Trustees of the Growth and Income Portfolio, an open-end institutional fund managed by J.P. Morgan Chase of New York, are awarding themselves nearly $11 million from a trustee retirement plan it terminated in February, according to a preliminary proxy statement filed with the Securities and Exchange Commission.

The retirement plan accrued just $6.5 million, but the board decided to distribute $10.95 million among themselves, according to the proxy.

"On February 22, 2001, the board of Trustees voted to terminate the plan and to pay to each trustee an agreed-upon amount of compensation equal, in the aggregate, to $10.95 million, of which $6.5 million had been previously accrued by the covered funds. The remaining $4.45 million was paid by Chase," the proxy said.

The plan was established by the trustees in 1995 and provides each trustee either eight percent of the highest annual compensation multiplied by the number of years served (not in excess of ten years), or four percent of the highest annual compensation multiplied by the number of years served in excess of ten years, provided that the annual retirement salary does not exceed the highest annual salary, the proxy said.

The amount being paid to the trustees is extremely generous, said Mercer Bullard, founder and CEO of Fund Democracy of Chevy Chase, Md. Moreover, the $4.5 million in payment given by Chase may compromise the board's independence, Bullard said.

"If this is an adviser making a one-time payment of $4.5 million, I don't know how you can have an independent board of trustees," he said.

Retirement plans for trustees or fund directors are fairly uncommon, according to C. Meyrick Payne, a senior partner at Management Practice of New York, a fund consulting firm. Only eight percent of funds offer their board of directors or trustees retirement plans and retirement programs for fund directors are generally disappearing, he said.

The primary issue is whether shareholders should be responsible for paying retirement expenses for someone who no longer serves the fund, Payne said. It could be the trustees on the Growth and Income Portfolio are simply trying to end an outmoded practice by terminating the retirement plan, he said.

However, some argue that trustees and directors take on huge responsibility by sitting on a fund's board and they should be compensated adequately for their role, he said.

The termination of the plan may also be the result of the merger between Chase Manhattan and J.P. Morgan of New York earlier this year, he said. Often when two companies merge, a fund may change how it operates in order to create uniformity between the merged entities, he said.

Either way, the plan is "generous," Payne said.

The trustees sitting on the Growth & Income Portfolio's board include: Fergus Reid, III, 68, chairman of the trust and a trustee since 1984; William J. Armstrong, 59, trustee since 1987; Roland J. Eppley, Jr., 68, trustee since 1989; Leonard M. Spalding, Jr., 65, trustee since 1998, H. Richard Vartabedian, 65, president and trustee of the trust, trustee since 1992.

Last year, the board of trustees met six times, according to the proxy. Reid was paid $202,750, Armstrong $90,000, Eppley, $91,000, Spalding $89,000 and Vartabedian $134,350, according to the proxy.

A study released earlier last month by Management Practice found that the median compensation for fund directors or trustees who governed over $50 billion in assets was $106,000 and those that governed between $25 to $50 billion was $72,000.

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