As filed with the Securities and Exchange Commission on July __, 1995
File No. 811-8464
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 1 [X]
HIGH INCOME PORTFOLIO
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(Exact Name of Registrant as Specified in Charter)
The Bank of Nova Scotia Building
P.O. Box 501, George Town, Grand Cayman
Cayman Islands, British West Indies
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (809) 949-2001
H. Day Brigham, Jr.
24 Federal Street, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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EXPLANATORY NOTE
This Registration Statement, as amended, has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended. However, interests in the Registrant have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), because
such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section
4(2) of the 1933 Act. Investments in the Registrant may be made only by
U.S. and foreign investment companies, common or commingled trust funds,
organizations or trusts described in Sections 401(a) or 501(a) of the
Internal Revenue Code of 1986, as amended, or similar organizations or
entities that are "accredited investors" within the meaning of Regulation
D under the 1933 Act. This Registration Statement, as amended, does not
constitute an offer to sell, or the solicitation of an offer to buy, any
interest in the Registrant.
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
High Income Portfolio (the "Portfolio") is a diversified,
open-end management investment company which was organized as a trust
under the laws of the State of New York on May 1, 1992. Interests in the
Portfolio are issued solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may be made only by U.S. and foreign investment companies,
common or commingled trust funds, organizations or trusts described in
Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement, as amended, does not constitute an offer to sell,
or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio's investment objective is to provide a high level
of current income. The Portfolio seeks to achieve its investment objective
by investing primarily in a diversified portfolio of high-yielding, high
risk, fixed-income securities (commonly referred to as "junk bonds").
Additional information about the investment policies of the
Portfolio appears in Part B. The Portfolio is not intended to be a
complete investment program, and a prospective investor should take into
account its objectives and other investments when considering the purchase
of interests in the Portfolio. The Portfolio cannot assure achievement of
its investment objective.
How the Portfolio Invests its Assets
The Portfolio normally invests at least 80% of its net assets in
fixed-income securities, including convertible securities, and up to 20%
of its net assets in common stocks and other equity securities when
consistent with its objective or acquired as part of a unit combining
fixed-income and equity securities. The foregoing policy is a
nonfundamental policy of the Portfolio and may be changed when authorized
by a vote of the Trustees of the Portfolio without obtaining the approval
of the investors in the Portfolio.
The fixed-income securities in which the Portfolio may invest
include preferred and preference stocks and all types of debt obligations
of both domestic and foreign issuers, such as bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional
sales contracts, commercial paper, and obligations issued or guaranteed by
the U.S. Government, any state or territory of the United States, any
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foreign government or any of their respective political subdivisions,
agencies or instrumentalities. Debt securities may bear fixed, fixed and
contingent, variable or floating rates of interest.
The Portfolio invests a substantial portion of its assets in high
yield, high risk securities issued in connection with mergers,
acquisitions, leveraged buy-outs, recapitalizations and other highly
leveraged transactions. These securities are subject to substantially
greater credit risks than some of the other fixed-income securities in
which the Portfolio may invest. These credit risks include the possibility
of default or bankruptcy of the issuer. The value of such securities may
also be subject to a greater degree of volatility in response to interest
rate fluctuations, economic downturns and changes in the financial
condition of the issuer. These securities are less liquid than other
fixed-income securities. During periods of deteriorating economic
conditions and contraction in the credit markets, the ability of issuers
of such securities to service their debt, meet projected goals, or obtain
additional financing may be impaired.
The Portfolio will normally invest at least 65% of its assets in
the lowest investment grade and lower rated obligations (rated Baa or
lower by Moody's Investors Service, Inc. ("Moody's") or BBB or lower by
Standard & Poor's Ratings Group ("S&P")) and unrated obligations.
Fixed-income securities that are in the lowest investment grade and lower
rating categories or that are unrated generally offer a higher yield than
is offered by obligations in the higher rating categories but also are
subject to greater credit risks as indicated elsewhere in this
registration statement. Because available yields and the yield
differential between higher and lower rated obligations vary over time, no
specific level of income or yield differential can ever be assured. For a
description of Moody's and S&P's ratings of fixed-income securities, see
Appendix A to this Part A. Unrated bonds are generally regarded as being
speculative and expose the investor to risks with respect to the issuer's
capacity to pay interest and repay principal, which risks are similar to
the risks of lower rated bonds. At March 31, 1995, the Portfolio had
approximately 96.8% of its assets invested in high yield, high risk bonds
that were rated lower than investment grade or unrated. See Appendix B to
this Part A for the Portfolio's asset composition on March 31, 1995.
The Portfolio may also invest a portion of its assets in debt
securities that are not paying current income in anticipation of possible
future income or capital appreciation. Interest and/or principal payments
thereon could be in arrears when such securities are acquired, and the
issuer may be in bankruptcy or undergoing a debt restructuring or
reorganization. Such securities may be unrated or the lowest rated
obligations (rated C by Moody's or D by S&P). Bonds rated C by Moody's are
regarded as having extremely poor prospects of ever attaining any real
investment standing. Bonds rated D by S&P are in payment default or a
bankruptcy petition has been filed and debt service payments are
jeopardized.
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Credit ratings are based largely on the issuer's historical
financial condition and the rating agency's investment analysis at the
time of rating, and the rating assigned to any particular security is not
necessarily a reflection of the issuer's current financial condition.
Credit quality in the high yield, high risk bond market can change from
time to time, and recently issued credit ratings may not fully reflect the
actual risks posed by a particular high yield security. Although Boston
Management and Research (the "Investment Adviser") considers security
ratings when making investment decisions, it performs its own credit and
investment analysis and does not rely primarily on the ratings assigned by
the rating services. In evaluating the quality of a particular issue,
whether rated or unrated, the Investment Adviser will normally take into
consideration, among other things, the issuer's financial resources and
operating history, its sensitivity to economic conditions and trends, the
ability of its management, its debt maturity schedules and borrowing
requirements, and relative values based on anticipated cash flow, interest
and asset coverages, and earnings prospects. Because of the greater number
of investment considerations involved in investing in high yield, high
risk bonds, the achievement of the Portfolio's objective depends more on
the Investment Adviser's judgment and analytical abilities than would be
the case if the Portfolio were investing primarily in securities in the
higher rating categories.
The Portfolio may also invest a portion of its assets in loan
interests, which are interests in amounts owed by a corporate,
governmental or other borrower to lenders or lending syndicates. Loan
interests purchased by the Portfolio may have a maturity of any number of
days or years, may be secured or unsecured, and may be of any credit
quality. Loan interests, which may take the form of participation
interests in, assignments of or novations of a loan, may be acquired from
U.S. and foreign banks, insurance companies, finance companies or other
financial institutions that have made loans or are members of a lending
syndicate or from the holders of loan interests. Loan interests involve
the risk of loss in the case of default or bankruptcy of the borrower and,
in the case of participation interests, involve a risk of insolvency of
the agent lending bank or other financial intermediary. Loan interests are
not rated by any nationally recognized rating service and are, at present,
not readily marketable and may be subject to contractual restrictions on
resale. The Portfolio may also invest in restricted securities and
securities eligible for resale pursuant to Rule 144A of the Securities Act
of 1933. An investment in restricted securities may involve relatively
greater risk and cost to the Portfolio because of their illiquidity.
Fixed-income securities in which the Portfolio may invest also
include zero coupon bonds, deferred interest bonds and bonds on which the
interest is payable in kind ("PIK bonds"). Zero coupon and deferred
interest bonds are debt obligations that are issued at a significant
discount from face value. The discount approximates the total amount of
interest the bonds will accrue and compound over the period until maturity
or the first interest accrual date at a rate of interest reflecting the
market rate of the security at the time of issuance. While zero coupon
bonds do not require the periodic payment of interest, deferred interest
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bonds provide for a period of delay before the regular payment of interest
begins. PIK bonds are debt obligations that provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the
form of additional debt obligations. Such investments benefit the issuer
by mitigating its need for cash to meet debt service, but also require a
higher rate of return to attract investors who are willing to defer
receipt of such cash. Such investments may experience greater volatility
in market value due to changes in interest rates than debt obligations
that make regular payments of interest. The Portfolio will accrue income
on such investments for tax and accounting purposes, in accordance with
applicable law, which income is distributable to shareholders. Because no
cash is received at the time such income is accrued, the Portfolio may be
required to liquidate other portfolio securities to satisfy its
distribution obligations.
The Portfolio may invest up to 25% of its total assets in foreign
securities, including securities issued or guaranteed by foreign
governments or their agencies or instrumentalities. Investing in foreign
securities may represent a greater degree of risk than investing in
domestic securities, because of the possibility of exchange rate
fluctuations, less publicly-available financial and other information,
more volatile and less liquid markets, less securities regulation, higher
brokerage costs, imposition of foreign withholding and other taxes, war,
expropriation or other adverse governmental actions.
When the Investment Adviser believes that it is appropriate to do
so, for defensive purposes, more than 35% of the Portfolio's assets may be
temporarily invested in securities rated A or better by Moody's or S&P. A
portion of the Portfolio's assets may be invested temporarily in cash or
short-term obligations including, but not limited to, certificates of
deposit, commercial paper, short-term notes, obligations issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, and repurchase agreements.
The Portfolio may invest up to 25% of its assets in securities of
issuers in each of the electric, gas and telephone utility industries if,
in the opinion of the Investment Adviser, the relative return available
from such securities and the relative risk, marketability, quality or
availability of securities of issuers in such industry justifies such an
investment. The value of such investments may be affected to a greater
degree by adverse developments in such industries. Industry-wide problems
include the effects of fluctuating economic conditions, energy
conservation practices, environmental regulations, high capital
expenditures, construction delays due to pollution control and
environmental considerations, uncertainties as to fuel availability and
costs, increased competition in deregulated sectors of such industries and
difficulties in obtaining timely and adequate rate relief from regulatory
commissions. If applications for rate increases are not granted or are not
acted upon promptly, the market prices of and interest or dividend
payments on utility securities may be adversely affected.
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Fixed-Income Obligations. Fixed-income obligations offering the
high current income sought by the Portfolio ordinarily are rated in lower
rating categories of recognized rating agencies or are unrated. Such
obligations are subject to substantially greater credit risks (including,
without limitation, the possibility of default by or bankruptcy of the
issuers of such securities and subordination of such obligations to the
prior claims of banks and other senior creditors) than securities in
higher rating categories. The probability of default for the lower quality
and unrated corporate debt in which the Portfolio invests has increased
during recent years. In recent years a number of overly leveraged
companies have defaulted on their long-term debt, and some have filed for
bankruptcy protection. Others have sought to restructure their debt
through security exchanges with bondholders. The takeover activity of the
past decade has resulted in exchanges of debt for equity and a decline in
the credit quality of many U.S. companies.
The lower quality and unrated securities in which the Portfolio
will invest will have speculative characteristics in varying degrees. The
value of such obligations may be more susceptible to real and perceived
adverse economic or industry conditions than is the case of higher quality
bonds. While the Investment Adviser will attempt to reduce the risks of
investing in lower rated or unrated securities through active portfolio
management, diversification, credit analysis and attention to current
developments and trends in the economy and the financial markets, there
can be no assurance that a broadly diversified portfolio of such
securities would substantially lessen the risks of defaults brought about
by an economic downturn or recession. The Portfolio will also take such
action as it considers appropriate in the event of anticipated financial
difficulties, default or bankruptcy of the issuer of any such obligation.
The Portfolio will incur additional expenditures in taking protective
action with respect to portfolio obligations in default and assets
securing such obligations. As at March 31, 1995, none of the obligations
of the Portfolio's net assets were in default. The Portfolio may retain
defaulted obligations in its portfolio when such retention is considered
desirable by the Investment Adviser. The Portfolio may also acquire other
securities issued in exchange for such obligations or issued in connection
with the debt restructuring or reorganization of the issuers, or where
such acquisition, in the judgment of the Investment Adviser, may enhance
the value of such obligations or would otherwise be consistent with the
Portfolio's investment policies.
Net Asset Value Fluctuation. The net asset value of the Portfolio
will change in response to fluctuations in prevailing interest rates and
changes in the value of the securities held by the Portfolio. When
interest rates decline, the value of securities already held by the
Portfolio can be expected to rise. Conversely, when interest rates rise,
the value of existing portfolio security holdings can be expected to
decline. Although the lower rated and unrated obligations in the
Portfolio's portfolio may provide higher yields, they may also be subject
to a greater degree of market fluctuation and are subject to greater
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investment risks than high quality obligations. Furthermore, the net
investment income provided by the Portfolio will fluctuate over time. In
addition and as indicated above, the Portfolio invests in high yield, high
risk bonds structured as zero coupon, deferred interest or pay-in-kind
securities; these bonds tend to be more speculative and may be subject to
substantially greater fluctuations in value due to changes in interest
rates than other income bearing obligations. Therefore, an investment in
interests in the Portfolio will not constitute a complete investment
program and is not appropriate for investors who cannot assume the
substantially greater risk of capital depreciation inherent in seeking
higher yields from high risk bonds.
High yield, high risk corporate bonds are frequently traded in
markets where the number of potential purchasers and sellers is limited.
There is no established resale market for certain of these bonds in which
the Portfolio invests. These considerations may make it difficult for the
Portfolio to value its securities, may affect the choice of securities
sold to meet redemption requests and may have the effect of limiting the
ability of the Portfolio to sell or dispose of such bonds on favorable
terms. The secondary market for high yield, high risk corporate
obligations is relatively new, is volatile and may be disrupted by war,
inflation or economic downturns, and is less liquid than the market for
high quality bonds. In the event of an illiquid market or in the absence
of readily available market quotations for certain of these bonds held by
the Portfolio, judgment will play a greater role in the valuation of such
bonds because there is less reliable, objective data available. Adverse
market or economic conditions could make it difficult at times for the
Portfolio to sell or dispose of certain high yield, high risk bonds. The
Portfolio may also be forced to sell these bonds at a significant loss to
meet shareholder redemptions.
Short-Term Trading. Securities may be sold in anticipation of a
market decline (a rise in interest rates) or purchased in anticipation of
a market rise (a decline in interest rates) and later sold. In addition, a
security may be sold and another purchased at approximately the same time
to take advantage of what the Portfolio believes to be a temporary
disparity in the normal yield relationship between the two securities.
Yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of
interest rates, such as changes in the overall demand for or supply of
various types of fixed-income securities or changes in the investment
objectives of investors. Such trading may be expected to increase the
Portfolio's portfolio turnover rate and the expenses incurred in
connection with such trading. The Portfolio anticipates that its annual
portfolio turnover rate will generally not exceed 100% (excluding turnover
of securities having a maturity of one year or less).
Lending of Securities. The Portfolio may seek to increase its
income by lending portfolio securities to broker-dealers or other
institutional borrowers. Under present regulatory policies of the
Securities and Exchange Commission (the "Commission"), such loans would be
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required to be secured continuously by collateral in cash, cash
equivalents or U.S. Government securities held by the Portfolio's
custodian and maintained on a current basis at an amount at least equal to
the market value of the securities loaned, which will be marked to market
daily. Cash equivalents include short-term municipal obligations as well
as taxable certificates of deposit, commercial paper and other short-term
money market instruments. The Portfolio would have the right to call a
loan and obtain the securities loaned at any time on up to five business
days' notice. During the existence of a loan, the Portfolio will continue
to receive the equivalent of the interest paid by the issuer on the
securities loaned and will also receive a fee, or all or a portion of the
interest on investment of the collateral, if any. However, the Portfolio
may pay lending fees to such borrowers. The Portfolio would not have the
right to vote any securities having voting rights during the existence of
the loan, but would call the loan in anticipation of an important vote to
be taken among holders of the securities or the giving or withholding of
their consent on a material matter affecting the investment. 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 Portfolio's management to be of good standing and when, in the
judgment of the Portfolio's management, the consideration which can be
earned from securities loans of this type justifies the attendant risk. If
the management of the Portfolio decides to make securities loans, it is
intended that the value of the securities loaned would not exceed 30% of
the Portfolio's total assets.
Forward Foreign Currency Exchange Contracts. The Portfolio may
enter into forward foreign currency exchange contracts. A forward foreign
currency exchange contract is a contract individually negotiated and
privately traded by currency traders and their customers. A forward
contract involves an obligation to purchase or sell a specific currency
for an agreed price at a future date, which may be any fixed number of
days from the date of the contract. The purpose of entering into these
contracts is to minimize the risk to the Portfolio from adverse changes in
the relationship between the U.S. dollar and foreign currencies. At the
same time, such contracts may limit potential gain from a positive change
in the relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may result in poorer overall
performance for the Portfolio than if it had not entered into forward
foreign currency exchange contracts.
Writing and Purchasing Call and Put Options. The Portfolio may
write (sell) covered call and put options with respect to up to 25% of its
net assets. All call options written by the Portfolio are covered, which
means that the Portfolio will own the securities subject to the option or
an offsetting call option so long as the option is outstanding. All put
options written by the Portfolio would be covered, which means that the
Portfolio would own offsetting put options or would have deposited with
its custodian cash, U.S. Government securities, or other liquid,
high-grade debt securities with a value at least equal to the exercise
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price of the put option. The Portfolio may purchase put and call options
on any securities in which the Portfolio may invest or options on any
securities index based on securities in which the Portfolio may invest.
Risks Associated With Options Transactions. There is no assurance
that a liquid secondary market on an options exchange will exist for any
particular option, or at any particular time. If the Portfolio is unable
to effect a closing purchase transaction with respect to covered options
it has written, the Portfolio will not be able to sell the underlying
securities or dispose of assets held in a segregated account until the
options expire or are exercised. Similarly, if the Portfolio is unable to
effect a closing sale transaction with respect to options it has
purchased, it would have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of
underlying securities. The Portfolio expects to purchase and write only
exchange-traded options until such time as the Portfolio's management
determines that the over-the-counter market in options is sufficiently
developed and the Portfolio has amended its registration statement so that
appropriate disclosure is furnished to prospective and existing
shareholders.
The writing and purchase of options is a highly specialized
activity which involves investment techniques and risks different from
those associated with ordinary portfolio securities transactions. In the
event of unanticipated changes in securities prices, the Portfolio may
recognize losses on call and put options written by the Portfolio to the
extent it is required to sell or purchase the underlying securities or to
terminate the option at a loss. The Portfolio may recognize a loss of the
premium on an option it has purchased to the extent that the option cannot
be profitably exercised before its expiration. The successful use of put
options for hedging purposes depends in part on the Investment Adviser's
ability to predict future price fluctuations and the degree of correlation
between the options and securities markets. The Portfolio pays brokerage
commissions or spreads in connection with its options transactions, as
well as for purchases and sales of underlying securities. The writing of
options could result in significant increases in the Portfolio's portfolio
turnover rate.
Futures and Options Transactions. To hedge against changes in
interest rates or securities prices, the Portfolio has the authority to
purchase and sell various kinds of futures contracts, and purchase and
write call and put options on any of such futures contracts; it may also
enter into closing purchase and sale transactions with respect to any of
such contracts and options. The futures contracts may be based on various
securities (such as U.S. Government securities), securities indices and
other financial instruments and indices. The Portfolio would engage in
futures and related options transactions only for bona fide hedging or
non-hedging purposes as defined in or permitted by regulations of the
Commodity Futures Trading Commission. The Portfolio did not engage in such
transactions during the period from June 1, 1994 (commencement of
operations) to June 30, 1995, and there is no assurance that it will
engage in such transactions in the future.
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The Portfolio may not purchase or sell futures contracts or
purchase or sell related options, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial
margin deposits on the Portfolio's outstanding positions in futures and
related options and the amount of premiums paid for outstanding positions
in options on futures would exceed 5% of the market value of the
Portfolio's net assets. These transactions involve brokerage costs,
require margin deposits and, in the case of contracts and options
obligating the Portfolio to purchase securities, require the Portfolio to
segregate liquid high-grade debt securities in an amount equal to the
underlying value of such contracts and options.
In addition, while transactions in futures contracts and options
on futures may reduce certain risks, such transactions themselves involve
(1) liquidity risk that contractual positions cannot be easily closed out
in the event of market changes, (2) correlation risk that changes in the
value of hedging positions may not match the market fluctuations intended
to be hedged (especially given that the only futures contracts currently
available to hedge corporate fixed income securities are futures on
various U.S. Government securities, stock index futures and on municipal
securities indices), (3) market risk that an incorrect prediction by the
Investment Adviser of interest rates may cause the Portfolio to perform
less well than if such positions had not been entered into, and (4) skills
different from those needed to select portfolio securities. Thus, while
the Portfolio may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices may result in
a poorer overall performance for the Portfolio than if it had not entered
into any futures contracts or options transactions. The loss incurred by
the Portfolio in writing options on futures is potentially unlimited and
may exceed the amount of the premium received. The Portfolio's activities
in options and futures contracts may be limited by the requirements of the
Internal Revenue Code for maintaining the qualification of each of the
Portfolio's investment company investors as a regulated investment company
for Federal tax purposes.
Diversified Status
The classification of the Portfolio under the Investment Company
Act of 1940, as amended (the "1940 Act"), as a "diversified" investment
company means that with respect to 75% of its total assets, the Portfolio
may not invest more than 5% of its total assets in the securities of any
one issuer or purchase 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
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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. Except for such enumerated
restrictions and as otherwise indicated in this Part A, the investment
objective and policies of the Portfolio are not fundamental policies and
accordingly may be changed by the Trustees without obtaining the approval
of the investors in the Portfolio. The Portfolio's investors will receive
written notice thirty days prior to any change in the investment objective
of the Portfolio. If any changes were made, the Portfolio might have
investment objectives different from the objectives which an investor
considered appropriate at the time of its initial investment.
In seeking to provide as much current income as possible, the
Portfolio invests a significant portion of its assets in high yield, high
risk corporate bonds. These obligations carry substantially greater
investment risk than higher quality bonds. Achievement of the Portfolio's
investment objective, which cannot be assured, is therefore much more
dependent upon the Investment Adviser's own credit analysis than is the
case for higher quality bonds. Investors are urged to consider carefully
the substantially greater risks of investing in a portfolio of high yield,
high risk corporate bonds before purchasing interests in the Portfolio.
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 Boston Management and
Research ("BMR" or the "Investment Adviser"), a wholly-owned subsidiary of
Eaton Vance Management ("Eaton Vance"), as its investment adviser. Eaton
Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931.
Acting under the general supervision of the Board of Trustees,
BMR manages the Portfolio's investments and affairs. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee
equal to the aggregate of:
(a) a daily asset-based fee computed by applying the annual asset
rate applicable to that portion of the total daily net assets
in each Category as indicated below, plus
(b) a daily income-based fee computed by applying the daily income
rate applicable to that portion of the total daily gross income
(which portion shall bear the same relationship to the total
daily gross income on such day as that portion of the total
daily net assets in the same Category bears to the total daily
net assets on such day) in each Category as indicated below:
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Annual Daily
Asset Income
Category Daily Net Assets Rate Rate
-------- ---------------- ----- ------
1 Up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
As of March 31, 1995, the Portfolio had net assets of $442,551,815.
For the period from the start of business, June 1, 1994, to March 31,
1995, the Portfolio paid BMR advisory fees equivalent to 0.64%
(annualized) of the Portfolio's average daily net assets for such period.
BMR also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. The Portfolio is responsible for the payment
of all expenses other than those expressly stated to be payable by BMR
under the investment advisory agreement.
BMR places the portfolio security transactions of the Portfolio for
execution with many broker-dealers firms. Fixed-income securities are
normally traded on a net basis (without commission) through broker-dealers
and banks acting for their own account. Such firms attempt to profit from
such transactions by buying at the bid price and selling at the higher
asked price of the market, and the difference is customarily referred to
as the spread. In selecting firms to execute portfolio transactions, BMR
judges their professional ability and quality of service and uses its best
efforts to obtain execution at prices which are advantageous to the
Portfolio and at reasonably competitive spreads. Subject to the foregoing,
BMR may consider sales of shares of other investment companies sponsored
by BMR or Eaton Vance as a factor in the selection of firms to execute
portfolio transactions.
Hooker Talcott, Jr. has acted as the portfolio manager of the
Portfolio since it commenced operations. Mr. Talcott has been a Vice
President of Eaton Vance since 1987 and of BMR since 1992.
BMR or Eaton Vance acts as investment adviser to investment companies
and various individual and institutional clients with assets under
management of approximately $15 billion. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp., a publicly held holding company. Eaton
Vance Corp., through its subsidiaries and affiliates, engages in
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investment management and marketing activities, fiduciary and banking
services, oil and gas operations, real estate investment, consulting and
management, and development of precious metals properties.
Administrator. The Bank of Nova Scotia Trust Company (Cayman) Ltd.,
The Bank of Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman,
Cayman Islands, British West Indies, maintains the Portfolio's principal
office and certain of its records and provides administrative assistance
in connection with meetings of the Portfolio's Trustees and
interestholders, for which services the Portfolio pays $1,500 per annum.
Transfer Agent. IBT Fund Services (Canada) Inc., 1 First Canadian
Place, King Street West, Suite 2800, P.O. Box 231, Toronto, Ontario,
Canada M5X 1C8, a subsidiary of Investors Bank & Trust Company, the
Portfolio's custodian, serves as transfer agent and dividend-paying agent
for the Portfolio and computes the daily net asset value of interests in
the Portfolio.
Item 6. Capital Stock and Other Securities
The Portfolio is organized as a trust under the laws of the State of
New York and intends to be treated as a partnership for Federal tax
purposes. Under the Declaration of Trust, the Trustees are authorized to
issue interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments
in the Portfolio may not be transferred, but an investor may withdraw all
or any portion of its investment at any time at net asset value. Investors
in the Portfolio will each be liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss
on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust provides that the Portfolio will terminate
120 days after the complete withdrawal of any investor in the Portfolio
unless either the remaining investors, by unanimous vote at a meeting of
such investors, or a majority of the Trustees of the Portfolio, by written
instrument consented to by all investors, agree to continue the business
of the Portfolio. This provision is consistent with the treatment of the
Portfolio as a partnership for Federal income tax purposes.
Investments in the Portfolio have no preemptive or conversion rights
and are fully paid and nonassessable by the Portfolio, except as set forth
above. The Portfolio is not required and has no current intention to hold
annual meetings of investors, but the Portfolio may hold special meetings
of investors when in the judgment of the Trustees it is necessary or
desirable to submit matters for an investor vote. Changes in fundamental
policies or restrictions will be submitted to investors for approval. The
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investment objective and all nonfundamental investment policies of the
Portfolio may be changed by the Trustees of the Portfolio without
obtaining the approval of the investors in the Portfolio. Investors have
under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of
investors) the right to communicate with other investors in connection
with requesting a meeting of investors for the purpose of removing one or
more Trustees. Any Trustee may be removed by the affirmative vote of
holders of two-thirds of the interests in the Portfolio.
Information regarding pooled investment entities or funds that invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors,
Inc., 24 Federal Street, Boston, MA 02110 (617) 482-8260. Smaller
investors in the Portfolio may be adversely affected by the actions of
larger investors 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 become less diverse, 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 June 30, 1995, EV Marathon High Income Fund controlled the
Portfolio by virtue of owning more than 99% of the outstanding voting
securities of the Portfolio.
The Portfolio's net asset value is determined each day on which the
New York Stock Exchange (the "Exchange") is open for trading ("Portfolio
Business Day"). This determination is made each Portfolio Business Day as
of the close of regular trading on the Exchange (normally 4:00 p.m., New
York time) (the "Portfolio Valuation Time").
Each investor in the Portfolio may add to or reduce its investment in
the Portfolio on each Portfolio Business Day as of the Portfolio Valuation
Time. The value of each investor's interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interest in the
Portfolio on such prior day. Any additions or withdrawals for the current
Portfolio Business Day will then be recorded. Each investor's percentage
of the aggregate interest in the Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may
be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii)
the denominator of which is the aggregate net asset value of the Portfolio
as of the Portfolio Valuation Time on the prior Portfolio Business Day
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plus or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage
so determined will then be applied to determine the value of the
investor's interest in the Portfolio for the current Portfolio Business
Day. See Item 7 regarding the pricing of investments in the Portfolio.
The Portfolio will allocate at least annually among its investors its
net investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit. The Portfolio's net investment
income consists of all income accrued on the Portfolio's assets, less all
actual and accrued expenses of the Portfolio, determined in accordance
with generally accepted accounting principles.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any Federal income tax. (See Part B, Item
20.) However, each investor in the Portfolio will take into account its
allocable share of the Portfolio's ordinary income and capital gain in
determining its Federal income tax liability. The determination of each
such share will be made in accordance with the governing instruments of
the Portfolio, which are intended to comply with the requirements of the
Code and the regulations promulgated thereunder.
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 (a "RIC") under the Code will be able to
satisfy the requirements for such qualification.
Item 7. Purchase of Interests in the Portfolio
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the 1933 Act. See "General Description of Registrant"
above.
An investment in the Portfolio will be made without a sales load. All
investments received by the Portfolio will be effected as of the next
Portfolio Valuation Time. The net asset value of the Portfolio is
determined at the Portfolio Valuation Time on each Portfolio Business Day.
The Portfolio will be closed for business and will not determine its net
asset value on the following business holidays: New Year's Day,
Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Portfolio's net asset value is computed in accordance with procedures
established by the Portfolio's Trustees.
The Portfolio's net asset value is determined by IBT Fund Services
(Canada) Inc. (as agent for the Portfolio) in the manner authorized by the
Trustees of the Portfolio. The net asset value is computed by subtracting
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the liabilities of the Portfolio from the value of its total assets.
Fixed-income securities (other than short-term obligations), including
listed securities and securities for which price quotations are available,
will normally be valued on the basis of market valuations furnished by a
pricing service. The pricing service uses information with respect to
transactions in bonds, quotations from bond dealers, market transactions
in comparable securities, various relationships between securities, and
yield to maturity in determining value. Securities listed on securities
exchanges or in the NASDAQ National Market are valued at closing sale
prices. Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked
prices. Short-term obligations maturing in sixty days or less are valued
at amortized cost, which approximates market. Other assets are valued at
fair value using methods determined in good faith by the Trustees. For
further information regarding the valuation of the Portfolio's assets, see
Part B.
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 (redeem) or any portion
(decrease) of 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
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.
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Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds
postponed during any period in which the Exchange is closed (other than
weekends or holidays) or trading on the Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists, or
during any other period permitted by order of the Commission for the
protection of investors.
Item 9. Pending Legal Proceedings
Not applicable.
A-16
APPENDIX A
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
fluctuation 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 the 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 will 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 of position characterizes bonds in this class.
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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 Ratings Group'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 differs
from the highest 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 debt in higher rated
categories.
Securities in which the Portfolio may invest will include those in the
following categories:
a-2
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 in higher
rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics 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. While such
debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major 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.
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
a-3
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 Standard & Poor's rating because no public rating has
been requested, because there is insufficient information on which to base
a rating, or because Standard & Poor's does not rate a particualr type of
obligation as a matter of policy.
Notes: Bonds that 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 speculative bonds. The Portfolio is dependent on the
Investment Adviser's judgment, analysis and experience in the evaluation
of such bonds.
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.
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APPENDIX B
High Income Portfolio
Asset Composition Information
For the Period Ended March 31, 1995
Percent of Net Assets
Preferred Stocks and Other Equity Securities 1.0%
Short-Term Obligations 3.0
Debt Securities -- Moody's Rating
Ba 8.2
B1 22.3
B2 27.0
B3 25.1
Caa 8.7
Unrated 4.7
Total 100.00
The chart above indicates the weighted average composition of the
Portfolio for the period ended March 31, 1995, with the debt securities
rated by Moody's Investors Service, Inc. separated into the indicated
categories. The weighted average indicated above was calculated on a
dollar weighted basis and was computed as at the end of each month during
the period. The chart does not necessarily indicate what the composition
of the Portfolio will be in the current and subsequent fiscal years. For
a description of Moody's Investors Service Inc.'s ratings of fixed-income
securities, see Appendix A to this Part A.
a-1
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-20
Purchase, Redemption and Pricing of Securities . . . . . . . . B-22
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . B-25
Calculation of Performance Data . . . . . . . . . . . . . . . . B-25
Financial Statements . . . . . . . . . . . . . . . . . . . . . B-25
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objectives and Policies.
Part A contains additional information about the investment objective
and policies of the High Income 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.
Other Fixed-Income Securities
Included in the fixed-income securities in which the Portfolio may
invest are preferred, preference and convertible stocks, equipment lease
certificates, equipment trust certificates and conditional sales
contracts. Preference stocks are stocks that have many characteristics of
preferred stocks, but are typically junior to an existing class of
preferred stocks. Equipment lease certificates are debt obligations
secured by leases on equipment (such as railroad cars, airplanes or office
equipment), with the issuer of the certificate being the owner and lessor
of the equipment. Equipment trust certificates are debt obligations
secured by an interest in property (such as railroad cars or airplanes),
the title of which is held by a trustee while the property is being used
by the borrower. Conditional sales contracts are agreements under which
the seller of property continues to hold title to the property until the
purchase price is fully paid or other conditions are met by the buyer.
The Portfolio may purchase fixed-rate bonds that have a demand feature
allowing the holder to redeem the bonds at specified times. These bonds
are more defensive than conventional long-term bonds (protecting to some
degree against a rise in interest rates) while providing greater
opportunity than comparable intermediate term bonds, because the Portfolio
B-1
may retain the bond if interest rates decline. By acquiring these kinds of
bonds the Portfolio obtains the contractual right to require the issuer of
the bonds to purchase the security at an agreed upon price, which right is
contained in the obligation itself rather than in a separate agreement or
instrument. Because this right is assignable only with the bond, the
Portfolio will not assign any separate value to such right. The Portfolio
may also purchase floating or variable rate obligations, which it would
anticipate using as short-term investments pending longer term investment
of its funds.
Loan Interests
A loan in which the Portfolio may acquire a loan interest (a "Loan
Interest") is typically originated, negotiated and structured by a U.S. or
foreign commercial bank, insurance company, finance company or other
financial institution (the "Agent") for a lending syndicate of financial
institutions. The Agent typically administers and enforces the loan on
behalf of the other lenders in the syndicate. In addition, an institution,
typically but not always the Agent (the "Collateral Bank"), holds
collateral (if any) on behalf of the lenders. These Loan Interests may
take the form of participation interests in, assignments of or novations
of a loan during its secondary distribution, or direct interests during a
primary distribution. Such Loan Interests may be acquired from U.S. or
foreign banks, insurance companies, finance companies or other financial
institutions who have made loans or are members of a lending syndicate or
from other holders of Loan Interests. The Portfolio may also acquire Loan
Interests under which the Portfolio derives its rights directly from the
borrower. Such Loan Interests are separately enforceable by the Portfolio
against the borrower and all payments of interest and principal are
typically made directly to the Portfolio from the borrower. In the event
that the Portfolio and other lenders become entitled to take possession of
shared collateral, it is anticipated that such collateral would be held in
the custody of a Collateral Bank for their mutual benefit. The Portfolio
may not act as an Agent, a Collateral Bank, a guarantor or sole negotiator
or structurer with respect to a loan.
The Portfolio's investment adviser, Boston Management and Research
("BMR"), will analyze and evaluate the financial condition of the borrower
in connection with the acquisition of any Loan Interest. BMR also analyzes
and evaluates the financial condition of the Agent and, in the case of
Loan Interests in which the Portfolio does not have privity with the
borrower, those institutions from or through whom the Portfolio derives
its rights in a loan (the "Intermediate Participants"). From time to time
BMR and its affiliates may borrow money from various banks in connection
with their business activities. Such banks may also sell interests in
loans to or acquire such interests from the Portfolio or may be
Intermediate Participants with respect to loans in which the Portfolio
owns interests. Such banks may also act as Agents for loans in which the
Portfolio owns interests.
In a typical loan the Agent administers the terms of the loan
agreement. In such cases, the Agent is normally responsible for the
B-2
collection of principal and interest payments from the borrower and the
apportionment of these payments to the credit of all institutions that are
parties to the loan agreement. The Portfolio will generally rely upon the
Agent or an Intermediate Participant to receive and forward to the
Portfolio its portion of the principal and interest payments on the loan.
Furthermore, unless under the terms of a participation agreement the
Portfolio has direct recourse against the borrower, the Portfolio will
rely on the Agent and the other members of the lending syndicate to use
appropriate credit remedies against the borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the loan
agreement based upon reports prepared by the borrower. The seller of the
Loan Interest usually does, but is often not obligated to, notify holders
of Loan Interests of any failures of compliance. The Agent may monitor the
value of the collateral and, if the value of the collateral declines, may
accelerate the loan, may give the borrower an opportunity to provide
additional collateral or may seek other protection for the benefit of the
participants in the loan. The Agent is compensated by the borrower for
providing these services under a loan agreement, and such compensation may
include special fees paid upon structuring and funding the loan and other
fees paid on a continuing basis. With respect to Loan Interests for which
the Agent does not perform such administrative and enforcement functions,
the Portfolio will perform such tasks on its own behalf, although a
Collateral Bank will typically hold any collateral on behalf of the
Portfolio and the other lenders pursuant to the applicable loan agreement.
A financial institution's appointment as Agent may usually be
terminated in the event that it fails to observe the requisite standard of
care or becomes insolvent, enters Federal Deposit Insurance Corporation
("FDIC") receivership, or, if not FDIC insured, enters into bankruptcy
proceedings. A successor Agent would generally be appointed to replace the
terminated Agent, and assets held by the Agent under the loan agreement
should remain available to holders of Loan Interests. However, if assets
held by the Agent for the benefit of the Portfolio were determined to be
subject to the claims of the Agent's general creditors, the Portfolio
might incur certain costs and delays in realizing payment on a loan
interest, or suffer a loss of principal and/or interest. In situations
involving Intermediate Participants similar risks may arise.
Purchasers of loan interests depend primarily upon the
creditworthiness of the borrower for payment of principal and interest. If
the Portfolio does not receive scheduled interest or principal payments on
such indebtedness, the Portfolio's share price and yield could be
adversely affected. Loans that are fully secured offer the Portfolio more
protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of
borrowers whose creditworthiness is poor involves substantially greater
risks, and may be highly speculative. Borrowers that are in bankruptcy or
restructuring may never pay off their indebtedness, or may pay only a
small fraction of the amount owed. Direct indebtedness of developing
countries will also involve a risk that the governmental entities
B-3
responsible for the repayment of the debt may be unable, or unwilling, to
pay interest and repay principal when due.
The Portfolio limits the amount of total assets that it will invest in
any one issuer or in issuers within the same industry. See Investment
Restrictions (1) and (8) below. For purposes of these restrictions, the
Portfolio generally will treat the borrower as the "issuer" of a Loan
Interest held by the Portfolio. In the case of loan participations where
the Agent or Intermediate Participant serves as financial intermediary
between the Portfolio and the borrower, the Portfolio, in appropriate
circumstances, will treat both the Agent or Intermediate Participant and
the borrower as "issuers" for the purposes of determining whether the
Portfolio has invested more than 5% of its total assets in a single
issuer. Treating a financial intermediary as an issuer of indebtedness may
restrict the Portfolio's ability to invest in indebtedness related to a
single intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different
companies and industries.
Foreign Investments
Investing in foreign issuers involves certain special considerations,
including those set forth below, which are not typically associated with
investing in U.S. issuers. Because investments in foreign issuers may
involve currencies of foreign countries, and because the Portfolio may
temporarily hold funds in bank deposits in foreign currencies during
completion of investment programs, the Portfolio may be affected favorably
or unfavorably by changes in currency rates and in exchange control
regulations and may incur costs in connection with conversions between
various currencies.
Because foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies, there may
be less publicly available information about a foreign company than about
a domestic company. Foreign stock markets, while growing in volume of
trading activity, have substantially less volume than the New York Stock
Exchange, and securities of some foreign companies are less liquid and
more volatile than securities of comparable U.S. companies. Similarly,
volume and liquidity in most foreign bond markets is less than in the
United States and, at times, volatility of price can be greater than in
the United States. Fixed commissions on foreign stock exchanges are
generally higher than negotiated commissions on U.S. exchanges, although
the Portfolio endeavors to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of stock exchanges, brokers and listed companies than in the
United States. Mail service between the United States and foreign
countries may be slower or less reliable than within the United States,
B-4
thus increasing the risk of delayed settlements of portfolio transactions
or loss of certificates for portfolio securities. In addition, with
respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability,
or diplomatic developments which could affect the Portfolio's investments
in those countries. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
The Portfolio may enter into forward foreign currency exchange
contracts. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions
are charged at any stage for trades.
At the maturity of a forward contract the Portfolio may either accept
or make delivery of the currency specified in the contract or, at or prior
to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to
forward contracts are usually effected with the currency trader who is a
party to the original forward contract.
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
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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 does not intend to enter into such forward contracts to
protect the value of its portfolio securities on a regular continuous
basis, and will not do so if, as a result, the Portfolio will have more
than 15% of the value of its total assets committed to the consummation of
such contracts. The Portfolio also will not enter into such forward
contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Portfolio to deliver an
amount of foreign currency in excess of the value of the securities held
by the Portfolio or other assets denominated in that currency. Under
normal circumstances, consideration of the prospect for currency parities
will be incorporated into the long-term investment decisions made with
regard to overall diversification strategies. However, the Portfolio
believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the
Portfolio will be served.
The Portfolio's custodian will place cash or liquid high grade debt
securities into a segregated account of the Portfolio in an amount equal
to the value of the Portfolio's total assets committed to the consummation
of forward foreign currency exchange contracts entered into relating to
the purchase of foreign currencies. If the value of the securities placed
in the segregated account declines, additional cash or securities will be
placed in the account on a daily basis so that the value of the account
will equal the amount of the Portfolio's commitments with respect to such
contracts.
The Portfolio generally will not enter into a forward contract with a
term of greater than one year. It also should be realized that this method
of protecting the value of the securities held by the Portfolio against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of
exchange that the Portfolio can achieve at some future point in time.
Although the Portfolio will enter into forward contracts to reduce
currency exchange rate risks, transactions in such contracts involve
certain other risks. Thus, although the Portfolio may benefit from such
transactions, unanticipated changes in currency exchange rates may result
in a poorer overall performance for the Portfolio than if it had not
engaged in any such transactions. Moreover, there may be imperfect
correlation between the securities held by the Portfolio denominated in a
particular currency and forward contracts entered into by the Portfolio.
Such imperfect correlation may prevent the Portfolio from achieving a
complete hedge or expose the Portfolio to risk of foreign exchange loss.
Writing and Purchasing Call and Put Options
B-6
A call option written by the Portfolio obligates the Portfolio to sell
specified securities to the holder of the option at a specified price at
any time before the expiration date. The Portfolio's purpose in writing
covered call options is to realize greater income than would be realized
on portfolio securities transactions alone. However, the Portfolio may
forego the opportunity to profit from an increase in the market price of
the underlying security. A put option written by the Portfolio would
obligate the Portfolio to purchase specified securities from the option
holder at a specified price at any time before the expiration date.
The purpose of writing such options is to generate additional income
for the Portfolio. However, in return for the option premium, the
Portfolio accepts the risk that it will be required to purchase the
underlying securities at a price in excess of the securities' market value
at the time of purchase.
The Portfolio may terminate its obligations under a call or put option
by purchasing an option identical to the one it has written. Such
purchases are referred to as "closing purchase transactions."
The Portfolio would also be able to enter into closing sale
transactions in order to realize gains or minimize losses on options
purchased by the Portfolio.
The Portfolio would normally purchase call options in anticipation of
an increase in the market value of securities of the type in which the
Portfolio may invest. The purchase of a call option would entitle the
Portfolio, in return for the premium paid, to purchase specified
securities at a specified price during the option period. The Portfolio
would ordinarily realize a gain if, during the option period, the value of
such securities exceeded the sum of the exercise price, the premium paid
and transaction costs; otherwise the Portfolio would realize a loss on the
purchase of the call option.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective
puts") or securities of the type in which it is permitted to invest. The
purchase of a put option would entitle the Portfolio, in exchange for the
premium paid, to sell specified securities at a specified price during the
option period. The purchase of protective puts is designed merely to
offset or hedge against a decline in the market value of the securities
held by the Portfolio. Put options may also be purchased by the Portfolio
for the purpose of affirmatively benefitting from a decline in the price
of securities that the Portfolio does not own. The Portfolio would
ordinarily realize a gain if, during the option period, the value of the
underlying securities decreased below the exercise price sufficiently to
cover the premium and transaction costs; otherwise the Portfolio would
realize a loss on the purchase of the put option. Gains and losses on the
purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.
B-7
The Portfolio would purchase put and call options on securities
indices for the same purposes as the purchase of options on securities.
Options on securities indices are similar to options on securities, except
that the exercise of securities index options requires cash payments and
does not involve the actual purchase or sale of securities. In addition,
securities index options are designed to reflect price fluctuations in a
group of securities or a segment of the securities market rather than
price fluctuations in a single security.
Special Risks Associated With Options on Securities
An options position may be closed out only on an options exchange that
provides a secondary market for an option of the same series. Although the
Portfolio will generally purchase or write only those options for which
there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange will exist for any particular
option, or at any particular time. For some options no secondary market on
an exchange may exist. In such event, it might not be possible to effect
closing transactions in particular options, with the result that the
Portfolio would have to exercise its options in order to realize any
profit and would incur transaction costs upon the sale of underlying
securities pursuant to the exercise of put options. If the Portfolio as a
covered call option writer is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange
include the following: (i) there may be insufficient trading interest in
certain options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii) trading halts,
suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities; (iv)
unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing
Corporation may not at all times be adequate to handle current trading
volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which
event the secondary market on that exchange (or in that class or series of
options) would cease to exist, although outstanding options on that
exchange that had been issued by the Options Clearing Corporation as a
result of trades on that exchange would continue to be exercisable in
accordance with their terms.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the
facilities of the Options Clearing Corporation inadequate, and thereby
result in the institution by an exchange of special procedures that may
interfere with the timely execution of customers' orders.
The amount of the premiums that the Portfolio may pay or receive may
be adversely affected as new or existing institutions, including other
B-8
investment companies, engage in or increase their option purchasing and
writing activities.
Futures Contracts
A change in the level of interest rates or securities may affect the
value of the securities held by the Portfolio (or of securities that the
Portfolio expects to purchase). To hedge against changes in rates or
prices or for non-hedging purposes, the Portfolio may enter into (i)
futures contracts for the purchase or sale of securities, (ii) futures
contracts on securities indices and (iii) futures contracts on other
financial instruments and indices. A futures contract may generally be
described as an agreement between two parties to buy and sell particular
financial instruments for an agreed price during a designated month (or to
deliver the final cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the
end of trading in the contract). All futures contracts entered into by the
Portfolio are traded on exchanges or boards of trade that are licensed and
regulated by the Commodity Futures Trading Commission ("CFTC").
Futures Contracts on Securities. A futures contract on a security is a
binding contractual commitment which, if held to maturity, will result in
an obligation to make or accept delivery, during a particular month, of
securities having a standardized face value and rate of return. By
purchasing futures on securities, the Portfolio will legally obligate
itself to accept delivery of the underlying security and pay the agreed
price; by selling futures on securities, it will legally obligate itself
to make delivery of the security against payment of the agreed price. Open
futures positions on securities are valued at the most recent settlement
price, unless such price does not reflect the fair value of the contract,
in which case the positions will be valued by or under the direction of
the Trustees of the Portfolio.
Positions taken in the futures markets are not normally held to
maturity, but are liquidated through offsetting transactions that may
result in a profit or loss. While the Portfolio's futures contracts on
securities will usually be liquidated in this manner, the Portfolio may
instead make or take delivery of the underlying securities whenever it
appears economically advantageous for the Portfolio to do so. A clearing
corporation associated with the exchange on which futures on securities
are traded guarantees that, if still open, the sale or purchase will be
performed on the settlement date.
Futures Contracts on Securities Indices. Futures contracts on
securities or other indices do not require the physical delivery of
securities, but merely provide for profits and losses resulting from
changes in the market value of a contract to be credited or debited at the
close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date a final cash settlement occurs
B-9
and the futures position is simply closed out. Changes in the market value
of a particular futures contract reflect changes in the level of the index
on which the futures contract is based.
Hedging Strategies. Hedging by use of futures contracts seeks to
establish with more certainty than would otherwise be possible the
effective rate of return on portfolio securities or securities that the
Portfolio proposes to acquire. The Portfolio may, for example, take a
"short" position in the futures market by selling futures contracts in
order to hedge against an anticipated rise in interest rates or a decline
in market prices that would adversely affect the value of the securities
held by the Portfolio. Such futures contracts may include contracts for
the future delivery of securities held by the Portfolio or 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. Although under
some circumstances prices of securities held by Portfolio may be more or
less volatile than prices of such futures contracts, the Investment
Adviser will attempt to estimate the extent of this difference in
volatility based on historical patterns and to compensate for it by having
the Portfolio enter into a greater or lesser number of futures contracts
or by attempting to achieve only a partial hedge against price changes
affecting the securities held by the Portfolio. When hedging of this
character is successful, any depreciation in the value of portfolio
securities will substantially be offset by appreciation in the value of
the futures position.
On other occasions, the Portfolio may take a "long" position by
purchasing such futures contracts. This would be done, for example, when
the Portfolio anticipates the subsequent purchase of particular securities
when it has the necessary cash, but expects the prices then available in
the securities market to be less favorable than the prices that are
currently available.
Options on Futures Contracts
The Portfolio may purchase and write call and put options on futures
contracts that are traded on a United States exchange or board of trade.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the option period. Upon
exercise of the option, the writer of the option is obligated to convey
the appropriate futures position to the holder of the option. If an option
is exercised on the last trading day before the expiration date of the
option, a cash settlement will be made in an amount equal to the
difference between the closing price of the futures contract and the
exercise price of the option.
B-10
The Portfolio may use options on futures contracts for bona fide
hedging purposes as defined below or for non-hedging purposes subject to
the limitations imposed by CFTC regulations. If the Portfolio purchases a
call (put) option on a futures contract it benefits from any increase
(decrease) in the value of the futures contract, but is subject to the
risk of decrease (increase) in value of the futures contract. The benefits
received are reduced by the amount of the premium and transaction costs
paid by the Portfolio for the option. If market conditions do not favor
the exercise of the option, the Portfolio's loss is limited to the amount
of such premium and transaction costs paid by the Portfolio for the
option.
If the Portfolio writes a call (put) option on a futures contract, the
Portfolio receives a premium but assumes the risk of a rise (decline) in
value in the underlying futures contract. If the option is not exercised,
the Portfolio gains the amount of the premium, which may partially offset
unfavorable changes in the value of securities held or to be acquired for
the Portfolio. If the option is exercised, the Portfolio will incur a
loss, which will be reduced by the amount of the premium it receives.
However, depending on the degree of correlation between changes in the
value of its portfolio securities and changes in the value of futures
positions, the Portfolio's losses from writing options on futures may be
partially offset by favorable changes in the value of portfolio securities
or in the cost of securities to be acquired.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option of the same
series. There is no guarantee that such closing transactions can be
effected. The Portfolio's ability to establish and close out positions on
such options will be subject to the development and maintenance of a
liquid market.
Limitations on the Use of Futures Contracts and Options on Futures
The Portfolio will engage in futures and related options transactions
for bona fide hedging or non-hedging purposes as defined in or permitted
by CFTC regulations. The Portfolio will determine that the price
fluctuations in the futures contracts and options on futures used for
hedging purposes are substantially related to price fluctuations in
securities held by the Portfolio or that it expects to purchase. Except as
stated below, the Portfolio's futures transactions will be entered into
for traditional hedging purposes -- i.e., contracts will be sold to
protect against a decline in the price of securities that the Portfolio
owns, or futures contracts will be purchased to protect the Portfolio
against an increase in the price of securities it intends to purchase. As
evidence of this hedging intent, the Portfolio expects that on 75% or more
of the occasions on which it takes a long futures (or option) position
(involving the purchase of futures contracts), the Portfolio will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities in the cash market at the time when the futures (or
option) position is closed out. However, in particular cases, when it is
economically advantageous for the Portfolio to do so, a long futures
position may be terminated (or an option may expire) without the
B-11
corresponding purchase of securities. As an alternative to compliance with
the bona fide hedging definition, a CFTC regulation permits the Portfolio
to elect to comply with a different test, under which the aggregate
initial margin and premiums required to establish non-hedging positions in
futures contracts and options on futures will not exceed 5% of the
Portfolio's net asset value after taking into account unrealized profits
and losses on such positions and excluding the in-the-money amount of such
options. The Portfolio will engage in transactions in futures and related
options contracts only to the extent such transactions are consistent with
the requirements of the Internal Revenue Code for maintaining the
qualification of each of the Portfolio's investment company investors as a
regulated investment company for Federal income tax purposes (see "Tax
Status").
The Portfolio will be required, in connection with transactions in
futures contracts and the writing of options on futures to make margin
deposits, which will be held by the Portfolio's custodian for the benefit
of the futures commission merchant through whom the Portfolio engages in
such futures and options transactions. Cash or liquid, high-grade debt
securities required to be segregated in connection with a "long" futures
position taken by the Portfolio will also be held by the custodian in a
segregated account and will be marked to market daily.
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 directly
by increasing income or indirectly by enhancing the Portfolio's net asset
value.
Investment Restrictions
Whenever an investment policy or investment restriction set forth in
Part A or this Part B states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall
be determined immediately after and as a result of the Portfolio's
acquisition of such security or other asset. Accordingly, any later
increase or decrease resulting from a change in values, assets or other
circumstances will not compel the Portfolio to dispose of such security or
other asset.
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
B-12
if the holders of more than 50% of the outstanding voting securities of
the Portfolio are present or represented at the meeting or (b) more than
50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in
the Investment Company Act of 1940 (the "1940 Act"). The Portfolio may
not:
(1) With respect to 75% of total assets of the Portfolio, purchase any
security if such purchase, at the time thereof, would cause more than 5%
of the total assets of the Portfolio (taken at market value) to be
invested in the securities of a single issuer, or cause more than 10% of
the total outstanding voting securities of such issuer to be held by the
Portfolio, except obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and except securities of other
investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Portfolio may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities). The deposit or payment by the Portfolio of initial,
maintenance or variation margin in connection with all types of options
and futures contract transactions is not considered the purchase of a
security on margin;
(4) Underwrite or participate in the marketing of securities of
others, except insofar as it may technically be deemed to be an
underwriter in selling a portfolio security under circumstances which may
require the registration of the same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies
which invest or deal in real estate;
(6) Purchase or sell physical commodities or contracts for the
purchase or sale of physical commodities;
(7) Make loans to any person except by (i) the acquisition of debt
securities and making portfolio investments, (ii) entering into repurchase
agreements or (iii) lending portfolio securities; or
(8) Purchase any security if such purchase, at the time thereof, would
cause more than 25% of the Portfolio's total assets to be invested in any
single industry, provided that the electric, gas and telephone utility
industries shall be treated as separate industries for purposes of this
restriction and further provided that there is no limitation with respect
to obligations issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities.
The Portfolio has adopted the following nonfundamental investment
policies which may be changed by the Trustees of the Portfolio with or
B-13
without the approval of the Portfolio's investors. As a matter of
nonfundamental policy, the Portfolio may not: (a) invest more than 15% of
net assets in investments which are not readily marketable, including
restricted securities and repurchase agreements maturing in more than
seven days. Restricted securities for the purposes of this limitation do
not include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that the Board of Trustees, or its delegate,
determines to be liquid, based upon the trading markets for the specific
security; (b) invest more than 5% of its total assets (taken at current
value) in the securities of issuers which, including their predecessors,
have been in operation for less than three years; (c) purchase put or call
options on securities if after such purchase more than 5% of its net
assets, as measured by the aggregate of the premiums paid by such options,
would be so invested; (d) purchase warrants in excess of 5% of its net
assets, of which 2% may be warrants which are not listed on the New York
or American Stock Exchange; (e) make short sales of securities or maintain
a short position, unless at all times when a short position is open it
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short,
and unless not more than 25% of its net assets (taken at current value) is
held as collateral for such sales at any one time. (The Portfolio will
make such sales only for the purpose of deferring realization of gain or
loss for Federal income tax purposes.); (f) purchase or retain in its
portfolio any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the
Portfolio or is a member, officer, director or trustee of or person
interested in any investment adviser of the Portfolio, if after the
purchase of the securities of such issuer by the Portfolio one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or
securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together
own beneficially more than 5% of such shares or securities or both (all
taken at market value); or (g) purchase oil, gas or other mineral leases
or purchase partnership interests in oil, gas or other mineral exploration
or development programs.
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 adopt policies more restrictive than the fundamental
policies described above. Should the Portfolio determine that any such
policy is no longer in the best interests of the Portfolio and its
investors, it will revoke such policy.
Item 14. Management of the Portfolio
The Trustees and officers of the Portfolio are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's
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investment adviser, Boston Management and Research ("BMR" or the
"Investment Adviser"), which is a wholly-owned subsidiary of Eaton Vance
Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance Corp.
("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc. ("EV").
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Portfolio, BMR, Eaton Vance,
EVC or EV, as defined in the 1940 Act, by virtue of their affiliation with
any one or more of the Portfolio, BMR, Eaton Vance, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE PORTFOLIO
M. DOZIER GARDNER (62), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and
a Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
JAMES B. HAWKES (53), Vice President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director
of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and
communications company) founded in 1988; Chairman of the Board of
Newspapers of New England. Inc. since 1983; Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University
Graduate School of Business Administration. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Harvard Graduate School of Business Administration, Soldiers
Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (59), Trustee
President and Director, United Asset Management Corporation, a holding
company owning institutional investment management firms. Chairman,
President and Director, The Regis Fund, Inc. (mutual fund). Director or
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
B-15
JACK L. TREYNOR (65), Trustee
Investment Adviser and Consultant. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE PORTFOLIO
WILLIAM CHISHOLM (__), Vice President
Senior Trust Officer of The Bank of Nova Scotia Trust Company (Cayman)
Limited.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of
Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman
Islands, British West Indies.
MICHEL NORMANDEAU (43), Vice President
Assistant Manager--Trust Services of The Bank of Nova Scotia Trust Company
(Cayman) Limited.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of
Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman
Islands, British West Indies.
RAYMOND O'NEILL (33), Vice President
Managing Director of IBT Trust and Custodian Services (Ireland) Limited
since January, 1995. Vice President, Atlantic Corporate Management
Limited, Warwick, Bermuda (1991-1994). Officer, The Bank of Bermuda
Limited, Hamilton, Bermuda (1987-1991).
Address: Earlsfort Terrace, Dublin 2, Ireland.
HOOKER TALCOTT, Jr. (52), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (50), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
B-16
A. JOHN MURPHY (32), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor,
The Boston Company (1991-1993) and Registration Specialist, Fidelity
Management & Research Co. (1986-1991). Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Murphy was elected Assistant
Secretary of the Portfolio on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate at
Dechert, Price & Rhoads and Gaston Snow & Ely Bartlett. Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Woodbury
was elected Assistant Secretary of the Portfolio on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the
Special Committee of the Board of Trustees. The Special Committee's
functions include a continuous review of the Portfolio's contractual
relationship with the Investment Adviser, making recommendations to the
Trustees regarding the compensation of those Trustees who are not members
of the Eaton Vance organization, and making recommendations to the
Trustees regarding candidates to fill vacancies, as and when they occur,
in the ranks of those Trustees who are not "interested persons" of the
Portfolio or the Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit
Committee of the Board of Trustees. The Audit Committee's functions
include making recommendations to the Trustees regarding the selection of
the independent accountants, and reviewing with such accountants and the
Treasurer of the Portfolio matters relative to accounting and auditing
practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent
of the Portfolio.
The fees and expenses of those Trustees of the Portfolio who are not
members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Portfolio. (The Trustees of the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Portfolio.)
During the fiscal year ended March 31, 1995, the noninterested Trustees of
the Portfolio earned the following compensation in their capacities as
Trustees of the Portfolio and the other funds in the Eaton Vance fund
complex(1):
Aggregate Total Compensation
Compensation from from Trust and Fund
Name Portfolio Complex
---- ----------------- ------------------
B-17
Donald R. Dwight $2,769(2) $135,000(4)
Samuel L. Hayes, III 2,755(3) 147,500(5)
Norton H. Reamer 2,728 135,000
John L. Thorndike 2,816 140,000
Jack L. Treynor 2,884 140,000
(1) The Eaton Vance fund complex consists of 205 registered investment
companies or series thereof.
(2) Includes $609 of deferred compensation.
(3) Includes $1,178 of deferred compensation.
(4) Includes $17,500 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
Trustees of the Portfolio who are not affiliated with BMR may elect to
defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees
invested by the Portfolio in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustee under the Plan
will be determined based upon the performance of such investments.
Deferral of Trustees' fees in accordance with the Plan will have a
negligible effect on the Portfolio's assets, liabilities and net income
per share, and will not obligate the Portfolio to retain the services of
any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee.
The Portfolio's Declaration of Trust provides that it will indemnify
its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Portfolio, unless, as to liability to the Portfolio or
its investors, it is finally adjudicated that they engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in their offices, or unless with respect to any other
matter it is finally adjudicated that they did not act in good faith in
the reasonable belief that their actions were in the best interests of the
Portfolio. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving
the settlement or other disposition, or by a reasonable determination,
based upon a review of readily available facts, by vote of a majority of
noninterested Trustees or in a written opinion of independent counsel,
that such officers or Trustees have not engaged in wilful misfeasance, bad
faith, gross negligence or reckless disregard of their duties.
Item 15. Control Persons and Principal Holder of Securities
As of June 30, 1995, EV Marathon High Income Fund (the "Marathon
Fund"), a series of Eaton Vance Mutual Funds Trust (the "Trust"),
B-18
controlled the Portfolio by virtue of owning more than 99% of the value of
the outstanding interests in the Portfolio. Because the Marathon Fund
controls the Portfolio, the Marathon Fund may take actions without the
approval of any other investor. The Marathon 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 that is an
investment company registered under the 1940 Act would follow the same or
a similar practice. The Trust, a Massachusetts business trust, is a
mutual fund -- an open-end management investment company.
Item 16. Investment Advisory and Other Services
Investment Adviser. The Portfolio engages BMR as investment adviser
pursuant to an Investment Advisory Agreement dated May 31, 1994. BMR or
Eaton Vance acts as investment adviser to investment companies and various
individual and institutional clients with combined assets under management
of approximately $15 billion.
BMR manages the investments and affairs of the Portfolio subject to
the supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolio investment research, advice and supervision, furnishes an
investment program and will determine what securities will be purchased,
held or sold by the Portfolio and what portion, if any, of the Portfolio's
assets will be held uninvested. The Investment Advisory Agreement requires
BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities. The
Portfolio is responsible for all expenses not expressly stated to be
payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and
continuing its existence, (ii) registration of the Portfolio under the
1940 Act, (iii) commissions, fees and other expenses connected with the
acquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of
interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under Federal and state
securities laws and of preparing and printing registration statements or
other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering
and maintaining registrations of the Portfolio and of the Portfolio's
placement agent as broker-dealer or agent under state securities laws,
(ix) expenses of reports and notices to investors and of meetings of
investors and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping for funds, securities and other
investments, keeping of books, accounts and records, and determination of
net asset values, book capital account balances and tax capital account
B-19
balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for
all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees
of the Portfolio, (xvii) compensation and expenses of Trustees of the
Portfolio who are not members of the BMR organization, and (xvii) such
non-recurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the obligation of
the Portfolio to indemnify its Trustees, officers and investors with
respect thereto.
For a description of the compensation that the Portfolio pays BMR
under the Investment Advisory Agreement, see "Management of the Portfolio"
in Part A. As of March 31, 1995, the Portfolio had net assets of
$442,551,815. For the period from the start of business, June 1, 1994, to
March 31, 1995, the Portfolio paid BMR advisory fees of $2,260,748
(equivalent to 0.64% (annualized) of the Portfolio's average daily net
assets for such period).
The Investment Advisory Agreement with BMR remains in effect until
February 28, 1996. It may be continued indefinitely thereafter so long as
such continuance after February 28, 1996 is approved at least annually (i)
by the vote of a majority of the Trustees who are not interested persons
of the Portfolio or of BMR cast in person at a meeting specifically called
for the purpose of voting on such approval and (ii) by the Board of
Trustees or by vote of a majority of the outstanding voting securities of
the Portfolio. The Agreement may be terminated at any time without penalty
on sixty (60) days' written notice by the Board of Trustees 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 BMR may render services to
others and engage in other business activities and may permit other fund
clients and other corporations and organizations to use the words "Eaton
Vance" or "Boston Management and Research" in their names. The Agreement
also provides that BMR shall not be liable for any loss incurred in
connection with the performance of its duties, or action taken or omitted
under that Agreement, in the absence of willful misfeasance, bad faith,
gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties thereunder, or for any
losses sustained in the acquisition, holding or disposition of any
security or other investment.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV
are both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton
Vance. The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M.
Dozier Gardner, James B. Hawkes, and Benjamin A. Rowland, Jr. The
Directors of EVC consist of the same persons and John G.L. Cabot and Ralph
Z. Sorenson. Mr. Clay is chairman and Mr. Gardner is president and chief
executive officer of EVC, BMR, Eaton Vance and EV. All of the issued and
outstanding shares of Eaton Vance and EV are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares
B-20
of the outstanding Voting Common Stock of EVC are deposited in a Voting
Trust which expires on December 31, 1996, the Voting Trustees of which are
Messrs. Clay, Brigham, Gardner, Hawkes and Rowland. The Voting Trustees
have unrestricted voting rights for the election of Directors of EVC. All
of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers and Directors of EVC and EV. As of June 30, 1995, Messrs. Clay,
Gardner and Hawkes each owned 24% of such voting trust receipts, and
Messrs. Rowland and Brigham owned 15% and 13%, respectively, of such
voting trust receipts. Messrs. Gardner, Hawkes and Otis are officers or
Trustees of the Portfolio and are members of the EVC, BMR, Eaton Vance and
EV organizations. Messrs. Murphy, O'Connor, Talcott, Terry and Woodbury
and Ms. Sanders are officers of the Portfolio and are members of the BMR,
Eaton Vance and/or EV organizations. BMR will receive the fees paid under
the Investment Advisory Agreement.
Eaton Vance owns all of the stock of Energex Corporation, which is
engaged in oil and gas operations. EVC owns all of the stock of
Marblehead Energy Corp. (which is engaged in oil and gas operations) and
77.3% of the stock of Investors Bank & Trust Company, custodian of the
Portfolio, which provides custodial, trustee and other fiduciary services
to investors, including individuals, employee benefit plans, corporations,
investment companies, savings banks and other institutions. In addition,
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment, consulting and management. EVC owns
all of the stock of Fulcrum Management, Inc. and MinVen Inc., which are
engaged in the development of precious metal properties. EVC, BMR, Eaton
Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to
time have transactions with various banks, including the custodian of the
Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not
be influenced by existing or potential custodial or other relationships
between the Portfolio and such banks.
Custodian. Investors Bank & Trust Company ("IBT"), 24 Federal Street,
Boston, Massachusetts (a 77.3% owned subsidiary of EVC) acts as custodian
for the Portfolio. IBT has the custody of all of the Portfolio's assets,
and its subsidiary, IBT Fund Services (Canada) Inc., maintains the general
ledger of the Portfolio and computes the daily net asset value of
interests in the Portfolio. In its capacity as custodian, IBT attends to
details in connection with the sale, exchange, substitution, transfer or
other dealings with the Portfolio's investments, receives and disburses
all funds and performs various other ministerial duties upon receipt of
proper instructions from the Portfolio. IBT charges fees that are
competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of
Portfolio net assets, and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are
then reduced by a credit for cash balances of the particular investment
B-21
company at the custodian equal to 75% of the 91-day, U.S. Treasury Bill
auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT,
the Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under
the 1940 Act, and the Portfolio's investments held by IBT as custodian are
thus subject to the additional examinations by the Portfolio's independent
accountants as called for by such Rule. For the period from the start of
business, June 1, 1994, to March 31, 1995, the Portfolio paid IBT
$147,500.
Independent Certified Public Accountants. Deloitte & Touche, Grand
Cayman, Cayman Islands, British West Indies, 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 Securities and Exchange Commission.
Item 17. Brokerage Allocation and Other Practices
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by
BMR. BMR is also responsible for the execution of transactions for all
other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of
all other accounts managed by it for execution with many broker-dealer
firms. BMR uses its best efforts to obtain execution of portfolio security
transactions at prices that are advantageous to the Portfolio and (when a
disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best
judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation
the size and type of the transaction, the general execution and
operational capabilities of the executing 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 the services rendered by the
broker-dealer in other transactions, and the reasonableness of the
commission or spread, if any. Transactions on United States 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 on portfolio security
B-22
transactions will, in the judgment of BMR, 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 BMR's other clients
for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934,
a broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of overall responsibilities which
BMR and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, BMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include
advice as to the value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement); and the "Research Services" referred to in the
next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to
receive research, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in
the performance of their investment responsibilities ("Research Services")
from broker-dealer firms which execute portfolio transactions for the
clients of such advisers and from third parties with which such
broker-dealers have arrangements. Consistent with this practice, BMR
receives Research Services from many broker-dealer firms with which BMR
places the Portfolio's transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and
transactions and recommendations as to the purchase and sale of securities
and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software,
data bases and services. Any particular Research Service obtained through
a broker-dealer may be used by BMR in connection with client accounts
other than those accounts which pay commissions to such broker-dealer. Any
such Research Service may be broadly useful and of value to BMR in
rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
B-23
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 BMR receives such Research Services.
BMR evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research
Services which BMR believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek
and execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, BMR is authorized to
consider as a factor in the selection of any firm with whom portfolio
orders may be placed the fact that such firm has sold or is selling
securities of other investment companies sponsored by BMR or Eaton Vance.
This policy is not inconsistent with a rule of the National Association of
Securities Dealers, Inc., which rule provides that no firm which is a
member of the Association shall favor or disfavor the distribution of
shares of any particular investment company or group of investment
companies on the basis of brokerage commissions received or expected by
such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its
affiliates. BMR will attempt to allocate equitably portfolio security
transactions among the Portfolio and the portfolios of its other
investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and
such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the
Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such
accounts. While this procedure could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Portfolio that the benefits
available from the BMR organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions. For the period from the
start of business, June 1, 1994, to March 31, 1995, the Portfolio paid
brokerage commissions of $3,684 on portfolio security transactions, of
which $569 was paid in respect of portfolio security transactions
aggregating approximately $206,198 to firms that provided some research
services to BMR or its affiliates (although many of such firms may have
been selected in any particular transaction primarily because of their
execution capabilities).
Item 18. Capital Stock and Other Securities
B-24
Under the Portfolio's Declaration of Trust, the Trustees are
authorized to issue interests in the Portfolio. Investors are entitled to
participate pro rata in distributions of taxable income, loss, gain and
credit of the Portfolio. Upon dissolution of the Portfolio, the Trustees
shall liquidate the assets of the Portfolio and apply and distribute the
proceeds thereof as follows: (a) first, to the payment of all debts and
obligations of the Portfolio to third parties including, without
limitation, the retirement of outstanding debt, including any debt owed to
holders of record of interests in the Portfolio ("Holders") or their
affiliates, and the expenses of liquidation, and to the setting up of any
reserves for contingencies which may be necessary; and (b) second, in
accordance with the Holders' positive Book Capital Account balances after
adjusting Book Capital Accounts for certain allocations provided in the
Declaration of Trust and in accordance with the requirements described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(2). Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the assets of the Portfolio would cause undue loss to the
Holders, the Trustees, in order to avoid such loss, may, after having
given notification to all the Holders, to the extent not then prohibited
by the law of any jurisdiction in which the Portfolio is then formed or
qualified and applicable in the circumstances, either defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Portfolio except those necessary to satisfy the Portfolio's debts and
obligations or distribute the Portfolio's assets to the Holders in
liquidation. Interests in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except
as set forth below. Interests in the Portfolio may not be transferred.
Certificates representing an investor's interest in the Portfolio are
issued only upon the written request of a Holder.
Each Holder is entitled to vote in proportion to the amount of its
interest in the Portfolio. Holders do not have cumulative voting rights.
The Portfolio is not required and has no current intention to hold annual
meetings of Holders but the Portfolio will hold meetings of Holders when
in the judgment of the Portfolio's Trustees it is necessary or desirable
to submit matters to a vote of Holders at a meeting. Any action which may
be taken by Holders may be taken without a meeting if Holders holding more
than 50% of all interests entitled to vote (or such larger proportion
thereof as shall be required by any express provision of the Declaration
of Trust of the Portfolio) consent to the action in writing and the
consents are filed with the records of meetings of Holders.
The Portfolio's Declaration of Trust may be amended by vote of Holders
of more than 50% of all interests in the Portfolio at any meeting of
Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all interests. The Trustees may also amend the Declaration of Trust
(without the vote or consent of Holders) to change the Portfolio's name or
the state or other jurisdiction whose law shall be the governing law, to
supply any omission or cure, correct or supplement any ambiguous,
defective or inconsistent provision, to conform the Declaration of Trust
to applicable Federal law or regulations or the requirements of the Code,
B-25
or to change, modify or rescind any provision, provided that such change,
modification or rescission is determined by the Trustees to be necessary
or appropriate and not to have a materially adverse effect on the
financial interests of the Holders. No amendment of the Declaration of
Trust which would change any rights with respect to any Holder's interest
in the Portfolio by reducing the amount payable thereon upon liquidation
of the Portfolio may be made, except with the vote or consent of the
Holders of two-thirds of all interests. References in the Declaration of
Trust and in Part A or this Part B to a specified percentage of, or
fraction of, interests in the Portfolio, means Holders whose combined Book
Capital Account balances represent such specified percentage or fraction
of the combined Book Capital Account balance of all, or a specified group
of, Holders.
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 or by votes
cast at a meeting called for that purpose. The Declaration of Trust
further provides that under certain circumstances, the investors may call
a meeting to remove a Trustee and that the Portfolio is required to
provide assistance in communicating with investors about such a meeting.
The Portfolio may merge or consolidate with any other corporation,
association, trust or other organization or may sell or exchange all or
substantially all of its assets upon such terms and conditions and for
such consideration when and as authorized by the Holders of (a) 67% or
more of the interests in the Portfolio present or represented at the
meeting of Holders, if Holders of more than 50% of all interests are
present or represented by proxy, or (b) more than 50% of all interests,
whichever is less. The Portfolio may be terminated (i) by the affirmative
vote of Holders of not less than two-thirds of all interests at any
meeting of Holders or by an instrument in writing without a meeting,
executed by a majority of the Trustees and consented to by Holders of not
less than two-thirds of all interests, or (ii) by the Trustees by written
notice to the Holders.
The Portfolio is organized as a trust under the laws of the State of
New York. Investors in the Portfolio will be held personally liable for
its obligations and liabilities, subject, however, to indemnification by
the Portfolio in the event that there is imposed upon an investor a
greater portion of the liabilities and obligations of the Portfolio than
B-26
its proportionate interest in the Portfolio. The Portfolio intends to
maintain fidelity and errors and omissions insurance deemed adequate by
the Trustees. Therefore, the risk of an investor incurring financial loss
on account of investor liability is limited to circumstances in which both
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.
Item 20. Tax Status
The Portfolio has been advised by tax counsel that, provided the
Portfolio is operated at all times during its existence in accordance with
certain organizational and operational documents, the Portfolio should be
classified as a partnership under the Internal Revenue Code of 1986, as
amended (the "Code"), and it should not be a "publicly traded partnership"
within the meaning of Section 7704 of the Code. Consequently, the
Portfolio does not expect that it will be required to pay any Federal
income tax, and a Holder will be required to take into account in
determining its Federal income tax liability its share of the Portfolio's
income, gain, losses and deductions.
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
believes that, in the case of a Holder that seeks to qualify as a
regulated investment company ("RIC") under the Code, the aggregate
approach should apply, and each such Holder should accordingly be deemed
to own a proportionate share of each of the assets of the Portfolio and to
B-27
be entitled to the gross income of the Portfolio attributable to that
share. Tax counsel has advised the Portfolio that such an investor should
be treated as the owner of a proportionate share of the Portfolio's assets
and income for purposes of all requirements of Sections 851(b) and
852(b)(5) of the Code. Further, the Portfolio believes that each Holder
that seeks to qualify as a RIC should be deemed to hold its proportionate
share of the Portfolio's assets for the period the Portfolio has held the
assets or for the period the Holder has been an investor in the Portfolio,
whichever is shorter. Investors should consult their tax advisors
regarding whether the entity or the aggregate approach applies to their
investment in the Portfolio in light of their particular tax status and
any special tax rules applicable to them.
In order to enable a Holder that is otherwise eligible to qualify as a
RIC, the Portfolio intends to satisfy the requirements of Subchapter M of
the Code relating to sources of income and diversification of assets as if
they were applicable to the Portfolio and to allocate and permit
withdrawals in a manner that will enable a Holder that is a RIC to comply
with those requirements. The Portfolio will allocate at least annually to
each Holder such Holder's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit in a manner intended to comply
with the Code and applicable Treasury regulations. Tax counsel has advised
the Portfolio that the Portfolio's allocations of taxable income and loss
should have "economic effect" under applicable Treasury regulations.
To the extent the cash proceeds of any withdrawal (or, under certain
circumstances, such proceeds plus the value of any marketable securities
distributed to an investor) ("liquid proceeds") exceed a Holder's adjusted
basis of his interest in the Portfolio, the Holder will generally realize
a gain for Federal income tax purposes. If, upon a complete withdrawal
(redemption of the entire interest), the Holder's adjusted basis of his
interest exceeds the liquid proceeds of such withdrawal, the Holder will
generally realize a loss for Federal income tax purposes. The tax
consequences of a withdrawal of property (instead of or in addition to
liquid proceeds) will be different and will depend on the specific factual
circumstances. A Holder's adjusted basis of an interest in the Portfolio
will generally be the aggregate prices paid therefor (including the
adjusted basis of contributed property and any gain recognized on such
contribution), increased by the amounts of the Holder's distributive share
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
B-28
expenditures not properly chargeable to capital account. Increases or
decreases in a Holder's share of the Portfolio's liabilities may also
result in corresponding increases or decreases in such adjusted basis.
Distributions of liquid proceeds in excess of a Holder's adjusted basis in
its interest in the Portfolio immediately prior thereto generally will
result in the recognition of gain to the Holder in the amount of such
excess.
The Portfolio may be subject to foreign withholding taxes with respect
to income derived from foreign securities. These taxes may be reduced or
eliminated under the terms of an applicable U.S. income tax treaty. As it
is not expected that more than 50% of the value of the total assets of the
Portfolio at the close of any taxable year will consist of securities
issued by foreign corporations, the Portfolio will not be eligible to pass
through to investors any foreign tax credits or deductions for foreign
taxes paid by the Portfolio. Certain foreign exchange gains and losses
realized by the Portfolio will be treated as ordinary income and losses.
Certain uses of foreign currency and investment by the Portfolio in
certain "passive foreign investment companies" may be limited as a tax
election may be made, if available, in order to avoid imposition of a tax
on the Portfolio.
The Portfolio's investment in zero coupon and deferred interest
securities and payment in kind securities will cause it to realize income
prior to the receipt of cash payments with respect to these securities.
Such income will be allocated daily to interests in the Portfolio. To
enable an investor that is a RIC to distribute its proportionate share of
this income and avoid a tax on such investor, the Portfolio may be
required to liquidate portfolio securities that it might otherwise have
continued to hold, in order to generate cash for distribution to the RIC.
Investments in lower rated or unrated securities may present special
tax issues for the Portfolio and hence for an investor in the Portfolio to
the extent actual or anticipated defaults may be more likely with respect
to such securities. Tax rules are not entirely clear about issues such as
when the Portfolio may cease to accrue interest, original issue discount,
or market discount; when and to what extent deductions may be taken for
bad debts or worthless securities; how payments received on obligations in
default should be allocated between principal and income; and whether
exchanges of debt obligations in a workout context are taxable.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and
character of its items of income, gain or loss and hence the allocations
of such items to investors. For example, certain positions held by the
Portfolio on the last business day of each taxable year will be marked to
market (i.e., treated as if closed out on such day), and any resulting
gain or loss will generally be treated as 60% long-term and 40% short-term
capital gain or loss. Certain positions held by the Portfolio that
B-29
substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject
to tax rules that may cause deferral of Portfolio losses, adjustments in
the holding period of Portfolio securities and conversion of short-term
into long-term capital losses.
Income from transactions in options and futures contracts derived by
the Portfolio with respect to its business of investing in securities will
qualify as permissible income for its Holders that are RICs under the
requirement that at least 90% of a RIC's gross income each taxable year
consist of specified types of income. However, income from the dispo-
sition by the Portfolio of options and futures contracts held for less
than three months will be subject to the requirement applicable to those
Holders that less than 30% of a RIC's gross income each taxable year
consist of certain short-term gains ("Short-Short Limitation").
If the Portfolio satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Holders that are RICs satisfy the Short-Short Limitation.
Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. The Portfolio
will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Portfolio does not so qualify, it
may be forced to defer the closing out of options and futures contracts
beyond the time when it otherwise would be advantageous to do so, in order
for Holders that are RICs to continue to qualify as such.
An entity that is treated as a partnership under the Code, such as the
Portfolio, is generally treated as a partnership under state and local tax
laws, but certain states may have different entity classification criteria
and may therefore reach a different conclusion. Entities that are
classified as partnerships are not treated as separate taxable entities
under most state and local tax laws, and the income of a partnership is
considered to be income of partners both in timing and in character. The
laws of the various states and local taxing authorities vary with respect
to the 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.
B-30
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, which are
included in the Annual Report to Shareholders of EV Marathon High Income
Fund for the fiscal year ended March 31, 1995, are incorporated by
reference into this Part B and have been so incorporated in reliance upon
the report of Deloitte & Touche, independent certified public accountants,
as experts in accounting and auditing.
Portfolio of Investments as of March 31, 1995
Statement of Assets and Liabilities as of March 31, 1995
Statement of Operations for the period from the start of business,
June 1, 1994, to March 31, 1995
Statement of Changes in Net Assets for the period from the start of
business, June 1, 1994, to March 31, 1995
Supplementary Data for the period from the start of business, June 1,
1994, to March 31, 1995
Notes to Financial Statements
Independent Auditors' Report
The Portfolio incorporates by reference the above audited financial
statements of the Portfolio contained in the Annual Report to Shareholders
of EV Marathon High Income Fund for the fiscal year ended March 31, 1995,
as previously filed electronically with the Securities and Exchange
Commission on May 31, 1995 (Accession Number 0000950156-95-000404).
B-31
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The Financial statements called for by this Item are incorporated by
reference into Part B and listed in Item 23 hereof.
(b) Exhibits
1(a). Declaration of Trust dated May 1, 1992 filed herewith.
1(b). Amendment to Declaration of Trust dated June 14, 1993 filed
herewith.
2. By-Laws of the Registrant dated May 1, 1992 filed herewith.
5. Investment Advisory Agreement between the Registrant and Boston
Management and Research dated May 31, 1994 filed herewith.
6. Placement Agent Agreement with Eaton Vance Distributors, Inc. dated
May 31, 1994 filed herewith.
8. Custodian Agreement with Investors Bank & Trust Company dated May
31, 1994 filed herewith.
9(a). Accounting and Interestholder Services Agreement with IBT Fund
Services (Canada) Inc. dated as of March 31, 1995 filed herewith.
9(b). Administration Agreement with The Bank of Nova Scotia Trust
Company (Cayman) Ltd. dated as of March 31, 1995 filed herewith.
13. Investment representation letter of Eaton Vance High Income Trust
dated March 14, 1994 filed herewith.
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
Title of Class As of June 30, 1995
Interests 5
Item 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust, filed as an Exhibit herewith.
B-1
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
Item 28. Business and Other Connections
To the knowledge of the Portfolio, none of the trustees or officers of
the Portfolio's investment adviser, except as set forth on its Form ADV as
filed with the Securities and Exchange Commission, is engaged in any other
business, profession, vocation or employment of a substantial nature,
except that certain trustees and officers also hold various positions
with and engage in business for affiliates of the investment adviser.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
All applicable accounts, books and documents required to be maintained
by the Registrant by Section 31(a) of the Investment Company Act of 1940,
as amended, and the Rules promulgated thereunder are in the possession and
custody of the Registrant's custodian, Investors Bank & Trust Company, 24
Federal Street, Boston, MA 02110, with the exception of certain corporate
documents and portfolio trading documents that are in the possession and
custody of the Registrant's investment adviser, Boston Management and
Research, 24 Federal Street, Boston, MA 02110. Certain corporate documents
are also maintained by The Bank of Nova Scotia Trust Company (Cayman)
Ltd., The Bank of Nova Scotia Building, P.O. Box 501, George Town, Grand
Cayman, Cayman Islands, British West Indies, and certain investor account
and Portfolio accounting records are held by IBT Fund Services (Canada)
Inc., 1 First Canadian Place, King Street West, Suite 2800, P.O. Box 231,
Toronto, Ontario, Canada M5X 1C8. 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-2
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Amendment to its Registration
Statement on Form N-1A to be signed on its behalf by the undersigned,
thereunto duly authorized in Hamilton, Bermuda on the 19th day of June,
1995.
HIGH INCOME PORTFOLIO
By /s/ M. Dozier Gardner
---------------------
M. Dozier Gardner
President
C-3
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
----------- -----------------------
1(a). Declaration of Trust dated May 1, 1992
1(b). Amendment to Declaration of Trust dated June 14, 1993
2. By-Laws of the Registrant dated May 1, 1992
5. Investment Advisory Agreement between the Registrant and Boston
Management and Research dated May 31, 1994
6. Placement Agent Agreement with Eaton Vance Distributors, Inc.
dated May 31, 1994
8. Custodian Agreement with Investors Bank & Trust Company dated May
31, 1994
9(a). Accounting and Interestholder Services Agreement with IBT Fund
Services (Canada) Inc. dated as of March 31, 1995
9(b). Administration Agreement with The Bank of Nova Scotia Trust
Company (Cayman) Ltd. dated as of March 31, 1995
13. Investment representation letter of Eaton Vance High Income Trust
dated March 14, 1994
HIGH INCOME PORTFOLIO
---------------------------
DECLARATION OF TRUST
Dated as of May 1, 1992
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 . . . . . . . . . . . . . . . . . 5
Section 3.4 Sale and Increases of Interests . . . . . . . 6
Section 3.5 Decreases and Redemptions of Interests . . . 6
Section 3.6 Borrow Money . . . . . . . . . . . . . . . . 6
Section 3.7 Delegation; Committees . . . . . . . . . . . 6
Section 3.8 Collection and Payment . . . . . . . . . . . 6
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . 6
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . 7
Section 3.11 Further Powers . . . . . . . . . . . . . . . 7
ARTICLE IV--Investment Advisory, Administration and Placement Agent
Arrangements . . . . . . . . . . . . . . . . . . . . . 7
Section 4.1 Investment Advisory, Administration and Other
Arrangements . . . . . . . . . . . . . . . . 7
Section 4.2 Parties to Contract . . . . . . . . . . . . . 8
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc. . . . . . . . . . . . . . . . . . . . . 8
Section 5.1 Liability of Holders; Indemnification . . . . 8
Section 5.2 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Third Parties . . . . . . . . . . . . . . 8
Section 5.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc. . . . . . . . . . . . 8
Section 5.4 Mandatory Indemnification . . . . . . . . . . 9
Section 5.5 No Bond Required of Trustees . . . . . . . . 9
i
PAGE
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc. . . . . . . . . . . . . . . 9
Section 5.7 Reliance on Experts, etc. . . . . . . . . . . 10
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.1 Interests . . . . . . . . . . . . . . . . . . 10
Section 6.2 Non-Transferability . . . . . . . . . . . . . 10
Section 6.3 Register of Interests . . . . . . . . . . . . 10
ARTICLE VII--Increases, Decreases And Redemptions of Interests . . . . 10
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions . . . . . . . . . . . . . . . . . . 11
Section 8.1 Book Capital Account Balances . . . . . . . . 11
Section 8.2 Allocations and Distributions to Holders . . 11
Section 8.3 Power to Modify Foregoing Procedures . . . . 11
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 9.1 Rights of Holders . . . . . . . . . . . . . . 11
Section 9.2 Meetings of Holders . . . . . . . . . . . . . 12
Section 9.3 Notice of Meetings . . . . . . . . . . . . . 12
Section 9.4 Record Date for Meetings, Distributions, etc. 12
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . 12
Section 9.6 Reports . . . . . . . . . . . . . . . . . . 13
Section 9.7 Inspection of Records . . . . . . . . . . . 13
Section 9.8 Holder Action by Written Consent . . . . . . 13
Section 9.9 Notices . . . . . . . . . . . . . . . . . . . 13
ARTICLE X--Duration; Termination; Amendment; Mergers; Etc. . . . . . . 14
Section 10.1 Duration . . . . . . . . . . . . . . . . . . 14
Section 10.2 Termination . . . . . . . . . . . . . . . . . 15
Section 10.3 Dissolution . . . . . . . . . . . . . . . . 15
Section 10.4 Amendment Procedure . . . . . . . . . . . . . 15
Section 10.5 Merger, Consolidation and Sale of Assets . . 16
Section 10.6 Incorporation . . . . . . . . . . . . . . . . 16
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11.1 Certificate of Designation; Agent for
Service of Process . . . . . . . . . . . . . 17
Section 11.2 Governing Law . . . . . . . . . . . . . . . . 17
Section 11.3 Counterparts . . . . . . . . . . . . . . . . 17
Section 11.4 Reliance by Third Parties . . . . . . . . . . 17
Section 11.5 Provisions in Conflict With Law or
Regulations . . . . . . . . . . . . . 17
ii
DECLARATION OF TRUST
OF
HIGH INCOME PORTFOLIO
-----------------------
This DECLARATION OF TRUST of High Income Portfolio is
made as of the 1st day of May, 1992 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 High Income 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
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
2
entities, whether or not legal entities, and governments and agencies and
political 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
3
as 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 written
instrument executed by a majority of the other Trustees, specifying the
date of such Trustee's 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
4
instruments, may fill such vacancy, and any Trustee so elected by the
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
5
participation in a meeting by means of such communications equipment shall
constitute presence in person at such meeting.
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.
6
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
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.
7
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
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,
8
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, 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,
9
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.
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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
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
11
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
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
12
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
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
13
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.
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
-------------------------------------------------
14
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
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
15
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 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.
16
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.
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
17
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 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:
18
Name Address Date of 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
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
19
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
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
20
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
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
21
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 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. Certificate of Designation; Agent for Service of
Process. The Trust shall file, with the Department of State of the State
of New York, a certificate, in the name of the Trust and executed by an
officer of the Trust, designating the Secretary of State of the State of
New York as an agent upon whom process in any action or proceeding against
the Trust may be served.
11.2. 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.
11.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the
22
same instrument, which shall be sufficiently evidenced by any one such
original counterpart.
11.4. 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, shall be conclusive evidence as to the matters so certified
in favor of any Person dealing with the Trustees.
11.5. Provisions in Conflict With Law or Regulations.
----------------------------------------------
(a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of
counsel, that any 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/James G. Baur
-------------------------------
James G. Baur, as Trustee and
not individually
/s/H. Day Brigham, Jr.
--------------------------------
H. Day Brigham, Jr., as Trustee
and not individually
/s/James B. Hawkes
-------------------------------
James B. Hawkes, as Trustee and
not individually
23
HIGH INCOME PORTFOLIO
AMENDMENT TO DECLARATION OF TRUST
June 14, 1993
The undersigned, being at least a majority of the Trustees of the
Portfolio, acting pursuant to Section 10.4 of ARTICLE X of the Declaration
of Trust, do hereby:
Change and amend Section 3.11 of ARTICLE III of the
Declaration of Trust to read as follows:
" 3.11. Further Powers. The Trustees shall have
power to conduct the business of the Trust and carry on
its operations in any and all of its branches and
maintain offices, whether within or without the State of
New York, in any and all states of the United States of
America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United
States and of foreign governments, and to do all such
other things and execute all such instruments as they
deem necessary, proper, appropriate or desirable in order
to promote the interests of the Trust although such
things are not herein specifically mentioned. The
Trustees shall have full power and authority, in the name
and on behalf of the Trust to engage in and to prosecute,
defend, compromise, settle, abandon, or adjust by
arbitration or otherwise, any actions, suits,
proceedings, disputes, claims and demands relating to
this Trust, and out of the assets of the Trust to pay or
to satisfy any liabilities, losses, debts, claims or
expenses (including without limitation attorneys' fees)
incurred in connection therewith, including those of
litigation, and such power shall include without
limitation the power of the Trustees or any committee
thereof, in the exercise of their or its good faith
business judgment, to dismiss or terminate any action,
suit, proceeding, dispute, claim or demand, derivative or
otherwise, brought by any person, including a Holder in
its own name or in the name of the Trust, whether or not
the Trust or any of the Trustees may be named
individually therein or the subject matter arises by
reason of business for or on behalf of the Trust. Any
determination as to what is in the interests of the Trust
which is made by the Trustees in good faith shall be
conclusive. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant
of power to the Trustees. The Trustees shall not be
required to obtain any court order in order to deal with
Trust Property."
Further, the undersigned do hereby declare and find that the
foregoing change and amendment is necessary and appropriate and does not
have a materially adverse effect on the financial interest of the Holders
of the Portfolio. Said Amendment shall take effect on the date set forth
above.
/s/Norton H. Reamer
---------------------------- ------------------------------
James G. Baur Norton H. Reamer
/s/Donald R. Dwight /s/John L. Thorndike
---------------------------- ------------------------------
Donald R. Dwight John L. Thorndike
/s/James B. Hawkes /s/Jack L. Treynor
---------------------------- ------------------------------
James B. Hawkes Jack L. Treynor
/s/Samuel L. Hayes, III
----------------------------
Samuel L. Hayes, III
-2-
HIGH INCOME PORTFOLIO
-----------------------
BY-LAWS
As Adopted May 1, 1992
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
BY-LAWS
OF
HIGH INCOME PORTFOLIO
These By-Laws are made and adopted pursuant to Section
2.7 of the Declaration of Trust establishing HIGH INCOME PORTFOLIO (the
"Trust"), dated as of May 1, 1992, 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
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
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
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
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.
HIGH INCOME PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 31st day of May, 1994, between High Income
Portfolio, a New York trust (the "Trust"), and Boston Management and
Research, a Massachusetts business trust (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 and to administer its affairs,
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 for administering its affairs
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. As investment adviser
to the Trust, the Adviser shall furnish continuously an investment program
and shall determine from time to time what securities and other
investments shall be acquired, disposed of 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 either directly with the
DC-211888.1
issuer or with brokers or dealers 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 and payment
of cash for the account of the Trust. In connection with the selection of
such brokers or dealers 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 any one or more investment companies sponsored by the Adviser or its
affiliates or shares of any other investment company investing in the
Trust.
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, on a daily basis, compensation in
an amount equal to the aggregate of:
(a) a daily asset-based fee computed by applying the annual
asset rate applicable to that portion of the total daily
net assets of the Trust in each category as indicated
below:
Annual Asset
Category Daily Net Assets Rate
-------- ---------------- ------------
1 up to $500 million 0.300%
2 $500 million but less than $1 billion 0.275%
3 $1 billion but less than $1.5 billion 0.250%
4 $1.5 billion but less than $2 billion 0.225%
5 $2 billion but less than $3 billion 0.200%
6 $3 billion and over 0.175%, plus
-2- A:\HIP.IAA
(b) a daily income-based fee computed by applying the daily
income rate applicable to that portion of the total daily
gross income of the Trust (which portion shall bear the
same relationship to the total daily gross income on such
day as that portion of the total daily net assets of the
Trust in the same Category bears to the total daily net
assets on such day) in each Category as indicated below:
Category Daily Net Assets Daily Income Rate
-------- ---------------- -----------------
1 up to $500 million 3.00%
2 $500 million but less than $1 billion 2.75%
3 $1 billion but less than $1.5 billion 2.50%
4 $1.5 billion but less than $2 billion 2.25%
5 $2 billion but less than $3 billion 2.00%
6 $3 billion and over 1.75%
Such daily compensation shall be paid monthly in arrears on the
last business day of each month. The Trust's daily net assets shall be
computed 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 with respect to the Trust, 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 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 statements 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
-3- A:\HIP.IAA
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, and (xviii) 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 trustees, shareholders or otherwise
and that trustees, officers 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 Holder or otherwise. It is also
understood that trustees, 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 which may include the words "Eaton Vance" or "Boston
Management and Research" or any combination thereof as part of their name,
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 of Interests in 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. Sub-Investment Advisers. The Adviser may employ one or
more sub-investment advisers from time to time to perform such of the acts
and services of the Adviser, including the selection of brokers or dealers
to execute the Trust's portfolio security transactions, and upon such
terms and conditions as may be agreed upon between the Adviser and such
investment adviser and approved by the Trustees of the Trust.
-4- A:\HIP.IAA
7. 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, 1995 and shall continue in full
force and effect indefinitely thereafter, but only so long as such
continuance after February 28, 1995 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 Trustees of the Trust or the trustees 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.
8. 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.
9. Limitation of Liability. The Adviser expressly
acknowledges the provision in the Declaration of Trust of the Trust
(Section 5.2 and 5.6) limiting the personal liability of the Trustees and
officers of the Trust, and the Adviser hereby agrees that it shall have
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.
10. 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.
-5- A:\HIP.IAA
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the day and year first above written.
HIGH INCOME PORTFOLIO
By:/s/M. Dozier Gardner
------------------
M. Dozier Gardner
BOSTON MANAGEMENT AND RESEARCH
By:/s/Curtis H. Jones
------------------
Curtis H. Jones
-6- A:\HIP.IAA
PLACEMENT AGENT AGREEMENT
May 31, 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, High Income Portfolio (the
"Trust"), an open-end diversified management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
organized as a New York trust, has agreed that Eaton Vance Distributors,
Inc. ("EVD") 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
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
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of a Covered Person's reckless
2
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
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
3
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
by the Commission.
4
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, 1995 and shall
continue in full force and effect indefinitely thereafter, but only so
long as such continuance after February 28, 1995 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. Certain Definitions.
-------------------
5
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,
HIGH INCOME PORTFOLIO
By: /s/M. Dozier Gardner
-----------------------
M. Dozier Gardner
President
Accepted:
EATON VANCE DISTRIBUTORS, INC.
By: /s/Wharton P. Whitaker
-------------------------------
Wharton P. Whitaker
President
6
HIGH INCOME PORTFOLIO
May 31, 1994
High Income Portfolio hereby adopts and agrees to become a party to the
attached Master Custodian Agreement between the Eaton Vance Hub Portfolios
and Investors Bank & Trust Company.
HIGH INCOME PORTFOLIO
BY: /s/M. Dozier Gardner
----------------------
M. Dozier Gardner
President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY: /s/Michael Rogers
------------------------------------------
Michael Rogers
Title: Sr. Vice President
CUSTODIAN AGREEMENT
between
GOVERNMENT OBLIGATIONS, HIGH INCOME AND
SENIOR DEBT PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
-----------------
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be Held by it . . . . 3
3. Duties of the Custodian with Respect to Property of the
Trust . . . . . . . . . . . . . . . . . . . . . . . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . 4-7
C. Registration of Securities . . . . . . . . . . . . . . . . 7
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . 7-8
E. Payments for Interests, or Increases in Interests,
in the Trust . . . . . . . . . . . . . . . . . . . . . 8
F. Investment and Availability of U.S. Federal Funds . . . . 8
G. Collections . . . . . . . . . . . . . . . . . . . . . . 8-9
H. Payment of Trust Monies . . . . . . . . . . . . . . . . 9-11
I. Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . . 11
J. Payments for Reductions or Redemptions of Interests
of the Trust . . . . . . . . . . . . . . . . . . . . . 11
K. Appointment of Agents by the Custodian . . . . . . . . 11-12
L. Deposit of Trust Portfolio Securities in
Securities Systems . . . . . . . . . . . . . . . . 12-14
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . 14-16
N. Segregated Account . . . . . . . . . . . . . . . . . . 16-17
O. Ownership Certificates for Tax Purposes . . . . . . . . . 17
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 17
Q. Communications Relating to Trust Portfolio Securities . . 17
R. Exercise of Rights; Tender Offers . . . . . . . . . . 17-18
S. Depository Receipts . . . . . . . . . . . . . . . . . . . 18
T. Interest Bearing Call or Time Deposits . . . . . . . . 18-19
U. Options, Futures Contracts and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . 19-21
V. Actions Permitted Without Express Authority . . . . . . . 21
4. Records and Miscellaneous Duties . . . . . . . . . . . . . 22-23
5. Opinion of Trust's Independent Public Accountants . . . . . . 23
6. Compensation and Expenses of Bank . . . . . . . . . . . . . . 23
7. Responsibility of Bank . . . . . . . . . . . . . . . . . . 23-24
8. Persons Having Access to Assets of the Trust . . . . . . . . 24
9. Effective Period, Termination and Amendment; Successor
Custodian . . . . . . . . . . . . . . . . . . . . 24-25
10. Interpretive and Additional Provisions . . . . . . . . . . 25-26
11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . 26
CUSTODIAN AGREEMENT
This Agreement is made between each of the Government
Obligations, High Income and Senior Debt Portfolios (hereinafter called
"Trusts"), each a New York trust having its principal place of business in
George Town, Grand Cayman, Cayman Islands, BWI, and Investors Bank &
Trust Company (hereinafter called "Bank", "Custodian" and "Agent"), a
trust company established under the laws of Massachusetts with a principal
place of business in Boston, Massachusetts.
Whereas, each Trust is registered under the Investment Company
Act of 1940 and has appointed the Bank to act as Custodian of its property
and to perform certain duties as its Agent, as more fully hereinafter set
forth; and
Whereas, the Bank is willing and able to act as the Trusts'
Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the
mutual covenants and agreements herein contained, each Trust and the Bank
agree as follows:
1. Definitions
-----------
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Board" shall mean the board of trustees of a Trust.
(b) "The Depository Trust Company", a clearing agency registered
with the U.S. Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(c) "Participants Trust Company", a clearing agency registered
with the U.S. Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(d) "Approved Clearing Agency" shall mean any other domestic
clearing agency registered with the U.S. Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which
acts as a securities depository.
(e) "Federal Book-Entry System" shall mean the book-entry
system referred to in Rule 17f-4(b) under the Investment Company Act of
1940 for United States and federal agency securities (i.e., as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR
Part 350, and the book-entry regulations of federal agencies substantially
in the form of Subpart O).
(f) "Approved Foreign Securities Depository" shall mean a non-
U.S. securities depository or clearing agency referred to in Rule 17f-4
under the Investment Company Act of 1940 for non-U.S. securities.
(g) "Approved Book-Entry System for Commercial Paper" shall mean
a system maintained by the Custodian or by a subcustodian employed
pursuant to Section 2 hereof for the holding of commercial paper in
book-entry form.
(h) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this
Agreement upon receipt of written or facsimile instructions signed by such
one or more person or persons as the Board shall have from time to time
authorized to give the particular class of instructions in question.
Different persons may be authorized to give instructions for different
purposes. A certified copy of a resolution of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of
any such person to act and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instructions may be
general or specific in terms and, where appropriate, may be standing
instructions. Unless the resolution delegating authority to any person or
persons to give a particular class of instructions specifically requires
that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class,
the Custodian shall be under no obligation to question the right of the
person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall
cause all oral instructions to be confirmed in writing. The Trust
authorizes the Custodian to tape record any and all telephonic or other
oral instructions given to the Custodian. Upon receipt of a certificate
signed by two officers of the Trust as to the authorization by the
President and the Treasurer of the Trust accompanied by a detailed
description of the communication procedures approved by the President and
the Treasurer of the Trust, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Trust and the
Custodian are satisfied that such procedures afford adequate safeguards
for the Trust's assets. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of
securities made by or for the Trust, the Custodian may take cognizance of
the provisions of the governing documents and registration statement of
the Trust as the same may from time to time be in effect (and resolutions
or proceedings of the holders of interests in the Trust or the Board),
but, nevertheless, except as otherwise expressly provided herein, the
Custodian may assume unless and until notified in writing to the contrary
that so-called proper instructions received by it are not in conflict with
or in any way contrary to any provisions of such governing documents and
- 2 -
registration statement, or resolutions or proceedings of the holders of
interests in the Trust or the Board.
(i) "Trust" shall mean one or all of the Trusts, as the context
may require.
(j) The term "Vote" when used with respect to the Board or the
Holders of Interests in the Trust shall include a vote, resolution,
consent, proceeding and other action taken by the Board or Holders in
accordance with the Declaration of Trust or By-Laws of the Trust.
2. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Trust hereby appoints and employs the Bank as its Custodian
and Agent in accordance with and subject to the provisions hereof, and the
Bank hereby accepts such appointment and employment. The Trust agrees to
deliver to the Custodian all securities, participation interests, cash and
other assets owned by it, and all payments of income, payments of
principal and capital distributions and adjustments received by it with
respect to all securities and participation interests owned by the Trust
from time to time, and the cash consideration received by it from time to
time in exchange for an interest in the Trust or for an increase in such
an interest. The Custodian shall not be responsible for any property of
the Trust held by the Trust and not delivered by the Trust to the
Custodian. The Trust will also deliver to the Bank from time to time
copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement
agent, together with such resolutions, and other proceedings of the Trust
as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more
subcustodians to perform such acts and services upon such terms and
conditions as shall be approved from time to time by the Board. Any such
subcustodian so employed by the Custodian shall be deemed to be the agent
of the Custodian, and the Custodian shall remain primarily responsible for
the securities, participation interests, moneys and other property of the
Trust held by such subcustodian. Any non-U.S. subcustodian shall be a
bank or trust company which is an eligible foreign custodian within the
meaning of Rule 17f-5 under the Investment Company Act of 1940, and the
non-U.S. custody arrangements shall be approved by the Board and shall be
in accordance with and subject to the provisions of said Rule. For the
purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the
Custodian under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Trust
-------------------------------------------------------------
A. Safekeeping and Holding of Property The Custodian shall
keep safely all property of the Trust and on behalf of
the Trust shall from time to time receive delivery of
Trust property for safekeeping. The Custodian shall
- 3 -
hold, earmark and segregate on its books and records for
the account of the Trust all property of the Trust,
including all securities, participation interests and
other assets of the Trust (1) physically held by the
Custodian, (2) held by any subcustodian referred to in
Section 2 hereof or by any agent referred to in Paragraph
K hereof, (3) held by or maintained in The Depository
Trust Company or in Participants Trust Company or in an
Approved Clearing Agency or in the Federal Book-Entry
System or in an Approved Foreign Securities Depository,
each of which from time to time is referred to herein as
a "Securities System", and (4) held by the Custodian or
by any subcustodian referred to in Section 2 hereof and
maintained in any Approved Book-Entry System for
Commercial Paper.
B. Delivery of Securities The Custodian shall release and
deliver securities or participation interests owned by
the Trust held (or deemed to be held) by the Custodian or
maintained in a Securities System account or in an
Approved Book-Entry System for Commercial Paper account
only upon receipt of proper instructions, which may be
continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities or participation
interests for the account of the Trust, but only
against receipt of payment therefor; if delivery
is made in Boston or New York City, payment
therefor shall be made in accordance with
generally accepted clearing house procedures or
by use of U.S. Federal Reserve Wire System
procedures; if delivery is made elsewhere payment
therefor shall be in accordance with the then
current "street delivery" custom or in accordance
with such procedures agreed to in writing from
time to time by the parties hereto; if the sale
is effected through a Securities System, delivery
and payment therefor shall be made in accordance
with the provisions of Paragraph L hereof; if the
sale of commercial paper is to be effected
through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor
shall be made in accordance with the provisions
of Paragraph M hereof; if the securities are to
be sold outside the United States, delivery of
the securities for the account of the Trust may
be made either (a) in advance of receipt of
payment therefor in the absence of specific
instructions to do so provided such actions are
consistent with local settlement practices and
customs, subject to the Custodian's standard of
- 4 -
care, or (b) in accordance with procedures agreed
to in writing from time to time by the parties
hereto; for the purposes of this subparagraph,
the term "sale" shall include the disposition of
a portfolio security (i) upon the exercise of an
option written by the Trust and (ii) upon the
failure by the Trust to make a successful bid
with respect to a portfolio security, the
continued holding of which is contingent upon the
making of such a bid;
2) Upon the receipt of payment in connection with
any repurchase agreement or reverse repurchase
agreement relating to such securities and entered
into by the Trust;
3) To the depository agent in connection with tender
or other similar offers for portfolio securities
of the Trust;
4) To the issuer thereof or its agent when such
securities or participation interests are called,
redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or
other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant
to Section 2 hereof;
5) To the issuer thereof, or its agent, for transfer
into the name of the Trust or into the name of
any nominee of the Custodian or into the name or
nominee name of any agent appointed pursuant to
Paragraph K hereof or into the name or nominee
name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different
number of bonds, certificates or other evidence
representing the same aggregate face amount or
number of units; provided that, in any such case,
the new securities or participation interests are
to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2
hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom;
provided that the Custodian shall adopt such
procedures as the Trust from time to time shall
approve to ensure their prompt return to the
Custodian by the broker in the event the broker
elects not to accept them;
- 5 -
7) For exchange or conversion pursuant to any plan
of merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such securities, or pursuant to
provisions for conversion of such securities, or
pursuant to any deposit agreement; provided that,
in any such case, the new securities and cash, if
any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2
hereof;
8) In the case of warrants, rights or similar
securities, the surrender thereof in connection
with the exercise of such warrants, rights or
similar securities, or the surrender of interim
receipts or temporary securities for definitive
securities; provided that, in any such case, the
new securities and cash, if any, are to be
delivered to the Custodian or any subcustodian
employed pursuant to Section 2 hereof;
9) For delivery in connection with any loans of
securities made by the Trust (such loans to be
made pursuant to the terms of the Trust's current
registration statement), but only against receipt
of adequate collateral as agreed upon from time
to time by the Custodian and the Trust, which may
be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities; except that in connection with
any securities loans for which collateral is to
be credited to the Custodian's account in the
book-entry system authorized by the U.S.
Department of Treasury, the Custodian will not be
held liable or responsible for the delivery of
securities loaned by the Trust prior to the
receipt of such collateral;
10) For delivery as security in connection with any
borrowings by the Trust requiring a pledge or
hypothecation of assets by the Trust (if then
permitted under circumstances described in the
current registration statement of the Trust),
provided, that the securities shall be released
only upon payment to the Custodian of the monies
borrowed, except that in cases where additional
collateral is required to secure a borrowing
already made, further securities may be released
for that purpose; upon receipt of proper
instructions, the Custodian may pay any such loan
upon redelivery to it of the securities pledged
- 6 -
or hypothecated therefor and upon surrender of
the note or notes evidencing the loan;
11) When required for delivery in connection with any
reduction of or redemption of an interest in the
Trust in accordance with the provisions of
Paragraph J hereof;
12) For delivery in accordance with the provisions of
any agreement between the Custodian (or a
subcustodian employed pursuant to Section 2
hereof) and a broker-dealer registered under the
Securities Exchange Act of 1934 and, if
necessary, the Trust, relating to compliance with
the rules of The Options Clearing Corporation or
of any registered national securities exchange,
or of any similar organization or organizations,
regarding deposit or escrow or other arrangements
in connection with options transactions by the
Trust;
13) For delivery in accordance with the provisions of
any agreement among the Trust, the Custodian (or
a subcustodian employed pursuant to Section 2
hereof), and a futures commissions merchant,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or of
any contract market or commodities exchange or
similar organization, regarding futures margin
account deposits or payments in connection with
futures transactions by the Trust;
14) For any other proper corporate purpose, but only
upon receipt of, in addition to proper
instructions, a certified copy of a resolution of
the Board specifying the securities to be
delivered, setting forth the purpose for which
such delivery is to be made, declaring such
purpose to be proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made.
C. Registration of Securities Securities held by the
Custodian (other than bearer securities) for the account
of the Trust shall be registered in the name of the Trust
or in the name of any nominee of the Trust or of any
nominee of the Custodian, or in the name or nominee name
of any agent appointed pursuant to Paragraph K hereof, or
in the name or nominee name of any subcustodian employed
pursuant to Section 2 hereof, or in the name or nominee
name of The Depository Trust Company or Participants
Trust Company or Approved Clearing Agency or Federal
- 7 -
Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in
an account of the Custodian or of such agent or of such
subcustodian containing only assets of the Trust or only
assets held by the Custodian or such agent or such
subcustodian as a custodian or subcustodian or in a
fiduciary capacity for customers. All certificates for
securities accepted by the Custodian or any such agent or
subcustodian on behalf of the Trust shall be in "street"
or other good delivery form or shall be returned to the
selling broker or dealer who shall be advised of the
reason thereof.
D. Bank Accounts The Custodian shall open and maintain a
separate bank account or accounts in the name of the
Trust, subject only to draft or order by the Custodian
acting pursuant to the terms of this Agreement, and shall
hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for
the account of the Trust other than cash maintained by
the Trust in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Trust
may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other
banks or trust companies as the Custodian may in its
discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank
or trust company shall be approved in writing by two
officers of the Trust. Such funds shall be deposited by
the Custodian in its capacity as Custodian and shall be
subject to withdrawal only by the Custodian in that
capacity.
E. Payment for Interests, or Increases in Interests, in the
Trust The Custodian shall make appropriate arrangements
with the Transfer Agent of the Trust to enable the
Custodian to make certain it promptly receives the cash
or other consideration due to the Trust for payment of
interests in the Trust, or increases in such interests,
in accordance with the governing documents and
registration statement of the Trust. The Custodian will
provide prompt notification to the Trust of any receipt
by it of such payments.
F. Investment and Availability of U.S. Federal Funds Upon
agreement between the Trust and the Custodian, the
Custodian shall, upon the receipt of proper instructions,
which may be continuing instructions when deemed
- 8 -
appropriate by the parties, invest in such securities and
instruments as may be set forth in such instructions on
the same day as received all federal funds received after
a time agreed upon between the Custodian and the Trust.
G. Collections The Custodian shall promptly collect all
income and other payments with respect to registered
securities held hereunder to which the Trust shall be
entitled either by law or pursuant to custom in the
securities business, and shall promptly collect all
income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and
shall credit such income, as collected, to the Trust's
custodian account. The Custodian shall do all things
necessary and proper in connection with such prompt
collections and, without limiting the generality of the
foregoing, the Custodian shall
1) Present for payment all coupons and other income
items requiring presentations;
2) Present for payment all securities which may
mature or be called, redeemed, retired or
otherwise become payable;
3) Endorse and deposit for collection, in the name
of the Trust, checks, drafts or other negotiable
instruments;
4) Credit income from securities maintained in a
Securities System or in an Approved Book-Entry
System for Commercial Paper at the time funds
become available to the Custodian; in the case of
securities maintained in The Depository Trust
Company funds shall be deemed available to the
Trust not later than the opening of business on
the first business day after receipt of such
funds by the Custodian. The Custodian shall
notify the Trust as soon as reasonably
practicable whenever income due on any security
is not promptly collected. In any case in which
the Custodian does not receive any due and unpaid
income after it has made demand for the same, it
shall immediately so notify the Trust in writing,
enclosing copies of any demand letter, any
written response thereto, and memoranda of all
oral responses thereto and to telephonic demands,
and await instructions from the Trust; the
Custodian shall in no case have any liability for
any nonpayment of such income provided the
Custodian meets the standard of care set forth in
- 9 -
Section 8 hereof. The Custodian shall not be
obligated to take legal action for collection
unless and until reasonably indemnified to its
satisfaction.
The Custodian shall also receive and collect all
stock dividends, rights and other items of like
nature, and deal with the same pursuant to proper
instructions relative thereto.
H. Payment of Trust Monies Upon receipt of proper
instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out monies of the Trust in the following cases only:
1) Upon the purchase of securities, participation
interests, options, futures contracts, forward
contracts and options on futures contracts
purchased for the account of the Trust but only
(a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer
or
(ii) detailed instructions signed by an officer
of the Trust regarding the participation
interests to be purchased or
(iii) written confirmation of the purchase by
the Trust of the options, futures contracts,
forward contracts or options on futures contracts
by the Custodian (or by a subcustodian employed
pursuant to Section 2 hereof or by a clearing
corporation of a national securities exchange of
which the Custodian is a member or by any bank,
banking institution or trust company doing
business in the United States or abroad which is
qualified under the Investment Company Act of
1940 to act as a custodian and which has been
designated by the Custodian as its agent for this
purpose or by the agent specifically designated
in such instructions as representing the
purchasers of a new issue of privately placed
securities); (b) in the case of a purchase
effected through a Securities System, upon
receipt of the securities by the Securities
System in accordance with the conditions set
forth in Paragraph L hereof; (c) in the case of a
purchase of commercial paper effected through an
Approved Book-Entry System for Commercial Paper,
upon receipt of the paper by the Custodian or
- 10 -
subcustodian in accordance with the conditions
set forth in Paragraph M hereof; (d) in the case
of repurchase agreements entered into between the
Trust and another bank or a broker-dealer,
against receipt by the Custodian of the
securities underlying the repurchase agreement
either in certificate form or through an entry
crediting the Custodian's segregated,
non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with
written evidence of the agreement by the bank or
broker-dealer to repurchase such securities from
the Trust; or (e) in the case of securities
purchased outside the United States, the
Custodian may make payment therefor either (i) in
advance of receipt of such securities in the
absence of specific instructions to do so
provided such actions are consistent with local
settlement practices and customs, subject to the
Custodian's standard of care, or (ii) in
accordance with procedures agreed to in writing
from time to time by the parties hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the
Trust as set forth in Paragraph B hereof;
3) When required for the reduction or redemption of
an interest in the Trust in accordance with the
provisions of Paragraph J hereof;
4) For the payment of any expense or liability
incurred by the Trust, including but not limited
to the following payments for the account of the
Trust: advisory fees, interest, taxes,
management compensation and expenses, accounting,
transfer agent and legal fees, and other
operating expenses of the Trust whether or not
such expenses are to be in whole or part
capitalized or treated as deferred expenses; and
5) For distributions or payments to Holders of
Interest of the Trust.
6) For any other proper corporate purpose, but only
upon receipt of, in addition to proper
instructions, a certified copy of a resolution of
the Board, specifying the amount of such payment,
setting forth the purpose for which such payment
is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person
or persons to whom such payment is to be made.
- 11 -
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for
purchase of securities for the account of the Trust is
made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written
instructions signed by two officers of the Trust to so
pay in advance, the Custodian shall be absolutely liable
to the Trust for such securities to the same extent as if
the securities had been received by the Custodian; except
that in the case of a repurchase agreement entered into
by the Trust with a bank which is a member of the Federal
Reserve System, the Custodian may transfer funds to the
account of such bank prior to the receipt of (i) the
securities in certificate form subject to such repurchase
agreement or (ii) written evidence that the securities
subject to such repurchase agreement have been
transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with
the Federal Reserve Bank of Boston or (iii) the
safekeeping receipt, provided that such securities have
in fact been so transferred by book-entry and the written
repurchase agreement is received by the Custodian in due
course; and except that if the securities are to be
purchased outside the United States, payment may be made
in accordance with procedures agreed to in writing from
time to time by the parties hereto. Notwithstanding any
other provision in this Agreement to the contrary, where
securities are purchased or sold outside the United
States, delivery of securities for the account of the
Trust may be made by the Custodian in advance of receipt
of payment for the securities sold, and the Custodian may
pay for securities in advance of receipt of the
securities purchased for the account of the Trust, in the
absence of specific instructions to do so provided such
actions are consistent with local settlement practices
and customs, subject to the Custodian's standard of care.
J. Payments for Reductions or Redemptions of Interests in
the Trust From such funds as may be available for the
purpose, but subject to any applicable resolutions of the
Board and the current procedures of the Trust, the
Custodian shall, upon receipt of written instructions
from the Trust or from the Trust's transfer agent make
funds and/or portfolio securities available for payment
to holders of interest in the Trust which have caused the
amount of their interests to be reduced, or for their
interest to be redeemed.
K. Appointment of Agents by the Custodian The Custodian may
at any time or times in its discretion appoint (and may
at any time remove) any other bank or trust company
(provided such bank or trust company is itself qualified
- 12 -
under the Investment Company Act of 1940 to act as a
custodian or is itself an eligible foreign custodian
within the meaning of Rule 17f-5 under said Act) as the
agent of the Custodian to carry out such of the duties
and functions of the Custodian described in this Section
3 as the Custodian may from time to time direct;
provided, however, that the appointment of any such agent
shall not relieve the Custodian of any of its
responsibilities or liabilities hereunder, and as between
the Trust and the Custodian the Custodian shall be fully
responsible for the acts and omissions of any such agent.
For the purposes of this Agreement, any property of the
Trust held by any such agent shall be deemed to be held
by the Custodian hereunder.
L. Deposit of Trust Portfolio Securities in Securities
Systems The Custodian may deposit and/or maintain
securities owned by the Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities
Depository
in each case only in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission
rules and regulations, and at all times subject to the
following provisions:
(a) The Custodian may (either directly or
through one or more subcustodians employed pursuant to
Section 2 keep securities of the Trust in a Securities
System provided that such securities are maintained in a
non-proprietary account ("Account") of the Custodian or
such subcustodian in the Securities System which shall
not include any assets of the Custodian or such
subcustodian or any other person other than assets held
by the Custodian or such subcustodian as a fiduciary,
custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to
securities of the Trust which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Trust, and the Custodian
shall be fully and completely responsible for maintaining
a recordkeeping system capable of accurately and
- 13 -
currently stating the Trust's holdings maintained in each
such Securities System.
(c) The Custodian shall pay for securities
purchased in book-entry form for the account of the Trust
only upon (i) receipt of notice or advice from the
Securities System that such securities have been
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Trust; except
that when such securities are purchased outside the
United States, payment therefor may be made by the
Custodian in advance of receipt of such notice or advice
and the making of such entry in the absence of specific
instructions to do so provided such actions are
consistent with local settlement practices and customs,
subject to the Custodian's standard of care. The
Custodian shall transfer securities sold for the account
of the Trust only upon (i) receipt of notice or advice
from the Securities System that payment for such
securities has been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Trust; except that when such securities are sold outside
the United States, transfer thereof may be made by the
Custodian in advance of receipt of such notice or advice
and the making of such entry in the absence of specific
instructions to do so provided such actions are
consistent with local settlement practices and customs,
subject to the Custodian's standard of care. Copies of
all notices or advices from the Securities System of
transfers of securities for the account of the Trust
shall identify the Trust, be maintained for the Trust by
the Custodian and be promptly provided to the Trust at
its request. The Custodian shall promptly send to the
Trust confirmation of each transfer to or from the
account of the Trust in the form of a written advice or
notice of each such transaction, and shall furnish to the
Trust copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the
account of the Trust on the next business day.
(d) The Custodian shall promptly send to the
Trust any report or other communication received or
obtained by the Custodian relating to the Securities
System's accounting system, system of internal accounting
controls or procedures for safeguarding securities
deposited in the Securities System; the Custodian shall
promptly send to the Trust any report or other
communication relating to the Custodian's internal
accounting controls and procedures for safeguarding
securities deposited in any Securities System; and the
- 14 -
Custodian shall ensure that any agent appointed pursuant
to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the
Trust and to the Custodian any report or other
communication relating to such agent's or subcustodian's
internal accounting controls and procedures for
safeguarding securities deposited in any Securities
System. The Custodian's books and records relating to
the Trust's participation in each Securities System will
at all times during regular business hours be open to the
inspection of the Trust's authorized officers, employees
or agents.
(e) The Custodian shall not act under this
Paragraph L in the absence of receipt of a certificate of
an officer of the Trust that the Board has approved the
use of a particular Securities System; the Custodian
shall also obtain appropriate assurance from the officers
of the Trust that the Board has annually reviewed the
continued use by the Trust of each Securities System, and
the Trust shall promptly notify the Custodian if the use
of a Securities System is to be discontinued; at the
request of the Trust, the Custodian will terminate the
use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its
agents or subcustodians or of any of its or their
employees or from any failure of the Custodian or any
such agent or subcustodian to enforce effectively such
rights as it may have against the Securities System or
any other person; at the election of the Trust, it shall
be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the
Securities System or any other person which the Custodian
may have as a consequence of any such loss or damage if
and to the extent that the Trust has not been made whole
for any such loss or damage.
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper Upon receipt of
proper instructions with respect to each issue of direct
issue commercial paper purchased by the Trust, the
Custodian may deposit and/or maintain direct issue
commercial paper owned by the Trust in any Approved
Book-Entry System for Commercial Paper, in each case only
in accordance with applicable Securities and Exchange
Commission rules, regulations, and no-action
- 15 -
correspondence, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or
through one or more subcustodians employed pursuant to
Section 2) keep commercial paper of the Trust in an
Approved Book-Entry System for Commercial Paper, provided
that such paper is issued in book entry form by the
Custodian or subcustodian on behalf of an issuer with
which the Custodian or subcustodian has entered into a
book-entry agreement and provided further that such paper
is maintained in a non-proprietary account ("Account") of
the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not
include any assets of the Custodian or such subcustodian
or any other person other than assets held by the
Custodian or such subcustodian as a fiduciary, custodian,
or otherwise for its customers.
(b) The records of the Custodian with respect to
commercial paper of the Trust which is maintained in an
Approved Book-Entry System for Commercial Paper shall
identify by book-entry each specific issue of commercial
paper purchased by the Trust which is included in the
System and shall at all times during regular business
hours be open for inspection by authorized officers,
employees or agents of the Trust. The Custodian shall be
fully and completely responsible for maintaining a
recordkeeping system capable of accurately and currently
stating the Trust's holdings of commercial paper
maintained in each such System.
(c) The Custodian shall pay for commercial paper
purchased in book-entry form for the account of the Trust
only upon contemporaneous (i) receipt of notice or advice
from the issuer that such paper has been issued, sold and
transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
purchase, payment and transfer for the account of the
Trust. The Custodian shall transfer such commercial
paper which is sold or cancel such commercial paper which
is redeemed for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the
Account, and (ii) the making of an entry on the records
of the Custodian to reflect such transfer or redemption
and payment for the account of the Trust. Copies of all
notices, advices and confirmations of transfers of
commercial paper for the account of the Trust shall
identify the Trust, be maintained for the Trust by the
Custodian and be promptly provided to the Trust at its
request. The Custodian shall promptly send to the Trust
- 16 -
confirmation of each transfer to or from the account of
the Trust in the form of a written advice or notice of
each such transaction, and shall furnish to the Trust
copies of daily transaction sheets reflecting each day's
transactions in the System for the account of the Trust
on the next business day.
(d) The Custodian shall promptly send to the
Trust any report or other communication received or
obtained by the Custodian relating to each System's
accounting system, system of internal accounting controls
or procedures for safeguarding commercial paper deposited
in the System; the Custodian shall promptly send to the
Trust any report or other communication relating to the
Custodian's internal accounting controls and procedures
for safeguarding commercial paper deposited in any
Approved Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant
to Paragraph K hereof or any subcustodian employed
pursuant to Section 2 hereof shall promptly send to the
Trust and to the Custodian any report or other
communication relating to such agent's or subcustodian's
internal accounting controls and procedures for
safeguarding securities deposited in any Approved
Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this
Paragraph M in the absence of receipt of a certificate of
an officer of the Trust that the Board has approved the
use of a particular Approved Book-Entry System for
Commercial Paper; the Custodian shall also obtain
appropriate assurance from the officers of the Trust that
the Board has annually reviewed the continued use by the
Trust of each Approved Book-Entry System for Commercial
Paper, and the Trust shall promptly notify the Custodian
if the use of an Approved Book-Entry System for
Commercial Paper is to be discontinued; at the request of
the Trust, the Custodian will terminate the use of any
such System as promptly as practicable.
(f) The Custodian (or subcustodian, if the
Approved Book-Entry System for Commercial Paper is
maintained by the subcustodian) shall issue physical
commercial paper or promissory notes whenever requested
to do so by the Trust or in the event of an electronic
system failure which impedes issuance, transfer or
custody of direct issue commercial paper by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Trust resulting from
use of any Approved Book-Entry System for Commercial
- 17 -
Paper by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or
subcustodians or of any of its or their employees or from
any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may
have against the System, the issuer of the commercial
paper or any other person; at the election of the Trust,
it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the
System, the issuer of the commercial paper or any other
person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Trust has not been made whole for any such loss or
damage.
N. Segregated Account The Custodian shall upon receipt of
proper instructions establish and maintain a segregated
account or accounts for and on behalf of the Trust, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account
by the Custodian pursuant to Paragraph L hereof, (i) in
accordance with the provisions of any agreement among the
Trust, the Custodian and any registered broker-dealer (or
any futures commission merchant), relating to compliance
with the rules of the Options Clearing Corporation and of
any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract
market or commodities exchange), or of any similar
organization or organizations, regarding escrow or
deposit or other arrangements in connection with
transactions by the Trust, (ii) for purposes of
segregating cash or U.S. Government securities in
connection with options purchased, sold or written by
the Trust or futures contracts or options thereon
purchased or sold by the Trust, (iii) for the purposes of
compliance by the Trust with the procedures required by
Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of
segregated accounts by registered investment companies
and (iv) for other proper purposes, but only, in the case
of clause (iv), upon receipt of, in addition to proper
instructions, a certificate signed by two officers of the
Trust, setting forth the purpose such segregated account
and declaring such purpose to be a proper purpose.
O. Ownership Certificates for Tax Purposes The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of the Trust held by it and in
connection with transfers of securities.
- 18 -
P. Proxies The Custodian shall, with respect to the
securities held by it hereunder, cause to be promptly
delivered to the Trust all forms of proxies and all
notices of meetings and any other notices or
announcements or other written information affecting or
relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its
nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian
nor its nominee shall vote upon any of the securities or
execute any proxy to vote thereon or give any consent or
take any other action with respect thereto (except as
otherwise herein provided) unless ordered to do so by
proper instructions.
Q. Communications Relating to Trust Portfolio Securities
The Custodian shall deliver promptly to the Trust all
written information (including, without limitation,
pendency of call and maturities of securities and
participation interests and expirations of rights in
connection therewith and notices of exercise of call and
put options written by the Trust and the maturity of
futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other persons
relating to the securities and participation interests
being held for the Trust. With respect to tender or
exchange offers, the Custodian shall deliver promptly to
the Trust all written information received by the
Custodian from issuers and other persons relating to the
securities and participation interests whose tender or
exchange is sought and from the party (or his agents)
making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender
offers, similar offers to purchase or exercise rights
(including, without limitation, pendency of calls and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices
of exercise of call and put options and the maturity of
futures contracts) affecting or relating to securities
and participation interests held by the Custodian under
this Agreement, the Custodian shall have responsibility
for promptly notifying the Trust of all such offers in
accordance with the standard of reasonable care set forth
in Section 8 hereof. For all such offers for which the
Custodian is responsible as provided in this Paragraph R,
the Trust shall have responsibility for providing the
Custodian with all necessary instructions in timely
fashion. Upon receipt of proper instructions, the
Custodian shall timely deliver to the issuer or trustee
thereof, or to the agent of either, warrants, puts,
calls, rights or similar securities for the purpose of
- 19 -
being exercised or sold upon proper receipt therefor and
upon receipt of assurances satisfactory to the Custodian
that the new securities and cash, if any, acquired by
such action are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof. Upon
receipt of proper instructions, the Custodian shall
timely deposit securities upon invitations for tenders of
securities upon proper receipt therefor and upon receipt
of assurances satisfactory to the Custodian that the
consideration to be paid or delivered or the tendered
securities are to be returned to the Custodian or
subcustodian employed pursuant to Section 2 hereof.
Notwithstanding any provision of this Agreement to the
contrary, the Custodian shall take all necessary action,
unless otherwise directed to the contrary by proper
instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or
similar rights of security ownership, and shall
thereafter promptly notify the Trust in writing of such
action.
S. Depository Receipts The Custodian shall, upon receipt of
proper instructions, surrender or cause to be surrendered
foreign securities to the depository used by an issuer of
American Depository Receipts or International Depository
Receipts (hereinafter collectively referred to as "ADRs")
for such securities, against a written receipt therefor
adequately describing such securities and written
evidence satisfactory to the Custodian that the
depository has acknowledged receipt of instructions to
issue with respect to such securities ADRs in the name of
a nominee of the Custodian or in the name or nominee name
of any subcustodian employed pursuant to Section 2
hereof, for delivery to the Custodian or such
subcustodian at such place as the Custodian or such
subcustodian may from time to time designate. The
Custodian shall, upon receipt of proper instructions,
surrender ADRs to the issuer thereof against a written
receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the
Custodian that the issuer of the ADRs has acknowledged
receipt of instructions to cause its depository to
deliver the securities underlying such ADRs to the
Custodian or to a subcustodian employed pursuant to
Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian
shall, upon receipt of proper instructions, place
interest bearing fixed term and call deposits with the
banking department of such banking institution (other
than the Custodian) and in such amounts as the Trust may
designate. Deposits may be denominated in U.S. Dollars
- 20 -
or other currencies. The Custodian shall include in its
records with respect to the assets of the Trust
appropriate notation as to the amount and currency of
each such deposit, the accepting banking institution and
other appropriate details and shall retain such forms of
advice or receipt evidencing the deposit, if any, as may
be forwarded to the Custodian by the banking institution.
Such deposits shall be deemed portfolio securities of the
Trust for the purposes of this Agreement, and the
Custodian shall be responsible for the collection of
income from such accounts and the transmission of cash to
and from such accounts.
U. Options, Futures Contracts and Foreign Currency
Transactions
1. Options The Custodian shall, upon receipt of
proper instructions and in accordance with the
provisions of any agreement between the
Custodian, any registered broker-dealer and, if
necessary, the Trust, relating to compliance with
the rules of the Options Clearing Corporation or
of any registered national securities exchange or
similar organization or organizations, receive
and retain confirmations or other documents, if
any, evidencing the purchase or writing of an
option on a security or securities index or other
financial instrument or index by the Trust;
deposit and maintain in a segregated account for
the Trust, either physically or by book-entry in
a Securities System, securities subject to a
covered call option written by the Trust; and
release and/or transfer such securities or other
assets only in accordance with a notice or other
communication evidencing the expiration,
termination or exercise of such covered option
furnished by the Options Clearing Corporation,
the securities or options exchange on which such
covered option is traded or such other
organization as may be responsible for handling
such options transactions. The Custodian and the
broker-dealer shall be responsible for the
sufficiency of assets held in the Trust's
segregated account in compliance with applicable
margin maintenance requirements.
2. Futures Contracts The Custodian shall,
upon receipt of proper instructions, receive and
retain confirmations and other documents, if any,
evidencing the purchase or sale of a futures
contract or an option on a futures contract by
the Trust; deposit and maintain in a segregated
- 21 -
account, for the benefit of any futures
commission merchant, assets designated by the
Trust as initial, maintenance or variation
"margin" deposits (including mark-to-market
payments) intended to secure the Trust's
performance of its obligations under any futures
contracts purchased or sold or any options on
futures contracts written by the Trust, in
accordance with the provisions of any agreement
or agreements among the Trust, the Custodian and
such futures commission merchant, designed to
comply with the rules of the Commodity Futures
Trading Commission and/or of any contract market
or commodities exchange or similar organization
regarding such margin deposits or payments; and
release and/or transfer assets in such margin
accounts only in accordance with any such
agreements or rules. The Custodian and the
futures commission merchant shall be responsible
for the sufficiency of assets held in the
segregated account in compliance with the
applicable margin maintenance and mark-to-market
payment requirements.
3. Foreign Exchange Transactions The Custodian
shall, pursuant to proper instructions, enter
into or cause a subcustodian to enter into
currency exchange contracts or options to
purchase and sell non-U.S. currencies for spot
and future delivery on behalf and for the account
of the Trust. Such transactions may be
undertaken by the Custodian or subcustodian with
such banking or financial institutions or other
currency brokers, as set forth in proper
instructions. Currency exchange contracts and
options shall be deemed to be portfolio
securities of the Trust; and accordingly, the
responsibility of the Custodian therefor shall be
the same as and no greater than the Custodian's
responsibility in respect of other portfolio
securities of the Trust. The Custodian shall be
responsible for the transmittal to and receipt of
cash from the currency broker or banking or
financial institution with which the contract or
option is made, the maintenance of proper records
with respect to the transaction and the
maintenance of any segregated account required in
connection with the transaction. The Custodian
shall have no duty with respect to the selection
of the currency brokers or banking or financial
institutions with which the Trust deals or for
their failure to comply with the terms of any
- 22 -
contract or option. Without limiting the
foregoing, it is agreed that upon receipt of
proper instructions and insofar as funds are made
available to the Custodian for the purpose, the
Custodian may (if determined necessary by the
Custodian to consummate a particular transaction
on behalf and for the account of the Trust) make
free outgoing payments of cash in the form of
U.S. dollars or other currency before receiving
confirmation of a currency exchange contract or
confirmation that the countervalue currency
completing the currency exchange contract has
been delivered or received. The Custodian shall
not be responsible for any costs and interest
charges which may be incurred by the Trust or the
Custodian as a result of the failure or delay of
third parties to deliver currency exchange;
provided that the Custodian shall nevertheless be
held to the standard of care set forth in, and
shall be liable to the Trust in accordance with,
the provisions of Section 8.
V. Actions Permitted Without Express Authority The
Custodian may in its discretion, without express
authority from the Trust:
1) make payments to itself or others for
minor expenses of handling securities or
other similar items relating to its
duties under this Agreement, provided,
that all such payments shall be
accounted for by the Custodian to the
Treasurer of the Trust and shall be
subject to subsequent approval by an
officer of the Trust;
2) surrender securities in temporary form
for securities in definitive form;
3) endorse for collection, in the name of
the Trust, checks, drafts and other
negotiable instruments; and
4) in general, attend to all
nondiscretionary details in connection
with the sale, exchange, substitution,
purchase, transfer and other dealings
with the securities and property of the
Trust except as otherwise directed by
the Trust.
4. Records and Miscellaneous Duties
- 23 -
--------------------------------
The Bank shall create, maintain and preserve all records relating
to its activities and obligations under this Agreement in such manner as
will meet the obligations of the Trust under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable U.S. federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the
Trust. All books of account and records maintained by the Bank in
connection with the performance of its duties under this Agreement shall
be the property of the Trust, shall at all times during the regular
business hours of the Bank be open for inspection by authorized officers,
employees or agents of the Trust, and in the event of termination of this
Agreement shall be delivered to the Trust or to such other person or
persons as shall be designated by the Trust. Disposition of any account
or record after any required period of preservation shall be only in
accordance with specific instructions received from the Trust. At the
request of the Trustees or duly authorized agent of the Trust located
outside the United States, The Bank shall assist generally in the
preparation of reports to holders of interest in the Trust, to the
Securities and Exchange Commission, including Form N-SAR, and to others,
audits of accounts, and other ministerial matters of like nature; and,
upon request, shall furnish the Trust's auditors with an attested
inventory of securities held with appropriate information as to securities
in transit or in the process of purchase or sale and with such other
information as said auditors may from time to time request. The Custodian
shall also maintain records of all receipts, deliveries and locations of
such securities, together with a current inventory thereof, and shall
conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for
which it is responsible under this Agreement in such manner as the
Custodian shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. The Bank shall not disclose or use
any books or records it has prepared or maintained by reason of this
Agreement in any manner except as expressly authorized herein or directed
by the Trust, and the Bank shall keep confidential any information
obtained by reason of this Agreement.
5. Opinion of Trust's Independent Public Accountants
-------------------------------------------------
The Custodian shall take all reasonable action, as the Trust may
from time to time request, to enable the Trust to obtain from year to
year favorable opinions from the Trust's independent public accountants
with respect to its activities hereunder in connection with the
preparation of the Trust's registration statement and Form N-SAR or other
periodic reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. Compensation and Expenses of Bank
---------------------------------
The Bank shall be entitled to reasonable compensation for its
services as Custodian and Agent, as agreed upon from time to time between
the Trust and the Bank. The Bank shall be entitled to receive from the
- 24 -
Trust on demand reimbursement for its cash disbursements, expenses and
charges, including counsel fees, in connection with its duties as
Custodian and Agent hereunder, but excluding salaries and usual overhead
expenses.
7. Responsibility of Bank
----------------------
So long as and to the extent that it is in the exercise of
reasonable care, the Bank as Custodian and Agent shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall
be liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is
intended to nor shall it be construed to modify the standards of care and
responsibility set forth in Section 2 hereof with respect to subcustodians
and in subparagraph f of Paragraph L of Section 3 hereof with respect to
Securities Systems and in subparagraph g of Paragraph M of Section 3
hereof with respect to an Approved Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a non-
U.S. banking institution to the same extent as set forth with respect to
subcustodians generally in Section 2 hereof, provided that, regardless of
whether assets are maintained in the custody of a non-U.S. banking
institution, a non-U.S. securities depository or a branch of a U.S. bank,
the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Trust to maintain custody of any securities or cash
of the Trust in other than the U.S. and Canada including, but not limited
to, losses resulting from governmental actions and restrictions,
nationalization, expropriation, currency restrictions, acts of war, civil
war or terrorism, insurrection, revolution, military or usurped powers,
nuclear fission, fusion or radiation, earthquake, storm or other
disturbance of nature or acts of God.
If the Trust requires the Bank in any capacity to take any action
with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Bank, result in the Bank or its
nominee assigned to the Trust being liable for the payment of money or
incurring liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
8. Persons Having Access to Assets of the Trust
- 25 -
--------------------------------------------
(i) No trustee, officer, employee or agent of the Trust shall
have physical access to the assets of the Trust held by the Custodian or
be authorized or permitted to withdraw any investments of the Trust, nor
shall the Custodian deliver any assets of the Trust to any such person.
No officer or director, employee or agent of the Custodian who holds any
similar position with the Trust or the investment adviser or the
administrator of the Trust shall have access to the assets of the Trust.
(ii) Access to assets of the Trust held hereunder shall only be
available to duly authorized officers, employees, representatives or
agents of the Custodian or other persons or entities for whose actions the
Custodian shall be responsible to the extent permitted hereunder, or to
the Trust's independent public accountants in connection with their
auditing duties performed on behalf of the Trust.
(iii) Nothing in this Section 8 shall prohibit any officer,
employee or agent of the Trust or of the investment adviser of the Trust
from giving instructions to the Custodian or executing a certificate so
long as it does not result in delivery of or access to assets of the Trust
prohibited by paragraph (i) of this Section 8.
9. Effective Period, Termination and Amendment; Successor Custodian
----------------------------------------------------------------
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination
to take effect not sooner than sixty (60) days after the date of such
delivery or mailing; provided, that the Trust may at any time by action of
its Board, (i) substitute another bank or trust company for the Custodian
by giving notice as described above to the Custodian, or (ii) immediately
terminate this Agreement in the event of the appointment of a conservator
or receiver for the Custodian by the Federal Deposit Insurance Corporation
or by the Banking Commissioner of The Commonwealth of Massachusetts or
upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon termination of
the Agreement, the Trust shall pay to the Custodian such compensation as
may be due as of the date of such termination and shall likewise reimburse
the Custodian for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding "voting
securities" of the Trust (as defined in the Investment Company Act of
1940) vote to have the securities, funds and other properties held
hereunder delivered and paid over to some other bank or trust company,
specified in the vote, having not less than $2,000,000 of aggregate
capital, surplus and undivided profits, as shown by its last published
report, and meeting such other qualifications for custodians set forth in
the Investment Company Act of 1940, the Board shall, forthwith, upon
giving or receiving notice of termination of this Agreement, appoint as
successor custodian, a bank or trust company having such qualifications.
- 26 -
The Bank, as Custodian, Agent or otherwise, shall, upon termination of the
Agreement, deliver to such successor custodian, all securities then held
hereunder and all funds or other properties of the Trust deposited with or
held by the Bank hereunder and all books of account and records kept by
the Bank pursuant to this Agreement, and all documents held by the Bank
relative thereto. In the event that no such vote has been adopted by the
shareholders and that no written order designating a successor custodian
shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Trust to the Trust but shall
have the right to deliver to a bank or trust company doing business in
Boston, Massachusetts of its own selection, having an aggregate capital,
surplus and undivided profits, as shown by its last published report, of
not less than $2,000,000, all funds, securities and properties of the
Trust held by or deposited with the Bank, and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents
held by the Bank relative thereto. Thereafter such bank or trust company
shall be the successor of the Custodian under this Agreement.
10. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Agreement, the Custodian
and the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that
no such interpretive or additional provisions shall contravene any
applicable U.S. federal or state regulations or any provision of the
governing instruments of the Trust. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to
be an amendment of this Agreement.
11. Notices
-------
Notices and other writings delivered or mailed postage prepaid to
the Trust addressed to The Bank of Nova Scotia Trust Company (Cayman)
Limited, The Bank of Nova Scotia Building, George Town, Grand Cayman,
Cayman Islands, WMI, or to such other address as the Trust may have
designated to the Bank, in writing with a copy to Eaton Vance Management
at 24 Federal Street, Boston, Massachusetts 02110, or to Investors Bank &
Trust Company, 24 Federal Street, Boston, Massachusetts 02110 with a copy
to Eaton Vance Management at 24 Federal Street, Boston, Massachusetts
02110, shall be deemed to have been properly delivered or given hereunder
to the respective addressees.
12. Massachusetts Law to Apply
--------------------------
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
- 27 -
The Custodian expressly acknowledges the provision in the
Declaration of Trust of the Trust (Section 5.2 and 5.6) limiting the
personal liability of the Trustees and officers of the Trust, and the
Custodian hereby agrees that it shall have recourse to the Trust for
payment of claims or obligations as between the Trust and the Custodian
arising out of this Agreement and shall not seek satisfaction from any
Trustee or officer of the Trust.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement on December 30, 1994.
GOVERNMENT OBLIGATIONS PORTFOLIO
HIGH INCOME PORTFOLIO
By: /s/James B. Hawkes
-------------------------------
James B. Hawkes, Vice President
SENIOR DEBT PORTFOLIO
By: /s/James B. Hawkes
-------------------------------
James B. Hawkes, President
INVESTORS BANK & TRUST COMPANY
By: /s/Michael Rogers
-------------------------------
Michael Rogers
Executive Managing Director
- 28 -
HIGH INCOME PORTFOLIO
----------------------
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
May 1, 1992
TABLE OF CONTENTS
PAGE
ARTICLE I--Introduction . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II--Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III--Capital Accounts
Section 3.1 Capital Accounts of Holders . . . . . . . . 4
Section 3.2 Book Capital Accounts . . . . . . . . . . . 4
Section 3.3 Tax Capital Accounts . . . . . . . . . . . . 4
Section 3.4 Compliance with Treasury Regulations . . . . 5
ARTICLE IV--Distributions of Cash and Assets
Section 4.1 Distributions of Distributable Cash . . . . 5
Section 4.2 Division Among Holders . . . . . . . . . . . 5
Section 4.3 Distributions Upon Liquidation of a
Holder's Interest in the Trust . . . 5
Section 4.4 Amounts Withheld . . . . . . . . . . . . . . 5
ARTICLE V--Allocations
Section 5.1 Allocation of Items to Book Capital Accounts 6
Section 5.2 Allocation of Taxable Income and Tax
Loss to Tax Capital Accounts . . . . 6
Section 5.3 Special Allocations to Book and
Tax Capital Accounts . . . . . . . . 7
Section 5.4 Other Adjustments to Book and Tax
Capital Accounts . . . . . . . . . . 7
Section 5.5 Timing of Tax Allocations to Book and
Tax Capital Accounts . . . . . . . . 7
Section 5.6 Redemptions During the Fiscal Year . . . . . 8
ARTICLE VI--Withdrawals
Section 6.1 Partial Withdrawals . . . . . . . . . . . . 8
Section 6.2 Redemptions . . . . . . . . . . . . . . . . 8
Section 6.3 Distribution in Kind . . . . . . . . . . . . 8
ARTICLE VII--Liquidation
Section 7.1 Liquidation Procedure . . . . . . . . . . . 8
Section 7.2 Alternative Liquidation Procedure . . . . . 9
Section 7.3 Cash Distributions Upon Liquidation . . . . 9
Section 7.4 Treatment of Negative Book Capital
Account Balance . . . . . . . . . . 9
i
PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
HIGH INCOME PORTFOLIO
(the "Trust")
-------------------------------
ARTICLE I
Introduction
------------
The Trust is treated as a partnership for federal income tax
purposes. These procedures have been adopted by the Trustees of the Trust
and will be furnished to the Trust's accountants for the purpose of
allocating Trust gains, income or loss and distributing Trust assets. The
Trust will maintain its books and records, for both book and tax purposes,
using the accrual method of accounting.
ARTICLE II
Definitions
-----------
Except as otherwise provided herein, a term referred to herein
shall have the same meaning as that ascribed to it in the Declaration.
References in this document to "hereof", "herein" and "hereunder" shall be
deemed to refer to this document in its entirety rather than the article
or section in which any such word appears.
"Book Capital Account" shall mean, for any Holder at any time in
any Fiscal Year, the Book Capital Account balance of the Holder on the
first day of the Fiscal Year, as adjusted each day pursuant to the
provisions of Section 3.2 hereof.
"Capital Contribution" shall mean, with respect to any Holder,
the amount of money and the Fair Market Value of any assets actually
contributed from time to time to the Trust with respect to the Interest
held by such Holder.
"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
Internal Revenue Code of 1954, as amended (or any corresponding provision
or provisions of succeeding law).
"Declaration" shall mean the Trust's Declaration of Trust, dated
May l, 1992, as amended from time to time.
"Designated Expenses" shall mean extraordinary Trust expenses
attributable to a particular Holder that are to be borne by such Holder.
"Distributable Cash" for any Fiscal Year shall mean the gross
cash proceeds from Trust activities, less the portion thereof used to pay
or establish Reserves, plus such portion of the Reserves as the Trustees,
in their sole discretion, no longer deem necessary to be held as Reserves.
Distributable Cash shall not be reduced by depreciation, amortization,
cost recovery deductions, or similar allowances.
"Fair Market Value" of a security, instrument or other asset on
any particular day shall mean the fair value thereof as determined in good
faith by or on behalf of the Trustees in the manner set forth in the
Registration Statement.
"Fiscal Year" shall mean an annual period determined by the
Trustees which ends on such day as is permitted by the Code.
"Holders" shall mean as of any particular time all holders of
record of Interests in the Trust.
"Interest(s)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by the
Declaration, which interest may be expressed as a percentage, determined
by calculating, at such times and on such bases 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.
"Investments" shall mean all securities, instruments or other
assets of the Trust of any nature whatsoever, including, but not limited
to, all equity and debt securities, futures contracts, and all property of
the Trust obtained by virtue of holding such assets.
"Matched Income or Loss" shall mean Taxable Income, Tax-Exempt
Income or Tax Loss of the Trust comprising interest, original issue
discount and dividends and all other types of income or loss to the extent
the Taxable Income, Tax-Exempt Income, Tax Loss or Loss items not included
in Tax Loss arising from such items are recognized for tax purposes at the
same time that Profit or Loss are accrued for book purposes by the Trust.
"Net Unrealized Gain" shall mean the excess, if any, of the
aggregate Fair Market Value of all Investments over the aggregate adjusted
bases, for federal income tax purposes, of all Investments.
"Net Unrealized Loss" shall mean the excess, if any, of the
aggregate adjusted bases, for federal income tax purposes, of all
Investments over the aggregate Fair Market Value of all Investments.
"Profit" and "Loss" shall mean, for each Fiscal Year or other
period, an amount equal to the Taxable Income or Tax Loss for such Fiscal
Year or period with the following adjustments:
(i) Any Tax-Exempt Income shall be added to
such Taxable Income or subtracted from such Tax Loss; and
(ii) Any expenditures of the Trust for such
year or period described in Section 705(a)(2)(B) of the
2
Code or treated as expenditures under
Section 705(a)(2)(B) of the Code pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Profit or Loss
or specially allocated shall be subtracted from such
Taxable Income or added to such Tax Loss.
"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.
"Registration Statement" shall mean the Registration Statement of
the Trust on Form N-1A as filed with the U.S. Securities and Exchange
Commission under the 1940 Act, as the same may be amended from time to
time.
"Reserves" shall mean, with respect to any Fiscal Year, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by the Trustees for working
capital and to pay taxes, insurance, debt service, renewals, or other
costs or expenses, incident to the ownership of the Investments or to its
operations.
"Tax Capital Account" shall mean, for any Holder at any time in
any Fiscal Year, the Tax Capital Account balance of the Holder on the
first day of the Fiscal Year, as adjusted each day pursuant to the
provisions of Section 3.3 hereof.
"Tax-Exempt Income" shall mean income of the Trust for such
Fiscal Year or period that is exempt from federal income tax and not
otherwise taken into account in computing Profit or Loss.
"Tax Lot" shall mean securities or other property which are both
purchased or acquired, and sold or otherwise disposed of, as a unit.
"Taxable Income" or "Tax Loss" shall mean the taxable income or
tax loss of the Trust, determined in accordance with Section 703(a) of the
Code, for each Fiscal Year as determined for federal income tax purposes,
together with each of the Trust's items of income, gain, loss or deduction
which is separately stated or otherwise not included in computing taxable
income and tax loss.
"Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time
to time (including corresponding provisions of succeeding regulations).
"Trust" shall mean High Income Portfolio, a trust fund formed
under the law of the State of New York by the Declaration.
"Trustees" shall mean each signatory to the Declaration, so long
as such signatory shall continue in office in accordance with the terms
thereof, and all other individuals who at the time in question have been
3
duly elected or appointed and have qualified as Trustees in accordance
with the provisions thereof and are then in office.
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 III
Capital Accounts
----------------
3.1. Capital Accounts of Holders. A separate Book Capital
Account and a separate Tax Capital Account shall be maintained for each
Holder pursuant to Section 3.2 and Section 3.3. hereof, respectively. In
the event the Trustees shall determine that it is prudent to modify the
manner in which the Book Capital Accounts or Tax Capital Accounts, or any
debits or credits thereto, are computed in order to comply with the
Treasury Regulations, the Trustees may make such modification, provided
that it is not likely to have a material effect on the amounts
distributable to any Holder pursuant to Article VII hereof upon the
dissolution of the Trust.
3.2. Book Capital Accounts. The Book Capital Account balance
of each Holder shall be adjusted each day by the following amounts:
(a) increased by any increase in Net Unrealized Gains or
decrease in Net Unrealized Losses allocated to such Holder pursuant to
Section 5.1(a) hereof;
(b) decreased by any decrease in Net Unrealized Gains or
increase in Net Unrealized Losses allocated to such Holder pursuant to
Section 5.1(b) hereof;
(c) increased or decreased, as the case may be, by the amount
of Profit or Loss, respectively, allocated to such Holder pursuant to
Section 5.1(c) hereof;
(d) increased by any Capital Contribution made by such
Holder; and,
(e) decreased by any distribution, including any distribution
to effect a withdrawal or Redemption, made to such Holder by the Trust.
Any adjustment pursuant to Section 3.2 (a), (b) or (c) above
shall be prorated for increases in each Holder's Book Capital Account
balance resulting from Capital Contributions, or distributions or
withdrawals from the Trust or Redemptions by the Trust occurring, during
such Fiscal Year as of the day after the Capital Contribution,
distribution, withdrawal or Redemption is accepted, made or effected by
the Trust.
4
3.3. Tax Capital Accounts. The Tax Capital Account balance of
each Holder shall be adjusted at the following times by the following
amounts:
(a) increased daily by the adjusted tax bases of any Capital
Contribution made by such Holder to the Trust;
(b) increased daily by the amount of Taxable Income and Tax-
Exempt Income allocated to such Holder pursuant to Section 5.2 hereof at
such times as the allocations are made under Section 5.2 hereof;
(c) decreased daily by the amount of cash distributed to the
Holder pursuant to any of these procedures including any distribution made
to effect a withdrawal or Redemption; and
(d) decreased by the amount of Tax Loss allocated to such
Holder pursuant to Section 5.2 hereof at such times as the allocations are
made under Section 5.2 hereof.
3.4. Compliance with Treasury Regulations. The foregoing
provisions and other provisions contained herein relating to the
maintenance of Book Capital Accounts and Tax Capital Accounts are intended
to comply with Treasury Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Treasury
Regulations.
The Trustees shall make any appropriate modifications in the
event unanticipated events might otherwise cause these procedures not to
comply with Treasury Regulations Section 1.704-1(b), including the
requirements described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(b)(1) and Treasury Regulations Section 1.704-1(b)(2)(iv).
Such modifications are hereby incorporated into these procedures by this
reference as though fully set forth herein.
5
ARTICLE IV
Distributions of Cash and Assets
--------------------------------
4.1. Distributions of Distributable Cash. Except as otherwise
provided in Article VII hereof, Distributable Cash for each Fiscal Year
may be distributed to the Holders at such times, if any, and in such
amounts as shall be determined in the sole discretion of the Trustees. In
exercising such discretion, the Trustees shall distribute such
Distributable Cash so that Holders that are regulated investment companies
can comply with the distribution requirements set forth in Code
Section 852 and avoid the excise tax imposed by Code Section 4982.
4.2. Division Among Holders. All distributions to the Holders
with respect to any Fiscal Year pursuant to Section 4.1 hereof shall be
made to the Holders in proportion to the Taxable Income, Tax-Exempt Income
or Tax Loss allocated to the Holders with respect to such Fiscal Year
pursuant to the terms of these procedures.
4.3. Distributions Upon Liquidation of a Holder's Interest in
the Trust. Upon liquidation of a Holder's interest in the Trust, the
proceeds will be distributed to the Holder as provided in Section 5.6,
Article VI, and Article VII hereof. If such Holder has a negative book
capital account balance, the provisions of Section 7.4 will apply.
4.4. Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any
payment or distribution to the Trust or the Holders shall be treated as
amounts distributed to such Holders pursuant to this Article IV for all
purposes under these procedures. The Trustees may allocate any such
amount among the Holders in any manner that is in accordance with
applicable law.
ARTICLE V
Allocations
-----------
5.1. Allocation of Items to Book Capital Accounts.
--------------------------------------------
(a) Increase in Net Unrealized Gains or Decrease in Net
Unrealized Losses. Any decrease in Net Unrealized Loss due to realization
of items shall be allocated to the Holder receiving the allocation of
Loss, in the same amount, under Section 5.1(c) hereof. Subject to Section
5.1(d) hereof, any increase in Net Unrealized Gains or decrease in Net
Unrealized Loss on any day during the Fiscal Year shall be allocated to
the Holders' Book Capital Accounts at the end of such day, in proportion
to the Holders' respective Book Capital Account balances at the
commencement of such day.
(b) Decrease in Net Unrealized Gains or Increase in Net
Unrealized Losses. Any decrease in Net Unrealized Gains due to
6
realization of items shall be allocated to the Holder receiving the
allocation of Profit, in the same amount, under Section 5.1(c) hereof.
Subject to Section 5.1(d) hereof, any decrease in Net Unrealized Gains or
increase in Net Unrealized Loss on any day during the Fiscal Year shall be
allocated to the Holders' Book Capital Accounts at the end of such day, in
proportion to the Holders' respective Book Capital Account balances at the
commencement of such day.
(c) Profit and Loss. Subject to Section 5.1(d) hereof,
Profit and Loss occurring on any day during the Fiscal Year shall be
allocated to the Holders' Book Capital Accounts at the end of such day in
proportion to the Holders' respective Book Capital Account balances at the
commencement of such day.
(d) Other Book Capital Account Adjustments.
(i) Any allocation pursuant to Section 5.1(a),
(b) or (c) above shall be prorated for increases in each
Holder's Book Capital Account resulting from Capital
Contributions, or distributions or withdrawals from the
Trust or Redemptions by the Trust occurring, during such
Fiscal Year as of the day after the Capital Contribution,
distribution, withdrawal or Redemption is accepted, made
or effected by the Trust.
(ii) For purposes of determining the Profit,
Loss, and Net Unrealized Gain or Net Unrealized Loss or
any other item allocable to any Fiscal Year, Profit,
Loss, and Net Unrealized Gain or Net Unrealized Loss and
any such other item shall be determined by or on behalf
of the Trustees using any reasonable method under Code
Section 706 and the Treasury Regulations thereunder.
5.2. Allocation of Taxable Income and Tax Loss to Tax Capital
Accounts.
------------------------------------------------
(a) Taxable Income and Tax Loss. Subject to Section 5.2(b)
and Section 5.3 hereof, which shall take precedence over this Section
5.2(a), Taxable Income or Tax Loss for any Fiscal Year shall be allocated
at least annually to the Holders' Tax Capital Accounts as follows:
(i) First, Taxable Income and Tax Loss,
whether constituting ordinary income (or loss) or capital
gain (or loss), derived from the sale or other
disposition of a Tax Lot of securities or other property
shall be allocated as of the date such income, gain or
loss is recognized for federal income tax purposes solely
in proportion to the amount of unrealized appreciation
(in the case of such income or capital gain, but not in
the case of any such loss) or depreciation (in the case
of any such loss, but not in the case of any such income
or capital gain) from that Tax Lot which was allocated to
7
the Holders' Book Capital Accounts each day that such
securities or other property was held by the Trust
pursuant to Section 5.1(a) and (b) hereof; and
(ii) Second, any remaining amounts at the end
of the Fiscal Year, to the Holders in proportion to their
respective daily average Book Capital Account balances
determined for the Fiscal Year of the allocation.
(b) Matched Income or Loss. Notwithstanding the provisions
of Section 5.2(a) hereof, Taxable Income, Tax-Exempt Income or Tax Loss
accruing on any day during the Fiscal Year constituting Matched Income or
Loss, shall be allocated daily to the Holders' Tax Capital Accounts solely
in proportion to and to the extent of corresponding allocations of Profit
or Loss to the Holders' Book Capital Accounts pursuant to the first
sentence of Section 5.1(c) hereof.
5.3. Special Allocations to Book and Tax Capital Accounts.
----------------------------------------------------
(a) The Designated Expenses computed for each Holder shall be
allocated separately (not included in the allocations of Matched Income or
Loss, Loss or Tax Loss) to the Book Capital Account and Tax Capital
Account of each Holder.
(b) If the Trust incurs any nonrecourse indebtedness, then
allocations of items attributable to nonrecourse indebtedness shall be
made to the Tax Capital Account of each Holder in accordance with the
requirements of Treasury Regulations Section 1.704-1(b)(4)(iv)(d).
(c) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, Taxable Income and Tax Loss with respect to any
property contributed to the capital of the Trust shall be allocated to the
Tax Capital Account of each Holder so as to take into account any
variation between the adjusted tax basis of such property to the Trust for
federal income tax purposes and such property's Fair Market Value at the
time of contribution to the Trust.
5.4. Other Adjustments to Book and Tax Capital Accounts.
--------------------------------------------------
(a) Any election or other decision relating to such
allocations shall be made by the Trustees in any manner that reasonably
reflects the purpose and intention of these procedures.
(b) Each Holder will report its share of Trust income and
loss for federal income tax purposes in accordance with the allocations
effected pursuant to Section 5.2 hereof.
5.5. Timing of Tax Allocations to Book and Tax Capital
Accounts. Allocation of Taxable Income, Tax-Exempt Income and Tax Loss
pursuant to Section 5.2 hereof for any Fiscal Year, unless specified above
to the contrary, shall be made only after corresponding adjustments have
8
been made to the Book Capital Accounts of the Holders for the Fiscal Year
as provided pursuant to Section 5.1 hereof.
5.6. Redemptions During the Fiscal Year. If a Redemption
occurs prior to the end of a Fiscal Year, the Trust will treat the Fiscal
Year as ended for the purposes of computing the redeeming Holder's
distributive share of Trust items and allocations of all items to such
Holder will be made as though each Holder were receiving its allocable
share of Trust items at such time. All items so allocated to the
redeeming Holder will be subtracted from the items to be allocated among
the other non-redeeming Holders at the actual end of the Fiscal Year. All
items allocated among the redeeming and non-redeeming Holders will be made
subject to the rules of Code Sections 702, 704, 706 and 708 and the
Treasury Regulations promulgated thereunder.
ARTICLE VI
Withdrawals
-----------
6.1. Partial Withdrawals. At any time any Holder shall be
entitled to request a withdrawal of such portion of the Interest held by
such Holder as such Holder shall request.
6.2. Redemptions. At any time a Holder shall be entitled to
request a Redemption of all of its Interest. A Holder's Interest may be
redeemed at any time during the Fiscal Year as provided in Section 6.3
hereof by a cash distribution or, at the option of a Holder, by a
distribution of a proportionate amount except for fractional shares of
each Trust asset at the option of the Trust. However, the Holder may be
redeemed by a distribution of a proportionate amount of the Trust's assets
only at the end of a Fiscal Year. However, if the Holder has contributed
any property to the Trust other than cash, if such property remains in the
Trust at the time the Holder requests withdrawal, then such property will
be sold by the Trust prior to the time at which the Holder withdraws from
the Trust.
6.3. Distribution in Kind. If a withdrawing Holder receives a
distribution in kind of its proportionate part of Trust property, then
unrealized income, gain, loss or deduction attributable to such property
shall be allocated among the Holders as if there had been a disposition of
the property on the date of distribution in compliance with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(iv)(e).
ARTICLE VII
Liquidation
-----------
7.1. Liquidation Procedure. Subject to Section 7.4 hereof,
upon dissolution of the Trust, the Trustees shall liquidate the assets of
the Trust, apply and distribute the proceeds thereof as follows:
9
(a) first to the payment of all debts and obligations of the
Trust to third parties, including without limitation the retirement of
outstanding debt, including any debt owed to 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) then in accordance with the Holders' positive Book
Capital Account balances after adjusting Book Capital Accounts for
allocations provided in Article V hereof and in accordance with the
requirements described in Treasury Regulations Section 1.704-1(b)(2)
(ii)(b)(2).
7.2. Alternative Liquidation Procedure. Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
or all of the Trust assets 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 Trust 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 Trust except
those necessary to satisfy the Trust's debts and obligations or distribute
the Trust's assets to the Holders in liquidation.
7.3. Cash Distributions Upon Liquidation. Except as provided
in Section 7.2 hereof, amounts distributed in liquidation of the Trust
shall be paid solely in cash.
7.4. Treatment of Negative Book Capital Account Balance. If a
Holder has a negative balance in its Book Capital Account following the
liquidation of its Interest, as determined after taking into account all
capital account adjustments for the Fiscal Year during which the
liquidation occurs, then such Holder shall restore the amount of such
negative balance to the Trust by the later of the end of the Fiscal Year
or 90 days after the date of such liquidation so as to comply with the
requirements of Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3).
Such amount shall, upon liquidation, be paid to creditors of the Trust or
distributed to other Holders in accordance with their positive Book
Capital Account balances.
10
ACCOUNTING AND INTERESTHOLDER SERVICES AGREEMENT
AGREEMENT made as of this 31st day of March, 1995, between High Income
Portfolio, a New York trust (the "Trust"), and IBT Fund Services (Canada)
Inc., an Ontario corporation ("IBT").
WHEREAS, the Trust is registered under the Investment Company Act of 1940
as an open-end management investment company and desires to engage IBT to
provide certain trust accounting and interestholder recordkeeping services
with respect to the Trust and IBT has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. IBT Appointed. The Trust hereby appoints IBT to provide
the services as hereinafter described and IBT agrees to act as such upon
the terms and conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed
below will have the following meaning:
2.1 Authorized Person. Authorized Person will mean
any of the persons duly authorized to give Proper Instructions or
otherwise act on behalf of the Trust by appropriate resolution of its
Board, and set forth in a certificate as required by Section 3 hereof.
2.2 Board. Board will mean the Board of Trustees of
the Trust.
2.3 Portfolio Security. Portfolio Security will mean
any security owned by the Trust.
2.4 Interests. Interests will mean participation
interests of the Trust.
3. Certification as to Authorized Persons. The Secretary or
Assistant Secretary of the Trust will at all times maintain on file with
IBT his or her certification to IBT, in such form as may be acceptable to
IBT, of (i) the names and signatures of the Authorized Persons and (ii)
the names of the Board members, it being understood that upon the
occurrence of any change in the information set forth in the most recent
certification on file (including without limitation any person named in
the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Trust,
will sign a new or amended certification setting forth the change and the
new, additional or omitted names or signatures. IBT will be entitled to
rely and act upon the most recent Officers' Certificate given to it by the
Trust.
4. Maintenance of Records. IBT will maintain records with
respect to the services provided by IBT hereunder and will furnish the
Trust daily with a statement of condition of the Trust. The books and
-2-
records of IBT pertaining to its actions under this Agreement and reports
by IBT or its independent accountants concerning its accounting systems
and internal accounting controls will be open to inspection and audit at
reasonable times by officers of or auditors employed by the Trust, and the
staff of The U.S. Securities and Exchange Commission, and will be
preserved by IBT in accordance with procedures established by the Trust.
IBT shall keep the books of account and render statements or
copies from time to time as reasonably requested by the Treasurer or any
executive officer of the Trust.
IBT, as fund accounting agent, shall assist generally in the
preparation of reports of a financial nature to Holders and others, audits
of accounts, and other ministerial matters of like nature.
5. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value. Inasmuch as the Trust is treated as a
partnership for federal income tax purposes, the Bank shall as Agent keep
and maintain the books and records of the Trust in accordance with the
Procedures for Allocations and Distributions adopted by the Trustees of
the Trust, as such Procedures may be in effect from time to time. A copy
of the current Procedures is attached to this Agreement, and the Trust
agrees promptly to furnish all revisions to or restatements of such
Procedures to the Bank.
The Bank shall as Agent keep such books of account (including
records showing the adjusted tax costs of the Trust's portfolio
securities) and render as at the close of business on each day a detailed
statement of the amounts received or paid out and of securities received
or delivered for the account of the Trust during said day and such other
statements, including a daily trial balance and inventory of the Trust's
portfolio securities; and shall furnish such other financial information
and data as from time to time requested by the Treasurer or any executive
officer of the Trust; and shall compute and determine, as of the close of
business of the New York Stock Exchange, or at such other time or times as
the Board may determine, the net asset value of the Trust and the net
asset value of each interest in the Trust, such computations and
determinations to be made in accordance with the governing documents of
the Trust and the votes and instructions of the Board and of the
investment adviser at the time in force and applicable, and promptly
notify the Trust and its investment adviser and such other persons as the
Trust may request of the result of such computation and determination. In
computing the net asset value IBT may rely upon security quotations
received by telephone or otherwise from sources or pricing services
designated by the Trust by proper instructions, and may further rely upon
information furnished to it by any authorized officer of the Trust
relative (a) to liabilities of the Trust not appearing on its books of
account, (b) to the existence, status and proper treatment of any reserve
or reserves, (c) to any procedures or policies established by the Board
regarding the valuation of portfolio securities or other assets, and (d)
to the value to be assigned to any bond, note, debenture, Treasury bill,
repurchase agreement, subscription right, security, participation
-3-
interests or other asset or property for which market quotations are not
readily available. IBT shall also compute and determine at such time or
times as the Trust may designate the portion of each item which has
significance for a holder of an interest in the Trust in computing and
determining its U.S. federal income tax liability including, but not
limited to, each item of income, expense and realized and unrealized gain
or loss of the Trust which is attributable for Federal income tax purposes
to each such holder.
6. Interestholder Services. IBT shall keep appropriate
records of the holdings of each interestholder on a daily basis. IBT
shall also keep each interestholder's subscription agreement with the
Portfolio.
7. Compensation of IBT. For the services to be rendered and
the facilities provided by IBT hereunder, the Trust shall pay to IBT a fee
from the assets of the Trust computed and paid monthly, in accordance with
Schedule B attached hereto, as the same may be changed by mutual agreement
of the parties from time to time.
8. Concerning IBT.
8.1 Performance of Duties and Standard of Care. IBT
shall not be liable for any error of judgment or mistake of law or for any
act or omission in the performance of its duties hereunder, except for
willful misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of its reckless disregard of its obligations and
duties hereunder.
IBT will be entitled to receive and act upon the advice of
independent counsel of its own selection, which may be counsel for the
Trust, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in
conformity with such advice. In the performance of its duties hereunder,
IBT will be protected and not be liable, and will be indemnified and held
harmless by the Trust for any reasonable action taken or omitted to be
taken by it in good faith reliance upon the terms of this Agreement, any
Officers' Certificate, and or written instructions received from an
Authorized Person, resolution of the Board, telegram, notice, request,
certificate or other instrument reasonably believed by IBT to be genuine
and for any other loss to the Trust except in the case of IBT's gross
negligence, willful misfeasance or bad faith in the performance of its
duties or reckless disregard of its obligations and duties hereunder.
Notwithstanding anything in this Agreement to the contrary, in no
event shall IBT be liable hereunder or to any third party:
(a) for any losses or damages of any kind
resulting from acts of God, earthquakes, fires, floods, storms or other
disturbances of restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss
or malfunction of utilities, transportation, or computers (hardware or
-4-
software) and computer facilities, the unavailability of energy sources
and other similar happenings or events except as results from IBT's own
gross negligence, willful misfeasance or bad faith in the performance of
its duties; or
(b) for special, punitive or consequential
damages arising from the provision of services hereunder, even if IBT has
been advised of the possibility of such damages.
8.2 Subcontractors. IBT, subject to approval of the
Trust, may subcontract for the performance of IBT's obligations hereunder
with any one or more persons, provided, however, that unless the Trust
otherwise expressly agrees in writing, IBT shall be as fully responsible
to the Trust for the acts and omissions of any subcontractor as it would
be for its own acts or omissions. In the event IBT obtains a judgment,
settlement or other monetary recovery for the wrongful conduct of the
subcontractor, the Trust shall be entitled to such recovery if such
conduct resulted in a loss to the Trust and IBT agrees to pursue such
claims vigorously. To the extent possible, such sub-contractors shall
provide services outside the United States.
8.3 Activities of IBT. The services provided by IBT
to the Trust are not to be deemed to be exclusive, IBT being free to
render administrative, fund accounting and/or other services to other
parties. It is understood that members of the Board, officers, and
shareholders of the Trust are or may become similarly interested in the
Trust and that IBT and/or any of its affiliates may become interested in
the Trust as a shareholder of the Trust or otherwise.
8.4 Insurance. IBT need not maintain any special
insurance for the benefit of the Trust, but will maintain customary
insurance for its obligations hereunder.
9. Termination. This Agreement may be terminated at any
time without penalty upon sixty days written notice delivered by either
party to the other by means of registered mail, and upon the expiration of
such sixty days, this Agreement will terminate. At any time after the
termination of this Agreement, the Fund will have access to the records of
IBT relating to the performance of its duties hereunder and IBT shall
cooperate in the transfer of such records to its successor.
10. Confidentiality. Both parties hereto agree that any non-
public information obtained hereunder concerning the other party is
confidential and may not be disclosed to any other person without the
consent of the other party, except as may be required by applicable law or
at the request of a governmental agency. The parties further agree that a
breach of this provision would irreparably damage the other party and
accordingly agree that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of this
provision.
-5-
11. Notices. Any notice or other instrument in writing
authorized or required by this Agreement to be given to either party
hereto will be sufficiently given if addressed to such party and mailed or
delivered to it at its office at the address set forth below; namely:
(a) In the case of notices sent to the Trust to:
C/O The Bank of Nova Scotia Trust Company (Cayman) Ltd.
The Bank of Nova Scotia Building
P. O. Box 501
George Town
Grand Cayman, Cayman Island
British West Indies
(b) In the case of notices sent to IBT to:
IBT Fund Services (Canada), Inc.
Suite 5850, One First Canadian Place
P. O. Box 231
Toronto, Ontario M5X 1A4
Attention: Evelyn Foo
or at such other place as such party may from time to time designate in
writing.
12. Amendments. This Agreement may not be altered or
amended, except by an instrument in writing, executed by both parties, and
in the case of the Trust, duly authorized and approved by its respective
Board.
13. Governing Law. This Agreement will be governed by the
laws of Ontario.
14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one instrument.
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the
day and year first written above.
High Income Portfolio
By:/s/ M. Dozier Gardner
---------------------
M. Dozier Gardner
Name
Title
ATTEST:
/s/ H. Day Brigham, Jr.
-----------------------
H. Day Brigham, Jr.
IBT Fund Services (Canada), Inc.
By:/s/ Michael F. Rogers
-----------------------------
Michael F. Rogers
Name
Title
ATTEST:
/s/ Robert Donahoe
------------------
Robert Donahoe
DATE: 2/22/95
-------
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of the 31st day of March, 1995.
BETWEEN: (1) High Income Portfolio, a New York trust the
principal office of which is at The Bank of Nova
Scotia Trust Company (Cayman) Limited, The Bank
Nova Scotia Building, George Town, Grand Cayman,
Cayman Island, British West Indies (the "Trust")
OF THE ONE PART
AND: (2) The Bank of Nova Scotia Trust Company (Cayman)
Ltd., a company duly incorporated in the Cayman
Islands the Registered Office of which is at
Albert Panton Street, George Town, Grand Cayman,
Cayman Islands, British West Indies aforesaid
(the "Administrator") OF THE OTHER PART.
WHEREAS:
(A) The Trust is registered under the United States
Investment Company Act of 1940 as an open-end management
investment company.
(B) The Administrator has agreed to provide general
administration services to the Trust, and the Trust
wishes to appoint the Administrator as general
administrator of the Trust upon the terms and conditions
hereinafter appearing.
AGREEMENT:
1. (a) In this Agreement the words standing in the first column
of the table next hereinafter contained shall bear the
meanings set opposite to them in the second column
thereof, if not inconsistent with the subject or context:
Words Meanings
"Declaration of Trust" The Declaration of Trust of the Trust
for the time being in force.
"Trustees" The Trustees of the Trust for the time
being, or as the case may be, the
Trustees assembled as a board.
"Registration Statement" The Registration Statement of the Trust
as amended and filed with the Securities
and Exchange Commission.
(b) Unless the context otherwise requires and except as
varied or otherwise specified in this agreement, words
and expressions contained in this agreement shall bear
the same meaning as in the Registration Statement
PROVIDED THAT any alteration or amendment of the
Registration Statement shall not be effective for the
purposes of this Agreement unless the administrator shall
by endorsement hereon or otherwise have assented in
writing thereto.
(c) The headings are intended for convenience only and shall
not affect the construction of this Agreement.
APPOINTMENT OF ADMINISTRATOR
2. The Trust hereby appoints the Administrator and the Administrator
hereby agrees to act as general administrator of the Trust in
accordance with the terms and conditions hereof with effect from
the date hereof.
DUTIES AS GENERAL CORPORATE ADMINISTRATOR
3. The Administrator shall from time to time deliver such
information explanations and reports to the Trust as the Trust
may reasonably require regarding the conduct of the business of
the Trust.
4. The Administrator shall provide the principal office of the
Trust; and
(a) conduct on behalf of the Trust all the day to day
business of the Trust, other than investment activities,
and provide the or procure such office accommodation,
secretarial staff and other facilities as may be required
for the purposes of fulfilling its duties under this
Agreement;
(b) receive and approve notices of subscriptions and
redemptions of Trust interests;
(c) at the request of the Trust, arrange execution and filing
with the U.S. Securities and Exchange Commission (the
"SEC") of amendments to the Trust's Registration
Statement, and of any other regulatory filings required
to be made by the Trust;
(d) deal with and reply to all correspondence and other
communications addressed to the Trust at its principal
office, whether in relation to the subscription, purchase
or redemption of interests in the Trust or otherwise
PROVIDED THAT in the event of any dispute in connection
with the issue, ownership, redemption or otherwise of any
interests the matter shall be referred to the Trust, and
the Administrator shall take such action as may
reasonably be required by the Trust;
-2-
(e) at any time during business hours to permit any duly
appointed agent or representative of the Trust, at the
expense of the Trust to inspect the Register of Holders
or any other documents or records in the possession of
the Administrator and give such agent or representative
during business hours all information, explanations and
assistance as such agent or representative may reasonably
require, and permit representatives of the U.S.
Securities and Exchange Commission to examine books and
records of the Trust;
(f) maintain and safeguard the Register of Holders of
Interests and other documents in connection therewith and
enter on such Register all original issues and allotments
of and all increases, decreases and redemptions of such
interests all in accordance with the provisions of the
Declaration of Trust and Trustee instructions and to
prepare all such lists of Holders of Interests of the
Trust and account numbers of Holders as may be required
by the Trust.
DEALINGS OF THE ADMINISTRATOR
5. Nothing herein contained shall prevent the Administrator or any
firm, person or company associated in any way with the
Administrator from contracting with or entering into any
financial, banking or other transaction with the Trust, any
shareholder or any company or body of persons any of whose
securities are held by or for the account of the Trust or from
being interested in such transaction.
6. Nothing herein contained shall prevent the Administrator or any
associate of the Administrator from acting as administrator or
general corporate manager or in any other capacity whatsoever for
any other company or body of persons on such terms as the
Administrator or such associate may arrange, and the
Administrator or such associate shall not be deemed to be
affected with notice of or to be under any duty to disclose the
Trust any fact or thing which may come to its knowledge or that
of any of its servants or agents in the course of so doing or in
any manner whatever otherwise than in the course of carrying out
its duties hereunder.
AGENTS AND ADVICE
7. The Administrator shall be at liberty in the performance of its
duties and in the exercise of any of the powers vested in it
hereunder to act by responsible officers or a responsible officer
for the time being and to employ and pay an agent who may (but
need not) be an associate of the Administrator to perform or
concur in performing any of the services required to be performed
hereunder and may act or rely upon the opinion or advice or any
-3-
information obtained from any broker, lawyer, valuer, surveyor,
auctioneer or other expert, whether reporting to the Trust, to
the Administrator or not, and the Administrator shall not be
responsible for any loss occasioned by its so acting.
8. The Administrator may at the expense of the Trust refer any legal
question to the legal advisers of the Trust for the time being
(whose name shall from time to time be notified by or on behalf
of the Trust to the Administrator) or legal advisers that it may
select with the prior approval of the Trust and may authorize any
such legal adviser to take the opinion of counsel on any matter
of difficulty and may act on any opinion given by such legal
advisers or counsel without being responsible for the correctness
thereof or for any result which may follow from so doing.
REMUNERATION
9. In consideration of the services performed by the Administrator
hereunder the Administrator shall be entitled to receive such
fees as are agreed upon in writing by the parties.
REIMBURSEMENT BY THE TRUST TO THE ADMINISTRATOR
10. In addition to the fees set out in clause 9 above the Trust shall
reimburse to the Administrator all reasonable costs and expenses
incurred by the Administrator in the performance of its duties
hereunder.
LIABILITY AND INDEMNITY
11. (a) The Administrator, its subsidiaries, agents, advisors,
shareholders, directors, officers, servants and employees
shall not be liable to the Trust or a Holder of its
Interests, or any of its or their successors or assigns,
expect for loss arising to the Trust by reason of act of,
or omissions due to negligence or willful default on the
part of any such persons as aforesaid.
(b) The Trust shall indemnify, defend and hold harmless the
Administrator and each of its subsidiaries, agents,
advisors, shareholders, directors, officers, servants and
employees from and against any loss, liability, damage,
cost or expense (including legal fees and expenses and
any amounts paid in settlement), resulting from its or
their actions or capacities hereunder or otherwise
concerning the business or activities undertaken on
behalf of the Trust under this Agreement or sustained by
any of them including (without restricting the generality
of the foregoing) loss sustained as a result of delay,
mis-delivery or error in transmission of any cable,
telefax, telex or telegraphic communication. Subject as
aforesaid all actions taken by the Administrator shall be
-4-
taken in good faith and in the reasonable belief that
such actions are taken in the best interests of the Trust
PROVIDED THAT termination of any action, proceeding,
demand, claim or lawsuit by judgment, order or settlement
shall not, of itself, create a presumption that the
conduct in question was not undertaken in good faith with
due care and in a manner reasonably believed to be in or
not opposed to the best interest of the Trust. The right
of indemnification hereunder shall remain in full force
and effect regardless of the expiration or termination of
this Agreement.
RIGHT TO ADVISE AND MANAGE THE FUNDS OR OTHERS
12. The Trust acknowledges that an important part of the
Administrator's business is, and that it derives profits from,
managing the affairs of its affiliates and other entities and
that the Administrator will be managing such affiliates and
entities during the same period that it is managing the affairs
of the Trust. The administrator and its officers and employees
shall be free to manage such other affiliates and entities and to
retain for its own or their benefit all profits and revenues
derived therefrom PROVIDED THAT the Administrator shall not
knowingly prefer affiliates of the Administrator or other
entities to the detriment of the affairs of the Trust.
RESTRICTIONS
13. Neither of the parties hereto shall do or commit any act, matter
or thing which would or might prejudice or bring into disrepute
in any manner the business or reputation of the other or any
director, officer or employee of the other.
14. Except as required by the law and save as contemplated by the
Declaration of Trust, neither of the parties hereto shall either
before or after the termination of this Agreement disclose to any
person not authorized by the other party to receive the same
information relating to such party or to the affairs of such
party of which the party disclosing the same shall have become
possessed during the period of this agreement, and both parties
shall use all reasonable endeavors to prevent any such disclosure
as aforesaid.
TERMINATION
15. The Administrator shall be entitled to resign its appointment
hereunder:
(a) by giving not less than two (2) month's notice in writing
to the Trust;
-5-
(b) if the Trust shall commit any breach of its obligations
under this Agreement and shall fail within ten days of
receipt of notice served by the Administrator requiring
it so to do, to make good such breach; and
(c) at any time without such notice as is referred to in sub-
paragraphs (a) and (b) of this clause if the Trust shall
go into liquidation (other than for the purpose of
reconstruction or amalgamation upon terms previously
approved in writing by the Administrator) or if a
receiver of any of the assets of the Trust is appointed.
16. The Trust may terminate the appointment of the Administrator:
(a) by giving no less than two (2) month's notice in writing
to the Administrator;
(b) if the Administrator shall commit any breach of its
obligations under this Agreement and shall fail within
ten days of receipt of notice served by the Trust
requiring it so to do, to make good such breach; and
(c) at any time without such notice as is referred to in sub-
paragraphs (a) and (b) or this clause if the
Administrator goes into liquidation (except a voluntary
liquidation for the purpose of reconstruction or
amalgamation upon terms previously approved in writing by
the Trust) or if a receiver is appointed of any of the
assets of the Administrator.
17. On termination of the appointment of the administrator under the
provisions of the preceding clauses, such termination shall be
without prejudice to any antecedent liability of the
Administrator or the Trust. The Administrator shall be entitled
to receive all fees and other moneys accrued up to the date of
such termination but shall not be entitled to compensation in
respect of such termination.
18. The administrator shall, on the termination of its appointment:
(a) Forthwith hand over to the Trust or as it shall direct
all books of account, registers, correspondence and
records of all and every description relating to the
affairs of the Trust which are in the Administrator's
possession but not including any promotional material
bearing the style or any trade mark or symbol of the
Administrator. The Administrator shall also in such
circumstance deliver or cause to be delivered to the
succeeding administrator or as the Trust shall direct all
funds or other properties of the Trust deposited with or
otherwise held by the Administrator or to its order
-6-
hereunder and do all such further acts as the Trust may
reasonably require of it.
(b) have the right by written request to require the Trust in
its Registration Statement and any other material made
available to investors and prospective investors to (as
may reasonably be approved by the Administrator) indicate
that the Administrator and its delegate(s) (if any) have
ceased to be its administrator.
REPRESENTATIONS AND WARRANTIES
19. (a) The Administrator represents and warrants to the Trust as
follows:
(i) The Administrator has full power and authority to
enter into and perform this Agreement and this
Agreement has been duly authorized by all
requisite corporate action, executed and
delivered by or on behalf of the Administrator
and constitutes a valid and binding agreement of
the Administrator.
(ii) Neither the execution, delivery nor performance
of this Agreement by the Administrator will
result in a breach or violation of any statute,
law, rule or of the material provisions of any
debenture or other material agreement binding
upon the Administrator and no consent, approval,
authorization or license by any court or
governmental agency is required for the
execution, delivery or performance of this
Agreement by The Administrator, except such as
have been obtained by the Administrator.
(b) the Trust represents and warrants to the Administrator as
follows:
(i) The Trust has full power and authority to enter
into and perform this Agreement and this
Agreement has been duly authorized by all
requisite corporate action, executed and
delivered by or on behalf of the Trust and
constitutes a valid and binding agreement of the
Trust.
(ii) Neither the execution, delivery nor performance
of this Agreement by the Trust will result in a
breach or violation of any statute, law, rule or
of the material provisions of any debentures or
other material agreement binding upon the Trust
and no consent, approval, authorization or
-7-
license by any court or governmental agency is
required for the execution, delivery or
performance of this Agreement by the Trust except
such as have been obtained by the Trust.
INDEPENDENT CONTRACTOR
20. For all purposes of this Agreement, the Administrator shall be an
independent contractor and not an employee or dependent agent of
the Trust, nor shall anything herein be construed as making the
Trust a partner or co-venturer with the Administrator or any of
its affiliates or other clients. Except as provided in this
Agreement, the Administrator shall have no authority to bind,
obligate or represent the Trust.
COMPLETE AGREEMENT
21. This Agreement constitutes the entire agreement between the
parties relating to the subject matter hereof.
ASSIGNMENT
22. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns but may not be assigned by any
party without the express written consent of the other party
which shall not be reasonably withheld or delayed.
23. This Agreement may not be amended except by the written consent
of each of the parties hereto.
NOTICES
24. Any notice delivered under this agreement shall be in writing and
signed by a duly authorized officer of the party giving such
notice and shall be delivered personally or sent by registered or
certified mail, postage prepaid, to the registered office of the
party for whom it is intended. a notice so posted shall be
deemed to be served at the expiration of seventy-two (72) hours
after posting and in proving service by post it shall be
sufficient to prove that an envelope containing the notice was
duly addressed, stamped and posted.
GOVERNING LAW
25. This Agreement shall be governed by and construed in accordance
with the laws of the Cayman Islands and the parties hereto agree
to submit to the non-exclusive jurisdiction of the Courts of the
Cayman Islands.
-8-
IN WITNESS WHEREOF this Agreement has been duly executed for and on behalf
of the parties hereto in manner binding upon them the day and year first
above written.
Signed by ) /s/ James B. Hawkes
for and on behalf of the said ) -----------------------------
High Income Portfolio ) James B. Hawkes
in the presence of: ) Vice President
)
/s/ H. Day Brigham, Jr.
--------------------------
H. Day Brigham, Jr.
Witness
SIGNED by ) /s/ Roger M. Davies
for and on behalf of the said ) -------------------
Bank of Nova Scotia Trust ) Robert M. Davies
Company (Cayman) Ltd. ) Director
in the presence of: )
) /s/ William A. Chisholm
) -----------------------
) William A. Chisholm
Assistant Secretary
/s/ M. Crawford
------------------------------
M. Crawford
Witness
-9-
March 14, 1994
High Income 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 High Income 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 HIGH INCOME TRUST
By/s/ M. Dozier Gardner
------------------------------
M. Dozier Gardner
President
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<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 449792
<INVESTMENTS-AT-VALUE> 429923
<RECEIVABLES> 20942
<ASSETS-OTHER> 4
<OTHER-ITEMS-ASSETS> 11
<TOTAL-ASSETS> 450880
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