AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1995
File Nos. 33- and 811-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
BT GLOBAL INVESTORS
(Exact Name of Registrant as Specified in Charter)
6 ST. JAMES AVENUE, BOSTON MASSACHUSETTS 02116
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 423-0800
THOMAS M. LENZ
SIGNATURE FINANCIAL GROUP, INC.
6 ST. JAMES AVENUE
BOSTON, MASSACHUSETTS 02116
(Name and Address of Agent for Service)
copies to:
Burton S. Leibert, Esq. Anne B. McMillen
Willkie Farr & Gallagher Bankers Trust Company
One Citicorp Center One Bankers Trust Plaza
153 East 53rd Street 130 Liberty Street
New York, New York 10022-4669 New York, New York 10006
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
PURSUANT TO RULE 24F-2(A)(1), REGISTRANT HEREBY DECLARES THAT AN INDEFINITE
NUMBER OF ITS SHARES OF BENEFICIAL INTEREST (PAR VALUE $0.00001 PER SHARE) IS
BEING REGISTERED BY THIS REGISTRATION STATEMENT.
BT Investment Portfolios, International Equity Portfolio and Capital
Appreciation Portfolio have also executed this Registration Statement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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BT0445
BT GLOBAL INVESTORS
FORM N-1A
CROSS REFERENCE SHEET
Part A
ITEM NO. HEADINGS IN PROSPECTUS
1. Cover Page . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . The Funds -- Expense Summary
3. Condensed Financial
Information . . . . . . . . . . Not applicable
4. General Description of
Registrant . . . . . . . . . . . Cover Page; The Funds -- Who May Want
to Invest; The Funds in Detail --
Risk Factors and Certain Securities
and Investment Practices
5. Management of the Fund . . . . . The Funds -- Expense Summary; The
Funds in Detail -- Management of the
Trust and the Portfolios
6. Capital Stock and Other
Securities . . . . . . . . . . . Cover Page; The Funds in Detail --
Performance; Your Account -- Types of
Accounts, How to Buy Shares, How to Sell
Shares; Shareholder and Account
Policies -- Dividends, Capital Gains and
Taxes, Exchange Restrictions, Sales
Charge Reductions and Waivers, Additional
Information About the Trust and
Portfolios
7. Purchase of Securities Being
Offered . . . . . . . . . . . . Your Account -- How to Buy Shares;
Shareholder and Account Policies --
Valuation Details, Exchange
Restrictions, Sales Charge Reductions
and Waivers
8. Redemption or Repurchase . . . . Your Account -- How to Sell Shares;
Shareholder and Account Policies --
Valuation Details, Exchange Restrictions
9. Pending Legal Proceedings . . . Not applicable
<PAGE>
Part B Headings in Statement of
ITEM NO. ADDITIONAL INFORMATION
10. Cover Page . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . Table of Contents
12. General Information and
History . . . . . . . . . . . . Not applicable
13. Investment Objectives and
Policies . . . . . . . . . . . . Risk Factors and Certain Securities
and Investment Practices
14. Management of the Fund . . . Management of the Trust and the
Portfolios
15. Control Persons and Principal
Holders of Securities . . . . . Management of the Trust and the
Portfolios (See also Prospectus--
Additional Information About the
Trust and Portfolios")
16. Investment Advisory and Other
Services . . . . . . . . . . . . Management of the Trust and the
Portfolios
17. Brokerage Allocation and Other
Practices . . . . . . . . . . . Risk Factors and Certain Securities
and Investment Practices
18. Capital Stock and Other
Securities . . . . . . . . . . . Organization of the Trust; (see also
Prospectus--"Dividends, Capital Gains
and Taxes")
19. Purchase, Redemption and Pricing
of Securities Being Offered . . Valuation of Securities; Redemption
in Kind
20. Tax Status . . . . . . . . . . . Taxation (see also Prospectus--
"Dividends, Capital Gains and Taxes")
21. Underwriters . . . . . . . . . . See Prospectus--"Breakdown of Expenses"
22. Calculations of Yield Quotations
of Money Market Funds . . . . . Performance Information
23. Financial Statements . . . . . . Financial Statements
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BT GLOBAL INVESTORS
PROSPECTUS
, 1995
GLOBAL HIGH YIELD SECURITIES FUND
CAPITAL APPRECIATION FUND
SMALL CAP FUND
INTERNATIONAL EQUITY FUND
PACIFIC BASIN EQUITY FUND
LATIN AMERICAN EQUITY FUND
BT Global Investors (the "Trust") is an open-end, management investment company
(mutual fund) which currently consists of eleven funds. Shares of the six
diversified funds listed above (each, a "Fund") are offered by this prospectus.
UNLIKE OTHER OPEN-END MANAGEMENT INVESTMENT COMPANIES (MUTUAL FUNDS), EACH FUND
SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE
ASSETS ("ASSETS") IN THE CORRESPONDING PORTFOLIO WHICH IS A SEPARATE FUND WITH
AN IDENTICAL INVESTMENT OBJECTIVE. SEE "SPECIAL INFORMATION CONCERNING MASTER-
Feeder Fund Structure" on page __.
Bankers Trust Company ("Bankers Trust") is the investment adviser (the
"Adviser") of each Portfolio.
Please read this Prospectus before investing, and keep it on file for future
reference. It contains important information, including how each Fund invests
and the services available to shareholders.
To learn more about each Fund and its investments, you can obtain a copy of the
Funds' Statement of Additional Information ("SAI"), dated , 1995, which contains
each Portfolio's most recent financial report and portfolio listing. The SAI has
been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by reference (legally forms a part of the Prospectus). For a
free copy of this document, contact the Funds at 6 St. James Avenue, Boston, MA
02116, or your Investment Professional.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, BANKERS
TRUST OR ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
GLOBAL HIGH YIELD SECURITIES PORTFOLIO AND LATIN AMERICAN EQUITY PORTFOLIO MAY
INVEST IN LOWER-QUALITY DEBT SECURITIES, SOMETIMES CALLED "JUNK BONDS."
INVESTORS SHOULD CONSIDER THAT THESE SECURITIES CARRY GREATER RISKS, SUCH AS THE
RISK OF DEFAULT, THAN OTHER DEBT SECURITIES. REFER TO "RISK FACTORS AND CERTAIN
SECURITIES AND INVESTMENT PRACTICES -- RISKS OF INVESTING IN HIGH YIELD
SECURITIES (JUNK BONDS)" ON PAGE __ FOR FURTHER INFORMATION.
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LATIN AMERICAN EQUITY PORTFOLIO AND GLOBAL HIGH YIELD SECURITIES PORTFOLIO MAY
BORROW MONEY FOR INVESTMENT IN SECURITIES. SUCH LEVERAGE WILL EXAGGERATE ANY
INCREASE OR DECREASE THE VALUE OF SHARES IN THE FUNDS. BORROWING ALSO INVOLVES
COSTS TO THE PORTFOLIO. SEE "RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT
PRACTICES -- LEVERAGE" ON PAGE __ HEREIN. EACH OF THESE FUNDS MAY BE CONSIDERED
A SPECULATIVE INVESTMENT AND IS DESIGNED FOR AGGRESSIVE INVESTORS.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
2
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CONTENTS
THE FUNDS __ WHO MAY WANT TO INVEST
__ INVESTMENT PRINCIPLES AND RISKS Each Fund's
overall approach to investing.
__ EXPENSE SUMMARY Sales charges and annual
operating expenses.
THE FUNDS IN DETAIL __ INVESTMENT OBJECTIVES AND POLICIES
__ RISK FACTORS AND CERTAIN SECURITIES AND
INVESTMENT PRACTICES
__ SPECIAL INFORMATION CONCERNING MASTER-FEEDER
FUND STRUCTURE
__ SECURITIES AND INVESTMENT PRACTICES
__ PERFORMANCE How each Fund has done over time.
__ MANAGEMENT OF THE TRUST AND THE PORTFOLIOS
YOUR ACCOUNT __ TYPES OF ACCOUNTS Different ways to setup your
account, including tax-sheltered retirement
plans.
__ HOW TO BUY SHARES Opening an account and making
additional investments.
__ HOW TO SELL SHARES Taking money out and closing
your account.
__ INVESTOR SERVICES to help you manage your
account.
SHAREHOLDER AND
ACCOUNT POLICIES __ DIVIDENDS, CAPITAL GAINS AND TAXES
__ VALUATION DETAILS Share price calculations and
the timing of purchases and redemptions.
__ EXCHANGE RESTRICTIONS
__ SALES CHARGE REDUCTIONS AND WAIVERS
__ ADDITIONAL INFORMATION ABOUT THE TRUST AND
PORTFOLIOS
__ APPENDIX
3
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THE FUNDS
The Trust seeks to achieve the investment objective of each Fund by investing
all the Assets of the Fund in the corresponding Portfolio.
GLOBAL HIGH YIELD SECURITIES FUND'S investment objective is high current income
from investment in a diversified portfolio of high yield, non-investment grade
debt securities issued in many of the world's securities markets. Capital
appreciation will be considered when consistent with the primary investment
objective of high current income. See "Risk Factors and Certain Securities and
Investment Practices."
CAPITAL APPRECIATION FUND'S investment objective is long-term capital growth;
the production of any current income is secondary to this objective. The
Portfolio invests primarily in growth-oriented common stocks of medium sized
domestic corporations and, to a lesser extent, foreign corporations.
SMALL CAP FUND'S investment objective is long-term capital growth; the
production of any current income is secondary to this objective. The Portfolio
seeks to provide long-term capital growth by investing primarily in equity
securities of smaller sized growth companies.
INTERNATIONAL EQUITY FUND'S investment objective is long-term capital
appreciation from investment in foreign equity securities (or other securities
with equity characteristics); the production of any current income is incidental
to this objective. The Portfolio invests primarily in established companies
based in developed countries outside the United States, but the Portfolio may
also invest in emerging market securities. See "Risk Factors and Certain
Securities and Investment Practices."
PACIFIC BASIN EQUITY FUND'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. See "Risk Factors and Certain
Securities and Investment Practices."
LATIN AMERICAN EQUITY FUND'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in, Latin America; the production of any current income is incidental
to this objective. See "Risk Factors and Certain Securities and Investment
Practices."
WHO MAY WANT TO INVEST
Shares of each Fund are offered through this Prospectus to investors who engage
an Investment Professional.
Capital Appreciation Fund, Small Cap Fund, International Equity Fund, Pacific
Basin Equity Fund, and Latin American Equity Fund are designed for investors who
4
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are willing to accept short-term domestic and/or foreign stock market
fluctuations in pursuit of potentially high long-term returns. These Funds
invest for growth and do not pursue income.
In addition, International Equity Fund, Global High Yield Securities Fund, Latin
American Equity Fund and Pacific Basin Equity Fund may also be appropriate for
investors who want to pursue their investment goals in markets outside of the
United States. By including international investments in your portfolio, you can
achieve an extra level of diversification and also participate in opportunities
around the world.
Each Fund is not in itself a balanced investment plan. You should consider your
investment objective and tolerance for risk when making an investment decision.
When you sell your Fund shares, they may be worth more or less than what you
paid for them.
INVESTMENT PRINCIPLES AND RISKS
The value of each Portfolio's investments varies based on many factors. Stock
values fluctuate, sometimes dramatically, in response to the activities of
individual companies and general market and economic conditions. Over time,
however, stocks have shown greater long-term growth potential than other types
of securities.
The value of bonds fluctuates based on changes in domestic or foreign interest
rates, the credit quality of the issuer, market conditions, and other economic
and political news. In general, bond prices rise when interest rates fall, and
vice versa. This effect is usually more pronounced for longer-term securities.
Lower-quality securities offer higher yields, but also carry more risk.
Because many foreign investments are denominated in foreign currencies, changes
in the value of these currencies can significantly affect a Fund's share price.
General economic factors in the various world markets can also impact the value
of your investment, especially for securities in emerging markets. Many
investments in emerging markets can be considered speculative, and therefore may
offer higher income (for debt funds) and total return potential, but
significantly greater risk.
Bankers Trust may use various investment techniques to hedge a Portfolio's
risks, but there is no guarantee that these strategies will work as intended.
When you sell your Fund shares, they may be worth more or less than what you
paid for them.
EXPENSE SUMMARY
ANNUAL OPERATING EXPENSES are paid out of the assets of each Portfolio and Fund.
Each Portfolio pays an investment advisory fee and an administrative services
fee to Bankers Trust. Each Fund also incurs other expenses such as maintaining
shareholder records and furnishing shareholder statements. Each Fund must
provide financial reports.
5
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The following table provides: (i) a summary of expenses relating to purchases
and sales of the shares of each Fund and the aggregate annual operating expenses
of the Fund and the corresponding Portfolio as a percentage of average daily net
assets of each Fund; and (ii) an example illustrating the dollar cost of such
expenses on a $1,000 investment in each Fund. THE TRUSTEES OF THE TRUST BELIEVE
THAT THE AGGREGATE PER SHARE EXPENSES OF EACH FUND AND THE CORRESPONDING
PORTFOLIO WILL BE LESS THAN OR APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE
FUND WOULD INCUR IF THE TRUST RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND
THE ASSETS OF EACH FUND WERE INVESTED DIRECTLY IN THE TYPE OF SECURITIES BEING
HELD BY THE CORRESPONDING PORTFOLIO.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchases
(as a percentage of offering price) 4.75%
Maximum Sales Charge on Reinvested
Distributions None
Redemption Fee None
Shareholder transaction expenses are charges you pay when you buy, sell,
exchange, or hold shares of a Fund. Lower front-end sales charges may be
available with purchases of $50,000 or more and/or in conjunction with various
programs. See "Valuation Details," on page __, for an explanation of how and
when these charges apply.
ANNUAL OPERATING EXPENSES
GLOBAL HIGH YIELD SECURITIES FUND
Investment advisory fee
(after reimbursement or waiver) 0.41%
12b-1 fees 0.35
Other expenses
(after reimbursements or waivers) 0.99%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 1.75%
CAPITAL APPRECIATION FUND
Investment advisory fee
(after reimbursement or waiver) 0.52%
12b-1 fees 0.50
Other expenses
(after reimbursements or waivers) 0.48%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 1.50%
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SMALL CAP FUND
Investment advisory fee
(after reimbursement or waiver) 0.37%
12b-1 fees 0.50
Other expenses
(after reimbursements or waivers) 0.63%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 1.50%
INTERNATIONAL EQUITY FUND
Investment advisory fee
(after reimbursement or waiver) 0.56%
12b-1 fees 0.50
Other expenses
(after reimbursements or waivers) 0.64%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 1.70%
PACIFIC BASIN EQUITY FUND
Investment advisory fee
(after reimbursement or waiver) 0.74%
12b-1 fees 0.50
Other expenses
(after reimbursements or waivers) 0.61%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 1.85%
LATIN AMERICAN EQUITY FUND
Investment advisory fee
(after reimbursement or waiver) 0.41%
12b-1 fees 0.50
Other expenses
(after reimbursements or waivers) 1.34%
----
TOTAL OPERATING EXPENSES
(after reimbursements or waivers) 2.25%
EXPENSE TABLE EXAMPLE: You would pay the following expenses, including the
maximum front-end sales charge on a $1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each time period:
EXAMPLES
1 YEAR 3 YEARS
------ -------
GLOBAL HIGH YIELD SECURITIES FUND $64 $100
CAPITAL APPRECIATION FUND $62 $93
SMALL CAP FUND $62 $93
INTERNATIONAL EQUITY FUND $64 $99
PACIFIC BASIN EQUITY FUND $65 $103
LATIN AMERICAN EQUITY FUND $69 $114
7
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The expense table and the example above show the costs and expenses that an
investor will bear directly or indirectly as a shareholder of a Fund. Bankers
Trust has voluntarily agreed to waive a portion of its investment advisory fee
with respect to each Portfolio. Without such waiver, each Portfolio's investment
advisory fee would be equal to the following: Global High Yield Securities
Portfolio -- 0.80%; Capital Appreciation Portfolio -- 0.65%; Small Cap Portfolio
-- 0.65%; International Equity Portfolio -- 0.65%; Pacific Basin Equity
Portfolio -- 0.75%; and Latin American Equity Portfolio -- 1.00%. The expense
table and the example reflect a voluntary undertaking by Bankers Trust or
Signature Broker- Dealer Services, Inc. ("SBDS"), as the distributor (the
"Distributor") of the shares of each Fund, to waive or reimburse expenses such
that the total operating expenses of each Fund and the corresponding Portfolio
(as a percentage of the Fund's average daily net assets) will not exceed the
following: Global High Yield Securities Fund -- 1.85%; Capital Appreciation Fund
-- 1.50%; Small Cap Fund -- 1.50%; International Equity Fund -- 1.70%; Pacific
Basin Equity Fund -- 1.85%; and Latin American Equity Fund -- 2.25%. In the
absence of this undertaking, assuming total assets of $25 million in each Fund,
it is estimated that "Total Operating Expenses" would be as follows: Global High
Yield Securities Fund -- 2.82%; Capital Appreciation Fund -- 2.41%; Small Cap
Fund -- 2.41%; International Equity Fund -- 2.67%; Pacific Basin Equity Fund --
2.78%; and Latin American Equity Fund -- 3.18%. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN. Moreover, while each example assumes a 5%
annual return, actual performance will vary and may result in a return greater
or less than 5%.
12b-1 fees for each Fund include a shareholder service fee and a distribution
fee. Shareholder service fees are paid by a Fund to SBDS to enable SBDS to
compensate Investment Professionals for providing personal shareholder service
and/or maintenance of shareholder accounts. Distribution fees are paid by a Fund
to SBDS to compensate Investment Professionals for services and expenses in
connection with the distribution of the applicable Fund's shares. Long-term
shareholders may pay more than the economic equivalent of the maximum sales
charges permitted by the National Association of Securities Dealers, Inc.
("NASD"), due to 12b-1 fees.
For more information about each Fund's and each Portfolio's expenses
see "Management of the Trust and the Portfolios" and "Valuation Details."
THE FUNDS IN DETAIL
INVESTMENT OBJECTIVES AND POLICIES
The Trust seeks to achieve the investment objective of each Fund by investing
all of its Assets in the corresponding Portfolio, which has the same investment
objective as the Fund. Since the investment characteristics of each Fund will
correspond directly to those of the corresponding Portfolio, the following is a
discussion of the various investments of and techniques employed by each
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Portfolio. Additional information about the investment policies of each
Portfolio appears in "Risk Factors and Certain Securities and Investment
Practices" in this Prospectus and in the Funds' SAI. There can be no assurance
that the investment objective of either a Fund or the corresponding Portfolio
will be achieved.
GLOBAL HIGH YIELD SECURITIES PORTFOLIO'S investment objective is high current
income from investment in a diversified portfolio of high yield, non-investment
grade debt securities issued in many of the world's securities markets. Capital
appreciation will be considered when consistent with the primary investment
objective of high current income. The Portfolio intends to invest in Brady bonds
and other sovereign debt and in high risk, lower quality debt securities
commonly referred to as "junk bonds" and regarded as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation as well as in the debt securities of
issuers located in emerging markets.
Under normal circumstances, at least 65% of the Portfolio's assets will be
invested in high yield, non-investment grade debt securities of both
governmental and corporate issuers in both the major industrialized markets and
the so-called "emerging markets." See "Risk Factors and Certain Securities and
Investment Practices -- Risks of Investing in Foreign Securities" and "--
Emerging Markets."
Although Bankers Trust considers both industrialized and emerging countries
eligible for investment pursuant to the Portfolio's objective, the Portfolio
will not be invested in all such markets at all times. Furthermore, investing in
some emerging markets may be neither feasible nor desirable from time to time,
due to the lack of adequate custodial arrangements for the Portfolio's assets,
exchange controls and overly burdensome repatriation rules, the lack of
organized and liquid securities markets, and unacceptable political risks. Under
normal circumstances, the Portfolio will invest in at least three emerging
markets countries. See "Risk Factors and Certain Securities and Investment
Practices -- Risks of Investing in Foreign Securities" and " -- Emerging
Markets."
The Portfolio generally invests in securities which are rated BBB or lower by
Standard & Poor's Corporation ("S&P") or Baa or lower by Moody's Investors
Service, Inc. ("Moody's") or, if unrated, of comparable quality in the opinion
of Bankers Trust. Securities which are rated BBB by S&P or Baa by Moody's
possess some speculative characteristics. A description of the rating categories
is attached to this Prospectus. THERE IS NO LOWER LIMIT WITH RESPECT TO THE
RATING CATEGORIES FOR SECURITIES IN WHICH THE PORTFOLIO MAY INVEST. SEE "RISK
FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES -- RISKS OF INVESTING
HIGH YIELD SECURITIES (JUNK BONDS)."
The Portfolio is not required to dispose of debt securities whose credit quality
declines at some point after the security is purchased; however, no more than
25% of the Portfolio's assets will be invested at any time in securities rated
less than CCC by S&P or Caa by Moody's or, if unrated, of comparable quality in
the opinion of Bankers Trust. S&P's lowest rating for bonds is CI, which is
reserved for income bonds on which no interest is being paid and D, which is
reserved for debt in default and in respect of which payment of interest or
repayment of
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principal is in arrears. Moody's lowest rating is C, which is applied to bonds
which have extremely poor prospects for ever attaining any real investment
standing. The Portfolio may, from time to time, purchase defaulted debt
securities if, in the opinion of Bankers Trust, the issuer may resume interest
payments in the near future. The Portfolio will not invest more than 10% of its
total assets (at the time of purchase) in defaulted debt securities, which may
be illiquid. Other than as set forth above, there is no restriction on the
percentage of the Portfolio's assets which may be invested in bonds of a
particular rating.
The Portfolio invests in debt obligations allocated among diverse markets and
denominated in various currencies, including multi-currency units such as
European Currency Units ("ECUs"). The Portfolio may purchase securities that are
issued by the government or a company or financial institution of one country
but denominated in the currency (or multi-currency unit) of another country.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, floating rate bonds, zero coupon bonds, sovereign and supranational
debt obligations, Brady bonds, loan participations and assignments, convertible
bonds, preferred stock, foreign currency exchange transactions, options on
foreign currencies, options on foreign bond indexes, futures contracts on
foreign bond indexes, options on futures contracts, Rule 144A securities,
when-issued or delayed delivery securities, securities lending, repurchase
agreements and reverse repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.
The Portfolio may borrow money for investment purposes. See "Risk Factors and
Certain Securities and Investment Practices -- Leverage."
CAPITAL APPRECIATION PORTFOLIO'S investment objective is long-term capital
growth; the production of any current income is secondary to this objective. The
Portfolio invests primarily in growth-oriented common stocks of medium sized
domestic corporations and, to a lesser extent, foreign corporations.
Bankers Trust, employs a flexible investment program in pursuit of the
Portfolio's investment objective. The Portfolio is not restricted to investments
in specific market sectors. The Portfolio may invest in any market sectors and
in companies of any size and may take advantage of any investment opportunity
with attractive long-term prospects. The Adviser takes advantage of its market
access and the research available to it to select investments in promising
growth companies that are involved in new technologies, new products, foreign
markets and special developments, such as research discoveries, acquisitions,
recapitalizations, liquidations or management changes, and companies whose stock
may be undervalued by the market. These situations are only illustrative of the
types of investment the Portfolio may make. The Portfolio is free to invest in
any common stock which in the Adviser's judgment provides above average
potential for long-term growth of capital and income.
The Portfolio will generally invest a majority of its assets in equity
securities of medium-sized companies (companies with a market capitalization of
between $500
10
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million and $2 billion), but may invest in securities of companies having
various levels of market capitalization, including smaller companies whose
securities may be more volatile and less liquid than securities issued by larger
companies with higher levels of net worth. Investments will be in companies in
various industries. Industry and company fundamentals along with key investment
themes and various quantitative screens will be used in the investment process.
Criteria for selection of individual securities include the issuer's competitive
environment and position, prospects for growth, managerial strength, earnings
momentum and quality, underlying asset value, relative market value and overall
marketability. The Portfolio will follow a disciplined selling process to lessen
market risks.
The Portfolio may also invest up to 25% of its assets in similar securities of
foreign issuers. For further information on foreign investments see "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
Foreign Securities."
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, options on stocks, options on stock indexes, futures contracts on
stock indexes, options on futures contracts, foreign currency exchange
transactions, options on foreign currencies, Rule 144A securities, when-issued
and delayed delivery securities, securities lending, and repurchase agreements.
See "Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the SAI for further information.
SMALL CAP PORTFOLIO'S investment objective is long-term capital growth; the
production of any current income is secondary to this objective.
The Portfolio seeks to provide long term capital growth by investing primarily
in equity securities of smaller U.S. companies. The Portfolio's policy is to
invest in equity securities of smaller companies that Bankers Trust believes are
in an early stage or transitional point in their development and have
demonstrated or have the potential for above average capital growth. The Adviser
will select companies which have the potential to gain market share in their
industry, achieve and maintain high consistent profitability or produce
increases in earnings. The Adviser also seeks companies with strong company
management and superior fundamental strength.
The Adviser employs a flexible investment program in pursuit of the Portfolio's
investment objective. The Portfolio is free to invest in any common stock which
in the Adviser's judgement provides above average potential for long-term growth
of capital and income.
Under normal market conditions, the Portfolio will invest at least 65% of its
assets in smaller companies (with market capitalizations less than $750 million
at time of purchase) that offer strong potential for capital growth. Small
capitalization companies have the potential to show earnings growth over time
that is well above the growth rate of the overall economy. The Portfolio may
also invest in larger, more established companies that the Adviser believes may
offer the potential for strong capital growth due to their relative market
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position, anticipated earnings growth, changes in management or other similar
opportunities. The Portfolio will follow a disciplined selling process to lessen
market risks.
For temporary defensive purposes, when in the opinion of the Adviser that market
conditions so warrant, the Portfolio may invest all or a portion of its Assets
in common stocks of larger, more established companies or in fixed-income
securities or short-term money market securities. To the extent the Portfolio is
engaged in temporary defensive investments, the Portfolio will not be pursuing
its investment objective.
The Portfolio may also invest up to 25% of its assets in similar securities of
foreign issuers. For further information on foreign investments see "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
Foreign Securities."
OTHER INVESTMENTS AND TECHNIQUES. The Portfolio may also utilize the following
investments and investment techniques and practices: short-term investments,
options on stocks, options on stock indexes, futures contracts on stock indexes,
options on future contracts, foreign currency exchange transactions, options on
foreign currencies, Rule 144A securities, when-issued and delayed delivery
securities, securities lending and repurchase agreements. See "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the SAI
for further information.
INTERNATIONAL EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment in foreign equity securities (or other securities
with equity characteristics); the production of any current income is incidental
to this objective. The Portfolio invests primarily in established companies
based in developed countries outside the United States, but the Portfolio also
invests in securities of issuers in emerging markets. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities" and "-- Emerging Markets." Under normal circumstances, the Portfolio
will invest at least 65% of the value of its total assets in the equity
securities of issuers based in at least three countries other than the United
States. The Portfolio's investments will generally be diversified among several
geographic regions and countries.
In countries and regions with well-developed capital markets where more
information is available, Bankers Trust will seek to select individual
investments for the Portfolio. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, managerial
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Portfolio may invest in securities of companies
having various levels of net worth, including smaller companies whose securities
may be more volatile than securities offered by larger companies with higher
levels of net worth.
In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
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with applicable regulations, the Portfolio may seek to achieve country exposure
through use of options or futures based on an established local index or through
investment in other registered investment companies. Investment in other
investment companies is limited in amount by the Investment Company Act of 1940,
as amended (the "1940 Act"), will involve the indirect payment of a portion of
the expenses, including advisory fees, of such other investment companies and
may result in a duplication of fees and expenses.
The Portfolio invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets
and may invest in restricted or unlisted securities.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, foreign currency exchange transactions, options on foreign
currencies, American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs") and European Depositary Receipts ("EDRs"), options on stocks, options
on foreign stock indexes, futures contracts on foreign stock indexes, options on
futures contracts, Rule 144A securities, when-issued and delayed delivery
securities, securities lending and repurchase agreements. See "Risk Factors and
Certain Securities and Investment Practices" in this Prospectus and in the SAI
for further information.
PACIFIC BASIN EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in the Pacific Basin region, other than Japan; the production of any
current income is incidental to this objective. Investment in such securities
involves certain considerations which are not normally involved in investment in
securities of U.S. issuers, and an investment in the Fund may be considered
speculative.
For purposes of this Prospectus, "issuers domiciled in, or doing business in,
the Pacific Basin region (other than Japan)" shall include securities of
issuers: (1) which are organized under the laws of Pacific Basin countries (see
below); (2) for which the principal securities trading market is in a Pacific
Basin country; or (3) which derive a significant proportion (at least 50
percent) of their revenues or profits from goods produced or sold, investments
made, or services performed in the countries of the Pacific Basin or which have
at least 50 percent of their assets situated in the countries of the Pacific
Basin. It is expected under normal conditions that at least 65% of the
Portfolio's assets will be invested in the equity securities of issuers located
in at least three countries in the Pacific Basin.
For the purpose of this Prospectus, the "Pacific Basin" includes, but is not
limited to, the following countries: Hong Kong, India, Indonesia, Malaysia, New
Zealand, Pakistan, the Philippines, the People's Republic of China ("China"),
Singapore, Sri Lanka, South Korea, Thailand, Taiwan and Vietnam. See "Risk
Factors and Certain Securities and Investment Practices -- Risks of Investing in
Foreign Securities" in this Prospectus and "Risk Factors and Certain Securities
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and Investment Practices -- Risks of Investing in China and China Region" in the
SAI.
The Portfolio will be managed using a disciplined, value-oriented investment
philosophy that stresses the inherent value of, and the medium term outlook for,
the companies under examination. Experience has proven that often the real basis
of a business is quite different from that perceived by the market: a
misconception that usually results in its shares trading below its true business
or replacement value. The exploitation of this "perception/reality" gap is a
hallmark of the investment style that has been adopted for the Portfolio, and a
potential source of value for its investors.
"Value" investing means trying to find companies which are mispriced by the
market for reasons of neglect, fashion or misconception. These opportunities
arise out of legislative changes, industrial restructuring and technology
advancements, for example. As a result, Bankers Trust and the sub-investment
adviser attach great importance to analyzing trends and accessing possible
breaks with traditional price patterns. At the company level, the emphasis is
placed on assessing the inherent "business" value of the firm. While this often
varies from the stock market's valuation, the Adviser and the sub-investment
adviser believe a company's stock price tends to gravitate to their "business"
value over time.
The Portfolio's investments will generally be diversified among several
geographic regions and countries in the Pacific Basin. Criteria for determining
the appropriate distribution of investment among various countries and regions
include the prospects for relative growth among foreign countries, expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships and the range of alternative opportunities
available to international investors.
The Portfolio will not invest more than 20% of the value of its total assets in
issuers domiciled in China.
In countries and regions where capital markets are underdeveloped or not easily
accessed and information is difficult to obtain, the Portfolio may choose to
invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options on futures based on an established local index or
through investment in other registered investment companies. Investment in other
investment companies is limited in amount by the 1940 Act, will involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies and may result in a duplication of fees and expenses.
The Portfolio invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets
and may invest in restricted unlisted securities.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may also utilize the
following investments and investment techniques and practices: short-term
investments, foreign currency exchange transactions, options on foreign
currencies, ADRs, GDRs and EDRs, options on stocks, options on foreign stock
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indexes, futures contracts on foreign stock indexes, options on futures
contracts, 144A securities, when-issued and delayed delivery securities,
securities lending and repurchase agreements. See "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI for
further information.
LATIN AMERICAN EQUITY PORTFOLIO'S investment objective is long-term capital
appreciation from investment primarily in the equity securities (or other
securities with equity characteristics) of companies domiciled in, or doing
business in, Latin America; the production of any current income is incidental
to this objective. Investment in such securities involves certain considerations
which are not normally involved in investment in securities of U.S. issuers, and
an investment in the Fund may be considered speculative. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities" and "-- Emerging Markets." It is expected under normal conditions
that at least 65% of the Portfolio's total assets will be invested in the equity
securities of Latin American issuers.
The Fund may borrow money for investment purposes. See "Risk Factors and Certain
Securities and Investment Practices -- Leverage."
The Portfolio invests in securities listed on foreign or domestic securities
exchanges and securities traded in foreign or domestic over-the-counter markets
and may invest in restricted or unlisted securities.
For purposes of this Prospectus, "Latin America" is defined as Mexico, and all
countries in Central America and South America, including Argentina, Brazil,
Chile, Colombia, Peru and Venezuela.
As used in this Prospectus, "securities of Latin American issuers" is defined
as: (i) securities of companies the principal securities trading market for
which is in Latin America; (ii) securities, traded in any market, of companies
that derive 50% or more of their total revenue from either goods or services
produced in Latin America or sales made in Latin America; (iii) securities of
companies organized under the laws of, and with a principal office in, Latin
America; or (iv) securities issued or guaranteed by the government of a country
in Latin America, its agencies or instrumentalities, political subdivisions or
the central bank of such a country. Determinations as to eligibility will be
made by Bankers Trust, under the supervision of the Board of Trustees of BT
Investment Portfolios, based on publicly available information and inquiries
made to the issuers.
Bankers Trust intends to consider investment only in those countries in Latin
America in which it believes investing is feasible and does not involve undue
political risks. As of the date of this Prospectus, this list included
Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Under normal
circumstances, the Portfolio's investments will be diversified among at least
three Latin American countries.
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The Portfolio may invest in securities of companies having various levels of net
worth, including small companies whose securities may be more volatile than
securities offered by larger companies with higher levels of net worth.
In other countries and regions where capital markets are underdeveloped or not
easily accessed and information is difficult to obtain, the Portfolio may choose
to invest only at the market level. Here, to the extent available and consistent
with applicable regulations, the Portfolio may seek to achieve country exposure
through the use of options or futures based on an established local index or
through investment in other registered investment companies. Investment in other
investment companies is limited in amount by the 1940 Act, will involve the
indirect payment of a portion of the expenses, including advisory fees, of such
other investment companies and may result in a duplication of fees and expenses.
FIXED INCOME INVESTMENTS. For purposes of seeking capital appreciation, the
Portfolio may invest up to 35% of its total assets in debt securities of Latin
American issuers which are rated at least C by S&P or Moody's or, if unrated, of
comparable quality in the opinion of Bankers Trust. As an operating policy,
which may be changed by the Board of Trustees of BT Investment Portfolios, the
Portfolio will not invest more than 10% of its total assets in debt securities
rated BBB or lower by S&P or Baa or lower by Moody's. Securities which are rated
BBB by S&P or Baa by Moody's possess speculative characteristics. Bonds rated C
by S&P are of the lowest quality and may be used when the issuer has filed a
bankruptcy petition, but debt payments are still being paid. Moody's lowest
rating is C, which is applied to bonds which have extremely poor prospects of
ever attaining any real investment standing. See "Risk Factors and Certain
Securities and Investment Practices -- Risks of Investing in High Yield
Securities (Junk Bonds)." Certain debt securities can provide the potential for
capital appreciation based on various factors such as changes in interest rates,
economic and market conditions, improvement in an issuer's ability to repay
principal and pay interest and ratings upgrades. Additionally, convertible bonds
offer the potential for capital appreciation through the conversion feature,
which enables the holder of the bond to benefit from increases in the market
price of the securities into which they are convertible.
OTHER INVESTMENTS AND INVESTMENT TECHNIQUES. The Portfolio may also utilize the
following investments and investment techniques and practices: Brady bonds,
foreign currency exchange transactions, options on foreign currencies, ADRs,
GDRs and EDRs, options on stocks, options on foreign stock indexes, futures
contracts on foreign stock indexes, options on futures contracts, when-issued
and delayed delivery securities, Rule 144A securities, short-term investments,
repurchase agreements, reverse repurchase agreements and securities lending. See
"Risk Factors and Certain Securities and Investment Practices" in this
Prospectus and in the SAI for further information.
RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about types of instruments
in which a Portfolio may invest, and strategies Bankers Trust may employ in
pursuit of a Portfolio's investment objective. A summary of risks and
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restrictions associated with these instrument types and investment practices is
included as well.
Bankers Trust may not buy all of these instruments or use all of these
techniques to the full extent permitted unless it believes that doing so will
help a Portfolio achieve its goal. Holdings and recent investment strategies are
described in the financial reports of a Fund and the corresponding Portfolio,
which are sent to Fund shareholders twice a year. For a free SAI or financial
report, call your Investment Professional.
RISKS OF INVESTING IN FOREIGN SECURITIES
Investors should realize that investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the United States. Investors should realize
that the value of a Portfolio's foreign investments 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
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 U.S. 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. In general, less information is publicly
available with respect to foreign issuers than is available with respect to U.S.
companies. Most foreign companies are also not subject to the uniform accounting
and financial reporting requirements applicable to issuers in the United States.
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.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, the value of the net assets of a Portfolio as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates. In order to protect against uncertainty in the level of future
foreign currency exchange rates, each Portfolio is also authorized to enter into
certain foreign currency exchange transactions. Furthermore, a Portfolio's
foreign investments may be less liquid and their prices may be more volatile
than comparable investments in securities of U.S. companies. The settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. Finally, there is generally
less government supervision and regulation of securities exchanges, brokers and
issuers in foreign countries than in the United States.
EMERGING MARKETS
The world's industrialized markets generally include but are not limited to the
following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
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Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and
the United States; the world's emerging markets generally include but are not
limited to the following: Argentina, Bolivia, Brazil, Bulgaria, Chile, China,
Colombia, Costa Rica, the Czech Republic, Ecuador, Egypt, Greece, Hungary,
India, Indonesia, Israel, the Ivory Coast, Jordan, Malaysia, Mexico, Morocco,
Nicaragua, Nigeria, Pakistan, Peru, the Philippines, Poland, Portugal, Romania,
Russia, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Uruguay, Venezuela, Vietnam and Zimbabwe.
Investment in securities of issuers based in underdeveloped countries entails
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 smaller size of the market for such
securities and a low or nonexistent 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) in the case of Eastern Europe and in China and other Asian
countries, the absence of developed capital markets and legal structures
governing private or foreign investment and private property and the possibility
that recent favorable economic and political developments could be slowed or
reversed by unanticipated events.
So long as the Communist Party continues to exercise a significant or, in some
countries, dominant role in Eastern European countries or in China and other
Asian countries, investments in such countries will involve risks of
nationalization, expropriation and confiscatory taxation. The Communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there may be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, a Portfolio could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into U.S. dollars, the
conversion rates may be artificial to the actual market values and may be
adverse to Fund shareholders.
In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive than in
the United States. Such markets have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment opportunities.
Inability to dispose of a security due to settlement problems could result
either in losses to the Portfolio due to subsequent declines in the value of the
security or, if the Portfolio has entered into a contract to sell the security,
could result in possible liability to the purchaser.
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RISKS OF INVESTING IN HIGH YIELD SECURITIES (JUNK BONDS)
Lower-rated securities, including securities rated from BB to D by S&P or Ba to
C by Moody's or, if unrated, of comparable quality in the opinion of Bankers
Trust, will usually offer higher yields than higher-rated securities. However,
there is more risk associated with these investments. This is because of the
reduced creditworthiness and increased risk of default that these securities
carry. Lower-rated securities generally tend to reflect short-term corporate and
market developments to a greater extent than higher-rated securities which react
primarily to fluctuations in the general level of interest rates. Lower rated
securities also involve greater sensitivity to significant increases in interest
rates. Short-term corporate and market developments affecting the prices and
liquidity of lower-rated securities could include adverse news impacting major
issues or underwriters or dealers in lower-rated or unrated securities. In
addition, since there are fewer investors in lower-rated securities, it may be
harder to sell securities at an optimum time.
An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than originally expected at the time such bonds were
purchased. In the event of a restructuring, the Portfolio may bear additional
legal or administrative expenses in order to maximize recovery from an issuer.
The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds.
The risk of loss due to default by the issuer is significantly greater for the
holders of high yield securities because such securities are generally unsecured
and are often subordinated to other obligations of the issuer. During an
economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield securities may experience financial stress and
may not have sufficient revenues to meet their interest payment obligations. An
issuer's ability to service its debt obligations may also be adversely affected
by specific corporate developments, its inability to meet specific projected
business forecasts, or the unavailability of additional financing.
Factors adversely affecting the market value of high yield and other Portfolio
securities will adversely affect the corresponding Fund's net asset value. In
addition, a Portfolio may incur additional expenses to the extent it is required
to seek recovery upon a default in the payment of principal or interest on its
portfolio holdings.
SPECIAL INFORMATION CONCERNING MASTER-FEEDER FUND STRUCTURE Unlike other
open-end management investment companies (mutual funds) which directly acquire
and manage their own portfolio securities, each Fund seeks to achieve its
investment objective by investing all of its Assets in the corresponding
Portfolio, a separate registered investment company with the same investment
objectives as the Fund. Therefore, an investor's interest in the
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Portfolio's securities is indirect, like investments in other investment
companies and pooled investment vehicles. In addition to selling a beneficial
interest to the corresponding Fund, each Portfolio may sell beneficial interests
to other mutual funds or institutional investors. Such investors will invest in
a Portfolio on the same terms and conditions and will pay a proportionate share
of the Portfolio's expenses. However, the other investors investing in a
Portfolio are not required to sell their shares at the same public offering
price as the Fund due to variations in sales commissions and other operating
expenses. Therefore, investors in a Fund should be aware that these differences
may result in differences in returns experienced by investors in the different
funds that invest in the Portfolio. Such differences in returns are also present
in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from Bankers Trust, as the
Administrator, at (800) 422-6577.
The master-feeder structure has been developed relatively recently, so
shareholders should carefully consider this investment approach.
Smaller funds investing in a Portfolio may be materially affected by the actions
of larger funds investing in the Portfolio. For example, if a large fund
withdraws from a Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns (however, this possibility
exists as well for traditionally structured funds which have large institutional
investors). Additionally, a Portfolio may become less diverse, resulting in
increased portfolio risk. Also, funds with a greater pro rata ownership in a
Portfolio could have effective voting control of the operations of the
Portfolio. Except as permitted by the SEC, whenever the Trust is requested to
vote on matters pertaining to a Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same proportion
as the votes of the Fund's shareholders. Fund shareholders who do not vote will
not affect the Trust's votes at the Portfolio meeting. The percentage of the
Trust's votes representing Fund shareholders not voting will be voted by the
Trustees or officers of the Trust in the same proportion as the Fund
shareholders who do, in fact, vote. Certain changes in the Portfolio's
investment objectives, policies or restrictions may require the Fund to withdraw
its interest in the Portfolio. Any such withdrawal could result in a
distribution "in kind" of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund could
incur brokerage, tax or other charges in converting the securities to cash. In
addition, the distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund. Notwithstanding the
above, there are other means for meeting redemption requests, such as borrowing.
A Fund may withdraw its investment from the Portfolio at any time, if the Board
of Trustees of the Trust determines that it is in the best interests of the
shareholders of the Fund to do so. Upon any such withdrawal, the Board of
Trustees of the Trust would consider what action might be taken, including the
investment of all the Assets of the Fund in another pooled investment entity
having the same investment objectives as the Fund or the retaining of an
investment adviser to manage the Fund's Assets in accordance with the investment
policies described herein with respect to the corresponding Portfolio.
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Each Fund's investment objective is not a fundamental policy and may be changed
upon notice to but without the approval of the Fund's shareholders. If there is
a change in a Fund's investment objective, the Fund's shareholders should
consider whether the Fund remains an appropriate investment in light of their
then-current needs. The investment objective of each Portfolio is also not a
fundamental policy. Shareholders of the Funds will receive 30 days prior written
notice with respect to any change in the investment objective of a Fund or the
corresponding Portfolio. See "Risk Factors and Certain Securities and Investment
Policies" in the SAI for a description of the fundamental policies of each
Portfolio that cannot be changed without approval by the holders of "a majority
of the outstanding voting securities" (as defined in the 1940 Act) of the
Portfolio.
For descriptions of the investment objective, policies and restrictions of each
Portfolio, see "The Funds in Detail" herein and "Risk Factors and Certain
Securities and Investment Practices" in this Prospectus and in the SAI. For
descriptions of the management of the Trust and the Portfolios, see "Management
of the Trust and the Portfolios" herein and in the SAI. For descriptions of the
expenses of the Portfolio, see "The Funds -- Expense Summary" herein and
"Management of the Trust and the Portfolios" herein and in the SAI.
SECURITIES AND INVESTMENT PRACTICES
EQUITY SECURITIES. As used herein, "equity securities" are defined as common
stock, preferred stock, trust or limited partnership interests, rights and
warrants to subscribe to or purchase such securities, sponsored or unsponsored
ADRs, EDRs and GDRs, and convertible securities, consisting of debt securities
or preferred stock that may be converted into common stock or that carry the
right to purchase common stock. Common stocks, the most familiar type, represent
an equity (ownership) interest in a corporation. Although equity securities have
a history of long-term growth in value, their prices fluctuate based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these factors.
DEBT SECURITIES. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. Debt securities, loans, and other direct debt
have varying degrees of quality and varying levels of sensitivity to changes in
interest rates. Longer-term bonds are generally more sensitive to interest rate
changes than short-term bonds.
Lower-quality foreign government securities are often considered to be
speculative and involve greater risk of default or price changes, or they may
already be in default. These risks are in addition to the general risks
associated with foreign securities.
CONVERTIBLE BONDS. A convertible security is a bond or preferred stock which may
be converted at a stated price within a specific period of time into a specified
number of shares of common stock of the same or different issuer. Convertible
securities are senior to common stock in a corporation's capital structure, but
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usually are subordinated to non-convertible debt securities. While providing a
fixed income stream -- generally higher in yield than in the income derivable
from a common stock but lower than that afforded by a non-convertible debt
security -- a convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital appreciation of
common stock into which it is convertible.
In general, the market value of a convertible security is the higher of its
investment value (its value as a fixed income security) or its conversion value
(the value of the underlying shares of common stock if the security is
converted). As a fixed income security, the market value of a convertible
security generally increases when interest rates decline and generally decreases
when interest rates rise; however, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.
PREFERRED STOCK. Preferred stock has a preference in liquidation (and, generally
dividends) over common stock but is subordinated in liquidation to debt. As a
general rule the market value of preferred stocks with fixed dividend rates and
no conversion rights varies inversely with interest rates and perceived credit
risk, with the price determined by the dividend rate. Some preferred stocks are
convertible into other securities, for example common stock, at a fixed price
and ratio or upon the occurrence of certain events. The market price of
convertible preferred stocks generally reflects an element of conversion value.
Because many preferred stocks lack a fixed maturity date, these securities
generally fluctuate substantially in value when interest rates change; such
fluctuations often exceed those of long-term bonds of the same issuer. Some
preferred stocks pay an adjustable dividend that may be based on an index,
formula, auction procedure or other dividend rate reset mechanism. In the
absence of credit deterioration, adjustable rate preferred stocks tend to have
more stable market values than fixed rate preferred stocks.
All preferred stocks are also subject to the same types of credit risks of the
issuer as corporate bonds. In addition, because preferred stock is junior to
debt securities and other obligations of an issuer, deterioration in the credit
rating of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar yield characteristics.
Preferred stocks may be rated by S&P and Moody's although there is no minimum
rating which a preferred stock must have (and a preferred stock may not be
rated) to be an eligible investment for a Portfolio. Bankers Trust expects,
however, that generally the preferred stocks in which a Portfolio invests will
be rated at least CCC by S&P or Caa by Moody's or, if unrated, of comparable
quality in the opinion of Bankers Trust. Preferred stocks rated CCC by S&P are
regarded as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations and represent the highest degree of speculation
among securities rated between BB and CCC; preferred stocks rated Caa by Moody's
are likely to be in arrears on dividend payments. Moody's rating with respect to
preferred stocks does not purport to indicate the future status of payments of
dividends.
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WARRANTS are instruments which entitle the holder to buy underlying equity
securities at a specific price for a specific period of time. A warrant tends to
be more volatile than its underlying securities and ceases to have value if it
is not exercised prior to its expiration date. In addition, changes in the value
of a warrant do not necessarily correspond to changes in the value of its
underlying securities.
U.S. GOVERNMENT SECURITIES are high-quality debt securities issued or guaranteed
by the U.S. Treasury or by an agency or instrumentality of the U.S. government.
Not all U.S. government securities are backed by the full faith and credit of
the United States. For example, securities issued by the Federal Farm Credit
Bank or by the Federal National Mortgage Association are supported by the
instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. However, securities issued by other agencies or instrumentalities
are supported only by the credit of the entity that issued them.
ADRS, GDRS AND EDRS are certificates evidencing ownership of shares of a
foreign- based issuer held in trust by a bank or similar financial institution.
Designed for use in U.S. and European securities markets, respectively, ADRs,
GDRs and EDRs are alternatives to the purchase of the underlying securities in
their national markets and currencies. ADRs, GDRs and EDRs are subject to the
same risks as the foreign securities to which they relate. See "Risk Factors and
Certain Securities and Investment Practices -- Risks of Investing in Foreign
Securities."
ZERO COUPON SECURITIES are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile, and certain zero coupon
securities move in the same direction as interest rates.
FLOATING RATE BONDS may have interest rates that move in tandem with a
benchmark, helping to stabilize their prices.
SOVEREIGN AND SUPRANATIONAL DEBT OBLIGATIONS. Debt instruments issued or
guaranteed by foreign governments, agencies, and supranational organizations
("sovereign debt obligations"), especially sovereign debt obligations of
developing countries, may involve a high degree of risk, and may be in default
or present the risk of default. The issuer of the obligation or the governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of principal
and interest may depend on political as well as economic factors.
BRADY BONDS. "Brady bonds" are bonds issued as a result of a restructuring of a
country's debt obligations to commercial banks under the "Brady plan." Brady
bonds have been issued by the governments of Argentina, Costa Rica, Mexico,
Nigeria, Uruguay and Venezuela, Brazil and the Philippines, as well as other
emerging market countries. Most Brady bonds are currently rated below BBB by S&P
or Baa by Moody's. While Bankers Trust is not aware of the occurrence of any
payment defaults on Brady bonds, investors should recognize that these debt
securities have been issued only recently and, accordingly, do not have a long
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payment history. Brady bonds may be collateralized or uncollateralized, are
issued in various currencies (primarily the U.S. dollar) and are actively traded
in the secondary market for Latin American debt.
RULE 144A SECURITIES are securities in the United States that are not registered
for sale under Federal securities laws but which can be resold to institutions
under the SEC's Rule 144A. Provided that a dealer or institutional trading
market in such securities exists, these restricted securities are treated as
exempt from the 15% limit on illiquid securities. Under the supervision of the
Board of Trustees of the Portfolio, Bankers Trust determines the liquidity of
restricted securities and, through reports from Bankers Trust, the Board will
monitor trading activity in restricted securities. Because Rule 144A is
relatively new, it is not possible to predict how these markets will develop. If
institutional trading in restricted securities were to decline, the liquidity of
the Portfolio could be adversely affected. No more than 10% of the Portfolio's
assets may be invested in securities restricted as to transfer or re-sale,
including Rule 144A securities.
WHEN ISSUED AND DELAYED DELIVERY SECURITIES. Each Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take place 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 no income accrues to the Portfolio until
settlement takes place. The Portfolio maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio buys a security at
one price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Portfolio
temporarily transfers possession of a portfolio instrument to another party in
return for cash. This could increase the risk of fluctuation in the fund's yield
or in the market value of its assets. A reverse repurchase agreement is a form
of borrowing and will be counted towards each Portfolio's borrowing
restrictions. See "Risk Factors and Certain Securities and Investment Practices
-- Leverage" below and in the SAI.
INVESTMENT COMPANIES. With respect to certain countries in which capital markets
are either less developed or not easily accessed, investments by the Portfolio
may be made through investment in other registered investment companies that in
turn are authorized to invest in the securities of such countries. Investment in
other investment companies is limited in amount by the 1940 Act, will involve
the indirect payment of a portion of the expenses, including advisory fees, of
such other investment companies and may result in a duplication of fees and
expenses.
SHORT-TERM INVESTMENTS. Each Portfolio intends to stay invested in the
securities described above to the extent practical in light of its objective and
long-term investment perspective. However, a Portfolio's assets may be invested
in high
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<PAGE>
quality short-term investments with remaining maturities of 397 days or less to
meet anticipated redemptions and expenses for day-to-day operating purposes and
when, in Bankers Trust's opinion, it is advisable to adopt a temporary defensive
position because of unusual and adverse conditions affecting the respective
markets.
SECURITIES LENDING. Each Portfolio is permitted to lend up to 30% of the total
value of its securities. These loans must be secured continuously by cash or
equivalent collateral or by a letter of credit at least equal to the market
value of the securities loaned plus accrued income. By lending its securities,
the Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by the opportunity to receive interest on the
collateral. 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.
LEVERAGE. Global High Yield Securities Portfolio and Latin American Equity
Portfolio may each borrow up to one-third of the value of its total assets, from
banks or through the use of reverse repurchase agreements, to increase its
holdings of portfolio securities. Under the 1940 Act, each Portfolio is required
to maintain continuous asset coverage of 300% with respect to such borrowings
and to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% due to market fluctuations or
otherwise, even if such liquidations of a Portfolio's holdings may be
disadvantageous from an investment standpoint.
Leveraging by means of borrowing may exaggerate the effect of any increase or
decrease in the value of each Portfolio's securities and the corresponding
Fund's net asset value and money borrowed by a Portfolio will be subject to
interest and other costs (which may include commitment fees and/or the cost of
maintaining minimum average balances) which may or may not exceed the income
received from the securities purchased with borrowed funds.
LOAN PARTICIPATIONS AND ASSIGNMENTS. Global High Yield Securities Portfolio may
invest in fixed and floating rate loans ("loans") arranged through private
negotiations between a borrower and one or more institutions ("lenders"). The
majority of the Portfolio's investments in loans in emerging markets is expected
to be in the form of participations in loans ("participations") and assignments
of portions of loans from third parties ("assignments"). The Portfolio may also
invest in loans, participations or assignments of loans to borrowers located in
the industrialized world. Participations typically will result in the
Portfolio's having a contractual relationship only with the lender, not the
borrower. The Portfolio will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
participation and only upon receipt by the lender of the payments from the
borrower. In connection with purchasing participations, the Portfolio generally
will have no right to enforce compliance by the borrower with the terms of the
loan agreement relating to the loan ("loan agreement"), nor any rights of
set-off against the borrower, and the Portfolio may not directly benefit from
any collateral supporting the loan in which it has purchased the participation.
As a result, the Portfolio will assume the credit risk of both the borrower and
the lender that is selling the participation. In the event of the insolvency of
the lender selling the
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participation, the Portfolio may be treated as a general creditor of the lender
and may not benefit from any set-off between the lender and the borrower. The
Portfolio will acquire participations only if the lender interpositioned between
the Portfolio and the borrower is determined by Bankers Trust to be
creditworthy. When the Portfolio purchases assignments from lenders, the
Portfolio will acquire direct rights against the borrower on the loan; however,
since assignments are arranged through private negotiations between the
potential assignees and assignors, the rights and obligations acquired by the
Portfolio as the purchaser of an assignment may differ from, and be more limited
than, those held by the assigning lender.
The Portfolio may have difficulty disposing of assignments and participations.
The liquidity of such securities is limited and the Portfolio anticipates that
such securities could only be sold to a limited number of institutional
investors. The lack of a liquid secondary market could have an adverse impact on
the value of such securities and on the Portfolio's ability to dispose of
particular assignments or participations when necessary to meet the Portfolio's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for assignments and participations also may make it more
difficult in valuing the Portfolio and, therefore, calculating the net asset
value per share of the Fund. All assignments and participations shall be
considered to be illiquid securities by the Portfolio. The investment by the
Portfolio in illiquid securities, including assignments and participations, is
limited to a total of 15% of net assets.
DERIVATIVES
Each Portfolio may invest in various instruments that are commonly known as
derivatives. Generally, a derivative is a financial arrangement, the value of
which is based on, or "derived" from, a traditional security, asset, or market
index. Some "derivatives" such as mortgage-related and other asset-backed
securities are in many respects like any other investment, although they may be
more volatile or less liquid than more traditional debt securities. There are,
in fact, many different types of derivatives and many different ways to use
them. There are a range of risks associated with those uses. Futures and options
are commonly used for traditional hedging purposes to attempt to protect a fund
from exposure to changing interest rates, securities prices, or currency
exchange rates and as a low cost method of gaining exposure to a particular
securities market without investing directly in those securities. However, some
derivatives are used for leverage, which tends to magnify the effects of an
instrument's price changes as market conditions change. Leverage involves the
use of a small amount of money to control a large amount of financial assets,
and can in some circumstances, lead to significant losses. Bankers Trust will
use derivatives only in circumstances where they offer the most efficient means
of improving the risk/reward profile of a Portfolio. The use of derivatives for
non-hedging purposes may be considered speculative.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Each Portfolio may enter into foreign
currency exchange transactions to convert to and from different foreign
currencies and to convert foreign currencies to and from the U.S. dollar. A
Portfolio either enters into these transactions on a spot (i.e., cash) basis at
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the spot rate prevailing in the foreign currency exchange market or uses forward
contracts to purchase or sell foreign currencies.
A forward foreign currency exchange contract is an obligation by a Portfolio to
purchase or to 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
transferable in the interbank market conducted 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. Neither spot transactions nor forward foreign currency
exchange contracts eliminate fluctuations in the prices of a Portfolio's
securities or in foreign exchange rates, or prevent loss if the prices of these
securities should decline.
A Portfolio may enter into foreign currency hedging transactions in an attempt
to protect against changes in foreign currency exchange rates between the trade
and settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated investment position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward 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.
OPTIONS ON FOREIGN CURRENCIES. Each Portfolio may write covered put and call
options and purchase put and call options on foreign currencies for the purpose
of protecting against declines in the U.S. dollar value of portfolio securities
and against increases in the U.S. dollar cost of securities to be acquired. Each
Portfolio may use options on currency to cross-hedge, which involves writing or
purchasing options on one currency to hedge against changes in exchange rates
for a different, but related currency. As with other types of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and the Portfolio could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may be used to hedge against fluctuations in exchange rates although, in the
event of exchange rate movements adverse to a Portfolio's position, it may
forfeit the entire amount of the premium plus related transaction costs. In
addition, a Portfolio may purchase call options on a currency when the
investment adviser anticipates that the currency will appreciate in value.
There is no assurance that a liquid secondary market on an options exchange will
exist for any particular option, or at any particular time. If a Portfolio is
unable to effect a closing purchase transaction with respect to covered options
it has written, the Portfolio will not be able to sell the underlying currency
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<PAGE>
or dispose of assets held in a segregated account until it closes out the
options or the options expire or are exercised. Similarly, if the Portfolio is
unable to close out options it has purchased, it would have to exercise the
options in order to realize any profit and will incur transaction costs. The
Portfolio pays brokerage commissions or spreads in connection with its options
transactions.
OPTIONS ON STOCKS. Each Portfolio (except the Global High Yield Securities
Portfolio) may write and purchase options on stocks. A call option gives the
purchaser of the option the right to buy, and obligates the writer to sell, the
underlying stock at the exercise price at any time during the option period.
Similarly, a put option gives the purchaser of the option the right to sell, and
obligates the writer to buy the underlying stock at the exercise price at any
time during the option period. A covered call option with respect to which a
Portfolio owns the underlying stock sold by the Portfolio exposes the Portfolio
during the term of the option to possible loss of opportunity to realize
appreciation in the market price of the underlying stock or to possible
continued holding of a stock which might otherwise have been sold to protect
against depreciation in the market price of the stock. A covered put option sold
by a Portfolio exposes the Portfolio during the term of the option to a decline
in price of the underlying stock.
OPTIONS ON SECURITIES INDEXES. Each Portfolio may purchase and write put and
call options on stock or bond indexes listed on domestic and foreign stock
exchanges, in lieu of direct investment in the underlying securities or for
hedging purposes. A stock or bond index fluctuates with changes in the market
values of the securities included in the index.
Options on securities indexes are generally similar to options on stocks except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of securities at a specified price, an option on a stock
or bond index gives the holders the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of the exercise,
multiplied by (b) a fixed "index multiplier."
Successful use by a Portfolio of options on security indexes will be subject to
Bankers Trust's ability to predict correctly movement in the direction of the
security market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual
securities.
FUTURES CONTRACTS ON SECURITIES INDEXES. A Portfolio may enter into contracts
providing for the making and acceptance of a cash settlement based upon changes
in the value of an index of domestic or foreign securities ("Futures
Contracts"). This investment technique may be used as a low-cost method of
gaining exposure to a particular securities market without investing directly in
those securities or to hedge against anticipated future changes in general
market prices which otherwise might either adversely affect the value of
securities held by the Portfolio or adversely affect the prices of securities
which are intended to be
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purchased at a later date for the Portfolio. A Futures Contract may also be
entered into to close out or offset an existing futures position.
When used for hedging purposes, each transaction in Futures Contracts involves
the establishment of a position which will move in a direction opposite to that
of the investment being hedged. If these hedging transactions are successful,
the futures position taken for the Portfolio will rise in value by an amount
which approximately offsets the decline in value of the portion of the
Portfolio's investments that is being hedged. Should general market prices move
in an unexpected manner, the full anticipated benefits of Futures Contracts may
not be achieved or a loss may be realized.
The risks of Futures Contracts also include a potential lack of liquidity in the
secondary market and incorrect assessments of market.
Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good faith deposit against performance of obligations under
Futures Contracts written for a Portfolio. A Portfolio may not purchase or sell
a Futures Contract if immediately thereafter its margin deposits on its
outstanding Futures Contracts, other than Futures Contracts used for hedging
purposes, would exceed 5% of the market value of the Portfolio's total assets.
OPTIONS ON FUTURES CONTRACTS. Each Portfolio may invest in options on futures
contracts for similar purposes.
There can be no assurance that the use of these portfolio strategies will be
successful.
ASSET COVERAGE. To assure that a Portfolio's use of futures and related options,
as well as when-issued and delayed-delivery securities and foreign currency
exchange transactions, are not used to achieve investment leverage, a Portfolio
will cover such transactions, as required under applicable interpretations, of
the SEC, either by owning the underlying securities, entering into an
off-setting transaction, or by establishing a segregated account with the
Portfolio's custodian containing high grade liquid debt securities in an amount
at all times equal to or exceeding the Portfolio's commitment with respect to
these instruments or contracts.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Portfolio for the periods indicated were as
follows: Global High Yield Securities Portfolio -- 347% for the period from
December 14, 1993 (commencement of operations) to September 30, 1994; Capital
Appreciation Portfolio -- 157% and 137% for the fiscal year ended December 31,
1994 and the period from March 9, 1993 (commencement of operations) to December
31, 1993, respectively; Small Cap Portfolio -- 154% for the period from October
21, 1993 (commencement of operations) to September 30, 1994; International
Equity Portfolio -- 15%, 17% and 7% for the fiscal years ended December 31,
1994, 1993 and the period from August 4, 1992 (commencement of operations) to
December 31, 1992, respectively; Pacific Basin Equity Portfolio -- 40% for the
period from November 1, 1993 (commencement of operations) to September 30, 1994;
and Latin American Equity Portfolio -- 124% for the period from October 25, 1993
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(commencement of operations) to September 30, 1994. These rates will vary from
year to year. High turnover rates increase transaction costs and may increase
investable capital gains. Bankers Trust considers these effects when evaluating
the anticipated benefits of short-term investing.
PERFORMANCE
Each Portfolio's recent strategies and holdings, and the corresponding Fund's
performance, is detailed twice a year in the Funds' financial reports, which are
sent to all Fund shareholders.
For current Fund performance or a free copy of the Funds' financial report,
please contact your Investment Professional.
Mutual fund performance is commonly measured as TOTAL RETURN and/or YIELD. Each
Fund's performance is affected by the expenses of that Fund. The exclusion of
any applicable sales charge from a performance calculation produces a higher
return.
EXPLANATION OF TERMS
TOTAL RETURN is the change in value of an investment in a Fund over a given
period, assuming reinvestment of any dividends and capital gains. A cumulative
total return reflects actual performance over a stated period of time. An
AVERAGE annual total return is a hypothetical rate of return that, if achieved
annually, would have produced the same cumulative total return if performance
had been constant over the entire period. Average annual total return
calculations smooth out variations in performance; they are not the same as
actual year-by- year results. Average annual total returns covering periods of
less than one year assume that performance will remain constant for the rest of
the year.
Average annual and cumulative total returns may or may not include the effect of
paying the maximum applicable sales charge.
Historical performance information for any period or portion thereof prior to
the commencement of investment operations of a Fund will be that of the
corresponding Portfolio, adjusted to assume that all charges and operating
expenses of the Fund and the Portfolio which are then in effect were deducted
during such periods.
TOTAL RETURNS (AS OF SEPTEMBER 30, 1995)
<TABLE>
<CAPTION>
Average Cumulative
Annual Total Total
Return for Return for
1 YEAR LIFE OF FUND LIFE OF FUND
------ ------------ ------------
<S> <C> <C> <C>
Global High Yield Securities Fund % %(a) %(a)
Capital Appreciation Fund % %(b) %(b)
Small Cap Fund % %(c) %(c)
International Equity Fund % %(d) %(d)
Pacific Basin Equity Fund % %(e) %(e)
Latin American Equity Fund % %(f) %(f)
</TABLE>
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(a)Portfolio commenced operations on December 14, 1993.
(b)Portfolio commenced operations on March 9, 1993.
(c)Portfolio commenced operations on October 21, 1993.
(d)Portfolio commenced operations on August 4, 1992.
(e)Portfolio commenced operations on November 1, 1993.
(f)Portfolio commenced operations on October 25, 1993.
YIELD refers to the income generated by an investment in a Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders. This difference may be significant for a
Fund investing in a Portfolio whose investments are denominated in foreign
currencies.
Performance information may include comparisons of a Fund's investment results
to various unmanaged indices or results of other mutual funds or investment or
savings vehicles. From time to time, Fund rankings may be quoted from various
sources, such as Lipper Analytical Services, Inc., Value Line and Morningstar,
Inc.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the total return of a Fund will vary depending upon
interest rates, the current market value of the securities held by the
corresponding Portfolio and changes in the expenses of the Fund or Portfolio. In
addition, during certain periods for which total return may be provided, Bankers
Trust or SBDS may have voluntarily agreed to waive portions of their fees, or
reimburse certain operating expenses of a Fund or Portfolio, on a month-to-month
basis. Such waivers will have the effect of increasing the Fund's net income
(and therefore its yield and total return) during the period such waivers are in
effect.
TOTAL RETURNS AND YIELDS ARE BASED ON PAST RESULTS AND ARE NOT AN INDICATION OF
FUTURE PERFORMANCE.
MANAGEMENT OF THE TRUST AND THE PORTFOLIOS
BOARD OF TRUSTEES
The Trust and each Portfolio is governed by a Board of Trustees which is
responsible for protecting the interests of investors. The Trustees of the Trust
are different individuals than the Trustees of each Portfolio. See "Management
of the Trust and the Portfolios" in the SAI for more information with respect to
the Trustees and officers of the Trust and each Portfolio.
INVESTMENT ADVISER
The Trust has not retained the services of an investment adviser since the Trust
seeks to achieve the investment objective of each Fund by investing all the
Assets of the Fund in the corresponding Portfolio. Each Portfolio has retained
the services of Bankers Trust as investment adviser (the "Adviser").
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BANKERS TRUST COMPANY AND ITS AFFILIATES
Bankers Trust Company, a New York banking corporation with executive offices at
Bankers Trust Plaza, 280 Park Avenue, New York, New York 10017, is a wholly
owned subsidiary of Bankers Trust New York Corporation. Bankers Trust conducts a
variety of general banking and trust activities and is a major wholesale
supplier of financial services to the international and domestic institutional
market.
As of December 31, 1994, Bankers Trust New York Corporation was the seventh
largest bank holding company in the United States with total assets of
approximately $97 billion. Bankers Trust is a worldwide merchant bank dedicated
to servicing the needs of corporations, governments, financial institutions and
private clients through a global network of over 120 offices in more than 40
countries. Investment management is a core business of Bankers Trust, built on a
tradition of excellence from its roots as a trust bank founded in 1903. The
scope of Bankers Trust's investment management capability is unique due to its
leadership positions in both active and passive quantitative management and its
presence in major equity and fixed income markets around the world. Bankers
Trust is one of the nation's largest and most experienced investment managers
with approximately $185 billion in assets under management.
Bankers Trust has more than 50 years of experience managing retirement assets
for the nation's largest corporations and institutions. In the past, these
clients have been serviced through separate account and commingled fund
structures. Now, BT Global Investors brings Bankers Trust's extensive investment
management expertise - once available to only the largest institutions in the
U.S. - to individual investors. Bankers Trust's officers have had extensive
experience in managing investment portfolios having objectives similar to those
of each Portfolio.
Bankers Trust, subject to the supervision and direction of the Board of Trustees
of each Portfolio, manages each Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. Bankers Trust may utilize the expertise of any of its world wide
subsidiaries and affiliates to assist it in its role as investment adviser. All
orders for investment transactions on behalf of a Portfolio are placed by
Bankers Trust with broker-dealers and other financial intermediaries that it
selects, including those affiliated with Bankers Trust. A Bankers Trust
affiliate will be used in connection with a purchase or sale of an investment
for the Portfolio only if Bankers Trust believes that the affiliate's charge for
the transaction does not exceed usual and customary levels. The Portfolio will
not invest in obligations for which Bankers Trust or any of its affiliates is
the ultimate obligor or accepting bank. The Portfolio may, however, invest in
the obligations of correspondents and customers of Bankers Trust.
The Investment Advisory Agreement provides for each Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, equal on an annual basis to the
following percentages of the average daily net assets of the Portfolio for its
then-current fiscal year: Global High Yield Securities Portfolio, 0.80%; Capital
Appreciation Portfolio, 0.65%; Small Cap Portfolio, 0.65%; International Equity
Portfolio, 0.65%; Pacific Basin Equity Portfolio, 0.75%; and Latin American
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Equity Portfolio, 1.00%. With respect to Global High Yield Securities Portfolio,
Pacific Basin Equity Portfolio, and Latin American Equity Portfolio, the
investment advisory fee is higher than that of most funds, but not necessarily
higher than that of a typical international fund, due to the greater complexity,
expense and commitment of resources involved in international investing.
Bankers Trust has been advised by its counsel that, in counsel's opinion,
Bankers Trust currently may perform the services for the Trust and the
Portfolios described in this Prospectus and the SAI without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretations of relevant Federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities law.
SUB-INVESTMENT ADVISER -- PACIFIC BASIN EQUITY PORTFOLIO Bankers Trust has
entered into a sub-investment advisory agreement (the "Sub-Advisory Agreement")
with BT Fund Managers International Limited ("BT Fund Managers International"),
a wholly owned registered investment advisory subsidiary of Bankers Trust
Australia Limited ("BTAL"). BTAL is a wholly owned subsidiary of Bankers Trust
New York Corporation. Under the Sub-Advisory Agreement, Bankers Trust may
receive investment advice and research services with respect to companies based
in the Pacific Basin and may grant BT Fund Managers International investment
management authority as well as the authority to buy and sell securities if
Bankers Trust believes it would be beneficial to the Pacific Basin Equity
Portfolio. Under the Sub-Advisory Agreement, BT Fund Managers International
receives a fee from Bankers Trust for providing investment advice and research
services, accrued daily and paid monthly, at the annual rate of 0.60% of the
average daily assets of the Portfolio.
PORTFOLIO MANAGERS
Francis J.K. Ledwidge, Managing Director of Bankers Trust, is responsible for
the day-to-day management of International Equity Portfolio. Mr. Ledwidge has
been employed with Bankers Trust since 1989 and has managed the Portfolio's
assets since the Portfolio commenced operations. In addition to being manager of
the Portfolio, Mr. Ledwidge is also a senior officer for Bankers Trust's Global
and International Equity, Balanced and Fixed Income Groups in New York and in
Switzerland, and chairman of Global Strategy Process.
Maria-Elena Carrion (CFA), Vice President of Bankers Trust, is primarily
responsible for the day-to-day management of Latin American Equity Portfolio.
Ms. Carrion has been employed by Bankers Trust since April, 1993 and has managed
the Portfolio's assets since the Portfolio commenced operations. Prior to April,
1993, Ms. Carrion was employed by Latin American Securities (London) (from June,
1991 to April, 1993). Prior to June, 1991, Ms. Carrion was employed by US Trust
Company (from September, 1986 to June, 1991).
David A. Reiss, Vice President of Bankers Trust and Stephen C. Freidheim,
Managing Director of Bankers Trust are responsible for the day-to-day management
of Global High Yield Securities Portfolio. Mr. Reiss has been employed by
Bankers Trust since March, 1994 and has managed the Portfolio's assets since
March, 1994. From September, 1989 to March, 1994, Mr. Reiss was a Portfolio
Manager at Kidder Peabody Asset Management. Prior to September, 1989, he was an
associate in Mortgage Research at Goldman, Sachs & Co. Mr. Freidheim has been
employed by
33
<PAGE>
Bankers Trust since August, 1993 and has managed the Portfolio's assets since
December, 1993. From July, 1990 to July, 1993 he was a Senior Vice President and
Director of Research and Trading at Nomura Securities International. Mr.
Freidheim was also on the Board of Directors of Nomura Corporate Research and
Asset Management. Prior to July, 1990, he was Director of Research at Kidder,
Peabody High Yield Asset Management.
Paul Durham, Vice President of BTAL, is responsible for the day-to-day
management of Pacific Basin Equity Portfolio. Mr. Durham has been employed by
Bankers Trust since January, 1988 and has managed the Portfolio's assets since
November, 1993.
Mary Lisanti, Managing Director of Bankers Trust, is responsible for the
day-to-day management of Capital Appreciation Portfolio and Small Cap Portfolio.
Ms. Lisanti has been employed by Bankers Trust since February, 1993 and has
managed each Portfolio's assets since each Portfolio commenced operations. Prior
to 1993, she was a Vice President and Portfolio Manager with Lieber &
Company/The Evergreen Funds (since 1990).
Bankers Trust investment personnel may invest in securities for their own
account pursuant to a code of ethics that establishes procedures for personal
investing and restricts certain transactions.
ADMINISTRATOR
Under its Administration and Services Agreement with the Trust, Bankers Trust
calculates the net asset value of each Fund and generally assists the Board of
Trustees of the Trust in all aspects of the administration and operation of the
Funds. The Administration and Services Agreement provides for the Trust to pay
Bankers Trust a fee, accrued daily and paid monthly equal on an annual basis to
the following percentages of the average daily net assets of the Fund for its
then-current fiscal year: Global High Yield Securities Fund, 0.95%; Capital
Appreciation Fund, 0.65%; Small Cap Fund, 0.65%; International Equity Fund,
0.85%; Pacific Basin Equity Fund, 0.75%; and Latin American Equity Fund, 0.95%.
Under an Administration and Services Agreement with each Portfolio, Bankers
Trust calculates the value of the assets of the Portfolio and generally assists
the respective Board of Trustees in all aspects of the administration and
operation of the Portfolios. The Administration and Services Agreement provides
for each Portfolio to pay Bankers Trust a fee, accrued daily and paid monthly,
equal on an annual basis to the following percentages of the Portfolio's average
daily net assets for its then-current fiscal year: Global High Yield Securities
Portfolio, 0.20%; Capital Appreciation Portfolio, 0.10%; Small Cap Portfolio,
0.10%; International Equity Portfolio, 0.15%; Pacific Basin Equity Portfolio,
0.25%; and Latin American Equity Portfolio, 0.20%. Under each Administration and
Services Agreement, Bankers Trust may delegate one or more of its
responsibilities to others, including SBDS, at Bankers Trust's expense.
DISTRIBUTOR
Under its Distribution Agreement with the Trust, SBDS, as Distributor, serves as
the Trust's principal underwriter on a best efforts basis. In addition, SBDS
provides the Trust with office facilities. SBDS is a wholly owned subsidiary of
Signature Financial Group, Inc. ("SFG"). SFG and its affiliates currently
provide administration and distribution services for other registered investment
34
<PAGE>
companies. The principal business address of SFG and SBDS is 6 St. James Avenue,
Boston, Massachusetts 02116.
DISTRIBUTION AND SERVICE PLAN
Pursuant to the terms of the Trust's Distribution and Service Plan pursuant to
Rule 12b-1 under the 1940 Act (the "Plan"), each Fund shall pay SBDS service
fees equal on an annual basis up to 0.25% of each Fund's average daily net
assets as reimbursement for the costs of compensating Investment Professionals
for providing personal shareholder services and maintaining shareholder
accounts. In addition, each Fund shall pay SBDS a distribution fee equal on an
annual basis to 0.25% (0.10% in the case of Global High Yield Securities Fund)
of each Fund's average daily net assets as reimbursement for expenses incurred
in connection with any activities primarily intended to result in the sale of
the Fund's shares, including, but not limited to: printing of prospectuses,
statements of additional information and reports for other than existing
shareholders; payment of asset-based sales charges or commissions to Investment
Professionals; costs of placing advertising in various media; services of
parties in formulating sales literature; and typesetting, printing and
distribution of sales literature. All costs and expenses in connection with
implementing and operating the Plan will be paid by each Fund, subject to the
0.50% (0.35% in the case of Global High Yield Securities Fund) of net assets
limitation. All costs and expenses associated with preparing the Prospectus and
SAI and in connection with printing them for and distributing them to existing
shareholders and regulatory authorities, which costs and expenses would not be
considered distribution expenses for purposes of the Plan, will also be paid by
the Funds. To the extent expenses of SBDS under the Plan in any fiscal year of
the Trust exceed amounts payable under the Plan during that year, those expenses
may be reimbursed in a succeeding fiscal year; however, no carrying charge or
interest will be added to the amount of the expense. Expenses incurred in
connection with distribution activities will be identified to each Fund or the
other series of the Trust involved, although it is anticipated that some
activities may be conducted on a Trust-wide basis, with the result that those
activities will not be identifiable to any particular series. In the latter
case, expenses will be allocated among the series of the Trust on the basis of
their relative net assets.
CUSTODIAN AND TRANSFER AGENT
Bankers Trust acts as custodian of the assets of the Trust and each Portfolio
and serves as the transfer agent (the "Transfer Agent") for the Trust and each
Portfolio under the Administration and Services Agreement with the Trust and
each Portfolio.
YOUR ACCOUNT
TYPES OF ACCOUNTS
Read your Investment Professional's program materials in conjunction with this
Prospectus for details of services that may differ from those described in the
Prospectus and for additional fees that may apply. Some of the services and
features of this Prospectus may not be available to you. Certain features of the
Funds, such as minimum initial or subsequent investment amounts, may be modified
in these programs, and administrative charges may be imposed for the services
rendered.
35
<PAGE>
The different ways to set up (register) your account with Bankers Trust are
listed below.
The account guidelines that follow may not apply to certain Funds or to certain
retirement accounts. If your employer offers a Fund through a retirement
program, contact your employer for more information. Otherwise, call your
Investment Professional directly.
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants). Joint accounts may be joint tenants in common or joint tenants
with rights of survivorship.
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible. Retirement accounts require special applications and typically
have lower minimums.
o INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age under 70 1/2
with earned income to invest up to $2,000 per tax year. Individuals can also
invest in a spouse's IRA if the spouse has earned income of less than $250.
o ROLLOVER IRAS retain special tax advantages for certain distributions from
employer sponsored retirement plans.
o SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small business owners or
those with self-employed income (and their eligible employees) with many of the
same advantages as a Keogh, but with fewer administrative requirements.
o 401(K) PLANS allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax deferred basis. These accounts need to be
established by the trustee of the plan.
o MONEY PURCHASE/PROFIT SHARING PLANS (Keogh Plans) are tax deferred pension
accounts designated for employees of unincorporated businesses or for persons
who are self-employed.
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) TO INVEST FOR A CHILD'S EDUCATION OR
OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA). Contact your Investment Professional.
36
<PAGE>
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before on account can be opened.
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS, OR OTHER
GROUPS Contact your Investment Professional.
HOW TO BUY SHARES
Once each business day, two share prices are calculated for shares of each Fund:
the offering price and the NAV. The offering price includes a front-end sales
charge, which you pay when you buy shares of a Fund, unless you qualify for a
re- duction or waiver as described on page __. When you buy shares at the
offering price, the Transfer Agent deducts the applicable sales charge and
invests the rest at NAV.
Shares are purchased at the next offering price or NAV, as applicable,
calculated after your investment is received and accepted. The offering price
and NAV are normally calculated at 4:00 p.m. Eastern time.
If you are placing your order through an Investment Professional, it is the
responsibility of your Investment Professional to transmit your order to buy
shares to the Transfer Agent before 4:00 p.m. Eastern time.
The Transfer Agent must receive payment within five business days after an order
for shares is placed; otherwise your purchase order may be canceled and you
could be held liable for resulting fees and/or losses.
Share certificates are not available for shares of the Funds.
IF YOU ARE NEW TO BT GLOBAL INVESTORS, complete and sign an account application
and mail it along with your check. If there is no account application
accompanying this Prospectus, call your Investment Professional.
IF YOU ALREADY HAVE MONEY INVESTED IN A BT GLOBAL INVESTORS FUND, you can:
o Mail an account application with a check,
o Wire money into your account,
o Open an account by exchanging from another BT Global Investors Fund, or o
Contact your Investment Professional.
If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Contact your Investment
Professional for more information and a retirement account application.
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,500
For retirement accounts $ 500
Through automatic investment plans $1,000
37
<PAGE>
TO ADD TO AN ACCOUNT $ 250
For retirement accounts $ 100
Through automatic investment plan $ 100
MINIMUM BALANCE $1,000
For retirement accounts None
For further information on opening an account, please consult your Investment
Professional or refer to the account application.
PHONE YOUR INVESTMENT PROFESSIONAL
TO OPEN AN ACCOUNT
Contact your Investment Professional. You may exchange from another BT Global
Investors Fund ( or the BT Investment Money Market Fund) account with the same
registration, including name, address, and taxpayer ID number.
TO ADD TO AN ACCOUNT
Contact your Investment Professional or call 1- 800-422-6577. You may exchange
from another BT Global Investors Fund account (or the BT Investment Money Market
Fund) with the same registration, including name, address, and taxpayer ID
number.
MAIL
TO OPEN AN ACCOUNT
Complete and sign the account application. Make your check payable to the
complete name of the Fund of your choice. Mail to the appropriate address
indicated on the application.
TO ADD TO AN ACCOUNT
Make your check payable to the complete name of the Fund of your choice.
Indicate your Fund account number on your check and mail to the address printed
on your account statement.
Exchange by mail: call your Investment Professional for instructions.
IN PERSON
TO OPEN AN ACCOUNT
Bring your account application and check to your Investment Professional.
TO ADD TO AN ACCOUNT
Bring your check to your Investment Professional.
38
<PAGE>
WIRE
TO OPEN AN ACCOUNT
Not available.
TO ADD TO AN ACCOUNT
Call your Investment Professional or wire to:
Routing #021001033 ATTN: Bankers Trust/IFTC Deposit CREDIT: Fund Number Global
High Yield Securities Fund - 500 Capital Appreciation Fund - 501 Small Cap Fund
- 502 International Equity Fund - 503 Pacific Basin Equity Fund - 504 Latin
American Equity Fund - 505 DDA#00-226-296 FBO: (Account name) (Account number)
Specify the complete name of the fund of your choice, and include your account
number and your name.
AUTOMATICALLY
TO OPEN AN ACCOUNT
Not available.
TO ADD TO AN ACCOUNT
Use Systematic Investment Program. Sign up for this service when opening your
account, or call your Investment Professional to begin the program.
HOW TO SELL SHARES
You can arrange to take money out of your fund account at any time by selling
(redeeming) some or all of your shares. Your shares shall be sold at the next
NAV calculated after an order is received by the Transfer Agent. NAV is normally
calculated at 4:00 p.m. Eastern time.
TO SELL SHARES IN A RETIREMENT ACCOUNT, your request must be made in writing,
except for exchanges to other eligible BT Global Investors Funds (or the BT
Investment Money Market Fund), which can be requested by phone or in writing.
For a retirement distribution form contact your Investment Professional or call
1-800-422-6577.
39
<PAGE>
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR NON-RETIREMENT ACCOUNT SHARES, leave
at least $1,000 worth of shares in the account to keep it open.
TO SELL SHARES BY BANK WIRE you will need to sign up for these services in
advance.
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect
you and Bankers Trust from fraud. Your request must be made in writing and
include a signature guarantee if any of the following situations apply:
o You wish to redeem more than $100,000 worth of shares, o Your account
registration has changed within the last 30 days, o The check is being mailed to
a different address than the one on your account (record address), o The check
is being made payable to someone other than the account owner, o The redemption
proceeds are being transferred to a BT account with a different registration, or
o You wish to have redemption proceeds wired to a non-predesignated bank
account.
You should be able to obtain a signature guarantee from a bank, broker, dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency, or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
o Your name,
o The Fund's name and Fund's number,
o Your Fund account number,
o The dollar amount or number of shares to be redeemed and
o Any other applicable requirements listed in the following table.
Deliver your letter to your Investment Professional, or mail it to the following
address:
[ADDRESS]
Unless otherwise instructed, the Transfer Agent will send a check to the record
address.
PHONE YOUR INVESTMENT PROFESSIONAL
ACCOUNT TYPE
All account types except retirement. All account types.
SPECIAL REQUIREMENTS
Maximum check request: $ .
You may exchange to other BT Global Investors Funds (or the BT Investment Money
Market Fund) if both accounts are registered with the same name(s), address, and
taxpayer ID number.
MAIL OR IN PERSON
ACCOUNT TYPE
Individual, Joint Tenant, Sale Proprietorship, UGMA, UTMA
SPECIAL REQUIREMENTS
The letter of instruction (with signature guaranteed) must be signed by all
persons required to sign for transactions, exactly as their names appear on the
account and sent to your Investment Professional or the Transfer Agent.
ACCOUNT TYPE
Retirement account
SPECIAL REQUIREMENTS
The account owner should complete a retirement distribution form. Contact your
Investment Professional or call 1- 800-422-6577.
ACCOUNT TYPE
Trust
SPECIAL REQUIREMENTS
The trustee must sign the letter indicating capacity as trustee. If the
trustee's name is not in the account registration, provide a copy of the trust
document certified with the last 60 days.
ACCOUNT TYPE
Business or Organization
SPECIAL REQUIREMENTS
At least one person authorized by corporate resolution to act on the account
must sign the letter.
ACCOUNT TYPE
Executor, Administrator, Conservator/Guardian
SPECIAL REQUIREMENTS
For instructions contact your Investment Professional or call 1- 800-422-6577.
40
<PAGE>
WIRE
ACCOUNT TYPE
All account types except retirement
SPECIAL REQUIREMENTS
You must sign up for the wire feature before using it. To verify that it is in
place, contact your Investment Professional or call 1-800-422-6577. Minimum
wire: $500.00. Your wire redemption request must be received by the Transfer
Agent before 4:00 p.m. Eastern time for money to be wired on the next business
day.
INVESTOR SERVICES
BT Global Investors Funds provide a variety of services to help you manage your
account.
INFORMATION SERVICES
STATEMENTS AND REPORTS that your Investment Professional or the Transfer Agent
will send to you include the following:
o Confirmation statements (after every transaction that affects your account
balance or your account registration)
o Account statements (quarterly)
o Financial reports (every six months)
To reduce expenses, only one copy of most financial reports will be mailed, even
if you have more than one account in the Fund. Call your Investment Professional
if you need additional copies of financial reports.
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your shares and buy shares of other BT Global
Investors Funds by telephone or in writing. The shares you exchange will carry
credit for any front-end sales charge you previously paid in connection with
their purchase.
Note that exchanges out of a fund [are limited to four per calendar year and
that they may] have tax consequences for you. For detail on policies and
restrictions governing exchanges including circumstances under which a
shareholder's exchange privilege may be suspended or revoked, see page __.
SYSTEMATIC WITHDRAWAL PROGRAM lets you set up periodic redemptions from your
account. Because of the shares' front-end charge, you may not want to set up a
systematic withdrawal plan during a period when you are buying shares on a
regular basis.
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<PAGE>
One easy way to pursue your financial goals is to invest money regularly. BT
Global Investors Funds offer convenient services that let you transfer money
into your fund account, or between fund accounts automatically. While regular
investment plans do not guarantee a profit and will not protect you against loss
in a declining market, they can be an excellent way to invest for retirement, a
home, educational expenses, and other long-term financial goals. Certain
restrictions apply for retirement accounts. Call your Investment Professional
for more information.
<TABLE>
<CAPTION>
REGULAR INVESTMENT PLANS
SYSTEMATIC INVESTMENT PROGRAM
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO A BT GLOBAL INVESTORS FUND
MINIMUM MINIMUM FREQUENCY SETTING UP OR CHANGING
INITIAL SUBSEQUENT
<S> <C> <C> <C>
$1,000 $100 Monthly, bimonthly, For a new account, complete
quarterly or semi- the appropriate section on the
annually application. For existing
accounts, call your
Investment Professional for an
application. To change the
amount or frequency of your
investment,contact your
Investment Professional
directly or call 1-800-422-6577.
Call at least 10 business
days prior to your next
scheduled investment date.
</TABLE>
SYSTEMATIC EXCHANGE PROGRAM
TO MOVE MONEY FROM ONE BT GLOBAL INVESTORS FUND TO ANOTHER (OR TO THE BT
INVESTMENT MONEY MARKET FUND)
<TABLE>
<CAPTION>
Minimum Frequency Setting up or changing
<S> <C> <C>
$100 Monthly, quarterly, To establish, call your
semi-annually or Investment Professional after
annually both accounts are open.
To change the amount or
frequency of your
investment, contact your
Investment Professional
directly or call 1-800-422-6577.
The account from which the
exchanges are to be
processed must have a
minimum balance of $10,000.
The account into which the
exchange is being processed
must have a minimum of
$1,000. Call at least two business
days prior to your next scheduled
exchange date.
</TABLE>
42
<PAGE>
SHAREHOLDER AND ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
Each Fund distributes substantially all of its net income and capital gains to
shareholders each year. Each Fund distributes capital gains annually. Normally,
income dividends for Global High Yield Securities Fund and Capital Appreciation
Fund are distributed quarterly; income dividends for Small Cap Fund,
International Equity Fund, Pacific Basin Equity Fund and Latin American Equity
Fund are distributed annually.
DISTRIBUTION OPTIONS
When you open an account, specify on your account application how you want to
receive distributions. The Trust offers four options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the Fund. If you do not
indicate a choice on your application you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be automatically
reinvested in additional shares of the Fund, but you will be sent a check for
each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
4. AUTOMATIC DIVIDENDS PROGRAM. Your dividend and capital gain distributions be
automatically invested in shares of another BT Global Investors Fund (or the BT
Investment Money Market Fund).
If you select distribution option 2 or 3 and the U.S. Postal Service cannot
deliver your checks, or if your checks remain uncashed for six months, those
checks will be reinvested in your account at the current NAV and your election
may be converted to the Reinvestment Option. You may change distribution option
at anytime by notifying the Transfer Agent in writing.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash. If
distributions from a retirement account for any taxable year following the year
in which the participant reaches age 70 1/2 are less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the Internal Revenue Service (the "IRS"). The
administrator, trustee or custodian of such a retirement account will be
responsible for reporting distributions from such accounts to the IRS.
Shares purchased through reinvestment of dividend and capital gain distributions
are not subject to a sales charge.
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<PAGE>
When each of the Funds deducts a distribution from its NAV, the reinvestment
price is the applicable Fund's NAV at the close of business that day.
Distribution checks will be mailed within seven days, or longer for a December
ex-dividend date.
TAXES
As with any investment, you should consider how an investment in the Funds could
affect you. Below are some of the Funds' tax implications. If your account is
not a tax-deferred retirement account beware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions from the Funds are subject to federal
income tax and may also be subject to state or local taxes. If living outside
the United States, your distributions from the Funds could also be taxed by the
country in which you reside.
For federal tax purposes, income and short-term capital gain distributions from
each of the Funds are taxed as dividends; long-term capital gain distributions
are taxed as long-term capital gains.
Mutual fund dividends from U.S. government securities are generally free from
state and local income taxes. However, particular states may limit this benefit,
and some types of securities, such as repurchase agreements and some agency-
backed securities, may not qualify for the benefit. In addition, some states may
impose intangible property taxes. You should consult your own tax adviser for
details and up-to-date information on the tax laws in your state.
Distributions are taxable when they are paid, whether you take them in cash or
reinvest them. However, distributions declared in December and paid in January
are taxable as if they were paid on December 31.
Every January, the Transfer Agent will send the IRS a statement showing the
taxable distributions paid to you in the previous year.
TAXES ON TRANSACTIONS. Your redemptions, including exchanges, are subject to
capital gains tax. A capital gain or loss is the difference between the cost of
your shares and the price you receive when you sell them.
Whenever you sell shares of a Fund, the Transfer Agent will send you or your
Investment Professional a confirmation statement showing how many shares you
sold and at what price. You also receive a consolidated transaction statement at
least quarterly. However, it is up to you or your tax preparer to determine
whether this sale resulted in a capital gain and, if so, the amount of tax to be
paid. BE SURE TO KEEP YOUR REGULAR ACCOUNT STATEMENTS; the information they
contain will be essential in calculating the amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a Fund deducts a capital gain
distribution or dividend distribution, as applicable, from its NAV, you will pay
the full price for the shares and then receive a portion of the price back in
the form of a taxable distribution.
44
<PAGE>
CURRENCY CONSIDERATIONS. If a Fund's dividends exceed its taxable income in any
year, which is sometimes the result of currency-related losses, all or a portion
of the Fund's dividends may be treated as a return of capital to shareholders
for tax purposes. To minimize the risk of a return of capital, each of the Funds
may adjust its dividends to take currency fluctuations into account, which may
cause the dividends to vary. Any return of capital will reduce the cost basis of
your shares, which will result in a higher reported capital gain or a lower
reported capital loss when you sell your shares. The statement you receive in
January will specify whether any distributions included a return of capital.
Undistributed net gains from currency transactions, if any, will generally be
distributed as a separate dividend in December.
There are tax requirements that all Funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, a Fund may have to
limit its investment activity in some types of instruments.
VALUATION DETAILS
THE FUNDS ARE OPEN FOR BUSINESS each day the NYSE is open. Each Fund's NAV and
offering price, as applicable, is calculated as of the close of regular trading
on the NYSE, currently 4:00 p.m. Eastern time.
A FUND'S NAV is the value of a single share. The NAV of each Fund is computed by
dividing the value of the Fund's Assets (i.e., the value of its investment in
the Portfolio and other assets), less all liabilities, by the total number of
its shares outstanding. Each Portfolio's securities and other assets are valued
primarily on the basis of market quotations or, if quotations are not readily
available, by Bankers Trust pursuant to procedures adopted by the Portfolio's
Board of Trustees. These procedures require Bankers Trust to value such a
security at the same value as an equivalent security which is readily marketable
and, in making such comparisons, to consider all relevant factors under
applicable guidelines of the SEC.
THE OFFERING PRICE (price to buy one share) is the applicable Fund's NAV, plus a
sales charge. The Funds have a maximum sales charge of 4.75% of the offering
price.
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<PAGE>
SALES CHARGES AND INVESTMENT PROFESSIONAL CONCESSIONS (FOR EACH FUND EXCEPT
GLOBAL HIGH YIELD SECURITIES FUND)
<TABLE>
<CAPTION>
Investment
Sales Charge Professional
as a % of Concession as
Offering Net Amount % of Offering
AMOUNT INVESTED PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.00%
$50,000 to less than $100,000 4.50 4.71 4.00
$100,000 to less than $250,000 3.50 3.63 3.00
$250,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1 million 2.00 2.04 1.75
$1 million or more None None See below[a]
</TABLE>
GLOBAL HIGH YIELD SECURITIES FUND
<TABLE>
<CAPTION>
Investment
Sales Charge Professional
as a % of Concession as
Offering Net Amount % of Offering
AMOUNT INVESTED PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90%
$50,000 to less than $100,000 3.50 3.63
$100,000 to less than $250,000 2.50 2.56
$250,000 to less than $500,000 1.50 1.52
$500,000 to less than $1 million 1.00 1.01
$1 million or more None None
</TABLE>
[a] INVESTMENT PROFESSIONALS WILL BE COMPENSATED (PROVIDED THE INVESTMENT
REMAINS IN THE FUNDS(S) FOR ___ MONTHS) WITH A SPECIAL ONE-TIME FEE OF 1.00% OF
AVERAGE ASSETS FOR PURCHASES OF $1 MILLION TO $3 MILLION OF ASSETS, 0.50% FOR $3
MILLION TO $20 MILLION OF ASSETS AND 0.15% FOR ASSETS OVER $20 MILLION.
REINSTATEMENT PRIVILEGE. If you have sold all or part of your shares of a Fund,
you may reinvest an amount equal to all or a portion of the redemption proceeds
in the same Fund or another BT Global Investors Fund, without paying any sales
charge, at the NAV next determined after receipt of your investment order,
provided that such reinvestment is made within 30 days of redemption. You must
reinstate your shares into an account with the same registration. This privilege
may be exercised only once by a shareholder with respect to a Fund and certain
restrictions may apply.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that your
social security or taxpayer identification number is correct and that you are
not subject to 31% backup withholding for failing to report income to the IRS.
If you violate IRS regulations, the IRS can require a Fund to withhold 31% of
your taxable distributions and redemptions.
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YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE: Your Investment Professional or
the Transfer Agent may only be liable for losses resulting from unauthorized
transactions if they do not follow reasonable procedures designed to verify the
identity of the caller. Your Investment Professional or the Transfer Agent will
request personalized security codes or other information, and may also record
calls. You should verify the accuracy of the confirmation statements immediately
after receipt. If you do not want the ability to redeem and exchange by
telephone, call your Investment Professional or the Transfer Agent for
instructions. Additional documentation may be required from corporations,
associations and certain fiduciaries.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. Each Fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. Purchase orders may be refused if, in
Bankers Trust's opinion, they would disrupt management of a Fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your shares will be purchased at the next
NAV or offering price, as applicable, calculated after your order is received
and accepted by the Transfer Agent. Note the following:
o All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks.
o The Funds do not accept cash.
o When making a purchase with more than one check, each check must have a value
of at least $50.
o Each Fund reserves the right to limit the number of checks processed at one
time.
o If your check does not clear, your purchase will be cancelled and you could be
liable for any losses or fees a Fund or the Transfer Agent has incurred.
o Direct Purchases: You begin to earn dividends as of the first business day
following the day the Fund receives payment.
o Automated Order Purchases: You begin to earn dividends as of the business day
your order is received and accepted.
AUTOMATED ORDERS PURCHASE. Shares of the Funds can be purchased or sold through
Investment Professionals utilizing an automated order placement and settlement
system that guarantees payment for orders on a specified date.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider buying
shares by bank wire, U.S. Postal money order, U.S. Treasury check, or Federal
Reserve check.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next NAV
calculated after your order is received and accepted. Note the following:
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o Normally, redemption proceeds will be mailed to you on the next business day,
but if making immediate payment could adversely affect a Fund it may take up to
seven days to pay you.
o Shares of the Funds will earn dividends through the date of redemption;
however, shares redeemed on a Friday or prior to a holiday will continue to earn
dividends until the next business day.
o Each Fund may hold payment on redemptions until it is reasonably satisfied
that investments made by check have been collected which can take up to seven
business days.
o Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
THE TRANSFER AGENT RESERVES THE RIGHT TO DEDUCT AN ANNUAL MAINTENANCE FEE of
$12.00 from accounts with a value of less than $2,500 (including any amount paid
as a sales charge). The fee, which is payable to the Transfer Agent, is designed
to offset in part the relatively higher costs of servicing smaller accounts.
IF YOUR NON-RETIREMENT ACCOUNT BALANCE FALLS BELOW $1,000, you will be given 30
days' notice to reestablish the minimum balance. If you do not increase your
balance, the Transfer Agent reserves the right to close your account and send
the proceeds to you. Your shares will be redeemed at the NAV on the day your
account is closed.
THE TRANSFER AGENT MAY CHARGE A FEE FOR SPECIAL SERVICES, such as providing
historical account documents, that are beyond the normal scope of its services.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a Fund for
shares of other BT Global Investors Funds (or the BT Investment Money Market
Fund.) However, you should note the following:
o The Fund you are exchanging into must be registered for sale in your state.
o You may only exchange between accounts that are registered in the same name,
address, and taxpayer identification number.
o Before exchanging into a Fund, read its Prospectus.
o If you exchange into a Fund with a sales charge from a Fund without a sales
charge, you will be required to pay the BT Global Investors Fund's sales charge.
o Exchanges may have tax consequences for you.
o Because excessive trading can hurt Fund performance and shareholders, each
Fund reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of the Fund per
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calendar year. Accounts under common ownership or control, including accounts
with the same taxpayer identification number, will be counted together for
purposes of the four exchange limit.
o Each Fund reserves the right to refuse exchange purchases by any person or
group if, in Bankers Trust's judgment, the Fund would be unable to invest the
money effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected.
o Your exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges that coincide with a "market timing" strategy
may be disruptive to a Fund.
o Although the Funds will attempt to give you prior notice whenever they are
reasonably able to do so, they may impose these restrictions at any time. The
Funds reserve the right to terminate or modify the exchange privilege in the
future on 60 days' notice to shareholders.
SALES CHARGE REDUCTIONS AND WAIVERS
The front-end sales charge will be reduced for purchases of shares according to
the Sales Charge Schedule shown on page __ if your purchase qualifies for one of
the following reduction plans.
The following programs are available for front-end sales charge reduction.
QUANTITY DISCOUNTS apply to purchases of shares of a single Fund or to combined
purchases of shares of other BT Global Investors Funds. (Minimum investment is
$50,000).
To qualify for a Quantity Discount, investing in a Fund's shares for several
accounts at the time same time will be considered a single transaction (Combined
Purchase), as long as shares are purchased through one Investment Professional
and the total is at least $50,000.
RIGHTS OF ACCUMULATION let you determine your front-end sales charge on a Fund's
shares by adding to your new purchase the value of all of BT Global Investors
Fund shares held by you, your spouse, and your children under age 21.
A LETTER OF INTENT lets you receive the same reduced front-end sales charge on
purchases of shares made during a 13-month period as if the total amount
invested during the period had been invested in a single lump sum. (see
"Quantity Discounts" above.) You must file your non-binding Letter within 90
days of the start of your purchases. Your initial investment must be at least 5%
of the amount you plan to invest. Out of the initial investment, 5% of the
dollar amount specified in the Letter will be registered in your name and held
in escrow. You will earn income dividends and capital gain distributions on
escrowed shares. Neither income dividends nor capital gain distributions
reinvested in additional shares will apply toward completion of the Letter. The
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escrow will be released when your purchase of the total amount has been
completed. You are not obligated to complete the Letter, and in such a case,
sufficient escrowed shares will be redeemed to pay any applicable front-end
sales charges.
A front-end sales charge will not apply to the following shares:
1. Purchased by an existing Bankers Trust investment management client;
2. Purchased by a bank trust officer, registered representative, or other
employee (or a member of one of their immediate families) of Investment
Professionals having agreements with SBDS or Bankers Trust;
3. Purchased by a current or former trustee or officer of a BT Fund or a current
or retired officer, director or regular employee of Bankers Trust or its direct
or indirect subsidiaries (a Bankers Trust trustee or employee), the spouse of a
Bankers Trust trustee or employee, a Bankers Trust trustee or employee acting as
custodian for a minor child, or a person acting as trustee of a trust for the
sole benefit of the minor child of a Bankers Trust trustee or employee;
4. Purchased by a charitable organization (as defined in Section 501(c)(3) of
the Internal Revenue Code) investing $100,000 or more;
5. Purchased for a charitable remainder trust or life income pool established
for the benefit of a charitable organization (as defined in Section 501 (c) (3)
of the Internal Revenue Code);
6. Purchased by a trust institution or bank trust department investing on its
own behalf or on behalf of its clients;
7. Purchased in an account for which an Investment Professional, bank,
broker-dealer or financial advisor charges an asset management fee, provided the
Investment Professional's bank, broker-dealer or financial advisor has an
agreement with SBDS or Bankers Trust;
8. Purchased as part of an employee benefit plan having more than 200 eligible
employees or a minimum of $1 million of plan assets.
9. Purchased for any state, county, or city, or any governmental
instrumentality, department, authority or agency; or
10. Purchased with redemption proceeds from other mutual fund complexes on which
you have previously paid a front-end sales charge.
ADDITIONAL INFORMATION ABOUT THE TRUST AND PORTFOLIOS
Each Fund is a mutual fund: an investment that pools shareholders' money and
invests it toward a specified goal. Each Fund is a separate diversified series
of BT Global Investors, a Massachusetts business trust. Each of Global High
Yield Securities Portfolio, Small Cap Portfolio, Pacific Basin Equity Portfolio
and Latin American Equity Portfolio is a separate diversified subtrust of BT
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Investment Portfolios, a New York master trust fund. Each of Capital
Appreciation Portfolio and International Equity Portfolio is a New York trust.
Each of the Trust and BT Investment Portfolios reserves the right to add
additional series in the future. The Trust also reserves the right to issue more
than one class of shares of each Fund.
The Trust or a Portfolio may hold special meetings and mail proxy materials.
These meetings may be called to elect or remove trustees, change fundamental
policies, approve Portfolio's investment advisory agreement, or for other
purposes. Shareholders not attending these meetings are encouraged to vote by
proxy. The Trust's Transfer Agent will mail proxy materials in advance,
including a voting card and information about the proposals to be voted on.
When matters are submitted for shareholder vote, shareholders of each Fund will
have one vote for each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of one of the Funds is required on any
matter affecting only that Fund on which shareholders are entitled to vote.
Shareholders of a Fund are not entitled to vote on Trust matters that do not
affect that Fund and do not require a separate vote of the Fund. All series of
the Trust will vote together on certain matters, such as electing trustees or
approving independent public auditors. There normally will be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of Trustees holding office have been elected by
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. The Trust will also
assist shareholders in communicating with one another as provided for in the
1940 Act.
Each series of the Trust will vote separately on any matter involving the
corresponding Portfolio. Shareholders of all of the series of the Trust will,
however, vote together to elect Trustees of the Trust and for certain other
matters. Under certain circumstances, the shareholders of one or more series
could control the outcome of these votes. The series of BT Investment Portfolios
will vote together or separately on matters in the same manner, and in the same
circumstances, as do the series of the Trust. As with the Trust, the investors
in one or more series of BT Investment Portfolios could control the outcome of
these votes.
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Each Portfolio was organized as a trust under the laws of the State of New York.
Each Portfolio's Declaration of Trust provides that each Fund and other entities
investing in a Portfolio (e.g., other investment companies, insurance company
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separate accounts and common and commingled trust funds) will each be liable for
all obligations of that Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and a Portfolio itself was unable to meet its
obligations. Accordingly, the Trustees of the Trust believe that neither the
Funds nor their shareholders will be adversely affected by reason of the Funds'
investing in the Portfolios. The interests in BT Investment Portfolios are
divided into separate series. No series of BT Investment Portfolios has any
preference over any other series.
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APPENDIX
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA - Bonds 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 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 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 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 rated Ba are judged to have speculative elements. Their future cannot
be considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both (good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B - Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
CAA - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
CA - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.
C - Bonds rated C are the lowest-rated class of bonds and issued so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Appendix-1
<PAGE>
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
DESCRIPTION OF S&PS CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher-rated categories.
BB - Debt rate BB has 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.
B - Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C -The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.
Appendix-2
<PAGE>
CI - The rating CI is reserved for income bonds on which no interest is being
paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Appendix-3
<PAGE>
BT0441D
STATEMENT OF
ADDITIONAL INFORMATION
, 1995
BT GLOBAL INVESTORS
oGLOBAL HIGH YIELD SECURITIES FUND
oCAPITAL APPRECIATION FUND
oSMALL CAP FUND
oINTERNATIONAL EQUITY FUND
oLATIN AMERICAN EQUITY FUND
oPACIFIC BASIN EQUITY FUND
BT Global Investors (the "Trust") is comprised of seven funds. The
shares of the funds -- Global High Yield Securities Fund, Capital Appreciation
Fund, Small Cap Fund, International Equity Fund, Latin American Equity Fund and
Pacific Basin Equity Fund, (each, a "Fund") -- are described herein.
TABLE OF CONTENTS
Risk Factors and Certain Securities and Investment Policies. . . .
Performance Information . . . . . . . . . . . . . . . . . . . . .
Valuation of Securities; Redemptions and Purchases in Kind . . . .
Management of the Trust and the Portfolios . . . . . . . . . . . .
Organization of the Trust . . . . . . . . . . . . . . . . . . . .
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements . . . . . . . . . . . . . . . . . . . . . . .
As described in the Prospectus, the Trust seeks to achieve the
investment objectives of each Fund by investing all the investable assets
("Assets") of the Fund in a diversified open-end management investment company
(or a series thereof) having the same investment objectives as such Fund. These
investment companies (or a series thereof) are, respectively, International
Equity Portfolio, Capital Appreciation Portfolio and BT Investment Portfolios.
Global High Yield Securities Portfolio, Small Cap Portfolio, Latin American
Equity Portfolio and Pacific Basin Equity Portfolio are each a series of BT
Investment Portfolios.
Since the investment characteristics of the Funds will correspond
directly to those of the respective Portfolio in which the Fund invests all of
its assets, the following is a discussion of the various investments of and
techniques employed by the Portfolios.
Shares of the Funds are sold by Signature Broker-Dealer Services, Inc.
("Signature"), the Trust's Distributor, to clients and customers (including
affiliates and correspondents) of Bankers Trust Company ("Bankers Trust"), the
Portfolios' Adviser, and to clients and customers of other organizations.
The Trust's Prospectus for the Funds is dated , 1995. The
Prospectus provides the basic information investors should know before investing
and may be obtained without charge by calling the Trust at the telephone number
listed below or by contacting any Service Agent. This Statement of Additional
<PAGE>
Information, which is not a Prospectus, is intended to provide additional
information regarding the activities and operations of the Trust and should be
read in conjunction with the Funds' Prospectus. This Statement of Additional
Information is not an offer of any Fund for which an investor has not received a
Prospectus. Capitalized terms not otherwise defined in this Statement of
Additional Information have the meanings accorded to them in the Fund's
Prospectus.
BANKERS TRUST COMPANY
INVESTMENT ADVISER OF EACH PORTFOLIO AND ADMINISTRATOR
SIGNATURE BROKER-DEALER SERVICES, INC.
DISTRIBUTOR
6 St. James Avenue, Boston, Massachusetts 02116 (800) 422-6577
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RISK FACTORS AND CERTAIN SECURITIES AND INVESTMENT POLICIES
INVESTMENT OBJECTIVES
The investment objective(s) of each Fund is described in that Fund's
Prospectus. There can, of course, be no assurance that any Fund will achieve its
investment objective(s).
INVESTMENT POLICIES
Each Fund seeks to achieve its investment objective by investing all of
its Assets in the corresponding Portfolio. The Trust may withdraw a Fund's
investment from the corresponding Portfolio at any time if the Board of Trustees
of the Trust determines that it is in the best interests of the Fund to do so.
Since the investment characteristics of each Fund will correspond
directly to those of the corresponding Portfolio, the following is a discussion
of the various investments of and techniques employed by each Portfolio.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. Certificates of
deposit are receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from
1 to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which is
a type of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
For a description of commercial paper ratings, see the Appendix to the
Prospectus.
LOWER-RATED DEBT SECURITIES. While the market for high yield corporate
debt securities has been in existence for many years and has weathered previous
economic downturns, the 1980's brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and restructuring.
Past experience may not provide an accurate indication of future performance of
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the high yield bond market, especially during periods of economic recession. In
fact, from 1989 to 1991, the percentage of lower-rated debt securities that
defaulted rose significantly above prior levels.
The market for lower-rated debt securities may be thinner and less
active than that for higher rated debt securities, which can adversely affect
the prices at which the former are sold. If market quotations are not available,
lower- rated debt securities will be valued in accordance with procedures
established by the Board of Trustees, including the use of outside pricing
services. Judgement plays a greater role in valuing high yield corporate debt
securities than is the case for securities for which more external sources for
quotations and last sale information is available. Adverse publicity and
changing investor perception may affect the ability of outside pricing services
to value lowerrated debt securities and the Global High Yield Securities
Portfolio's ability to dispose of these securities.
Since the risk of default is higher for lower-rated debt securities,
Bankers Trust's research and credit analysis are an especially important part of
managing securities of this type held by the Portfolio. In considering
investments for the Portfolio, Bankers Trust will attempt to identify those
issuers of high yielding debt securities whose financial conditions are adequate
to meet future obligations, have improved or are expected to improve in the
future. Bankers Trust's analysis focuses on relative values based on such
factors as interest on dividend coverage, asset coverage, earnings prospects and
the experience and managerial strength of the issuer.
The Global High Yield Securities Portfolio may choose, at its expense
or in conjunction with others, to pursue litigation or otherwise exercise its
rights as a security holder to seek to protect the interest of security holders
if it determines this to be in the best interest of the Global High Yield
Securities Fund.
ILLIQUID SECURITIES. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended (the "1933
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the 1933 Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
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<PAGE>
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
The Securities and Exchange Commission the (the "SEC") has adopted Rule
144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act of resales of certain securities to qualified institutional buyers. The
Adviser anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.
The Adviser will monitor the liquidity of Rule 144A securities in each
Portfolio's portfolio under the supervision of the Portfolio's Board of
Trustees. In reaching liquidity decisions, the Adviser will consider, among
other things, the following factors: (1) the frequency of trades and quotes for
the security; (2) the number of dealers and other potential purchasers wishing
to purchase or sell the security; (3) dealer undertakings to make a market in
the security and (4) the nature of the security and of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer).
SHORT-TERM INSTRUMENTS. When a Portfolio experiences large cash inflows
through the sale of securities and desirable equity securities, that are
consistent with the Portfolio's investment objective, which are unavailable in
sufficient quantities or at attractive prices, the Portfolio may hold short-term
investments for a limited time pending availability of such equity securities.
Short-term instruments consist of foreign and domestic: (i) short-term
obligations of sovereign governments, their agencies, instrumentalities,
authorities or political subdivisions; (ii) other short-term debt securities
rated AA or higher by S&P or Aa or higher by Moody's or, if unrated, of
comparable quality in the opinion of Bankers Trust; (iii) commercial paper; (iv)
bank obligations, including negotiable certificates of deposit, time deposits
and banker's acceptances; and (v) repurchase agreements. At the time the
Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer of the issuer's parent must have outstanding debt rated
AA or higher by S&P or Aa or higher by Moody's or outstanding commercial paper
or bank obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such
ratings are available, the instrument must be of comparable quality in the
opinion of Bankers Trust. These instruments may be denominated in U.S dollars or
in foreign currencies.
FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING EASTERN EUROPE.
Global High Yield Securities Portfolio may invest in foreign securities issued
by Eastern European countries. Investments in companies domiciled in Eastern
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European countries may be subject to potentially greater risks than those of
other foreign issuers. These risks include: (i) potentially less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the low volume of trading, which result in less liquidity
and in greater price volatility; (iii) certain national policies which may
restrict the Portfolios' investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; (iv)
foreign taxation; (v) the absence of developed legal structures governing
private or foreign investment or allowing for judicial redress for injury to
private property; (vi) the absence, until recently in certain Eastern European
countries, of a capital market structure or market-oriented economy; and (vii)
the possibility that recent favorable economic developments in Eastern Europe
may be slowed or reversed by unanticipated political or social events in such
countries, or in the Commonwealth of Independent States (formerly the Union of
Soviet Socialist Republics).
The economic situation remains difficult for Eastern European countries
in transition from central planning, following what has already been a sizable
decline in output. The contraction now appears to be bottoming out in parts of
Eastern Europe, where some countries are projected to register positive growth
in 1995. Following three successive years of output declines, there are
preliminary indications of a turnaround in the former Czech and Slovak Federal
Republic, Hungary and Poland; growth in private sector activity and strong
exports now appear to have contained the fall in output. A number of their
governments, including those of Hungary and Poland, are currently implementing
or considering reforms directed at political and economic liberalization,
including efforts to foster multi-party political systems, decentralize economic
planning, and a move toward free-market economies. But key aspects of the reform
and stabilization efforts have not yet been fully implemented, and there remain
risks of policy slippage. At present, no Eastern European country has a
developed stock market, but Poland, Hungary and the Czech Republic have small
securities markets in operation.
In many other countries of the region, output losses have been even
larger. These declines reflect the adjustment difficulties during the early
stages of the transition, high rates of inflation, the compression of imports,
disruption in trade among the countries of the former Soviet Union, and
uncertainties about the reform process itself. Large-scale subsidies are
delaying industrial restructuring and are exacerbating the fiscal situation. A
reversal of these adverse factors is not anticipated in the near term, and
output is expected to decline further in most of these countries. In the Russian
Federation and most other countries of the former Soviet Union, economic
conditions are of particular concern because of economic instability due to
political unrest and armed conflicts in many regions. Further, no accounting
standards exist in Eastern European countries. Although certain Eastern European
currencies may be convertible into U.S. dollars, the conversion rates may be
artificial to the actual market values and may be adverse to the Fund's
shareholders.
BRADY BONDS. Latin American Equity Portfolio and Global High Yield
Securities Portfolio may invest in "Brady bonds," which have been issued by the
governments of Argentina, Costa Rica, Mexico, Nigeria, Uruguay and Venezuela.
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Most Brady bonds are currently rated below BBB by Standard & Poor's Corporation
("S&P") or Baa by Moody's Investors Services Inc. ("Moody's").
The Brady Plan was conceived by the U.S. Treasury in the 1980's in an
attempt to produce a debt restructuring program which would enable a debt
country to (i) reduce the absolute level of debt of its creditor banks, and (ii)
reschedule its external debt repayments, based upon its ability to service such
debts by persuading its creditor banks to accept a debt write-off by offering
them a selection of options, each of which represented an attractive substitute
for the nonperforming debt. Although it was envisaged that each debtor country
would agree to a unique package of options with its creditor banks, the plan was
that these options would be based upon the following:(i) a discount bond
carrying a market rate of interest (whether fixed or floating), with principal
collateralized by the debtor country with cash or securities in an amount equal
to at least one year of rolling interest; (ii) a par bond carrying a low rate of
interest (whether fixed or floating), collateralized in the same way as in (i)
above; and (iii) retention of existing debt (thereby avoiding a debt write-off)
coupled with an advance of new money or subscription of new bonds.
Latin American Equity Portfolio and Global High Yield Securities
Portfolio may invest in either collateralized or uncollateralized Brady bonds.
U.S. dollar-denominated, collateralized Brady bonds, which may be fixed rate par
bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that in the case of fixed rate bonds, is equal to at
least one year of rolling interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at the time and is adjusted at regular intervals
thereafter.
FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING LATIN AMERICA.
Investing in securities of Latin American issuers may entail risks relating to
the potential political and economic instability of certain Latin American
countries and the risks of expropriation, nationalization, confiscation or the
imposition of restrictions on foreign investment and on repatriation of capital
invested. In the event of expropriation, nationalization or other confiscation
by any country, Latin American Equity Fund could lose its entire investment in
any such country.
The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major securities
markets in the U.S. disclosure and regulatory standards are in many respects
less stringent than U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of investors in such
markets.
The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to volume of
trading in the securities of U.S. issuers could cause prices to be erratic for
reasons apart from factors that affect the soundness and competitiveness of the
securities issuers. For example, limited market size may cause prices to be
unduly influenced by traders who control large positions. Adverse publicity and
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investors' perceptions, whether or not based on in-depth fundamental analysis,
may decrease the value and liquidity of portfolio securities.
The economies of Latin American countries may be predominantly based in
only a few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens or
inflation rates; and (v) securities of issuers located in Latin America may have
limited marketability and may be subject to more abrupt or erratic price
movements.
Governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector through the ownership or control of many companies, including some of the
largest in those countries. As a result, government actions in the future could
have a significant effect on economic conditions which may adversely affect
prices of certain portfolio securities. Expropriation, confiscatory taxation,
nationalization, political, economic or social instability or other similar
developments, such as military coups, have occurred in the past and could also
adversely affect the Portfolio's investments in this region.
Certain Latin American countries such as Argentina, Brazil and Mexico
are among the world's largest debtors to commercial banks and foreign
governments. At times, certain Latin American countries have declared moratoria
on the payment of principal and/or interest on outstanding debt. Investment in
sovereign debt can involve a high degree of risk.
In recent years, there have been significant improvements in some Latin
American economies; however, others continue to experience economic problems,
including high inflation rates and high interest rates. The emergence of Latin
American economies and securities markets will require economic and fiscal
discipline, as well as stable political and social conditions. Recovery may also
be influenced by international economic conditions, particularly those in the
United States, by world prices for oil and other commodities, and international
trade agreements such as the North American Free Trade Agreement. Because Latin
American securities generally are denominated and pay dividends or interest in
currencies of Latin American countries, and the Portfolio holds various foreign
currencies from time to time, the value of the net assets of the Portfolio as
measured in U.S. dollars will be affected favorably or unfavorably by changes in
exchange rates, the Portfolio is authorized to enter into certain foreign
currency exchange transactions.
Latin American Equity Portfolio invests in securities denominated in
currencies of Latin American countries. Accordingly, changes in the value of
these currencies against the U.S. dollar will result in corresponding changes in
the U.S. dollar value of the Portfolio's assets denominated in those currencies.
Criteria for determining the appropriate distribution of investments among
various countries and regions include the prospects for relative growth among
the countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships and the range of
alternative opportunities available to international investors. The Portfolio
seeks to benefit from economic and other developments in Latin America.
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Some Latin American countries also may have managed currencies, which
are not free floating against the U.S. dollar. In addition, there is risk that
certain Latin American countries may restrict the free conversion of their
currencies into other currencies. Further, certain Latin American currencies may
not be internationally traded. Certain of these currencies have experienced a
steep devaluation relative to the U.S. dollar. Any devaluations in the
currencies in which the Portfolio's securities are denominated may have a
detrimental impact on the Fund's net asset value.
The economies of individual Latin American countries may differ
favorably or unfavorably from the U.S. economy in such respects as the rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Certain Latin
American countries have experienced high levels of inflation which can have a
debilitating effect on an economy. Furthermore, certain Latin American countries
may impose withholding taxes on dividends payable to the Portfolio at a higher
rate than those imposed by other foreign countries. This may reduce the Fund's
investment income available for distribution to shareholders.
Certain Latin American countries such as Argentina, Brazil and Mexico
are among the world's largest debtors to commercial banks and foreign
governments. At times, certain Latin American countries have declared moratoria
on the payment of principal and/or interest on outstanding debt. Investment in
sovereign debt can involve a high degree of risk. The governmental entity that
controls the repayment of sovereign debt may not be able or willing to repay the
principal and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest due
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the International Monetary Fund, and the political constraints to which
a governmental entity may be subject. Governmental entities may also be
dependent on expected disbursements from foreign governments, multilateral
agencies and others abroad to reduce principal and interest arrearages on their
debt. The commitment on the part of these governments, agencies and others to
make such disbursements may be conditioned on a governmental entity's
implementation of economic reforms and/or economic performance and the timely
service of such debtor's obligations. Failure to implement such reforms, achieve
such levels of economic performance or repay principal or interest when due may
result in the cancellation of such third parties' commitments to lend funds to
the governmental entity, which may further impair such debtor's ability or
willingness to service its debts in a timely manner. Consequently, governmental
entities may default on their sovereign debt.
Holders of sovereign debt, including the Portfolio, may be requested to
participate in the rescheduling of such debt and to extend further loans to
governmental entities. There is no bankruptcy proceeding by which defaulted
sovereign debt may be collected in whole or in part.
Latin America is a region rich in natural resources such as oil,
copper, tin, silver, iron ore, forestry, fishing, livestock and agriculture. The
region
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has a large population (roughly 300 million) representing a large domestic
market. Economic growth was strong in the 1960's and 1970's, but slowed
dramatically (and in some instances was negative) in the 1980's as a result of
poor economic policies, higher international interest rates, and the denial of
access to new foreign capital. Although a number of Latin American countries are
currently experiencing lower rates of inflation and higher rates of real growth
in Gross Domestic Product than they have in the past, other Latin American
countries continue to experience significant problems, including high inflation
rates and high interest rates. Capital flight has proven a persistent problem
and external debt has been forcibly rescheduled. Political turmoil, high
inflation, capital repatriation restrictions and nationalization have further
exacerbated conditions.
Large budget deficits and a high level of state ownership in many
productive and service areas have given way to balanced budgets and
privatization in Mexico, Brazil, Chile and Argentina. Changes in political
leadership have encouraged the implementation of market oriented economic
policies such as balanced budgets. Privatization trade reform and monetary
reform have been among the steps taken to modernize the Latin American economies
and to regenerate growth in the region. However, governments of many Latin
American countries have exercised and continue to exercise substantial influence
over many aspects of the private sector through the ownership or control of many
companies, including some of the largest in those countries. As a result,
government actions in the future could have a significant effect on economic
conditions which may adversely affect prices of certain portfolio securities.
Expropriation, confiscatory taxation, nationalization, political, economic or
social instability or other similar developments, such a military coups, have
occurred in the past and could also adversely affect the Portfolio's investments
in this region.
Changes in political leadership, the implementation of market oriented
economic policies, such as privatization, trade reform and fiscal and monetary
reform are among the recent steps taken to renew economic growth. External debt
is being restructured and flight capital (domestic capital that has left the
home country) has begun to return. Inflation control efforts have also been
implemented. Free Trade Zones are being discussed in various areas around the
region, the most notable being a free trade zone between Mexico and the U.S.
Various trade agreements have also been formed within the region such as the
Andean Pact, Mercosur and North American Free Trade Agreement (NAFTA). The
largest of these is NAFTA, which was implemented on January 1, 1994. Latin
American equity markets can be extremely volatile and in the past have shown
little correlation with the U.S. market. Currencies are typically weak, but most
are now relatively free floating, and it is not unusual for the currencies to
undergo wide fluctuations in value over short periods of time due to changes in
the market.
FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING THE PACIFIC
BASIN. Many Asian countries may be subject to a greater degree of social,
political and economic instability than is the case in the United States and
European countries. Such instability may result from (i) authoritarian
governments or military involvement in political and economic decision-making;
(ii) popular unrest associated with demands for improved political, economic and
social
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conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring
countries; and (v) ethnic, religious and racial disaffection.
The economies of most of the Asian countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally, the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of the Asian countries.
Thailand has been transformed into one of the fastest growing stock
markets in the world. On February 23, 1991, the military staged its 17th coup
since the overthrow of the absolute monarchy in 1932. The newly appointed
government quickly focused on the economy and enacted major tax revisions,
slashing personal income tax and reducing taxes on imports. Most significantly,
it pushed through a 7% value added tax. Released from political consideration by
the coup, the Bank of Thailand was finally able to implement a monetary
tightening. As a result, interest rates rose and GDP declined to 7.7% from 10%
the previous year. The government continues to move ahead with new projects -
especially telecommunications, roads and port facilities - needed to refurbish
the country's overtaxed infrastructure. Nonetheless, political unrest coupled
with the shooting of anti-government demonstrators in May 1992 has caused many
international businesses to question Thailand's political stability.
Hong Kong's impending return to Chinese dominion in 1997 has not
initially had a positive effect on its economic growth which was vigorous in the
1980's. However, authorities in Beijing have agreed to maintain a capitalist
system for 50 years that, along with Hong Kong's economic growth, continued to
further strong stock market returns. In preparation for 1997, Hong Kong has to
develop trade with China, where it is the largest foreign investor, while also
maintaining its longstanding export relationship with the United States.
Spending on infrastructure improvements is a significant priority of the
colonial government while the private sector continues to diversify abroad based
on its position as an established international trade center in the Far East.
In terms of GDP, industrial standards and level of education, South
Korea is second only to Japan in Asia. It enjoys the benefits of a diversified
economy with well developed sectors in electronics, automotive, textiles and
shoe manufacturing, steel and shipbuilding among others. The driving force
behind the economy's dynamic growth has been the planned development of an
export-oriented economy in a vigorously entrepreneurial society. Real GDP grew
about 7.5% in 1991. Labor unrest was noticeably calmer, unemployment averaged a
low of 2.3%, and investment was strong. Inflation rates, however, are beginning
to challenge South Korea's strong economic performance. In addition, the
international situation between South and North Korea continues to improve. Both
Koreas joined the United Nations separately in late 1991, creating another forum
for negotiation and joint cooperation.
Indonesia is a mixed economy with many socialist institutions and
central planning, but has recently placed emphasis on deregulation and private
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enterprise. Like Thailand, Indonesia has extensive natural wealth, yet with a
large and rapidly increasingly population, it remains a poor country.
Agriculture, including forestry and fishing, is an important sector, accounting
for 21% of GDP and over 50% of the labor force. Once the world's largest rice
importer, Indonesia is now nearly self-sufficient.
The Malaysian economy continued to perform well, growing at an average
annual rate of 9% from 1987 through 1991. This placed Malaysia as one of the
fastest growing economies in the Asian-Pacific region. Malaysia has become the
world's third-largest producer of semiconductor devices (after the US and Japan)
and the world's largest exporter of semiconductor devices. More remarkable is
the country's ability to achieve rapid economic growth with relative price
stability (2% inflation over the past five years) as the government followed
prudent fiscal/monetary policies. Malaysia's high export dependence level leaves
it vulnerable to a recession in the OECD countries or a fall in world commodity
prices.
Singapore has an open entrepreneurial economy with strong service and
manufacturing sectors and excellent international trading links derived from its
entrepot history. During the 1970's and early 1980's, the economy expanded
rapidly, achieving an average annual growth rate of 9%. Per capita GDP is among
the highest in Asia. Singapore holds a position as a major oil refining and
services center.
FOREIGN SECURITIES: SPECIAL CONSIDERATIONS CONCERNING CHINA AND CHINA
REGION. China's economic reform plan was designed to bring in foreign investment
capital and technological skills. The result has been a move towards a more
mixed economy away from the previous centrally planned economy. The process of
devolving responsibility for all aspects of enterprise to local management and
authorities continues, even though the system of socialism with Chinese
characteristics involves considerable influence by the central government on
production and marketing.
In order to attract foreign investment, China has since 1978 designated
certain areas of the country where overseas investors can receive special
investment incentives and tax concessions. There are five Special Economic Zones
(Shenzhen, Shantou and Zhuhai in Guangdong Province, Xiamen in Fujian Province
and Hainan Island, which itself is a province). Fourteen coastal cities have
been designated as "open cities" and certain Open Economic Zones have been
established in coastal areas. Shanghai has established the Pudong New Area.
Twenty-seven High and New Technology Industrial Development Zones have been
approved where preferential treatment is given to enterprises which are
confirmed as technology intensive.
China has had for many centuries a well deserved reputation for being
closed to foreigners, with trade with the outside world being carried on under
terms of extreme restriction and under central control. Such conditions were
maintained in the first thirty years of the Communist regime which began in
1949; however there have been several stages of evolution, from the institution
of an industrialization program in the 1950s to a modernization policy
commencing in 1978 which combined economic development with the beginnings of
opening the country.
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The securities markets in the China Region are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. A high proportion of the shares of many Chinese issuers may be held by a
limited number of persons and financial institutions, which may limit the number
of shares available for investment by the Portfolio. Similarly, volume and
liquidity in the bond markets in China are less than in the United States and,
at times, price volatility can be greater than in the United States. A limited
number of issuers in Chinese securities markets may represent a
disproportionately large percentage of market capitalization and trading value.
The limited liquidity of securities markets in China may also affect the
Portfolio's ability to acquire or dispose of securities at the price and time it
wishes to do so. Accordingly, during periods of rising securities prices in the
more illiquid Chinese securities markets, the Portfolio's ability to participate
fully in such price increases may be limited by its investment policy of
investing not more than 15% of its net assets in illiquid securities.
Conversely, the Portfolio's inability to dispose fully and promptly of positions
in declining markets will cause the Portfolio's net asset value to decline as
the value of the unsold positions is marked to lower prices. In addition, the
Chinese securities markets are susceptible to being influenced by large
investors trading significant blocks of securities.
The Chinese, Hong Kong and Taiwan stock markets are undergoing a period
of growth and change which may result in trading volatility and difficulties in
the settlement and recording of transactions, and in interpreting and applying
the relevant law and regulations.
China governmental actions can have a significant effect on the
economic conditions in China, which could adversely affect the value and
liquidity of the Portfolio's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
The securities industry in China is not well developed. China has no
securities laws of nationwide applicability. The municipal securities
regulations adopted by Shanghai and Shenzhen municipalities are very new, as are
their respective securities exchanges and other self-regulatory organizations.
In addition, Chinese stockbrokers and other intermediaries may not perform as
well as their counterparts in the United States and other more developed
securities markets. The prices at which the Portfolio may acquire investments
may be affected by trading by persons with material non-public information and
by securities transactions by brokers in anticipation of transactions by the
Portfolio in particular securities.
China does not have a comprehensive system of laws, although
substantial changes have occurred in this regard in recent years. The corporate
form of organization has only recently been permitted in China and national
regulations governing corporations were introduced only in May, 1992. Prior to
the introduction of such regulations, Shanghai had adopted a set of corporate
regulations applicable to corporations located or listed in Shanghai, and the
relationship between the two sets of regulations is not clear. Consequently,
until a firmer legal basis is provided, even such fundamental corporate law
tenets as the limited liability status of Chinese issuers and their authority to
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issue shares remain open to question. Laws regarding fiduciary duties of
officers and directors and the protection of shareholders are not well
developed. China's judiciary is relatively inexperienced in enforcing the laws
that exist, leading to a higher than usual degree of uncertainty as to the
outcome of any litigation. Even where adequate law exists in China, it may be
impossible to obtain swift and equitable enforcement of such law, or to obtain
enforcement of the judgement by a court of another jurisdiction. The bankruptcy
laws pertaining to state enterprises have rarely been used and are untried in
regard to an enterprise with foreign shareholders, and there can be no assurance
that such shareholders, including the Portfolio, would be able to realize the
value of the assets of the enterprise or receive payment in convertible
currency. As the Chinese legal system develops, the promulgation of new laws,
changes to existing laws and the preemption of local laws by national laws may
adversely affect foreign investors, including the Portfolio. The uncertainties
faced by foreign investors in China are exacerbated by the fact that many laws,
regulations and decrees of China are not publicly available, but merely
circulated internally.
Exports continue to rise strongly, although China remains vulnerable to
United States economic conditions and possible trade sanctions, unless it
liberalizes current import restrictions and improves its human rights record.
However, imports are also expected to rise and may outstrip exports in terms of
growth rates.
There are currently two officially recognized securities exchanges in
China -- The Shanghai Securities Exchange which opened in December 1990 and The
Shenzhen Stock Exchange which opened in July 1991. Shares traded on these
Exchanges are two types -- "A" shares which can be traded only by Chinese
investors and "B" shares which can be traded only by individuals and
corporations not resident in China.
In Shanghai, all "B" Shares are denominated in Chinese renminbi
("RMB"), but all transactions in "B" shares must be settled in U.S. dollars, and
all distributions made on "B" shares are payable in U.S. dollars, the exchange
rate being the weighted average exchange rate for the U.S. dollar as published
by the Shanghai Foreign Exchange Adjustment Centre.
In Shenzhen, the purchase and sale prices for "B" shares are quoted in
Hong Kong dollars. Dividends and other lawful revenue derived from "B" shares
are calculated in RMB but payable in Hong Kong dollars, the rate of exchange
being the average rate published by Shenzhen Foreign Exchange Adjustment Centre.
There are no foreign exchange restrictions on the repatriation of gains
made on or income derived from "B" Shares, subject to the payment of taxes
imposed by China thereon.
Company law relating to companies limited by shares and regulations
regarding the issuing of shares by equity joint ventures have not yet been
developed on a national basis. The Shenzhen municipality issued regulations in
1992 relating to joint stock companies, and the Shanghai municipality has a
draft joint stock company law under review. Regulations governing the trading of
securities on both the Shenzhen and the Shanghai stock exchanges have been
issued by each municipality; there is no national securities legislation as yet.
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Economies of countries in the China Region may differ favorably or
unfavorably from the U.S. economy in such respects as rate of growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. As an export-driven economy,
the economy of China is affected by developments in the economies of its
principal trading partners. Revocation by the United States of China's "Most
Favored Nation" trading status, which the U.S. President and Congress reconsider
annually, would adversely affect the trade and economic development of China and
Hong Kong. Hong Kong and Taiwan have limited natural resources, resulting in
dependence on foreign sources for certain raw materials and economic
vulnerability to global fluctuations of price and supply.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The successful use of such instruments draws upon the
Adviser's skill and experience with respect to such instruments and usually
depends on the Adviser's ability to forecast interest rate and currency exchange
rate movements correctly. Should interest or exchange rates move in an
unexpected manner, a Portfolio may not achieve the anticipated benefits of
futures contracts or options on futures contracts or may realize losses and thus
will be in a worse position than if such strategies had not been used. In
addition, the correlation between movements in the price of futures contracts or
options on futures contracts and movements in the price of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
Successful use of the futures contract and related options are subject
to special risk considerations. A liquid secondary market for any futures or
options contract may not be available when a futures or options position is
sought to be closed. In addition, there may be an imperfect correlation between
movements in the securities or currency in the Portfolio. Successful use of
futures or options contracts are further dependent on Bankers Trust's ability to
correctly predict movements in the securities or foreign currency markets and no
assurance can be given that its judgement will be correct. Successful use of
options on securities or stock indices are subject to similar risk
considerations. In addition, by writing covered call options, the Portfolio
gives up the opportunity, while the option is in effect, to profit from any
price increase in the underlying securities above the options exercise price.
FUTURES CONTRACTS. A Portfolio may enter into contracts for the
purchase or sale for future delivery of fixed-income securities, foreign
currencies, or contracts based on financial indices including any index of U.S.
Government securities, foreign government securities or corporate debt
securities. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange. A Portfolio may enter into futures
contracts which are based on debt securities that are backed by the full faith
and credit of the U.S. Government, such as long-term U.S. Treasury Bonds,
Treasury Notes, GNMA modified pass-through mortgage-backed securities and
three-month U.S. Treasury Bills. A Portfolio may
15
<PAGE>
also enter into futures contracts which are based on bonds issued by entities
other than the U.S. Government.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Portfolio will incur brokerage fees when it purchases or sells futures
contracts.
The purpose of the acquisition or sale of a futures contract, in the
case of a Portfolio which holds or intends to acquire fixed-income securities,
is to attempt to protect the Portfolio from fluctuations in interest or foreign
exchange rates without actually buying or selling fixed-income securities or
foreign currencies. For example, if interest rates were expected to increase,
the Portfolio might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Portfolio. If interest rates did
increase, the value of the debt security in the Portfolio would decline, but the
value of the futures contracts to the Portfolio would increase at approximately
the same rate, thereby keeping the net asset value of the Portfolio from
declining as much as it otherwise would have. The Portfolio could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Portfolio to maintain a defensive position
without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, a Portfolio could take
advantage of the anticipated rise in the value of debt securities without
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actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Portfolio could then buy debt securities
on the cash market. To the extent a Portfolio enters into futures contracts for
this purpose, the assets in the segregated asset account maintained to cover the
Portfolio's obligations with respect to such futures contracts will consist of
cash, cash equivalents or high quality liquid debt securities from its portfolio
in an amount equal to the difference between the fluctuating market value of
such futures contracts and the aggregate value of the initial and variation
margin payments made by the Portfolio with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.
In addition, futures contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the Portfolios, if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, a Portfolio's overall performance would be poorer than if it had not
entered into any such contract. For example, if a Portfolio has hedged against
the possibility of an increase in interest rates which would adversely affect
the price of debt securities held in its portfolio and interest rates decrease
instead, the Portfolio will lose part or all of the benefit of the increased
value of its debt securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if a Portfolio
has insufficient cash, it may have to sell debt securities from its portfolio to
meet daily variation margin requirements. Such sales of bonds may be, but will
not necessarily be, at increased prices which reflect the rising market. A
Portfolio may have to sell securities at a time when it may be disadvantageous
to do so.
OPTIONS ON FUTURES CONTRACTS. Each Portfolio may purchase and write
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities. As with
the purchase of futures contracts, when a Portfolio is not fully invested it may
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purchase a call option on a futures contract to hedge against a market advance
due to declining interest rates.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Portfolio will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Portfolio may purchase a put option on a futures contract to hedge
its portfolio against the risk of rising interest rates.
The amount of risk a Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
The Board of Trustees of each Portfolio has adopted the requirement
that futures contracts and options on futures contracts be used only as a hedge
and not for speculation. In addition to this requirement, the Board of Trustees
of each Portfolio has also adopted a restriction that the Portfolio will not
enter into any futures contracts or options on futures contracts if immediately
thereafter the amount of margin deposits on all the futures contracts of the
Portfolio and premiums paid on outstanding options on futures contracts owned by
the Portfolio would exceed 5% of the market value of the total assets of the
Portfolio.
OPTIONS ON FOREIGN CURRENCIES. Each Portfolio may purchase and write
options on foreign currencies for hedging purposes in a manner similar to that
in which futures contracts on foreign currencies, or forward contracts, will be
utilized. For example, a decline in the dollar value of a foreign currency in
which portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Portfolio may purchase put options on the foreign currency. If the value of
the currency does decline, a Portfolio will have the right to sell such currency
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for a fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio deriving from purchases of foreign
currency options will be reduced by the amount of the premium and related
transaction costs. In addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Portfolio could sustain losses on
transactions in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such rates.
Each Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, where a Portfolio anticipates a decline
in the dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the options will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if rates move
in the manner projected, will expire unexercised and allow the Portfolio to
hedge such increased cost up to the amount of the premium. As in the case of
other types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Portfolio would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Portfolio also may be required
to forego all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
Each Portfolio intends to write covered call options on foreign
currencies. A call option written on a foreign currency by a Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by its Custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Portfolio in cash, U.S. Government securities and other high quality liquid
debt securities in a segregated account with its custodian.
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Each Portfolio also intends to write call options on foreign currencies
that are not covered for cross-hedging purposes. A call option on a foreign
currency is for cross-hedging purposes if it is not covered, but is designed to
provide a hedge against a decline in the U.S. dollar value of a security which
the Portfolio owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the exchange rate. In
such circumstances, the Portfolio collateralizes the option by maintaining in a
segregated account with its custodian, cash or U.S. Government securities or
other high quality liquid debt securities in an amount not less than the value
of the underlying foreign currency in U.S. dollars marked to market daily.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND
OPTIONS ON FOREIGN CURRENCIES. Unlike transactions entered into by a Portfolio
in futures contracts, options on foreign currencies and forward contracts are
not traded on contract markets regulated by the CFTC or (with the exception of
certain foreign currency options) by the SEC. To the contrary, such instruments
are traded through financial institutions acting as market-makers, although
foreign currency options are also traded on certain national securities
exchanges such as the Philadelphia Stock Exchange and the Chicago Board Options
Exchange, subject to SEC regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign
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governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.
As in the case of forward contracts, certain options on foreign
currencies are traded over-the-counter and involve liquidity and credit risks
which may not be present in the case of exchange-traded currency options. A
Portfolio's ability to terminate over-the-counter options will be more limited
than with exchange-traded options. It is also possible that broker-dealers
participating in over-the-counter options transactions will not fulfill their
obligations. Until such time as the staff of the SEC changes its position, each
Portfolio will treat purchased over-the-counter options and assets used to cover
written over-the-counter options as illiquid securities. With respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the repurchase
formula.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by: (i) other complex foreign
political and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.
OPTIONS ON SECURITIES. Each Portfolio may write (sell) covered call and
put options to a limited extent on its portfolio securities ("covered options")
in an attempt to increase income. However, the Portfolio may forgo the benefits
of appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Portfolio.
When a Portfolio writes a covered call option, it gives the purchaser
of the option the right to buy the underlying security at the price specified in
the option (the "exercise price") by exercising the option at any time during
the option period. If the option expires unexercised, the Portfolio will realize
income in an amount equal to the premium received for writing the option. If the
option is exercised, a decision over which the Portfolio has no control, the
Portfolio must sell the underlying security to the option holder at the exercise
price. By writing a covered call option, the Portfolio forgoes, in exchange for
the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the underlying
security above the exercise price.
When a Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at the
specified exercise price at any time during the option period. If the option
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expires unexercised, the Portfolio will realize income in the amount of the
premium received for writing the option. If the put option is exercised, a
decision over which the Portfolio has no control, the Portfolio must purchase
the underlying security from the option holder at the exercise price. By writing
a covered put option, the Portfolio, in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price. The Portfolio will only write put options involving
securities for which a determination is made at the time the option is written
that the Portfolio wishes to acquire the securities at the exercise price.
A Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." The Portfolio will realize a profit or loss for a closing purchase
transaction if the amount paid to purchase an option is less or more, as the
case may be, than the amount received from the sale thereof. To close out a
position as a purchaser of an option, the Portfolio, may make a "closing sale
transaction" which involves liquidating the Portfolio's position by selling the
option previously purchased. Where the Portfolio cannot effect a closing
purchase transaction, it may be forced to incur brokerage commissions or dealer
spreads in selling securities it receives or it may be forced to hold underlying
securities until an option is exercised or expires.
When a Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount
of the deferred credit will be subsequently marked to market to reflect the
current market value of the option written. The current market value of a traded
option is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked price. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.
A Portfolio may purchase call and put options on any securities in
which it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The purchase
of a call option would entitle the Portfolio, in exchange for the premium paid,
to purchase a security at a specified price during the option period. The
Portfolio would ordinarily have a gain if the value of the securities increased
above the exercise price sufficiently to cover the premium and would have a loss
if the value of the securities remained at or below the exercise price during
the option period.
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A Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell a security, which may or may not be held in the Portfolio's portfolio, at a
specified price during the option period. The purchase of protective puts is
designed merely to offset or hedge against a decline in the market value of the
Portfolio's portfolio securities. Put options also may be purchased by the
Portfolio for the purpose of affirmatively benefiting from a decline in the
price of securities which the Portfolio does not own. The Portfolio would
ordinarily recognize a gain if the value of the securities decreased below the
exercise price sufficiently to cover the premium and would recognize a loss if
the value of the securities remained at or above the exercise price. Gains and
losses on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.
Each Portfolio has adopted certain other nonfundamental policies
concerning option transactions which are discussed below. The Portfolio's
activities in options may also be restricted by the requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated
investment company.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.
A Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Portfolio will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The Adviser will monitor
the creditworthiness of dealers with whom the Portfolio enters into such options
transactions under the general supervision of the Portfolios' Trustees.
OPTIONS ON SECURITIES INDICES. In addition to options on securities,
each Portfolio, with the exception of International Bond Portfolio, may also
purchase and write (sell) call and put options on securities indices. Such
options give the holder the right to receive a cash settlement during the term
of the option based upon the difference between the exercise price and the value
of the index.
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Such options will be used for the purposes described above under "Options on
Securities."
International Equity Portfolio and Pacific Basin Equity Portfolio may,
to the extent allowed by Federal and state securities laws, invest in securities
indices instead of investing directly in individual foreign securities.
Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close out
options positions on securities indices is more likely to occur, although the
Portfolio generally will only purchase or write such an option if the Adviser
believes the option can be closed out.
Use of options on securities indices also entails the risk that trading
in such options may be interrupted if trading in certain securities included in
the index is interrupted. The Portfolio will not purchase such options unless
the Adviser believes the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities.
Price movements in a Portfolio's portfolio may not correlate precisely
with movements in the level of an index and, therefore, the use of options on
indices cannot serve as a complete hedge. Because options on securities indices
require settlement in cash, the Adviser may be forced to liquidate portfolio
securities to meet settlement obligations.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Because each Portfolio
buys and sells securities denominated in currencies other than the U.S. dollar
and receives interest, dividends and sale proceeds in currencies other than the
U.S. dollar, each Portfolio from time to time may enter into foreign currency
exchange transactions to convert to and from different foreign currencies and to
convert foreign currencies to and from the U.S. dollar. A Portfolio either
enters into these transactions on a spot (I.E., cash) basis at the spot rate
prevailing in the foreign currency exchange market or uses forward contracts to
purchase or sell foreign currencies.
A forward foreign currency exchange contract is an obligation by a
Portfolio to purchase or sell a specific currency at a future date, which may be
any fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are transferable in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. A forward foreign
currency exchange contract generally has no deposit requirement and is traded at
a net price without commission. Each Portfolio maintains with its custodian a
segregated account of high grade liquid assets in an amount at least equal to
its obligations under each forward foreign currency exchange contract. 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.
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Each Portfolio may enter into foreign currency hedging transactions in
an attempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or changes in
foreign currency exchange rates that would adversely affect a portfolio position
or an anticipated investment position. Since consideration of the prospect for
currency parities will be incorporated into Bankers Trust's long-term investment
decisions, a Portfolio will not routinely enter into foreign currency hedging
transactions with respect to security transactions; however, Bankers Trust
believes that it is important to have the flexibility to enter into foreign
currency hedging transactions when it determines that the transactions would be
in the Portfolio's best interest. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of such securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain.
While these contracts are not presently regulated by the CFTC, the CFTC
may in the future assert authority to regulate forward contracts. In such event
the Portfolio's ability to utilize forward contracts in the manner set forth in
the Prospectus may be restricted. Forward contracts may reduce the potential
gain from a positive change in the relationship between the U.S. dollar and
foreign currencies. Unanticipated changes in currency prices may result in
poorer overall performance for the Portfolio than if it had not entered into
such contracts. The use of foreign currency forward contracts may not eliminate
fluctuations in the underlying U.S. dollar equivalent value of the prices of or
rates of return on a Portfolio's foreign currency denominated portfolio
securities and the use of such techniques will subject a Portfolio to certain
risks.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. In
addition, a Portfolio may not always be able to enter into foreign currency
forward contracts at attractive prices and this will limit the Portfolio's
ability to use such contract to hedge or cross-hedge its assets. Also, with
regard to a Portfolio's use of cross-hedges, there can be no assurance that
historical correlations between the movement of certain foreign currencies
relative to the U.S. dollar will continue. Thus, at any time poor correlation
may exist between movements in the exchange rates of the foreign currencies
underlying a Portfolio's crosshedges and the movements in the exchange rates of
the foreign currencies in which the Portfolio's assets that are the subject of
such cross-hedges are denominated.
RATING SERVICES
The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of
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quality. Although these ratings are an initial criterion for selection of
portfolio investments, Bankers Trust also makes its own evaluation of these
securities, subject to review by the Board of Trustees. After purchase by a
Portfolio, an obligation may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Portfolio. Neither event would
require a Fund to eliminate the obligation from its portfolio, but Bankers Trust
will consider such an event in its determination of whether a Fund should
continue to hold the obligation. A description of the ratings used herein and in
the Funds' Prospectus is set forth in the Appendix to the Prospectus.
INVESTMENT RESTRICTIONS
The following investment restrictions are "fundamental policies" of
each Fund and each Portfolio and may not be changed with respect to the Fund or
the Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "Majority of the
outstanding voting securities" under the Investment Company Act of 1940, as
amended (the "1940 Act"), and as used in this Statement of Additional
Information and the Prospectus, means, with respect to the Fund (or the
Portfolio), the lesser of (i) 67% or more of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio) present at a
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund or of the total beneficial interests of the Portfolio) are present or
represented by proxy or (ii) more than 50% of the outstanding voting securities
of the Fund (or of the total beneficial interests of the Portfolio). Whenever
the Trust is requested to vote on a fundamental policy of a Portfolio, the Trust
will hold a meeting of the corresponding Fund's shareholders and will cast its
vote as instructed by that Fund's shareholders. Fund shareholders who do not
vote will not affect the Trust's votes at the Portfolio meeting. The percentage
of the Trust's votes representing Fund shareholders not voting will be voted by
the Trustees of the Trust in the same proportion as the Fund shareholders who
do, in fact, vote.
As a matter of fundamental policy, no Portfolio (or Fund) may (except
that no investment restriction of a Fund shall prevent a Fund from investing all
of its Assets in an open-end investment company with substantially the same
investment objectives):
(1) borrow money or mortgage or hypothecate assets of the Portfolio
(Fund), except that in an amount not to exceed 1/3 of the current value of the
Portfolio's (Fund's) assets, it may borrow money as a temporary measure for
extraordinary or emergency purposes and enter into reverse repurchase agreements
or dollar roll transactions, and except that it may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings (it is
intended that money would be borrowed only from banks and only either to
accommodate requests for the withdrawal of beneficial interests (redemption of
shares) while effecting an orderly liquidation of portfolio securities or to
maintain liquidity in the event of an unanticipated failure to complete a
portfolio security transaction or other similar situations) or reverse
repurchase agreements, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this restriction and
except that
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assets may be pledged to secure letters of credit solely for the purpose of
participating in a captive insurance company sponsored by the Investment Company
Institute; for additional related restrictions, see clause (i) under the caption
"State and Federal Restrictions" below (as an operating policy, the Portfolios
may not engage in dollar roll transactions);
(2) underwrite securities issued by other persons except insofar as the
Portfolios (Trust or the Funds) may technically be deemed an underwriter under
the 1933 Act in selling a portfolio security;
(3) make loans to other persons except: (a) through the lending of the
Portfolio's (Fund's) portfolio securities and provided that any such loans not
exceed 30% of the Portfolio's (Fund's) total assets (taken at market value); (b)
through the use of repurchase agreements or the purchase of short-term
obligations; or (c) by purchasing a portion of an issue of debt securities of
types distributed publicly or privately (under current regulations, the
Portfolio's (Fund's) fundamental policy with respect to 20% risk weighing for
financial institutions prevent the Portfolio (Fund) from engaging in securities
lending);
(4) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (except
that the Portfolio (Trust) may hold and sell, for the Portfolio's (Fund's)
portfolio, real estate acquired as a result of the Portfolio's (Fund's)
ownership of securities);
(5) concentrate its investments in any particular industry (excluding
U.S. Government securities), but if it is deemed appropriate for the achievement
of a Portfolio's (Fund's) investment objective(s), up to 25% of its total assets
may be invested in any one industry; and
(6) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.
STATE AND FEDERAL RESTRICTIONS. In order to comply with certain state
and Federal statutes and policies each Portfolio (or the Trust, on behalf of
each Fund) will not as a matter of operating policy (except that no operating
policy shall prevent a Fund from investing all of its Assets in an open-end
investment company with substantially the same investment objectives):
(i) borrow money (including through reverse repurchase or forward roll
transactions) for any purpose in excess of 5% of the Portfolio's
(Fund's) total assets (taken at cost), except that the Portfolio
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(Fund) may borrow for temporary or emergency purposes up to 1/3
of its total assets;
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of
the Portfolio's (Fund's) total assets (taken at market value),
provided that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation margin,
and reverse repurchase agreements are not considered a pledge of
assets for purposes of this restriction;
(iii)purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained and
except that deposits of initial deposit and variation margin may be
made in connection with the purchase, ownership, holding or sale of
futures;
(iv) sell securities it does not own such that the dollar amount of such
short sales at any one time exceeds 25% of the net equity of the
Portfolio (Fund), and the value of securities of any one issuer in
which the Portfolio (Fund) is short exceeds the lesser of 2.0% of the
value of the Portfolio's (Fund's) net assets or 2.0% of the securities
of any class of any U.S. issuer and, provided that short sales may be
made only in those securities which are fully listed on a national
securities exchange or a foreign exchange (This provision does not
include the sale of securities of the Portfolio (Fund)
contemporaneously owns or has the right to obtain securities
equivalent in kind and amount to those sold, i.e., short sales against
the box.) (the Portfolios (Funds) have no current intention to engage
in short selling);
(v) invest for the purpose of exercising control or management;
(vi) purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation; provided,
however, that securities of any investment company will not be
purchased for the Portfolio (Fund) if such purchase at the time
thereof would cause: (a) more than 10% of the Portfolio's (Fund's)
total assets (taken at the greater of cost or market value) to be
invested in the securities of such issuers; (b) more than 5% of the
Portfolio's (Fund's) total assets (taken at the greater of cost or
market value) to be invested in any one investment company; or (c)
more than 3% of the outstanding voting securities of any such issuer
to be held for the Portfolio (Fund); provided further that, except in
the case of a merger or consolidation, the Portfolio (Fund) shall not
purchase any securities of any open-end investment company unless the
Portfolio (Fund) (1) waives the investment advisory fee with respect
to assets
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invested in other open-end investment companies and (2) incurs no
sales charge in connection with the investment;
(vii)invest more than 10% of the Portfolio's (Fund's) total assets (taken
at the greater of cost or market value) in securities (excluding Rule
144A securities) that are restricted as to resale under the 1933 Act;
(viii) invest more than 15% of the Portfolio's (Fund's) total assets (taken
at the greater of cost or market value) in (a) securities (including
Rule 144A securities) that are restricted as to resale under the 1933
Act, and (b) securities that are issued by issuers which (including
predecessors) have been in operation less than three years (other than
U.S. Government securities), provided, however, that no more than 5%
of the Portfolio's (Fund's) total assets are invested in securities
issued by issuers which (including predecessors) have been in
operation less than three years;
(ix) with respect to 75% of the Portfolio's (Fund's) total assets, purchase
securities of any issuer if such purchase at the time thereof would
cause the Portfolio (Fund) to hold more than 10% of any class of
securities of such issuer, for which purposes all indebtedness of an
issuer shall be deemed a single class and all preferred stock of an
issuer shall be deemed a single class, except that futures or option
contracts shall not be subject to this restriction;
(x) with respect to 75% of its assets, invest more than 5% of its total
assets in the securities (excluding U.S. Government securities) of any
one issuer;
(xi) invest in securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of
the Portfolio (Trust), or is an officer or partner of the Adviser, if
after the purchase of the securities of such issuer for the Portfolio
(Fund) one or more of such persons owns beneficially more than 1/2 of
1% of the shares or securities, or both, all taken at market value, of
such issuer, and such persons owning more than 1/2 of 1% of such
shares or securities together own beneficially more than 5% of such
shares or securities, or both, all taken at market value;
(xii)invest in warrants (other than warrants acquired by the Portfolio
(Fund) as part of a unit or attached to securities at the time of
purchase) if, as a result, the investments (valued at the lower of
cost or market) would exceed 5% of the value of the Portfolio's
(Fund's) net assets or if, as a result, more than 2% of the
Portfolio's (Fund's) net assets would be invested in warrants not
listed on a recognized United States or foreign stock exchange, to the
extent permitted by applicable state securities laws;
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(xiii) write puts and calls on securities unless each of the following
conditions are met: (a) the security underlying the put or call is
within the investment policies of the Portfolio (Fund) and the option
is issued by the Options Clearing Corporation, except for put and call
options issued by non-U.S. entities or listed on non-U.S. securities
or commodities exchanges; (b) the aggregate value of the obligations
underlying the puts determined as of the date the options are sold
shall not exceed 5% of the Portfolio's (Fund's) net assets; (c) the
securities subject to the exercise of the call written by the
Portfolio (Fund) must be owned by the Portfolio (Fund) at the time the
call is sold and must continue to be owned by the Portfolio (Fund)
until the call has been exercised, has lapsed, or the Portfolio (Fund)
has purchased a closing call, and such purchase has been confirmed,
thereby extinguishing the Portfolio's (Fund's) obligation to deliver
securities pursuant to the call it has sold; and (d) at the time a put
is written, the Portfolio (Fund) establishes a segregated account with
its custodian consisting of cash or short-term U.S. Government
securities equal in value to the amount the Portfolio (Fund) will be
obligated to pay upon exercise of the put (this account must be
maintained until the put is exercised, has expired, or the Portfolio
(Fund) has purchased a closing put, which is a put of the same series
as the one previously written); and
(xiv)buy and sell puts and calls on securities, stock index futures or
options on stock index futures, or financial futures or options on
financial futures unless such options are written by other persons
and: (a) the options or futures are offered through the facilities of
a national securities association or are listed on a national
securities or commodities exchange, except for put and call options
issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all such
options which are held at any time do not exceed 20% of the
Portfolio's (Fund's) total net assets; and (c) the aggregate margin
deposits required on all such futures or options thereon held at any
time do not exceed 5% of the Portfolio's (Fund's) total assets.
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.
Each Fund will comply with the state securities laws and regulations of
all states in which it is registered. Each Portfolio will comply with the
permitted investments and investment limitations in the securities laws and
regulations of all states in which the corresponding Fund, or any other
registered investment company investing in the Portfolio, is registered.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
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The Adviser is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for each Portfolio,
the selection of brokers, dealers and futures commission merchants to effect
transactions and the negotiation of brokerage commissions, if any. Brokerdealers
may receive brokerage commissions on portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon the exercise of options. Orders may be directed to
any broker-dealer or futures commission merchant, including to the extent and in
the manner permitted by applicable law, Bankers Trust or its subsidiaries or
affiliates. Purchases and sales of certain portfolio securities on behalf of a
Portfolio are frequently placed by the Adviser with the issuer or a primary or
secondary market-maker for these securities on a net basis, without any
brokerage commission being paid by the Portfolio. Trading does, however, involve
transaction costs. Transactions with dealers serving as market-makers reflect
the spread between the bid and asked prices. Transaction costs may also include
fees paid to third parties for information as to potential purchasers or sellers
of securities. Purchases of underwritten issues may be made which will include
an underwriting fee paid to the underwriter.
The Adviser seeks to evaluate the overall reasonableness of the
brokerage commissions paid (to the extent applicable) in placing orders for the
purchase and sale of securities for a Portfolio taking into account such factors
as price, commission (negotiable in the case of national securities exchange
transactions), if any, size of order, difficulty of execution and skill required
of the executing broker-dealer through familiarity with commissions charged on
comparable transactions, as well as by comparing commissions paid by the
Portfolio to reported commissions paid by others. The Adviser reviews on a
routine basis commission rates, execution and settlement services performed,
making internal and external comparisons.
The Adviser is authorized, consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, when placing portfolio transactions
for a Portfolio with a broker to pay a brokerage commission (to the extent
applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research, market or
statistical information. The term "research, market or statistical information"
includes advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts.
Consistent with the policy stated above, the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. and such other policies as
the Trustees of the Portfolio may determine, the Adviser may consider sales of
shares of the Trust and of other investment company clients of Bankers Trust as
a factor in the selection of broker-dealers to execute portfolio transactions.
Bankers Trust will make such allocations if commissions are comparable to those
charged by nonaffiliated, qualified broker-dealers for similar services.
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Higher commissions may be paid to firms that provide research services
to the extent permitted by law. Bankers Trust may use this research information
in managing the Portfolio's assets, as well as the assets of other clients.
Except for implementing the policies stated above, there is no
intention to place portfolio transactions with particular brokers or dealers or
groups thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to a Portfolio and to the Adviser, it is the
opinion of the management of the Portfolios that such information is only
supplementary to the Adviser's own research effort, since the information must
still be analyzed, weighed and reviewed by the Adviser's staff. Such information
may be useful to the Adviser in providing services to clients other than the
Portfolios, and not all such information is used by the Adviser in connection
with the Portfolios. Conversely, such information provided to the Adviser by
brokers and dealers through whom other clients of the Adviser effect securities
transactions may be useful to the Adviser in providing services to the
Portfolios.
In certain instances there may be securities which are suitable for a
Portfolio as well as for one or more of the Adviser's other clients. Investment
decisions for a Portfolio and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as a Portfolio is concerned. However, it is believed that
the ability of a Portfolio to participate in volume transactions will produce
better executions for the Portfolio.
For the years ended December 31, 1994 and 1993 and the period from
August 4, 1992 (commencement of operations) through December 31, 1992,
International Equity Portfolio paid brokerage commissions in the amount of
$110,580, $63,523 and $2,000, respectively.
For the period from October 25, 1993 (commencement of operations)
through September 30, 1994, Latin American Equity Portfolio paid brokerage
commissions in the amount of $188,008.
For the period from December 14, 1993 (commencement of operations)
through September 30, 1994, Global High Yield Securities Portfolio paid no
brokerage commissions.
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For the period from November 1, 1993 (commencement of operations)
through September 30, 1994, Pacific Basin Equity Portfolio paid brokerage
commissions in the amount of $139,363.
For the year ended December 31, 1994 and the period from March 9, 1993
(commencement of operations) through December 31, 1993, Capital Appreciation
Portfolio paid brokerage commissions in the amount of $162,941 and $58,016,
respectively.
For the period from October 21, 1993 (commencement of operations)
through September 30, 1994, Small Cap Portfolio paid brokerage commissions in
the amount of $20,835.
For the years ended December 31, 1994 and 1993, Equity 500 Index
Portfolio paid brokerage commissions in the amount of $97,069 and $63,408,
respectively.
PERFORMANCE INFORMATION
STANDARD PERFORMANCE INFORMATION
From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:
YIELD: Yields for a Fund used in advertising are computed by dividing
the Fund's interest and dividend income for a given 30-day or one-month
period, net of expenses, by the average number of shares entitled to
receive distributions during the period, dividing this figure by the
Fund's net asset value per share at the end of the period, and
annualizing the result (assuming compounding of income) in order to
arrive at an annual percentage rate. Income is calculated for purpose
of yield quotations in accordance with standardized methods applicable
to all stock and bond mutual funds. Dividends from equity investments
are treated as if they were accrued on a daily basis, solely for the
purpose of yield calculations. In general, interest income is reduced
with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and
is increased with respect to bonds trading at a discount by adding a
portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation.
Income calculated for the purposes of calculating a Fund's yield
differs from income as determined for other accounting purposes.
Because of the different accounting methods used, and because of the
compounding assumed in yield calculations, the yield quoted for a Fund
may differ from the rate of distributions of the Fund paid over the
same period or the rate of income reported in the Fund's financial
statements.
TOTAL RETURN: A Fund's average annual total return is calculated for
certain periods by determining the average annual compounded rates of
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return over those periods that would cause an investment of $1,000
(made at the maximum public offering price with all distributions
reinvested) to reach the value of that investment at the end of the
periods. A Fund may also calculate total return figures which represent
aggregate performance over a period or year-by-year performance.
PERFORMANCE RESULTS: Any total return quotation provided for a Fund
should not be considered as representative of the performance of the
Fund in the future since the net asset value and public offering price
of shares of the Fund will vary based not only on the type, quality and
maturities of the securities held in the corresponding Portfolio, but
also on changes in the current value of such securities and on changes
in the expenses of the Fund and the corresponding Portfolio. These
factors and possible differences in the methods used to calculate total
return should be considered when comparing the total return of a Fund
to total returns published for other investment companies or other
investment vehicles. Total return reflects the performance of both
principal and income.
COMPARISON OF FUND PERFORMANCE
Comparison of the quoted nonstandardized performance of various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effect of the methods used to calculate performance when comparing
performance of a Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs. The Funds may
include comparisons of their investment results to the following unmanaged
indices: Global High Yield Securities Fund - JP Morgan Emerging Markets Bonds
Index or Lipper World Income Funds Average; Capital Appreciation Fund - Standard
& Poor's 500 Composite Stock Price Index, Standard & Poor's MidCap 400 Index,
Lipper General Equity Averages or Lipper MidCap Average; Small Cap Fund -
Russell 2000 Index or Lipper Small Companies Growth Funds Average; International
Equity Fund - MSCI GDP Weighted EAFE Index, MSCI EAFE Index or Lipper
International Average; Latin American Equity Fund - IFCG Latin America Index,
IFCI Latin America Index or Lipper Latin American Funds Average; and Pacific
Basin Equity Fund - MSCI Combined Far East Free Excluding Japan Index or Lipper
Pacific Region Funds Average.
Evaluations of a Fund's performance made by independent sources may
also be used in advertisements concerning the Fund. Sources for a Fund's
performance information could include the following:
ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
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BARRON'S, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
BUSINESS WEEK, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
CONSUMER DIGEST, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
FINANCIAL TIMES, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
FINANCIAL WORLD, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
FORBES, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
FORTUNE, a national business publication that periodically rates the performance
of a variety of mutual funds.
GLOBAL INVESTOR, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
INVESTOR'S DAILY, a daily newspaper that features financial, economic and
business news.
LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, a weekly
publication of industry-wide mutual fund averages by type of fund.
MONEY, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
MORNINGSTAR INC., a publisher of financial information and mutual fund research.
NEW YORK TIMES, a nationally distributed newspaper which regularly covers
financial news.
PERSONAL INVESTING NEWS, a monthly news publication that often reports on
investment opportunities and market conditions.
PERSONAL INVESTOR, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
SUCCESS, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
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U.S. NEWS AND WORLD REPORT, a national business weekly that periodically reports
mutual fund performance data.
VALUE LINE, a biweekly publication that reports on the largest 15,000 mutual
funds.
WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
WEISENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.
WORKING WOMEN, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
VALUATION OF SECURITIES; REDEMPTIONS AND PURCHASES IN KIND
Equity and debt securities (other than short-term debt obligations
maturing in 60 days or less), including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term debt obligations
and money market securities maturing in 60 days or less are valued at amortized
cost, which approximates market.
Securities for which market quotations are not available are valued by
Bankers Trust pursuant to procedures adopted by each Portfolio's Board of
Trustees. It is generally agreed that securities for which market quotations are
not readily available should not be valued at the same value as that carried by
an equivalent security which is readily marketable.
The problems inherent in making a good faith determination of value are
recognized in the codification effected by SEC Financial Reporting Release No. 1
("FRR 1" (formerly Accounting Series Release No. 113)) which concludes that
there is "no automatic formula" for calculating the value of restricted
securities. It recommends that the best method simply is to consider all
relevant factors before making any calculation. According to FRR 1 such factors
would include consideration of the:
type of security involved, financial statements, cost at
date of purchase, size of holding, discount from market
value of unrestricted securities of the same class at the
time of purchase, special reports prepared by analysts,
information as to any transactions or offers with respect to
the security, existence of merger proposals or tender offers
affecting the security, price and extent of public trading
in similar securities of the issuer or comparable companies,
and other relevant matters.
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To the extent that a Portfolio purchases securities which are
restricted as to resale or for which current market quotations are not
available, the Adviser of the Portfolio will value such securities based upon
all relevant factors as outlined in FRR 1.
The Trust, on behalf of each Fund, and each Portfolio reserve the
right, if conditions exist which make cash payments undesirable, to honor any
request for redemption or repurchase order by making payment in whole or in part
in readily marketable securities chosen by the Trust, or the Portfolio, as the
case may be, and valued as they are for purposes of computing the Fund's or the
Portfolio's net asset value, as the case may be (a redemption in kind). If
payment is made to a Fund shareholder in securities, an investor, including the
Fund, the shareholder may incur transaction expenses in converting these
securities into cash. The Trust, on behalf of each Fund, and each Portfolio have
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which each Fund and each Portfolio are obligated to redeem shares or beneficial
interests, as the case may be, with respect to any one investor during any
90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund or the Portfolio, as the case may be, at the beginning
of the period.
Each Portfolio has agreed to make a redemption in kind to the
corresponding Fund whenever the Fund wishes to make a redemption in kind and
therefore shareholders of the Fund that receive redemptions in kind will receive
portfolio securities of the corresponding Portfolio and in no case will they
receive a security issued by the Portfolio. The Portfolio has advised the Trust
that the Portfolio will not redeem in kind except in circumstances in which the
Fund is permitted to redeem in kind or unless requested by the Fund.
Each investor in a Portfolio, including the corresponding Fund, may add
to or reduce its investment in the Portfolio on each day the Portfolio
determines its net asset value. At the close of each such business 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 withdrawals which are to be
effected as of the close of business on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of business on such day plus or minus, as the case may be, the
amount of net additions to or withdrawals from the investor's investment in the
Portfolio effected as of the close of business on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of business on such day plus or minus, as the case may be, the amount of
net additions to or withdrawals from 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
the close of business on the following business day.
Each Fund may, at its own option, accept securities in payment for
shares. The securities delivered in payment for shares are valued by the method
described under "Net Asset Value" as of the day the Fund receives the
securities. This is a taxable transaction to the shareholder. Securities may be
accepted in payment for shares only if they are, in the judgment of Bankers
Trust, appropriate investments for the Fund's corresponding Portfolio. In
addition, securities accepted in payment for shares must: (i) meet the
investment objective and policies of the acquiring Fund's corresponding
Portfolio; (ii) be acquired by the applicable Fund for investment and not for
resale (other than for resale to the Fund's corresponding Portfolio); (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
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a stock exchange, over-the-counter market or by readily available market
quotations from a dealer in such securities. Each Fund reserves the right to
accept or reject at its own option any and all securities offered in payment for
its shares.
MANAGEMENT OF THE TRUST AND THE PORTFOLIOS
Each Board of Trustees is composed of persons experienced in financial
matters who meet throughout the year to oversee the activities of the Funds or
Portfolios they represent. In addition, the Trustees review contractual
arrangements with companies that provide services to the Funds/Portfolios and
review the Funds' performance.
The Trustees and officers of the Trust and Portfolios and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate those Trustees who
are "interested persons" (as defined in the 1940 Act) of the Trust. Unless
otherwise indicated, the address of each Trustee and officer is 6 St. James
Avenue, Boston, Massachusetts.
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TRUSTEES OF THE TRUST
________________ -- Trustee; 5 year bio and address.
________________ -- Trustee; 5 year bio and address.
________________ *-- President and Trustee; 5 year bio and address.
TRUSTEES OF THE PORTFOLIOS
CHARLES P. BIGGAR--Trustee; Retired; Director of Chase/NBW Bank
Advisory Board; Director, Batemen, Eichler, Hill Richards Inc.; formerly Vice
President of International Business Machines and President of the National
Services and the Field Engineering Divisions of IBM. His address is 12 Hitching
Post Lane, Chappaqua, New York 10514.
S. LELAND DILL--Trustee; Retired; Director, Coutts & Co. (U.S.A.)
International; Director, Zweig Cash Fund and Zweig Series Trust; formerly
Partner of KPMG Peat Marwick; Director, Vinters International Company Inc.;
General Partner of Pemco (an investment company registered under the 1940 Act).
His address is 5070 North Ocean Drive, Singer Island, Florida 33404.
PHILIP W. COOLIDGE*--President and Trustee; Chairman, Chief Executive
Officer and President, Signature Financial Group, Inc. ("SFG") (since December,
1988) and Signature Broker-Dealer Services, Inc. ("Signature") (since April,
1989).
OFFICERS OF THE TRUST AND PORTFOLIOS
Unless otherwise specified, each officer listed below holds the same
position with the Trust and each Portfolio.
JAMES B. CRAVER -- Treasurer and Secretary; Senior Vice President, SFG
(since January, 1991); Secretary, Signature (since January, 1991); Partner,
Baker & Hostetler (prior to January, 1991).
DAVID G. DANIELSON -- Assistant Treasurer; Assistant Manager, SFG
(since May, 1991); Graduate Student, Northeastern University (from April, 1990
to March, 1991); Tax Accountant & Systems Analyst, Putnam Companies (prior to
March, 1990).
JAMES S. LELKO, JR. -- Assistant Treasurer; Assistant Manager, SFG (since
January 1993); Senior Tax Compliance Accountant, Putnam Investments (prior to
December 1992).
BARBARA M. O'DETTE -- Assistant Treasurer; Assistant Treasurer, SFG
(since December, 1988) and Signature (since April, 1989); Administrative
Controller, Massachusetts Financial Services Company (prior to December, 1988).
DANIEL E. SHEA -- Assistant Treasurer; Assistant Manager, SFG (since
November 1993); Supervisor and Senior Technical Advisor, Putnam Investments
(prior to November 1993).
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THOMAS M. LENZ -- Assistant Secretary; Vice President and Associate
General Counsel, SFG (since November, 1989); Assistant Secretary, Signature
(since February, 1991); Attorney, Ropes & Gray (prior to November, 1989).
MOLLY S. MUGLER -- Assistant Secretary; Legal Counsel and Assistant
Secretary, SFG (since December, 1988); Assistant Secretary, Signature (since
April, 1989).
LINDA T. GIBSON -- Assistant Secretary; Legal Counsel and Assistant
Secretary, SFG (since May, 1992); Assistant Secretary, Signature (since October,
1992); student, Boston University School of Law (September, 1989 to May, 1992);
Product Manager, SFG (January, 1989 to September, 1989).
ANDRES E. SALDANA -- Assistant Secretary; Legal Counsel, SFG (since
November, 1992); Assistant Secretary, Signature (since September, 1993);
Attorney, Ropes & Gray (September, 1990 to November, 1992); law student, Yale
Law School (September, 1987 to May, 1990).
Messrs. Coolidge, Craver, Danielson, Lelko, Lenz, Saldana and Shea and Mss.
Gibson, Mugler and O'Dette also hold similar positions for other investment
companies for which Signature or an affiliate serves as the principal
underwriter.
No person who is an officer or director of Bankers Trust is an officer
or Trustee of the Trust or the Portfolio. No director, officer or employee of
Signature or any of its affiliates will receive any compensation from the Trust
or a Portfolio for serving as an officer or Trustee of the Trust or a Portfolio.
The Trust pays each Trustee who is not a director, officer or employee of the
Adviser, the Distributor, the Administrator or any of their affiliates an annual
fee of [$10,000], respectively, per annum plus [$500], respectively, per meeting
attended and reimburses them for travel and out-of-pocket expenses. Each
Portfolio and Cash Management, Treasury Money, Tax Free Money, NY Tax Free
Money, Utility, Short/Intermediate U.S. Government Securities, Intermediate Tax
Free, Asset Management and BT Investment Portfolios (together with the Trust,
the "Fund Complex") collectively pay each Trustee who is not a director, officer
or employee of the Adviser, the Distributor, the Administrator or any of their
affiliates an annual fee of $10,000, respectively, per annum plus $500,
respectively, per meeting attended and reimburses them for travel and
out-of-pocket expenses.
For the year ended December 31, 1994, International Equity Portfolio
accrued Trustees fees equal to $1,230.
For the period from October 25, 1993 (commencement of operations)
through September 30, 1994, Latin American Equity Portfolio accrued Trustees
fees equal
to $668.
For the period from November 1, 1993 (commencement of operations)
through September 30, 1994, Pacific Basin Equity Portfolio accrued Trustees fees
equal
to $684.
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For the period from December 14, 1993 (commencement of operations)
through September 30, 1994, Global High Yield Securities Portfolio accrued
Trustees fees
equal to $663.
For the year ended December 31, 1994, Capital Appreciation Portfolio
accrued Trustees fees equal to $1,231.
For the period from October 21, 1993 (commencement of operations)
through September 30, 1994, Small Cap Portfolio accrued Trustees fees equal to
$669.
For the year ended December 31, 1994, Equity 500 Index Portfolio
accrued Trustees fees of $2,059.
Bankers Trust reimbursed the Funds and Portfolios for a portion of their
Trustees fees for the period above. See "Investment Adviser" and "Administrator"
below.
As of September 1, 1995, the Trustees and officers of the Trust and the
Portfolios owned in the aggregate less than 1% of the shares of any Fund or the
Trust (all series taken together).
INVESTMENT ADVISER
Under the terms of each Portfolio's investment advisory agreement with
Bankers Trust (the "Advisory Agreement"), Bankers Trust manages the Portfolio
subject to the supervision and direction of the Board of Trustees of the
Portfolio. Bankers Trust will: (i) act in strict conformity with each
Portfolio's Declaration of Trust, the 1940 Act and the Investment Advisers Act
of 1940, as the same may from time to time be amended; (ii) manage each
Portfolio in accordance with the Portfolio's investment objectives, restrictions
and policies; (iii) make investment decisions for each Portfolio; and (iv) place
purchase and sale orders for securities and other financial instruments on
behalf of each Portfolio.
Bankers Trust bears all expenses in connection with the performance of
services under each Advisory Agreement. The Trust and each Portfolio bears
certain other expenses incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of Trustees of the Trust or the
Portfolio who are not officers, directors or employees of Bankers Trust,
Signature or any of their affiliates; SEC fees and state Blue Sky qualification
fees; charges of custodians and transfer and dividend disbursing agents; certain
insurance premiums; outside auditing and legal expenses; costs of maintenance of
corporate existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of shareholders, officers and Trustees of the Trust or the
Portfolio; and any extraordinary expenses.
For the years ended December 31, 1994, 1993 and the period from August
4, 1992 (commencement of operations) through December 31, 1992, Bankers Trust
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<PAGE>
accrued $322,489, $25,031 and $17,462, respectively, in compensation for
investment advisory services provided to International Equity Portfolio. During
the same periods, Bankers Trust reimbursed $117,653, $65,394 and $24,849,
respectively, to that Portfolio to cover expenses.
For the period from October 25, 1993 (commencement of operations)
through September 30, 1994, Bankers Trust aggregated $102,872 in compensation
for investment advisory services provided to Latin American Equity Portfolio.
During the same period, Bankers Trust reimbursed $81,307 to that Portfolio to
cover expenses.
For the period from November 1, 1993 (commencement of operations)
through September 30, 1994, Bankers Trust aggregated $116,020 in compensation
for investment advisory services provided to Pacific Basin Equity Portfolio.
During the same period, Bankers Trust reimbursed $40,461 to that Portfolio to
cover expenses.
For the period from December 14, 1993 (commencement of operations)
through September 30, 1994, Bankers Trust aggregated $66,073 in compensation for
investment advisory services provided to Global High Yield Securities Portfolio.
During the same period, Bankers Trust reimbursed $48,741 to that Portfolio to
cover expenses.
For the year ended December 31, 1994 and the period from March 9, 1993
(commencement of operations) through December 31, 1993, Bankers Trust accrued
$329,399 and $67,695, respectively, in compensation for investment advisory
services provided to Capital Appreciation Portfolio. During the same periods,
Bankers Trust reimbursed $114,930 and $43,137, respectively, to that Portfolio
to cover expenses.
For the period from October 21, 1993 (commencement of operations)
through September 30, 1994, Bankers Trust aggregated $69,420 in compensation for
investment advisory services provided to Small Cap Portfolio. During the same
period, Bankers Trust reimbursed $41,110 to that Portfolio to cover expenses.
For the years ended December 31, 1994 and 1993, Bankers Trust accrued
$428,346 and $74,893, respectively, in compensation for investment advisory
services provided to Equity 500 Index Portfolio. During the same periods,
Bankers Trust reimbursed $249,230 and $72,112, respectively, to that Portfolio
to cover expenses.
Bankers Trust may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may be purchased on behalf
of the Portfolios, including outstanding loans to such issuers which could be
repaid in whole or in part with the proceeds of securities so purchased. Such
affiliates deal, trade and invest for their own accounts in such obligations and
are among the leading dealers of various types of such obligations. Bankers
Trust has informed the Portfolios that, in making its investment decisions, it
does not obtain or use material inside information in its possession or in the
possession of any of its affiliates. In making investment recommendations for
the Portfolios, Bankers Trust will not inquire or take into consideration
whether an issuer of securities proposed for purchase or sale by a Portfolio is
a
42
<PAGE>
customer of Bankers Trust, its parent or its subsidiaries or affiliates and, in
dealing with its customers, Bankers Trust, its parent, subsidiaries and
affiliates will not inquire or take into consideration whether securities of
such customers are held by any fund managed by Bankers Trust or any such
affiliate.
Each Fund's prospectus contains disclosure as to the amount of Bankers
Trust's investment advisory and administration and services fees, including
waivers thereof. Bankers Trust may not recoup any of its waived investment
advisory or administration and services fees. Such waivers by Bankers Trust
shall stay in effect for at least 12 months.
SUB-INVESTMENT ADVISER
Bankers Trust has entered into a sub-investment advisory agreement (the
"Sub-Advisory Agreement") with BT Fund Managers International Limited ("BT Fund
Managers International") a wholly owned subsidiary of Bankers Trust Australia
Limited ("BTAL") in Sydney. BTAL is a wholly owned subsidiary of Bankers Trust
New York Corporation. Under the Sub-Advisory Agreement, Bankers Trust may
receive investment advice and research services with respect to companies based
in the Pacific Basin and may grant BT Fund Managers International investment
management authority as well as the authority to buy and sell securities if
Bankers Trust believes it would be beneficial to the Portfolio.
BTAL, which was granted a banking license in 1986, is the parent of
Bankers Trust Australia Group which has offices is Sydney, Melbourne, Perth,
Brisbane, Adelaide, London and Hong Kong. A representative office of Bankers
Trust Company was opened in Australia in 1966 and Australian merchant banking
operations commences in 1969. A related organization, Bankers Trust New Zealand
Limited, was established in 1986. Although BTAL has not previously served as
investment adviser for a registered investment company, BTAL provides investment
services for a range of clients.
ADMINISTRATOR
Under the administration and services agreements, Bankers Trust is
obligated on a continuous basis to provide such administrative services as the
Board of Trustees of the Trust and each Portfolio reasonably deem necessary for
the proper administration of the Trust or a Portfolio. Bankers Trust will
generally assist in all aspects of the Funds' and Portfolios' operations; supply
and maintain office facilities (which may be in Bankers Trust's own offices),
statistical and research data, data processing services, clerical, accounting,
bookkeeping and recordkeeping services (including without limitation the
maintenance of such books and records as are required under the 1940 Act and the
rules thereunder, except as maintained by other agents), internal auditing,
executive and administrative services, and stationery and office supplies;
prepare reports to shareholders or investors; prepare and file tax returns;
supply financial information and supporting data for reports to and filings with
the SEC and various state Blue Sky authorities; supply supporting documentation
for meetings of the Board of Trustees; provide monitoring reports and assistance
regarding compliance with Declarations of Trust, by-laws, investment objectives
and policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
43
<PAGE>
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.
Pursuant to a sub-administration agreement (the "Sub-Administration
Agreement"), Signature performs such sub-administration duties for the Trust and
the Portfolios as from time to time may be agreed upon by Bankers Trust and
Signature. The Sub-Administration Agreement provides that Signature will receive
such compensation as from time to time may be agreed upon by Signature and
Bankers Trust. All such compensation will be paid by Bankers Trust.
For the years ended December 31, 1994 , 1993 and the period from August
4, 1992 (commencement of operations) through December 31, 1992, Bankers Trust
received $74,420, $25,031 and $4,030, respectively, in compensation for
administrative and other services provided to International Equity Portfolio.
For the fiscal period from October 25, 1993 (commencement of
operations) through September 30, 1994, Bankers Trust received $20,574 in
compensation for administrative and other services provided to Latin American
Equity Portfolio.
For the fiscal period from November 1, 1993 (commencement of
operations) through September 30, 1994, Bankers Trust received $38,673 in
compensation for administrative and other services provided to Pacific Basin
Equity Portfolio.
For the fiscal period from December 14, 1993 (commencement of
operations) through September 30, 1994, Bankers Trust received $16,518 in
compensation for administrative and other services provided to Global High Yield
Securities Portfolio.
For the year ended December 31, 1994 and the period from March 9, 1993
(commencement of operations) through December 31, 1993, Bankers Trust received
$50,677 and $10,415, respectively, in compensation for administrative and other
services provided to Capital Appreciation Portfolio.
For the fiscal period from October 21, 1993 (commencement of
operations) through September 30, 1994, Bankers Trust received $10,680 in
compensation for administrative and other services provided to Small Cap
Portfolio.
For the years ended December 31, 1994 and 1993, Bankers Trust received
$214,173 and $37,446, respectively, in compensation for administrative and other
services provided to Equity 500 Index Portfolio.
Bankers Trust has agreed that if in any fiscal year the aggregate
expenses of any Fund and its respective Portfolio (including fees pursuant to
the Advisory Agreement, but excluding interest, taxes, brokerage and, if
permitted by the relevant state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over a Fund,
Bankers Trust will reimburse the Fund for the excess expense to the extent
required by state law. As of the date of this Statement of Additional
Information, the most restrictive annual expense limitation applicable to any
Fund is 2.50% of the Fund's first $30 million of average annual net assets,
2.00% of the next $70 million of average annual net assets and 1.50% of the
remaining average annual net assets.
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<PAGE>
CUSTODIAN AND TRANSFER AGENT
Bankers Trust, 280 Park Avenue, New York, New York 10017, serves as
Custodian for the Trust and for each Portfolio pursuant to the administration
and services agreements. As Custodian, it holds the Funds' and each Portfolio's
assets. Bankers Trust also serves as transfer agent of the Trust and of each
Portfolio pursuant to the respective administration and services agreement.
Under its transfer agency agreement with the Trust, Bankers Trust maintains the
shareholder account records for each Fund, handles certain communications
between shareholders and the Trust and causes to be distributed any dividends
and distributions payable by the Trust. Bankers Trust may be reimbursed by the
Funds or the Portfolios for its out-of-pocket expenses. Bankers Trust will
comply with the self-custodian provisions of Rule 17f-2 under the 1940 Act.
USE OF NAME
The Trust and Bankers Trust have agreed that the Trust may use "BT" as
part of its name for so long as Bankers Trust serves as investment adviser to
the Portfolios. The Trust has acknowledged that the term "BT" is used by and is
a property right of certain subsidiaries of Bankers Trust and that those
subsidiaries and/or Bankers Trust may at any time permit others to use that
term.
The Trust may be required, on 60 days' notice from Bankers Trust at any
time, to abandon use of the acronym "BT" as part of its name. If this were to
occur, the Trustees would select an appropriate new name for the Trust, but
there would be no other material effect on the Trust, its shareholders or
activities.
BANKING REGULATORY MATTERS
Bankers Trust has been advised by its counsel that in its opinion
Bankers Trust may perform the services for the Portfolios contemplated by the
Advisory Agreements and other activities for the Funds and the Portfolios
described in the Prospectuses and this Statement of Additional Information
without violation of the Glass-Steagall Act or other applicable banking laws or
regulations. However, counsel has pointed out that future changes in either
Federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as future judicial or administrative
decisions or interpretations of present and future statutes and regulations,
might prevent Bankers Trust from continuing to perform those services for the
Trust and the Portfolios. State laws on this issue may differ from the
interpretations of relevant Federal law and banks and financial institutions may
be required to register as dealers pursuant to state securities law. If the
circumstances described above should change, the Boards of Trustees would review
the relationships with Bankers Trust and consider taking all actions necessary
in the circumstances.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022-4669, serves as Counsel to the Trust and each
Portfolio. Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City,
Missouri 64105 acts as Independent Accountants of the Trust and each Portfolio.
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<PAGE>
ORGANIZATION OF THE TRUST
Shares of the Trust do not have cumulative voting rights, which means
that holders of more than 50% of the shares voting for the election of Trustees
can elect all Trustees. Shares are transferable but have no preemptive,
conversion or subscription rights. Shareholders generally vote by Fund, except
with respect to the election of Trustees and the ratification of the selection
of independent accountants.
Massachusetts law provides that shareholders could under certain
circumstances be held personally liable for the obligations of the Trust.
However, the Trust's Declaration of Trust disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of this disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Declaration of Trust provides for indemnification
from the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations, a possibility that the Trust believes is remote. Upon payment of
any liability incurred by the Trust, the shareholder paying the liability will
be entitled to reimbursement from the general assets of the Trust. The Trustees
intend to conduct the operations of the Trust in a manner so as to avoid, as far
as possible, ultimate liability of the shareholders for liabilities of the
Trust.
TAXATION
TAXATION OF THE FUNDS
The Trust intends to qualify annually and to elect each Fund to be
treated as a regulated investment company under the Code.
To qualify as a regulated investment company, each Fund must, among
other things: (a) derive in each taxable year at least 90% of its gross income
from dividends, interest, payments with respect to securities loans and gains
from the sale or other disposition of stock, securities or foreign currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of certain assets (namely, in the case of the Fund,
(i) stock or securities; (ii) options, futures, and forward contracts (other
than those on foreign currencies); and (iii) foreign currencies (including
options, futures, and forward contracts on such currencies) not directly related
to the Fund's principal business of investing in stock or securities (or options
and futures with respect to stocks or securities)) held less than three months
(the 30% Limitation"); (c) diversify its holdings so that, at the end of each
quarter of the taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash and cash items (including receivables), U.S.
Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited for
the purposes of this calculation to an amount not greater than 5% of the value
of the Fund's total assets and not greater than 10% of the outstanding voting
securities of
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such issuer and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies); and (d)
distribute at least 90% of its investment company taxable income (which
includes, among other items, dividends, interest and net short-term capital
gains in excess of net long-term capital losses) and its net tax-exempt interest
income, if any, each taxable year.
As a regulated investment company, each Fund will not be subject to
U.S. Federal income tax on its investment company taxable income and net capital
gains (the excess of net long-term capital gains over net short-term capital
losses), if any, that it distributes to shareholders. The Fund intends to
distribute to its shareholders, at least annually, substantially all of its
investment company taxable income and net capital gains. Amounts not distributed
on a timely basis in accordance with a calendar year distribution requirement
are subject to a nondeductible 4% excise tax. To prevent imposition of the
excise tax, the Fund must distribute during each calendar year an amount equal
to the sum of: (1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year; (2) at least 98% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses, as prescribed by the Code) for the one-year period ending on October 31
of the calendar year; and (3) any ordinary income and capital gains for previous
years that was not distributed during those years. A distribution will be
treated as paid on December 31 of the current calendar year if it is declared by
the Fund in October, November or December with a record date in such a month and
paid by the Fund during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received. To prevent application of the excise tax, the Fund
intends to make its distributions in accordance with the calendar year
distribution requirement.
Each Fund shareholder will also receive, if appropriate, various
written notices after the close of the Fund's prior taxable year as to the
Federal income status of his dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Shareholders should consult
their tax advisers as to any state and local taxes that may apply to these
dividends and distributions. The dollar amount of dividends excluded from
Federal income taxation and the dollar amount subject to such income taxation,
if any, will vary for each shareholder depending upon the size and duration of
each shareholder's investment in the Fund. To the extent that the Fund earns
taxable net investment income, the Fund intends to designate as taxable
dividends the same percentage of each dividend as its taxable net investment
income bears to its total net investment income earned. Therefore, the
percentage of each dividend designated as taxable, if any, may vary.
INTERNATIONAL EQUITY PORTFOLIO, LATIN AMERICAN EQUITY PORTFOLIO, PACIFIC BASIN
EQUITY PORTFOLIO AND GLOBAL HIGH YIELD SECURITIES PORTFOLIO
FOREIGN SECURITIES. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to determine
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the effective rate of foreign tax in advance since the amount of the Portfolio's
assets to be invested in various countries will vary.
If the Portfolio is liable for foreign taxes, and if more than 50% of
the value of the Portfolio's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, it may make an
election pursuant to which certain foreign taxes paid by it would be treated as
having been paid directly by shareholders of the entities, such as the
corresponding Fund, which have invested in the Portfolio. Pursuant to such
election, the amount of foreign taxes paid will be included in the income of the
corresponding Fund's shareholders, and such Fund shareholders (except tax-exempt
shareholders) may, subject to certain limitations, claim either a credit or
deduction for the taxes. Each such Fund shareholder will be notified after the
close of the Portfolio's taxable year whether the foreign taxes paid will "pass
through" for that year and, if so, such notification will designate (a) the
shareholder's portion of the foreign taxes paid to each such country and (b) the
portion which represents income derived from sources within each such country.
The amount of foreign taxes for which a shareholder may claim a credit
in any year will generally be subject to a separate limitation for "passive
income," which includes, among other items of income, dividends, interest and
certain foreign currency gains. Because capital gains realized by the Portfolio
on the sale of foreign securities will be treated as U.S.source income, the
available credit of foreign taxes paid with respect to such gains may be
restricted by this limitation.
DISTRIBUTIONS
Dividends paid out of the Fund's investment company taxable income will
be taxable to a U.S. shareholder as ordinary income. Distributions of net
capital gains, if any, designated as capital gain dividends are taxable as
long-term capital gains, regardless of how long the shareholder has held the
Fund's shares, and are not eligible for the dividends-received deduction.
Shareholders receiving distributions in the form of additional shares, rather
than cash, generally will have a cost basis in each such share equal to the net
asset value of a share of the Fund on the reinvestment date. Shareholders will
be notified annually as to the U.S. Federal tax status of distributions.
TAXATION OF THE PORTFOLIOS
The Portfolios are not subject to Federal income taxation. Instead, the
Fund and other investors investing in a Portfolio must take into account, in
computing their Federal income tax liability, their share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items, without
regard to whether they have received any cash distributions from the Portfolio.
Distributions received by a Fund from the corresponding Portfolio
generally will not result in the Fund recognizing any gain or loss for Federal
income tax purposes, except that: (1) gain will be recognized to the extent that
any cash distributed exceeds the Fund's basis in its interest in the Portfolio
prior to the distribution; (2) income or gain may be realized if the
distribution is made
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in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio; and
(3) loss may be recognized if the distribution is made in liquidation of the
Fund's entire interest in the Portfolio and consists solely of cash and/or
unrealized receivables. A Fund's basis in its interest in the corresponding
Portfolio generally will equal the amount of cash and the basis of any property
which the Fund invests in the Portfolio, increased by the Fund's share of income
from the Portfolio, and decreased by the amount of any cash distributions and
the basis of any property distributed from the Portfolio.
SALE OF SHARES
Any gain or loss realized by a shareholder upon the sale or other
disposition of shares of the Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced (including shares
acquired pursuant to a dividend reinvestment plan) within a period of 61 days
beginning 30 days before and ending 30 days after disposition of the shares. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on a disposition of Fund
shares held by the shareholder for six months or less will be treated as a
long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
FOREIGN WITHHOLDING TAXES
Income received by a Portfolio from sources within foreign countries
may be subject to withholding and other taxes imposed by such countries.
BACKUP WITHHOLDING
A Fund may be required to withhold U.S. Federal income tax at the rate
of 31% of all taxable distributions payable to shareholders who fail to provide
the Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain other
shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. Federal income tax liability.
FOREIGN SHAREHOLDERS
The tax consequences to a foreign shareholder of an investment in a
Fund may be different from those described herein. Foreign shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
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<PAGE>
OTHER TAXATION
The Trust is organized as a Massachusetts business trust and, under
current law, neither the Trust nor any Fund is liable for any income or
franchise tax in the Commonwealth of Massachusetts, provided that the Fund
continues to qualify as a regulated investment company under Subchapter M of the
Code. The investment by each Fund in the corresponding Portfolio does not cause
the Fund to be liable for any income or franchise tax in the State of New York.
Each of International Equity Portfolio and Capital Appreciation is
organized as a New York trust. BT Investment Portfolios is a New York master
trust fund. Each Portfolio is not subject to any income or franchise tax in the
State of New York or the Commonwealth of Massachusetts.
Fund shareholders may be subject to state and local taxes on their Fund
distributions. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund.
FINANCIAL STATEMENTS
GLOBAL HIGH YIELD SECURITIES FUND, CAPITAL APPRECIATION FUND, SMALL CAP FUND,
INTERNATIONAL EQUITY FUND, LATIN AMERICAN EQUITY FUND AND PACIFIC BASIN EQUITY
FUND
Statement of Assets and Liabilities, , 1995
Report of Independent Accountants
The following financial statements for each of the following Portfolios
are incorporated herein by reference from the its annual report, a copy of which
is attached hereto:
BT INVESTMENT PORTFOLIOS - GLOBAL HIGH YIELD SECURITIES PORTFOLIO
Statement of Assets and Liabilities, September 30, 1994
Statement of Operations for the period from December 14, 1993
(commencement of operations) through September 30, 1994
Statement of Changes in Net Assets for the period from December
14, 1993 (commencement of operations) through September 30, 1994
Financial Highlights: Selected ratios and supplemental data for the
period indicated
Schedule of Portfolio of Investments, September 30, 1994
Notes to Financial Statements
Report of Independent Accountants
CAPITAL APPRECIATION PORTFOLIO
Statement of Assets and Liabilities, December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the year ended December 31, 1994
and the period from March 9, 1993 through December 31, 1993
Financial Highlights: Selected ratios and supplemental data for the
periods indicated
Schedule of Portfolio of Investments, December 31, 1994
Notes to Financial Statements
50
<PAGE>
Report of Independent Accountants
BT INVESTMENT PORTFOLIOS - SMALL CAP PORTFOLIO
Statement of Assets and Liabilities, September 30, 1994
Statement of Operations for the period from October 21, 1993
(commencement of operations) through September 30, 1994
Statement of Changes in Net Assets for the period from October 21, 1993
(commencement of operations) through September 30, 1994
Financial Highlights: Selected ratios and supplemental data for the
period indicated
Schedule of Portfolio of Investments, September 30, 1994
Notes to Financial Statements
Report of Independent Accountants
INTERNATIONAL EQUITY PORTFOLIO
Statement of Assets and Liabilities, December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the years ended December 31,
1994 and 1993
Financial Highlights: Selected ratios and supplemental data for the
periods indicated
Schedule of Portfolio of Investments, December 31, 1994
Notes to Financial Statements
Report of Independent Accountants
BT INVESTMENT PORTFOLIOS - PACIFIC BASIN EQUITY PORTFOLIO
Statement of Assets and Liabilities, September 30, 1994
Statement of Operations for the period from November 1, 1993
(commencement of operations) through September 30, 1994
Statement of Changes in Net Assets for the period from November 1, 1993
(commencement of operations) through September 30, 1994
Financial Highlights: Selected ratios and supplemental data for the
period indicated
Schedule of Portfolio of Investments, September 30, 1994
Notes to Financial Statements
Report of Independent Accountants
BT INVESTMENT PORTFOLIOS - LATIN AMERICAN EQUITY PORTFOLIO
Statement of Assets and Liabilities, September 30, 1994
Statement of Operations for the period from October 25, 1993
(commencement of operations) through September 30, 1994
Statement of Changes in Net Assets for the period from October 25, 1993
(commencement of operations) through September 30, 1994
Financial Highlights: Selected ratios and supplemental data for the
period indicated
Schedule of Portfolio of Investments, September 30, 1994
Notes to Financial Statements
Report of Independent Accountants
51
<PAGE>
BT0441D
BT GLOBAL INVESTORS --
GLOBAL HIGH YIELD SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
, 1995
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $16,667
Deferred organization expenses . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
LIABILITIES:
Accrued organization expenses . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . $16,667
=======
NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($16,667 /1,666.70 SHARES OUTSTANDING) . . . . . . . $10.00
======
NOTES:
(1) BT Global Investors, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date, with
respect to Global High Yield Securities Fund (the "Fund"), except for
matters relating to the organization of the Trust, the Fund's
establishment and designation as a series of the Trust, and the
registration under the Securities Act of 1933 of the Fund's shares of
beneficial interest ("Shares") and the sale of 1,666.70 Shares
("Initial Shares") of the Fund to SFG Investors II Limited Partnership
("SFG Investors"). The Trust will invest all of the Fund's investable
assets in Global High Yield Securities Portfolio (the "Portfolio"), a
series of BT Investment Portfolios, an investment company registered
under the Investment Company Act of 1940, as amended. The Fund is one
of eleven series of the Trust.
(2) Organization expenses of the Fund are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Fund. The
amount paid by the Trust on any redemption by SFG Investors or any
other then-current holder of the Initial Shares of the Fund will be
reduced by a portion of any unamortized organization expenses of the
Fund determined by the proportion of the number of the Initial Shares
of the Fund redeemed to the number of the Initial Shares of the Fund
then outstanding after taking into account any prior redemptions of the
Initial Shares of the Fund.
(3) The Trust has entered into an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Trust.
52
<PAGE>
BT0441D
BT GLOBAL INVESTORS --
CAPITAL APPRECIATION FUND
STATEMENT OF ASSETS AND LIABILITIES
, 1995
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $16,667
Deferred organization expenses . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
LIABILITIES:
Accrued organization expenses . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . $16,667
=======
NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($16,667/1,666.70 SHARES OUTSTANDING). . . . . . . . $10.00
======
NOTES:
(1) BT Global Investors, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date, with
respect to Capital Appreciation Fund (the "Fund"), except for matters
relating to the organization of the Trust, the Fund's establishment
and designation as a series of the Trust, and the registration under
the Securities Act of 1933 of the Fund's shares of beneficial interest
("Shares") and the sale of 1,666.70 Shares ("Initial Shares") of the
Fund to SFG Investors II Limited Partnership ("SFG Investors"). The
Trust will invest all of the Fund's investable assets in Capital
Appreciation Portfolio (the "Portfolio"), an investment company
registered under the Investment Company Act of 1940, as amended. The
Fund is one of eleven series of the Trust.
(2) Organization expenses of the Fund are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Fund. The
amount paid by the Trust on any redemption by SFG Investors or any
other then-current holder of the Initial Shares of the Fund will be
reduced by a portion of any unamortized organization expenses of the
Fund determined by the proportion of the number of the Initial Shares
of the Fund redeemed to the number of the Initial Shares of the Fund
then outstanding after taking into account any prior redemptions of the
Initial Shares of the Fund.
(3) The Trust has entered into an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Trust.
53
<PAGE>
BT0441D
BT GLOBAL INVESTORS --
SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
, 1995
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $16,667
Deferred organization expenses . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
LIABILITIES:
Accrued organization expenses . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . $16,667
=======
NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($16,667 / 1,666.70 SHARES OUTSTANDING). . . . . . . $10.00
======
NOTES:
(1) BT Global Investors, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date, with
respect to Small Cap Fund (the "Fund"), except for matters relating to
the organization of the Trust, the Fund's establishment and
designation as a series of the Trust, and the registration under the
Securities Act of 1933 of the Fund's shares of beneficial interest
("Shares") and the sale of 1,666.70 Shares ("Initial Shares") of the
Fund to SFG Investors II Limited Partnership ("SFG Investors"). The
Trust will invest all of the Fund's investable assets in Small Cap
Portfolio (the "Portfolio"), a series of BT Investment Portfolios, an
investment company registered under the Investment Company Act of
1940, as amended. The Fund is one of eleven series of the Trust.
(2) Organization expenses of the Fund are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Fund. The
amount paid by the Trust on any redemption by SFG Investors or any
other then-current holder of the Initial Shares of the Fund will be
reduced by a portion of any unamortized organization expenses of the
Fund determined by the proportion of the number of the Initial Shares
of the Fund redeemed to the number of the Initial Shares of the Fund
then outstanding after taking into account any prior redemptions of the
Initial Shares of the Fund.
(3) The Trust has entered into an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Trust.
54
<PAGE>
BT0441D
BT GLOBAL INVESTORS --
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
, 1995
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $16,667
Deferred organization expenses . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
LIABILITIES:
Accrued organization expenses . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . $16,667
=======
NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($16,667 /1,666.70 SHARES OUTSTANDING) . . . . . . . $10.00
======
NOTES:
(1) BT Global Investors, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date, with
respect to International Equity Fund (the "Fund"), except for matters
relating to the organization of the Trust, the Fund's establishment
and designation as a series of the Trust, and the registration under
the Securities Act of 1933 of the Fund's shares of beneficial interest
("Shares") and the sale of 1,666.70 Shares ("Initial Shares") of the
Fund to SFG Investors II Limited Partnership ("SFG Investors"). The
Trust will invest all of the Fund's investable assets in International
Equity Portfolio (the "Portfolio"), an investment company registered
under the Investment Company Act of 1940, as amended. The Fund is one
of eleven series of the Trust.
(2) Organization expenses of the Fund are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Fund. The
amount paid by the Trust on any redemption by SFG Investors or any
other then-current holder of the Initial Shares of the Fund will be
reduced by a portion of any unamortized organization expenses of the
Fund determined by the proportion of the number of the Initial Shares
of the Fund redeemed to the number of the Initial Shares of the Fund
then outstanding after taking into account any prior redemptions of the
Initial Shares of the Fund.
(3) The Trust has entered into an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Trust.
55
<PAGE>
BT0441D
BT GLOBAL INVESTORS --
PACIFIC BASIN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
, 1995
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $16,667
Deferred organization expenses . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
LIABILITIES:
Accrued organization expenses . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . $16,667
=======
NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($16,667 / 1,666.70 SHARES OUTSTANDING) . . . . . . $10.00
======
NOTES
(1) BT Global Investors, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date, with
respect to Pacific Basin Equity Fund (the "Fund"), except for matters
relating to the organization of the Trust, the Fund's establishment
and designation as a series of the Trust, and the registration under
the Securities Act of 1933 of the Fund's shares of beneficial interest
("Shares") and the sale of 1,666.70 Shares ("Initial Shares") of the
Fund to SFG Investors II Limited Partnership ("SFG Investors"). The
Trust will invest all of the Fund's investable assets in Pacific Basin
Equity Portfolio (the "Portfolio"), a series of BT Investment
Portfolios, an investment company registered under the Investment
Company Act of 1940, as amended. The Fund is one of eleven series of
the Trust.
(2) Organization expenses of the Fund are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Fund. The
amount paid by the Trust on any redemption by SFG Investors or any
other then-current holder of the Initial Shares of the Fund will be
reduced by a portion of any unamortized organization expenses of the
Fund determined by the proportion of the number of the Initial Shares
of the Fund redeemed to the number of the Initial Shares of the Fund
then outstanding after taking into account any prior redemptions of the
Initial Shares of the Fund.
(3) The Trust has entered into an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Trust.
56
<PAGE>
BT0441D
BT GLOBAL INVESTORS --
LATIN AMERICAN EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
, 1995
ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $16,667
Deferred organization expenses . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . .
LIABILITIES:
Accrued organization expenses . . . . . . . . . . . .
Net assets . . . . . . . . . . . . . . . . . . $16,667
=======
NET ASSET VALUE PER SHARE OF BENEFICIAL
INTEREST ($16,667 / 1,666.70 SHARES OUTSTANDING) . . . . . . $10.00
======
NOTES:
(1) BT Global Investors, a Massachusetts business trust (the "Trust"), was
organized on July 24, 1995 and has been inactive since that date, with
respect to Latin American Equity Fund (the "Fund"), except for matters
relating to the organization of the Trust, the Fund's establishment
and designation as a series of the Trust, and the registration under
the Securities Act of 1933 of the Fund's shares of beneficial interest
("Shares") and the sale of 1,666.70 Shares ("Initial Shares") of the
Fund to SFG Investors II Limited Partnership ("SFG Investors"). The
Trust will invest all of the Fund's investable assets in Latin
American Equity Portfolio (the "Portfolio"), a series of BT Investment
Portfolios, an investment company registered under the Investment
Company Act of 1940, as amended. The Fund is one of eleven series of
the Trust.
(2) Organization expenses of the Fund are being deferred and will be
amortized on a straight-line basis over a period not to exceed five
years from the commencement of investment operations of the Fund. The
amount paid by the Trust on any redemption by SFG Investors or any
other then-current holder of the Initial Shares of the Fund will be
reduced by a portion of any unamortized organization expenses of the
Fund determined by the proportion of the number of the Initial Shares
of the Fund redeemed to the number of the Initial Shares of the Fund
then outstanding after taking into account any prior redemptions of the
Initial Shares of the Fund.
(3) The Trust has entered into an Administration and Services Agreement
with Bankers Trust Company under which Bankers Trust Company provides
administration, custody and transfer agency services to the Trust.
57
<PAGE>
BT0441D
DISTRIBUTOR
Signature Broker-Dealer Services, Inc. BT GLOBAL INVESTORS
6 St. James Avenue
Boston, MA 02116 oGLOBAL HIGH YIELD SECURITIES FUND
(617) 423-0800 oCAPITAL APPRECIATION FUND
oSMALL CAP FUND
oINTERNATIONAL EQUITY FUND
INVESTMENT ADVISER OF EACH PORTFOLIO oPACIFIC BASIN EQUITY FUND
oLATIN AMERICAN EQUITY FUND
Bankers Trust Company
280 Park Avenue
New York, NY 10017
TRANSFER AGENT
Bankers Trust Company
280 Park Avenue
New York, NY 10017
CUSTODIAN
Bankers Trust Company STATEMENT OF
280 Park Avenue ADDITIONAL INFORMATION
New York, NY 10015 , 1995
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
LEGAL COUNSEL
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022-4669
<PAGE>
<PAGE>
BT0445
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS INCLUDED IN PART B - TO BE FILED BY AMENDMENT
BT GLOBAL INVESTORS:
Statement of Assets and Liabilities as of [], 1995
Report of Independent Accountants
BT INVESTMENT PORTFOLIOS - EQUITY 500 EQUAL WEIGHTED PORTFOLIO, BOND INDEX
PORTFOLIO, INTERNATIONAL EQUITY INDEX PORTFOLIO AND SMALL CAP INDEX
PORTFOLIO:
Statement of Assets and Liabilities as of [], 1995
Report of Independent Accountants
BT INVESTMENT PORTFOLIOS - LATIN AMERICAN EQUITY PORTFOLIO, GLOBAL HIGH YIELD
SECURITIES PORTFOLIO, SMALL CAP PORTFOLIO AND PACIFIC BASIN EQUITY PORTFOLIO
Statement of Assets and Liabilities, September 30, 1994
Statement of operations for the period indicated
Statement of Changes in Net Assets for each of the periods indicated
Financial Highlights: Selected ratios and supplemental data for each of the
periods indicated
Schedule of Portfolio Investments, September 30, 1994
Notes to Financial Statements
Report of Independent Accountants
CAPITAL APPRECIATION PORTFOLIO, INTERNATIONAL EQUITY PORTFOLIO AND EQUITY 500
INDEX PORTFOLIO
Statement of Assets and Liabilities, December 31, 1994
Statement of operations for the period indicated
Statement of Changes in Net Assets for each of the periods indicated
Financial Highlights: Selected ratios and supplemental data for each of the
periods indicated
Schedule of Portfolio Investments, December 31, 1994
Notes to Financial Statements
Report of Independent Accountants
(b) EXHIBITS:
(1) Declaration of Trust of the Trust.1
(2) By-Laws of the Trust.1
(3) Inapplicable.
(4) Specimen stock certificates for shares of beneficial
interest of the Trust.2
(5) Inapplicable.
<PAGE>
C-2
(6) Distribution Agreement.2
(7) Inapplicable.
(8) See Exhibit 9(b).
(9) (a) See Exhibit 9(b).
(b) Administration and Services Agreement.2
(10) Opinion of counsel.2
(11) Consent of independent accountants.2
(12) Inapplicable.
(13) Investment letter of initial shareholder.2
(14) Inapplicable.
(15) Plan of Distribution pursuant to Rule 12b-l under the
Investment Company Act of 1940, as amended
(the "1940 Act").2
(16) Method of computations of performance information.2
(17) Powers of Attorney.2
1 Filed herein.
2 To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST.
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record
TITLE OF CLASS HOLDERS (AS OF AUGUST 22, 1995)
-------------- -------------------------------
International Equity Fund 0
Latin American Equity Fund 0
Pacific Basin Equity Fund 0
Global High Yield Securities Fund 0
Capital Appreciation Fund 0
Small Cap Fund 0
Equity 500 Index Fund 0
Equity 500 Equal Weighted Fund 0
Bond Index Fund 0
International Equity Index Fund 0
Small Cap Index Fund 0
<PAGE>
C-3
ITEM 27. INDEMNIFICATION.
Under Article XI, Section 2 of the Trust's Declaration of Trust, any past or
present Trustee or officer of the Trust (including persons who serve at the
Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise
[hereinafter referred to as a "Covered Person"]) is indemnified to the
fullest extent permitted by law against liability and all expenses reasonably
incurred by him in connection with any action, suit or proceeding to which he
may be a party or otherwise involved by reason of his being or having been a
Covered Person. This provision does not authorize indemnification when it is
determined, in the manner specified in the Declaration of Trust, that such
Covered Person has not acted in good faith in the reasonable belief that his
actions were in or not opposed to the best interests of the Trust. Moreover,
this provision does not authorize indemnification when it is determined, in
the manner specified in the Declaration of Trust, that such Covered Person
would otherwise be liable to the Trust or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of his
duties. Expenses may be paid by the Trust in advance of the final disposition
of any action, suit or proceeding upon receipt of an undertaking by such
Covered Person to repay such expenses to the Trust in the event that it is
ultimately determined that indemnification of such expenses is not authorized
under the Declaration of Trust and either (i) the Covered Person provides
security for such undertaking, (ii) the Trust is insured against losses from
such advances or (iii) the disinterested Trustees or independent legal
counsel determines, in the manner specified in the Declaration of Trust, that
there is reason to believe the Covered Person will be found to be entitled to
indemnification.
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to Trustees, officers and
controlling persons of the Trust pursuant to the foregoing provisions, or
otherwise, the Trust has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the 1933 Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Trust
of expenses incurred or paid by a Trustee, officer or controlling person of
the Trust in the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with
the securities being registered, the Trust will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
<PAGE>
C-4
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Signature Broker-Dealer Services, Inc. is the Distributor
("Signature") for the shares of BT Global Investors. Signature also
serves as the principal underwriter or placement agent for other
registered investment companies.
(b) Set forth below are the names, principal business addresses and
positions of each director and officer of Signature. Unless otherwise
noted, the principal business address of these individuals is
Signature Broker-Dealer Services, Inc., 6 St. James Avenue, Boston,
Massachusetts 02116. Unless otherwise specified, none of the officers
and directors of Signature serve as officers and Trustees of the
Trust.
PHILIP W. COOLIDGE: Chief Executive Officer, President and Director of Signature
and President and Trustee of the Registrant.
JAMES B. CRAVER: Secretary and Senior Vice President of Signature and Secretary
and Treasurer of the Registrant.
LINWOOD C. DOWNS: Treasurer of Signature.
THOMAS M. LENZ: Assistant Secretary of Signature and Assistant Secretary of the
Registrant.
MOLLY S. MUGLER: Assistant Secretary of Signature and Assistant Secretary of the
Registrant.
LINDA T. GIBSON: Assistant Secretary of Signature and Assistant Secretary
of the Registrant.
ANDReS E. SALDAnA: Assistant Secretary of Signature and Assistant Secretary of
the Registrant.
SUSAN JAKUBOSKI: Assistant Treasurer of Signature.
BARBARA M. O'DETTE: Assistant Treasurer of Signature and Assistant
Treasurer of the Registrant.
BETH A. REMY: Assistant Treasurer of Signature.
JULIE J. WYETZNER: Product Management Officer of Signature.
CHRISTOPHER W. TOMECEK: Director and Senior Vice President of Signature.
ROBERT G. DAVIDOFF: Director of Signature; CMNY Capital, L.P, 135 East 57th
Street, New York, NY 10022.
KATE B.M. BOLSOVER: Director of Signature; Signature Financial Group (Europe),
Ltd., 49 St. James's Street, London SW1A 1JT.
<PAGE>
C-5
DONALD S. CHADWICK: Director of Signature; Scarborough & Company, 110 East 42nd
Street, New York, NY 10017.
LEEDS HACKETT: Director of Signature; National Credit Management Corporation,
10155 York Road, Cockeysville, MD 21030.
LAURENCE E. LEVINE: Director of Signature; First International Capital,
Ltd., 130 Sunrise Avenue, Palm Beach, FL 33480.
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
BT INSTITUTIONAL FUNDS: 6 St. James Avenue, Boston, MA 02116.
BANKERS TRUST COMPANY: 280 Park Avenue, New York, NY 10017.
INVESTORS FIDUCIARY TRUST COMPANY: 127 West 10th Street, Kansas City, MO 64105.
SIGNATURE BROKER-DEALER SERVICES, INC.: 6 St. James Avenue, Boston, MA 02116.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
<PAGE>
C-6
ITEM 32. UNDERTAKINGS.
(a) The Registrant undertakes to file a post-effective amendment,
including financials, which need not be certified, within four to six
months following the commencement of operations of each of its
series. The financial statements included in such amendment will be
as of and for the time period ended on a date reasonably close or as
soon as practicable to the date of the amendment.
(b) The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the Act were applicable to the
Registrant except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of the net asset value or values of shares held by such
requesting shareholders.
(c) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the Registrant shall
furnish each person to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement on Form N-1A (the "Registration Statement") to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of Boston
and the Commonwealth of Massachusetts on the 23rd day of August, 1995.
BT GLOBAL INVESTORS
By: /S/THOMAS M. LENZ
Thomas M. Lenz
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on August 23, 1995.
SIGNATURE TITLE
/S/THOMAS M. LENZ Trustee
Thomas M. Lenz
/S/ANDRES E. SALDANA Trustee
Andres E. Saldana
/S/SUZAN M. BARRON Trustee
Suzan M. Barron
<PAGE>
SIGNATURE
International Equity Portfolio has duly caused this Registration Statement on
Form N-1A of BT Global Investors to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and the Commonwealth of
Massachusetts on the 22nd day of August, 1995.
INTERNATIONAL EQUITY PORTFOLIO
By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President
This Registration Statement on Form N-1A of BT Global Investors has been
signed below by the following persons in the capacities indicated on August 22,
1995.
SIGNATURE TITLE
/S/PHILIP W. COOLIDGE Trustee and President of
Philip W. Coolidge International Equity Portfolio
CHARLES P. BIGGAR* Trustee of International Equity
Charles P. Biggar Portfolio
S. LELAND DILL* Trustee of International
S. Leland Dill Equity Portfolio
/S/JAMES B. CRAVER Treasurer (Principal Financial
James B. Craver and Principal Accounting
Officer) of International Equity
Portfolio
*By: /S/JAMES B. CRAVER
James B. Craver as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.
<PAGE>
SIGNATURES
Capital Appreciation Portfolio has duly caused this Registration Statement on
Form N-1A of BT Global Investors to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and the Commonwealth of
Massachusetts on the 22nd of August, 1995.
CAPITAL APPRECIATION PORTFOLIO
By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President
This Registration Statement on Form N-1A of BT Global Investors has been
signed below by the following persons in the capacities indicated on August 22,
1995.
SIGNATURE TITLE
/S/PHILIP W. COOLIDGE Trustee and President of Capital
Philip W. Coolidge Appreciation Portfolio
CHARLES P. BIGGAR* Trustee of Capital Appreciation
Charles P. Biggar Portfolio
S. LELAND DILL* Trustee of Capital Appreciation
S. Leland Dill Portfolio
/S/JAMES B. CRAVER Treasurer (Principal Financial and
James B. Craver Principal Accounting Officer) of
Capital Appreciation Portfolio
*By: /S/JAMES B. CRAVER
James B. Craver as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.
<PAGE>
SIGNATURES
BT Investment Portfolios has duly caused this Registration Statement on Form
N-1A of BT Global Investors to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and the Commonwealth of
Massachusetts on the 22nd day of August, 1995.
BT INVESTMENT PORTFOLIOS
By: /S/PHILIP W. COOLIDGE
Philip W. Coolidge
President
This Registration Statement on Form N-1A of BT Global Investors has been
signed below by the following persons in the capacities indicated on August 22,
1995.
SIGNATURE TITLE
/S/PHILIP W. COOLIDGE Trustee and President of BT
Philip W. Coolidge Investment Portfolios
CHARLES P. BIGGAR* Trustee of BT Investment
Charles P. Biggar Portfolios
S. LELAND DILL* Trustee of BT Investment
S. Leland Dill Portfolios
/S/JAMES B. CRAVER Treasurer (Principal Financial and
James B. Craver Principal Accounting Officer) of
BT Investment Portfolios
*By: /S/JAMES B. CRAVER
James B. Craver as Attorney-in-Fact pursuant to a Power of Attorney
previously filed.
<PAGE>
BT GLOBAL INVESTORS
EXHIBITS
TO
REGISTRATION STATEMENT ON
FORM N-1A
EXHIBIT INDEX
EXHIBIT NO. PAGE
(1) Declaration of Trust of the Registrant
(2) By-Laws of the Registrant
BT0434
BT GLOBAL INVESTORS
DECLARATION OF TRUST
Dated as of July 24, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--Name and Definitions 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II--Trustees 3
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees
Section 2.3 Resignation and Appointment of Trustees 3
Section 2.4 Vacancies 4
Section 2.5 Delegation of Power to Other Trustees 4
ARTICLE III--Powers of Trustees 4
Section 3.1 General 4
Section 3.2 Investments 5
Section 3.3 Legal Title 6
Section 3.4 Issuance and Repurchase of Securities 6
Section 3.5 Borrowing Money; Lending Trust Property 6
Section 3.6 Delegation; Committees 6
Section 3.7 Collection and Payment 6
Section 3.8 Expenses 7
Section 3.9 Manner of Acting; By-Laws 7
Section 3.10 Miscellaneous Powers 7
Section 3.11 Principal Transactions 7
Section 3.12 Trustees and Officers as Shareholders 8
ARTICLE IV--Investment Adviser, Distributor, Administrator, Transfer
Agent and Shareholder Servicing Agents 8
Section 4.1 Investment Adviser 8
Section 4.2 Distributor 9
Section 4.3 Administrator 9
Section 4.4 Transfer Agent and Shareholder Servicing Agents 9
Section 4.5 Parties to Contract 9
ARTICLE V--Limitations of Liability of Shareholders, Trustees and Others 10
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc. 10
Section 5.2 Non-Liability of Trustees, etc. 10
Section 5.3 Mandatory Indemnification; Insurance 11
Section 5.4 No Bond Required of Trustees 12
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. 12
Section 5.6 Reliance on Experts, etc. 13
i
<PAGE>
ARTICLE VI--Shares of Beneficial Interest 13
Section 6.1 Beneficial Interest 13
Section 6.2 Rights of Shareholders 13
Section 6.3 Trust Only 13
Section 6.4 Issuance of Shares 14
Section 6.5 Register of Shares 14
Section 6.6 Transfer of Shares 14
Section 6.7 Notices 15
Section 6.8 Voting Powers 15
Section 6.9 Series and Class Designation 15
ARTICLE VII--Redemptions 18
Section 7.1 Redemptions 18
Section 7.2 Suspension of Right of Redemption 18
Section 7.3 Redemption of Shares; Disclosure of Holding 18
Section 7.4 Redemptions of Accounts of Less than
Minimum Amount 19
ARTICLE VIII--Determination of Net Asset Value, Net Income and
Distributions 19
ARTICLE IX--Duration; Termination of Trust; Amendment; Mergers, etc. 19
--------------------------------------------------------
Section 9.1 Duration 19
Section 9.2 Termination of Trust 20
Section 9.3 Amendment Procedure 20
Section 9.4 Merger, Consolidation and Sale of Assets 22
Section 9.5 Incorporation, Reorganization 22
Section 9.6 Incorporation or Reorganization of Series 22
ARTICLE X--Reports to Shareholders and Shareholder Communications 23
------------------------------------------------------
ARTICLE XI--Miscellaneous 23
Section 11.1 Filing 23
Section 11.2 Governing Law 23
Section 11.3 Counterparts 23
Section 11.4 Reliance by Third Parties 23
Section 11.5 Provisions in Conflict with Law or Regulations 24
Section 11.6 Principal Office 24
ii
<PAGE>
BT0434
DECLARATION OF TRUST
OF
BT GLOBAL INVESTORS
Dated as of July 24, 1995
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest (par value
$0.00001 per share) ("Shares") issued in one or more series, which series may be
divided into one or more classes, as hereinafter provided and
NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the Shares issued
hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is "BT Global
Investors."
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Administrator" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.3 hereof.
(b) "By-Laws" means the By-laws referred to in Section 3.9 hereof, as
from time to time amended.
(c) "Commission" has the meaning given that term in the 1940 Act.
(d) "Custodian" means a party employed by the Trust to furnish services
as described in Article X of the By-Laws.
(e) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration", "hereof",
<PAGE>
2
"herein", and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(f) "Distributor" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.2 hereof.
(g) "Interested Person" has the meaning given that term in the 1940
Act.
(h) "Investment Adviser" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(i) "Majority Shareholder Vote" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the 1940
Act, except that such term may be used herein with respect to the Shares of the
Trust as a whole or the Shares of any particular series, or class of any series,
as the context may require.
(j) "1940 Act" means the Investment Company Act of 1940 and the rules
and regulations thereunder, as amended from time to time.
(k) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign.
(l) "Shareholder" means a record owner of outstanding Shares.
(m) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series or class of Shares established by the
Trustees pursuant to Section 6.9 hereof, equal proportionate transferable units
into which such series or class of Shares shall be divided from time to time.
The term "Shares" includes fractions of Shares as well as whole Shares.
(n) "Shareholder Servicing Agent" means a party furnishing services to
the Trust pursuant to any shareholder servicing contract described in Section
4.4 hereof.
(o) "Transfer Agent" means a party furnishing services to the Trust
pursuant to any transfer agency contract described in Section 4.4 hereof.
(p) "Trust" means the trust created hereby.
(q) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(r) "Trustees" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly elected or appointed,
qualified and serving as Trustees in accordance with the provisions hereof, and
reference
<PAGE>
3
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three nor more than 15.
Section 2.2. Term of Office of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided; except
that (a) any Trustee may resign his trust (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date as
is specified therein; (b) any Trustee may be removed with cause, at any time by
written instrument signed by at least two-thirds of the remaining Trustees,
specifying the date when such removal shall become effective; (c) any Trustee
who has attained a mandatory retirement age established pursuant to any written
policy adopted form time to time by at least two thirds of the Trustees shall,
automatically and without action of 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; (d) 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 signed by a majority of the
other Trustees, specifying the date of his retirement; and (e) a Trustee may be
removed at any meeting of Shareholders by a vote of two thirds of the
outstanding Shares of each series. For purposes of the foregoing clause (b), the
term "cause" shall include, but not be limited to, failure to comply with such
written policies as may from time to time be adopted by at least two thirds of
the Trustees with respect to the conduct of Trustees and attendance at meetings.
Upon the resignation, retirement or removal of a Trustee, or his otherwise
ceasing to be a Trustee, he 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 the resigning,
retiring or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
Section 2.3. Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees shall fill such vacancy by
appointing such other individual as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person 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 the Declaration. Within twelve months of such appointment, the
<PAGE>
4
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16
(a) of the 1940 Act.
Section 2.4. Vacancies. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees 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 the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six months at
any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two Trustees personally exercise the powers granted to the Trustees
under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
Section 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
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. 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 both within and without the Commonwealth of Massachusetts,
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 the Trustees deem necessary, proper 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 made by the Trustees in good faith shall be conclusive. In construing the
provisions of the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
<PAGE>
5
Section 3.2. Investments. (a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an investment
company;
(ii) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of U.S. and foreign currencies, any form of gold
or other precious metal, commodity contracts, any form of option contract,
contracts for the future acquisition or delivery of fixed income or other
securities, shares of, or any other interest in, any investment company as
defined in the 1940 Act, and securities and related derivatives of every nature
and kind, including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed or sponsored by any and all Persons, including,
without limitation,
(A) states, territories and possessions of the United States and the
District of Columbia and any political subdivision, agency or instrumentality of
any such Person,
(B) the U.S. Government, any foreign government, any political
subdivision or any agency or instrumentality of the U.S. Government, any foreign
government or any political subdivision of the U.S. Government or any foreign
government,
(C) any international or supranational instrumentality,
(D) any bank or savings institution, or
(E) any corporation, trust, partnership or other organization organized
under the laws of the United States or of any state, territory or possession
thereof, or under any foreign law;
or in "when issued" contracts for any such securities, to retain Trust assets in
cash and from time to time to change the securities or obligations in which the
assets of the Trust are invested; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every 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 said rights, powers and privileges in respect of
any of said investments; and
(iii) to carry on any other business in connection with or incidental
to any of the foregoing powers, to do everything necessary, proper or desirable
for the accomplishment of any purpose or the attainment of any object or the
furtherance of any power hereinbefore set forth, and to do every other act or
thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
(b) The Trustees shall not be limited to investing in securities or
obligations maturing before the possible termination of the Trust, nor shall the
<PAGE>
6
Trustees be limited by any law limiting the investments which may be made by
fiduciaries.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
Section 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
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 of any
other Person or nominee, 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 Person who may hereafter become a Trustee. Upon the
resignation, removal or death of a Trustee, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds of the Trust or other Trust Property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. Borrowing Money; Lending Trust Property. 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 Trust
Property, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust Property.
Section 3.6. Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owed to the Trust; and to enter into releases, agreements and other
instruments.
<PAGE>
7
Section 3.8. Expenses. Subject to Section 6.9 hereof, the Trustees
shall have the 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 the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees at which a quorum is
present, including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of a majority of the
Trustees. The Trustees may adopt By-Laws not inconsistent with this Declaration
to provide for the conduct of the business of the Trust and may amend or repeal
such By-Laws to the extent such power is not reserved to the Shareholders.
Section 3.10. Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, the Administrator, Trustees,
officers, employees, agents, the Investment Adviser, the Distributor, selected
dealers 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 constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust; (f) to the extent permitted by law, indemnify any person
with whom the Trust has dealings, including any Investment Adviser,
Administrator, Custodian, Distributor, Transfer Agent, Shareholder Servicing
Agent and any dealer, 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, provided, that the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.
Section 3.11. Principal Transactions. Except in transactions permitted
by the 1940 Act, or any order of exemption issued by the Commission, the
Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with any Investment Adviser, Administrator, Shareholder Servicing
Agent, Custodian, Distributor or Transfer Agent or with any Interested Person of
such Person; but
<PAGE>
8
the Trust may, upon customary terms, employ any such Person, or firm or company
in which such Person is an Interested Person, as broker, legal counsel,
registrar, transfer agent, dividend disbursing agent or custodian.
Section 3.12. Trustees and Officers as Shareholders. Except as
hereinafter provided, no officer, Trustee or member of any advisory board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser, Administrator or of the Distributor, and no Investment Adviser,
Administrator or Distributor of the Trust, shall take long or short positions in
the securities issued by the Trust. The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent for the account of
the Trust;
(c) The purchase from the Trust or from the Distributor of Shares by
any officer, Trustee or member of any advisory board of the Trust or by any
member, partner, officer, director or trustee of the Investment Adviser or of
the Distributor at a price not lower than the net asset value of the Shares at
the moment of such purchase, provided that any such sales are only to be made
pursuant to a uniform offer described in the current prospectus or statement of
additional information for the Shares being purchased; or
(d) The Investment Adviser, the Distributor, the Administrator, or any
of their officers, partners, directors or trustees from purchasing Shares prior
to the effective date of the Trust's registration statement under the Securities
Act of 1933, as amended, relating to the Shares.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
AND SHAREHOLDER SERVICING AGENTS
Section 4.1. Investment Adviser. Subject to a Majority Shareholder Vote
of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby the other party to each such contract shall
undertake to furnish the Trust such management, investment advisory, statistical
and research facilities and services, promotional activities, and such other
facilities and services, if any, with respect to one or more series of Shares,
as the Trustees shall from time to time consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
Notwithstanding any provision of the Declaration, the Trustees may delegate to
the Investment Adviser authority (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
<PAGE>
9
sales, loans or exchanges of assets of the Trust 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 the Investment Adviser (and
all without further action by the Trustees). Any of such purchases, sales, loans
or exchanges shall be deemed to have been authorized by all the Trustees. Such
services may be provided by one or more Persons.
Section 4.2. Distributor. The Trustees may in their discretion from
time to time enter into one or more distribution contracts providing for the
sale of Shares whereby the Trust may either agree to sell the Shares to the
other party to any such contract or appoint any such other party its sales agent
for such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of the Declaration
or the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer and sales agreements with
registered securities dealers and depository institutions to further the purpose
of the distribution or repurchase of the Shares. Such services may be provided
by one or more Persons.
Section 4.3. Administrator. The Trustees may in their discretion from
time to time enter into one or more administrative services contracts whereby
the other party to each such contract shall undertake to furnish such
administrative services to the Trust as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine, provided that such terms and conditions are not
inconsistent with the provisions of this Declaration or the By-Laws. Such
services may be provided by one or more Persons.
Section 4.4. Transfer Agent and Shareholder Servicing Agents. The
Trustees may in their discretion from time to time enter into one or more
transfer agency and shareholder servicing contracts whereby the other party to
each such contract shall undertake to furnish such transfer agency and/or
shareholder services to the Trust or to shareholders of the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of this
Declaration or the By-Laws. Such services may be provided by one or more
Persons. Except as otherwise provided in the applicable shareholder servicing
contract, a Shareholder Servicing Agent shall be deemed to be the record owner
of outstanding Shares beneficially owned by customers of such Shareholder
Servicing Agent for whom it is acting pursuant to such shareholder servicing
contract.
Section 4.5. Parties to Contract. Any contract of the character
described in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV or any Custodian
contract as described in Article X of the By-Laws may be entered into with any
Person, although one or more of the Trustees or officers of the Trust may be an
officer, partner, director, trustee, shareholder, or member of such other party
to the contract, and no such contract shall be invalidated or rendered voidable
by
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10
reason of the existence of any such relationship; nor shall any Person 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 not inconsistent with the provisions of this
Article IV or the By-Laws. The same Person may be the other party to contracts
entered into pursuant to Sections 4.1, 4.2, 4.3 and 4.4 above or any Custodian
contract as described in Article X of the By-Laws, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. 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
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful 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. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein. Notwithstanding any other provision of this
Declaration to the contrary, no Trust Property shall be used to indemnify or
reimburse any Shareholder of any Shares of any series or class thereof other
than Trust Property allocated or belonging to that series, or allocable to the
class thereof.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust or to any
Shareholder, Trustee, officer, employee, or agent thereof 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 his own
bad faith, wilful misfeasance, gross negligence or reckless disregard of his
duties.
Section 5.3. Mandatory Indemnification; Insurance. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
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11
(i) every person who is or has been a Trustee or officer of the Trust
shall be indemnified by the Trust, to the fullest extent permitted by law
(including the 1940 Act) as currently in effect or as hereafter amended, against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim", "action", "suit", or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, administrative or
other, including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by reason of
a final adjudication by the court or other body before which the proceeding was
brought that he engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a Trustee or
officer or other disposition not involving a final adjudication as provided in
paragraph (b) (i) or (b) (ii) above resulting in a payment by a Trustee or
officer, unless there has been either a determination that such Trustee or
officer did not engage in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his 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 he did not engage in such conduct:
(a) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(b) by written opinion of independent legal counsel.
(c) Subject to the provisions of the 1940 Act, the Trust may maintain
insurance for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability (whether or not the Trust would have
the power to indemnify such Persons against such liability), and such other
insurance as the Trustees in their sole judgment shall deem advisable.
(d) The rights of indemnification herein provided shall be severable,
shall not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to be such
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12
a Trustee or officer and shall inure to the benefit of the heirs, executors and
administrators of such Person. Nothing contained herein shall affect any rights
to indemnification to which personnel other than Trustees and officers may be
entitled by contract or otherwise under law.
(e) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3 a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
Section 5.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, Shareholder Servicing Agent, Transfer Agent or other
Person dealing with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as Trustees under the
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees shall recite
that the same is executed or made by them not individually, but as Trustees
under the Declaration, and that the obligations of any such instrument are not
binding upon any of the Trustees or Shareholders individually, but bind only the
trust estate, and may contain any further recital which they or he may deem
appropriate, but
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13
the omission of such recital shall not operate to bind any of the Trustees or
Shareholders individually. The Trustees shall at all times maintain insurance
for the protection of the Trust Property, Shareholders, Trustees, officers,
employees and agents 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.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or
employee of the Trust shall, in the performance of his 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, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, any Shareholder Servicing Agent, selected dealers, accountants,
appraisers 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
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder may be divided into transferable Shares, which may be divided into one
or more series as provided in Section 6.9 hereof. Each such series shall have
such class or classes of Shares as the Trustees may from time to time determine.
The number of Shares authorized hereunder is unlimited. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and non-assessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in the Declaration. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with respect to any series
or class of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of trustee and beneficiary between the Trustees and the
Shareholders. It is not the intention of the Trustees to create a general
partnership, limited partnership, joint stock association, corporation, bailment
or any form of legal relationship other than a trust. Nothing in the Declaration
shall be construed to make the Shareholders, either by themselves or with the
Trustees, partners or members of a joint stock association.
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14
Section 6.4. Issuance of Shares. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, 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. In connection
with any issuance of Shares, the Trustees may issue fractional Shares. The
Trustees may from time to time divide or combine the Shares of any series into a
greater or lesser number without thereby changing their proportionate beneficial
interests in Trust Property allocated or belonging to such series. Contributions
to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or fractions of a Share.
Section 6.5. Register of Shares. A register or registers shall be kept
at the principal office of the Trust or at an office of the Transfer Agent
(and/or any sub-transfer agent which may be a Shareholder Servicing Agent) which
register or registers, taken together, shall contain the names and addresses of
the Shareholders and the number of Shares held by them respectively and a record
of all transfers thereof. Such register or registers shall be conclusive as to
who are the holders of the Shares and who shall be entitled to receive dividends
or distributions or otherwise to exercise or enjoy the rights of Shareholders.
No Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-Laws
provided, until he has given his address to the Transfer Agent, a sub-transfer
agent, or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may authorize
the issuance of Share certificates and promulgate appropriate rules and
regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees, the Transfer Agent or
a sub-transfer agent, of a duly executed instrument of transfer, together with
any certificate or certificates (if issued) for such Shares and such evidence of
the genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded on
the register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent, a sub-transfer agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees, the Transfer
Agent or a sub-transfer agent; but until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent, sub-transfer agent or
registrar nor
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15
any officer or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law.
Section 6.7. Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 6.8. Voting Powers. The Shareholders shall have power to vote
only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii)
with respect to any investment advisory or management contract as provided in
Section 4.1 hereof, (iii) with respect to termination of the Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to
the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Sections 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Sections 9.5 and 9.6 hereof, (vii) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or not
a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (viii) with respect to such additional matters relating to the
Trust as may be required by the Declaration, the By-Laws or any registration of
the Trust with the Commission (or any successor agency) or any state, or as the
Trustees may consider necessary or desirable. Each whole Share shall be entitled
to one 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. Shares shall be voted by
individual series or class on any matter submitted to a vote of the Shareholders
of the Trust except as provided in Section 6.9(g) hereof. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration or the By-Laws to be taken by Shareholders. At
any meeting of Shareholders of the Trust or of any series or class of the Trust,
a Shareholder Servicing Agent may vote any shares as to which such Shareholder
Servicing Agent is the agent of record and which are not otherwise represented
in person or by proxy at the meeting, proportionately in accordance with the
votes cast by beneficial owners of all shares otherwise represented at the
meeting in person or by proxy as to which such Shareholder Servicing Agent is
the agent of record. Any shares so voted by a Shareholder Servicing Agent will
be deemed represented at the meeting for quorum purposes. The By-Laws may
include further provisions for Shareholder votes and meetings and related
matters.
Section 6.9. Series and Class Designation. As set forth in Appendix I
hereto, the Trustees have authorized the division of Shares into series and
classes, as designated and established pursuant to the provisions of Appendix I
and this Section 6.9. The Trustees, in their discretion, may authorize the
division of Shares into one or more additional series, which may be divided into
one or more classes, and the different series and classes shall be established
and designated, and the variations in the relative rights, privileges and
preferences as between the different series and classes shall be fixed and
determined by the Trustees upon and subject to the following provisions:
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16
(a) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series and different classes thereof as to purchase price, right of redemption
and the price, terms and manner of redemption, and special and relative rights
as to dividends and on liquidation.
(b) The number of authorized Shares and the number of Shares of each
series or classes that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any series or classes into one or more series or classes that may
be established and designated from time to time. The Trustees may hold as
treasury shares (of the same or some other series or class), reissue for such
consideration and on such terms as they may determine, or cancel any Shares of
any series or class reacquired by the Trust at their discretion from time to
time.
(c) All consideration received by the Trust for the issuance or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income and earnings thereon,
profits therefrom, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series (and are allocable to any classes of that
series) for all purposes, subject only to the rights of creditors of such
series, and shall be so recorded upon the books of account of the Trust. In the
event that there are any assets, income, earnings, profits, proceeds, funds or
payments which are not readily identifiable as belonging to any particular
series, the Trustees shall allocate them to and among any one or more of the
series and the classes thereof established and designated from time to time in
such manner and on such basis as the Trustees, in their sole discretion, deem
fair and equitable. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all series and classes for all purposes. No
Shareholder of any particular series or class thereof shall have any claim on or
right to any assets allocated or belonging to any other series, and allocable to
any class thereof, of Shares.
(d) The assets belonging to each particular series, and allocable to
any class thereof, shall be charged with the liabilities of the Trust in respect
of that series, and allocable to any class thereof, and all expenses, costs,
charges and reserves attributable to that series, and allocable to any class
thereof, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
series or class shall be allocated and charged by the Trustees to and among any
one or more of the series and the classes thereof established and designated
from time to time in such manner and on such basis as the Trustees, in their
sole discretion, deem fair and equitable. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all series and classes for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. Under no circumstances shall the assets allocated
or belonging to
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17
any particular series or class be charged with liabilities, expenses, costs,
charges or reserves attributable to any other series or class. All Persons who
have extended credit which has been allocated to a particular series or class,
or who have a claim or contract which has been allocated to any particular
series or class, shall look only to the assets of that particular series or
class for payment of such credit, claim or contract.
(e) The power of the Trustees to invest and reinvest the Trust Property
allocated or belonging to any particular series shall be governed by Section 3.2
hereof unless otherwise provided in the instrument of the Trustees establishing
such series which is hereinafter described.
(f) Each Share of a series or of any class thereof shall represent a
beneficial interest in the net assets allocated or belonging to such series
only, and such interest shall not extend to the assets of the Trust generally.
Dividends and distributions on Shares of a particular series or of any class
thereof may be paid with such frequency as the Trustees may determine, which may
be monthly or otherwise, pursuant to a standing vote or votes adopted only once
or with such frequency as the Trustees may determine, to the Shareholders of
that series or class only, from such of the income and capital gains, accrued or
realized, from the assets belonging to that series, or allocable to that class,
as the Trustees may determine, after providing for actual and accrued
liabilities belonging to that series or allocable to that class. All dividends
and distributions on Shares of a particular series or class thereof shall be
distributed pro rata to the Shareholders of that series in proportion to the
number of Shares of that series or class held by such Shareholders at the date
and time of record established for the payment of such dividends or
distributions. Shares of any particular series or class thereof of the Trust may
be redeemed solely out of Trust Property allocated or belonging to that series
or class. Upon liquidation or termination of a series of the Trust, Shareholders
of such series shall be entitled to receive a pro rata share of the net assets
of such series (or allocable to that series) only.
(g) Notwithstanding any provision hereof to the contrary, on any matter
submitted to a vote of the Shareholders of the Trust, all Shares then entitled
to vote shall be voted by individual series or class, except that (i) when
required by the 1940 Act to be voted in the aggregate, Shares shall not be voted
by individual series or classes, and (ii) when the Trustees have determined that
the matter affects only the interests of Shareholders of one or more series or
class, only Shareholders of such series or class shall be entitled to vote
thereon.
(h) The establishment and designation of any series or class of Shares
shall be effective upon the execution by a majority of the Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such series or class, or as otherwise provided in such
instrument, or upon a resolution adopted by a majority of the Trustees and the
execution by an officer of the Trust on behalf of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series or class, or as otherwise provided in such
instrument. At any time that there are no Shares outstanding of any particular
series or class previously established and designated, the Trustees may by an
instrument
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18
executed by a majority of their number abolish that series or class and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
ARTICLE VII
REDEMPTIONS
Section 7.l Redemptions. In case any Shareholder at any time desires to
dispose of his Shares, he may deposit his certificate or certificates therefor,
duly endorsed in blank or accompanied by an instrument of transfer executed in
blank, or if the Shares are not represented by any certificate, a written
request or other such form of request as the Trustees may from time to time
authorize, at the office of the Transfer Agent, the Shareholder Servicing Agent
which is the agent of record for such Shareholder, or at the office of any bank
or trust company, either in or outside of the Commonwealth of Massachusetts,
which is a member of the Federal Reserve System and which the said Transfer
Agent or the said Shareholder Servicing Agent has designated in writing for that
purpose, together with an irrevocable offer in writing in a form acceptable to
the Trustees to sell the Shares represented thereby to the Trust at the net
asset value per Share thereof, next determined after such deposit as provided in
Section 8.1 hereof. Payment for said Shares shall be made to the Shareholder
within seven days after the date on which the deposit is made, unless (i) the
date of payment is postponed pursuant to Section 7.2 hereof, or (ii) the
receipt, or verification of receipt, of the purchase price for the Shares to be
redeemed is delayed, in either of which events payment may be delayed beyond
seven days.
Section 7.2 Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment of the
redemption proceeds for the whole or any part of any period (i) during which the
New York Stock Exchange is closed other than customary week-end and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which disposal
by the Trust of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Trust fairly to determine the value of its
net assets, or (iv) during which the Commission for the protection of
Shareholders by order permits the suspension of the right of redemption or
postponement of the date of payment of the redemption proceeds; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii) or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment of the
redemption proceeds until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which, in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
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Section 7.3. Redemption of Shares; Disclosure of Holding. If the
Trustees shall, at any time and in good faith, be of the opinion that direct or
indirect ownership of Shares has or may become concentrated in any Person to an
extent which would disqualify the Trust, or any series of the Trust, as a
regulated investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), then the Trustees shall have the power by lot or other means
deemed equitable by them (i) to call for redemption by any such Person a number
of Shares of the Trust, or such series or class of the Trust, sufficient to
maintain or bring the direct or indirect ownership of Shares of the Trust, or
such series or class of the Trust, into conformity with the requirements for
such qualification, and (ii) to refuse to transfer or issue Shares of the Trust,
or such series or class of the Trust, to any Person whose acquisition of the
Shares of the Trust, or such series or class of the Trust, would result in such
disqualification. The redemption shall be effected at the redemption price and
in the manner provided in Section 7.l hereof.
The Shareholders of the Trust shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares of the Trust as the Trustees deem necessary to comply with
the provisions of the Code, or to comply with the requirements of any other
authority. Upon the failure of a Shareholder to disclose such information and to
comply with such demand of the Trustees, the Trust shall have the power to
redeem such Shares at a redemption price determined in accordance with Section
7.1 hereof.
Section 7.4 Redemptions of Accounts of Less than Minimum Amount. The
Trustees shall have the power, and any Shareholder Servicing Agent with whom the
Trust has so agreed (or a subcontractor of such Shareholder Servicing Agent)
shall have the power, at any time to redeem Shares of any Shareholder at a
redemption price determined in accordance with Section 7.l hereof if at such
time the aggregate net asset value of the Shares owned by such Shareholder is
less than a minimum amount as determined from time to time and disclosed in a
prospectus of the Trust or in the Shareholder Servicing Agent's (or
subcontractor's) agreement with its customer. A Shareholder shall be notified
that the aggregate value of his Shares is less than such minimum amount and
allowed 60 days to make an additional investment before redemption is processed.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and shall set
forth in the By-Laws or in a duly adopted vote or votes of the Trustees such
bases and times for determining the per Share net asset value of the Shares or
net income, or the declaration and payment of dividends and distributions, as
they may deem necessary or desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
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Section 9.2. Termination of Trust. (a) The Trust may be terminated (i)
by a Majority Shareholder Vote of its Shareholders, or (ii) by the Trustees by
written notice to the Shareholders. Any series or class of the Trust may be
terminated (i) by a Majority Shareholder Vote of the Shareholders of that series
or class, or (ii) by the Trustees by written notice to the Shareholders of that
series or class. Upon the termination of the Trust or any series or class of the
Trust:
(i) The Trust or series or class of 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,
series or class of the Trust and all the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or series of the Trust
shall have been wound up, including the power to fulfill or discharge the
contracts of the Trust, collect the assets of the Trust or series of the Trust,
sell, convey, assign, exchange, transfer or otherwise dispose of all or any part
of the remaining Trust Property of the Trust or series (or allocable to a class)
of the Trust 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, series or class of the
Trust, and to do all other acts appropriate to liquidate the business of the
Trust, series or class of the Trust; provided, that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or substantially all
of the Trust Property of the Trust, series or Trust of the Trust shall require
Shareholder approval in accordance with Section 9.4 or 9.6 hereof, respectively;
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 may
distribute the remaining Trust Property of the Trust or series (or allocable to
a class) of the Trust, in cash or in kind or partly in cash and partly in kind,
among the Shareholders of the Trust, series or class of the Trust according to
their respective rights.
(b) After termination of the Trust, series or class of the Trust and
distribution to the Shareholders of the Trust, series or class of the Trust as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder with respect to the Trust, series or class of
the Trust, and the rights and interests of all Shareholders of the Trust, series
or class of the Trust shall thereupon cease.
Section 9.3. Amendment Procedure. (a) This Declaration may be amended
by a Majority Shareholder Vote of the Shareholders or by any instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a majority of the Shares of the Trust. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to designate series in accordance with Section 6.9 hereof, to
change the name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or to
conform this
<PAGE>
21
Declaration to the requirements of applicable federal laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or to (i) change the state or other
jurisdiction designated herein as the state or other jurisdiction whose laws
shall be the governing law hereof, (ii) effect such changes herein as the
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the laws 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
Internal Revenue Code of 1986, as amended, or (C) to permit the transfer of
shares (or to permit the transfer of any other beneficial interests or shares in
the Trust, however denominated), and (iii) in conjunction with any amendment
contemplated by the foregoing clause (i) or the foregoing clause (ii) 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 (ii) or clause (iii) to be conclusively
evidenced by the execution of any such amendment by a majority of the Trustees,
but the Trustees shall not be liable for failing so to do.
(b) No amendment which the Trustees have determined would affect the
rights, privileges or interests of holders of a particular series or class of
Shares, but not the rights, privileges or interests of holders of all series or
classes of Shares generally, and which would otherwise require a Majority
Shareholder Vote under paragraph (a) of this Section 9.3, may be made except
with the vote or consent by a Majority Shareholder Vote of Shareholders of such
series or class.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
(d) Notwithstanding any other provision hereof, no amendment may be
made under this Section 9.3 which would change any rights with respect to the
Shares, or any series or class of Shares, by reducing the amount payable thereon
upon liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the Majority Shareholder Vote of the Shares or
that series or class of Shares. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
(f) Notwithstanding any other provision hereof, until such time as a
registration statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this
<PAGE>
22
Declaration may be amended in any respect by the affirmative vote of a majority
of the Trustees or by an instrument signed by a majority of the Trustees.
Section 9.4. 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 (or all or substantially all of the Trust Property allocated or
belonging to a particular series or allocable to a particular class of the
Trust) including its good will, upon such terms and conditions and for such
consideration when and as authorized at any meeting of Shareholders called for
such purpose by the vote of the holders of two-thirds of the outstanding Shares
of all series of the Trust voting as a single class, or of the affected series
of the Trust, as the case may be, or by an instrument or instruments in writing
without a meeting, consented to by the vote of the holders of two-thirds of the
outstanding Shares of all series and classes of the Trust voting as a single
class, or of the affected series or classes of the Trust, as the case may be;
provided, however, that if such merger, consolidation, sale, lease or exchange
is recommended by the Trustees, the vote or written consent by Majority
Shareholder Vote shall be sufficient authorization; and any such merger,
consolidation, sale, lease or exchange shall be deemed for all purposes to have
been accomplished under and pursuant to the statutes of the Commonwealth of
Massachusetts. Nothing contained herein shall be construed as requiring approval
of Shareholders for any sale of assets in the ordinary course of the business of
the Trust.
Section 9.5. Incorporation, Reorganization. With the approval of the
holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. Subject to Section 9.4 hereof, 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 in this Section 9.5 shall be
construed as requiring approval of Shareholders 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 such organization or entities.
Section 9.6. Incorporation or Reorganization of Series. With the
approval of a Majority Shareholder Vote of any series or class, the Trustees may
sell, lease or exchange all of the Trust Property allocated or belonging to that
series or class, or cause to be organized or assist in organizing a corporation
or corporations under the laws of any other jurisdiction, or any other trust,
unit investment trust, partnership, association or other organization, to take
over
<PAGE>
23
all of the Trust Property allocated or belonging to that series or allocable to
that class and to sell, convey and transfer such Trust Property to any such
corporation, trust, unit investment trust, partnership, association, or other
organization in exchange for the shares or securities thereof or otherwise.
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other place or places as may be required under the laws of the
Commonwealth of Massachusetts and may also be filed or recorded in such other
places as the Trustees deem appropriate. Each amendment so filed shall state or
be accompanied by a certificate signed and acknowledged by a Trustee stating
that such action was duly taken in the manner provided herein, and unless such
amendment or such certificate sets forth some later time for the effectiveness
of such amendment, such amendment shall be effective upon its filing. A restated
Declaration, integrating into a single instrument all of the provisions of the
Declaration which are then in effect and operative, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of this original
Declaration and the various amendments thereto.
Section 11.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 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 such original
counterpart.
Section 11.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, is a Trustee hereunder
certifying to: (i) the number or identity of Trustees or Shareholders, (ii) the
due authorization of the execution of any instrument or writing, (iii) the form
of any vote passed at a meeting of Trustees or Shareholders, (iv) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
<PAGE>
24
written instrument satisfies the requirements of this Declaration, (v) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (vi) the existence of any fact or facts which in any manner relates
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 and their successors.
Section 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 such provision is in conflict
with the 1940 Act, the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or with other applicable laws 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 the
Declaration in any jurisdiction.
<PAGE>
25
Section 11.6. Principal Office. The principal office of the Trust is
6 St. James Avenue, 9th Floor, Boston, Massachusetts, 02116.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 24th day of July, 1995.
/S/ANDRES E. SALDANA
Andres E. Saldana
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
/S/THOMAS M. LENZ
Thomas M. Lenz
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
/S/SUZAN M. BARRON
Suzan M. Barron
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
BT0434
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS.
July 24, 1995
Then personally appeared the above-named Andres E. Saldana, Thomas M.
Lenz and Suzan M. Barron, who severally acknowledged the foregoing instrument to
be their free act and deed.
Before me,
, Notary Public
My commission expires:
<PAGE>
BT0434 Appendix I
BT GLOBAL INVESTORS
Establishment and
Designation of Series and Classes of Shares of
Beneficial Interest (par value $0.001 per share)
Dated as of July 24, 1995
Pursuant to Section 6.9 of the Declaration of Trust, dated as of June ,
1995 (the "Declaration of Trust"), of BT Global Investors (the "Trust"), the
Trustees of the Trust hereby establish and designate seven series of Shares (as
defined in the Declaration of Trust) (each a "Fund" and collectively the
"Funds"), which Funds shall each initially consist of only one class of Shares
and shall have the following special and relative rights:
1. The Funds shall be designated as follows:
Capital Appreciation Fund
Small Cap Fund
Latin American Equity Fund
Pacific Basin Equity Fund
International Equity Fund
Global High Yield Securities Fund
Equity 500 Index Fund
Equity 500 Equal Weighted Fund
Bond Index Fund
International Equity Index Fund
Small Cap Index Fund
2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of the Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to the Fund, and shall
be entitled to receive its pro rata share of the net assets of the Fund upon
liquidation of the Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
<PAGE>
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund now or hereafter created, or otherwise to
change the special and relative rights of any Fund.
IN WITNESS WHEREOF, the undersigned have signed this instrument as of
July 24, 1995.
/S/ANDRES E. SALDANA
Andres E. Saldana
As Trustee and not Individually
/S/THOMAS M. LENZ
Thomas M. Lenz
As Trustee and not Individually
/S/SUZAN M. BARRON
Suzan M. Barron
As Trustee and not Individually
BT0434
<PAGE>
BT Global Investors
6 St. James Avenue, 9th Floor
Boston, Massachusetts 02116
(617) 423-0800
Initial Trustee Residence
Andres E. Saldana, Esq. 58 Newell Road
Newton, MA 02166
(617) 969-6206
Thomas M. Lenz, Esq. 8 Mt. Ida St., Apt. 5
Newton, MA 02158
(617) 244-9013
Suzan M. Barron 1792 Columbia Road #3
S. Boston, MA 02127
(617) 268-1179
Principal Contact: Thomas M. Lenz, Esq.
BT Global Investors
c/o Signature Financial Group, Inc.
6 St. James Avenue
Boston, MA 02116
(617) 423-0800
<PAGE>
BT0434
BY-LAWS
OF
BT GLOBAL INVESTORS
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property" and "Trustees" have the respective
meanings given them in the Declaration of Trust of BT Global Investors dated as
of July 24, 1995.
ARTICLE II
OFFICES
Section 1. Principal Office. 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 Commonwealth as the Trustees may from time
to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. A meeting of Shareholders may be called at any
time by a majority of the Trustees and shall be called by any Trustee upon
written request, which shall specify the purpose or purposes for which such
meeting is to be called, of Shareholders holding in the aggregate not less than
10% of the outstanding Shares entitled to vote on the matters specified in such
written request. Any such meeting shall be held within or without the
Commonwealth of Massachusetts on such day and at such time as the Trustees shall
designate. The holders of a majority of outstanding Shares entitled to vote
present in person or by proxy shall constitute a quorum at any meeting of the
Shareholders. In the absence of a quorum, a majority of outstanding Shares
entitled to vote present in person or by proxy may adjourn the meeting from time
to time until a quorum shall be present.
Whenever a matter is required to be voted by Shareholders of the Trust
in the aggregate under Section 6.8 and Section 6.9 and Section 6.9(g) of the
Declaration, the Trust may either hold a meeting of Shareholders of all series
<PAGE>
2
and classes, as established and designated pursuant to Section 6.9 of the
Declaration, to vote on such matter, or hold separate meetings of shareholders
of each of the individual series and/or classes 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 the majority of outstanding Shares of
the individual series and/or classes entitled to vote present in person or by
proxy shall be present at each such separate meeting and (iii) a quorum
consisting of the holders of a majority of all Shares of the Trust entitled to
vote present in person or by proxy shall be present in the aggregate at such
separate meetings, and the votes of Shareholders 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 all meetings of Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder entitled to vote at such meeting at his
address as recorded on the register of the Trust, mailed at least 10 days and
not more than 60 days before the meeting. Only the business stated in the notice
of the meeting shall be considered at such meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any
Shareholder who shall have failed to inform the Trust of his current address or
if a written waiver of notice, executed before or after the meeting by the
Shareholder or his attorney thereunto authorized, is filed with the records of
the meeting.
Where separate meetings are held for Shareholders of each of the
individual series and/or classes to vote on a matter required to be voted on by
Shareholders 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 the purpose of determining the Shareholders
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 close the transfer books for such period, not exceeding 30 days, as
the Trustees may determine; or without closing the transfer books the Trustees
may fix a date not more than 60 days prior to the date of any meeting of
Shareholders or distribution or other action as a record date for the
determination of the persons to be treated as Shareholders of record for such
purpose.
Where separate meetings are held for Shareholders of each of the
individual series to vote on a matter required to be voted on by Shareholders 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. Proxies. At any meeting of Shareholders, any holder of
Shares 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 shall be taken.
Pursuant to
<PAGE>
3
a vote of a majority of the Trustees, proxies may be solicited in the name of
the Trust or one or more Trustees or officers of the Trust. Only Shareholders of
record shall be entitled to vote. Each full Share shall be entitled to one vote
and fractional Shares shall be entitled to a vote of such fraction. When any
Share is held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Share, but if more than one of
them shall be 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 Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of such Share, such Share
may be voted by such guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
Section 5. Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
shareholders of a Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
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 Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the Chairman or
by any Trustee. Notice of the time and place of each meeting other than regular
or stated meetings shall be given by the Secretary or an Assistant Secretary or
by the officer or Trustee calling the meeting and shall be mailed to each
Trustee at least two days before the meeting, or shall be telegraphed, cabled,
or wirelessed to each Trustee at his business address, or personally delivered
to him at least one day before the meeting. Notice of a meeting need not be
given to any Trustee if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any Trustee
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him. A notice or waiver of notice need not specify the
purpose of any meeting. The Trustees may meet by means of a telephone conference
circuit or similar communications equipment by means of which all persons
participating in the meeting can hear each other, which telephone conference
meeting shall be deemed to have been held at a place designated by the Trustees
at the meeting. Participation in a telephone conference meeting shall constitute
presence in
<PAGE>
4
person at such meeting. Any action required or permitted to be taken at any
meeting of the Trustees may be taken by the Trustees without a meeting if all
the Trustees consent to the action in writing and the written consents are filed
with the records of the Trustees' meetings. Such consents shall be treated as a
vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees
present in person at any regular or special meeting of the Trustees shall
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration or these By-Laws) the act of a
majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three Trustees to hold office at the
pleasure of the Trustees. While the Trustees are not in session, the Executive
Committee shall have the power to conduct the current and ordinary business of
the Trust, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
the Executive Committee except those powers which by law, the Declaration or
these By-Laws the Trustees are prohibited from so delegating. The Trustees may
also elect from their own number other Committees from time to time, the number
composing such Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a chairman of any such Committee. In the absence of such designation a
Committee may elect its own chairman.
Section 2. Meeting, Quorum and Manner of Acting. The Trustees may (i)
provide for stated meetings of any Committee, (ii) specify the manner of calling
and notice required for special meetings of any Committee, (iii) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (iv) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (v) authorize the members of a Committee to meet by means
of a telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and records
of decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
<PAGE>
5
Section 3. Advisory Board. The Trustees may appoint an Advisory Board
to consist in the first instance of not less than three members. Members of such
Advisory Board shall not be Trustees or officers and need not be Shareholders. A
member of such Advisory Board shall hold office for such period as the Trustees
may by vote provide and may resign therefrom by a written instrument signed by
him which shall take effect upon its delivery to the Trustees. The Advisory
Board shall have no legal powers and shall not perform the functions of Trustees
in any manner, such Advisory Board being intended merely to act in an advisory
capacity. Such Advisory Board shall meet at such times and upon such notice as
the Trustees may by vote provide.
Section 4. Chairman. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairman, to hold office until his
successor shall have been duly elected and qualified. The Chairman shall not
hold any other office. The Chairman may be, but need not be, a Shareholder. The
Chairman shall preside at all meetings of the Trustees and shall have such other
duties as from time to time may be assigned to him by the Trustees.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, each of whom shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Vice Presidents, 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 By-Laws, the President, the Treasurer
and the Secretary shall hold office until his respective successor shall have
been duly elected and qualified, and all other officers shall hold office at the
pleasure of the Trustees. The Secretary and Treasurer may be the same person. A
Vice President and the Treasurer or a Vice President and the Secretary may be
the same person, but the offices of Vice President, Secretary and Treasurer
shall not be held by the same person. The President shall not hold any other
office. Except as above provided, any two offices may be held by the same
person. Any officer may be, but does not need be, a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause by a vote of a
majority of the Trustees. Any 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 President. The President, unless
the Chairman, if any, is so appointed by the Trustees, shall be the principal
executive officer of the Trust. Subject to the control of the Trustees and any
committee of the Trustees, the President shall at all times exercise a general
<PAGE>
6
supervision and direction over the affairs of the Trust. The President shall
have the power to employ attorneys and counsel for the Trust and to employ such
subordinate officers, agents, clerks and employees as he may find necessary to
transact the business of the Trust. The President shall also have the power to
grant, issue, execute or sign such powers of attorney, proxies or other
documents as may be deemed advisable or necessary in the furtherance of the
interests of the Trust. The President shall have such other powers and duties
as, from time to time, may be conferred upon or assigned to him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there are more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees or the President.
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 such custodian
as the Trustees may employ pursuant to Article X hereof. 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. The Treasurer shall give a bond for the
faithful discharge of his duties, if required to do so by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Shareholders in proper books provided for
that purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust; and shall have charge of the Share transfer
books, lists and records unless the same are in the charge of the Transfer
Agent. The Secretary shall attend to the giving and serving of all 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. Each Assistant Treasurer shall
give a bond for the faithful discharge of his duties, if required to do so by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
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.
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Section 10. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any committee of officers upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of each series of the Trust shall be determined by the
Trustees, and the Trustees may from time to time change any fiscal year.
ARTICLE VIII
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 IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been telegraphed,
cabled or wirelessed for the purposes of these By-Laws when it has been
delivered to a representative of any telegraph, cable or wireless company with
instruction that it be telegraphed, cabled or wirelessed. Any notice shall be
deemed to be given at the time when the same shall be mailed, telegraphed,
cabled or wirelessed.
ARTICLE X
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all times
employ a bank or trust company having a capital, surplus and undivided profits
of at least $5,000,000 as custodian with authority as its 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:
(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
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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 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. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or with such other person
as may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodian.
Section 3. Acceptance of Receipts in Lieu of Certificates. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
Section 4. Provisions of Custodian Contract. The following provisions
shall apply to the employment of a custodian pursuant to this Article X and to
any contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled, and
shall order the same to be delivered by the custodian only upon
completion of a sale, exchange, transfer, pledge, or other disposition
thereof, and upon receipt by the custodian of the consideration
therefor or a certificate of deposit or a receipt of an issuer or of
its Transfer Agent, all as the Trustees
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may generally or from time to time require or approve, or to a
successor custodian; and the Trustees shall cause all funds owned by
the Trust or to which it may become entitled to be paid to the
custodian, and shall order the same disbursed only for investment
against delivery of the securities acquired, or in payment of expenses,
including management compensation, and liabilities of the Trust,
including distributions to Shareholders, or to a successor custodian;
provided, however, that nothing herein shall prevent delivery of
securities for examination to the broker purchasing the same in accord
with the "street delivery" custom whereby such securities are delivered
to such broker in exchange for a delivery receipt exchanged on the same
day for an uncertified check of such broker to be presented on the same
day for certification.
(b) In case of the resignation, removal or inability to serve of any such
custodian, the Trust shall promptly appoint another bank or trust
company meeting the requirements of this Article X as successor
custodian. The agreement with the custodian shall provide that the
retiring custodian shall, upon receipt of notice of such appointment,
deliver all Trust Property in its possession to and only to such
successor, and that pending appointment of a successor custodian, or a
vote of the Shareholders to function without a custodian, the custodian
shall not deliver any Trust Property to the Trust, but may deliver all
or any part of the Trust Property to a bank or trust company doing
business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least $5,000,000; provided that arrangements
are made for the Trust Property to be held under terms similar to those
on which they were held by the retiring custodian.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be adopted (a) by the Shareholders by a Majority Shareholder
Vote, or (b) by the Trustees, provided, however, that no By-Law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration or these By-Laws, a vote of the
Shareholders.
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