As filed with the Securities and Exchange Commission on April 29, 1996
File No. 811-8778
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
SELECT ADVISORS PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
311 Pike Street
Cincinnati, Ohio 45202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 800-669-2793
Thomas M. Lenz
6 St. James Avenue
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
<PAGE>
IFS0051D
EXPLANATORY NOTE
This Amendment to the Registration Statement on Form N-1A (the
"Registration Statement") has been filed by the Registrant pursuant to Section
8(b) of the Investment Company Act of 1940, as amended. However, beneficial
interests in the series of the Registrant are not being registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests will
be issued solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant's series may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. The Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any beneficial
interests in any series of the Registrant.
<PAGE>
IFS0051D
SELECT ADVISORS PORTFOLIOS
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.
Select Advisors Portfolios (the "Portfolio Trust") is a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York on February 7, 1994. Beneficial
interests in the Portfolio Trust are divided into nine separate series, each
having a distinct investment objectives and policies, nine of which, Emerging
Growth Portfolio, International Equity Portfolio, Growth & Income Portfolio,
Growth & Income Portfolio II, Balanced Portfolio, Income Opportunity Portfolio,
Bond Portfolio, Bond Portfolio II and Municipal Bond Portfolio (each a
"Portfolio" and, collectively, the "Portfolios") are described herein.
Beneficial interests in the Portfolios are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
Investments in the Portfolio Trust may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.
The following is a discussion of the various investment policies of
each Portfolio. Further information about the investment policies of each
Portfolio, including a list of those restrictions on its investment activities
that are "fundamental" (i.e., they cannot be changed without shareholder
approval), appears in Part B. There can be no assurance that the investment
objective of the Portfolios will be achieved.
Emerging Growth Portfolio
The primary investment objective of the Portfolio is capital
appreciation with income as a secondary investment objective. The Portfolio
attempts to achieve its investment objectives through investment primarily in
the common stock of smaller, rapidly growing companies. With respect to the
Emerging Growth Portfolio, "emerging growth" companies are smaller companies
with total market capitalization less than the average of Standard & Poor's
Composite Stock Price Index (the "S&P 500"), which is currently approximately
$20 billion which the Portfolio Advisor (as defined below) believes has earnings
that may be expected to grow faster than the U.S. economy in general, because of
new products, structural changes in the economy or management changes.
<PAGE>
A-2
Under normal circumstances, at least 65% of the Portfolio's total
assets will be invested in securities of emerging growth companies. In selecting
investments for the Portfolio, the Portfolio Advisor seeks emerging growth
companies that it believes are undervalued in the marketplace. These companies
typically possess a relatively high rate of return on invested capital so that
future growth can be financed from internal sources. Companies in which the
Portfolio is likely to invest may have limited product lines, markets or
financial resources and may lack management depth. The securities of these
companies may have limited marketability and may be subject to more abrupt or
erratic market movements than securities of larger, more established companies
or the market averages in general. A portion of the Portfolio's assets may be
invested in the securities of larger companies which the Portfolio Advisor
believes offer comparable appreciation or to ensure sufficient liquidity. Since
the Portfolio invests primarily in smaller companies, the Portfolio invests only
to a limited extent in larger companies in emerging industries.
In addition to common stocks, the Portfolio may invest in preferred
stocks, convertible bonds and other fixed-income instruments not issued by
emerging growth companies which present opportunities for capital appreciation
as well as income. Such instruments include U.S. Treasury obligations, corporate
bonds, debentures, mortgage related securities issued by various governmental
agencies, such as Government National Mortgage Association ("GNMA") and
government related organizations, such as the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"),
including collateralized mortgage obligations ("CMOs"), privately issued
mortgage related securities (including CMOs), stripped U.S. Government and
mortgage related securities, non- publicly registered securities, and asset
backed securities. The Portfolio will only invest in bonds and preferred stock
rated at least Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Corporation ("S&P") or, if unrated, determined by the
Portfolio Advisor to be of comparable quality. Bonds rated Baa or BBB possess
some speculative characteristics.
The Portfolio may invest up to 20% of its assets in foreign securities
principally traded outside the United States and in American Depositary Receipts
("ADRs"). The Portfolio may not invest more than 10% of its total assets in the
securities of companies based in an emerging market. See "Risk Factors and
Certain Investment Techniques -- Foreign Securities" and "-- Risks Associated
with 'Emerging Markets' Securities."
International Equity Portfolio
The investment objective of the Portfolio is long-term capital
appreciation by investing primarily in equity securities of companies based
outside the United States. The Portfolio expects that initially its investments
will be concentrated in Europe, Asia, the Far East, North and South America,
Africa, the Pacific Rim and Latin America.
The Portfolio may invest in securities of companies in emerging markets
(see "Risk Factors and Certain Investment Techniques"), but does not expect to
invest more than 40% of its total assets in securities of issuers in emerging
markets. The Portfolio will invest in issuers of companies from at least three
countries outside the United States.
<PAGE>
A-3
Under normal market conditions, the Portfolio will invest a minimum of
80% of its total assets in equity securities of non-U.S. issuers. With respect
to the International Equity Portfolio, equity securities means common stock and
preferred stock (including convertible preferred stock), bonds, notes and
debentures convertible into common or preferred stock, stock purchase warrants
and rights, equity interests in trusts and partnerships, and depository receipts
of companies.
The Portfolio may invest up to 20% of its total assets in debt
securities issued by U.S. or foreign banks, corporations or other business
organizations, or by U.S. or foreign governments or governmental entities
(including supranational organizations such as the International Bank for
Reconstruction and Development, i.e., the "World Bank"). The Portfolio may
choose to take advantage of opportunities for capital appreciation from debt
securities by reason of anticipated changes in such factors as interest rates,
currency relationships, or credit standing of individual issuers. The Portfolio
will invest less than 35% of its total assets in lower-quality, high yielding
securities, commonly known as "junk bonds." See "Risk Factors and Certain
Investment Techniques -- Medium and Lower Rated and Unrated Securities". The
Portfolio will not invest in preferred stocks or debt securities rated less than
B by S&P and Moody's. Investing in securities issued by foreign companies and
governments involves considerations and potential risks not typically associated
with investing in obligations issued by the U.S. government and domestic
corporations. Investments in "emerging markets" securities include the
securities of issuers based in some of the world's underdeveloped markets,
including Eastern Europe. Investments in securities of issuers based in
underdeveloped countries entail all of the risks of investing in foreign issuers
to a heightened degree.See "Risk Factors and Certain Investment Techniques --
Foreign Securities."
The Portfolio will not invest in any illiquid securities except for
Rule 144A securities. See "Additional Risks and Investment Techniques --
Illiquid Securities" and "-- Non-Publicly Traded ("Restricted") Securities and
Rule 144A Securities".
Growth & Income Portfolio and Growth & Income Portfolio II
The investment objective of each Portfolio is long term capital
appreciation and dividend income by investing primarily in a diversified
portfolio of common stocks of high quality companies that, in the Portfolio
Advisor's opinion, have above average growth potential at the time of purchase.
In general, these securities are characterized as having above average dividend
yields and below average price earnings ratios relative to the stock market in
general, as measured by the S&P 500. Other factors, such as earnings and
dividend growth prospects as well as industry outlook and market share, also are
considered. Under normal conditions, at least 80% of each Portfolio's total
assets will be invested in common stocks and at least 65% of each Portfolio's
total assets will be invested in common stocks that, at the time of investment,
will be expected to pay regular dividends.
Each Portfolio will generally invest a majority of its assets in common
stocks of issuers with total market capitalization of $1 billion or greater at
the time of purchase, but may invest in securities of companies having various
<PAGE>
A-4
levels of market capitalization, including smaller companies whose securities
may be more volatile and less liquid than securities issued by larger companies
with higher levels of net worth. Investments will be in companies in various
industries.
Each Portfolio may also invest up to 20% of its total assets in foreign
securities, including securities of foreign issuers in the form of ADRs. Each
Portfolio may not invest more than 5% of its total assets in the securities of
companies based in an emerging market. See "Risk Factors and Certain Investment
Techniques -- Foreign Securities."
Each Portfolio may invest under normal circumstances up to 20% of its
total assets in preferred stock, convertible bonds and other fixed income
instruments rated at least Baa by Moody's or BBB by S&P. Each Portfolio may
invest up to 5% of its total assets in bonds rated below Baa by Moody's or BBB
by S&P. See "Risk Factors and Certain Investment Techniques -- Medium and Lower
Rated ("Junk Bonds") and Unrated Debt Securities."
Balanced Portfolio
The investment objective of the Portfolio is growth of capital and
income through investment in common stocks and fixed-income securities. Under
normal circumstances, the Advisor expects approximately 60% of the Portfolio's
total assets to be invested in equity securities and 40% of its total assets to
be invested in fixed-income securities. For this purpose, "equity securities"
includes warrants, preferred stock and securities convertible into equity
securities. The Portfolio will, under normal circumstances, invest at least 25%
of the Portfolio's total assets in fixed-income senior securities. For purposes
of this requirement, only the fixed-income component of a convertible bond will
be considered.
The Portfolio may invest in the types of fixed-income securities
(including preferred stock), with the same rating requirements, described below
with respect to the Bond Portfolio.
Up to one-third of the Portfolio's assets may be invested in foreign
equity or fixed-income securities. No more than 15% of the Portfolio's total
assets will be invested in the securities of issuers based in emerging markets.
See "Risk Factors and Certain Investment Techniques -- Foreign Securities" and
"-- Risks Associated with 'Emerging Markets' Securities."
Income Opportunity Portfolio
The investment objective of the Portfolio is high current income
through investment in a diversified portfolio of high yield, non-investment
grade debt securities of both U.S. and non-U.S. issuers and in mortgate related
securities. To the extent consistent with its primary objective, the Portfolio
will also seek capital appreciation. The Portfolio intends to invest a portion
of its assets in high risk, low quality debt securities of both corporate and
government issuers, commonly referred to as "junk bonds," and regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay
<PAGE>
A-5
principal in accordance with the terms of the obligation as well as debt
securities of issuers located in emerging market countries.
The Portfolio may invest in debt obligations (which may be denominated
in U.S. dollars or in non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (such as the World Bank) and
foreign governments (including political subdivisions having taxing authority)
or their agencies or instrumentalities, and debt obligations issued by U.S.
corporations denominated in non-U.S. currencies. These investments may include
debt obligations such as bonds (including sinking fund and callable bonds),
debentures and notes (including variable and floating rate instruments),
together with preferred stocks and zero coupon securities. The Portfolio may
also invest in loans, other direct debt obligations and loan participations.
Up to 100% of the assets of the Portfolio may be invested in foreign
fixed- income securities, but no more than 30% of the total assets of the
Portfolio may be invested in non-U.S. dollar-denominated securities. The
Portfolio may invest up to 65% of its total assets in debt securities of issuers
located in emerging market countries. See "Risk Factors and Certain Investment
Techniques -- Foreign Securities."
The Portfolio will generally invest in securities rated BBB or lower by
S&P or Baa or lower by Moody's or, if unrated, of comparable quality in the
opinion of the Portfolio Advisor. Securities rated BBB by S&P or Baa by Moody's
possess some speculative characteristics. See the Appendix A to Part B for a
description of Moody's and S&P ratings and "Risk Factors and Certain Investment
Techniques -- Medium and Lower Rated and Unrated Securities" for a description
of certain risks associated with lower rated securities.
In addition to high yield corporate bonds, the Portfolio will also
invest in mortgage related securities which represent pools of mortgage loans
assembled for sale to investors by various governmental agencies, such as GNMA
and government related organizations, such as FNMA and FHLMC as well as by
private issuers, such as commercial banks, savings and loan institutions,
mortgage bankers and private mortgage insurance companies.
The Portfolio may attempt to hedge against unfavorable changes in
currency exchange rates by engaging in forward currency transactions and trading
currency futures contracts and options thereon.
Bond Portfolio and Bond Portfolio II
The investment objective of each Portfolio is to provide high current
income primarily through investments in investment grade bonds. Investment grade
bonds are those rated at least Baa by Moody's or BBB by S&P or unrated bonds
considered by each Portfolio's Portfolio Advisor to be of comparable quality.
Under normal circumstances, at least 65% of the value of each Portfolio's total
assets will be invested in bonds or debentures (as described in the first
sentence of the next paragraph). The average maturity of each Portfolio will be
between five and fifteen years. The average maturity of each Portfolio's
holdings may be shortened in order to preserve capital if the Portfolio Advisor
<PAGE>
A-6
anticipates a rise in interest rates. Conversely, the maturity may be
lengthened to maximize returns if interest rates are expected to decline.
Each Portfolio invests in U.S. Treasury obligations, corporate bonds,
debentures, mortgage related securities issued by various governmental agencies,
such as GNMA and government related organizations, such as FNMA and FHLMC,
including CMOs, privately issued mortgage related securities (including CMOs),
stripped U.S. Government and mortgage related securities, non-publicly
registered securities, asset backed securities and Eurodollar certificates of
deposit and Eurodollar bonds. They will also invest in preferred stocks. No more
than 60% of each Portfolio's total assets will be invested in mortgage-related
securities. Each Portfolio will not invest in any bond rated lower than B by S&P
or by Moody's. Each Portfolio will invest less than 35% of its assets in U.S. or
foreign non-investment grade (junk) bonds or preferred stock. High risk, lower
quality debt securities are regarded as predominantly speculative with respect
to the issuer's ability to pay interest and repay principal in accordance with
the terms of the obligation. Up to 20% of each Portfolio's assets may be
invested in fixed-income securities denominated in foreign currencies. These
foreign securities must meet the same rating and quality standards as the
Portfolios' U.S. dollar-denominated investments. See "Risk Factors and Certain
Investment Techniques -- Foreign Securities."
Municipal Bond Portfolio
The investment objective of the Portfolio is to provide a high level of
current income that is excluded from regular federal income taxation. The
Portfolio seeks to achieve its objective through investment in a diversified
portfolio of general obligation, revenue and private activity bonds and notes
that are issued by or on behalf of states, territories and possessions of the
United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities, or multistate agencies or authorities, the
interest on which, in the opinion of counsel to the issuer of the instrument, is
excluded from gross income for regular federal income tax purposes ("Municipal
Obligations").
The Portfolio expects to maintain a weighted average maturity of five
to ten years. Portfolio composition generally covers a range of maturities with
broad geographic and issuer diversification.
The Portfolio limits its investments to investment grade Municipal
Obligations that are bonds rated at least Baa by Moody's or BBB by S&P and
municipal notes rated MIG-1 or MIG-2 by Moody's or SP-1+, SP-1 or SP-2 by S&P,
as well as in unrated securities determined to be of comparable investment grade
quality by the Portfolio Advisor. Bonds rated Baa by Moody's or BBB by S&P may
have speculative characteristics.
The Portfolio may also invest in variable rate Municipal Obligations,
most of which permit the holder thereof to receive the principal amount on
demand upon from one day to one year's notice.
For more information about Municipal Obligations see "Additional Risks
and Investment Techniques -- Municipal Obligations" and Part B.
<PAGE>
A-7
It is a fundamental policy of the Portfolio that under normal
circumstances at least 80% of the Portfolio's total assets will be invested in
Municipal Obligations, and it is a non-fundamental "operating" policy that at
least 65% of its total assets will be invested in bonds or debentures. The
Portfolio will not invest more than 25% of its total assets in Municipal
Obligations whose issuers are located in the same state or more than 25% of its
total assets in tax-exempt Municipal Obligations that are secured by revenues
from entities in any one of the following categories: hospitals and health
facilities; ports and airports; or colleges and universities. The Portfolio will
also not invest more than 25% of its total assets in private activity bonds of
similar projects. The Portfolio may, however, invest more than 25% of its total
assets in Municipal Obligations of one or more of the following types: turnpikes
and toll roads; public housing authorities, general obligations of states and
localities; state and local housing finance authorities; and municipal utilities
systems.
The Portfolio reserves the right to invest without limit in private
activity bonds, although it does not currently expect to invest more than 20% of
its total assets in private activity bonds. Dividends attributable to interest
income on certain types of private activity bonds issued after August 7, 1986 to
finance nongovernmental activities are a specific tax preference item for
purposes of the federal individual and corporate alternative minimum taxes.
Dividends derived from interest income on all Municipal Obligations are a
component of the "current earnings" adjustment item for purposes of the federal
corporate alternative minimum tax.
When the Portfolio is maintaining a temporary defensive position, it
may invest in short-term investments, some of which may not be tax exempt.
Securities eligible for short-term investment by the Portfolio are tax exempt
notes of municipal issuers having, at the time of purchase, a rating within the
three highest grades of Moody's or S&P or, if not rated, having an issue of
outstanding Municipal Obligations rated within the three highest grades by
Moody's or S&P, and taxable short-term instruments having quality
characteristics comparable to those for Municipal Obligations. The Portfolio may
invest in temporary investments for defensive reasons in anticipation of a
market decline. At no time will more than 20% of the Portfolio's total assets be
invested in temporary investments unless the Portfolio has adopted a defensive
investment policy. The Portfolio will purchase tax exempt or taxable temporary
investments pending the investment of the proceeds from the sale of the
securities held by the Portfolio or from the purchase of the Portfolio's shares
by shareholders or in order to have highly liquid securities available to meet
anticipated redemptions. To the extent that the Portfolio holds temporary
investments, it may not achieve its investment objective.
The Portfolio's investments in private activity bonds and taxable
instruments will not cause the Portfolio to have more than 25% of its total
assets invested in any one industry.
Risk Factors and Certain Investment Techniques
Foreign Securities. Investing in securities issued by foreign companies
and governments involves considerations and potential risks not typically
associated with investing in obligations issued by the U.S. government and
<PAGE>
A-8
domestic corporations. Less information may be available about foreign companies
than about domestic companies and foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to domestic
companies. The values of foreign investments are affected by changes in currency
rates or exchange control regulations, restrictions or prohibitions on the
repatriation of foreign currencies, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the United States or abroad) or changed circumstances in
dealings between nations. Costs are also incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions and
custody fees are generally higher than those charged in the United States, and
foreign securities markets may be less liquid, more volatile and less subject to
governmental supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the United States,
including expropriation, confiscatory taxation, lack of uniform accounting and
auditing standards and potential difficulties in enforcing contractual
obligations and could be subject to extended clearance and settlement periods.
Risks Associated with "Emerging Markets" Securities. Investments in
"emerging markets" securities include the securities of issuers based in some of
the world's underdeveloped markets, including Eastern Europe. Investments in
securities of issuers based in underdeveloped countries entail all of the risks
of investing in foreign issuers outlined in this section to a heightened degree.
These heightened risks include: (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less social, political and economic stability;
(ii) the smaller size of the market for such securities and a low or nonexistent
volume of trading, resulting in a lack of liquidity and in price volatility;
(iii) certain national policies which may restrict a Portfolio's investment
opportunities including restrictions on investing in issuers in industries
deemed sensitive to relevant national interests; and (iv) in the case of Eastern
Europe, the absence of developed capital market and legal structures governing
private or foreign investment and private property and the possibility that
recent favorable economic and political developments could be slowed or reversed
by unanticipated events.
So long as the Communist Party continues to exercise a significant or,
in some cases, dominant role in Eastern European countries, investments in such
countries will involve risk of nationalization, expropriation and confiscatory
taxation. The Communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, and in many cases
without adequate compensation, and there is no assurance that such expropriation
will not occur in the future. In the event of such expropriation, a Portfolio
could lose a substantial portion of any investments it has made in the affected
countries. Finally, even though certain Eastern European currencies may be
convertible into U.S. dollars, the conversion rates may be artificial in
relation to the actual market values and may be adverse to Portfolio investors.
Currency Exchange Rates. A Portfolio's share value may change
significantly when the currencies, other than the U.S. dollar, in which the
Portfolio's investments are denominated strengthen or weaken against the U.S.
dollar. Currency exchange rates generally are determined by the forces of supply
<PAGE>
A-9
and demand in the foreign exchange markets and the relative merits of
investments in different countries as seen from an international perspective.
Currency exchange rates can also be affected unpredictably by intervention by
U.S. or foreign governments or central banks or by currency controls or
political developments in the United States or abroad.
Medium and Lower Rated ("Junk Bonds") and Unrated Securities.
Securities rated in the fourth highest category by S&P or Moody's, although
considered investment grade, may possess speculative characteristics, and
changes in economic or other conditions are more likely to impair the ability of
issuers of these securities to make interest and principal payments than is the
case with respect to issuers of higher grade bonds.
Generally, medium or lower rated securities and unrated securities of
comparable quality, sometimes referred to as "junk bonds," offer a higher
current yield than is offered by higher rated securities, but also (i) will
likely have some quality and protective characteristics that, in the judgment of
the rating organizations, are outweighed by large uncertainties or major risk
exposures to adverse conditions and (ii) are predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. The yield of junk bonds will
fluctuate over time.
The market values of certain of these securities also tend to be more
sensitive to individual corporate developments and changes in economic
conditions than higher quality bonds. In addition, medium and lower rated
securities and comparable unrated securities generally present a higher degree
of credit risk. The risk of loss due to default by these issuers is
significantly greater because medium and lower rated securities and unrated
securities of comparable quality generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness. Since the risk of
default is higher for lower-rated debt securities, the Portfolio Advisor's
research and credit analysis are an especially important part of managing
securities of this type held by a Portfolio. In light of these risks, the Board
of Trustees has instructed the Portfolio Advisor, in evaluating the
creditworthiness of an issue, whether rated or unrated, to take various factors
into consideration, which may include, as applicable, the issuer's financial
resources, its sensitivity to economic conditions and trends, the operating
history of and the community support for the facility financed by the issue, the
ability of the issuer's management and regulatory matters.
In addition, the market value of securities in lower rated categories
is more volatile than that of higher quality securities, and the markets in
which medium and lower rated or unrated securities are traded are more limited
than those in which higher rated securities are traded. The existence of limited
markets may make it more difficult for the Portfolios to obtain accurate market
quotations for purposes of valuing their respective portfolios and calculating
their respective net asset values. Moreover, the lack of a liquid trading market
may restrict the availability of securities for the Portfolios to purchase and
may also have the effect of limiting the ability of a Portfolio to sell
securities at their fair value either to meet redemption requests or to respond
to changes in the economy or the financial markets.
<PAGE>
A-10
Lower rated debt obligations also present risks based on payment
expectations. If an issuer calls the obligation for redemption, a Portfolio may
have to replace the security with a lower yielding security, resulting in a
decreased return for shareholders. Also, as the principal value of bonds moves
inversely with movements in interest rates, in the event of rising interest
rates the value of the securities held by a Portfolio may decline relatively
proportionately more than a portfolio consisting of higher rated securities. If
a Portfolio experiences unexpected net redemptions, it may be forced to sell its
higher rated bonds, resulting in a decline in the overall credit quality of the
securities held by the Portfolio and increasing the exposure of the Portfolio to
the risks of lower rated securities. Investments in zero coupon bonds may be
more speculative and subject to greater fluctuations in value due to changes in
interest rates than bonds that pay interest currently.
Subsequent to its purchase by a Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event will require sale of these securities
by the Portfolio, but the Portfolio Advisor will consider this event in its
determination of whether the Portfolio should continue to hold the securities.
Additional Risks and Investment Techniques.
Derivatives. The Portfolios may invest in various instruments that are
commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a traditional
security, asset, or market index. Some "derivatives" such as mortgage related
and other asset-backed securities are in many respects like any other
investment, although they may be more volatile or less liquid than more
traditional debt securities. There are, in fact, many different types of
derivatives and many different ways to use them. There are a range of risks
associated with those uses. Futures and options are commonly used for
traditional hedging purposes to attempt to protect a fund from exposure to
changing interest rates, securities prices, or currency exchange rates and for
cash management purposes as a low cost method of gaining exposure to a
particular securities market without investing directly in those securities.
However, some derivatives are used for leverage, which tends to magnify the
effects of an instrument's price changes as market conditions change. Leverage
involves the use of a small amount of money to control a large amount of
financial assets, and can in some circumstances, lead to significant losses. A
Portfolio Advisor will use derivatives only in circumstances where the Portfolio
Advisor believes they offer the most economic means of improving the risk/reward
profile of a Portfolio. Derivatives will not be used to increase portfolio risk
above the level that could be achieved using only traditional investment
securities or to acquire exposure to changes in the value of assets or indexes
that by themselves would not be purchased for the Portfolios. The use of
derivatives for non-hedging purposes may be considered speculative. A
description of the derivatives a Portfolio may use and some of their associated
risks is found below.
ADRs, EDRs and CDRs. ADRs are U.S. dollar-denominated receipts
typically issued by domestic banks or trust companies that represent the deposit
with those entities of securities of a foreign issuer. ADRs are publicly traded
on exchanges or over-the-counter in the United States. European Depository
Receipts
<PAGE>
A-11
("EDRs") which are sometimes referred to as Continental Depository Receipts
("CDRs") may also be purchased by the Portfolios. EDRs and CDRs are generally
issued by foreign banks and evidence ownership of either foreign or domestic
securities. Certain institutions issuing ADRs or EDRs may not be sponsored by
the issuer of the underlying foreign securities. A non-sponsored depository may
not provide the same shareholder information that a sponsored depository is
required to provide under its contractual arrangements with the issuer of the
underlying foreign securities.
Fixed-Income and Other Debt Instrument Securities. Fixed-income and
other debt instrument securities include all bonds, high yield or "junk" bonds,
municipal bonds, debentures, U.S. Government securities, mortgage-related
securities including government stripped mortgage-related securities, zero
coupon securities and custodial receipts. The market value of fixed-income
obligations of the Portfolios will be affected by general changes in interest
rates which will result in increases or decreases in the value of the
obligations held by the Portfolios. The market value of the obligations held by
a Portfolio can be expected to vary inversely to changes in prevailing interest
rates. Shareholders also should recognize that, in periods of declining interest
rates, a Portfolio's yield will tend to be somewhat higher than prevailing
market rates and, in periods of rising interest rates, a Portfolio's yield will
tend to be somewhat lower. Also, when interest rates are falling, the inflow of
net new money to a Portfolio from the continuous sale of its shares will tend to
be invested in instruments producing lower yields than the balance of its
portfolio, thereby reducing the Portfolio's current yield. In periods of rising
interest rates, the opposite can be expected to occur. In addition, securities
in which a Portfolio may invest may not yield as high a level of current income
as might be achieved by investing in securities with less liquidity, less
creditworthiness or longer maturities.
Ratings made available by S&P and Moody's are relative and subjective
and are not absolute standards of quality. Although these ratings are initial
criteria for selection of portfolio investments, a Portfolio Advisor also will
make its own evaluation of these securities. Among the factors that will be
considered are the long-term ability of the issuers to pay principal and
interest and general economic trends.
Fixed-income securities may be purchased on a when-issued or delayed-
delivery basis. See "When-Issued and Delayed-Delivery Securities" below.
U.S. Government Securities. Each Portfolio may invest in U.S.
Government securities, which are obligations issued or guaranteed by the U.S.
Government, its agencies, authorities or instrumentalities. Some U.S. Government
securities, such as U.S. Treasury bills, Treasury notes and Treasury bonds,
which differ only in their interest rates, maturities and times of issuance, are
supported by the full faith and credit of the United States. Others are
supported by: (i) the right of the issuer to borrow from the U.S. Treasury, such
as securities of the Federal Home Loan Banks; (ii) the discretionary authority
of the U.S. government to purchase the agency's obligations, such as securities
of the FNMA; or (iii) only the credit of the issuer, such as securities of the
Student Loan Marketing Association. No assurance can be given that the U.S.
Government will provide financial support in the future to U.S. Government
agencies, authorities or
<PAGE>
A-12
instrumentalities that are not supported by the full faith and credit of the
United States.
Securities guaranteed as to principal and interest by the U.S.
Government, its agencies, authorities or instrumentalities include: (i)
securities for which the payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. Government or any of its
agencies, authorities or instrumentalities; and (ii) participation interests in
loans made to foreign governments or other entities that are so guaranteed. The
secondary market for certain of these participation interests is limited and,
therefore, may be regarded as illiquid.
Mortgage Related Securities. Each Portfolio may invest in mortgage
related securities. There are several risks associated with mortgage related
securities generally. One is that the monthly cash inflow from the underlying
loans may not be sufficient to meet the monthly payment requirements of the
mortgage related security.
Prepayment of principal by mortgagors or mortgage foreclosures will
shorten the term of the underlying mortgage pool for a mortgage related
security. Early returns of principal will affect the average life of the
mortgage related securities remaining in a Portfolio. The occurrence of mortgage
prepayments is affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. In periods of rising interest rates, the rate
of prepayment tends to decrease, thereby lengthening the average life of a pool
of mortgage related securities. Conversely, in periods of falling interest rates
the rate of prepayment tends to increase, thereby shortening the average life of
a pool. Reinvestment of prepayments may occur at higher or lower interest rates
than the original investment, thus affecting the yield of a Portfolio. Because
prepayments of principal generally occur when interest rates are declining, it
is likely that a Portfolio will have to reinvest the proceeds of prepayments at
lower interest rates than those at which the assets were previously invested. If
this occurs, a Portfolio's yield will correspondingly decline. Thus, mortgage
related securities may have less potential for capital appreciation in periods
of falling interest rates than other fixed-income securities of comparable
maturity, although these securities may have a comparable risk of decline in
market value in periods of rising interest rates. To the extent that a Portfolio
purchases mortgage related securities at a premium, unscheduled prepayments,
which are made at par, will result in a loss equal to any unamortized premium.
CMOs are obligations fully collateralized by a portfolio of mortgages
or mortgage related securities. Payments of principal and interest on the
mortgages are passed through to the holders of the CMOs on the same schedule as
they are received, although certain classes of CMOs have priority over others
with respect to the receipt of prepayments on the mortgages. Therefore,
depending on the type of CMOs in which a Portfolio invests, the investment may
be subject to a greater or lesser risk of prepayment than other types of
mortgage related securities.
Mortgage related securities may not be readily marketable. To the
extent any of these securities are not readily marketable in the judgment of the
Portfolio Advisor, the investment restriction limiting a Portfolio's investment
<PAGE>
A-13
in illiquid instruments to not more than 15% of the value of its net assets will
apply.
Stripped Mortgage Related Securities. These securities are either
issued and guaranteed, or privately-issued but collateralized by securities
issued by, GNMA, FNMA or FHLMC. These securities represent beneficial ownership
interests in either periodic principal distributions ("principal-only") or
interest distributions ("interest-only") on mortgage related certificates issued
by GNMA, FNMA or FHLMC, as the case may be. The certificates underlying the
stripped mortgage related securities represent all or part of the beneficial
interest in pools of mortgage loans. A Portfolio will invest in stripped
mortgage related securities in order to enhance yield or to benefit from
anticipated appreciation in value of the securities at times when its Portfolio
Advisor believes that interest rates will remain stable or increase. In periods
of rising interest rates, the expected increase in the value of stripped
mortgage related securities may offset all or a portion of any decline in value
of the securities held by the Portfolio.
Investing in stripped mortgage related securities involves the risks
normally associated with investing in mortgage related securities. See "Mortgage
Related Securities" above. In addition, the yields on stripped mortgage related
securities are extremely sensitive to the prepayment experience on the mortgage
loans underlying the certificates collateralizing the securities. If a decline
in the level of prevailing interest rates results in a rate of principal
prepayments higher than anticipated, distributions of principal will be
accelerated, thereby reducing the yield to maturity on interest-only stripped
mortgage related securities and increasing the yield to maturity on principal-
only stripped mortgage related securities. Sufficiently high prepayment rates
could result in a Portfolio not fully recovering its initial investment in an
interest-only stripped mortgage related security. Stripped mortgage related
securities are currently traded in an over-the-counter market maintained by
several large investment banking firms. There can be no assurance that the
Portfolio will be able to effect a trade of a stripped mortgage related security
at a time when it wishes to do so. The Portfolio will acquire stripped mortgage
related securities only if a secondary market for the securities exists at the
time of acquisition. Except for government stripped mortgage related securities
based on fixed rate FNMA and FHLMC mortgage certificates that meet certain
liquidity criteria established by the Board of Trustees of the Portfolio Trust,
the Portfolios will treat government stripped mortgage related securities and
privately-issued mortgage related securities as illiquid and will limit its
investments in these securities, together with other illiquid investments, to
not more than 15% of net assets.
Municipal Obligations. The term "Municipal Obligations" generally is
understood to include debt obligations issued to obtain funds for various public
purposes, the interest on which is, in the opinion of bond counsel to the
issuer, excluded from gross income for regular federal income tax purposes. In
addition, if the proceeds from private activity bonds are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, the interest paid on such bonds may be excluded from
gross income for federal income tax purposes, although current federal tax laws
place substantial limitations on the size of these issues.
<PAGE>
A-14
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit, and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source, but not from the
general taxing power. Sizable investments in revenue bonds obligations could
involve an increased risk to the Portfolio should any of the related facilities
experience financial difficulties. Private activity bonds are in most cases
revenue bonds and do not generally carry the pledge of the credit of the issuing
municipality. There are, of course, variations in the security of Municipal
Obligations, both within a particular classification and between
classifications.
Zero Coupon Securities. Zero coupon U.S. Government securities are debt
obligations that are issued or purchased at a significant discount from face
value. The discount approximates the total amount of interest the security will
accrue and compound over the period until maturity or the particular interest
payment date at a rate of interest reflecting the market rate of the security at
the time of issuance. Zero coupon securities do not require the periodic payment
of interest. These investments benefit the issuer by mitigating its need for
cash to meet debt service, but also require a higher rate of return to attract
investors who are willing to defer receipt of cash. These investments may
experience greater volatility in market value than U.S. Government securities
that make regular payments of interest. A Portfolio accrues income on these
investments for tax and accounting purposes, which is distributable to
shareholders and which, because no cash is received at the time of accrual, may
require the liquidation of other portfolio securities to satisfy the Portfolio's
distribution obligations, in which case the Portfolio will forego the purchase
of additional income producing assets with these funds. Zero coupon securities
include STRIPS, that is, securities underwritten by securities dealers or banks
that evidence ownership of future interest payments, principal payments or both
on certain notes or bonds issued by the U.S. Government, its agencies,
authorities or instrumentalities. They also include Coupons Under Book Entry
System ("CUBES"), which are component parts of U.S. Treasury bonds and represent
scheduled interest and principal payments on the bonds.
Loans and Other Direct Debt Instruments. These are instruments in
amounts owed by a corporate, governmental or other borrower to another party.
They may represent amounts owed to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables) or to other parties. Direct debt instruments purchased by a
Portfolio may have a maturity of any number of days or years, may be secured or
unsecured, and may be of any credit quality. Direct debt instruments involve the
risk of loss in the case of default or insolvency of the borrower. Direct debt
instruments may offer less legal protection to a Portfolio in the event of fraud
or misrepresentation. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments also may include standby financing commitments that obligate a
Portfolio to supply additional cash to the borrower on demand at the time when a
Portfolio would not have otherwise done so, even if the borrower's condition is
unlikely that the amount will ever be repaid.
<PAGE>
A-15
These instruments will be considered illiquid securities and so will be
limited, along with a Portfolio's other illiquid securities, to not more than
15% of the Portfolio's net assets.
Swap Agreements. To help enhance the value of its portfolio or manage
its exposure to different types of investments, the Portfolios may enter into
interest rate, currency and mortgage swap agreements and may purchase and sell
interest rate "caps," "floors" and "collars."
In a typical interest rate swap agreement, one party agrees to make
regular payments equal to a floating interest rate on a specified amount (the
"notional principal amount") in return for payments equal to a fixed interest
rate on the same amount for a specified period. If a swap agreement provides for
payment in different currencies, the parties may also agree to exchange the
notional principal amount. Mortgage swap agreements are similar to interest rate
swap agreements, except that notional principal amount is tied to a reference
pool of mortgages.
In a cap or floor, one party agrees, usually in return for a fee, to
make payments under particular circumstances. For example, the purchaser of an
interest rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed level; the purchaser of an interest rate floor
has the right to receive payments to the extent a specified interest rate falls
below an agreed level. A collar entitles the purchaser to receive payments to
the extent a specified interest rate falls outside an agreed range.
Swap agreements may involve leverage and may be highly volatile;
depending on how they are used, they may have considerable impact on a
Portfolio's performance. Swap agreements involve risks depending upon the other
party's creditworthiness and ability to perform, as judged by the Portfolio
Advisor, as well as the Portfolio's ability to terminate its swap agreements or
reduce its exposure through offsetting transactions.
All swap agreements are considered as illiquid securities and,
therefore, will be limited, along with all of a Portfolio's other illiquid
securities, to 15% of that Portfolio's net assets.
Custodial Receipts. Custodial receipts or certificates, such as
Certificates of Accrual on Treasury Securities ("CATS"), Treasury Investors
Growth Receipts ("TIGRs") and Financial Corporation certificates ("FICO
Strips"), are securities underwritten by securities dealers or banks that
evidence ownership of future interest payments, principal payments or both on
certain notes or bonds issued by the U.S. Government, its agencies, authorities
or instrumentalities. The underwriters of these certificates or receipts
purchase a U.S. Government security and deposit the security in an irrevocable
trust or custodial account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured coupon payments
and the final principal payment on the U.S. Government Security. Custodial
receipts evidencing specific coupon or principal payments have the same general
attributes as zero coupon U.S. Government securities, described above. Although
typically under the terms of a custodial receipt a Portfolio is authorized to
assert its rights directly against the issuer of the underlying obligation, the
<PAGE>
A-16
Portfolio may be required to assert through the custodian bank such rights as
may exist against the underlying issuer. Thus, if the underlying issuer fails to
pay principal and/or interest when due, a Portfolio may be subject to delays,
expenses and risks that are greater than those that would have been involved if
the Portfolio had purchased a direct obligation of the issuer. In addition, if
the trust or custodial account in which the underlying security has been
deposited is determined to be an association taxable as a corporation, instead
of a non-taxable entity, the yield on the underlying security would be reduced
in respect of any taxes paid.
When-Issued and Delayed-Delivery Securities. To secure prices deemed
advantageous at a particular time, each Portfolio may purchase securities on a
when-issued or delayed-delivery basis, in which case delivery of the securities
occurs beyond the normal settlement period; payment for or delivery of the
securities would be made prior to the reciprocal delivery or payment by the
other party to the transaction. A Portfolio will enter into when-issued or
delayed- delivery transactions for the purpose of acquiring securities and not
for the purpose of leverage. When-issued securities purchased by the Portfolio
may include securities purchased on a "when, as and if issued" basis under which
the issuance of the securities depends on the occurrence of a subsequent event,
such as approval of a merger, corporate reorganization or debt restructuring.
Securities purchased on a when-issued or delayed-delivery basis may
expose a Portfolio to risk because the securities may experience fluctuations in
value prior to their actual delivery. The Portfolio does not accrue income with
respect to a when-issued or delayed-delivery security prior to its stated
delivery date. Purchasing securities on a when-issued or delayed-delivery basis
can involve the additional risk that the yield available in the market when the
delivery takes place may be higher than that obtained in the transaction itself.
Repurchase Agreements. Each of the Portfolios may engage in repurchase
agreement transactions. Under the terms of a typical repurchase agreement, a
Portfolio would acquire an underlying debt obligation for a relatively short
period (usually not more than one week) subject to an obligation of the seller
to repurchase, and the Portfolio to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Portfolio's holding
period. This arrangement results in a fixed rate of return that is not subject
to market fluctuations during the Portfolio's holding period. A Portfolio may
enter into repurchase agreements with respect to U.S. Government securities with
member banks of the Federal Reserve System and certain non-bank dealers approved
by the Board of Trustees. Under each repurchase agreement, the selling
institution is required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. The Portfolio
Advisor, acting under the supervision of the Advisor and the Board of Trustees,
reviews on an ongoing basis the value of the collateral and the creditworthiness
of those non-bank dealers with whom the Portfolio enters into repurchase
agreements. In entering into a repurchase agreement, a Portfolio bears a risk of
loss in the event that the other party to the transaction defaults on its
obligations and the Portfolio is delayed or prevented from exercising its rights
to dispose of the underlying securities, including the risk of a possible
decline in the value of the underlying securities during the period in which the
Portfolio seeks to assert its rights to them, the risk of incurring expenses
<PAGE>
A-17
associated with asserting those rights and the risk of losing all or a part of
the income from the agreement. Repurchase agreements are considered to be
collateralized loans under the Investment Company Act of 1940, as amended
(the"1940 Act").
Reverse Repurchase Agreements and Forward Roll Transactions. With the
exception of the Municipal Bond Portfolio, the Portfolios may enter into reverse
repurchase agreements and forward roll transactions. In a reverse repurchase
agreement the Portfolio agrees to sell portfolio securities to financial
institutions such as banks and broker-dealers and to repurchase them at a
mutually agreed date and price. Forward roll transactions are equivalent to
reverse repurchase agreements but involve mortgage-backed securities and involve
a repurchase of a substantially similar security. At the time the Portfolio
enters into a reverse repurchase agreement or forward roll transaction it will
place in a segregated custodial account cash, U.S. Government securities or high
grade, liquid debt obligations having a value equal to the repurchase price,
including accrued interest. Reverse repurchase agreements and forward roll
transactions involve the risk that the market value of the securities sold by
the Portfolio may decline below the repurchase price of the securities. Reverse
repurchase agreements and forward roll transactions are considered to be
borrowings by a Portfolio for purposes of the limitations described in "Certain
Investment Policies" below and in Part B.
Lending Portfolio Securities. To generate income for the purpose of
helping to meet its operating expenses, each Portfolio other than Municipal Bond
Portfolio may lend securities to brokers, dealers and other financial
organizations. These loans, if and when made, may not exceed 30% of a
Portfolio's assets taken at value. A Portfolio's loans of securities will be
collateralized by cash, letters of credit or U.S. Government securities. The
cash or instruments collateralizing a Portfolio's loans of securities will be
maintained at all times in a segregated account with the Portfolio's custodian,
or with a designated subcustodian, in an amount at least equal to the current
market value of the loaned securities. In lending securities to brokers, dealers
and other financial organizations, a Portfolio is subject to risks, which, like
those associated with other extensions of credit, include delays in recovery and
possible loss of rights in the collateral should the borrower fail financially.
Illiquid Securities. No Portfolio may invest more than 15% of its net
assets in securities which are illiquid or otherwise not readily marketable. The
Trustees of the Portfolio Trust have adopted a policy that the International
Equity Portfolio may not invest in illiquid securities other than Rule 144A
securities. If a security becomes illiquid after purchase by the Portfolio, the
Portfolio will normally sell the security unless to do so would not be in the
best interests of shareholders.
Non-Publicly Traded ("Restricted") Securities and Rule 144A Securities.
Each Portfolio may purchase securities in the United States that are not
registered for sale under federal securities laws but which can be resold to
institutions under Securities and Exchange Commission (the "SEC") Rule 144A or
under an exemption from such laws. Provided that a dealer or institutional
trading market in such securities exists, these restricted securities or Rule
144A securities are treated as exempt from the Portfolio's 15% limit on illiquid
<PAGE>
A-18
securities. The Board of Trustees of the Portfolio Trust, with advice and
information from the respective Portfolio Advisor, will determine the liquidity
of restricted securities or Rule 144A securities by looking at factors such as
trading activity and the availability of reliable price information and, through
reports from such Portfolio Advisor, the Board of Trustees of the Portfolio
Trust will monitor trading activity in restricted securities. Because Rule 144A
is relatively new, it is not possible to predict how the markets for Rule 144A
securities will develop. If institutional trading in restricted securities or
Rule 144A securities were to decline, a Portfolio's illiquidity could be
increased and the Portfolio could be adversely affected.
No Portfolio will invest more than 10% of its total assets in
restricted securities (excluding Rule 144A securities).
Temporary Investments. For temporary defensive purposes during periods
when the Portfolio Advisor of a Portfolio believes, in consultation with the
Advisor, that pursuing the Portfolio's basic investment strategy may be
inconsistent with the best interests of its shareholders, the Portfolio may
invest its assets without limit in the following money market instruments: U.S.
Government securities (including those purchased in the form of custodial
receipts), repurchase agreements, certificates of deposit and bankers'
acceptances issued by banks or savings and loan associations having assets of at
least $500 million as of the end of their most recent fiscal year and high
quality commercial paper.
In addition, for the same purposes the Portfolio Advisor of
International Equity Portfolio may invest without limit in obligations issued or
guaranteed by foreign governments or by any of their political subdivisions,
authorities, agencies or instrumentalities that are rated at least AA by S&P or
Aa by Moody's or, if unrated, are determined by the Portfolio Advisor to be of
equivalent quality. Each Portfolio also may hold a portion of its assets in
money market instruments or cash in amounts designed to pay expenses, to meet
anticipated redemptions or pending investments in accordance with its objectives
and policies. Any temporary investments may be purchased on a when-issued basis.
Futures Contracts and Related Options. Each Portfolio may enter into
futures contracts and purchase and write (sell) options on these contracts,
including but not limited to interest rate, securities index and foreign
currency futures contracts and put and call options on these futures contracts.
These contracts will be entered into only upon the concurrence of the Portfolio
Advisor that such contracts are necessary or appropriate in the management of
the Portfolio's assets. These contracts will be entered into on exchanges
designated by the Commodity Futures Trading Commission ("CFTC") or, consistent
with CFTC regulations, on foreign exchanges. These transactions may be entered
into for bona fide hedging and other permissible risk management purposes
including protecting against anticipated changes in the value of securities a
Portfolio intends to purchase.
No Portfolio will hedge more than 25% of its total assets by selling
futures, buying puts, and writing calls under normal conditions. In addition, no
Portfolio will buy futures or write puts whose underlying value exceeds 25%
<PAGE>
A-19
of its total assets, and no Portfolio will buy calls with a value exceeding 5%
of its total assets.
A Portfolio will not enter into futures contracts and related options
for which the aggregate initial margin and premiums exceed 5% of the fair market
value of the Portfolio's assets after taking into account unrealized profits and
unrealized losses on any contracts it has entered into.
A Portfolio may lose the expected benefit of these futures or options
transactions and may incur losses if the prices of the underlying commodities
move in an unanticipated manner. In addition, changes in the value of the
Portfolio's futures and options positions may not prove to be perfectly or even
highly correlated with changes in the value of its portfolio securities.
Successful use of futures and related options is subject to a Portfolio
Advisor's ability to predict correctly movements in the direction of the
securities markets generally, which ability may require different skills and
techniques than predicting changes in the prices of individual securities.
Moreover, futures and options contracts may only be closed out by entering into
offsetting transactions on the exchange where the position was entered into (or
a linked exchange), and as a result of daily price fluctuation limits there can
be no assurance that an offsetting transaction could be entered into at an
advantageous price at any particular time. Consequently, a Portfolio may realize
a loss on a futures contract or option that is not offset by an increase in the
value of its portfolio securities that are being hedged or a Portfolio may not
be able to close a futures or options position without incurring a loss in the
event of adverse price movements.
Options on Foreign Currencies. Each Portfolio that may invest in
foreign securities may write covered put and call options and purchase put and
call options on foreign currencies for the purpose of protecting against
declines in the dollar value of portfolio securities and against increases in
the dollar cost of securities to be acquired. The Portfolio may use options on
currency to cross-hedge, which involves writing or purchasing options on one
currency to hedge against changes in exchange rates for a different, but related
currency. As with other types of options, however, the writing of an option on
foreign currency will constitute only a partial hedge up to the amount of the
premium received, and the Portfolio could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may be used to hedge against
fluctuations in exchange rates although, in the event of exchange rate movements
adverse to the Portfolio's position, it may not forfeit the entire amount of the
premium plus related transaction costs. In addition, the Portfolio may purchase
call options on currency when the Portfolio Advisor anticipates that the
currency will appreciate in value.
There is no assurance that a liquid secondary market on an options
exchange will exist for any particular option, or at any particular time. If the
Portfolio is unable to effect a closing purchase transaction with respect to
covered options it has written, the Portfolio will not be able to sell the
underlying currency or dispose of assets held in a segregated account until the
options expire. Similarly, if the Portfolio is unable to effect a closing sale
transaction with respect to options it has purchased, it would have to exercise
<PAGE>
A-20
the options in order to realize any profit and will incur transaction costs upon
the purchase or sale of underlying currency. The Portfolio pays brokerage
commissions or spreads in connection with its options transactions.
As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-rated currency options. The
Portfolio's ability to terminate over-the-counter options ("OTC Options") will
be more limited than the exchange-traded options. It is also possible that
broker-dealers participating in OTC Options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, the
Portfolio will treat purchased OTC Options and assets used to cover written OTC
Options as illiquid securities. With respect to options written with primary
dealers in U.S. Government securities pursuant to an agreement requiring a
closing purchase transaction at a formula price, the amount of illiquid
securities may be calculated with reference to the repurchase formula.
Options on Stock. The Portfolio may write and purchase options on
stocks. Each Portfolio which invests in equity securities may write or purchase
options on stock. A call option gives the purchaser of the option the right to
buy, and obligates the writer to sell, the underlying stock at the exercise
price at any time during the option period. Similarly, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy the
underlying stock at the exercise price at any time during the option period. A
covered call option with respect to which the Portfolio owns the underlying
stock sold by the Portfolio exposes the Portfolio during the term of the option
to possible loss of opportunity to realize appreciation in the market price of
the underlying stock or to possible continued holding of a stock which might
otherwise have been sold to protect against depreciation in the market price of
the stock. A covered put option sold by the Portfolio exposes the Portfolio
during the term of the option to a decline in price of the underlying stock.
To close out a position when writing covered options, the Portfolio may
make a "closing purchase transaction" which involves purchasing an option on the
same stock with the same exercise price and expiration date as the option which
it has previously written on the stock. The Portfolio will realize a profit or
loss for a closing purchase transaction if the amount paid to purchase an option
is less or more, as the case may be, than the amount received from the sale
thereof. To close out a position as a purchaser of an option, the Portfolio may
make a "closing sale transaction" which involves liquidating the Portfolio's
position by selling the option previously purchased.
Options on Securities Indexes. Each Portfolio may purchase and write
put and call options on securities indexes listed on domestic and, in the case
of those Portfolios which may invest in foreign securities, on foreign
exchanges. A securities index fluctuates with changes in the market values of
the securities included in the index.
Options on securities indexes are generally similar to options on stock
except that the delivery requirements are different. Instead of giving the right
to take or make delivery of stock at a specified price, an option on a security
index gives the holders the right to receive a cash "exercise settlement amount"
<PAGE>
A-21
equal to (a) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of the exercise, multiplied by
(b) a fixed "index multiplier." Receipt of this cash amount will depend upon the
closing level of the index upon which the option is based being greater than, in
the case of a call, or less than, in the case of a put, the exercise price of
the option. The amount of cash received will be equal to such difference between
the closing price of the index and the exercise price of the option expressed in
dollars or a foreign currency, as the case may be, times a specified multiple.
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. The writer may offset its position in securities
index options prior to expiration by entering into a closing transaction on an
exchange or the option may expire unexercised.
To the extent permitted by U.S. federal or state securities laws, the
International Equity Portfolio may invest in options on foreign stock indexes in
lieu of direct investment in foreign securities. The Portfolio may also use
foreign stock index options for hedging purposes.
Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular security, whether the
Portfolio will realize a gain or loss from the purchase or writing of options on
an index depends upon movements in the level of securities prices in the market
generally or, in the case of certain indexes, in an industry or market segment,
rather than movements in price of a particular security. Accordingly, successful
use by a Portfolio of options on security indexes will be subject to the
Portfolio Advisor's ability to predict correctly movement in the direction of
that securities market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual securities.
Forward Currency Contracts. Each Portfolio that may invest in foreign
currency-denominated securities may hold currencies to meet settlement
requirements for foreign securities and may engage in currency exchange
transactions in order to protect against uncertainty in the level of future
exchange rates between a particular foreign currency and the U.S. dollar or
between foreign currencies in which the Portfolio's securities are or may be
denominated. Forward currency contracts are agreements to exchange one currency
for another-for example, to exchange a certain amount of U.S. dollars for a
certain amount of French francs at a future date. The date (which may be any
agreed-upon fixed number of days in the future), the amount of currency to be
exchanged and the price at which the exchange will take place will be negotiated
with a currency trader and fixed for the term of the contract at the time that
the Portfolio enters into the contract.
In hedging specific portfolio positions, a Portfolio may enter into a
forward contract with respect to either the currency in which the positions are
denominated or another currency deemed appropriate by the Portfolio Advisor. The
amount the Portfolio may invest in forward currency contracts is limited to the
amount of the Portfolio's aggregate investments in foreign currencies. Risks
associated with entering into forward currency contracts include the possibility
that the market for forward currency contracts may be limited with respect to
<PAGE>
A-22
certain currencies and, upon a contract's maturity, the inability of a Portfolio
to negotiate with the dealer to enter into an offsetting transaction. Forward
currency contracts may be closed out only by the parties entering into an
offsetting contract. In addition, the correlation between movements in the
prices of those contracts and movements in the price of the currency hedged or
used for cover will not be perfect. There is no assurance that an active forward
currency contract market will always exist. These factors will restrict a
Portfolio's ability to hedge against the risk of devaluation of currencies in
which a Portfolio holds a substantial quantity of securities and are unrelated
to the qualitative rating that may be assigned to any particular security. See
Part B for further information concerning forward currency contracts.
Asset Coverage. To assure that a Portfolio's use of futures and related
options, as well as when-issued and delayed-delivery transactions, forward
currency contracts and swap transactions, are not used to achieve investment
leverage, the Portfolio will cover such transactions, as required under
applicable SEC interpretations, either by owning the underlying securities or by
establishing a segregated account with the Portfolio Trust's custodian
containing high grade liquid debt securities in an amount at all times equal to
or exceeding the Portfolio's commitment with respect to these instruments or
contracts.
Certain Investment Restrictions. Each Portfolio has adopted certain
investment restrictions that are enumerated in detail in Part B. Among other
restrictions, each Portfolio may not, with respect to 75% of its total assets
taken at market value, invest more than 5% of its total assets in the securities
of any one issuer, except U.S. Government securities, or acquire more than 10%
of any class of the outstanding voting securities of anyone issuer. In addition,
except as described herein with respect to the Municipal Bond Portfolio, each
Portfolio may not invest more than 25% of its total assets in securities of
issuers in any one industry. Each Portfolio may borrow money as a temporary
measure from banks in an aggregate amount not exceeding one-third of the value
of the Portfolio's total assets to meet redemptions and for other temporary or
emergency purposes not involving leveraging. Reverse repurchase agreements and
forward roll transactions involving mortgage related securities will be
aggregated with bank borrowings for purposes of this calculation. No Portfolio
may purchase securities while borrowings exceed 5% of the value of the
Portfolio's total assets. No Portfolio will invest more than 15% of the value of
its net assets in securities that are illiquid, including certain government
stripped mortgage related securities, repurchase agreements maturing in more
than seven days an that cannot be liquidated prior to maturity and securities
that are illiquid by virtue of the absence of a readily available market.
Securities that have legal or contractual restrictions on resale but have a
readily available market, such as certain 144A securities, are deemed not
illiquid for this purpose. No Portfolio may invest more than 10% of its assets
in restricted securities (excluding 144A securities).
Portfolio Turnover. No Portfolio will trade in securities for short
term profits but, when circumstances warrant, securities may be sold without
regard to the length of time held. An annual portfolio turnover rate of 100%
would occur when all the securities held by the Portfolio are replaced one time
during a period of one year. for the year ended December 31, 1995, the annual
turnover rate of each Portfolio was as follows: Emerging Growth Portfolio -
109%;
<PAGE>
A-23
International Equity Portfolio - 90%; Growth & Income Portfolio - 102%; Growth
Growth & Income Portfolio II - 0.96%; Balanced Portfolio - 121% (equity
investments - 104%, fixed-income investments - 149%); Income Opportunity
Portfolio - 120%; Bond Portfolio - 78%; Bond Portfolio II - 0.80%%; and
Municipal Bond Portfolio - 54%. A portfolio turnover of approximately 100% may
be higher than those of other mutual funds. A Portfolio with a higher portfolio
turnover rate will have higher brokerage transaction expenses and a higher
incident of realized capital gains.
Item 5. Management of the Portfolio Trust.
The Board of Trustees of the Portfolio Trust provides broad supervision
over the affairs of the Portfolio Trust. A majority of the Portfolio Trust's
Trustees are not affiliated with the Advisor nor the Portfolio Advisors.
A majority of the disinterested Trustees have adopted written
procedures reasonably appropriate to deal with potential conflicts of interest
arising from the fact that the same individuals are trustees of the Portfolio
Trust and certain investors in the Portfolio Trust, up to and including creating
a separate board of trustees. See "Management of the Portfolio Trust" in Part B
for more information about the Trustees and officers of the Portfolio Trust.
Advisor
Touchstone Advisors, Inc., located at 311 Pike Street, Cincinnati, Ohio
45202, serves as the investment advisor to the Portfolio Trust and, accordingly,
as advisor to each of the Portfolios. The Advisor is wholly-owned subsidiary of
IFS Financial Services, Inc., which is a wholly-owned subsidiary of Western-
Southern Life Assurance Company. Western-Southern Life Assurance Company is a
wholly-owned subsidiary of The Western and Southern Life Insurance Company.
The Portfolio Trust (as to each of the Portfolios) has entered into an
investment advisory agreement (the "Advisory Agreements") with the Advisor
which, in turn, has entered into a portfolio advisory agreement ("Portfolio
Agreement") with investment advisors (the "Portfolio Advisor"), selected by the
Advisor for the Portfolios. It is the Advisor's responsibility to select,
subject to the review and approval of the Board of Trustees of the Portfolio
Trust, Portfolio Advisors who have distinguished themselves by able performance
in their respective areas of expertise in asset management and to review their
continued performance.
Subject to the supervision and direction of the Board of Trustees, the
Advisor provides investment management evaluation services principally by
performing initial due diligence on prospective Portfolio Advisors and
thereafter monitoring Portfolio Advisor performance through quantitative and
qualitative analysis as well as periodic in-person, telephonic and written
consultations with Portfolio Advisors. In evaluating prospective Portfolio
Advisors, the Advisor considers, among other factors, each Portfolio Advisor's
level of expertise; relative performance and consistency of performance over a
minimum period of five years; level of adherence to investment discipline or
philosophy; personnel, facilities and financial strength; and quality of service
and client communications. The Advisor has responsibility for communicating
performance
<PAGE>
A-24
expectations and evaluations to each Portfolio Advisor and ultimately
recommending to the Board of Trustees of the Portfolio Trust whether the
Portfolio Advisor's contract should be renewed, modified or terminated. The
Advisor provides written reports to the Board of Trustees regarding the results
of its evaluation and monitoring functions. The Advisor is also responsible for
conducting all operations of the Portfolios except those operations
subcontracted to the Portfolio Advisors, or contracted by the Portfolio Trust to
the custodian, transfer agent and Administrator.
The Portfolio Advisor of each Portfolio makes all the day-to-day
decisions to buy or sell particular portfolio securities.
The Emerging Growth Portfolio will be managed by two Portfolio
Advisors, each managing a portion of the Portfolio's assets. The Advisor will
allocate varying percentages of the assets of the Portfolio to each Portfolio
Advisor, which percentages will be adjusted from time to time by the Advisor
based on its evaluation of each Portfolio Advisor.
The Balanced Portfolio will also be managed by two Portfolio Advisors.
One Portfolio Advisor will manage the Portfolio's equity investments, while the
second will manage the Portfolio's fixed-income and cash equivalents
investments. The Advisor may adjust from time to time the portion of the
Balanced Portfolio's assets invested in equities and fixed-income securities,
although the Portfolio is expected to remain relatively static in its investment
allocation between equities and fixed-income securities.
Each Portfolio pays the Advisor a fee for its services that is computed
daily and paid monthly at an annual rate equal to the percentage of the value of
the average daily net assets of the Portfolio as follows: Emerging Growth
Portfolio - 0.80%; International Equity Portfolio - 0.95%; Growth & Income
Portfolio - 0.75%; Growth & Income Portfolio II - 0.75%; Balanced Portfolio -
0.70%; Income Opportunity Portfolio - 0.65%; Bond Portfolio - 0.55%; Bond
Portfolio II - 0.55%; and Municipal Bond Portfolio - 0.55%. The investment
advisory fee paid by the Emerging Growth Portfolio, Growth & Income Portfolio,
Growth & Income Portfolio II and International Equity Portfolio is higher than
that of most mutual funds. The Advisor in turn pays each Portfolio Advisor a fee
for its services provided to the Portfolio that is computed daily and paid
monthly at an annual rate equal to the percentage specified below of the value
of the average daily net assets of the Portfolio:
Emerging Growth Portfolio
David L. Babson & Company, Inc. 0.50%
y Capital Management 0.45% of the first $10 million
Company, Inc. 0.40% of the next $40 million
0.35% thereafter
International Equity Portfolio
BEA Associates 0.85% on the first $30 million
0.80% on the next $20 million
0.70% on the next $20 million
0.60% thereafter
<PAGE>
A-25
Growth & Income Portfolio and Growth & Income Portfolio II
Fort Washington Investment 0.45%
Advisors, Inc.
Balanced Portfolio
Harbor Capital Management 0.50% of the first $75 million
Company Inc. 0.40% of the next $75 million
0.30% thereafter
Balanced Portfolio
Morgan Grenfell Capital 0.35% on the first $40 million
Management, Inc. 0.30% thereafter
Income Opportunity Portfolio
Alliance Capital Management L.P. 0.40% on the first $50 million
0.35% on the next $20 million
0.30% on the next $20 million
0.25% thereafter
Bond Portfolio and Bond Portfolio II
Fort Washington Investment 0.30%
Advisors, Inc.
Municipal Bond Portfolio
Neuberger & Berman 0.25% of the first $100 million
0.20% of the next $100 million
0.15% thereafter
Fort Washington Investment Advisors, Inc. is an affiliate of the
Advisor, and investors should be aware that the Advisor may be subject to a
conflict of interest when making decisions regarding the retention and
compensation of Fort Washington and may be subject to such a conflict concerning
other particular Portfolio Advisors. However, the Advisor's decisions, including
the identity of a Portfolio Advisor and the specific amount of the Advisor's
compensation to be paid to the Portfolio Advisor, are subject to review and
approval by a majority of the Board of Trustees and separately by a majority of
such Trustees who are not affiliated with the Advisor or any of its affiliates.
Consultant to the Investment Advisor
RogersCasey Consulting, Inc. ("RogersCasey") located at 85 Old Kings
Highway, North Darien, Connecticut 06820, has been engaged in the business of
rendering portfolio advisor evaluations since 1976. The staff at RogersCasey is
experienced in acting as investment consultants and in developing, implementing
and managing multiple portfolio advisor programs. RogersCasey provides asset
management consulting services to various institutional and individual clients
and provides the Advisor with investment consulting services with respect to
development, implementation and management of the Portfolio Trust's multiple
portfolio manager program. RogersCasey is employed by and its fees are paid by
the Advisor (not by the Portfolio Trust). As consultant, RogersCasey provides
research concerning registered investment advisors to be retained by the Advisor
as portfolio advisors, monitors and assists the Advisor with the periodic
<PAGE>
A-26
reevaluation of existing portfolio advisors and makes periodic reports to the
Advisor, and the Board of Trustees of the Portfolio Trust.
Portfolio Advisors
Subject to the supervision and direction of the Advisor and,
ultimately, the Board of Trustees, each Portfolio Advisor manages the securities
held by the Portfolio it serves in accordance with the Portfolio's stated
investment objective and policies, making investment decisions for the Portfolio
and placing orders to purchase and sell securities on behalf of the Portfolio.
The following sets forth certain information about each of the
Portfolio Advisors. The individual employed by the Portfolio Advisor who is
primarily responsible for the day-to-day investment management of the Portfolio
is named below.
David L. Babson & Company, Inc. ("Babson") serves as one of two
Portfolio Advisors to Emerging Growth Portfolio. As of June 30, 1995, Babson
became a separate and distinct indirect subsidiary of MassMutual Holding
Company. Babson has been registered as an investment advisor under the Advisers
Act of 1940, as amended ("Advisers Act"), since 1940. Babson provides investment
advisory services to individual and institutional clients. As of December 31,
1995, Babson and affiliates had assets under management of $12.6 billion. Eugene
H. Gardner, Jr., Peter C. Schlieman and Lance F. James are primarily responsible
for the day-to-day investment management of the portion of the Portfolio's
assets allocated to Babson by the Advisor. Mr. Gardner has been with Babson
since 1990, Mr. Schlieman has been with Babson since 1979 and Mr. James has been
with the firm since 1986. Babson's principal executive offices are located at
One Memorial Drive, Cambridge, Massachusetts 02142-1300.
Westfield Capital Management Company, Inc. ("Westfield") serves as the
second Portfolio Advisor to Emerging Growth Portfolio. Westfield is owned 100%
by the active members of its professional staff. Westfield has been registered
as an investment advisor under the Advisers Act since 1989. Westfield provides
investment advisory services to individual and institutional clients. As of
December 31, 1995, Westfield had assets under management of $959 million.
Michael J. Chapman (CFA) is primarily responsible for the day-to-day investment
management of the portion of the Portfolio's assets allocated to Westfield by
the Advisor. Mr. Chapman has been with Westfield since 1990, after 9 years with
Eaton Vance Corporation in Boston, Massachusetts. Westfield's principal
executive offices are located at One Financial Center, Boston, Massachusetts
02111.
BEA Associates serves as Portfolio Advisor to International Equity
Portfolio. BEA Associates is a New York general partnership and is owned 80% by
Credit Swisse Capital Corporation and 20% by CS Advisors Corp., a New York
corporation which is a subsidiary of CS Capital. BEA Associates has been
registered as an investment advisor under the Advisers Act since 1968. BEA
Associates provides investment advisory services to individual and institutional
clients. As of December 31, 1995, BEA Associates had assets under management of
$27.4 billion. The Portfolio is managed using a team approach co-headed by
<PAGE>
A-27
William Sterling and Emilio Bassini (CPA). Regional portfolio managers include
Stephen Swift, Steven Bleiberg and Richard Watt. The managers have an average of
17 years experience in the industry, ranging from 13 years to 24 years. BEA
Associates's principal executive offices are located at 153 East 53rd Street,
New York, New York 10022.
Fort Washington Investment Advisors, Inc. ("Fort Washington") serves as
the Portfolio Advisor to Growth & Income Portfolio and Growth & Income Portfolio
II. Fort Washington is owned by The Western and Southern Life Insurance Company.
Fort Washington has been registered as an investment advisor under the Advisers
Act since 1990. Fort Washington provides investment advisory services to
individual and institutional clients. As of December 31, 1995, Fort Washington
had assets under management of $7.2 billion. John O'Connor is primarily
responsible for the day-to-day investment management of the Portfolios. Mr.
O'Connor (CFA and CPA) joined Western-Southern/Fort Washington in 1988 and is
the Senior Portfolio Manager and Director of Investment Research. Fort
Washington's principal executive offices are located at 420 East Fourth Street,
Cincinnati, Ohio 45202.
Harbor Capital Management Company, Inc. ("Harbor") serves as Portfolio
Advisor to the equity portion of Balanced Portfolio. Harbor is 85% owned by the
employees of the firm and 15% by Baer Holding Limited of Zurich. Harbor has been
registered as an investment advisor under the Advisers Act since 1979. Harbor
provides investment advisory services to individual and institutional clients.
As of December 31, 1995, Harbor had assets under management of $3.6 billion.
Alan S. Fields and Ben Niedermeyer are primarily responsible for the day-to-day
investment management of the equity portion of the Portfolio. Mr. Fields has
been a Managing Director at Harbor since 1979 and portfolio manager with Harbor
since 1992. Harbor's principal executive offices are located at 125 High Street,
26th Floor, Boston, Massachusetts 02110.
Morgan Grenfell Capital Management, Inc. ("Morgan Grenfell") serves as
Portfolio Advisor to the fixed-income portion of Balanced Portfolio. Morgan
Grenfell is owned 100% by Deutsch Bank. Morgan Grenfell has been registered as
an investment advisor under the Advisors Act since 1985. Morgan Grenfell
provides investment advisory services to individual and institutional clients.
As of December 31, 1995, Morgan Grenfell had assets under management of $7.9
billion. David W. Baldt is primarily responsible for the day-to-day investment
management of the fixed-income portion of the Portfolio. Mr. Baldt (CFA) joined
Morgan Grenfell in 1989. Morgan Grenfell's principal executive offices are
located at 885 Third Avenue, New York, New York 10022.
Alliance Capital Management L.P. ("Alliance") serves as Portfolio
Advisor to Income Opportunity Portfolio. Alliance is owned 8% by its employees
and 59% by The Equitable Life Assurance Society of the United States. The
balance of its units are is publicly traded. Alliance has been registered as an
investment advisor under the Advisors Act since 1971. Alliance provides
investment advisory services to individual and institutional clients. As of
December 31, 1995, Alliance had assets under management of $146.5 billion. Wayne
Lyski and Vickie Fuller are primarily responsible for the day-to-day investment
management of the Portfolio. Mr. Lyski has been with Alliance since 1983 and has
22 years of
<PAGE>
A-28
investment experience. Ms. Fuller (CPA) and has been with the Alliance since
1985 and has 15 years of investment experience. Alliance's principal executive
offices are located at 1345 Avenue of the Americas, New York, New York 10105.
Fort Washington also serves as Portfolio Advisor to the Bond Portfolio
and Bond Portfolio II. Roger Lanham, Rance Duke and Brendan White are primarily
responsible for the day-to-day investment management of the Portfolios. Mr.
Lanham is a CFA and has been with Western-Southern/Fort Washington since 1980.
Mr. Duke has been with Western and Southern/Fort Washington since 1978. Mr.
White is a CFA and has been with Western and Southern/Fort Washington since
1993.
Neuberger & Berman serves as Portfolio Advisor to Municipal Bond
Portfolio. Neuberger & Berman is 100% employee owned. Neuberger & Berman has
been registered as an investment advisor under the Advisors Act since 1966.
Neuberger & Berman provides investment advisory services to individual and
institutional clients. As of December 31, 1995, Neuberger & Berman had assets
under management of $38 billion. Theresa Havell is primarily responsible for the
day-to-day investment management of the Portfolio. Ms. Havell has been
affiliated with Neuberger & Berman since 1986. Neuberger & Berman's principal
executive offices are located at 605 Third Avenue, New York, New York
10158-3698.
Administrator
Signature Financial Services, Inc., located at 6 St. James Avenue,
Boston Massachusetts 02116, serves as administrator and fund accounting agent to
both the Portfolio Trust pursuant to an agreement ("Administrative Services and
Fund Accounting Agreement"). Pursuant to the Administrative Services and Fund
Accounting Agreement, Signature provides the Portfolio Trust with general office
facilities and supervises the overall administration of the Portfolio Trust,
including, among other responsibilities, the negotiation of contracts and fees
with, and the monitoring of performance and billings of, the independent
contractors and agents of the Portfolio Trust; the preparation and filing of all
documents required for compliance by the Portfolio Trust with applicable laws
and regulations; and arranging for the maintenance of books and records of the
Portfolio Trust. Signature provides persons satisfactory to the Board of
Trustees of the Portfolio Trust to serve as certain officers of the Portfolio
Trust. Such officers, as well as certain other employees and Trustees of the
Portfolio Trust, may be directors, officers or employees of Signature or its
affiliates.
For the services to be rendered by Signature, each Portfolio shall pay
to Signature administrative services and fund accounting fees computed and paid
monthly that are equal, in the aggregate, to 0.20% on an annual basis of the
average daily net assets of all the Portfolios and other funds for which the
Advisor and Signature provide their respective services. After $100 million of
total assets, this fee is reduced according to an asset schedule down to a
<PAGE>
A-29
minimum of 0.05%. After the total fees owing to Signature are determined, each
Portfolio will be allocated its pro rata share on the basis of average daily net
assets. In addition each Portfolio is subject to a minimum annual administrative
services and fund accounting fee. See "Management of the Portfolio Trust" in
Part B.
Custodian and Transfer Agent
Investors Bank & Trust Company ("IBT") is located at 89 South Street,
Boston, Massachusetts 02111, and serves as custodian of each Portfolio's
investments. IBT also serves as the Portfolio Trust's transfer agent.
Allocation of Expenses of the Portfolios
Each Portfolio bears its own expenses, which generally include all
costs not specifically borne by the Advisor, the Portfolio Advisors and the
Administrator. Included among a Portfolio's expenses are: costs incurred in
connection with its organization; investment management and administration fees;
fees for necessary professional and brokerage services; fees for any pricing
service; the costs of regulatory compliance; and costs associated with
maintaining the Portfolio Trust's legal existence and shareholder relations.
Item 6. Capital Stock and Other Securities.
The Portfolio Trust was 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 separate series of the Portfolio Trust. Each
investor is entitled to a vote in proportion to the amount of its investment in
each Portfolio. Investments in the Portfolios may not be transferred, but an
investor may withdraw all or any portion of his investment at any time at net
asset value. Investors in the Portfolios (e.g., investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of each Portfolio. However, the risk of an investor
in the Portfolios incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and each
Portfolio itself was unable to meet its obligations. For additional information,
please refer to Part B.
The Portfolio Trust reserves the right to create and issue a number of
series, in which case investments in each series would participate equally in
earnings and assets of the particular series. Currently, the Portfolio Trust has
nine series: Emerging Growth Portfolio, International Equity Portfolio, Income
Opportunity Portfolio, Bond Portfolio, Bond Portfolio II, Balanced Portfolio,
Growth & Income Portfolio, Growth & Income Portfolio II and Municipal Bond
Portfolio.
Investments in the Portfolios have no pre-emptive or conversion rights
and are fully paid and non-assessable, except as set forth below. The Portfolio
Trust is not required and has no current intention to hold annual meetings of
investors, but the Portfolio 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. Changes in fundamental policies will be submitted to
<PAGE>
A-30
investors for approval. Investors have under certain circumstances (e.g. upon
application and submission of certain specified documents to the Trustees by a
specified percentage of the aggregate value of the Portfolio Trust's outstanding
interests) the right to communicate with other investors in connection with
requesting a meeting of investors for the purpose of removing one or more
Trustees. Investors also have the right to remove one or more Trustees without a
meeting by a declaration in writing by a specified number of investors. Upon
liquidation of a Portfolio, investors would be entitled to share pro rata in the
net assets of the Portfolio available for distribution to investors.
The net asset value of each Portfolio is determined each day on which
the New York Stock Exchange Inc. ("NYSE") is open for trading ("Fund Business
Day") (and on such other days as are deemed necessary in order to comply with
Rule 22c-1 under the 1940 Act). This determination is made as of the close of
regular trading on the NYSE which is currently 4:00 p.m., New York time (the
"Valuation Time").
Each investor in the Portfolios may add to or reduce its investment in
each Portfolio on each Fund Business Day. At each Valuation Time on each such
business day, the value of each investor's beneficial interest in each Portfolio
will be determined by multiplying the net asset value of a Portfolio by the
percentage, effective for that day, that represents that investor's share of the
aggregate beneficial interests in the Portfolio. Any additions or withdrawals,
which are to be effected on that day, will then be effected. The investor's
percentage of the aggregate beneficial interests in each Portfolio will then be
recomputed as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in each Portfolio as of the Valuation
Time, on such day plus or minus, as the case may be, the amount of any additions
to or withdrawals from the investor's investment in each Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset value of
each Portfolio as of the Valuation Time, on such day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investments in each Portfolio by all investors in each Portfolio. The percentage
so determined will then be applied to determine the value of the investor's
interest in each Portfolio as of the Valuation Time, on the following business
day of each Portfolio.
The net income of each Portfolio shall consist of (i) all income
accrued, less the amortization of any premium, on the assets of each Portfolio,
less (ii) all actual and accrued expenses of each Portfolio determined in
accordance with generally accepted accounting principles ("Net Income").
Interest income includes discount earned (including both original issue and
market discount) on discount paper accrued ratably to the date of maturity and
any net realized gains or losses on the assets of the Portfolio. All the Net
Income of each Portfolio is allocated pro rata among the investors in each
Portfolio. The Net Income is accrued daily and distributed monthly to the
investors in each Portfolio.
Under the anticipated method of operation of the Portfolios, the
Portfolios will not be subject to any income tax. However, each investor in the
Portfolios will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolios' ordinary income and
capital gain in determining its income tax liability. The determination of such
share will
<PAGE>
A-31
be made in accordance with the Internal Revenue Code of 1986, as amended (the
"Code"), and regulations promulgated thereunder.
It is intended that the Portfolios' assets, income and distributions
will be managed in such a way that an investor in the Portfolios will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolios.
Securities that are primarily traded on foreign exchanges are generally
valued at the preceding closing values of the securities on their respective
exchanges, except that, when an occurrence subsequent to the time a value was so
established is likely to have changed that value, the fair market value of those
securities will be determined by consideration of other factors by or under the
direction of the Board of Trustees of the Portfolio Trust. A security that is
primarily traded on a domestic or foreign stock exchange is valued at the last
sale price on that exchange or, if no sales occurred during the day, at the
current quoted bid price. All short-term dollar-denominated investments that
mature in 60 days or less are valued on the basis of amortized cost (which
involves valuing an investment at its cost and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the effect of
fluctuating interest rates on the market value of the investment) which the
Board of Trustees of the Portfolio Trust has determined represents fair value.
An option that is written by a Portfolio is generally valued at the last sale
price or, in the absence of the last sale price, the last offer price. An option
that is purchased by a Portfolio is generally valued at the last sale price or,
in the absence of the last sale price, the last bid price. The value of a
futures contract is equal to the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract on the valuation date of the futures contract. A settlement price may
not be used if the market rises or falls the maximum allowed amount with respect
to a particular futures contract or if the securities underlying the futures
contract experience significant price fluctuations after the determination of
the settlement price. When a settlement price cannot be used, futures contracts
will be valued at their fair market value as determined by or under the
direction of the Board of Trustees of the Portfolio Trust.
All assets and liabilities initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between the bid and
offered quotations of the currencies against U.S. dollars as last quoted by any
recognized dealer. If the bid and offered quotations are not available, the rate
of exchange will be determined in good faith by the Board of Trustees of the
Portfolio Trust. In carrying out the valuation policies of the Board of Trustees
of the Portfolio Trust, independent pricing services may be consulted. Further
information regarding the Portfolio Trust's valuation policies is contained in
Part B.
Item 7. Purchase of Securities Being Offered.
Beneficial interests in the Portfolio Trust are issued solely in
private placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. See "General Description of
Registrant" above.
<PAGE>
A-32
An investment in the Portfolio Trust may be made without a sales load.
All investments are made at the net asset value next determined if an order is
received by the Portfolio Trust by the designated cutoff time for each
accredited investor. The net asset value of each Portfolio is determined on each
Fund Business Day. Each Portfolio's portfolio securities are valued primarily on
the basis of market quotations or, if quotations are not readily available, by a
method which the Board of Trustees believes accurately reflects fair value.
There is no minimum initial or subsequent investment in the Portfolio
Trust. However, because each Portfolio intends to be as fully invested at all
times as is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Portfolio Trust's custodian bank by a Federal Reserve Bank).
The Portfolio Trust and Touchstone Securities, Inc. ("Touchstone
Securities") reserve the right to cease accepting investments in the Portfolios
at any time or to reject any investment order.
The placement agent for the Portfolios is Touchstone Securities. The
principal business address of is 311 Pike Street, Cincinnati, Ohio 45202.
Touchstone Securities receives no additional compensation for serving as the
placement agent for the Portfolios.
Item 8. Redemption or Repurchase.
An investor in the Portfolios may withdraw all or any portion of its
investment at the net asset value next determined if a withdrawal request in
proper form is furnished by the investor to the Portfolios by the designated
cutoff time for each accredited investor. The proceeds of a withdrawal will be
paid by the Portfolios in federal funds normally on the Fund Business Day the
withdrawal is effected, but in any event within seven days. The Portfolios
reserve the right to pay redemptions in kind. Investments in the Portfolios may
not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the NYSE is closed (other than weekends or holidays)
or trading on such exchange is restricted, or, to the extent otherwise permitted
by the 1940 Act, if an emergency exists.
Item 9. Pending Legal Proceedings.
Not applicable.
<PAGE>
IFS0051D
SELECT ADVISORS PORTFOLIOS
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 Portfolio Trust . . . . . . . . . . B-22
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . B-25
Investment Advisory and Other Services . . . . . . . B-26
Brokerage Allocation and Other Practices . . . . . . B-30
Capital Stock and Other Securities . . . . . . . . . B-32
Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . B-34
Tax Status . . . . . . . . . . . . . . . . . . . . . B-35
Underwriters . . . . . . . . . . . . . . . . . . . . B-36
Calculation of Performance Data . . . . . . . . . . . B-36
Financial Statements . . . . . . . . . . . . . . . . B-36
Appendix A . . . . . . . . . . . . . . . . . . . . . Appendix A-1
Appendix B . . . . . . . . . . . . . . . . . . . . . Appendix B-1
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objectives and Policies.
Part A contains additional information about the investment objectives
and policies of Emerging Growth Portfolio, International Equity Portfolio,
Growth & Income Portfolio, Growth & Income Portfolio II, Balanced Portfolio,
Income Opportunity Portfolio, Bond Portfolio, Bond Portfolio II and Municipal
Bond Portfolio (each a "Portfolio," and collectively, the "Portfolios"), each a
series of Select Advisors Portfolios (the "Portfolio Trust"). This Part B should
only be read in conjunction with Part A. This section contains supplemental
information concerning the types of securities and other instruments in which
each Portfolio may invest, the investment policies and portfolio strategies that
each Portfolio may utilize and certain risks attendant to those investments,
policies and strategies.
Certificates of Deposit and Bankers' Acceptances. Certificates of
deposit are receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Bankers' acceptances
<PAGE>
B-2
typically arise from short-term credit arrangements designed to enable
businesses to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.
Commercial Paper. Commercial paper consists of short-term (usually from
1 to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which is
a type of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
For a description of commercial paper ratings, see the Appendix A to
this Part B.
Lower-Rated Debt Securities. While the market for high yield corporate
debt securities has been in existence for many years and has weathered previous
economic downturns, the 1980's brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and restructuring.
Past experience may not provide an accurate indication of future performance of
the high yield bond market, especially during periods of economic recession. In
fact, from 1989 to 1991, the percentage of lower-rated debt securities that
defaulted rose significantly above prior levels.
The market for lower-rated debt securities may be thinner and less
active than that for higher rated debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not available,
lower- rated debt securities will be valued in accordance with procedures
established by the Board of Trustees of the Portfolio Trust, including the use
of outside pricing services. Judgment plays a greater role in valuing high yield
corporate debt securities than is the case for securities for which more
external sources for quotations and last sale information is available. Adverse
publicity and changing investor perception may affect the ability of outside
pricing services to value lower-rated debt securities and the ability to dispose
of these securities.
In considering investments for the Portfolio, the Portfolio Advisor
will attempt to identify those issuers of high yielding debt securities whose
financial condition is adequate to meet future obligations, has improved or is
expected to improve in the future. The Portfolio Advisor's analysis focuses on
relative values based on such factors as interest or dividend coverage, asset
coverage, earnings prospects and the experience and managerial strength of the
issuer.
<PAGE>
B-3
A Portfolio may choose, at its expense or in conjunction with others,
to pursue litigation or otherwise exercise its rights as a security holder to
seek to protect the interest of security holders if it determines this to be in
the best interest of the Portfolio.
Illiquid Securities. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the "1933
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the 1933 Act are referred to as "private placements"
or "restricted securities" and are purchased directly from the issuer or in the
secondary market. Investment companies do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and an
investment company might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. An investment company might
also have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
The Securities and Exchange Commission (the "SEC") has adopted Rule
144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act of resales of certain securities to qualified institutional buyers. The
Advisor and each Portfolio Advisor anticipates that the market for certain
restricted securities such as institutional commercial paper will expand further
as a result of this regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National Association
of Securities Dealers, Inc.
Each Portfolio Advisor will monitor the liquidity of Rule 144A
securities in the respective Portfolio's portfolio under the supervision of the
Portfolio Trust's Board of Trustees. In reaching liquidity decisions, each
Portfolio Advisor will consider, among other things, the following factors: (1)
the frequency of trades and quotes for the security; (2) the number of dealers
and other potential purchasers wishing to purchase or sell the security; (3)
dealer undertakings to make a market in the security and (4) the nature of the
security
<PAGE>
B-4
and of the marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of the transfer).
Foreign Securities: Special Considerations Concerning Eastern Europe.
Investments in companies domiciled in Eastern European countries may be subject
to potentially greater risks than those of other foreign issuers. These risks
include: (i) potentially less social, political and economic stability; (ii) the
small current size of the markets for such securities and the low volume of
trading, which result in less liquidity and in greater price volatility; (iii)
certain national policies which may restrict the Portfolios' investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; (v) the absence
of developed legal structures governing private or foreign investment or
allowing for judicial redress for injury to private property; (vi) the absence,
until recently in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the possibility that recent
favorable economic developments in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such countries, or in the
Commonwealth of Independent States (formerly the Union of Soviet Socialist
Republics).
So long as the Communist Party continues to exercise a significant or,
in some cases, dominant role in Eastern European countries, investments in such
countries will involve risks of nationalization, expropriation and confiscatory
taxation. The Communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in many cases
without adequate compensation, and there may be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
a Portfolio could lose a substantial portion of any investments it has made in
the affected countries. Further, no accounting standards exist in Eastern
European countries. Finally, even though certain Eastern European currencies may
be convertible into U.S. dollars, the conversion rates may be artificial in
relation to the actual market values and may be adverse to the Portfolio's
shareholders.
Lending of Portfolio Securities. By lending its securities, a Portfolio
can increase its income by continuing to receive interest on the loaned
securities as well as by either investing the cash collateral in short-term
securities or obtaining yield in the form of interest paid by the borrower when
U.S. Government obligations are used as collateral. There may be risks of delay
in receiving additional collateral or risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially. Each Portfolio will adhere to the following
conditions whenever its securities are loaned: (i) the Portfolio must receive at
least 100 percent cash collateral or equivalent securities from the borrower;
(ii) the borrower must increase this collateral whenever the market value of the
securities including accrued interest rises above the level of the collateral;
(iii) the Portfolio must be able to terminate the loan at any time; (iv) the
Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and any
increase in market value; (v) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a material event
adversely
<PAGE>
B-5
affecting the investment occurs, the Board of Trustees must terminate the loan
and regain the right to vote the securities.
Municipal Obligations - Municipal Bond Portfolio
Municipal Bonds. Municipal bonds generally fund longer-term capital
needs than municipal notes and have maturities exceeding one year when issued.
The Municipal Bond Portfolio may invest in municipal bonds. Municipal bonds
include:
General Obligation Bonds. Issuers of general obligation bonds include
states, counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and sewer
systems. The basic security behind general obligation bonds is the issuer's
pledge of its full faith and credit and taxing power for the payment of
principal and interest. The taxes that can be levied for the payment of debt
service may be limited or unlimited as to the rate or amount of special
assessments.
Revenue Bonds. The principal security for a revenue bond is generally
the net revenues derived from a particular facility, group of facilities or, in
some cases, the proceeds of a special excise tax or other specific revenue
source. Revenue bonds are issued to finance a wide variety of capital projects,
including electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund that may be used
to make principal and interest payments on the issuer's obligations. Housing
finance authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, certificates
of deposit and/or the net revenues from housing or other public projects. Some
authorities provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
Private Activity Bonds. Private activity bonds, which are considered
Municipal Obligations if the interest paid thereon is excluded from gross income
for federal income tax purposes but is a specific tax preference item for
federal individual and corporate alternative minimum tax purposes, are issued by
or on behalf of public authorities to raise money to finance various
privately-operated facilities such as manufacturing facilities, certain hospital
and university facilities and housing projects. These bonds are also used to
finance public facilities such as airports, mass transit systems and ports. The
payment of the principal and interest on these bonds is dependent solely on the
ability of the facility's user to meet its financial obligations generally and
the pledge, if any, of real and personal property so financed as security for
payment.
Municipal Notes. Municipal notes generally fund short-term capital
needs. Municipal notes, include:
Tax Anticipation Notes. Tax anticipation notes are issued to
finance working capital needs of municipalities. Generally, they
are issued in anticipation of various seasonal tax revenue, such as
<PAGE>
B-6
income, sales, use and business taxes, and are payable from
these specific future taxes.
Revenue Anticipation Notes. Revenue anticipation notes are
issued in expectation of receipt of other types of revenue,
such as federal revenues available under federal revenue
sharing programs.
Bond Anticipation Notes. Bond anticipation notes are issued to
provide interim financing until long-term financing can be
arranged. In most cases, the long-term bonds provide funds for
the repayment of these notes.
Miscellaneous, Temporary and Anticipatory Instruments. These
instruments may include notes issued to obtain interim
financing pending entering into alternate financial
arrangements, such as receipt of anticipated federal, state or
other grants or aid, passage of increased legislative
authority to issue longer-term instruments or obtaining other
refinancing.
Construction Loan Notes. Construction loan notes are sold to
provide construction financing. Permanent financing, the
proceeds of which are applied to the payment of construction
loan notes, is sometimes provided by a commitment of the
Government National Mortgage Association ("GNMA") to purchase
the loan, accompanied by a commitment by the Federal Housing
Administration to insure mortgage advances thereunder. In
other instances, permanent financing is provided by
commitments of banks to purchase the loan. The Municipal Bond
Portfolio will only purchase construction loan notes that are
subject to permanent GNMA or bank purchase commitments.
Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is issued
by agencies of state and local governments to finance seasonal working capital
needs or as short-term financing in anticipation of longer-term financing.
Standby Commitments. The Portfolio may acquire standby commitments or
"puts" solely to facilitate portfolio liquidity; the Portfolio intends to
exercise its rights thereunder for trading purposes. The maturity of a Municipal
Obligation is not to be considered shortened by any standby commitment to which
the obligation is subject. Thus, standby commitments do not affect the
dollar-weighted average maturity of the Portfolio.
When Municipal Obligations are subject to puts separate from the
underlying securities, no value is assigned to the put. Because of the
difficulty of evaluating the likelihood of exercise or the potential benefit of
a put, the Board of Trustees has determined that puts shall have a fair market
value of zero, regardless of whether any direct or indirect consideration was
paid.
<PAGE>
B-7
Since the value of the put is partly dependent on the ability of the
put writer to meet its obligation to repurchase, the Portfolio's policy is to
enter into put transactions only with put writers who are approved by the
Portfolio Advisor. It is the Portfolio's general policy to enter into put
transactions only with those put writers which are determined to present minimal
credit risks. In connection with this determination, the Board of Trustees will
review regularly the Portfolio Advisor's list of approved put writers, taking
into consideration, among other things, the ratings, if available, of their
equity and debt securities, their reputation in the municipal securities
markets, their net worth, their efficiency in consummating transactions and any
collateral arrangements, such as letters of credit securing the puts written by
them. Commercial banks normally will be members of the Federal Reserve System,
and other dealers will be members of the National Association of Securities
Dealers, Inc. or members of a national securities exchange. Other put writers
will have outstanding debt rated Aa or better by Moody's Investors Service, Inc.
("Moody's") or AA or better by Standard & Poor's Corporation ("S&P"), or will be
of comparable quality in the Portfolio Advisor's opinion, or such put writers'
obligations will be collateralized and of comparable quality in the Portfolio
Advisor's opinion. The Board of Trustees has directed each Portfolio Advisor not
to enter into put transactions with any put writer that, in the judgment of the
Portfolio Advisor using the above-described criteria, is or becomes a
recognizable credit risk. The Portfolio Trust is unable to predict whether all
or any portion of any loss sustained could subsequently be recovered from a put
writer in the event that a put writer should default on its obligation to
repurchase an underlying security.
Futures Contracts and Options on Futures Contracts
General. The successful use of such instruments draws upon the
Portfolio Advisor's skill and experience with respect to such instruments and
usually depends on the Portfolio Advisor's ability to forecast interest rate and
currency exchange rate movements correctly. Should interest or exchange rates
move in an unexpected manner, a Portfolio may not achieve the anticipated
benefits of futures contracts or options on futures contracts or may realize
losses and thus will be in a worse position than if such strategies had not been
used. In addition, the correlation between movements in the price of futures
contracts or options on futures contracts and movements in the price of the
securities and currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
Futures Contracts. A Portfolio may enter into contracts for the
purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indexes including any index of U.S.
Government securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange. A Portfolio may enter into futures
contracts which are based on debt securities that are backed by the full faith
and credit of the U.S. Government,
<PAGE>
B-8
such as long-term U.S. Treasury Bonds, Treasury Notes, GNMA modified
pass-through mortgage-backed securities and three-month U.S. Treasury Bills. A
Portfolio may also enter into futures contracts which are based on bonds issued
by entities other than the U.S. Government.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Portfolio will incur brokerage fees when it purchases or sells futures
contracts.
The purpose of the acquisition or sale of a futures contract, in the
case of a Portfolio which holds or intends to acquire fixed-income securities,
is to attempt to protect the Portfolio from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities or
foreign currencies. For example, if interest rates were expected to increase,
the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt security in the Portfolio would decline, but the
value of the futures contracts to the Portfolio would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio from
declining as much as it otherwise would have. The Portfolio could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Portfolio to maintain a defensive position
without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
<PAGE>
B-9
contracts should be similar to those of debt securities, a Portfolio could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market.
When a Portfolio enters into a futures contract for any purpose, the
Portfolio will establish a segregated account with the Portfolio's custodian to
collateralize or "cover" the Portfolio's obligation consisting of cash, cash
equivalents or high grade liquid debt securities from its portfolio in an amount
equal to the difference between the fluctuating market value of such futures
contracts and the aggregate value of the initial and variation margin payments
made by the Portfolio with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Portfolio Advisor may
still not result in a successful transaction.
In addition, futures contracts entail risks. Although each applicable
Portfolio Advisor believes that use of such contracts will benefit the
respective Portfolio, if the Portfolio Advisor's investment judgment about the
general direction of interest rates is incorrect, a Portfolio's overall
performance would be poorer than if it had not entered into any such contract.
For example, if a Portfolio has hedged against the possibility of an increase in
interest rates which would adversely affect the price of debt securities held in
its portfolio and interest rates decrease instead, the Portfolio will lose part
or all of the benefit of the increased value of its debt securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if a Portfolio has insufficient cash, it may have
to sell debt securities from its portfolio to meet daily variation margin
requirements. Such sales of bonds may be, but will not necessarily be, at
increased prices which reflect the rising market. A Portfolio may have to sell
securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts. Each Portfolio may purchase and write
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
<PAGE>
B-10
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Portfolio is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may purchase a put option on a futures contract to hedge
its portfolio against the risk of rising interest rates.
The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The Portfolio will not enter into any futures contracts or options on
futures contracts if immediately thereafter the amount of margin deposits on all
the futures contracts of the Portfolio and premiums paid on outstanding options
on futures contracts owned by the Portfolio would exceed 5% of the market value
of the total assets of the Portfolio.
Options on Foreign Currencies. Options on foreign currencies are used
for hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts, are utilized. For example, a decline
in the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their value
in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Portfolio may purchase put
options on the foreign currency. If the value of the currency does decline, a
Portfolio will have the right to sell such currency for a fixed amount in
dollars
<PAGE>
B-11
and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Portfolio could sustain losses on
transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
Options on foreign currencies may be written for the same types of
hedging purposes. For example, where a Portfolio anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the options will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
Certain Portfolios intend to write covered call options on foreign
currencies. A call option written on a foreign currency by a Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in cash, U.S. Government securities and other high quality liquid
debt securities in a segregated account with its custodian.
<PAGE>
B-12
Certain Portfolios also intend to write call options on foreign
currencies that are not covered for cross-hedging purposes. A call option on a
foreign currency is for cross-hedging purposes if it is not covered, but is
designed to provide a hedge against a decline in the U.S. dollar value of a
security which the Portfolio owns or has the right to acquire and which is
denominated in the currency underlying the option due to an adverse change in
the exchange rate. In such circumstances, the Portfolio collateralizes the
option by maintaining in a segregated account with its custodian, cash or U.S.
Government securities or other high quality liquid debt securities in an amount
not less than the value of the underlying foreign currency in U.S. dollars
marked to market daily.
Additional Risks of Options on Futures Contracts, Forward Contracts and
Options on Foreign Currencies. Unlike transactions entered into by a Portfolio
in futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign
<PAGE>
B-13
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.
As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. A
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.
Options on Securities. The respective Portfolios may write (sell),to a
limited extent, only covered call and put options on a security then held in its
portfolio ("covered options") in an attempt to increase income. However, the
Portfolio may forgo the benefits of appreciation on securities sold or may pay
more than the market price on securities acquired pursuant to call and put
options written by the Portfolio.
When a Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio will realize
income in an amount equal to the premium received for writing the option. If the
option is exercised, a decision over which the Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the exercise
price. By writing a covered call option, the Portfolio forgoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.
<PAGE>
B-14
When a Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at the exercise price. By writing
a covered put option, the Portfolio, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price. The Portfolio will only write put options involving
securities that the Portfolio owns, or which the Portfolio wishes to acquire at
the exercise price.
A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." Where the Portfolio cannot effect a closing purchase transaction,
it may be forced to incur brokerage commissions or dealer spreads in selling
securities it receives or it may be forced to hold underlying securities until
an option is exercised or expires.
When a Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount
of the deferred credit will be subsequently marked to market to reflect the
current market value of the option written. The current market value of a traded
option is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written.
Securities against which options are written will be segregated on the
books of the custodian for the Portfolio. If the Portfolio does not own the
security on which the option is written, the Portfolio will "cover" its
obligation by placing high grade liquid debt securities in a segregated account
at the Portfolio's custodian.
A Portfolio may purchase call and put options on any securities in
which it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio, in exchange for the premium paid,
to purchase a security at a specified price during the option period. The
Portfolio would ordinarily have a gain if the value of the securities increased
above the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price during
the option period.
<PAGE>
B-15
A Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell a security, which may or may not be held in the Portfolio's portfolio, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's portfolio securities. Put options also may be purchased by the
Portfolio for the purpose of affirmatively benefiting from a decline in the
price of securities which the Portfolio does not own. The Portfolio would
ordinarily recognize a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would recognize a loss if
the value of the securities remained at or above the exercise price. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.
Each Portfolio has adopted certain other nonfundamental policies
concerning option transactions which are discussed below. The Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.
A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Portfolio Advisor will
monitor the creditworthiness of dealers with whom a Portfolio enters into such
options transactions under the general supervision of the Board of Trustees.
Options on Securities Indexes. Such options give the holder the right
to receive a cash settlement during the term of the option based upon the
difference between the exercise price and the value of the index. Such options
will be used for the purposes described above under "Options on Securities" or,
to the extent allowed by law, as a substitute for investment in individual
securities.
<PAGE>
B-16
Options on securities indexes entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close out
options positions on securities indexes is more likely to occur, although the
Portfolio generally will only purchase or write such an option if the Portfolio
Advisor believes the option can be closed out.
Use of options on securities indexes also entails the risk that trading
in such options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolio will not purchase such options unless
the Advisor and the respective Portfolio Advisor each believes the market is
sufficiently developed such that the risk of trading in such options is no
greater than the risk of trading in options on securities.
Price movements in a Portfolio's portfolio may not correlate precisely
with movements in the level of an index and, therefore, the use of options on
indexes cannot serve as a complete hedge. Because options on securities indexes
require settlement in cash, the Portfolio Advisor may be forced to liquidate
portfolio securities to meet settlement obligations.
When a Portfolio writes a put or call option on a securities index it
will cover the position by placing high grade liquid debt instruments in a
segregated asset account with the Portfolio's custodian.
Forward Currency Contracts. Because, when investing in foreign
securities,a Portfolio buys and sells securities denominated in currencies other
than the U.S. dollar and receives interest, dividends and sale proceeds in
currencies other than the U.S. dollar, such Portfolios from time to time may
enter into forward currency transactions to convert to and from different
foreign currencies and to convert foreign currencies to and from the U.S.
dollar. A 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 currency contracts to purchase or sell foreign currencies.
A forward currency contract is an obligation by a Portfolio to purchase
or sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract. Forward currency contracts establish an
exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. A forward currency contract generally has
no deposit requirement and is traded at a net price without commission. Each
Portfolio maintains with its custodian a segregated account of high grade liquid
assets in an amount at least equal to its obligations under each forward
currency contract. Neither spot transactions nor forward currency contracts
eliminate fluctuations in the prices of the Portfolio's securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.
A Portfolio may enter into foreign currency hedging transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect for
<PAGE>
B-17
currency parities will be incorporated into a Portfolio Advisor's long-term
investment decisions, a Portfolio will not routinely enter into foreign currency
hedging transactions with respect to security transactions; however, the
Portfolio Advisors believe that it is important to have the flexibility to enter
into foreign currency hedging transactions when it determines that the
transactions would be in a Portfolio's best interest. Although these
transactions tend to minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of the hedged currency increase. The precise
matching of the forward currency contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of such securities between the date the forward currency
contract is entered into and the date it matures. The projection of currency
market movements is extremely difficult, and the successful execution of a
hedging strategy is highly uncertain.
While these contracts are not presently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward currency contracts. In
such event the Portfolio's ability to utilize forward currency contracts in the
manner set forth in the Prospectus may be restricted. Forward currency contracts
may reduce the potential gain from a positive change in the relationship between
the U.S. dollar and foreign currencies. Unanticipated changes in currency prices
may result in poorer overall performance for the Portfolio than if it had not
entered into such contracts. The use of foreign currency forward currency
contracts may not eliminate fluctuations in the underlying U.S. dollar
equivalent value of the prices of or rates of return on a Portfolio's foreign
currency denominated portfolio securities and the use of such techniques will
subject a Portfolio to certain risks.
The matching of the increase in value of a forward currency contract
and the decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, a Portfolio may not always be able to enter into foreign
currency forward currency contracts at attractive prices and this will limit the
Portfolio's ability to use such contract to hedge or cross-hedge its assets.
Also, with regard to a Portfolio's use of cross-hedges, there can be no
assurance that historical correlations between the movement of certain foreign
currencies relative to the U.S. dollar will continue. Thus, at any time poor
correlation may exist between movements in the exchange rates of the foreign
currencies underlying a Portfolio's cross-hedges and the movements in the
exchange rates of the foreign currencies in which the Portfolio's assets that
are the subject of such cross-hedges are denominated.
Rating Services
The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection of
portfolio investments, the Portfolio Advisors also make their own evaluation of
these securities, subject to review by the Board of Trustees of the Portfolio
<PAGE>
B-18
Trust. After purchase by a Portfolio, an obligation may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event would require a Portfolio to eliminate the obligation from its
portfolio, but a Portfolio Advisor will consider such an event in its
determination of whether a Portfolio should continue to hold the obligation. A
description of the ratings used herein and in Part A is set forth in the
Appendix A to this Part B.
Investment Restrictions
The following investment restrictions are "fundamental policies" of
each Portfolio and may not be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio. "Majority of the outstanding
voting securities" under the Investment Company Act of 1940, as amended (the
"1940 Act"), and as used in this Part B and Part A, means, with respect to the
Portfolio, the lesser of (i) 67% or more of the outstanding voting securities of
the Portfolio present at a meeting, if the holders of more than 50% of the
outstanding voting securities of the Portfolio are present or represented by
proxy or (ii) more than 50% of the outstanding voting securities of the
Portfolio.
As a matter of fundamental policy, no Portfolio may:
(1) borrow money or mortgage or hypothecate assets of the Portfolio,
except that in an amount not to exceed 1/3 of the current value of the
Portfolio's net assets, it may borrow money (including through reverse
repurchase agreements, forward roll transactions involving mortgage-backed
securities or other investment techniques entered into for the purpose of
leverage), and except that it may pledge, mortgage or hypothecate not more than
1/3 of such assets to secure such borrowings, provided that collateral
arrangements with respect to options and futures, including deposits of initial
deposit and variation margin, are not considered a pledge of assets for purposes
of this restriction and except that assets may be pledged to secure letters of
credit solely for the purpose of participating in a captive insurance company
sponsored by the Investment Company Institute; for additional related
restrictions, see clause (i) under the caption "State and Federal Restrictions"
below;
(2) underwrite securities issued by other persons except insofar as the
Portfolios may technically be deemed an underwriter under the 1933 Act in
selling a portfolio security;
(3) make loans to other persons except: (a) through the lending of the
Portfolio's portfolio securities and provided that any such loans not exceed 30%
of the Portfolio's total assets (taken at market value); (b) through the use of
repurchase agreements or the purchase of short-term obligations; or (c) by
purchasing a portion of an issue of debt securities of types distributed
publicly or privately ;
(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (except
that the
<PAGE>
B-19
Portfolio may hold and sell, for the Portfolio's portfolio, real estate acquired
as a result of the Portfolio's ownership of securities);
(5) concentrate its investments in any particular industry (excluding
U.S. Government securities), but if it is deemed appropriate for the achievement
of a Portfolio's investment objective(s), up to 25% of its total assets may be
invested in any one industry;
(6) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction; and
(7) with respect to 75% of its total assets taken at market value,
invest in assets other than cash and cash items (including receivables), U.S.
Government securities, securities of other investment companies and other
securities for purposes of this calculation limited in respect of any one issuer
to an amount not greater in value than 5% of the value of the total assets of
the Portfolio and to not more than 10% of the outstanding voting securities of
such issuer.
State and Federal Restrictions. In order to comply with certain state
and federal statutes and policies each Portfolio will not as a matter of
"operating policy" (changeable by the Board of Trustees without a shareholder
vote):
(i) borrow money (including through reverse repurchase agreements
or forward roll transactions involving mortgage-backed
securities or similar investment techniques entered into for
leveraging purposes), except that the Portfolio may borrow for
temporary or emergency purposes up to 10% of its total assets;
provided, however, that no Portfolio may purchase any security
while outstanding borrowings exceed 5%;
(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's total assets (taken at market value),
provided that collateral arrangements with respect to options
and futures, including deposits of initial deposit and
variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this
restriction;
(iii) purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;
(iv) sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a
right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities
sold and provided
<PAGE>
B-20
that if such right is conditional the sale is made upon the
same conditions;
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of
merger or consolidation; provided, however, that securities of
any investment company will not be purchased for the Portfolio
if such purchase at the time thereof would cause: (a) more
than 10% of the Portfolio's total assets (taken at the greater
of cost or market value) to be invested in the securities of
such issuers; (b) more than 5% of the Portfolio's total assets
(taken at the greater of cost or market value) to be invested
in any one investment company; or (c) more than 3% of the
outstanding voting securities of any such issuer to be held
for the Portfolio; provided further that, except in the case
of a merger or consolidation, the Portfolio shall not purchase
any securities of any open-end investment company unless the
Portfolio (1) waives the investment advisory fee, with respect
to assets invested in other open-end investment companies and
(2) incurs no sales charge in connection with the investment;
(vii) invest more than 15% of the Portfolio's net assets (taken at
the greater of cost or market value) in securities that are
illiquid or not readily marketable (defined as a security that
cannot be sold in the ordinary course of business within seven
days at approximately the value at which the Portfolio has
valued the security) not including (a) Rule 144A securities
that have been determined to be liquid by the Board of
Trustees; and (b) commercial paper that is sold under section
4(2) of the 1933 Act which: (i) is not traded flat or in
default as to interest or principal; and (ii) is rated in one
of the two highest categories by at least two nationally
recognized statistical rating organizations and the
Portfolio's Board of Trustees have determined the commercial
paper to be liquid; or (iii) is rated in one of the two
highest categories by one nationally recognized statistical
rating agency and the Portfolio's Board of Trustees have
determined that the commercial paper is equivalent quality and
is liquid;
(viii) invest more than 5% of the Portfolio's total assets in
securities issued by issuers which (including the period of
operation of any predecessor or unconditional guarantor of
such issuer) have been in operation less than three years;
(ix) invest more than 10% of the Portfolio's total assets in
securities that are restricted from being sold to the public
without registration under the 1933 Act (other than Rule 144A
Securities deemed liquid by the Portfolio Trust's Board of
Trustees;
<PAGE>
B-21
(x) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio to hold more than 10% of any
class of securities of such issuer, for which purposes all
indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be
subject to this restriction;
(xi) purchase or retain in the Portfolio's portfolio any securities
issued by an issuer any of whose officers, directors, trustees
or security holders is an officer or Trustee of the Portfolio
Trust, or is an officer or partner of the Advisor, if after
the purchase of the securities of such issuer for the
Portfolio one or more of such persons owns beneficially more
than 1/2 of 1% of the shares or securities, or both, all taken
at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities, or
both, all taken at market value;
(xii) invest more than 5% of the Portfolio's net assets in warrants
(valued at the lower of cost or market) (other than warrants
acquired by the Portfolio as part of a unit or attached to
securities at the time of purchase), but not more than 2% of
the Portfolio's net assets may be invested in warrants not
listed on the New York Stock Exchange Inc. ("NYSE") or the
American Stock Exchange;
(xiii) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into
or exchangeable, without payment of any further consideration,
for securities of the same issue and equal in amount to, the
securities sold short, and unless not more than 10% of the
Portfolio's net assets (taken at market value) is represented
by such securities, or securities convertible into or
exchangeable for such securities, at any one time (the
Portfolios have no current intention to engage in short
selling);
(xiv) purchase puts, calls, straddles, spreads and any combination
thereof if by reason thereof the value of the Portfolio's
aggregate investment in such classes of securities will exceed
5% of its total assets;
(xv) write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the investment policies of the Portfolio
and the option is issued by the Options Clearing Corporation,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b)
the aggregate value of the obligations underlying the puts
determined as of the date the options are sold shall not
exceed 50% of the Portfolio's net assets; (c) the securities
subject to the exercise of the call written by the Portfolio
must be owned by the Portfolio at the time the call is
<PAGE>
B-22
sold and must continue to be owned by the Portfolio until the
call has been exercised, has lapsed, or the Portfolio has
purchased a closing call, and such purchase has been
confirmed, thereby extinguishing the Portfolio's obligation to
deliver securities pursuant to the call it has sold; and (d)
at the time a put is written, the Portfolio establishes a
segregated account with its custodian consisting of cash or
short-term U.S. Government securities equal in value to the
amount the Portfolio will be obligated to pay upon exercise of
the put (this account must be maintained until the put is
exercised, has expired, or the Portfolio has purchased a
closing put, which is a put of the same series as the one
previously written); and
(xvi) buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or financial futures or
options on financial futures unless such options are written
by other persons and: (a) the options or futures are offered
through the facilities of a national securities association or
are listed on a national securities or commodities exchange,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b)
the aggregate premiums paid on all such options which are held
at any time do not exceed 20% of the Portfolio's total net
assets; and (c) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed
5% of the Portfolio's total assets.
Each Portfolio will comply with the applicable investment limitations found
in the state securities laws and regulations of all states in which any
registered investment company investing in the Portfolio is registered.
Item 14. Management of the Portfolio Trust.
The Trustees and officers of the Portfolio 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 Portfolio
Trust. Unless otherwise indicated below, the address of each Trustee and officer
is 311 Pike Street, Cincinnati, Ohio 45202.
Trustees of the Portfolio Trust
*EDWARD G. HARNESS, JR. (age 47) -- Trustee and President; Director,
President and Chief Executive Officer, Touchstone Advisor, Inc. ("Touchstone")
(since December, 1993); Director, Chief Executive Officer, Touchstone
Securities, Inc. ("Touchstone Securities") (since October, 1991); President, IFS
Financial Services, Inc. (since November, 1990); President, Landmark Financial
Corporation (prior to July, 1990).
*WILLIAM J. WILLIAMS (age 80) -- Trustee; Chairman of the Board of
Directors, The Western and Southern Life Insurance Company (since 1984). His
address is 400 Broadway, Cincinnati, OH 45202.
<PAGE>
B-23
JOSEPH S. STERN, JR., (age 78) -- Trustee; Retired Professor Emeritus,
College of Business, University of Cincinnati. His Address is 3 Grandin Place,
Cincinnati, OH 45208.
PHILLIP R. COX (age 48) -- Trustee; President and Chief Executive
Officer, Cox Financial Corp. (prior to 1989); Director, Federal Reserve Bank of
Cleveland (since January, 1994); Director, Cincinnati Bell, Inc. (since March,
1993); Director, PNC Bank (since October, 1992); Director, CINergy (since May,
1994). His address is 4199 Crossgate Lane, Cincinnati, OH 45236.
ROBERT E. STAUTBERG (age 61) -- Trustee; Director, Scripps Howard
Broadcasting Co. (since May, 1989); Retired Partner, KPMG Peat Marwick (prior to
1989); Trustee, Good Samaritan Hospital (since January, 1988); Trustee and
Director of other not for profit organizations. His address is 4815 Drake Road,
Cincinnati, OH 45243.
DAVID POLLAK (age 79) -- Trustee; Retired; President, Ultimate
Distributing Company (prior to 1994); Vice Chairman and Director, Continental
Steel (prior to 1986); Director Emeritus, Fifth Third Bank; Trustee Emeritus,
Cornell University; Trustee and officer of other not for profit organizations.
His address is 1313 Kemper, Suite III, Cincinnati, OH 45246.
Officers of the Portfolio Trust
EDWARD S. HEENAN (age 52) -- Treasurer; Vice President and Controller,
Touchstone (since December, 1993); Director, Controller, Touchstone Securities
(since October, 1991); Vice President and Comptroller, The Western and Southern
Life Insurance Company (since 1987). His address is 400 Broadway, Cincinnati, OH
45202.
THOMAS M. LENZ (age 37) -- Secretary; Senior Vice President and
Associate General Counsel, Signature Financial Group, Inc. ("SFG") (since
November, 1989); Attorney, Ropes & Gray (prior to November, 1989). His address
is 6 St. James Avenue, Boston, MA 02116.
DAVID G. DANIELSON (age 31) -- Assistant Treasurer; Assistant Manager,
SFG (since May, 1991); Graduate Student, Northeastern University (from April,
1990 to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior
to March, 1990). His address is 6 St. James Avenue, Boston, MA 02116.
JOHN R. ELDER (age 47) -- Assistant Treasurer; Vice President, SFG
(since April, 1995); Treasurer, Phoenix Family of Mutual Funds (prior to April,
1995); Audit Manager, Price Waterhouse (prior to 1983). His address is 6 St.
James Avenue, Boston, MA 02116.
BRIAN J. HALL (age 30) -- Assistant Treasurer; Assistant Manager, SFG
(since November, 1991); Senior State Regulation Administrator (prior to
November, 1991) The Boston Company. His address is 6 St. James Avenue, Boston,
MA 02116.
<PAGE>
B-24
BRIAN J. MANLEY (age 32) -- Assistant Treasurer; Vice President and
Chief Financial Officer, Touchstone (since December, 1993); Vice President and
Chief Financial Officer, Touchstone Securities (since November, 1991); Assistant
Controller, The Union Central Life Insurance Company (prior to 1991).
DANIEL E. SHEA (age 33) -- Assistant Treasurer; Assistant Manager, SFG
(since November 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to November 1993). His address is 6 St. James Avenue, Boston,
MA 02116.
LINDA T. GIBSON (age 30) -- Assistant Secretary; Vice President, Global
Product Management and Assistant Secretary, SFG (since May, 1992); student,
Boston University School of Law (September, 1989 to May, 1992). Her address is 6
St. James Avenue, Boston, MA 02116.
MOLLY S. MUGLER (age 44) -- Assistant Secretary; Legal Counsel and
Assistant Secretary, SFG (since December, 1988). Her address is 6 St. James
Avenue, Boston, MA 02116.
ANDRES E. SALDANA (age 33) -- Assistant Secretary; Legal Counsel, SFG
(since November, 1992); Attorney, Ropes & Gray (September, 1990 to November,
1992). His address is 6 St. James Avenue, Boston, MA 02116.
Messrs. Danielson, Elder, Hall, Lenz, Saldana and Shea and Mss. Gibson
and Mugler also hold similar positions for affiliates of SFG and for other
investment companies for which SFG or an affiliate serves as administrator or
principal underwriter.
No director, officer or employee of the Advisor, the Portfolio
Advisors, the Administrator or any of their affiliates will receive any
compensation from the Portfolio Trust for serving as an officer or Trustee of
the Portfolio Trust. The Portfolio Trust, Select Advisors Trust A, Select
Advisors Trust C and Select Advisors Variable Insurance Trust (the "Fund
Complex") pays in the aggregate, each Trustee who is not a director, officer or
employee of the Advisor, the Portfolio Advisors, the Administrator or any of
their affiliates an annual fee of $5,000, respectively, per annum plus $1,000,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses. For the year ended December 31, 1995 the Portfolio Trust
incurred $15,849 in aggregate Trustee fees and expenses. The following table
reflects fees paid for the same period.
<PAGE>
B-25
Trustee Compensation Table
Total Compensation
Compensation from
from Portfolio Trust
Name of Person, Portfolio and Fund Complex
Position Trust Paid to Trustees
Joseph S. Stern, Jr., $1,394 $10,000
Trustee of Portfolio
Trust
Phillip R. Cox, $1,394 $10,000
Trustee of Portfolio
Trust
Robert E. Stautberg, $1,394 $10,000
Trustee of Portfolio
Trust
David Pollak, $1,606 $9,000
Trustee of Portfolio
Trust
As of April 1, 1996, the Trustees and officers of the Portfolio Trust
owned in the aggregate less than 1% of the shares of any Portfolio or the
Portfolio Trust (all series taken together).
The Portfolio Trust's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Portfolio Trust, unless, as to liability to the Portfolio Trust
or the investors in the Portfolio Trust, it is finally adjudicated that they
engaged in wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in their offices, or unless with respect to any other
matter it is finally adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interests of the Portfolio
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 wilful misfeasance, bad faith, gross negligence or reckless disregard
of their duties.
Item 15. Control Persons and Principal Holders of Securities.
As of March 31, 1996, the following series (each a "Fund," and
collectively, the "Funds") of Select Advisors Trust A and Select Advisors Trust
C (the "Trusts") owned the following percentage of the corresponding Portfolio's
outstanding interests: Touchstone Emerging Growth Fund A and Touchstone Emerging
Growth Fund C owned 66.9% and 33.1%, respectively, of the value of the
<PAGE>
B-26
outstanding interests in the Emerging Growth Portfolio; Touchstone Growth and
Income Fund A owned 9.5% of the value of the outstanding interests in the Growth
and Income Portfolio; Touchstone International Equity Fund A and Touchstone
International Equity Fund C owned 51.3% and 48.7%, respectively, of the value of
the outstanding interests in the International Equity Portfolio; Touchstone
Balanced Fund A and Touchstone Balanced Fund C owned 52.0% and 48.0%,
respectively, of the value of the outstanding interests in the Balanced
Portfolio; Touchstone Income Opportunity Fund A and Touchstone Income
Opportunity Fund C owned 53.2% and 46.8%, respectively, of the value of the
outstanding interests in the Income Opportunity Portfolio; and Touchstone
Municipal Bond Fund A and Touchstone Municipal Bond Fund C owned 54.3% and
45.7%, respectively, of the value of the outstanding interests in the Municipal
Bond Portfolio. As of February 28, 1995, the following series of The
Western-Southern Life Insurance Company Separate Account A (each, a "Separate
Account") owned the following percentage of the corresponding Portfolio's
outstanding interests: Equity Portfolio owned 88.4% and 100%, respectively, of
the value of the outstanding interests in the Growth & Income Portfolio and the
Growth & Income Portfolio II, respectively; and the Bond Portfolio 93.1% and
100%, respectively, of the value of the outstanding interests in the Bond
Portfolio and the Bond Portfolio II, respectively. Because each Fund or The
Western-Southern Life Insurance Company Separate Account A controls the
corresponding Portfolio, it may take actions without the approval of any other
investor in the Portfolios or any other series of the Trust/Separate Account, as
the case may be.
Each Fund has informed the Trusts that except as permitted by the SEC,
whenever it is requested to vote on matters pertaining to the fundamental
policies of each Portfolio, the Fund will hold a meeting of shareholders and
will cast its votes as instructed by the Fund's shareholders. It is anticipated
that other registered investment companies investing in the Portfolios will
follow the same or a similar practice.
Item 16. Investment Advisory and Other Services.
Advisor
Touchstone Advisors, Inc. (the "Advisor") provides service to each
Portfolio pursuant to Investment Advisory Agreements with the Portfolio Trust
(the "Advisory Agreements"). The services provided by the Advisor consist of
directing and supervising each Portfolio Advisor, reviewing and evaluating the
performance of each Portfolio Advisor and determining whether or not any
Portfolio Advisor should be replaced. The Advisor furnishes at its own expense
all facilities and personnel necessary in connection with providing these
services. Each respective Advisory Agreement will continue in effect if such
continuance is specifically approved at least annually by the Board of Trustees
and by a majority of the Trustees who are not parties to the Advisory Agreement
or interested persons of any such party, at a meeting called for the purpose of
voting on the Advisory Agreement.
Each Advisory Agreement is terminable, with respect to a Portfolio,
without penalty on not more than 60 days' nor less than thirty days written
notice by the Portfolio Trust when authorized either by majority vote of the
investors in each Portfolio (with the vote of each being in proportion to the
amount of their investment) or by a vote of a majority of the Board of Trustees
or by the Advisor, and will automatically terminate in the event of its
assignment. Each
<PAGE>
B-27
Advisory Agreement provides that neither the Advisor 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 its services to the Portfolios,
except for wilful misfeasance, bad faith or gross negligence or reckless
disregard of its or their obligations and duties under the Advisory Agreement.
Part A contains a description of fees payable to the Advisor for
services under the Advisory Agreements.
For the periods indicated, each Portfolio incurred the following
investment advisory fees equal on an annual basis to the following percentages
of the average daily net assets of each Portfolio:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging International Growth & Income Municipal
Growth Equity Income Balanced Opportunity Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
For the $26,169 $43,963 $94,187 $16,553 $13,479 $62,478 $12,393
Year Ended
12/31/95
For the $3,865 $11,150 $18,075 $3,365 $3,073 $13,392 $2,657
Period
10/3/94* to
12/31/94
</TABLE>
Growth &
Income Bond
Portfolio Portfolio
II II
For the $88,934 $61,568
Year Ended
12/31/95
For the $8,015 $6,064
Period
11/21/94*
to 12/31/94
- ------------
* Commencement of operations
For the periods indicated, the Advisor has voluntarily agreed to
reimburse each Portfolio the following amounts:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging International Growth & Income Municipal
Growth Equity Income Balanced Opportunity Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
For the $65,261 $102,137 $37,425 $67,859 $69,419 $42,920 $67,966
Year Ended
12/31/95
For the $23,152 $16,652 $18,075 $24,761 $24,966 $13,392 $25,324
Period
10/3/94*
to
12/31/94
</TABLE>
<PAGE>
B-28
Growth &
Income Bond
Portfolio Portfolio
II II
For the $85,300 $69,754
Year Ended
12/31/95
For the $14,346 $15,160
Period
11/21/94*
to 12/31/94
- ------------
* Commencement of operations
Portfolio Advisors
The Advisor has, in turn, entered into a portfolio advisory agreement
(each a "Portfolio Agreement") with each Portfolio Advisor selected by the
Advisor for a Portfolio. Under the direction of the Advisor and, ultimately, of
the Board of Trustees of the Portfolio Trust, each Portfolio Advisor is
responsible for making all of the day-to-day investment decisions for the
respective Portfolio (or portion of a Portfolio).
Each Portfolio Advisor furnishes at its own expense all facilities and
personnel necessary in connection with providing these services. Each Portfolio
Agreement contains provisions similar to those described above with respect to
the Advisory Agreements.
Administrator
Pursuant to the administrative services and fund accounting agreement
(the "Administrative Services Agreement"), Signature Financial Services, Inc.
("Signature") provides the Portfolio Trust with general office facilities and
supervises the overall administration of the Portfolio Trust, including, among
other responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, the independent contractors and
agents of the Portfolio Trust; the preparation and filing of all documents
required for compliance by the Portfolio Trust with applicable laws and
regulations; and arranging for the maintenance of books and records of the
Portfolio Trust. The Administrator provides persons satisfactory to the Board of
Trustees of the Portfolio Trust to serve as officers of the Portfolio Trust.
Such officers, as well as certain other employees and Trustees of the Portfolio
Trust, may be directors, officers or employees of the Administrator or its
affiliates.
The Administrative Services Agreement provides that Signature shall
receive from each Portfolio administrative and fund accounting fees equal, in
the aggregate, on an annual basis to the following:
0.20% of the average daily net assets of all Select Advisory
Portfolios (as defined below) up to $100 million;
0.18% of the average daily net assets of all Select Advisory
Portfolios from $100 million to $200 million;
<PAGE>
B-29
0.12% of the average daily net assets of all Select Advisory
Portfolios from $200 million to $500 million;
0.08% of the average daily net assets of all Select Advisory
Portfolios from $500 million to $1 billion; and
0.05% of the average daily net assets of all Select Advisory
Portfolios greater than $1 billion.
(As used above, the term "Select Advisory Portfolios" includes all
registered investment companies (or series thereof) the securities
issued by which are not registered under the Securities Act of 1933, as
amended (the "1933 Act") and which invest in a portfolio of securities,
as opposed to investing all or most of their Assets in another
registered investment company, with which the Advisor has an investment
advisory agreement and with which Signature has an administrative
services and fund accounting agreement.)
In addition, each Portfolio is subject to a minimum annual
administrative services and fund accounting fee of $60,000 ($40,000 in the first
year of operations). This minimum fee is subject to increases depending on how
many investors a Portfolio has.
The Portfolios incurred the following administrative and fund accounting fees
for the periods indicated:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging International Growth & Income Municipal
Growth Equity Income Balanced Opportunity Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
For the Year $47,425 $56,773 $46,643 $47,446 $45,723 $47,775 $50,027
Ended
12/31/95
For the $9,753 $9,753 $9,753 $9,753 $9,753 $9,753 $9,753
Period
10/3/94* to
12/31/94
</TABLE>
Growth &
Income
Portfolio Bond
II Portfolio II
For the $46,743 $47,124
Year Ended
12/31/95
For the $4,384 $4,384
Period
11/21/94*
to 12/31/94
- ------------
* Commencement of operations
The Administrative Services Agreement provides that Signature may
render administrative services to others. The Administrative Services Agreement
also provides that neither the Administrator nor its personnel shall be liable
for any error of judgment or mistake of law or for any act or omission, except
for wilful misfeasance, bad faith or gross negligence in the performance of its
or their
<PAGE>
B-30
duties or by reason of reckless disregard of its or their obligations and duties
under the Administrative Services Agreement.
The Administrative Services Agreement terminates automatically if it is
assigned and may be terminated, with respect to a Portfolio, without penalty by
majority vote of the investors in the Portfolio (with the vote of each being in
proportion to the amount of their investment) or by either party on not more
than 60 days' nor less than thirty days written notice.
Signature is a wholly-owned subsidiary of SFG, a Delaware corporation.
Custodian and Transfer Agent
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts 02111, serves as custodian for each Portfolio pursuant to a
custody agreement. As custodian, IBT holds the Funds' and each Portfolio's
assets. IBT also serves as the Portfolio Trust's transfer agent.
Independent Accountants
Coopers & Lybrand L.L.P., are the independent certified public
accountants for the Portfolio Trust, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the SEC. The principal business address of Coopers & Lybrand L.L.P.
is One Post Office Square, Boston, Massachusetts 02109.
Item 17. Brokerage Allocation and Other Practices.
The Portfolio Advisors are responsible for decisions to buy and sell
securities, futures contracts and options on such securities and futures for
each Portfolio, the selection of brokers, dealers and futures commission
merchants to effect transactions and the negotiation of brokerage commissions,
if any. Broker-dealers may receive brokerage commissions on portfolio
transactions, including options, futures and options on futures transactions and
the purchase and sale of underlying securities upon the exercise of options.
Orders may be directed to any broker-dealer or futures commission merchant,
including to the extent and in the manner permitted by applicable law, the
Advisor, the Portfolio Advisors or their subsidiaries or affiliates. Purchases
and sales of certain portfolio securities on behalf of a Portfolio are
frequently placed by the Portfolio Advisor with the issuer or a primary or
secondary market- maker for these securities on a net basis, without any
brokerage commission being paid by the Portfolio. Trading does, however, involve
transaction costs. Transactions with dealers serving as market-makers reflect
the spread between the bid and asked prices. Purchases of underwritten issues
may be made which will include an underwriting fee paid to the underwriter.
The Portfolio Advisors seek to evaluate the overall reasonableness of
the brokerage commissions paid through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. In placing orders for the
purchase and sale of securities for a Portfolio, the Portfolio Advisors take
into account such factors as price, commission (if any, negotiable in the case
of
<PAGE>
B-31
national securities exchange transactions), size of order, difficulty of
execution and skill required of the executing broker-dealer. The Portfolio
Advisors review on a routine basis commission rates, execution and settlement
services performed, making internal and external comparisons.
The Portfolio Advisors are authorized, consistent with Section 28(e) of
the Securities Exchange Act of 1934, as amended, when placing portfolio
transactions for a Portfolio with a broker to pay a brokerage commission (to the
extent applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research, market or
statistical information. The term "research, market or statistical information"
includes advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts. A Portfolio Advisor may use this research
information in managing a Portfolio's assets, as well as the assets of other
clients.
Consistent with the policy stated above, the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. and such other policies as
the Board of Trustees may determine, the Portfolio Advisors may consider sales
of shares of the Portfolio Trust as a factor in the selection of broker-dealers
to execute portfolio transactions. The Portfolio Advisor will make such
allocations if commissions are comparable to those charged by nonaffiliated,
qualified broker-dealers for similar services.
Except for implementing the policies stated above, there is no
intention to place portfolio transactions with particular brokers or dealers or
groups thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to a Portfolio and to the corresponding
Portfolio Advisor, it is the opinion of the management of the Portfolios that
such information is only supplementary to the Portfolio Advisor's own research
effort, since the information must still be analyzed, weighed and reviewed by
the Portfolio Advisor's staff. Such information may be useful to the Portfolio
Advisor in providing services to clients other than the Portfolios, and not all
such information is used by the Portfolio Advisor in connection with the
Portfolios. Conversely, such information provided to the Portfolio Advisor by
brokers and dealers through whom other clients of the Portfolio Advisor effect
securities transactions may be useful to the Portfolio Advisor in providing
services to the Portfolios.
In certain instances there may be securities which are suitable for a
Portfolio as well as for one or more of the respective Portfolio Advisor's other
clients. Investment decisions for a Portfolio and for the Portfolio Advisor'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.
<PAGE>
B-32
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling that same security. Some simultaneous transactions
are inevitable when several clients receive investment advice from the same
investment advisor, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as a Portfolio in
concerned. However, it is believed that the ability of a Portfolio to
participate in volume transactions will produce better executions for the
Portfolio.
The Portfolios paid the following brokerage commissions for the periods
indicated:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Emerging International Growth & Income Municipal
Aggregate Growth Equity Income Balanced Opportunity Bond Bond
Commission Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
For the $9,127 $21,883 $34,430 $4,519 $0 $0 $0
Year Ended
12/31/95
For the $7,691 $23,432 $3,440 $2,106 $0 $0 $0
Period
10/3/94*
to
12/31/94
</TABLE>
Growth &
Income Bond
Aggregate Portfolio Portfolio
Commission II II
For the $30,788 None
Year Ended
12/31/95
For the $4,982 None
Period
11/21/94*
to
12/31/94
- ------------
* Commencement of operations
Item 18. Capital Stock and Other Securities.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in separate series, such as the Portfolios. No series of
the Portfolio Trust has any preference over any other series. Investors in the
<PAGE>
B-33
Portfolios are entitled to participate pro rata in distributions of taxable
income, loss, gain and credit of the Portfolios. Upon liquidation or dissolution
of the Portfolios, investors are entitled to share pro rata in the net assets of
the Portfolios available for distribution to investors. Investments in the
Portfolios have no preference, preemptive, conversion or similar rights and are
fully paid and nonassessable, except as set forth below. Investments in the
Portfolios may not be transferred.
Each investor in the Portfolios is entitled to a vote in proportion to
the amount of its investment. The Portfolios and the other series of the
Portfolio Trust will all vote together in certain circumstances (e.g., election
of the Portfolio Trust's Trustees and auditors, as required by the 1940 Act and
the rules thereunder). One or more series of the Portfolio Trust could control
the outcome of these votes. Investors do not have cumulative voting rights, and
investors holding more than 50% of the aggregate beneficial interests in the
Portfolio Trust, or in a series as the case may be, may control the outcome of
votes and in such event the other investors in the Portfolios, or in the series,
would not be able to elect any Trustee. The Portfolio Trust is not required and
has no current intention to hold annual meetings of investors but the Portfolios
will hold special meetings of investors when in the judgment of the Portfolio
Trust's Trustees it is necessary or desirable to submit matters for an investor
vote. No material amendment may be made to the Portfolio Trust's Declaration of
Trust without the affirmative majority vote of investors (with the vote of each
being in proportion to the amount of its investment).
The Portfolio Trust, with respect to each Portfolio, may enter into a
merger or consolidation, or sell all or substantially all of its assets, if
approved by the vote of two-thirds of the Portfolios' investors (with the vote
of each being in proportion to its percentage of the beneficial interests in a
Portfolio), except that if the Trustees of the Portfolio Trust recommend such
sale of assets, the approval by vote of a majority of the investors (with the
vote of each being in proportion to its percentage of the beneficial interests
of each Portfolio) will be sufficient. A Portfolio may also be terminated (i)
upon liquidation and distribution of its assets, if approved by the vote of
two-thirds of its investors (with the vote of each being in proportion to the
amount of its investment), or (ii) by the Trustees of the Portfolio Trust by
written notice to its investors.
The Portfolio Trust is organized as a trust under the laws of the State
of New York. Investors in the Portfolios or any other series of the Portfolio
Trust will be held personally liable for its obligations and liabilities,
subject, however, to indemnification by the Portfolio Trust in the event that
there is imposed upon an investor a greater portion of the liabilities and
obligations than its proportionate beneficial interest. The Declaration of Trust
also provides that the Portfolio Trust shall maintain appropriate insurance (for
example, fidelity bonding and errors and omissions insurance) for the protection
of the Portfolio Trust, its investors, Trustees, officers, employees and agents
covering possible tort and other liabilities. Thus, the risk of an investor
incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio Trust
itself was unable to meet its obligations with respect to any series thereof.
<PAGE>
B-34
The Declaration of Trust further provides that obligations of the
Portfolios or any other series of the Portfolio Trust are not binding upon the
Trustees individually but only upon the property of the Portfolios or other
series of the Portfolio Trust, as the case may be, and that the Trustees will
not be liable for any action or failure to act, but nothing in the Declaration
of Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of wilful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
The Portfolio Trust reserves the right to create and issue a number of
series, in which case investments in each series would participate equally in
the earnings and assets of the particular series. Investors in each series would
be entitled to vote separately to approve advisory agreements or changes in
investment policy, but investors of all series may vote together in the election
or selection of Trustees, principal underwriters and accountants. Upon
liquidation or dissolution of any series of the Portfolio Trust, the investors
in that series would be entitled to share pro rata in the net assets of that
series available for distribution to investors.
Item 19. Purchase, Redemption and Pricing of Securities Being Offered.
Beneficial interests in each Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. See "General Description of
Registrant," "Purchase of Securities Being Offered" and "Redemption or
Repurchase" in Part A.
Each Portfolio determines its net asset value as of 4:00 p.m., New York
time, on each day on which the NYSE is open for trading ("Fund Business Day"),
by dividing the value of each Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) by the value of the investment of the investors in each Portfolio at
the time the determination is made. (As of the date of this Registration
Statement, the NYSE is both open every weekday except for: (a) the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day; and (b) the
preceding Friday of the subsequent Monday when one of the calendar-determined
holidays falls on a Saturday or Sunday, respectively. Purchases and withdrawals
will be effected at the time of determination of net asset value next following
the receipt of any purchase or withdrawal order.
Equity and debt securities (other than short-term debt obligations
maturing in 60 days or less), including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term debt obligations
and money market securities maturing in 60 days or less are valued at amortized
cost, which approximates market. Other assets are valued at fair value using
methods determined in good faith by the Board of Trustees.
<PAGE>
B-35
Item 20. Tax Status.
The Portfolio Trust is organized as a trust under New York law. Under
the anticipated method of operation of the Portfolio Trust, the Portfolios will
not be subject to any income tax. However each investor in the Portfolios will
be taxable on its share (as determined in accordance with the governing
instruments of the Portfolio Trust) of a Portfolio's ordinary income and capital
gain in determining its income tax liability. The determination of such share
will be made in accordance with the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations promulgated thereunder.
The Portfolio Trust's taxable year-end is December 31. Although, as
described above, each Portfolio will not be subject to federal income tax, the
Portfolio Trust will file appropriate income tax returns with respect to each
Portfolio.
It is intended that the assets, income and distributions of the
Portfolios will be managed in such a way that an investor in each Portfolio will
be able to satisfy the requirements of Subchapter M of the Code, assuming that
the investor invested all of its assets in that Portfolio.
There are certain tax issues that will be relevant to only certain of
the investors, specifically investors that are segregated asset accounts and
investors who contribute assets rather than cash to the Portfolios. It is
intended that such segregated asset accounts will be able to satisfy
diversification requirements applicable to them and that such contributions of
assets will not be taxable provided certain requirements are met. Such investors
are advised to consult their own tax advisors as to the tax consequences of an
investment in the Portfolios.
Foreign Securities. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to determine
the effective rate of foreign tax in advance since the amount of each
Portfolio's assets to be invested in various countries will vary.
If each Portfolio is liable for foreign taxes, and if more than 50% of
the value of each Portfolio's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, it may make an
election pursuant to which certain foreign taxes paid by it would be treated as
having been paid directly by its investors. Pursuant to such election, the
amount of foreign taxes paid will be included in the income of each Portfolio's
investors, and such investors (except tax-exempt investors) may, subject to
certain limitations, claim either a credit or deduction for the taxes. Each such
investor will be notified after the close of each Portfolio's taxable year
whether the foreign taxes paid will "pass through" for that year and, if so,
such notification will designate (a) the investor's portion of the foreign taxes
paid to each such country and (b) the portion which represents income derived
from sources within each such country.
The amount of foreign taxes for which an investor may claim a credit in
any year will generally be subject to a separate limitation for "passive
income," which includes, among other items of income, dividends, interest and
certain
<PAGE>
foreign currency gains. Because capital gains realized by each Portfolio on the
sale of foreign securities will be treated as U.S.-source income, the available
credit of foreign taxes paid with respect to such gains may be restricted by
this limitation.
Item 21. Underwriters.
The placement agent for the Portfolio Trust is Touchstone Securities
which receives no additional compensation for serving in this capacity.
Investment companies, insurance company separate accounts, common and commingled
trust funds and similar organizations and entities may continuously invest in
each Portfolio.
Item 22. Calculation of Performance Data.
Not applicable.
Item 23. Financial Statements.
The following financial statements for the Portfolios at and for the
fiscal period indicated are incorporated herein by reference from their current
reports to shareholders filed with the SEC pursuant to Section 30(b) of the 1940
Act and Rule 30b2-1 thereunder. A copy of each such report will be provided,
without charge, to each person receiving this Statement of Additional
Information.
EMERGING GROWTH PORTFOLIO, INTERNATIONAL EQUITY PORTFOLIO, GROWTH & INCOME
PORTFOLIO, BALANCE PORTFOLIO, INCOME OPPORTUNITY PORTFOLIO, BOND PORTFOLIO
AND MUNICIPAL BOND PORTFOLIO
Schedule of Investments, December 31, 1995 Statement of Assets and
Liabilities, December 31, 1995 Statement of Operations, for the year
ended December 31, 1995 Statement of Changes in Net Assets for the year
ended December 31, 1995 and the period from October 3, 1994 to December
31, 1994 Notes to Financial Statements Supplementary Data Report of
Independent Accountants
GROWTH & INCOME PORTFOLIO II AND BOND PORTFOLIO II
Schedule of Investments, December 31, 1995 Statement of Assets and
Liabilities, December 31, 1995 Statement of Operations, for the year
ended December 31, 1995 Statement of Changes in Net Assets, for the
year ended December 31, 1995 and the period November 21, 1994
(commencement of operations) to December 31, 1994 Notes to Financial
Statements Supplementary Data Report of Independent Accountants
<PAGE>
APPENDIX A
BOND, COMMERCIAL PAPER AND MUNICIPAL OBLIGATIONS RATINGS
Set forth below are descriptions of the ratings of Moody's and S&P,
which represent their opinions as to the quality of the Municipal Obligations
and securities which they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and are not absolute standards of
quality.
Moody's Bond Ratings
Aaa. Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A. Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa. Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa. Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Appendix A-1
<PAGE>
Ca. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated. Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not
rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1, Ba-1 and B-1.
S&P's Bond Rating
AAA. Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA. Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the higher rated issues only in small degree.
A. Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in the highest rated
categories.
BBB. Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
Appendix A-2
<PAGE>
BB, B, CCC, CC, and C. Bonds rated BB, B, CCC, CC, and C are regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of this obligations.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.
C1. The rating C1 is reserved for income bonds on which no interest is
being paid.
D. Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or Minus (-). The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR. Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Description of S&P Municipal Bond Ratings:
AAA - Prime - These are obligations of the highest quality. They have
the strongest capacity for timely payment of debt service.
General Obligation Bonds - In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.
Revenue Bonds - Debt service coverage has been, and is expected to
remain, substantial, stability of the pledged revenues is also exceptionally
strong due to the competitive position of the municipal enterprise or to the
nature of the revenues. Basic security provisions (including rate covenant,
earnings test for issuance of additional bonds and debt service reserve
requirements) are rigorous. There is evidence of superior management.
AA - High Grade - The investment characteristics of bonds in this group
are only slightly less marked than those of the prime quality issues. Bonds
rated AA have the second strongest capacity for payment of debt service.
A - Good Grade - Principal and interest payments on bonds in this
category are regarded as safe although the bonds are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
bonds in higher rated categories. This rating describes the third strongest
capacity for payment of debt service. Regarding municipal bonds, the rating
differs from the two higher ratings because:
Appendix A-3
<PAGE>
General Obligation Bonds - There is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and expenditures,
or in quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds - Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appearance appears adequate.
S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA rating category.
Description of Moody's Municipal Bond Ratings:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Moody's may apply the numerical modifier in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
within its generic rating classification possesses the strongest investment
attributes.
Description of S&P Municipal Note Ratings:
Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1, or -2) to distinguish more clearly the
credit quality of notes as compared to bonds. Notes rated SP-1 have a very
strong or strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics are given the designation of
SP-1+. Notes rated SP-2 have a satisfactory capacity to pay principal and
interest.
Appendix A-4
<PAGE>
Description of Moody's Municipal Note Ratings:
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG-1/VMIG-1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG-2/VMIG-2 are of high
quality, with ample margins of protection, although not as large as the
preceding group.
S&P's Commercial Paper Ratings
A is the highest commercial paper rating category utilized by S&P,
which uses the numbers 1+, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt rating is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward trend.
Typically, the issuer is a strong company in a well-established industry and has
superior management.
Moody's Commercial Paper Ratings
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Appendix A-5
<PAGE>
APPENDIX B
TAXABLE EQUIVALENT YIELD TABLE (Under
Federal Personal Income Tax Law and Rates for 1995)
The table shows the approximate taxable bond yields which are
equivalent to tax-exempt bond yields from 2% to 6% under 1995 federal personal
income tax laws. Such yields may differ under the laws applicable to subsequent
years if the effect of any such law is to change any tax bracket or the amount
of taxable income which is applicable to a tax bracket. Separate calculations,
showing the applicable taxable income brackets, are provided for investors who
file joint returns and for those investors who file individual returns.
<TABLE>
<CAPTION>
Taxable Income* Income TAX-EXEMPT YIELD
<C> <C> <C> <C> <C> <C> <C> <C>
Tax
Single Return Joint Return Bracket 2% 3% 4% 5% 6%
--------------- -------------- ------- ------------------------------------------------
Equivalent-Taxable Yield
$ 0 - $ 22,750 $ 0 - $ 38,000 15.00% 2.4 3.5 4.7 5.9 7.1
$ 22,751 - $ 55,100 $ 38,001 - $ 91,850 28.00% 2.8 4.2 5.6 6.9 8.3
$ 55,101 - $115,000 $ 91,851 - $140,000 31.00% 2.9 4.4 5.8 7.2 8.7
$115,001 - $250,000 $140,001 - $250,000 36.00% 3.1 4.7 6.3 7.8 9.4
Over $250,000 Over $250,000 39.60% 3.3 5.0 6.6 8.3 9.9
</TABLE>
*Net amount subject to federal personal income tax after deductions and
exemptions.
While it is expected that a substantial portion of the dividends paid to the
investors in the Portfolios will be exempt from federal personal income taxes,
portions of such dividends from time to time may be subject to federal income
taxes.
NOTE: The information in the table is presented as of March 31, 1996.
Appendix B-1
<PAGE>
IFS0051D SELECT ADVISORS PORTFOLIOS
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
The financial statements called for by this Item are included in Part B and
listed in Item 23 hereof.
(b) Exhibits
1. Declaration of Portfolio Trust of the Registrant.3
2. By-Laws of the Registrant.3
5(A). Investment Advisory Agreement between the Registrant and Touchstone
Advisors, Inc. ("Touchstone").3
5(B). Portfolio Advisory Agreement between Touchstone and David L. Babson
and Company, Inc.3
5(C). Portfolio Advisory Agreement between Touchstone and Westfield
Capital Management Company, Inc.3
5(D). Portfolio Advisory Agreement between Touchstone and BEA Associates.3
5(E). Portfolio Advisory Agreement between Touchstone and Fort Washington
Investment Advisors, Inc. (with respect to Growth & Income
Portfolio).3
5(F). Portfolio Advisory Agreement between Touchstone and Harbor Capital
Management Company, Inc.3
5(G). Portfolio Advisory Agreement between Touchstone and Morgan Grenfell
Capital Management, Inc.3
5(H). Portfolio Advisory Agreement between Touchstone and Fort Washington
Investment Advisors, Inc. (with respect to Bond Portfolio).3
5(I). Portfolio Advisory Agreement between Touchstone and Alliance Capital
Management, L.P.3
5(J). Portfolio Advisory Agreement between Touchstone and Neuberger &
Berman.3
8. Custodian Agreement between the Registrant and Investors Bank &
Trust Company.1
9. Administration and Services Agreement between the Registrant and
Signature Financial Services, Inc. ("Signature").1
27. Financial Data Schedules.1
13. Investment representation letters of initial investors.2
1 Incorporated herein by reference from the registration statement of the
Registrant on Form N-1A (the "Registration Statement") as originally filed with
the Securities and Exchange Commission on September 23, 1994.
2 Incorporated herein by reference from Amendment No. 1 to the Registration
Statement as originally filed with the Securities and Exchange Commission
on November 14, 1994.
3 Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
(1) (2)
Title of Class Number of Record Holders
Series of Beneficial Interests (as of April 1, 1996)
Emerging Growth Portfolio 2
International Equity Portfolio 2
Growth & Income Portfolio 2
Growth & Income Portfolio II 2
Balanced Portfolio 2
Income Opportunity Portfolio 2
Bond Portfolio 2
Bond Portfolio II 2
Municipal Bond Portfolio 2
Item 27. Indemnification.
Reference is hereby made to Article V of the Registrant's Declaration of Trust,
filed as an Exhibit herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940,
as amended (the "1940 Act").
Item 28. Business and Other Connections of Investment Advisor.
Touchstone Advisors, Inc. ("Touchstone Advisors") serves as investment
advisor to the Portfolio Trust.
Set forth below are the names, principal business addresses and positions of
each director and officer of Touchstone Advisors. Unless otherwise noted, the
principal business address of these individuals is Touchstone Advisors, Inc.,
311 Pike Street, Cincinnati, Ohio 45202. Unless otherwise specified, none of the
officers and directors of Touchstone Advisors serve as officers and Trustees of
the Portfolio Trust.
<TABLE>
<S> <C> <C>
Position and Offices
with Touchstone Position and Offices
Name Advisors with the Registrant
James N. Clark* Director none
Edward G. Harness, Jr. Director, President Chairman of the
and Chief Executive Board, President and
Officer Chief Executive
Officer
William F. Ledwin* Director none
Donald J. Wuebbling* Director, Secretary
and Chief Legal Officer none
Edward S. Heenan* Vice President Treasurer
and Controller
J. Thomas Lancaster* Vice President and
Treasurer none
Brian Manley Vice President and Assistant Treasurer
Chief Financial Officer
Richard K. Taulbee* Vice President none
Patricia Wilson Chief Compliance Officer none
Robert F. Morand* Assistant Secretary none
Robert A. Dressman* Assistant Treasurer none
Timothy D. Speed* Assistant Treasurer none
</TABLE>
*Principal business address is 400 Broadway, Cincinnati, Ohio 45202
Item 29. Principal Underwriters.
Not applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in part, at
the office of the Registrant and the following locations:
Name Address
Touchstone Securities, Inc. 311 Pike Street
(placement agent) Cincinnati, Ohio 45202
Touchstone Advisors, Inc. 311 Pike Street
(investment advisor) Cincinnati, Ohio 45202
Investors Bank & Trust Company 89 South Street
(custodian and transfer agent) Boston, Massachusetts 02111
Signature Financial Services, Inc. 6 St. James Avenue
(administrator) Boston, Massachusetts 02116
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, as amended,
the Registrant has duly caused this Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Boston and Commonwealth of Massachusetts on the 29th day of April, 1996.
SELECT ADVISORS PORTFOLIOS
By /S/ THOMAS M. LENZ
Thomas M. Lenz
Secretary
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1. Declaration of Portfolio Trust of the Registrant
2. By-Laws of the Registrant
5(A). Investment Advisory Agreement between the Registrant and
Touchstone
5(B). Portfolio Advisory Agreement between Touchstone and David L.
Babson and Company, Inc.
5(C). Portfolio Advisory Agreement between Touchstone and Westfield
Capital Management Company, Inc.
5(D). Portfolio Advisory Agreement between Touchstone and BEA
Associates
5(E). Portfolio Advisory Agreement between Touchstone and Fort
Washington Investment Advisors, Inc. (with respect to Growth &
Income Portfolio)
5(F). Portfolio Advisory Agreement between Touchstone and Harbor
Capital Management Company, Inc.
5(G). Portfolio Advisory Agreement between Touchstone and Morgan
Grenfell Capital Management, Inc.
5(H). Portfolio Advisory Agreement between Touchstone and Fort
Washington Investment Advisors, Inc. (with respect to Bond
Portfolio).
5(I). Portfolio Advisory Agreement between Touchstone and Alliance
Capital Management, L.P.
5(J). Portfolio Advisory Agreement between Touchstone and Neuberger
& Berman.
SELECT ADVISORS PORTFOLIOS
Amendment No. 1
to
Declaration of Trust
--------------------------
The undersigned, being at least a majority of the trustees of Select
Advisors Portfolios, a master trust fund established under the laws of the State
of New York pursuant to a Declaration of Trust dated as of February 7, 1994 (the
"Declaration of Trust"), pursuant to Section 10.4(a) of the Declaration of
Trust, hereby amend the Declaration of Trust as follows:
1. The definition of "Holder" in Section 1.2., DEFINITIONS, is
hereby deleted and replaced by the following:
"HOLDER" shall mean the record holder of any Interest.
With respect to Bond Portfolio II and Growth & Income
Portfolio II, at no time will a Holder be a holder not
permitted by Treasury Regulations Section 1.817-
5(f)(2)(i)(A), which includes those holders mentioned in
Treasury Regulations Section 1.817-5(f)(3).
2. The definition of "Institutional Investor(s)" in Section 1.2.,
DEFINITIONS, is hereby deleted and replaced by the following:
"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, and which in the case of Bond Portfolio II
and Growth & Income Portfolio II, is a holder permitted
by Treasury Regulations Section 1.817-5(f)(2)(i)(A),
which includes those holders mentioned in Treasury
Regulations Section 1.817-5(f)(3).
3. Section 10.2, DISSOLUTION, is hereby deleted and replaced by the
following:
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 in writing by the Holders of not less than
two-thirds of such Interests, (ii) by the Trustees by
written notice of dissolution to the Holders of the
<PAGE>
Interests in the Series, or (iii) upon the bankruptcy or
withdrawal of any Holder of an Interest in the Series,
the Series shall be dissolved effective 120 days after
the event. However, the remaining Holders of Interests
in such Series may, by majority vote, agree to continue
the business of the Series even if there has been such a
dissolution. The Trust may be dissolved by action of the
Trustees upon the dissolution of the last remaining
Series.
This Amendment 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.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of March 30, 1995.
/S/ PHILLIP R. COX
-------------------------------
Phillip R. Cox
As Trustee and not individually
/S/ EDWARD G. HARNESS, JR.
-------------------------------
Edward G. Harness, Jr.
As Trustee and not individually
/S/ DAVID POLLAK
-------------------------------
David Pollak
As Trustee and not individually
/S/ ROBERT E. STAUTBERG
-------------------------------
Robert E. Stautberg
As Trustee and not individually
/S/ JOSEPH S. STERN, JR.
-------------------------------
Joseph S. Stern, Jr.
As Trustee and not individually
/S/ WILLIAM J. WILLIAMS
-------------------------------
William J. Williams
As Trustee and not individually
<PAGE>
IFS0004A
SELECT ADVISORS PORTFOLIOS
--------------------------
DECLARATION OF TRUST
Dated as of February 7, 1994
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C> <C>
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 and Actions Without Meetings ..................... 5
Section 2.6 Officers; Chairman of the Board ........................... 5
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
ARTICLE V--LIABILITY 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
i
<PAGE>
PAGE
----
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 ..................................................................... 22
Section 11.1 Certificate of Designation; Agent for
Service of Process ..................................... 22
Section 11.2 Governing Law ............................................. 22
Section 11.3 Counterparts .............................................. 23
Section 11.4 Reliance by Third Parties ................................. 23
Section 11.5 Provisions in Conflict with Law or Regulations ............ 23
ii
</TABLE>
<PAGE>
IFS0004A
DECLARATION OF TRUST
OF
SELECT ADVISORS PORTFOLIOS
--------------------------
This DECLARATION OF TRUST of SELECT ADVISORS PORTFOLIOS is made as of
the 7th day of February, 1994 by the parties signatory hereto, as Trustees (as
defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a 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 SELECT ADVISORS 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
<PAGE>
established by the Trustees pursuant to Section 8.1 hereof. The Trust shall
maintain separate records of Book Capital Accounts for each such Series.
"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
2
<PAGE>
(B) more than 50% of all Interests in such one or more Series, whichever is
less.
"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 or more than fifteen. 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
3
<PAGE>
provided in Section 2.4 hereof, the Trustees continuing in office, regardless of
their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration. A
Trustee shall be an individual at least 21 years of age who is not under legal
disability.
2.2. TERM AND ELECTION. Each Trustee named herein, or elected or
appointed prior to the first meeting of Holders, shall (except in the event of
resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. RESIGNATION, REMOVAL AND RETIREMENT. Any Trustee may resign his or
her trust (without need for prior or subsequent accounting) by an instrument in
writing executed by such Trustee and delivered or mailed to the Chairman, if
any, the President or the Secretary of the Trust and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any Trustee may be removed 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) by the action of two-thirds of the remaining
Trustees. 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 incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the date of
such Trustee's retirement. Upon the resignation, retirement or removal of a
Trustee, or a Trustee otherwise ceasing to be a Trustee, such resigning,
retired, removed or former Trustee shall execute and deliver such documents as
the remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such resigning,
retired, removed or former Trustee. Upon the death of any Trustee or upon
removal, retirement or resignation due to any Trustee's incapacity to serve as
Trustee, the legal representative of such deceased, removed, retired or
resigning Trustee shall execute and deliver on behalf of such deceased, removed,
retired or resigning Trustee such documents as the remaining Trustees shall
require for the purpose set forth in the preceding sentence.
2.4. VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, retirement or
removal of a Trustee. No such vacancy shall operate to annul this Declaration or
to revoke any existing agency created pursuant to the terms of this Declaration.
In the case of a vacancy, Holders of at least a majority of the Interests
entitled to vote, acting at any meeting of Holders held in accordance with
Section 9.2 hereof, or, to the extent permitted by the 1940 Act, a majority vote
of the Trustees continuing in office acting by written instrument or
4
<PAGE>
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 AND ACTIONS WITHOUT 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.
5
<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 their political
subdivisions, agencies and instrumentalities, or by the United States
6
<PAGE>
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 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.
7
<PAGE>
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; legal counsel to the Trust or
to the Trustees; 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 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 non-recurring items as
may arise, including litigation to which the Trust or a Series (or a Trustee or
8
<PAGE>
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 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; (g) 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 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.
9
<PAGE>
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
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
10
<PAGE>
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. LIABILITY 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 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
11
<PAGE>
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, 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 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 a reasonable basis for
believing that such Person will not be disqualified from indemnification under
this Section 5.4.
12
<PAGE>
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 legal counsel, or upon reports made to the Trust or any Series by any
of its officers or employees or by any Investment Adviser or Administrator,
accountant, appraiser or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust 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.
13
<PAGE>
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 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,
14
<PAGE>
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.
6.3. NON-TRANSFERABILITY. 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
15
<PAGE>
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.
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
16
<PAGE>
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 (g) such additional matters relating to the Trust as may be required by the
1940 Act or otherwise 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.
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
17
<PAGE>
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 future 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.
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 be in writing and 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
18
<PAGE>
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 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. Such
consents shall be treated for all purposes as a vote taken at a meeting of
Holders. Each such written consent shall be executed by or on behalf of the
Holder delivering such consent and shall bear the date of such execution. No
such written consent shall be effective to take the action referred to therein
unless, within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the records
of the meetings of Holders.
9.9. NOTICES. Any and all communications, including any and all notices
to which any Holder may be entitled, shall be deemed duly served or given if
mailed, postage prepaid, addressed to a Holder at its last known address as
recorded on the register of the Trust 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:
<TABLE>
<CAPTION>
Date of
Name Address Birth
---- ------- -----
<S> <C> <C>
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
19
<PAGE>
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 03/22/88
Newton, MA 02166
</TABLE>
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 in writing by the Holders
of not less than two-thirds of such Interests, (ii) by the Trustees by written
notice of dissolution to the Holders of the Interests in the Series, or (iii)
upon the bankruptcy or withdrawal 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
20
<PAGE>
(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.
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
21
<PAGE>
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 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 of 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
22
<PAGE>
hereof shall be subject to and construed in accordance with the law of the State
of New York and reference shall be specifically made to the trust law of the
State of New York as to the construction of matters not specifically covered
herein or as to which an ambiguity exists.
11.3. COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any one such original counterpart.
11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of Trustees or Holders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed at a meeting of Trustees or Holders, (d) the fact that the number of
Trustees or Holders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officer elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees.
11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, or with other applicable law and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this Declaration of
Trust of SELECT ADVISORS PORTFOLIOS as of the day and year first above written.
/S/ THOMAS M. LENZ
-------------------------------
Thomas M. Lenz
As Trustee and not individually
/S/ LINDA T. GIBSON
-------------------------------
Linda T. Gibson
As Trustee and not individually
/S/ JAMES B. CRAVER
-------------------------------
James B. Craver
As Trustee and not individually
IFS0004A
23
<PAGE>
SCHEDULE A
----------
SELECT ADVISORS PORTFOLIOS
Initial Series
--------------
Municipal Bond Portfolio
Bond Portfolio
Bond Portfolio II
Balanced Portfolio
Growth & Income Portfolio
Growth & Income Portfolio II
Income Opportunity Portfolio
Emerging Growth Portfolio
International Equity Portfolio
IFS0004A
IFS0004A
SELECT ADVISORS PORTFOLIOS
---------------------------
BY-LAWS
As Adopted February 7, 1994
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C> <C>
ARTICLE I -- MEETINGS OF HOLDERS .............................................................. 1
Section 1.1 Fixing Record Dates ....................................... 1
Section 1.2 Records at Holder Meetings ................................ 1
Section 1.3 Inspectors of Election .................................... 1
Section 1.4 Proxies; Voting ........................................... 2
Section 1.5 Series Holders Meetings ................................... 2
ARTICLE II -- MEETINGS OF TRUSTEES ............................................................ 2
Section 2.1 Annual and Regular Meetings ............................... 2
Section 2.2 Notice .................................................... 2
ARTICLE III -- OFFICERS ....................................................................... 2
Section 3.1 Officers of the Trust ..................................... 2
Section 3.2 Election and Tenure ....................................... 2
Section 3.3 Removal of Officers ....................................... 3
Section 3.4 Bonds and Surety .......................................... 3
Section 3.5 Chairman, President and Vice President .................... 3
Section 3.6 Secretary ................................................. 3
Section 3.7 Treasurer ................................................. 4
Section 3.8 Other Officers and Duties ................................. 4
ARTICLE IV -- MISCELLANEOUS ................................................................... 4
Section 4.1 Depositories .............................................. 4
Section 4.2 Signatures ................................................ 4
Section 4.3 Seal ...................................................... 4
Section 4.4 Indemnification ........................................... 5
Section 4.5 Distribution Disbursing Agents and the
Like ..................................................... 5
ARTICLE V -- REGULATIONS; AMENDMENT OF BY-LAWS ................................................ 5
Section 5.1 Regulations ............................................... 5
Section 5.2 Amendment and Repeal of By-Laws ........................... 5
i
</TABLE>
<PAGE>
BY-LAWS
OF
SELECT ADVISORS PORTFOLIOS
--------------------------
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing SELECT ADVISORS PORTFOLIOS (the "Trust"),
dated as of February 7, 1994, as from time to time amended (the "Declaration").
All words and terms capitalized in these By-Laws shall have the meaning or
meanings set forth for such words or terms in the Declaration.
ARTICLE I
Meetings of Holders
-------------------
Section 1.1. FIXING RECORD DATES. If the Trustees do not, prior to any
meeting of the Holders, fix a record date, then the date of mailing notice of
the meeting shall be the record date.
Section 1.2. RECORDS AT HOLDER MEETINGS. At each meeting of the Holders
there shall be open for inspection the minutes of the last previous meeting of
Holders of the Trust and a list of the Holders of the Trust, certified to be
true and correct by the Secretary or other proper agent of the Trust, as of the
record date of the meeting. Such list of Holders shall contain the name of each
Holder in alphabetical order and the address and Interest owned by such Holder
on such record date.
Section 1.3. INSPECTORS OF ELECTION. In advance of any meeting of the
Holders, the Trustees may appoint Inspectors of Election to act at the meeting
or any adjournment thereof. If Inspectors of Election are not so appointed, the
chairman, if any, of any meeting of the Holders may, and on the request of any
Holder or his proxy shall, appoint Inspectors of Election. The number of
Inspectors of Election shall be either one or three. If appointed at the meeting
on the request of one or more Holders or proxies, a Majority Interests Vote
shall determine whether one or three Inspectors of Election are to be appointed,
but failure to allow such determination by the Holders shall not affect the
validity of the appointment of Inspectors of Election. In case any individual
appointed as an Inspector of Election fails to appear or fails or refuses to so
act, the vacancy may be filled by appointment made by the Trustees in advance of
the convening of the meeting or at the meeting by the individual acting as
chairman of the meeting. The Inspectors of Election shall determine the Interest
owned by each Holder, the Interests represented at the meeting, the existence of
a quorum, the authenticity, validity and effect of proxies, shall receive votes,
ballots or consents, shall hear and determine all challenges and questions in
any way arising in connection with the right to vote, shall count and tabulate
all votes or consents, shall determine the results, and shall do such other acts
as may be proper to conduct the election or vote with fairness to all Holders.
If there are three Inspectors of Election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. On request of the chairman, if any, of the meeting, or of any Holder or his
proxy, the Inspectors of Election shall make a report in writing of any
challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
1
<PAGE>
Section 1.4. PROXIES; VOTING. No proxy shall be valid after one year
from the date of its execution, unless a longer period is expressly stated in
such proxy.
Section 1.5 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 such separate meeting shall be determined
in the manner described above in Section 1.1.
ARTICLE II
Meetings of Trustees
--------------------
Section 2.1. ANNUAL AND REGULAR MEETINGS. The Trustees shall hold an
annual meeting for the election of officers and the transaction of other
business which may come before such meeting.
Section 2.2. NOTICE. Notice of a meeting shall be given by mail, by
telegram (which term shall include a cablegram), by telecopier or delivered
personally (which term shall include by telephone). Neither the business to be
transacted at, nor the purpose of, any meeting of the Trustees need be stated in
the notice or waiver of notice of such meeting, and no notice need be given of
action proposed to be taken by written consent.
ARTICLE III
Officers
--------
Section 3.1. OFFICERS OF THE TRUST. The officers of the Trust shall
consist of a Chairman, if any, a President, a Secretary, a Treasurer and such
other officers or assistant officers, including Vice Presidents, as may be
elected by the Trustees. Any two or more of the offices may be held by the same
person. The Trustees may designate a Vice President as an Executive Vice
President and may designate the order in which the other Vice Presidents may
act. The Chairman shall be a Trustee, but no other officer of the Trust,
including the President, need be a Trustee.
Section 3.2. ELECTION AND TENURE. At the initial organization meeting
and thereafter at each annual meeting of the Trustees, the Trustees shall elect
the Chairman, if any, the President, the Secretary, the Treasurer and such other
officers as the Trustees shall deem necessary or appropriate in order to carry
out the business of the Trust. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors have been duly elected
2
<PAGE>
and qualified. The Trustees may fill any vacancy in office or add any additional
officer at any time.
Section 3.3. REMOVAL OF OFFICERS. Any officer may be removed at any
time, with or without cause, by action of a majority of the Trustees. This
provision shall not prevent the making of a contract of employment for a
definite term with any officer and shall have no effect upon any cause of action
which any officer may have as a result of removal in breach of a contract of
employment. Any officer may resign at any time by notice in writing signed by
such officer and delivered or mailed to the Chairman, if any, the President or
the Secretary, and such resignation shall take effect immediately, or at a later
date according to the terms of such notice in writing.
Section 3.4. BONDS AND SURETY. Any officer may be required by the
Trustees to be bonded for the faithful performance of his duties in such amount
and with such sureties as the Trustees may determine.
Section 3.5. CHAIRMAN, PRESIDENT AND VICE PRESIDENTS. The Chairman, if
any, shall, if present, preside at all meetings of the Holders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to him by the Trustees. Subject to such supervisory
powers, if any, as may be given by the Trustees to the Chairman, if any, the
President shall be the chief executive officer of the Trust and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the Trust and of its employees and shall exercise such
general powers of management as are usually vested in the office of President of
a corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the Holders and, in the absence of the Chairman, the
President shall preside at all meetings of the Trustees. The President shall be,
ex officio, a member of all standing committees of Trustees. Subject to the
direction of the Trustees, the President shall have the power, in the name and
on behalf of the Trust, to execute any and all loan documents, contracts,
agreements, deeds, mortgages and other instruments in writing, and to employ and
discharge employees and agents of the Trust. Unless otherwise directed by the
Trustees, the President shall have full authority and power to attend, to act
and to vote, on behalf of the Trust, at any meeting of any business organization
in which the Trust holds an interest, or to confer such powers upon any other
person, by executing any proxies duly authorizing such person. The President
shall have such further authorities and duties as the Trustees shall from time
to time determine. In the absence or disability of the President, the Vice
Presidents in order of their rank or the Vice President designated by the
Trustees, shall perform all of the duties of the President, and when so acting
shall have all the powers of and be subject to all of the restrictions upon the
President. Subject to the direction of the President, each Vice President shall
have the power in the name and on behalf of the Trust to execute any and all
loan documents, contracts, agreements, deeds, mortgages and other instruments in
writing, and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees or by the President.
Section 3.6. SECRETARY. The Secretary shall keep the minutes of all
meetings of, and record all votes of, Holders, Trustees and the Executive
Committee, if any. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary. The Secretary shall be custodian of the seal of the Trust, if any,
and (and any other person so authorized by the Trustees) shall affix the seal
or, if permitted, a facsimile thereof, to any instrument executed by the Trust
3
<PAGE>
which would be sealed by a New York corporation executing the same or a similar
instrument and shall attest the seal and the signature or signatures of the
officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a New York corporation, and shall have such other authorities and duties as
the Trustees shall from time to time determine.
Section 3.7. TREASURER. Except as otherwise directed by the Trustees,
the Treasurer shall 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. The
Treasurer may endorse for deposit or collection all notes, checks and other
instruments payable to the Trust or to its order and shall deposit all funds of
the Trust as may be ordered by the Trustees or the President. The Treasurer
shall keep accurate account of the books of the Trust's transactions which shall
be the property of the Trust, and which together with all other property of the
Trust in his possession, shall be subject at all times to the inspection and
control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial officer of the Trust. The Treasurer shall have such
other duties and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize the Investment Manager and Administrator to maintain bank accounts and
deposit and disburse funds on behalf of the Trust.
Section 3.8. OTHER OFFICERS AND DUTIES. The Trustees may elect such
other officers and assistant officers as they shall from time to time determine
to be necessary or desirable in order to conduct the business of the Trust.
Assistant officers shall act generally in the absence of the officer whom they
assist and shall assist that officer in the duties of his office. Each officer,
employee and agent of the Trust shall have such other duties and authorities as
may be conferred upon him by the Trustees or delegated to him by the President.
ARTICLE IV
Miscellaneous
-------------
Section 4.1. DEPOSITORIES. The funds of the Trust shall be deposited in
such depositories as the Trustees shall designate and shall be drawn out on
checks, drafts or other orders signed by such officer, officers, agent or agents
(including the Investment Manager and Administrator) as the Trustees may from
time to time authorize.
Section 4.2. SIGNATURES. All contracts and other instruments shall be
executed on behalf of the Trust by such officer, officers, agent or agents as
provided in these By-Laws or as the Trustees may from time to time by resolution
provide.
Section 4.3. SEAL. The seal of the Trust, if any, may be affixed to any
document, and the seal and its attestation may be lithographed, engraved or
otherwise printed on any document with the same force and effect as if it had
been imprinted and attested manually in the same manner and with the same effect
as if done by a New York corporation.
4
<PAGE>
Section 4.4. INDEMNIFICATION. Insofar as the conditional advancing of
indemnification monies under Section 5.4 of the Declaration for actions based
upon the 1940 Act may be concerned, such payments will be made only on the
following conditions: (i) the advances must be limited to amounts used, or to be
used, for the preparation or presentation of a defense to the action, including
costs connected with the preparation of a settlement; (ii) advances may be made
only upon receipt of a written promise by, or on behalf of, the recipient to
repay the amount of the advance which exceeds the amount to which it is
ultimately determined that he is entitled to receive from the Trust by reason of
indemnification; and (iii) (a) such promise must be secured by a surety bond,
other suitable insurance or an equivalent form of security which assures that
any repayment may be obtained by the Trust without delay or litigation, which
bond, insurance or other form of security must be provided by the recipient of
the advance, or (b) a majority of a quorum of the Trust's disinterested,
non-party Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient of
the advance ultimately will be found entitled to indemnification.
Section 4.5. DISTRIBUTION DISBURSING AGENTS AND THE LIKE. The Trustees
shall have the power to employ and compensate such distribution disbursing
agents, warrant agents and agents for the reinvestment of distributions as they
shall deem necessary or desirable. Any of such agents shall have such power and
authority as is delegated to any of them by the Trustees.
ARTICLE V
Regulations; Amendment of By-laws
---------------------------------
Section 5.1. REGULATIONS. The Trustees may make such additional rules
and regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the sale and purchase of Interests of the Trust.
Section 5.2. AMENDMENT AND REPEAL OF BY-LAWS. In accordance with
Section 2.7 of the Declaration, the Trustees shall have the power to alter,
amend or repeal the By-Laws or adopt new By-Laws at any time. Action by the
Trustees with respect to the By-Laws shall be taken by an affirmative vote of a
majority of the Trustees. The Trustees shall in no event adopt By-Laws which are
in conflict with the Declaration.
The Declaration refers to the Trustees as Trustees, but not as
individuals or personally; and no Trustee, officer, employee or agent of the
Trust shall be held to any personal liability, nor shall resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust.
IFS0004A
5
Exhibit 5(A).
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of _____________, 1994, by and between
TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and SELECT
ADVISORS PORTFOLIOS, a New York master trust created pursuant to a Declaration
of Trust dated February 7, 1994, as amended from time to time (the "Trust").
WHEREAS, the Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act"); and
WHEREAS, shares of beneficial in the Trust are divided into separate
series (each, along with any series which may in the future be established, a
"Portfolio"); and
WHEREAS, the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment advisor and to
have an investment advisor perform for it various investment advisory and
research services and other management services; and
WHEREAS, the Advisor is an investment Advisor registered under the
Investment Advisers Act of 1940, as amended, and desires to provide investment
advisory services to the Trust;
NOW THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADVISOR. The Trust hereby employs the Advisor to
manage the investment and reinvestment of the assets of each Portfolio subject
to the control and direction of the Trust's Board of Trustees, for the period on
the terms hereinafter set forth. The Advisor hereby accepts such employment and
agrees during such period to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Advisor shall for all
purposes herein be deemed to be independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
2. OBLIGATIONS AND SERVICES TO BE PROVIDED BY THE ADVISOR. In
providing the services and assuming the obligations set forth herein, the
Advisor may, at its expense, employ one or more subadvisors for any Portfolio.
Any agreement between the Advisor and a subadvisor shall be subject to the
renewal, termination and amendment provisions of paragraph 10 hereof. The
Advisor undertakes to provide the following services and to assume the following
obligations:
a) The Advisor will manage the investment and reinvestment of the
assets of each Portfolio, subject to and in accordance with the respective
investment objectives and policies of each Portfolio and any directions which
the Trust's Board of Trustees may issue from time to time. In pursuance of the
foregoing, the Advisor may engage separate investment advisors ("Portfolio
Advisor(s)") to make all determinations with respect to the investment of the
assets of each Portfolio, to effect the purchase and sale of portfolio
securities and to take such steps as may be necessary to implement the same.
Such determination and services by each Portfolio Advisor shall also include
determining the manner in which voting rights, rights to consent to corporate
action and any other rights pertaining to the portfolio securities shall be
exercised. The Advisor shall, and shall cause each Portfolio Advisor to, render
regular reports to the Trust's Board of Trustees concerning the Trust's and each
Portfolio's investment activities.
b) The Advisor shall, or shall cause the respective Portfolio
Advisor(s) to place orders for the execution of all portfolio transactions, in
the name of the respective Portfolio and in accordance with the policies with
respect thereto set forth in the Trust's registration statements under the 1940
Act and the Securities Act of 1933, as such registration statements may be
amended from time to time. In connection with the placement of orders for the
execution of portfolio transactions, the Advisor shall create and maintain (or
cause the Portfolio Advisors to create and maintain) all necessary brokerage
records for each Portfolio, which records shall comply with all applicable laws,
rules and regulations, including but not limited to records required by Section
31(a) of the 1940 Act. All records shall be the property of the Trust and shall
be available for inspection and use by the Securities and Exchange Commission
(the "SEC"), the Trust or any person retained by the Trust. Where applicable,
such records shall be maintained by the Advisor (or Portfolio Advisor) for the
periods and in the places required by Rule 31a-02 under the 1940 Act.
c. In the event of any reorganization or other change in the Advisor,
its investment principals, supervisors or members of its investment (or
comparable) committee, the Advisor shall give the Trust's Board of Trustees
written notice of such reorganization or change within a reasonable time (but
not later than 30 days) after such reorganization or change.
d) The Advisor shall bear its expenses of providing services to the
Trust pursuant to this Agreement except such expenses as are undertaken by the
Trust. In addition, the Advisor shall pay the salaries and fees, if any, of all
Trustees, officers and employees of the Trust who are affiliated persons, as
defined in Section 2(a)(3) of the 1940 Act, of the Advisor.
e) The Advisor will manage, or will cause the Portfolio Advisors to
manage, the Portfolio Assets and the investment and reinvestment of such assets
so as to comply with the provisions of the 1940 Act and with Subchapter M of the
Internal Revenue Code of 1986, as amended.
3. EXPENSES. The Trust shall pay the expenses of its operation,
including but not limited to (i) charges and expenses for Trust accounting,
pricing and appraisal services and related overhead, (ii) the charges and
expenses of the Portfolio's auditor's; (iii) the charges and expenses of any
custodian, transfer agent, plan agent, dividend disbursing agent and registrar
appointed by the Trust with respect to the Portfolios; (iv) brokers'
commissions, and issue and transfer taxes, chargeable to the Trust in connection
with securities transactions to which the Trust is a party; (v) insurance
premiums, interest charges, dues and fees for Trust membership in trade
associations and all taxes and fees payable by the Trust to federal, state or
other governmental agencies; (vi) fees and expenses involved in registering and
maintaining registrations of the Trust and/or interests in the Trust with the
SEC, state or blue sky securities agencies and foreign countries, including the
preparation of Prospectuses and Statements of Additional Information for filing
with the SEC; (vii) all expenses of meetings of Trustees and of interest holders
of the Trust and of preparing, printing and distributing prospectuses, notices,
proxy statements and all reports to shareholders and to governmental agencies;
(viii) charges and expenses of legal counsel to the Trust; (ix) compensation of
Trustees of the Trust; (x) the cost of preparing and printing share
certificates; and (xi) interest on borrowed money, if any.
4. COMPENSATION OF THE ADVISOR.
a) As compensation for the services rendered and obligations assumed
hereunder by the Advisor, the Trust shall pay to the Advisor monthly a fee that
is equal on an annual basis to that percentage of the average daily net assets
of each Portfolio set forth on Schedule 1 attached hereto (and with respect to
any future Portfolio, such percentage as the Trust and the Advisor may agree to
from time to time). Such fee shall be computed and accrued daily. If the Advisor
serves as investment advisor for less than the whole of any period specified in
this Section 4a, the compensation to the Advisor shall be prorated. For purposes
of calculating the Advisor's fee, the daily value of each Portfolio's net assets
shall be computed by the same method as the Trust uses to compute the net asset
value of that Portfolio.
b) The Advisor will pay all fees owing to each Portfolio Advisor, and
the Trust shall not be obligated to the Portfolio Advisors in any manner with
respect to the compensation of such Portfolio Advisors.
c) The Advisor reserves the right to waive all or a part of its fee.
5. ACTIVITIES OF THE ADVISOR. The services of the Advisor to the Trust
hereunder are not to be deemed exclusive, and the Advisor shall be free to
render similar services to others. It is understood that the Trustees and
officers of the Trust are or may become interested in the Advisor as
stockholders, officers or otherwise, and that stockholders and officers of the
Advisor are or may become similarly interested in the Trust, and that the
Advisor may become interested in the Trust as a shareholder or otherwise.
6. USE OF NAMES. The Trust will not use the name of the Advisor in any
prospectus, sales literature or other material relating to the Trust in any
manner not approved prior thereto by the Advisor; except that the Trust may use
such name in any document which merely refers in accurate terms to its
appointment hereunder or in any situation which is required by the SEC or a
state securities commission; and provided further, that in no event shall such
approval be unreasonably withheld. The Advisor will not use the name of the
Trust in any material relating to the Advisor in any manner not approved prior
thereto by the Trust; except that the Advisor may use such name in any document
which merely refers in accurate terms to the appointment of the Advisor
hereunder or in any situation which is required by the SEC or a state securities
commission. In all other cases, the parties may use such names to the extent
that the use is approved by the party named, it being agreed that in no event
shall such approval be unreasonably withheld.
The Trustees of the Trust acknowledge that, in consideration of the
Advisor's assumption of certain organization expenses of the Trust and of the
various Portfolios, the Advisor has reserved for itself the rights to the name
"Select Advisors Portfolios" (or any similar names) and that use by the Trust of
such name shall continue only with the continuing consent of the Advisor, which
consent may be withdrawn at any time, effective immediately, upon written notice
thereof to the Trust.
7. LIMITATION OF LIABILITY OF THE ADVISOR.
a. Absent willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of the
Advisor, the Advisor shall not be subject to liability to the Trust or to any
holder of an interest in any Portfolio for any act or omission in the course of,
or connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in this
Section 7, the term "Advisor" shall include Touchstone Advisors, Inc. and/or any
of its affiliates and the directors, officers and employees of Touchstone
Advisors, Inc. and/or of its affiliates.
b. The Trust will indemnify the Advisor against, and hold it harmless
from, any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from acts or omissions of the
Trust. Indemnification shall be made only after: (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
Trust was liable for the damages claimed or (ii) in the absence of such a
decision, a reasonable determination based upon a review of the facts, that the
Trust was liable for the damages claimed, which determination shall be made by
either (a) the vote of a majority of a quorum of Trustees of the Trust who are
neither "interested persons" of the Trust nor parties to the proceeding
("disinterested non-party Trustees") or (b) an independent legal counsel
satisfactory to the parties hereto, whose determination shall be set forth in a
written opinion. The Advisor shall be entitled to advances from the Trust for
payment of the reasonable expenses incurred by it in connection with the matter
as to which it is seeking indemnification in the manner and to the fullest
extent that would be permissible under the applicable provisions of the General
Corporation Law of Ohio. The Advisor shall provide to the Trust a written
affirmation of its good faith belief that the standard of conduct necessary for
indemnification under such law has been met and a written undertaking to repay
any such advance if it should ultimately be determined that the standard of
conduct has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Advisor shall provide security in form and
amount acceptable to the Trust for its undertaking; (b) the Trust is insured
against losses arising by reason of the advance; or (c) a majority of a quorum
of the Trustees of the Trust, the members of which majority are disinterested
non-party Trustees, or independent legal counsel in a written opinion, shall
have determined, based on a review of facts readily available to the Trust at
the time the advance is proposed to be made, that there is reason to believe
that the Advisor will ultimately be found to be entitled to indemnification.
8. LIMITATION OF TRUST'S LIABILITY. The Advisor acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Declaration of Trust. The Advisor agrees that the Trust's
obligations hereunder in any case shall be limited to the Trust and to its
assets and that the Advisor shall not seek satisfaction of any such obligation
from the holders of the interests in any Portfolio nor from any Trustee,
officer, employee or agent of the Trust.
9. FORCE MAJEURE. The Advisor shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Advisor shall take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
10. RENEWAL, TERMINATION AND AMENDMENT.
a) This Agreement shall continue in effect, unless sooner terminated
as hereinafter provided, for a period of twelve months from the date hereof and
it shall continue indefinitely thereafter as to each Portfolio, provided that
such continuance is specifically approved by the parties hereto and, in
addition, at least annually by (i) the vote of holders of a majority of the
outstanding voting securities of the affected Portfolio or by vote of a majority
of the Trust's Board of Trustees and (ii) by the vote of a majority of the
Trustees who are not parties to this Agreement or interested persons of the
Advisor, cast in person at a meeting called for the purpose of voting on such
approval.
b) This Agreement may be terminated at any time, with respect to any
Portfolio(s), without payment of any penalty, by the Trust's Board of Trustees
or by a vote of the majority of the outstanding voting securities of the
affected Portfolio(s) upon 60 days' prior written notice to the Advisor and by
the Advisor upon 60 days' prior written notice to the Trust.
c) This Agreement may be amended at any time by the parties hereto,
subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of the majority of the outstanding
voting securities of any Portfolio affected by such change. This Agreement shall
terminate automatically in the event of its assignment.
d) The terms "assignment," "interested persons" and "majority of the
outstanding voting securities" shall have the meaning set forth for such terms
in the 1940 Act.
11. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions, in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered inn their names and on their behalf by the
undersigned, thereunto duly authorized, all as of the day and year first above
written. Pursuant to the Trust's Declaration of Trust, dated as of February 7,
1994, the obligations of this Agreement are not binding upon any of the Trustees
or interestholders of the Trust individually, but bind only the Trust estate.
SELECT ADVISORS PORTFOLIOS
By
Attest:
TOUCHSTONE ADVISORS, INC.
By
Attest:
<PAGE>
SCHEDULE 1
Emerging Growth Portfolio 0.80%
International Equity Portfolio 0.95%
Growth & Income Portfolio 0.75%
Balanced Portfolio 0.70%
Income Opportunity 0.65%
Bond Portfolio 0.55%
Municipal Bond Portfolio 0.55%
Exhibit 5(B).
PORTFOLIO ADVISORY AGREEMENT
EMERGING GROWTH PORTFOLIO
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
DAVID L. BABSON & COMPANY, INC., a Massachusetts corporation (the "Portfolio
Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Select
Advisors Portfolios (the "Trust"), a Massachusetts business trust organized
pursuant to a Declaration of Trust dated February 7, 1994 and registered as an
open-end management investment company under The Investment Company Act of 1940
(the "1940 Act") to provide investment advisory services with respect to certain
assets of the Emerging Growth Portfolio of the Trust (herein the "Portfolio");
and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of that portion of
the assets of the Portfolio allocated to it by the Advisor (which portion, until
changed by the Advisor by not less than ten days prior written notice, shall be
50% of the total assets of the Portfolio) (the said portion, as it may be
changed from time to time, being herein called the "Portfolio Assets"), subject
to the control and direction of the Advisor and the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Portfolio Advisor
hereby accepts such employment and agrees during such period to render the
services and to perform the duties called for by this Agreement for the
compensation herein provided. The Portfolio Advisor shall at all times maintain
its registration as an investment advisor under the investment Advisers Act of
1940 and shall otherwise comply in all material respects with all applicable
laws and regulations, both state and federal. The Portfolio Advisor shall for
all purposes herein be deemed an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and
reinvestment of the Portfolio Assets, subject to and in accordance with
the investment objectives, policies and restrictions of the Portfolio
and any directions which the Advisor or the Trust's Board of Trustees
may give from time to time with respect to the Portfolio. In
furtherance of the foregoing, the Portfolio Advisor will make all
determinations with respect to the investment of the Portfolio Assets
and the purchase and sale of portfolio securities and shall take such
steps as may be necessary or advisable to implement the same. The
Portfolio Advisor also will determine the manner in which voting
rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities will be exercised. The Portfolio
Advisor will render regular reports to the Trust's Board of Trustees,
to the Advisor and to Rogers, Casey Consulting, Inc. (or such other
advisor or advisors as the Advisor shall engage to assist it in the
evaluation of the performance and activities of the Portfolio Advisor).
Such reports shall be made in such form and manner and with respect to
such matters regarding the Portfolio and the Portfolio Advisor as the
Trust, the Advisor or Rogers, Casey Consulting, Inc. shall from time to
time request; provided, however, that in the absence of extraordinary
circumstances, the individual primarily responsible for management of
the Portfolio Assets for the Portfolio Advisor will not be required to
attend in person more than one meeting per year with the trustees of
the Trust.
b. The Portfolio Advisor shall provide support to the Advisor
with respect to the marketing of the Portfolio, including but not
limited to: (i) permission to use the Portfolio Advisor's name as
provided in Section 5, (ii) permission to use the past performance and
investment history of the Portfolio Advisor with respect to a composite
of other portfolios managed by the Portfolio Advisor that are
comparable, in investment objective and composition, to the Portfolio,
(iii) access to the individual(s) responsible for day-to-day management
of the Portfolio for marketing conferences, teleconferences and other
activities involving the promotion of the Portfolio, subject to the
reasonable request of the Advisor, (iv) permission to use biographical
and historical data of the Portfolio Advisor and individual manager(s),
and (v) permission to use the names of those clients, preapproved by
the Portfolio Advisor, to which the Portfolio Advisor provides
investment management services, subject to receipt of the consent of
such clients to the use of their names.
c. The Portfolio Advisor will, in the name of the Portfolio,
place orders for the execution of all portfolio transactions in
accordance with the policies with respect thereto set forth in the
Trust's registration statements under the 1940 Act and the Securities
Act of 1933, as such registration statements may be in effect from time
to time. In connection with the placement of orders for the execution
of portfolio transactions, the Portfolio Advisor will create and
maintain all necessary brokerage records of the Portfolio in accordance
with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act. All
records shall be the property of the Trust and shall be available for
inspection and use by the Securities and Exchange Commission (the
"SEC"), the Trust or any person retained by the Trust. Where
applicable, such records shall be maintained by the Advisor for the
periods and in the places required by Rule 31a-2 under the 1940 Act.
When placing orders with brokers and dealers, the Portfolio Advisor's
primary objective shall be to obtain the most favorable price and
execution available for the Portfolio, and in placing such orders the
Portfolio Advisor may consider a number of factors, including, without
limitation, the overall direct net economic result to the Portfolio
(including commissions, which may not be the lowest available but
ordinarily should not be higher than the generally prevailing
competitive range), the financial strength and stability of the broker,
the efficiency with which the transaction will be effected, the ability
to effect the transaction at all where a large block is involved and
the availability of the broker or dealer to stand ready to execute
possibly difficult transactions in the future. The Portfolio Advisor is
specifically authorized, to the extent authorized by law (including,
without limitation, Section 28(e) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to pay a broker or dealer who
provides research services to the Portfolio Advisor an amount of
commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting such transaction, in recognition of such additional research
services rendered by the broker or dealer, but only if the Portfolio
Advisor determines in good faith that the excess commission is
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to discretionary accounts that it
manages, and that the Portfolio derives or will derive a reasonably
significant benefit from such research services. The Portfolio Advisor
will present a written report to the Board of Trustees of the Trust, at
least quarterly, indicating total brokerage expenses, actual or
imputed, as well as the services obtained in consideration for such
expenses, broken down by broker-dealer and containing such information
as the Board of Trustees reasonably shall request.
d. In the event of any reorganization or other change in the
Portfolio Advisor, its investment principals, supervisors or members of
its investment (or comparable) committee, the Portfolio Advisor shall
give the Advisor and the Trust's Board of Trustees written notice of
such reorganization or change within a reasonable time (but not later
than 30 days) after such reorganization or change.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. The Portfolio Advisor will manage the Portfolio Assets and
the investment and reinvestment of such assets so as to comply with the
1940 Act and with Subchapter M of the Internal Revenue Code of 1986, as
amended.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Portfolio Advisor, the Advisor will pay to
the Portfolio Advisor a monthly fee equal on an annual basis to 0.50%
of the average daily net Portfolio Assets. Such fee shall be computed
and accrued daily. If the Portfolio Advisor serves in such capacity for
less than the whole of any period specified in this Section 3a, the
compensation to the Portfolio Advisor shall be prorated. For purposes
of calculating the Portfolio Advisor's fee, the daily value of the
Portfolio Assets shall be computed by the same method as the Trust uses
to compute the net asset value of the Portfolio for purposes of
purchases and redemptions of interests thereof.
b. The Portfolio Advisor reserves the right to waive all or a
part of its fees hereunder.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request, subject to the
limitation on personal attendance at such meetings set forth in Section 2a) (i)
the financial condition and prospects of the Portfolio Advisor, (ii) the nature
and amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (iii) information regarding any
potential conflicts of interest arising by reason of its continuing provision of
advisory services to the Portfolio and to its other accounts, and (iv) such
other information as the Board of Trustees shall reasonably request regarding
the Portfolio, the Portfolio's performance, the services provided by the
Portfolio Advisor to the Portfolio as compared to its other accounts and the
plans of, and the capability of, the Portfolio Advisor with respect to providing
future services to the Portfolio and its other accounts. The Portfolio Advisor
agrees to submit to the Trust a statement defining its policies with respect to
the allocation of business among the Portfolio and its other clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto and will hereafter
supply to the Advisor, promptly upon the preparation thereof, copies of all
amendments or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further, that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the appointment
of the Portfolio Advisor hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR. Absent willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Portfolio Advisor, the Portfolio Advisor
shall not be subject to liability to the Advisor, the Trust or to any holder of
an interest in the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in this
Section 6, the term "Portfolio Advisor" shall include the Portfolio Advisor
and/or any of its affiliates and the directors, officers and employees of the
Portfolio Advisor and/or any of its affiliates.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio
affected by such change.
d. The terms "assignment," "interested persons" and "majority"
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 318 Broadway, Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be One Memorial Drive, Cambridge, MA
02142-1300.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
By
Edward G. Harness, Jr.
President
Attest:
Secretary
DAVID L. BABSON & COMPANY, INC.
By
Name, President
Attest:
Secretary
Exhibit 5(C).
PORTFOLIO ADVISORY AGREEMENT
EMERGING GROWTH PORTFOLIO
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
WESTFIELD CAPITAL MANAGEMENT COMPANY, INC., a Massachusetts corporation (the
"Portfolio Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Select
Advisors Portfolios, a Massachusetts business trust (the "Trust")
registered under the Investment Company Act of 1940 (the "1940 Act"), to provide
investment advisory services with respect to certain assets of the Emerging
Growth Portfolio (herein the "Portfolio") of the Trust; and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of that portion of
the assets of the Portfolio allocated to it by the Advisor (such portion being
herein called the "Portfolio Assets"), subject to the control and direction of
the Advisor and the Trust's Board of Trustees, for the period and on the terms
hereinafter set forth. The Portfolio Advisor hereby accepts such employment and
agrees during such period to render the services and to perform the duties
called for by this Agreement for the compensation herein provided. The Portfolio
Advisor shall at all times maintain its registration as an investment advisor
under the investment Advisers Act of 1940 and shall otherwise comply in all
material respects with all applicable laws and regulations, both state and
federal. The Portfolio Advisor shall for all purposes herein be deemed an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and reinvestment of
the Portfolio Assets, subject to and in accordance with the investment
objectives, policies and restrictions of the Portfolio and any
directions which the Advisor or the Trust's Board of Trustees may give
from time to time with respect to the Portfolio. In furtherance of the
foregoing, the Portfolio Advisor will make all determinations with
respect to the investment of the Portfolio Assets and the purchase and
sale of portfolio securities and shall take such steps as may be
necessary or advisable to implement the same. The Portfolio Advisor
also will determine the manner in which voting rights, rights to
consent to corporate action and any other rights pertaining to the
portfolio securities will be exercised. The Portfolio Advisor will
render regular reports to the Trust's Board of Trustees, to the Advisor
and to Rogers, Casey Consulting, Inc. (or such other advisor or
advisors as the Advisor shall engage to assist it in the evaluation of
the performance and activities of the Portfolio Advisor). Such reports
shall be made in such form and manner and with respect to such matters
regarding the Portfolio and the Portfolio Advisor as the Trust, the
Advisor or Rogers, Casey Advisors, Inc. shall from time to time
request.
b. The Portfolio Advisor shall provide support to the Advisor
with respect to the marketing of the Portfolio, including but not
limited to: (i) permission to use the Portfolio Advisor's name as
provided in Section 5, (ii) permission to use the past performance and
investment history of the Portfolio Advisor as the same is applicable
to the Portfolio, (iii) access to the individual(s) responsible for
day-to-day management of the Portfolio for marketing conferences,
teleconferences and other activities involving the promotion of the
Portfolio, subject to the reasonable request of the Advisor, (iv)
permission to use biographical and historical data of the Portfolio
Advisor and individual manager(s), and (v) permission to use the names
of those institutional clients to which the Portfolio Advisor provides
investment management services, subject to receipt of the consent of
such clients to the use of their names.
c. The Portfolio Advisor will, in the name of the Portfolio, place
orders for the execution of all portfolio transactions in accordance
with the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act of
1933, as such registration statements may be in effect from time to
time. In connection with the placement of orders for the execution of
portfolio transactions, the Portfolio Advisor will create and maintain
all necessary brokerage records of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for inspection and use
by the Securities and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places required by
Rule 31a-2 under the 1940 Act. When placing orders with brokers and
dealers, the Portfolio Advisor's primary objective shall be to obtain
the most favorable price and execution available for the Portfolio, and
in placing such orders the Portfolio Advisor may consider a number of
factors, including, without limitation, the overall,direct net economic
result to the Portfolio (including commissions, which may not be the
lowest available but ordinarily should not be higher than the generally
prevailing competitive range), the financial strength and stability of
the broker, the efficiency with which the transaction will be effected,
the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to
execute possibly difficult transactions in the future. The Portfolio
Advisor is specifically authorized, to the extent authorized by law
(including, without limitation, Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay a broker
or dealer who provides research services to the Portfolio Advisor an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the
Portfolio Advisor determines in good faith that the excess commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to discretionary accounts that it
manages, and that the Portfolio derives or will derive a reasonably
significant benefit from such research services. The Portfolio Advisor
will present a written report to the Board of Trustees of the Trust, at
least quarterly, indicating total brokerage expenses, actual or
imputed, as well as the services obtained in consideration for such
expenses, broken down by broker-dealer and containing such information
as the Board of Trustees reasonably shall request.
d. In the event of any reorganization or other change in the
Portfolio Advisor, its investment principals, supervisors or members of
its investment (or comparable) committee, the Portfolio Advisor shall
give the Advisor and the Trust's Board of Trustees written notice of
such reorganization or change within a reasonable time (but not later
than 30 days) after such reorganization or change.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. The Portfolio Advisor will manage the Portfolio Assets and
the investment and reinvestment of such assets so as to comply with the
provisions of the Investment Company Act of 1940 and with Subchapter M
of the Internal Revenue Code of 1986, as amended.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Portfolio Advisor, the Advisor will pay to
the Portfolio Advisor a monthly fee equal on an annual basis to 0.45%
of the first $10 million of the average daily net assets of the
Portfolio managed by the Portfolio Advisor, 0.40% of the average daily
net assets of the Portfolio managed by the Portfolio Advisor in excess
of $10 million and up to $50 million and 0.35% of the average daily net
assets of the Portfolio managed by the Portfolio Advisor in excess of
$50 million. Such fee shall be computed and accrued daily. If the
Portfolio Advisor serves in such capacity for less than the whole of
any period specified in this Section 3a, the compensation to the
Portfolio Advisor shall be prorated. For purposes of calculating the
Portfolio Advisor's fee, the daily value of the Portfolio's net assets
shall be computed by the same method as the Trust uses to compute the
net asset value of the Portfolio for purposes of purchases and
redemptions of interests thereof.
b. The Portfolio Advisor reserves the right to waive all or a
part of its fees hereunder.
4. Activities of the Portfolio Advisor. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request) (i) the
financial condition and prospects of the Portfolio Advisor, (ii) the nature and
amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (iii) information regarding any
potential conflicts of interest arising by reason of its continuing provision of
advisory services to the Portfolio and to its other accounts, and (iv) such
other information as the Board of Trustees shall reasonably request regarding
the Portfolio, the Portfolio's performance, the services provided by the
Portfolio Advisor to the Portfolio as compared to its other accounts and the
plans of, and the capability of, the Portfolio Advisor with respect to providing
future services to the Portfolio and its other accounts. At least annually, the
Portfolio Advisor will provide to the Trustees information regarding the
composite return of such of its other accounts as are comparable, in investment
objective and composition, to the Portfolio. The Portfolio Advisor agrees to
submit to the Trust a statement defining its policies with respect to the
allocation of investment opportunities among the Portfolio and its other
clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including the
Portfolio Advisor's statement of financial condition) and will hereafter supply
to the Advisor, promptly upon the preparation thereof, copies of all amendments
or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further ' that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the appointment
of the Portfolio Advisor hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR. Absent willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Portfolio Advisor, the Portfolio Advisor
shall not be subject to liability to the Advisor, the Trust or to any holder of
an interest in the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in this
Section 6, the term "Portfolio Advisor" shall include the Portfolio Advisor
and/or any of its affiliates and the directors, officers and employees of the
Portfolio Advisor and/or any of its affiliates.
7. Limitation of Trust's Liability. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies , work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio affected
by such change.
d. The terms "assignment," "interested persons" and "majority"
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 318 Broadway, Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be One Financial Center - 27th Floor,
Boston, MA 02111.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
By
Edward G. Harness, Jr.
President
Attest:
Secretary
WESTFIELD CAPITAL MANAGEMENT COMPANY, INC.
By
Name, President
Attest:
Secretary
Exhibit 5(D).
PORTFOLIO ADVISORY AGREEMENT
INTERNATIONAL EQUITY PORTFOLIO
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
BEA ASSOCIATES, a New York general partnership (the "Portfolio Advisor").
WHEREAS, the Advisor has been organized to operate as an investment
advisor registered under the Investment Advisers Act of 1940, as amended, and
has been retained by Select Advisors Portfolios (the "Trust"), a Massachusetts
business trust organized pursuant to a Declaration of Trust dated February 7,
1994 and registered as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act") to provide investment advisory
services to the International Equity Portfolio of the Trust (herein the
"Portfolio"); and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of those assets of
the Portfolio allocated to it by the Advisor (the "Portfolio Assets"), subject
to the control and direction of the Advisor and the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Portfolio Advisor
hereby accepts such employment and agrees during such period to render the
services and to perform the duties called for by this Agreement for the
compensation herein provided. The Portfolio Advisor shall at all times maintain
its registration as an investment advisor under the investment Advisers Act of
1940 and shall otherwise comply in all material respects with all applicable
laws and regulations, both state and federal. The Portfolio Advisor shall for
all purposes herein be deemed an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and reinvestment of
the assets of the Portfolio Assets, subject to and in accordance with
the investment objectives, policies and restrictions of the Portfolio
and any directions which the Advisor or the Trust's Board of Trustees
may give from time to time with respect to the Portfolio. In
furtherance of the foregoing, the Portfolio Advisor will make all
determinations with respect to the investment of the assets of the
Portfolio and the purchase and sale of portfolio securities and shall
take such steps as may be necessary or advisable to implement the same.
The Portfolio Advisor also will determine the manner in which voting
rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities will be exercised. The Portfolio
Advisor will render regular reports to the Trust's Board of Trustees,
to the Advisor and to Rogers, Casey Consulting, Inc. (or such other
advisor or advisors as the Advisor shall engage to assist it in the
evaluation of the performance and activities of the Portfolio Advisor).
Such reports shall be made in such form and manner and with respect to
such matters regarding the Portfolio and the Portfolio Advisor as the
Trust, the Advisor or Rogers, Casey Consulting, Inc. shall from time to
time reasonably request.
b. The Portfolio Advisor shall provide support to the Advisor
with respect to the marketing of the Portfolio, consisting of (i)
permission to use the Portfolio Advisor's name as provided in Section
5, (ii) permission to use the past performance and investment history
of the Portfolio Advisor as the same is applicable to the Portfolio,
(iii) access to the individual(s) responsible for the management of the
Portfolio for marketing conferences, teleconferences and other
activities involving the promotion of the Portfolio, subject to the
reasonable request of the Advisor and to the limitation that the
individual primarily responsible for management of the Portfolio Assets
for the Portfolio Advisor will not be required to attend more than one
meeting of the Trust's Trustees in any one year, (iv) permission to use
biographical and historical data of the Portfolio Advisor and
individual manager(s), and (v) permission to use the names of clients
to which the Portfolio Advisor provides investment management services,
subject to any restrictions imposed by clients on the use of such
names.
c. The Portfolio Advisor will, in the name of the Portfolio, place
orders for the execution of all portfolio transactions in accordance
with the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act of
1933, as such registration statements may be in effect from time to
time. In connection with the placement of orders for the execution of
portfolio transactions, the Portfolio Advisor will create and maintain
all necessary brokerage records of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for inspection and use
by the Securities and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places required by
Rule 31a-2 under the 1940 Act. When placing orders with brokers and
dealers, the Portfolio Advisor's primary objective shall be to obtain
the most favorable price and execution available for the Portfolio, and
in placing such orders the Portfolio Advisor may consider a number of
factors, including, without limitation, the overall direct net economic
result to the Portfolio (including commissions, which may not be the
lowest available but ordinarily should not be higher than the generally
prevailing competitive range), the financial strength and stability of
the broker, the efficiency with which the transaction will be effected,
the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to
execute possibly difficult transactions in the future. The Portfolio
Advisor is specifically authorized, to the extent authorized by law
(including, without limitation, Section 28(e) of the Securities
Exchange Act of 1934, as amended (the Exchange Act"), to pay a broker
or dealer who provides research services to the Portfolio Advisor an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the
Portfolio Advisor determines in good faith that the excess commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to discretionary accounts that it
manages. The Portfolio Advisor will present a written report to the
Board of Trustees of the Trust, at least quarterly, indicating total
brokerage expenses, actual or imputed, as well as the services obtained
in consideration for such expenses, broken down by broker-dealer and
containing such information as the Board of Trustees reasonably shall
request.
d. In the event of any reorganization or other change in the
Portfolio Advisor, its investment principals, supervisors or members of
its investment (or comparable) committee, the Portfolio Advisor shall
give the Advisor and the Trust's Board of Trustees written notice of
such reorganization or change within a reasonable time (but not later
than 30 days) after such reorganization or change. In addition, the
Portfolio Advisor will notify the Advisor of any change in the
membership of the Portfolio Advisor within a reasonable time (but not
more than 30 days) after such change takes place.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. Based on account information regarding the Portfolio
provided by the Advisor, the Portfolio Advisor will manage the
Portfolio Assets and the investment and reinvestment of such assets so
as to comply with the provisions of the 1940 Act and with Subchapter M
of the Internal Revenue Code of 1986, as amended; provided, however,
that with respect to provisions of the 1940 Act regarding transactions
with affiliates, the obligations of the Portfolio Advisor shall be
limited to matters involving its own affiliates and such other persons
as the Advisor shall expressly identify as affiliated persons.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Portfolio Advisor, the Advisor will pay to
the Portfolio Advisor a monthly fee equal on an annual basis to 0.85%
of the first $30 million of the average daily net assets of the
Portfolio, 0.80% of the average daily net assets of the Portfolio in
excess of $30 million and up to $50 million, 0.70% of the average daily
net assets of the Portfolio in excess of $50 million and up to $70
million, and 0.60% of the average daily net assets of the Portfolio in
excess of $70 million. Such fee shall be computed and accrued daily. If
the Portfolio Advisor serves in such capacity for less than the whole
of any period specified in this Section 3a, the compensation to the
Portfolio Advisor shall be prorated. For purposes of calculating the
Portfolio Advisor's fee, the daily value of the Portfolio's net assets
shall be computed by the same method as the Trust uses to compute the
net asset value of the Portfolio for purposes of purchases and
redemptions of interests thereof.
b. The Portfolio Advisor reserves the right to waive all or a
part of its fees hereunder.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request) information
reasonably requested by such Board of Trustees regarding (i) the nature and
amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (ii) any potential conflicts of
interest arising by reason of its continuing provision of advisory services to
the Portfolio and to its other accounts, and (iii) such other matters as the
Board of Trustees shall reasonably request regarding the Portfolio, the
Portfolio's performance, the services provided by the Portfolio Advisor to the
Portfolio as compared to its other accounts and the plans of, and the capability
of, the Portfolio Advisor with respect to providing future services to the
Portfolio and its other accounts. The Portfolio Advisor agrees to submit to the
Trust a statement defining its policies with respect to the allocation of
business among the Portfolio and its other clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including the
Portfolio Advisor's statement of financial condition) and will hereafter supply
to the Advisor, promptly upon the preparation thereof, copies of all amendments
or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further, that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor, and the Trust shall each approve all uses
of their respective names which merely refer in accurate terms to the
appointment of the Portfolio Advisor hereunder or which are required by the SEC
or a state securities commission; and, provided further, that in no event shall
such approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR.
a. Absent willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of
the Portfolio Advisor, the Portfolio Advisor shall not be subject to
liability to the Advisor, the Trust or to any holder of an interest in
the Portfolio for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in
this Section 6, the term "Portfolio Advisor" shall include the
Portfolio Advisor and/or any of its affiliates and the directors,
officers and employees of the Portfolio Advisor and/or any of its
affiliates.
b. The Trust or the Advisor will indemnify the Portfolio Advisor
against, and hold it harmless from, any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from its activities under and pursuant to this
Agreement, except to the extent that such losses, claims, damages,
liabilities or expenses result from the gross negligence, bad faith or
willful misfeasance of the Portfolio Advisor or from a breach of its
obligations or duties hereunder. Indemnification shall be made only
after: (i) a final decision on the merits by a court or other body
before whom the proceeding was brought that the Trust or the Advisor
was liable for the damages claimed or (ii) in the absence of such a
decision, a reasonable determination based upon a review of the facts,
that the Trust or the Advisor was liable for the damages claimed, which
determination shall be made by either (a) the vote of a majority of a
quorum of Trustees of the Trust who are neither "interested persons" of
the Trust nor parties to the proceeding ("disinterested non-party
Trustees") or (b) an independent legal counsel satisfactory to the
parties hereto, whose determination shall be set forth in a written
opinion. The Portfolio Advisor shall be entitled to advances from the
Trust for payment of the reasonable expenses incurred by it in
connection with the matter as to which it is seeking indemnification in
the manner and to the fullest extent that would be permissible under
the applicable provisions of the General Corporation Law of Ohio. The
Portfolio Advisor shall provide to the Trust a written affirmation of
its good faith belief that the standard of conduct necessary for
indemnification under such law has been met and a written undertaking
to repay any such advance if it should ultimately be determined that
the standard of conduct has not been met. In addition, at least one of
the following additional conditions shall be met: (a) the Portfolio
Advisor shall provide security in form and amount acceptable to the
Trust for its undertaking; (b) the Trust is insured against losses
arising by reason of the advance; or (c) a majority of a quorum of the
Trustees of the Trust, the members of which majority are disinterested
non-party Trustees, or independent legal counsel in a written opinion,
shall have determined, based on a review of facts readily available to
the Trust at the time the advance is proposed to be made, that there is
reason to believe that the Portfolio Advisor will ultimately be found
to be entitled to indemnification.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer or employee of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio affected
by such change.
d. The terms "assignment," "interested persons" and "majority"
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 318 Broadway, Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be One Citicorp Center, 153 E. 53rd
Street, New York, NY 10122.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
By
Edward G. Harness, Jr.
President
Attest:
Secretary
BEA ASSOCIATES
By
Name, President
Attest:
Secretary
Exhibit 5(E).
PORTFOLIO ADVISORY AGREEMENT
GROWTH & INCOME PORTFOLIO
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
FORT WASHINGTON INVESTMENT ADVISORS, INC., an Ohio corporation (the "Portfolio
Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Select
Portfolio Advisors (the "Trust"), a Massachusetts business trust
organized pursuant to a Declaration of Trust dated February 7, 1994 and
registered as an open-end management investment company under the Investment
Company Act of 1940 (the " 1940 Act"), to provide investment advisory services
to the Growth & Income Portfolio (herein the "Portfolio"); and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of those assets of
the Portfolio allocated to it by the Advisor (the "Portfolio Assets"), subject
to the control and direction of the Advisor and the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Portfolio Advisor
hereby accepts such employment and agrees during such period to render the
services and to perform the duties called for by this Agreement for the
compensation herein provided. The Portfolio Advisor shall at all times maintain
its registration as an investment advisor under the Investment Advisers Act of
1940 and shall otherwise comply in all material respects with all applicable
laws and regulations, both state and federal. The Portfolio Advisor shall for
all purposes herein be deemed an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no day of
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and
reinvestment of the assets of the Portfolio Assets, subject to and in
accordance with the investment objectives, policies and restrictions of
the Portfolio and any directions which the Advisor or the Trust's Board
of Trustees may give from time to time with respect to the Portfolio.
In furtherance of the foregoing, the Portfolio Advisor will make all
determinations with respect to the investment of the assets of the
Portfolio and the purchase and sale of portfolio securities and shall
take such steps as may be necessary or advisable to implement the same.
The Portfolio Advisor also will determine the manner in which voting
rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities will be exercised. The Portfolio
Advisor will render regular reports to the Trust's Board of Trustees,
to the Advisor and to Rogers, Casey Consulting, Inc. (or such other
advisor or advisors as the Advisor shall engage to assist it in the
evaluation of the performance and activities of the Portfolio Advisor).
Such reports shall be made in such form and manner and with respect to
such matters regarding the Portfolio and the Portfolio Advisor as the
Trust, the Advisor or Rogers, Casey Consulting, Inc. shall from time to
time request.
b. The Portfolio Advisor shall provide support to the Advisor
with respect to the marketing of the Portfolio, including but not
limited to: (i) permission to use the Portfolio Advisor's name as
provided in Section 5, (ii) permission to use the past performance and
investment history of the Portfolio Advisor as the same is applicable
to the Portfolio, and (iii) access to the individual(s) responsible for
day-to-day management of the Portfolio for marketing conferences,
teleconferences and other activities involving the promotion of the
Portfolio, subject to the reasonable request of the Advisor, (iv)
permission to use biographical and historical data of the Portfolio
Advisor and individual manager(s), and (v) permission to use the names
of clients to which the Portfolio Advisor provides investment
management services, subject to any restrictions imposed by clients on
the use of such names.
c. The Portfolio Advisor will, in the name of the Portfolio, place
orders for the execution of all portfolio transactions in accordance
with the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act of
1933, as such registration statements may be in effect from time to
time. In connection with the placement of orders for the execution of
portfolio transactions, the Portfolio Advisor will create and maintain
all necessary brokerage records of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for inspection and use
by the Securities and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places required by
Rule 31a-2 under the 1940 Act. When placing orders with brokers and
dealers, the Portfolio Advisor's primary objective shall be to obtain
the most favorable price and execution available for the Portfolio, and
in placing such orders the Portfolio Advisor may consider a number of
factors, including, without limitation, the overall direct net economic
result to the Portfolio (including commissions, which may not be the
lowest available but ordinarily should not be higher than the generally
prevailing competitive range), the financial strength and stability of
the broker, the efficiency with which the transaction will be effected,
the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to
execute possibly difficult transactions in the future. The Portfolio
Advisor is specifically authorized, to the extent authorized by law
(including, without limitation, Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay a broker
or dealer who provides research services to the Portfolio Advisor an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the
Portfolio Advisor determines in good faith that the excess commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to discretionary accounts that it
manages, and that the Portfolio derives or will derive a reasonably
significant benefit from such research services. The Portfolio Advisor
will present a written report to the Board of Trustees of the Trust, at
least quarterly, indicating total brokerage expenses, actual or
imputed, as well as the services obtained in consideration for such
expenses, broken down by broker-dealer and containing such information
as the Board of Trustees reasonably shall request.
d. In the event of any reorganization or other change in the
Portfolio Advisor, its investment principals, supervisors or members of
its investment (or comparable) committee, the Portfolio Advisor shall
give the Advisor and the Trust's Board of Trustees written notice of
such reorganization or change within a reasonable time (but not later
than 30 days) after such reorganization or change.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. The Portfolio Advisor will manage the Portfolio Assets and
the investment and reinvestment of such assets so as to comply with the
provisions of the 1940 Act and with Subchapter M of the Internal
Revenue Code of 1986, as amended.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Portfolio Advisor, the Advisor will pay to
the Portfolio Advisor a monthly fee equal on an annual basis to 0.45%
of the average daily net assets of the Portfolio. Such fee shall be
computed and accrued daily. If the Portfolio Advisor serves in such
capacity for less than the whole of any period specified in this
Section 3a, the compensation to the Portfolio Advisor shall be
prorated. For purposes of calculating the Portfolio Advisor's fee, the
daily value of the Portfolio's net assets shall be computed by the same
method as the Trust uses to compute the net asset value of the
Portfolio for purposes of purchases and redemptions of interests
thereof.
b. The Portfolio Advisor reserves the right to waive all or a
part of its fees hereunder.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request) (i) the
financial condition and prospects of the Portfolio Advisor, (ii) the nature and
amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (iii) information regarding any
potential conflicts of interest arising by reason of its continuing provision of
advisory services to the Portfolio and to its other accounts, and (iv) such
other information as the Board of Trustees shall reasonably request regarding
the Portfolio, the Portfolio's performance, the services provided by the
Portfolio Advisor to the Portfolio as compared to its other accounts and the
plans of, and the capability of, the Portfolio Advisor with respect to providing
future services to the Portfolio and its other accounts. At least annually, the
Portfolio Advisor shall report to the Trustees the total number and type of such
other accounts and the approximate total asset value thereof (but not the
identities of the beneficial owners of such accounts). The Portfolio Advisor
agrees to submit to the Trust a statement defining its policies with respect to
the allocation of business among the Portfolio and its other clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including the
Portfolio Advisor's statement of financial condition) and will hereafter supply
to the Advisor, promptly upon the preparation thereof, copies of all amendments
or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further, that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the appointment
of the Portfolio Advisor hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR.
a. Absent willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the
Portfolio Advisor, the Portfolio Advisor shall not be subject to
liability to the Advisor, the Trust or to any holder of an interest in
the Portfolio for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in
this Section 6, the term "Portfolio Advisor" shall include the
Portfolio Advisor and/or any of its affiliates and the directors,
officers and employees of the Portfolio Advisor and/or any of its
affiliates.
b. The Advisor will indemnify the Portfolio Advisor against,
and hold it harmless from, any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and
expenses) resulting from acts or omissions of the Advisor and/or the
Trust. Indemnification shall be made only after: (i) a final decision
on the merits by a court or other body before whom the proceeding was
brought that the Trust or the Advisor was liable for the damages
claimed or (ii) in the absence of such a decision, a reasonable
determination based upon a review of the facts, that the Trust or the
Advisor was liable for the damages claimed, which determination shall
be made by either (a) the vote of a majority of a quorum of Trustees of
the Trust who are neither "interested persons" of the Trust nor parties
to the proceeding ("disinterested non-party Trustees") or (b) an
independent legal counsel satisfactory to the parties hereto, whose
determination shall be set forth in a written opinion. The Portfolio
Advisor shall be entitled to advances from the Trust for payment of the
reasonable expenses incurred by it in connection with the matter as to
which it is seeking indemnification in the manner and to the fullest
extent that would be permissible under the indemnification provisions
of the General Corporation Law of Ohio. The Portfolio Advisor shall
provide to the Trust a written affirmation of its good faith belief
that the standard of conduct necessary for indemnification under such
law has been met and a written undertaking to repay any such advance if
it should ultimately be determined that the standard of conduct has not
been met. In addition, at least one of the following additional
conditions shall be met: (a) the Portfolio Advisor shall provide
security in form and amount acceptable to the Trust for its
undertaking; (b) the Trust is insured against losses arising by reason
of the advance; or (c) a majority of a quorum of the Trustees of the
Trust, the members of which majority are disinterested non-party
Trustees, or independent legal counsel in a written opinion, shall have
determined, based on a review of facts readily available to the Trust
at the time the advance is proposed to be made, that there is reason to
believe that the Portfolio Advisor will ultimately be found to be
entitled to indemnification.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio affected
by such change.
d. The terms "assignment," "interested persons" and "majority"
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 318 Broadway Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be 550 East 4th Street, Cincinnati, Ohio
45202.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
By
Edward G. Harness, Jr.
President
Attest:
Secretary
FORT WASHINGTON INVESTMENT ADVISORS, INC.
By
Name, President
Attest:
Secretary
Exhibit 5(F).
PORTFOLIO ADVISORY AGREEMENT
BALANCED PORTFOLIO (EQUITY)
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
HARBOR CAPITAL MANAGEMENT COMPANY, INC., a Massachusetts corporation (the
"Portfolio Advisor").
WHEREAS, the Advisor has been organized to operate as an investment
advisor registered under the Investment Advisers Act of 1940, as amended, and
has been retained by Select Advisors Portfolio (the "Trust"), a Massachusetts
business trust organized pursuant to a Declaration of Trust dated February 7,
1994 and registered as an open-end management investment company under the
Investment Company Act of 1940 (the " 1940 Act") to provide investment advisory
services to the equity portion of the Balanced Portfolio (herein the
"Portfolio") of the Trust; and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of those assets of
the Portfolio allocated to it by the Advisor (the "Portfolio Assets"), subject
to the control and direction of the Advisor and the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Portfolio Advisor
hereby accepts such employment and agrees during such period to render the
services and to perform the duties called for by this Agreement for the
compensation herein provided. The Portfolio Advisor shall at all times maintain
its registration as an investment advisor under the Investment Advisers Act of
1940 and shall otherwise comply in all material respects with all applicable
laws and regulations, both state and federal. The Portfolio Advisor shall for
all purposes herein be deemed an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and reinvestment of
the assets of the Portfolio Assets, subject to and in accordance with
the investment objectives, policies and restrictions of the Portfolio
and any directions which the Advisor or the Trust's Board of Trustees
may give from time to time with respect to the Portfolio. In
furtherance of the foregoing, the Portfolio Advisor will make all
determinations with respect to the investment of the assets of the
Portfolio and the purchase and sale of portfolio securities and shall
take such steps as may be necessary or advisable to implement the same.
The Portfolio Advisor also will determine the manner in which voting
rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities will be exercised. The Portfolio
Advisor will render regular reports to the Trust's Board of Trustees,
to the Advisor and to Rogers, Casey Consulting, Inc. (or such other
advisor or advisors as the Advisor shall engage to assist it in the
evaluation of the performance and activities of the Portfolio Advisor).
Such reports shall be made in such form and manner and with respect to
such matters regarding the Portfolio and the Portfolio Advisor as the
Trust, the Advisor or Rogers, Casey Advisors, Inc. shall from time to
time request.
b. The Portfolio Advisor shall provide support to the Advisor
with respect to the marketing of the Portfolio, including but not
limited to: (i) permission to use the Portfolio Advisor's name as
provided in Section 5, (ii) permission to use the past performance and
investment history of the Portfolio Advisor as the same is applicable
to the Portfolio, and (iii) access to the individual(s) responsible for
day-to-day management of the Portfolio for marketing conferences,
teleconferences and other activities involving the promotion of the
Portfolio, subject to the reasonable request of the Advisor, (iv)
permission to use biographical and historical data of the Portfolio
Advisor and individual manager(s), and (v) permission to use the names
of clients to which the Portfolio Advisor provides investment
management services, subject to any restrictions imposed by clients on
the use of such names.
c. The Portfolio Advisor will, in the name of the Portfolio, place
orders for the execution of all portfolio transactions in accordance
with the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act of
1933, as such registration statements may be in effect from time to
time. In connection with the placement of orders for the execution of
portfolio transactions, the Portfolio Advisor will create and maintain
all necessary brokerage records of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for inspection and use
by the Securities and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places required by
Rule 31a-2 under the 1940 Act. When placing orders with brokers and
dealers, the Portfolio Advisor's primary objective shall be to obtain
the most favorable price and execution available for the Portfolio, and
in placing such orders the Portfolio Advisor may consider a number of
factors, including, without limitation, the overall direct net economic
result to the Portfolio (including commissions, which may not be the
lowest available but ordinarily should not be higher than the generally
prevailing competitive range), the financial strength and stability of
the broker, the efficiency with which the transaction will be effected,
the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to
execute possibly difficult transactions in the future. The Portfolio
Advisor is specifically authorized, to the extent authorized by law
(including, without limitation, Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay a broker
or dealer who provides research services to the Portfolio Advisor an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the
Portfolio Advisor determines in good faith that the excess commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to discretionary accounts that it
manages, and that the Portfolio derives or will derive a reasonably
significant benefit from such research services. The Portfolio Advisor
will present a written report to the Board of Trustees of the Trust, at
least quarterly, indicating total brokerage expenses, actual or
imputed, as well as the services obtained in consideration for such
expenses, broken down by broker-dealer and containing such information
as the Board of Trustees reasonably shall request.
d. In the event of any reorganization or other change in the
Portfolio Advisor, its investment principals, supervisors or members of
its investment (or comparable) committee, the Portfolio Advisor shall
give the Advisor and the Trust's Board of Trustees written notice of
such reorganization or change within a reasonable time (but not later
than 30 days) after such reorganization or change.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. The Portfolio Advisor will manage the Portfolio Assets and
the investment and reinvestment of such assets so as to comply with the
provisions of the 1940 Act and with Subchapter M of the Internal
Revenue Code of 1986, as amended.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Portfolio Advisor, the Advisor will pay to
the Portfolio Advisor a monthly fee equal on an annual basis to 0.50%
of the first $75 million of the average daily net assets of the equity
portion of the Portfolio, 0.40% of the average daily net assets of the
equity portion of the Portfolio in excess of $75 million and up to $150
million and 0.30% of the average daily net assets of the equity portion
of the Portfolio in excess of $150 million. Such fee shall be computed
and accrued daily. If the Portfolio Advisor serves in such capacity for
less than the whole of any period specified in this Section 3a, the
compensation to the Portfolio Advisor shall be prorated. For purposes
of calculating the Portfolio Advisor's fee, the daily value of the
Portfolio's net assets shall be computed by the same method as the
Trust uses to compute the net asset value of the Portfolio for purposes
of purchases and redemptions of interests thereof.
b. The Portfolio Advisor reserves the right to waive all or a
part of its fees hereunder.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request) (i) the
financial condition and prospects of the Portfolio Advisor, (ii) the nature and
amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (iii) information regarding any
potential conflicts of interest arising by reason of its continuing provision of
advisory services to the Portfolio and to its other accounts, and (iv) such
other information as the Board of Trustees shall reasonably request regarding
the Portfolio, the Portfolio's performance, the services provided by the
Portfolio Advisor to the Portfolio as compared to its other accounts and the
plans of, and the capability of, the Portfolio Advisor with respect to providing
future services to the Portfolio and its other accounts. At least annually, the
Portfolio Advisor shall report to the Trustees the total number and type of such
other accounts and the approximate total asset value thereof (but not the
identities of the beneficial owners of such accounts). The Portfolio Advisor
agrees to submit to the Trust a statement defining its policies with respect to
the allocation of business among the Portfolio and its other clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including the
Portfolio Advisor's statement of financial condition) and will hereafter supply
to the Advisor, promptly upon the preparation thereof, copies of all amendments
or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further, that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the appointment
of the Portfolio Advisor hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR. Absent willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Portfolio Advisor, the Portfolio Advisor
shall not be subject to liability to the Advisor, the Trust or to any holder of
an interest in the Portfolio for any act or omission in the course (if, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in this
Section 6, the term "Portfolio Advisor" shall include the Portfolio Advisor
and/or any of its affiliates and the directors, officers and employees of the
Portfolio Advisor and/or any of its affiliates.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio affected
by such change.
d. The terms "assignment," "interested persons" and "majority"
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 318 Broadway, Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be 125 High Street - 26th Floor, Boston,
MA 02110.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
BY
Edward G. Harness, Jr.
President
Attest:
Secretary
HARBOR CAPITAL MANAGEMENT COMPANY, INC.
BY
Name, President
Attest:
Secretary
Exhibit 5(G).
PORTFOLIO ADVISORY AGREEMENT
BALANCED PORTFOLIO (FIXED INCOME)
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and,
MORGAN GRENFELL CAPITAL MANAGEMENT, INC., a New York corporation (the "Portfolio
Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Select
Advisors Portfolios (the "Trust") a Massachusetts business trust organized
pursuant to a Declaration of Trust dated February 7, 1994 and registered as an
open-end management investment company under The Investment Company Act of 1940
(the " 1940 Act") to provide investment advisory services to the fixed income
portion of the Balanced Portfolio, a series of the Trust (herein the
"Portfolio"); and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of those assets of
the Portfolio allocated to it by the Advisor (the "Portfolio Assets"), subject
to the control and direction of the Advisor and the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Portfolio Advisor
hereby accepts such employment and agrees during such period to render the
services and to perform the duties called for by this Agreement for the
compensation herein provided. The Portfolio Advisor shall at all times maintain
its registration as an investment advisor under the investment Advisers Act of
1940 and shall otherwise comply in all material respects with all applicable
laws and regulations, both state and federal. The Portfolio Advisor shall for
all purposes herein be deemed an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and reinvestment of
the assets of the Portfolio Assets, subject to and in accordance with
the investment objectives, policies and restrictions of the Portfolio
and any directions which the Advisor or the Trust's Board of Trustees
may give from time to time with respect to the Portfolio. In
furtherance of the foregoing, the Portfolio Advisor will make all
determinations with respect to the investment of the assets of the
Portfolio and the purchase and sale of portfolio securities and shall
take such steps as may be necessary or advisable to implement the same.
The Portfolio Advisor also will determine the manner in which voting
rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities will be exercised. The Portfolio
Advisor will render regular reports to the Trust's Board of Trustees,
to the Advisor and to such other advisor or consultant as the Advisor
shall engage to assist it in the evaluation of the performance and
activities of the Portfolio Advisor. Such reports shall be made in such
form and manner and with respect to such matters regarding the
Portfolio and the Portfolio Advisor as the Trust, the Advisor or such
consultant or advisor engaged by the Advisor shall from time to time
request.
b. The Portfolio Advisor shall (i) permit the Advisor and the
Trust to use the past performance and investment history of the
Portfolio Advisor, as the same is applicable to the Portfolio and to
the extent permitted by applicable law and regulations, (ii) provide
the Advisor and the Trust access to the individual(s) responsible for
day-to-day management of the Portfolio in connection with marketing
conferences, teleconferences and other activities involving the
promotion of the Portfolio, subject to the reasonable request of the
Trust or the Advisor, and (iii) permit the Advisor and the Trust to use
biographical and historical data of the Portfolio Advisor and
individual manager(s).
c. The Portfolio Advisor will, in the name of the Portfolio, place
orders for the execution of all portfolio transactions in accordance
with the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act of
1933, as such registration statements may be in effect from time to
time. In connection with the placement of orders for the execution of
portfolio transactions, the Portfolio Advisor will create and maintain
all necessary brokerage records of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for inspection and use
by the Securities and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places required by
Rule 31a-2 under the 1940 Act. When placing orders with brokers and
dealers, the Portfolio Advisor's primary objective shall be to obtain
the most favorable price and execution available for the Portfolio, and
in placing such orders the Portfolio Advisor may consider a number of
factors, including, without limitation, the overall direct net economic
result to the Portfolio (including commissions, which may not be the
lowest available but ordinarily should not be higher than the generally
prevailing competitive range), the financial strength and stability of
the broker, the efficiency with which the transaction will be effected,
the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to
execute possibly difficult transactions in the future. The Portfolio
Advisor is specifically authorized, to the extent authorized by law
(including, without limitation, Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay a broker
or dealer who provides research services to the Portfolio Advisor an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the
Portfolio Advisor determines in good faith that the excess commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to the Portfolio and other discretionary
accounts that it manages. The Portfolio Advisor will present a written
report to the Board of Trustees of the Trust, at least quarterly,
indicating total brokerage expenses, actual or imputed, as well as the
services obtained in consideration for such expenses, broken down by
broker-dealer and containing such information as the Board of Trustees
reasonably shall request.
d. In the event of any reorganization or other change in the
Portfolio Advisor, its investment principals, supervisors or members of
its investment (or comparable) committee, the Portfolio Advisor shall
give the Advisor and the Trust's Board of Trustees written notice of
such reorganization or change within a reasonable time (but not later
than 30 days) after such reorganization or change.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. The Advisor understands that the Portfolio Advisor, because
it will manage only a portion of the assets held by the Portfolio, is
unable to assure that the Portfolio, as a whole, will comply with the
provisions of the 1940 Act and Subchapter M of the Internal Revenue
Code of 1986. Nonetheless, during the term of this Agreement the
Portfolio Advisor will not take or omit to take any action with respect
to the Portfolio Assets that it knows or reasonably should know will
have the effect of causing the Portfolio to fail to comply with the
provisions of the 1940 Act or such Subchapter M. In this regard, the
Portfolio Advisor will not be charged with knowledge of any information
regarding those assets of the Portfolio that are not under its
management, unless such information is provided, in writing, to the
Portfolio Advisor by the Trust or the Advisor in sufficient time to
enable the Portfolio Advisor to take or omit to take action that would
keep the Portfolio in compliance with the 1940 Act and Subchapter M.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Portfolio Advisor, the Advisor will pay to
the Portfolio Advisor a monthly fee equal on an annual basis to 0.35%
of the first $40 million of the average daily net assets of the fixed
income portion of the Portfolio, and 0.30% of the average daily net
assets of the fixed income portion of the Portfolio in excess of $40
million. Such fee shall be computed and accrued daily. If the Portfolio
Advisor serves in such capacity for less than the whole of any period
specified in this Section 3a, the compensation to the Portfolio Advisor
shall be prorated. For purposes of calculating the Portfolio Advisor's
fee, the daily value of the Portfolio's net assets shall be computed by
the same method as the Trust uses to compute the net asset value of the
Portfolio for purposes of purchases and redemptions of interests
thereof.
b. The Portfolio Advisor reserves the right to waive all or a
part of its fees hereunder, as well as to terminate any such waiver at
any time by written notice to the Advisor and the Trust.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request) (i) the
financial condition of the Portfolio Advisor, (ii) the nature and amount of
transactions affecting the Portfolio that involve the Portfolio Advisor and
affiliates of the Portfolio Advisor, (iii) information regarding any potential
conflicts of interest arising by reason of its continuing provision of advisory
services to the Portfolio and to its other accounts, and (iv) such other
information as the Board of Trustees shall reasonably request regarding the
Portfolio, the Portfolio's performance, the services provided by the Portfolio
Advisor to the Portfolio as compared to its other accounts and the plans of, and
the capability of, the Portfolio Advisor with respect to providing future
services to the Portfolio and its other accounts. The Portfolio Advisor agrees
to submit to the Trust a statement defining its policies with respect to the
allocation of investment opportunities among the Portfolio and its other
clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including the
Portfolio Advisor's statement of financial condition) and will hereafter supply
to the Advisor, promptly upon the preparation thereof, copies of all amendments
or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other
material relating to the Advisor or the Trust in any manner not
approved in advance by the Portfolio Advisor; provided, however, that
the Portfolio Advisor will approve all uses of its name which merely
refer in accurate terms to its appointment hereunder or which are
required by the SEC or a state securities commission; and provided
further, that in no event shall such approval be unreasonably withheld.
The Portfolio Advisor shall not use the name of the Advisor or the
Trust in any material relating to the Portfolio Advisor in any manner
not approved in advance by the Advisor or the Trust, as the case may
be; provided, however, that the Advisor and the Trust shall each
approve all uses of their respective names which merely refer in
accurate terms to the appointment of the Portfolio Advisor hereunder or
which are required by the SEC or a state securities commission; and,
provided further, that in no event shall such approval be unreasonably
withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR.
a. Absent willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of
the Portfolio Advisor, the Portfolio Advisor shall not be subject to
liability to the Advisor, the Trust or to any holder of an interest in
the Portfolio for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in
this Section 6, the term "Portfolio Advisor" shall include the
Portfolio Advisor and/or any of its affiliates and the directors,
officers and employees of the Portfolio Advisor and/or any of its
affiliates.
b. The Advisor will indemnify the Portfolio Advisor against,
and hold it harmless from, any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and
expenses) resulting from acts or omissions of the Advisor and/or the
Trust. Indemnification shall be made only after: (i) a final decision
on the merits by a court or other body before whom the proceeding was
brought that the Trust or the Advisor was liable for the damages
claimed or (ii) in the absence of such a decision, a reasonable
determination based upon a review of the facts, that the Trust or the
Advisor was liable for the damages claimed, which determination shall
be made by either (a) the vote of a majority of a quorum of Trustees of
the Trust who are neither "interested persons" of the Trust nor parties
to the proceeding ("disinterested non-party Trustees") or (b) an
independent legal counsel satisfactory to the parties hereto, whose
determination shall be set forth in a written opinion. The Portfolio
Advisor shall be entitled to advances from the Advisor for payment of
the reasonable expenses incurred by it in connection with the matter as
to which it is seeking indemnification in the manner and to the fullest
extent that would be permissible under the applicable provisions of the
General Corporation Law of Ohio. The Portfolio Advisor shall provide to
the Advisor a written affirmation of its good faith belief that the
standard of conduct necessary for indemnification under such law has
been met and a written undertaking to repay any such advance if it
should ultimately be determined that the standard of conduct has not
been met. In addition, at least one of the following additional
conditions shall be met: (a) the Portfolio Advisor shall provide
security in form and amount acceptable to the Advisor for its
undertaking; (b) the Advisor is insured against losses arising by
reason of the advance; or (c) a majority of a quorum of the Trustees of
the Trust, the members of which majority are disinterested non-party
Trustees, or independent legal counsel in a written opinion, shall have
determined, based on a review of facts readily available to the Trust
at the time the advance is proposed to be made, that there is reason to
believe that the Portfolio Advisor will ultimately be found to be
entitled to indemnification.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio affected
by such change.
d. The terms "assignment," "interested persons" and "majority"
of the outstanding voting securities" shall have the meanings set forth
for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 31 8 Broadway, Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be 885 Third Avenue, New York, NY 10002.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement sets forth the entire agreement of the parties with respect to the
subject matter hereof and supersedes any oral or prior written understanding of
agreement of the parties with respect to the subject matter hereof.
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.
TOUCHSTONE ADVISORS, INC.
By
Edward G. Harness, Jr.
President
Attest:
Secretary
MORGAN GRENFELL CAPITAL MANAGEMENT, INC.
By
James E. Minnick, President
Attest:
Secretary
<PAGE>
JOINDER
Select Advisors Portfolios, an intended beneficiary of the performance
to be rendered by Morgan Grenfell Capital Management, Inc. pursuant to the
foregoing agreement (the "Agreement"), does hereby, as further consideration for
such performance, join in and agree to perform, jointly and severally with
Touchstone Advisors, Inc. (the "Advisor"), those obligations to be performed by
the Advisor and/or Select Advisors Portfolios under and pursuant
to Section 6b of the Agreement (subject, however, to the terms of such Section
6b and of Section 7 of the Agreement) and under and pursuant to Section 5 of the
Agreement.
SELECT ADVISORS PORTFOLIOS
By:
Trustee
Exhibit 5(H).
PORTFOLIO ADVISORY AGREEMENT
BOND PORTFOLIO
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
FORT WASHINGTON INVESTMENT ADVISORS, INC., an Ohio corporation (the "Portfolio
Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Select
Portfolio Advisors (the "Trust"), a Massachusetts business trust
organized pursuant to a Declaration of Trust dated February 7, 1994 and
registered as an open-end management investment company under the Investment
Company Act of 1940 (the " 1940 Act"), to provide investment advisory services
to the Bond Portfolio (herein the "Portfolio"); and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of those assets of
the Portfolio allocated to it by the Advisor (the "Portfolio Assets"), subject
to the control and direction of the Advisor and the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Portfolio Advisor
hereby accepts such employment and agrees during such period to render the
services and to perform the duties called for by this Agreement for the
compensation herein provided. The Portfolio Advisor shall at all times maintain
its registration as an investment advisor under the Investment Advisers Act of
1940 and shall otherwise comply in all material respects with all applicable
laws and regulations, both state and federal. The Portfolio Advisor shall for
all purposes herein be deemed an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no day of
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and
reinvestment of the assets of the Portfolio Assets, subject to and in
accordance with the investment objectives, policies and restrictions of
the Portfolio and any directions which the Advisor or the Trust's Board
of Trustees may give from time to time with respect to the Portfolio.
In furtherance of the foregoing, the Portfolio Advisor will make all
determinations with respect to the investment of the assets of the
Portfolio and the purchase and sale of portfolio securities and shall
take such steps as may be necessary or advisable to implement the same.
The Portfolio Advisor also will determine the manner in which voting
rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities will be exercised. The Portfolio
Advisor will render regular reports to the Trust's Board of Trustees,
to the Advisor and to Rogers, Casey Consulting, Inc. (or such other
advisor or advisors as the Advisor shall engage to assist it in the
evaluation of the performance and activities of the Portfolio Advisor).
Such reports shall be made in such form and manner and with respect to
such matters regarding the Portfolio and the Portfolio Advisor as the
Trust, the Advisor or Rogers, Casey Consulting, Inc. shall from time to
time request.
b. The Portfolio Advisor shall provide support to the Advisor
with respect to the marketing of the Portfolio, including but not
limited to: (i) permission to use the Portfolio Advisor's name as
provided in Section 5, (ii) permission to use the past performance and
investment history of the Portfolio Advisor as the same is applicable
to the Portfolio, and (iii) access to the individual(s) responsible for
day-to-day management of the Portfolio for marketing conferences,
teleconferences and other activities involving the promotion of the
Portfolio, subject to the reasonable request of the Advisor, (iv)
permission to use biographical and historical data of the Portfolio
Advisor and individual manager(s), and (v) permission to use the names
of clients to which the Portfolio Advisor provides investment
management services, subject to any restrictions imposed by clients on
the use of such names.
c. The Portfolio Advisor will, in the name of the Portfolio, place
orders for the execution of all portfolio transactions in accordance
with the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act of
1933, as such registration statements may be in effect from time to
time. In connection with the placement of orders for the execution of
portfolio transactions, the Portfolio Advisor will create and maintain
all necessary brokerage records of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for inspection and use
by the Securities and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places required by
Rule 31a-2 under the 1940 Act. When placing orders with brokers and
dealers, the Portfolio Advisor's primary objective shall be to obtain
the most favorable price and execution available for the Portfolio, and
in placing such orders the Portfolio Advisor may consider a number of
factors, including, without limitation, the overall direct net economic
result to the Portfolio (including commissions, which may not be the
lowest available but ordinarily should not be higher than the generally
prevailing competitive range), the financial strength and stability of
the broker, the efficiency with which the transaction will be effected,
the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to
execute possibly difficult transactions in the future. The Portfolio
Advisor is specifically authorized, to the extent authorized by law
(including, without limitation, Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay a broker
or dealer who provides research services to the Portfolio Advisor an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the
Portfolio Advisor determines in good faith that the excess commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to discretionary accounts that it
manages, and that the Portfolio derives or will derive a reasonably
significant benefit from such research services. The Portfolio Advisor
will present a written report to the Board of Trustees of the Trust, at
least quarterly, indicating total brokerage expenses, actual or
imputed, as well as the services obtained in consideration for such
expenses, broken down by broker-dealer and containing such information
as the Board of Trustees reasonably shall request.
d. In the event of any reorganization or other change in the
Portfolio Advisor, its investment principals, supervisors or members of
its investment (or comparable) committee, the Portfolio Advisor shall
give the Advisor and the Trust's Board of Trustees written notice of
such reorganization or change within a reasonable time (but not later
than 30 days) after such reorganization or change.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. The Portfolio Advisor will manage the Portfolio Assets and
the investment and reinvestment of such assets so as to comply with the
provisions of the 1940 Act and with Subchapter M of the Internal
Revenue Code of 1986, as amended.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
a. As compensation for the services to be rendered and duties
undertaken hereunder by the Portfolio Advisor, the Advisor will pay to
the Portfolio Advisor a monthly fee equal on an annual basis to 0.30%
of the average daily net assets of the Portfolio. Such fee shall be
computed and accrued daily. If the Portfolio Advisor serves in such
capacity for less than the whole of any period specified in this
Section 3a, the compensation to the Portfolio Advisor shall be
prorated. For purposes of calculating the Portfolio Advisor's fee, the
daily value of the Portfolio's net assets shall be computed by the same
method as the Trust uses to compute the net asset value of the
Portfolio for purposes of purchases and redemptions of interests
thereof.
b. The Portfolio Advisor reserves the right to waive all or a
part of its fees hereunder.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request) (i) the
financial condition and prospects of the Portfolio Advisor, (ii) the nature and
amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (iii) information regarding any
potential conflicts of interest arising by reason of its continuing provision of
advisory services to the Portfolio and to its other accounts, and (iv) such
other information as the Board of Trustees shall reasonably request regarding
the Portfolio, the Portfolio's performance, the services provided by the
Portfolio Advisor to the Portfolio as compared to its other accounts and the
plans of, and the capability of, the Portfolio Advisor with respect to providing
future services to the Portfolio and its other accounts. At least annually, the
Portfolio Advisor shall report to the Trustees the total number and type of such
other accounts and the approximate total asset value thereof (but not the
identities of the beneficial owners of such accounts). The Portfolio Advisor
agrees to submit to the Trust a statement defining its policies with respect to
the allocation of business among the Portfolio and its other clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including the
Portfolio Advisor's statement of financial condition) and will hereafter supply
to the Advisor, promptly upon the preparation thereof, copies of all amendments
or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further, that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the appointment
of the Portfolio Advisor hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR.
a. Absent willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the
Portfolio Advisor, the Portfolio Advisor shall not be subject to
liability to the Advisor, the Trust or to any holder of an interest in
the Portfolio for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in
this Section 6, the term "Portfolio Advisor" shall include the
Portfolio Advisor and/or any of its affiliates and the directors,
officers and employees of the Portfolio Advisor and/or any of its
affiliates.
b. The Advisor will indemnify the Portfolio Advisor against,
and hold it harmless from, any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and
expenses) resulting from acts or omissions of the Advisor and/or the
Trust. Indemnification shall be made only after: (i) a final decision
on the merits by a court or other body before whom the proceeding was
brought that the Trust or the Advisor was liable for the damages
claimed or (ii) in the absence of such a decision, a reasonable
determination based upon a review of the facts, that the Trust or the
Advisor was liable for the damages claimed, which determination shall
be made by either (a) the vote of a majority of a quorum of Trustees of
the Trust who are neither "interested persons" of the Trust nor parties
to the proceeding ("disinterested non-party Trustees") or (b) an
independent legal counsel satisfactory to the parties hereto, whose
determination shall be set forth in a written opinion. The Portfolio
Advisor shall be entitled to advances from the Trust for payment of the
reasonable expenses incurred by it in connection with the matter as to
which it is seeking indemnification in the manner and to the fullest
extent that would be permissible under the indemnification provisions
of the General Corporation Law of Ohio. The Portfolio Advisor shall
provide to the Trust a written affirmation of its good faith belief
that the standard of conduct necessary for indemnification under such
law has been met and a written undertaking to repay any such advance if
it should ultimately be determined that the standard of conduct has not
been met. In addition, at least one of the following additional
conditions shall be met: (a) the Portfolio Advisor shall provide
security in form and amount acceptable to the Trust for its
undertaking; (b) the Trust is insured against losses arising by reason
of the advance; or (c) a majority of a quorum of the Trustees of the
Trust, the members of which majority are disinterested non-party
Trustees, or independent legal counsel in a written opinion, shall have
determined, based on a review of facts readily available to the Trust
at the time the advance is proposed to be made, that there is reason to
believe that the Portfolio Advisor will ultimately be found to be
entitled to indemnification.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment.
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio affected
by such change.
d. The terms "assignment," "interested persons" and "majority"
of the outstanding voting securities" shall have the meaning set forth
for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 318 Broadway Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be 550 East 4th Street, Cincinnati, Ohio
45202.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
By
Edward G. Harness, Jr.
President
Attest:
Secretary
FORT WASHINGTON INVESTMENT ADVISORS, INC.
By
Name, President
Attest:
Secretary
Exhibit 5(I).
PORTFOLIO ADVISORY AGREEMENT
INCOME OPPORTUNITY PORTFOLIO
This PORTFOLIO ADVISORY AGREEMENT is made as of the day of , 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
ALLIANCE CAPITAL MANAGEMENT, L.P., a limited partnership organized under the
laws of Delaware (the "Portfolio Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Select
Advisors Portfolios (the "Trust"), a Massachusetts business trust organized
pursuant to a Declaration of Trust dated February 7, 1994 and registered as an
open-end investment company under The Investment Company Act of 1940 (the "1940
Act"), to provide investment advisory services to the Income Opportunity
Portfolio (herein the "Portfolio") of the Trust; and
WHEREAS, the Portfolio Advisor is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject
to the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of those assets of
the Portfolio allocated to it by the Advisor (the "Portfolio Assets"), subject
to the oversight responsibilities of the Advisor under the Advisor Agreement and
of the Trust's Board of Trustees under applicable law, for the period and on the
terms hereinafter set forth. The Portfolio Advisor hereby accepts such
employment and agrees during such period to render the services and to perform
the duties called for by this Agreement for the compensation herein provided.
The Portfolio Advisor shall at all times maintain its registration as an
investment advisor under the investment Advisers Act of 1940 and shall otherwise
comply in all material respects with all applicable laws and regulations, both
state and federal. The Portfolio Advisor shall for all purposes herein be deemed
an independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Trust in any way or otherwise be deemed an agent of the Trust or the Portfolio.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide
the following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and
reinvestment of the Portfolio Assets, subject to and in accordance with
the investment objectives, policies and restrictions of the Portfolio
and subject to the oversight responsibilities of the Advisor under the
Advisory Agreement and of the Trust's Board of Trustees under
applicable
law, in each case with respect to the Portfolio. In furtherance of the
foregoing, the Portfolio Advisor will make all determinations with
respect to the investment of the assets of the Portfolio and the
purchase and sale of portfolio securities and shall take such steps as
may be necessary or advisable to implement the same. The Portfolio
Advisor also will determine the manner in which voting rights, rights
to consent to corporate action and any other rights pertaining to the
portfolio securities will be exercised. The Portfolio Advisor will
render regular reports to the Trust's Board of Trustees, to the Advisor
and to Rogers, Casey Consulting, Inc. (or such other advisor or
advisors as the Advisor shall engage to assist it in the evaluation of
the performance and activities of the Portfolio Advisor). Such reports
shall be made in such form and manner and with respect to such matters
regarding the Portfolio and the Portfolio Advisor as the Trust, the
Advisor or Rogers, Casey Advisors, Inc. shall from time to time
request.
b. The Portfolio Advisor shall provide support to the Advisor
with respect to the marketing of the Portfolio, including but not
limited to: (i) permission to use the Portfolio Advisor's name as
provided in Section 5, (ii) permission to use the past performance and
investment history of the Portfolio Advisor as the same is applicable
to the Portfolio, and (iii) access to the individual(s) responsible for
day-to-day management of the Portfolio for marketing conferences,
teleconferences and other activities involving the promotion of the
Portfolio, subject to the reasonable request of the Advisor, (iv)
permission to use biographical and historical data of the Portfolio
Advisor and individual manager(s), and (v) permission to use the names
of those clients to which the Portfolio Advisor provides investment
management services, subject to receipt of the consent of such clients
to the use of their names.
c. The Portfolio Advisor will, in the name of the Portfolio, place
orders for the execution of all portfolio transactions in accordance
with the policies with respect thereto set forth in the Trust's
registration statements under the 1940 Act and the Securities Act of
1933, as such registration statements may be in effect from time to
time. In connection with the placement of orders for the execution of
portfolio transactions, the Portfolio Advisor will create and maintain
all necessary brokerage records of the Portfolio in accordance with all
applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All records shall be
the property of the Trust and shall be available for inspection and use
by the Securities and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such records shall be
maintained by the Advisor for the periods and in the places required by
Rule 31a-2 under the 1940 Act. When placing orders with brokers and
dealers, the Portfolio Advisor's primary objective shall be to obtain
the most favorable price and execution available for the Portfolio, and
in placing such orders the Portfolio Advisor may consider a number of
factors, including, without limitation, the overall direct net economic
result to the Portfolio (including commissions, which may not be the
lowest available but ordinarily should not be higher than the generally
prevailing competitive range), the financial strength and stability of
the broker, the efficiency with which the transaction will be effected,
the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to
execute possibly difficult transactions in the future. The Portfolio
Advisor is specifically authorized, to the extent authorized by law
(including, without limitation, Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to pay a broker
or dealer who provides research services to the Portfolio Advisor an
amount of commission for effecting a portfolio transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the
Portfolio Advisor determines in good faith that the excess commission
is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of the
particular transaction or the Portfolio Advisor's overall
responsibilities with respect to discretionary accounts that it
manages. The Portfolio Advisor will present a written report to the
Board of Trustees of the Trust, at least quarterly, indicating total
brokerage expenses, actual or imputed, as well as the services obtained
in consideration for such expenses, broken down by broker-dealer and
containing such information as the Board of Trustees reasonably shall
request.
d. In the event of any reorganization(s) or other change(s) in
the Portfolio Advisor, its executive officers or members of its
investment (or comparable) committee that, individually or
collectively, are likely to have a material adverse effect on the
ability of the Portfolio Advisor to manage the Portfolio or otherwise
perform its obligations to the Advisor and the Trust under this
Agreement, the Portfolio Advisor shall give the Advisor and the Trust's
Board of Trustees written notice of such reorganization or change
within a reasonable time (but not later than 30 days) after such
reorganization or change. In addition, the Portfolio Advisor will
notify the Advisor of any change in membership of the Portfolio
Advisor's general partners within a reasonable time (but not later than
30 days) after such change.
e. The Portfolio Advisor will bear its expenses of providing
services to the Portfolio pursuant to this Agreement except such
expenses as are undertaken by the Advisor or the Trust.
f. The Portfolio Advisor will manage the Portfolio Assets and
the investment and reinvestment of such assets so as to comply with the
provisions of the Investment Company Act of 1940 and with Subchapter M
of the Internal Revenue Code of 1986, as amended.
3. COMPENSATION OF THE PORTFOLIO ADVISOR. As compensation for the
services to be rendered and duties undertaken hereunder by the
Portfolio Advisor, the Advisor will pay to the Portfolio Advisor a
monthly fee equal on an annual basis to 0.40% of the first $50 million
of the average daily net assets of the Portfolio, 0.35% of the average
daily net assets of the Portfolio in excess of $50 million and up to
$70 million and 0.30% of the average daily net assets of the Portfolio
in excess of $70 million and up to $90 million and 0.25% of the average
daily assets of the Portfolio in excess of $90 million. Such fee shall
be computed and accrued daily. If the Portfolio Advisor serves in such
capacity for less than the whole of any period specified in this
Section 3, the compensation to the Portfolio Advisor shall be prorated.
For purposes of calculating the Portfolio Advisor's fee, the daily
value of the Portfolio's net assets shall be computed by the same
method as the Trust uses to compute the net asset value of the
Portfolio for purposes of purchases and redemptions of interests
thereof.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the
Portfolio Advisor may perform investment advisory services for various other
clients, including other investment companies. The Portfolio Advisor will report
to the Board of Trustees of the Trust (at regular quarterly meetings and at such
other times as such Board of Trustees reasonably shall request) (i) the nature
and amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (ii) information regarding any
potential conflicts of interest arising by reason of its continuing provision of
advisory services to the Portfolio and to its other accounts, and (iii) such
other information as the Board of Trustees shall reasonably request regarding
the Portfolio, the Portfolio's performance, the services provided by the
Portfolio Advisor to the Portfolio as compared to its other accounts and the
plans of, and the capability of, the Portfolio Advisor with respect to providing
future services to the Portfolio and its other accounts. The Portfolio Advisor
agrees to submit to the Trust a statement defining its policies with respect to
the allocation of investment opportunities among the Portfolio and its other
clients.
It is understood that the Portfolio Advisor may become interested in
the Trust as an interest holder or otherwise.
The Portfolio Advisor has supplied to the Advisor and the Trust copies
of its Form ADV with all exhibits and attachments thereto (including the
Portfolio Advisor's statement of financial condition) and will hereafter supply
to the Advisor, promptly upon the preparation thereof, copies of all amendments
or restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name
of the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further, that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the appointment
of the Portfolio Advisor hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR. Absent willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Portfolio Advisor, the Portfolio Advisor
shall not be subject to liability to the Advisor, the Trust or to any holder of
an interest in the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security. As used in this
Section 6, the term "Portfolio Advisor" shall include the Portfolio Advisor
and/or any of its affiliates and the directors, officers and employees of the
Portfolio Advisor and/or any of its affiliates.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges
that it has received notice of and accepts the limitations upon the Trust's
liability set forth in its Declaration of Trust. The Portfolio Advisor agrees
that (i) the Trust's obligations to the Portfolio Advisor under this Agreement
(or indirectly under the Advisory Agreement) shall be limited, in any event to
the assets of the Portfolio and (ii) the Portfolio Advisor shall not seek
satisfaction of any such obligation from the holders of interests in the
Portfolio nor from any Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays
or errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner
terminated as hereinafter provided, for a period of 12 months from the
date hereof; and it shall continue thereafter provided that such
continuance is specifically approved by the parties and, in addition,
at least annually by (i) the vote of the holders of a majority of the
outstanding voting securities (as herein defined) of the Portfolio or
by vote of a majority of the Trust's Board of Trustees and (ii) by the
vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting
on such approval.
b. This Agreement may be terminated at any time, without
payment of any penalty, (i) by the Advisor, by the Trust's Board of
Trustees or by a vote of the majority of the outstanding voting
securities of the Portfolio, in any such case upon not less than 60
days' prior written notice to the Portfolio Advisor and (ii) by the
Portfolio Advisor upon not less than 60 days' prior written notice to
the Advisor and the Trust. This Agreement shall terminate automatically
in the event of its assignment (as defined below).
c. This Agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if
required by applicable SEC rules and regulations, a vote of the
majority of the outstanding voting securities of the Portfolio affected
by such change.
d. The terms "assignment" and "majority" of the outstanding
voting securities" shall have the meaning set forth for such terms in
the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or
shall be found to be invalid by a court decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing
addressed and delivered personally (or by telecopy) or mailed postage-paid, to
the other party at such address as such other party may designate in accordance
with this paragraph for the receipt of such notice. Until further notice to the
other party, it is agreed that the address of the Trust and that of the Advisor
for this purpose shall be 318 Broadway, Cincinnati, Ohio 45202 and that the
address of the Portfolio Advisor shall be 1345 Avenue of the Americas, New York,
NY 10105.
12. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
By
Edward G. Harness, Jr.
President
Attest:
Secretary
ALLIANCE CAPITAL MANAGEMENT L.P.
by ALLIANCE CAPITAL MANAGEMENT CORP.,
GENERAL PARTNER
By
Mark R. Manley
Assistant Secretary
Attest:
Secretary
Exhibit 5(J).
PORTFOLIO ADVISORY AGREEMENT
MUNICIPAL BOND PORTFOLIO
This PORTFOLIO ADVISORY AGREEMENT is made as of September 9, 1994, by
and between TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and
Neuberger & Berman, a limited partnership (the "Portfolio Advisor").
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and has been retained by Select
Advisors Portfolios (the "Trust"), a New York trust organized pursuant to a
Declaration of Trust dated February 7, 1994 and registered as an open-end
management investment company under the Investment Company Act of 1940 (the
"1940 Act") to provide investment advisory services to the Municipal Bond
Portfolio (herein the "Portfolio"); and
WHEREAS, the Portfolio Advisor also is an investment advisor registered
under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Advisor desires to retain the Portfolio Advisor to furnish
it with portfolio management services in connection with the Advisor's
investment advisory activities on behalf of the Portfolio, and the Portfolio
Advisor is willing to furnish such services to the Advisor and the Portfolio;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE PORTFOLIO ADVISOR. In accordance with and subject to
the Investment Advisory Agreement between the Trust and the Advisor, attached
hereto as Exhibit A (the "Advisory Agreement"), the Advisor hereby appoints the
Portfolio Advisor to manage the investment and reinvestment of those assets of
the Portfolio allocated to it by the Advisor (the "Portfolio Assets"), subject
to the control and direction of the Advisor and the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Portfolio Advisor
hereby accepts such employment and agrees during such period to render the
services and to perform the duties called for by this Agreement for the
compensation herein provided. The Portfolio Advisor shall at all times maintain
its registration as an investment advisor under the Investment Advisers Act of
1940 and shall otherwise comply in all material respects with all applicable
laws and regulations, both state and federal. The Portfolio Advisor shall for
all purposes herein be deemed an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust or the Portfolio. The Portfolio Advisor shall have no
obligation or responsibility for assets of the Portfolio that are not Portfolio
Assets.
2. DUTIES OF THE PORTFOLIO ADVISOR. The Portfolio Advisor will provide the
following services and undertake the following duties:
a. The Portfolio Advisor will manage the investment and reinvestment of the
assets of the Portfolio Assets, subject to and in accordance with the written
investment objectives, policies and restrictions of the Portfolio and any
directions which the Advisor or the Trust's Board of Trustees to the Portfolio
Advisor. Any changes in such objectives, policies, restrictions or directions
shall be effective as to the Portfolio Advisor only when reasonable advance
notice of such changes, either by delivery of a copy of the Trust's registration
statement under the 1940 Act and the Securities Act of 1993 (the notice
describing such changes has been delivered to the Portfolio Advisor. In
furtherance of the foregoing, the Portfolio Advisor will make all determinations
with respect to the investment of the assets of the Portfolio and the purchase
and sale of portfolio securities and shall take such steps as may be necessary
or advisable to implement the same. In the performance of its obligations under
this Agreement, the Portfolio Advisor will not be required to take into account
assets of the Portfolio that are not Portfolio Assets, as defined herein. The
Portfolio Advisor also will determine the manner in which voting rights, rights
to consent to corporate action and any other rights pertaining to the Portfolio
Assets will be exercised. The Portfolio Advisor will render regular reports to
the Trust's Board of Trustees, to the Advisor and to Rogers, Casey Consulting,
Inc. (or such other consultant or consultants as the Advisor shall engage to
assist it in the evaluation of the performance and activities of the Portfolio
Advisor). Such reports shall be made in such form and manner and with respect to
such matters regarding the Portfolio and the Portfolio Advisor as the Trust, the
Advisor or Rogers, Casey Consulting, Inc. shall from time to time request.
b. The Portfolio Advisor shall provide support to the Advisor with respect
to the marketing of the Portfolio, including but not limited to: (i) permission
to use the Portfolio Advisor's name as provided in Section 5, (ii) permission to
use the past performance and investment history of the Portfolio Advisor as the
same is applicable to the Portfolio, and (iii) access to the individual's)
responsible for day-to-day management of the Portfolio for marketing
conferences, teleconferences and other activities involving the promotion of the
Portfolio, subject to the reasonable request of the Advisor, (iv) permission to
use biographical and historical data of the Portfolio Advisor and individual
manager(s), and (v) permission to use the names of clients to which the
Portfolio Advisor provides investment management services, subject to any
restrictions imposed by clients on the use of such names.
c. The Portfolio Advisor will in the name of the Portfolio place orders
for the execution of all portfolio transactions in accordance with the policies
with respect thereto set forth in the Trust's registration statements under the
1940 Act, as such registration statements may be in effect from time to time and
to the extent that such registration statements are supplied to the Portfolio
Advisor in accordance with Section 2a. In connection with the placing of orders
for the execution of portfolio transactions, the Portfolio Advisor will create
and maintain all necessary brokerage records of the Portfolio in accordance with
all applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All records shall be the property of
the Trust and shall be available for inspection and use by the Securities and
Exchange Commission (the "SEC"), the Trust or any person retained by the Trust.
Where applicable, such records shall be maintained by the Advisor for the
periods and in the places required by Rule 31a-2 under the 1940 Act. Where
applicable, such records shall be maintained by the Advisor for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The Portfolio Advisor
will be allowed access to such records and to use the information contained
therein to the extent (i) required to enable the Portfolio Advisor to comply
with requirements of federal and state securities laws that are applicable to it
and (ii) necessary for the Portfolio Advisor's own business purposes; provided
that it will take no action with respect to such information that would be in
breach of its fiduciary obligations to the Portfolio or its obligations under
this Agreement. When placing orders with brokers and dealers, the Portfolio
Advisor's primary objective shall be to obtain the most favorable price and
execution available for the Portfolio, and in placing such orders the Portfolio
Advisor may consider a number of factors, including, without limitation, the
overall direct net economic result to the Portfolio (including commissions,
which may not be the lowest available but ordinarily should not be higher than
the generally prevailing competitive range), the financial strength and
stability of the broker, the efficiency with which the transaction will be
effected, the ability to effect the transaction at all where a large block is
involved and the availability of the broker or dealer to stand ready to execute
possibly difficult transactions in the future. The Portfolio Advisor is
specifically authorized, to the extent authorized by law (including, without
limitation, Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), to pay a broker or dealer who provides research services
to the Portfolio Advisor an amount of commission for effecting a portfolio
transaction in excess of the amount of commission another broker or dealer would
have charged for effecting such transaction, in recognition of such additional
research services rendered by the broker or dealer, but only if the Portfolio
Advisor determines in good faith that the excess commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer viewed in terms of the particular transaction or the Portfolio
Advisor's overall responsibilities with respect to discretionary accounts that
it manages, and that the Portfolio derives or will derive a reasonably
significant benefit from such research services. The Portfolio Advisor will
present a written report to the Board of Trustees of the Trust, at least
quarterly, indicating total brokerage expenses, actual or imputed, as well as
the services obtained in consideration for such expenses, broken down by
broker-dealer and containing such information as the Board of Trustees
reasonably shall request.
d. In the event of any reorganization or other change in the Portfolio
Advisor, its investment principals, supervisors or members of its investment (or
comparable) committee, the Portfolio Advisor shall give the Advisor and the
Trust's Board of Trustees written notice of such reorganization or change within
a reasonable time (but not later than 30 days) after such reorganization or
change.
e. The Portfolio Advisor will bear its expenses of providing services to
the Portfolio pursuant to this Agreement except such expenses as are undertaken
by the Advisor or the Trust.
f. The Portfolio Advisor will manage the Portfolio Assets and the
investment and reinvestment of such assets so as to comply with the provisions
of the 1940 Act and with Subchapter M of the Internal Revenue Code of 1986, as
amended.
3. COMPENSATION OF THE PORTFOLIO ADVISOR.
As compensation for the services to be rendered and duties undertaken
hereunder by the Portfolio Advisor, the Advisor will pay to the Portfolio
Advisor a monthly fee equal on an annual basis to 0.25% of the first $100
million of the average daily net assets of the Portfolio, 0.20% of the average
daily net assets of the Portfolio in excess of $100 million and up to $200
million and 0.15% of the average daily net assets of the Portfolio in excess of
$200 million. Such fee shall be computed and accrued daily. If the Portfolio
Advisor serves in such capacity for less than the whole of any period specified
in this Section 3a, the compensation to the Portfolio Advisor shall be prorated.
For purposes of calculating the Portfolio Advisor's fee, the daily value of the
Portfolio's net assets shall be computed by the same method as the Trust uses to
compute the net asset value of the Portfolio for purposes of purchases and
redemptions of interests thereof.
4. ACTIVITIES OF THE PORTFOLIO ADVISOR. It is understood that the Portfolio
Advisor may perform investment advisory services for various other clients,
including other investment companies. The Portfolio Advisor will report to the
Board of Trustees of the Trust (at regular quarterly meetings and at such other
times as such Board of Trustees reasonably shall request) such information as
the Board of Trustees shall reasonably request regarding (i) the nature and
amount of transactions affecting the Portfolio that involve the Portfolio
Advisor and affiliates of the Portfolio Advisor, (ii) any potential conflicts of
interest arising by reason of its continuing provision of advisory services to
the Portfolio and to its other accounts, and (iii) such other matters as the
Board of Trustees shall reasonably request regarding the Portfolio, the
Portfolios performance, the services provided by the Portfolio Advisor to the
Portfolio as compared to its other accounts having comparable investment
objectives and the plans of, and the capability of, the Portfolio Advisor with
respect to providing future services to the Portfolio and its other accounts. At
least annually, the Portfolio Advisor shall report to the Trustees the total
number and type of such other accounts and the approximate total asset value
thereof (but not the identities of the beneficial owners of such accounts). The
Portfolio Advisor agrees to submit to the Trust a statement defining its
policies with respect to the allocation of business among the Portfolio and its
other clients.
It is understood that the Portfolio Advisor may become interested in the
Trust as an interest holder.
The Portfolio Advisor has supplied to the Advisor and the Trust copies of
its Form ADV with all exhibits and attachments thereto (including the Portfolio
Advisor's statement of financial condition) and will hereafter supply to the
Advisor, promptly upon the preparation thereof, copies of all amendments or
restatements of such document.
5. USE OF NAMES. Neither the Advisor nor the Trust shall use the name of
the Portfolio Advisor in any prospectus, sales literature or other material
relating to the Advisor or the Trust in any manner not approved in advance by
the Portfolio Advisor; provided, however, that the Portfolio Advisor will
approve all uses of its name which merely refer in accurate terms to its
appointment hereunder or which are required by the SEC or a state securities
commission; and provided further, that in no event shall such approval be
unreasonably withheld. The Portfolio Advisor shall not use the name of the
Advisor or the Trust in any material relating to the Portfolio Advisor in any
manner not approved in advance by the Advisor or the Trust, as the case may be;
provided, however, that the Advisor and the Trust shall each approve all uses of
their respective names which merely refer in accurate terms to the appointment
of the Portfolio Advisor hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
6. LIMITATION OF LIABILITY OF THE PORTFOLIO ADVISOR.
a. Except to the extent specified in Section 6(b) of the Investment Company
Act of 1940 concerning loss resulting from a breach by Portfolio Advisor of its
fiduciary duties with respect to the services it provides under this Agreement
for compensation, absent willful misfeance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of the
Portfolio Advisor, the Portfolio Advisor shall not be subject to liability to
the Advisor, the Trust or to any holder of an interest in the Portfolio for any
act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security. As used in this Section 6, the term "Portfolio Advisor"
shall include the Portfolio Advisor and/or any of its affiliates and the
directors, officers and employees of the Portfolio Advisor and/or any of its
affiliates.
b. The Advisor will indemnify the Portfolio Advisor against, and hold it
harmless from, any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from acts or
omissions of the Advisor and/or the Trust. Indemnification shall be made only
after: (i) a final decision on the merits by a court or other body before whom
the proceeding was brought that the Trust or the Advisor was liable for the
damages claimed or (ii) in the absence of such a decision, a reasonable
determination based upon a review of the facts, that the Trust or the Advisor
was liable for the damages claimed, which determination shall be made by either
(a) the vote of a majority of a quorum of Trustees of the Trust who are neither
"interested persons" of the Trust nor parties to the proceeding ("disinterested
non-party Trustees") or (b) an independent legal counsel satisfactory to the
parties hereto, whose determination shall be set forth in a written opinion. The
Portfolio Advisor shall be entitled to advances from the Trust for payment of
the reasonable expenses incurred by it in connection with the matter as to which
it is seeking indemnification in the manner and to the fullest extent that would
be permissible under the indemnification provisions of the General Corporation
Law of Ohio. The Portfolio Advisor shall provide to the Trust a written
affirmation of its good faith belief that the standard of conduct necessary for
indemnification under such law has been met and a written undertaking to repay
any such advance if it should ultimately be determined that the standard of
conduct has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Portfolio Advisor shall provide security in
form and amount acceptable to the Trust for its undertaking; (b) the Trust is
insured against losses arising by reason of the advance; or (c) a majority of a
quorum of the Trustees of the Trust, the members of which
majority are disinterested non-party Trustees, or independent legal counsel
in a written opinion, shall have determined, based on a review of facts readily
available to the Trust at the time the advance is proposed to be made, that
there is reason to believe that the Portfolio Advisor will ultimately be found
to be entitled to indemnification.
7. LIMITATION OF TRUST'S LIABILITY. The Portfolio Advisor acknowledges that
it has received notice of and accepts the limitations upon the Trust's liability
set forth in its Declaration of Trust. The Portfolio Advisor agrees that (i) the
Trust's obligations to the Portfolio Advisor under this Agreement (or indirectly
under the Advisory Agreement) shall be limited, in any event to the assets of
the Portfolio and (ii) the Portfolio Advisor shall not seek satisfaction of any
such obligation from the holders of interests in the Portfolio nor from any
Trustee, officer, employee or agent of the Trust.
8. FORCE MAJEURE. The Portfolio Advisor shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Portfolio Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT.
a. This Agreement shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of 12 months from the date hereof; and it
shall continue thereafter provided that such continuance is specifically
approved by the parties and, in addition, at least annually by (i) the vote of
the holders of a majority of the outstanding voting securities (as herein
defined) of the Portfolio or by vote of a majority of the Trust's Board of
Trustees and (ii) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of either the Advisor or the Portfolio
Advisor, cast in person at a meeting called for the purpose of voting on such
approval.
b. This Agreement may be terminated at any time, without payment of any
penalty, (i) by the Advisor, by the Trust's Board of Trustees or by a vote of
the majority of the outstanding voting securities of the Portfolio, in any such
case upon not less than 60 days' prior written notice to the Portfolio Advisor
and (ii) by the Portfolio Advisor upon not less than 60 days' prior written
notice to the Advisor and the Trust. This Agreement shall terminate
automatically in the event of its assignment (as defined below).
c. It is understood between the parties that the sole initial investors in
the Portfolio will be the Municipal Bond Funds of Select Advisors Trust and
Select Advisors Trust II (each herein sometimes called a "spoke"). The Advisor
will give the Portfolio Advisor at least 60 days prior written notice of any
agreement or plan by or pursuant to which one or more additional investors (or
spokes) are to be allowed to invest in the Portfolio. In such event, the
Portfolio Advisor may, at its sole option, terminate this Agreement by giving
not less than 60 days nor more than 90 days prior written notice thereof to the
Trust and the Advisor.
d. This Agreement may be amended at any time by the parties hereto, subject
to approval by the Trust's Board of Trustees and, if required by applicable SEC
rules and regulations, a vote of the majority of the outstanding voting
securities of the Portfolio affected by such change.
e. The terms "assignment," "interested persons" and "majority" of the
outstanding voting securities" shall have the meaning set forth for such terms
in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall become or shall
be found to be invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
11. NOTICE. Any notices under this Agreement shall be in writing addressed
and delivered personally (or by telecopy) or overnight courier service (as
agreed upon by the parties), to the other party at such address as such other
party may designate in accordance with this paragraph for the receipt of such
notice. Until further notice to the other party, it is agreed that the address
of the Trust and that of the Advisor for this purpose shall be 318 Broadway,
Cincinnati, Ohio 45202 and that the address of the Portfolio Advisor shall be
550 East 4th Street, Cincinnati, Ohio 45202.
12. MISCELLANEOUS. Each party agrees to perform such further actions and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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.
TOUCHSTONE ADVISORS, INC.
By /S/ EDWARD G. HARNESS, JR.
Edward G. Harness, Jr.
President
Attest:
/S/ JILL T. MCGRUDER
Secretary
NEUBERGER & BERMAN
By
Partner
Attest:
Secretary
<PAGE>
Exhibit A
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of September 9, 1994, by and between
TOUCHSTONE ADVISORS, INC., an Ohio corporation (the "Advisor"), and SELECT
ADVISORS PORTFOLIOS, a New York master trust created pursuant to a Declaration
of Trust dated February 7, 1994, as amended from time to time (the "Trust").
WHEREAS, the Trust is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act"); and
WHEREAS, interests in the Trust are divided into separate subtrusts
(each, along with any subtrust which may in the future be established, a
"Portfolio"); and
WHEREAS, the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment advisor and to
have an investment advisor perform for it various investment advisory and
research services and other management services; and
WHEREAS, the Advisor is an investment Advisor registered under the
Investment Advisers Act of 1940, as amended, and desires to provide investment
advisory services to the Trust;
NOW THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADVISOR. The Trust hereby employs the Advisor to
manage the investment and reinvestment of the assets of each Portfolio subject
to the control and direction of the Trust's Board of Trustees, for the period on
the terms hereinafter set forth. The Advisor hereby accepts such employment and
agrees during such period to render the services and to assume the obligations
herein set forth for the compensation herein provided. The Advisor shall for all
purposes herein be deemed to be independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise), have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
2. OBLIGATIONS AND SERVICES TO BE PROVIDED BY THE ADVISOR. In providing
the services and assuming the obligations set forth herein, the Advisor may, at
its expense, employ one or more subadvisors for any Portfolio. Any agreement
between the Advisor and a subadvisor shall be subject to the renewal,
termination and amendment provisions of paragraph 10 hereof. The Advisor
undertakes to provide the following services and to assume the following
obligations:
a) The Advisor will manage the investment and reinvestment of the
assets of each Portfolio, subject to and in accordance with the respective
investment objectives and policies of each Portfolio and any directions which
the Trust's Board of Trustees may issue from time to time. In pursuance of the
foregoing, the Advisor may engage separate investment advisors ("Portfolio
Advisor(s)") to make all determinations with respect to the investment of the
assets of each Portfolio, to effect the purchase and sale of portfolio
securities and to take such steps as may be necessary to implement the same.
Such determination and services by each Portfolio Advisor shall also include
determining the manner in which voting rights, rights to consent to corporate
action and any other rights pertaining to the portfolio securities shall be
exercised. The Advisor shall, and shall cause each Portfolio Advisor to, render
regular reports to the Trust's Board of Trustees concerning the Trust's and each
Portfolio's investment activities.
b) The Advisor shall, or shall cause the respective Portfolio Advisor(s) to
place orders for the execution of all portfolio transactions, in the name of the
respective Portfolio and in accordance with the policies with respect thereto
set forth in the Trust's registration statements under the 1940 Act and the
Securities Act of 1933, as such registration statements may be amended from time
to time. In connection with the placement of orders for the execution of
portfolio transactions, the Advisor shall create and maintain (or cause the
Portfolio Advisors to create and maintain) all necessary brokerage records for
each Portfolio, which records shall comply with all applicable laws, rules and
regulations, including but not limited to records required by Section 31(a) of
the 1940 Act. All records shall be the property of the Trust and shall be
available for inspection and use by the Securities and Exchange Commission (the
"SEC"), the Trust or any person retained by the Trust. Where applicable, such
records shall be maintained by the Advisor (or Portfolio Advisor) for the
periods and in the places required by Rule 31a-02 under the 1940 Act.
c. In the event of any reorganization or other change in the Advisor, its
investment principals, supervisors or members of its investment (or comparable)
committee, the Advisor shall give the Trust's Board of Trustees written notice
of such reorganization or change within a reasonable time (but not later than 30
days) after such reorganization or change.
d) The Advisor shall bear its expenses of providing services to the
Trust pursuant to this Agreement except such expenses as are undertaken by the
Trust. In addition, the Advisor shall pay the salaries and fees, if any, of all
Trustees, officers and employees of the Trust who are affiliated persons, as
defined in Section 2(a)(3) of the 1940 Act, of the Advisor.
e) The Advisor will manage, or will cause the Portfolio Advisors to manage,
the Portfolio Assets and the investment and reinvestment of such assets so as to
comply with the provisions of the 1940 Act and with Subchapter M of the Internal
Revenue Code of 1986, as amended.
3. EXPENSES. The Trust shall pay the expenses of its operation, including
but not limited to (i) charges and expenses for Trust accounting, pricing and
appraisal services and related overhead, (ii) the charges and expenses of the
Portfolio's auditor's; (iii) the charges and expenses of any custodian, transfer
agent, plan agent, dividend disbursing agent and registrar appointed by the
Trust with respect to the Portfolios; (iv) brokers' commissions, and issue and
transfer taxes, chargeable to the Trust in connection with securities
transactions to which the Trust is a party; (v) insurance premiums, interest
charges, dues and fees for Trust membership in trade associations and all taxes
and fees payable by the Trust to federal, state or other governmental agencies;
(vi) fees and expenses involved in registering and maintaining registrations of
the Trust and/or interests in the Trust with the SEC, state or blue sky
securities agencies and foreign countries, including the preparation of
Prospectuses and Statements of Additional Information for filing with the SEC;
(vii) all expenses of meetings of Trustees and of interest holders of the Trust
and of preparing, printing and distributing prospectuses, notices, proxy
statements and all reports to shareholders and to governmental agencies; (viii)
charges and expenses of legal counsel to the Trust; (ix) compensation of
Trustees of the Trust; (x) the cost of preparing and printing share
certificates; and (xi) interest on borrowed money, if any.
4. COMPENSATION OF THE ADVISOR.
a) As compensation for the services rendered and obligations assumed
hereunder by the Advisor, the Trust shall pay to the Advisor monthly a fee that
is equal on an annual basis to that percentage of the average daily net assets
of each Portfolio set forth on Schedule 1 attached hereto (and with respect to
any future Portfolio, such percentage as the Trust and the Advisor may agree to
from time to time). Such fee shall be computed and accrued daily. If the Advisor
serves as investment advisor for less than the whole of any period specified in
this Section 4a, the compensation to the Advisor shall be prorated. For purposes
of calculating the Advisor's fee, the daily value of each Portfolio's net assets
shall be computed by the same method as the Trust uses to compute the net asset
value of that Portfolio.
b) The Advisor will pay all fees owing to each Portfolio Advisor, and
the Trust shall not be obligated to the Portfolio Advisors in any manner with
respect to the compensation of such Portfolio Advisors.
c) The Advisor reserves the right to waive all or a part of its fee.
5. ACTIVITIES OF THE ADVISOR. The services of the Advisor to the Trust
hereunder are not to be deemed exclusive, and the Advisor shall be free to
render similar services to others. It is understood that the Trustees and
officers of the Trust are or may become interested in the Advisor as
stockholders, officers or otherwise, and that stockholders and officers of the
Advisor are or may become similarly interested in the Trust, and that the
Advisor may become interested in the Trust as a shareholder or otherwise.
6. USE OF NAMES. The Trust will not use the name of the Advisor in any
prospectus, sales literature or other material relating to the Trust in any
manner not approved prior thereto by the Advisor; except that the Trust may use
such name in any document which merely refers in accurate terms to its
appointment hereunder or in any situation which is required by the SEC or a
state securities commission; and provided further, that in no event shall such
approval be unreasonably withheld. The Advisor will not use the name of the
Trust in any material relating to the Advisor in any manner not approved prior
thereto by the Trust; except that the Advisor may use such name in any document
which merely refers in accurate terms to the appointment of the Advisor
hereunder or in any situation which is required by the SEC or a state securities
commission. In all other cases, the parties may use such names to the extent
that the use is approved by the party named, it being agreed that in no event
shall such approval be unreasonably withheld.
The Trustees of the Trust acknowledge that, in consideration of the
Advisor's assumption of certain organization expenses of the Trust and of the
various Portfolios, the Advisor has reserved for itself the rights to the name
"Select Advisors Portfolios" (or any similar names) and that use by the Trust of
such name shall continue only with the continuing consent of the Advisor, which
consent may be withdrawn at any time, effective immediately, upon written notice
thereof to the Trust.
7. LIMITATION OF LIABILITY OF THE ADVISOR.
a. Absent willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the Advisor, the
Advisor shall not be subject to liability to the Trust or to any holder of an
interest in any Portfolio for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security. As used in this Section 7, the
term "Advisor" shall include Touchstone Advisors, Inc. and/or any of its
affiliates and the directors, officers and employees of Touchstone Advisors,
Inc. and/or of its affiliates.
b. The Trust will indemnify the Advisor against, and hold it harmless from,
any and all losses, claims, damages, liabilities or expenses (including
reasonable counsel fees and expenses) resulting from acts or omissions of the
Trust. Indemnification shall be made only after: (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
Trust was liable for the damages claimed or (ii) in the absence of such a
decision, a reasonable determination based upon a review of the facts, that the
Trust was liable for the damages claimed, which determination shall be made by
either (a) the vote of a majority of a quorum of Trustees of the Trust who are
neither "interested persons" of the Trust nor parties to the proceeding
("disinterested non-party Trustees") or (b) an independent legal counsel
satisfactory to the parties hereto, whose determination shall be set forth in a
written opinion. The Advisor shall be entitled to advances from the Trust for
payment of the reasonable expenses incurred by it in connection with the matter
as to which it is seeking indemnification in the manner and to the fullest
extent that would be permissible under the applicable provisions of the General
Corporation Law of Ohio. The Advisor shall provide to the Trust a written
affirmation of its good faith belief that the standard of conduct necessary for
indemnification under such law has been met and a written undertaking to repay
any such advance if it should ultimately be determined that the standard of
conduct has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Advisor shall provide security in form and
amount acceptable to the Trust for its undertaking; (b) the Trust is insured
against losses arising by reason of the advance; or (c) a majority of a quorum
of the Trustees of the Trust, the members of which majority are disinterested
non-party Trustees, or independent legal counsel in a written opinion, shall
have determined, based on a review of facts readily available to the Trust at
the time the advance is proposed to be made, that there is reason to believe
that the Advisor will ultimately be found to be entitled to indemnification.
8. LIMITATION OF TRUST'S LIABILITY. The Advisor acknowledges that it has
received notice of and accepts the limitations upon the Trust's liability set
forth in its Declaration of Trust. The Advisor agrees that the Trust's
obligations hereunder in any case shall be limited to the Trust and to its
assets and that the Advisor shall not seek satisfaction of any such obligation
from the holders of the interests in any Portfolio nor from any Trustee,
officer, employee or agent of the Trust.
9. FORCE MAJEURE. The Advisor shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Advisor shall take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
10. RENEWAL, TERMINATION AND AMENDMENT.
a) This Agreement shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of twelve months from the date hereof and it
shall continue indefinitely thereafter as to each Portfolio, provided that such
continuance is specifically approved by the parties hereto and, in addition, at
least annually by (i) the vote of holders of a majority of the outstanding
voting securities of the affected Portfolio or by vote of a majority of the
Trust's Board of Trustees and (ii) by the vote of a majority of the Trustees who
are not parties to this Agreement or interested persons of the Advisor, cast in
person at a meeting called for the purpose of voting on such approval.
b) This Agreement may be terminated at any time, with respect to any
Portfolio(s), without payment of any penalty, by the Trust's Board of Trustees
or by a vote of the majority of the outstanding voting securities of the
affected Portfolio(s) upon 60 days' prior written notice to the Advisor and by
the Advisor upon 60 days' prior written notice to the Trust.
c) This Agreement may be amended at any time by the parties hereto, subject
to approval by the Trust's Board of Trustees and, if required by applicable SEC
rules and regulations, a vote of the majority of the outstanding voting
securities of any Portfolio affected by such change. This Agreement shall
terminate automatically in the event of its assignment.
d) The terms "assignment," "interested persons" and "majority of the
outstanding voting securities" shall have the meaning set forth for such terms
in the 1940 Act.
11. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
12. MISCELLANEOUS. Each party agrees to perform such further actions and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions, in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered inn their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
Pursuant to the Trust's Declaration of Trust, dated as of February 7, 1994, the
obligations of this Agreement are not binding upon any of the Trustees or
interestholders of the Trust individually, but bind only the Trust estate.
SELECT ADVISORS PORTFOLIOS
By ________________________________
Edward G. Harness, Jr., President
Attest:
- ---------------------------
TOUCHSTONE ADVISORS, INC.
By ____________________________
Jill T. McGruder, Vice President
Attest:
- ---------------------------
SCHEDULE 1
Emerging Growth Portfolio 0.80%
International Equity Portfolio 0.95%
Growth & Income Portfolio 0.75%
Balanced Portfolio 0.70%
Income Opportunity 0.65%
Bond Portfolio 0.55%
Municipal Bond Portfolio 0.55%
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The Emerging
Growth Portfolio Annual Report dated December 31, 1995 and is qualified in
its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 1
<NAME> EMERGING GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 3,414,324
<INVESTMENTS-AT-VALUE> 3,910,644
<RECEIVABLES> 46,445
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,505
<TOTAL-ASSETS> 3,983,594
<PAYABLE-FOR-SECURITIES> 10,409
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 94,871
<TOTAL-LIABILITIES> 105,280
<SENIOR-EQUITY> 3,878,314
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,878,314
<DIVIDEND-INCOME> 35,612
<INTEREST-INCOME> 12,487
<OTHER-INCOME> 0
<EXPENSES-NET> 51,976
<NET-INVESTMENT-INCOME> (3,877)
<REALIZED-GAINS-CURRENT> 275,958
<APPREC-INCREASE-CURRENT> 410,318
<NET-CHANGE-FROM-OPS> 682,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,828,463
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,169
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 117,237
<AVERAGE-NET-ASSETS> 3,262,178
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The
International Equity Portfolio Annual Report dated December 31, 1995 and
is qualified in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 2
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 4,861,356
<INVESTMENTS-AT-VALUE> 5,127,647
<RECEIVABLES> 71,830
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,505
<TOTAL-ASSETS> 5,107,585
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 118,747
<TOTAL-LIABILITIES> 118,747
<SENIOR-EQUITY> 5,107,585
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 5,107,585
<DIVIDEND-INCOME> 63,082
<INTEREST-INCOME> 17,515
<OTHER-INCOME> 0
<EXPENSES-NET> 76,257
<NET-INVESTMENT-INCOME> 4,340
<REALIZED-GAINS-CURRENT> (425,634)
<APPREC-INCREASE-CURRENT> 676,327
<NET-CHANGE-FROM-OPS> 255,033
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,828,463
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 43,963
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 178,394
<AVERAGE-NET-ASSETS> 4,615,050
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The Growth
& Income Portfolio Annual Report dated December 31, 1995 and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 3
<NAME> GROWTH & INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 12,541,742
<INVESTMENTS-AT-VALUE> 15,636,447
<RECEIVABLES> 72,462
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,505
<TOTAL-ASSETS> 15,735,414
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 159,656
<TOTAL-LIABILITIES> 159,656
<SENIOR-EQUITY> 15,575,758
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,575,758
<DIVIDEND-INCOME> 234,287
<INTEREST-INCOME> 34,222
<OTHER-INCOME> 0
<EXPENSES-NET> 154,569
<NET-INVESTMENT-INCOME> 113,940
<REALIZED-GAINS-CURRENT> 1,974,179
<APPREC-INCREASE-CURRENT> 1,798,625
<NET-CHANGE-FROM-OPS> 3,886,744
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,578,663
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 94,187
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 191,994
<AVERAGE-NET-ASSETS> 12,523,983
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the Growth & Income
Portfolio II Annual Report dated December 31, 1995 and is qualified in its
entirety by reference to such annual report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 8
<NAME> GROWTH & INCOME PORTFOLIO II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 11032977
<INVESTMENTS-AT-VALUE> 13894208
<RECEIVABLES> 126460
<ASSETS-OTHER> 31685
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14052353
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 158816
<TOTAL-LIABILITIES> 158816
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 13893537
<DIVIDEND-INCOME> 223031
<INTEREST-INCOME> 28798
<OTHER-INCOME> 0
<EXPENSES-NET> 101068
<NET-INVESTMENT-INCOME> 150761
<REALIZED-GAINS-CURRENT> 1554207
<APPREC-INCREASE-CURRENT> 1902447
<NET-CHANGE-FROM-OPS> 3607415
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3970712
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 88934
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 210084
<AVERAGE-NET-ASSETS> 11857815
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The Balanced
Portfolio Annual Report dated December 31, 1995 and is qualified in its entirety
by reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 4
<NAME> BALANCED PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,627,773
<INVESTMENTS-AT-VALUE> 2,884,397
<RECEIVABLES> 58,853
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,505
<TOTAL-ASSETS> 2,969,755
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,036
<TOTAL-LIABILITIES> 82,036
<SENIOR-EQUITY> 2,581,456
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,581,456
<DIVIDEND-INCOME> 20,709
<INTEREST-INCOME> 68,803
<OTHER-INCOME> 0
<EXPENSES-NET> 35,659
<NET-INVESTMENT-INCOME> 53,853
<REALIZED-GAINS-CURRENT> 169,621
<APPREC-INCREASE-CURRENT> 252,839
<NET-CHANGE-FROM-OPS> 476,313
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 412,431
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16,553
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 103,518
<AVERAGE-NET-ASSETS> 2,358,238
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The Income
Opportunity Portfolio Annual Report dated December 31, 1995 and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 5
<NAME> INCOME OPPORTUNITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,442,710
<INVESTMENTS-AT-VALUE> 2,547,953
<RECEIVABLES> 89,034
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,505
<TOTAL-ASSETS> 2,663,492
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 82,036
<TOTAL-LIABILITIES> 82,036
<SENIOR-EQUITY> 2,581,456
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,581,456
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 288,370
<OTHER-INCOME> 0
<EXPENSES-NET> 29,282
<NET-INVESTMENT-INCOME> 259,088
<REALIZED-GAINS-CURRENT> 8,065
<APPREC-INCREASE-CURRENT> 185,892
<NET-CHANGE-FROM-OPS> 453,045
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 284,205
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,479
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 98,701
<AVERAGE-NET-ASSETS> 2,067,968
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The Bond
Portfolio Annual Report dated December 31, 1995 and is qualified in its entirety
by reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 6
<NAME> BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 12,110,610
<INVESTMENTS-AT-VALUE> 12,860,924
<RECEIVABLES> 218,764
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,505
<TOTAL-ASSETS> 13,106,193
<PAYABLE-FOR-SECURITIES> 351,531
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 127,868
<TOTAL-LIABILITIES> 479,399
<SENIOR-EQUITY> 12,626,794
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12,626,794
<DIVIDEND-INCOME> 18,000
<INTEREST-INCOME> 851,949
<OTHER-INCOME> 0
<EXPENSES-NET> 115,266
<NET-INVESTMENT-INCOME> 754,683
<REALIZED-GAINS-CURRENT> 254,000
<APPREC-INCREASE-CURRENT> 768,522
<NET-CHANGE-FROM-OPS> 1,777,205
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 767,820
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 62,478
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158,186
<AVERAGE-NET-ASSETS> 11,328,688
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial data extracted from the Bond Portfolio
II Annual Report dated December 31, 1995 and is qualified in its entirety by
reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 9
<NAME> BOND PORTFOLIO II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 11339015
<INVESTMENTS-AT-VALUE> 12144261
<RECEIVABLES> 258154
<ASSETS-OTHER> 31685
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12434100
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129610
<TOTAL-LIABILITIES> 129610
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12304490
<DIVIDEND-INCOME> 18513
<INTEREST-INCOME> 838721
<OTHER-INCOME> 0
<EXPENSES-NET> 84187
<NET-INVESTMENT-INCOME> 773047
<REALIZED-GAINS-CURRENT> 315080
<APPREC-INCREASE-CURRENT> 777621
<NET-CHANGE-FROM-OPS> 1865748
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 61568
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 176329
<AVERAGE-NET-ASSETS> 11194199
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains financial summary information extracted from The
Municipal Bond Portfolio dated December 31, 1995 and is qualified in its
entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000930591
<NAME> SELECT ADVISORS PORTFOLIOS
<SERIES>
<NUMBER> 7
<NAME> MUNICIPAL BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,396,382
<INVESTMENTS-AT-VALUE> 2,461,867
<RECEIVABLES> 80,320
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,505
<TOTAL-ASSETS> 2,568,692
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 79,855
<TOTAL-LIABILITIES> 79,855
<SENIOR-EQUITY> 2,488,837
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,488,837
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 132,918
<OTHER-INCOME> 0
<EXPENSES-NET> 27,825
<NET-INVESTMENT-INCOME> 105,093
<REALIZED-GAINS-CURRENT> (4,076)
<APPREC-INCREASE-CURRENT> 90,026
<NET-CHANGE-FROM-OPS> 191,043
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,989,099
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,393
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 95,791
<AVERAGE-NET-ASSETS> 2,247,031
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
