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As filed with the Securities and Exchange Commission on April 26, 1996
File No. 811-8012
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 3 [X]
GOVERNMENT OBLIGATIONS PORTFOLIO
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(Exact Name of Registrant as Specified in Charter)
24 Federal Street
Boston, Massachusetts 02110
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 482-8260
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H. Day Brigham, Jr.
24 Federal Street, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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EXPLANATORY NOTE
This Registration Statement, as amended, has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended. However, interests in the Registrant have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), because
such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section
4(2) of the 1933 Act. Investments in the Registrant may be made only by
U.S. and foreign investment companies, common or commingled trust funds,
organizations or trusts described in Sections 401(a) or 501(a) of the
Internal Revenue Code of 1986, as amended, or similar organizations or
entities that are "accredited investors" within the meaning of Regulation
D under the 1933 Act. This Registration Statement, as amended, does not
constitute an offer to sell, or the solicitation of an offer to buy, any
interest in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
Paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant
Government Obligations Portfolio (the "Portfolio") is a diversified,
open-end management investment company which was organized as a trust
under the laws of the State of New York on May 1, 1992. Interests in the
Portfolio are issued solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may be made only by U.S. and foreign investment companies,
common or commingled trust funds, organizations or trusts described in
Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement, as amended, does not constitute an offer to sell,
or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio's investment objective is to realize a high current
return. The Portfolio's investment objective is nonfundamental and may be
changed when authorized by a vote of the Trustees of the Portfolio without
obtaining the approval of the investors in the Portfolio.
Additional information about the investment policies of the Portfolio
appears in Part B. The Portfolio is not intended to be a complete
investment program, and a prospective investor should take into account
its objectives and other investments when considering the purchase of an
interest in the Portfolio. The Portfolio cannot assure achievement of its
investment objective.
How the Portfolio Invests its Assets
In seeking high current return, the Portfolio invests in securities
issued, guaranteed or otherwise backed by the U.S. Government, including
mortgage-backed securities of federal agencies and federally chartered
corporations, and engages in active management strategies, including
futures transactions and related techniques primarily for hedging
purposes. The Portfolio's management believes that a high current return
may be derived from yields on U.S. Government securities, including market
discount accrued on obligations purchased below their stated redemption
value.
U.S. Government Securities. U.S. Government securities include (1) U.S.
Treasury obligations, which differ in their interest rates, maturities and
times of issuance: U.S. Treasury bills (maturities of one year or less),
U.S. Treasury notes (maturities of one to ten years), and U.S. Treasury
bonds (generally maturities of greater than ten years) and (2) obligations
issued or guaranteed by U.S. Government agencies and instrumentalities
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which are supported by any of the following: (a) the full faith and credit
of the U.S. Treasury, (b) the right of the issuer to borrow any amount
limited to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain
obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. The Portfolio may also invest in
any other security or agreement collateralized or otherwise secured by
U.S. Government securities. Agencies and instrumentalities of the U.S.
Government include, but are not limited to: Federal Land Banks, Federal
Financing Banks, Banks for Cooperatives, Federal Intermediate Credit
Banks, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation ("FHLMC"), Federal National Mortgage Association
("FNMA"), Government National Mortgage Association ("GNMA"), Student Loan
Marketing Association, United States Postal Service, Small Business
Administration, Tennessee Valley Authority and any other enterprise
established or sponsored by the U.S. Government. Because the U.S.
Government generally is not obligated to provide support to its
instrumentalities, the Portfolio will invest in obligations issued by
these instrumentalities only if the Portfolio's investment adviser, Boston
Management and Research ("BMR" or the "Investment Adviser"), determines
that the credit risk with respect to such obligations is minimal.
Mortgaged-Backed Securities. The Portfolio may invest in mortgage-backed
securities that are either issued by the U.S. Government or one of its
agencies or instrumentalities or, if privately issued, collateralized by
mortgages that are insured, guaranteed or otherwise backed by the U.S.
Government, its agencies or instrumentalities. Mortgage-backed securities
represent participation interests in pools of adjustable and fixed-rate
mortgage loans. Unlike conventional debt obligations, mortgage-backed
securities provide monthly payments derived from the monthly interest and
principal payments (including any prepayments) made by the individual
borrowers on the pooled mortgage loans. The mortgage loans underlying
mortgage-backed securities are generally subject to a greater rate of
principal prepayments in a declining interest rate environment and to a
lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest and prepayment rate scenarios, the
Portfolio may fail to recover the full amount of its investment in
mortgage-backed securities, notwithstanding any direct or indirect
governmental or agency guarantee. Because faster than expected
prepayments must usually be invested in lower yielding securities,
mortgage-backed securities are less effective than conventional bonds in
"locking in" a specified interest rate. To mitigate prepayment risk, the
Investment Adviser considers the selection of mortgage-backed securities
that as a group have a history of more stable prepayment rates relative to
interest rate fluctuations. In a rising interest rate environment, a
declining prepayment rate will extend the average life of many mortgage-
backed securities. This possibility is often referred to as extension
risk. Extending the average life of a mortgage-backed security increases
the risk of depreciation due to future increases in market interest rates.
As of December 31, 1995, the Portfolio had approximately 38.5% of its net
assets invested in FNMA Mortgage-Backed Certificates, approximately 42.5%
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of its net assets invested in Participation Certificates of FHLMC, and
approximately 9.5% of its net assets invested in GNMA Certificates. FNMA
guarantees the timely payment of principal and interest of its
Certificates, FHLMC guarantees the timely payment of interest and the
ultimate collection of the principal of its Participation Certificates,
and GNMA Certificates are guaranteed by the full faith and credit of the
U.S. Government.
The Portfolio may also invest in classes of collateralized mortgage
obligations ("CMOs") and various other mortgage-backed securities. Senior
CMO classes will typically have priority over residual CMO classes as to
the receipt of principal and/or interest payments on the underlying
mortgages. In choosing among CMO classes, the Investment Adviser will
evaluate the total income potential of each class and other factors. If
such obligations or securities are privately issued they will currently be
considered by the Investment Adviser as possible investments for the
Portfolio only when the mortgage collateral is insured, guaranteed or
otherwise backed by the U.S. Government or one or more of its agencies or
instrumentalities. As of December 31, 1995, the Portfolio had
approximately 5.0% of its net assets invested in CMOs (including one which
was privately issued).
The Portfolio may invest in securities that fluctuate in value with an
index. Such securities generally will either be issued by the U.S.
Government or one of its agencies or instrumentalities or, if privately
issued, collateralized by mortgages that are insured, guaranteed or
otherwise backed by the U.S. Government, its agencies or
instrumentalities. The interest rate or, in some cases, the principal
payable at the maturity of an indexed security may change positively or
inversely in relation to one or more interest rates, financial indices,
securities prices or other financial indicators ("reference prices"). An
indexed security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on an indexed security is
a multiple of the change in the reference price. Thus, indexed securities
may decline in value due to adverse market changes in reference prices.
As of December 31, 1995, the Portfolio held no such securities. Because
mortgage-backed and indexed securities derive their value from another
instrument, security or index, they are considered derivative debt
securities, and are subject to different combinations of prepayment,
extension, interest rate and/or other market risks.
The Portfolio may enter into contracts to purchase securities for a
fixed price at a future date beyond the customary settlement time if the
Portfolio holds and maintains until the settlement date in a segregated
account cash, U.S. Government securities and liquid, high-grade debt
obligations in an amount sufficient to meet the purchase price, or if the
Portfolio enters into offsetting contracts for the forward sale of other
securities it owns. Such contracts are customarily referred to as
"forward commitments" and involve a risk of loss if the value of the
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security to be purchased declines prior to the settlement date.
The principal of and/or interest on certain U.S. Government securities
that may be purchased by the Portfolio could be (a) payable in foreign
currencies rather than U.S. dollars or (b) increased or diminished as a
result of changes in the value of the U.S. dollar relative to the value of
foreign currencies. The value of such portfolio securities denominated in
foreign currencies may be affected favorably or unfavorably by changes in
the exchange rate between foreign currencies and the U.S. dollar. In order
to limit the risk inherent in this type of security, it is the current
policy of the Portfolio not to purchase any such security if after such
purchase (i) more than 5% of its net assets (taken at market value) would
be invested in securities denominated in foreign currencies or (ii) more
than 2% of its net assets (taken at market value) would be invested in
securities denominated in any one foreign currency.
The Portfolio may from time to time have temporary investments in
short-term debt obligations (including certificates of deposit, bankers'
acceptances and commercial paper) pending the making of other investments
or as a reserve to service redemptions and repurchases of its shares.
Active Management Strategies
The Portfolio may engage in several active management strategies to
enhance income and reduce investment risk. Each strategy requires the
Investment Adviser to consider special factors. In addition, the
Portfolio may temporarily borrow up to 5% of the value of its total assets
to satisfy redemption requests or settle securities transactions.
Securities Lending. The Portfolio may seek to increase its income by
lending portfolio securities to broker-dealers or other institutional
borrowers. During the existence of a loan, the Portfolio will continue to
receive the equivalent of the interest paid by the issuer on the
securities loaned and will also receive a fee, or all or a portion of the
interest on investment of the collateral, if any. However, the Portfolio
may pay lending fees to such borrowers. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the
securities loaned if the borrower of the securities fails financially.
However, the loans will be made only to organizations deemed by the
Investment Adviser to be of good standing and when, in the Investment
Adviser's judgment, the consideration that can be earned from securities
loans of this type justifies the attendant risk. The financial condition
of the borrower will be monitored by the Investment Adviser on an ongoing
basis. The value of the securities loaned will not exceed 30% of the
Portfolio's total assets. During the year ended December 31, 1995, the
Portfolio typically had outstanding approximately $61 million in
collateralized loans with terms of 7 days.
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Futures Contracts and Other Derivative Instruments. The Portfolio may
purchase or sell derivative instruments (which are instruments that derive
their value from another instrument, security, index or currency) to hedge
against fluctuations in interest rates, securities prices or currency
exchange rates, to change the duration of the Portfolio's fixed income
portfolio, as a substitute for the purchase or sale of securities or
currency, or to enhance return. The Portfolio's transactions in
derivative instruments may include the purchase or sale of futures
contracts on securities (such as U.S. Government securities), indices,
other financial instruments (such as certificates of deposit, Eurodollar
time deposits, and economic indices) or currencies; options on futures
contracts; exchange-traded and other-the-counter ("OTC") options on
securities, indices or currencies; and forward contracts to purchase or
sell currencies. All of the Portfolio's transactions in derivative
instruments involve a risk of loss or depreciation due to: unanticipated
adverse changes in interest rates, securities prices or currency exchange
rates; the inability to close out a position; default by the counterparty;
imperfect correlation between a position and the desired hedge; tax
constraints on closing out positions; and portfolio management constraints
on securities subject to such transactions. The loss on derivative
instruments (other than purchased options) may substantially exceed the
Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that
expire before they can be profitably exercised by the Portfolio. The
Portfolio incurs transaction costs in opening and closing positions in
derivative instruments. There can be no assurance that the Investment
Adviser's use of derivative instruments will be advantageous to the
Portfolio.
The Portfolio's success in using derivative instruments to hedge
portfolio assets depends on the degree of price correlation between the
derivative instrument and the hedged asset. Imperfect correlation may be
caused by several factors, including temporary price disparities among the
trading markets for the derivative instrument, the assets underlying the
derivative instrument and the Portfolio's assets. OTC derivative
instruments involve a heightened risk that the issuer or counterparty will
fail to perform its contractual obligations. The staff of the Securities
and Exchange Commission ("Commission") takes the position that purchased
OTC options, assets used as cover for written OTC options, and certain
other derivative instruments (and securities) are subject to the
Portfolio's 15% limit on illiquid investments. The Portfolio's ability to
terminate OTC derivative instruments may depend on the cooperation of the
counterparties to such instruments. For thinly traded derivative
securities and contracts, the only source of price quotations may be the
selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts,
options on futures contracts and options on foreign currencies traded on
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an exchange regulated by the Commodity Futures Trading Commission
("CFTC"), in each case that are not for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required
to establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the
Portfolio's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Portfolio has entered into.
Short Sales Against-the-Box. The Portfolio may sell securities short
where it owns at least an equal amount of the security sold short or
another security convertible or exchangeable for an equal amount of the
security sold short without payment of further compensation (a short sale
against-the-box). Under current tax law, short sale against-the-box
transactions enable the Portfolio to hedge its exposure to securities that
it holds without selling the securities and recognizing gains. A short
sale against-the-box requires that the short-seller absorb certain costs
so long as the position is open. In a short sale against-the-box, the
short seller is exposed to the risk of being forced to deliver appreciated
securities to close the position if the borrowed security is called in,
causing a gain to be recognized.
Short-Term Trading. Securities may be sold in anticipation of a market
decline (a rise in interest rates) or purchased in anticipation of a
market rise (a decline in interest rates) and later sold. In addition, a
security may be sold and another purchased at approximately the same time
to take advantage of what the Portfolio believes to be a temporary
disparity in the normal yield relationship between the two securities.
Yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for or supply of
various types of fixed-income securities or changes in the investment
objectives of investors.
Mortgage Rolls. The Portfolio may enter into mortgage "dollar rolls" in
which the Portfolio sells mortgage-backed securities for delivery in the
current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future
date. During the roll period, the Portfolio forgoes principal and interest
paid on the mortgage-backed securities. The Portfolio is compensated by
the difference between the current sales price and the lower forward price
for the future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale. A "covered
roll" is a specific type of dollar roll for which there is an offsetting
cash position or a cash equivalent security position which matures on or
before the forward settlement date of the dollar roll transaction. The
Portfolio will only enter into covered rolls. Covered rolls are not
treated as a borrowing or other senior security and will be excluded from
the calculation of the Portfolio's borrowings and other senior securities.
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Leverage Through Borrowing. The Portfolio may borrow from banks to
increase its portfolio holdings of debt securities on which call options
may be written and to acquire U.S. Treasury bills which may be deposited
with the Portfolio's custodian or a broker-dealer in connection with
various Portfolio investments. Such borrowings will be unsecured. The
Investment Company Act of 1940, as amended (the "1940 Act"), requires the
Portfolio to maintain continuous asset coverage of not less than 300% with
respect to such borrowings. This allows the Portfolio to borrow for such
purposes an amount (when taken together with any borrowings for temporary
extraordinary or emergency purposes as described below) equal to as much
as 50% of the value of its net assets (not including such borrowings). If
such asset coverage should decline to less than 300% due to market
fluctuations or other reasons, the Portfolio may be required to sell some
of its portfolio holdings within three days in order to reduce the
Portfolio's debt and restore the 300% asset coverage, even though it may
be disadvantageous from an investment standpoint to sell securities at
that time. Leveraging will exaggerate any increase or decrease in the net
asset value of the securities held by Portfolio, and in that respect may
be considered a speculative practice. Money borrowed for leveraging will
be subject to interest costs which may or may not exceed the option
premiums and interest received from the securities purchased. The
Portfolio may also be required to maintain minimum average balances in
connection with such borrowings or to pay a commitment or other fee to
maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate.
Repurchase Agreements. The Portfolio may enter into repurchase agreements
with respect to U.S. Government securities. Under a repurchase agreement,
the seller agrees to repurchase such securities at the Portfolio's cost
plus interest within a specified time (normally one day). While repurchase
agreements involve certain risks not associated with direct investments in
U.S. Government securities, the Portfolio follows procedures designed to
moderate such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized banks. In addition, the
Portfolio's repurchase agreements will provide that the value of the
collateral underlying the repurchase agreements will always be at least
equal to the repurchase price, including any accrued interest earned on
the repurchase agreement. In the event of a default or bankruptcy by a
selling bank, the Portfolio will seek to liquidate such collateral.
However, the exercise of the Portfolio's right to liquidate such
collateral would involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase are
less than the repurchase price, the Portfolio could suffer a loss.
Additional Investment Information
The Portfolio expects that various new types of investments, hedging
techniques and management strategies will be developed and made available
to institutional investors in the future. The Investment Adviser will
consider making such investments or adopting such techniques or strategies
if it determines that they are consistent with the Portfolio's investment
objective and policies. Of course, the total mix of the Portfolio's
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investments can change daily.
Fluctuations in Value. Because interest yields on U.S. Government
securities and opportunities to realize net gains from options and futures
transactions may vary from time to time because of general economic and
market conditions and many other factors, current return will fluctuate,
and there can be no assurance that the Portfolio's objective will be
achieved. As a result of their high credit quality and market liquidity,
U.S. Government securities generally provide a lower current return than
obligations of other issuers. As with other debt securities, the value of
U.S. Government securities changes as interest rates fluctuate.
Fluctuations in the value of securities held by the Portfolio will not
affect interest income on existing portfolio securities but will be
reflected in net asset value. Thus, a decrease in interest rates will
generally result in an increase in the value of Portfolio interests.
Conversely, during periods of rising interest rates, the value of
Portfolio interests will generally decline. The magnitude of these
fluctuations will generally be greater at times when the Portfolio's
average maturity is longer. In addition, as set forth above, the
derivative securities the Portfolio may hold may magnify those risks and
pose additional risks. Active management techniques, if successful, may
only partly offset these risks. Interests in the Portfolio are not
government guaranteed.
Investment Restrictions. The Portfolio has adopted certain fundamental
investment restrictions, which are enumerated in detail in Part B and
which may not be changed unless authorized by an investor vote. These
restrictions are designed to reduce investment risk. Except for such
enumerated restrictions and as otherwise indicated in this Part A, the
investment objective and policies of the Portfolio are not fundamental
policies and accordingly may be changed by the Trustees without obtaining
the approval of the investors in the Portfolio. The Portfolio's investors
will receive written notice thirty days prior to any change in the
investment objective of the Portfolio. If any changes were made, the
Portfolio might have an investment objective different from the objective
which an investor considered appropriate at the time of its initial
investment.
Item 5. Management of the Portfolio
The Portfolio is organized as a trust under the laws of the State of
New York. The Portfolio intends to comply with all applicable federal and
state securities laws.
Investment Adviser. The Portfolio engages BMR, a wholly-owned subsidiary
of Eaton Vance Management ("Eaton Vance"), as its investment adviser.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931.
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Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. BMR also
furnishes for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for servicing the investments
of the Portfolio. Under its investment advisory agreement with the
Portfolio, BMR receives a monthly advisory fee of 0.0625% (equal to 0.75%
annually) of the average daily net assets of the Portfolio up to $500
million. On net assets of $500 million and over the annual fee is reduced
as follows:
Annualized Fee Rate
Average Daily Net Assets for the Month (for each Level)
$500 million but less than $1 billion . . . . . . . . . 0.6875%
$1 billion but less than $1.5 billion . . . . . . . . . 0.6250%
$1.5 billion but less than $2 billion . . . . . . . . . 0.5625%
$2 billion but less than $3 billion . . . . . . . . . . 0.5000%
$3 billion and over . . . . . . . . . . . . . . . . . . 0.4375%
As of December 31, 1995, the Portfolio had net assets of $521,788,905.
For the fiscal year ended December 31, 1995, the Portfolio paid BMR
advisory fees equivalent to 0.75% of the Portfolio's average daily net
assets for such year.
BMR or Eaton Vance acts as investment adviser to investment companies
and various individual and institutional clients with assets under
management of over $16 billion. Eaton Vance is a wholly-owned subsidiary
of Eaton Vance Corp., a publicly-held holding company. Eaton Vance Corp.,
through its subsidiaries and affiliates, engages primarily in investment
management, administration, and marketing activities.
Susan Schiff has acted as the portfolio manager of the Portfolio since
it commenced operations. She has been a Vice President of Eaton Vance and
of BMR since 1993.
BMR places the portfolio transactions of the Portfolio with many
broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices that are advantageous to the Portfolio and at
reasonably competitive commission rates. Subject to the foregoing, BMR may
consider sales of shares of other investment companies sponsored by BMR or
Eaton Vance as a factor in the selection of broker-dealer firms to execute
portfolio transactions.
The Portfolio is responsible for the payment of all of its costs and
expenses not expressly stated to be payable by BMR under the investment
advisory agreement.
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Item 6. Capital Stock and Other Securities
The Portfolio is organized as a trust under the laws of the State of
New York and intends to be treated as a partnership for federal tax
purposes. Under the Declaration of Trust, the Trustees are authorized to
issue interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments
in the Portfolio may not be transferred, but an investor may withdraw all
or any portion of its investment at any time at net asset value. Investors
in the Portfolio will each be liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss
on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust of the Portfolio provides that the Portfolio
will terminate 120 days after the complete withdrawal of any investor in
the Portfolio unless either the remaining investors, by unanimous vote at
a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
the treatment of the Portfolio as a partnership for federal income tax
purposes.
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and nonassessable by the Portfolio, except as set forth
above. The Portfolio is not required and has no current intention to hold
annual meetings of investors, but the Portfolio may hold special meetings
of investors when in the judgment of the Trustees it is necessary or
desirable to submit matters for an investor vote. Changes in fundamental
policies or restrictions will be submitted to investors for approval. The
investment objective and all nonfundamental investment policies of the
Portfolio may be changed by the Trustees of the Portfolio without
obtaining the approval of the investors in the Portfolio. Investors have
under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of
investors) the right to communicate with other investors in connection
with requesting a meeting of investors for the purpose of removing one or
more Trustees. Any Trustee may be removed by the affirmative vote of
holders of two-thirds of the interests in the Portfolio.
Information regarding pooled investment entities or funds that invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors,
Inc., 24 Federal Street, Boston, MA 02110, (617) 482-8260. Smaller
investors in the Portfolio may be adversely affected by the actions of a
larger investor in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in
increased portfolio risk, and experience decreasing economies of scale.
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However, this possibility exists as well for historically structured funds
that have large or institutional investors.
As of April 1, 1996, EV Traditional Government Obligations Fund
controlled the Portfolio by virtue of owning approximately 68.3% of the
outstanding voting interests in the Portfolio.
The Portfolio's net asset value is determined each day on which the
New York Stock Exchange (the "Exchange") is open for trading ("Portfolio
Business Day"). This determination is made each Portfolio Business Day as
of the close of regular trading on the Exchange (normally 4:00 p.m., New
York time) (the "Portfolio Valuation Time").
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Portfolio Business Day as of the Portfolio Valuation
Time. The value of each investor's interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interest in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage
of the aggregate interest in the Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may
be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii)
the denominator of which is the aggregate net asset value of the Portfolio
as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day 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 for the current Portfolio Business
Day. See Item 7 regarding the pricing of investments in the Portfolio.
The Portfolio will allocate at least annually among its investors its
net investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit. The Portfolio's net investment
income consists of all income accrued on the Portfolio's assets, less all
actual and accrued expenses of the Portfolio, determined in accordance
with generally accepted accounting principles.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any federal income tax. (See Part B, Item
20.) However, each investor in the Portfolio will take into account its
allocable share of the Portfolio's ordinary income and capital gain in
determining its federal income tax liability. The determination of each
such share will be made in accordance with the governing instruments of
the Portfolio, which are intended to comply with the requirements of the
Code and the regulations promulgated thereunder.
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It is intended that the Portfolio's assets and income will be managed
in such a way that an investor in the Portfolio that seeks to qualify as a
regulated investment company under the Code will be able to satisfy the
requirements for such qualification.
Item 7. Purchase of Interests in the Portfolio
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the 1933 Act. See "General Description of Registrant"
above.
An investment in the Portfolio will be made without a sales load. All
investments received by the Portfolio will be effected as of the next
Portfolio Valuation Time. The net asset value of the Portfolio is
determined at the Portfolio Valuation Time on each Portfolio Business Day.
The Portfolio will be closed for business and will not determine its net
asset value on the following business holidays: New Year's Day,
Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Portfolio's net asset value is computed in accordance with procedures
established by the Portfolio's Trustees.
The Portfolio's net asset value is determined by Investors Bank &
Trust Company (as custodian and agent for the Portfolio) in the manner
authorized by the Trustees of the Portfolio. The net asset value is
computed by subtracting the liabilities of the Portfolio from the value of
its total assets. Mortgage-backed "pass-through" securities are valued
through use of a matrix pricing system which takes into account closing
bond valuations, yield differentials, anticipated prepayments and interest
rates. For further information regarding the valuation of the Portfolio's
assets, see Part B, Item 19.
There is no minimum initial or subsequent investment in the Portfolio.
The Portfolio reserves the right to cease accepting investments at any
time or to reject any investment order.
The placement agent for the Portfolio is Eaton Vance Distributors,
Inc. ("EVD"). The principal business address of EVD is 24 Federal Street,
Boston, Massachusetts 02110. EVD receives no compensation for serving as
the placement agent for the Portfolio.
Item 8. Redemption or Decrease of Interest
An investor in the Portfolio may withdraw all of (redeem) or any
portion of (decrease) its interest in the Portfolio if a withdrawal
request in proper form is furnished by the investor to the Portfolio. All
withdrawals will be effected as of the next Portfolio Valuation Time. The
proceeds of a withdrawal will be paid by the Portfolio normally on the
Portfolio Business Day the withdrawal is effected, but in any event within
seven days. The Portfolio reserves the right to pay the proceeds of a
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withdrawal (whether a redemption or decrease) by a distribution in kind of
portfolio securities (instead of cash). The securities so distributed
would be valued at the same amount as that assigned to them in calculating
the net asset value for the interest (whether complete or partial) being
withdrawn. If an investor received a distribution in kind upon such
withdrawal, the investor could incur brokerage and other charges in
converting the securities to cash. The Portfolio has filed with the
Commission a notification of election on Form N-18F-1 committing to pay in
cash all requests for withdrawals by any investor, limited in amount with
respect to such investor during any 90 day period to the lesser of (a)
$250,000 or (b) 1% of the net asset value of the Portfolio at the
beginning of such period.
Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds
postponed during any period in which the Exchange is closed (other than
weekends or holidays) or trading on the Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists, or
during any other period permitted by order of the Commission for the
protection of investors.
Item 9. Pending Legal Proceedings
Not applicable.
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PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
Page
General Information and History . . . . . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . . . . . B-1
Management of the Portfolio . . . . . . . . . . . . . . . . . . . B-11
Control Persons and Principal Holder of Securities . . . . . . . . B-15
Investment Advisory and Other Services . . . . . . . . . . . . . . B-16
Brokerage Allocation and Other Practices . . . . . . . . . . . . . B-19
Capital Stock and Other Securities . . . . . . . . . . . . . . . . B-21
Purchase, Redemption and Pricing of Securities . . . . . . . . . . B-23
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
Calculation of Performance Data . . . . . . . . . . . . . . . . . B-27
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . B-28
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objectives and Policies.
Part A contains additional information about the investment objective and
policies of Government Obligations Portfolio (the "Portfolio"). This Part
B should be read in conjunction with Part A. Capitalized terms used in
this Part B and not otherwise defined have the meanings given them in Part
A.
Mortgage-Backed Securities
The Portfolio's investments in mortgage-backed securities may include
conventional mortgage pass-through securities, SMBS and certain classes of
multiple class CMOs (as described below). Examples of SMBS include
interest only and principal only securities. The CMO classes in which the
Portfolio may invest include sequential and parallel pay CMOs, including
planned amortization class and target amortization class securities. The
Portfolio may also invest in the floating rate mortgage-backed securities
listed under "Indexed Securities."
GNMA Certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans. These loans -- issued by lenders
such as mortgage bankers, commercial banks and savings and loan
associations -- are either insured by the Federal Housing Administration
or guaranteed by the Veterans Administration. A "pool" or group or such
mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once such pool is approved by GNMA,
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the timely payment of interest and principal on the Certificates issued
representing such pool is guaranteed by the full faith and credit of the
U.S. Government. As mortgage-backed securities, GNMA Certificates differ
from bonds in that the principal is paid back by the borrower over the
length of the loan rather than returned in a lump sum at maturity. GNMA
Certificates are called "pass-through" securities because a pro rata share
of both regular interest and principal payments, as well as unscheduled
early prepayments, on the underlying mortgage pool is passed through
monthly to the holder of the Certificate (i.e., the Portfolio). As
indicated below, because the unscheduled prepayment rate of the underlying
mortgage pool covered by a "pass-through" security cannot be predicted
with accuracy, the average life of a particular issue of GNMA Certificates
cannot be accurately predicted. The Portfolio may purchase GNMA
Certificates and various other mortgage-backed securities on a when-issued
basis subject to certain limitations and requirements.
The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the U.S. Government created by Congress for the
purposes of increasing the availability of mortgage credit for residential
housing, issues participation certificates ("PCs") representing undivided
interests in FHLMC's mortgage portfolio. While FHLMC guarantees the timely
payment of interest and ultimate collection of the principal of its PCs,
its PCs are not backed by the full faith and credit of the U.S.
Government. FHLMC PCs differ from GNMA Certificates in that the mortgages
underlying the PCs are mostly "conventional" mortgages rather than
mortgages insured or guaranteed by a federal agency or instrumentality.
However, in several other respects, such as the monthly pass-through of
interest and principal (including unscheduled prepayments) and the
unpredictability of future unscheduled prepayments on the underlying
mortgage pools, FHLMC PCs are similar to GNMA Certificates.
The Federal National Mortgage Association ("FNMA"), a federally
chartered corporation owned entirely by private stockholders, purchases
both conventional and federally insured or guaranteed residential
mortgages from various entities, including savings and loan associations,
savings banks, commercial banks, credit unions and mortgage bankers, and
packages pools of such mortgages in the form of pass-through securities
generally called FNMA Mortgage-Backed Certificates, which are guaranteed
as to timely payment of principal and interest by FNMA, but are not backed
by the full faith and credit of the U.S. Government. Like GNMA
Certificates and FHLMC PCs, these pass-through securities are subject to
the unpredictability of unscheduled prepayments on the underlying mortgage
pools.
While it is not possible to accurately predict the life of a
particular issue of a mortgage-backed "pass-through" security held by the
Portfolio, the actual life of any such security is likely to be
substantially less than the average maturity of the mortgage pool
underlying the security. This is because unscheduled early prepayments of
principal on the security owned by the Portfolio will result from the
prepayment, refinancing or foreclosure of the underlying mortgage loans in
the mortgage pool. The Portfolio, when the monthly payments (which may
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include unscheduled prepayments) on such a security are passed through to
it, may be able to reinvest them only at a lower rate of interest. Because
of the regular scheduled payments of principal and the early unscheduled
prepayments of principal, the mortgage-backed "pass-through" security is
less effective than other types of obligations as a means of "locking-in"
attractive long-term interest rates. As a result, this type of security
may have less potential for capital appreciation during periods of
declining interest rates than other U.S. Government securities of
comparable maturities, although many issues of mortgage-backed
"pass-through" securities may have a comparable risk of decline in market
value during periods of rising interest rates. If such a security has been
purchased by the Portfolio at a premium above its par value, both a
scheduled payment of principal and an unscheduled prepayment of principal,
which would be made at par, will accelerate the realization of a loss
equal to that portion of the premium applicable to the payment or
prepayment and will reduce total return. If such a security has been
purchased by the Portfolio at a discount from its par value, both a
scheduled payment of principal and an unscheduled prepayment of principal
will increase current and total returns and will accelerate the
recognition of income, which, when distributed to investors, will be
taxable as ordinary income. The Portfolio intends to acquire the majority
of its holdings of mortgage-backed "pass-through" securities at a discount
from par value.
Collateralized Mortgage Obligations ("CMOs")
CMOs are debt securities issued by the FHLMC and by financial
institutions and other mortgage lenders which are generally fully
collateralized by a pool of mortgages held under an indenture. The key
feature of the CMO structure is the prioritization of the cash flows from
a pool of mortgages among the several classes of CMO holders, thereby
creating a series of obligations with varying rates and maturities
appealing to a wide range of investors. CMOs generally are secured by an
assignment to a trustee under the indenture pursuant to which the bonds
are issued of collateral consisting of a pool of mortgages. Payments with
respect to the underlying mortgages generally are made to the trustee
under the indenture. Payments of principal and interest on the underlying
mortgages are not passed through to the holders of the CMOs as such (that
is, the character of payments of principal and interest is not passed
through and therefore payments to holders of CMOs attributable to interest
paid and principal repaid on the underlying mortgages do not necessarily
constitute income and return of capital, respectively, to such holders),
but such payments are dedicated to payment of interest on and repayment of
principal of the CMOs. CMOs are issued in two or more classes or series
with varying maturities and stated rates of interest determined by the
issuer. Because the interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on
which are used to pay interest to each class and to retire successive
maturities in sequence. CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of sufficient early prepayments on such
mortgages, the class or series of CMO first to mature generally will be
retired prior to maturity. Therefore, although in most cases the issuer of
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CMOs will not supply additional collateral in the event of such
prepayments, there will be sufficient collateral to secure CMOs that
remain outstanding. Currently, the Portfolio's investment adviser, Boston
Management and Research ("BMR" or the "Investment Adviser"), will consider
privately issued CMOs or other mortgage-backed securities as possible
investments for the Portfolio only when the mortgage collateral is
insured, guaranteed or otherwise backed by the U.S. Government or one or
more of its agencies or instrumentalities (e.g., insured by the Federal
Housing Administration or Farmers Home Administration or guaranteed by the
Administrator of Veterans Affairs or consisting in whole or in part of
U.S. Government securities).
Stripped Mortgage-Backed Securities ("SMBS")
The Portfolio may invest in SMBS, which are derivative multiclass
mortgage securities. The Portfolio may only invest in SMBS issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. SMBS
are usually structured with two classes that receive different proportions
of the interest and principal distributions from a pool of mortgages. A
common type of SMBS will have one class receiving all of the interest from
the mortgages, while the other class will receive all of the principal.
However, in some instances, one class will receive some of the interest
and most of the principal while the other class will receive most of the
interest and the remainder of the principal. If the underlying mortgages
experience greater than anticipated prepayments of principal, the
Portfolio may fail to fully recoup its initial investment in these
securities. Although the market for such securities is increasingly
liquid, certain SMBS may not be readily marketable and will be considered
illiquid for purposes of the Portfolio's limitation on investments in
illiquid securities. The determination of whether a particular SMBS is
liquid will be made by the Investment Adviser under guidelines and
standards established by the Trustees. The market value of the class
consisting entirely of principal payments generally is unusually volatile
in response to changes in interest rates. The yields on a class of SMBS
that receives all or most of the interest from mortgages are generally
higher than prevailing market yields on other mortgage-backed securities
because their cash flow patterns are more volatile and there is a greater
risk that the initial investment will not be fully recouped. The
Investment Adviser will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and by using
certain hedging techniques.
Indexed Securities
The indexed securities purchased by the Portfolio may include interest
only ("IO") and principal only ("PO") securities, floating rate securities
linked to the Cost of Funds Index ("COFI floaters"), other "lagging rate"
floating rate securities, floating rate securities that are subject to a
maximum interest rate ("capped floaters"), leveraged floating rate
securities ("super floaters"), leveraged inverse floating rate securities
("inverse floaters"), dual index floaters, range floaters, index
amortizing notes and various currency indexed notes.
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<PAGE>
Risks of Certain Mortgage-Backed and Indexed Securities
The risk of early prepayments is the primary risk associated with
mortgage IOs, super floaters and other leveraged floating rate mortgage-
backed securities. The primary risks associated with COFI floaters, other
"lagging rate" floaters, capped floaters, inverse floaters, POs and
leveraged inverse IOs are the potential extension of average life and/or
depreciation due to rising interest rates. Although not mortgage-backed
securities, index amortizing notes and other callable securities are
subject to extension risk resulting from the issuer's failure to exercise
its option to call or redeem the notes before their stated maturity date.
The residual classes of CMOs are subject to both prepayment and extension
risk.
Other types of floating rate derivative debt securities present more
complex types of interest rate risks. For example, range floaters are
subject to the risk that the coupon will be reduced to below market rates
if a designated interest rate floats outside of a specified interest rate
band or collar. Dual index or yield curve floaters are subject to
depreciation in the event of an unfavorable change in the spread between
two designated interest rates. The market values of currency linked
securities may be very volatile and may decline during periods of unstable
currency exchange rates.
Leverage Though Borrowing
The Portfolio and the other investment companies managed by BMR or
Eaton Vance Management participate in a Line of Credit Agreement (the
"Credit Agreement") with Citibank, N.A. ("Citibank"). Citibank agrees, in
the Credit Agreement, to consider requests from the Portfolio and such
other investment companies that Citibank make advances ("Advances") to
the Portfolio and such other investment companies from time to time. The
aggregate amount of all such Advances to all such borrowers will not
exceed $120,000,000, $100,000,000 of which is a discretionary facility and
$20,000,000 of which is a committed facility. The Portfolio has currently
determined that its borrowings under the Credit Agreement will not exceed,
at any one time outstanding, the lesser of (a) 1/3 of the current market
value of the net assets of the Portfolio or (b) $7,500,000 (the "Amount
Available to the Portfolio"). The Portfolio is obligated to pay to
Citibank, in addition to interest on Advances made to it, a quarterly fee
on the average daily unused portion of the Amount Available to the
Portfolio at the rate of 1/4 of 1% per annum. The Credit Agreement may be
terminated by Citibank or the borrowers at any time upon 30 days' prior
written notice. The Portfolio expects to use the proceeds of the Advances
primarily for leveraging purposes. As at December 31, 1995 the Portfolio
had outstanding loans pursuant to the Credit Agreement amounting to
$3,835,000. The average daily loan balance for the fiscal year ended
December 31, 1995, was $1,067,197 and the average daily interest rate was
7.41%.
The Portfolio, like many other investment companies, may also borrow
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money for temporary extraordinary or emergency purposes. Such borrowings
may not exceed 5% of the value of the Portfolio's total assets at the time
of borrowing. The Portfolio may pledge up to 10% of the lesser of cost or
value of its total assets to secure such borrowings.
When-Issued Securities and Forward Commitments
The Portfolio may purchase and sell securities on a "forward
commitment" or "when-issued" basis. Forward commitment or when-issued
transactions arise when securities are purchased or sold by the Portfolio
with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous price and yield to the Portfolio
at the time of entering into the transaction. However, the yield on a
comparable security when the transaction is consummated may vary from the
yield on the security at the time that the forward commitment or
when-issued transaction was made. From the time of entering into the
transaction until delivery and payment is made at a later date, the
securities that are the subject of the transaction are subject to market
fluctuations. When the Portfolio engages in forward commitment or
when-issued transactions, the Portfolio relies on the seller or buyer, as
the case may be, to consummate the sale. Failure to do so may result in
the Portfolio missing the opportunity of obtaining a price or yield
considered to be advantageous. Forward commitment or when-issued
transactions may be expected to occur a month or more before delivery is
due. However, no payment or delivery is made by the Portfolio until it
receives payment or delivery from the other party to the transaction. The
Portfolio will maintain in a segregated account with its custodian cash,
U.S. Government securities or other liquid, high grade debt securities
having an aggregate value equal to the amount of such purchase commitments
until payment is made. To the extent the Portfolio engages in forward
commitment or when-issued transactions, it will do so for the purpose of
acquiring or disposing of securities held by the Portfolio consistent with
the Portfolio's investment objective and policies and not for the purpose
of investment leverage.
Lending Portfolio Securities
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under
present regulatory policies of the Securities and Exchange Commission (the
"Commission"), such loans are required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities held by
the Portfolio's custodian and maintained on a current basis at an amount
at least equal to the market value of the securities loaned, which will be
marked to market daily. Cash equivalents include certificates of deposit,
commercial paper and other short-term money market instruments. The
Portfolio would have the right to call a loan and obtain the securities
loaned at any time on up to five business days' notice. The Portfolio
would not have the right to vote any securities having voting rights
during the existence of a loan, but would call the loan in anticipation of
an important vote to be taken among holders of the securities or the
giving or withholding of their consent on a material matter affecting the
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investment. Securities lending involves administration expenses,
including finders' fees.
Writing and Purchasing Call and Put Options
The Portfolio may write covered put and call options on U.S.
Government securities. The Portfolio does not intend to write a covered
option on U.S. Government securities if after such transaction more than
25% of its net assets, as measured by the aggregate value of such
securities underlying all covered calls and puts written by the Portfolio,
would be subject to such options. The Portfolio will only write a put
option on a security which it intends to ultimately acquire for its
investment portfolio. The Portfolio does not intend to purchase an option
on any U.S. Government security if after such transaction more than 5% of
its net assets, as measured by the aggregate of all premiums paid for all
options held by the Portfolio, would be so invested.
Securities dealers make over-the-counter ("OTC") markets in options on
certain "pass-through" mortgage-backed securities, such as GNMA
Certificates, FHLMC PCs and FNMA Mortgage-Backed Certificates. These
dealers buy and sell call and put options on such securities, and the
Portfolio may enter into option transactions with such dealers. Because
the remaining principal balance of a "pass-through" mortgage-backed
security declines each month as a result of regular scheduled payments and
early unscheduled prepayments of principal, the Portfolio, as a writer of
a call option holding such a security as "cover" to satisfy its delivery
obligation in the event of exercise, may find that the security it holds
no longer has a sufficient remaining principal balance for this purpose.
Should this occur, the Portfolio will purchase additional securities in
order to maintain its "cover."
Futures Contracts and Options on Futures Contracts
Futures Contracts. The Portfolio may enter into futures contracts traded
on an exchange regulated by the Commodity Futures Trading Commission
("CFTC") and on foreign exchanges, but, with respect to foreign exchange-
traded futures contracts, only if the Investment Adviser determines that
trading on each such foreign exchange does not subject the Portfolio to
risks, including credit and liquidity risks, that are materially greater
than the risks associated with trading on CTFC-regulated exchanges.
Hedging Strategies. In order to hedge its current or anticipated
portfolio positions, the Portfolio may use futures contracts on securities
held in its Portfolio or on securities with characteristics similar to
those of the securities held by the Portfolio. If, in the opinion of the
Investment Adviser, there is a sufficient degree of correlation between
price trends for the securities held by the Portfolio and futures
contracts based on other financial instruments, securities indices or
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other indices, the Portfolio may also enter into such futures contracts as
part of its hedging strategy. Although under some circumstances prices of
securities held by the Portfolio may be more or less volatile than prices
of such futures contracts, the Investment Adviser will attempt to estimate
the extent of this difference in volatility based on historical patterns
and to compensate for it by having the Portfolio enter into a greater or
lesser number of futures contracts or by attempting to achieve only a
partial hedge against price changes affecting the securities held by the
Portfolio.
Options on Futures Contracts. The Portfolio may purchase and write call
and put options on futures contracts which are traded on a United States
exchange or board of trade or any foreign exchange on which the Portfolio
is permitted to trade futures contracts. The Portfolio will not purchase
or write options on futures contracts unless, in the opinion of the
Investment Adviser, the market for such options has developed sufficiently
that the risks associated with such options transactions are not greater
than the risks associated with futures transactions.
Some derivative securities are not readily marketable or may become
illiquid under adverse market conditions. In addition, during periods of
market volatility, a commodity exchange may suspend or limit trading in an
exchange-traded derivative instrument, which may make the instrument
temporarily illiquid and difficult to price. Commodity exchanges may also
establish daily limits on the amount that the price of a futures contract
or futures option can vary from the previous day's settlement price. Once
the daily limit is reached, no trades may be made that day at a price
beyond the limit. This may prevent the Portfolio from closing out
positions and limiting its losses.
Limitations on the Use of Futures Contracts and Certain Options
The Portfolio will engage in futures and related options transactions
for bona fide hedging or non-hedging purposes as defined in or permitted
by CFTC regulations. In general, the Portfolio will determine that the
price fluctuations in the futures contracts and options on futures used
for hedging purposes are substantially related to price fluctuations in
securities held by the Portfolio or which it expects to purchase. To
evidence its hedging intent, the Portfolio expects that on 75% or more of
the occasions on which it takes a long futures (or option or futures)
positions, the Portfolio will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities at the time when the
futures (or option) position is closed out. However, in particular cases,
when it is economically advantageous for the Portfolio to do so, a long
futures (or options) position may be terminated (or an option may expire)
without the corresponding purchase of securities. The Portfolio will
engage in transactions in futures and related options contracts only to
the extent such transactions are consistent with the requirements of the
Code for maintaining the qualification of each of the Portfolio's
investment company investors as a regulated investment company for federal
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income tax purposes (see "Tax Status").
Forward Foreign Currency Exchange Contracts
Forward contracts are individually negotiated and privately traded by
currency traders and their customers. A forward contract involves an
obligation to purchase or sell a specific currency (or basket of
currencies) for an agreed price at a future date, which may be any fixed
number of days from the date of the contract. The Portfolio may engage in
cross-hedging by using forward contracts in one currency (or basket or
currencies) to hedge against fluctuations in the value of securities
denominated in a different currency if the Investment Adviser determines
that there is an established historical pattern of correlation between the
two currencies (or the basket of currencies and the underlying currency).
Use of a different foreign currency magnifies the Portfolio's exposure to
foreign currency exchange rate fluctuations.
The precise projection of short-term currency market movements is not
possible and short-term hedging provides a means of fixing the dollar
value of only a portion of the Portfolio's foreign assets. The Portfolio
will not enter into forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the
Portfolio to deliver an amount of foreign currency in excess of the value
of the securities held by the Portfolio or other assets denominated in
that currency.
Asset Coverage for Derivative Instruments
Transactions using forward contracts, futures contracts and options
(other than options that the Portfolio has purchased) expose the Portfolio
to an obligation to another party. The Portfolio will not enter into any
such transactions unless it owns either (1) an offsetting ("covered")
position in securities, currencies, or other options, futures contracts or
forward contracts, or (2) cash, receivables and short-term debt securities
with a value sufficient at all times to cover its potential obligations
not covered as provided in (1) above. The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its
custodian in the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding forward contract, futures contract
or option is open, unless they are replaced with other appropriate assets.
As a result, the commitment of a large portion of the Portfolio's assets
to cover or segregated accounts could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current
obligations.
Portfolio Turnover
If the Portfolio writes a substantial number of call options and the
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market prices of the underlying securities appreciate, or if the Portfolio
writes a substantial number of put options and the market prices of the
underlying securities depreciate, there may be a very substantial turnover
of securities held by the Portfolio. Although it is not anticipated that
the annual portfolio turnover rate will exceed 200% under such
circumstances, portfolio turnover may be greater than 200%, but is not
expected to exceed 300%. A 200% turnover rate would occur if all of the
securities held by the Portfolio were sold and either repurchased or
replaced twice within one year. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs,
which will be borne directly by the Portfolio. It may also result in the
realization of capital gains. The Portfolio pays brokerage commissions in
connection with futures transactions and the writing of options and
effecting of closing purchase or sale transactions, as well as for
purchases and sales of portfolio securities. See "Brokerage Allocation and
Other Practices" for a discussion of the Portfolio's brokerage practices.
The portfolio turnover rates of the Portfolio for the fiscal years ended
December 31, 1995 and 1994 were 19% and 35%, respectively.
Investment Restrictions
The Portfolio has adopted the following investment restrictions which
may not be changed without the approval of the holders of a "majority of
the outstanding voting securities" of the Portfolio, which as used in this
Part B means the lesser of (a) 67% or more of the outstanding voting
securities of the Portfolio present or represented by proxy at a meeting
if the holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented at the meeting or (b) more than
50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in
the Investment Company Act of 1940 (the "1940 Act"). As a matter of
fundamental policy, the Portfolio may not:
(1) With respect to 75% of its total assets, invest more than 5% of
its total assets in the securities of a single issuer or purchase more
than 10% of the outstanding voting securities of a single issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies; or
invest more than 25% of its total assets in any single industry (other
than securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities);
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Portfolio may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities). The deposit or payment by the Portfolio of initial,
maintenance or variation margin in connection with all types of options
and futures contract transactions is not considered the purchase of a
security on margin;
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(4) Underwrite or participate in the marketing of securities of
others, except insofar as it may technically be deemed to be an
underwriter in selling a portfolio security under circumstances which may
require the registration of the same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies
which invest or deal in real estate;
(6) Purchase or sell physical commodities or contracts for the
purchase or sale of physical commodities;
(7) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities; or
(8) Buy investment securities from or sell them to any of its officers
or Trustees, the investment adviser or placement agent, as principal;
however, any such person or concerns may be employed as a broker upon
customary terms.
The Portfolio has adopted the following investment policies which may
be changed by the Portfolio without the approval of its investors. As a
matter of nonfundamental policy, the Portfolio may not: (a) purchase put
or call options on U.S. Government securities if after such purchase more
than 5% or its net assets, as measured by the aggregate of the premiums
paid for such options held by the Portfolio, would be so invested; (b)
purchase any put options, long futures contracts, or call options on a
futures contract if at the date of such purchase realized net losses from
such transactions during the fiscal year to date exceed 5% of its average
net assets during such period; (c) make short sales of securities or
maintain a short position, unless at all times when a short position is
open it owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 25% of its net assets (taken at
current value) is held as collateral for such sales at any one time; (d)
purchase securities of any issuer which, including predecessors, has not
been in continuous operation for at least three years, except that 5% of
its total assets (taken at market value) may be invested in certain
issuers not in such continuous operation but substantially all of whose
assets are (i) securities of one or more issuers which have had a record
of three years' continuous operation or (ii) assets of an independent
division of an issuer which division has had a record of three years'
continuous operation; provided, however, that exempted from this
restriction are U.S. Government securities, securities of issuers which
are rated by at least one nationally recognized statistical rating
organization, municipal obligations and obligations issued or guaranteed
by any foreign government or its agencies or instrumentalities; (e) invest
more than 15% of net assets in investments which are not readily
marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes
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of this limitation do not include securities eligible for resale pursuant
to Rule 144A of the Securities Act of 1933 and commercial paper issued
pursuant to Section 4(2) of said Act that the Board of Trustees, or its
delegate, determines to be liquid, based upon the trading markets for the
specific security; (f) purchase or retain in its portfolio any securities
issued by an issuer any of whose officers, directors, trustees or security
holders is an officer or Trustee of the Portfolio or is a member, officer,
director or trustee of any investment adviser of the Portfolio, if after
the purchase of the securities of such issuer by the Portfolio one or more
of such persons owns beneficially more than 1/2 of 1% of the shares or
securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together
own beneficially more than 5% of such shares or securities or both (all
taken at market value); or (g) purchase oil, gas or other mineral leases
or purchase partnership interests in oil, gas or other mineral exploration
or development programs.
Whenever an investment policy or investment restriction set forth in
Part A or this Part B states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall
be determined immediately after and as a result of the Portfolio's
acquisition of such security or asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances,
will not compel the Portfolio to dispose of such security or other asset.
Notwithstanding the foregoing, the Portfolio must always be in compliance
with the borrowing policy set forth above.
In order to permit the sale in certain states of shares of certain
open-end investment companies that are investors in the Portfolio, the
Portfolio may make commitments more restrictive than the policies
described above. Should the Portfolio determine that any such commitment
is no longer in the best interests of the Portfolio and its investors, it
will revoke such commitment.
Item 14. Management of the Portfolio
The Trustees and officers of the Portfolio are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's
investment adviser, Boston Management and Research ("BMR" or the
"Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management
("Eaton Vance"); of Eaton Vance's parent, Eaton Vance Corp. ("EVC"); and
of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV"). Eaton Vance
and EV are both wholly-owned subsidiaries of EVC. Those Trustees who are
"interested persons" of the Portfolio, BMR, Eaton Vance, EVC or EV, as
defined in the 1940 Act, by virtue of their affiliation with any one or
more of the Portfolio, BMR, Eaton Vance, EVC or EV, are indicated by an
asterisk(*).
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TRUSTEES OF THE PORTFOLIO
M. DOZIER GARDNER (62), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and
a Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
JAMES B. HAWKES (54), Vice President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director
of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and
communications company) founded in 1988; Chairman of the Board of
Newspapers of New England, Inc. since 1983. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff Professor of Investment Banking at Harvard University
Graduate School of Business Administration. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding
company owning institutional investment management firms. Chairman,
President and Director, UAM Funds (mutual funds). Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
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OFFICERS OF THE PORTFOLIO
SUSAN SCHIFF (35), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
MARK S. VENEZIA (46), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (51), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (64), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor,
The Boston Company (1991-1993) and Registration Specialist, Fidelity
Management & Research Co. (1986-1991). Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Murphy was elected Assistant
Secretary on March 27, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Office
of various investment companies managed by Eaton Vance or BMR. Mr.
Woodbury was elected Assistant Secretary on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the
Special Committee of the Board of Trustees of the Portfolio. The purpose
of the Special Committee is to consider, evaluate and make recommendations
to the full Board of Trustees concerning (i) all contractual arrangements
with service providers to the Portfolio, including investment advisory
fund accounting, and custodial services, and (ii) all other matters in
which Eaton Vance or its affiliate has any actual or potential conflict of
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interest with the Portfolio or its interestholders.
The Nominating Committee is comprised of four Trustees who are not
"interested persons," as that term is defined under the 1940 Act
("noninterested Trustees"). The Committee has four-year staggered terms,
with one member rotating off the Committee to be replaced by another
noninterested Trustee of the Portfolio. Messrs. Hayes (Chairman), Reamer,
Thorndike and Treynor are currently serving on the Committee. The purpose
of the Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board
of Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit
Committee of the Board of Trustees of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees
regarding the selection of the independent accountants, and reviewing with
such accountants and the Treasurer of the Portfolio matters relative to
trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian of the Portfolio.
The fees and expenses of those Trustees who are not members of the
Eaton Vance organization (the noninterested Trustees) are paid by the
Portfolio. (The Trustees who are members of the Eaton Vance organization
receive no compensation from the Portfolio). During the fiscal year ended
December 31, 1995, the Trustees of the Portfolio earned the following
compensation in their capacities as Trustees from the Portfolio and the
other funds in the Eaton Vance fund complex(1):
Aggregate Total Compensation
Compensation from Portfolio and
Name from Portfolio Fund Complex
---- -------------- ------------------
Donald R. Dwight $3,970(2) $135,000(4)
Samuel L. Hayes, III 3,912(3) 150,000(5)
Norton H. Reamer 3,895 135,000
John L. Thorndike 4,012 140,000
Jack L. Treynor 4,118 140,000
(1)The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
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(2)Includes $1,335 of deferred compensation.
(3)Includes $1,900 of deferred compensation.
(4)Includes $35,000 of deferred compensation.
(5)Includes $33,750 of deferred compensation.
Trustees of the Portfolio who are not affiliated with BMR may elect to
defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees
invested by the Portfolio in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustee under the Plan
will be determined based upon the performance of such investments.
Deferral of Trustees' fees in accordance with the Plan will have a
negligible effect on the Portfolio's assets, liabilities and net income
per share, and will not obligate the Portfolio to retain the services of
any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. The Portfolio does not have a retirement
plan for its Trustees.
The Portfolio's Declaration of Trust provides that it will indemnify
its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Portfolio, unless, as to liability to the Portfolio or
its investors, it is finally adjudicated that they engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in their offices, or unless with respect to any other
matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Portfolio. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving
the settlement or other disposition, or by a reasonable determination,
based upon a review of readily available facts, by vote of a majority of
noninterested Trustees or in a written opinion of independent counsel,
that such officers or Trustees have not engaged in wilful misfeasance, bad
faith, gross negligence or reckless disregard of their duties.
Item 15. Control Persons and Principal Holders of Securities
As of April 1, 1996, EV Traditional Government Obligations Fund (the
"Traditional Fund"), EV Marathon Government Obligations Fund (the
"Marathon Fund") and EV Classic Government Obligations Fund (the "Classic
Fund"), each a series of Eaton Vance Mutual Funds Trust (the "Trust"),
owned approximately 68.3%, 23.8% and 7.9%, respectively, of the value of
the outstanding interests in the Portfolio. Because the Traditional Fund
controls the Portfolio, the Traditional Fund may take actions without the
approval of any other investor. Each of the Traditional, Marathon and
Classic Funds has informed the Portfolio that whenever it is requested to
vote on matters pertaining to the fundamental policies of the Portfolio,
it will hold a meeting of shareholders and will cast its vote as
instructed by its shareholders. It is anticipated that any other investor
in the Portfolio which is an investment company registered under the 1940
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Act would follow the same or a similar practice. The Trust is an open-end
management investment company organized as a business trust under the laws
of the Commonwealth of Massachusetts.
Item 16. Investment Advisory and Other Services
Investment Adviser. The Portfolio engages BMR as its investment
adviser pursuant to an Investment Advisory Agreement dated October 28,
1993. BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with combined
assets under management of over $16 billion.
BMR manages the investments and affairs of the Portfolio subject to
the supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolio investment research, advice and supervision, furnishes an
investment program, and will determine what securities will be purchased,
held or sold by the Portfolio and what portion, if any, of the Portfolio's
assets will be held uninvested. The Investment Advisory Agreement requires
BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities. The
Portfolio is responsible for all expenses not expressly stated to be
payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and
continuing its existence, (ii) registration of the Portfolio under the
1940 Act, (iii) commissions, fees and other expenses connected with the
acquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of
interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or
other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering
and maintaining registrations of the Portfolio and of the Portfolio's
placement agent as broker-dealer or agent under state securities laws,
(ix) expenses of reports and notices to investors and of meetings of
investors and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping for funds, securities and other
investments, keeping of books, accounts and records, and determination of
net asset values, book capital account balances and tax capital account
balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for
all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees
of the Portfolio, (xvii) compensation and expenses of Trustees of the
Portfolio who are not members of the BMR organization, and (xviii) such
non-recurring items as may arise, including expenses incurred in
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connection with litigation, proceedings and claims and the obligation of
the Portfolio to indemnify its Trustees, officers and investors with
respect thereto.
On March 28, 1994, the Trustees of the Portfolio voted to accept a
waiver of BMR's compensation by instituting the breakpoints set forth in
"Management of the Portfolio" in Part A (effective as of April 1, 1994) in
the advisory fee rate then provided for in the Investment Advisory
Agreement. Prior to April 1, 1994, the Investment Advisory Agreement
provided for a monthly advisory fee of 0.0625% (equivalent to 0.75%
annually) of the average daily net assets of the Portfolio.
For a description of the compensation that the Portfolio pays BMR
under the Investment Advisory Agreement, see "Management of the Portfolio"
in Part A. As at December 31, 1995, the Portfolio had net assets of
$521,788,905. For the fiscal years ended December 31, 1995 and 1994, BMR
earned advisory fees of $3,928,237 and $4,259,500, respectively
(equivalent to 0.75% and 0.74%, respectively, of the Portfolio's average
daily net assets for such years). For the period from the start of
business, October 28, 1993, to the fiscal year ended December 31, 1993,
BMR earned advisory fees of $727,254 (equivalent to 0.75% (annualized) of
the Portfolio's average daily net assets for such period).
The Investment Advisory Agreement with BMR remains in effect until
February 28, 1997. It may be continued indefinitely thereafter so long as
such continuance is approved at least annually (i) by the vote of a
majority of the Trustees of the Portfolio who are not interested persons
of the Portfolio or of BMR cast in person at a meeting specifically called
for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding
voting securities of the Portfolio. The Agreement may be terminated at any
time without penalty on sixty (60) days' written notice by the Board of
Trustees, or by vote of the majority of the outstanding voting securities
of the Portfolio, and the Agreement will terminate automatically in the
event of its assignment. The Agreement provides that BMR may render
services to others. The Agreement also provides that BMR shall not be
liable for any loss incurred in connection with the performance of its
duties, or action taken or omitted under that Agreement, in the absence of
willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and
duties thereunder, or for any losses sustained in the acquisition, holding
or disposition of any security or other investment.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV
are both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton
Vance. The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M.
Dozier Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors
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of EVC consist of the same persons and John G.L. Cabot and Ralph Z.
Sorenson. Mr. Clay is chairman and Mr. Gardner is president and chief
executive officer of EVC, BMR, Eaton Vance and EV. All of the issued and
outstanding shares of Eaton Vance and EV are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares
of the outstanding Voting Common Stock of EVC are deposited in a Voting
Trust which expires on December 31, 1996, the Voting Trustees of which are
Messrs. Clay, Brigham, Gardner, Hawkes and Rowland. The Voting Trustees
have unrestricted voting rights for the election of Directors of EVC. All
of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers and Directors of EVC and EV. As of March 29, 1996, Messrs. Clay,
Gardner and Hawkes each owned 24% of such voting trust receipts, and
Messrs. Rowland and Brigham owned 15% and 13%, respectively, of such
voting trust receipts. Messrs. Gardner, Hawkes and Otis are officers or
Trustees of the Portfolio and are members of the EVC, BMR, Eaton Vance and
EV organizations. Messrs. Murphy, O'Connor, Venezia and Woodbury and Ms.
Sanders and Ms. Schiff are officers of the Portfolio and are also members
of the BMR, Eaton Vance and EV organizations. BMR will receive the fees
paid under the Investment Advisory Agreement.
EVC owns all of the stock of Energex Energy Corporation, which engages
in oil and gas exploration and development. In addition, Eaton Vance owns
all of the stock of Northeast Properties, Inc., which is engaged in real
estate investment. EVC owns all of the stock of Fulcrum Management, Inc.
and MinVen Inc., which are engaged in precious metal mining venture
investment and management. EVC also owns 24% of the Class A shares of
Lloyd George Management (B.V.I.) Limited, a registered investment adviser.
EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to
time have transactions with various banks, including the custodian of the
Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not
be influenced by existing or potential custodial or other relationships
between the Portfolio and such banks.
Custodian. Investors Bank & Trust Company ("IBT"), 89 South Street,
Boston, Massachusetts, acts as custodian for the Portfolio. IBT has the
custody of all of the Portfolio's assets, maintains the general ledger of
the Portfolio, and computes the daily net asset value of interests in the
Portfolio. In such capacity, it attends to details in connection with the
sale, exchange, substitution, or transfer of or other dealings with the
Portfolio's investments, receives and disburses all funds, and performs
various other ministerial duties upon receipt of proper instructions from
the Portfolio. IBT charges fees that are competitive within the industry.
A portion of the fee relates to custody, bookkeeping and valuation
services and is based upon a percentage of Portfolio net assets, and a
portion of the fee relates to activity charges, primarily the number of
portfolio transactions. These fees are then reduced by a credit for cash
balances of the Portfolio at the custodian equal to 75% of the 91-day,
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U.S. Treasury Bill auction rate applied to the Portfolio's average daily
collected balances for the week. Landon T. Clay, a Director of EVC and an
officer, Trustee or Director of other entities in the Eaton Vance
organization, own approximately 13% of the voting stock of Investors
Financial Services Corp., the holding company parent of IBT. Management
believes that such ownership does not create an affiliated person
relationship between the Portfolio and IBT under the 1940 Act.
Independent Accountants. Coopers & Lybrand L.L.P., One Post Office
Square, Boston, Massachusetts, are the independent accountants of the
Portfolio, providing audit services, tax return preparation, and
assistance and consultation with respect to the preparation of filings
with the Commission.
Item 17. Brokerage Allocation and Other Practices
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by
BMR. BMR is also responsible for the execution of transactions for all
other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of
all other accounts managed by it for execution with many firms. BMR uses
its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Portfolio and at reasonably
competitive spreads or (when a disclosed commission is being charged) at
reasonably competitive commission rates. In seeking such execution, BMR
will use its best judgment in evaluating the terms of a transaction, and
will give consideration to various relevant factors, including without
limitation the size and type of the transaction, the nature and character
of the market for the security, the confidentiality, speed and certainty
of effective execution required for the transaction, the general execution
and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other
transactions, and the reasonableness of the commission or spread, if any.
The debt securities and obligations purchased and sold by the Portfolio
are generally traded in the domestic over-the-counter markets on a net
basis (i.e., without commission) through broker-dealers and banks acting
for their own accounts rather than as brokers, or otherwise involve
transactions with the issuer of such obligations. Such firms attempt to
profit from such transactions by buying at the bid price and selling at
the higher asked price of the market for such obligations, and the
difference between the bid and asked price is customarily referred to as
the spread. The Portfolio may also purchase such obligations from domestic
underwriters, the cost of which may include undisclosed fees and
concessions to the underwriters. Although spreads or commissions on
portfolio security transactions will, in the judgment of BMR, be
reasonable in relation to the value of the services provided, spreads or
commissions exceeding those which another firm might charge may be paid to
firms who were selected to execute transactions on behalf of the Portfolio
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and BMR's other clients for providing brokerage and research services to
BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934,
a broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made either on the basis of that
particular transaction or on the basis of overall responsibilities which
BMR and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, BMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include
advice as to the value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement); and the "Research Services" referred to in the
next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to
receive research, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in
the performance of their investment responsibilities ("Research Services")
from broker-dealer firms which execute portfolio transactions for the
clients of such advisers and from third parties with which such
broker-dealers have arrangements. Consistent with this practice, BMR
receives Research Services from many broker-dealer firms with which BMR
places the Portfolio's transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and
transactions and recommendations as to the purchase and sale of securities
and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software,
data bases and services. Any particular Research Service obtained through
a broker-dealer may be used by BMR in connection with client accounts
other than those accounts which pay commissions to such broker-dealer. Any
such Research Service may be broadly useful and of value to BMR in
rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
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through which such Research Service was obtained. The advisory fee paid by
the Portfolio is not reduced because BMR receives such Research Services.
BMR evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research
Services which BMR believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek
and execute portfolio security transactions at advantageous prices and at
reasonably competitive commission rates or spreads, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
portfolio orders may be placed the fact that such firm has sold or is
selling securities of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the National
Association of Securities Dealers, Inc., which rule provides that no firm
which is a member of the Association shall favor or disfavor the
distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or
expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its
affiliates. BMR will attempt to allocate equitably portfolio security
transactions among the Portfolio and the portfolios of its other
investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and
such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the
Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such
accounts. While this procedure could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Portfolio that the benefits
available from the BMR organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions. For the fiscal years
ended December 31, 1995 and 1994, and for the period from the start of
business, October 28, 1993, to December 31, 1993, the Portfolio paid no
brokerage commissions on portfolio transactions.
Item 18. Capital Stock and Other Securities
Under the Portfolio's Declaration of Trust, the Trustees are
authorized to issue interests in the Portfolio. Investors are entitled to
participate pro rata in distributions of taxable income, loss, gain and
credit of the Portfolio. Upon dissolution of the Portfolio, the Trustees
B-22
<PAGE>
shall liquidate the assets of the Portfolio and apply and distribute the
proceeds thereof as follows: (a) first, to the payment of all debts and
obligations of the Portfolio to third parties including, without
limitation, the retirement of outstanding debt, including any debt owed to
holders of record of interests in the Portfolio ("Holders") or their
affiliates, and the expenses of liquidation, and to the setting up of any
reserves for contingencies which may be necessary; and (b) second, in
accordance with the Holders' positive Book Capital Account balances after
adjusting Book Capital Accounts for certain allocations provided in the
Declaration of Trust and in accordance with the requirements described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2). Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the assets of the Portfolio would cause undue loss to the
Holders, the Trustees, in order to avoid such loss, may, after having
given notification to all the Holders, to the extent not then prohibited
by the law of any jurisdiction in which the Portfolio is then formed or
qualified and applicable in the circumstances, either defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Portfolio except those necessary to satisfy the Portfolio's debts and
obligations or distribute the Portfolio's assets to the Holders in
liquidation. Interests in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except
as set forth below. Interests in the Portfolio may not be transferred.
Certificates representing an investor's interest in the Portfolio are
issued only upon the written request of a Holder.
Each Holder is entitled to vote in proportion to the amount of its
interest in the Portfolio. Holders do not have cumulative voting rights.
The Portfolio is not required and has no current intention to hold annual
meetings of Holders but the Portfolio will hold meetings of Holders when
in the judgment of the Portfolio's Trustees it is necessary or desirable
to submit matters to a vote of Holders at a meeting. Any action which may
be taken by Holders may be taken without a meeting if Holders holding more
than 50% of all interests entitled to vote (or such larger proportion
thereof as shall be required by any express provision of the Declaration
of Trust of the Portfolio) consent to the action in writing and the
consents are filed with the records of meetings of Holders.
The Portfolio's Declaration of Trust may be amended by vote of Holders
of more than 50% of all interests in the Portfolio at any meeting of
Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all interests. The Trustees may also amend the Declaration of Trust
(without the vote or consent of Holders) to change the Portfolio's name or
the state or other jurisdiction whose law shall be the governing law, to
supply any omission or cure, correct or supplement any ambiguous,
defective or inconsistent provision, to conform the Declaration of Trust
to applicable federal law or regulations or to the requirements of the
Code, or to change, modify or rescind any provision, provided that such
change, modification or rescission is determined by the Trustees to be
necessary or appropriate and not to have a materially adverse effect on
the financial interests of the Holders. No amendment of the Declaration of
B-23
<PAGE>
Trust which would change any rights with respect to any Holder's interest
in the Portfolio by reducing the amount payable thereon upon liquidation
of the Portfolio may be made, except with the vote or consent of the
Holders of two-thirds of all interests. References in the Declaration of
Trust and in Part A or this Part B to a specified percentage of, or
fraction of, interests in the Portfolio, means Holders whose combined Book
Capital Account balances represent such specified percentage or fraction
of the combined Book Capital Account balance of all, or a specified group
of, Holders.
In accordance with the Declaration of Trust, there normally will be no
meetings of the investors for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees holding office
have been elected by investors. In such an event, the Trustees of the
Portfolio then in office will call an investors' meeting for the election
of Trustees. Except for the foregoing circumstances, and unless removed
by action of the investors in accordance with the Portfolio's Declaration
of Trust, the Trustees shall continue to hold office and may appoint
successor Trustees.
The Declaration of Trust provides that no person shall serve as a
Trustee if investors holding two-thirds of the outstanding interests have
removed him from that office either by a written declaration filed with
the Portfolio's custodian or by votes cast at a meeting called for that
purpose. The Declaration of Trust further provides that under certain
circumstances, the investors may call a meeting to remove a Trustee and
that the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The Portfolio may merge or consolidate with any other corporation,
association, trust or other organization or may sell or exchange all or
substantially all of its assets upon such terms and conditions and for
such consideration when and as authorized by the Holders of (a) 67% or
more of the interests in the Portfolio present or represented at the
meeting of Holders, if Holders of more than 50% of all interests are
present or represented by proxy, or (b) more than 50% of all interests,
whichever is less. The Portfolio may be terminated (i) by the affirmative
vote of Holders of not less than two-thirds of all interests at any
meeting of Holders or by an instrument in writing without a meeting,
executed by a majority of the Trustees and consented to by Holders of not
less than two-thirds of all interests, or (ii) by the Trustees by written
notice to the Holders.
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for
its obligations and liabilities, subject, however, to indemnification by
the Portfolio in the event that there is imposed upon an investor a
greater portion of the liabilities and obligations of the Portfolio than
its proportionate interest in the Portfolio. The Portfolio intends to
maintain fidelity and errors and omissions insurance deemed adequate by
the Trustees. Therefore, the risk of an investor incurring financial loss
on account of investor liability is limited to circumstances in which both
B-24
<PAGE>
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects
a Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Item 19. Purchase, Redemption and Pricing of Securities
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the Securities Act of 1933. See "Purchase of Interests
in the Portfolio" and "Redemption or Decrease of Interest" in Part A.
Except as described below, debt securities for which the
over-the-counter market is the primary market are normally valued at the
mean between the latest available bid and asked prices. Over-the-counter
options are valued at the mean between the bid and asked prices provided
by dealers. Financial futures contracts listed on commodity exchanges and
exchange-traded options are valued at closing settlement prices.
Short-term obligations having remaining maturities of less than 60 days
are valued at amortized cost, which approximates value, unless the
Trustees determine that under particular circumstances such method does
not result in fair value. As authorized by the Trustees, debt securities
(other than short-term obligations) may be valued on the basis of
valuations furnished by a pricing service which determines valuations
based upon market transactions for normal, institutional-size trading
units of such securities. Mortgage-backed "pass-through" securities are
valued through use of a matrix pricing system which takes into account
closing bond valuations, yield differentials, anticipated prepayments and
interest rates. Securities for which there is no such quotation or
valuation and all other assets are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Item 20. Tax Status
The Portfolio has been advised by tax counsel that, provided the
Portfolio is operated at all times during its existence in accordance with
certain organizational and operational documents, the Portfolio should be
classified as a partnership under the Internal Revenue Code of 1986, as
amended (the "Code"), and it should not be a "publicly traded partnership"
within the meaning of Section 7704 of the Code. Consequently, the
Portfolio does not expect that it will be required to pay any federal
income tax, and a Holder will be required to take into account in
determining its federal income tax liability its share of the Portfolio's
income, gain, losses and deductions.
B-25
<PAGE>
Under Subchapter K of the Code, a partnership is considered to be
either an aggregate of its members or a separate entity, depending upon
the factual and legal context in which the question arises. Under the
aggregate approach, each partner is treated as an owner of an undivided
interest in partnership assets and operations. Under the entity approach,
the partnership is treated as a separate entity in which partners have no
direct interest in partnership assets and operations. The Portfolio has
been advised by tax counsel that, in the case of a Holder that seeks to
qualify as a regulated investment company (a "RIC") under the Code, the
aggregate approach should apply, and each such Holder should accordingly
be deemed to own a proportionate share of each of the assets of the
Portfolio and to be entitled to the gross income of the Portfolio
attributable to that share for purposes of all requirements of Sections
851(b) and 852(b)(5) of the Code. Further, the Portfolio has been advised
by tax counsel that each Holder that seeks to qualify as a RIC should be
deemed to hold its proportionate share of the Portfolio's assets for the
period the Portfolio has held the assets or for the period the Holder has
been an investor in the Portfolio, whichever is shorter. Investors should
consult their tax advisors regarding whether the entity or the aggregate
approach applies to their investment in the Portfolio in light of their
particular tax status and any special tax rules applicable to them.
In order to enable a Holder that is otherwise eligible to qualify as a
RIC, the Portfolio intends to satisfy the requirements of Subchapter M of
the Code relating to sources of income and diversification of assets as if
they were applicable to the Portfolio and to allocate and permit
withdrawals in a manner that will enable a Holder that is a RIC to comply
with those requirements. The Portfolio will allocate at least annually to
each Holder such Holder's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit in a manner intended to comply
with the Code and applicable Treasury regulations. Tax counsel has advised
the Portfolio that the Portfolio's allocations of taxable income and loss
should have "economic effect" under applicable Treasury regulations.
To the extent the cash proceeds of any withdrawal (or, under certain
circumstances, such proceeds plus the value of any marketable securities
distributed to an investor) ("liquid proceeds") exceed a Holder's adjusted
basis of his interest in the Portfolio, the Holder will generally realize
a gain for federal income tax purposes. If, upon a complete withdrawal
(redemption of the entire interest), the Holder's adjusted basis of his
interest exceeds the liquid proceeds of such withdrawal, the Holder will
generally realize a loss for federal income tax purposes. The tax
consequences of a withdrawal of property (instead of or in addition to
liquid proceeds) will be different and will depend on the specific factual
circumstances. A Holder's adjusted basis of an interest in the Portfolio
will generally be the aggregate prices paid therefor (including the
adjusted basis of contributed property and any gain recognized on such
contribution), increased by the amounts of the Holder's distributive share
B-26
<PAGE>
of items of income (including interest income exempt from federal income
tax) and realized net gain of the Portfolio, and reduced, but not below
zero, by (i) the amounts of the Holder's distributive share of items of
Portfolio loss, and (ii) the amount of any cash distributions (including
distributions of interest income exempt from federal income tax and cash
distributions on withdrawals from the Portfolio) and the basis to the
Holder of any property received by such Holder other than in liquidation,
and (iii) the Holder's distributive share of the Portfolio's nondeductible
expenditures not properly chargeable to capital account. Increases or
decreases in a Holder's share of the Portfolio's liabilities may also
result in corresponding increases or decreases in such adjusted basis.
Distributions of liquid proceeds in excess of a Holder's adjusted basis in
its interest in the Portfolio immediately prior thereto generally will
result in the recognition of gain to the Holder in the amount of such
excess.
The Portfolio's transactions in foreign currency, foreign currency
denominated debt securities, payables and receivables denominated in a
foreign currency, options and futures on foreign currency and forward
foreign currency exchange contracts are subject to special tax rules that
may convert capital gain or loss into ordinary income or loss and may
affect the amount, timing and character of the Portfolio's income or loss
and hence of allocations and/or distributions to the Portfolio's
investors.
Positions held by the Portfolio which consist of one or more debt
securities and one or more listed options or futures contracts which
substantially diminish the risk of loss of the Portfolio with respect to
such debt securities will be treated as "mixed straddles" for federal
income tax purposes. Such straddles are ordinarily subject to the
provisions of Section 1092 of the Code, the operation of which can result
in deferral of losses, adjustments in the holding periods of the debt
securities and conversion of short-term capital losses into long-term
capital losses. The operation of these rules can be mitigated or
eliminated by means of various elections which are available to the
Portfolio for federal income tax purposes.
To eliminate the application of these rules, the Portfolio has elected
mixed straddle accounting for one or more designated classes of activities
involving mixed straddles. Under this method of accounting, figures are
derived for aggregate short-term and long-term capital gains and losses
associated with all positions in a mixed straddle account on a daily
basis. Specifically, gains and losses are computed for all positions
disposed of on a given day, and all outstanding positions on such day are
marked to market (subject to subsequent adjustments to reflect the gain or
loss realized thereby). Gains and losses from all positions in debt
securities in the account are netted, as are gains and losses from all
positions in options and futures. If the two resulting figures both
represent net gains or net losses, the net gain or loss attributable to
the debt securities is treated as short-term capital gain or loss, and the
B-27
<PAGE>
net gain or loss attributable to the options and futures contracts is
treated as 60% long-term and 40% short-term capital gain or loss.
Alternatively, if the resulting figures represent a net gain and a net
loss, the two figures are further netted to arrive at a single figure for
the day. This figure is treated as 60% long-term and 40% short-term
capital gain or loss unless it reflects the fact that the net gain or loss
from the debt securities outweighed the net gain or loss from the options
and futures, in which case this figure is treated as short-term capital
gain or loss.
On the last business day of the taxable year the annual account net
gain or loss for each mixed straddle account is determined by netting the
daily net gains or losses for each business day during the taxable year.
(The annual account net gain or loss is adjusted to take into account any
interest and carrying charges incurred in connection with positions in the
account which were required to be capitalized.) Annual account net gains
or losses are then netted for all mixed straddle accounts to yield the
total annual account net gain or loss. This figure is subject to an
overall limitation such that no more than 50% of it will be treated as
long-term capital gain and no more than 40% of it will be treated as
short-term capital loss.
The Portfolio may make other tax elections with respect to mixed
straddles which do not properly belong in any of its mixed straddle
accounts.
In the absence of a mixed straddle election, futures or currency
forward contracts entered into by the Portfolio and listed nonequity
options written or purchased by the Portfolio (including options on debt
securities, options on futures contracts, options on securities indexes
and options on broad-based stock indexes, but possibly excluding certain
foreign currency-related options, futures or forward contracts) will be
governed by Section 1256 of the Code. Absent a tax election to the
contrary, gain or loss attributable to the lapse, exercise or closing out
of any such position will be treated as 60% long-term and 40% short-term
capital gain or loss, and on the last trading day of the Portfolio's
taxable year all outstanding Section 1256 positions will be marked to
market (i.e., treated as if such positions were closed out at their
closing price on such day), and any resulting gain or loss will be
recognized as 60% long-term and 40% short-term capital gain or loss. Under
certain circumstances, the entry into a futures contract to sell a
security or the purchase of a put option with respect to a security may
constitute a short sale for federal income tax purposes, causing an
adjustment in the holding period of the underlying security or a
substantially identical security held by the Portfolio.
The Portfolio will monitor its transactions in options, futures
contracts and forward contracts in order to enable an investor that is a
RIC to maintain its qualification as a RIC for federal income tax
B-28
<PAGE>
purposes.
The Portfolio's investment in securities acquired at a market
discount, or zero coupon and certain other securities with original issue
discount will cause it to realize income prior to the receipt of cash
payments with respect to these securities. Such income will be allocated
daily among investors in the Portfolio. To enable an investor that is a
RIC to distribute its proportionate share of this income and avoid a tax
on such investor, the Portfolio may be required to liquidate portfolio
securities that it might otherwise have continued to hold, in order to
generate cash for distribution to the RIC.
An entity that is treated as a partnership under the Code, such as the
Portfolio, is generally treated as a partnership under state and local tax
laws, but certain states may have different entity classification criteria
and may therefore reach a different conclusion. Entities that are
classified as partnerships are not treated as separate taxable entities
under most state and local tax laws, and the income of a partnership is
considered to be income of partners both in timing and in character. The
laws of the various states and local taxing authorities vary with respect
to the status of a partnership interest under state and local tax laws,
and each Holder of an interest in the Portfolio is advised to consult his
own tax adviser.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Investors should consult
their own tax advisers with respect to special tax rules that may apply in
their particular situations, as well as the state, local or foreign tax
consequences of investing in the Portfolio.
Item 21. Underwriters
The placement agent for the Portfolio is Eaton Vance Distributors,
Inc., which receives no compensation for serving in this capacity.
Investment companies, common and commingled trust funds, and similar
organizations and entities may continuously invest in the Portfolio.
Item 22. Calculation of Performance Data
Not applicable.
Item 23. Financial Statements
The following audited financial statements of the Portfolio for the
fiscal year ended December 31, 1995, are incorporated by reference into
this Part B and have been so incorporated in reliance upon the report of
Coopers & Lybrand L.L.P., independent accountants, as experts in
accounting and auditing.
B-29
<PAGE>
Portfolio of Investments as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the fiscal year ended December 31, 1995
Statement of Changes in Net Assets for the fiscal year ended December
31, 1995, and for the fiscal year ended December 31, 1994
Supplementary Data for the fiscal year ended December 31, 1995, for
the fiscal year ended December 31, 1994, and for the period from the
start of business, October 28, 1993, to December 31, 1993
Notes to Financial Statements
Report of Independent Accountants
For purposes of the EDGAR filing of this amendment to the Portfolio's
registration statement, the Portfolio incorporates by reference the above
audited financial statements, as previously filed electronically with the
Commission (Accession Number 0000950156-96-000292).
B-30
<PAGE>
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements called for by this Item are incorporated by
reference in Part B and listed in Item 23 hereof.
(b) Exhibits
1. Declaration of Trust dated May 1, 1992, filed electronically as
Exhibit No. 1 to Amendment No. 2 (filed with the Commission on March 21,
1995) and incorporated herein by reference (Accession No. 0000898432-95-
000071).
2. By-Laws of the Registrant adopted May 1, 1992, filed electronically as
Exhibit No. 2 to Amendment No. 2 (filed with the Commission on March 21,
1995) and incorporated herein by reference (Accession No. 0000898432-95-
000071).
5. Investment Advisory Agreement between the Registrant and Boston
Management and Research dated October 28, 1993, filed electronically as
Exhibit No. 5 to Amendment No. 2 (filed with the Commission on March 21,
1995) and incorporated herein by reference (Accession No. 0000898432-95-
000071).
6. Placement Agent Agreement with Eaton Vance Distributors, Inc. dated
October 28, 1993, filed electronically as Exhibit No. 6 to Amendment No. 2
(filed with the Commission on March 21, 1995) and incorporated herein by
reference (Accession No. 0000898432-95-000071).
7. The Securities and Exchange Commission has granted the Registrant an
exemptive order that permits the Registrant to enter into deferred
compensation arrangements with its independent Trustees. See In the
Matter of Capital Exchange Fund, Inc., Release No. IC-20671 (November 1,
1994).
8(a). Custodian Agreement with Investors Bank & Trust Company dated
October 23, 1995, filed herewith.
8(b). Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995, filed herewith.
C-1
<PAGE>
13. Investment representation letter of Eaton Vance Government
Obligations Trust, on behalf of EV Traditional Government Obligations
Fund, dated September 27, 1993, filed electronically as Exhibit No. 13 to
Amendment No. 2 (filed with the Commission on March 21, 1995) and
incorporated herein by reference (Accession No. 0000898432-95-000071).
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of
Title of Class Record Holders
-------------- As of April 1, 1996
--------------------
Interests 5
Item 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit to Amendment No. 2 to the Registrant's
Registration Statement and incorporated herein by reference.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
Item 28. Business and Other Connections
To the knowledge of the Portfolio, none of the trustees or officers of
the Portfolio's investment adviser, except as set forth on its Form ADV as
filed with the Securities and Exchange Commission, is engaged in any other
business, profession, vocation or employment of a substantial nature,
except that certain trustees and officers also hold various positions with
and engage in business for affiliates of the investment adviser.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
All applicable accounts, books and documents required to be maintained
by the Registrant by Section 31(a) of the Investment Company Act of 1940,
as amended, and the Rules promulgated thereunder are in the possession and
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<PAGE>
custody of the Registrant's custodian, Investors Bank & Trust Company, 89
South Street, Boston, MA 02111, with the exception of certain corporate
documents and portfolio trading documents, which are in the possession and
custody of the Registrant's investment adviser, Boston Management and
Research, 24 Federal Street, Boston, MA 02110. The Registrant is informed
that all applicable accounts, books and documents required to be
maintained by registered investment advisers are in the custody and
possession of the Registrant's investment adviser.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Registration Statement on Form N-1A to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Toronto, Ontario, Canada, on the 24th day of April, 1996.
GOVERNMENT OBLIGATIONS PORTFOLIO
By /s/ M. Dozier Gardner
-----------------------------
M. Dozier Gardner
President
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
8(a). Custodian Agreement with Investors Bank & Trust Company
dated October 23, 1995
8(b). Amendment to Custodian Agreement with Investors Bank &
Trust Company dated October 23, 1995
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO
October 23, 1995
Government Obligations Portfolio hereby adopts and agrees to become a
party to the attached Master Custodian Agreement between the Eaton Vance
Hub Portfolios and Investors Bank & Trust Company.
GOVERNMENT OBLIGATIONS PORTFOLIO
By /s/ M. Dozier Gardner
-------------------------------
President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY: /s/Michael F. Rogers
----------------------------------
Title: Executive Managing Director
<PAGE>
MASTER CUSTODIAN AGREEMENT
between
EATON VANCE HUB PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be Held by It . . . . 3
3. Duties of the Custodian with Respect to
Property of the Trust . . . . . . . . . . . . . . . . . . . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . 4-7
C. Registration of Securities . . . . . . . . . . . . . . . . 7
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 8
E. Payments for Interests, or Increases in Interests,
in the Trust . . . . . . . . . . . . . . . . . . . . . . 8
F. Investment and Availability of Federal Funds . . . . . . . 8
G. Collections . . . . . . . . . . . . . . . . . . . . . . 8-9
H. Payment of Trust Monies . . . . . . . . . . . . . . . 10-11
I. Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . 11-12
J. Payments for Repurchases or Redemptions
of Interests of the Trust . . . . . . . . . . . . . . . . 12
K. Appointment of Agents by the Custodian . . . . . . . . . . 12
L. Deposit of Trust Portfolio Securities in Securities
Systems . . . . . . . . . . . . . . . . . . . . . . 12-14
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . 15-17
N. Segregated Account . . . . . . . . . . . . . . . . . . . . 17
O. Ownership Certificates for Tax Purposes . . . . . . . . . 18
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 18
Q. Communications Relating to Trust Portfolio . . . . . . . 18
Securities
-i-
<PAGE>
R. Exercise of Rights; Tender Offers . . . . . . . . . . 18-19
S. Depository Receipts . . . . . . . . . . . . . . . . . . . 19
T. Interest Bearing Call or Time Deposits . . . . . . . . . . 20
U. Options, Futures Contracts and Foreign
Currency Transactions . . . . . . . . . . . . . . . 20-22
V. Actions Permitted Without Express Authority . . . . . . . 22
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . 22-23
5. Records and Miscellaneous Duties . . . . . . . . . . . . . 23-24
6. Opinion of Trust's Independent Public Accountants . . . . . . 24
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . 24
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . 24-25
9. Persons Having Access to Assets of the Trust . . . . . . . 25-26
10. Effective Period, Termination and Amendment;
Successor Custodian . . . . . . . . . . . . . . . . . . . 26-27
11. Interpretive and Additional Provisions . . . . . . . . . . . . 27
12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 27
14. Adoption of the Agreement by the Trust . . . . . . . . . . . . 28
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MASTER CUSTODIAN AGREEMENT
This Agreement is made between each investment company advised by
Boston Management and Research which has adopted this Agreement in the
manner provided herein and Investors Bank & Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under
the laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the
Investment Company Act of 1940 and has appointed the Bank to act as
Custodian of its property and to perform certain duties as its Agent, as
more fully hereinafter set forth; and
Whereas, the Bank is willing and able to act as each such
investment company's Custodian and Agent, subject to and in accordance
with the provisions hereof;
Now, therefore, in consideration of the premises and of the
mutual covenants and agreements herein contained, each such investment
company and the Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Trust" shall mean the investment company which has adopted
this Agreement.
(b) "Board" shall mean the board of trustees of the Trust.
(c) "The Depository Trust Company", a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(d) "Participants Trust Company", a clearing agency registered
with the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(e) "Approved Clearing Agency" shall mean any other domestic
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934 which acts as a
securities depository but only if the Custodian has received a certified
copy of a resolution of the Board approving such clearing agency as a
securities depository for the Trust.
(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
United States and federal agency securities (i.e., as provided in Subpart
O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350,
<PAGE>
and the book-entry regulations of federal agencies substantially in the
form of Subpart O).
(g) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in Rule 17f-4 under
the Investment Company Act of 1940 for foreign securities but only if the
Custodian has received a certified copy of a resolution of the Board
approving such depository or clearing agency as a foreign securities
depository for the Trust.
(h) "Approved Book-Entry System for Commercial Paper" shall mean
a system maintained by the Custodian or by a subcustodian employed
pursuant to Section 2 hereof for the holding of commercial paper in
book-entry form but only if the Custodian has received a certified copy of
a resolution of the Board approving the participation by the Trust in such
system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this
Agreement upon receipt of written or facsimile instructions signed by such
one or more person or persons as the Board shall have from time to time
authorized to give the particular class of instructions in question.
Different persons may be authorized to give instructions for different
purposes. A certified copy of a resolution of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of
any such person to act and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instructions may be
general or specific in terms and, where appropriate, may be standing
instructions. Unless the resolution delegating authority to any person or
persons to give a particular class of instructions specifically requires
that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class,
the Custodian shall be under no obligation to question the right of the
person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall
cause all oral instructions to be confirmed in writing. The Trust
authorizes the Custodian to tape record any and all telephonic or other
oral instructions given to the Custodian. Upon receipt of a certificate
signed by two officers of the Trust as to the authorization by the
President and the Treasurer of the Trust accompanied by a detailed
description of the communication procedures approved by the President and
the Treasurer of the Trust, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Trust and the
Custodian are satisfied that such procedures afford adequate safeguards
for the Trust's assets. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of
securities made by or for the Trust, the Custodian may take cognizance of
the provisions of the governing documents and registration statement of
the Trust as the same may from time to time be in effect (and resolutions
or proceedings of the holders of interests in the Trust or the Board),
but, nevertheless, except as otherwise expressly provided herein, the
Custodian may assume unless and until notified in writing to the contrary
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<PAGE>
that so-called proper instructions received by it are not in conflict with
or in any way contrary to any provisions of such governing documents and
registration statement, or resolutions or proceedings of the holders of
interests in the Trust or the Board.
(j) The term "Vote" when used with respect to the Board or the
Holders of Interests in the Trust shall include a vote, resolution,
consent, proceeding and other action taken by the Board or Holders in
accordance with the Declaration of Trust or By-Laws of the Trust.
2. Employment of Custodian and Property to be Held by It
The Trust hereby appoints and employs the Bank as its Custodian
and Agent in accordance with and subject to the provisions hereof, and the
Bank hereby accepts such appointment and employment. The Trust agrees to
deliver to the Custodian all securities, participation interests, cash and
other assets owned by it, and all payments of income, payments of
principal and capital distributions and adjustments received by it with
respect to all securities and participation interests owned by the Trust
from time to time, and the cash consideration received by it from time to
time in exchange for an interest in the Trust or for an increase in such
an interest. The Custodian shall not be responsible for any property of
the Trust held by the Trust and not delivered by the Trust to the
Custodian. The Trust will also deliver to the Bank from time to time
copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement
agent, together with such resolutions, and other proceedings of the Trust
as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more
subcustodians to perform such acts and services upon such terms and
conditions as shall be approved from time to time by the Board. Any such
subcustodian so employed by the Custodian shall be deemed to be the agent
of the Custodian, and the Custodian shall remain primarily responsible for
the securities, participation interests, moneys and other property of the
Trust held by such subcustodian. Any foreign subcustodian shall be a bank
or trust company which is an eligible foreign custodian within the meaning
of Rule 17f-5 under the Investment Company Act of 1940, and the foreign
custody arrangements shall be approved by the Board and shall be in
accordance with and subject to the provisions of said Rule. For the
purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the
Custodian under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Trust
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Trust and on behalf of the Trust
shall from time to time receive delivery of Trust property
for safekeeping. The Custodian shall hold, earmark and
segregate on its books and records for the account of the
Trust all property of the Trust, including all securities,
participation interests and other assets of the Trust (1)
physically held by the Custodian, (2) held by any
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<PAGE>
subcustodian referred to in Section 2 hereof or by any agent
referred to in Paragraph K hereof, (3) held by or maintained
in The Depository Trust Company or in Participants Trust
Company or in an Approved Clearing Agency or in the Federal
Book-Entry System or in an Approved Foreign Securities
Depository, each of which from time to time is referred to
herein as a "Securities System", and (4) held by the
Custodian or by any subcustodian referred to in Section 2
hereof and maintained in any Approved Book-Entry System for
Commercial Paper.
B. Delivery of Securities The Custodian shall release and
deliver securities or participation interests owned by the
Trust held (or deemed to be held) by the Custodian or
maintained in a Securities System account or in an Approved
Book-Entry System for Commercial Paper account only upon
receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, and only
in the following cases:
1) Upon sale of such securities or participation
interests for the account of the Trust, but only
against receipt of payment therefor; if delivery is
made in Boston or New York City, payment therefor
shall be made in accordance with generally accepted
clearing house procedures or by use of Federal Reserve
Wire System procedures; if delivery is made elsewhere
payment therefor shall be in accordance with the then
current "street delivery" custom or in accordance with
such procedures agreed to in writing from time to time
by the parties hereto; if the sale is effected through
a Securities System, delivery and payment therefor
shall be made in accordance with the provisions of
Paragraph L hereof; if the sale of commercial paper is
to be effected through an Approved Book-Entry System
for Commercial Paper, delivery and payment therefor
shall be made in accordance with the provisions of
Paragraph M hereof; if the securities are to be sold
outside the United States, delivery may be made in
accordance with procedures agreed to in writing from
time to time by the parties hereto; for the purposes
of this subparagraph, the term "sale" shall include
the disposition of a portfolio security (i) upon the
exercise of an option written by the Trust and (ii)
upon the failure by the Trust to make a successful bid
with respect to a portfolio security, the continued
holding of which is contingent upon the making of such
a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the
Trust;
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<PAGE>
3) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Trust;
4) To the issuer thereof or its agent when such
securities or participation interests are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian or
any subcustodian employed pursuant to Section 2
hereof;
5) To the issuer thereof, or its agent, for transfer into
the name of the Trust or into the name of any nominee
of the Custodian or into the name or nominee name of
any agent appointed pursuant to Paragraph K hereof or
into the name or nominee name of any subcustodian
employed pursuant to Section 2 hereof; or for exchange
for a different number of bonds, certificates or other
evidence representing the same aggregate face amount
or number of units; provided that, in any such case,
the new securities or participation interests are to
be delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the
Trust from time to time shall approve to ensure their
prompt return to the Custodian by the broker in the
event the broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion of such securities, or
pursuant to any deposit agreement; provided that, in
any such case, the new securities and cash, if any,
are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar securities,
the surrender thereof in connection with the exercise
of such warrants, rights or similar securities, or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
9) For delivery in connection with any loans of
securities made by the Trust (such loans to be made
pursuant to the terms of the Trust's current
registration statement), but only against receipt of
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<PAGE>
adequate collateral as agreed upon from time to time
by the Custodian and the Trust, which may be in the
form of cash or obligations issued by the United
States government, its agencies or instrumentalities;
except that in connection with any securities loans
for which collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of Treasury, the
Custodian will not be held liable or responsible for
the delivery of securities loaned by the Trust prior
to the receipt of such collateral;
10) For delivery as security in connection with any
borrowings by the Trust requiring a pledge or
hypothecation of assets by the Trust (if then
permitted under circumstances described in the current
registration statement of the Trust), provided, that
the securities shall be released only upon payment to
the Custodian of the monies borrowed, except that in
cases where additional collateral is required to
secure a borrowing already made, further securities
may be released for that purpose; upon receipt of
proper instructions, the Custodian may pay any such
loan upon redelivery to it of the securities pledged
or hypothecated therefor and upon surrender of the
note or notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of an interest in the Trust
in accordance with the provisions of Paragraph J
hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a
broker-dealer registered under the Securities Exchange
Act of 1934 and, if necessary, the Trust, relating to
compliance with the rules of The Options Clearing
Corporation or of any registered national securities
exchange, or of any similar organization or
organizations, regarding deposit or escrow or other
arrangements in connection with options transactions
by the Trust;
13) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian (or a
subcustodian employed pursuant to Section 2 hereof),
and a futures commissions merchant, relating to
compliance with the rules of the Commodity Futures
Trading Commission and/or of any contract market or
commodities exchange or similar organization,
regarding futures margin account deposits or payments
in connection with futures transactions by the Trust;
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<PAGE>
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a resolution of the Board specifying
the securities to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be proper corporate purpose,
and naming the person or persons to whom delivery of
such securities shall be made.
C. Registration of Securities Securities held by the
Custodian (other than bearer securities) for the account of
the Trust shall be registered in the name of the Trust or
in the name of any nominee of the Trust or of any nominee
of the Custodian, or in the name or nominee name of any
agent appointed pursuant to Paragraph K hereof, or in the
name or nominee name of any subcustodian employed pursuant
to Section 2 hereof, or in the name or nominee name of The
Depository Trust Company or Participants Trust Company or
Approved Clearing Agency or Federal Book-Entry System or
Approved Book-Entry System for Commercial Paper; provided,
that securities are held in an account of the Custodian or
of such agent or of such subcustodian containing only
assets of the Trust or only assets held by the Custodian or
such agent or such subcustodian as a custodian or
subcustodian or in a fiduciary capacity for customers. All
certificates for securities accepted by the Custodian or
any such agent or subcustodian on behalf of the Trust shall
be in "street" or other good delivery form or shall be
returned to the selling broker or dealer who shall be
advised of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a
separate bank account or accounts in the name of the Trust,
subject only to draft or order by the Custodian acting in
pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of the Trust
other than cash maintained by the Trust in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian
for the Trust may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in
such other banks or trust companies as the Custodian may in
its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall be approved in writing by two officers of the Trust.
Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be subject to withdrawal only
by the Custodian in that capacity.
E. Payments for Interests, or Increases in Interests, in the
Trust The Custodian shall make appropriate arrangements with
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<PAGE>
the Transfer Agent of the Trust to enable the Custodian to
make certain it promptly receives the cash or other
consideration due to the Trust for payment of interests in
the Trust, or increases in such interests, in accordance with
the governing documents and registration statement of the
Trust. The Custodian will provide prompt notification to the
Trust of any receipt by it of such payments.
F. Investment and Availability of Federal Funds Upon agreement
between the Trust and the Custodian, the Custodian shall,
upon the receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the
parties, invest in such securities and instruments as may be
set forth in such instructions on the same day as received
all federal funds received after a time agreed upon between
the Custodian and the Trust.
G. Collections The Custodian shall promptly collect all income
and other payments with respect to registered securities held
hereunder to which the Trust shall be entitled either by law
or pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect
to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or agent
thereof and shall credit such income, as collected, to the
Trust's custodian account. The Custodian shall do all things
necessary and proper in connection with such prompt
collections and, without limiting the generality of the
foregoing, the Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or
be called, redeemed, retired or otherwise become
payable;
3) Endorse and deposit for collection, in the name of the
Trust, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a
Securities System or in an Approved Book-Entry System
for Commercial Paper at the time funds become
available to the Custodian; in the case of securities
maintained in The Depository Trust Company funds shall
be deemed available to the Trust not later than the
opening of business on the first business day after
receipt of such funds by the Custodian.
The Custodian shall notify the Trust as soon as reasonably
practicable whenever income due on any security is not
promptly collected. In any case in which the Custodian
does not receive any due and unpaid income after it has
made demand for the same, it shall immediately so notify
the Trust in writing, enclosing copies of any demand
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<PAGE>
letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await
instructions from the Trust; the Custodian shall in no case
have any liability for any nonpayment of such income
provided the Custodian meets the standard of care set forth
in Section 8 hereof. The Custodian shall not be obligated
to take legal action for collection unless and until
reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock
dividends, rights and other items of like nature, and deal
with the same pursuant to proper instructions relative
thereto.
H. Payment of Trust Monies Upon receipt of proper instructions,
which may be continuing instructions when deemed appropriate
by the parties, the Custodian shall pay out monies of the
Trust in the following cases only:
1) Upon the purchase of securities, participation
interests, options, futures contracts, forward
contracts and options on futures contracts purchased
for the account of the Trust but only (a) against the
receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer
of the Trust regarding the participation
interests to be purchased or
(iii)written confirmation of the purchase by the
Trust of the options, futures contracts, forward
contracts or options on futures contracts by the
Custodian (or by a subcustodian employed pursuant
to Section 2 hereof or by a clearing corporation
of a national securities exchange of which the
Custodian is a member or by any bank, banking
institution or trust company doing business in
the United States or abroad which is qualified
under the Investment Company Act of 1940 to act
as a custodian and which has been designated by
the Custodian as its agent for this purpose or by
the agent specifically designated in such
instructions as representing the purchasers of a
new issue of privately placed securities); (b) in
the case of a purchase effected through a
Securities System, upon receipt of the securities
by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c)
in the case of a purchase of commercial paper
effected through an Approved Book-Entry System
for Commercial Paper, upon receipt of the paper
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<PAGE>
by the Custodian or subcustodian in accordance
with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements
entered into between the Trust and another bank
or a broker-dealer, against receipt by the
Custodian of the securities underlying the
repurchase agreement either in certificate form
or through an entry crediting the Custodian's
segregated, non-proprietary account at the
Federal Reserve Bank of Boston with such
securities along with written evidence of the
agreement by the bank or broker-dealer to
repurchase such securities from the Trust; or (e)
with respect to securities purchased outside of
the United States, in accordance with written
procedures agreed to from time to time in writing
by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the
Trust as set forth in Paragraph B hereof;
3) When required for the reduction or redemption of
an interest in the Trust in accordance with the
provisions of Paragraph J hereof;
4) For the payment of any expense or liability
incurred by the Trust, including but not limited
to the following payments for the account of the
Trust: advisory fees, interest, taxes,
management compensation and expenses, accounting,
transfer agent and legal fees, and other
operating expenses of the Trust whether or not
such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For distributions or payment to Holders of
Interest in the Trust; and
6) For any other proper corporate purpose, but only
upon receipt of, in addition to proper
instructions, a certified copy of a resolution of
the Board, specifying the amount of such payment,
setting forth the purpose for which such payment
is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase
of securities for the account of the Trust is made by the
Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions signed by two
officers of the Trust to so pay in advance, the Custodian
shall be absolutely liable to the Trust for such securities
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to the same extent as if the securities had been received by
the Custodian; except that in the case of a repurchase
agreement entered into by the Trust with a bank which is a
member of the Federal Reserve System, the Custodian may
transfer trusts to the account of such bank prior to the
receipt of (i) the securities in certificate form subject to
such repurchase agreement or (ii) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve
Bank of Boston or (iii) the safekeeping receipt, provided
that such securities have in fact been so transferred by
book-entry and the written repurchase agreement is received
by the Custodian in due course; and except that if the
securities are to be purchased outside the United States,
payment may be made in accordance with procedures agreed to
in writing from time to time by the parties hereto.
J. Payments for Repurchases or Redemptions of Interests in the
Trust From such funds as may be available for the purpose,
but subject to any applicable resolutions of the Board and
the current procedures of the Trust, the Custodian shall,
upon receipt of written instructions from the Trust or from
the Trust's Transfer Agent, make funds and/or portfolio
securities available for payment to Holders of Interest in
the Trust who have caused the amount of their interests to be
reduced, or for their interest to be redeemed.
K. Appointment of Agents by the Custodian The Custodian may at
any time or times in its discretion appoint (and may at any
time remove) any other bank or trust company (provided such
bank or trust company is itself qualified under the
Investment Company Act of 1940 to act as a custodian or is
itself an eligible foreign custodian within the meaning of
Rule 17f-5 under said Act) as the agent of the Custodian to
carry out such of the duties and functions of the Custodian
described in this Section 3 as the Custodian may from time to
time direct; provided, however, that the appointment of any
such agent shall not relieve the Custodian of any of its
responsibilities or liabilities hereunder, and as between the
Trust and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent.
For the purposes of this Agreement, any property of the Trust
held by any such agent shall be deemed to be held by the
Custodian hereunder.
L. Deposit of Trust Portfolio Securities in Securities Systems
The Custodian may deposit and/or maintain securities owned by
the Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
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(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depositoryin
each case only in accordance with applicable
Federal Reserve Board and Securities and Exchange
Commission rules and regulations, and at all
times subject to the following provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2 keep
securities of the Trust in a Securities System provided
that such securities are maintained in a non-proprietary
account ("Account") of the Custodian or such subcustodian
in the Securities System which shall not include any
assets of the Custodian or such subcustodian or any other
person other than assets held by the Custodian or such
subcustodian as a fiduciary, custodian, or otherwise for
its customers.
(b) The records of the Custodian with respect to
securities of the Trust which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Trust, and the Custodian
shall be fully and completely responsible for maintaining
a recordkeeping system capable of accurately and
currently stating the Trust's holdings maintained in each
such Securities System.
(c) The Custodian shall pay for securities purchased in
book-entry form for the account of the Trust only upon
(i) receipt of notice or advice from the Securities
System that such securities have been transferred to the
Account, and (ii) the making of any entry on the records
of the Custodian to reflect such payment and transfer for
the account of the Trust. The Custodian shall transfer
securities sold for the account of the Trust only upon
(i) receipt of notice or advice from the Securities
System that payment for such securities has been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer and payment for the account of the Trust. Copies
of all notices or advices from the Securities System of
transfers of securities for the account of the Trust
shall identify the Trust, be maintained for the Trust by
the Custodian and be promptly provided to the Trust at
its request. The Custodian shall promptly send to the
Trust confirmation of each transfer to or from the
account of the Trust in the form of a written advice or
notice of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the
account of the Trust on the next business day.
(d) The Custodian shall promptly send to the Trust any
report or other communication received or obtained by the
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Custodian relating to the Securities System's accounting
system, system of internal accounting controls or
procedures for safeguarding securities deposited in the
Securities System; the Custodian shall promptly send to
the Trust any report or other communication relating to
the Custodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Securities System; and the Custodian shall ensure that
any agent appointed pursuant to Paragraph K hereof or any
subcustodian employed pursuant to Section 2 hereof shall
promptly send to the Trust and to the Custodian any
report or other communication relating to such agent's or
subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Securities System. The Custodian's books and records
relating to the Trust's participation in each Securities
System will at all times during regular business hours be
open to the inspection of the Trust's authorized
officers, employees or agents.
(e) The Custodian shall not act under this Paragraph L
in the absence of receipt of a certificate of an officer
of the Trust that the Board has approved the use of a
particular Securities System; the Custodian shall also
obtain appropriate assurance from the officers of the
Trust that the Board has annually reviewed the continued
use by the Trust of each Securities System, and the Trust
shall promptly notify the Custodian if the use of a
Securities System is to be discontinued; at the request
of the Trust, the Custodian will terminate the use of any
such Securities System as promptly as practicable.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or subcustodians or of any of its or their
employees or from any failure of the Custodian or any
such agent or subcustodian to enforce effectively such
rights as it may have against the Securities System or
any other person; at the election of the Trust, it shall
be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if
and to the extent that the Trust has not been made whole
for any such loss or damage.
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper Upon receipt of
proper instructions with respect to each issue of direct
issue commercial paper purchased by the Trust, the
Custodian may deposit and/or maintain direct issue
commercial paper owned by the Trust in any Approved
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Book-Entry System for Commercial Paper, in each case only
in accordance with applicable Securities and Exchange
Commission rules, regulations, and no-action
correspondence, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one
or more subcustodians employed pursuant to Section 2)
keep commercial paper of the Trust in an Approved
Book-Entry System for Commercial Paper, provided that
such paper is issued in book entry form by the
Custodian or subcustodian on behalf of an issuer with
which the Custodian or subcustodian has entered into a
book-entry agreement and provided further that such
paper is maintained in a non-proprietary account
("Account") of the Custodian or such subcustodian in
an Approved Book-Entry System for Commercial Paper
which shall not include any assets of the Custodian or
such subcustodian or any other person other than
assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to
commercial paper of the Trust which is maintained in
an Approved Book-Entry System for Commercial Paper
shall identify by book-entry each specific issue of
commercial paper purchased by the Trust which is
included in the Securities System and shall at all
times during regular business hours be open for
inspection by authorized officers, employees or agents
of the Trust. The Custodian shall be fully and
completely responsible for maintaining a recordkeeping
system capable of accurately and currently stating the
Trust's holdings of commercial paper maintained in
each such System.
(c) The Custodian shall pay for commercial paper
purchased in book-entry form for the account of the
Trust only upon contemporaneous (i) receipt of notice
or advice from the issuer that such paper has been
issued, sold and transferred to the Account, and (ii)
the making of an entry on the records of the Custodian
to reflect such purchase, payment and transfer for the
account of the Trust. The Custodian shall transfer
such commercial paper which is sold or cancel such
commercial paper which is redeemed for the account of
the Trust only upon contemporaneous (i) receipt of
notice or advice that payment for such paper has been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
transfer or redemption and payment for the account of
the Trust. Copies of all notices, advices and
confirmations of transfers of commercial paper for the
account of the Trust shall identify the Trust, be
maintained for the Trust by the Custodian and be
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promptly provided to the Trust at its request. The
Custodian shall promptly send to the Trust
confirmation of each transfer to or from the account
of the Trust in the form of a written advice or notice
of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting
each day's transactions in the System for the account
of the Trust on the next business day.
(d) The Custodian shall promptly send to the Trust
any report or other communication received or obtained
by the Custodian relating to each System's accounting
system, system of internal accounting controls or
procedures for safeguarding commercial paper deposited
in the System; the Custodian shall promptly send to
the Trust any report or other communication relating
to the Custodian's internal accounting controls and
procedures for safeguarding commercial paper deposited
in any Approved Book-Entry System for Commercial
Paper; and the Custodian shall ensure that any agent
appointed pursuant to Paragraph K hereof or any
subcustodian employed pursuant to Section 2 hereof
shall promptly send to the Trust and to the Custodian
any report or other communication relating to such
agent's or subcustodian's internal accounting controls
and procedures for safeguarding securities deposited
in any Approved Book-Entry System for Commercial
Paper.
(e) The Custodian shall not act under this Paragraph
M in the absence of receipt of a certificate of an
officer of the Trust that the Board has approved the
use of a particular Approved Book-Entry System for
Commercial Paper; the Custodian shall also obtain
appropriate assurance from the officers of the Trust
that the Board has annually reviewed the continued use
by the Trust of each Approved Book-Entry System for
Commercial Paper, and the Trust shall promptly notify
the Custodian if the use of an Approved Book-Entry
System for Commercial Paper is to be discontinued; at
the request of the Trust, the Custodian will terminate
the use of any such System as promptly as practicable.
(f) The Custodian (or subcustodian, if the Approved
Book-Entry System for Commercial Paper is maintained
by the subcustodian) shall issue physical commercial
paper or promissory notes whenever requested to do so
by the Trust or in the event of an electronic system
failure which impedes issuance, transfer or custody of
direct issue commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting
from use of any Approved Book-Entry System for
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Commercial Paper by reason of any negligence,
misfeasance or misconduct of the Custodian or any of
its agents or subcustodians or of any of its or their
employees or from any failure of the Custodian or any
such agent or subcustodian to enforce effectively such
rights as it may have against the System, the issuer
of the commercial paper or any other person; at the
election of the Trust, it shall be entitled to be
subrogated to the rights of the Custodian with respect
to any claim against the System, the issuer of the
commercial paper or any other person which the
Custodian may have as a consequence of any such loss
or damage if and to the extent that the Trust has not
been made whole for any such loss or damage.
N. Segregated Account The Custodian shall upon receipt of
proper instructions establish and maintain a segregated
account or accounts for and on behalf of the Trust, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by
the Custodian pursuant to Paragraph L hereof, (i) in
accordance with the provisions of any agreement among the
Trust, the Custodian and any registered broker-dealer (or any
futures commission merchant), relating to compliance with the
rules of the Options Clearing Corporation and of any
registered national securities exchange (or of the Commodity
Futures Trading Commission or of any contract market or
commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other
arrangements in connection with transactions by the Trust,
(ii) for purposes of segregating cash or U.S. Government
securities in connection with options purchased, sold or
written by the Trust or futures contracts or options thereon
purchased or sold by the Trust, (iii) for the purposes of
compliance by the Trust with the procedures required by
Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to proper instructions, a certificate signed
by two officers of the Trust, setting forth the purpose such
segregated account and declaring such purpose to be a proper
purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for
all federal and state tax purposes in connection with receipt
of income or other payments with respect to securities of the
Trust held by it and in connection with transfers of
securities.
P. Proxies The Custodian shall, with respect to the securities
held by it hereunder, cause to be promptly delivered to the
Trust all forms of proxies and all notices of meetings and
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any other notices or announcements or other written
information affecting or relating to the securities, and upon
receipt of proper instructions shall execute and deliver or
cause its nominee to execute and deliver such proxies or
other authorizations as may be required. Neither the
Custodian nor its nominee shall vote upon any of the
securities or execute any proxy to vote thereon or give any
consent or take any other action with respect thereto (except
as otherwise herein provided) unless ordered to do so by
proper instructions.
Q. Communications Relating to Trust Portfolio Securities The
Custodian shall deliver promptly to the Trust all written
information (including, without limitation, pendency of call
and maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Trust and the
maturity of futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Trust. With respect to tender or exchange
offers, the Custodian shall deliver promptly to the Trust all
written information received by the Custodian from issuers
and other persons relating to the securities and
participation interests whose tender or exchange is sought
and from the party (or his agents) making the tender or
exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender
offers, similar offers to purchase or exercise rights
(including, without limitation, pendency of calls and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options and the maturity of futures
contracts) affecting or relating to securities and
participation interests held by the Custodian under this
Agreement, the Custodian shall have responsibility for
promptly notifying the Trust of all such offers in accordance
with the standard of reasonable care set forth in Section 8
hereof. For all such offers for which the Custodian is
responsible as provided in this Paragraph R, the Trust shall
have responsibility for providing the Custodian with all
necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to
the issuer or trustee thereof, or to the agent of either,
warrants, puts, calls, rights or similar securities for the
purpose of being exercised or sold upon proper receipt
therefor and upon receipt of assurances satisfactory to the
Custodian that the new securities and cash, if any, acquired
by such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall timely
deposit securities upon invitations for tenders of securities
upon proper receipt therefor and upon receipt of assurances
satisfactory to the Custodian that the consideration to be
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paid or delivered or the tendered securities are to be
returned to the Custodian or subcustodian employed pursuant
to Section 2 hereof. Notwithstanding any provision of this
Agreement to the contrary, the Custodian shall take all
necessary action, unless otherwise directed to the contrary
by proper instructions, to comply with the terms of all
mandatory or compulsory exchanges, calls, tenders,
redemptions, or similar rights of security ownership, and
shall thereafter promptly notify the Trust in writing of such
action.
S. Depository Receipts The Custodian shall, upon receipt of
proper instructions, surrender or cause to be surrendered
foreign securities to the depository used by an issuer of
American Depository Receipts or International Depository
Receipts (hereinafter collectively referred to as "ADRs") for
such securities, against a written receipt therefor
adequately describing such securities and written evidence
satisfactory to the Custodian that the depository has
acknowledged receipt of instructions to issue with respect to
such securities in the name of a nominee of the Custodian or
in the name or nominee name of any subcustodian employed
pursuant to Section 2 hereof, for delivery to the Custodian
or such subcustodian at such place as the Custodian or such
subcustodian may from time to time designate. The Custodian
shall, upon receipt of proper instructions, surrender ADRs to
the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written
evidence satisfactory to the Custodian that the issuer of the
ADRs has acknowledged receipt of instructions to cause its
depository to deliver the securities underlying such ADRs to
the Custodian or to a subcustodian employed pursuant to
Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall,
upon receipt of proper instructions, place interest bearing
fixed term and call deposits with the banking department of
such banking institution (other than the Custodian) and in
such amounts as the Trust may designate. Deposits may be
denominated in U.S. Dollars or other currencies. The
Custodian shall include in its records with respect to the
assets of the Trust appropriate notation as to the amount and
currency of each such deposit, the accepting banking
institution and other appropriate details and shall retain
such forms of advice or receipt evidencing the deposit, if
any, as may be forwarded to the Custodian by the banking
institution. Such deposits shall be deemed portfolio
securities of the Trust for the purposes of this Agreement,
and the Custodian shall be responsible for the collection of
income from such accounts and the transmission of cash to and
from such accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
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1. Options. The Custodian shall, upon receipt of
proper instructions and in accordance with the provisions
of any agreement between the Custodian, any registered
broker-dealer and, if necessary, the Trust, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations,
receive and retain confirmations or other documents, if
any, evidencing the purchase or writing of an option on a
security or securities index or other financial
instrument or index by the Trust; deposit and maintain in
a segregated account for the Trust, either physically or
by book-entry in a Securities System, securities subject
to a covered call option written by the Trust; and
release and/or transfer such securities or other assets
only in accordance with a notice or other communication
evidencing the expiration, termination or exercise of
such covered option furnished by the Options Clearing
Corporation, the securities or options exchange on which
such covered option is traded or such other organization
as may be responsible for handling such options
transactions. The Custodian and the broker-dealer shall
be responsible for the sufficiency of assets held in the
Trust's segregated account in compliance with applicable
margin maintenance requirements.
2. Futures Contracts The Custodian shall, upon
receipt of proper instructions, receive and retain
confirmations and other documents, if any, evidencing the
purchase or sale of a futures contract or an option on a
futures contract by the Trust; deposit and maintain in a
segregated account, for the benefit of any futures
commission merchant, assets designated by the Trust as
initial, maintenance or variation "margin" deposits
(including mark-to-market payments) intended to secure
the Trust's performance of its obligations under any
futures contracts purchased or sold or any options on
futures contracts written by Trust, in accordance with
the provisions of any agreement or agreements among the
Trust, the Custodian and such futures commission
merchant, designed to comply with the rules of the
Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar
organization regarding such margin deposits or payments;
and release and/or transfer assets in such margin
accounts only in accordance with any such agreements or
rules. The Custodian and the futures commission merchant
shall be responsible for the sufficiency of assets held
in the segregated account in compliance with the
applicable margin maintenance and mark-to-market payment
requirements.
3. Foreign Exchange Transactions The Custodian
shall, pursuant to proper instructions, enter into or
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cause a subcustodian to enter into foreign exchange
contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf and for
the account of the Trust. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts and options shall be deemed to be
portfolio securities of the Trust; and accordingly, the
responsibility of the Custodian therefor shall be the
same as and no greater than the Custodian's
responsibility in respect of other portfolio securities
of the Trust. The Custodian shall be responsible for the
transmittal to and receipt of cash from the currency
broker or banking or financial institution with which the
contract or option is made, the maintenance of proper
records with respect to the transaction and the
maintenance of any segregated account required in
connection with the transaction. The Custodian shall
have no duty with respect to the selection of the
currency brokers or banking or financial institutions
with which the Trust deals or for their failure to comply
with the terms of any contract or option. Without
limiting the foregoing, it is agreed that upon receipt of
proper instructions and insofar as funds are made
available to the Custodian for the purpose, the Custodian
may (if determined necessary by the Custodian to
consummate a particular transaction on behalf and for the
account of the Trust) make free outgoing payments of cash
in the form of U.S. dollars or foreign currency before
receiving confirmation of a foreign exchange contract or
confirmation that the countervalue currency completing
the foreign exchange contract has been delivered or
received. The Custodian shall not be responsible for any
costs and interest charges which may be incurred by the
Trust or the Custodian as a result of the failure or
delay of third parties to deliver foreign exchange;
provided that the Custodian shall nevertheless be held to
the standard of care set forth in, and shall be liable to
the Trust in accordance with, the provisions of Section
8.
V. Actions Permitted Without Express Authority The Custodian
may in its discretion, without express authority from the
Trust:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to
its duties under this Agreement, provided, that all such
payments shall be accounted for by the Custodian to the
Treasurer of the Trust;
2) surrender securities in temporary form for securities in
definitive form;
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3) endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Trust except as otherwise directed by
the Trust.
4. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be)
keep such books of account (including records showing the adjusted tax
costs of the Trust's portfolio securities) and render as at the close of
business on each day a detailed statement of the amounts received or paid
out and of securities received or delivered for the account of the Trust
during said day and such other statements, including a daily trial balance
and inventory of the Trust's portfolio securities; and shall furnish such
other financial information and data as from time to time requested by the
Treasurer or any executive officer of the Trust; and shall compute and
determine, as of the close of business of the New York Stock Exchange, or
at such other time or times as the Board may determine, the net asset
value of the Trust and the net asset value of each interest in the Trust,
such computations and determinations to be made in accordance with the
governing documents of the Trust and the votes and instructions of the
Board and of the investment adviser at the time in force and applicable,
and promptly notify the Trust and its investment adviser and such other
persons as the Trust may request of the result of such computation and
determination. In computing the net asset value the Custodian may rely
upon security quotations received by telephone or otherwise from sources
or pricing services designated by the Trust by proper instructions, and
may further rely upon information furnished to it by any authorized
officer of the Trust relative (a) to liabilities of the Trust not
appearing on its books of account, (b) to the existence, status and proper
treatment of any reserve or reserves, (c) to any procedures or policies
established by the Board regarding the valuation of portfolio securities
or other assets, and (d) to the value to be assigned to any bond, note,
debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interests or other asset or property for which
market quotations are not readily available. The Custodian shall also
compute and determine at such time or times as the Trust may designate the
portion of each item which has significance for a holder of an interest in
the Trust in computing and determining its federal income tax liability
including, but not limited to, each item of income, expense and realized
and unrealized gain or loss of the Trust which is attributable for Federal
income tax purposes to each such holder.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating
to its activities and obligations under this Agreement in such manner as
will meet the obligations of the Trust under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable federal and state tax laws and any other law
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or administrative rules or procedures which may be applicable to the
Trust. All books of account and records maintained by the Bank in
connection with the performance of its duties under this Agreement shall
be the property of the Trust, shall at all times during the regular
business hours of the Bank be open for inspection by authorized officers,
employees or agents of the Trust, and in the event of termination of this
Agreement shall be delivered to the Trust or to such other person or
persons as shall be designated by the Trust. Disposition of any account
or record after any required period of preservation shall be only in
accordance with specific instructions received from the Trust. The Bank
shall assist generally in the preparation of reports to holder of interest
in the Trust, to the Securities and Exchange Commission, including Form
N-SAR, and to others, audits of accounts, and other ministerial matters of
like nature; and, upon request, shall furnish the Trust's auditors with an
attested inventory of securities held with appropriate information as to
securities in transit or in the process of purchase or sale and with such
other information as said auditors may from time to time request. The
Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof,
and shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for
which it is responsible under this Agreement in such manner as the
Custodian shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. The Bank shall not disclose or use
any books or records it has prepared or maintained by reason of this
Agreement in any manner except as expressly authorized herein or directed
by the Trust, and the Bank shall keep confidential any information
obtained by reason of this Agreement.
6. Opinion of Trust's Independent Public Accountants
The Custodian shall take all reasonable action, as the Trust may
from time to time request, to enable the Trust to obtain from year to year
favorable opinions from the Trust's independent public accountants with
respect to its activities hereunder in connection with the preparation of
the Trust's registration statement and Form N-SAR or other periodic
reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its
services as Custodian and Agent, as agreed upon from time to time between
the Trust and the Bank. The Bank shall be entitled to receive from the
Trust on demand reimbursement for its cash disbursements, expenses and
charges, including counsel fees, in connection with its duties as
Custodian and Agent hereunder, but excluding salaries and usual overhead
expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of
reasonable care, the Bank as Custodian and Agent shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
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reasonably believed by it to be genuine and to be signed by the proper
party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall
be liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is
intended to nor shall it be construed to modify the standards of care and
responsibility set forth in Section 2 hereof with respect to subcustodians
and in subparagraph f of Paragraph L of Section 3 hereof with respect to
Securities Systems and in subparagraph g of Paragraph M of Section 3
hereof with respect to an Approved Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a
foreign banking institution to the same extent as set forth with respect
to subcustodians generally in Section 2 hereof, provided that, regardless
of whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank,
the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Trust to maintain custody of any securities or cash
of the Trust in a foreign country including, but not limited to, losses
resulting from nationalization, expropriation, currency restrictions, acts
of war, civil war or terrorism, insurrection, revolution, military or
usurped powers, nuclear fission, fusion or radiation, earthquake, storm or
other disturbance of nature or acts of God.
If the Trust requires the Bank in any capacity to take any action
with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Bank, result in the Bank or its
nominee assigned to the Trust being liable for the payment of money or
incurring liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
9. Persons Having Access to Assets of the Trust
(i) No trustee, officer, employee, or agent of the Trust shall
have physical access to the assets of the Trust held by the Custodian or
be authorized or permitted to withdraw any investments of the Trust, nor
shall the Custodian deliver any assets of the Trust to any such person.
No officer or director, employee or agent of the Custodian who holds any
similar position with the Trust or the investment adviser or the
administrator of the Trust shall have access to the assets of the Trust.
(ii) Access to assets of the Trust held hereunder shall only be
available to duly authorized officers, employees, representatives or
agents of the Custodian or other persons or entities for whose actions the
Custodian shall be responsible to the extent permitted hereunder, or to
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the Trust's independent public accountants in connection with their
auditing duties performed on behalf of the Trust.
(iii) Nothing in this Section 9 shall prohibit any officer,
employee or agent of the Trust or of the investment adviser of the Trust
from giving instructions to the Custodian or executing a certificate so
long as it does not result in delivery of or access to assets of the Trust
prohibited by paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor
Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination
to take effect not sooner than sixty (60) days after the date of such
delivery or mailing; provided, that the Trust may at any time by action of
its Board, (i) substitute another bank or trust company for the Custodian
by giving notice as described above to the Custodian, or
(ii) immediately terminate this Agreement in the event of the appointment
of a conservator or receiver for the Custodian by the Federal Deposit
Insurance Corporation or by the Banking Commissioner of The Commonwealth
of Massachusetts or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction. Upon
termination of the Agreement, the Trust shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and
disbursements.
Unless the holders of a majority of the outstanding "voting
securities" of the Trust (as defined in the Investment Company Act of
1940) vote to have the securities, funds and other properties held
hereunder delivered and paid over to some other bank or trust company,
specified in the vote, having not less than $2,000,000 of aggregate
capital, surplus and undivided profits, as shown by its last published
report, and meeting such other qualifications for custodians set forth in
the Investment Company Act of 1940, the Board shall, forthwith, upon
giving or receiving notice of termination of this Agreement, appoint as
successor custodian, a bank or trust company having such qualifications.
The Bank, as Custodian, Agent or otherwise, shall, upon termination of the
Agreement, deliver to such successor custodian, all securities then held
hereunder and all funds or other properties of the Trust deposited with or
held by the Bank hereunder and all books of account and records kept by
the Bank pursuant to this Agreement, and all documents held by the Bank
relative thereto. In the event that no such vote has been adopted by the
Holders of Interest in the Trust and that no written order designating a
successor custodian shall have been delivered to the Bank on or before the
date when such termination shall become effective, then the Bank shall not
deliver the securities, funds and other properties of the Trust to the
Trust but shall have the right to deliver 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 by its last
published report, of not less than $2,000,000, all funds, securities and
-24-
<PAGE>
properties of the Trust held by or deposited with the Bank, and all books
of account and records kept by the Bank pursuant to this Agreement, and
all documents held by the Bank relative thereto. Thereafter such bank or
trust company shall be the successor of the Custodian under this
Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian
and the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this Agreement. Any
such interpretive or additional provisions shall be in a writing signed by
both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the governing instruments
of the Trust. No interpretive or additional provisions made as provided
in the preceding sentence shall be deemed to be an amendment of this
Agreement.
12. Notices
Notices and other writings delivered or mailed postage prepaid to
the Trust addressed to 24 Federal Street, Boston, MA 02110 or to such
other address as the Trust may have designated to the Bank, in writing
with a copy to Eaton Vance Management at 24 Federal Street, Boston,
Massachusetts 02110, or to Investors Bank & Trust Company, 24 Federal
Street, Boston, Massachusetts 02110 with a copy to Eaton Vance Management
at 24 Federal Street, Boston, Massachusetts 02110, shall be deemed to have
been properly delivered or given hereunder to the respective addressees.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
The Custodian expressly acknowledges the provision in the
Declaration of Trust of the Trust (Section 5.2 and 5.6) limiting the
personal liability of the Trustees and officers of the Trust, and the
Custodian hereby agrees that it shall have recourse to the Trust for
payment of claims or obligations as between the Trust and the Custodian
arising out of this Agreement, and the Custodian shall not seek
satisfaction from any Trustee or officer of the Trust.
14. Adoption of the Agreement by the Trust
The Trust represents that its Board has approved this Agreement
and has duly authorized the Trust to adopt this Agreement, such adoption
to be evidenced by a letter agreement between the Trust and the Bank
reflecting such adoption, which letter agreement shall be dated and signed
by a duly authorized officer of the Trust and duly authorized officer of
the Bank. This Agreement shall be deemed to be duly executed and
delivered by each of the parties in its name and behalf by its duly
authorized officer as of the date of such letter agreement, and this
-25-
<PAGE>
Agreement shall be deemed to supersede and terminate, as of the date of
such letter agreement, all prior agreements between the Trust and the Bank
relating to the custody of the Trust's assets.
* * * * *
-26-
<PAGE>
AMENDMENT TO
MASTER CUSTODIAN AGREEMENT
between
EATON VANCE HUB PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
This Amendment, dated as of October 23, 1995, is made to the
MASTER CUSTODIAN AGREEMENT (the "Agreement") between each investment
company advised by Boston Management and Research which has adopted the
Agreement (the "Trusts") and Investors Bank & Trust Company (the
"Custodian") pursuant to Section 10 of the Agreement.
The Trusts and the Custodian agree that Section 10 of the
Agreement shall, as of October 23, 1995, be amended to read as follows:
Unless otherwise defined herein, terms which are defined in the
Agreement and used herein are so used as so defined.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated by either party after
August 31, 2000 by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
that the Trust may at any time by action of its Board, (i) substitute
another bank or trust company for the Custodian by giving notice as
described above to the Custodian in the event the Custodian assigns this
Agreement to another party without consent of the noninterested Trustees
of the Trust, or (ii) immediately terminate this Agreement in the event of
the appointment of a conservator or receiver for the Custodian by the
Federal Deposit Insurance Corporation or by the Banking Commissioner of
The Commonwealth of Massachusetts or upon the happening of a like event at
the direction of an appropriate regulatory agency or court of competent
jurisdiction. Upon termination of the Agreement, the Trust shall pay to
the Custodian such compensation as may be due as of the date of such
termination (and shall likewise reimburse the Custodian for its costs,
expenses and disbursements).
This Agreement may be amended at any time by the written
agreement of the parties hereto. If a majority of the non-interested
trustees of any of the Trusts determines that the performance of the
Custodian has been unsatisfactory or adverse to the interests of Trust
holders of any Trust or Trusts or that the terms of the Agreement are no
longer consistent with publicly available industry standards, then the
Trust or Trusts shall give written notice to the Custodian of such
determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non-interested trustees of
the Trusts. If the conditions of the preceding sentence are not met then
the Trust or Trusts may terminate this Agreement on sixty (60) days
written notice.
<PAGE>
The Board of the Trust shall, forthwith, upon giving or receiving
notice of termination of this Agreement, appoint as successor custodian, a
bank or trust company having the qualifications required by the Investment
Company Act of 1940 and the Rules thereunder. The Bank, as Custodian,
Agent or otherwise, shall, upon termination of the Agreement, deliver to
such successor custodian, all securities then held hereunder and all funds
or other properties of the Trust deposited with or held by the Bank
hereunder and all books of account and records kept by the Bank pursuant
to this Agreement, and all documents held by the Bank relative thereto.
In the event that no written order designating a successor custodian shall
have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Trust to the Trust but shall
have the right to deliver to a bank or trust company doing business in
Boston, Massachusetts of its own selection meeting the above required
qualifications, all funds, securities and properties of the Trust held by
or deposited with the Bank, and all books of account and records kept by
the Bank pursuant to this Agreement, and all documents held by the Bank
relative thereto. Thereafter such bank or trust company shall be the
successor of the Custodian under this Agreement.
Except as expressly provided herein, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized officers, as of the day and year
first above written.
Alabama Tax Free Portfolio
Arizona Tax Free Portfolio
Arkansas Tax Free Portfolio
Cash Management Portfolio
Colorado Tax Free Portfolio
Connecticut Tax Free Portfolio
Florida Insured Tax Free Portfolio
Florida Tax Free Portfolio
Georgia Tax Free Portfolio
Government Obligations Portfolio
Growth Portfolio
Hawaii Tax Free Portfolio
High Yield Municipals Portfolio
Investors Portfolio
Kansas Tax Free Portfolio
Kentucky Tax Free Portfolio
Louisiana Tax Free Portfolio
Maryland Tax Free Portfolio
Massachusetts Tax Free Portfolio
Michigan Tax Free Portfolio
Minnesota Tax Free Portfolio
Mississippi Tax Free Portfolio
Missouri Tax Free Portfolio
2
<PAGE>
National Municipals Portfolio
New Jersey Tax Free Portfolio
New York Tax Free Portfolio
North Carolina Tax Free Portfolio
Ohio Tax Free Portfolio
Oregon Tax Free Portfolio
Pennsylvania Tax Free Portfolio
Rhode Island Tax Free Portfolio
South Carolina Tax Free Portfolio
Special Investment Portfolio
Stock Portfolio
Strategic Income Portfolio
Tax Free Reserves Portfolio
Tennessee Tax Free Portfolio
Texas Tax Free Portfolio
Total Return Portfolio
Virginia Tax Free Portfolio
West Virginia Tax Free Portfolio
Arizona Limited Maturity Tax Free Portfolio
California Tax Free Portfolio
California Limited Maturity Tax Free Portfolio
Connecticut Limited Maturity Tax Free Portfolio
Florida Limited Maturity Tax Free Portfolio
Massachusetts Limited Maturity Tax Free Portfolio
Michigan Limited Maturity Tax Free Portfolio
National Limited Maturity Tax Free Portfolio
New Jersey Limited Maturity Tax Free Portfolio
New York Limited Maturity Tax Free Portfolio
North Carolina Limited Maturity Tax Free Portfolio
Ohio Limited Maturity Tax Free Portfolio
Pennsylvania Limited Maturity Tax Free Portfolio
Virginia Limited Maturity Tax Free Portfolio
By: /s/James L. O'Connor
----------------------
Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/Michael F. Rogers
-----------------------
3
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000912747
<NAME> GOVERNMENT OBLIGATIONS PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 555,044
<INVESTMENTS-AT-VALUE> 582,515
<RECEIVABLES> 7,382
<ASSETS-OTHER> 11
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<TOTAL-ASSETS> 589,908
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<TOTAL-LIABILITIES> 68,119
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<EXPENSES-NET> 8,041
<NET-INVESTMENT-INCOME> 41,114
<REALIZED-GAINS-CURRENT> 29,163
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 70,277
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 521,788
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,928
<INTEREST-EXPENSE> 3,738
<GROSS-EXPENSE> 8,042
<AVERAGE-NET-ASSETS> 521,789
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PAGE>
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
