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As filed with the Securities and Exchange Commission on April 26, 1996
File No. 811-8332
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
EMERGING MARKETS PORTFOLIO
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(Exact Name of Registrant as Specified in Charter)
3808 One Exchange Square
Central, Hong Kong
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(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (617) 482-8260
Thomas Otis
24 Federal Street, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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EXPLANATORY NOTE
This Registration Statement, as amended, has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended. However, interests in the Registrant have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), because
such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section
4(2) of the 1933 Act. Investments in the Registrant may be made only by
U.S. and foreign investment companies, common or commingled trust funds,
organizations or trusts described in Sections 401(a) or 501(a) of the
Internal Revenue Code of 1986, as amended, or similar organizations or
entities that are "accredited investors" within the meaning of Regulation
D under the 1933 Act. This Registration Statement, as amended, does not
constitute an offer to sell, or the solicitation of an offer to buy, any
interests in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to Paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant
Emerging Markets Portfolio (the "Portfolio") is a diversified,
open-end management investment company which was organized as a trust
under the laws of the State of New York on January 18, 1994. Interests in
the Portfolio are issued solely in private placement transactions that do
not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"). Investments in
the Portfolio may be made only by U.S. and foreign investment companies,
common or commingled trust funds, organizations or trusts described in
Section 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement, as amended, does not constitute an offer to sell,
or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio's investment objective is to seek long-term capital
appreciation. The Portfolio seeks to achieve its objective by investing
in equity securities of companies in countries with emerging markets
("Emerging Market Countries"). Emerging Market Countries are located in
Asia, Latin America, the Middle East, Southern Europe, Eastern Europe,
Africa and the region comprising the former Soviet Union. The Portfolio
considers countries with emerging markets to be all countries that are
generally considered to be developing or emerging countries by the
International Bank for Reconstruction and Development (more commonly
referred to as the "World Bank") or the International Finance Corporation,
as well as countries that are classified by the United Nations or
otherwise regarded by their own authorities as developing.
The Portfolio is intended for long-term investors and is not
intended to be a complete investment program. Prospective investors
should take into account their objectives and other investments when
considering the purchase of an interest in the Portfolio. The Portfolio
cannot assure achievement of its investment objective. The investment
objective of the Portfolio is nonfundamental. Investments in Emerging
Markets Countries can be considered speculative, and therefore may offer
higher potential for gains and losses than investments in the developed
markets of the world. See "Investment Policies and Risks" for further
information.
The Portfolio's Investments in Emerging Markets
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The following is a general discussion of certain features of the
Emerging Market Countries economies in which the Portfolio intends to
invest. There can be no assurance that the Portfolio will be able to
capitalize on the factors described herein. Opinions expressed herein are
the good faith opinions of the Portfolio's investment adviser, Lloyd
George Investment Management (Bermuda) Limited (the "Adviser").
The Adviser believes that the long-term growth rates of the eco-
nomies of certain Emerging Market Countries may be substantially higher
than those of developed countries. For a discussion of the risks
associated with investing in Emerging Market Countries, see "Investment
Policies and Risks."
The Adviser believes that factors favoring investment in the
economies of many Emerging Market Countries include:
Political changes in governments which favor a shift from
socialism and government involvement in the private sector to a
market-driven economy. Emerging Market Countries in Asia, Latin
America, the Middle East, Southern Europe, Eastern Europe,
Africa, and the region comprising the former Soviet Union are in
the process of implementing broad market reforms to revitalize
their economies. The Adviser believes that these reforms have
helped lead to significantly higher levels of economic activity.
Privatizations of government-owned and -operated companies in
certain Emerging Market Countries, which provide a source of
capital for government budgets and can result in improved
operating efficiencies and services. The Adviser believes that
many privatized companies may have significant growth potential
arising from the demand created by increasing economic activity.
A favorable regulatory climate. Given the essential role of
private enterprise in economic growth, many Emerging Market
Country governments have in the past provided support to help
companies to finance the considerable capital expenditures they
need to expand. This support has taken a variety of forms,
including tax concessions, more favorable rate or tariff
structures, and limited monopolies on services.
According to the World Bank, the combined market capitalization
of developing countries has grown from $67 billion in 1982 to over $2,373
billion, as of December 31, 1995. World Bank data indicate that
developing countries are experiencing more rapid economic growth than
industrialized countries.
As a result of such factors, the Adviser believes that
substantial opportunities for long-term capital appreciation will be
presented by investments in the equity securities of companies in Emerging
Market Countries.
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Investment Policies and Risks
The Portfolio seeks to achieve its objective through investing in
a carefully selected and continuously managed portfolio consisting
primarily of equity securities of companies in Emerging Market Countries.
A company will be considered to be in an Emerging Market Country if it is
domiciled or has significant operations in that country. The Portfolio
will, under normal market conditions, invest at least 65% of its total
assets in such securities ("Emerging Market investments"). Substantially
all of the Portfolio's assets, however, will normally be invested in
equity securities, warrants, and options on equity securities and indices.
The Portfolio will ordinarily be invested in at least three Emerging
Market Countries.
Equity securities, for purposes of the 65% policy, will be
limited to common and preferred stocks; equity interests in trusts,
partnerships, joint ventures and other unincorporated entities or
enterprises; special classes of shares available only to foreign investors
in markets that restrict ownership by foreign investors to certain classes
of equity securities; convertible preferred stocks; and other convertible
instruments. The convertible instruments in which the Portfolio will
invest will generally not be rated, but will typically be equivalent in
credit quality to securities rated below investment grade (i.e., credit
quality equivalent to lower than Baa by Moody's Investors Services, Inc.
or lower than BBB by Standard & Poor's). Convertible debt securities that
are not investment grade are commonly called "junk bonds" and have risks
similar to equity securities; they have speculative characteristics and
changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make principal and interest payments than
is the case with higher grade debt securities. Such debt securities will
not exceed 20% of total assets.
When consistent with its investment objective, the Portfolio may
also invest in equity securities of companies outside of Emerging Market
Countries, as well as warrants, options on equity securities and indices,
options on currency, futures contracts, options on futures contracts,
forward foreign currency exchange contracts, currency swaps and other
non-equity investments. However, such investments will not, under normal
market conditions, exceed 35% of the Portfolio's total assets. The Port-
folio will not invest more than 5% of its net assets in warrants.
The Portfolio may, for temporary defensive purposes, invest some
or all of its total assets in high grade debt securities of foreign and
United States companies, foreign governments and the U.S. Government, and
their respective agencies, instrumentalities, political subdivisions and
authorities, as well as in high quality money market instruments
denominated in U.S. dollars or a foreign currency.
Investing in Foreign Securities. Investing in securities issued
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by foreign companies and governments involves considerations and possible
risks not typically associated with investing in securities issued by the
U.S. Government and domestic corporations. The values of foreign invest-
ments are affected by changes in currency rates or exchange control
regulations, application of foreign tax laws, including withholding taxes,
changes in governmental administration or economic or monetary policy (in
this country or abroad) or changed circumstances in dealings between
nations. Because investment in foreign securities will usually involve
currencies of foreign countries, the value of the assets of the Portfolio
as measured in U.S. dollars may be adversely affected by changes in
foreign currency exchange rates. Such rates may fluctuate significantly
over short periods of time causing the Portfolio's net asset value to
fluctuate as well. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions
and other costs of investing are generally higher than in the United
States, and foreign securities markets may be less liquid, more volatile
and less subject to governmental supervision than in the United States.
Investments in foreign issuers could be adversely affected by other
factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards
and potential difficulties in enforcing contractual obligations.
More than 25% of the Portfolio's total assets, adjusted to
reflect currency transactions and positions, may be denominated in any
single currency. Concentration in a particular currency will increase the
Portfolio's exposure to adverse developments affecting the value of such
currency. An issuer of securities purchased by the Portfolio may be
domiciled in a country other than the country in whose currency the
securities are denominated.
Because the Portfolio will, under normal market conditions,
invest at least 65% of its total assets in Emerging Market investments,
its investment performance will be especially affected by events affecting
companies in Emerging Market Countries. The value and liquidity of
Emerging Market investments may be affected favorably or unfavorably by
political, economic, fiscal, regulatory or other developments in Emerging
Market Countries. Foreign investment in the securities of issuers in
Emerging Market Countries is usually restricted or controlled to some
degree. The extent of economic development, political stability and
market depth of different Emerging Market Countries varies widely.
Certain Emerging Market Countries are either comparatively underdeveloped
or are in the process of becoming developed. Emerging Market investments
typically involve greater potential for gain or loss than investments in
securities of issuers in developed countries. In comparison to the United
States and other developed countries, Emerging Market Countries may have
relatively unstable governments and economies based on only a few
industries. Given the Portfolio's investments, the Portfolio will likely
be particularly sensitive to changes in the economies of Emerging Market
Countries as the result of any reversals of economic liberalization in
those countries, political unrest or changes in their trading status.
Securities Trading Markets. The securities markets in Emerging
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Market Countries are substantially smaller, less liquid and more volatile
than the major securities markets in the United States. A high proportion
of the shares of many issuers may be held by a limited number of persons
and financial institutions, which may limit the number of shares available
for investment by the Portfolio. The prices at which the Portfolio may
acquire investments may be affected by trading by persons with material
non-public information and by securities transactions by brokers in
anticipation of transactions by the Portfolio in particular securities.
Emerging Market Country securities are susceptible to being influenced by
large investors trading significant blocks of securities. Similarly,
volume and liquidity in the bond markets in Emerging Market Countries are
less than in the United States and, at times, price volatility can be
greater than in the United States. The limited liquidity of these
securities markets in Emerging Market Countries may also affect the
Portfolio's ability to acquire or dispose of securities at the price and
time it wishes to do so.
The stock markets in many Emerging Market Countries are un-
dergoing a period of growth and change, which may result in trading or
price volatility and difficulties in the settlement and recording of
transactions, and in interpreting and applying the relevant law and
regulations. The securities industries in these countries are com-
paratively underdeveloped, and stockbrokers and other intermediaries may
not perform as well as their counterparts in the United States and other
more developed securities markets.
Settlement of securities transactions may be delayed and is
generally less frequent than in the U.S., which could affect the liquidity
of the Portfolio's assets. In addition, disruptions due to work stoppages
and trading improprieties in these securities markets have caused such
markets to close. If extended closings were to occur in stock markets
where the Portfolio was heavily invested, the Portfolio's ability to
redeem Portfolio interests could become correspondingly impaired. To
mitigate these risks, the Portfolio may have to maintain a higher cash
position than it otherwise would, thereby possibly diluting its return, or
the Portfolio may have to sell more liquid securities which it would not
otherwise choose to sell. In some cases, the Portfolio may find it
necessary or desirable to borrow funds on a short-term basis, within the
limits set by the Investment Company Act of 1940, as amended, (the "1940
Act"), to help meet redemption requests. Such borrowings would result in
increased expense to an investor. The Portfolio may suspend redemption
privileges or postpone the date of payment for more than seven days after
a redemption order is received under certain circumstances.
The Portfolio will invest in Emerging Market Countries, in which
political and economic structures may be undergoing significant evolution
and rapid development. Such countries may lack the social, political and
economic stability characteristic of the United States. Certain of such
countries may have in the past failed to recognize private property rights
and have at times nationalized or expropriated the assets of private
companies. The laws of Emerging Market Countries relating to limited
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liability of corporate shareholders, fiduciary duties of officers and
directors, and the bankruptcy of state enterprises may be less well
developed than or different from such laws in the United States. It may
be more difficult to obtain a judgment in a court of an Emerging Market
Country than it is in the United States. In addition, unanticipated
political or social developments may affect the values of the Portfolio's
investments in those countries and the availability to the Portfolio of
additional investments in those countries.
Governmental actions can have a significant effect on the
economic conditions in Emerging Market Countries, which could adversely
affect the value and liquidity of the Portfolio's investments. Although
some governments in Emerging Market Countries have recently begun to
institute economic reform policies, there can be no assurances that they
will continue to pursue such policies or, if they do, that such policies
will succeed.
Unlisted Securities. The Portfolio may invest up to 15% of its
net assets in securities of companies that are neither listed on a stock
exchange nor traded over the counter. Unlisted securities may include new
and early stage companies, which may involve a high degree of business and
financial risk that can result in substantial losses and may be considered
speculative. Such securities will generally be deemed to be illiquid.
Because of the absence of any public trading market for these investments,
the Portfolio may take longer to liquidate these positions than would be
the case for publicly traded securities. Although these securities may be
resold in privately negotiated transactions, the prices realized from
these sales could be less than those originally paid by the Portfolio or
less than what may be considered the fair value of such securities.
Furthermore, issuers whose securities are not publicly traded may not be
subject to public disclosure and other investor protection requirements
applicable to publicly traded securities. If such securities are required
to be registered under the securities laws of one or more jurisdictions
before being resold, the Portfolio may be required to bear the expenses of
registration. In addition, any capital gains realized on the sale of such
securities may be subject to higher rates of taxation than taxes payable
on the sale of listed securities.
Derivative Instruments. The Portfolio may purchase or sell
derivative instruments (which are instruments that derive their value from
another instrument, security, index or currency) to enhance return (which
may be considered speculative), to hedge against fluctuations in
securities prices, interest rates or currency exchange rates, or as a
substitute for the purchase or sale of securities or currencies. The
Portfolio's transactions in derivative instruments may be in the U.S. or
abroad and may include the purchase or sale of futures contracts on
securities, securities indices, other indices, other financial instruments
or currencies; options on futures contracts; exchange-traded and over-the-
counter options on securities, indices or currencies; and forward foreign
currency exchange contracts. The Portfolio's transactions in derivative
instruments involve a risk of loss or depreciation due to: unanticipated
adverse changes in securities prices, interest rates, the other financial
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instruments' prices or currency exchange rates; the inability to close out
a position; default by the counterparty; imperfect correlation between a
position and the desired hedge; tax constraints on closing out positions;
and portfolio management constraints on securities subject to such
transactions. The loss on derivative instruments (other than purchased
options) may substantially exceed the Portfolio's initial investment in
these instruments. In addition, the Portfolio may lose the entire premium
paid for purchased options that expire before they can be profitably
exercised by the Portfolio. The Portfolio incurs transaction costs in
opening and closing positions in derivative instruments. There can be no
assurance that the Adviser's use of derivative instruments will be
advantageous to the Portfolio.
The Portfolio may purchase call and put options on any securities
in which the Portfolio may invest or options on any securities index
composed of securities in which the Portfolio may invest. The Portfolio
does not intend to write a covered option on any security if after such
transaction more than 15% of its net assets, as measured by the aggregate
value of the securities underlying all covered calls and puts written by
the Portfolio, would be subject to such options. The Portfolio does not
intend to purchase an option on any security if, after such transaction,
more than 5% of its net assets, as measured by the aggregate of all
premiums paid for all such options held by the Portfolio, would be so
invested.
To the extent that the Portfolio enters into futures contracts,
options on futures contracts and options on foreign currencies traded on
an exchange regulated by the Commodity Futures Trading Commission
("CFTC"), in each case that are not for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required
to establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the
Portfolio's portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Portfolio has entered into.
Forward contracts are individually negotiated and privately
traded by currency traders and their customers. A forward contract
involves an obligation to purchase or sell a specific currency (or basket
of currencies) for an agreed price at a future date, which may be any
fixed number of days from the date of the contract. The Portfolio may
engage in cross-hedging by using forward contracts in one currency (or
basket of currencies) to hedge against fluctuations in the value of
securities denominated in a different currency if the Adviser determines
that there is an established historical pattern of correlation between the
two currencies (or the basket of currencies and the underlying currency).
Use of a different foreign currency magnifies the Portfolio's exposure to
foreign currency exchange rate fluctuations. The Portfolio may also use
forward contracts to shift its exposure to foreign currency exchange rate
changes from one currency to another.
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The Portfolio may enter into currency swaps for both hedging and
non-hedging purposes. Currency swaps involve the exchange of rights to
make or receive payments in specified currencies. Because currency swaps
are individually negotiated, the Portfolio expects to achieve an
acceptable degree of correlation between its portfolio investments and its
currency swap positions. Currency swaps usually involve the delivery of
the entire principal value of one designated currency in exchange for the
other designated currency. Therefore, the entire principal value of a
currency swap is subject to the risk that the other party to the swap will
default on its contractual delivery obligations. The use of currency
swaps is a highly specialized activity which involves special investment
techniques and risks. If the Adviser is incorrect in its forecasts of
market values and currency exchange rates, the Portfolio's performance
will be adversely affected.
Other Investment Companies. The Portfolio reserves the right to
invest up to 10% of its total assets in the securities of other investment
companies unaffiliated with the Adviser or Eaton Vance Management ("Eaton
Vance") that have the characteristics of closed-end investment companies.
The Portfolio will indirectly bear its proportionate share of any
management fees paid by investment companies in which it invests in
addition to the advisory fee paid by the Portfolio. The value of closed-
end investment securities, which are usually traded on an exchange, is
affected by demand for the securities themselves, independent of the
demand for the underlying portfolio assets and, accordingly, such
securities can trade at a discount from their net asset values.
Investment Limitations
The Portfolio has adopted certain fundamental investment
restrictions which are enumerated in detail in Part B and which may not be
changed unless authorized by an investor vote. Among these fundamental
restrictions, the Portfolio may not (1) borrow money, except as permitted
by the 1940 Act; (2) purchase any securities on margin (but the Portfolio
may obtain such short-term credits as may be necessary for the clearance
of purchases and sales of securities); or (3) with respect to 75% of its
total assets, invest more than 5% of its total assets (taken at current
value) in the securities of any one issuer, or invest in more than 10% of
the outstanding voting securities of any one issuer, except obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies.
Investment restrictions are considered at the time of acquisition of
assets; the sale of portfolio assets generally is not required in the
event of a subsequent change in circumstances. As a matter of fundamental
policy, the Portfolio will not invest 25% or more of its total assets in
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the securities, other than U.S. Government securities, of issuers in any
one industry. However, the Portfolio is permitted to invest 25% or more
of its total assets in (i) the securities of issuers located in any one
Emerging Market Country and (ii) securities denominated in the currency of
any one country.
Except for the fundamental investment restrictions and policies
specifically identified above and enumerated in Part B, the investment
objective and policies of the Portfolio are not fundamental policies and
accordingly may be changed by the Trustees without obtaining the approval
of the investors in the Portfolio. The Portfolio's investors will receive
written notice thirty days prior to any change in the investment objective
of the Portfolio. If any changes were made, the Portfolio might have an
investment objective different from the objective which an investor
considered appropriate at the time of its initial investment.
As a matter of nonfundamental policy, the Portfolio may not (i)
purchase any securities if, at the time of such purchase, permitted
borrowings exceed 5% of the value of its total assets, or (ii) invest more
than 15% of its net assets in over-the-counter options, repurchase
agreements maturing in more than seven days, and other illiquid
securities. Nevertheless, the Portfolio may temporarily borrow up to 5%
of the value of its total assets to satisfy redemption requests or settle
securities transactions. The Portfolio may lend portfolio securities and
engage in repurchase agreements and reverse repurchase agreements but the
Adviser has no current intention to do so.
Under the 1940 Act and the rules promulgated thereunder, the
Portfolio's investments in the securities of any company that, in its most
recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities is limited to 5% of any class of the
issuer's equity securities and 10% of the outstanding principal amount of
the issuer's debt securities, provided that the Portfolio's aggregate
investments in the securities of any such issuer does not exceed 5% of the
Portfolio's total assets. Some of the companies available for investment
in Emerging Market Countries, including some enterprises being privatized
by such countries, are financial services businesses that engage in
securities-related activities. The Portfolio's ability to invest in such
enterprises may thus be limited.
Item 5. Management of the Portfolio
The Portfolio is organized as a trust under the laws of the State
of New York. The Portfolio intends to comply with all applicable federal
and state securities laws.
Investment Adviser
The Portfolio engages Lloyd George Investment Management
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(Bermuda) Limited (the "Adviser") as its investment adviser. The Adviser,
acting under the general supervision of the Board of Trustees of the
Portfolio, manages the Portfolio's investments and affairs. The Portfolio
is co-managed by Robert Lloyd George and Scobie Dickinson Ward.
The Adviser is registered as an investment adviser with the
Securities and Exchange Commission (the "Commission"). The Adviser is a
subsidiary of Lloyd George Management (B.V.I.) Limited ("LGM"). LGM and
its subsidiaries act as investment adviser to various individual and
institutional clients with total assets under management of approximately
$1.5 billion. Eaton Vance's parent, Eaton Vance Corp., owns 24% of the
Class A shares issued by LGM.
LGM was established in 1991 to provide investment management
services with respect to equity securities of companies trading in many
emerging markets. LGM currently manages Pacific Basin and Asian
portfolios for both private clients and institutional investors seeking
long-term capital growth. LGM's core investment team consists of nine
experienced investment professionals, based in Hong Kong, who have worked
together over a number of years successfully managing client portfolios in
Pacific Basin and Asian stock markets. LGM also has offices in Bombay,
India and London, England. The team has a unique knowledge of, and
experience with, Pacific Basin and Asian emerging markets. LGM is
ultimately controlled by the Hon. Robert J.D. Lloyd George, President and
Trustee of the Portfolio and Chairman and Chief Executive Officer of the
Adviser. LGM's only activity is portfolio management.
LGM and the Adviser have adopted a disciplined management style,
providing a blend of Asian and multinational expertise with the most
rigorous international standards of fundamental security analysis.
Although focused primarily in Asia, LGM and the Adviser maintain a network
of international contacts in order to monitor international economic and
stock market trends and offer clients a global management service.
Personnel of the Adviser include the following:
The Honorable Robert Lloyd George. Chairman. Born in London in
1952 and educated at Eaton College, where he was a King's Scholar, and at
Oxford University. Prior to founding LGM, Mr. Lloyd George was Managing
Director of Indosuez Asia Investment Services Ltd. Previously, he spent
four years with the Fiduciary Trust Company of New York researching
international securities, in the United States and Europe, for the United
Nations Pension Fund. Mr. Lloyd George is the author of numerous
published articles and three books - "A Guide to Asian Stock Markets"
(Longmans, Hong Kong, 1989), "The East West Pendulum" (Woodhead -
Faulkner, Cambridge, 1991), and "North South - an Emerging Markets
Handbook" (Probus, England, 1994).
William Walter Raleigh Kerr. Finance Director and Chief
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Operating Officer. Born in 1950 and educated at Ampleforth and Oxford.
Mr. Kerr qualified as a Chartered Accountant at Thomson McLintock & Co.
before joining The Oldham Estate Company plc as Financial Controller.
Prior to joining LGM, Mr. Kerr was a Director of Banque Indosuez's
corporate finance subsidiary, Financiere Indosuez Limited, in London.
Prior to that Mr. Kerr worked for First Chicago Limited.
Scobie Dickinson Ward. Director. Born in 1966 and a cum laude
graduate of both Phillips Academy Andover, and Harvard University. Mr.
Ward joined Indosuez Asia Investment Services in 1989, where he managed
the $100 million Himalayan Fund, and the Indosuez Tasman Fund, investing
in Australia and New Zealand. Messrs. Ward and Lloyd George manage Eaton
Vance's Emerging Markets Portfolio, Greater China Growth Portfolio and
South Asia Portfolio (which invests in India and the Indian subcontinent).
M. F. Tang. Director. Born in 1946 and educated in Hong Kong.
Mr. Tang is a Fellow of the Chartered Association of Certified
Accountants. Mr. Tang joined LGM having worked for Australian Mutual
Provident Society in Sydney where he was a Portfolio Manager responsible
for Asian Equities. Prior thereto, Mr. Tang worked for Barclays Australia
Investment Services Ltd. From 1978 to 1986, Mr. Tang worked for Barings
International Investment Management, and prior to that, he spent six years
with Peat Marwick Mitchell & Co. Mr. Tang is fluent in the Cantonese and
Mandarin dialects of the Chinese language.
Bidare Narayanrao Manjunath. Chief Representative, India. Born
in 1958 and educated at Birla Institute of Technology and Science where he
received a Masters Degree, Mr. Manjunath joined Canara Bank in 1982 where
he worked in the economic research department before joining its mutual
fund division in 1987. In 1992, Mr. Manjunath joined Credit Capital
Finance Corporation Ltd where he served as Associate Vice President before
becoming Lloyd George Management's Chief Representative, India in 1993.
Mr. Manjunath was involved in the investment process for both the
Himalayan Fund and the LG India Fund, which he co-manages.
Pamela Chan. Director. Born in Hong Kong in 1957 and graduated
from Mills College in Oakland, California. She was an investment
executive for Jardine Fleming from 1982-1984 before moving to Australia
where she worked as a Fund Manager for Rothschild and Aetna. She joined
Sun Life Assurance Society PLC in England in 1987 where she was the head
of South East Asian Equities and a Director. She joined LGM in April 1994
where she is a portfolio manager and a member of the Pension Management
Committee.
Adaline Mang-Yee Ko. Director. Born in 1943 and educated at
University of Birmingham, England and at London Business School where she
received here MBA. Ms. Ko has over 13 years experience working with Far
East Asian equities. From 1982-1988, she worked at Save & Prosper Group
Ltd. as an investment manager. In 1988, Ms. Ko transferred to Robert
Fleming & Co. Ltd. In 1990, she was promoted to Director of Fleming
Investment Management Ltd. In 1992, she was promoted to Head of the
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Pacific Region Portfolios Group where she supervised a team of 5 with
responsibility for over $1.5 billion in assets under management. Ms. Ko
joined LGM in 1995.
While the Portfolio is a New York trust, the Adviser, together
with certain Trustees and officers of the Portfolio, are not residents of
the United States, and substantially all of their respective assets may be
located outside of the United States. It may be difficult for investors
to effect service of process within the United States upon such
individuals, or to realize judgments of courts of the United States
predicated upon civil liabilities of the Adviser and such individuals
under the federal securities laws of the United States. The Portfolio has
been advised that there is substantial doubt as to the enforceability in
the countries in which the Adviser and such individuals reside of such
civil remedies and criminal penalties as are afforded by the federal
securities laws of the United States.
Under its investment advisory agreement with the Portfolio, the
Adviser receives a monthly advisory fee of 0.0625% (equivalent to 0.75%
annually) of the average daily net assets of the Portfolio up to $500
million, which fee declines at intervals above $500 million. As of
December 31, 1995, the Portfolio had net assets of $3,587,269. For the
fiscal year ended December 31, 1995, the Portfolio paid the Adviser
advisory fees equivalent to 0.75% of the Portfolio's average daily net
assets for such year.
The Adviser also furnishes for the use of the Portfolio office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Portfolio. The Adviser places the
portfolio transactions of the Portfolio with many broker-dealer firms and
uses its best efforts to obtain execution of such transactions at prices
which are advantageous to the Portfolio and at reasonably competitive com-
mission rates. Subject to the foregoing, the Adviser may consider sales
of shares of certain investment companies managed or administered by Eaton
Vance as a factor in the selection of firms to execute portfolio
transactions.
Administrator
Eaton Vance, its affiliates and its predecessor companies have
been managing assets of individuals and institutions since 1924 and
managing investment companies since 1931. Eaton Vance acts as investment
adviser to investment companies and various individual and institutional
clients with assets under management of over $16 billion. Eaton Vance is
a wholly-owned subsidiary of Eaton Vance Corp., a publicly-held holding
company that, through its subsidiaries and affiliates, engages primarily
in investment management, administration and marketing activities.
Eaton Vance, acting under the general supervision of the Board of
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Trustees of the Portfolio, administers the business affairs of the
Portfolio. Eaton Vance's services include monitoring and providing
reports to the Trustees of the Portfolio concerning the investment
performance achieved by the Adviser for the Portfolio, recordkeeping,
preparation and filing of documents required to comply with federal and
state securities laws, supervising the activities of the custodian of the
Portfolio, providing assistance in connection with Trustees' and
interestholders' meetings and other administrative services necessary to
conduct the business of the Portfolio. Eaton Vance does not provide any
investment management or advisory services to the Portfolio. Eaton Vance
also furnishes for the use of the Portfolio office space and all necessary
office facilities, equipment and personnel for administering the business
affairs of the Portfolio.
Under its administration agreement with the Portfolio, Eaton
Vance receives a monthly administration fee in the amount of 1/48 of 1%
(equal to 0.25% annually) of the average daily net assets of the Portfolio
up to $500 million, which fee declines at intervals above $500 million.
For the fiscal year ended December 31, 1995, the Portfolio paid Eaton
Vance administration fees equivalent to 0.25% of the Portfolio's average
daily net assets for such year. The combined advisory and administration
fees payable by the Portfolio are higher than similar fees charged by most
other investment companies.
The Portfolio is responsible for the payment of all of its costs
and expenses not expressly stated to be payable by the Adviser under the
investment advisory agreement or by Eaton Vance under the administration
agreement.
Item 6. Capital Stock and Other Securities
The Portfolio is organized as a trust under the laws of the State
of New York and intends to be treated as a partnership for federal tax
purposes. Under the Declaration of Trust, the Trustees are authorized to
issue interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments
in the Portfolio may not be transferred, but an investor may withdraw all
or any portion of its investment at any time at net asset value.
Investors in the Portfolio will each be liable for all obligations of the
Portfolio. However, the risk of an investor in the Portfolio incurring
financial loss on account of such liability is limited to circumstances in
which both adequate insurance exists and the Portfolio itself is unable
to meet its obligations.
The Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of any investor in the
Portfolio unless either the remaining investors, by unanimous vote at a
meeting of such investors, or a majority of the Trustees of the Portfolio,
by written instrument consented to by all investors, agree to continue the
business of the Portfolio. This provision is consistent with the
treatment of the Portfolio as a partnership for federal income tax
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purposes.
Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable by the Portfolio, except as
set forth above. The Portfolio is not required and has no current
intention to hold annual meetings of investors, but the Portfolio may hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Changes in
fundamental policies or restrictions will be submitted to investors for
approval. The investment objective and all nonfundamental investment
policies of the Portfolio may be changed by the Trustees of the Portfolio
without obtaining the approval of the investors in the Portfolio.
Investors have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified
number of investors) the right to communicate with other investors in
connection with requesting a meeting of investors for the purpose of
removing one or more Trustees. Any Trustee may be removed by the
affirmative vote of holders of two-thirds of the interests in the
Portfolio. Upon liquidation of the Portfolio, investors would be entitled
to share pro rata in the net assets of the Portfolio available for
distribution to investors.
Information regarding pooled investment entities or funds that
invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc., 24 Federal Street, Boston, MA 02110, (617) 482-8260.
Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower
returns. Additionally, the Portfolio may hold fewer securities, resulting
in increased portfolio risk, and experience decreasing economies of scale.
However, this possibility exists as well for historically structured funds
that have large or institutional investors.
As of April 1, 1996, EV Traditional Emerging Markets Fund and EV
Marathon Emerging Markets Fund owned approximately 34.7% and 56.4%,
respectively, of the outstanding voting interests in the Portfolio.
The net asset value of the Portfolio 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 (currently
4:00 p.m., New York time) (the "Portfolio Valuation Time").
Each investor in the Portfolio may add to or reduce its invest-
ment 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
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Portfolio on such day. Any additions or withdrawals, which are to be
effected on that day, will then be effected. Each investor's percentage
of the aggregate interests in the Portfolio will then be recomputed as the
percentage equal to a fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the close of regular
trading on the Exchange (normally 4:00 p.m., New York time), on such day
plus or minus, as the case may be, that amount of any additions to or
withdrawals from the investor's investment in the Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the close of such trading on such 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 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 under the Code will be able to
satisfy the requirements for such qualification.
Item 7. Purchase of Interests in the Portfolio
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the 1933 Act. See "General Description of Registrant"
above.
An investment in the Portfolio will be made without a sales load.
All investments received by the Portfolio will be effected as of the next
Portfolio Valuation Time. The net asset value of the Portfolio is
determined at the Portfolio Valuation Time on each Portfolio Business Day.
The Portfolio will be closed for business and will not determine its net
asset value on the following business holidays: New Year's Day,
Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
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Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Portfolio's net asset value is computed in accordance with procedures
established by the Portfolio's Trustees.
The Portfolio's net asset value is determined by Investors Bank &
Trust Company (as custodian and agent for the Portfolio) based on market
or fair value in the manner authorized by the Trustees of the Portfolio.
Exchange listed securities generally are valued at closing sale prices.
The net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. For further information
regarding the valuation of the Portfolio's assets, see Part B, Item 19.
There is no minimum initial or subsequent investment in the
Portfolio. The Portfolio reserves the right to cease accepting
investments at any time or to reject any investment order.
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc. ("EVD"). The principal business address of EVD is 24
Federal Street, Boston, Massachusetts 02110. EVD receives no compensation
for serving as the placement agent for the Portfolio.
Item 8. Redemption or Decrease of Interest
An investor in the Portfolio may withdraw all of (redeem) or any
portion of (decrease) its interest in the Portfolio if a withdrawal
request in proper form is furnished by the investor to the Portfolio. All
withdrawals will be effected as of the next Portfolio Valuation Time. The
proceeds of a withdrawal will be paid by the Portfolio normally on the
Portfolio Business Day the withdrawal is effected, but in any event within
seven days. The Portfolio reserves the right to pay the proceeds of a
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 1940 Act, if an emergency exists, or
during any other period permitted by order of the Commission for the
protection of investors.
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Item 9. Pending Legal Proceedings
Not applicable.
A-17
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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-12
Control Persons and Principal Holder of Securities . . . B-15
Investment Advisory and Other Services . . . . . . . . . B-16
Brokerage Allocation and Other Practices . . . . . . . . B-18
Capital Stock and Other Securities . . . . . . . . . . . B-22
Purchase, Redemption and Pricing of Securities . . . . . B-24
Tax Status . . . . . . . . . . . . . . . . . . . . . . . B-25
Underwriters . . . . . . . . . . . . . . . . . . . . . . B-27
Calculation of Performance Data . . . . . . . . . . . . B-27
Financial Statements . . . . . . . . . . . . . . . . . . B-27
Appendix A -- Description of Securities Ratings . . . . a-1
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 Emerging Markets Portfolio (the "Portfolio").
This Part B should be read in conjunction with Part A. Capitalized terms
used in this Part B and not otherwise defined have the meanings given them
in Part A.
Foreign Investments
Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant
risks not present in domestic investments. For example, there is
generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting
requirements of the U.S. securities laws. Foreign issuers are generally
not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to
domestic issuers. Investments in foreign securities also involve the risk
of possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds
or other assets of the Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments.
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<PAGE>
Further, economies of particular countries or areas of the world may
differ favorably or unfavorably from the economy of the United States. It
is anticipated that in most cases the best available market for foreign
securities will be on exchanges or in over-the-counter markets located
outside of the United States. Foreign stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
United States, and securities of some foreign issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. In addition, foreign brokerage
commissions are generally higher than commissions on securities traded in
the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities
markets, broker-dealers, and issuers than in the United States.
Foreign Currency Transactions
Because investments in companies whose principal business
activities are located outside of the United States will frequently
involve currencies of foreign countries, and because assets of the
Portfolio may temporarily be held in bank deposits in foreign currencies
during the completion of investment programs, the value of the assets of
the Portfolio as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange
control regulations. Currency exchange rates can also be affected un-
predictably by intervention by U.S. or foreign governments or central
banks, or the failure to intervene, or by currency controls or political
developments in the U.S. or abroad. The Portfolio may conduct its foreign
currency exchange transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through
entering into swaps, forward contracts, options or futures on currency.
On spot transactions, foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the
Portfolio at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
Currency Swaps
Currency swaps require maintenance of a segregated account
described under "Asset Coverage for Derivative Instruments" below. The
Portfolio will not enter into any currency swap unless the credit quality
of the unsecured senior debt or the claims-paying ability of the other
party thereto is considered to be investment grade by Lloyd George
Investment Management (Bermuda) Limited (the "Adviser"). If there is a
default by the other party to such a transaction, the Portfolio will have
contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with
a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid in comparison with
the markets for other similar instruments which are traded in the
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interbank market.
Forward Foreign Currency Exchange Transactions
The Portfolio may enter into forward foreign currency exchange
contracts in several circumstances. First, when the Portfolio enters into
a contract for the purchase or sale of a security denominated in a foreign
currency, or when the Portfolio anticipates the receipt in a foreign
currency of dividend or interest payments on such a security which it
holds, the Portfolio may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest
payment, as the case may be. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars, of the amount of foreign
currency involved in the underlying transactions, the Portfolio will
attempt to protect itself against an adverse change in the relationship
between the U.S. dollar and the subject foreign currency during the period
between the date on which the security is purchased or sold, or on which
the dividend or interest payment is declared, and the date on which such
payments are made or received.
Additionally, when management of the Portfolio believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, it may enter into a forward contract to sell, for
a fixed amount of dollars, the amount of foreign currency approximating
the value of some or all of the securities held by the Portfolio
denominated in such foreign currency. The precise matching of the forward
contract amounts and the value of the securities involved will not
generally be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the
value of those securities between the date on which the contract is
entered into and the date it matures. The precise projection of
short-term currency market movements is not possible, and short-term
hedging provides a means of fixing the dollar value of only a portion of
the Portfolio's foreign assets.
The Portfolio generally will not enter into a forward contract
with a term of greater than one year.
Special Risks Associated With Currency Transactions
Transactions in forward contracts, as well as futures and options
on foreign currencies, are subject to the risk of governmental actions
affecting trading in or the prices of currencies underlying such
contracts, which could restrict or eliminate trading and could have a
substantial adverse effect on the value of positions held by the
Portfolio. In addition, the value of such positions could be adversely
affected by a number of other complex political and economic factors
applicable to the countries issuing the underlying currencies.
Furthermore, unlike trading in most other types of instruments,
there is no systematic reporting of last sale information with respect to
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<PAGE>
the foreign currencies underlying forward contracts, futures contracts and
options. As a result, the available information on which the Portfolio's
trading systems will be based may not be as complete as the comparable
data on which the Portfolio makes investment and trading decisions in
connection with securities and other transactions. Moreover, because the
foreign currency market is a global, twenty-four hour market, events could
occur on that market which will not be reflected in the forward, futures
or options markets until the following day, thereby preventing the
Portfolio from responding to such events in a timely manner.
Settlements of over-the-counter forward contracts or of the
exercise of foreign currency options generally must occur within the
country issuing the underlying currency, which in turn requires parties to
such contracts to accept or make delivery of such currencies in conformity
with any United States or foreign restrictions and regulations regarding
the maintenance of foreign banking relationships, fees, taxes or other
charges.
Unlike currency futures contracts and exchange-traded options,
options on foreign currencies and forward contracts are not traded on
contract markets regulated by the Commodities Futures Trading Commission
("CFTC") or (with the exception of certain foreign currency options) the
Securities and Exchange Commission ("Commission"). To the contrary, such
instruments are traded through financial institutions acting as market-
makers. (Foreign currency options are also traded on the Philadelphia
Stock Exchange subject to Commission regulation). In an over-the-counter
trading environment, many of the protections associated with transactions
on exchanges will not be available. For example, there are no daily price
fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of
an option cannot lose more than the amount of the premium plus related
transaction costs, this entire amount could be lost. Moreover, an option
writer could lose amounts substantially in excess of its initial
investment due to the margin and collateral requirements associated with
such option positions. Similarly, there is no limit on the amount of
potential losses on forward contracts to which the Portfolio is a party.
In addition, over-the-counter transactions can only be entered
into with a financial institution willing to take the opposite side, as
principal, of the Portfolio's position unless the institution acts as
broker and is able to find another counterparty willing to enter into the
transaction with the Portfolio. Where no such counterparty is available,
it will not be possible to enter into a desired transaction. There also
may be no liquid secondary market in the trading of over-the-counter
contracts, and the Portfolio may be unable to close out options purchased
or written, or forward contracts entered into, until their exercise,
expiration or maturity. This in turn could limit the Portfolio's ability
to realize profits or to reduce losses on open positions and could result
in greater losses.
Furthermore, over-the-counter transactions are not backed by the
guarantee of an exchange's clearing corporation. The Portfolio will
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<PAGE>
therefore be subject to the risk of default by, or the bankruptcy of, the
financial institution serving as its counterparty. One or more of such
institutions also may decide to discontinue its role as market-maker in a
particular currency, thereby restricting the Portfolio's ability to enter
into desired hedging transactions. The Portfolio will enter into over-
the-counter transactions only with parties whose creditworthiness has been
reviewed and found satisfactory by the Adviser.
The purchase and sale of exchange-traded foreign currency
options, however, are subject to the risks of the availability of a liquid
secondary market described above, as well as the risks regarding adverse
market movements, margining of options written, the nature of the foreign
currency market, possible intervention by governmental authorities and the
effect of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not presented
by the over-the-counter market. For example, exercise and settlement of
such options must be made exclusively through the Options Clearing
Corporation ("OCC"), which has established banking relationships in
applicable foreign countries for this purpose. As a result, the OCC may,
if it determines that foreign governmental restrictions or taxes would
prevent the orderly settlement of foreign currency option exercises, or
would result in undue burdens on the OCC or its clearing member, impose
special procedures for exercise and settlement, such as technical changes
in the mechanics of delivery of currency, the fixing of dollar settlement
prices of prohibitions on exercise.
Risks Associated With Derivative Instruments
Entering into a derivative instrument involves a risk that the
applicable market will move against the Portfolio's position and that the
Portfolio will incur a loss. For derivative instruments other than
purchased options, this loss may exceed the amount of the initial
investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to
a particular market risk. Leverage enhances the Portfolio's exposure to
the price volatility of derivative instruments it holds. The Portfolio's
success in using derivative instruments to hedge portfolio assets depends
on the degree of price correlation between the derivative instruments and
the hedged asset. Imperfect correlation may be caused by several factors,
including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and
the Portfolio assets. Over-the-counter ("OTC") derivative instruments
involve an enhanced risk that the issuer or counterparty will fail to
perform its contractual obligations. Some derivative instruments are not
readily marketable or may become illiquid under adverse market conditions.
In addition, during periods of market volatility, a commodity exchange may
suspend or limit trading in an exchange-traded derivative instrument,
which may make the contract temporarily illiquid and difficult to price.
Commodity exchanges may also establish daily limits on the amount that the
price of a futures contract or futures option can vary from the previous
day's settlement price. Once the daily limit is reached, no trades may be
made that day at the price beyond the limit. This may prevent the
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Portfolio from closing out positions and limiting its losses. The staff
of the Commission takes the position that purchased OTC options, and
assets used as cover for written OTC options, are subject to the
Portfolio's 15% limit on illiquid investments. However, with respect to
options written with primary dealers in U.S. Government securities
pursuant to an agreement requiring a closing purchase transaction at a
formula price, the amount of illiquid securities may be calculated with
reference to the formula price. The Portfolio's ability to terminate OTC
derivative instruments may depend on the cooperation of the counterparties
to such contracts. For thinly traded derivative instruments, the only
source of price quotations may be the selling dealer or counterparty. In
addition, certain provisions of the Internal Revenue Code of 1986, as
amended ("Code"), limit the extent to which the Portfolio may purchase and
sell derivative instruments. The Portfolio will engage in transactions in
futures contracts and related options only to the extent such transactions
are consistent with the requirements of the Code for maintaining the
qualification of the Fund as a regulated investment company for federal
income tax purposes. See "Tax Status."
Asset Coverage for Derivative Instruments
Transactions using forward contracts, futures contracts and
written options expose the Portfolio to an obligation to another party.
The Portfolio will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies,
or other options or futures contracts or forward contracts, or (2) cash,
receivables and short-term debt securities with a value sufficient at all
times to cover its potential obligations not covered as provided in (1)
above. The Portfolio will comply with Commission guidelines regarding
cover for these instruments and, if the guidelines so require, set aside
cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be
sold while the position in the corresponding forward contract, futures
contract or option is open, unless they are replaced with other
appropriate assets. As a result, the commitment of a large portion of the
Portfolio's assets to cover or segregated accounts could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
Limitations on Futures Contracts and Options
If the Portfolio has not complied with the 5% CFTC test set forth
in Part A, to evidence its hedging intent, the Portfolio expects that, on
75% or more of the occasions on which it takes a long futures or option on
futures position, it will have purchased or will be in the process of
purchasing, equivalent amounts of related securities at the time when the
futures or options position is closed out. However, in particular cases,
when it is economically advantageous for the Portfolio to do so, a long
futures or options position may be terminated (or an option may expire)
B - 6
<PAGE>
without a corresponding purchase or securities.
The Portfolio may enter into futures contracts, and options on
futures contracts, traded on an exchange regulated by the CFTC and on
foreign exchanges, but, with respect to foreign exchange-traded futures
contracts an options on such futures contracts, only if the Investment
Adviser determines that trading on each such foreign exchange does not
subject the Portfolio to risks, including credit and liquidity risks, that
are materially greater than the risks associated with training on CFTC-
regulated exchanges.
In order to hedge its current or anticipated portfolio positions,
the Portfolio may use futures contracts on securities held in its
portfolio or on securities with characteristics similar to those of the
securities held by the Portfolio. If, in the opinion of the Investment
Adviser, there is a sufficient degree of correlation between price trends
for the securities held by the Portfolio and futures contracts based on
other financial instruments, securities indices or other indices, the
Portfolio may also enter into such futures contracts as part of its
hedging strategy.
All call and put options on securities written by the Portfolio
will be covered. This means that, in the case of a call option, the
Portfolio will own the securities subject to the call option or an
offsetting call option so long as the call option is outstanding. In the
case of a put option, the Portfolio will own an offsetting put option or
will have deposited with its custodian cash or liquid, high-grade debt
securities with a value at least equal to the exercise price of the put
option. The Portfolio may only write a put option on a security that it
intends ultimately to acquire for its investment portfolio.
Repurchase Agreements
Under a repurchase agreement the Portfolio buys a security at one
price and simultaneously promises to sell that same security back to the
seller at a higher price. At no time will the Portfolio commit more than
15% of its net assets to repurchase agreements which mature in more than
seven days and other illiquid securities. The Portfolio's repurchase
agreements will provide that the value of the collateral underlying the
repurchase agreement will always be at least equal to the repurchase
price, including any accrued interest earned on the repurchase agreement,
and will be marked to market daily. The Portfolio may enter into
repurchase agreements with respect to its permitted investments, but
currently would do so only with member banks of the Federal Reserve System
or with primary dealers in U.S. Government securities. In the event of
the bankruptcy of the other party to a repurchase agreement, the Portfolio
might experience delays in recovering its cash. To the extent that, in
the meantime, the value of the securities the Portfolio purchased may have
decreased, the Portfolio could experience a loss.
Reverse Repurchase Agreements
B - 7
<PAGE>
The Portfolio may enter into reverse repurchase agreements.
Under a reverse repurchase agreement, the Portfolio temporarily transfers
possession of a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash. At the same time, the Portfolio agrees
to repurchase the instrument at an agreed upon time (normally within seven
days) and price, which reflects an interest payment. The Portfolio
expects that it will enter into reverse repurchase agreements when it is
able to invest the cash so acquired at a rate higher than the cost of the
agreement, which would increase the income earned by the Portfolio. The
Portfolio could also enter into reverse repurchase agreements as a means
of raising cash to satisfy redemption requests without the necessity of
selling portfolio assets.
When the Portfolio enters into a reverse repurchase agreement,
any fluctuations in the market value of either the securities transferred
to another party or the securities in which the proceeds may be invested
would affect the market value of the Portfolio's assets. As a result,
such transactions may increase fluctuations in the market value of the
Portfolio's assets. While there is a risk that large fluctuations in the
market value of the Portfolio's assets could affect the Portfolio's net
asset value, this risk is not significantly increased by entering into
reverse repurchase agreements, in the opinion of the Adviser. Because
reverse repurchase agreements may be considered to be the practical
equivalent of borrowing funds, they constitute a form of leverage. If the
Portfolio reinvests the proceeds of a reverse repurchase agreement at a
rate lower than the cost of the agreement, entering into the agreement
will lower the Portfolio's yield.
At all times that a reverse repurchase agreement is outstanding,
the Portfolio will maintain cash or high grade liquid debt securities in a
segregated account at its custodian bank with a value at least equal to
its obligation under the agreement. Securities and other assets held in
the segregated account may not be sold while the reverse repurchase
agreement is outstanding, unless other suitable assets are substituted.
While the Adviser does not consider reverse repurchase agreements to
involve a traditional borrowing of money, reverse repurchase agreements
will be included in the Portfolio's borrowing restrictions.
Portfolio Turnover
The Portfolio cannot accurately predict its portfolio turnover
rate, but it is anticipated that the annual turnover rate will generally
not exceed 100% (excluding turnover of securities having a maturity of one
year or less). A 100% annual turnover rate would occur, for example, if
all the securities in the portfolio were replaced once in a period of one
year. A high turnover rate (100% or more) necessarily involves greater
expenses to the Portfolio. The Portfolio engages in portfolio trading
(including short-term trading) if it believes that a transaction including
all costs will help in achieving its investment objective either by
increasing income or by enhancing the Portfolio's net asset value. Short-
term trading may be advisable in light of a change in circumstances of a
particular company or within a particular industry, or in light of general
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market, economic or political conditions. High portfolio turnover may
also result in the realization of substantial net short-term capital
gains. The portfolio turnover rates for the fiscal year ended December
31, 1995, and for the period from the start of business, November 30,
1994, to December 31, 1994, were 98% and 0%, respectively.
Lending Portfolio Securities
The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers.
Under present regulatory policies of the Commission, such loans are
required to be secured continuously by collateral in cash, cash
equivalents or U.S. Government securities held by the Portfolio's
custodian and maintained on a current basis at an amount at least equal to
market value of the securities loaned, which will be marked to market
daily. Cash equivalents include certificates of deposit, commercial paper
and other short-term money market instruments. The financial condition of
the borrower will be monitored by the Adviser on an ongoing basis. The
Portfolio would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also
receive a fee, or all or a portion of the interest on investment of the
collateral. The Portfolio would have the right to call a loan and obtain
the securities loaned at any time on up to five business days' notice.
The Portfolio would not have the right to vote any securities having
voting rights during the existence of a loan, but could call the loan in
anticipation of an important vote to be taken among holders of the
securities or the giving or withholding of their consent on a material
matter affecting the investment. If the Adviser decides to make
securities loans, it is intended that the value of the securities loaned
would not exceed one-third of the Portfolio's total assets. As with other
extensions of credit there are risks of delay in recovery or even loss of
rights in the securities loaned if the borrower of the securities fails
financially. However, the loans will be made only to organizations deemed
by the Adviser to be sufficiently creditworthy and when, in the judgment
of the Adviser, the consideration which can be earned from securities
loans of this type justifies the attendant risk. Securities lending
involves administration expenses including finders' fees.
Investment Restrictions
The Portfolio has adopted the following investment restrictions
which may not be changed without the approval of the holders of a
"majority of the outstanding voting securities" of the Portfolio, which as
used in this Part B means the lesser of (a) 67% or more of the outstanding
voting securities of the Portfolio present or represented by proxy at a
meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or
(b) more than 50% of the outstanding voting securities of the Portfolio.
The term "voting securities" as used in this paragraph has the same
meaning as in the Investment Company Act of 1940 ("1940 Act"). As a
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matter of fundamental policy, the Portfolio may not:
(1) Borrow money or issue senior securities except as permitted
by the Investment Company Act of 1940.
(2) Purchase any securities on margin (but the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities).
(3) Underwrite securities of other issuers.
(4) Invest in real estate including interests in real estate
limited partnerships (although it may purchase and sell securities which
are secured by real estate and securities of companies which invest or
deal in real estate) or in commodities or commodity contracts for the
purchase or sale of physical commodities.
(5) Make loans to any person except by (a) the acquisition of
debt securities and making portfolio investments, (b) entering into
repurchase agreements and (c) lending portfolio securities.
(6) With respect to 75% of its total assets, invest more than 5%
of its total assets (taken at current value) in the securities of any one
issuer, or invest in more than 10% of the outstanding voting securities of
any one issuer, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except securities of
other investment companies.
(7) Concentrate its investments in any particular industry, but,
if deemed appropriate for the Portfolio's objective, up to 25% of the
value of its assets may be invested in securities of companies in any one
industry (although more than 25% may be invested in securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities).
Notwithstanding the investment policies and restrictions of the
Portfolio, the Portfolio may invest part of its assets in another
investment company consistent with the 1940 Act.
The Portfolio has adopted the following nonfundamental investment
policies which may be changed by the Portfolio without the approval of its
investors. The Portfolio may not invest more than 15% of its net assets
in investments which are not readily marketable, including restricted
securities and repurchase agreements with a maturity longer than seven
days. Restricted securities for the purposes of this limitation do not
include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees of the Portfolio, or its
delegate, determines to be liquid. The Portfolio does not intend to
invest in Rule 144A securities or make short sales of securities during
the coming year. Except for obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities, the Portfolio will
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not knowingly purchase a security issued by a company (including
predecessors) with less than three years operating history (unless such
security is rated at least B or a comparable rating at the time of
purchase by at least one nationally recognized rating service) if, as a
result of such purchase, more than 5% of the Portfolio's total assets
(taken at current value) would be invested in such securities. The
Portfolio will not purchase warrants if, as a result of such purchase,
more than 5% of the Portfolio's net assets (taken at current value) would
be invested in warrants, and the value of such warrants which are not
listed on the New York or American Stock Exchange may not exceed 2% of the
Portfolio's net assets; this policy does not apply to or restrict warrants
acquired by the Portfolio in units or attached to securities, inasmuch as
such warrants are deemed to be without value. The Portfolio will not
purchase any securities if at the time of such purchase, permitted borrow-
ings under investment restriction (1) above exceed 5% of the value of the
Portfolio's total assets. The Portfolio will not purchase oil, gas or
other mineral leases or purchase partnership interests in oil, gas or
other mineral exploration or development programs. The Portfolio will not
purchase or retain in its portfolio any securities issued by an issuer any
of whose officers, directors, trustees or security holders is an officer
or Trustee of the Trust or is a member, officer, director or trustee of
any investment adviser of the Portfolio if after the purchase of the
securities of such issuer by the Portfolio one or more of such persons
owns beneficially more than 1/2 of 1% of the shares or securities or both
(all taken at market value) of such issuer and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more
than 5% of such shares of securities or both (all taken at market value).
Whenever an investment policy or investment restriction set forth
in Part A or this Part B states a maximum percentage of assets that may be
invested in any security or other asset, or describes a policy regarding
quality standards, such percentage limitation or standard shall be
determined immediately after and as a result of the Portfolio's
acquisition of such security or other asset. Accordingly, any later
increase or decrease resulting from a change in values, assets or other
circumstances, other than a subsequent rating change below investment
grade made by a rating service, will not compel the Portfolio to dispose
of such security or other asset. Notwithstanding the foregoing, under
normal market conditions the Portfolio must take actions necessary to
comply with the policy of investing at least 65% of its total assets in
equity securities. Moreover, the Portfolio must always be in compliance
with the borrowing policy set forth above.
In order to permit the sale in certain states of shares of
certain open-end investment companies that are investors in the Portfolio,
the Portfolio may make commitments more restrictive than the policies
described above. Should the Portfolio determine that any such commitment
is no longer in the best interests of the Portfolio and its investors, it
will revoke such commitment.
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Item 14. Management of the Portfolio
The Portfolio's Trustees and officers are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. The business address of the
Adviser is 3808 One Exchange Square, Central, Hong Kong. Those Trustees
who are "interested persons" of the Portfolio, the Adviser, Eaton Vance
Management ("Eaton Vance"), Eaton Vance's wholly-owned subsidiary, Boston
Management and Research ("BMR"), Eaton Vance's parent, Eaton Vance Corp.
("EVC"), and Eaton Vance's trustee, Eaton Vance, Inc. ("EV") as defined in
the 1940 Act by virtue of their affiliation with any one or more of the
Portfolio, the Adviser, Eaton Vance, BMR, EVC or EV, are indicated by an
asterisk (*).
Trustees
HON. ROBERT LLOYD GEORGE (43), President and Trustee*
Chairman and Chief Executive of Lloyd George Management (B.V.I.) Limited.
Chairman and Chief Executive Officer of the Adviser. Managing Director of
Indosuez Asia Investment Services, Ltd. from 1984 to 1991.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES B. HAWKES (54), Vice President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director
of EVC and EV. Director of Lloyd George Management (B.V.I.) Limited.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff Professor of Investment Banking at Harvard University
Graduate School of Business Administration. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
STUART HAMILTON LECKIE (50), Trustee
Chairman - Asia Pacific Fidelity Investments Management (HK) Ltd.
Address: Citibank Tower, 3 Garden Road, Hong Kong
HON. EDWARD K.Y. CHEN (51), Trustee
President of Lingnan College in Hong Kong. Professor and Director of
Centre of Asian Studies at the University of Hong Kong from 1979-1995.
Director of First Pacific Company and a Board Member of the Mass Transit
Railway Corporation. Member of the Executive Council of the Hong Kong
Government since 1992 and Chairman of the Consumer Council since 1991.
Address: President's Office, Lingnan College, Tuen Mun, Hong Kong
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Officers
SCOBIE DICKINSON WARD (30), Vice President, Assistant Secretary and
Assistant Treasurer
Director of Lloyd George Management (B.V.I.) Limited. Director of the
Adviser. Investment Manager of Indosuez Asia Investment Services, Ltd.
from 1990 to 1991.
Address: 3808 One Exchange Square, Central, Hong Kong
WILLIAM WALTER RALEIGH KERR (45), Vice President, Secretary and Assistant
Treasurer
Director, Finance Director and Chief Operating Officer of the Adviser.
Director of Lloyd George Management (B.V.I.) Limited.
Address: 3808 One Exchange Square, Central, Hong Kong
JAMES L. O'CONNOR (51), Vice President and Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
THOMAS OTIS (64), Vice President and Assistant Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
JANET E. SANDERS (60), Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity
Management & Research Co. (1986-1991).
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Officer
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<PAGE>
of various investment companies managed by Eaton Vance or BMR.
Address: Eaton Vance Management, 24 Federal Street, Boston, Massachusetts
02110
The fees and expenses of those Trustees who are not members of
the Eaton Vance organization (the noninterested Trustees) are paid by the
Portfolio. (The Trustees who are members of the Eaton Vance organization
receive no compensation from the Portfolio.) During the fiscal year ended
December 31, 1995, the noninterested Trustees of the Portfolio earned the
following compensation in their capacities as Trustees from the Portfolio
and the other funds in the Eaton Vance fund complex(1):
Aggregate Total Compensation
Compensation from Portfolio and
Name from Portfolio Fund Complex
---- -------------- -------------------
Hon. Edward K.Y. Chen $5,000 $ 15,000
Samuel L. Hayes, III 5,000 150,000(2)
Stuart Hamilton Leckie 5,000 15,000
(1) The Eaton Vance fund complex consists of 219 registered
investment companies or series thereof.
(2) Includes $33,750 of deferred compensation.
Trustees of the Portfolio who are not affiliated with the Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his
deferred fees invested by the Portfolio in the shares of one or more funds
in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will
have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular
level of compensation to the Trustee. The Portfolio does not have a
retirement plan for its Trustees.
The Adviser is a subsidiary of Lloyd George Management (B.V.I.)
Limited, which is ultimately controlled by the Hon. Robert J.D. Lloyd
George, President and Trustee of the Portfolio and Chairman and Chief
Executive Officer of the Adviser. Mr. Hawkes is a Trustee and officer of
the Portfolio and an officer of the Portfolio's administrator and of BMR.
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<PAGE>
Mr. Hayes is a Trustee of the Portfolio.
The Portfolio's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved
because of their offices with the Portfolio, unless, as to liability to
the Portfolio or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect
to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Portfolio. In the case of settlement, such
indemnification will not be provided unless it has been determined by a
court or other body approving the settlement, such indemnification will
not be provided unless it has been determined by a court or other body
approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of
a majority of noninterested Trustees or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
Item 15. Control Persons and Principle Holders of Securities
As of April 1, 1996, EV Marathon Emerging Markets Fund (the
"Marathon Fund") and EV Traditional Emerging Markets Fund (the
"Traditional Fund") owned approximately 56.4% and 34.7%, respectively, of
the outstanding voting interests in the Portfolio. The Marathon Fund may
take actions without the approval of any other investor. Each of the
Marathon Fund and the Traditional Fund 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 Marathon and Traditional Funds are series of Eaton Vance Special
Investment Trust, an open-end management investment company organized as a
business trust under the laws of the Commonwealth of Massachusetts.
Item 16. Investment Advisory and Other Services
The Adviser. The Portfolio engages Lloyd George Investment
Management (Bermuda) Limited (the "Adviser") as its investment adviser
pursuant to an investment advisory agreement dated March 24, 1994. As
investment adviser to the Portfolio, the Adviser manages the Portfolio's
investments, subject to the supervision of the Board of Trustees of the
Portfolio. The Adviser is also responsible for effecting all security
transactions on behalf of the Portfolio, including the allocation of
principal transactions and portfolio brokerage and the negotiation of com-
missions. See "Brokerage Allocation and Other Practices." Under the
investment advisory agreement, the Adviser receives a monthly advisory fee
computed by applying the annual asset rate applicable to that portion of
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<PAGE>
the average daily net assets of the Portfolio throughout the month in each
category as indicated below:
Annual
Category Average Daily Net Assets Asset Rate
-------- ------------------------ ----------
1 less than $500 million 0.75%
2 $500 million but less than $1 billion 0.70
3 $1 billion but less than $1.5 billion 0.65
4 $1.5 billion but less than $2 billion 0.60
5 $2 billion but less than $3 billion 0.55
6 $3 billion and over 0.50
As of December 31, 1995, the Portfolio had net assets of
$3,587,269. For the fiscal year ended December 31, 1995, the portfolio
paid the Adviser advisory fees of $17,297 (equivalent to 0.75% of the
Portfolio's average daily net assets for such year). For the period from
the start of business, November 30, 1994, to December 31, 1994, the
Adviser would have earned, absent a fee reduction, advisory fees of $318
(equivalent to 0.75% (annualized) of the Portfolio's average daily net
assets for such period). To enhance the net income of the Portfolio, the
Adviser made a reduction in the full amount of its advisory fee during
such period.
The directors of the Adviser are the Honorable Robert Lloyd
George, William Walter Raleigh Kerr, M.F. Tang, Scobie Dickinson Ward,
Pamela Chan, Adaline Mang-Yee Ko, Peter Bubenzer and Judith Collins. The
Hon. Robert J.D. Lloyd George is Chairman and Chief Executive Officer of
the Adviser and Mr. Kerr is an officer of the Adviser. The business
address of the first six individuals is 3808 One Exchange Square, Central,
Hong Kong and of the last two is Cedar House, 41 Cedar Avenue, Hamilton
HM12, Bermuda.
The Portfolio's investment advisory agreement with the Adviser remains
in effect until February 28, 1997; it may be continued indefinitely
thereafter so long as such continuance is approved at least annually (i)
by the vote of a majority of the Trustees of the Portfolio who are not
interested persons of the Portfolio cast in person at a meeting
specifically called for the purpose of voting on such approval and (ii) by
the Board of Trustees of the Portfolio or by vote of a majority of the
outstanding voting securities of the Portfolio. The agreement may be
terminated at any time without penalty on sixty days' written notice by
the Board of Trustees of either party or by vote of the majority of the
outstanding voting securities of the Portfolio, and the agreement will
terminate automatically in the event of its assignment. The agreement
provides that the Adviser may render services to others. The agreement
also provides that, in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations or duties under the
agreement on the part of the Adviser, the Adviser shall not be liable to
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the Portfolio or to any shareholder for any act or omission in the course
of or connected with rendering services or for any losses sustained in the
purchase, holding or sale of any security.
The Administrator. See Part A for a description of the services
Eaton Vance performs as administrator of the Portfolio. Under Eaton
Vance's administration agreement with the Portfolio, Eaton Vance receives
a monthly administration fee from the Portfolio. This fee is computed by
applying the annual asset rate applicable to that portion of the average
daily net assets of the Portfolio throughout the month in each category as
indicated below:
Annual
Category Average Daily Net Assets Asset Rate
-------- ------------------------ ----------
1 less than $500 million 0.25%
2 $500 million but less than $1 billion 0.23333
3 $1 billion but less than $1.5 billion 0.21667
4 $1.5 billion but less than $2 billion 0.20
5 $2 billion but less than $3 billion 0.18333
6 $3 billion and over 0.16667
For the fiscal year ended December 31, 1995, Eaton Vance earned
administration fees of $5,762 (equivalent to 0.25% of the Portfolio's
average daily net assets for such year). To enhance the net income of the
Portfolio, Eaton Vance was allocated expenses in the amount of $61,361
during such year. For the period from the start of business, November 30,
1994, to December 31, 1994, Eaton Vance earned administration fees of $106
(equivalent to 0.25% (annualized) of the Portfolio's average daily net
assets for such period). To enhance the net income of the Portfolio,
Eaton Vance made a reduction of its administration fee and was allocated
expenses in the amounts of $106 and $631, respectively, during such
period.
Eaton Vance's administration agreement with the Portfolio will
remain in effect until February 28, 1997. The administration agreement
may be continued from year to year after such date so long as such
continuance is approved annually by the vote of a majority of the Trustees
of the Portfolio. The administration agreement may be terminated at any
time without penalty on sixty days' written notice by the Board of
Trustees of either party thereto, or by a vote of a majority of the
outstanding voting securities of the Portfolio. The administration
agreement will terminate automatically in the event of its assignment.
The administration agreement provides that, in the absence of Eaton
Vance's willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties to the Portfolio under such
agreement, Eaton Vance will not be liable to the Portfolio for any loss
incurred. The agreement was initially approved by the Trustees, including
the non-interested Trustees, of the Portfolio at a meeting held on
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<PAGE>
February 23, 1994.
The Portfolio will be responsible for all of its costs and
expenses not expressly stated to be payable by the Adviser under the
investment advisory agreement or by Eaton Vance under the administration
agreement. Such costs and expenses to be borne by the Portfolio include,
without limitation: custody fees and expenses, including those incurred
for determining net asset value and keeping accounting books and records;
expenses of pricing and valuation services; membership dues in investment
company organizations; brokerage commissions and fees; fees and expenses
of registering under the securities laws; expenses of reports to
investors; proxy statements, and other expenses of investors' meetings;
insurance premiums, printing and mailing expenses; interest, taxes and
corporate fees; legal and accounting expenses; compensation and expenses
of Trustees not affiliated with the Adviser or Eaton Vance; and investment
advisory and administration fees. The Portfolio will also bear expenses
incurred in connection with litigation in which the Portfolio is a party
and any legal obligation to indemnify its officers and Trustees with
respect thereto.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR
is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and
BMR. The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M.
Dozier Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The
Directors of EVC consist of the same persons and John G.L. Cabot and Ralph
Z. Sorenson. Mr. Clay is chairman and Mr. Gardner is president and chief
executive officer of EVC, Eaton Vance, BMR and EV. All of the issued and
outstanding shares of Eaton Vance and of EV are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares
of the outstanding Voting Common Stock of EVC are deposited in a Voting
Trust which expires December 31, 1996, the Voting Trustees of which are
Messrs. Brigham, Clay, Gardner, Hawkes and Rowland. The Voting Trustees
have unrestricted voting rights for the election of Directors of EVC. All
of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of Eaton Vance and BMR who are also
officers and Directors of EVC and EV. As of March 29, 1996, Messrs.
Clay, Gardner and Hawkes each owned 24% and Messrs. Rowland and Brigham
owned 15% and 13%, respectively, of such voting trust receipts. Messrs.
Gardner, Hawkes and Otis are members of the EVC, Eaton Vance, BMR and EV
organizations. Mr. Hawkes is a Vice President and Trustee and Mr. Otis is
a Vice President and Assistant Secretary of the Portfolio. Messrs.
Murphy, O'Connor and Woodbury and Ms. Sanders are officers of the
Portfolio and are also members of the Eaton Vance, BMR and EV
organizations. Eaton Vance will receive the fees paid under the
administration agreement.
EVC owns all of the stock of Energex Energy Corporation, which is
engaged in oil and gas exploration and development. In addition, Eaton
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Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC owns all of the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal
mining venture investment and management. EVC also owns
24% of the Class A shares of Lloyd George Management (B.V.I.) Limited, a
registered investment adviser. EVC, Eaton Vance, BMR and EV may also
enter into other businesses.
EVC and its affiliates and its officers and employees from time to
time have transactions with various banks, including the custodian of the
Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions will not be influenced
by existing or potential custodial or other relationships between the
Portfolio and such banks.
Custodian. Investors Bank & Trust Company ("IBT"), 89 South
Street, Boston, Massachusetts, acts as custodian for the Portfolio. IBT
has the custody of all cash and securities of the Portfolio purchased in
the United States, maintains the Portfolio's general ledger, and computes
the Portfolio's daily net asset value. In such capacities IBT attends to
details in connection with the sale, exchange, substitution or transfer of
or other dealings with the Portfolio's investments, receives and disburses
all funds, and performs various other ministerial duties upon receipt of
proper instructions from the Portfolio.
Portfolio securities, if any, purchased by the Portfolio in the
U.S. are maintained in the custody of IBT or of other domestic banks or
depositories. Portfolio securities purchased outside of the U.S. are
maintained in the custody of foreign banks and trust companies that are
members of IBT's Global Custody Network, or foreign depositories used by
such foreign banks and trust companies. Each of the domestic and foreign
custodial institutions holding portfolio securities has been approved by
the Board of Trustees of the Portfolio in accordance with regulations
under the 1940 Act.
IBT charges fees which are competitive within the industry. These
fees for the Portfolio relate to (1) custody services based upon a
percentage of the market values of portfolio securities; (2) bookkeeping
and valuation services provided at an annual rate; (3) activity charges,
primarily the result of the number of portfolio transactions; and (4)
reimbursement of out-of-pocket expenses. These fees are then reduced by a
credit for cash balances of the Portfolio at the custodian equal to 75% of
the 91-day U.S. Treasury Bill auction rate applied to the Portfolio's
average daily collected balances. Landon T. Clay, a Director of EVC and
an officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors
Financial Services Corp., the holding company parent of IBT. Management
believes that such ownership does not create an affiliated person
relationship between the Portfolio and IBT under the 1940 Act.
Independent Certified Public Accountants. Deloitte & Touche LLP, 125
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Summer Street, Boston, Massachusetts, are the independent certified public
accountants of the Portfolio, providing audit services, tax return
preparation, and assistance and consultation with respect to the
preparation of filings with the Commission.
Item 17. Brokerage Allocation and Other Practices
Decisions concerning the execution of portfolio security
transactions by the Portfolio, including the selection of the market and
the broker-dealer firm, are made by the Adviser.
The Adviser places the portfolio security transactions of the
Portfolio and of certain other accounts managed by the Adviser for
execution with many broker-dealer firms. The Adviser uses its best
efforts to obtain execution of portfolio transactions at prices which are
advantageous to the Portfolio and (when a disclosed commission is being
charged) at reasonably competitive commission rates. In seeking such
execution, the Adviser will use its best judgment in evaluating the terms
of a transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the
general execution and operational capabilities of the broker-dealer, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction,
the reputation, reliability, experience and financial condition of the
broker-dealer, the value and quality of services rendered by the broker-
dealer in other transactions, and the reasonableness of the commission, if
any. Transactions on stock exchanges and other agency transactions
involve the payment by the Portfolio of negotiated brokerage commissions.
Such commissions vary among different broker-dealer firms, and a
particular broker-dealer may charge different commissions according to
such factors as the difficulty and size of the transaction and the volume
of business done with such broker-dealer. Transactions in foreign
securities usually involve the payment of fixed brokerage commissions,
which are generally higher than those in the United States. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an
underwritten offering the price paid by the Portfolio includes a disclosed
fixed commission or discount retained by the underwriter or dealer.
Although commissions paid on portfolio transactions will, in the judgment
of the Adviser, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may
be paid to broker-dealers who were selected to execute transactions on
behalf of the Portfolio and the Adviser's other clients in part for
providing brokerage and research services to the Adviser.
As authorized in Section 28(e) of the 1934 Act, a broker or dealer
who executes a portfolio transaction on behalf of the Portfolio may
receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
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provided. This determination may be made either on the basis of that
particular transaction or on the basis of the overall responsibilities
which the Adviser and its affiliates have for accounts over which they
exercise investment discretion. In making any such determination, the
Adviser will not attempt to place a specific dollar value on the brokerage
and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research
services may include advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and
settlement); and the "Research Services" referred to in the next
paragraph.
It is a common practice in the investment advisory industry for
the advisers of investment companies, institutions and other investors to
receive research, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in
the performance of their investment responsibilities ("Research Services")
from broker-dealers which execute portfolio transactions for the clients
of such advisers and from third parties with which such broker-dealers
have arrangements. Consistent with this practice, the Adviser may receive
Research Services from broker-dealer firms with which the Adviser places
the portfolio transactions of the Portfolio and from third parties with
which these broker-dealers have arrangements. These Research Services may
include such matters as general economic and market reviews, industry and
company reviews, evaluations of securities and portfolio strategies and
transactions, recommendations as to the purchase and sale of securities
and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software,
data bases and services. Any particular Research Service obtained through
a broker-dealer may be used by the Adviser in connection with client ac-
counts other than those accounts which pay commissions to such broker-
dealer. Any such Research Service may be broadly useful and of value to
the Adviser in rendering investment advisory services to all or a
significant portion of its clients, or may be relevant and useful for the
management of only one client's account or of a few clients' accounts, or
may be useful for the management of merely a segment of certain clients'
accounts, regardless of whether any such account or accounts paid
commissions to the broker-dealer through which such Research Service was
obtained. The advisory fee paid by the Portfolio is not reduced because
the Adviser receives such Research Services. The Adviser evaluates the
nature and quality of the various Research Services obtained through
broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which the
Adviser believes are useful or of value to it in rendering investment
advisory services to its clients.
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Subject to the requirement that the Adviser shall use its best
efforts to seek to execute portfolio security transactions of the
Portfolio at advantageous prices and at reasonably competitive commission
rates or spreads, the Adviser is authorized to consider as a factor in the
selection of any broker-dealer firm with whom Portfolio orders may be
placed the fact that such firm has sold or is selling shares of investment
companies sponsored by Eaton Vance. This policy is not inconsistent with
a rule of the National Association of Securities Dealers, Inc., which rule
provides that no firm which is a member of the Association shall favor or
disfavor the distribution of shares of any particular investment company
or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by the Adviser or its
affiliates. The Adviser will attempt to allocate equitably portfolio
transactions among the Portfolio and the portfolios of its other
investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and
such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the
Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such
accounts. While this procedure could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Portfolio that the benefits
available from the Adviser's organization outweigh any disadvantage that
may arise from exposure to simultaneous transactions. For the fiscal year
ended December 31, 1995, the Portfolio paid brokerage commissions of
$28,313 for portfolio security transactions, of which approximately
$23,739 was paid in respect of portfolio security transactions aggregating
approximately $3,720,149 to firms which provided some Research Services to
the Adviser's organization (although many such firms may have been
selected in any particular transaction primarily because of their
execution capabilities). For the period from the start of business,
November 30, 1994, to December 31, 1994, the Portfolio paid brokerage
commissions of $2,170 with respect to portfolio security transactions, all
of which was paid in respect of portfolio security transactions
aggregating approximately $405,241 to firms which provided some Research
Services to the Adviser's organization (although many such firms may have
been selected in any particular transaction primarily because of their
execution capabilities).
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
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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 owned
to holders of record of interests in the Portfolio ("Holders") or their
affiliates, and the expenses of liquidation, and to the setting up of any
reserves for contingencies which may be necessary; and (b) second, in
accordance with the Holders' positive Book Capital Account balances after
adjusting Book Capital Accounts for certain allocations provided in the
Declaration of Trust and in accordance with the requirements described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2). Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the assets of the Portfolio would cause undue loss to the
Holders, the Trustees, in order to avoid such loss, may, after having
given notification to all the Holders, to the extent not then prohibited
by the law of any jurisdiction in which the Portfolio is then formed or
qualified and applicable in the circumstances, either defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Portfolio except those necessary to satisfy the Portfolio's debts and
obligations or distribute the Portfolio's assets to the Holders in
liquidation. Interests in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except
as set forth below. Interests in the Portfolio may not be transferred.
Certificates representing an investor's interest in the Portfolio are
issued only upon the written request of a Holder.
Each Holder is entitled to vote in proportion to the amount of its
interest in the Portfolio. Holders do not have cumulative voting rights.
The Portfolio is not required and has no current intention to hold annual
meetings of Holders but the Portfolio will hold meetings of Holders when
in the judgment of the Portfolio's Trustees it is necessary or desirable
to submit matters to a vote of Holders at a meeting. any action which may
be taken by Holders may be taken without a meeting if Holders holding more
than 50% of all interests entitled to vote (or such larger proportion
thereof as shall be required by any express provision of the Declaration
of Trust of the Portfolio) consent to the action in writing and the
consents are filed with the records of meetings of Holders.
The Portfolio's Declaration of Trust may be amended by vote of Holders
of more than 50% of all interests in the Portfolio at any meeting of
Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all interests. The Trustees may also amend the Declaration of Trust
(without the vote or consent of Holders) to change the Portfolio's name or
the state or other jurisdiction whose law shall be the governing law, to
supply any omission or to 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
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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.
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for
its obligations and liabilities, subject, however, to indemnification by
the Portfolio in the event that there is imposed upon an investor a
greater portion of the liabilities and obligations of the Portfolio than
its proportionate interest in the Portfolio. The Portfolio intends to
maintain fidelity and errors and omissions insurance deemed adequate by
the Trustees. Therefore, the risk of an investor incurring financial loss
B - 24
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on account of investor liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects
a Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Item 19. Purchase, Redemption and Pricing of Securities
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the Securities Act of 1933. See "Purchase of Interests
in the Portfolio" and "Redemption or Decrease of Interest" in Part A. See
Part A, Item 7 regarding the pricing of interests in the Portfolio.
Securities listed on foreign or U.S. securities exchanges or in the
NASDAQ National Market System are valued at closing sale prices or, if
there were no sales, at the mean between the closing bid and asked prices
therefor on the exchange where such securities are principally traded or
on such National Market System. Unlisted or listed securities for which
closing sale prices are not available are valued at the mean between the
latest bid and asked prices. An option is valued at the last sale price
as quoted on the principal exchange or board of trade on which such option
or contract is traded, or in the absence of a sale, the mean between the
last bid and asked prices. Futures positions on securities or currencies
are generally valued at closing settlement prices. All other securities
are valued at fair value as determined in good faith by or pursuant to
procedures established by the Trustees. Short-term debt securities with a
remaining maturity of 60 days or less are valued at amortized cost. If
securities were acquired with a remaining maturity of more than 60 days,
their amortized cost value will be based on their value on the sixty-first
day prior to maturity. Other fixed income and debt securities, including
listed securities and securities for which price quotations are available,
will normally be valued on the basis of valuations furnished by a pricing
service.
Generally, trading in the foreign securities owned by the
Portfolio is substantially completed each day at various times prior to
the close of the New York Stock Exchange (the "Exchange"). The values of
these securities used in determining the net asset value of the
Portfolio's shares are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and
the close of the Exchange which will not be reflected in the computation
of the Portfolio's net asset value (unless the Portfolio deems that such
events would materially affect its net asset value, in which case an
adjustment would be made and reflected in such computation). Foreign
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securities and currency held by the Portfolio will be valued in U.S.
dollars; such values will be computed by the custodian based on foreign
currency exchange rate quotations.
Item 20. Tax Status
The Portfolio has been advised by tax counsel that, provided the
Portfolio is operated at all times during its existence in accordance with
certain organizational and operational documents, the Portfolio should be
classified as a partnership under the Internal Revenue Code of 1986, as
amended (the "Code"), and it should not be a "publicly traded partnership"
within the meaning of Section 7704 of the Code. Consequently, the
Portfolio does not expect that it will be required to pay any federal
income tax.
Under Subchapter K of the Code, a partnership is considered to be
either an aggregate of its members or a separate entity depending upon the
factual and legal context in which the question arises. Under the
aggregate approach, each partner is treated as an owner of an undivided
interest in partnership assets and operations. Under the entity approach,
the partnership is treated as a separate entity in which partners have no
direct interest in partnership assets and operations. The Portfolio has
been advised by tax counsel that, in the case of a Holder that seeks to
qualify as a regulated investment company (a "RIC"), the aggregate
approach should apply, and each such Holder should accordingly be deemed
to own a proportionate share of each of the assets of the Portfolio and to
be entitled to the gross income of the Portfolio attributable to that
share for purposes of all requirements of Sections 851(b) and 852(b)(5) of
the Code. Further, the Portfolio has been advised by tax counsel that each
Holder that seeks to qualify as a RIC should be deemed to hold its
proportionate share of the Portfolio's assets for the period the Portfolio
has held the assets or for the period the Holder has been an investor in
the Portfolio, whichever is shorter. Investors should consult their tax
advisers 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 which is a RIC to comply
with those requirements. The Portfolio will allocate at least annually to
each Holder it's distributive share of the Portfolio's net investment
income, net realized capital gains, and any other items of income, gain,
loss, deduction or credit in a manner intended to comply with the Code and
applicable Treasury regulations. Tax counsel has advised the Portfolio
that the Portfolio's allocations of taxable income and loss should have
"economic effect" under applicable Treasury regulations.
To the extent the cash proceeds of any withdrawal (or, under certain
circumstances, such proceeds plus the value of any marketable securities
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distributed to an investor) ("liquid proceeds") exceed a Holder's adjusted
basis of his interest in the Portfolio, the Holder will generally realize
a gain for federal income tax purposes. If, upon a complete withdrawal
(redemption of the entire interest), the Holder's adjusted basis of his
interest exceeds the liquid proceeds of such withdrawal, the Holder will
generally realize a loss for federal income tax purposes. The tax
consequences of a withdrawal of property (instead of or in addition to
liquid proceeds) will be different and will depend on the specific factual
circumstances. A Holder's adjusted basis of an interest in the Portfolio
will generally be the aggregate prices paid therefor (including the
adjusted basis of contributed property and any gain recognized on such
contribution), increased by the amounts of the Holder's distributive share
of items of income (including interest income exempt from federal income
tax) and realized net gain of the Portfolio, and reduced, but not below
zero, by (i) the amounts of the Holder's distributive share of items of
Portfolio loss, and (ii) the amount of any cash distributions (including
distributions of interest income exempt from federal income tax and cash
distributions on withdrawals from the Portfolio) and the basis to the
Holder of any property received by such Holder other than in liquidation,
and (iii) the Holder's distributive share of the Portfolio's nondeductible
expenditures not properly chargeable to capital account. Increases or
decreases in a Holder's share of the Portfolio's liabilities may also
result in corresponding increases or decreases in such adjusted basis.
Distributions of liquid proceeds in excess of a Holder's adjusted basis in
its interest in the Portfolio immediately prior thereto generally will
result in the recognition of gain to the Holder in the amount of such
excess.
Foreign exchange gains and losses realized by the Portfolio and
allocated to the RIC in connection with the Portfolio's investments in
foreign securities and certain options, futures or forward contracts or
foreign currency 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 securities and 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 or
avoid imposition of a tax on such an investor.
The Portfolio anticipates that it will be subject to foreign taxes on
its income (including, in some cases, capital gains) from foreign
securities. Tax conventions between certain countries and the U.S. may
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reduce or eliminate such taxes.
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 difference entity classification
criteria and may therefore reach a different conclusion. Entities that
are classified as partnerships are not treated as separate taxable
entities under most state and local tax laws, and the income of a
partnership is considered to be income of partners both in timing and in
character. The exemption of interest income for federal income tax
purposes does not necessarily result in exemption under the income or tax
laws of any state or local taxing authority. The laws of the various
states and local taxing authorities vary with respect to the taxation of
such interest income, as well as to the status of a partnership interest
under state and local tax laws, and each Holder of an interest in the
Portfolio is advised to consult his own tax adviser.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Investors should consult
their own tax advisers with respect to special tax rules that may apply in
their particular situations, as well as the state, local or foreign tax
consequences of investing in the Portfolio.
Item 21. Underwriters
The placement agent for the Portfolio is Eaton Vance Distributors,
Inc., which receives no compensation for serving in this capacity.
Investment companies, common and commingled trust funds, and similar
organizations and entities may continuously invest in the Portfolio.
Item 22. Calculation of Performance Data
Not applicable.
Item 23. Financial Statements
The following audited financial statements of the Portfolio for the
fiscal year ended December 31, 1995, are incorporated by reference in this
Part B and have been so incorporated in reliance upon the report of
Deloitte and Touche LLP, independent certified public accountants, as
experts in accounting and auditing.
Portfolio of Investments as at December 31, 1995
Statement of Assets and Liabilities as at December 31, 1995
Statement of Operations for the fiscal year ended December 31, 1995
Statement of Changes in Net Assets for the fiscal year ended December
31, 1995, and for the period from the start of business, November 30,
1994, to December 31, 1994
Supplementary Data for the fiscal year ended December 31, 1995, and
for the period from the start of business, November 30, 1994, to
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December 31, 1994
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 0000950156-96-000224).
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APPENDIX A
Description of Securities Ratings(1)
Description of Moody's Investors Service, Inc.'s corporate bond ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risk appear
somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Securities in which the Portfolio may invest include those in the
following categories:
Baa: Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present,
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty
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of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic
rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end
of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
Description of Standard & Poor's corporate bond ratings:
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher rated
categories.
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Securities in which the Portfolio may invest will include those in the
following categories:
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt in
higher rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied B or B- rating.
a - 3
<PAGE>
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Bonds may lack a S&P's rating because no public rating has been
requested, because there is insufficient information on which to base a
rating, or because S&P does not rate a particular type of obligation as a
matter of policy.
Note: Bonds which are unrated expose the investor to risks with respect
to capacity to pay interest or repay principal which are similar to the
risks of lower-rated bonds. The Portfolio is dependent on the Investment
Adviser's judgment, analysis and experience in the evaluation of such
bonds.
* * * * *
Note: (1) Investors should note that the assignment of a rating to a bond
by a rating service may not reflect the effect of recent developments on
the issuer's ability to make interest and principal payments.
a - 4
<PAGE>
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements called for by this Item are incorporated by
reference in Part B and listed in Item 23 hereof.
(b) Exhibits
1. Declaration of Trust dated January 18, 1994, filed
herewith.
2. By-Laws of the Registrant adopted January 18, 1994, filed
herewith.
5. Investment Advisory Agreement between the Registrant and
Lloyd George Investment Management (Bermuda) Limited
dated March 24, 1994, filed herewith.
6. Placement Agent Agreement with Eaton Vance Distributors,
Inc. dated March 24, 1994, 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. Form of Custodian Agreement with Investors Bank & Trust
Company filed electronically as Exhibit No. 8 to the
Registration Statement of Asian Small Companies Portfolio
(1940 Act File No. 811-7529) (filed with the Commission
on February 5, 1996) and incorporated herein by reference
(Accession No. 0001003291-96-000015).
9. Administration Agreement between the Registrant and Eaton
Vance Management dated March 24, 1994, filed herewith.
13. Investment representation letter of Eaton Vance
Management dated January 18, 1994, 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
Record Holders as of
Title of Class April 1, 1996
-------------- ---------------------
Interests 5
Item 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as Exhibit 1 herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
Item 28. Business and Other Connections
Lloyd George Investment Management (Bermuda) Limited ("Lloyd George")
serves as investment adviser to the Portfolio. Lloyd George, a
corporation organized under the laws of Bermuda, is a wholly-owned
subsidiary of Lloyd George Management (B.V.I.) Limited ("LGM"). LGM and
its subsidiaries act as investment adviser to various individuals and
institutional clients.
To the knowledge of the Portfolio, none of the trustees or officers of
the Portfolio's investment adviser, except as set forth on its Form ADV as
filed with the Securities and Exchange Commission, is engaged in any other
business, profession, vocation or employment of a substantial nature,
except that certain trustees and officers also hold various positions with
and engage in business for affiliates of the investment adviser.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
All applicable accounts, books and documents required to be maintained
by the Registrant by Section 31(a) of the Investment Company Act of 1940
and the Rules promulgated thereunder are in the possession and custody of
the Registrant's custodian, Investors Bank & Trust Company, 89 South
C - 2
<PAGE>
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 administrator at 24 Federal Street, Boston, MA
02110. The Registrant is informed that all applicable accounts, books and
documents required to be maintained by registered investment advisers are
in the custody and possession of the Registrant's investment adviser.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
C - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Registration Statement on Form N-1A to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Boston and Commonwealth of Massachusetts, on the 25th day of
April, 1996.
EMERGING MARKETS PORTFOLIO
By: /s/ Thomas Otis
---------------------------
Thomas Otis
Vice President and Assistant
Secretary
C - 4
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1. Declaration of Trust dated January 18, 1994
2. By-Laws of the Registrant adopted January 18, 1994
5. Investment Advisory Agreement between the Registrant and
Lloyd George Investment Management (Bermuda) Limited
dated March 24, 1994
6. Placement Agent Agreement with Eaton Vance Distributors,
Inc. dated March 24, 1994
9. Administration Agreement between the Registrant and Eaton
Vance Management dated March 24, 1994
13. Investment representation letter of Eaton Vance
Management dated January 18, 1994
C - 5
<PAGE>
EMERGING MARKETS PORTFOLIO
--------------------------
DECLARATION OF TRUST
Dated as of January 18, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . . 1
ARTICLE II--Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Number and Qualification . . . . . . . . . . 3
Section 2.2 Term and Election . . . . . . . . . . . . . . 3
Section 2.3 Resignation, Removal and Retirement . . . . . 3
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . . 4
Section 2.5 Meetings . . . . . . . . . . . . . . . . . . 4
Section 2.6 Officers; Chairman of the Board . . . . . . . 5
Section 2.7 By-Laws . . . . . . . . . . . . . . . . . . . 5
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 General . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Investments . . . . . . . . . . . . . . . . . 5
Section 3.3 Legal Title . . . . . . . . . . . . . . . . . 6
Section 3.4 Sale and Increases of Interests . . . . . . . 6
Section 3.5 Decreases and Redemptions of Interests . . . 7
Section 3.6 Borrow Money . . . . . . . . . . . . . . . . 7
Section 3.7 Delegation; Committees . . . . . . . . . . . 7
Section 3.8 Collection and Payment . . . . . . . . . . . 7
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . 7
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . 7
Section 3.11 Further Powers . . . . . . . . . . . . . . . 8
Section 3.12 Litigation . . . . . . . . . . . . . . . . . 8
ARTICLE IV--Investment Advisory, Administration and Placement Agent
Arrangements . . . . . . . . . . . . . . . . 8
Section 4.1 Investment Advisory, Administration and Other
Arrangements . . . . . . . . . . . . 8
Section 4.2 Parties to Contract . . . . . . . . . . . . . 9
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc. . . . . . . . . . . . . . . . 9
Section 5.1 Liability of Holders; Indemnification . . . . 9
Section 5.2 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties . . . . . . . . 9
Section 5.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc. . . . . . . . . . . 10
i
<PAGE>
Section 5.4 Mandatory Indemnification . . . . . . . . . . 10
Section 5.5 No Bond Required of Trustees . . . . . . . . 10
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc . . . . . . . . . . . . . 10
Section 5.7 Reliance on Experts, etc . . . . . . . . . . 11
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.1 Interests . . . . . . . . . . . . . . . . . . 11
Section 6.2 Non-Transferability . . . . . . . . . . . . . 11
Section 6.3 Register of Interests . . . . . . . . . . . . 11
ARTICLE VII--Increases, Decreases And Redemptions of Interests . . . . 12
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions . . . . . . . . . . . . . . 12
Section 8.1 Book Capital Account Balances . . . . . . . . 12
Section 8.2 Allocations and Distributions to Holders . . 12
Section 8.3 Power to Modify Foregoing Procedures . . . . 13
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.1 Rights of Holders . . . . . . . . . . . . . . 13
Section 9.2 Meetings of Holders . . . . . . . . . . . . . 13
Section 9.3 Notice of Meetings . . . . . . . . . . . . . 13
Section 9.4 Record Date for Meetings, Distributions, etc. 13
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . 14
Section 9.6 Reports . . . . . . . . . . . . . . . . . . . 14
Section 9.7 Inspection of Records . . . . . . . . . . . . 14
Section 9.8 Holder Action by Written Consent . . . . . . 14
Section 9.9 Notices . . . . . . . . . . . . . . . . . . . 15
ARTICLE X--Duration; Termination; Amendment; Mergers; Etc. . . . . . . 15
Section 10.1 Duration . . . . . . . . . . . . . . . . . . 15
Section 10.2 Termination . . . . . . . . . . . . . . . . . 16
Section 10.3 Dissolution . . . . . . . . . . . . . . . . . 17
Section 10.4 Amendment Procedure . . . . . . . . . . . . . 17
Section 10.5 Merger, Consolidation and Sale of Assets . . 18
Section 10.6 Incorporation . . . . . . . . . . . . . . . . 18
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.1 Governing Law . . . . . . . . . . . . . . . . 18
Section 11.2 Counterparts . . . . . . . . . . . . . . . . 19
Section 11.3 Reliance by Third Parties . . . . . . . . . . 19
Section 11.4 Provisions in Conflict With Law or Regulations 19
ii
<PAGE>
DECLARATION OF TRUST
OF
EMERGING MARKETS PORTFOLIO
---------------------------
This DECLARATION OF TRUST of Emerging Markets Portfolio is made
as of the 18th day of January, 1994 by the parties signatory hereto, as
Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the law
of the State of New York for the investment and reinvestment of its
assets; and
WHEREAS, it is proposed that the trust assets be composed of
money and property contributed thereto by the holders of interests in the
trust entitled to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold
in trust all money and property contributed to the trust fund and will
manage and dispose of the same for the benefit of the holders of interests
in the Trust and subject to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust")
shall be Emerging Markets Portfolio and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not
individually, and shall not refer to the officers, employees, agents or
independent contractors of the Trust or holders of interests in the Trust.
1.2. Definitions. As used in this Declaration, the following
terms shall have the following meanings:
"Administrator" shall mean any party furnishing services to the
Trust pursuant to any administration contract described in Section 4.1
hereof.
"Book Capital Account" shall mean, for any Holder at any time,
the Book Capital Account of the Holder for such day, determined in
accordance with Section 8.1 hereof.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended from time to time, as well as any non-superseded provisions of the
U.S. Internal Revenue Code of 1954, as amended (or any corresponding
<PAGE>
provision or provisions of succeeding law).
"Commission" shall mean the U.S. Securities and Exchange
Commission.
"Declaration" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "Declaration",
"hereof", "herein" and "hereunder" shall be deemed to refer to this
Declaration rather than the article or section in which any such word
appears.
"Fiscal Year" shall mean an annual period determined by the
Trustees which ends on December 31 of each year or on such other day as is
permitted or required by the Code.
"Holders" shall mean as of any particular time all holders of
record of Interests in the Trust.
"Institutional Investor(s)" shall mean any regulated investment
company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual,
S corporation, partnership or grantor trust beneficially owned by any
individual, S corporation or partnership.
"Interest(s)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by this
Declaration, which interest may be expressed as a percentage, determined
by calculating, at such times and on such basis as the Trustees shall from
time to time determine, the ratio of each Holder's Book Capital Account
balance to the total of all Holders' Book Capital Account balances.
Reference herein to a specified percentage of, or fraction of, Interests,
means Holders whose combined Book Capital Account balances represent such
specified percentage or fraction of the combined Book Capital Account
balances of all, or a specified group of, Holders.
"Interested Person" shall have the meaning given it in the 1940
Act.
"Investment Adviser" shall mean any party furnishing services to
the Trust pursuant to any investment advisory contract described in
Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of
Holders, of (A) 67% or more of the Interests present or represented at
such meeting, if Holders of more than 50% of all Interests are present or
represented by proxy, or (B) more than 50% of all Interests, whichever is
less.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
2
<PAGE>
subdivisions thereof.
"Redemption" shall mean the complete withdrawal of an Interest of
a Holder the result of which is to reduce the Book Capital Account balance
of that Holder to zero, and the term "redeem" shall mean to effect a
Redemption.
"Trustees" shall mean each signatory to this Declaration, so long
as such signatory shall continue in office in accordance with the terms
hereof, and all other individuals who at the time in question have been
duly elected or appointed and have qualified as Trustees in accordance
with the provisions hereof and are then in office, and reference in this
Declaration to a Trustee or Trustees shall refer to such individual or
individuals in their capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees.
The "1940 Act" shall mean the U.S. Investment Company Act of
1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall
be fixed from time to time by action of the Trustees taken as provided in
Section 2.5 hereof; provided, however, that the number of Trustees so
fixed shall in no event be less than three or more than 15. Any vacancy
created by an increase in the number of Trustees may be filled by the
appointment of an individual having the qualifications described in this
Section 2.1 made by action of the Trustees taken as provided in Section
2.5 hereof. Any such appointment shall not become effective, however,
until the individual named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be
bound by the terms of this Declaration. No reduction in the number of
Trustees shall have the effect of removing any Trustee from office.
Whenever a vacancy occurs, until such vacancy is filled as provided in
Section 2.4 hereof, the Trustees continuing in office, regardless of their
number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration. A
Trustee shall be an individual at least 21 years of age who is not under
legal disability.
2.2. Term and Election. Each Trustee named herein, or elected
or appointed prior to the first meeting of Holders, shall (except in the
event of resignations, retirements, removals or vacancies pursuant to
Section 2.3 or Section 2.4 hereof) hold office until a successor to such
Trustee has been elected at such meeting and has qualified to serve as
3
<PAGE>
Trustee, as required under the 1940 Act. Subject to the provisions of
Section 16(a) of the 1940 Act and except as provided in Section 2.3
hereof, each Trustee shall hold office during the lifetime of the Trust
and until its termination as hereinafter provided.
2.3. Resignation, Removal and Retirement. Any Trustee may
resign his or her trust (without need for prior or subsequent accounting)
by an instrument in writing executed by such Trustee and delivered or
mailed to the Chairman, if any, the President or the Secretary of the
Trust and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument. Any Trustee may be
removed by the affirmative vote of Holders of two-thirds of the Interests
or (provided the aggregate number of Trustees, after such removal and
after giving effect to any appointment made to fill the vacancy created by
such removal, shall not be less than the number required by Section 2.1
hereof) with cause, by the action of two-thirds of the remaining Trustees.
Removal with cause includes, but is not limited to, the removal of a
Trustee due to physical or mental incapacity or failure to comply with
such written policies as from time to time may be adopted by at least
two-thirds of the Trustees with respect to the conduct of the Trustees and
attendance at meetings. Any Trustee who has attained a mandatory
retirement age, if any, established pursuant to any written policy adopted
from time to time by at least two-thirds of the Trustees shall,
automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such
policy, effective as of the date determined in accordance with such
policy. Any Trustee who has become incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by
retirement. Upon the resignation, retirement or removal of a Trustee, or
a Trustee otherwise ceasing to be a Trustee, such resigning, retired,
removed or former Trustee shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of conveying to the Trust
or the remaining Trustees any Trust Property held in the name of such
resigning, retired, removed or former Trustee. Upon the death of any
Trustee or upon removal, retirement or resignation due to any Trustee's
incapacity to serve as Trustee, the legal representative of such deceased,
removed, retired or resigning Trustee shall execute and deliver on behalf
of such deceased, removed, retired or resigning Trustee such documents as
the remaining Trustees shall require for the purpose set forth in the
preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, retirement, adjudicated incompetence or other incapacity to
perform the duties of the office, or removal, of a Trustee. No such
vacancy shall operate to annul this Declaration or to revoke any existing
agency created pursuant to the terms of this Declaration. In the case of
a vacancy, Holders of at least a majority of the Interests entitled to
vote, acting at any meeting of Holders held in accordance with Section 9.2
hereof, or, to the extent permitted by the 1940 Act, a majority vote of
the Trustees continuing in office acting by written instrument or
instruments, may fill such vacancy, and any Trustee so elected by the
4
<PAGE>
Trustees or the Holders shall hold office as provided in this Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President, the
Secretary, an Assistant Secretary or any two Trustees, at such time, on
such day and at such place, as shall be designated in the notice of the
meeting. The Trustees shall hold an annual meeting for the election of
officers and the transaction of other business which may come before such
meeting. Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given by mail, by telegram
(which term shall include a cablegram), by telecopier or delivered
personally (which term shall include by telephone). If notice is given by
mail, it shall be mailed not later than 48 hours preceding the meeting and
if given by telegram, telecopier or personally, such notice shall be sent
or delivery made not later than 24 hours preceding the meeting. Notice of
a meeting of Trustees may be waived before or after any meeting by signed
written waiver. Neither the business to be transacted at, nor the purpose
of, any meeting of the Trustees need be stated in the notice or waiver of
notice of such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except in the situation in
which a Trustee attends a meeting for the express purpose of objecting, at
the commencement of such meeting, to the transaction of any business on
the ground that the meeting was not lawfully called or convened. The
Trustees may act with or without a meeting, but no notice need be given of
action proposed to be taken by written consent. A quorum for all meetings
of the Trustees shall be a majority of the Trustees. Unless provided
otherwise in this Declaration, any action of the Trustees may be taken at
a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the
Trustees.
Any committee of the Trustees, including an executive committee,
if any, may act with or without a meeting. A quorum for all meetings of
any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee
may be taken at a meeting by vote of a majority of the members present (a
quorum being present) or without a meeting by written consent of a
majority of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes
under this Section 2.5 and shall be entitled to vote to the extent
permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of a conference telephone
or similar communications equipment by means of which all individuals
participating in the meeting can hear each other and participation in a
meeting by means of such communications equipment shall constitute
presence in person at such meeting.
5
<PAGE>
2.6. Officers; Chairman of the Board. The Trustees shall,
from time to time, elect a President, a Secretary and a Treasurer. The
Trustees may elect or appoint, from time to time, a Chairman of the Board
who shall preside at all meetings of the Trustees and carry out such other
duties as the Trustees may designate. The Trustees may elect or appoint
or authorize the President to appoint such other officers, agents or
independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each other officer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to time,
amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the
same extent as if the Trustees were the sole owners of the Trust Property
and such business in their own right, but with such powers of delegation
as may be permitted by this Declaration. The Trustees may perform such
acts as in their sole discretion they deem proper for conducting the
business of the Trust. The enumeration of or failure to mention any
specific power herein shall not be construed as limiting such exclusive
and absolute control. The powers of the Trustees may be exercised without
order of or resort to any court.
3.2. Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase
or otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of U.S. and foreign currencies
and related instruments including forward contracts, and securities,
including common and preferred stock, warrants, bonds, debentures, time
notes and all other evidences of indebtedness, negotiable or non-
negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, forward contracts, options, futures
contracts, and other securities, including, without limitation, those
issued, guaranteed or sponsored by any state, territory or possession of
the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the U.S. Government,
any foreign government, or any agency, instrumentality or political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the
United States or under any foreign laws; and to exercise any and all
6
<PAGE>
rights, powers and privileges of ownership or interest in respect of any
and all such investments of any kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of such
rights, powers and privileges in respect of any of such investments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional instruments in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the
Trustees be limited by any law limiting the investments which may be made
by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall
have the power to cause legal title to any Trust Property to be held by or
in the name of one or more of the Trustees, or in the name of the Trust,
or in the name or nominee name of any other Person on behalf of the Trust,
on such terms as the Trustees may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each individual who may hereafter
become a Trustee upon his due election and qualification. Upon the
resignation, removal or death of a Trustee, such resigning, removed or
deceased Trustee shall automatically cease to have any right, title or
interest in any Trust Property, and the right, title and interest of such
resigning, removed or deceased Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit
any Institutional Investor to purchase an Interest, or increase its
Interest, for such type of consideration, including cash or property, at
such time or times (including, without limitation, each business day), and
on such terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses.
Individuals, S corporations, partnerships and grantor trusts that are
beneficially owned by any individual, S corporation or partnership may not
purchase Interests. A Holder which has redeemed its Interest may not be
permitted to purchase an Interest until the later of 60 calendar days
after the date of such Redemption or the first day of the Fiscal Year next
succeeding the Fiscal Year during which such Redemption occurred.
3.5 Decreases and Redemptions of Interests. Subject to
Article VII hereof, the Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit a Holder to redeem its
Interest, or decrease its Interest, for either cash or property, at such
time or times (including, without limitation, each business day), and on
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such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to borrow
money or otherwise obtain credit and to secure the same by mortgaging,
pledging or otherwise subjecting as security the assets of the Trust,
including the lending of portfolio securities, and to endorse, guarantee,
or undertake the performance of any obligation, contract or engagement of
any other Person.
3.7. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the
Trust Property and over the business of the Trust, to delegate from time
to time to such of their number or to officers, employees, agents or
independent contractors of the Trust the doing of such things and the
execution of such instruments in either the name of the Trust or the names
of the Trustees or otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including
taxes, against the Trust Property; to prosecute, defend, compromise or
abandon any claims relating to the Trust or the Trust Property; to
foreclose any security interest securing any obligation, by virtue of
which any property is owed to the Trust; and to enter into releases,
agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur and pay
any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to
pay reasonable compensation from the Trust Property to themselves as
Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal and brokerage services, as they in
good faith may deem reasonable, and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust.
3.10. Miscellaneous Powers. The Trustees shall have power to:
(a) employ or contract with such Persons as the Trustees may deem
appropriate for the transaction of the business of the Trust and terminate
such employees or contractual relationships as they consider appropriate;
(b) enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Investment Adviser, Administrator, placement agent,
Holders, Trustees, officers, employees, agents or independent contractors
of the Trust against all claims arising by reason of holding any such
position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not the Trust would have the power to indemnify
such Person against such liability; (d) establish pension, profit-sharing
and other retirement, incentive and benefit plans for the Trustees,
officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious,
educational, scientific, civic or similar purposes; (f) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
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including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents or independent contractors of the
Trust, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and
change the Fiscal Year and the method by which the accounts of the Trust
shall be kept; and (i) adopt a seal for the Trust, but the absence of such
a seal shall not impair the validity of any instrument executed on behalf
of the Trust.
3.11. Further Powers. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of
its branches and maintain offices, whether within or without the State of
New York, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the
United States of America and of foreign governments, and to do all such
other things and execute all such instruments as they deem necessary,
proper, appropriate or desirable in order to promote the interests of the
Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust which is made by
the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a
grant of power to the Trustees. The Trustees shall not be required to
obtain any court order in order to deal with Trust Property.
3.12 Litigation. 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 the 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.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements
4.1. Investment Advisory, Administration and Other
Arrangements. The Trustees may in their discretion, from time to time,
enter into investment advisory contracts, administration contracts or
placement agent agreements whereby the other party to such contract or
agreement shall undertake to furnish the Trustees such investment
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advisory, administration, placement agent and/or other services as the
Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole
discretion determine. Notwithstanding any provision of this Declaration,
the Trustees may authorize any Investment Adviser (subject to such general
or specific instructions as the Trustees may, from time to time, adopt) to
effect purchases, sales, loans or exchanges of Trust Property on behalf of
the Trustees or may authorize any officer, employee or Trustee to effect
such purchases, sales, loans or exchanges pursuant to recommendations of
any such Investment Adviser (all without any further action by the
Trustees). Any such purchase, sale, loan or exchange shall be deemed to
have been authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 hereof or in the By-Laws of the Trust may be
entered into with any corporation, firm, trust or association, although
one or more of the Trustees or officers of the Trust may be an officer,
director, Trustee, shareholder or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable
by reason of the existence of any such relationship, nor shall any
individual holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of
any such contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this
Article IV or the By-Laws of the Trust. The same Person may be the other
party to one or more contracts entered into pursuant to Section 4.1 hereof
or the By-Laws of the Trust, and any individual may be financially
interested or otherwise affiliated with Persons who are parties to any or
all of the contracts mentioned in this Section 4.2 or in the By-Laws of
the Trust.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each Holder shall
be jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities
and obligations of the Trust in the event that the Trust fails to satisfy
such liabilities and obligations; provided, however, that, to the extent
assets are available in the Trust, the Trust shall indemnify and hold each
Holder harmless from and against any claim or liability to which such
Holder may become subject by reason of being or having been a Holder to
the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders, is greater than such Holder's
Interest (proportionate share), and shall reimburse such Holder for all
legal and other expenses reasonably incurred by such Holder in connection
with any such claim or liability. The rights accruing to a Holder under
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this Section 5.1 shall not exclude any other right to which such Holder
may be lawfully entitled, nor shall anything contained herein restrict the
right of the Trust to indemnify or reimburse a Holder in any appropriate
situation even though not specifically provided herein. Notwithstanding
the indemnification procedure described above, it is intended that each
Holder shall remain jointly and severally liable to the Trust's creditors
as a legal matter.
5.2. Limitations of Liability of Trustees, Officers, Employees,
Agents, Independent Contractors to Third Parties. No Trustee, officer,
employee, agent or independent contractor (except in the case of an agent
or independent contractor to the extent expressly provided by written
contract) of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or the Holders, in
connection with Trust Property or the affairs of the Trust; and all such
Persons shall look solely to the Trust Property for satisfaction of claims
of any nature against a Trustee, officer, employee, agent or independent
contractor (except in the case of an agent or independent contractor to
the extent expressly provided by written contract) of the Trust arising in
connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
provided by written contract) of the Trust shall be liable to the Trust or
the Holders for any action or failure to act (including, without
limitation, the failure to compel in any way any former or acting Trustee
to redress any breach of trust) except for such Person's own bad faith,
willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. Mandatory Indemnification. The Trust shall indemnify, to
the fullest extent permitted by law (including the 1940 Act), each
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
provided by written contract) of the Trust (including any Person who
serves at the Trust's request as a director, officer or trustee of another
organization in which the Trust has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to
any matter as to which such Person shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of such Person's duties; provided, however, that as to any
matter disposed of by a compromise payment by such Person, pursuant to a
consent decree or otherwise, no indemnification either for such payment or
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for any other expenses shall be provided unless there has been a
determination that such Person did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such Person's office by the court or other body approving
the settlement or other disposition or by a reasonable determination,
based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that such Person did not engage in such conduct by
written opinion from independent legal counsel approved by the Trustees.
The rights accruing to any Person under these provisions shall not exclude
any other right to which such Person may be lawfully entitled; provided
that no Person may satisfy any right of indemnity or reimbursement granted
in this Section 5.4 or in Section 5.2 hereof or to which such Person may
be otherwise entitled except out of the Trust Property. The Trustees may
make advance payments in connection with indemnification under this
Section 5.4, provided that the indemnified Person shall have given a
written undertaking to reimburse the Trust in the event it is subsequently
determined that such Person is not entitled to such indemnification.
5.5. No Bond Required of Trustees. No Trustee shall, as such,
be obligated to give any bond or surety or other security for the
performance of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender or other Person dealing with any Trustee,
officer, employee, agent or independent contractor of the Trust shall be
bound to make any inquiry concerning the validity of any transaction
purporting to be made by such Trustee, officer, employee, agent or
independent contractor or be liable for the application of money or
property paid, loaned or delivered to or on the order of such Trustee,
officer, employee, agent or independent contractor. Every obligation,
contract, instrument, certificate or other interest or undertaking of the
Trust, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees, officers, employees,
agents or independent contractors of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the
Trust made or sold by any Trustee, officer, employee, agent or independent
contractor of the Trust, in such capacity, shall contain an appropriate
recital to the effect that the Trustee, officer, employee, agent or
independent contractor of the Trust shall not personally be bound by or
liable thereunder, nor shall resort be had to their private property for
the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee,
officer, employee, agent or independent contractor of the Trust. Subject
to the provisions of the 1940 Act, the Trust may maintain insurance for
the protection of the Trust Property, the Holders, and the Trustees,
officers, employees, agents and independent contractors of the Trust in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
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5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust shall, in the
performance of such Person's duties, be fully and completely justified and
protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the
Trust (whether or not the Trust would have the power to indemnify such
Persons against such liability), upon an opinion of counsel, or upon
reports made to the Trust by any of its officers or employees or by any
Investment Adviser or Administrator, accountant, appraiser or other
experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property
shall consist of non-transferable Interests. The Interests shall be
personal property giving only the rights in this Declaration specifically
set forth. The value of an Interest shall be equal to the Book Capital
Account balance of the Holder of the Interest.
6.2. Non-Transferability. A Holder may not transfer, sell or
exchange its Interest.
6.3. Register of Interests. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the name,
address and Book Capital Account balance of each Holder. Such register
shall be conclusive as to the identity of the Holders, and the Trust shall
not be bound to recognize any equitable or legal claim to or interest in
an Interest which is not contained in such register. No Holder shall be
entitled to receive payment of any distribution, nor to have notice given
to it as herein provided, until it has given its address to such officer
or agent of the Trust as is keeping such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this Declaration
and to such restrictions as may from time to time be adopted by the
Trustees, each Holder shall have the right to vary its investment in the
Trust at any time without limitation by increasing (through a capital
contribution) or decreasing (through a capital withdrawal) or by a
Redemption of its Interest. An increase in the investment of a Holder in
the Trust shall be reflected as an increase in the Book Capital Account
balance of that Holder and a decrease in the investment of a Holder in the
Trust or the Redemption of the Interest of a Holder shall be reflected as
a decrease in the Book Capital Account balance of that Holder. The Trust
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shall, upon appropriate and adequate notice from any Holder increase,
decrease or redeem such Holder's Interest for an amount determined by the
application of a formula adopted for such purpose by resolution of the
Trustees; provided that (a) the amount received by the Holder upon any
such decrease or Redemption shall not exceed the decrease in the Holder's
Book Capital Account balance effected by such decrease or Redemption of
its Interest, and (b) if so authorized by the Trustees, the Trust may, at
any time and from time to time, charge fees for effecting any such
decrease or Redemption, at such rates as the Trustees may establish, and
may, at any time and from time to time, suspend such right of decrease or
Redemption. The procedures for effecting decreases or Redemptions shall
be as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account
balance of each Holder shall be determined on such days and at such time
or times as the Trustees may determine. The Trustees shall adopt
resolutions setting forth the method of determining the Book Capital
Account balance of each Holder. The power and duty to make calculations
pursuant to such resolutions may be delegated by the Trustees to the
Investment Adviser, Administrator, custodian, or such other Person as the
Trustees may determine. Upon the Redemption of an Interest, the Holder of
that Interest shall be entitled to receive the balance of its Book Capital
Account. A Holder may not transfer, sell or exchange its Book Capital
Account balance.
8.2. Allocations and Distributions to Holders. The Trustees
shall, in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall
make (i) the allocation of unrealized gains and losses, taxable income and
tax loss, and profit and loss, or any item or items thereof, to each
Holder, (ii) the payment of distributions, if any, to Holders, and
(iii) upon liquidation, the final distribution of items of taxable income
and expense. Such procedures shall be set forth in writing and be
furnished to the Trust's accountants. The Trustees may amend the
procedures adopted pursuant to this Section 8.2 from time to time. The
Trustees may retain from the net profits such amount as they may deem
necessary to pay the liabilities and expenses of the Trust, to meet
obligations of the Trust, and as they may deem desirable to use in the
conduct of the affairs of the Trust or to retain for future requirements
or extensions of the business.
8.3. Power to Modify Foregoing Procedures. Notwithstanding
any of the foregoing provisions of this Article VIII, the Trustees may
prescribe, in their absolute discretion, such other bases and times for
determining the net income of the Trust, the allocation of income of the
Trust, the Book Capital Account balance of each Holder, or the payment of
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distributions to the Holders as they may deem necessary or desirable to
enable the Trust to comply with any provision of the 1940 Act or any order
of exemption issued by the Commission or with the Code.
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust Property
and the right to conduct any business described herein are vested
exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests
and they shall have no power or right to call for any partition or
division of any Trust Property.
9.2. Meetings of Holders. Meetings of Holders may be called
at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Holders holding, in the aggregate, not
less than 10% of the Interests, such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall
be held within or without the State of New York and within or without the
United States of America on such day and at such time as the Trustees
shall designate. Holders of one-third of the Interests, present in person
or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other
applicable law, this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote of the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the
Holders present, either in person or by proxy, at such meeting constitutes
the action of the Holders, unless a greater number of affirmative votes is
required by the 1940 Act, other applicable law, this Declaration or the
By-Laws of the Trust. All or any one of more Holders may participate in a
meeting of Holders by means of a conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
9.3. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at
least 10 days and not more than 60 days before the meeting. Notice of any
meeting may be waived in writing by any Holder either before or after such
meeting. The attendance of a Holder at a meeting shall constitute a
waiver of notice of such meeting except in the situation in which a Holder
attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting was not lawfully called or
convened. At any meeting, any business properly before the meeting may be
considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
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9.4. Record Date for Meetings, Distributions, etc. For the
purpose of determining the Holders who are entitled to notice of and to
vote or act at any meeting, including any adjournment thereof, or to
participate in any distribution, or for the purpose of any other action,
the Trustees may from time to time fix a date, not more than 90 days prior
to the date of any meeting of Holders or the payment of any distribution
or the taking of any other action, as the case may be, as a record date
for the determination of the Persons to be treated as Holders for such
purpose. If the Trustees do not, prior to any meeting of the Holders, so
fix a record date, then the date of mailing notice of the meeting shall be
the record date.
9.5. Proxies, etc. At any meeting of Holders, any Holder
entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such
vote is to be taken. A proxy may be revoked by a Holder at any time
before it has been exercised by placing on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct,
a later dated proxy or written revocation. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of the
Trust or of one or more Trustees or of one or more officers of the Trust.
Only Holders on the record date shall be entitled to vote. Each such
Holder shall be entitled to a vote proportionate to its Interest. When an
Interest is held jointly by several Persons, any one of them may vote at
any meeting in person or by proxy in respect of such Interest, but if more
than one of them is present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to
be cast, such vote shall not be received in respect of such Interest. A
proxy purporting to be executed by or on behalf of a Holder shall be
deemed valid unless challenged at or prior to its exercise, and the burden
of proving invalidity shall rest on the challenger. No proxy shall be
valid after one year from the date of execution, unless a longer period is
expressly stated in such proxy. The Trust may also permit a Holder to
authorize and empower individuals named as proxies on any form of proxy
solicited by the Trustees to vote that Holder's Interest on any matter by
recording his voting instructions on any recording device maintained for
that purpose by the Trust or its agent, provided the Holder complies with
such procedures as the Trustees may designate to be necessary or
appropriate to determine the authenticity of the voting instructions so
recorded; such instructions shall be deemed to constitute a written proxy
signed by the Holder and delivered to the Trust and shall be deemed to be
dated as of the date such instructions were transmitted, and the Holder
shall be deemed to have approved and ratified all actions taken by such
proxies in accordance with the voting instructions so recorded.
9.6. Reports. The Trustees shall cause to be prepared and
furnished to each Holder, at least annually as of the end of each Fiscal
Year, a report of operations containing a balance sheet and a statement of
income of the Trust prepared in conformity with generally accepted
accounting principles and an opinion of an independent public accountant
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on such financial statements. The Trustees shall, in addition, furnish to
each Holder at least semi-annually interim reports of operations
containing an unaudited balance sheet as of the end of such period and an
unaudited statement of income for the period from the beginning of the
then-current Fiscal Year to the end of such period.
9.7. Inspection of Records. The books and records of the
Trust shall be open to inspection by Holders during normal business hours
for any purpose not harmful to the Trust.
9.8. Holder Action by Written Consent. 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 this Declaration)
consent to the action in writing and the written consents are filed with
the records of the meetings of Holders. Such consents shall be treated
for all purposes as a vote taken at a meeting of Holders. Each such
written consent shall be executed by or on behalf of the Holder delivering
such consent and shall bear the date of such execution. No such written
consent shall be effective to take the action referred to therein unless,
within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the
records of the meetings of Holders.
9.9. Notices. Any and all communications, including any and
all notices to which any Holder may be entitled, shall be deemed duly
served or given if mailed, postage prepaid, addressed to a Holder at its
last known address as recorded on the register of the Trust.
ARTICLE X
Duration; Termination;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible termination or dissolution
in accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration
of 20 years after the death of the last survivor of the initial Trustees
named herein and the following named persons:
Date of
Name Address Birth
Cassius Marcellus Cornelius 742 Old Dublin Road November 9, 1990
Clay Hancock, NH 03449
Sara Briggs Sullivan 1308 Rhodes Street September 17, 1990
Dubois, WY 82513
Myles Bailey Rawson Winhall Hollow Road May 13, 1990
R.R. #1, Box 178B
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Bondville, VT 05340
Zeben Curtis Kopchak Box 1126 October 31, 1989
Cordova, AK 99574
Landon Harris Clay 742 Old Dublin Road February 15, 1989
Hancock, NH 03449
Kelsey Ann Sullivan 1308 Rhodes Street May 1, 1988
Dubois, WY 82513
Carter Allen Rawson Winhall Hollow Road January 28, 1988
R.R. #1, Box 178B
Bondville, VT 05340
Obadiah Barclay Kopchak Box 1126 August 29, 1987
Cordova, AK 99574
Richard Tubman Clay 742 Old Dublin Road April 12, 1987
Hancock, NH 03449
Thomas Moragne Clay 742 Old Dublin Road April 11, 1985
Hancock, NH 03449
Zachariah Bishop Kopchak Box 1126 January 11, 1985
Cordova, AK 99574
Sager Anna Kopchak Box 1126 May 22, 1983
Cordova, AK 99574
10.2. Termination.
(a) The Trust may be terminated (i) by the affirmative
vote of Holders of not less than two-thirds of all Interests at any
meeting of Holders or by an instrument in writing without a meeting,
executed by a majority of the Trustees and consented to by Holders of not
less than two-thirds of all Interests, or (ii) by the Trustees by written
notice to the Holders. Upon any such termination,
(i) the Trust shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust have been
wound up, including the power to fulfill or discharge the contracts
of the Trust, collect the assets of the Trust, sell, convey,
assign, exchange or otherwise dispose of all or any part of the
Trust Property to one or more Persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay the
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liabilities of the Trust, and do all other acts appropriate to
liquidate the business of the Trust; provided that any sale,
conveyance, assignment, exchange or other disposition of all or
substantially all the Trust Property shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration by the vote of Holders holding more than 50% of all
Interests; and
(iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities
and refunding agreements as they deem necessary for their
protection, the Trustees shall distribute the remaining Trust
Property, in cash or in kind or partly each, among the Holders
according to their respective rights as set forth in the procedures
established pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and
file with the records of the Trust an instrument in writing setting forth
the fact of such termination and distribution. Upon termination of the
Trust, the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Holders shall thereupon cease.
10.3. Dissolution. Upon the bankruptcy of any Holder, or upon the
Redemption of any Interest, the Trust shall be dissolved effective 120
days after the event. However, the Holders (other than such bankrupt or
redeeming Holder) may, by a unanimous affirmative vote at any meeting of
such Holders or by an instrument in writing without a meeting executed by
a majority of the Trustees and consented to by all such Holders, agree to
continue the business of the Trust even if there has been such a
dissolution.
10.4. Amendment Procedure.
(a) This Declaration may be amended by the vote of Holders
of more than 50% of all Interests at any meeting of Holders or by an
instrument in writing without a meeting, executed by a majority of the
Trustees and consented to by the Holders of more than 50% of all
Interests. Notwithstanding any other provision hereof, this Declaration
may be amended by an instrument in writing executed by a majority of the
Trustees, and without the vote or consent of Holders, for any one or more
of the following purposes: (i) to change the name of the Trust, (ii) to
supply any omission, or to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, (iii) to conform this
Declaration to the requirements of applicable federal law or regulations
or the requirements of the applicable provisions of the Code, (iv) to
change the state or other jurisdiction designated herein as the state or
other jurisdiction whose law shall be the governing law hereof, (v) to
effect such changes herein as the Trustees find to be necessary or
appropriate (A) to permit the filing of this Declaration under the law of
such state or other jurisdiction applicable to trusts or voluntary
19
<PAGE>
associations, (B) to permit the Trust to elect to be treated as a
"regulated investment company" under the applicable provisions of the
Code, or (C) to permit the transfer of Interests (or to permit the
transfer of any other beneficial interest in or share of the Trust,
however denominated), (vi) in conjunction with any amendment contemplated
by the foregoing clause (iv) or the foregoing clause (v) to make any and
all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (v) or the foregoing clause (vi) to be
conclusively evidenced by the execution of any such amendment by a
majority of the Trustees, and (vii) change, modify or rescind any
provision of this Declaration provided such change, modification or
rescission is found by the Trustees to be necessary or appropriate and to
not have a materially adverse effect on the financial interests of the
Holders, any such finding to be conclusively evidenced by the execution of
any such amendment by a majority of the Trustees; provided, however, that
unless effected in compliance with the provisions of Section 10.4(b)
hereof, no amendment otherwise authorized by this sentence may be made
which would reduce the amount payable with respect to any Interest upon
liquidation of the Trust and; provided, further, that the Trustees shall
not be liable for failing to make any amendment permitted by this Section
10.4(a).
(b) No amendment may be made under Section 10.4(a) hereof
which would change any rights with respect to any Interest by reducing the
amount payable thereon upon liquidation of the Trust, except with the vote
or consent of Holders of two-thirds of all Interests.
(c) A certification in recordable form executed by a
majority of the Trustees setting forth an amendment and reciting that it
was duly adopted by the Holders or by the Trustees as aforesaid or a copy
of the Declaration, as amended, in recordable form, and executed by a
majority of the Trustees, shall be conclusive evidence of such amendment
when filed with the records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees at any
meeting of Trustees or by an instrument executed by a majority of the
Trustees.
10.5. Merger, Consolidation and Sale of Assets. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of
the Trust Property, including good will, upon such terms and conditions
and for such consideration when and as authorized at any meeting of
Holders called for such purpose by a Majority Interests Vote, and any such
merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of
the State of New York.
10.6. Incorporation. Upon a Majority Interests Vote, the Trustees
20
<PAGE>
may cause to be organized or assist in organizing a corporation or
corporations under the law of any jurisdiction or a trust, partnership,
association or other organization to take over the Trust Property or to
carry on any business in which the Trust directly or indirectly has any
interest, and to sell, convey and transfer the Trust Property to any such
corporation, trust, partnership, association or other organization in
exchange for the equity interests thereof or otherwise, and to lend money
to, subscribe for the equity interests of, and enter into any contract
with any such corporation, trust, partnership, association or other
organization, or any corporation, trust, partnership, association or other
organization in which the Trust holds or is about to acquire equity
interests. The Trustees may also cause a merger or consolidation between
the Trust or any successor thereto and any such corporation, trust,
partnership, association or other organization if and to the extent
permitted by law. Nothing contained herein shall be construed as
requiring approval of the Holders for the Trustees to organize or assist
in organizing one or more corporations, trusts, partnerships, associations
or other organizations and selling, conveying or transferring a portion of
the Trust Property to one or more of such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Governing Law. This Declaration is executed by the Trustees
and delivered in the State of New York and with reference to the law
thereof, and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed in accordance
with the law of the State of New York and reference shall be specifically
made to the trust law of the State of New York as to the construction of
matters not specifically covered herein or as to which an ambiguity
exists.
11.2. Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original,
and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any one such original
counterpart.
11.3. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Holders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Holders, (d) the fact that the number of Trustees or Holders present at
any meeting or executing any written instrument satisfies the requirements
of this Declaration, (e) the form of any By-Laws adopted by or the
identity of any officer elected by the Trustees, or (f) the existence of
any fact or facts which in any manner relate to the affairs of the Trust,
21
<PAGE>
shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees.
11.4. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable, and
if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, or with other applicable
law and regulations, the conflicting provision shall be deemed never to
have constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction
and shall not in any manner affect such provision in any other
jurisdiction or any other provision of this Declaration in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the day and year first above written.
/s/ Robert Lloyd George
-----------------------------------
Robert Lloyd George, as Trustee and
not individually
/s/ James B. Hawkes
-----------------------------------
James B. Hawkes, as Trustee and
not individually
/s/ Samuel L. Hayes, III
------------------------------------
Samuel L. Hayes, III, as Trustee and
not individually
/s/ Edward K. Y. Chen
------------------------------------
Edward K. Y. Chen, as Trustee and
not individually
/s/ Stuart Hamilton Leckie
------------------------------------
Stuart Hamilton Leckie, as Trustee
and not individually
22
<PAGE>
EMERGING MARKETS PORTFOLIO
--------------------------
BY-LAWS
As Adopted January 18, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- Meetings of Holders . . . . . . . . . . . . . . . . . . 1
Section 1.1 Records at Holder Meetings . . . . 1
Section 1.2 Inspectors of Election . . . . . . 1
ARTICLE II -- Officers . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Officers of the Trust . . . . . . . 2
Section 2.2 Election and Tenure . . . . . . . . 2
Section 2.3 Removal of Officers . . . . . . . . 2
Section 2.4 Bonds and Surety . . . . . . . . . 2
Section 2.5 Chairman, President and Vice President 2
Section 2.6 Secretary . . . . . . . . . . . . . 3
Section 2.7 Treasurer . . . . . . . . . . . . . 3
Section 2.8 Other Officers and Duties . . . . . 3
ARTICLE III -- Miscellaneous . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Depositories . . . . . . . . . . . 4
Section 3.2 Signatures . . . . . . . . . . . . 4
Section 3.3 Seal . . . . . . . . . . . . . . . . 4
Section 3.4 Indemnification . . . . . . . . . . 4
Section 3.5 Distribution Disbursing Agents and the
Like . . . . . . . . . . . . . . . 4
ARTICLE IV -- Regulations; Amendment of By-Laws . . . . . . . . . . . 5
Section 4.1 Regulations . . . . . . . . . . . . 5
Section 4.2 Amendment and Repeal of By-Laws . . 5
i
<PAGE>
BY-LAWS
OF
EMERGING MARKETS PORTFOLIO
---------------------------
These By-Laws are made and adopted pursuant to Section
2.7 of the Declaration of Trust establishing EMERGING MARKETS PORTFOLIO
(the "Trust"), dated as of January 18, 1994, as from time to time amended
(the "Declaration"). All words and terms capitalized in these By-Laws
shall have the meaning or meanings set forth for such words or terms in
the Declaration.
ARTICLE I
Meetings of Holders
Section 1.1. Records at Holder Meetings. At each
meeting of the Holders there shall be open for inspection the minutes of
the last previous meeting of Holders of the Trust and a list of the
Holders of the Trust, certified to be true and correct by the Secretary or
other proper agent of the Trust, as of the record date of the meeting.
Such list of Holders shall contain the name of each Holder in alphabetical
order and the address and Interest owned by such Holder on such record
date.
Section 1.2. Inspectors of Election. In advance of any
meeting of the Holders, the Trustees may appoint Inspectors of Election to
act at the meeting or any adjournment thereof. If Inspectors of Election
are not so appointed, the chairman, if any, of any meeting of the Holders
may, and on the request of any Holder or his proxy shall, appoint
Inspectors of Election. The number of Inspectors of Election shall be
either one or three. If appointed at the meeting on the request of one or
more Holders or proxies, a Majority Interests Vote shall determine whether
one or three Inspectors of Election are to be appointed, but failure to
allow such determination by the Holders shall not affect the validity of
the appointment of Inspectors of Election. In case any individual
appointed as an Inspector of Election fails to appear or fails or refuses
to so act, the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at the meeting by the
individual acting as chairman of the meeting. The Inspectors of Election
shall determine the Interest owned by each Holder, the Interests
represented at the meeting, the existence of a quorum, the authenticity,
validity and effect of proxies, shall receive votes, ballots or consents,
shall hear and determine all challenges and questions in any way arising
in connection with the right to vote, shall count and tabulate all votes
or consents, shall determine the results, and shall do such other acts as
may be proper to conduct the election or vote with fairness to all
Holders. If there are three Inspectors of Election, the decision, act or
certificate of a majority is effective in all respects as the decision,
act or certificate of all. On request of the chairman, if any, of the
<PAGE>
meeting, or of any Holder or its proxy, the Inspectors of Election shall
make a report in writing of any challenge or question or matter determined
by them and shall execute a certificate of any facts found by them.
ARTICLE II
Officers
Section 2.1. Officers of the Trust. The officers of the
Trust shall consist of a Chairman, if any, a President, a Secretary, a
Treasurer and such other officers or assistant officers, including Vice
Presidents, as may be elected by the Trustees. Any two or more of the
offices may be held by the same individual. The Trustees may designate a
Vice President as an Executive Vice President and may designate the order
in which the other Vice Presidents may act. The Chairman shall be a
Trustee, but no other officer of the Trust, including the President, need
be a Trustee.
Section 2.2. Election and Tenure. At the initial
organization meeting and thereafter at each annual meeting of the
Trustees, the Trustees shall elect the Chairman, if any, the President,
the Secretary, the Treasurer and such other officers as the Trustees shall
deem necessary or appropriate in order to carry out the business of the
Trust. Such officers shall hold office until the next annual meeting of
the Trustees and until their successors have been duly elected and
qualified. The Trustees may fill any vacancy in office or add any
additional officer at any time.
Section 2.3. Removal of Officers. Any officer may be
removed at any time, with or without cause, by action of a majority of the
Trustees. This provision shall not prevent the making of a contract of
employment for a definite term with any officer and shall have no effect
upon any cause of action which any officer may have as a result of removal
in breach of a contract of employment. Any officer may resign at any time
by notice in writing signed by such officer and delivered or mailed to the
Chairman, if any, the President or the Secretary, and such resignation
shall take effect immediately, or at a later date according to the terms
of such notice in writing.
Section 2.4. Bonds and Surety. Any officer may be
required by the Trustees to be bonded for the faithful performance of his
duties in such amount and with such sureties as the Trustees may
determine.
Section 2.5. Chairman, President and Vice Presidents.
The Chairman, if any, shall, if present, preside at all meetings of the
Holders and of the Trustees and shall exercise and perform such other
powers and duties as may be from time to time assigned to him by the
Trustees. Subject to such supervisory powers, if any, as may be given by
the Trustees to the Chairman, if any, the President shall be the chief
executive officer of the Trust and, subject to the control of the
2
<PAGE>
Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the Holders and, in the absence of the
Chairman, the President shall preside at all meetings of the Trustees.
The President shall be, ex officio, a member of all standing committees of
Trustees. Subject to the direction of the Trustees, the President shall
have the power, in the name and on behalf of the Trust, to execute any and
all loan documents, contracts, agreements, deeds, mortgages and other
instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the President
shall have full authority and power to attend, to act and to vote, on
behalf of the Trust, at any meeting of any business organization in which
the Trust holds an interest, or to confer such powers upon any other
person, by executing any proxies duly authorizing such person. The
President shall have such further authorities and duties as the Trustees
shall from time to time determine. In the absence or disability of the
President, the Vice Presidents in order of their rank or the Vice
President designated by the Trustees, shall perform all of the duties of
the President, and when so acting shall have all the powers of and be
subject to all of the restrictions upon the President. Subject to the
direction of the President, each Vice President shall have the power in
the name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing,
and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees or by the President.
Section 2.6. Secretary. The Secretary shall keep the
minutes of all meetings of, and record all votes of, Holders, Trustees and
the Executive Committee, if any. The results of all actions taken at a
meeting of the Trustees, or by written consent of the Trustees, shall be
recorded by the Secretary. The Secretary shall be custodian of the seal
of the Trust, if any, and (and any other person so authorized by the
Trustees) shall affix the seal or, if permitted, a facsimile thereof, to
any instrument executed by the Trust which would be sealed by a New York
corporation executing the same or a similar instrument and shall attest
the seal and the signature or signatures of the officer or officers
executing such instrument on behalf of the Trust. The Secretary shall
also perform any other duties commonly incident to such office in a New
York corporation, and shall have such other authorities and duties as the
Trustees shall from time to time determine.
Section 2.7. Treasurer. Except as otherwise directed by
the Trustees, the Treasurer shall have the general supervision of the
monies, funds, securities, notes receivable and other valuable papers and
documents of the Trust, and shall have and exercise under the supervision
of the Trustees and of the President all powers and duties normally
incident to his office. The Treasurer may endorse for deposit or
collection all notes, checks and other instruments payable to the Trust or
to its order and shall deposit all funds of the Trust as may be ordered by
the Trustees or the President. The Treasurer shall keep accurate account
3
<PAGE>
of the books of the Trust's transactions which shall be the property of
the Trust, and which together with all other property of the Trust in his
possession, shall be subject at all times to the inspection and control of
the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall
also be the principal financial officer of the Trust. The Treasurer shall
have such other duties and authorities as the Trustees shall from time to
time determine. Notwithstanding anything to the contrary herein
contained, the Trustees may authorize the Investment Adviser or the
Administrator to maintain bank accounts and deposit and disburse funds on
behalf of the Trust.
Section 2.8. Other Officers and Duties. The Trustees
may elect such other officers and assistant officers as they shall from
time to time determine to be necessary or desirable in order to conduct
the business of the Trust. Assistant officers shall act generally in the
absence of the officer whom they assist and shall assist that officer in
the duties of his office. Each officer, employee and agent of the Trust
shall have such other duties and authorities as may be conferred upon him
by the Trustees or delegated to him by the President.
ARTICLE III
Miscellaneous
Section 3.1. Depositories. The funds of the Trust shall
be deposited in such depositories as the Trustees shall designate and
shall be drawn out on checks, drafts or other orders signed by such
officer, officers, agent or agents (including the Investment Adviser or
the Administrator) as the Trustees may from time to time authorize.
Section 3.2. Signatures. All contracts and other
instruments shall be executed on behalf of the Trust by such officer,
officers, agent or agents as provided in these By-Laws or as the Trustees
may from time to time by resolution provide.
Section 3.3. Seal. The seal of the Trust, if any, may
be affixed to any document, and the seal and its attestation may be
lithographed, engraved or otherwise printed on any document with the same
force and effect as if it had been imprinted and attested manually in the
same manner and with the same effect as if done by a New York corporation.
Section 3.4. Indemnification. Insofar as the
conditional advancing of indemnification monies under Section 5.4 of the
Declaration for actions based upon the 1940 Act may be concerned, such
payments will be made only on the following conditions: (i) the advances
must be limited to amounts used, or to be used, for the preparation or
presentation of a defense to the action, including costs connected with
the preparation of a settlement; (ii) advances may be made only upon
receipt of a written promise by, or on behalf of, the recipient to repay
the amount of the advance which exceeds the amount to which it is
ultimately determined that he is entitled to receive from the Trust by
4
<PAGE>
reason of indemnification; and (iii) (a) such promise must be secured by a
surety bond, other suitable insurance or an equivalent form of security
which assures that any repayment may be obtained by the Trust without
delay or litigation, which bond, insurance or other form of security must
be provided by the recipient of the advance, or (b) a majority of a quorum
of the Trust's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of
readily available facts, that the recipient of the advance ultimately will
be found entitled to indemnification.
Section 3.5. Distribution Disbursing Agents and the
Like. The Trustees shall have the power to employ and compensate such
distribution disbursing agents, warrant agents and agents for the
reinvestment of distributions as they shall deem necessary or desirable.
Any of such agents shall have such power and authority as is delegated to
any of them by the Trustees.
ARTICLE IV
Regulations; Amendment of By-Laws
Section 4.1. Regulations. The Trustees may make such
additional rules and regulations, not inconsistent with these By-Laws, as
they may deem expedient concerning the sale and purchase of Interests of
the Trust.
Section 4.2. Amendment and Repeal of By-Laws. In
accordance with Section 2.7 of the Declaration, the Trustees shall have
the power to alter, amend or repeal the By-Laws or adopt new By-Laws at
any time. Action by the Trustees with respect to the By-Laws shall be
taken by an affirmative vote of a majority of the Trustees. The Trustees
shall in no event adopt By-Laws which are in conflict with the
Declaration.
The Declaration refers to the Trustees as Trustees, but
not as individuals or personally; and no Trustee, officer, employee or
agent of the Trust shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any
obligation or claim or otherwise in connection with the affairs of the
Trust.
5
<PAGE>
EMERGING MARKETS PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made this 24th day of March, 1994 between Emerging
Markets Portfolio, a New York trust (the "Trust"), and Lloyd George
Investment Management (Bermuda) Limited, a Bermuda corporation (the
"Adviser").
1. Duties of the Adviser. The Trust hereby employs the
Adviser to act as investment adviser for and to manage the investment and
reinvestment of the assets of the Trust, subject to the supervision of the
Trustees of the Trust, for the period and on the terms set forth in this
Agreement.
The Adviser hereby accepts such employment, and undertakes to
afford to the Trust the advice and assistance of the Adviser's
organization in the choice of investments and in the purchase and sale of
securities for the Trust and to furnish for the use of the Trust office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Trust and to pay the salaries and fees of
all officers and Trustees of the Trust who are members of the Adviser's
organization and all personnel of the Adviser performing services relating
to research and investment activities. The Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, except as
otherwise expressly provided or authorized, have no authority to act for
or represent the Trust in any way or otherwise be deemed an agent of the
Trust.
The Adviser shall provide the Trust with such investment
management and supervision as the Trust may from time to time consider
necessary for the proper supervision of the Trust's investments. As
investment adviser to the Trust, the Adviser shall furnish continuously an
investment program and shall determine from time to time what securities
shall be purchased, sold or exchanged and what portion of the Trust's
assets shall be held uninvested, subject always to the applicable
restrictions of the Declaration of Trust, By-Laws and registration
statement of the Trust under the Investment Company Act of 1940, all as
from time to time amended. Should the Trustees of the Trust at any time,
however, make any specific determination as to investment policy for the
Trust and notify the Adviser thereof in writing, the Adviser shall be
bound by such determination for the period, if any, specified in such
notice or until similarly notified that such determination has been
revoked. The Adviser shall take, on behalf of the Trust, all actions
which it deems necessary or desirable to implement the investment policies
of the Trust.
The Adviser shall place all orders for the purchase or sale of
portfolio securities for the account of the Trust with brokers or dealers
or banks or firms or other persons selected by the Adviser, and to that
end the Adviser is authorized as the agent of the Trust to give
instructions to the custodian of the Trust as to deliveries of securities
<PAGE>
and payment of cash for the account of the Trust. In connection with the
selection of such brokers or dealers or banks or firms or other persons
and the placing of such orders, the Adviser shall use its best efforts to
seek to execute security transactions at prices which are advantageous to
the Trust and (when a disclosed commission is being charged) at reasonably
competitive commission rates. In selecting brokers or dealers qualified
to execute a particular transaction, brokers or dealers may be selected
who also provide brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) to the
Adviser and the Adviser is expressly authorized to pay any broker or
dealer who provides such brokerage and research services a commission for
executing a security transaction which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall responsibilities which
the Adviser and its affiliates have with respect to accounts over which
they exercise investment discretion. Subject to the requirement set forth
in the second sentence of this paragraph, the Adviser is authorized to
consider, as a factor in the selection of any broker or dealer with whom
purchase or sale orders may be placed, the fact that such broker or dealer
has sold or is selling shares of Eaton Vance Greater China Growth Fund or
any other investment company or series thereof that invests substantially
all of its assets in the Trust.
The Adviser shall not be responsible for providing certain
special administrative services to the Trust under this Agreement. Eaton
Vance Management, in its capacity as Administrator of the Trust, shall be
responsible for providing such services to the Trust under the Trust's
separate Administration Agreement with the Administrator.
2. Compensation of the Adviser. For the services, payments
and facilities to be furnished hereunder by the Adviser, the Adviser shall
be entitled to receive from the Trust, a monthly advisory fee computed by
applying the annual asset rate applicable to that portion of the average
daily net assets of the Trust throughout the month in each Category as
indicated below:
Annual
Category Average Daily Net Assets Asset Rate
1 less than $500 million 0.75%
2 $500 million but less than $1 billion 0.70%
3 $1 billion but less than $1.5 billion 0.65%
4 $1.5 billion but less than $2 billion 0.60%
5 $2 billion but less than $3 billion 0.55%
6 $3 billion and over 0.50%
Such advisory fee shall be paid monthly in arrears on the last
business day of each month. The Trust's net asset value shall be computed
2
<PAGE>
in accordance with the Declaration of Trust of the Trust and any
applicable votes and determinations of the Trustees of the Trust. In case
of initiation or termination of the Agreement during any month, the fee
for that month shall be based on the number of calendar days during which
it is in effect.
The Adviser may, from time to time, waive all or a part of the
above compensation.
3. Allocation of Charges and Expenses. It is understood
that the Trust will pay all its expenses other than those expressly stated
to be payable by the Adviser hereunder, which expenses payable by the
Trust shall include, without implied limitation, (i) expenses of
maintaining the Trust and continuing its existence, (ii) registration of
the Trust under the Investment Company Act of 1940, (iii) commissions,
fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting
and legal expenses, (v) taxes and interest, (vi) governmental fees, (vii)
expenses of issue, sale and redemption of Interests in the Trust, (viii)
expenses of registering and qualifying the Trust and Interests in the
Trust under federal and state securities laws and of preparing and
printing registration statements or other offering documents or memoranda
for such purposes and for distributing the same to Holders and investors,
and fees and expenses of registering and maintaining registrations of the
Trust and of the Trust's placement agent as broker-dealer or agent under
state securities laws, (ix) expenses of reports and notices to Holders and
of meetings of Holders and proxy solicitations therefor, (x) expenses of
reports to governmental officers and commissions, (xi) insurance expenses,
(xii) association membership dues, (xiii) fees, expenses and disbursements
of custodians and subcustodians for all services to the Trust (including
without limitation safekeeping of funds, securities and other investments,
keeping of books, accounts and records, and determination of net asset
values, book capital account balances and tax capital account balances),
(xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, Holder servicing agents and registrars for all services
to the Trust, (xv) expenses for servicing the accounts of Holders, (xvi)
any direct charges to Holders approved by the Trustees of the Trust,
(xvii) compensation and expenses of Trustees of the Trust who are not
members of the Adviser's organization, (xviii) the administration fees
payable by the Trust under any administration or similar agreement to
which the Trust is a party, and (xvix) such non-recurring items as may
arise, including expenses incurred in connection with litigation,
proceedings and claims and the obligation of the Trust to indemnify its
Trustees, officers and Holders with respect thereto.
4. Other Interests. It is understood that Trustees and
officers of the Trust and Holders of Interests in the Trust are or may be
or become interested in the Adviser as directors, officers, employees,
shareholders or otherwise and that directors, officers, employees and
shareholders of the Adviser are or may be or become similarly interested
in the Trust, and that the Adviser may be or become interested in the
Trust as a shareholder or otherwise. It is also understood that
3
<PAGE>
directors, officers, employees and shareholders of the Adviser may be or
become interested (as directors, trustees, officers, employees,
shareholders or otherwise) in other companies or entities (including,
without limitation, other investment companies) which the Adviser may
organize, sponsor or acquire, or with which it may merge or consolidate,
and that the Adviser or its subsidiaries or affiliates may enter into
advisory or management agreements or other contracts or relationships with
such other companies or entities.
5. Limitation of Liability of the Adviser. The services of
the Adviser to the Trust are not to be deemed to be exclusive, the Adviser
being free to render services to others and engage in other business
activities. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part of the Adviser, the Adviser shall not be subject to liability to the
Trust or to any Holder for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses which may
be sustained in the acquisition, holding or disposition of any security or
other investment.
6. 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, 1996 and shall continue in full
force and effect indefinitely thereafter, but only so long as such
continuance after February 28, 1996 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 the Adviser 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 the Trustees of the Trust or the directors of
the Adviser, as the case may be, and the Trust may, at any time upon such
written notice to the Adviser, 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.
7. Amendments of the Agreement. This Agreement may be
amended by a writing signed by both parties hereto, provided that no
amendment to this Agreement shall be effective until approved (i) by the
vote of a majority of those Trustees of the Trust who are not interested
persons of the Adviser or the Trust cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of
the outstanding voting securities of the Trust.
8. Limitation of Liability. The Adviser 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 the Adviser hereby agrees that it shall have
4
<PAGE>
recourse to the Trust for payment of claims or obligations as between the
Trust and the Adviser arising out of this Agreement and shall not seek
satisfaction from any Trustee or officer of the Trust.
9. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the day and year first above written.
EMERGING MARKETS PORTFOLIO LLOYD GEORGE INVESTMENT
MANAGEMENT (BERMUDA) LIMITED
By:/s/James B. Hawkes By:/s/R. Lloyd George
------------------------- ----------------------------
Vice President President
5
<PAGE>
PLACEMENT AGENT AGREEMENT
March 24, 1994
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, Emerging Markets 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") 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 Portfolio 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
<PAGE>
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 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
2
<PAGE>
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 Adviser of the
Trust, Boston Management and Research, 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 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
3
<PAGE>
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;
(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
4
<PAGE>
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, 1996 and shall
continue in full force and effect indefinitely thereafter, but only so
long as such continuance after February 28, 1996 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.
5
<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,
EMERGING MARKETS PORTFOLIO
By: /s/ James B. Hawkes
--------------------------
Vice President
Accepted:
EATON VANCE DISTRIBUTORS, INC.
By: /s/ H. Day Brigham, Jr.
---------------------------
Vice President
6
<PAGE>
EMERGING MARKETS PORTFOLIO
ADMINISTRATION AGREEMENT
AGREEMENT made this 24 day of March, 1994 between Emerging
Markets Portfolio, a New York trust (the "Trust"), and Eaton Vance
Management, a Massachusetts business trust (the ``Administrator''):
1. Duties of the Administrator. The Trust hereby employs
the Administrator to act as administrator for and to manage and administer
the affairs of the Trust, subject to the supervision of the Trustees of
the Trust, for the period and on the terms set forth in this Agreement.
The Administrator hereby accepts such employment, and agrees to
manage and administer the Trust's business affairs and, in connection
therewith, to furnish for the use of the Trust office space and all
necessary office facilities, equipment and personnel for administering the
affairs of the Trust.
The Administrator's services include monitoring and providing
reports to the Trustees of the Trust concerning the investment performance
achieved by the Adviser for the Trust, recordkeeping, preparation and
filing of documents required to comply with Federal and state securities
laws, supervising the activities of the custodian of the Trust, providing
assistance in connection with meetings of the Trustees and of Holders of
Interests in the Trust and other management and administrative services
necessary to conduct the business of the Trust.
The Administrator shall not be responsible for providing
investment management or advisory services to the Trust under this
Agreement. Lloyd George Investment Management (Bermuda) Limited in its
capacity of investment adviser to the Trust, shall be responsible for
managing the investment and reinvestment of the assets of the Trust under
the Trust's separate Investment Advisory Agreement with the investment
adviser.
2. Compensation of the Administrator. For the services,
payments and facilities to be furnished hereunder by the Administrator,
the Trust shall pay to the Administrator on the last day of such month a
fee computed by applying the annual asset rate applicable to that portion
of the average daily net assets of the Trust throughout the month in each
Category as indicated below:
Annual
Category Average Daily Net Assets Asset Rate
1 less than $500 million 0.25000%
2 $500 million but less than $1 billion 0.23333%
3 $1 billion but less than $1.5 billion 0.21667%
4 $1.5 billion but less than $2 billion 0.20000%
5 $2 billion but less than $3 billion 0.18333%
6 $3 billion and over 0.16667%
<PAGE>
The average daily net assets of the Trust will be computed in accordance
with the Declaration of Trust, and any applicable votes and determinations
of the Trustees of the Trust. In case of initiation or termination of
this Agreement during any month, the fee for that month shall be reduced
proportionately on the basis of the number of calendar days during which
it is in effect and the fee shall be computed upon the average net assets
for the business days it is so in effect for that month.
The Administrator may, from time to time, waive all or a part of
the above compensation.
3. Allocation of Charges and Expenses. It is understood
that the Trust will pay all its expenses other than those expressly stated
to be payable by the Administrator hereunder, which expenses payable by
the Trust shall include, without implied limitation, (i) expenses of
maintaining the Trust and continuing its existence, (ii) registration of
the Trust under the Investment Company Act of 1940, (iii) commissions,
fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting
and legal expenses, (v) taxes and interest, (vi) governmental fees, (vii)
expenses of issue, sale and redemption of Interests in the Trust, (viii)
expenses of registering and qualifying the Trust and Interests in the
Trust under federal and state securities laws and of preparing and
printing registration statements or other offering documents or memoranda
for such purposes and for distributing the same to Holders and investors,
and fees and expenses of registering and maintaining registrations of the
Trust and of the Trust's placement agent as broker-dealer or agent under
state securities laws, (ix) expenses of reports and notices to Holders and
of meetings of Holders and proxy solicitations therefor, (x) expenses of
reports to governmental officers and commissions, (xi) insurance expenses,
(xii) association membership dues, (xiii) fees, expenses and other
disbursements, if any, of custodians and sub-custodians for all services
to the Trust (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records,
and determination of net asset values, book capital account balances and
tax capital account balances), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, Holder servicing agents and
registrars for all services to the Trust, (xv) expenses of servicing the
accounts of Holders, (xvi) any direct charges to Holders approved by the
Trustees of the Trust, (xvii) compensation and expenses of Trustees of the
Trust who are not members of the Administrator's organization, (xviii) the
advisory fees payable under any advisory agreement to which the Trust is a
party and (xix) such non-recurring items as may arise, including expenses
incurred in connection with litigation, proceedings and claims and the
obligation of the Trust to indemnify its Trustees, officers and Holders
with respect thereto.
4. Other Interests. It is understood that Trustees,
officers and Holders of Interest in the Trust are or may be or become
interested in the Administrator as Trustees, officers, or employees, or
otherwise and that Trustees, officers and employees of the Administrator
are or may be or become similarly interested in the Trust, and that the
2
<PAGE>
Administrator may be or become interested in the Trust as a shareholder or
otherwise. It is also understood that Trustees, officers and employees of
the Administrator may be or become interested (as directors, trustees,
officers, employees, shareholders or otherwise) in other companies or
entities (including, without limitation, other investment companies) which
the Administrator may organize, sponsor or acquire, or with which it may
merge or consolidate, and that the Administrator or its subsidiaries or
affiliates may enter into advisory or management agreements or other
contracts or relationships with such other companies or entities.
5. Limitation of Liability of the Administrator. The
services of the Administrator of the Trust are not to be deemed to be
exclusive, the Administrator being free to render services to others and
engage in other business activities. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Administrator, the
Administrator shall not be subject to liability to the Trust or to any
Holder of the Trust for any act or omission in the course of, or connected
with, rendering services hereunder or for any losses which may be
sustained in the acquisition, holding or disposition of any security or
other investment.
6. Duration and Termination of the 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 to and including February 28, 1996 and shall continue in full force
and effect indefinitely thereafter, but only so long as such continuance
after February 28, 1996 is specifically approved at least annually by the
Trustees of the Trust.
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 its Trustees, and the Trust may, at any time
upon such written notice to the Administrator, 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.
7. Amendment of the Agreement. This Agreement may be
amended by a writing signed by both parties hereto, provided that no
amendment to this Agreement shall be effective until approved by the vote
of a majority of the Trustees of the Trust.
8. Limitation of Liability. The Administrator 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 the Administrator hereby agrees that it shall
have recourse to the Trust for payment of claims or obligations as between
the Trust and the Administrator arising out of this Agreement and shall
not seek satisfaction from any Trustee or officer of the Trust.
9. Certain Definitions. The term "assignment" when used
herein shall have the meaning specified in the Investment Company Act of
3
<PAGE>
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 terms "Holders" and "Interests" when
used herein shall have the respective meanings specified in the
Declaration of Trust of the Trust.
EMERGING MARKETS PORTFOLIO EATON VANCE MANAGEMENT
By /s/ James B. Hawkes By /s/ Curtis H. Jones
------------------------ --------------------------
Vice President Vice President,
and not individually
4
<PAGE>
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617)482-8260, (800)225-6265
January 18, 1994
Emerging Markets Portfolio
24 Federal Street
Boston, MA 02110
Ladies and Gentlemen:
With respect to our purchase from you, at the purchase price of
$100,000, of an interest (an "Initial Interest") in Emerging Markets
Portfolio (the "Portfolio"), we hereby advise you that we are purchasing
such Initial Interest for investment purposes without any present
intention of redeeming or reselling.
The amount paid by the Portfolio on any withdrawal by us of any
portion of such Initial Interest will be reduced by a portion of any
unamortized organization expenses, determined by the proportion of the
amount of such Initial Interest withdrawn to the aggregate Initial
Interests of all holders of similar Initial Interests then outstanding
after taking into account any prior withdrawals of any such Initial
Interest.
Very truly yours,
EATON VANCE MANAGEMENT
By /s/ James L. O'Connor
-------------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918685
<NAME> EMERGING MARKETS PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,803,317
<INVESTMENTS-AT-VALUE> 3,078,487
<RECEIVABLES> 62,255
<ASSETS-OTHER> 29,781
<OTHER-ITEMS-ASSETS> 752,048
<TOTAL-ASSETS> 3,922,571
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43,249
<TOTAL-LIABILITIES> 335,302
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 274,758
<NET-ASSETS> 3,587,269
<DIVIDEND-INCOME> 29,122
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 52,339
<NET-INVESTMENT-INCOME> (23,217)
<REALIZED-GAINS-CURRENT> (147,448)
<APPREC-INCREASE-CURRENT> 281,463
<NET-CHANGE-FROM-OPS> 110,798
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,391,999
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,297
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 121,019
<AVERAGE-NET-ASSETS> 2,311,418
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PAGE>
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 5.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
</TABLE>
