As filed with the Securities and Exchange Commission on
January 29, 1996
File No. 811-8790
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 1
THE NON-U.S. FIXED INCOME PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
P.O. Box 2494, Elizabethan Square - 2nd Floor, George Town,
Grand Cayman BWI
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code:
(809) 945-1824
Thomas M. Lenz, 6 St. James Avenue, Boston, Massachusetts
02116
(Name and Address of Agent for Service)
Copy to: Steven K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended. However,
beneficial interests in the Registrant are not being registered under the
Securities Act of 1933 (the "1933 Act") because such interests will be issued
solely in private placement transactions that do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in the
Registrant may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any beneficial interests in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
The Non-U.S. Fixed Income Portfolio (the "Portfolio") is a no-load,
open-end management investment company which was organized as a trust under the
laws of the State of New York on June 16, 1993. Beneficial interests in the
Portfolio are issued solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may only be made by investment companies, insurance company separate
accounts, common or commingled trust funds or similar organizations or entities
that are "accredited investors" within the meaning of Regulation D under the
1933 Act. This Registration Statement does not constitute an offer to sell, or
the solicitation of an offer to buy, any "security" within the meaning of the
1933 Act.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan Guaranty" or the "Advisor").
Investments in the Portfolio are not deposits or obligations of, or
guaranteed or endorsed by, Morgan Guaranty or any other bank. Interests in the
Portfolio are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other governmental agency. An
investment in the Portfolio is subject to risk, as the net asset value of the
Portfolio will fluctuate with changes in the value of the Portfolio's holdings.
There can be no assurance that the investment objective of the Portfolio will be
achieved.
Part B contains more detailed information about the Portfolio, including
information related to (i) the investment policies and restrictions of the
Portfolio, (ii) the Trustees, officers, Advisor and administrator of the
Portfolio, (iii) portfolio transactions and (iv) rights and liabilities of
investors.
The investment objective of the Portfolio is described below, together with
the policies employed to attempt to achieve this objective. Additional
information about the investment policies of the Portfolio appears in Part B,
under Item 13. There can be no assurance that the investment objective of the
Portfolio will be achieved.
The Portfolio's investment objective is to provide a high total return,
consistent with moderate risk of capital, from a portfolio of international
fixed income securities. Total return will consist of income plus realized and
unrealized capital gains and losses. The Portfolio seeks to achieve its
objective by investing in the types of fixed income securities described below.
The expected total return of a portfolio of fixed income securities may not be
as high as that of a portfolio of equity securities.
The Portfolio is designed for investors seek exposure to the international
bond markets in their investment portfolios.
The Advisor actively manages the Portfolio's allocation across countries,
its duration and the selection of specific securities within countries. Based on
fundamental economic and capital markets research, quantitative valuation
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techniques and experienced judgment, the Advisor allocates the Portfolio's
assets primarily among the developed countries of the world outside the United
States. The Advisor adjusts the Portfolio's duration in light of market
conditions and the Advisor's interest rate outlook for the countries in which it
invests. The Advisor selects securities among the broad sectors of the fixed
income market including, but not limited to, debt obligations of governments and
their agencies, supranational organizations, corporations and banks, taking into
consideration such factors as their relative value, the likelihood of a change
in credit rating, and the liquidity of the issue. Under normal circumstances,
the Advisor intends to keep the Portfolio essentially fully invested with at
least 65% of the Portfolio's assets invested in bonds of foreign issuers. These
investments will be made in at least three foreign countries. For further
information on international investments, see "Additional Investment Information
and Risk Factors."
Duration is a measure of the weighted average maturity of the bonds held in
the Portfolio and can be used as a measure of the sensitivity of the Portfolio's
market value to changes in interest rates. Typically, the Portfolio's duration
will range between one year shorter and one year longer than the duration of the
non-U.S. fixed income universe, as represented by Salomon Brothers Non-U.S.
World Government Bond Index, the Portfolio's benchmark. Currently the
benchmark's duration is approximately 5 years. The maturities of the individual
bonds in the Portfolio may vary widely, however.
The Portfolio may invest in securities denominated in foreign currencies,
the U.S. dollar or multinational currency units such as the ECU. The Advisor
will generally attempt to hedge the Portfolio's foreign currency exposure into
the U.S. dollar. However, the Advisor may from time to time decide to keep
foreign currency positions unhedged or engage in foreign currency transactions
if, based on fundamental research, technical factors, and the judgment of
experienced currency managers, it believes the foreign currency exposure will
benefit the Portfolio. For further information on foreign currency exchange
transactions, see "Additional Investment Information and Risk Factors."
The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates in each country, but the Portfolio may also
engage in short-term trading consistent with its objective. To the extent the
Portfolio engages in short-term trading, it may realize short-term capital gains
or losses and incur increased transaction costs. The estimated annual portfolio
turnover rate for the Portfolio is generally not expected to exceed 300%.
CORPORATE BONDS. The Portfolio may invest in a broad range of debt
obligations of foreign issuers. These include debt securities of foreign
corporations; debt obligations of foreign banks and bank holding companies; and
debt obligations issued or guaranteed by supranational organizations such as the
World Bank, the European Investment Bank and the Asian Development Bank. To a
limited extent, the Portfolio may also invest in non-U.S. dollar denominated
securities of U.S. issuers.
GOVERNMENT SECURITIES. The Portfolio may invest in debt obligations issued
or guaranteed by a foreign sovereign government or one of its agencies,
authorities, instrumentalities or political subdivisions including a foreign
state, province or municipality.
MONEY MARKET INVESTMENTS. The Portfolio may invest in money market
instruments of foreign or domestic issuers denominated in U.S. dollars and other
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currencies. Under normal circumstances the Portfolio will purchase these
securities as a part of its management of the Portfolio's duration, to invest
temporary cash balances or to maintain liquidity to meet redemptions. However,
the Portfolio may also invest in money market instruments as a temporary
defensive measure taken in the Advisor's judgment during, or in anticipation of,
adverse market conditions. For more detailed information about these money
market investments see Item 13 in Part B.
QUALITY INFORMATION. Under normal circumstances at least 65% of the
Portfolio's total assets will consist of securities that at the time of purchase
are rated at least A by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poor's Ratings Group ("Standard & Poor's") or that are unrated and in the
Advisor's opinion are of comparable quality. In the case of the remaining 35% of
the Portfolio's investments, the Portfolio may purchase securities that are
rated Baa or better by Moody's or BBB or better by Standard & Poor's or are
unrated and in the Advisor's opinion are of comparable quality. Securities rated
Baa by Moody's or BBB by Standard & Poor's are considered investment grade, but
have some speculative characteristics. These standards must be satisfied at the
time an investment is made. If the quality of the investment later declines, the
Portfolio may continue to hold the investment. See Appendix A in Part B for more
detailed information on these ratings.
NON-DIVERSIFICATION. The Portfolio is registered as a non-diversified
investment company which means that the Portfolio is not limited by the
Investment Company Act of 1940, as amended (the "1940 Act"), in the proportion
of its assets that may be invested in the obligations of a single issuer. Thus,
the Portfolio may invest a greater proportion of its assets in the securities of
a smaller number of issuers and, as a result, may be subject to greater risk
with respect to its portfolio securities. The Portfolio, however, will comply
with the diversification requirements imposed by the Internal Revenue Code of
1986, as amended (the "Code"), for qualification as a regulated investment
company. See Item 20 in Part B.
The Portfolio may also purchase obligations on a when-issued or delayed
delivery basis, enter into repurchase and reverse repurchase agreements, loan
its portfolio securities, purchase certain privately placed securities and enter
into forward foreign currency exchange contracts. In addition, the Portfolio may
use options on securities and indexes of securities, futures contracts and
options on futures contracts for hedging and risk management purposes. Forward
foreign currency exchange contracts, options and futures contracts are
derivative instruments. For a discussion of these investments and investment
techniques, see "Additional Investment Information and Risk Factors."
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio
may invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and for fixed income investments no interest
accrues to the Portfolio until settlement. At the time of settlement, a
when-issued
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security may be valued at less than its purchase price. The Portfolio maintains
with the Custodian a separate account with a segregated portfolio of securities
in an amount at least equal to these commitments. When entering into a
when-issued or delayed delivery transaction, the Portfolio will rely on the
other party to consummate the transaction; if the other party fails to do so,
the Portfolio may be disadvantaged. It is the current policy of the Portfolio
not to enter into when-issued commitments exceeding in the aggregate 15% of the
market value of the Portfolio's total assets less liabilities other than the
obligations created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Trustees. In a repurchase agreement, the Portfolio buys a
security from a seller that has agreed to repurchase it at a mutually agreed
upon date and price, reflecting the interest rate effective for the term of the
agreement. The term of these agreements is usually from overnight to one week. A
repurchase agreement may be viewed as a fully collateralized loan of money by
the Portfolio to the seller. The Portfolio always receives securities as
collateral with a market value at least equal to the purchase price plus accrued
interest and this value is maintained during the term of the agreement. If the
seller defaults and the collateral value declines, the Portfolio might incur a
loss. If bankruptcy proceedings are commenced with respect to the seller, the
Portfolio's realization upon the disposition of collateral may be delayed or
limited. Investments in certain repurchase agreements and certain other
investments which may be considered illiquid are limited. See "Illiquid
Investments; Privately Placed and other Unregistered Securities" below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment
restrictions, the Portfolio is permitted to lend its securities in an amount up
to 33-1/3% of the value of the Portfolio's net assets. The Portfolio may lend
its securities if such loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Portfolio at least equal at
all times to 100% of the market value of the securities loaned, plus accrued
interest. While such securities are on loan, the borrower will pay the Portfolio
any income accruing thereon. Loans will be subject to termination by the
Portfolio in the normal settlement time, generally three business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to the
Portfolio and its investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will
consider all facts and circumstances, including the creditworthiness of the
borrowing financial institution, and the Portfolio will not make any loans in
excess of one year. The Portfolio will not lend its securities to any officer,
Trustee, Director, employee or other affiliate of the Portfolio, the Adviser or
the placement agent, unless otherwise permitted by applicable law.
FOREIGN INVESTMENT INFORMATION. The Portfolio invests primarily in certain
foreign securities. Investment in securities of foreign issuers and in
obligations of foreign branches of domestic banks involves somewhat different
investment risks from those affecting securities of U.S. domestic issuers. There
may be limited publicly available information with respect to foreign issuers,
and foreign issuers are not generally subject to uniform accounting, auditing
and financial standards and requirements comparable to those applicable to
domestic companies. Dividends and interest paid by foreign issuers may be
subject to withholding and other foreign taxes which may decrease the net return
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on foreign investments as compared to dividends and interest paid to the
Portfolio by domestic companies.
Investors should realize that the value of the Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Portfolio's operations. Furthermore, the economies of individual foreign
nations may differ from the United States economy, whether favorably or
unfavorably, in areas such as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position; it may also be more difficult to obtain and enforce a
judgment against a foreign issuer. Any foreign investments made by the Portfolio
must be made in compliance with U.S. and foreign currency restrictions and tax
laws restricting the amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign bond
markets has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. issuers. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In addition, there is generally
less government supervision and regulation of securities exchanges, brokers and
issuers located in foreign countries than in the United States.
Although the Portfolio invests primarily in securities of established
issuers based in developed foreign counties, it may also invest in securities of
issuers in emerging markets countries. Investments in securities of issuers in
emerging markets countries may involve a high degree of risk and many may be
considered speculative. These investments carry all of the risks of investing in
securities of 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 small current size of the markets for securities of emerging markets
issuers and the currently low or non-existent volume of trading, resulting in
lack of liquidity and in price volatility; (iii) certain national policies which
may restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; and (iv) the absence of developed legal structures governing private
or foreign investment and private property.
Since the Portfolio's investments in foreign securities involve foreign
currencies, the value of their assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations, including currency blockage. See "Foreign Currency Exchange
Transactions."
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio buys and
sells securities and receives interest and dividends in currencies other than
the U.S. dollar, the Portfolio may from time to time enter into foreign currency
exchange transactions. The Portfolio either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or uses forward contracts to purchase or sell foreign
currencies. The cost of the Portfolio's spot currency exchange transactions is
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generally the difference between the bid and offer spot rate of the currency
being purchased or sold.
A forward foreign currency exchange contract is an obligation by the
Portfolio to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the exchange rate
between the currencies exchanged under the contract. These contracts are entered
into in the interbank market directly between currency traders (usually large
commercial banks) and their customers. A forward foreign currency exchange
contract generally has no deposit requirement, and is traded at a net price
without commission. The Portfolio will not enter into forward contracts for
speculative purposes. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of the Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an
attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or
anticipated securities transactions. The Portfolio may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or
principally traded in a foreign currency. To do this, the Portfolio would enter
into a forward contract to sell the foreign currency in which the investment is
denominated or principally traded in exchange for U.S. dollars. The Portfolio
will only enter into forward contracts to sell a foreign currency in exchange
for another foreign currency if the Advisor expects the foreign currency
purchased to appreciate against the U.S. dollar.
Although these transactions are intended to minimize the risk of loss due
to a decline in the value of the hedged currency, at the same time they limit
any potential gain that might be realized should the value of the hedged
currency increase. In addition, forward contracts that convert a foreign
currency into another foreign currency will cause the Portfolio to assume the
risk of fluctuations in the value of the currency purchased against the hedged
currency and the U.S. dollar. The precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible
because the future value of such securities in foreign currencies will change as
a consequence of market conditions in the value of such securities between the
date the forward contract is entered into and the date it matures. The
projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into
reverse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date and
price, reflecting the interest rate effective for the term of the agreement. For
purposes of the 1940 Act it is considered a form of borrowing by the Portfolio
and, therefore, is a form of leverage. Leverage may cause any gains or losses of
the Portfolio to be magnified. For more information, see Item 13 in Part B.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES.
The Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 15% of the market value of the Portfolio's total assets would be in
illiquid investments. Subject to this non-fundamental policy limitation, the
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Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the 1933
Act and cannot be offered for public sale in the United States without first
being registered under the 1933 Act. An illiquid investment is any investment
that cannot be disposed of within seven days in the normal course of business at
approximately the amount at which it is valued by the Portfolio. The price the
Portfolio pays for illiquid securities or receives upon resale may be lower than
the price paid or received for similar securities with a more liquid market.
Accordingly the valuation of these securities will reflect any limitations on
their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional
investors without registration under the 1933 Act. These securities may be
determined to be liquid in accordance with guidelines established by the Advisor
and approved by the Trustees. The Trustees will monitor the Advisor's
implementation of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may (a) purchase and sell
(write) exchange traded and over-the-counter put and call options on fixed
income securities or indexes of fixed income securities, (b) purchase and sell
futures contracts on indexes of fixed income securities, and (c) purchase and
sell (write) put and call options on futures contracts on indexes of fixed
income securities. Each of these instruments is a derivative instrument, as its
value derives from the underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk
management purposes. See Item 13 in Part B. The Portfolio may not use futures
contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its
exposure to changing interest rates and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge the Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and return
characteristics of the Portfolio's overall strategy in a manner deemed
appropriate to the Advisor and consistent with the Portfolio's objective and
policies. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
The use of options and futures is a highly specialized activity which
involves investment strategies and risks different from those associated with
ordinary portfolio securities transactions, and there can be no guarantee that
their use will increase the Portfolio's return. While the use of these
instruments by the Portfolio may reduce certain risks associated with owning its
portfolio securities, these techniques themselves entail certain other risks. If
the Advisor applies a strategy at an inappropriate time or judges market
conditions or trends incorrectly, options and futures strategies may lower the
Portfolio's return. Certain strategies limit the Portfolio's possibilities to
realize gains as well as limiting its exposure to losses. The Portfolio could
also experience losses if the prices of its options and futures positions were
poorly correlated with its other investments, or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option premiums,
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in connection with its futures and options transactions and these transactions
could significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) 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. In addition, the Portfolio will not purchase or sell
(write) futures contracts, options on futures contracts or commodity options for
risk management purposes if, as a result, the aggregate initial margin and
options premiums required to establish these positions exceed 5% of the net
asset value of the Portfolio. For more detailed information about these
transactions, see the "Risk Management" in Part B.
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indexes
of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a
liquid market exists. If the option is allowed to expire, the Portfolio will
lose the entire premium it paid. If the Portfolio exercises a put option on a
security, it will sell the instrument underlying the option at the strike price.
If the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price
of the underlying instrument falls substantially. However, if the price of the
instrument underlying the option does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the instrument underlying the option at the option's
strike price. A call buyer typically attempts to participate in potential price
increases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect to
suffer a loss if security prices do not rise sufficiently to offset the cost of
the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put
option, it takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the Portfolio assumes the
obligation to pay the strike price for the instrument underlying the option if
the other party to the option chooses to exercise it. The Portfolio may seek to
terminate its position in a put option it writes before exercise by purchasing
an offsetting option in the market at its current price. If the market is not
liquid for a put option the Portfolio has written, however, the Portfolio must
continue to be prepared to pay the strike price while the option is outstanding,
regardless of price changes, and must continue to post margin as discussed
below.
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If the price of the underlying instrument rises, a put writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the writer will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
and holding the underlying instrument directly, however, because the premium
received for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the
option's underlying instrument in return for the strike price upon exercise of
the option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium a call writer offsets part of the effect of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index
of securities or a futures contract is required to deposit cash or securities or
a letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase put and call options on any
securities index based on securities in which the Portfolio may invest. Options
on securities indexes are similar to options on securities, except that the
exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Portfolio, in purchasing or selling index options, is subject to the risk
that the value of its portfolio securities may not change as much as an index
because the Portfolio's investments generally will not match the composition of
an index.
For a number of reasons, a liquid market may not exist and thus the
Portfolio may not be able to close out an option position that it has previously
entered into. When the Portfolio purchases an OTC option, it will be relying on
its counterparty to perform its obligations, and the Portfolio may incur
additional losses if the counterparty is unable to perform.
FUTURES CONTRACTS. When the Portfolio purchases a futures contract, it
agrees to purchase a specified quantity of an underlying instrument at a
specified future date or to make a cash payment based on the value of a
securities index. When the Portfolio sells a futures contract, it agrees to sell
a specified quantity of the underlying instrument at a specified future date or
to receive a cash payment based on the value of a securities index. The price at
which the purchase and sale will take place is fixed when the Portfolio enters
into the contract. Futures can be held until their delivery dates or the
position can be (and normally is) closed out before then. There is no assurance,
however, that a liquid market will exist when the Portfolio wishes to close out
a particular position.
When the Portfolio purchases a futures contract, the value of the futures
contract tends to increase and decrease in tandem with the value of its
underlying instrument.
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Therefore, purchasing futures contracts will tend to increase the Portfolio's
exposure to positive and negative price fluctuations in the underlying
instrument, much as if it had purchased the underlying in instrument directly.
When the Portfolio sells a futures contract, by contrast, the value of its
futures position will tend to move in a direction contrary to the value of the
underlying instrument. Selling futures contracts, therefore, will tend to offset
both positive and negative market price changes, much as if the underlying
instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or
pay for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant (FCM).
Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid, high quality assets in connection with
its use of options and futures contracts to the extent required by the staff of
the Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of the Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options
and a more detailed discussion of associated risks, see Item 13 in Part B.
INVESTMENT RESTRICTIONS
The investment objective of the Portfolio, together with the investment
restrictions described below and in Part B, except as noted, are deemed
fundamental policies, i.e., they may be changed only with the approval of a
majority of the outstanding voting securities of the Portfolio.
The Portfolio may not purchase securities or other obligations of issuers
conducting their principal business activity in the same industry if its
investments in such industry would exceed 25% of the value of the Portfolio's
total assets, except this limitation shall not apply to investments in U.S.
Government securities. (For the purposes of this 25% limitation, the staff of
the Securities and Exchange Commission (the "SEC") considers (i) all
supranational organizations as a group to be a single industry and (ii) each
foreign government and its political subdivisions to be a single industry.) In
addition, the Portfolio may not borrow money except that the Portfolio
<PAGE>
may (a) borrow money from banks for temporary or emergency purposes (not for
leveraging purposes) and (b) enter into reverse repurchase agreements for any
purpose, provided that (a) and (b) in total do not exceed 33-1/3% of the
Portfolio's total assets less liabilities (other than borrowings); and the
Portfolio may not issue senior securities except as permitted by the 1940 Act or
any rule, order or interpretation thereunder.
For a more detailed discussion of the above investment restrictions, as
well as a description of certain other investment restrictions, see Item 13 in
Part B.
ITEM 5. MANAGEMENT OF THE PORTFOLIO.
The Board of Trustees provides broad supervision over the affairs of the
Portfolio. The Portfolio has retained the services of Morgan Guaranty as
investment advisor. The Portfolio has retained the services of Signature
Broker-Dealer Services, Inc. ("SBDS") as administrator (the "Administrator").
The Portfolio has not retained the services of a principal underwriter or
distributor, since interests in the Portfolio are offered solely in private
placement transactions. SBDS, acting as agent for the Portfolio, serves as
exclusive placement agent of interests in the Portfolio. SBDS receives no
additional compensation for serving as exclusive placement agent to the
Portfolio.
The Portfolio has entered into a Portfolio Fund Services Agreement with
Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio. The fees to be paid under the
agreement approximate the reasonable cost of Pierpont Group, Inc. in providing
these services. Pierpont Group, Inc. was organized in 1989 at the request of the
Trustees of the Pierpont Family of Funds for the purpose of providing these
services at cost to these funds. See Item 14 in Part B. The principal offices of
Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, New York 10017.
INVESTMENT ADVISOR. The Portfolio has retained the services of Morgan
Guaranty as investment advisor. Morgan Guaranty, with principal offices at 60
Wall Street, New York, New York 10260, is a New York trust company which
conducts a general banking and trust business. Morgan Guaranty is a wholly owned
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding
company organized under the laws of Delaware. Through offices in New York City
and abroad, J.P. Morgan, through the Advisor and other subsidiaries, offers a
wide range of services to governmental, institutional, corporate and individual
customers and acts as investment adviser to individual and institutional clients
with combined assets under management of over $165 billion (of which the Advisor
advises over $26 billion). Morgan Guaranty provides investment advice and
portfolio management services to the Portfolio. Subject to the supervision of
the Portfolio's Trustees, Morgan Guaranty makes the Portfolio's day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages the Portfolio's investments. See Item 16 in Part B.
Morgan Guaranty uses a sophisticated, disciplined, collaborative process
for managing all asset classes. For fixed income portfolios, this process
focuses on the systematic analysis of real interest rates, sector
diversification, quantitative and credit analysis, and, for foreign fixed income
securities, country selection. Morgan Guaranty has managed portfolios of
international fixed income securities on behalf of its clients since 1977. The
portfolio managers making investments in international fixed income securities
work in conjunction with fixed income, credit, capital market and economic
<PAGE>
research analysts, as well as traders and administrative officers. The following
persons are primarily responsible for the day-to-day management and
implementation of Morgan Guaranty's process for the Portfolio (the inception
date of each person's responsibility for the Portfolio and his or her business
experience for the past five years is indicated parenthetically): Robert P.
Browne, Vice President (since October, 1994; employed by Morgan Guaranty since
prior to 1991 as a portfolio manager of international fixed income investments)
and Lili B.L. Dung, Vice President (since October, 1994; employed by Morgan
Guaranty since prior to 1991 as a portfolio manager of international fixed
income investments).
As compensation for the services rendered and related expenses borne by
Morgan Guaranty under the Investment Advisory Agreement with the Portfolio, the
Portfolio has agreed to pay Morgan Guaranty a fee, which is computed daily and
may be paid monthly, at the annual rate of 0.35% of the Portfolio's average
daily net assets.
Under a separate agreement, Morgan Guaranty also provides financial, fund
accounting and administrative services to the Portfolio. See "Administrative
Services Agent" below.
ADMINISTRATOR. Under an Administration Agreement with the Portfolio, SBDS
serves as the Administrator for the Portfolio and in that capacity supervises
the Portfolio's day-to-day operations other than management of the Portfolio's
investments. In this capacity, SBDS administers and manages all aspects of the
Portfolio's day-to-day operations subject to the supervision of the Trustees,
except as set forth under "Investment Advisor," "Administrative Services Agent"
and "Custodian". In connection with its responsibilities as Administrator, SBDS
(i) furnishes ordinary clerical and related services for day-to-day operations
including certain record keeping responsibilities; (ii) takes responsibility for
compliance with all applicable federal and state securities and other regulatory
requirements; and (iii) performs such administrative and managerial oversight of
the activities of the Portfolio's custodian and transfer agent, as the Trustees
may direct from time to time.
Under the Portfolio's Administration Agreement, the Portfolio has agreed to
pay SBDS a fee equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate average net
assets of the Portfolio and the other portfolios (collectively, the "Master
Portfolios") in which series of The Pierpont Funds, The JPM Institutional Funds
or The JPM Advisor Funds invest. The charge is calculated in accordance with the
following annual schedule: 0.03% of the first $7 billion of the Master
Portfolios' aggregate average daily net assets, and 0.01% of the Master
Portfolios' aggregate average daily net assets in excess of $7 billion. The
portion of this charge payable by the Portfolio is determined by the
proportionate share that its net assets bear to the total assets of The Pierpont
Funds, The JPM Institutional Funds, The JPM Advisor Funds and the Master
Portfolios.
SBDS, a registered broker-dealer, serves as exclusive placement agent for
the Portfolio. SBDS is a wholly owned subsidiary of Signature Financial Group,
Inc. ("Signature"). Signature and its affiliates currently provide
administration and distribution services for a number of registered investment
companies through offices located in Boston, New York, London, Toronto and
George Town, Grand Cayman. The principal business address of SBDS is 6 St. James
Avenue, Boston, Massachusetts 02116.
<PAGE>
ADMINISTRATIVE SERVICES AGENT. Under an Administrative Services Agreement
with the Portfolio, Morgan Guaranty is responsible for certain financial, fund
accounting and administrative services provided to the Portfolio, including
services related to Portfolio tax returns and financial reports. Under the
Administrative Services Agreement, the Portfolio has agreed to pay Morgan
Guaranty a fee equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios' aggregate average daily net assets,
and 0.03% of the Master Portfolios' aggregate average daily net assets in excess
of $7 billion. The portion of this charge payable by the Portfolio is determined
by the proportionate share that its net assets bear to the total net assets of
the Master Portfolios, The Pierpont Funds, The JPM Institutional Funds, The JPM
Advisor Funds and other investors in the Master Portfolios for which Morgan
Guaranty provides similar services. Under the terms of the Administrative
Services Agreement, Morgan Guaranty may delegate one or more of its
responsibilities to other entities, at Morgan Guaranty's expense.
CUSTODIAN. State Street Bank and Trust Company, 40 King Street West,
Toronto, Ontario, Canada M5H 3Y8 serves as the Portfolio's custodian and
transfer agent (the "Custodian").
EXPENSES. In addition to the fees payable to Morgan Guaranty, SBDS and
Pierpont Group, Inc. under the various agreements discussed under "Management of
the Portfolio," "Investment Advisor," "Administrator" and "Administrative
Services Agent" above, the Portfolio is responsible for certain usual and
customary expenses associated with its operations. Such expenses include
organization expenses, legal fees, accounting expenses, insurance costs, the
compensation and expenses of the Trustees, registration fees under federal
securities laws and extraordinary expenses applicable to the Portfolio. Such
expenses also include registration fees under foreign securities laws, custodian
fees and brokerage expenses.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolio is organized as a trust under the laws of the State of New
York. Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments in the
Portfolio may not be transferred, but an investor may withdraw all or any
portion of its investment at any time at net asset value. Investors in the
Portfolio (e.g., investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations.
Investments in the Portfolio have no preemptive or conversion rights and
are fully paid and nonassessable, except as set forth below. The Portfolio is
not required and has no current intention of holding annual meetings of
investors, but the Portfolio will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
investor vote. Changes in fundamental policies will be submitted to investors
for approval. Investors have under certain circumstances (e.g., upon application
and submission of certain specified documents to the Trustees by a specified
percentage of the outstanding interests in the Portfolio) the right to
communicate with other investors in connection with requesting a meeting of
<PAGE>
investors for the purpose of removing one or more Trustees. Investors also have
the right to remove one or more Trustees without a meeting by a declaration in
writing by a specified percentage of the outstanding interests in the Portfolio.
Upon liquidation of the Portfolio, investors would be entitled to share pro rata
in the net assets of the Portfolio available for distribution to investors.
The net asset value of the Portfolio is determined each business day other
than the holidays listed in Part B ("Portfolio Business Day"). This
determination is made once each Portfolio Business Day as of 4:15 p.m. New York
time (the "Valuation Time").
The "net income" of the Portfolio will consist of (i) all income accrued,
less the amortization of any premium, on the assets of the Portfolio, less (ii)
all actual and accrued expenses of the Portfolio determined in accordance with
generally accepted accounting principles. Interest income includes discount
earned (including both original issue and market discount) on discount paper
accrued ratably to the date of maturity and any net realized gains or losses on
the assets of the Portfolio. All the net income of the Portfolio is allocated
pro rata among the investors in the Portfolio.
The end of the Portfolio's fiscal year is September 30.
Under the anticipated method of operation of the Portfolio, the Portfolio
will not be subject to any income tax. However, each investor in the Portfolio
will be taxable on its share (as determined in accordance with the governing
instruments of the Portfolio) of the Portfolio's ordinary income and capital
gain in determining its income tax liability. The determination of such share
will be made in accordance with the Code and regulations promulgated thereunder.
It is intended that the Portfolio's assets, income and distributions will
be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.
Investor inquiries may be directed to SBDS, in care of Signature Financial
Group (Grand Cayman) Ltd., at Elizabethan Square, Shedden Road, George Town,
Grand Cayman, Cayman Islands (809-945-1824).
ITEM 7. PURCHASE OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, insurance company separate accounts, common or
commingled trust funds, or similar organizations or entities which are
"accredited investors" as defined in Rule 501 under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.
An investment in the Portfolio may be made without a sales load. All
investments are made at net asset value next determined after an order is
received in "good order" by the Portfolio. The net asset value of the Portfolio
is determined on each Portfolio Business Day.
<PAGE>
There is no minimum initial or subsequent investment in the Portfolio.
However, because the Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., monies credited to the account
of the Custodian by a Federal Reserve Bank).
The Portfolio may, at its own option, accept securities in payment for
investments in its beneficial interest. The securities delivered in kind are
valued by the method described in Item 19 of Part B as of the business day prior
to the day the Portfolio receives the securities. Securities may be accepted in
payment for beneficial interests only if they are, in the judgment of Morgan
Guaranty, appropriate investments for the Portfolio. In addition, securities
accepted in payment for beneficial interests must: (i) meet the investment
objective and policies of the Portfolio; (ii) be acquired by the Portfolio for
investment and not for resale; (iii) be liquid securities which are not
restricted as to transfer either by law or liquidity of market; and (iv) if
stock, have a value which is readily ascertainable as evidenced by a listing on
a stock exchange, over-the-counter market or by readily available market
quotations from a dealer in such securities. The Portfolio reserves the right to
accept or reject at its own option any and all securities offered in payment for
beneficial interests.
The Portfolio and SBDS reserve the right to cease accepting investments at
any time or to reject any investment order.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Portfolio Business Day. At the Valuation Time on each such
day, the value of each investor's beneficial interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
the aggregate beneficial interests in the Portfolio. Any additions or
reductions, which are to be effected as of the Valuation Time on such day, will
then be effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio will then be recomputed as the percentage equal to
the fraction (i) the numerator of which is the value of such investor's
investment in the Portfolio as of the Valuation Time on such day plus or minus,
as the case may be, the amount of net additions to or reductions in the
investor's investment in the Portfolio effected as of the Valuation Time, and
(ii) the denominator of which is the aggregate net asset value of the Portfolio
as of the Valuation Time on such day, plus or minus, as the case may be, the
amount of net additions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of the Valuation Time on the following Portfolio Business Day.
ITEM 8. REDEMPTION OR REPURCHASE.
An investor in the Portfolio may redeem all or any portion of its
investment at the net asset value next determined after a request in "good
order" is furnished by the investor to the Portfolio. The proceeds of a
redemption will be paid by the Portfolio in federal funds normally on the next
Portfolio Business Day after the redemption is effected, but in any event within
seven days. Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any redemption
may be suspended or the payment of the proceeds therefrom postponed during any
period in which the New York Stock Exchange (the "NYSE") is closed (other than
<PAGE>
weekends or holidays) or trading on the NYSE is restricted or, to the extent
otherwise permitted by the 1940 Act, if an emergency exists.
The Portfolio reserves the right under certain circumstances, such as
accommodating requests for substantial withdrawals or liquidations, to pay
distributions in kind to investors (i.e., to distribute portfolio securities as
opposed to cash). If securities are distributed, an investor could incur
brokerage, tax or other charges in converting the securities to cash. In
addition, distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Portfolio or the investor's
portfolio, as the case may be.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Not applicable.
<PAGE>
PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS. Page
General Information and History ............ B-1
Investment Objective and Policies........... B-1
Management of the Portfolio................. B-12
Control Persons and Principal Holders
of Securities............................... B-15
Investment Advisory and Other Services...... B-16
Brokerage Allocation and Other Practices.... B-20
Capital Stock and Other Securities.......... B-22
Purchase, Redemption and Pricing of
Securities.................................. B-23
Tax Status.................................. B-24
Underwriters................................ B-25
Calculations of Performance Data............ B-25
Financial Statements........................ B-25
Appendix.................................... Appendix-1
ITEM 12. GENERAL INFORMATION AND HISTORY.
Not applicable.
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES.
The investment objective of The Non-U.S. Fixed Income Portfolio (the
"Portfolio") is to provide a high total return consistent with moderate risk of
capital, from a portfolio of international fixed income securities. The
Portfolio attempts to achieve its investment objective by investing primarily in
high grade, non-dollar-denominated corporate and government debt obligations of
foreign issuers described in Part A and this Part B.
The Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan Guaranty" or the "Advisor").
INVESTMENT PROCESS
Duration management: The duration decision is central to Morgan Guaranty's
investment process and begins with an analysis of economic conditions and real
yields in the countries that make up the Portfolio's universe. Based on this
analysis, fixed income portfolio managers forecast three potential paths
(optimistic, pessimistic, and most likely) that interest rates in each market
could follow over the next three and twelve months. These forecasts are
converted into return curves that enable Morgan Guaranty to estimate the
risk-return profile of different portfolio durations. In each market, duration
is set at its "optimal" level--that is, at the level that Morgan Guaranty
believes will generate the highest excess return per unit of excess risk, as
measured against the benchmark.
<PAGE>
Country allocation: Morgan Guaranty allocates the Portfolio's assets
primarily among the developed countries of the world outside the United States.
Country allocations are determined through an optimization procedure that ranks
markets according to the risks and returns inherent in their "optimal"
durations. Country weightings also reflect liquidity and credit quality
considerations. To help contain risk, Morgan Guaranty typically limits the
country-weighted duration of the Portfolio to a range between one year shorter
and one year longer than that of the benchmark.
Sector/security selection: Holdings primarily consist of government and
government-guaranteed bonds, but also include publicly and privately traded
corporate debt obligations, debt obligations of banks and bank holding companies
and of supranational organizations, and convertible securities. Sectors are
over- or under-weighted when Morgan Guaranty perceives significant valuation
distortions in their yield spreads. Securities are selected by the portfolio
manager, with substantial input from fixed income analysts and traders as well
as from Morgan Guaranty's extended network of equity analysts. Credit analysts
monitor the quality of current and prospective holdings and, in conjunction with
the credit committee, recommend purchases and sales.
The following discussion supplements the information regarding the
investment objective of the Portfolio and the policies to be employed to achieve
this objective as set forth above and in Part A.
MONEY MARKET INSTRUMENTS
As discussed in Part A, the Portfolio may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased by the Portfolio appears below. See "Quality and Diversification
Requirements".
U.S. TREASURY SECURITIES. The Portfolio may invest in direct obligations of
the U.S. Treasury, including Treasury bills, notes and bonds, all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. The Portfolio may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. In the case of securities not backed by the
full faith and credit of the United States, the Portfolio must look principally
to the federal agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its commitments.
Securities in which the Portfolio may invest that are not backed by the full
faith and credit of the United States include, but are not limited to,
obligations of the Tennessee Valley Authority, the Federal Home Loan Mortgage
Corporation, and the U.S. Postal Service, each of which has the right to borrow
from the U.S. Treasury to meet its obligations. Securities in which the
Portfolio may invest that are not backed by the full faith and credit of the
United States, include, but are not limited to, obligations of the Federal Farm
Credit System and the Federal Home Loan Banks, both of whose obligations may be
satisfied only by the individual credits of each issuing agency. Securities
which are backed by the full faith and credit of the United States include
obligations of the Government National Mortgage Association, the Farmers Home
Administration, and the Export-Import Bank.
<PAGE>
FOREIGN GOVERNMENT OBLIGATIONS. The Portfolio, subject to its applicable
investment policies, may also invest in short-term obligations of foreign
sovereign governments or of their agencies, instrumentalities, authorities or
political subdivisions. These securities may be denominated in the U.S. dollar
or in another currency. See "Foreign Investments".
BANK OBLIGATIONS. The Portfolio, unless otherwise noted in Part A or below,
may invest in negotiable certificates of deposit, time deposits and bankers'
acceptances of (i) banks, savings and loan associations and savings banks which
are organized under the laws of the United States or any state, (ii) foreign
branches of these banks or of foreign banks of equivalent size (Euros) and (iii)
U.S. branches of foreign banks of equivalent size (Yankees). The Portfolio will
not invest in obligations for which the Advisor, or any of its affiliated
persons, is the ultimate obligor or accepting bank. The Portfolio may also
invest in obligations of international banking institutions designated or
supported by national governments to promote economic reconstruction,
development or trade between nations (e.g., the European Investment Bank, the
Inter-American Development Bank, or the World Bank).
COMMERCIAL PAPER. The Portfolio may invest in commercial paper, including
master demand obligations. Master demand obligations are obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan Guaranty acting as agent, for no
additional fee, in its capacity as investment advisor to the Portfolio and as
fiduciary for other clients for whom it exercises investment discretion. The
monies loaned to the borrower come from accounts managed by the Advisor or its
affiliates, pursuant to arrangements with such accounts. Interest and principal
payments are credited to such accounts. The Advisor, acting as a fiduciary on
behalf of its clients, has the right to increase or decrease the amount provided
to the borrower under an obligation. The borrower has the right to pay without
penalty all or any part of the principal amount then outstanding on an
obligation together with interest to the date of payment. Since these
obligations typically provide that the interest rate is tied to the Federal
Reserve commercial paper composite rate, the rate on master demand obligations
is subject to change. Repayment of a master demand obligation to participating
accounts depends on the ability of the borrower to pay the accrued interest and
principal of the obligation on demand which is continuously monitored by the
Advisor. Since master demand obligations typically are not rated by credit
rating agencies, the Portfolio may invest in such unrated obligations only if at
the time of an investment the obligation is determined by the Advisor to have a
credit quality which satisfies the Portfolio's quality restrictions. See
"Quality and Diversification Requirements." Although there is no secondary
market for master demand obligations, such obligations are considered by the
Portfolio to be liquid because they are payable upon demand. The Portfolio does
not have any specific percentage limitation on investments in master demand
obligations.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
with brokers, dealers or banks that meet the credit guidelines approved by the
Trustees. In a repurchase agreement, the Portfolio buys a security from a seller
that has agreed to repurchase the same security at a mutually agreed upon date
and price. The resale price normally is in excess of the purchase price,
reflecting an agreed upon interest rate. This interest rate is effective for the
period of time the Portfolio is invested in the agreement and is not related to
<PAGE>
the coupon rate on the underlying security. A repurchase agreement may also be
viewed as a fully collateralized loan of money by the Portfolio to the seller.
The period of these repurchase agreements will usually be short, from overnight
to one week, and at no time will the Portfolio invest in repurchase agreements
for more than 13 months. The securities which are subject to repurchase
agreements, however, may have maturity dates in excess of 13 months from the
effective date of the repurchase agreement. The Portfolio will always receive
securities as collateral whose market value is, and during the entire term of
the agreement remains, at least equal to 100% of the dollar amount invested by
the Portfolio in each agreement plus accrued interest, and the Portfolio will
make payment for such securities only upon physical delivery or upon evidence of
book entry transfer to the account of the Custodian. If the seller defaults, the
Portfolio might incur a loss if the value of the collateral securing the
repurchase agreement declines and might incur disposition costs in connection
with liquidating the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, realization upon disposal
of the collateral by the Portfolio may be delayed or limited.
The Portfolio may make investments in other debt securities with remaining
effective maturities of not more than 13 months, including without limitation
corporate and foreign bonds, asset-backed securities and other obligations
described in Part A or this Part B.
CORPORATE BONDS AND OTHER DEBT SECURITIES
As discussed in Part A, the Portfolio may invest in bonds and other debt
securities of domestic and foreign issuers to the extent consistent with its
investment objectives and policies. A description of these investments appears
in Part A and below. See "Quality and Diversification Requirements". For
information on short-term investments in these securities, see "Money Market
Instruments".
ASSET-BACKED SECURITIES. Asset-backed securities directly or indirectly
represent a participation interest in, or are secured by and payable from, a
stream of payments generated by particular assets such as motor vehicle or
credit card receivables. Payments of principal and interest may be guaranteed up
to certain amounts and for a certain time period by a letter of credit issued by
a financial institution unaffiliated with the entities issuing the securities.
The asset-backed securities in which the Portfolio may invest are subject to the
Portfolio's overall credit requirements. However, asset-backed securities, in
general, are subject to certain risks. Most of these risks are related to
limited interests in applicable collateral. For example, credit card debt
receivables are generally unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts on credit card debt
thereby reducing the balance due. Additionally, if the letter of credit is
exhausted, holders of asset-backed securities may also experience delays in
payments or losses if the full amounts due on underlying sales contracts are not
realized. Because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of the market cycle has not been tested.
FOREIGN INVESTMENTS
The Portfolio makes substantial investments in foreign countries. Foreign
investments may be made directly in securities of foreign issuers or in the form
of American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). Generally, ADRs and EDRs are receipts issued by a bank or trust
company that evidence ownership of underlying securities issued by a foreign
<PAGE>
corporation and that are designed for use in the domestic, in the case of ADRs,
or European, in the case of EDRs, securities markets.
Since investments in foreign securities may involve foreign currencies, the
value of the Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. The Portfolio may enter into forward
commitments for the purchase or sale of foreign currencies in connection with
the settlement of foreign securities transactions or to manage the Portfolio's
currency exposure related to foreign investments. The Portfolio will not enter
into such commitments for speculative purposes. See "Additional Investment
Information and Risk Factors" in Part A.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and for money market instruments and other fixed income investments
no interest accrues to the Portfolio until settlement takes place. At the time
the Portfolio makes the commitment to purchase securities on a when-issued or
delayed delivery basis, it will record the transaction, reflect the value each
day of such securities in determining its net asset value and, if applicable,
calculate the maturity for the purposes of average maturity from that date. At
the time of settlement a when-issued security may be valued at less than the
purchase price. To facilitate such acquisitions, the Portfolio will maintain
with the Custodian a segregated account with liquid assets, consisting of cash,
U.S. Government securities or other appropriate securities, in an amount at
least equal to such commitments. On delivery dates for such transactions, the
Portfolio will meet its obligations from maturities or sales of the securities
held in the segregated account and/or from cash flow. If the Portfolio chooses
to dispose of the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. It is the current
policy of the Portfolio not to enter into when-issued commitments exceeding in
the aggregate 15% of the market value of the Portfolio's total assets, less
liabilities other than the obligations created by when-issued commitments.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies may
be acquired by the Portfolio to the extent permitted under the Investment
Company Act of 1940, as amended (the "1940 Act"). These limits require that, as
determined immediately after a purchase is made, (i) not more than 5% of the
value of the Portfolio's total assets will be invested in the securities of any
one investment company, (ii) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group, and (iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Portfolio. As a shareholder of another
investment company, the Portfolio would bear, along with other shareholders, its
pro rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that the Portfolio bears directly in connection with its own operations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Portfolio sells a
<PAGE>
security and agrees to repurchase the same security at a mutually agreed upon
date and price. For the purposes of the 1940 Act it is also considered as the
borrowing of money by the Portfolio and, therefore, a form of leverage. The
Portfolio will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, the Portfolio will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. The Portfolio
will not invest the proceeds of a reverse repurchase agreement for a period
which exceeds the duration of the reverse repurchase agreement. The Portfolio
may not enter into reverse repurchase agreements exceeding in the aggregate
one-third of the market value of its total assets, less liabilities other than
the obligations created by reverse repurchase agreements. The Portfolio will
establish and maintain with the Custodian a separate account with a segregated
portfolio of securities in an amount at least equal to its purchase obligations
under its reverse repurchase agreements. See "Investment Restrictions" below.
LOANS OF PORTFOLIO SECURITIES. The Portfolio may lend its securities if
such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
investors. The Portfolio may pay reasonable finders' and custodial fees in
connection with a loan. In addition, the Portfolio will consider all facts and
circumstances including the creditworthiness of the borrowing financial
institution, and the Portfolio will not make any loans in excess of one year.
The Portfolio will not lend their securities to any officer, Trustee, Director,
employee or other affiliate of the Portfolio, the Advisor or the placement
agent, unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolio may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in Part A.
As to illiquid investments, the Portfolio is subject to a risk that should
the Portfolio decide to sell them when a ready buyer is not available at a price
the Portfolio deems representative of their value, the value of the Portfolio's
net assets could be adversely affected. Where an illiquid security must be
registered under the Securities Act of 1933, as amended (the "1933 Act"), before
it may be sold, the Portfolio may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Although the Portfolio is not limited by the diversification requirements
of the 1940 Act, it will comply with the diversification requirements imposed by
the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as
a regulated investment company. To meet these requirements, the Portfolio must
diversify its holdings so that, with respect to 50% of the Portfolio's assets,
<PAGE>
no more than 5% of its assets are invested in the securities of any one issuer
other than the U.S. Government at the close of each quarter of the Portfolio's
taxable year. The Portfolio may with respect to the remaining 50% of its assets,
invest up to 25% of its assets in the securities of any one issuer (except this
limitation does not apply to U.S. Government Securities).
The Portfolio invests principally in a diversified portfolio of "high
grade" and "investment grade" securities. Investment grade debt is rated, on the
date of investment, within the four highest ratings of Moody's, currently Aaa,
Aa, A and Baa, or of Standard & Poor's, currently AAA, AA, A and BBB, while high
grade debt is rated, on the date of the investment, within the two highest of
such ratings. Such securities must be rated, on the date of investment, Ba by
Moody's or BB by Standard & Poor's. The Portfolio may invest in debt securities
which are not rated or other debt securities to which these ratings are not
applicable, if in the opinion of the Advisor, such securities are of comparable
quality to the rated securities discussed above. In determining suitability of
investment in a particular unrated security, the Advisor takes into
consideration asset and debt service coverage, the purpose of the financing,
history of the issuer, existence of other rated securities of the issuer, and
other relevant conditions, such as comparability to other issuers. In addition,
at the time the Portfolio invests in any commercial paper, bank obligation or
repurchase agreement, the issuer must have outstanding debt rated A or higher by
Moody's or Standard & Poor's, the issuer's parent corporation, if any, must have
outstanding commercial paper rated Prime-1 by Moody's or A-1 by Standard &
Poor's, or if no such ratings are available, the investment must be of
comparable quality in the Advisor's opinion.
OPTIONS AND FUTURES TRANSACTIONS
Exchange Traded and Over-the-Counter Options. All options purchased or sold
by the Portfolio will be traded on a securities exchange or will be purchased or
sold by securities dealers (over-the-counter or OTC options) that meet
creditworthiness standards approved by the Board of Trustees. While
exchange-traded options are obligations of the Options Clearing Corporation, in
the case of OTC options, the Portfolio relies on the dealer from which it
purchased the option to perform if the option is exercised. Thus, when the
Portfolio purchases an OTC option, it relies on the dealer from which it
purchased the option to make or take delivery of the underlying securities.
Failure by the dealer to do so would result in the loss of the premium paid by
the Portfolio as well as loss of the expected benefit of the transaction.
The staff of the SEC has taken the position that, in general, purchased OTC
options and the underlying securities used to cover written OTC options are
illiquid securities. However, the Portfolio may treat as liquid the underlying
securities used to cover written OTC options, provided it has arrangements with
certain qualified dealers who agree that the Portfolio may repurchase any option
it writes for a maximum price to be calculated by a predetermined formula. In
these cases, the OTC option itself would only be considered illiquid to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
Futures Contracts and Options on Futures Contracts. In entering into
futures and options transactions the Portfolio may purchase or sell (write)
futures contracts and purchase put and call options, including put and call
options on futures contracts. In addition, the Portfolio may sell (write) put
and call options, including options on futures. Futures contracts obligate the
buyer to take and the seller to make delivery at a future date of a specified
quantity of a financial instrument or an amount of cash based on the value of a
securities index. Currently, futures contracts are
<PAGE>
available on various types of fixed income securities, including but not limited
to U.S. Treasury bonds, notes and bills, Eurodollar certificates of deposit and
on indexes of fixed income securities and indexes of equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid by
the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by the Portfolio are paid by the Portfolio into a segregated
account, in the name of the Futures Commission Merchant, as required by the 1940
Act and the SEC's interpretations thereunder.
COMBINED POSITIONS. The Portfolio may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Portfolio may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match the
Portfolio's current or anticipated investments exactly. The Portfolio may invest
in options and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
Options and futures contracts prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
<PAGE>
may not be successful in all cases. If price changes in the Portfolio's options
or futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially require the Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. (See "Exchange Traded and Over-the-Counter
Options" above for a discussion of the liquidity of options not traded on an
exchange.)
POSITION LIMITS. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, the Portfolio or the Advisor may be
required to reduce the size of its futures and options positions or may not be
able to trade a certain futures or options contract in order to avoid exceeding
such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Portfolio
intends to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which the Portfolio can commit assets
to initial margin deposits and option premiums. In addition, the Portfolio will
comply with guidelines established by the SEC with respect to coverage of
options and futures contracts by mutual funds, and if the guidelines so require,
will set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be sold
while the futures contract or option is outstanding, unless they are replaced
with other suitable assets. As a result, there is a possibility that segregation
of a large percentage of the Portfolio's assets could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
RISK MANAGEMENT
The Portfolio may employ non-hedging risk management techniques. Examples
of such strategies include synthetically altering the duration of a portfolio or
the mix of securities in a portfolio. For example, if the Advisor wishes to
extend maturities in a fixed income portfolio in order to take advantage of an
anticipated decline in interest rates, but does not wish to purchase the
underlying long-term securities, it might cause the Portfolio to purchase
futures contracts on long-term debt securities. Similarly, if the Advisor wishes
to decrease fixed income securities or purchase equities, it could cause the
Portfolio to sell futures contracts on debt securities and purchase futures
contracts on a stock index. Such non-hedging risk management techniques are not
speculative, but because they involve leverage include, as do all leveraged
transactions, the possibility of losses as well as gains that are greater than
if these techniques involved the purchase and sale of the securities themselves
rather than their synthetic derivatives.
<PAGE>
PORTFOLIO TURNOVER
The portfolio turnover rate for the Portfolio for the period from October
11, 1994 (commencement of operations) through September 30, 1995 was 288%. A
rate of 100% indicates that the equivalent of all of the Portfolio's assets have
been sold and reinvested in a year. High portfolio turnover may result in the
realization of substantial net capital gains or losses. To the extent net short
term capital gains are realized, any distribution resulting from such gains are
considered ordinary income for federal income tax purposes. See Item 20 below.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Portfolio.
Except where otherwise noted, these investment restrictions are "fundamental"
policies which, under the 1940 Act, may not be changed without the vote of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Portfolio. A "majority of the outstanding voting securities" is defined in
the 1940 Act as the lesser of (a) 67% or more of the voting securities present
at a meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, or (b) more than 50% of the
outstanding voting securities. The percentage limitations contained in the
restrictions below apply at the time of the purchase of securities.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC staff
interpretations thereof are amended or modified, the Portfolio may not:
1. Purchase any security if, as a result, more than 25% of the value of the
Portfolio's total assets would be invested in securities of issuers having
their principal business activities in the same industry. This limitation
shall not apply to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. In addition, and while
subject to changing interpretations, so long as a single foreign
government or supranational organization is considered to be an "industry"
for the purposes of this 25% limitation, the Portfolio will comply
therewith. The staff of the SEC considers all supranational organizations
(as a group) to be a single industry for concentration purposes;
2. Borrow money, except that the Portfolio may (i) borrow money from banks
for temporary or emergency purposes (not for leveraging purposes) and (ii)
enter into reverse repurchase agreements for any purpose; provided that
(i) and (ii) in total do not exceed 33-1/3% of the value of the
Portfolio's total assets (including the amount borrowed) less liabilities
(other than borrowings). If at any time any borrowings come to exceed
33-1/3% of the value of the Portfolio's total assets, the Portfolio will
reduce its borrowings within three business days to the extent necessary
to comply with the 33-1/3% limitation;
3. Make loans to other persons, except through the purchase of debt
obligations, loans of portfolio securities, and participation in repurchase
agreements;
4. Purchase or sell physical commodities or contracts thereon, unless acquired
as a result of the ownership of securities or instruments, but the
Portfolio may purchase or sell futures contracts or options (including
options on futures contracts, but excluding options or futures contracts on
physical commodities) and may enter into foreign currency forward
contracts;
<PAGE>
5. Purchase or sell real estate, but the Portfolio may purchase or sell
securities that are secured by real estate or issued by companies
(including real estate investment trusts) that invest or deal in real
estate;
6. Underwrite securities of other issuers, except to the extent the
Portfolio, in disposing of portfolio securities, may be deemed an
underwriter within the meaning of the 1933 Act; or
7. Issue senior securities, except as permitted under the 1940 Act or any
rule, order or interpretation thereunder.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The investment restrictions
described below are not fundamental policies of the Portfolio and may be changed
by the Trustees. These non-fundamental investment policies require that the
Portfolio may not:
1. Acquire securities of other investment companies, except as permitted by
the 1940 Act or any rule, order or interpretation thereunder, or in
connection with a merger, consolidation, reorganization, acquisition of
assets or an offer of exchange;
2. Acquire any illiquid securities if as a result thereof, more than 15% of
the market value of the Portfolio's total assets would be in investments
that are illiquid;
3. Purchase any security if, as a result, the Portfolio would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three
years;
4. Sell any security short, unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold or unless
it covers such short sales as required by the current rules or positions of
the Securities and Exchange Commission or its staff. Transactions in
futures contracts and options shall not constitute selling securities
short;
5. Purchase or retain securities of any issuer if, to the knowledge of the
Portfolio, any of the Portfolio's officers or Trustees or any officer of
the Portfolio's investment adviser individually owns more than 1/2 of 1% of
the issuer's outstanding securities and such persons owning more than 1/2
of 1% of such securities together beneficially own more than 5% of such
securities, all taken at market;
6. Purchase securities on margin, but the Portfolio may obtain such short
term credits as may be necessary for the clearance of transactions; or
7. Invest in real estate limited partnerships or purchase interests in oil,
gas or mineral exploration or development programs or leases.
There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
<PAGE>
ITEM 14. MANAGEMENT OF THE PORTFOLIO.
The Trustees and officers of the Portfolio, their business addresses and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. An asterisk indicates that a
Trustee is an "interested person" (as defined in the 1940 Act) of the Portfolio.
TRUSTEES AND OFFICERS
Position with Principal Occupations
Name and Address Portfolio During Past Five Years
Frederick S. Addy (aged 64) Trustee Retired; Executive Vice President
5300 Arbutus Cove and Chief Financial Officer from
Austin, TX 78746 January 1990 to April
1994, Amoco Corporation.
William G. Burns (aged 63) Trustee Retired; Limited Partner, Galen
2200 Alaqua Drive Partners L.P. and Vice Chairman,
Longwood, FL 32779 Galen Associates, since
1990; Chief Executive
Officer, Galen
Associates and General
Partner, Galen Partners
L.P., until 1991.
Arthur C. Eschenlauer(aged 61) Trustee Retired; Senior Vice President,
14 Alta Vista Drive, Morgan Guaranty, until 1987.
RD #2
Princeton, NJ 08540
Matthew Healey(*)(aged 58) Trustee; Chairman, Pierpont Group, Inc.,
Pine Tree Club Estates Chairman since 1989; Chairman and Chief
10286 Saint Andrew Road and Chief Executive Officer, Execution
Boynton Beach, FL 33436 Executive Services, Inc. until October 1991
Officer
Michael P. Mallardi (aged 61) Trustee Senior Vice President, Capital
77 West 66th Street Cities/ABC, Inc., President,
New York, NY 10017 Broadcast Group, since 1986.
Each Trustee is paid an annual fee as follows for serving as Trustee of the
Portfolio, The Pierpont Funds, The JPM Institutional Funds and each other
registered investment company in which series of The Pierpont Funds, The JPM
Institutional Funds or The JPM Advisor Funds invest, and is reimbursed for
expenses incurred in connection with service as a Trustee. The compensation paid
to the Trustees in calendar 1995 is set forth below. The Trustees may hold
various other directorships unrelated to the Portfolio.
<PAGE>
TOTAL COMPENSATION
FROM THE JPM
INSTITUTIONAL
PENSION OR FUNDS, THE
RETIREMENT PIERPONT FUNDS AND
AGGREGATE BENEFITS ESTIMATED THEIR
COMPENSATION ACCRUED AS ANNUAL CORRESPONDING
FROM THE PART OF BENEFITS PORTFOLIOS PAID TO
PORTFOLIO PORTFOLIO UPON TRUSTEES DURING
DURING 1995 EXPENSES RETIREMENT 1995
Frederick S. $5,123 None None $62,500
Addy, Trustee
William G. $5,123 None None $62,500
Burns, Trustee
Arthur C. $5,123 None None $62,500
Eschenlauer,
Trustee
Matthew $5,123 None None $62,500
Healey,
Trustee(*),
Chairman
and Chief
Executive
Officer
Michael P. $5,123 None None $62,500
Mallardi,
Trustee
(*) During 1994, Pierpont Group, Inc. paid Mr. Healey, in his role as
Chairman of Pierpont Group, Inc., compensation in the amount of $140,000,
contributed $21,000 to a defined contribution plan on his behalf and paid
$20,000 in insurance premiums for his benefit.
As of April 1, 1995 the annual fee paid to each Trustee for serving as a
Trustee of the Portfolio, The Pierpont Funds, The JPM Institutional Funds and
each of the registered investment companies in which series of The JPM
Institutional Funds, The Pierpont Funds or The JPM Advisor Funds invest was
adjusted to $65,000.
The Trustees of the Portfolio are the same as the Trustees of each of The
JPM Institutional Funds and The Pierpont Funds. In accordance with applicable
state requirements, 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, The Pierpont Funds and The JPM Institutional Funds, up to and
including creating a separate board of trustees.
<PAGE>
The Trustees of the Portfolio, in addition to reviewing actions of the
Portfolio's various service providers, decide upon matters of general policy. On
January 15, 1994 the Portfolio entered into a Portfolio Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's affairs. Pierpont Group, Inc.
was organized in July 1989 to provide services for The Pierpont Family of Funds,
and the Trustees are the equal and sole shareholders of Pierpont Group, Inc. The
Portfolio has agreed to pay Pierpont Group, Inc. a fee in an amount representing
its reasonable costs in performing these services. These costs are periodically
reviewed by the Trustees. The aggregate fees paid to Pierpont Group, Inc. by the
Portfolio for the period from October 11, 1994 (commencement of operations)
through September 30, 1995 were $20,446. The Portfolio has no employees; its
officers (listed below), with the exception of its Chief Executive Officer, are
provided and compensated by Signature Broker-Dealer Services, Inc. ("SBDS"), a
wholly owned subsidiary of Signature Financial Group, Inc. ("Signature"). The
Portfolio's officers conduct and supervise the business operations of the
Portfolio.
The officers of the Portfolio and their principal occupations during the
past five years are set forth below. The business address of each of the
officers unless otherwise noted is Signature Broker-Dealer Services, Inc., 6 St.
James Avenue, Boston, Massachusetts 02116.
MATTHEW HEALEY (aged 58); Chief Executive Officer; Chairman, Pierpont
Group, Inc., since 1989; Chairman and Chief Executive Officer, Execution
Services, Inc. until October 1991. His address is Pine Tree Club Estates, 10286
Saint Andrews Road, Boynton Beach, FL 33436.
PHILIP W. COOLIDGE (aged 44); President; Chairman, Chief Executive Officer
and President, Signature since December 1988 and SBDS since April 1989.
DAVID G. DANIELSON (aged 30); Assistant Treasurer; Assistant Manager,
Signature since May 1991; Graduate Student, Northeastern University from April
1990 to March 1991.
JOHN R. ELDER (aged 47); Treasurer; Vice President, Signature (since April
1995); Treasurer, Phoenix Family of Mutual Funds (Phoenix Home Life Mutual
Insurance Company) (from 1983 to March 1995).
LINDA T. GIBSON (aged 30); Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since June 1991; Assistant Secretary, SBDS since November
1992; law student, Boston University School of Law prior to May 1992.
JAMES E. HOOLAHAN (aged 48); Vice President; Senior Vice President,
Signature since December 1989.
SUSAN JAKUBOSKI (aged 31); Assistant Secretary and Assistant Treasurer of
the Portfolio; Manager and Senior Fund Administrator, Signature and Signature
(Cayman) (since August 1994); Assistant Treasurer, SBDS (since September 1994);
Fund Compliance Administrator, Concord Financial Group, Inc. (from November 1990
to August 1994); Senior Fund Accountant, Neuberger & Berman Management
Incorporated (since prior to 1990). Her address is P.O. Box 2494, Elizabethan
Square, George Town, Grand Cayman, Cayman Islands, B.W.I.
JAMES S. LELKO (aged 30); Assistant Treasurer; Assistant Manager, Signature
since January 1993; Senior Tax Compliance Accountant, Putnam Companies since
prior to December 1992.
<PAGE>
THOMAS M. LENZ (aged 37); Secretary; Vice President and Associate General
Counsel, Signature since November 1989; Assistant Secretary, SBDS since February
1991.
MOLLY S. MUGLER (aged 44); Assistant Secretary; Legal Counsel and Assistant
Secretary, Signature since December 1988; Assistant Secretary, SBDS since April
1989.
ANDRES E. SALDANA (aged 33); Assistant Secretary; Legal Counsel and
Assistant Secretary, Signature since November 1992; Assistant Secretary, SBDS
since September 1993; Attorney, Ropes & Gray from September 1990 to November
1992.
DANIEL E. SHEA (aged 33); Assistant Treasurer; Assistant Manager of Fund
Administration, Signature since November 1993; Supervisor and Senior Technical
Advisor, Putnam Investments since prior to 1990.
Messrs. Coolidge, Danielson, Elder, Hoolahan, Lelko, Lenz, Saldana and Shea
and Mss. Gibson, Mugler and Jakuboski hold similar positions for other
investment companies for which SBDS or an affiliate serves as principal
underwriter.
The Portfolio's Declaration of Trust provides that it will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Portfolio, unless, as to liability to the Portfolio or its investors, it is
finally adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Portfolio. In the case of settlement, such indemnification
will not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable determination,
based upon a review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel, that such
officers or Trustees have not engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
As of January 24, 1996, The JPM Institutional International Bond Fund Ltd.,
a Bahamas International Business Company, owned 97.90% of the outstanding
beneficial interests in the Portfolio. So long as the Fund controls the
Portfolio, it may take actions without the approval of any other holder of
beneficial interests in the Portfolio.
The Fund has informed the Portfolio that whenever it is requested to vote
on matters pertaining to the Portfolio (other than a vote by a Portfolio to
continue the operation of the Portfolio upon the withdrawal of another investor
in the Portfolio), it will hold a meeting of its shareholders and will cast its
vote as instructed by those shareholders.
The officers and Trustees of the Portfolio as a group own less than 1% of
the outstanding beneficial interests in the Portfolio.
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ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES.
INVESTMENT ADVISOR. The investment advisor to the Portfolio is Morgan
Guaranty, a wholly-owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P.
Morgan"), a bank holding company organized under the laws of the State of
Delaware. Morgan Guaranty, whose principal offices are at 60 Wall Street, New
York, New York 10260, is a New York trust company which conducts a general
banking and trust business. Morgan Guaranty is subject to regulation by the New
York State Banking Department and is a member bank of the Federal Reserve
System. Through offices in New York City and abroad, Morgan Guaranty offers a
wide range of services, primarily to governmental, institutional, corporate and
high net worth individual customers in the United States and throughout the
world.
J.P. Morgan, through the Advisor and other subsidiaries, acts as investment
advisor to individuals, governments, corporations, employee benefit plans,
mutual funds and other institutional investors with combined assets under
management of $165 billion (of which the Advisor advises over $26 billion).
J.P. Morgan has a long history of service as adviser, underwriter and
lender to an extensive roster of major companies and as a financial advisor to
national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.
The basis of the Advisor's investment process is fundamental investment
research as the firm believes that fundamentals should determine an asset's
value over the long term. J.P. Morgan currently employs over 100 full time
research analysts, among the largest research staffs in the money management
industry, in its investment management divisions located in New York, Long,
Tokyo, Frankfurt, Melbourne and Singapore to cover companies, industries and
countries on site. In addition, the investment management divisions employ
approximately 300 capital market researchers, portfolio managers and traders.
The conclusions of the equity analysts' fundamental research is quantified into
a set of projected returns for individual companies through the use of a
dividend discount model. These returns are projected for 2 to 5 years to enable
analysts to take a longer term view. These returns, or normalized earnings, are
used to establish relative values among stocks in each industrial sector. These
values may not be the same as the markets' current valuations of these
companies. This provides the basis for ranking the attractiveness of the
companies in an industry according to five distinct quintiles or rankings. This
ranking is one of the factors considered in determining the stocks purchased and
sold in each sector. The Advisor's fixed income investment process is based on
analysis of real rates, sector diversification and quantitative and credit
analysis.
The investment advisory services the Advisor provides to the Portfolio are
not exclusive under the terms of the Advisory Agreement. The Advisor is free to
and does render similar investment advisory services to others. The Advisor
serves as investment advisor to personal investors and other investment
companies and acts as fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are invested in
common trust funds for which the Advisor serves as trustee. The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolio. Such accounts are supervised by officers and
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employees of the Advisor who may also be acting in similar capacities for
the Portfolio. See Item 17 below.
Sector weightings are generally similar to the Portfolio's benchmark with
emphasis on security selection as the method to achieve investment performance
superior to the benchmark. The benchmark for the Portfolio is the Salomon
Brothers Non-U.S. Government Bond Index (currency hedged).
J.P. Morgan Investment Management Inc., a wholly-owned subsidiary of J.P.
Morgan, is a registered investment adviser under the Investment Advisers Act of
1940, as amended, which manages employee benefit funds of corporations, labor
unions and state and local governments and the accounts of other institutional
investors, including investment companies. Certain of the assets of employee
benefit accounts under its management are invested in commingled pension trust
funds for which the Advisor serves as trustee. J.P. Morgan Investment Management
Inc. advises the Advisor on investment of the commingled pension trust funds.
The Portfolio is managed by officers of the Advisor who, in acting for
their customers, including the Portfolio, do not discuss their investment
decisions with any personnel of J.P. Morgan or any personnel of other divisions
of the Advisor or with any of its affiliated persons, with the exception of J.P.
Morgan Investment Management Inc., which provides securities trading and
investment research services for the Advisor's investment advisory and fiduciary
accounts. See Item 17 below for a description of services provided to the
Portfolio by J.P. Morgan Investment Management Inc.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Investment
Advisory Agreement, the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to the annual rate of 0.35% of the
Portfolio's average daily net assets. For the period from October 11, 1994
(commencement of operations) through September 30, 1995 the Portfolio paid
$782,748 in advisory fees to the Advisor.
The Investment Advisory Agreement provides that it will continue in effect
for a period of two years after execution only if specifically approved annually
thereafter (i) by a vote of the holders of a majority of the Portfolio's
outstanding securities or by its Trustees and (ii) by a vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreement or
"interested persons" as defined by the 1940 Act cast in person at a meeting
called for the purpose of voting on such approval. The Investment Advisory
Agreement will terminate automatically if assigned and is terminable at any time
without penalty by a vote of a majority of the Trustees, or by a vote of the
holders of a majority of the Portfolio's outstanding voting securities, on 60
days' written notice to the Advisor and by the Advisor on 90 days' written
notice to the Portfolio.
The Glass-Steagall Act and other applicable laws generally prohibit banks
such as Morgan Guaranty from engaging in the business of underwriting or
distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company continuously engaged in the issuance of its shares, such as
the Portfolio. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment advisor and custodian to such an
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investment company. Morgan Guaranty believes that it may perform the services
for the Portfolio contemplated by the Advisory Agreement without violation of
the Glass-Steagall Act or other applicable banking laws or regulations. State
laws on this issue may differ from the interpretation of relevant federal law,
and banks and financial institutions may be required to register as dealers
pursuant to state securities laws. However, it is possible that future changes
in either federal or state statutes and regulations concerning the permissible
activities of banks or trust companies, as well as further judicial or
administrative decisions and interpretations of present and future statutes and
regulations, might prevent Morgan Guaranty from continuing to perform such
services for the Portfolio.
If Morgan Guaranty were prohibited from acting as investment advisor to the
Portfolio, it is expected that the Trustees of the Portfolio would recommend to
investors that they approve the Portfolio's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
Under a separate agreement, Morgan Guaranty also receives compensation for
providing financial, fund accounting and administrative services to the
Portfolio. See "Administrative Services Agent" below.
ADMINISTRATOR. SBDS serves as the Portfolio's Administrator and in that
capacity administers and manages all aspects of the Portfolio's day-to-day
operations subject to the supervision of the Trustees, except as set forth under
"Investment Advisor," "Administrative Services Agent" and "Custodian". In
connection with its responsibilities as Administrator, SBDS (i) furnishes
ordinary clerical and related services for day-to-day operations including
certain record keeping responsibilities; (ii) takes responsibility for
compliance with all applicable federal and state securities and other regulatory
requirements including, without limitation, preparing and mailing and filing
(but not paying for) registration statements, and information statements and all
required reports to the Portfolio's investors, the SEC, and state securities
commissions; and (iii) performs such administrative and managerial oversight of
the activities of the Portfolio's custodian, as the Trustees may direct from
time to time.
Under the Portfolio's Administration Agreement, the Portfolio has agreed to
pay SBDS a fee equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate average net
assets of the Portfolio and the other portfolios (collectively, the "Master
Portfolios") in which series of The Pierpont Funds, The JPM Institutional Funds
or The JPM Advisor Funds invest. This charge is calculated in accordance with
the following schedule: 0.03% of the first $7 billion of the Master Portfolios'
aggregate average daily net assets, and 0.01% of the Master Portfolios'
aggregate average daily net assets in excess of $7 billion. The portion of this
charge payable by the Portfolio is determined by the proportionate share that
its net assets bear to the total net assets of The Pierpont Funds, The JPM
Institutional Funds, The JPM Advisor Funds and the Master Portfolios. For the
period from October 11, 1994 (commencement of operations) through September 30,
1995, the Portfolio paid $13,862 in fees to SBDS as Administrator.
The Administration Agreement may be renewed or amended by the Trustees
without an investor vote. The Administration Agreement is terminable at any time
without penalty by a vote of a majority of the Trustees of the Portfolio on not
more than 60 days' written notice nor less than 30 days' written notice to the
other party. The Administrator may subcontract for the performance of its
obligations under the Administration Agreement only if the Trustees approve such
subcontract and find the subcontracting party to be qualified to perform the
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obligations sought to be subcontracted, provided, however, that unless the
Portfolio expressly agrees in writing, the Administrator shall be fully
responsible for the acts and omissions of any subcontractor as it would for its
own acts or omissions.
ADMINISTRATIVE SERVICES AGENT. The Portfolio has entered into an
Administrative Services Agreement (the "Services Agreement") with Morgan
Guaranty effective December 29, 1995, pursuant to which Morgan Guaranty is
responsible for certain financial, fund accounting and administrative services
provided to the Portfolio. The services to be provided by Morgan Guaranty as
Administrative Services Agent under the Services Agreement include, but are not
limited to, assisting the Administrator in preparing tax returns, reviewing
financial reports, coordinating annual audits, assisting in the development of
budgets, overseeing preparation of tax information for investors, monitoring the
accounting activities and daily partnership allocation, and providing other
related services.
Under the Services Agreement, the Portfolio has agreed to pay Morgan
Guaranty a fee equal to its proportionate share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Master Portfolios in accordance with the following annual schedule: 0.06% on the
first $7 billion of the Master Portfolios' aggregate average daily net assets,
and 0.03% of the Master Portfolios' aggregate average daily net assets in excess
of $7 billion. The portion of this charge payable by the Portfolio is determined
by the proportionate share that its net assets bear to the total net assets of
The Pierpont Funds, The JPM Institutional Funds, The JPM Advisor Funds, the
Master Portfolios and other investors in the Master Portfolios for which Morgan
Guaranty provides similar services.
Under the Administrative Services Agreement, Morgan Guaranty may delegate
one or more of its responsibilities to other entities, including SBDS, at Morgan
Guaranty's expense. The Administrative Services Agreement may be terminated at
any time, without penalty, by the Trustees or Morgan Guaranty, in each case on
not more than 60 days' nor less than 30 days' written notice to the other party.
Prior to September 1, 1995, the Portfolio entered into a Financial and Fund
Accounting Services Agreement (the "Prior Services Agreement"). Under the Prior
Services Agreement, Morgan Guaranty, in addition to performing the activities
described above as Administrative Services Agent, assumed the annual costs of
certain expenses incurred by the Portfolio. For the period from October 11, 1994
(commencement of operations) through September 30, 1995, the Portfolio paid
$156,367 in fees under the Prior Services Agreement.
See "Expenses" below for applicable expense limitations.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 40 King
Street West, Toronto, Ontario, Canada M5H 348, serves as the Portfolio's
Custodian and Transfer Agent. Pursuant to the Custodian Contract with the
Portfolio, State Street is responsible for maintaining the books and records of
portfolio transactions and holding the portfolio securities and cash. In the
case of foreign assets held outside the United States, the Custodian employs
various sub-custodians, who were approved by the Trustees of the Portfolio in
accordance with the regulations of the SEC. The Custodian maintains portfolio
transaction records. As Transfer Agent, State Street is responsible for
maintaining account records detailing the ownership of interests in the
Portfolio. The Portfolio is responsible for the fees of State Street as
custodian for the Portfolio.
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INDEPENDENT ACCOUNTANTS. Price Waterhouse L.L.P., 1177 Avenue of the
Americas, New York, New York 10036, serves as the Portfolio's independent
accountants providing audit and accounting services including (i) conducting an
annual audit of the financial statements of the Portfolio, (ii) assisting in the
preparation and/or review of the Portfolio's federal and state income tax
returns and (iii) consulting with the Portfolio as to matters of accounting and
federal and state income taxation.
EXPENSES. In addition to the fees payable to Pierpont Group, Inc., Morgan
Guaranty and SBDS under various agreements discussed under "Management of the
Portfolio," "Investment Advisor," "Administrator" and "Administrative Services
Agent," the Portfolio is responsible for certain usual and customary expenses
associated with its operations. Such expenses include organization expenses,
legal fees, accounting expenses, insurance costs, the compensation and expenses
of the Trustees, registration fees under federal securities laws, and
extraordinary expenses applicable to the Portfolio. Such expenses also include
registration fees under foreign securities laws, custodian fees and brokerage
expenses.
Morgan Guaranty has agreed that if in any fiscal year the sum of any
Portfolio's expenses exceeds the limits set by applicable regulations of state
securities commissions, the fees payable by the Portfolio to Morgan Guaranty for
that year shall be reduced as specified by agreement with the Trust on behalf of
the Portfolio. Currently, Morgan Guaranty believes that the most restrictive
expense limitation of state securities commissions limits expenses to 2.5% of
the first $30 million of average net assets, 2% of the next $70 million of such
net assets and 1.5% of such net assets in excess of $100 million for any fiscal
year. For additional information regarding waivers or expense subsidies, see
"Management of the Portfolio" in Part A.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES.
J.P. Morgan Investment Management Inc., acting as agent for Morgan
Guaranty, places orders for the Portfolio for all purchases and sales of
portfolio securities. Morgan Guaranty enters into repurchase agreements and
reverse repurchase agreements for the Portfolio and executes loans of portfolio
securities on behalf of the Portfolio. See Item 13 above.
Fixed income and debt securities and municipal bonds and notes are
generally traded at a net price with dealers acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings, securities are purchased at a
fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On occasion,
certain securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
Portfolio transactions for the Portfolio will be undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. The Portfolio may engage in short term trading
consistent with its objective.
In connection with portfolio transactions for the Portfolio, J.P. Morgan
Investment Management Inc. intends to seek best price and execution on a
competitive basis for both purchases and sales of securities.
<PAGE>
In selecting a broker, J.P. Morgan Investment Management Inc. considers a
number of factors including: the price per unit of the security; the broker's
reliability for prompt, accurate confirmations and on-time delivery of
securities; the firm's financial condition; as well as the commissions charged.
A broker may be paid a brokerage commission in excess of that which another
broker might have charged for effecting the same transaction if, after
considering the foregoing factors, J.P. Morgan Investment Management Inc.
decides that the broker chosen will provide the best possible execution. J.P.
Morgan Investment Management Inc. and Morgan Guaranty monitor the reasonableness
of the brokerage commissions paid in light of the execution received. The
Trustees of the Portfolio review regularly the reasonableness of commissions and
other transaction costs incurred by the Portfolio in light of facts and
circumstances deemed relevant from time to time, and, in that connection, will
receive reports from the Advisor and published data concerning transaction costs
incurred by institutional investors generally. Research services provided by
brokers to which J.P. Morgan Investment Management Inc. has allocated brokerage
business in the past include economic statistics and forecasting services,
industry and company analyses, portfolio strategy services, quantitative data,
and consulting services from economists and political analysts. Research
services furnished by brokers are used for the benefit of all the Advisor's
clients and not solely or necessarily for the benefit of the Portfolio. The
Advisor believes that the value of research services received is not
determinable and does not significantly reduce its expenses. The Portfolio does
not reduce its fee to the Advisor by any amount that might be attributable to
the value of such services.
Subject to the overriding objective of obtaining the best possible
execution of orders, J.P. Morgan Investment Management Inc. may allocate a
portion of the Portfolio's portfolio brokerage transactions to affiliates of
Morgan Guaranty. In order for affiliates of Morgan Guaranty to effect any
portfolio transactions for the Portfolio, the commissions, fees or other
remuneration received by such affiliates must be reasonable and fair compared to
the commissions, fees, or other remuneration paid to other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. Furthermore,
the Trustees of the Portfolio, including a majority of the Trustees who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any commissions, fees, or other remuneration paid to such
affiliates are consistent with the foregoing standard.
The Portfolio's securities will not be purchased from or through or sold to
or through the Portfolio's Administrator, placement agent or Advisor or any
"affiliated person" (as defined in the 1940 Act) of the Administrator, placement
agent or Advisor when such entities are acting as principals, except to the
extent permitted by law. In addition, the Portfolio will not purchase securities
during the existence of any underwriting group relating thereto of which the
Advisor or an affiliate of the Advisor is a member, except to the extent
permitted by law.
On those occasions when Morgan Guaranty deems the purchase or sale of a
security to be in the best interests of the Portfolio as well as other
investors, J.P. Morgan Investment Management Inc., to the extent permitted by
applicable laws and regulations, may, but is not obligated to, aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other customers in order to obtain best execution, including lower
brokerage commissions if appropriate. In such event, allocation of the
securities so purchased or sold as well as any expenses incurred in the
transaction will be made by J.P. Morgan Investment Management Inc. in the manner
it considers to be most equitable and consistent with Morgan Guaranty's
fiduciary obligations to the Portfolio. In some instances, this procedure might
adversely affect the Portfolio.
If the Portfolio effects a closing purchase transaction with respect to an
option written by it, normally such transaction will be executed by the same
broker-dealer who executed the sale of the option. The writing of options by the
Portfolio will be subject to limitations established by each of the exchanges
governing the maximum number of options in each class which may be written by a
single investor or group of investors acting in concert, regardless of whether
the options are written on the same or different exchanges or are held or
written in one or more accounts or through one or more brokers. The number of
options which the Portfolio may write may be affected by options written by the
Advisor for other investment advisory clients. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
<PAGE>
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Portfolio. Investors are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Investments in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except as set
forth below. Investments in the Portfolio may not be transferred. Certificates
representing an investor's beneficial interest in the Portfolio are issued only
upon the written request of an investor.
Each investor is entitled to a vote in proportion to the amount of its
investment in the Portfolio. Investors in the Portfolio do not have cumulative
voting rights, and investors holding more than 50% of the aggregate beneficial
interest in the Portfolio may elect all of the Trustees if they choose to do so
and in such event the other investors in the Portfolio would not be able to
elect any Trustee. The Portfolio is not required and has no current intention to
hold annual meetings of investors but the Portfolio will hold special meetings
of investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters for an investor vote. No material amendment may be
made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors (with the vote of each being in proportion to the amount of
its investment).
The Portfolio may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by the vote of two thirds of its
investors (with the vote of each being in proportion to its percentage of the
beneficial interests in the Portfolio), except that if the Trustees recommend
such sale of assets, the approval by vote of a majority of the investors (with
the vote of each being in proportion to its percentage of the beneficial
interests of the Portfolio) will be sufficient. The Portfolio may also be
terminated (i) upon liquidation and distribution of its assets if approved by
the vote of two thirds of its investors (with the vote of each being in
proportion to the amount of its investment) or (ii) by the Trustees by written
notice to its investors.
The Portfolio is organized as a trust under the laws of the State of New
York. Investors in the Portfolio will be held personally liable for its
obligations and liabilities, subject, however, to indemnification by the
Portfolio in the event that there is imposed upon an investor a greater portion
of the liabilities and obligations of the Portfolio than its proportionate
beneficial interest in the Portfolio. The Declaration of Trust also
<PAGE>
provides that the Portfolio shall maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Portfolio, its investors, Trustees, officers, employees and agents covering
possible tort and other liabilities. Thus, the risk of an investor incurring
financial loss on account of investor liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations.
The Portfolio's Declaration of Trust further provides that obligations of
the Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES.
Beneficial interests in the Portfolio are issued solely in private
placement transactions that do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act.
Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are valued
using prices supplied daily by an independent pricing service or services that
(i) are based on the last sale price on a national securities exchange or, in
the absence of recorded sales, at the readily available closing bid price on
such exchange or at the quoted bid price in the over-the-counter market, if such
exchange or market constitutes the broadest and most representative market for
the security and (ii) in other cases, take into account various factors
affecting market value, including yields and prices of comparable securities,
indication as to value from dealers and general market conditions. If such
prices are not supplied by the Portfolio's independent pricing service, such
securities are priced in accordance with procedures adopted by the Trustees. All
portfolio securities with a remaining maturity of less than 60 days are valued
by the amortized cost method. Because of the large number of municipal bond
issues outstanding and the varying maturity dates, coupons and risk factors
applicable to each issuer's books, no readily available market quotations exist
for most municipal securities.
Trading in securities in most foreign markets is normally completed before
trading in U.S. markets and may also take place on days on which the U.S.
markets are closed. If events materially affecting the value of securities occur
between the time when the market in which they are traded closes and the time
when the Portfolio's net asset value is calculated, such securities will be
valued at fair value in accordance with procedures established by and under the
general supervision of the Trustees.
If the Portfolio determines that it would be detrimental to the best
interest of the remaining investors in the Portfolio to make payment wholly or
partly in cash, payment of the redemption price may be made in whole or in part
by a distribution in kind of securities from the Portfolio, in lieu of cash, in
conformity with the applicable rule of the SEC. If interests are redeemed in
kind, the redeeming investor might incur transaction costs in converting the
assets into cash. The method of valuing portfolio securities is described above
and such valuation will be made as of the same time the redemption price is
determined. The Portfolio will not redeem in kind except in circumstances in
which an investor is permitted to redeem in kind.
<PAGE>
The net asset value of the Portfolio will not be computed on a day in which
no order to purchase or withdraw beneficial interests in the Portfolio has been
received or on the days the following legal holidays are observed: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. On days when U.S. trading markets close
early in observance of these holidays, the Portfolio would expect to close for
purchases and withdrawals at the same time. The days on which net asset value is
determined are the Portfolio's business days.
ITEM 20. TAX STATUS.
The Portfolio is organized as a New York trust. The Portfolio is not
subject to any income or franchise tax in the State of New York or the
Commonwealth of Massachusetts. However each investor in the Portfolio will be
taxable on its share (as determined in accordance with the governing instruments
of the Portfolio) of the Portfolio's ordinary income and capital gain in
determining its income tax liability. The determination of such share will be
made in accordance with the Code, and regulations promulgated thereunder.
Although, as described above, the Portfolio will not be subject to federal
income tax, it will file appropriate income tax returns.
It is intended that the Portfolio's assets will be managed in such a way
that an investor in the Portfolio will be able to satisfy the requirements of
Subchapter M of the Code. For the Portfolio to qualify as a regulated investment
company under Subchapter M of the Code, the Portfolio limits its investments so
that at the close of each quarter of its taxable year (a) no more than 25% of
its total assets are invested in the securities of any one issuer, except
government securities, and (b) with regard to 50% of its total assets, no more
than 5% of its total assets are invested in the securities of a single issuer,
except U.S. Government securities.
Gains or losses on sales of securities by the Portfolio will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where, if applicable, the Portfolio
acquires a put or writes a call thereon. Other gains or losses on the sale of
securities will be short-term capital gains or losses. Gains and losses on the
sale, lapse or other termination of options on securities will be treated as
gains and losses from the sale of securities. If an option written by the
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase by the Portfolio of the option from its holder, the Portfolio will
realize a short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Portfolio in the closing
transaction. If securities are purchased by the Portfolio pursuant to the
exercise of a put option written by it, the Portfolio will subtract the premium
received from its cost basis in the securities purchased.
Under the Code, gains or losses attributable to disposition of foreign
currency or to foreign currency contracts, or to fluctuations in exchange rates
between the time the Portfolio accrues income or receivables or expenses or
other liabilities denominated in a foreign currency and the time the Portfolio
actually collects such income or pays such liabilities, are treated as ordinary
income or ordinary loss. Similarly, gains or losses on the disposition of debt
securities held by the Portfolio, if any, denominated in foreign currency, to
the extent attributable to fluctuations in exchange rates between the
acquisition and disposition dates are also treated as ordinary income or loss.
<PAGE>
Forward currency contracts, options and futures contracts entered into by
the Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. Straddles may also result in the loss of the holding
period of underlying securities for purposes of the 30% of gross income test
described above, and therefore, the Portfolio's ability to enter into forward
currency contracts, options and futures contracts may be limited.
Certain options, futures and foreign currency contracts held by the
Portfolio at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes--i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. Any gain or loss recognized on foreign currency contracts will be
treated as ordinary income.
FOREIGN INVESTORS. Allocations of U.S. source dividend income to an
investor who, as to the United States, is a foreign trust, foreign corporation
or other foreign investor will be subject to United States withholding tax at
the rate of 30% (or lower treaty rate). Allocations of Portfolio interest or
short term or net long term capital gains to foreign investors will not be
subject to United States tax.
STATE AND LOCAL TAXES. The Portfolio may be subject to state or local taxes
in jurisdictions in which the Portfolio is deemed to be doing business. In
addition, the treatment of the Portfolio and its investors in those states which
have income tax laws might differ from treatment under the federal income tax
laws. Investors should consult their own tax advisors with respect to any state
or local taxes.
FOREIGN TAXES. The Portfolio may be subject to foreign withholding taxes
with respect to income received from sources within foreign countries.
OTHER TAXATION. The investment by an investor in the Portfolio does not
cause the investor to be liable for any income or franchise tax in the State of
New York. Investors are advised to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in the Portfolio.
ITEM 21. UNDERWRITERS.
The exclusive placement agent for the Portfolio is SBDS, which receives no
additional compensation for serving in this capacity. Investment companies,
insurance company separate accounts, common and commingled trust funds and
similar organizations and entities may continuously invest in the Portfolio.
ITEM 22. CALCULATIONS OF PERFORMANCE DATA.
Not applicable.
ITEM 23. FINANCIAL STATEMENTS.
The financial statements contained in the Annual Report of the Portfolio
for the fiscal year ended September 30, 1995 and filed with the Securities and
Exchange Commission on December 4, 1995 (Accession Number 0000912057-95-010663)
are incorporated herein by reference.
<PAGE>
APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S
Corporate and Municipal Bonds
AAA - Debt rated AAA have the highest ratings assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA - Debt rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in a small
degree.
A - Debt 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
debts in higher rated categories.
BBB - Debt 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 debts in this category than for
debts in higher rated categories.
BB - Debt rated BB is regarded as having less near-term vulnerability to
default than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
Commercial Paper, including Tax Exempt
A - Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
further refined with the designations 1, 2, and 3 to indicate the
relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding
timely payment is very strong.
Short-Term Tax-Exempt Notes
SP-1 - The short-term tax-exempt note rating of SP-1 is the highest rating
assigned by Standard & Poor's and has a very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a "plus" (+)
designation.
SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory
capacity to pay principal and interest.
<PAGE>
MOODY'S
Corporate and Municipal Bonds
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.
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.
Commercial Paper, including Tax Exempt
Prime-1 - 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.
<PAGE>
- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Short-Term Tax Exempt Notes
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes
with this rating enjoy 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.
MIG-2 - MIG-2 rated notes are of high quality but with margins of
protection not as large as MIG-1.
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS INCLUDED IN PART A:
Not applicable.
FINANCIAL STATEMENTS INCLUDED IN PART B:
The financial statements included in Item 23 are as follows:
Schedule of Investments at September 30, 1995* Statement of
Assets and Liabilities at September 30, 1995* Statement of
Operations for the period from October 11, 1994
(commencement of operations) through September 30, 1995*
Statement of Changes in Net Assets for the period from
October 11, 1994 (commencement of operations) through September
30, 1995* Supplementary Data - September 30, 1995* Notes to
Financial Statements - September 30, 1995* Report of Independent
Accountants - September 30, 1995*
-------------------------
*Incorporated herein by reference to the Annual Report of the Registrant
for the fiscal year ended September 30, 1995, filed with the Securities
and Exchange Commission on the EDGAR system on December 4, 1995 (Accession
Number 0000912057-95-010663).
(B) EXHIBITS
1 Declaration of Trust of the Registrant as amended
2 By-Laws of the Registrant as amended
5 Investment Advisory Agreement between the Registrant and Morgan
Guaranty Trust Company of New York ("Morgan Guaranty")
8* Custodian Contract between the Registrant and State Street Bank
and Trust Company ("State Street")
9(a) Administration Agreement between the Registrant and Signature
Broker-Dealer Services, Inc.
9(b)*Transfer Agency and Service Agreement between the Registrant and
State Street
9(c)*Restated Financial and Fund Accounting Services Agreement
between the Registrant and Morgan Guaranty
<PAGE>
9(d)*Portfolio Fund Services Agreement between the Registrant and
Pierpont Group, Inc.
9(e) Administrative Services Agreement between the Registrant and
Morgan Guaranty
27 Financial Data Schedule
-----------------------
*Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A filed with the Securities and Exchange Commission on
September 28, 1994.
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
(AS OF JANUARY 29, 1996)
Beneficial Interests 3
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as an Exhibit to its Registration Statement on Form N-1A.
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.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Morgan Guaranty is a New York trust company which is a wholly-owned
subsidiary of J.P. Morgan & Co. Incorporated. Morgan Guaranty conducts a general
banking and trust business.
To the knowledge of the Registrant, none of the directors, except those set
forth below, or executive officers of Morgan Guaranty is or has been during the
past two fiscal years engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain officers and directors
of Morgan Guaranty also hold various positions with, and engage in business for,
J.P. Morgan & Co. Incorporated, which owns all the outstanding stock of Morgan
Guaranty. Set forth below are the names, addresses, and principal business of
each director of Morgan Guaranty who is engaged in another business, profession,
vocation or employment of a substantial nature.
<PAGE>
<TABLE>
<S> <C> <C>
Name and Address Principal Business Type of Business
Riley P. Bechtel President and Chief Executive Officer Architectural
P.O. Box 193965 Bechtel Group Design and
San Francisco, CA 94119-3965 Construction
Martin Feldstein President and Chief Executive Officer Economic
1050 Massachusetts Ave. National Bureau of Economic Research, Research
Cambridge, MA 02138 Inc.
Hanna H. Gray President Emeritus and Professor of Academic
1126 East 59th Street History institution
Chicago, IL 60637 The University of Chicago
James R. Houghton Chairman and Chief Executive Officer Glass
HQ E2-08 Corning Incorporated products
Corning, NY 14831
James L. Ketelsen Retired Chairman and Chief Executive Oil, pipe-
Tenneco Building Officer lines, and
P.O. Box 2511 Tenneco Inc. manufacturing
Houston, TX 77001
William S. Lee Chairman Emeritus Utility
P.O. Box 1006 Duke Power Company
Charlotte, NC 28242
Lee R. Raymond Chairman of the Board and Chief Oil, natural
225 E. John W. Carpenter Executive Officer gas, and
Freeway Exxon Corporation other petro-
Irving, TX 75062 leum
products
Richard D. Simmons President Newspaper
1150 Fifteenth Street NW International Herald Tribune
Washington, DC 20071
Douglas C. Yearley Chairman, President and Chief Chemicals
2600 N. Central Avenue Executive Officer
Phoenix, AZ 85007 Phelps Dodge Corporation
</TABLE>
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:
<PAGE>
Name Address
Morgan Guaranty Trust Company of New York 60 Wall Street
(records relating to its functions as New York, NY 10260-0060
investment adviser and services agent)
9 West 57th Street
New York, NY 10019
State Street Bank and Trust Company 40 King Street West
(records relating to its functions as Toronto, Ontario Canada
custodian and transfer agent) M5H 3Y8
Signature Broker-Dealer Services, Inc. P.O. Box 268
c/o Signature Financial Group Elizabethan Square, 2nd Fl.
(Grand Cayman) Ltd. George Town, Grand Cayman
(records relating to its functions as Cayman Islands, B.W.I.
administrator and exclusive placement agent)
Pierpont Group, Inc. 461 Fifth Avenue
(records relating to its assisting the New York, New York 10017
Trustees in carrying out their duties
in supervising the Registrant's affairs)
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereto
duly authorized, in George Town, Grand Cayman, Cayman Islands, on the 29th day
of January, 1996.
THE NON-U.S. FIXED INCOME PORTFOLIO
By SUSAN JAKUBOSKI
Susan Jakuboski
Assistant Secretary and
Assistant Treasurer
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1 Declaration of Trust of the Registrant as amended.
2 By-Laws of the Registrant as amended.
5 Investment Advisory Agreement between the Registrant and Morgan
Guaranty Trust Company of New York.
9(a) Administration Agreement between the Registrant and Signature
Broker-Dealer Services, Inc.
9(e) Administrative Services Agreement between the Registrant and
Morgan Guaranty Trust Company of New York.
17 Financial Data Schedule.
EXHIBIT 1
DECLARATION OF TRUST
OF
THE NON-U.S. FIXED INCOME PORTFOLIO
This DECLARATION OF TRUST of the The Non-U.S. Fixed Income Portfolio is
made as of the 16th day of June, 1993 by the parties signatory hereto, as
Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the law of the
State of New York for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the trust assets be composed of money and
property contributed thereto by the holders of interests in the trust entitled
to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund and will manage and dispose
of the same for the benefit of the holders of interests in the Trust and subject
to the provisions hereof, to wit:
ARTICLE I
THE TRUST
1.1. NAME. The name of the trust created hereby (the "Trust") shall be The
Non-U.S. Fixed Income Portfolio and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Trust" wherever hereinafter used)
shall refer to the Trustees as Trustees, and not individually, and shall not
refer to the officers, employees, agents or independent contractors of the Trust
or holders of interests in the Trust.
1.2. DEFINITIONS. As used in this Declaration, the following
terms shall have the following meanings:
The term "Interested Person" shall have the meaning given it in the 1940
Act.
"BOOK CAPITAL ACCOUNT" shall mean, for any Holder at any time, the Book
Capital Account of the Holder for such day, determined in accordance with
Section 8.1 hereof.
"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
<PAGE>
"HEREUNDER" shall be deemed to refer to this Declaration rather than the article
or section in which any such word appears.
"FISCAL YEAR" shall mean an annual period determined by the Trustees which
ends on December 31 of each year or on such other day as is permitted or
required by the Code.
"HOLDERS" shall mean as of any particular time all holders
of record of Interests in the Trust.
"INSTITUTIONAL INVESTOR(S)" shall mean any regulated investment company,
segregated asset account, foreign investment company, common trust fund, group
trust or other investment arrangement, whether organized within or without the
United States of America, other than an individual, S corporation, partnership
or grantor trust beneficially owned by any individual, S corporation or
partnership.
"INTEREST(S)" shall mean the interest of a Holder in the Trust, including
all rights, powers and privileges accorded to Holders by this Declaration, which
interest may be expressed as a percentage, determined by calculating, at such
times and on such basis as the Trustees shall from time to time determine, the
ratio of each Holder's Book Capital Account balance to the total of all Holders'
Book Capital Account balances. Reference herein to a specified percentage of, or
fraction of, Interests, means Holders whose combined Book Capital Account
balances represent such specified percentage or fraction of the combined Book
Capital Account balances of all, or a specified group of, Holders.
"INVESTMENT MANAGER AND ADMINISTRATOR" shall mean any party furnishing
services to the Trust pursuant to any investment management or administration
contract described in Section 4.1 hereof.
"MAJORITY INTERESTS VOTE" shall mean the vote, at a meeting of Holders, of
(A) 67% or more of the Interests present or represented at such meeting, if
Holders of more than 50% of all Interests are present or represented by proxy,
or (B) more than 50% of all Interests, whichever is less.
"PERSON" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"REDEMPTION" shall mean the complete withdrawal of an Interest of a Holder
the result of which is to reduce the Book Capital Account balance of that Holder
to zero, and the term "REDEEM" shall mean to effect a Redemption.
"TRUSTEES" shall mean each signatory to this Declaration, so long as such
signatory shall continue in office in accordance with the terms hereof, and all
other individuals who at the time in question have been duly elected or
appointed and have qualified as Trustees in accordance with the provisions
hereof and are then in office, and reference in this Declaration to a Trustee or
Trustees shall refer to such individual or individuals in their capacity as
Trustees hereunder.
"TRUST PROPERTY" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees.
The "1940 ACT" shall mean the United States Investment Company Act of
1940, as amended from time to time, and the rules and regulations thereunder.
<PAGE>
ARTICLE II
TRUSTEES
2.1. NUMBER AND QUALIFICATION. The number of Trustees shall be fixed from
time to time by action of the Trustees taken as provided in Section 2.5 hereof;
provided, however, that the number of Trustees so fixed shall in no event be
less than three or more than 15. Any vacancy created by an increase in the
number of Trustees may be filled by the appointment of an individual having the
qualifications described in this Section 2.1 made by action of the Trustees
taken as provided in Section 2.5 hereof. Any such appointment shall not become
effective, however, until the individual named in the written instrument of
appointment shall have accepted in writing such appointment and agreed in
writing to be bound by the terms of this Declaration. No reduction in the number
of Trustees shall have the effect of removing any Trustee from office. Whenever
a vacancy occurs, until such vacancy is filled as provided in Section 2.4
hereof, the Trustees continuing in office, regardless of their number, shall
have all the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A Trustee shall be an individual
at least 21 years of age who is not under legal disability.
2.2. TERM AND ELECTION. Each Trustee named herein, or elected or appointed
prior to the first meeting of Holders, shall (except in the event of
resignations, retirements, removals or vacancies pursuant to Section 2.3 or
Section 2.4 hereof) hold office until a successor to such Trustee has been
elected at such meeting and has qualified to serve as Trustee, as required under
the 1940 Act. Subject to the provisions of Section 16(a) of the 1940 Act and
except as provided in Section 2.3 hereof, each Trustee shall hold office during
the lifetime of the Trust and until its termination as hereinafter provided.
2.3. RESIGNATION, REMOVAL AND RETIREMENT. Any Trustee may resign his or her
trust (without need for prior or subsequent accounting) by an instrument in
writing executed by such Trustee and delivered or mailed to the Chairman, if
any, the President or the Secretary of the Trust and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any Trustee may be removed by the affirmative vote of Holders of
two-thirds of the Interests or (provided the aggregate number of Trustees, after
such removal and after giving effect to any appointment made to fill the vacancy
created by such removal, shall not be less than the number required by Section
2.1 hereof) with cause, by the action of two-thirds of the remaining Trustees.
Removal with cause includes, but is not limited to, the removal of a Trustee due
to physical or mental incapacity or failure to comply with such written policies
as from time to time may be adopted by at least two-thirds of the Trustees with
respect to the conduct of the Trustees and attendance at meetings. Any Trustee
who has attained a mandatory retirement age, if any, established pursuant to any
written policy adopted from time to time by at least two-thirds of the Trustees
shall, automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such policy,
effective as of the date determined in accordance with such policy. Any Trustee
who has become incapacitated by illness or injury as determined by a majority of
the other Trustees, may be retired by written instrument executed by a majority
of the other Trustees, specifying the date of such Trustee's retirement. Upon
the resignation, retirement or removal of a Trustee, or a Trustee otherwise
ceasing to be a Trustee, such resigning, retired, removed or former Trustee
shall execute and deliver such documents as the remaining Trustees shall require
for the purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of such resigning, retired, removed or former Trustee.
Upon the death of any Trustee or upon removal, retirement or resignation due to
any Trustee's incapacity to serve as Trustee, the legal representative of such
deceased, removed, retired or resigning Trustee shall execute and deliver on
<PAGE>
behalf of such deceased, removed, retired or resigning Trustee such documents as
the remaining Trustees shall require for the purpose set forth in the preceding
sentence.
2.4. VACANCIES. The term of office of a Trustee shall terminate and a
vacancy shall occur in the event of the death, resignation, retirement,
adjudicated incompetence or other incapacity to perform the duties of the
office, or removal, of a Trustee. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of a vacancy, Holders of at least a majority of
the Interests entitled to vote, acting at any meeting of Holders held in
accordance with Section 9.2 hereof, or, to the extent permitted by the 1940 Act,
a majority vote of the Trustees continuing in office acting by written
instrument or instruments, may fill such vacancy, and any Trustee so elected by
the Trustees or the Holders shall hold office as provided in this Declaration.
2.5. MEETINGS. Meetings of the Trustees shall be held from time to time
upon the call of the Chairman, if any, the President, the Secretary, an
Assistant Secretary or any two Trustees. Regular meetings of the Trustees may be
held without call or notice at a time and place fixed by the By-Laws or by
resolution of the Trustees. Notice of any other meeting shall be mailed or
otherwise given not less than 24 hours before the meeting but may be waived in
writing by any Trustee either before or after such meeting. The attendance of a
Trustee at a meeting shall constitute a waiver of notice of such meeting except
in the situation in which a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting was
not lawfully called or convened. The Trustees may act with or without a meeting.
A quorum for all meetings of the Trustees shall be a majority of the Trustees.
Unless provided otherwise in this Declaration, any action of the Trustees may be
taken at a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the Trustees.
Any committee of the Trustees, including an executive committee, if any,
may act with or without a meeting. A quorum for all meetings of any such
committee shall be a majority of the members thereof. Unless provided otherwise
in this Declaration, any action of any such committee may be taken at a meeting
by vote of a majority of the members present (a quorum being present) or without
a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees,
Trustees who are Interested Persons of the Trust or otherwise interested in any
action to be taken may be counted for quorum purposes under this Section 2.5 and
shall be entitled to vote to the extent permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all individuals participating in the
meeting can hear each other and participation in a meeting by means of such
communications equipment shall constitute presence in person at such meeting.
2.6. OFFICERS; CHAIRMAN OF THE BOARD. The Trustees shall, from time to
time, elect a President, a Secretary and a Treasurer. The Trustees may elect or
appoint, from time to time, a Chairman of the Board who shall preside at all
meetings of the Trustees and carry out such other duties as the Trustees may
designate. The Trustees may elect or appoint or authorize the President to
appoint such other officers, agents or independent contractors with such powers
as the Trustees may deem to be advisable. The Chairman, if any, shall be and
each other officer may, but need not, be a Trustee.
2.7. BY-LAWS. The Trustees may adopt and, from time to time, amend or
repeal By-Laws for the conduct of the business of the Trust.
<PAGE>
ARTICLE III
POWERS OF TRUSTEES
3.1. GENERAL. The Trustees shall have exclusive and absolute control over
the Trust Property and over the business of the Trust to the same extent as if
the Trustees were the sole owners of the Trust Property and such business in
their own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion they
deem proper for conducting the business of the Trust. The enumeration of or
failure to mention any specific power herein shall not be construed as limiting
such exclusive and absolute control. The powers of the Trustees may be exercised
without order of or resort to any court.
3.2. INVESTMENTS. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute or otherwise deal in
or dispose of United States and foreign currencies and related instruments
including forward contracts, and securities, including common and preferred
stock, warrants, bonds, debentures, time notes and all other evidences of
indebtedness, negotiable or non-negotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or any
international instrumentality, or by any bank, savings institution, corporation
or other business entity organized under the laws of the United States or under
any foreign laws; and to exercise any and all rights, powers and privileges of
ownership or interest in respect of any and all such investments of any kind and
description, including, without limitation, the right to consent and otherwise
act with respect thereto, with power to designate one or more Persons to
exercise any of such rights, powers and privileges in respect of any of such
investments; and the Trustees shall be deemed to have the foregoing powers with
respect to any additional instruments in which the Trustees may determine to
invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
3.3. LEGAL TITLE. Legal title to all Trust Property shall be vested in the
Trustees as joint tenants except that the Trustees shall have the power to cause
legal title to any Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust, or in the name or nominee name of any
other Person on behalf of the Trust, on such terms as the Trustees may
determine.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each individual who may hereafter become a Trustee upon
his due election and qualification. Upon the resignation, removal or death of a
Trustee, such resigning, removed or deceased Trustee shall automatically cease
to have any right, title or interest in any Trust Property, and the right, title
and interest of such resigning, removed or deceased Trustee in the Trust
<PAGE>
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
3.4. SALE AND INCREASES OF INTERESTS. The Trustees, in their discretion,
may, from time to time, without a vote of the Holders, permit any Institutional
Investor to purchase an Interest, or increase its Interest, for such type of
consideration, including cash or property, at such time or times (including,
without limitation, each business day), and on such terms as the Trustees may
deem best, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. Individuals, S corporations, partnerships and
grantor trusts that are beneficially owned by any individual, S corporation or
partnership may not purchase Interests. A Holder which has redeemed its Interest
may not be permitted to purchase an Interest until the later of 60 calendar days
after the date of such Redemption or the first day of the Fiscal Year next
succeeding the Fiscal Year during which such Redemption occurred.
3.5 DECREASES AND REDEMPTIONS OF INTERESTS. Subject to Article VII hereof,
the Trustees, in their discretion, may, from time to time, without a vote of the
Holders, permit a Holder to redeem its Interest, or decrease its Interest, for
either cash or property, at such time or times (including, without limitation,
each business day), and on such terms as the Trustees may deem best.
3.6. BORROW MONEY. The Trustees shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, including the lending
of portfolio securities, and to endorse, guarantee, or undertake the performance
of any obligation, contract or engagement of any other Person.
3.7. DELEGATION; COMMITTEES. The Trustees shall have power, consistent
with their continuing exclusive and absolute control over the Trust Property and
over the business of the Trust, to delegate from time to time to such of their
number or to officers, employees, agents or independent contractors of the Trust
the doing of such things and the execution of such instruments in either the
name of the Trust or the names of the Trustees or otherwise as the Trustees may
deem expedient.
3.8. COLLECTION AND PAYMENT. The Trustees shall have power to collect all
property due to the Trust; and to pay all claims, including taxes, against the
Trust Property; to prosecute, defend, compromise or abandon any claims relating
to the Trust or the Trust Property; to foreclose any security interest securing
any obligation, by virtue of which any property is owed to the Trust; and to
enter into releases, agreements and other instruments.
3.9. EXPENSES. The Trustees shall have power to incur and pay any expenses
which in the opinion of the Trustees are necessary or incidental to carry out
any of the purposes of this Declaration, and to pay reasonable compensation from
the Trust Property to themselves as Trustees. The Trustees shall fix the
compensation of all officers, employees and Trustees. The Trustees may pay
themselves such compensation for special services, including legal and brokerage
services, as they in good faith may deem reasonable, and reimbursement for
expenses reasonably incurred by themselves on behalf of the Trust.
3.10. MISCELLANEOUS POWERS. The Trustees shall have power to: (a) employ or
contract with such Persons as the Trustees may deem appropriate for the
transaction of the business of the Trust and terminate such employees or
contractual relationships as they consider appropriate; (b) enter into joint
ventures, partnerships and any other combinations or associations; (c) purchase,
and pay for out of Trust Property, insurance policies insuring the Investment
Manager
<PAGE>
and Administrator, placement agent, Holders, Trustees, officers, employees,
agents or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not the Trust would have the
power to indemnify such Person against such liability; (d) establish pension,
profit-sharing and other retirement, incentive and benefit plans for the
Trustees, officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious, educational,
scientific, civic or similar purposes; (f) to the extent permitted by law,
indemnify any Person with whom the Trust has dealings, including the Investment
Manager and Administrator, placement agent, Holders, Trustees, officers,
employees, agents or independent contractors of the Trust, to such extent as the
Trustees shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the Fiscal Year of the Trust and the method
by which its accounts shall be kept; and (i) adopt a seal for the Trust, but the
absence of such a seal shall not impair the validity of any instrument executed
on behalf of the Trust.
3.11. FURTHER POWERS. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices, whether within or without the State of New York, in any
and all states of the United States of America, in the District of Columbia, and
in any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper, appropriate or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust which
is made by the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a grant of
power to the Trustees. The Trustees shall not be required to obtain any court
order in order to deal with Trust Property.
ARTICLE IV
Investment Management and Administration
AND PLACEMENT AGENT ARRANGEMENTS
4.1. INVESTMENT MANAGEMENT AND OTHER ARRANGEMENTS. The Trustees may in
their discretion, from time to time, enter into investment management and
administration contracts or placement agent agreements whereby the other party
to such contract or agreement shall undertake to furnish the Trustees such
investment management and administration, placement agent and/or other services
as the Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole discretion
determine. Notwithstanding any provision of this Declaration, the Trustees may
authorize any Investment Manager and Administrator (subject to such general or
specific instructions as the Trustees may, from time to time, adopt) to effect
purchases, sales, loans or exchanges of Trust Property on behalf of the Trustees
or may authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of any such Investment
Manager and Administrator (all without any further action by the Trustees). Any
such purchase, sale, loan or exchange shall be deemed to have been authorized by
the Trustees.
4.2. PARTIES TO CONTRACT. Any contract of the character described in
Section 4.1 hereof or in the By-Laws of the Trust may be entered into with any
corporation, firm, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, Trustee, shareholder or
member of such other party to the contract, and no such contract shall be
<PAGE>
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any individual holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of any such contract or accountable for any profit realized
directly or indirectly therefrom, provided that the contract when entered into
was reasonable and fair and not inconsistent with the provisions of this Article
IV or the By-Laws of the Trust. The same Person may be the other party to one or
more contracts entered into pursuant to Section 4.1 hereof or the By-Laws of the
Trust, and any individual may be financially interested or otherwise affiliated
with Persons who are parties to any or all of the contracts mentioned in this
Section 4.2 or in the By-Laws of the Trust.
ARTICLE V
Liability of Holders; Limitations of LIABILITY OF
TRUSTEES, OFFICERS, ETC.
5.1. LIABILITY OF HOLDERS; INDEMNIFICATION. Each Holder shall be jointly
and severally liable (with rights of contribution INTER SE in proportion to
their respective Interests in the Trust) for the liabilities and obligations of
the Trust in the event that the Trust fails to satisfy such liabilities and
obligations; provided, however, that, to the extent assets are available in the
Trust, the Trust shall indemnify and hold each Holder harmless from and against
any claim or liability to which such Holder may become subject by reason of
being or having been a Holder to the extent that such claim or liability imposes
on the Holder an obligation or liability which, when compared to the obligations
and liabilities imposed on other Holders, is greater than such Holder's Interest
(proportionate share), and shall reimburse such Holder for all legal and other
expenses reasonably incurred by such Holder in connection with any such claim or
liability. The rights accruing to a Holder under this Section 5.1 shall not
exclude any other right to which such Holder may be lawfully entitled, nor shall
anything contained herein restrict the right of the Trust to indemnify or
reimburse a Holder in any appropriate situation even though not specifically
provided herein. Notwithstanding the indemnification procedure described above,
it is intended that each Holder shall remain jointly and severally liable to the
Trust's creditors as a legal matter.
5.2. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS,
INDEPENDENT CONTRACTORS TO THIRD PARTIES. No Trustee, officer, employee, agent
or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
shall be subject to any personal liability whatsoever to any Person, other than
the Trust or the Holders, in connection with Trust Property or the affairs of
the Trust; and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature against a Trustee, officer, employee, agent
or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
arising in connection with the affairs of the Trust.
5.3. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS,
INDEPENDENT CONTRACTORS TO TRUST, HOLDERS, ETC. No Trustee, officer, employee,
agent or independent contractor (except in the case of an agent or independent
contractor to the extent expressly provided by written contract) of the Trust
shall be liable to the Trust or the Holders for any action or failure to act
(including, without limitation, the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for such Person's own bad
faith, willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. MANDATORY INDEMNIFICATION. The Trust shall indemnify, to the fullest
extent permitted by law (including the 1940 Act), each Trustee, officer,
employee, agent or independent contractor (except in the case of an agent or
independent contractor to the extent expressly provided by written contract) of
the Trust (including any Person who serves at the Trust's request as a director,
<PAGE>
officer or trustee of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise) against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be involved or
with which such Person may be threatened, while in office or thereafter, by
reason of such Person being or having been such a Trustee, officer, employee,
agent or independent contractor, except with respect to any matter as to which
such Person shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of such Person's duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for such payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Person's office by the court or other body approving the
settlement or other disposition or by a reasonable determination, based upon a
review of readily available facts (as opposed to a full trial-type inquiry),
that such Person did not engage in such conduct by written opinion from
independent legal counsel approved by the Trustees. The rights accruing to any
Person under these provisions shall not exclude any other right to which such
Person may be lawfully entitled; provided that no Person may satisfy any right
of indemnity or reimbursement granted in this Section 5.4 or in Section 5.2
hereof or to which such Person may be otherwise entitled except out of the Trust
Property. The Trustees may make advance payments in connection with
indemnification under this Section 5.4, provided that the indemnified Person
shall have given a written undertaking to reimburse the Trust in the event it is
subsequently determined that such Person is not entitled to such
indemnification.
5.5. NO BOND REQUIRED OF TRUSTEES. No Trustee shall, as such, be obligated
to give any bond or surety or other security for the performance of any of such
Trustee's duties hereunder.
5.6. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC. No
purchaser, lender or other Person dealing with any Trustee, officer, employee,
agent or independent contractor of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by such
Trustee, officer, employee, agent or independent contractor or be liable for the
application of money or property paid, loaned or delivered to or on the order of
such Trustee, officer, employee, agent or independent contractor. Every
obligation, contract, instrument, certificate or other interest or undertaking
of the Trust, and every other act or thing whatsoever executed in connection
with the Trust shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees, officers, employees,
agents or independent contractors of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made or sold by any Trustee, officer, employee, agent or independent contractor
of the Trust, in such capacity, shall contain an appropriate recital to the
effect that the Trustee, officer, employee, agent or independent contractor of
the Trust shall not personally be bound by or liable thereunder, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim thereunder, and appropriate references shall be made therein to the
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any Trustee, officer, employee, agent or independent
contractor of the Trust. Subject to the provisions of the 1940 Act, the Trust
may maintain insurance for the protection of the Trust Property, the Holders,
and the Trustees, officers, employees, agents and independent contractors of the
Trust in such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
<PAGE>
5.7. RELIANCE ON EXPERTS, ETC. Each Trustee, officer, employee, agent or
independent contractor of the Trust shall, in the performance of such Person's
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Trust (whether or not the Trust would have the
power to indemnify such Persons against such liability), upon an opinion of
counsel, or upon reports made to the Trust by any of its officers or employees
or by any Investment Manager and Administrator, accountant, appraiser or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE VI
INTERESTS
6.1. INTERESTS. The beneficial interest in the Trust Property shall
consist of non-transferable Interests except as provided in Section 6.2 hereof.
The Interests shall be personal property giving only the rights in this
Declaration specifically set forth. The value of an Interest shall be equal to
the Book Capital Account balance of the Holder of the Interest.
6.2. NON-TRANSFERABILITY. A Holder may not transfer, sell or exchange its
Interest except as part of a merger or similar plan of reorganization of a
Holder as permitted by the Trustees.
6.3. REGISTER OF INTERESTS. A register shall be kept at the Trust under
the direction of the Trustees which shall contain the name, address and Book
Capital Account balance of each Holder. Such register shall be conclusive as to
the identity of the Holders. No Holder shall be entitled to receive payment of
any distribution, nor to have notice given to it as herein provided, until it
has given its address to such officer or agent of the Trust as is keeping such
register for entry thereon.
ARTICLE VII
INCREASES, DECREASES AND REDEMPTIONS OF INTERESTS
Subject to applicable law, to the provisions of this Declaration and to
such restrictions as may from time to time be adopted by the Trustees, each
Holder shall have the right to vary its investment in the Trust at any time
without limitation by increasing (through a capital contribution) or decreasing
(through a capital withdrawal) or by a Redemption of its Interest. An increase
in the investment of a Holder in the Trust shall be reflected as an increase in
the Book Capital Account balance of that Holder and a decrease in the investment
of a Holder in the Trust or the Redemption of the Interest of a Holder shall be
reflected as a decrease in the Book Capital Account balance of that Holder. The
Trust shall, upon appropriate and adequate notice from any Holder increase,
decrease or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the Trustees;
provided that (a) the amount received by the Holder upon any such decrease or
Redemption shall not exceed the decrease in the Holder's Book Capital Account
balance effected by such decrease or Redemption of its Interest, and (b) if so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees for effecting any such decrease or Redemption, at such rates as the
Trustees may establish, and may, at any time and from time to time, suspend such
right of decrease or Redemption. The procedures for effecting decreases or
Redemptions shall be as determined by the Trustees from time to time.
<PAGE>
ARTICLE VIII
Determination of Book Capital Account
BALANCES AND DISTRIBUTIONS
8.1. BOOK CAPITAL ACCOUNT BALANCES. The Book Capital Account balance of
each Holder shall be determined on such days and at such time or times as the
Trustees may determine. The Trustees shall adopt resolutions setting forth the
method of determining the Book Capital Account balance of each Holder. The power
and duty to make calculations pursuant to such resolutions may be delegated by
the Trustees to the Investment Manager and Administrator, custodian, or such
other Person as the Trustees may determine. Upon the Redemption of an Interest,
the Holder of that Interest shall be entitled to receive the balance of its Book
Capital Account in cash or in kind. Except as provided in Section 6.2, a holder
may not transfer, sell or exchange its Book Capital Account balance.
8.2. ALLOCATIONS AND DISTRIBUTIONS TO HOLDERS. The Trustees shall, in
compliance with the Code, the 1940 Act and generally accepted accounting
principles, establish the procedures by which the Trust shall make (i) the
allocation of unrealized gains and losses, taxable income and tax loss, and
profit and loss, or any item or items thereof, to each Holder, (ii) the payment
of distributions, if any, to Holders, and (iii) upon liquidation, the final
distribution of items of taxable income and expense. Such procedures shall be
set forth in writing and be furnished to the Trust's accountants. The Trustees
may amend the procedures adopted pursuant to this Section 8.2 from time to time.
The Trustees may retain from the net profits such amount as they may deem
necessary to pay the liabilities and expenses of the Trust, to meet obligations
of the Trust, and as they may deem desirable to use in the conduct of the
affairs of the Trust or to retain for future requirements or extensions of the
business.
8.3. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of the
foregoing provisions of this Article VIII, the Trustees may prescribe, in their
absolute discretion, such other bases and times for determining the net income
of the Trust, the allocation of income of the Trust, the Book Capital Account
balance of each Holder, or the payment of distributions to the Holders as they
may deem necessary or desirable to enable the Trust to comply with any provision
of the 1940 Act or any order of exemption issued by the Commission or with the
Code.
ARTICLE IX
HOLDERS
9.1. RIGHTS OF HOLDERS. The ownership of the Trust Property and the right
to conduct any business described herein are vested exclusively in the Trustees,
and the Holders shall have no right or title therein other than the beneficial
interest conferred by their Interests and they shall have no power or right to
call for any partition or division of any Trust Property.
9.2. MEETINGS OF HOLDERS. Meetings of Holders may be called at any time by
a majority of the Trustees and shall be called by any Trustee upon written
request of Holders holding, in the aggregate, not less than 10% of the
Interests, such request specifying the purpose or purposes for which such
meeting is to be called. Any such meeting shall be held within or without the
State of New York and within or without the United States of America on such day
and at such time as the Trustees shall designate. Holders of one-third of the
Interests, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the 1940
Act, other applicable law, this Declaration or the By-Laws of the Trust. If a
quorum is present at a meeting, an affirmative vote of the Holders present, in
<PAGE>
person or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless a greater number of affirmative votes is required by the
1940 Act, other applicable law, this Declaration or the By-Laws of the Trust.
All or any one of more Holders may participate in a meeting of Holders by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other and participation
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting.
9.3. NOTICE OF MEETINGS. Notice of each meeting of Holders, stating the
time, place and purposes of the meeting, shall be given by the Trustees by mail
to each Holder, at its registered address, mailed at least 10 days and not more
than 60 days before the meeting. Notice of any meeting may be waived in writing
by any Holder either before or after such meeting. The attendance of a Holder at
a meeting shall constitute a waiver of notice of such meeting except in the
situation in which a Holder attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting was
not lawfully called or convened. At any meeting, any business properly before
the meeting may be considered whether or not stated in the notice of the
meeting. Any adjourned meeting may be held as adjourned without further notice.
9.4. RECORD DATE FOR MEETINGS, DISTRIBUTIONS, ETC. For the purpose of
determining the Holders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time fix a date, not more than 90 days
prior to the date of any meeting of Holders or the payment of any distribution
or the taking of any other action, as the case may be, as a record date for the
determination of the Persons to be treated as Holders for such purpose.
9.5. PROXIES, ETC. At any meeting of Holders, any Holder entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Secretary, or with such other
officer or agent of the Trust as the Secretary may direct, for verification
prior to the time at which such vote is to be taken. A proxy may be revoked by a
Holder at any time before it has been exercised by placing on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, a later dated proxy or written revocation. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of the Trust or
of one or more Trustees or of one or more officers of the Trust. Only Holders on
the record date shall be entitled to vote. Each such Holder shall be entitled to
a vote proportionate to its Interest. When an Interest is held jointly by
several Persons, any one of them may vote at any meeting in person or by proxy
in respect of such Interest, but if more than one of them is present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Interest. A proxy purporting to be executed by or on behalf of a Holder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger.
9.6. REPORTS. The Trustees shall cause to be prepared and furnished to
each Holder, at least annually as of the end of each Fiscal Year, a report of
operations containing a balance sheet and a statement of income of the Trust
prepared in conformity with generally accepted accounting principles and an
opinion of an independent public accountant on such financial statements. The
Trustees shall, in addition, furnish to each Holder at least semi-annually
interim reports of operations containing an unaudited balance sheet as of the
end of such period and an unaudited statement of income for the period from the
beginning of the then-current Fiscal Year to the end of such period.
9.7. INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Holders during normal business hours for any purpose not harmful
to the Trust.
<PAGE>
9.8. HOLDER ACTION BY WRITTEN CONSENT. Any action which may be taken by
Holders may be taken without a meeting if Holders of all Interests entitled to
vote consent to the action in writing and the written consents are filed with
the records of the meetings of Holders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Holders. Each such written consent
shall be executed by or on behalf of the Holder delivering such consent and
shall bear the date of such execution. No such written consent shall be
effective to take the action referred to therein unless, within one year of the
earliest dated consent, written consents executed by a sufficient number of
Holders to take such action are filed with the records of the meetings of
Holders.
9.9. NOTICES. Any and all communications, including any and all notices to
which any Holder may be entitled, shall be deemed duly served or given if
mailed, postage prepaid, addressed to a Holder at its last known address as
recorded on the register of the Trust.
ARTICLE X
DURATION; TERMINATION;
AMENDMENT; MERGERS; ETC.
10.1. DURATION. Subject to possible termination or dissolution in
accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration of 20
years after the death of the last survivor of the initial Trustees named herein
and the following named persons:
Date of
NAME ADDRESS BIRTH
Nicole Catherine Rumery 18 Rio Vista Street 12/21/91
North Billerica, MA 01862
Nelson Stewart Ruble 65 Duck Pond Road 04/10/91
Glen Cove, NY 11542
Shelby Sara Wyetzner 8 Oak Brook Lane 10/18/90
Merrick, NY 11566
Amanda Jehan Sher Coolidge 483 Pleasant Street, #9 08/16/89
Belmont, MA 02178
David Cornelius Johnson 752 West End Avenue, Apt. 10J 05/02/89
New York, NY 10025
Conner Leahy McCabe 100 Parkway Road, Apt. 3C 02/22/89
Bronxville, NY 10708
Andrea Hellegers 530 East 84th Street, Apt. 5H 12/22/88
New York, NY 10028
Emilie Blair Ruble 65 Duck Pond Road 02/24/89
Glen Cove, NY 11542
<PAGE>
Brian Patrick Lyons 152-48 Jewel Avenue 01/20/89
Flushing, NY 11367
Caroline Bolger Cima 11 Beechwood Lane 12/23/88
Scarsdale, NY 10583
Katherine Driscoll Cima 11 Beechwood Lane 04/05/92
Scarsdale, NY 10583
10.2. TERMINATION.
(a) The Trust may be terminated (i) by the affirmative vote of Holders of
not less than two-thirds of all Interests at any meeting of Holders or by an
instrument in writing without a meeting, executed by a majority of the Trustees
and consented to by Holders of not less than two-thirds of all Interests, or
(ii) by the Trustees by written notice to the Holders. Upon any such
termination,
(i) the Trust shall carry on no business except for the purpose of winding
up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the Trust and all
of the powers of the Trustees under this Declaration shall continue until the
affairs of the Trust have been wound up, including the power to fulfill or
discharge the contracts of the Trust, collect the assets of the Trust, sell,
convey, assign, exchange or otherwise dispose of all or any part of the Trust
Property to one or more Persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other property of
any kind, discharge or pay the liabilities of the Trust, and do all other acts
appropriate to liquidate the business of the Trust; provided that any sale,
conveyance, assignment, exchange or other disposition of all or substantially
all the Trust Property shall require approval of the principal terms of the
transaction and the nature and amount of the consideration by the vote of
Holders holding more than 50% of all Interests; and
(iii) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees shall
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Holders according to their respective rights as set forth in the
procedures established pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust and distribution to the Holders as
herein provided, a majority of the Trustees shall execute and file with the
records of the Trust an instrument in writing setting forth the fact of such
termination and distribution. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Holders shall thereupon cease.
10.3. DISSOLUTION. Upon the bankruptcy of any Holder, or upon the
Redemption of any Interest, the Trust shall be dissolved effective 120 days
after the event. However, the Holders (other than such bankrupt or redeeming
Holder) may, by a unanimous affirmative vote at any meeting of such Holders or
by an instrument in writing without a meeting executed by a majority of the
Trustees and consented to by all such Holders, agree to continue the business of
the Trust even if there has been such a dissolution.
<PAGE>
10.4. AMENDMENT PROCEDURE.
(a) This Declaration may be amended by the vote of Holders of more than
50% of all Interests at any meeting of Holders or by an instrument in writing
without a meeting, executed by a majority of the Trustees and consented to by
the Holders of more than 50% of all Interests. Notwithstanding any other
provision hereof, this Declaration may be amended by an instrument in writing
executed by a majority of the Trustees, and without the vote or consent of
Holders, for any one or more of the following purposes: (i) to change the name
of the Trust, (ii) to supply any omission, or to cure, correct or supplement any
ambiguous, defective or inconsistent provision hereof, (iii) to conform this
Declaration to the requirements of applicable federal law or regulations or the
requirements of the applicable provisions of the Code, (iv) to change the state
or other jurisdiction designated herein as the state or other jurisdiction whose
law shall be the governing law hereof, (v) to effect such changes herein as the
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the law of such state or other jurisdiction applicable to
trusts or voluntary associations, (B) to permit the Trust to elect to be treated
as a "regulated investment company" under the applicable provisions of the Code,
(C) to permit the Trust to comply with fiscal or other statutory or official
requirements of any government authority, or (D) to permit the transfer of
Interests (or to permit the transfer of any other beneficial interest in or
share of the Trust, however denominated), and (vi) in conjunction with any
amendment contemplated by the foregoing clause (iv) or the foregoing clause (v)
to make any and all such further changes or modifications to this Declaration as
the Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (v) or the foregoing clause (vi) to be
conclusively evidenced by the execution of any such amendment by a majority of
the Trustees; provided, however, that unless effected in compliance with the
provisions of Section 10.4(b) hereof, no amendment otherwise authorized by this
sentence may be made which would reduce the amount payable with respect to any
Interest upon liquidation of the Trust and; provided, further, that the Trustees
shall not be liable for failing to make any amendment permitted by this Section
10.4(a).
(b) No amendment may be made under Section 10.4(a) hereof which would
change any rights with respect to any Interest by reducing the amount payable
thereon upon liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with the vote or consent of Holders of
two-thirds of all Interests.
(c) A certification in recordable form executed by a majority of the
Trustees setting forth an amendment and reciting that it was duly adopted by the
Holders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees, shall
be conclusive evidence of such amendment when filed with the records of the
Trust.
Notwithstanding any other provision hereof, until such time as Interests
are first sold, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees at any meeting of Trustees or
by an instrument executed by a majority of the Trustees.
10.5. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust may merge or
consolidate with any other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of the Trust Property,
including good will, upon such terms and conditions and for such consideration
when and as authorized at any meeting of Holders called for such purpose by the
affirmative vote of Holders of not less than two-thirds of all Interests, or by
an instrument in writing without a meeting, consented to by Holders of not less
than two-thirds of all Interests, and any such merger, consolidation, sale,
<PAGE>
lease or exchange shall be deemed for all purposes to have been accomplished
under and pursuant to the statutes of the State of New York.
10.6. INCORPORATION. Upon a Majority Interests Vote, the Trustees may
cause to be organized or assist in organizing a corporation or corporations
under the law of any jurisdiction or a trust, partnership, association or other
organization to take over the Trust Property or to carry on any business in
which the Trust directly or indirectly has any interest, and to sell, convey and
transfer the Trust Property to any such corporation, trust, partnership,
association or other organization in exchange for the equity interests thereof
or otherwise, and to lend money to, subscribe for the equity interests of, and
enter into any contract with any such corporation, trust, partnership,
association or other organization, or any corporation, trust, partnership,
association or other organization in which the Trust holds or is about to
acquire equity interests. The Trustees may also cause a merger or consolidation
between the Trust or any successor thereto and any such corporation, trust,
partnership, association or other organization if and to the extent permitted by
law. Nothing contained herein shall be construed as requiring approval of the
Holders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to one or
more of such organizations or entities.
ARTICLE XI
MISCELLANEOUS
11.1. CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS. The Trust
shall file, with the Department of State of the State of New York, a
certificate, in the name of the Trust and executed by an officer of the Trust,
designating the Secretary of State of the State of New York as an agent upon
whom process in any action or proceeding against the Trust may be served.
11.2. GOVERNING LAW. This Declaration is executed by the Trustees and
delivered in the State of New York and with reference to the law thereof, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed in accordance with the law of the State
of New York and reference shall be specifically made to the trust law of the
State of New York as to the construction of matters not specifically covered
herein or as to which an ambiguity exists.
11.3. COUNTERPARTS. This Declaration may be simultaneously executed in
several counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any one such original counterpart.
11.4. RELIANCE BY THIRD PARTIES. Any certificate executed by an individual
who, according to the records of the Trust or of any recording office in which
this Declaration may be recorded, appears to be a Trustee hereunder, certifying
to: (a) the number or identity of Trustees or Holders, (b) the due authorization
of the execution of any instrument or writing, (c) the form of any vote passed
at a meeting of Trustees or Holders, (d) the fact that the number of Trustees or
Holders present at any meeting or executing any written instrument satisfies the
requirements of this Declaration, (e) the form of any By-Laws adopted by or the
identity of any officer elected by the Trustees, or (f) the existence of any
fact or facts which in any manner relate to the affairs of the Trust, shall be
conclusive evidence as to the matters so certified in favor of any Person
dealing with the Trustees.
<PAGE>
11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, or with other applicable law and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the day and year first above written.
BY: /S/ JAMES B. CRAVER
James B. Craver
As Trustee and not Individually
BY: /S/ THOMAS M. LENZ
Thomas M. Lenz
As Trustee and not Individually
BY: /S/ ANDRES E. SALDANA
Andres E. Saldana
As Trustee and not Individually
<PAGE>
AMENDMENT NO. 1 TO DECLARATION OF TRUST OF
THE NON-U.S. FIXED INCOME PORTFOLIO
DATED AS OF JUNE 24, 1993
The undersigned, being all the Trustees of the Non-U.S. Fixed Income
Portfolio, a New York Trust (the "Trust"), acting pursuant to the last paragraph
of Section 10.4 of the Declaration of Trust dated as of June 16, 1993 hereby
amend in its entirety paragraph (a) of Section 10.4 of the Trust's Declaration
of Trust as follows:
(a) This Declaration may be amended by the vote of Holders of more
than 50% of all Interests at any meeting of Holders or by an instrument in
writing without a meeting, executed by a majority of the Trustees and
consented to by the Holders of more than 50% of all Interests.
Notwithstanding any other provision hereof, this Declaration may be
amended by an instrument in writing executed by a majority of the
Trustees, and without the vote or consent of Holders, for any one or more
of the following purposes: (i) to change the name of the Trust, (ii) to
supply any omission, or to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, (iii) to conform this
Declaration to the requirements of applicable federal law or regulations
or the requirements of the applicable provisions of the Code, (iv) to
change the state or other jurisdiction designated herein as the state or
other jurisdiction whose law shall be the governing law hereof, (v) to
effect such changes herein as the Trustees find to be necessary or
appropriate (A) to permit the filing of this Declaration under the law of
such state or other jurisdiction applicable to trusts or voluntary
associations, (B) to permit the Trust to elect to be treated as a
"regulated investment company" under the applicable provisions of the
Code, (C) to permit the Trust to comply with fiscal or other statutory or
official requirements of any government authority, or (D) to permit the
transfer of Interests (or to permit the transfer of any other beneficial
interest in or share of the Trust, however denominated), and (vi) in
conjunction with any amendment contemplated by the foregoing clause (iv)
or the foregoing clause (v) to make any and all such further changes or
modifications to this Declaration as the Trustees find to be necessary or
appropriate, any finding of the Trustees referred to in the foregoing
clause (v) or the foregoing clause (vi) to be conclusively evidenced by
the execution of any such amendment by a majority of the Trustees;
provided, however, that unless effected in compliance with the provisions
of Section 10.4(b) hereof, no amendment otherwise authorized by this
sentence may be made which would reduce the amount payable with respect to
any Interest upon liquidation of the Trust and; provided, further, that
the Trustees shall not be liable for failing to make any amendment
permitted by this Section 10.4(a).
The undersigned have executed this amendment as of the year and date first
written above.
BY: /S/ JAMES B. CRAVER
James B. Craver
As Trustee and not Individually
BY: /S/ THOMAS M. LENZ
Thomas M. Lenz
As Trustee and not Individually
BY: /S/ ANDRES E. SALDANA
Andres E. Saldana
As Trustee and not Individually
<PAGE>
AMENDMENT NO. 2 TO DECLARATION OF TRUST OF
THE NON-U.S. FIXED INCOME PORTFOLIO
DATED AS OF APRIL 13, 1995
The undersigned, being all the Trustees of The Non-U.S. Fixed Income
Portfolio, a trust organized under the laws of the State of New York (the
"Trust), acting pursuant to the last paragraph of Section 10.4 of the
Declaration of Trust dated as of June 16, 1993, as amended, hereby amend in its
entirety paragraph Section 6.2 of the Trust's Declaration of Trust as follows:
6.2. NON-TRANSFERABILITY. A Holder may not transfer, sell or exchange its
Interest except as part of a merger or similar plan of reorganization of a
Holder that qualifies under Section 368 of the Code as permitted by the
Trustees.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 13th day of April, 1995. This instrument may be executed by the Trustees on
separate counterparts but shall be effective only when signed by all of the
Trustees.
/S/FREDERICK S. ADDY /S/WILLIAM G. BURNS
Frederick S. Addy William G. Burns
/S/ARTHUR C. ESCHENLAUER /S/MATTHEW HEALEY
Arthur C. Eschenlauer Matthew Healey
/S/MICHAEL P. MALLARDI
Michael P. Mallardi
EXHIBIT 2
BY-LAWS
OF
EACH HUB TRUST LISTED ON SCHEDULE I
AND
EACH SPOKE TRUST LISTED ON SCHEDULE II
ARTICLE I
DEFINITIONS
Each Trust listed on Schedule I is referred to in these By-Laws as a "HUB
TRUST".* Each Trust listed on Schedule II is referred to in these By-Laws as a
"SPOKE TRUST".*
In the case of each Hub Trust and each Spoke Trust, unless otherwise
specified, capitalized terms have the respective meanings given them in the
Declaration of Trust of such Trust dated as of the date set forth in Schedule I
or II, as amended from time to time. In the case of each Spoke Trust, the term
"Holder" has the meaning given the term "Shareholder" in the Declaration.
ARTICLE II
OFFICES
SECTION 1. PRINCIPAL OFFICE. In the case of each Hub Trust, the principal
office of the Trust shall be in such place as the Trustees may determine from
time to time, PROVIDED THAT the principal office shall be outside the United
States of America if the Trustees determine that the Trust is intended to be
operated so that it is not engaged in United States trade or business for United
States federal income tax purposes. In the case of each Spoke Trust, until
changed by the Trustees, the principal office of the Trust in the Commonwealth
of Massachusetts shall be in the City of Boston, County of Suffolk.
SECTION 2. OTHER OFFICES. The Trust may have offices in such other places
without as well as within the state of its organization and the United States of
America as the Trustees may from time to time determine.
*"Hub" and "Spoke" are service marks of Signature Financial
Group, Inc.
ARTICLE III
HOLDERS
SECTION 1. 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 the case of each Hub Trust or 10% of the Shares issued and
outstanding and entitled to vote thereat in the case of each Spoke Trust, 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 organization
of the Trust and within, or, if applicable, in the case of a Hub Trust only
without, the United States of America on such day and at such time as the
Trustees shall designate. Holders of one third of the Interests in the case
<PAGE>
of each Hub Trust or one third of the Shares issued and outstanding and entitled
to vote thereat in the case of each Spoke Trust, 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, the Declaration or
these 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 in the case of each Hub Trust, or 50% of the total Shares issued and
outstanding and entitled to vote thereat in the case of each Spoke Trust,
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless a greater number of affirmative votes is required by the
1940 Act, other applicable law, the Declaration or these By-Laws.
All or any one or 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.
In the case of The Series Portfolio or any Spoke Trust, whenever a matter
is required to be voted by Holders of the Trust in the aggregate under Section
9.1 and Section 9.2 of the Declaration of The Series Portfolio or Section 6.8
and Section 6.9 and Section 6.9(g) of the Declaration of the Spoke Trust, the
Trust may either hold a meeting of Holders of all series, as defined in Section
1.2 of the Declaration of The Series Portfolio or Section 6.9 of the Declaration
of the Spoke Trust, 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
consisting of the Holders of one third of the outstanding Interests or Shares,
as the case may be, of the individual series entitled to vote shall be present
at each such separate meeting except as may otherwise be required by the 1940
Act, other applicable law, the Declaration or these ByLaws and (iii) a quorum
consisting of the Holders of one third of all Interests or Shares, as the,case
may be, of the Trust entitled to vote, except as may otherwise be required by
the 1940 Act, other applicable law, the Declaration or these By-Laws, 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.
SECTION 2. NOTICE OF MEETINGS. Notice of each meeting of Holders, stating
the time, place and purpose of the meeting, shall be given by the Trustees by
mail to each Holder, at its registered address, mailed at least 10 days and not
more than 60 days before the meeting. Notice of any meeting may be waived in
writing by any Holder either before or after such meeting. The attendance of a
Holder at a meeting shall constitute a waiver of notice of such meeting except
in the situation in which a Holder attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting was
not lawfully called or convened. At any meeting, any business properly before
the meeting may be considered whether or not stated in the notice of the
meeting. Any adjourned meeting may be held as adjourned without further notice.
In the case of The Series Portfolio and each Spoke Trust, where 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, as
provided in Article III, Section 1 above, notice of each such separate meeting
shall be provided in the manner described above in this Section 2.
SECTION 3. RECORD DATE FOR MEETINGS. For the purpose of determining the
Holders who are entitled to notice of and to vote at any meeting, the Trustees
may from time to time fix a date, not more than 90 days prior to the date of any
meeting of Holders as a record date for the determination of the Persons to be
treated as Holders for such purpose.
<PAGE>
In the case of The Series Portfolio and each Spoke Trust, where 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, as
provided in Article III, Section 1 above, the record date of each such separate
meeting shall be determined in the manner described above in this Section 3.
SECTION 4. VOTING, PROXIES, INSPECTORS OF ELECTION. At any meeting of
Holders, any Holder entitled to vote thereat may vote by proxy, PROVIDED THAT no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote is
to be taken. A proxy may be revoked by a Holder at any time before it has been
exercised by placing on file with the Secretary, or with such other officer or
agent of the Trust as the Secretary may direct, a later dated proxy or written
revocation. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of the Trust or of one or more Trustees or of one or
more officers of the Trust. No proxy shall be valid after one year from the date
of its execution, unless a longer period is expressly stated in the proxy.
In the case of each Hub Trust, only Holders on the record date shall be
entitled to vote and each such Holder shall be entitled to a vote proportionate
to its Interest. In the case of each Spoke Trust, (i) only Holders on the record
date shall be entitled to vote; (ii) each whole Share shall be entitled to vote
as to any matter on which it is entitled to vote and each fractional Share shall
be entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted; (iii) Shares shall be voted by
individual series on any matter submitted to a vote of the Holders of the Trust
except as provided in Section 6.9(g) of the Declaration; and (iv) at any meeting
of Holders of the Trust or of any series of the Trust, a Shareholder Servicing
Agent may vote any Shares as to which such Shareholder Servicing Agent is the
agent of record.
The Chairman of the meeting may, and upon the request of the Holders of
10% of the Interests or Shares, as the case may be, entitled to vote at such
election shall, appoint one or three inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election certify the result of the vote taken. No
candidate for Trustee shall be appointed such inspector. If there are three
inspectors of election, the decision, act or certification of a majority is
effective in all respects as the decision, act or certificate of all.
At every meeting of the Holders, all proxies shall be required and taken
in charge of and all ballots shall be required and canvassed by the Secretary of
the meeting, who shall decide all questions touching the qualification of
voters, the validity of the proxies, the acceptance or rejection of votes and
any other questions related to the conduct of the vote with fairness to all
Holders, unless inspectors of election shall have been appointed, in which event
the inspectors of election shall decide all such questions. On request of the
Chairman of the meeting, or of any Holder or his proxy, the Secretary shall make
a report in writing of any question determined and shall execute a certificate
of facts found, unless inspectors of election shall have been appointed, in
which event the inspectors of election shall do so.
When an Interest is held or Shares are held jointly by several Persons,
any one of them may vote at any meeting in person or by proxy in respect of such
Interest or Shares, 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 or Shares. A proxy purporting to be executed by or on behalf of a
Holder shall be deemed valid unless challenged at or prior to its exercise, and
the burden of proving invalidity shall rest on the challenger.
<PAGE>
SECTION 5. HOLDER ACTION BY WRITTEN CONSENT. In the case of each Hub
Trust, any action which may be taken by Holders may be taken without a meeting
if Holders of all Interests entitled to vote consent to the action in writing
and the written consents are filed with the records of the meetings of Holders.
In the case of each Spoke Trust, any action which may be taken by Holders may be
taken without a meeting if Holders holding a majority of Shares entitled to vote
on the matter (or such larger proportion thereof as shall be required by law,
the Declaration or these By-Laws for approval of such matter) 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.
SECTION 6. CONDUCT OF MEETINGS. The meetings of the Holders shall be
presided over by the Chairman, or if he is not present, by a Chairman to be
elected at the meeting. The Secretary of the Trust, if present, shall act as
secretary of such meetings, or if he is not present, an Assistant Secretary
shall so act; if neither the Secretary nor any Assistant Secretary is present,
then the meeting shall elect its secretary.
ARTICLE IV
TRUSTEES
SECTION 1. PLACE OF MEETING, ETC. The Trustees may hold their meetings,
have one or more offices, and keep the books of the Trust, inside or outside the
state of organization of the Trust or the United States of America, at any
office of the Trust or at any other place as they may from time to time
determine, or in the case of meetings, as they may from time to time determine
or as shall be specified or fixed in the respective notices or waivers of notice
thereof.
SECTION 2. MEETINGS. Meetings of the Trustees shall be held from time to
time upon the call of the Chairman or any two Trustees. The President, the
Secretary or an Assistant Secretary may call meetings only upon the written
direction of the Chairman or two Trustees. The Trustees shall hold an annual
meeting for the election of officers and transaction of other business which may
come before such meeting. Regular meetings of the Trustees may be held without
call or notice at a time and place fixed 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. Notice shall be given of any proposed action to be taken by
written consent. Notice of a meeting or proposed action to be taken by written
consent may be given by telegram (which term shall include a cablegram), by
telecopier or delivered personally (which term shall include by telephone), as
well as by mail. 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.
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.
SECTION 3. QUORUM. A quorum for all meetings of the Trustees shall be a
majority of the Trustees. Unless provided otherwise in the Declaration, the 1940
Act or other applicable law, any action of the Trustees may be taken at a
meeting by vote of a majority of the Trustees present (a quorum being present).
In the absence of a quorum, a majority of the Trustees present may adjourn the
<PAGE>
meeting from time to time until a quorum shall be present. Notice of an
adjourned meeting need not be given.
With respect to actions 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 and shall be entitled to vote to the extent
permitted by the 1940 Act.
SECTION 4. COMMITTEES. The Trustees, by the majority vote of all the
Trustees then in office, may appoint from the Trustees committees which shall in
each case consist of such number of Trustees (not less than two) and shall have
and may exercise such powers as the Trustees may determine in the resolution
appointing them. Unless provided otherwise in the Declaration or by the
Trustees, a majority of all the members of any such committee may determine its
actions and fix the time and place of its meetings. With respect to actions of
any committee, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes and
shall be entitled to vote to the extent permitted by the 1940 Act. The Trustees
shall have power at any time to change the members and powers of any such
committee, to fill vacancies and to discharge any such committee. Each committee
shall keep regular minutes of its meetings and cause them to be filed with the
minutes of the proceedings of the Trustees.
SECTION 5. TELEPHONE MEETINGS. 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 participating
in a meeting by means of such communications equipment shall constitute presence
in person at such meeting. Any conference telephone meeting shall be deemed to
have been held at a place designated by the Trustees at the meeting.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken at any meeting of the Trustees or any committee thereof may be taken
without a meeting, if a written consent to such action is signed either by all
the Trustees or all members of such committee then in office or by an 80%
majority of the Trustees or an 80% majority of members of such committee,
PROVIDED THAT no action by 80% majority consent shall be effective unless and
until (i) each Trustee or committee member signing such consent shall have been
advised in writing of the following information: the identity of any Trustee or
committee member not signing such consent and the reasons for his not signing;
and (ii) after receiving such information signing Trustees or committee members
who represent an 80% majority then in office indicate in writing that the
consent shall become effective by 80% majority, rather than unanimous, consent.
All such effective written consents shall be filed with the minutes of the
proceedings of the Trustees and treated as a vote for all purposes.
SECTION 7. COMPENSATION. The Trustees shall be entitled to
receive such compensation from the Trust for their services as
may from time to time be voted by the Trustees.
SECTION 8. CHAIRMAN. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to serve until his successor
shall have been duly elected and qualified; the Chairman may serve on committees
of the Trustees. The Chairman shall not be an officer of the Trust solely by
virtue of his serving as Chairman. The Chairman shall preside at all meetings of
the Trustees at which he is present, shall serve as the liaison between the
Trustees and the officers of the Trust and between the Trustees and their staff
and shall have such other duties as from time to time may be assigned to him by
the Trustees.
SECTION 9. TRUSTEES' STAFF; COUNSEL FOR THE TRUST AND TRUSTEES, ETC. The
Trustees may employ or contract with one or more Persons to serve as their staff
<PAGE>
and to provide such services related thereto as may be determined from time to
time. The Trustees may employ attorneys as counsel for the Trust and/or the
Trustees and may engage such other experts or consultants as may be determined
from time to time.
ARTICLE V
OFFICERS
SECTION 1. GENERAL PROVISIONS. The Trustees may elect or appoint such
officers or agents as the business of the Trust may require, including without
limitation a Chief Executive Officer, a President, one or more Vice Presidents,
a Treasurer, a Secretary, one or more Assistant Treasurers and one or more
Assistant Secretaries. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents.
SECTION 2. TERM OF OFFICE AND QUALIFICATIONS. Except as otherwise provided
by law, the Declaration or these ByLaws, each of the principal executive officer
described in Section 4 below, the Treasurer and the Secretary shall hold office
until a successor shall have been duly elected and qualified, and any other
officers shall hold office at the pleasure of the Trustees. Any two or more
offices may be held by the same Person, PROVIDED THAT at least two different
individuals shall serve as officers. Any officer may be, but does not need be, a
Trustee.
SECTION 3. REMOVAL. The Trustees may remove any officer with or without
cause by a vote of a majority of the Trustees. Any subordinate officer or agent
appointed by any officer or committee may be removed with or without cause by
such appointing officer or committee.
SECTION 4. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER; PRESIDENT.
The Chief Executive Officer, if any, shall be the principal executive officer of
the Trust. Subject to the control of the Trustees, the Chief Executive Officer
shall (i) at all times exercise general supervision and direction over the
affairs of the Trust, (ii) have the power to grant, issue, execute or sign such
documents as may be deemed advisable or necessary in the ordinary course of the
Trust's business and (iii) have such other powers and duties as from time to
time may be assigned by the Trustees.
If there is no Chief Executive Officer, the President shall be the
principal executive officer of the Trust and shall have the powers and duties
set forth above in this Section 4. If there is a Chief Executive Officer and a
President, the President shall have such powers and duties as from time to time
may be assigned by the Trustees or the Chief Executive Officer.
SECTION 5. POWERS AND DUTIES OF VICE PRESIDENTS. In the absence or
disability of the President, any Vice President designated by the Trustees or
the President shall perform all the duties, and may exercise any of the powers,
of the President. Each Vice President shall perform such other duties as from
time to time may be assigned to him by the Trustees or the Chief Executive
Officer.
SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall be the
principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to the Trust's
custodian. The Treasurer shall render a statement of condition of the finances
of the Trust to the Trustees as often as they shall require the same and shall
in general perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Trustees.
SECTION 7. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall keep the
minutes of all meetings of the Holders in proper books provided for that
<PAGE>
purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust, if any; and shall have charge of the Holder
lists and records unless the same are in the charge of the Transfer Agent. The
Secretary shall attend to the giving and serving of notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, shall in general perform all the duties incident to
the office of Secretary and such other duties as from time to time may be
assigned to him by the Trustees.
SECTION 8. POWERS AND DUTIES OF ASSISTANT TREASURERS. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him by the Trustees.
SECTION 9. POWERS AND DUTIES OF ASSISTANT SECRETARIES. In the absence or
disability of the Secretary, any Assistant Secretary designated by the Trustees
shall perform all of the duties, and may exercise any of the powers, of the
Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
SECTION 10. COMPENSATION OF OFFICERS. Subject to any applicable law or
provision of the Declaration, any compensation of any officer may be fixed from
time to time by the Trustees. No officer shall be prevented from receiving any
such compensation as such officer by reason of the fact that he is also a
Trustee. If no such compensation is fixed for any officer, such officer shall
not be entitled to receive any compensation from the Trust.
SECTION 11. BOND AND SURETY. As provided in the Declaration, any officer
may be required by the Trustees to be bonded for the faithful performance of his
duties in the amount and with such sureties as the Trustees may determine.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE VII
FISCAL YEAR
The Trust may have different fiscal years for its separate and distinct
series, if applicable. The fiscal year(s) of the Trust shall be determined by
the Trustees, PROVIDED THAT the Trustees (or the Treasurer subject to
ratification by the Trustees) may from time to time change any fiscal year.
ARTICLE VIII
CUSTODIAN
SECTION 1. APPOINTMENT AND DUTIES. The Trustees shall at all times employ
one or more banks or trust companies having a capital, surplus and undivided
profits of at least $50,000,000 as custodian with authority as the Trust's
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the Declaration, these By-Laws and the 1940 Act:
<PAGE>
(i) to hold the securities owned by the Trust and deliver the same upon
written order; (ii) to receive and receipt for any monies due to the Trust
and deposit the same in its own banking department or elsewhere as the
Trustees may direct; (iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and accounts of the
Trust and furnish clerical and accounting services; and (v) if authorized
by the Trustees, to compute the net income of the Trust and the net asset
value of the Trust or, in the case of each Spoke Trust, Shares;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees. Subject to the
approval of the Trustees, the custodian may enter into arrangements with
securities depositories. All such custodial, sub-custodial and depository
arrangements shall be subject to, and comply with, the provisions of the 1940
Act and the rules and regulations promulgated thereunder.
SECTION 2. SUCCESSOR CUSTODIAN. The Trust shall upon the resignation or
inability to serve of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian; (ii) require that the cash and
securities owned by the Trust be delivered directly to the successor
custodian; and (iii) in the event that no successor custodian can be
found, submit to the Holders before permitting delivery of the cash and
securities owned by the Trust otherwise than to a successor custodian, the
question whether the
Trust shall be liquidated or shall function without a custodian.
ARTICLE IX
INDEMNIFICATION
In the case of each Hub Trust, 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, nonparty 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.
<PAGE>
ARTICLE X
AMENDMENTS, ADDITIONAL TRUSTS, ETC.
The Trustees shall have the power to alter, amend or repeal these By-Laws
or adopt new By-Laws at any time to the extent such power is not reserved to the
Holders by the 1940 Act, other applicable law or the Declaration. Action by the
Trustees with respect to these 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.
One or more additional trusts may be added to Schedule I or Schedule II by
resolution of the trustees of such trust(s), PROVIDED THAT the trustees of such
trust(s) are identical to the Trustees of the Hub Trusts and the Spoke Trusts
immediately prior to such addition.
In the case of each Hub Trust, 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. In
the case of each Spoke Trust, the Declaration refers to the Trustees not
individually, but as Trustees under the Declaration, and no Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or its Holders, in connection
with Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard for his duty
to such Person; and all such Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust.
<PAGE>
SCHEDULE I
HUB TRUSTS
STATE OF DATE OF DATE
ORGANIZA- DECLARA- BY-LAWS
TRUST TION TION ADOPTED
The Treasury Money Market Portfolio New York 11/4/92 10/13/94
The Money Market Portfolio New York 1/29/93 10/13/94
The Tax Exempt Money Market Portfolio New York 1/29/93 10/13/94
The Short Term Bond Portfolio New York 1/29/93 10/13/94
The U.S. Fixed Income Portfolio New York 1/29/93 10/13/94
The Tax Exempt Bond Portfolio New York 1/29/93 10/13/94
The Selected U.S. Equity Portfolio New York 1/29/93 10/13/94
The U.S. Stock Portfolio New York 1/29/93 10/13/94
The Diversified Portfolio New York 1/29/93 10/13/94
The Non-U.S. Equity Portfolio New York 1/29/93 10/13/94
The Diversified Portfolio New York 1/29/93 10/13/94
The Non-U.S. Fixed Income Portfolio New York 6/13/93 10/13/94
The Emerging Markets Equity Portfolio New York 6/13/93 10/13/94
The New York Total Return Bond Portfolio New York 6/13/93 10/13/94
(name changed)
The Series Portfolio New York 6/14/94 10/13/94
SCHEDULE II
SPOKE TRUSTS
DATE OF DATE
STATE OF DECLARA- BY-LAWS
TRUST ORGANIZATION TION ADOPTED
The Pierpont Funds Massachusetts 11/4/92 10/13/94
The JPM Institutional Funds Massachusetts 11/4/92 10/13/94
The JPM Institutional Plus Funds Massachusetts 11/4/92 10/13/94
EXHIBIT 5
THE NON-U.S. FIXED INCOME PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
Agreement, made this 24th day of September, 1994, between The Non-U.S.
Fixed Income Portfolio, a trust organized under the law of the State of New York
(the "Portfolio") and Morgan Guaranty Trust Company of New York, a New York
trust company authorized to conduct a general banking business (the "Advisor"),
WHEREAS, the Portfolio is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Portfolio desires to retain the Advisor to render investment
advisory services to the Portfolio, and the Advisor is willing to render such
services;
NOW, THEREFORE, this Agreement
W I T N E S S E T H:
that in consideration of the premises and mutual promises hereinafter set forth,
the parties hereto agree as follows:
1. The Portfolio hereby appoints the Advisor to act as investment adviser
to the Portfolio for the period and on the terms set forth in this Agreement.
The Advisor accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. Subject to the general supervision of the Trustees of the Portfolio,
the Advisor shall manage the investment operations of the Portfolio and the
composition of the Portfolio's holdings of securities and investments, including
cash, the purchase, retention and disposition thereof and agreements relating
thereto, in accordance with the Portfolio's investment objectives and policies
as stated in the Registration Statement (as defined in paragraph 3(d) of this
Agreement) and subject to the following understandings:
(a) the Advisor shall furnish a continuous investment program for the
Portfolio and determine from time to time what investments or securities
will be purchased, retained, sold or lent by the Portfolio, and what
portion of the assets will be invested or held uninvested as cash;
(b) the Advisor shall use the same skill and care in the management
of the Portfolio's investments as it uses in the administration of other
accounts for which it has investment responsibility as agent;
(c) the Advisor, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Declaration of
Trust, By-Laws and Registration Statement of the Portfolio and with the
instructions and directions of the Trustees of the Portfolio and will
conform to and comply with the requirements of the 1940 Act and all other
applicable federal and state laws and regulations;
(d) the Advisor shall determine the securities to be purchased, sold
or lent by the Portfolio and as agent for the Portfolio will effect
portfolio transactions pursuant to its determinations either directly with
the issuer or with any broker and/or dealer in such securities; in placing
orders with brokers and/or dealers the Advisor intends to seek best price
<PAGE>
and execution for purchases and sales; the Advisor shall also determine
whether or not the Portfolio shall enter into repurchase or reverse
repurchase agreements;
On occasions when the Advisor deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
customers of the Advisor, the Advisor may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased in order to obtain best
execution, including lower brokerage commissions, if applicable. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the
manner it considers to be the most equitable and consistent with its
fiduciary obligations to the Portfolio;
(e) the Advisor shall maintain books and records with respect to the
Portfolio's securities transactions and shall render to the Portfolio's
Trustees such periodic and special reports as the Trustees may reasonably
request; and
(f) the investment management services of the Advisor to the
Portfolio under this Agreement are not to be deemed exclusive, and the
Advisor shall be free to render similar services to others.
3. The Portfolio has delivered copies of each of the following documents
to the Advisor and will promptly notify and deliver to it all future amendments
and supplements, if any:
(a) Declaration of Trust of the Portfolio (such Declaration of Trust,
as presently in effect and as amended from time to time, is herein called
the "Declaration of Trust");
(b) By-Laws of the Portfolio (such By-Laws, as
presently in effect and as amended from time to time, are
herein called the "By-Laws");
(c) Certified resolutions of the Trustees of the Portfolio
authorizing the appointment of the Advisor and approving the form
of this Agreement;
(d) The Portfolio's Notification of Registration on Form N-8A and
Registration Statement on Form N-1A (No. 811-8790) each under the 1940 Act
(the "Registration Statement") as filed with the Securities and Exchange
Commission (the "Commission") on September 28, 1994, all amendments
thereto.
4. The Advisor shall keep the Portfolio's books and records required to be
maintained by it pursuant to paragraph 2(e). The Advisor agrees that all records
which it maintains for the Portfolio are the property of the Portfolio and it
will promptly surrender any of such records to the Portfolio upon the
Portfolio's request. The Advisor further agrees to preserve for the periods
prescribed by Rule 31a-2 of the Commission under the 1940 Act any such records
as are required to be maintained by the Advisor with respect to the Portfolio by
Rule 31a-1 of the Commission under the 1940 Act.
5. During the term of this Agreement the Advisor will pay all expenses
incurred by it in connection with its activities under this Agreement, other
than the cost of securities and investments purchased for the Portfolio
(including taxes and brokerage commissions, if any).
6. For the services provided and the expenses borne pursuant to this
Agreement, the Portfolio will pay to the Advisor as full compensation therefor a
fee at an annual rate equal to .35% of the Portfolio's average daily net assets.
<PAGE>
This fee will be computed daily and payable as agreed by the Portfolio and the
Advisor, but no more frequently than monthly.
7. The Advisor shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Portfolio in connection with the matters to
which this Agreement relates, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the 1940 Act) or a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.
8. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Portfolio at any
time, without the payment of any penalty, by vote of a majority of all the
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio on 60 days' written notice to the Advisor, or by the
Advisor at any time, without the payment of any penalty, on 90 days' written
notice to the Portfolio. This Agreement will automatically and immediately
terminate in the event of its assignment (as defined in the 1940 Act).
9. The Advisor shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided herein or
authorized by the Trustees of the Portfolio from time to time, have no authority
to act for or represent the Portfolio in any way or otherwise be deemed an agent
of the Portfolio.
10. This Agreement may be amended by mutual consent, but the consent of
the Portfolio must be approved (a) by vote of a majority of those Trustees of
the Portfolio who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
amendment, and (b) by vote of a majority of the outstanding voting securities of
the Portfolio.
11. Notices of any kind to be given to the Advisor by the Portfolio shall
be in writing and shall be duly given if mailed or delivered to the Advisor at 9
West 57th Street, New York, New York 10019, Attention: Managing Director, Funds
Management Division, or at such other address or to such other individual as
shall be specified by the Advisor to the Portfolio. Notices of any kind to be
given to the Portfolio by the Advisor shall be in writing and shall be duly
given if mailed or delivered to the Portfolio c/o Signature Financial Group
(Cayman) Limited at P.O. Box 2494, Elizabethan Square, George Town, Grand Cayman
BWI or to such other individual as shall be specified by the Portfolio to the
Advisor.
12. The Trustees have authorized the execution of this Agreement in their
capacity as Trustees and not individually and the Advisor agrees that neither
the shareholders nor the Trustees nor any officer, employee, representative or
agent of the Portfolio shall be personally liable upon, or shall resort be had
to their private property for the satisfaction of, obligations given, executed
or delivered on behalf of or by the Portfolio, that the shareholders, trustees,
officers, employees, representatives and agents of the Portfolio shall not be
personally liable hereunder, and that it shall look solely to the property of
the Portfolio for the satisfaction of any claim hereunder.
13. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
<PAGE>
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the 24th day of September,
1994.
THE NON-U.S. FIXED INCOME PORTFOLIO
By: /S/THOMAS M. LENZ
Thomas M. Lenz
Assistant Secretary
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /S/KATHLEEN H. TRIPP
Kathleen H. Tripp
Vice President
EXHIBIT 9(a)
THE NON-U.S. FIXED INCOME PORTFOLIO
ADMINISTRATION AGREEMENT
ADMINISTRATION AGREEMENT, dated as of September 24, 1993 by and between
The Non-U.S. Fixed Income Portfolio, a New York trust (the "Portfolio"), and
Signature Broker-Dealer Services, Inc., a Delaware corporation (the
"Administrator").
W I T N E S S E T H:
WHEREAS, the Portfolio is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (collectively with
the rules and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Portfolio wishes to engage the Administrator to provide
certain administrative and management services, and the Administrator is
willing to provide such administrative and management services to the
Portfolio, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of the Administrator. Subject to the general direction and
control of the Board of Trustees of the Portfolio, the Administrator shall
perform such administrative and management services as may from time to time be
reasonably requested by the Portfolio, which shall include without limitation:
(a) providing office space, equipment and clerical personnel necessary for
maintaining the organization of the Portfolio and for performing the
administrative and management functions herein set forth; (b) arranging, if
desired by the Portfolio, for Directors, officers and employees of the
Administrator to serve as Trustees, officers or agents of the Portfolio if duly
elected or appointed to such positions and subject to their individual consent
and to any limitations imposed by law; (c) preparing and, if applicable, filing
all documents required for compliance by the Portfolio with applicable laws and
regulations, including registration statements, registration fee filings,
semi-annual and annual reports to investors, proxy statements and tax returns;
(d) preparation of agendas and supporting documents for and minutes of meetings
of Trustees, committees of Trustees and investors; and (e) maintaining books
and records of the Portfolio. In the performance of its duties under this
<PAGE>
Agreement, the Administrator will comply with the provisions of the Declaration
of Trust and By-Laws of the Portfolio and the Portfolio's stated investment
objective, policies and restrictions, and will use its best efforts to
safeguard and promote the welfare of the Portfolio, and to comply with other
policies which the Board of Trustees may from time to time determine.
Notwithstanding the foregoing, the Administrator shall not be deemed to have
assumed any duties with respect to, and shall not be responsible for, the
management of the Portfolio's assets or the rendering of investment advice and
supervision with respect thereto, nor shall the Administrator be deemed to have
assumed or have any responsibility with respect to functions specifically
assumed by any transfer agent or custodian of the Portfolio.
2. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Administrator hereby agrees that all records which it
maintains for the Portfolio are the property of the Portfolio and further
agrees to surrender promptly to the Portfolio any such records upon the
Portfolio's request.
3. Allocation of Charges and Expenses. The Administrator shall pay the
entire salaries and wages of all of the Portfolio's Trustees, officers and
agents who devote part or all of their time to the affairs of the Administrator
or its affiliates, and the wages and salaries of such persons shall not be
deemed to be expenses incurred by the Portfolio for purposes of this Section 3.
Except as provided in the foregoing sentence, the Administrator shall not pay
other expenses relating to the Portfolio including, without limitation,
compensation of Trustees not affiliated with the Administrator; governmental
fees; interest charges; taxes; membership dues in the Investment Company
Institute allocable to the Portfolio; fees and expenses of the Portfolio's
independent auditors, of legal counsel and of any transfer agent or registrar
of the Portfolio; expenses of preparing, printing and mailing reports, notices,
proxy statements and reports to investors and governmental officers and
commissions; expenses of preparing and mailing agendas and supporting documents
for meetings of Trustees and committees of Trustees; expenses connected with
the execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the Portfolio's custodian for all services to
the Portfolio, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of
interests of the Portfolio; expenses of meetings of investors in the Portfolio;
and expenses relating to the issuance, registration and qualification of
interests in the Portfolio.
<PAGE>
4. Compensation of Administrator. For the services to be rendered and the
facilities to be provided by the Administrator hereunder, the Administrator
will receive a fee from the Portfolio as agreed by the Administrator and the
Portfolio from time to time as set forth on Schedule A attached hereto. This
fee will be computed daily and will be payable as agreed by the Portfolio and
the Administrator, but no more frequently than monthly.
5. Limitation of Liability of the Administrator. The Administrator shall
not be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Portfolio or the
performance of its duties hereunder, except for wilful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder. As used in this
Section 5, the term "Administrator" shall include Signature Broker-Dealer
Services, Inc. and/or any of its affiliates and the Directors, officers and
employees of Signature Broker-Dealer Services, Inc. and/or of its affiliates.
6. Activities of the Administrator. The services of the Administrator to
the Portfolio are not to be deemed to be exclusive, the Administrator being
free to render administrative and/or other services to other parties. It is
understood that Trustees, officers, and investors of the Portfolio are or may
become interested in the Administrator and/or any of its affiliates, as
Directors, officers, employees, or otherwise, and that Directors, officers and
employees of the Administrator and/or any of its affiliates are or may become
similarly interested in the Portfolio and that the Administrator and/or any of
its affiliates may be or become interested in the Portfolio as an investor or
otherwise.
7. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by the Board of Trustees of the Portfolio or by the
Administrator, in each case on not more than 60 days' nor less than 30 days'
written notice to the other party.
8. Subcontracting by the Administrator. The Administrator may subcontract
for the performance of its obligations hereunder with any one or more persons;
provided, however, that the Administrator shall not enter into any such
subcontract unless the Trustees of the Portfolio shall have approved such
subcontract and found the subcontracting party to be qualified to perform the
obligations sought to be subcontracted; and provided, further, that, unless the
Portfolio otherwise expressly agrees in writing, the Administrator shall be as
fully responsible to the Portfolio for
<PAGE>
the acts and omissions of any subcontractor as it would be for its own
acts or omissions.
9. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
10. Amendments. This Agreement may be amended only by mutual written
consent.
11. Miscellaneous. This agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect their construction
or effect. Should any part of this Agreement be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors, to the extent
permitted by law.
12. Notice. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Administrator at Signature
Broker-Dealer Services, Inc., 6 St. James Avenue, Suite 900, Boston,
Massachusetts 02116; or (2) to the Portfolio c/o Signature Financial Group
(Cayman) Limited at P.O. Box 268, Elizabethan Square, 2nd Floor, George Town,
Grand Cayman BWI, Attention: Treasurer.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of the Portfolio has executed this Agreement not
individually, but as an officer of the Portfolio under the Portfolio's
Declaration of Trust, dated June 16, 1993 as amended, and the obligations of
this Agreement are not binding upon any of the Trustees or investors of the
Portfolio individually, but bind only the trust estate.
THE NON-U.S. FIXED INCOME PORTFOLIO
By /s/ Thomas M. Lenz
Thomas M. Lenz
Assistant Secretary
SIGNATURE BROKER-DEALER SERVICES, INC.
By /s/ Philip W. Coolidge
Philip W. Coolidge
Chief Executive Officer
<PAGE>
SCHEDULE A
ADMINISTRATION FEES
The annual administration fee charged to and payable by the Portfolio is
determined as follows: The administration fee rate is calculated daily based on
the aggregate daily net assets of the Portfolio and the other registered
investment companies listed on the attached Schedule B in accordance with the
following schedule:
0.010% of the first $1 billion
0.008% of the next $2 billion
0.006% of the next $2 billion
0.004% over $5 billion
This fee rate is then applied daily to the net assets of the Portfolio.
<PAGE>
SCHEDULE B
The Treasury Money Market Portfolio
The Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Short Term Bond Portfolio
The U.S. Fixed Income Portfolio
The Tax Exempt Bond Portfolio
The Selected U.S. Equity Portfolio
The U.S. Stock Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Diversified Portfolio
The Non-U.S. Fixed Income Portfolio
The Emerging Markets Equity Portfolio
The New York Total Return Bond Portfolio
The Asia Growth Portfolio, a series of The Series Portfolio
The Japan Equity Portfolio, a series of The Series Portfolio
The European Equity Portfolio, a series of The Series Portfolio
<PAGE>
SCHEDULE A
ADMINISTRATION FEES
PORTFOLIOS LISTED ON SCHEDULE B (THE "MASTER PORTFOLIOS")
The annual administration fee charged to and payable by each Master Portfolio
is equal to its proportionate share of an annual complex-wide charge. This
charge is calculated daily based on the aggregate net assets of the registered
investment companies (collectively the "Master Portfolios") and in accordance
with the following annual schedule:
0.03% on the first $7 billion of the Master Portfolios'
aggregate average daily net assets; and
0.01% of the Master Portfolios' aggregate average daily net
assets in excess of
$7 billion
The portion of this charge payable by each Master Portfolio is determined by
the proportionate share that its net assets bear to the total of the net assets
of the Master Portfolios, The Pierpont Funds, The JPM Institutional Funds and
The JPM Advisor Funds.
Approved: December 26, 1995
Effective December 29, 1995
(supersedes schedule approved 7/7/94 for The Series
Portfolio, 3/9/94 for The New York Total Return Bond
Portfolio and 9/24/93 for all other Master Portfolios)
EACH MASTER PORTFOLIO
/s/ Matthew Healey
Matthew Healey, Chairman and
Chief Executive Officer
SIGNATURE BROKER-DEALER SERVICES, INC.
/s/ Linwood C. Downd
Name: Linwood C. Downs
Title: Treasurer
<PAGE>
SCHEDULE B
MASTER PORTFOLIOS
The Treasury Money Market Portfolio
The Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Short Term Bond Portfolio
The U.S. Fixed Income Portfolio
The Tax Exempt Bond Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Diversified Portfolio
The Non-U.S. Fixed Income Portfolio
The Emerging Markets Equity Portfolio
The New York Total Return Bond Portfolio
The Asia Growth Portfolio, a series of The Series Portfolio
The Japan Equity Portfolio, a series of The Series Portfolio
The European Equity Portfolio, a series of The Series Portfolio
Revised: December, 1995
(supersedes schedule approved 77/94 for The Series
Portfolio, 3/9/94 for The New York Total Return Bond
Portfolio and 9/24/93 for all other Master Portfolios)
EXHIBIT 9(e)
THE NON-U.S. FIXED INCOME PORTFOLIO
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of December 29, 1995, by and
between The Non-U.S. Fixed Income Portfolio, a New York trust (the
"Portfolio"), and Morgan Guaranty Trust Company of New York, a New York trust
company ("Morgan").
W I T N E S S E T H:
WHEREAS, the Portfolio is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (collectively with
the rules and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Portfolio wishes to engage Morgan to provide certain
financial, fund accounting oversight and administrative services for the
Portfolio, and Morgan is willing to provide such services for the Portfolio,
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Duties of Morgan. Subject to the general direction and control of the
Board of Trustees of the Portfolio, Morgan shall perform such financial, fund
accounting oversight, administrative and related services as may from time to
time be reasonably requested by the Portfolio, which shall include without
limitation: a) preparing the Portfolio's tax returns and financial statements
and other financial reports for review by the Portfolio's independent auditors;
b) coordinating the Portfolio's annual audit; c) developing the Portfolio's
budget and establishing its rate of expense accrual; d) preparing the tax
information necessary for investors including the calculation of the allocated
amount of income attributable to each investor, if any, which has been subject
to withholding or other tax assessments or other governmental charges by
non-United States tax jurisdictions; e) calculating the daily partnership
allocation for the Portfolio from the financial information furnished to it by
the Portfolio's custodian; f) overseeing the Portfolio's custodian and transfer
agent, including monitoring the daily income accrual and collection, expense
accrual and disbursement, and computation of the Portfolio's net asset value;
verifying the calculation of performance data for the Portfolio; monitoring the
trade reporting for portfolio securities transactions; monitoring the pricing
of portfolio securities and compliance with amortized cost procedures, if
applicable; and monitoring the computation of the Portfolio's income and
capital gains and confirming that they have been properly allocated to the
holders of record; and g) providing such other related services as the
Portfolio may reasonably request, to the extent permitted by applicable law.
Morgan shall provide all personnel and facilities necessary in order for it to
provide the services contemplated by this paragraph.
Morgan assumes no responsibilities under this Agreement other than to
render the services called for hereunder, on the terms and conditions provided
herein. In the performance of its duties under this Agreement, Morgan will
comply with the provisions of the Declaration of Trust and By-Laws of the
Portfolio and the Portfolio's stated investment objective, policies and
restrictions, and will use its best efforts to safeguard and promote the
welfare of the Portfolio, and to comply with other policies which the Board of
Trustees may from time to time determine.
<PAGE>
2. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Morgan hereby agrees that all records which it maintains
for the Portfolio are the property of the Portfolio and further agrees to
surrender promptly to the Portfolio any such records upon the Portfolio's
request.
3. Liaison with and Opinion of the Portfolio's Independent Public
Accountants.
3.1. Morgan shall act as liaison with the Portfolio's independent public
accountants and shall provide, upon request, account analyses, fiscal year
summaries and other audit-related schedules. Morgan shall take all reasonable
action in the performance of its obligations under this Agreement to assure
that the necessary information is made available to such accountants for the
expression of their opinion, as such may be required by the Portfolio from time
to time.
3.2. Morgan shall take all reasonable action, as the Portfolio may from
time to time request, to obtain from year to year favorable opinions from the
Portfolio's independent public accountants with respect to its activities
hereunder in connection with the preparation of the Portfolio's registration
statement on Form N-1A, reports on Form N-SAR or other periodic reports to the
Securities and Exchange Commission and with respect to any other requirements
of such Commission.
4. Reports to Portfolio by Independent Public Accountants. Morgan shall
provide the Portfolio, at such times as the Portfolio may reasonably require,
with reports by independent public accountants on the accounting system and
internal accounting control relating to the services provided by Morgan under
Sections 1(d) and 1(e) of this Agreement; such reports, shall be of sufficient
scope and in sufficient detail, as may reasonably be required by the Portfolio
to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and if there are no such inadequacies, the
reports shall so state.
5. Allocation of Charges and Expenses. Morgan shall bear all of the
expenses incurred in connection with carrying out its duties hereunder. The
Portfolio shall pay the usual, customary or extraordinary expenses incurred by
the Portfolio, including without limitation compensation of Trustees; federal
and state governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute allocable to the Portfolio; fees and expenses of
the Portfolio's administrator, Morgan pursuant to the Investment Advisory
Agreement and this Agreement, Pierpont Group, Inc. pursuant to the Portfolio
Fund Services Agreement, the Portfolio's custodian for all services to the
Portfolio (including safekeeping of funds and securities and maintaining
required books and accounts), independent auditors, legal counsel and of any
transfer agent, registrar or dividend disbursing agent of the Portfolio;
brokerage expenses; expenses of preparing, printing and mailing reports,
notices, proxy statements and reports to investors and governmental offices and
commissions; expenses of preparing and mailing agendas and supporting documents
for meetings of Trustees and committees of Trustees; insurance premiums;
expenses of calculating the net asset value of interests in the Portfolio;
expenses of meetings of investors in the Portfolio; expenses relating to the
issuance of interests in the Portfolio; and litigation and indemnification
expenses.
6. Compensation of Morgan. For the services to be rendered and the expenses
to be borne by Morgan hereunder, the Portfolio shall pay Morgan a fee at an
annual rate as set forth on Schedule A attached hereto. This fee will be
computed daily and payable as agreed by the Portfolio and Morgan, but no more
frequently than monthly.
<PAGE>
7. Limitation of Liability of Morgan. Morgan shall not be liable for any
error of judgment or mistake of law or for any act or omission in the
performance of its duties hereunder, except for willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of the
reckless disregard of its obligations and duties hereunder.
8. Activities of Morgan. The services of Morgan to the Portfolio are not
to be deemed to be exclusive, Morgan being free to engage in any other
business or to render services of any kind to any other corporation, firm,
individual or association.
9. Termination. This Agreement may be terminated at any time, without the
payment of any penalty, by the Board of Trustees of the Portfolio or by Morgan,
in each case on not more than 60 days' nor less than 30 days' written notice to
the other party.
10. Subcontracting by Morgan. Morgan may subcontract for the performance of
its obligations hereunder with any one or more persons; provided, however,
that, unless the Portfolio otherwise expressly agrees in writing, Morgan shall
be as fully responsible to the Portfolio for the acts and omissions of any
subcontractor as it would be for its own acts or omissions.
11. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
12. Amendments. This Agreement may be amended only by mutual written
consent.
13. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements,
terminations, extensions or other understandings relating to Morgan's provision
of financial, fund accounting oversight or administrative services for the
Portfolio. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. Should any part of this
Agreement be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefit of the parties hereto
and their respective successors, to the extent permitted by law.
14. Notice. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid (1) to Morgan at Morgan Guaranty Trust Company
of New York, 522 Fifth Avenue, New York, New York 10036, Attention: Managing
Director, Funds Management Division, or (2) to the Portfolio c/o Signature
Financial Group (Grand Cayman), Ltd. at P.O. Box 2494, Elizabethan Square, 2nd
Floor, George Town, Grand Cayman BWI, Attention: Treasurer.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written. The
undersigned officer of the Portfolio has executed this Agreement not
individually, but as an officer of the
<PAGE>
Portfolio under the Portfolio's Declaration of Trust, dated June 16, 1993, as
amended, and the obligations of this Agreement are not binding upon any of the
Trustees or investors of the Portfolio individually, but bind only the trust
estate.
THE NON-U.S. FIXED INCOME PORTFOLIO
By /s/ Matthew Healey
Matthew Healey, Chairman and
Chief Executive Officer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By /s/ Kathleen H. Tripp
Kathleen H. Tripp, Vice President
<PAGE>
SCHEDULE A
ADMINISTRATIVE SERVICES FEES
PORTFOLIOS LISTED ON SCHEDULE B (THE "MASTER PORTFOLIOS")
The financial, fund accounting oversight and administrative services
fee charged to and payable by each Master Portfolio is equal to its
proportionate share of an annual complex-wide charge. This charge is calculated
daily based on the aggregate net assets of the Master Portfolios and in
accordance with the following annual schedule:
0.06% on the first $7 billion of the Master Portfolios' aggregate
average daily net assets; and
0.03% of the Master Portfolios' aggregate average daily net assets
in excess of $7 billion
The portion of this charge payable by each Master Portfolio is determined by
the proportionate share that its net assets bear to the total of the net assets
of the Master Portfolios, The Pierpont Funds, The JPM Institutional Funds, The
JPM Advisor Funds and other investors in the Master Portfolios for which Morgan
provides similar services.
Approved:December __, 1995
Effective December 29, 1995
<PAGE>
SCHEDULE B
MASTER PORTFOLIOS
The Treasury Money Market Portfolio
The Money Market Portfolio
The Tax Exempt Money Market Portfolio
The Short Term Bond Portfolio
The U.S. Fixed Income Portfolio
The Tax Exempt Bond Portfolio
The Selected U.S. Equity Portfolio
The U.S. Small Company Portfolio
The Non-U.S. Equity Portfolio
The Diversified Portfolio
The Non-U.S. Fixed Income Portfolio
The Emerging Markets Equity Portfolio
The New York Total Return Bond Portfolio
The Asia Growth Portfolio, a series of The Series Portfolio
The Japan Equity Portfolio, a series of The Series Portfolio
The European Equity Portfolio, a series of The Series Portfolio
Revised December, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from The Non-U.S.
Fixed Income Portfolio Annual Report dated September 30, 1995 and is qualified
in its entirety by reference to such Annual Report.
</LEGEND>
<CIK> 0000930893
<NAME> THE NON-U.S. FIXED INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 272,945,669
<INVESTMENTS-AT-VALUE> 276,911,297
<RECEIVABLES> 7,887,945
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,038,613
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<NET-CHANGE-FROM-OPS> 29,963,270
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<DISTRIBUTIONS-OF-INCOME> 0
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