As filed with the Securities and Exchange Commission on April 24, 1997
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. 4 [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)
(617) 482-8260
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(Registrant's Telephone Number, including Area Code)
Alan R. Dynner
24 Federal Street, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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Throughout this Registration Statement, information concerning Government
Obligations Portfolio (the "Portfolio") is incorporated by reference from
Amendment No. 33 to the Registration Statement of Eaton Vance Mutual Funds Trust
(File No. 2-90946 under the Securities Act of 1933 (the "1933 Act")) (the
"Amendment"), which was filed electronically with the Securities and Exchange
Commission on April 21, 1997 (Accession No. 0000950156-97-000394). The Amendment
contains the prospectus and statement of additional information ("SAI") of EV
Traditional Government Obligations Fund (the "Feeder Fund"), which invests
substantially all of its assets in the Portfolio.
PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
Paragraph 4 of Instruction F of the General Instructions to Form N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
The 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 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 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.
Registrant incorporates by reference information concerning the
Portfolio's investment objective and investment practices from "The Fund's
Investment Objective" and "Investment Policies and Risks" in the Feeder Fund
prospectus.
ITEM 5. MANAGEMENT OF THE PORTFOLIO
Registrant incorporates by reference information concerning the
Portfolio's management from "Management of the Fund and the Portfolio" in the
Feeder Fund prospectus.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
Registrant incorporates by reference information concerning interests
in the Portfolio from "Organization of the Fund and the Portfolio" in the Feeder
Fund prospectus and "Other Information" in Part I of the Feeder Fund SAI. An
interest in the Portfolio has no preemptive or conversion rights and is fully
paid and nonassessable by the Portfolio, except as described under "Organization
of the Fund and Portfolio" in the Feeder Fund prospectus.
As of April 4, 1997, the Feeder Fund controlled the Portfolio by virtue of
owning approximately 67.04% of the outstanding voting interests in the
Portfolio.
A-1
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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.
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.
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 ("RIC") 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.
Registrant incorporates by reference information concerning the
computation of net asset value and valuation of Portfolio assets from "Valuing
Fund Shares" in the Feeder Fund prospectus. For further information, see Item 19
of Part B.
A-2
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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"), a wholly-owned subsidiary of Eaton Vance Management. 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 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 Securities and Exchange Commission (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 The Investment Company Act of 1940 (the "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.
A-3
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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-2
Control Persons and Principal Holder of Securities ..........................B-2
Investment Advisory and Other Services ......................................B-2
Brokerage Allocation and Other Practices ....................................B-2
Capital Stock and Other Securities ..........................................B-2
Purchase, Redemption and Pricing of Securities ..............................B-5
Tax Status ..................................................................B-5
Underwriters ................................................................B-9
Calculation of Performance Data .............................................B-9
Financial Statements ........................................................B-9
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 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.
Registrant incorporates by reference additional information concerning
the investment policies of the Portfolio as well as information concerning the
investment restrictions of the Portfolio from "Additional Information about
Investment Policies" and "Investment Restrictions" in Part I of the Feeder Fund
SAI. The Portfolio's portfolio turnover rates for the fiscal years ended
December 31, 1996 and 1995 were 11% and 19%, respectively.
ITEM 14. MANAGEMENT OF THE PORTFOLIO
Registrant incorporates by reference additional information concerning
the management of the Portfolio from "Trustees and Officers" in Part I of the
Feeder Fund SAI and "Fees and Expenses" in Part II of the Feeder Fund SAI.
B-1
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ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 4, 1996, the Feeder 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 67.04%, 26.24% and 6.72%, respectively, of the value of the
outstanding interests in the Portfolio. Because the Feeder Fund controls the
Portfolio, the Feeder Fund may take actions without the approval of any other
investor. Each of the Feeder, 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 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. The address of the Feeder Fund,
Marathon and Classic Funds is 24 Federal Street, Boston, MA 02110.
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
Registrant incorporates by reference information concerning investment
advisory and other services provided to the Portfolio from "Investment Adviser
and Administrator", "Custodian" and "Independent Accountants" in Part I of the
Feeder Fund SAI.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
Registrant incorporates by reference information concerning the
brokerage practices of the Portfolio from "Portfolio Security Transactions" in
Part I of the Feeder Fund SAI.
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 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. Certificates representing an investor's
interest in the Portfolio are issued only upon the written request of a Holder.
B-2
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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 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.
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.
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.
B-3
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The Declaration of Trust 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
See "Purchase of Interests in the Portfolio" and "Redemption or
Decrease of Interest" in Part A.
Registrant incorporates by reference information concerning valuation
of the Portfolio's assets from "Determination of Net Asset Value" in Part I of
the Feeder Fund SAI.
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 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.
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 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), 852(b)(5), 853(a) and 854
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 the distribution
requirements applicable to RICs (including those under Sections 852 and 4982 of
the Code. 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.
B-4
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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), a Holder receives only liquid proceeds (and/or unrealized
receivables) and 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. In addition, on a distribution to a Holder from the
Portfolio (whether pursuant to a partial or complete withdrawal or otherwise),
(1) income or gain will be recognized if the distribution is in liquidation of
the Holder's entire interest in the Portfolio and includes a disproportionate
share of any unrealized receivables held by the Portfolio and (2) gain or loss
may be recognized on a distribution to a Holder that contributed property to the
Portfolio. 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 the contribution
thereof), increased by the amounts of the Holder's distributive share 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.
The Portfolio's transactions in options, futures contracts, forward
contracts and certain other transactions involving foreign exchange gain or loss
will be subject to special tax rules, the effect of which may be to accelerate
income to the Portfolio, defer Portfolio losses, cause adjustments in the
holding periods of Portfolio securities, convert capital gain into ordinary
income and convert short-term capital losses into long-term capital losses. For
example, the tax treatment of many types of options, futures contracts and
forward contacts entered into by the Portfolio will be governed by Section 1256
of the Code. Absent a tax election for "mixed straddles" (see below), each such
position held by the Portfolio on the last business day of each taxable year
will be marked to market (i.e., treated as if it were closed out on such day),
and any resulting gain or loss, except for certain currency-related positions,
will generally be treated as 60% long-term and 40% short-term capital gain or
loss, with subsequent adjustments made to any gain or loss realized upon an
actual disposition of such positions. When the Portfolio holds an option or
contract governed by Section 1256 which substantially diminishes the Holder's
risk of loss with respect to another position of the Portfolio not governed by
Section 1256 (as might occur in some hedging transactions), this combination of
positions could be a "mixed straddle" which is generally subject to special tax
rules requiring deferral of losses and other adjustments in addition to being
subject in part to Section 1256. The Portfolio may make certain tax elections
for its "mixed straddles" which could alter certain effects of these rules. In
order to qualify as a RIC for federal income tax purposes, a Holder must derive
less than 30% of its annual gross income from the sale or other disposition of
securities and certain other investments held for less than three months, and
the Portfolio will limit its activities in options, futures contracts and
forward contracts to the extent necessary to enable the Holder to comply with
this requirement.
B-5
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Foreign exchange gains and losses realized by the Portfolio and
allocated to the RIC in connection with the Portfolio's investments in foreign
currency, foreign currency-related transactions and certain options, futures or
forward contracts may be treated as ordinary income and losses under special tax
rules. Certain options futures or forward contracts of the Portfolio may be
required to be marked to market (i.e., treated as if closed out) on the last day
of each taxable year, and any gain or loss realized with respect to these
contracts may be required to be treated as 60% long-term and 40% short-term gain
or loss. Positions of the Portfolio in offsetting options, futures or forward
contracts may be treated as "straddles" and be subject to other special rules
that may, upon allocation of the Portfolio's income, gain or loss to the RIC,
affect the amount, timing and character of the RIC's distributions to
shareholders. Certain uses of foreign currency and foreign currency derivatives
such as options, futures, forward contracts and swaps and investment by the
Portfolio in the stock of certain "passive foreign investment companies" may be
limited or a tax election may be made, if available, in order to enable an
investor that is a RIC to preserve its qualification as a RIC and/or avoid
imposition of a tax on such an investor.
The Portfolio anticipates that it will be subject to foreign
withholding and other taxes on its income (including, in some cases, capital
gains) from foreign securities. Tax conventions between certain countries and
the U.S. may reduce or eliminate such taxes.
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.
The Portfolio's investments, if any, in securities issued with original
issue discount (possibly including certain asset-related securities) or
securities acquired at a market discount (if an election is made to include
accrued market discount in current income) will cause it to realize income prior
to the receipt of cash payments with respect to these securities. In order to
enable a Holder to distribute its proportionate share of this income, the
Portfolio may be required to liquidate portfolio securities that it might
otherwise have continued to hold in order to generate cash that the Holder may
withdraw from the Portfolio for subsequent distribution to such Holder's
shareholders.
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 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.
B-6
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ITEM 21. UNDERWRITERS
The placement agent for the Portfolio is EVD. 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 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.
Portfolio of Investments as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the fiscal year ended December 31, 1996
Statement of Changes in Net Assets for the fiscal years ended December
31, 1996 and 1995
Supplementary Data for the fiscal years ended December 31, 1996,
1995 and 1994, and for the period from the start of business, October
28, 1993, to December 31, 1993
Notes to Financial Statements
Independent Auditors' Report
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 0000950156-97-000267).
B-7
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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 as Exhibit 1 to
Post-Effective Amendment No. 2 and incorporated herein by
reference.
1(a) Amendment to Declaration of Trust date June 14, 1993 filed
herewith.
2 By-Laws of the Registrant adopted May 1, 1992, filed as Exhibit 2
to Post-Effective Amendment Amendment No. 2 and incorporated
herein by reference.
5 Investment Advisory Agreement between the Registrant and Boston
Management and Research dated October 28, 1993, filed as Exhibit
5 to Post-Effective Amendment Amendment 2 and incorporated herein
by reference.
6 Placement Agent Agreement between the Registrant and Eaton Vance
Distributors, Inc. date November 1, 1996 filed herewith.
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 as Exhibit 8(a) to Post-Effective
Amendment No. 3 and incorporated herein by reference.
8(b) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995, filed as Exhibit 8(b) to
Post-Effective Amendment No. 3 and incorporated herein by
reference.
13 Investment representation letter of Eaton Vance Government
Obligations Trust, on behalf of EV Traditional Government
Obligations Fund, dated September 27, 1993, filed as Exhibit 13
to Post-Effective Amendment Amendment No.2 and incorporated
herein by reference.
14 Securities Lending Agreement between Merrill Lynch and Government
Securities Portfolio dated November 18, 1996 filed herewith.
C-1
<PAGE>
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 4, 1997
Interests 4
ITEM 27. INDEMNIFICATION
Article V of the Registrant's Declaration of Trust contains
indemnification provisions for Trustees and officers. 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 Placement Agent Agreement also provides for reciprocal indemnity of
the placement agent, on the one hand, and the Trustees and officers on the
other.
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 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 1940 Act, as amended, and the Rules
promulgated thereunder are in the possession and 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.
C-2
<PAGE>
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
Boston and Commonwealth of Massachusetts, on the 24th day of April, 1997.
GOVERNMENT OBLIGATIONS PORTFOLIO
By /s/ M. Dozier Gardner
----------------------
M. Dozier Gardner
President
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1(a) Amendment to Declaration of Trust dated June 14, 1993
6 Placement Agent Agreement between the Registrant and Eaton
Vance Distributors, Inc. date November 1, 1996
14 Securities Lending Agreement between Merrill Lynch and
Government Securities Portfolio dated November 18, 1996
GOVERNMENT OBLIGATIONS PORTFOLIO
AMENDMENT TO DECLARATION OF TRUST
June 14, 1993
The undersigned, being at least a majority of the Trustees of the Portfolio,
acting pursuant to Section 10.4 of ARTICLE X of the Declaration of Trust, do
hereby:
Change and amend Section 3.11 of ARTICLE III of the Declaration of
Trust to read as follows:
" 3.11. Further Powers. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices, whether within or without the State of
New York, in any and all states of the United States of America, in the
district of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of
the United States and of foreign governments, and to do all such other
things and execute all such instruments as they deem necessary, proper,
appropriate or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. The
Trustees shall have full power and authority, in the name and on behalf
of the Trust to engage in and to prosecute, defend, compromise, settle,
abandon, or adjust by arbitration or otherwise, any actions, suits,
proceedings, disputes, claims and demands relating to this Trust, and
out of the assets of the Trust to pay or to satisfy any liabilities,
losses, debts, claims or expenses (including without limitation
attorneys' fees) incurred in connection therewith, including those of
litigation, and such power shall include without limitation the power
of the Trustees or any committee thereof, in the exercise of their or
its good faith business judgment, to dismiss or terminate any action,
suit, proceeding, dispute, claim or demand, derivative or otherwise,
brought by any person, including a Holder in its own name or in the
name of the Trust, whether or not the Trust or any of the Trustees may
be named individually therein or the subject matter arises by reason of
business for or on behalf of the Trust. Any determination as to what is
in the interests of the Trust which is made by the Trustees in good
faith shall be conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to
the Trustees. The Trustees shall not be required to obtain any court
order in order to deal with Trust Property."
<PAGE>
Further, the undersigned do hereby declare and find that the foregoing
change and amendment is necessary and appropriate and does not have a materially
adverse effect on the financial interest of the Holders of the Portfolio. Said
Amendment shall take effect on the date set forth above.
/s/ Landon T. Clay /s/ Norton H. Reamer
- --------------------------- ---------------------------
Landon T. Clay Norton H. Reamer
/s/ Donald R. Dwight /s/ John L. Thorndike
- --------------------------- ---------------------------
Donald R. Dwight John L. Thorndike
/s/ James B. Hawkes /s/ Jack L. Treynor
- --------------------------- ---------------------------
James B. Hawkes Jack L. Treynor
/s/ Samuel L. Hayes, III
- ---------------------------
Samuel L. Hayes, III
2
PLACEMENT AGENT AGREEMENT
November 1, 1996
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, Massachusetts 02110
Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Strategic Income Portfolio (the "Trust"), an
open-end diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), organized as a New
York trust, has agreed that Eaton Vance Distributors, Inc. ("EVD"), formerly
named EV Distributors, Inc., shall be the placement agent (the "Placement
Agent") of Interests in the Trust ("Trust Interests").
1. Services as Placement Agent.
1.1 EVD will act as Placement Agent of the Trust Interests covered by
the Trust's registration statement then in effect under the 1940 Act. In acting
as Placement Agent under this Placement Agent Agreement, neither EVD nor its
employees or any agents thereof shall make any offer or sale of Trust Interests
in a manner which would require the Trust Interests to be registered under the
Securities Act of 1933, as amended (the "1933 Act").
1.2 All activities by EVD and its agents and employees as Placement
Agent of Trust Interests shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations adopted
pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission").
1.3 Nothing herein shall be construed to require the Trust to accept
any offer to purchase any Trust Interests, all of which shall be subject to
approval by the Board of Trustees.
1.4 The Trust shall furnish from time to time for use in connection
with the sale of Trust Interests such information with respect to the Trust and
Trust Interests as EVD may reasonably request. The Trust shall also furnish EVD
upon request with: (a) unaudited semiannual statements of the Trust's books and
accounts prepared by the Trust, and (b) from time to time such additional
information regarding the Trust's financial or regulatory condition as EVD may
reasonably request.
1.5 The Trust represents to EVD that all registration statements filed
by the Trust with the Commission under the 1940 Act with respect to Trust
Interests have been prepared in conformity with the requirements of such statute
and the rules and regulations of the Commission thereunder. As used in this
Agreement the term "registration statement" shall mean any registration
statement filed with the Commission as modified by any amendments thereto that
at any time shall have been filed with the Commission by or on behalf of the
Trust. The Trust represents and warrants to EVD that any registration statement
will contain all statements required to be stated therein in conformity with
both such statute and the rules and regulations of the Commission; that all
statements of fact contained in any registration statement will be true and
correct in all material respects at the time of filing of such registration
statement or amendment thereto; and that no registration statement will include
<PAGE>
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of Trust Interests. The Trust may but shall not be
obligated to propose from time to time such amendment to any registration
statement as in the light of future developments may, in the opinion of the
Trust's counsel, be necessary or advisable. If the Trust shall not propose such
amendment and/or supplement within fifteen days after receipt by the Trust of a
written request from EVD to do so, EVD may, at its option, terminate this
Agreement. The Trust shall not file any amendment to any registration statement
without giving EVD reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendment to any registration statement as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
1.6 The Trust agrees to indemnify, defend and hold EVD, its several
officers and directors, and any person who controls EVD within the meaning of
Section 15 of the 1933 Act or Section 20 of the Securities and Exchange Act of
1934 (the "1934 Act") (for purposes of this paragraph 1.6, collectively,
"Covered Persons") free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which any Covered Person may incur under the 1933 Act, the
1934 Act, common law or otherwise, arising out of or based on any untrue
statement of a material fact contained in any registration statement, private
placement memorandum or other offering material ("Offering Material") or arising
out of or based on any omission to state a material fact required to be stated
in any Offering Material or necessary to make the statements in any Offering
Material not misleading; provided, however, that the Trust's agreement to
indemnify Covered Persons shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any financial and other statements as are
furnished in writing to the Trust by EVD in its capacity as Placement Agent for
use in the answers to any items of any registration statement or in any
statements made in any Offering Material, or arising out of or based on any
omission or alleged omission to state a material fact in connection with the
giving of such information required to be stated in such answers or necessary to
make the answers not misleading; and further provided that the Trust's agreement
to indemnify EVD and the Trust's representations and warranties hereinbefore set
forth in this paragraph 1.6 shall not be deemed to cover any liability to the
Trust or its investors to which a Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of a Covered Person's reckless disregard of its
obligations and duties under this Agreement. The Trust should be notified of any
action brought against a Covered Person, such notification to be given by a
writing addressed to the Trust, 24 Federal Street Boston, Massachusetts 02110,
with a copy to the Administrator of the Trust, Eaton Vance Management, at the
same address, promptly after the summons or other first legal process shall have
been duly and completely served upon such Covered Person. The failure to so
notify the Trust of any such action shall not relieve the Trust from any
liability except to the extent the Trust shall have been prejudiced by such
failure, or from any liability that the Trust may have to the Covered Person
against whom such action is brought by reason of any such untrue statement or
omission, otherwise than on account of the Trust's indemnity agreement contained
in this paragraph. The Trust will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but in such case such
defense shall be conducted by counsel of good standing chosen by the Trust and
approved by EVD, which approval shall not be unreasonably withheld. In the event
the Trust elects to assume the defense of any such suit and retain counsel of
good standing approved by EVD, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but in case the Trust does not elect to assume the defense of any such suit or
in case EVD reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse the Covered Person named as defendant in such suit, for the
2
<PAGE>
fees and expenses of any counsel retained by EVD or it. The Trust's
indemnification agreement contained in this paragraph and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Covered Persons, and shall survive the delivery of any Trust Interests. This
agreement of indemnity will inure exclusively to Covered Persons and their
successors. The Trust agrees to notify EVD promptly of the commencement of any
litigation or proceedings against the Trust or any of its officers or Trustees
in connection with the issue and sale of any Trust Interests.
1.7 EVD agrees to indemnify, defend and hold the Trust, its several
officers and trustees, and any person who controls the Trust within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act (for purposes of
this paragraph 1.7, collectively, "Covered Persons") free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands, liabilities and any
counsel fees incurred in connection therewith) that Covered Persons may incur
under the 1933 Act, the 1934 Act or common law or otherwise, but only to the
extent that such liability or expense incurred by a Covered Person resulting
from such claims or demands shall arise out of or be based on any untrue
statement of a material fact contained in information furnished in writing by
EVD in its capacity as Placement Agent to the Trust for use in the answers to
any of the items of any registration statement or in any statements in any other
Offering Material or shall arise out of or be based on any omission to state a
material fact in connection with such information furnished in writing by EVD to
the Trust required to be stated in such answers or necessary to make such
information not misleading. EVD shall be notified of any action brought against
a Covered Person, such notification to be given by a writing addressed to EVD at
24 Federal Street, Boston, Massachusetts 02110, promptly after the summons or
other first legal process shall have been duly and completely served upon such
Covered Person. EVD shall have the right of first control of the defense of the
action with counsel of its own choosing satisfactory to the Trust if such action
is based solely on such alleged misstatement or omission on EVD's part, and in
any other event each Covered Person shall have the right to participate in the
defense or preparation of the defense of any such action. The failure to so
notify EVD of any such action shall not relieve EVD from any liability except to
the extent the Trust shall have been prejudiced by such failure, or from any
liability that EVD may have to Covered Persons by reason of any such untrue or
alleged untrue statement, or omission or alleged omission, otherwise than on
account of EVD's indemnity agreement contained in this paragraph.
1.8 No Trust Interests shall be offered by either EVD or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Trust Interests hereunder shall be accepted by the Trust if and so long
as the effectiveness of the registration statement or any necessary amendments
thereto shall be suspended under any of the provisions of the 1933 Act or the
1940 Act; provided, however, that nothing contained in this paragraph shall in
any way restrict or have an application to or bearing on the Trust's obligation
to redeem Trust Interests from any investor in accordance with the provisions of
the Trust's registration statement or Declaration of Trust, as amended from time
to time.
1.9 The Trust agrees to advise EVD as soon as reasonably practical by a
notice in writing delivered to EVD or its counsel:
(a) of any request by the Commission for amendments to the registration
statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement then in effect or the
initiation by service of process on the Trust of any proceeding for that
purpose;
3
<PAGE>
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement then in effect or that requires
the making of a change in such registration statement in order to make the
statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment to any
registration statement that may from time to time be filed with the Commission.
For purposes of this paragraph 1.9, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.10 EVD agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information not otherwise publicly available relative to the Trust and its
prior, present or potential investors and not to use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where EVD may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
2. Duration and Termination of this Agreement.
This Agreement shall become effective upon the date of its execution,
and, unless terminated as herein provided, shall remain in full force and effect
through and including February 28, 1997 and shall continue in full force and
effect indefinitely thereafter, but only so long as such continuance after
February 28, 1997 is specifically approved at least annually (i) by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Trust and (ii) by the vote of a majority of those Trustees of
the Trust who are not interested persons of EVD or the Trust cast in person at a
meeting called for the purpose of voting on such approval.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this agreement without the payment of any
penalty, by action of Trustees of the Trust or the Directors of EVD, as the case
may be, and the Trust may, at any time upon such written notice to EVD,
terminate this Agreement by vote of a majority of the outstanding voting
securities of the Trust. This Agreement shall terminate automatically in the
event of its assignment.
3. Representations and Warranties.
EVD and the Trust each hereby represents and warrants to the other that
it has all requisite authority to enter into, execute, deliver and perform its
obligations under this Agreement and that, with respect to it, this Agreement is
legal, valid and binding, and enforceable in accordance with its terms.
4. Limitation of Liability.
EVD expressly acknowledges the provision in the Declaration of Trust of
the Trust (Sections 5.2 and 5.6) limiting the personal liability of the Trustees
and officers of the Trust, and EVD hereby agrees that it shall have recourse to
the Trust for payment of claims or obligations as between the Trust and EVD
arising out of this Agreement and shall not seek satisfaction from any Trustee
or officer of the Trust.
4
<PAGE>
5. Certain Definitions.
The terms "assignment" and "interested persons" when used herein shall
have the respective meanings specified in the Investment Company Act of 1940 as
now in effect or as hereafter amended subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission by any rule, regulation
or order. The term "vote of a majority of the outstanding voting securities"
shall mean the vote, at a meeting of Holders, of the lesser of (a) 67 per centum
or more of the Interests in the Trust present or represented by proxy at the
meeting if the Holders of more than 50 per centum of the outstanding Interests
in the Trust are present or represented by proxy at the meeting, or (b) more
than 50 per centum of the outstanding Interests in the Trust. The terms
"Holders" and "Interests" when used herein shall have the respective meanings
specified in the Declaration of Trust of the Trust.
6. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of law,
including the applicable provisions of the 1940 Act and to the extent that any
provisions herein contained conflict with any such applicable provisions of law,
the latter shall control.
The laws of the Commonwealth of Massachusetts shall, except to the
extent that any applicable provisions of federal law shall be controlling,
govern the construction, validity and effect of this Agreement, without
reference to principles of conflicts of law.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this Agreement and returning the same
to the undersigned, whereupon this Agreement shall constitute a binding contract
between the parties hereto effective at the closing of business on the date
hereof.
Yours very truly,
STRATEGIC INCOME PORTFOLIO
By: /s/ James B. Hawkes
-----------------------
President
Accepted:
EATON VANCE DISTRIBUTORS, INC.
By: /s/ Wharton P. Whitaker
--------------------------
President
5
SECURITIES LENDING AGREEMENT
Agreement made as of November 18, 1996, between Merrill Lynch Government
Securities Inc. and/or Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MERRILL LYNCH") and Government Obligations Portfolio, a New York trust (the
"Trust"),
1. Loan of Securities. The Trust in its sole discretion may from time to
time lend securities owned by it to MERRILL LYNCH at MERRILL LYNCH's request.
The parties agree to be liable as principals with respect to all transactions
hereunder. No loan will consist of assets subject to ERISA. In the event that
the Trust makes such a loan of its securities ("the Leaned Securities") MERRILL
LYNCH shall wire federal funds (cash collateral) or transfer marketable
securities issued by the United States Government or agencies thereof ("U.S.
Government securities") to the designated custodian of the Trust as specified
herein against receipt of the Loaned Securities in good deliverable form. The
Trust represents that, as to any Loaned Securities, it shall have at the time of
delivery to MERRILL LYNCH no present intention to sell the same. MERRILL LYNCH
represents that it has the unqualified right to sell, transfer, assign, pledge
or create a security interest in any securities that are to become Collateral
pursuant to this Agreement. MERRILL LYNCH represents that in all transactions
contemplated by this Agreement any securities (other than securities that
qualify as "exempted securities" under Regulation T of the Board of Governors of
the Federal Reserve System) shall be borrowed from the Trust for the purpose of
making delivery of such securities to either a short sale or a failure to
receive securities it is required to deliver, or for other purposes permitted
under the provisions of Regulation T or any other applicable regulation of the
Federal Reserve Board, as may be amended from time to time. MERRILL LYNCH
represents that it is a broker-dealer registered as such with the U.S.
Securities and Exchange Commission and, where appropriate, with State Blue Sky
administrators, and that it has net capital under the net capital rules of the
U.S. Securities and Exchange Commission of at least $5,000,000. MERRILL LYNCH
also represents that it will not undertake a transaction hereunder if there has
been a material adverse change in MERRILL LYNCH's financial condition or net
capital ratio since the date of the latest statement furnished to the Trust
under Section 7 hereunder.
Until such time as a loan of securities is terminated pursuant hereto,
MERRILL LYNCH shall have all incidents of ownership of the Loaned Securities,
including without limitation the right to assign the Loaned Securities to
others; provided, however, that MERRILL LYNCH shall be obligated to the Trust
with respect to all dividends, distributions and interest pertaining to the
Loaned Securities as set forth in Section 5 hereof. The Trust hereby waives any
right to vote Loaned Securities during the term of a loan unless special
arrangements have been set forth in the confirmation under Section 4. It is
understood, however, that a loan will be terminated by the Trust if, in the sole
opinion of the Trust, a material event affecting the Loaned Securities is to
occur which will require the Trust either to vote or to exercise rights with
respect to such securities.
In consideration of each loan as to which the Collateral consists of U.S.
Government securities, MERRILL LYNCH shall pay the Trust a loan premium computed
daily and based on the market value at the time of the borrowing assigned to the
Loaned Securities for such loan, as adjusted by any marks to market processed
subsequently, from the first business day that the Trust or its agent has made
delivery of the Loaned Securities to MERRILL LYNCH or its agent (i.e., the
Trust's custodian, Investors Bank & Trust Company, 89 South Street, Boston,
Massachusetts) by 10:00 A.M. New York City time to, but not including, the date
that securities identical to the Loaned Securities are returned to the Trust or
its agent after termination of the loan under Section 8 or 9 or identical
securities are purchased by the Trust under Section 10. The daily rate of such
<PAGE>
loan premium shall be computed by multiplying the annual rate for such
premium specified in the confirmation delivered under Section 4 for such loan by
the fraction 1/360 (which rate may be changed by mutual agreement of the parties
and confirmed by written notice of MERRILL LYNCH to the Trust). All accrued loan
premiums shall be paid by the earlier of (i) the date of termination of all
loans under this Agreement or (ii) the seventh business day of each month.
In consideration of the provisions of Section 2 of this Agreement
permitting the Trust to invest cash collateral for its own account, the Trust
agrees to pay MERRILL LYNCH a lending fee computed daily for each loan based on
the amount of the cash collateral delivered to the Trust with respect to such
loan. The amount of the lending fee shall be computed from the first business
day that the Trust receives such cash collateral to, but not including, the date
that securities identical to the Loaned Securities are delivered to the Trust or
its agent after termination of such loan in accordance with Section 8 or 9 or
identical securities are purchased by the Trust under Section 10. The daily rate
of such lending fee shall be computed by multiplying the annual rate for such
fee specified in the confirmation delivered under Section 4 of this Agreement
for such loan by the fraction 1/360 (which rate may be changed by mutual
agreement of the parties and confirmed by written notice of MERRILL LYNCH to the
Trust). All accrued lending fees shall be paid by the Trust by the earlier of
(i) the date of termination of all loans under this Agreement, or (ii) the
seventh business day of each month.
2. Collateral and Perfected Security Interest Therein. Concurrently with
its receipt of the Loaned Securities from the Trust, MERRILL LYNCH shall wire
federal funds or transfer U.S. Government securities ("the Collateral") to the
Trust in an amount equal to at least 102% of the market value of all Loaned
Securities then being loaned by the Trust to MERRILL LYNCH. In addition to all
rights of the Trust under this agreement, MERRILL LYNCH hereby pledges and
grants to the Trust, as security for the prompt performance by MERRILL LYNCH of
all of its present and future obligations to the Trust under this agreement, a
security interest in all Collateral with respect to all transactions hereunder
and all proceeds thereof. MERRILL LYNCH agrees to take, or to cause to be taken,
all such actions as may be required under applicable law to perfect the Trust's
interest in the Collateral as both an outright transferee and as the secured
party under this agreement. Without limiting the generality of the foregoing.
MERRILL LYNCH shall, with respect to all Government Securities transferred by it
to the Trust as Collateral hereunder, direct that the record ownership of such
Collateral be transferred to the account of the Trust's custodian on the federal
book entry system at the Federal Reserve Bank of Boston. It is understood that
all security interests created in the Collateral shall survive the termination
of any loan under Section 8 or 9 and shall continue until the Loaned Securities
are returned by MERRILL LYNCH or its agent. Prior to the maturity of any
Collateral which consists of U.S. Government securities, MERRILL LYNCH shall
replace such Collateral with cash or other U.S. Government securities acceptable
to the Trust and of equal market value. MERRILL LYNCH shall have the right at
any other time to substitute other U.S. Government securities acceptable to the
Trust and of equal market value. Substituted securities shall be considered
Collateral for all purposes. At or before the time of any such substitution
MERRILL LYNCH shall supply the Trust with a written statement of the respective
market values of the Collateral to be returned and the Collateral to be
substituted. To the extent that any cash or non-cash distribution shall be made
on any Collateral securities. MERRILL LYNCH shall provide the Trust with
instructions prior to the distribution date as to the manner in which the
distribution shall be paid to MERRILL LYNCH or its agent. The Trust shall not
hypothecate the Collateral or otherwise encumber MERRILL LYNCH's interest in it,
except under Section 10.
2
<PAGE>
WITHOUT WAIVING ANY RIGHTS GIVEN TO THE TRUST HEREUNDER, IT IS UNDERSTOOD AND
AGREED THAT THE PROVISIONS OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970 MAY
NOT PROTECT THE TRUST WITH RESPECT TO LOANED SECURITIES HEREUNDER AND THAT,
THEREFORE, THE TRUST MAY NOT BE ABLE TO LOOK TO THE PROVISIONS OF SUCH ACT FOR
SATISFACTION OF CHASE'S OBLIGATIONS IN THE EVENT THAT CHASE FAILS TO RETURN THE
LOANED SECURITIES.
The Trust may use or invest any cash collateral and any additional cash
collateral delivered by MERRILL LYNCH pursuant to this Agreement in any manner
deemed appropriate by the Trust, and may commingle such cash collateral (and
investments made therewith) with cash and other assets owned by the Trust. Such
use or investment shall be at the Trust's own risk and for its own account, and
the Trust shall retain income and profits and shall bear all losses therefrom.
3. Deliveries of Loaned Securities. The Trust shall deliver the Loaned
Securities to MERRILL LYNCH by either (a) delivering to MERRILL LYNCH
certificates representing the Loaned Securities together with duly executed
stock or bond transfer powers, as the case may be, with signatures guaranteed by
a bank or a member firm of the New York Stock Exchange, Inc., in which event the
Trust shall list the Loaned Securities on a schedule and receipt, which MERRILL
LYNCH shall execute and return when the Loaned Securities are received, or (b)
causing the Loaned Securities to be credited to MERRILL LYNCH's account and
debited to the Trust's account at a Clearing Organization, as agreed to by the
parties hereto, and such crediting and debiting shall result in receipt by
MERRILL LYNCH and the Trust of a Clearing Organization notice of such crediting
and debiting. Redelivery of Loaned Securities by MERRILL LYNCH to the Trust
shall be accomplished in the same manner.
4. Confirmation. Each time that securities are loaned under this Agreement,
MERRILL LYNCH shall prepare, execute and deliver to the Trust a confirmation
which shall:
(a) list the Loaned Securities;
(b) list the Collateral;
(c) compute the amount of the Collateral necessary to comply with Section
2; and
(d) set forth (i) the annual rate for the lending fee and the annual rate
for the loan premium, (ii) any special arrangements under Section 1
concerning voting of the Loaned Securities and (iii) any special
instructions for delivery.
On a copy of such confirmation, the Trust shall promptly acknowledge to
MERRILL LYNCH its agreement to the terms of the letter and set forth any
additional special instructions for delivery. The Trust shall notify MERRILL
LYNCH of any errors in parts (a), (c) and (d) of the confirmation by telephone,
confirmed in writing on the same day, before noon on the first Banking Day
following the loan. At the time of each such loan the Trust, acting as agent for
MERRILL LYNCH, shall prepare a duplicate confirmation for its own files and the
list of Collateral in part (b) and such duplicate confirmation shall be
effective immediately upon its preparation by the Trust for all purposes of this
Agreement.
5. Dividends, Distributions, etc. The Trust shall be entitled to receive
all distributions made by the issuers of the Loaned Securities, including
without limitation cash dividends, stock dividends, interest payments,
redemption payments, distributions of any kind, stock splits, and rights to
purchase additional securities declared, granted, or made by such issuers. Upon
the receipt of any such cash distribution made by any such issuers, MERRILL
3
<PAGE>
LYNCH shall pay an equal amount to the Trust on the date for such
distribution. In the case of a non-cash distribution, the amount of securities
distributed shall be added to the Loaned Securities on the date for such
distribution and considered as such for all purposes, except that upon no less
than six business days' notice by the Trust to MERRILL LYNCH prior to the date
for such distribution, MERRILL LYNCH or its agent shall deliver to the Trust or
its agent an equal amount of the distributed securities on the next business day
after the date for such distribution.
6. Marking to Market. In the event the market value of all Loaned
Securities then being loaned by the Trust to MERRILL LYNCH plus all accrued
interest on such Loaned Securities, as at the close of trading on a Banking Day,
shall equal or exceed the market value of all Collateral, MERRILL LYNCH shall
forthwith (but no later than the next Banking Day) wire to the Trust an amount
in federal funds or transfer to the Trust U.S. Government securities in an
amount which, together with the market value of all Collateral than on deposit,
will equal 102% of the market value, at the time, of all Loaned Securities. When
transferred to the Trust, such additional collateral shall be considered
Collateral for all purposes hereunder. In the event that the aggregate market
value of the Loaned Securities (computed as aforesaid) shall decrease to an
amount such that the market value of all Collateral then on deposit exceeds by
more than 4% the market value of all Loaned Securities, the Trust shall (on
demand by MERRILL LYNCH) release to MERRILL LYNCH the Collateral in excess of
102% of such market value. During the term of any loan under this Agreement, the
Trust's custodian will determine on each Banking Day the market value of all
Collateral and the market value of all Loaned Securities and any resulting
deficiency in the Collateral under this Section 6, and will report to MERRILL
LYNCH any deficiency in the Collateral so determined. Any transfers by MERRILL
LYNCH of additional Collateral to cover the deficiency indicated by such report
shall be made no later than the end of the day on which such report is
furnished. Any transfers of additional Collateral to the Trust under this
Section 6 shall be accompanied or preceded by a written statement by MERRILL
LYNCH as to the individual market values of the additional Collateral. Absent
demand by MERRILL LYNCH, the Trust is not required to report or return any
excess Collateral under this Section 6. MERRILL LYNCH has the right to demand
return any excess Collateral.
7. CHASE's Financial Condition. MERRILL LYNCH has delivered to the Trust
its most recent financial statements delivered to its customers under Rule
17a-5(c) of the Securities Exchange Act of 1934. MERRILL LYNCH represents that
the financial statements contained in such Forms fairly represented its
financial condition as of the date of the financial statements. MERRILL LYNCH
also represents that there has been on material adverse change in its financial
condition or net capital ratio after the date of its most recent financial
statement.
MERRILL LYNCH shall promptly deliver to the Trust all statements
subsequently required to be furnished to customers by Rule 17a-5(c). MERRILL
LYNCH has also delivered to the Trust its most recent financial information
otherwise available to the public and, as long as any loan to MERRILL LYNCH is
outstanding under this Agreement, will promptly deliver to the Trust any such
financial information subsequently available. MERRILL LYNCH will notify the
Trust at the time of any request for a loan under Section 1 if there has been
any material adverse change (specifying in detail the nature of each such
change) in its financial condition or net capital ratio since the date of its
then most recent such statement or information previously delivered to the
Trust.
8. Termination of a Loan. An Open Overnight loan of securities may be
terminated by either party on any Banking Day by giving telephonic notice to the
other party by 10:30 A.M. EST on the same day. An Open Term loan may be
terminated by either party on the last Banking Day of the term by giving
telephonic notice to the other party at least by 10:30 A.M. EST on such Banking
4
<PAGE>
Day. Closed loans shall terminate as provided in Section 14 hereof. MERRILL
LYNCH shall on or before any termination date deliver to the Trust the Loaned
Securities in the following form: (a) if any of the Loaned Securities are in
registered certificated form, MERRILL LYNCH shall deliver certificates for such
Loaned Securities in proper form for transfer with executed stock or bond
transfer powers, as the case may be, attached: (b) if any of the Loaned
Securities are in bearer certificate form, MERRILL LYNCH shall deliver such
securities in bearer form; (c) if any of the Loaned Securities are in the
federal book entry system, MERRILL LYNCH shall direct that such Loaned
Securities be transferred to the account of the Trust's custodian on the federal
book entry system at the Federal Reserve Bank of Boston by 2:30 P.M. on the
termination date. Upon request of MERRILL LYNCH, the Trust may by telephone
waive the requirement of same form delivery by MERRILL LYNCH and accept the
return of securities in bearer certificated form or registered certificated
securities in proper form for transfer or securities in the federal book entry
system or a combination of several forms.
Upon proper delivery by MERRILL LYNCH of the Loaned Securities, the Trust
shall concurrently therewith return to MERRILL LYNCH the Collateral as is
specified by MERRILL LYNCH in a statement containing a computation of compliance
with Section 2 after the specified deliveries, unless MERRILL LYNCH is in
default under Section 9. If a loan shall not have been sooner terminated by the
Trust or by MERRILL LYNCH, it shall automatically terminate on the first
anniversary of the loan.
9. Termination Upon Default. All loans made under this Agreement shall be
terminated immediately upon the happening of any of the following events:
(a) If any securities identical to Loaned Securities are not returned to
the Trust as specified in Section 8;
(b) If any distributions are not paid to the Trust as specified in Section
5; and such default is not cured within one business day after notice;
(c) If MERRILL LYNCH shall fail to deposit additional Collateral as
provided in Section 6, and such default is not cured within one
business day after receipt of notice of such default;
(d) If the representations as to MERRILL LYNCH's financial condition and
net capital ratio made under Sections 1 and 7 shall have been
incorrect when made;
(e) If shall make a general assignment for the benefit of creditors; admit
in writing its inability to pay its debts as they become due; file a
petition in bankruptcy or a petition seeking any reorganization,
arrangement, composition, readjuments, liquidation, dissolution or
similar relief under any present or future bankruptcy, insolvency or
similar statute, law or regulation or seek the appointment of any
trustee, receiver or liquidator of MERRILL LYNCH or any material part
of its properties;
(f) If any federal or state agency or any creditor of MERRILL LYNCH other
than the Trust shall file any petition or seek any appointment
specified in Section 9(e) or under the Securities Investor Protection
Act with respect to MERRILL LYNCH;
(g) If the Securities and Exchange Commission shall revoke or suspend the
registration of MERRILL LYNCH as a broker-dealer; or
(h) If any national securities exchange or national securities association
shall revoke or suspend the membership of MERRILL LYNCH;
10. Liquidation for Default. Upon the happening of any event specified in
Section 9, the Trust may immediately elect to purchase a like amount of
securities identical to the Loaned Securities in the principal market for such
securities. If the principal market is a securities exchange, such purchases may
also be made from any other source, but then only at a total price per unit not
more than the last previous reported sales on such exchange. In the event of any
5
<PAGE>
such purchase, the Trust may apply the Collateral to the payment of the
purchase price (in the case of a loan secured by Collateral consisting of U.S.
Government securities, by selling a sufficient amount of the Collateral in the
principal market for such Collateral), including any brokerage expenses and
accrued interest and MERRILL LYNCH shall be entitled to retain a like amount of
identical Loaned Securities. The Trust may similarly apply the Collateral to any
other obligation of MERRILL LYNCH under this Agreement, including loan premiums
and distributions. The Trust shall immediately notify MERRILL LYNCH after any
such action. If any Collateral remains after all obligations of MERRILL LYNCH
under this Agreement have been satisfied, the Trust or its agent shall promptly
return to MERRILL LYNCH or its agent the balance of the Collateral. If the
Collateral is not sufficient to satisfy all such obligations, MERRILL LYNCH
shall be liable to the Trust for the amount of remaining obligations plus
interest at the applicable daily prime rate (being the daily base rate on
corporate loans at large U.S. money center commercial banks then being reported
in the Eastern Edition of the Wall Street Journal).
11. Trust Events of Default. All loans under this Agreement shall be
terminated immediately upon the happening of any of the following events:
(a) If the Loaned Securities are not delivered as specified in Section 1
above;
(b) If the Trust shall fail to perform its obligations under Section 1 and
2 above in respect of payment of a lending fee and substitution; and
such default is not cured within one business day after notice;
(c) If the Trust shall fail to pay any amount required pursuant to Section
2 above in respect of cash or non-cash distributions on Collateral
securities; and such default is not cured within one business day
after notice;
(d) If the Trust shall fail to return excess Collateral upon notice as
provided in Sections 6 or 8 above; and such default is not cured
within one business day after such notice;
(e) If any representations made by the Trust shall have been incorrect in
any material respects when made;
(f) If the Trust shall make a general assignment for the benefit of
creditors; admit in writing its inability to pay its debts as they
become due; file a petition in bankruptcy or a petition seeking any
reorganization, arrangement composition, readjustment, liquidation,
dissolution or similar relief under any present or future bankruptcy,
reorganization, insolvency or similar statute, law or regulation or
seek the appointment of any trustee, receiver, custodian or liquidator
of the Trust for all or substantially all of its properties; or
(g) If a proceeding is commenced against the Trust seeking relief or an
appointment of a type described in paragraph (f) above and such
proceeding is not dismissed within 30 days after the commencement
thereof;
12. MERRILL LYNCH's Rights Upon Trust Default. Upon the happening of any
event specified in Section 11, MERRILL LYNCH may, upon one business day's prior
notice to the Trust (which notice may be the same notice referred to in
paragraph (b), (c) or (d) above and shall not be required to be given in advance
in the case of the events described in paragraph (f) or (g), (i) terminate or
accelerate to a date designated by MERRILL LYNCH the date fixed for termination
of the directly affected loan or all loans hereunder and (ii) purchase in the
principal market therefor in a commercially reasonable manner securities with a
market value equal to any Collateral required to be returned or delivered by the
Trust but not so returned or delivered by the date designated by MERRILL LYNCH,
or elect to be deemed, for all purposes of this Agreement, to have purchased
such securities, and in either event apply the cost of such purchase (including
any reasonable expenses incurred in connection therewith) or, in the case of
deemed purchase, the market value of such securities as of the date of such
6
<PAGE>
deemed purchase, against the Trust's obligations hereunder and any other amounts
owing by the Trust, upon which application the Trust's obligations hereunder and
any such other amounts shall be reduced by the amount so applied, the Trust
shall be released from the obligation to pay any part of the Trust's obligations
other than any amount remaining after such reductions, if any, and the Trust
shall be released from any obligations to sell, return or deliver such
Collateral. The Trust shall promptly pay MERRILL LYNCH any amount of its
obligations not released as a result of MERRILL LYNCH's actions hereunder, if
any , after such reduction and the Trust shall thereafter be released from any
obligations to sell, return or deliver such Collateral. The Trust shall pay to
MERRILL LYNCH any excess of such cost of purchase of replacement securities
(including expenses as aforesaid) or in the case of deemed purchase, such market
value of such securities over the amount of the Trust's obligations (prior to
reduction), plus interest at the applicable interest rate (being the daily base
rate on corporate loans at large U.S. money center commercial banks then being
reported in the Eastern Division of the Wall Street Journal) on such excess for
the period from the date of such purchase or deemed purchase until the date of
full payment by Trust. Notwithstanding anything contained in this Agreement,
MERRILL LYNCH shall under no circumstances whatsoever have any obligation or
liability to Trust in respect of any loan following the failure of Trust to pay
the Trust's obligations or return or deliver the applicable Collateral as and
when required by the terms of this Agreement. The parties agree that the
transactions hereunder are "securities contracts" under the Federal Bankruptcy
Code.
13. Market Value. If the principal market for the Collateral or the Loaned
Securities is a national securities exchange, their market value shall be
determined by their last sale price on such exchange on the preceding trading
day or, if there was no sale on that day, on the closing bid quotation on such
exchange on that day. If the principal market for the Collateral or the Loaned
Securities is over-the-counter, their market value shall be determined by the
Trust's closing price quotations on the preceding trading day unless MERRILL
LYNCH or the Trust submits bid quotations from two other recognized dealers, in
which case their market value shall be determined by the mean between the other
quotations.
14. Definition of Certain Terms. As used herein the term Banking Day shall
mean any day on which the federal book entry systems are open for business and
operational at both the Federal Reserve Bank of Boston and the Federal Reserve
Bank of New York. A Closed Overnight loan shall terminate on the following
Banking Day, unless converted into an Open Overnight loan or a Term loan by
mutual agreement of the parties and confirmed by written notice of MERRILL LYNCH
to the Trust. A Term loan shall be from two to seven days as mutually agreed by
the parties; a Closed Term loan shall terminate on the last Banking Day of the
term, unless extended or converted into an Open Loan by mutual agreement of the
parties and confirmed by written notice of MERRILL LYNCH to the Trust. An Open
loan shall continue from day to day (or term to term) unless terminated in
accordance with Section 8 hereof.
15. Transfer Taxes and Fees. All transfer taxes and transfer fees with
respect to the transfer of the Loaned Securities and Collateral between the
Trust and MERRILL LYNCH upon the making or termination of the loan shall be paid
by MERRILL LYNCH. If the Trust shall incur any loss or expense by reason of
MERRILL LYNCH's failure to pay all said taxes and fees as may be due by reason
thereof, the Trust shall be entitled to receive the same from MERRILL LYNCH.
7
<PAGE>
16. Indemnification, etc. Except for taxes other than transfer taxes,
MERRILL LYNCH agrees to indemnify, defend, hold and save harmless the Trust from
any claims, actions, demands or lawsuits of any kind whatsoever arising in any
way out of the use that MERRILL LYNCH makes of the Loaned Securities, except
such as may be caused by the negligence or willful acts of the Trust. If either
party fails to return, as provided in Section 8 hereof, any Collateral which
consists of U.S. Government securities, Loaned Securities or securities
identical to Loaned Securities, that party agrees to reimburse the other party
for any losses caused by such other party's inability to re-deliver such
securities to a subsequent purchaser, except that such other party shall take
all reasonable steps to minimize any such loss, and provided that in no event
shall either party be liable for other than standardized compensatory damages.
17. Notices, Deliveries, etc. All notices (except such as are permitted
hereunder to be made by telephone) and deliveries required hereunder shall be
delivered to the parties entitled to receive such notice or delivery at the
following addresses:
If to Merrill Lynch: Merrill Lynch Government Securities, Inc.
World Financial Center-North Tower
New York, N.Y. 10281-1323
Attention: Corporate and Institutional Client Group
If to the Trust: Investors Bank & Trust Company, as Custodian for
Government Obligations Portfolio
89 South Street
Boston, Massachusetts 02111
Attention: Mutual Funds Department
or at such other addresses which the Trust or MERRILL LYNCH may furnish the
other by written notice pursuant hereto. Any notice, statement, letter,
confirmation, instruction or other writing shall be deemed delivered to a party
if received by such party via telex, TWX, facsimile transmission, wire or other
teleprocess or electronic communication system which MERRILL LYNCH and the Trust
employ for their written communications hereunder.
18. Miscellaneous. Each party agrees that time is of the essence in the
performance of its obligations hereunder. This Agreement shall not be assigned
by any party without the prior written consent of the other parties. Subject to
the foregoing this Agreement shall be binding upon and shall inure to the
benefits of the parties hereto and their respective successors and assigns. This
Agreement shall not be changed except by an instrument in writing signed by each
of the parties hereto. This Agreement may be terminated at any time by the Trust
upon written notice to MERRILL LYNCH, and by MERRILL LYNCH by written notice to
the Trust, provided, however, that the obligations and rights of the Trust and
MERRILL LYNCH under this Agreement with respect to any outstanding loan shall
survive and continue despite any termination of this Agreement until performed
or satisfied. This Agreement supersedes any previous agreement between the
parties concerning the lending of securities.
8
<PAGE>
19. Limitation of Personal Liability. MERRILL LYNCH expressly acknowledges
the provision in the Declaration of Trust of the Trust limiting the personal
liability of the Trustees and shareholders of the Trust, and MERRILL LYNCH
hereby agrees that it shall have recourse only to the assets of the Trust for
the payment of claims or obligations as between MERRILL LYNCH and the Trust
arising out of this Agreement and shall not seek satisfaction of any such
obligation from the Trustees or shareholders of the Trust.
20. Law. This Agreement shall be construed in accordance with, and the
rights of the parties are to be governed by, the laws of the State of New York.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its officer thereunto duly authorized, as
of the day and year first duly written.
MERRILL LYNCH GOVERNMENT SECURITIES, INC. AND/OR
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
BY: /s/ Thomas H. Brady
-----------------------------
Title Vice President
GOVERNMENT OBLIGATIONS PORTFOLIO
BY: /s/ Susan Schiff
-----------------------------
President
9
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<ARTICLE> 6
<CIK> 0000912747
<NAME> GOVERNMENT OBLIGATIONS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 493,863
<INVESTMENTS-AT-VALUE> 509,072
<RECEIVABLES> 7,070
<ASSETS-OTHER> 47
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<NET-ASSETS> 455,523
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<NET-INVESTMENT-INCOME> 37,858
<REALIZED-GAINS-CURRENT> (5,404)
<APPREC-INCREASE-CURRENT> (10,812)
<NET-CHANGE-FROM-OPS> 21,642
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<NUMBER-OF-SHARES-SOLD> 0
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<NET-CHANGE-IN-ASSETS> (66,266)
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 7,296
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<PER-SHARE-NAV-BEGIN> 0.000
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