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As filed with the Securities and Exchange Commission on July 26, 1995
File No. 811-8710
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]
VIRGINIA LIMITED MATURITY
TAX FREE PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
24 Federal Street
Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 482-8260
Thomas Otis
24 Federal Street, Boston, Massachusetts 02110
(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
investment companies, common or commingled trust funds, or similar
organizations or entities that are "accredited investors" within the
meaning of Regulation D under the 1933 Act. This Registration Statement,
as amended, does not constitute an offer to sell, or the solicitation of
an offer to buy, any interest in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to Paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant
Virginia Limited Maturity Tax Free Portfolio (the "Portfolio") is
a non-diversified, open-end management investment company which was
organized as a trust under the laws of the State of New York on August 10,
1994. Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"). Investments in the Portfolio may be made only by U.S. and foreign
investment companies, common or commingled trust funds, 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 (1) a high
level of current income exempt from regular Federal income tax and
Virginia State personal income taxes and (2) limited principal
fluctuation. The Portfolio seeks to achieve its objective by investing
primarily in Virginia obligations (as defined below) having a dollar
weighted average duration of between three and nine years and which are
rated at least investment grade by a major rating agency or, if unrated,
are determined to be of at least investment grade quality by the
Portfolio's investment adviser, Boston Management and Research (the
"Investment Adviser" or "BMR").
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 seeks to achieve its investment objective by
investing at least 80% of its net assets during periods of normal market
conditions in debt obligations issued by or on behalf of the Commonwealth
of Virginia and its political subdivisions, and the governments of Puerto
Rico, the U.S. Virgin Islands and Guam, the interest on which is exempt
from regular Federal income tax, is not a tax preference item under the
Federal alternative minimum tax, and is exempt from Virginia State
personal income taxes ("Virginia tax-exempt obligations"). The foregoing
policy is a fundamental policy of the Portfolio and may not be changed
unless authorized by a vote of investors in the Portfolio.
At least 80% of the Portfolio's net assets will normally be
invested in obligations rated at least investment grade at the time of
investment (which are those rated Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or BBB or higher by either Standard & Poor's
Ratings Group ("S&P") or Fitch Investors Service, Inc. ("Fitch")) or, if
unrated, determined by the Investment Adviser to be of at least investment
grade quality. The Portfolio may invest up to 20% of its net assets in
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Virginia obligations rated below investment grade (but not lower than B by
Moody's, S&P or Fitch) and unrated Virginia obligations considered to be
of comparable quality by the Investment Adviser. Virginia obligations
rated Baa or BBB may have speculative characteristics. Also, changes in
economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than in the case
of higher rated obligations. Securities rated below Baa or BBB are
commonly known as "junk bonds". The Portfolio may retain an obligation
whose rating drops below B after its acquisition if such retention is
considered desirable by the Investment Adviser. See "Risk Considerations."
For a description of municipal obligation ratings, see the Appendix to
Part B.
In pursuing its investment objective, the Portfolio seeks to
invest in a portfolio having a dollar weighted average duration of between
three and nine years. Duration represents the dollar weighted average
maturity of expected cash flows (i.e., interest and principal payments) on
one or more debt obligations, discounted to their present values. The
duration of an obligation is usually not more than its stated maturity and
is related to the degree of volatility in the market value of the
obligation. Maturity measures only the time until a bond or other debt
security provides its final payment; it does not take into account the
pattern of a security's payments over time. Duration takes both interest
and principal payments into account and, thus, in the Investment Adviser's
opinion, is a more accurate measure of a debt security's sensitivity to
changes in interest rates. In computing the duration of its portfolio, the
Portfolio will have to estimate the duration of debt obligations that are
subject to prepayment or redemption by the issuer, based on projected cash
flows from such obligations.
The Portfolio may use various techniques to shorten or lengthen
the dollar weighted average duration of its portfolio, including the
acquisition of debt obligations at a premium or discount, and transactions
in futures contracts and options on futures. Subject to the requirement
that the dollar weighted average portfolio duration will not exceed nine
years, the Portfolio may invest in individual debt obligations of any
maturity.
Virginia Obligations. Municipal obligations eligible for the
exemption from Virginia State personal income taxes ("Virginia
obligations") are issued for a wide variety of both public and private
purposes. Public purpose municipal bonds include general obligation bonds
and revenue bonds. General obligation bonds are backed by the taxing power
of the issuing municipality. Revenue bonds are backed by the revenues of a
project or facility. Municipal notes include bond anticipation notes, tax
anticipation notes, revenue anticipation notes, and construction loan
notes. Bond, tax and revenue anticipation notes are short-term obligations
that will be retired with the proceeds of an anticipated bond issue, tax
revenue or facility revenue, respectively. Construction loan notes are
short-term obligations that will be retired with the proceeds of long-term
mortgage financing. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in obligations issued by the
Commonwealth of Virginia or its political subdivisions.
Interest income from certain types of Virginia obligations may
subject the recipient to or increase the recipient's liability for the
Federal alternative minimum tax. The Portfolio may not invest more than
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20% of its net assets in these obligations and obligations that pay
interest subject to regular Federal income tax and/or Virginia State
personal income taxes. As at March 31, 1995, the Portfolio had 0% of its
net assets invested in private activity bonds. Distributions to corporate
investors of certain interest income may be subject to the Federal
alternative minimum tax.
Concentration in Virginia Issuers -- Risks. Because the
Portfolio will normally invest at least 65% of its assets in Virginia
obligations, it is more susceptible to factors adversely affecting
Virginia issuers than is a comparable municipal bond fund that does not
concentrate its investments in the obligations of issuers located in a
single state.
The Constitution of Virginia requires a balanced budget and
limits the ability of the Commonwealth to create debt. General obligation
debt may be incurred to meet certain short-term needs, to finance capital
projects and, under less stringent restrictions, to finance revenue-
producing capital projects. Also, "special fund" revenue bonds, to which
the constitutional debt restrictions do not apply and which are not
supported by the full faith and credit of the Commonwealth, may be issued
to finance qualifying Commonwealth revenue projects.
General obligations of cities, towns and counties are payable
from the general revenues of the entity, including ad valorem tax revenues
on property within the jurisdiction. Nevertheless, the ability of a bond
holder to obtain a writ of mandamus to require the levy of taxes if
problematic. Revenue obligations issued by other entities are customarily
payable only from revenues from the particular project or projects
involved. Holders of any defaulted general obligation bonds may petition
the Governor for remedial action.
The economy of Virginia is based primarily on manufacturing, the
government sector, agriculture, mining and tourism, and unemployment rates
have been below the national average. The Commonwealth has a long history
of fiscal stability, due in large part to conservative financial
operations and diverse sources of revenue. In the past decade, however,
the Commonwealth has experienced cycles of financial stringency. No
significant new taxes or increases were enacted by the General Assembly at
the 1995 session.
As a result of litigation involving proceedings before the United
States Supreme Court, the Commonwealth may be obligated to refund tax
payments made by federal pensioners of up to $707.5 million. Legislation
has been enacted to effect a settlement of the litigation, but the
claimants have not accepted its terms.
General obligations of Virginia are rated Aaa, AAA, and AAA by
Moody's, Fitch and S&P, respectively. The bond ratings are current as of
the date hereof and are based on economic conditions that may not
continue; moreover, there can be no assurance that particular bond issues
may not be adversely affected by changes in economic, political or other
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conditions. The Commonwealth's political subdivisions may have different
ratings that are unrelated to the ratings assigned to Commonwealth
obligations.
Virginia obligations also include obligations issued by the
governments of Puerto Rico, the U.S. Virgin Islands and Guam to the extent
that these obligations are exempt from Virginia State personal income
taxes. The Portfolio may invest up to 5% of its net assets in obligations
issued by the governments of each of the U.S. Virgin Islands and Guam, and
up to 35% of its net assets in obligations issued by the government of
Puerto Rico. The economy of Puerto Rico is dominated by the manufacturing
and service sectors. Although the economy of Puerto Rico expanded
significantly from fiscal 1984 through fiscal 1990, the rate of this
expansion slowed during fiscal years 1991, 1992 and 1993. Growth in
fiscal 1994 will depend on several factors, including the state of the
U.S. economy and the relative stability in the price of oil, the exchange
rate of the U.S. dollar and the cost of borrowing. Although the Puerto
Rico unemployment rate has declined substantially since 1985, the
seasonally adjusted unemployment rate for February, 1995 was approximately
12.5%. The North American Free Trade Agreement ("NAFTA"), which became
effective on January 1, 1994, could lead to the loss of Puerto Rico's
lower salaried or labor intensive jobs to Mexico.
S&P rates Puerto Rico general obligation debt A, while Moody's
rates it Baa1; these ratings have been in place since 1956 and 1976,
respectively. S&P assigned a stable outlook on Puerto Rico on April 26,
1994.
Concentration. The Portfolio may invest 25% or more of its
assets in Virginia obligations of the same type, including, without
limitation, the following: lease rental obligations of state and local
authorities; obligations of state and local housing finance authorities,
municipal utilities systems or public housing authorities; obligations for
hospitals or life care facilities; or industrial development or pollution
control bonds issued for electric utility systems, steel companies, paper
companies or other purposes. This may make the Portfolio more susceptible
to adverse economic, political or regulatory occurrences affecting a
particular category of issuer. For example, health care-related issuers
are susceptible to medicaid reimbursement policies, and national and state
health care legislation. As the Portfolio's concentration increases, so
does the potential for fluctuation of the net asset value of an interest
in the Portfolio.
Non-Diversified Status. The classification of the Portfolio
under the Investment Company Act of 1940, as amended (the "1940 Act"), as
a "non-diversified" investment company allows it to invest, with respect
to 50% of its assets, more than 5% (but not more than 25%) of its assets
in the securities of any issuer. The Portfolio is likely to invest a
greater percentage of its assets in the securities of a single issuer than
would a diversified fund. Therefore, the Portfolio would be more
susceptible than a diversified fund to any single adverse economic or
political occurrence or development affecting issuers of Virginia
obligations.
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Other Investment Practices
The Portfolio may engage in the following investment practices,
some of which may be considered to involve "derivative" instruments
because they derive their value from another instrument, security or
index.
Insured Obligations. The Portfolio may purchase municipal bonds
that are additionally secured by insurance, bank credit agreements, or
escrow accounts. The credit quality of companies which provide such credit
enhancements will affect the value of those securities. Although the
insurance feature reduces certain financial risks, the premiums for
insurance and the higher market price paid for insured obligations may
reduce current yield. Insurance generally will be obtained from insurers
with a claims-paying ability rated Aaa by Moody's or AAA by S&P or Fitch.
The insurance does not guarantee the market value of the insured
obligations or the net asset value of the Portfolio's interests.
When-Issued Securities. The Portfolio may purchase securities on
a "when-issued" basis, which means that payment and delivery occur on a
future settlement date. The price and yield of such securities are
generally fixed on the date of commitment to purchase. However, the market
value of the securities may fluctuate prior to delivery and upon delivery
the securities may be worth more or less than the Portfolio agreed to pay
for them. The Portfolio may also purchase instruments that give the
Portfolio the option to purchase a Virginia obligation when and if issued.
Futures Transactions. The Portfolio may purchase and sell
various kinds of financial futures contracts and options thereon to hedge
against changes in interest rates. The futures contracts may be based on
various debt securities (such as U.S. Government securities), securities
indices (such as the Municipal Bond Index traded on the Chicago Board of
Trade), and other financial instruments and indices. Such transactions
involve a risk of loss or depreciation due to unanticipated adverse
changes in securities prices, which may exceed the Portfolio's initial
investment in these contracts. The Portfolio may not purchase or sell
futures contracts or related options, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of margin
deposits and premiums paid on the Portfolio's outstanding positions would
exceed 5% of the market value of the Portfolio's net assets. These
transactions involve transaction costs. There can be no assurance that
the Investment Advisor's use of futures will be advantageous to the
Portfolio. Distributions of any gains realized on the Portfolio's
transactions in futures and options on futures will be taxable.
Risk Considerations
Many Virginia obligations offering high current income are in the
lowest investment grade category (Baa or BBB), lower categories or may be
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unrated. As indicated above, the Portfolio may invest in Virginia
obligations rated below investment grade (but not lower than B by Moody's,
S&P or Fitch) and comparable unrated obligations. The lowest investment
grade, lower rated and comparable unrated Virginia obligations in which
the Portfolio may invest will have speculative characteristics in varying
degrees. While such obligations may have some quality and protective
characteristics, these characteristics can be expected to be offset or
outweighed by uncertainties or major risk exposures to adverse conditions.
Lower rated and comparable unrated Virginia obligations are subject to the
risk of an issuer's inability to meet principal and interest payments on
the obligations (credit risk) and may also be subject to greater price
volatility due to such factors as interest rate sensitivity, market
perception of the creditworthiness of the issuer and general market
liquidity (market risk). Lower rated or unrated municipal obligations are
also more likely to react to real or perceived developments affecting
market and credit risk than are more highly rated obligations, which react
primarily to movements in the general level of interest rates.
The Portfolio may retain defaulted obligations in its portfolio
when such retention is considered desirable by the Investment Adviser. In
the case of a defaulted obligation, the Portfolio may incur additional
expense seeking recovery of its investment. Municipal obligations held by
the Portfolio which are rated below investment grade, but which,
subsequent to the assignment of such rating, are backed by escrow accounts
containing U.S. Government obligations may be determined by the Investment
Adviser to be of investment grade quality for purposes of the Portfolio's
investment policies. The Portfolio may retain in its Portfolio an
obligation whose rating drops below B after its acquisition, if such
retention is considered desirable by the Investment Adviser; provided,
however, that holdings of obligations rated below Baa or BBB will not
exceed 35% of net assets. In the event the rating of an obligation held
by the Portfolio is downgraded, causing the Portfolio to exceed this
limitation, the Investment Adviser will (in an orderly fashion within a
reasonable period of time) dispose of such obligations as it deems
necessary in order to comply with its credit quality limitations. For a
description of municipal obligation ratings, see the Appendix to Part B.
The net asset value of the Portfolio's interests 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 held by the Portfolio can be expected to
rise. Conversely, when interest rates rise, the value of most portfolio
security holdings can be expected to decline. Because the Portfolio
intends to limit its average portfolio duration to no more than nine
years, its net asset value can be expected to be less sensitive to changes
in interest rates than that of a fund with a longer average portfolio
duration. Changes in the credit quality of the issuers of Virginia
obligations held by the Portfolio will affect the principal value of (and
possibly the income earned on) such obligations. In addition, the values
of such securities are affected by changes in general economic conditions
and business conditions affecting the specific industries of their
issuers. Changes by recognized rating services in their ratings of a
security and in the ability of the issuer to make payments of principal
and interest may also affect the value of the Portfolio's investments.
The amount of information about the financial condition of an issuer of
municipal obligations may not be as extensive as that made available by
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corporations whose securities are publicly traded. An investment in
interests in the Portfolio will not constitute a complete investment
program.
At times, a substantial portion of the Portfolio's assets may be
invested in securities as to which the Portfolio, by itself or together
with other accounts managed by the Investment Adviser and its affiliates,
holds a major portion or all of such securities. Under adverse market or
economic conditions or in the event of adverse changes in the financial
condition of the issuer, the Portfolio could find it more difficult to
sell such securities when the Investment Adviser believes it advisable to
do so or may be able to sell such securities only at prices lower than if
such securities were more widely held. Under such circumstances, it may
also be more difficult to determine the fair value of such securities for
purposes of computing the Portfolio's net asset value.
The secondary market for some Virginia obligations (including
issues that are privately placed with the Portfolio) is less liquid than
that for taxable debt obligations or for other more widely traded
municipal obligations. The Portfolio will not invest in illiquid
securities if more than 15% of its assets would be invested in securities
that are not readily marketable. No established resale market exists for
certain of the Virginia obligations in which the Portfolio may invest. The
market for obligations rated below investment grade is also likely to be
less liquid than the market for higher rated obligations. As a result, the
Portfolio may be unable to dispose of these municipal obligations at times
when it would otherwise wish to do so at the prices at which they are
valued.
Certain securities held by the Portfolio may permit the issuer at
its option to "call", or redeem, its securities. If an issuer were to
redeem securities held by the Portfolio during a time of declining
interest rates, the Portfolio may not be able to reinvest the proceeds in
securities providing the same investment return as the securities
redeemed.
Some of the securities in which the Portfolio invests may include
so-called "zero-coupon" bonds, whose values are subject to greater
fluctuation in response to changes in market interest rates than bonds
which pay interest currently. Zero-coupon bonds are issued at a
significant discount from face value and pay interest only at maturity
rather than at intervals during the life of the security. The Portfolio
is required to accrue and distribute income from zero-coupon bonds on a
current basis, even though it does not receive that income currently in
cash. Thus, the Portfolio may have to sell other investments to obtain
cash needed to make income distributions.
The Portfolio may invest in municipal leases and participation in
municipal leases. The obligation of the issuer to meet its obligations
under such leases is often subject to the appropriation by the appropriate
legislative body, on an annual or other basis, of funds for the payment of
the obligations. Investments in municipal leases are thus subject to the
risk that the legislative body will not make the necessary appropriation
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and the issuer will not otherwise be willing or able to meet its
obligations.
Investment Restrictions
The Portfolio has adopted certain fundamental investment
restrictions which are enumerated in detail in Part B and which may not be
changed unless authorized by an investor vote. 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 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.
Item 5. Management of the Portfolio
The Portfolio is organized as a trust under the laws of the State
of New York. The Portfolio intends to comply with all applicable Federal
and state securities laws.
Investment Adviser. The Portfolio engages BMR, a wholly-owned
subsidiary of Eaton Vance Management ("Eaton Vance"), as its investment
adviser. Eaton Vance, its affiliates and its predecessor companies have
been managing assets of individuals and institutions since 1924 and
managing investment companies since 1931.
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 at March 31, 1995, the Portfolio had net assets of $220,628.
For the period from the start of business, November 11, 1994, to March 31,
1995, the Portfolio, absent a fee reduction, would have paid BMR advisory
fees equivalent to 0.45% (annualized) of the Portfolio's average daily net
assets for such period. To enhance the net income of the Portfolio, BMR
made a reduction of its advisory fee in the full amount of such fee, and
BMR was allocated $1,160 of expenses related to the operation of the
Portfolio.
BMR 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.
William H. Ahern has acted as the portfolio manager of the
Portfolio since the Portfolio commenced operations. He has been an
Assistant Vice President of Eaton Vance since 1994 and an employee since
1989.
Municipal obligations, including Virginia obligations, 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 which will 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 investment
companies sponsored by BMR or Eaton Vance as a factor in the selection of
firms to execute portfolio transactions.
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
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.
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Item 6. Capital Stock and Other Securities
The Portfolio is organized as a trust under the laws of the State
of New York and intends to be treated as a partnership for Federal tax
purposes. Under the Declaration of Trust, the Trustees are authorized to
issue interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments
in the Portfolio may not be transferred, but an investor may withdraw all
or any portion of its investment at any time at net asset value. Investors
in the Portfolio will each be liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss
on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of any investor in the
Portfolio unless either the remaining investors, by unanimous vote at a
meeting of such investors, or a majority of the Trustees of the Portfolio,
by written instrument consented to by all investors, agree to continue the
business of the Portfolio. This provision is consistent with the treatment
of the Portfolio as a partnership for Federal income tax purposes.
Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable by the Portfolio, except as
set forth above. The Portfolio is not required and has no current
intention to hold annual meetings of investors, but the Portfolio may hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Changes in
fundamental policies or restrictions will be submitted to investors for
approval. The investment objective and all nonfundamental investment
policies of the Portfolio may be changed by the Trustees of the Portfolio
without obtaining the approval of the investors in the Portfolio.
Investors have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified
number of investors) the right to communicate with other investors in
connection with requesting a meeting of investors for the purpose of
removing one or more Trustees. Any Trustee may be removed by the
affirmative vote of holders of two-thirds of the interests in the
Portfolio.
Information regarding pooled investment entities or funds which
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
which have large or institutional investors.
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As of June 30, 1995, EV Marathon Virginia Limited Maturity Tax
Free Fund, a series of Eaton Vance Investment Trust, and Eaton Vance, a
Massachusetts business trust and a wholly-owned subsidiary of EVC,
controlled the Portfolio by virtue of owning approximately 62.8% and
37.2%, respectively, of the outstanding voting securities of the
Portfolio.
The net asset value of the Portfolio is determined each day on
which the New York Stock Exchange (the "Exchange") is open for trading
("Portfolio Business Day"). This determination is made each Portfolio
Business Day as of the close of regular trading on the Exchange (currently
4:00 p.m., New York time) (the "Portfolio Valuation Time").
Each investor in the Portfolio may add to or reduce its
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 represents that investor's share of the aggregate interest in
the Portfolio on such prior day. Any additions or withdrawals for the
current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which
is the value of such investor's investment in the Portfolio as of the
Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in the Portfolio for the current
Portfolio Business Day.
The Portfolio will allocate at least annually among its investors
its net taxable (if any) and tax-exempt 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 instruments are intended to comply with the
requirements of the Code and the regulations promulgated thereunder.
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It is intended that the Portfolio's assets and income will be
managed in such a way that an investor in the Portfolio that seeks to
qualify as a regulated investment company ("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 price interests in
the Portfolio on the following business holidays: New Year's Day,
Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Portfolio's net asset value is computed in accordance with procedures
established by the Portfolio's Trustees.
The Portfolio's net asset value is determined by Investors Bank &
Trust Company (as custodian and agent for the Portfolio) based on market
or fair value in the manner authorized by the Trustees of the Portfolio.
The net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Inasmuch as the market for
Virginia obligations is a dealer market with no central trading location
or continuous quotation system, it is not feasible to obtain last
transaction prices for most Virginia obligations held by the Portfolio,
and such obligations, including those purchased on a when-issued basis,
will normally be valued on the basis of 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. Taxable obligations for which price
quotations are readily available normally will be valued at the mean
between the latest available bid and asked prices. Open futures positions
on debt securities are valued at the most recent settlement prices unless
such price does not reflect the fair value of the contract, in which case
the positions will be valued by or at the direction of the Trustees of the
Portfolio. Other assets are valued at fair value using methods determined
in good faith by or at the direction of the Trustees. For further
information regarding the valuation of the Portfolio's assets, see Part B,
Item 19.
There is no minimum initial or subsequent investment in the
Portfolio. The Portfolio reserves the right to cease accepting investments
at any time or to reject any investment order.
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc. ("EVD"). The principal business address of EVD is 24
Federal Street, Boston, Massachusetts 02110. EVD receives no compensation
for serving as the placement agent for the Portfolio.
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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
Securities and Exchange Commission a notification of election on Form N-
18F-1 committing to pay in cash all requests for withdrawals by any
investor, limited in amount with respect to such investor during any 90
day period to the lesser of (a) $250,000 or (b) 1% of the net asset value
of the Portfolio at the beginning of such period.
Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds
postponed during any period in which the Exchange is closed (other than
weekends or holidays) or trading on the Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists, or
during any other period permitted by order of the Commission for the
protection of investors.
Item 9. Pending Legal Proceedings
Not applicable.
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PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
Page
General Information and History . . . . . . . . . . . . . . B-1
Investment Objectives and Policies . . . . . . . . . . . . B-1
Management of the Portfolio . . . . . . . . . . . . . . . . B-13
Control Persons and Principal Holder of Securities . . . . B-16
Investment Advisory and Other Services . . . . . . . . . . B-16
Brokerage Allocation and Other Practices . . . . . . . . . B-19
Capital Stock and Other Securities . . . . . . . . . . . . B-21
Purchase, Redemption and Pricing of Securities . . . . . . B-23
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . B-23
Underwriters . . . . . . . . . . . . . . . . . . . . . . . B-26
Calculation of Performance Data . . . . . . . . . . . . . . B-26
Financial Statements . . . . . . . . . . . . . . . . . . . B-26
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . a-1
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objectives and Policies.
Part A contains additional information about the investment
objective and policies of the Virginia Limited Maturity Tax Free 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.
Virginia Obligations
As used in this Part B, the term "Virginia obligations" refers to
debt obligations issued by the Commonwealth of Virginia and its political
subdivisions (for example, counties, cities, towns, districts and
authorities) and the governments of Puerto Rico, the U.S. Virgin Islands
and Guam, the interest on which is exempt from regular Federal income tax
and Virginia State personal income taxes. In general, there are three
categories of Virginia obligations the interest on which is exempt from
Federal income tax and is not a tax preference item for purposes of the
Federal alternative minimum tax: (i) certain "public purpose" obligations
(whenever issued), which include obligations issued directly by state and
local governments or their agencies to fulfill essential governmental
functions; (ii) certain obligations issued before August 8, 1986 for the
benefit of non-governmental persons or entities; and (iii) certain
"private activity bonds" issued after August 7, 1986 which include
"qualified Section 501(c)(3) bonds" or refundings of certain obligations
included in the second category. In assessing the Federal income tax
treatment of interest on any such obligation, the Portfolio will generally
rely on an opinion of the issuer's counsel (when available) and will not
undertake any independent verification of the basis for the opinion. Such
bonds are issued to obtain funds for various public and private purposes.
The two principal classifications of municipal bonds are "general
obligation" bonds and "revenue" bonds.
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Interest on certain "private activity bonds" issued after August
7, 1986 is exempt from regular Federal income tax, but such interest is
treated as a tax preference item that could subject the recipient to or
increase the recipient's liability for the Federal alternative minimum
tax. It should be noted that, for a corporate holder (other than a
regulated investment company) of an interest in the Portfolio, interest on
all Virginia obligations (whenever issued) is included in "adjusted
current earnings" for purposes of the Federal alternative minimum tax as
applied to corporations (only to the extent not already included in
alternative minimum taxable income as income attributable to private
activity bonds).
Market discount on long-term tax-exempt municipal obligations
(i.e., obligations with a term of more than one year) purchased in the
secondary market after April 30, 1993 is taxable as ordinary income. A
long-term debt obligation is generally treated as acquired at a market
discount if the secondary market purchase price is less than (i) the
stated principal amount payable at maturity, in the case of an obligation
that does not have original issue discount or (ii) in the case of an
obligation that does have original issue discount, the sum of the issue
price and any original issue discount that accrued before the obligation
was purchased, subject to a de minimus amount.
Issuers of general obligation bonds include states, counties,
cities, towns and regional districts. The proceeds of these obligations
are used to fund a wide range of public projects including the
construction or improvement of schools, highways and roads, water and
sewer systems and a variety of other public purposes. The basic security
of general obligation bonds is the issuer's pledge of its faith, credit
and taxing power for the payment of principal and interest. The taxes that
can be levied for the payment of debt service may be limited or unlimited
as to rate and amount.
The principal security for a revenue bond is generally the net
revenues derived from a particular facility or group of facilities or, in
some cases, from the proceeds of a special excise or other specific
revenue source. Revenue bonds have been issued to fund a wide variety of
capital projects including: electric, gas, water, sewer and solid waste
disposal systems; highways, bridges and tunnels; port, airport and parking
facilities; transportation systems; housing facilities, colleges and
universities and hospitals. Although the principal security behind these
bonds varies widely, many provide additional security in the form of a
debt service reserve fund whose monies may be used to make principal and
interest payments on the issuer's obligations. Housing finance authorities
have a wide range of security including partially or fully insured, rent
subsidized and/or collateralized mortgages, and/or the net revenues from
housing or other public projects. In addition to a debt service reserve
fund, some authorities provide further security in the form of a state's
ability (without legal obligation) to make up deficiencies in the debt
service reserve fund. Lease rental revenue bonds issued by a state or
local authority for capital projects are normally secured by annual lease
rental payments from the state or locality to the authority sufficient to
cover debt service on the authority's obligations. Such payments are
usually subject to annual appropriations by the state or locality.
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Industrial development and pollution control bonds are in most
cases revenue bonds and are generally not secured by the taxing power of
the municipality, but are usually secured by the revenues derived by the
authority from payments of the industrial user or users.
The Portfolio may on occasion acquire revenue bonds which carry
warrants or similar rights covering equity securities. Such warrants or
rights may be held indefinitely, but if exercised, the Portfolio
anticipates that it would, under normal circumstances, dispose of any
equity securities so acquired within a reasonable period of time.
While most municipal bonds pay a fixed rate of interest semi-
annually in cash, there are exceptions. Some bonds pay no periodic cash
interest, but rather make a single payment at maturity representing both
principal and interest. Bonds may be issued or subsequently offered with
interest coupons materially greater or less than those then prevailing,
with price adjustments reflecting such deviation.
The obligations of any person or entity to pay the principal of
and interest on a Virginia obligation are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Federal Bankruptcy Act, and laws, if any, which may
be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints
upon enforcement of such obligations. There is also the possibility that
as a result of litigation or other conditions the power or ability of any
person or entity to pay when due principal of and interest on a municipal
obligation may be materially affected. There have been recent instances of
defaults and bankruptcies involving municipal obligations which were not
foreseen by the financial and investment communities. The Portfolio will
take whatever action it considers appropriate in the event of anticipated
financial difficulties, default or bankruptcy of either the issuer of any
municipal obligation or of the underlying source of funds for debt
service. Such action may include retaining the services of various persons
or firms (including affiliates of the Investment Adviser) to evaluate or
protect any real estate, facilities or other assets securing any such
obligation or acquired by the Portfolio as a result of any such event, and
the Portfolio may also manage (or engage other persons to manage) or
otherwise deal with any real estate, facilities or other assets so
acquired. The Portfolio anticipates that real estate consulting and
management services may be required with respect to properties securing
various municipal obligations in its portfolio or subsequently acquired by
the Portfolio. The Portfolio will incur additional expenditures in taking
protective action with respect to portfolio obligations in default and
assets securing such obligations.
The yields on Virginia obligations will be dependent on a variety
of factors, including purposes of issue and source of funds for repayment,
general money market conditions, general conditions of the municipal bond
market, size of a particular offering, maturity of the obligation and
rating of the issue. The ratings of Moody's, S&P and Fitch represent their
opinions as to the quality of the obligations which they undertake to
rate. It should be emphasized, however, that ratings are based on judgment
and are not absolute standards of quality. Consequently, Virginia
obligations with the same maturity, coupon and rating may have different
yields while obligations of the same maturity and coupon with different
ratings may have the same yield. In addition, the market price of such
obligations will normally fluctuate with changes in interest rates, and
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<PAGE>
therefore the net asset value of the Portfolio will be affected by such
changes.
Risks of Concentration
Virginia Obligations. The following information as to certain
Virginia considerations is given to investors in view of the Portfolio's
policy of concentrating its investments in Virginia issuers. Such
information is derived from sources that are generally available to
investors and is believed to be accurate. Such information constitutes
only a brief summary, does not purport to be a complete description and is
based on information from official statements relating to securities
offerings of Virginia issuers. The Portfolio has not independently
verified this information.
The Commonwealth of Virginia has had a tradition of low debt, and
a large proportion of its general obligation bonds has been supported by
particular revenue-producing projects. However, a trend towards more use
of non-general obligation debt, which is not subject to constitutional
limits on borrowing, is now changing the Commonwealth's debt profile. In
recent years, the Commonwealth has expanded its limited obligation
borrowings through various financing vehicles such as the Virginia Public
Building Authority and the Virginia College Building Authority, and has
embarked upon a substantial transportation bonding program to which
certain increases in retail sales and motor vehicle-related taxes enacted
in 1986 are dedicated. The General Fund is the Commonwealth's major
operating fund and accounts for about half of Commonwealth expenditures.
It covers all functions except highways and Federal grant disbursements,
for which there are special revenue funds.
While the Commonwealth has had a long history of sound financial
operations, variations of a cyclical nature have occurred during the past
several years. During fiscal year 1992, financial operations were
somewhat more favorable than expected. Revenues of $5.6 billion exceeded
expenditures by approximately $150 million with $44 million in increased
revenues and the balance in decreased expenditures ordered by the Governor
in December of 1991. The closing balance at June 30, 1992 was $195.1
million, of which $142.3 million will be reappropriated, leaving $52.8
million as an unreserved, undesignated balance, the first such balance in
four years. The fiscal 1993 ending balance for the General Fund was
$331.8 million of which $59.7 million is unreserved, undesignated.
Revenues for the 1993 fiscal year were 8.9% higher than fiscal year 1992,
a $103 million increase. At the close of the biennium ending June 30,
1994, the Fund balance amounted to $518.7 million of which $81 million was
reserved, including $79.9 million for the Revenue Stabilization Fund.
Virginia's economy is generally affected by economic trends
throughout the country and in the Mid-Atlantic region, and it is
particularly influenced by Federal civilian and military installations and
the growth of suburban communities around Washington, D.C. Also
significant to the economy of Virginia are manufacturing (such as
electronic equipment, shipbuilding, and chemical products), minerals
(chiefly coal), service sector occupations (including banking and
insurance), agriculture and tourism. Unemployment rates are typically
below the national average, but because of a large military and civilian
government employment component, and the related civilian employment, a
B - 4
<PAGE>
substantial decrease in defense or other governmental spending could have
a material adverse effect on both the unemployment rate and the economy of
the Commonwealth in general.
Obligations of Puerto Rico, the U.S. Virgin Islands and Guam.
Subject to the Portfolio's investment policies as set forth in Part A, the
Portfolio may invest in the obligations of the governments of Puerto Rico,
the U.S. Virgin Islands and Guam. Accordingly, the Portfolio may be
adversely affected by local political and economic conditions and
developments affecting the issuers of such obligations.
Puerto Rico has a diversified economy dominated by the
manufacturing and service sectors. Manufacturing is the largest sector in
terms of gross domestic product and is more diversified than during
earlier phases of Puerto Rico's industrial development. The three largest
sectors of the economy (as a percentage of employment) are services (47%),
government (22%) and manufacturing (16.4%). These three sectors represent
39%, 11% and 39%, respectively, of the gross domestic product. The
service sector is the fastest growing, while the government and
manufacturing sectors have been stagnant for the past five years. The
North American Free Trade Agreement (NAFTA), which became effective
January 1, 1994, could lead to the loss of Puerto Rico's lower salaried or
labor intensive jobs to Mexico. The February, 1995 unemployment rate was
12.5%, down from 16% for 1994.
The Commonwealth of Puerto Rico exercises virtually the same
control over its internal affairs as do the fifty states; however, it
differs from the states in its relationship with the Federal government.
Most Federal taxes, except those such as social security taxes that are
imposed by mutual consent, are not levied in Puerto Rico. However, in
conjunction with the 1993 U.S. budget plan, Section 936 of the Code was
amended and provided for two alternative limitations to the Section 936
credit. The first option will limit the credit against such income to 40%
of the credit allowable under current law, with a five year phase-in
period starting at 60% of the allowable credit. The second option is a
wage and depreciation based credit. The reduction of the tax benefits to
those U.S. companies with operations in Puerto Rico may lead to slower
growth in the future. There can be no assurance that these modifications
will not lead to a weakened economy, a lower rating on Puerto Rico's debt
or lower prices for Puerto Rican bonds that may be held by the Portfolio.
Puerto Rico's financial reporting was first conformed to
generally accepted accounting principles in fiscal 1990. Nonrecurring
revenues have been used frequently to balance recent years' budgets. In
November, 1993 Puerto Ricans voted on whether they wished to retain their
Commonwealth status, become a state or establish an independent nation.
The measure was defeated, with 48.5% voting to remain a Commonwealth, 46%
voting for statehood and 4% voting for independence. Retaining
Commonwealth status leaves intact the current relationship with the
Federal government. There can be no assurance that the statehood issue
will not be brought to a vote in the future. A successful statehood vote
in Puerto Rico would then require the U.S. Congress to ratify the
election.
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The United States Virgin Islands (USVI) are located
approximately 1,100 miles east-southeast of Miami and are made up of St.
Croix, St. Thomas and St. John. Population, after reaching a peak of
110,800 in 1985, declined to 101,809 in 1990. The economy is heavily
reliant on the tourism industry, with roughly 43% of non-agricultural
employment in tourist-related trade and services. As of April, 1993,
unemployment stood at 2.7%. The tourism industry is economically
sensitive and would likely be adversely affected by a recession in either
the United States or Europe.
An important component of the USVI revenue base is the Federal
excise tax on rum exports. Tax revenues rebated by the Federal government
to the USVI provide the primary security of many outstanding USVI bonds.
Since more than 90% of the rum distilled in the USVI is distilled at one
plant, any interruption in its operations (as occurred after Hurricane
Hugo in 1989) would adversely affect these revenues. Consequently, there
can be no assurance that rum exports to the United States and the rebate
of tax revenues to the USVI will continue at their present levels. The
preferential tariff treatment the USVI rum industry currently enjoys could
be reduced under NAFTA. Increased competition from Mexican rum producers
could reduce USVI rum imported to the U.S., decreasing excise tax revenues
generated. The USVI experienced budget deficits in fiscal years 1989 and
1990: in 1989 due to wage settlements with the unionized government
employees, and in 1990 as a result of Hurricane Hugo. The USVI recorded a
small surplus in fiscal year 1991. At the end of fiscal 1992, the last
year for which results are available, the USVI had an unreserved General
Fund deficit of approximately $8.31 million, or approximately 2.1% of
expenditures. In order to close a forecasted fiscal 1994 revenue gap of
$45.6 million, the Department of Finance has proposed several tax
increases and fund transfers. There is currently no rated, unenhanced
U.S. Virgin Islands debt outstanding.
Guam, an unincorporated U.S. territory, is located 1,500 miles
southeast of Tokyo. Population, 133,000 in 1990, was up 26% from the 1980
census level. The U.S. military is a key component of Guam's economy.
The Federal government directly comprises more than 10% of the employment
base, with a substantial component of the service sector to support these
personnel. Guam is expected to benefit from the closure of the Subic Bay
Naval Base and the Clark Air Force Base in the Philippines. The Naval Air
Station, one of several U.S. military facilities on the island, has been
slated for closure by the Defense Base Closure and Realignment Committee;
however, the administration plans to use these facilities to expand the
Island's commercial airport. Guam is also heavily reliant on tourists,
particularly the Japanese. Unemployment was 3.2% in 1991. For 1994, the
financial position of Guam has weakened further as it incurred an
unaudited General Fund operating deficit. The administration has taken
steps to improve its financial position; however, there are no guarantees
that an improvement will be realized. Guam's general obligation debt is
rated Baa by Moody's.
Obligations of Particular Types of Issuers. The Portfolio may
invest 25% or more of its total assets in Virginia obligations of the same
type. There could be economic, business or political developments which
might affect all Virginia obligations of a similar type. In particular,
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<PAGE>
investments in the industrial revenue bonds listed above might involve
without limitation the following risks.
Hospital bond ratings are often based on feasibility studies
which contain projections of expenses, revenues and occupancy levels.
Among the influences affecting a hospital's gross receipts and net income
available to service its debt are demand for hospital services, the
ability of the hospital to provide the services required, management
capabilities, economic developments in the service area, efforts by
insurers and government agencies to limit rates and expenses, confidence
in the hospital, service area economic developments, competition,
availability and expense of malpractice insurance, Medicaid and Medicare
funding and possible Federal legislation limiting the rates of increase of
hospital charges.
Electric utilities face problems in financing large construction
programs in an inflationary period, cost increases and delay occasioned by
safety and environmental considerations (particularly with respect to
nuclear facilities), difficulty in obtaining fuel at reasonable prices,
and in achieving timely and adequate rate relief from regulatory
commissions, effects of energy conservation and limitations on the
capacity of the capital market to absorb utility debt.
Pollution control and other industrial development bonds are
issued by state or local agencies to finance various projects, including
those of domestic steel producers, and may be backed solely by agreements
with such companies. Domestic steel companies are expected to suffer the
consequences of such adverse trends as high labor costs, high foreign
imports encouraged by foreign productivity increases and a strong U.S.
dollar, and other cost pressures such as those imposed by anti-pollution
legislation. Domestic steel capacity is being reduced currently by large-
scale plant closings and this period of rationalization may not end until
further legislative protection is provided through tariff price supports
or mandatory import quotas, such as those recently enacted for certain
specialty steel products.
Life care facilities are an alternative form of long-term housing
for the elderly which offer residents the independence of a condominium
life style and, if needed, the comprehensive care of nursing home
services. Bonds to finance these facilities have been issued by various
state industrial development authorities. Because the bonds are normally
secured only by the revenues of each facility and not by state or local
government tax payments, they are subject to a wide variety of risks.
Primarily, the projects must maintain adequate occupancy levels to be able
to provide revenues sufficient to meet debt service payments. Moreover,
because a portion of housing, medical care and other services may be
financed by an initial deposit, it is important that the facility maintain
adequate financial reserves to secure estimated actuarial liabilities. The
ability of management to accurately forecast inflationary cost pressures
is an important factor in this process. The facilities may also be
affected adversely by regulatory cost restrictions applied to health care
delivery in general, particularly state regulations or changes in Medicare
and Medicaid payments or qualifications, or restrictions imposed by
medical insurance companies. They may also face competition from
alternative health care or conventional housing facilities in the private
or public sector.
Zero Coupon Bonds
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Zero coupon bonds are debt obligations which do not require the
periodic payment of interest and 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 at a rate of
interest reflecting the market rate of the security at the time of
issuance. Zero coupon bonds 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.
Insurance
Insured Virginia obligations held by the Portfolio (if any) will
be insured as to their scheduled payment of principal and interest under
either (i) an insurance policy obtained by the issuer or underwriter of
the obligation at the time of its original issuance or (ii) an insurance
policy obtained by the Portfolio or a third party subsequent to the
obligation's original issuance (which may not be reflected in the
obligation's market value). In either event such insurance may provide
that in the event of nonpayment of interest or principal when due with
respect to an insured obligation, the insurer is not required to make such
payment until a specified time has lapsed (which may be 30 days or more
after notice).
Credit Quality
The Portfolio is dependent on the Investment Adviser's judgment,
analysis and experience in evaluating the quality of Virginia obligations.
In evaluating the credit quality of a particular issue, when rated or
unrated, the Investment Adviser will normally take into consideration,
among other things, the financial resources of the issuer (or, as
appropriate, of the underlying source of funds for debt service), its
sensitivity to economic conditions and trends, any operating history of
and the community support for the facility financed by the issuer, the
ability of the issuer's management and regulatory matters. The Investment
Adviser will attempt to reduce the risks of investing in the lowest
investment grade, below investment grade and comparable unrated
obligations through active portfolio management, credit analysis and
attention to current developments and trends in the economy and the
financial markets.
See "Portfolio of Investments" in the audited financial
statements of the Portfolio incorporated by reference into this Part B
with respect to any defaulted obligations held by the Portfolio.
Short-Term Trading
The Portfolio may sell securities in anticipation of a market
decline (a rise in interest rates) or purchase and later sell securities
in anticipation of a market rise (a decline in interest rates). 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 Virginia obligations or changes in the investment
objectives of investors. Such trading may be expected to increase the
portfolio turnover rate and the expenses incurred in connection with such
trading. The Portfolio anticipates that its annual portfolio turnover rate
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will generally not exceed 100% (excluding turnover of securities having
maturity of one year or less).
Municipal Leases
The Portfolio may invest in municipal leases and participation
therein, which arrangements frequently involve special risks. Municipal
leases are obligations in the form of a lease or installment purchase
arrangement which are issued by a state or local government to acquire
equipment and facilities. Interest income from such obligations is
generally exempt from local and state taxes in the state of issuance.
"Participation" in such leases are undivided interests in a portion of the
total obligation. Participation entitle their holders to receive a pro
rata share of all payments under the lease. A trustee is usually
responsible for administering the terms of the participation and enforcing
the participants' rights in the underlying lease. Leases and installment
purchase or conditional sale contracts (which normally provide for title
to the leased asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and
equipment without meeting the constitutional and statutory requirements
for the issuance of debt. State debt-issuance limitations are deemed to be
inapplicable because of the inclusion in many leases or contracts of "non-
appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless
money is appropriated for such purpose by the appropriate legislative body
on a yearly or other periodic basis. Such arrangements are, therefore,
subject to the risk that the governmental issuer will not appropriate
funds for lease payments.
Certain municipal lease obligations owned by the Portfolio may be
deemed illiquid for purposes of the Portfolio's 15% limitation on
investing in illiquid securities, unless determined by the Investment
Adviser, pursuant to guidelines adopted by the Trustees, to be liquid
securities for purposes of such limitation. In determining the liquidity
of municipal lease obligations, the Investment Adviser will consider a
variety of factors including: (1) the willingness of dealers to bid for
the security; (2) the number of dealers willing to purchase or sell the
obligation and the number of other potential buyers; (3) the frequency of
trades and quotes for the obligation; and (4) the nature of the
marketplace trades. In addition, the Investment Adviser will consider
factors unique to particular lease obligations affecting the marketability
thereof. These include the general creditworthiness of the municipality,
the importance of the property covered by the lease to the municipality,
and the likelihood that the marketability of the obligation will be
maintained throughout the time the obligation is held by the Portfolio. In
the event the Portfolio acquires an unrated municipal lease obligation,
the Investment Adviser will be responsible for determining the credit
quality of such obligation on an ongoing basis, including an assessment of
the likelihood that the lease may or may not be canceled.
Securities Lending
The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers.
Under present regulatory policies of the Securities and Exchange
Commission (the "Commission"), such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current
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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
loans justifies the attendant risk. Distributions of any income realized
by the Portfolio from securities loans will be taxable. 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. The Portfolio has no present intention of engaging in
securities lending.
When-Issued Securities
New issues of Virginia and other types of municipal obligations
are sometimes offered on a "when-issued" basis, that is, delivery and
payment for the securities normally take place within a specified number
of days after the date of the Portfolio's commitment and are subject to
certain conditions such as the issuance of satisfactory legal opinions.
The Portfolio may also purchase securities on a when-issued basis pursuant
to refunding contracts in connection with the refinancing of an issuer's
outstanding indebtedness. Refunding contracts generally require the issuer
to sell and the Portfolio to buy such securities on a settlement date that
could be several months or several years in the future.
The Portfolio will make commitments to purchase when-issued
securities only with the intention of actually acquiring the securities,
but may sell such securities before the settlement date if it is deemed
advisable as a matter of investment strategy. The payment obligation and
the interest rate that will be received on the securities are fixed at the
time the Portfolio enters into the purchase commitment. The Portfolio's
custodian will segregate cash or high grade liquid debt securities in a
separate account of the Portfolio in an amount at least equal to the when-
issued commitments. If the value of the securities placed in the separate
account declines, additional cash or high grade liquid debt securities
will be placed in the account on a daily basis so that the value of the
account will at least equal the amount of the Portfolio's when-issued
commitments. When the Portfolio commits to purchase a security on a when-
issued basis, it records the transaction and reflects the value of the
security in determining its net asset value. Securities purchased on a
when-issued basis and the securities held by the Portfolio are subject to
changes in value based upon the perception of the creditworthiness of the
issuer and changes in the level of interest rates (i.e., appreciation when
interest rates decline and depreciation when interest rates rise).
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Therefore, to the extent that the Portfolio remains substantially fully
invested at the same time that it has purchased securities on a when-
issued basis, there will be greater fluctuations in the Portfolio's net
asset value than if it solely set aside cash to pay for when-issued
securities.
Floating or Variable Rate Obligations
The Portfolio may purchase floating or variable rate obligations.
Floating or variable rate instruments provide for adjustments in the
interest rate at specified intervals (weekly, monthly, semi-annually,
etc.). The revised rates are usually set at the issuer's discretion, in
which case the investor normally enjoys the right to "put" the security
back to the issuer or the issuer's agent. Rate revisions may alternatively
be determined by formula or in some other contractual fashion. Floating or
variable rate obligations normally provide that the holder can demand
payment of the obligation on short notice at par with accrued interest and
are frequently secured by letters of credit or other credit support
arrangements provided by banks. To the extent that such letters of credit
or other arrangements constitute an unconditional guarantee of the
issuer's obligations, a bank may be treated as the issuer of a security
for the purpose of complying with the diversification requirements set
forth in Section 5(b) of the Investment Company Act of 1940 (the "1940
Act") and Rule 5b-2 thereunder. The Portfolio would anticipate using these
obligations as cash equivalents pending longer term investment of its
funds.
Redemption, Demand and Put Features
Most municipal bonds have a fixed final maturity date. However,
it is commonplace for the issuer to reserve the right to call the bond
earlier. Also, some bonds may have "put" or "demand" features that allow
early redemption by the bondholder. Interest income generated by certain
bonds having demand features may not qualify as tax-exempt interest.
Longer term fixed-rate bonds may give the holder a right to request
redemption at certain times (often annually after the lapse of an
intermediate term). 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 may retain the bond if interest rates
decline. By acquiring these kinds of obligations the Portfolio obtains the
contractual right to require the issuer of the security or some other
person (other than a broker or dealer) to purchase the security at an
agreed upon price, which right is contained in the obligation itself
rather than in a separate agreement with the seller or some other person.
Because this right is assignable with the security, which is readily
marketable and valued in the customary manner, the Portfolio will not
assign any separate value to such right.
Liquidity and Protective Put Options
The Portfolio may also enter into a separate agreement with the
seller of the security or some other person granting the Portfolio the
right to put the security to the seller thereof or the other person at an
agreed upon price. The Portfolio intends to limit this type of transaction
to institutions (such as banks or securities dealers) which the Investment
Adviser believes present minimal credit risks and would engage in this
type of transaction to facilitate portfolio liquidity or (if the seller so
agrees) to hedge against rising interest rates. There is no assurance that
this kind of put option will be available to the Portfolio or that selling
institutions will be willing to permit the Portfolio to exercise a put to
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hedge against rising interest rates. A separate put option may not be
marketable or otherwise assignable, and sale of the security to a third
party or lapse of time with the put unexercised may terminate the right to
exercise the put. The Portfolio does not expect to assign any value to any
separate put option which may be acquired to facilitate portfolio
liquidity, inasmuch as the value (if any) of the put will be reflected in
the value assigned to the associated security; any put acquired for
hedging purposes would be valued in good faith under methods or procedures
established by the Trustees after consideration of all relevant factors,
including its expiration date, the price volatility of the associated
security, the difference between the market price of the associated
security and the exercise price of the put, the creditworthiness of the
issuer of the put and the market prices of comparable put options.
Interest income generated by certain bonds having put features may not
qualify as tax-exempt interest.
Futures Contracts
A change in the level of interest rates 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, the Portfolio
may enter into (i) futures contracts for the purchase or sale of debt
securities, (ii) futures contracts on securities indices and (iii) futures
contracts on other financial instruments and indices. 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") and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant exchange.
The Portfolio may purchase and write call and put options on futures
contracts which are traded on a United States or foreign exchange or board
of trade.
The Portfolio will engage in futures and related options
transactions for bona fide 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 are
substantially related to price fluctuations in securities held by the
Portfolio or which it expects to purchase. The Portfolio's futures
transactions will be entered into for traditional hedging purposes -- that
is, futures 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 corresponding purchase of securities.
The Portfolio will engage in transactions in futures and related options
contracts only to the extent such transactions are consistent with the
requirements of the 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").
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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.
Short-Term Obligations
Although the Portfolio will normally attempt to invest
substantially all of its assets in Virginia obligations, the Portfolio
may, under normal circumstances, invest up to 20% of its net assets in
short-term obligations the interest on which is subject to regular Federal
income tax, is a tax preference item for purposes of the Federal
alternative minimum tax, and/or is subject to Virginia State personal
income taxes. Although the Portfolio is permitted to invest up to 20% of
its assets in short-term taxable obligations under normal market
conditions, the Portfolio does not expect to invest more than 5% of its
assets in such securities under such conditions. Such short-term taxable
obligations may include, but are not limited to, certificates of deposit,
commercial paper, short-term notes and obligations issued or guaranteed by
the U.S. Government or any of its agencies or instrumentalities. During
periods of adverse market conditions, the Portfolio may temporarily invest
more than 20% of its assets in such short-term taxable obligations, all of
which will be high quality.
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 held by 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.
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 or describes a policy regarding
quality standards, such percentage limitation or standard shall be
determined immediately after and as a result of the Portfolio's
acquisition of such security or other asset. Accordingly, any later
increase or decrease resulting from a change in values, assets or other
circumstances, other than a subsequent rating change below investment
grade made by a rating service, will not compel the Portfolio to dispose
of such security or other asset.
The Portfolio has adopted the following investment restrictions
which may not be changed without the approval of the holders of a
"majority of the outstanding voting securities" of the Portfolio, which as
used in this Part B means the lesser of (a) 67% or more of the outstanding
voting securities of the Portfolio present or represented by proxy at a
meeting if the holders of more than 50% of the outstanding voting
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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 1940 Act. The Portfolio may not:
(1) 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 or maintenance margin in connection with futures contracts or
related options transactions is not considered the purchase of a security
on margin;
(2) Borrow money or issue senior securities except as permitted
by the Investment Company Act of 1940;
(3) 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;
(4) Purchase or sell real estate (including limited partnership
interests in real estate, but excluding readily marketable interests in
real estate investment trusts or readily marketable securities of
companies which invest or deal in real estate or securities which are
secured by real estate);
(5) Purchase or sell physical commodities or contracts for the
purchase or sale of physical commodities; or
(6) Make loans to any person except by (a) the acquisition of
debt instruments and making portfolio investments, (b) entering into
repurchase agreements, and (c) lending portfolio securities.
For purposes of the investment restrictions listed above, the
determination of the "issuer" of a municipal obligation which is not a
general obligation bond will be made by the Investment Adviser on the
basis of the characteristics of the obligation and other relevant factors,
the most significant of which is the source of funds committed to meeting
interest and principal payments of such obligation.
The Portfolio has adopted the following investment policies which
may be changed by the Portfolio without approval of its investors. As a
matter of nonfundamental policy, the Portfolio may not: (a) engage in
options, futures or forward transactions if more than 5% of its net
assets, as measured by the aggregate of the premiums paid by the
Portfolio, would be so invested; (b) make short sales of securities or
maintain a short position, unless at all times when a short position is
open the Portfolio 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; (c) invest more than 15% of its 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; (d)
purchase or retain in its portfolio any securities issued by an issuer any
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of whose officers, directors, trustees or security holders is an officer
or Trustee of the Portfolio or is a member, officer, director or trustee
of any investment adviser of the Portfolio, if after the purchase of the
securities of such issuer by the Portfolio one or more of such persons
owns beneficially more than 1/2 of 1% of the shares or securities or both
(all taken at market value) of such issuer and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more
than 5% of such shares or securities or both (all taken at market value);
or (e) 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 which are investors in the
Portfolio, the Portfolio may adopt policies more restrictive than the
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 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
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
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.
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 University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
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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
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
THOMAS J. FETTER (51), President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ROBERT B. MACINTOSH (38), Vice President
Vice President of BMR since August 11, 1992, and of Eaton Vance and EV.
Employee of Eaton Vance since March 8, 1991. Fidelity Investments -
Portfolio Manager (1986-1991). Officer of various investment companies
managed by Eaton Vance or BMR.
WILLIAM H. AHERN (36), Vice President
Assistant Vice President of BMR, Eaton Vance and EV, and an employee of
Eaton Vance since July 17, 1989. Officer of various investment companies
managed by Eaton Vance or BMR. Mr. Hender was elected Vice President of
the Portfolio on June 19, 1995.
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 Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
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JAMES F. ALBAN (33), Assistant Treasurer
Assistant Vice President of BMR since August 11, 1992, and of Eaton Vance
and EV since January 17, 1992, and an employee of Eaton Vance since
September 23, 1991. Tax Consultant and Audit Senior with Deloitte &
Touche (1987-1991). Officer of various investment companies managed by
Eaton Vance or BMR.
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 March 27, 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 Investment Adviser's 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 Investment Adviser.
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 certified public 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):
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Aggregate Compensation Total Compensation
Name from Portfolio from Trust and Fund
---- --------------------- Complex
Donald R. Dwight $0 $135,000(2)
Samuel L. Hayes, III 0 147,500(3)
Norton H. Reamer 0 135,000
John L. Thorndike 0 140,000
Jack L. Treynor 0 140,000
(1) The Eaton Vance fund complex consists of 205 registered
investment companies or series thereof.
(2) Includes $17,500 of deferred compensation.
(3) 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 Trustees
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will
have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular
level of compensation to the Trustee.
The Portfolio'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 Virginia Limited Maturity Tax
Free Fund (the "Marathon Fund"), a series of Eaton Vance Investment Trust,
and Eaton Vance, a Massachusetts business trust and a wholly-owned
subsidiary of EVC, controlled the Portfolio by virtue of owning
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approximately 62.8% and 37.2%, respectively, of the value of the
outstanding interests in the Portfolio. Because the Marathon Fund controls
the Portfolio, it 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 which is an investment company registered under
the 1940 Act would follow the same or a similar practice.
Item 16. Investment Advisory and Other Services
Investment Adviser. The Portfolio engages BMR as its investment
adviser pursuant to an Investment Advisory Agreement dated October 25,
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 determines what securities will be purchased, held
or sold by the Portfolio and what portion, if any, of the Portfolio's
assets will be held uninvested. The Investment Advisory Agreement requires
BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities. The
Portfolio is responsible for all expenses not expressly stated to be
payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and
continuing its existence, (ii) registration of the Portfolio under the
1940 Act, (iii) commissions, fees and other expenses connected with the
acquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of
interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under Federal and state
securities laws and of preparing and printing registration statements or
other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering
and maintaining registrations of the Portfolio and of the Portfolio's
placement agent as broker-dealer or agent under state securities laws,
(ix) expenses of reports and notices to investors and of meetings of
investors and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping for funds, securities and other
investments, keeping of books, accounts and records, and determination of
net asset values, book capital account balances and tax capital account
balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for
all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees
of the Portfolio, (xvii) compensation and expenses of Trustees of the
Portfolio who are not members of the BMR organization, and (xviii) such
nonrecurring items as may arise, including expenses incurred in connection
with litigation, proceedings and claims and the obligation of the
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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
$220,628. For the period from the start of business, November 11, 1994,
to March 31, 1995, BMR would have earned, absent a fee reduction, advisory
fees of $300 (equivalent to 0.45% (annualized) of the Portfolio's average
daily net assets for such period). To enhance the net income of the
Portfolio, BMR made a reduction of its advisory fee in the full amount of
such fee, and BMR was allocated expenses related to the operation of the
Portfolio in the amount of $1,160.
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 of the Portfolio
who are not interested persons of the Portfolio or of BMR cast in person
at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Portfolio or by vote of
a majority of the outstanding voting securities of the Portfolio. The
Agreement may be terminated at any time without penalty on sixty (60)
days' written notice by the Board of Trustees 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
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
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Messrs. Rowland and Brigham owned 15% and 13%, respectively, of such
voting trust receipts. Messrs. Hawkes and Otis are officers or Trustees of
the Portfolio and are members of the EVC, BMR, Eaton Vance and EV
organizations. Messrs. Ahern, Alban, Fetter, MacIntosh, Murphy, O'Connor
and Woodbury and Ms. Sanders are officers of the Portfolio and are also
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, maintains the general ledger of the Portfolio and computes the
daily net asset value of interests in the Portfolio. In such capacity it
attends to details in connection with the sale, exchange, substitution or
transfer of, or other dealings with, the Portfolio's investments, receives
and disburses all funds and performs various other ministerial duties upon
receipt of proper instructions from the Portfolio. IBT charges fees which
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
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
certified public accountants as called for by such Rule. For the period
from the start of business, November 11, 1994, to March 31, 1995, the
Portfolio paid IBT $0.
Independent Certified Public Accountants. Deloitte & Touche LLP,
125 Summer Street, Boston, Massachusetts, are the independent certified
public accountants of the Portfolio, providing audit services, tax return
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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 firms. BMR
uses its best efforts to obtain execution of portfolio security
transactions at prices which are advantageous to the Portfolio and at
reasonably competitive spreads or (when a disclosed commission is being
charged) at reasonably competitive commission rates. In seeking such
execution, BMR will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality,
speed and certainty of effective execution required for the transaction,
the general execution and operational capabilities of the executing firm,
the reputation, reliability, experience and financial condition of the
firm, the value and quality of the services rendered by the firm in this
and other transactions, and the reasonableness of the spread or
commission, if any. Municipal obligations, including Virginia obligations,
purchased and sold by the Portfolio are generally traded in the over-the-
counter market on a net basis (i.e., without commission) through broker-
dealers and banks acting for their own account rather than as brokers, or
otherwise involve transactions directly with the issuer of such
obligations. Such firms attempt to profit from such transactions by buying
at the bid price and selling at the higher asked price of the market for
such obligations, and the difference between the bid and asked price is
customarily referred to as the spread. The Portfolio may also purchase
municipal obligations from underwriters, the cost of which may include
undisclosed fees and concessions to the underwriters. While it is
anticipated that the Portfolio will not pay significant brokerage
commissions in connection with such portfolio security transactions, on
occasion it may be necessary or appropriate to purchase or sell a security
through a broker on an agency basis, in which case the Portfolio will
incur a brokerage commission. Although spreads or commissions on portfolio
security transactions will, in the judgment of BMR, be reasonable in
relation to the value of the services provided, spreads or commissions
exceeding those which another firm might charge may be paid to firms who
were selected to execute transactions on behalf of the Portfolio 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
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related to such services. Brokerage and research services may include
advice as to the value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement); and the "Research Services" referred to in the
next paragraph.
It is a common practice of the investment advisory industry and
of the advisers of investment companies, institutions and other investors
to receive research, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in
the performance of their investment responsibilities ("Research Services")
from broker-dealer firms which execute portfolio transactions for the
clients of such advisers and from third parties with which such broker-
dealers have arrangements. Consistent with this practice, BMR receives
Research Services from many broker-dealer firms with which BMR places the
Portfolio's transactions and from third parties with which these broker-
dealers have arrangements. These Research Services include such matters as
general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions and
recommendations as to the purchase and sale of securities and other
portfolio transactions, financial, industry and trade publications, news
and information services, pricing and quotation equipment and services,
and research oriented computer hardware, software, data bases and
services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may
be relevant and useful for the management of only one client's account or
of a few clients' accounts, or may be useful for the management of merely
a segment of certain clients' accounts, regardless of whether any such
account or accounts paid commissions to the broker-dealer 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 shares of any investment company 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.
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Municipal obligations 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 purchasing municipal obligations 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, November 11, 1994, to March 31, 1995, the
Portfolio paid no brokerage commissions on portfolio transactions.
Item 18. Capital Stock and Other Securities
Under the Portfolio's Declaration of Trust, the Trustees are
authorized to issue interests in the Portfolio. Investors are entitled to
participate pro rata in distributions of taxable income, loss, gain and
credit of the Portfolio. Upon dissolution of the Portfolio, the Trustees
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
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action which may be taken by Holders may be taken without a meeting if
Holders holding more than 50% of all interests entitled to vote (or such
larger proportion thereof as shall be required by any express provision of
the Declaration of Trust of the Portfolio) consent to the action in
writing and the consents are filed with the records of meetings of
Holders.
The Portfolio's Declaration of Trust may be amended by vote of
Holders of more than 50% of all interests in the Portfolio at any meeting
of Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all interests. The Trustees may also amend the Declaration of Trust
(without the vote or consent of Holders) to change the Portfolio's name or
the state or other jurisdiction whose law shall be the governing law, to
supply any omission or cure, correct or supplement any ambiguous,
defective or inconsistent provision, to conform the Declaration of Trust
to applicable Federal law or regulations or to the requirements of the
Internal Revenue Code, or to change, modify or rescind any provision,
provided that such change, modification or rescission is determined by the
Trustees to be necessary or appropriate and not to have a materially
adverse effect on the financial interests of the Holders. No amendment of
the Declaration of Trust which would change any rights with respect to any
Holder's interest in the Portfolio by reducing the amount payable thereon
upon liquidation of the Portfolio may be made, except with the vote or
consent of the Holders of two-thirds of all interests. References in the
Declaration of Trust and in Part A or this Part B to a specified
percentage of, or fraction of, interests in the Portfolio, means Holders
whose combined Book Capital Account balances represent such specified
percentage or fraction of the combined Book Capital Account balance of
all, or a specified group of, Holders.
The Portfolio may merge or consolidate with any other
corporation, association, trust or other organization or may sell or
exchange all or substantially all of its assets upon such terms and
conditions and for such consideration when and as authorized by the
Holders of (a) 67% or more of the interests in the Portfolio present or
represented at the meeting of Holders, if Holders of more than 50% of all
interests are present or represented by proxy, or (b) more than 50% of all
interests, whichever is less. The Portfolio may be terminated (i) by the
affirmative vote of Holders of not less than two-thirds of all interests
at any meeting of Holders or by an instrument in writing without a
meeting, executed by a majority of the Trustees and consented to by
Holders of not less than two-thirds of all interests, or (ii) by the
Trustees by written notice to the Holders.
In accordance with the Declaration of Trust, there normally will
be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event, the Trustees of
the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances, and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust provides that no person shall serve as a
Trustee if investors holding two-thirds of the outstanding interests have
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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 is organized as a trust under the laws of the State
of New York. Investors in the Portfolio will be held personally liable
for its obligations and liabilities, subject, however, to indemnification
by the Portfolio in the event that there is imposed upon an investor a
greater portion of the liabilities and obligations of the Portfolio than
its proportionate interest in the Portfolio. The Portfolio intends to
maintain fidelity and errors and omissions insurance deemed adequate by
the Trustees. Therefore, the risk of an investor incurring financial loss
on account of investor liability is limited to circumstances in which both
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, gains, losses, deductions and tax preference items.
Under Subchapter K of the Code, a partnership is considered to be
either an aggregate of its members or a separate entity depending upon the
factual and legal context in which the question arises. Under the
aggregate approach, each partner is treated as an owner of an undivided
interest in partnership assets and operations. Under the entity approach,
the partnership is treated as a separate entity in which partners have no
direct interest in partnership assets and operations. The Portfolio has
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been advised by tax counsel that, in the case of a Holder that seeks to
qualify as a RIC, the aggregate approach should apply, and each such
Holder should accordingly be deemed to own a proportionate share of each
of the assets of the Portfolio and to be entitled to the gross income of
the Portfolio attributable to that share for purposes of all requirements
of Sections 851(b) and 852(b)(5) of the Code. Further, the Portfolio has
been advised by tax counsel that each Holder that seeks to qualify as a
RIC should be deemed to hold its proportionate share of the Portfolio's
assets for the period the Portfolio has held the assets or for the period
the Holder has been an investor in the Portfolio, whichever is shorter.
Investors should consult their tax advisers regarding whether the entity
or the aggregate approach applies to their investment in the Portfolio in
light of their particular tax status and any special tax rules applicable
to them.
In order to enable a Holder in the Portfolio that is otherwise
eligible to qualify as a RIC, the Portfolio intends to satisfy the
requirements of Subchapter M of the Code relating to sources of income and
diversification of assets as if they were applicable to the Portfolio and
to allocate and permit withdrawals in a manner that will enable a Holder
which is a RIC to comply with those requirements. The Portfolio will
allocate at least annually to each Holder its distributive share of the
Portfolio's net taxable (if any) and tax-exempt 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 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
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immediately prior thereto generally will result in the recognition of gain
to the Holder in the amount of such excess.
The Portfolio may acquire zero coupon or other securities issued
with original issue discount. As the holder of those securities, the
Portfolio must account for the original issue discount (even on municipal
securities) that accrues on the securities during the taxable year, even
if it receives no corresponding payment on the securities during the year.
Because each Holder that is a RIC annually must distribute substantially
all of its investment company taxable income and net tax-exempt income,
including any original issue discount, to qualify for treatment as a RIC,
any such Holder may be required in a particular year to distribute as an
"exempt-interest dividend" an amount that is greater than its pro-
portionate share of the total amount of cash the Portfolio actually
receives. Those distributions will be made from the Holder's cash assets,
if any, or from its proportionate share of the Portfolio's cash assets or
the proceeds of sales of the Portfolio's securities, if necessary. The
Portfolio may realize capital gains or losses from those sales, which
would increase or decrease the investment company taxable income and/or
net capital gain (the excess of net long-term capital gain over net short-
term capital loss) of a Holder that is a RIC. In addition, any such gains
may be realized on the disposition of securities held for less than three
months. Because of the Short-Short Limitation (defined below), any such
gains would reduce the Portfolio's ability to sell other securities, or
options or futures contracts, held for less than three months that it
might wish to sell in the ordinary course of its portfolio management.
Investments in lower rated or unrated securities may present
special tax issues for the Portfolio and hence to 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.
In order for a Holder that is a RIC to be entitled to pay the
tax-exempt interest income the Portfolio allocates to it as
exempt-interest dividends to its shareholders, the Holder must satisfy
certain requirements, including the requirement that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets
consists of obligations the interest on which is excludable from gross
income under Section 103(a) of the Code. The Portfolio intends to
concentrate its investments in such tax-exempt obligations to an extent
that will enable a RIC that invests its investable assets in the Portfolio
to satisfy this 50% requirement.
Interest on certain municipal obligations is treated as a tax
preference item for purposes of the federal alternative minimum tax.
Holders that are required to file federal income tax returns are required
to report tax-exempt interest allocated to them by the Portfolio on such
returns.
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From time to time proposals have been introduced before Congress
for the purpose of restricting or eliminating the Federal income tax
exemption for interest on certain types of municipal obligations, and it
can be expected that similar proposals may be introduced in the future.
Under Federal tax legislation enacted in 1986, the Federal income tax
exemption for interest on certain municipal obligations was eliminated or
restricted. As a result of such legislation, the availability of
municipal obligations for investment by the Portfolio and the value of the
Portfolio may be affected.
In the course of managing its investments, the Portfolio may
realize some short-term and long-term capital gains (and/or losses) as a
result of market transactions, including sales of portfolio securities and
rights to when-issued securities and options and futures transactions.
The Portfolio may also realize taxable income from certain short-term
taxable obligations, securities loans, a portion of original issue
discount with respect to certain stripped municipal obligations or their
stripped coupons and certain realized accrued market discount. Any
allocations of such capital gains or other taxable income to Holders would
be taxable to Holders that are subject to tax. However, it is expected
that such amounts, if any, would normally be insubstantial in relation to
the tax-exempt interest earned by the Portfolio.
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 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
B - 29
<PAGE>
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.
Interest on indebtedness incurred or continued by an investor to
purchase or carry an investment in the Portfolio is not deductible to the
extent it is deemed attributable to the investor's investment, through the
Portfolio, in tax-exempt obligations. Further, persons who are
"substantial users" (or persons related to "substantial users") of
facilities financed by industrial development or private activity bonds
should consult their tax advisers before investing in the Portfolio.
"Substantial user" is defined in applicable Treasury regulations to
include a "non-exempt person" who regularly uses in trade or business a
part of a facility financed from the proceeds of industrial development
bonds and would likely be interpreted to include private activity bonds
issued to finance similar facilities.
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 exemption of interest income for Federal income tax
purposes does not necessarily result in exemption under the income or tax
laws of any state or local taxing authority. The laws of the various
states and local taxing authorities vary with respect to the taxation of
such interest income, as well as to the status of a partnership interest
under state and local tax laws, and each holder of an interest in the
Portfolio is advised to consult his own tax adviser.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Investors should consult
their own tax advisers with respect to special tax rules that may apply in
their particular situations, as well as the state, local or foreign tax
consequences of investing in the Portfolio.
Item 21. Underwriters
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc., which receives no compensation for serving in this
capacity. Investment companies, common and commingled trust funds and
similar organizations and entities may continuously invest in the
Portfolio.
Item 22. Calculation of Performance Data
Not applicable.
Item 23. Financial Statements
The following audited financial statements of the Portfolio,
which are included in the Annual Report to Shareholders of EV Marathon
Virginia Limited Maturity Tax Free Fund for the fiscal year ended March
31, 1995, are incorporated by reference into this Part B and have been so
B - 30
<PAGE>
incorporated in reliance upon the report of Deloitte and Touche LLP,
independent certified public accountants, as experts in accounting and
auditing.
Portfolio of Investments as 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, November 11, 1994, to March 31, 1995
Statement of Changes in Net Assets for the period from the start
of business, November 11, 1994, to March 31, 1995
Supplementary Data for the period from the start of business,
November 11, 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 Virginia Limited Maturity Tax Free Fund for
the fiscal year ended March 31, 1995, as previously filed electronically
with the Securities and Exchange Commission on May 30, 1995 (Accession
Number 0000950146-95-000252).
B - 31
<PAGE>
APPENDIX
Description of Securities Ratings+
Moody's Investors Service, Inc.
Municipal Bonds
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.
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.
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.
---------------
+ The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for
the securities listed. Ratings are generally given to securities at the
time of issuance. While the rating agencies may from time to time
revise such ratings, they undertake no obligation to do so, and the
ratings indicated do not necessarily represent ratings which would be
given to these securities on the date of the Portfolio's fiscal year
end.
a - 1
<PAGE>
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.
Absence of Rating: Where no rating has been assigned or where a rating has
been suspended or withdrawn, it may be for reasons unrelated to the
quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or
companies that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is
not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be
formed; if a bond is called for redemption; or for other reasons.
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.
Municipal Short-Term Obligations
Ratings: Moody's ratings for state and municipal short-term obligations
will be designated Moody's Investment Grade or (MIG). Such rating
recognizes the differences between short term credit risk and long term
risk. Factors effecting the liquidity of the borrower and short term
cyclical elements are critical in short term ratings, while other factors
of major importance in bond risk, long term secular trends for example,
may be less important over the short run.
a - 2
<PAGE>
A short term rating may also be assigned on an issue having a demand
feature, variable rate demand obligation (VRDO). Such ratings will be
designated as VMIG1, SG or if the demand feature is not rated, NR. A short
term rating on issues with demand features are differentiated by the use
of the VMIG1 symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. Additionally, investors should be alert to the fact
that the source of payment may be limited to the external liquidity with
no or limited legal recourse to the issuer in the event the demand is not
met.
Commercial Paper
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 365 days.
Issuers (or supporting institutions) rated Prime-1 or P-1 have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-
1 repayment ability will often be evidenced by many of the following
characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
-- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2
Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Prime-3
Issuers (or supporting institutions) rated Prime-3 (P-3) have an
acceptable ability for repayment of senior short-term obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.
Standard & Poor's Ratings Group
Investment Grade
a - 3
<PAGE>
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the 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.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibit 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. BB indicates the least 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
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
a - 4
<PAGE>
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.
p: The letter "p" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by
the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and
timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment
on the likelihood of, or the risk of default upon failure of such
completion. The investor should exercise his own judgment with respect to
such likelihood and risk.
L: The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit collateral
is insured by the Federal Deposit Insurance Corp. and interest is
adequately collateralized. In the case of certificates of deposit, the
letter "L" indicates that the deposit, combined with other deposits being
held in the same right and capacity, will be honored for principal and
accrued pre-default interest up to the federal insurance limits within 30
days after closing of the insured institution or, in the event that the
deposit is assumed by a successor insured institution, upon maturity.
NR: NR indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Municipal Notes
S&P note ratings reflect the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term
debt rating. The following criteria will be used in making that
assessment:
-- Amortization schedule (the larger the final maturity
relative to other maturities the more likely it will be
treated as a note).
-- Sources of payment (the more dependent the issue is on the
market for its refinancing, the more likely it will be
treated as a note).
Note rating symbols are as follows:
a - 5
<PAGE>
SP-1: Strong capacity to pay principal and interest. Those issues
determined to possess very strong characteristics will be given a plus(+)
designation.
SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of
the notes.
SP-3: Speculative capacity to pay principal and interest.
Commercial Paper
Standard & Poor's commercial paper ratings are a current assessment of the
likelihood of timely payment of debts considered short-term in the
relevant market.
A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with
the numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1: This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B: Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short term debt obligations with doubtful
capacity for payment.
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 had not expired, unless S&P believes
that such payments will be made during such grace period.
Fitch Investors Service, Inc.
Investment Grade Bond Ratings
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA: Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated `AAA'. Because bonds
rated in the `AAA' and `AA' categories are not significantly vulnerable to
a - 6
<PAGE>
foreseeable future developments, short-term debt of these issuers is
generally rated `F-1+'.
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
High Yield Bond Ratings
BB: Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
that could assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC: Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or reorganization of
the obligor. `DDD' represents the highest potential for recovery on these
bonds, and `D' represents the lowest potential for recovery.
Plus (+) or Minus (-): The ratings from AA to C may be modified by the
addition of a plus or minus sign to indicate the relative position of a
credit within the rating category.
NR: Indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful completion
of a project or the occurrence of a specific event.
Investment Grade Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years,
a - 7
<PAGE>
including commercial paper, certificates of deposit, medium-term notes,
and municipal and investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
`F-1+'.
F-2: Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the `F-1+' and `F-1' categories.
F-3: Fair Credit Quality. Issues carrying this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse change could cause these securities to be rated
below investment grade.
* * * * * * * *
Notes: Bonds which are unrated expose the investor to risks with respect
to capacity to pay interest or repay principal which are similar to the
risks of lower-rated 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.
a - 8
<PAGE>
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. Declaration of Trust dated August 10, 1994 filed herewith.
2. By-Laws of the Registrant dated August 10, 1994 filed
herewith.
5. Investment Advisory Agreement between the Registrant and
Boston Management and Research dated October 25, 1994 filed
herewith.
6. Placement Agent Agreement with Eaton Vance Distributors, Inc.
dated October 25, 1994 filed herewith.
8. Custodian Agreement with Investors Bank & Trust Company dated
October 25, 1994 filed herewith.
13. Investment representation letter of Eaton Vance Management
dated August 15, 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)
Title of Class Number of
Record Holders
as of June 30, 1995
Interests 3
Item 27. Indemnification.
Reference is hereby made to Article V of the Registrant's
Declaration of Trust, filed as an Exhibit herewith.
The Trustees and officers of the Registrant and the personnel of
the Registrant's investment adviser are insured under an errors and
omissions liability insurance policy. The Registrant and its officers are
also insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
Item 28. Business and Other Connections.
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
C - 1
<PAGE>
positions with and engage in business for affiliates of the investment
adviser.
Item 29. Principal Underwriters.
Not applicable.
Item 30. Location of Accounts and Records.
All applicable accounts, books and documents required to be
maintained by the Registrant by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder are in the possession and
custody of the Registrant's custodian, Investors Bank & Trust Company, 24
Federal Street, Boston, MA 02110 and 89 South Street, Boston, MA 02111,
and its transfer agent, The Shareholder Services Group, Inc., 53 State
Street, Boston, MA 02104, with the exception of certain corporate
documents and portfolio trading documents which are in the possession and
custody of the Registrant's investment adviser at 24 Federal Street,
Boston, MA 02110. 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 Registrant's investment
adviser.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Not applicable.
C - 2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Amendment No. 1 to the
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Boston and
Commonwealth of Massachusetts on this 24th day of July, 1995.
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
By /s/ Thomas J. Fetter
--------------------
Thomas J. Fetter
President
C - 3
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1. Declaration of Trust dated August 10, 1994
2. By-Laws of the Registrant dated August 10, 1994
5. Investment Advisory Agreement between the Registrant and Boston
Management and Research dated October 25, 1994
6. Placement Agent Agreement with Eaton Vance Distributors, Inc.
dated October 25, 1994
8. Custodian Agreement with Investors Bank & Trust Company dated
October 25, 1994
13. Investment representation letter of Eaton Vance Management dated
August 15, 1994
<PAGE>
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
_______________________
DECLARATION OF TRUST
Dated as of August 10, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--The Trust . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . 1
ARTICLE II--Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Number and Qualification . . . . . . . . . . . . . 3
Section 2.2 Term and Election . . . . . . . . . . . . . . . . 3
Section 2.3 Resignation, Removal and Retirement . . . . . . . 3
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . . . . 4
Section 2.5 Meetings . . . . . . . . . . . . . . . . . . . . . 4
Section 2.6 Officers; Chairman of the Board . . . . . . . . . 5
Section 2.7 By-Laws . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 General . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Investments . . . . . . . . . . . . . . . . . . . 5
Section 3.3 Legal Title . . . . . . . . . . . . . . . . . . . 6
Section 3.4 Sale and Increases of Interests . . . . . . . . . 6
Section 3.5 Decreases and Redemptions of Interests . . . . . . 7
Section 3.6 Borrow Money . . . . . . . . . . . . . . . . . . . 7
Section 3.7 Delegation; Committees . . . . . . . . . . . . . . 7
Section 3.8 Collection and Payment . . . . . . . . . . . . . . 7
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . . . . 7
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . . . . 7
Section 3.11 Further Powers . . . . . . . . . . . . . . . . . . 8
Section 3.12 Litigation . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV--Investment Advisory, Administration and Placement Agent
Arrangements . . . . . . . . . . . . . . . . . . . . . 8
Section 4.1 Investment Advisory, Administration and Other
Arrangements . . . . . . . . . . . . . . . . . . . 8
Section 4.2 Parties to Contract . . . . . . . . . . . . . . . 9
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc. . . . . . . . . . . . . . . . . . . . . 9
Section 5.1 Liability of Holders; Indemnification . . . . . . 9
Section 5.2 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Third Parties . . . . . . . . . . . . . . . . . 9
Section 5.3 Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors
to Trust, Holders, etc. . . . . . . . . . . . . . 10
Section 5.4 Mandatory Indemnification . . . . . . . . . . . . 10
i
<PAGE>
Section 5.5 No Bond Required of Trustees . . . . . . . . . . . 10
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc . . . . . . . . . . . . . . . . 10
Section 5.7 Reliance on Experts, etc . . . . . . . . . . . . . 11
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.1 Interests . . . . . . . . . . . . . . . . . . . . 11
Section 6.2 Non-Transferability . . . . . . . . . . . . . . . 11
Section 6.3 Register of Interests . . . . . . . . . . . . . . 11
ARTICLE VII--Increases, Decreases And Redemptions of Interests . . . . 12
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions . . . . . . . . . . . . . . . . . . . 12
Section 8.1 Book Capital Account Balances . . . . . . . . . . 12
Section 8.2 Allocations and Distributions to Holders . . . . . 12
Section 8.3 Power to Modify Foregoing Procedures . . . . . . . 13
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9.1 Rights of Holders . . . . . . . . . . . . . . . . 13
Section 9.2 Meetings of Holders . . . . . . . . . . . . . . . 13
Section 9.3 Notice of Meetings . . . . . . . . . . . . . . . . 13
Section 9.4 Record Date for Meetings, Distributions, etc. . . 13
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . . . 14
Section 9.6 Reports . . . . . . . . . . . . . . . . . . . . . 14
Section 9.7 Inspection of Records . . . . . . . . . . . . . . 14
Section 9.8 Holder Action by Written Consent . . . . . . . . . 14
Section 9.9 Notices . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE X--Duration; Termination; Amendment; Mergers; Etc. . . . . . . 15
Section 10.1 Duration . . . . . . . . . . . . . . . . . . . . . 15
Section 10.2 Termination . . . . . . . . . . . . . . . . . . . 16
Section 10.3 Dissolution . . . . . . . . . . . . . . . . . . . 17
Section 10.4 Amendment Procedure . . . . . . . . . . . . . . . 17
Section 10.5 Merger, Consolidation and Sale of Assets . . . . . 18
Section 10.6 Incorporation . . . . . . . . . . . . . . . . . . 18
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.1 Governing Law . . . . . . . . . . . . . . . . . . 18
Section 11.2 Counterparts . . . . . . . . . . . . . . . . . . . 19
Section 11.3 Reliance by Third Parties . . . . . . . . . . . . 19
Section 11.4 Provisions in Conflict With Law or Regulations . . 19
ii
<PAGE>
DECLARATION OF TRUST
OF
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
_______________________________
This DECLARATION OF TRUST of Virginia Limited Maturity Tax Free
Portfolio is made as of the 10th day of August, 1994 by the parties
signatory hereto, as Trustees (as defined in Section 1.2 hereof).
W I T N E S S E T H:
WHEREAS, the Trustees desire to form a trust fund under the law of
the State of New York for the investment and reinvestment of its assets;
and
WHEREAS, it is proposed that the trust assets be composed of money
and property contributed thereto by the holders of interests in the trust
entitled to ownership rights in the trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the trust fund and will manage
and dispose of the same for the benefit of the holders of interests in the
Trust and subject to the provisions hereof, to wit:
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust") shall
be Virginia Limited Maturity Tax Free 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).
<PAGE>
"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 March 31 of each year or on such other day as is permitted
or required by the Code.
"Holders" shall mean as of any particular time all holders of record
of Interests in the Trust.
"Institutional Investor(s)" shall mean any regulated investment
company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual,
S corporation, partnership or grantor trust beneficially owned by any
individual, S corporation or partnership.
"Interest(s)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by this
Declaration, which interest may be expressed as a percentage, determined
by calculating, at such times and on such basis as the Trustees shall from
time to time determine, the ratio of each Holder's Book Capital Account
balance to the total of all Holders' Book Capital Account balances.
Reference herein to a specified percentage of, or fraction of, Interests,
means Holders whose combined Book Capital Account balances represent such
specified percentage or fraction of the combined Book Capital Account
balances of all, or a specified group of, Holders.
"Interested Person" shall have the meaning given it in the 1940 Act.
"Investment Adviser" shall mean any party furnishing services to the
Trust pursuant to any investment advisory contract described in Section
4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of
Holders, of (A) 67% or more of the Interests present or represented at
such meeting, if Holders of more than 50% of all Interests are present or
represented by proxy, or (B) more than 50% of all Interests, whichever is
less.
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
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
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<PAGE>
of that Holder to zero, and the term "redeem" shall mean to effect a
Redemption.
"Trustees" shall mean each signatory to this Declaration, so long as
such signatory shall continue in office in accordance with the terms
hereof, and all other individuals who at the time in question have been
duly elected or appointed and have qualified as Trustees in accordance
with the provisions hereof and are then in office, and reference in this
Declaration to a Trustee or Trustees shall refer to such individual or
individuals in their capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees.
The "1940 Act" shall mean the U.S. Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall be fixed
from time to time by action of the Trustees taken as provided in Section
2.5 hereof; provided, however, that the number of Trustees so fixed shall
in no event be less than three or more than 15. Any vacancy created by an
increase in the number of Trustees may be filled by the appointment of an
individual having the qualifications described in this Section 2.1 made by
action of the Trustees taken as provided in Section 2.5 hereof. Any such
appointment shall not become effective, however, until the individual
named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of
this Declaration. No reduction in the number of Trustees shall have the
effect of removing any Trustee from office. Whenever a vacancy occurs,
until such vacancy is filled as provided in Section 2.4 hereof, the
Trustees continuing in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A Trustee shall be an
individual at least 21 years of age who is not under legal disability.
2.2. Term and Election. Each Trustee named herein, or elected or
appointed prior to the first meeting of Holders, shall (except in the
event of resignations, retirements, removals or vacancies pursuant to
Section 2.3 or Section 2.4 hereof) hold office until a successor to such
Trustee has been elected at such meeting and has qualified to serve as
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.
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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 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,
4
<PAGE>
an Assistant Secretary or any two Trustees, at such time, on such day and
at such place, as shall be designated in the notice of the meeting. The
Trustees shall hold an annual meeting for the election of officers and the
transaction of other business which may come before such meeting. Regular
meetings of the Trustees may be held without call or notice at a time and
place fixed by the By-Laws or by resolution of the Trustees. Notice of
any other meeting shall be given by mail, by telegram (which term shall
include a cablegram), by telecopier or delivered personally (which term
shall include by telephone). If notice is given by mail, it shall be
mailed not later than 48 hours preceding the meeting and if given by
telegram, telecopier or personally, such notice shall be sent or delivery
made not later than 24 hours preceding the meeting. Notice of a meeting
of Trustees may be waived before or after any meeting by signed written
waiver. Neither the business to be transacted at, nor the purpose of, any
meeting of the Trustees need be stated in the notice or waiver of notice
of such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except in the situation in
which a Trustee attends a meeting for the express purpose of objecting, at
the commencement of such meeting, to the transaction of any business on
the ground that the meeting was not lawfully called or convened. The
Trustees may act with or without a meeting, but no notice need be given of
action proposed to be taken by written consent. A quorum for all meetings
of the Trustees shall be a majority of the Trustees. Unless provided
otherwise in this Declaration, any action of the Trustees may be taken at
a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the
Trustees.
Any committee of the Trustees, including an executive committee, if
any, may act with or without a meeting. A quorum for all meetings of any
such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee
may be taken at a meeting by vote of a majority of the members present (a
quorum being present) or without a meeting by written consent of a
majority of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes
under this Section 2.5 and shall be entitled to vote to the extent
permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of the
Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all individuals
participating in the meeting can hear each other and participation in a
meeting by means of such communications equipment shall constitute
presence in person at such meeting.
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
5
<PAGE>
preside at all meetings of the Trustees and carry out such other duties as
the Trustees may designate. The Trustees may elect or appoint or
authorize the President to appoint such other officers, agents or
independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each other officer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to time, amend
or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute control
over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
such business in their own right, but with such powers of delegation as
may be permitted by this Declaration. The Trustees may perform such acts
as in their sole discretion they deem proper for conducting the business
of the Trust. The enumeration of or failure to mention any specific power
herein shall not be construed as limiting such exclusive and absolute
control. The powers of the Trustees may be exercised without order of or
resort to any court.
3.2. Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or
otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of U.S. and foreign currencies
and related instruments including forward contracts, and securities,
including common and preferred stock, warrants, bonds, debentures, time
notes and all other evidences of indebtedness, negotiable or non-
negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, forward contracts, options, futures
contracts, and other securities, including, without limitation, those
issued, guaranteed or sponsored by any state, territory or possession of
the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the U.S. Government,
any foreign government, or any agency, instrumentality or political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the
United States or under any foreign laws; and to exercise any and all
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,
6
<PAGE>
with power to designate one or more Persons to exercise any of such
rights, powers and privileges in respect of any of such investments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional instruments in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the
Trustees be limited by any law limiting the investments which may be made
by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property shall be vested
in the Trustees as joint tenants except that the Trustees shall have the
power to cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust, or in
the name or nominee name of any other Person on behalf of the Trust, on
such terms as the Trustees may determine.
The right, title and interest of the Trustees in the Trust Property
shall vest automatically in each individual who may hereafter become a
Trustee upon his due election and qualification. Upon the resignation,
removal or death of a Trustee, such resigning, removed or deceased Trustee
shall automatically cease to have any right, title or interest in any
Trust Property, and the right, title and interest of such resigning,
removed or deceased Trustee in the Trust Property shall vest automatically
in the remaining Trustees. Such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered.
3.4. Sale and Increases of Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit
any Institutional Investor to purchase an Interest, or increase its
Interest, for such type of consideration, including cash or property, at
such time or times (including, without limitation, each business day), and
on such terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses.
Individuals, S corporations, partnerships and grantor trusts that are
beneficially owned by any individual, S corporation or partnership may not
purchase Interests. A Holder which has redeemed its Interest may not be
permitted to purchase an Interest until the later of 60 calendar days
after the date of such Redemption or the first day of the Fiscal Year next
succeeding the Fiscal Year during which such Redemption occurred.
3.5 Decreases and Redemptions of Interests. Subject to Article VII
hereof, the Trustees, in their discretion, may, from time to time, without
a vote of the Holders, permit a Holder to redeem its Interest, or decrease
its Interest, for either cash or property, at such time or times
(including, without limitation, each business day), and on 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
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<PAGE>
otherwise subjecting as security the assets of the Trust, including the
lending of portfolio securities, and to endorse, guarantee, or undertake
the performance of any obligation, contract or engagement of any other
Person.
3.7. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the
Trust Property and over the business of the Trust, to delegate from time
to time to such of their number or to officers, employees, agents or
independent contractors of the Trust the doing of such things and the
execution of such instruments in either the name of the Trust or the names
of the Trustees or otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including
taxes, against the Trust Property; to prosecute, defend, compromise or
abandon any claims relating to the Trust or the Trust Property; to
foreclose any security interest securing any obligation, by virtue of
which any property is owed to the Trust; and to enter into releases,
agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur and pay any
expenses which in the opinion of the Trustees are necessary or incidental
to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the Trust Property to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and
Trustees. The Trustees may pay themselves such compensation for special
services, including legal and brokerage services, as they in good faith
may deem reasonable, and reimbursement for expenses reasonably incurred by
themselves on behalf of the Trust.
3.10. Miscellaneous Powers. The Trustees shall have power to:
(a) employ or contract with such Persons as the Trustees may deem
appropriate for the transaction of the business of the Trust and terminate
such employees or contractual relationships as they consider appropriate;
(b) enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Investment Adviser, Administrator, placement agent,
Holders, Trustees, officers, employees, agents or independent contractors
of the Trust against all claims arising by reason of holding any such
position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not the Trust would have the power to indemnify
such Person against such liability; (d) establish pension, profit-sharing
and other retirement, incentive and benefit plans for the Trustees,
officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious,
educational, scientific, civic or similar purposes; (f) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
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
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<PAGE>
change the Fiscal Year and the method by which the accounts of the Trust
shall be kept; and (i) adopt a seal for the Trust, but the absence of such
a seal shall not impair the validity of any instrument executed on behalf
of the Trust.
3.11. Further Powers. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of
its branches and maintain offices, whether within or without the State of
New York, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the
United States of America and of foreign governments, and to do all such
other things and execute all such instruments as they deem necessary,
proper, appropriate or desirable in order to promote the interests of the
Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust which is made by
the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a
grant of power to the Trustees. The Trustees shall not be required to
obtain any court order in order to deal with Trust Property.
3.12 Litigation. The Trustees shall have full power and authority,
in the name and on behalf of the Trust, to engage in and to prosecute,
defend, compromise, settle, abandon, or adjust by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims and demands
relating to the Trust, and out of the assets of the Trust to pay or to
satisfy any liabilities, losses, debts, claims or expenses (including
without limitation attorneys' fees) incurred in connection therewith,
including those of litigation, and such power shall include without
limitation the power of the Trustees or any committee thereof, in the
exercise of their or its good faith business judgment, to dismiss or
terminate any action, suit, proceeding, dispute, claim or demand,
derivative or otherwise, brought by any Person, including a Holder in its
own name or in the name of the Trust, whether or not the Trust or any of
the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements
4.1. Investment Advisory, Administration and Other Arrangements. The
Trustees may in their discretion, from time to time, enter into investment
advisory contracts, administration contracts or placement agent agreements
whereby the other party to such contract or agreement shall undertake to
furnish the Trustees such investment 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
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Investment Adviser (subject to such general or specific instructions as
the Trustees may, from time to time, adopt) to effect purchases, sales,
loans or exchanges of Trust Property on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (all without any further action by the Trustees). Any
such purchase, sale, loan or exchange shall be deemed to have been
authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character described in
Section 4.1 hereof or in the By-Laws of the Trust may be entered into with
any corporation, firm, trust or association, although one or more of the
Trustees or officers of the Trust may be an officer, director, Trustee,
shareholder or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any individual holding such
relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of any such contract or
accountable for any profit realized directly or indirectly therefrom,
provided that the contract when entered into was reasonable and fair and
not inconsistent with the provisions of this Article IV or the By-Laws of
the Trust. The same Person may be the other party to one or more
contracts entered into pursuant to Section 4.1 hereof or the By-Laws of
the Trust, and any individual may be financially interested or otherwise
affiliated with Persons who are parties to any or all of the contracts
mentioned in this Section 4.2 or in the By-Laws of the Trust.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each Holder shall be
jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities
and obligations of the Trust in the event that the Trust fails to satisfy
such liabilities and obligations; provided, however, that, to the extent
assets are available in the Trust, the Trust shall indemnify and hold each
Holder harmless from and against any claim or liability to which such
Holder may become subject by reason of being or having been a Holder to
the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders, is greater than such Holder's
Interest (proportionate share), and shall reimburse such Holder for all
legal and other expenses reasonably incurred by such Holder in connection
with any such claim or liability. The rights accruing to a Holder under
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.
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5.2. Limitations of Liability of Trustees, Officers, Employees,
Agents, Independent Contractors to Third Parties. No Trustee, officer,
employee, agent or independent contractor (except in the case of an agent
or independent contractor to the extent expressly provided by written
contract) of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or the Holders, in
connection with Trust Property or the affairs of the Trust; and all such
Persons shall look solely to the Trust Property for satisfaction of claims
of any nature against a Trustee, officer, employee, agent or independent
contractor (except in the case of an agent or independent contractor to
the extent expressly provided by written contract) of the Trust arising in
connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers, Employees,
Agents, Independent Contractors to Trust, Holders, etc. No Trustee,
officer, employee, agent or independent contractor (except in the case of
an agent or independent contractor to the extent expressly provided by
written contract) of the Trust shall be liable to the Trust or the Holders
for any action or failure to act (including, without limitation, the
failure to compel in any way any former or acting Trustee to redress any
breach of trust) except for such Person's own bad faith, willful
misfeasance, gross negligence or reckless disregard of such Person's
duties.
5.4. Mandatory Indemnification. The Trust shall indemnify, to the
fullest extent permitted by law (including the 1940 Act), each Trustee,
officer, employee, agent or independent contractor (except in the case of
an agent or independent contractor to the extent expressly provided by
written contract) of the Trust (including any Person who serves at the
Trust's request as a director, officer or trustee of another organization
in which the Trust has any interest as a shareholder, creditor or
otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by such Person in connection with the
defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which such Person may be involved or with which such
Person may be threatened, while in office or thereafter, by reason of such
Person being or having been such a Trustee, officer, employee, agent or
independent contractor, except with respect to any matter as to which such
Person shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of such Person's
duties; provided, however, that as to any matter disposed of by a
compromise payment by such Person, pursuant to a consent decree or
otherwise, no indemnification either for such payment or 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
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to any Person under these provisions shall not exclude any other right to
which such Person may be lawfully entitled; provided that no Person may
satisfy any right of indemnity or reimbursement granted in this Section
5.4 or in Section 5.2 hereof or to which such Person may be otherwise
entitled except out of the Trust Property. The Trustees may make advance
payments in connection with indemnification under this Section 5.4,
provided that the indemnified Person shall have given a written
undertaking to reimburse the Trust in the event it is subsequently
determined that such Person is not entitled to such indemnification.
5.5. No Bond Required of Trustees. No Trustee shall, as such, be
obligated to give any bond or surety or other security for the performance
of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender or other Person dealing with any Trustee, officer,
employee, agent or independent contractor of the Trust shall be bound to
make any inquiry concerning the validity of any transaction purporting to
be made by such Trustee, officer, employee, agent or independent
contractor or be liable for the application of money or property paid,
loaned or delivered to or on the order of such Trustee, officer, employee,
agent or independent contractor. Every obligation, contract, instrument,
certificate or other interest or undertaking of the Trust, and every other
act or thing whatsoever executed in connection with the Trust shall be
conclusively taken to have been executed or done by the executors thereof
only in their capacity as Trustees, officers, employees, agents or
independent contractors of the Trust. Every written obligation, contract,
instrument, certificate or other interest or undertaking of the Trust made
or sold by any Trustee, officer, employee, agent or independent contractor
of the Trust, in such capacity, shall contain an appropriate recital to
the effect that the Trustee, officer, employee, agent or independent
contractor of the Trust shall not personally be bound by or liable
thereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee,
officer, employee, agent or independent contractor of the Trust. Subject
to the provisions of the 1940 Act, the Trust may maintain insurance for
the protection of the Trust Property, the Holders, and the Trustees,
officers, employees, agents and independent contractors of the Trust in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
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
12
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by any of its officers or employees or by any Investment Adviser or
Administrator, accountant, appraiser or other experts or consultants
selected with reasonable care by the Trustees, officers or employees of
the Trust, regardless of whether such counsel or expert may also be a
Trustee.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property shall
consist of non-transferable Interests. The Interests shall be personal
property giving only the rights in this Declaration specifically set
forth. The value of an Interest shall be equal to the Book Capital
Account balance of the Holder of the Interest.
6.2. Non-Transferability. A Holder may not transfer, sell or
exchange its Interest.
6.3. Register of Interests. A register shall be kept at the Trust
under the direction of the Trustees which shall contain the name, address
and Book Capital Account balance of each Holder. Such register shall be
conclusive as to the identity of the Holders, and the Trust shall not be
bound to recognize any equitable or legal claim to or interest in an
Interest which is not contained in such register. No Holder shall be
entitled to receive payment of any distribution, nor to have notice given
to it as herein provided, until it has given its address to such officer
or agent of the Trust as is keeping such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this Declaration and
to such restrictions as may from time to time be adopted by the Trustees,
each Holder shall have the right to vary its investment in the Trust at
any time without limitation by increasing (through a capital contribution)
or decreasing (through a capital withdrawal) or by a Redemption of its
Interest. An increase in the investment of a Holder in the Trust shall be
reflected as an increase in the Book Capital Account balance of that
Holder and a decrease in the investment of a Holder in the Trust or the
Redemption of the Interest of a Holder shall be reflected as a decrease in
the Book Capital Account balance of that Holder. The Trust 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
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<PAGE>
from time to time, charge fees for effecting any such decrease or
Redemption, at such rates as the Trustees may establish, and may, at any
time and from time to time, suspend such right of decrease or Redemption.
The procedures for effecting decreases or Redemptions shall be as
determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account balance
of each Holder shall be determined on such days and at such time or times
as the Trustees may determine. The Trustees shall adopt resolutions
setting forth the method of determining the Book Capital Account balance
of each Holder. The power and duty to make calculations pursuant to such
resolutions may be delegated by the Trustees to the Investment Adviser,
Administrator, custodian, or such other Person as the Trustees may
determine. Upon the Redemption of an Interest, the Holder of that
Interest shall be entitled to receive the balance of its Book Capital
Account. A Holder may not transfer, sell or exchange its Book Capital
Account balance.
8.2. Allocations and Distributions to Holders. The Trustees shall,
in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall
make (i) the allocation of unrealized gains and losses, taxable income and
tax loss, and profit and loss, or any item or items thereof, to each
Holder, (ii) the payment of distributions, if any, to Holders, and
(iii) upon liquidation, the final distribution of items of taxable income
and expense. Such procedures shall be set forth in writing and be
furnished to the Trust's accountants. The Trustees may amend the
procedures adopted pursuant to this Section 8.2 from time to time. The
Trustees may retain from the net profits such amount as they may deem
necessary to pay the liabilities and expenses of the Trust, to meet
obligations of the Trust, and as they may deem desirable to use in the
conduct of the affairs of the Trust or to retain for future requirements
or extensions of the business.
8.3. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining
the net income of the Trust, the allocation of income of the Trust, the
Book Capital Account balance of each Holder, or the payment of
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.
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ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust Property and the
right to conduct any business described herein are vested exclusively in
the Trustees, and the Holders shall have no right or title therein other
than the beneficial interest conferred by their Interests and they shall
have no power or right to call for any partition or division of any Trust
Property.
9.2. Meetings of Holders. Meetings of Holders may be called at any
time by a majority of the Trustees and shall be called by any Trustee upon
written request of Holders holding, in the aggregate, not less than 10% of
the Interests, such request specifying the purpose or purposes for which
such meeting is to be called. Any such meeting shall be held within or
without the State of New York and within or without the United States of
America on such day and at such time as the Trustees shall designate.
Holders of one-third of the Interests, present in person or by proxy,
shall constitute a quorum for the transaction of any business, except as
may otherwise be required by the 1940 Act, other applicable law, this
Declaration or the By-Laws of the Trust. If a quorum is present at a
meeting, an affirmative vote of the Holders present, in person or by
proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the
action of the Holders, unless a greater number of affirmative votes is
required by the 1940 Act, other applicable law, this Declaration or the
By-Laws of the Trust. All or any one of more Holders may participate in a
meeting of Holders by means of a conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
9.3. Notice of Meetings. Notice of each meeting of Holders, stating
the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at
least 10 days and not more than 60 days before the meeting. Notice of any
meeting may be waived in writing by any Holder either before or after such
meeting. The attendance of a Holder at a meeting shall constitute a
waiver of notice of such meeting except in the situation in which a Holder
attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting was not lawfully called or
convened. At any meeting, any business properly before the meeting may be
considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
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
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<PAGE>
of any meeting of Holders or the payment of any distribution or the taking
of any other action, as the case may be, as a record date for the
determination of the Persons to be treated as Holders for such purpose.
If the Trustees do not, prior to any meeting of the Holders, so fix a
record date, then the date of mailing notice of the meeting shall be the
record date.
9.5. Proxies, etc. At any meeting of Holders, any Holder entitled to
vote thereat may vote by proxy, provided that no proxy shall be voted at
any meeting unless it shall have been placed on file with the Secretary,
or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote is to be
taken. A proxy may be revoked by a Holder at any time before it has been
exercised by placing on file with the Secretary, or with such other
officer or agent of the Trust as the Secretary may direct, a later dated
proxy or written revocation. Pursuant to a resolution of a majority of
the Trustees, proxies may be solicited in the name of the Trust or of one
or more Trustees or of one or more officers of the Trust. Only Holders on
the record date shall be entitled to vote. Each such Holder shall be
entitled to a vote proportionate to its Interest. When an Interest is
held jointly by several Persons, any one of them may vote at any meeting
in person or by proxy in respect of such Interest, but if more than one of
them is present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast,
such vote shall not be received in respect of such Interest. A proxy
purporting to be executed by or on behalf of a Holder shall be deemed
valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger. No proxy shall be valid
after one year from the date of execution, unless a longer period is
expressly stated in such proxy. The Trust may also permit a Holder to
authorize and empower individuals named as proxies on any form of proxy
solicited by the Trustees to vote that Holder's Interest on any matter by
recording his voting instructions on any recording device maintained for
that purpose by the Trust or its agent, provided the Holder complies with
such procedures as the Trustees may designate to be necessary or
appropriate to determine the authenticity of the voting instructions so
recorded; such instructions shall be deemed to constitute a written proxy
signed by the Holder and delivered to the Trust and shall be deemed to be
dated as of the date such instructions were transmitted, and the Holder
shall be deemed to have approved and ratified all actions taken by such
proxies in accordance with the voting instructions so recorded.
9.6. Reports. The Trustees shall cause to be prepared and furnished
to each Holder, at least annually as of the end of each Fiscal Year, a
report of operations containing a balance sheet and a statement of income
of the Trust prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant 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.
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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:
<TABLE>
<CAPTION>
Date of
Name Address Birth
<S> <C> <C>
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
17
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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
</TABLE>
10.2. Termination.
(a) The Trust may be terminated (i) by the affirmative vote of
Holders of not less than two-thirds of all Interests at any meeting of
Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by Holders of not less than
two-thirds of all Interests, or (ii) by the Trustees by written notice to
the Holders. Upon any such termination,
(i) the Trust shall carry on no business except for the purpose
of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust have
been wound up, including the power to fulfill or discharge the
contracts of the Trust, collect the assets of the Trust, sell,
convey, assign, exchange or otherwise dispose of all or any part
of the Trust Property to one or more Persons at public or
private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind,
discharge or pay the 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
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<PAGE>
and the nature and amount of the consideration by the vote of
Holders holding more than 50% of all Interests; and
(iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary for
their protection, the Trustees shall distribute the remaining
Trust Property, in cash or in kind or partly each, among the
Holders according to their respective rights as set forth in the
procedures established pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and
file with the records of the Trust an instrument in writing setting forth
the fact of such termination and distribution. Upon termination of the
Trust, the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Holders shall thereupon cease.
10.3. Dissolution. Upon the bankruptcy of any Holder, or upon
the Redemption of any Interest, the Trust shall be dissolved effective 120
days after the event. However, the Holders (other than such bankrupt or
redeeming Holder) may, by a unanimous affirmative vote at any meeting of
such Holders or by an instrument in writing without a meeting executed by
a majority of the Trustees and consented to by all such Holders, agree to
continue the business of the Trust even if there has been such a
dissolution.
10.4. Amendment Procedure.
(a) This Declaration may be amended by the vote of Holders of
more than 50% of all Interests at any meeting of Holders or by an
instrument in writing without a meeting, executed by a majority of the
Trustees and consented to by the Holders of more than 50% of all
Interests. Notwithstanding any other provision hereof, this Declaration
may be amended by an instrument in writing executed by a majority of the
Trustees, and without the vote or consent of Holders, for any one or more
of the following purposes: (i) to change the name of the Trust, (ii) to
supply any omission, or to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, (iii) to conform this
Declaration to the requirements of applicable federal law or regulations
or the requirements of the applicable provisions of the Code, (iv) to
change the state or other jurisdiction designated herein as the state or
other jurisdiction whose law shall be the governing law hereof, (v) to
effect such changes herein as the Trustees find to be necessary or
appropriate (A) to permit the filing of this Declaration under the law of
such state or other jurisdiction applicable to trusts or voluntary
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
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by the foregoing clause (iv) or the foregoing clause (v) to make any and
all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (v) or the foregoing clause (vi) to be
conclusively evidenced by the execution of any such amendment by a
majority of the Trustees, and (vii) change, modify or rescind any
provision of this Declaration provided such change, modification or
rescission is found by the Trustees to be necessary or appropriate and to
not have a materially adverse effect on the financial interests of the
Holders, any such finding to be conclusively evidenced by the execution of
any such amendment by a majority of the Trustees; provided, however, that
unless effected in compliance with the provisions of Section 10.4(b)
hereof, no amendment otherwise authorized by this sentence may be made
which would reduce the amount payable with respect to any Interest upon
liquidation of the Trust and; provided, further, that the Trustees shall
not be liable for failing to make any amendment permitted by this Section
10.4(a).
(b) No amendment may be made under Section 10.4(a) hereof which
would change any rights with respect to any Interest by reducing the
amount payable thereon upon liquidation of the Trust, except with the vote
or consent of Holders of two-thirds of all Interests.
(c) A certification in recordable form executed by a majority
of the Trustees setting forth an amendment and reciting that it was duly
adopted by the Holders or by the Trustees as aforesaid or a copy of the
Declaration, as amended, in recordable form, and executed by a majority of
the Trustees, shall be conclusive evidence of such amendment when filed
with the records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees at any
meeting of Trustees or by an instrument executed by a majority of the
Trustees.
10.5. Merger, Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or
other organization or may sell, lease or exchange all or substantially all
of the Trust Property, including good will, upon such terms and conditions
and for such consideration when and as authorized at any meeting of
Holders called for such purpose by a Majority Interests Vote, and any such
merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of
the State of New York.
10.6. Incorporation. Upon a Majority Interests Vote, the
Trustees 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
20
<PAGE>
corporation, trust, partnership, association or other organization in
exchange for the equity interests thereof or otherwise, and to lend money
to, subscribe for the equity interests of, and enter into any contract
with any such corporation, trust, partnership, association or other
organization, or any corporation, trust, partnership, association or other
organization in which the Trust holds or is about to acquire equity
interests. The Trustees may also cause a merger or consolidation between
the Trust or any successor thereto and any such corporation, trust,
partnership, association or other organization if and to the extent
permitted by law. Nothing contained herein shall be construed as
requiring approval of the Holders for the Trustees to organize or assist
in organizing one or more corporations, trusts, partnerships, associations
or other organizations and selling, conveying or transferring a portion of
the Trust Property to one or more of such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Governing Law. This Declaration is executed by the
Trustees and delivered in the State of New York and with reference to the
law thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
in accordance with the law of the State of New York and reference shall be
specifically made to the trust law of the State of New York as to the
construction of matters not specifically covered herein or as to which an
ambiguity exists.
11.2. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the
same instrument, which shall be sufficiently evidenced by any one such
original counterpart.
11.3. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
Holders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Holders, (d) the fact that the number of Trustees or Holders present at
any meeting or executing any written instrument satisfies the requirements
of this Declaration, (e) the form of any By-Laws adopted by or the
identity of any officer elected by the Trustees, or (f) the existence of
any fact or facts which in any manner relate to the affairs of the Trust,
shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees.
21
<PAGE>
11.4. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, or with other applicable law
and regulations, the conflicting provision shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of this Declaration shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not in
any manner affect such provision in any other jurisdiction or any other
provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the day and year first above written.
/s/Donald R. Dwight /s/Norton H. Reamer
--------------------------- --------------------------------
Donald R. Dwight, as Trustee Norton H. Reamer, as Trustee
and not individually and not individually
/s/James B. Hawkes /s/John L. Thorndike
--------------------------- --------------------------------
James B. Hawkes, as Trustee and John L. Thorndike, as Trustee
not individually and not individually
/s/Samuel L. Hayes, III /s/Jack L. Treynor
--------------------------- -------------------------------
Samuel L. Hayes, III, as Trustee Jack L. Treynor, as Trustee
and not individually and not individually
22
<PAGE>
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
____________________________
BY-LAWS
As Adopted August 10, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I -- Meetings of Holders . . . . . . . . . . . . . . . . . . 1
Section 1.1 Records at Holder Meetings . . . . . . . . 1
Section 1.2 Inspectors of Election . . . . . . . . . . 1
ARTICLE II -- Officers . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Officers of the Trust . . . . . . . . . . . 2
Section 2.2 Election and Tenure . . . . . . . . . . . . 2
Section 2.3 Removal of Officers . . . . . . . . . . . . 2
Section 2.4 Bonds and Surety . . . . . . . . . . . . . 2
Section 2.5 Chairman, President and Vice President . . 2
Section 2.6 Secretary . . . . . . . . . . . . . . . . . 3
Section 2.7 Treasurer . . . . . . . . . . . . . . . . . 3
Section 2.8 Other Officers and Duties . . . . . . . . . 3
ARTICLE III -- Miscellaneous . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Depositories . . . . . . . . . . . . . . . 4
Section 3.2 Signatures . . . . . . . . . . . . . . . . 4
Section 3.3 Seal . . . . . . . . . . . . . . . . . . . . 4
Section 3.4 Indemnification . . . . . . . . . . . . . . 4
Section 3.5 Distribution Disbursing Agents and the
Like . . . . . . . . . . . . . . . . 4
ARTICLE IV -- Regulations; Amendment of By-Laws . . . . . . . . . . . 5
Section 4.1 Regulations . . . . . . . . . . . . . . . . 5
Section 4.2 Amendment and Repeal of By-Laws . . . . . . 5
<PAGE>
BY-LAWS
OF
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
______________________________
These By-Laws are made and adopted pursuant to Section 2.7 of
the Declaration of Trust establishing VIRGINIA LIMITED MATURITY TAX FREE
PORTFOLIO (the "Trust"), dated August 10, 1994, as from time to time
amended (the "Declaration"). All words and terms capitalized in these
By-Laws shall have the meaning or meanings set forth for such words or
terms in the Declaration.
ARTICLE I
Meetings of Holders
Section 1.1. Records at Holder Meetings. At each meeting of
the Holders there shall be open for inspection the minutes of the last
previous meeting of Holders of the Trust and a list of the Holders of the
Trust, certified to be true and correct by the Secretary or other proper
agent of the Trust, as of the record date of the meeting. Such list of
Holders shall contain the name of each Holder in alphabetical order and
the address and Interest owned by such Holder on such record date.
Section 1.2. Inspectors of Election. In advance of any meeting
of the Holders, the Trustees may appoint Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not
so appointed, the chairman, if any, of any meeting of the Holders may, and
on the request of any Holder or his proxy shall, appoint Inspectors of
Election. The number of Inspectors of Election shall be either one or
three. If appointed at the meeting on the request of one or more Holders
or proxies, a Majority Interests Vote shall determine whether one or three
Inspectors of Election are to be appointed, but failure to allow such
determination by the Holders shall not affect the validity of the
appointment of Inspectors of Election. In case any individual appointed
as an Inspector of Election fails to appear or fails or refuses to so act,
the vacancy may be filled by appointment made by the Trustees in advance
of the convening of the meeting or at the meeting by the individual acting
as chairman of the meeting. The Inspectors of Election shall determine
the Interest owned by each Holder, the Interests represented at the
meeting, the existence of a quorum, the authenticity, validity and effect
of proxies, shall receive votes, ballots or consents, shall hear and
determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
shall determine the results, and shall do such other acts as may be proper
to conduct the election or vote with fairness to all Holders. If there
are three Inspectors of Election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate
of all. On request of the chairman, if any, of the meeting, or of any
Holder or its proxy, the Inspectors of Election shall make a report in
<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 25th day of October, 1994, between Virginia
Limited Maturity Tax Free 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.
<PAGE>
The Adviser shall place all orders for the purchase or sale of
portfolio securities for the account of the Trust either directly with the
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 payments
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 is
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:
Category Daily Net Assets Annual Asset
Rate
1 up to $20 million 0.100%
2 $20 million but less than $40 million 0.200%
3 $40 million but less than $500 million 0.300%
4 $500 million but less than $1 billion 0.275%
5 $1 billion but less than $1.5 billion 0.250%
6 $1.5 billion but less than $2 billion 0.225%
7 $2 billion but less than $3 billion 0.200%
8 $3 billion and over 0.175%, plus
(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
<PAGE>
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 $20 million 1.00%
2 $20 million but less than $40 million 2.00%
3 $40 million but less than $500 million 3.00%
4 $500 million but less than $1 billion 2.75%
5 $1 billion but less than $1.5 billion 2.50%
6 $1.5 billion but less than $2 billion 2.25%
7 $2 billion but less than $3 billion 2.00%
8 $3 billion and over 1.75%, plus
Such daily compensation shall be paid monthly in arrears on the last
business day of each month. The Trust's daily net assets and gross income
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 its expenses other than those expressly stated to be
payable by the Adviser hereunder, which expenses payable by the Trust
shall include, without implied limitation, (i) expenses of maintaining the
Trust and continuing its existence, (ii) registration of the Trust under
the Investment Company Act of 1940, (iii) commissions, fees and other
expenses connected with the acquisition, holding and disposition of
securities and other investments, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale, and redemption of Interests in the Trust, (viii) expenses
of registering and qualifying the Trust and Interests in the Trust under
federal and state securities laws and of preparing and printing
registration statements or other offering 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
the Trust's placement agent as broker-dealer or agent under state
securities laws, (ix) expenses of reports and notices to Holders and of
meetings of Holders and proxy solicitations therefor, (x) expenses of
reports to governmental officers and commissions, (xi) insurance expenses,
(xii) association membership dues, (xiii) fees, expenses and disbursements
of custodians and subcustodians for all services to the Trust (including
without limitation safekeeping of funds, securities and other investments,
keeping of books, accounts and records, and determination of net asset
values, book capital account balances and tax capital account balances),
(xiv) fees, expenses and disbursements of transfer agents, dividend
<PAGE>
disbursing agents, Holder servicing agents and registrars for all services
to the Trust, (xv) expenses for servicing the account 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.
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, 1994 and shall continue in full force
and effect indefinitely thereafter, but only so long as such continuance
after February 28, 1994 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
<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the day and year first above written.
VIRGINIA LIMITED MATURITY BOSTON MANAGEMENT AND RESEARCH
TAX FREE PORTFOLIO
By:/s/Thomas J. Fetter By /s/H. Day Brigham, Jr.
------------------- ----------------------
President Vice President,
and not individually
<PAGE>
PLACEMENT AGENT AGREEMENT
October 25, 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, Virginia Limited Maturity Tax Free
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.
<PAGE>
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
2
<PAGE>
its investors to which a Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of a Covered Person's reckless
disregard of its obligations and duties under this Agreement. The Trust
should be notified of any action brought against a Covered Person, such
notification to be given by a writing addressed to the Trust, 24 Federal
Street Boston, Massachusetts 02110, with a copy to the 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
3
<PAGE>
to state a material fact in connection with such information furnished in
writing by EVD to the Trust required to be stated in such answers or
necessary to make such information not misleading. EVD shall be notified
of any action brought against a Covered Person, such notification to be
given by a writing addressed to EVD at 24 Federal Street, Boston,
Massachusetts 02110, promptly after the summons or other first legal
process shall have been duly and completely served upon such Covered
Person. EVD shall have the right of first control of the defense of the
action with counsel of its own choosing satisfactory to the Trust if such
action is based solely on such alleged misstatement or omission on EVD's
part, and in any other event each Covered Person shall have the right to
participate in the defense or preparation of the defense of any such
action. The failure to so notify EVD of any such action shall not relieve
EVD from any liability except to the extent the Trust shall have been
prejudiced by such failure, or from any liability that EVD may have to
Covered Persons by reason of any such untrue or alleged untrue statement,
or omission or alleged omission, otherwise than on account of EVD's
indemnity agreement contained in this paragraph.
1.8 No Trust Interests shall be offered by either EVD or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Trust Interests hereunder shall be accepted by the
Trust if and so long as the effectiveness of the registration statement or
any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act or the 1940 Act; provided, however, that
nothing contained in this paragraph shall in any way restrict or have an
application to or bearing on the Trust's obligation to redeem Trust
Interests from any investor in accordance with the provisions of the
Trust's registration statement or Declaration of Trust, as amended from
time to time.
1.9 The Trust agrees to advise EVD as soon as reasonably
practical by a notice in writing delivered to EVD or its counsel:
(a) of any request by the Commission for amendments to the
registration statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement then in
effect or the initiation by service of process on the Trust of any
proceeding for that purpose;
(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.
4
<PAGE>
For purposes of this paragraph 1.9, informal requests by or acts
of the Staff of the Commission shall not be deemed actions of or requests
by the Commission.
1.10 EVD agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and
other information not otherwise publicly available relative to the Trust
and its prior, present or potential investors and not to use such records
and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where EVD may be exposed to
civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
2. Duration and Termination of this Agreement.
This Agreement shall become effective upon the date of its
execution, and, unless terminated as herein provided, shall remain in full
force and effect through and including February 28, 1996 and shall
continue in full force and effect indefinitely thereafter, but only so
long as such continuance after February 28, 1996 is specifically approved
at least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Trust and (ii) by
the vote of a majority of those Trustees of the Trust who are not
interested persons of EVD or the Trust cast in person at a meeting called
for the purpose of voting on such approval.
Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this agreement without the payment
of any penalty, by action of Trustees of the Trust or the Directors of
EVD, as the case may be, and the Trust may, at any time upon such written
notice to EVD, terminate this Agreement by vote of a majority of the
outstanding voting securities of the Trust. This Agreement shall
terminate automatically in the event of its assignment.
3. Representations and Warranties.
EVD and the Trust each hereby represents and warrants to the
other that it has all requisite authority to enter into, execute, deliver
and perform its obligations under this Agreement and that, with respect to
it, this Agreement is legal, valid and binding, and enforceable in
accordance with its terms.
4. Limitation of Liability.
EVD expressly acknowledges the provision in the Declaration of
Trust of the Trust (Sections 5.2 and 5.6) limiting the personal liability
of the Trustees and officers of the Trust, and EVD hereby agrees that it
shall have recourse to the Trust for payment of claims or obligations as
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<PAGE>
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.
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,
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
By: /s/Thomas J. Fetter
--------------------
President
Accepted:
EATON VANCE DISTRIBUTORS, INC.
By: /s/Wharton P. Whitaker
-----------------------
President
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<PAGE>
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
October 25, 1994
Virginia Limited Maturity Tax Free 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.
VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
BY: /s/Thomas J. Fetter
--------------------
President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY: /s/Paul McGuiggan
------------------
Title: Director
<PAGE>
MASTER CUSTODIAN AGREEMENT
between
EATON VANCE HUB PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be Held by It . . . . . . 3
3. Duties of the Custodian with Respect to
Property of the Trust . . . . . . . . . . . . . . . . . . . . . . 3
A. Safekeeping and Holding of Property . . . . . . . . . . . . 3-4
B. Delivery of Securities . . . . . . . . . . . . . . . . . . 4-6
C. Registration of Securities . . . . . . . . . . . . . . . . . 6
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Payments for Interests, or Increases in Interests,
in the Trust . . . . . . . . . . . . . . . . . . . . . . . . . 7
F. Investment and Availability of Federal Funds . . . . . . . . 7
G. Collections . . . . . . . . . . . . . . . . . . . . . . . . 7-8
H. Payment of Trust Monies . . . . . . . . . . . . . . . . . . 8-9
I. Liability for Payment in Advance of
Receipt of Securities Purchased . . . . . . . . . . . . . . 9-10
J. Payments for Repurchases or Redemptions
of Interests of the Trust . . . . . . . . . . . . . . . . . . 10
K. Appointment of Agents by the Custodian . . . . . . . . . . . 10
L. Deposit of Trust Portfolio Securities in Securities
Systems . . . . . . . . . . . . . . . . . . . . . . . 10-12
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . . 12-14
N. Segregated Account . . . . . . . . . . . . . . . . . . . 14-15
O. Ownership Certificates for Tax Purposes . . . . . . . . . . . 15
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Q. Communications Relating to Trust Portfolio . . . . . . . . . 15
Securities
R. Exercise of Rights; Tender Offers . . . . . . . . . . . . 15-16
S. Depository Receipts . . . . . . . . . . . . . . . . . . . . . 16
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<PAGE>
T. Interest Bearing Call or Time Deposits . . . . . . . . . . . 16
U. Options, Futures Contracts and Foreign
Currency Transactions . . . . . . . . . . . . . . . . 17-18
V. Actions Permitted Without Express Authority . . . . . . . . . 18
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value . . . . . . . . . . . . . . . 18-19
5. Records and Miscellaneous Duties . . . . . . . . . . . . . . 19-20
6. Opinion of Trust's Independent Public Accountants . . . . . . . . 20
7. Compensation and Expenses of Bank . . . . . . . . . . . . . . . . 20
8. Responsibility of Bank . . . . . . . . . . . . . . . . . . . 20-21
9. Persons Having Access to Assets of the Trust . . . . . . . . . . 21
10. Effective Period, Termination and Amendment;
Successor Custodian . . . . . . . . . . . . . . . . . . . . . 21-22
11. Interpretive and Additional Provisions . . . . . . . . . . . . . 22
12. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-23
13. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . 23
14. Adoption of the Agreement by the Trust . . . . . . . . . . . . . 23
ii
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made between each investment company advised by
Boston Management and Research which has adopted this Agreement in the
manner provided herein and Investors Bank & Trust Company (hereinafter
called "Bank", "Custodian" and "Agent"), a trust company established under
the laws of Massachusetts with a principal place of business in Boston,
Massachusetts.
Whereas, each such investment company is registered under the
Investment Company Act of 1940 and has appointed the Bank to act as
Custodian of its property and to perform certain duties as its Agent, as
more fully hereinafter set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the
provisions hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company
and the Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Trust" shall mean the investment company which has adopted this
Agreement.
(b) "Board" shall mean the board of trustees of the Trust.
(c) "The Depository Trust Company", a clearing agency registered
with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934 which acts as a securities
depository and which has been specifically approved as a
securities depository for the Trust by the Board.
(d) "Participants Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities
depository and which has been specifically approved as a
securities depository for the Trust by the Board.
(e) "Approved Clearing Agency" shall mean any other domestic
clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of
1934 which acts as a securities depository but only if the
Custodian has received a certified copy of a resolution of the
Board approving such clearing agency as a securities depository
for the Trust.
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(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of
1940 for United States and federal agency securities (i.e., as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306,
Subpart B of 31 CFR Part 350, and the book-entry regulations of
federal agencies substantially in the form of Subpart O).
(g) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in Rule
17f-4 under the Investment Company Act of 1940 for foreign
securities but only if the Custodian has received a certified
copy of a resolution of the Board approving such depository or
clearing agency as a foreign securities depository for the
Trust.
(h) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed
pursuant to Section 2 hereof for the holding of commercial paper
in book-entry form but only if the Custodian has received a
certified copy of a resolution of the Board approving the
participation by the Trust in such system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in
this Agreement upon receipt of written or facsimile instructions
signed by such one or more person or persons as the Board shall
have from time to time authorized to give the particular class
of instructions in question. Different persons may be
authorized to give instructions for different purposes. A
certified copy of a resolution of the Board may be received and
accepted by the Custodian as conclusive evidence of the
authority of any such person to act and may be considered as in
full force and effect until receipt of written notice to the
contrary. Such instructions may be general or specific in terms
and, where appropriate, may be standing instructions. Unless
the resolution delegating authority to any person or persons to
give a particular class of instructions specifically requires
that the approval of any person, persons or committee shall
first have been obtained before the Custodian may act on
instructions of that class, the Custodian shall be under no
obligation to question the right of the person or persons giving
such instructions in so doing. Oral instructions will be
considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give
such instructions with respect to the transaction involved. The
Trust shall cause all oral instructions to be confirmed in
writing. The Trust authorizes the Custodian to tape record any
and all telephonic or other oral instructions given to the
Custodian. Upon receipt of a certificate signed by two officers
of the Trust as to the authorization by the President and the
Treasurer of the Trust accompanied by a detailed description of
the communication procedures approved by the President and the
2
<PAGE>
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 registration statement, or resolutions or
proceedings of the holders of interests in the Trust or the
Board.
(j) The term "Vote" when used with respect to the Board or the
Holders of Interests in the Trust shall include a vote,
resolution, consent, proceeding and other action taken by the
Board or Holders in accordance with the Declaration of Trust or
By-Laws of the Trust.
2. Employment of Custodian and Property to be Held by It
The Trust hereby appoints and employs the Bank as its Custodian and
Agent in accordance with and subject to the provisions hereof, and the
Bank hereby accepts such appointment and employment. The Trust agrees to
deliver to the Custodian all securities, participation interests, cash and
other assets owned by it, and all payments of income, payments of
principal and capital distributions and adjustments received by it with
respect to all securities and participation interests owned by the Trust
from time to time, and the cash consideration received by it from time to
time in exchange for an interest in the Trust or for an increase in such
an interest. The Custodian shall not be responsible for any property of
the Trust held by the Trust and not delivered by the Trust to the
Custodian. The Trust will also deliver to the Bank from time to time
copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement
agent, together with such resolutions, and other proceedings of the Trust
as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians
to perform such acts and services upon such terms and conditions as shall
be approved from time to time by the Board. Any such subcustodian so
employed by the Custodian shall be deemed to be the agent of the
Custodian, and the Custodian shall remain primarily responsible for the
securities, participation interests, moneys and other property of the
3
<PAGE>
Trust held by such subcustodian. Any foreign subcustodian shall be a bank
or trust company which is an eligible foreign custodian within the meaning
of Rule 17f-5 under the Investment Company Act of 1940, and the foreign
custody arrangements shall be approved by the Board and shall be in
accordance with and subject to the provisions of said Rule. For the
purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the
Custodian under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Trust
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Trust and on behalf of the Trust
shall from time to time receive delivery of Trust property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Trust all property
of the Trust, including all securities, participation interests
and other assets of the Trust (1) physically held by the
Custodian, (2) held by any subcustodian referred to in Section 2
hereof or by any agent referred to in Paragraph K hereof, (3)
held by or maintained in The Depository Trust Company or in
Participants Trust Company or in an Approved Clearing Agency or
in the Federal Book-Entry System or in an Approved Foreign
Securities Depository, each of which from time to time is
referred to herein as a "Securities System", and (4) held by the
Custodian or by any subcustodian referred to in Section 2 hereof
and maintained in any Approved Book-Entry System for Commercial
Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Trust held
(or deemed to be held) by the Custodian or maintained in a
Securities System account or in an Approved Book-Entry System
for Commercial Paper account only upon receipt of proper
instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities or participation interests for
the account of the Trust, but only against receipt of
payment therefor; if delivery is made in Boston or New York
City, payment therefor shall be made in accordance with
generally accepted clearing house procedures or by use of
Federal Reserve Wire System procedures; if delivery is made
elsewhere payment therefor shall be in accordance with the
then current "street delivery" custom or in accordance with
such procedures agreed to in writing from time to time by
the parties hereto; if the sale is effected through a
Securities System, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph L
hereof; if the sale of commercial paper is to be effected
through an Approved Book-Entry System for Commercial Paper,
delivery and payment therefor shall be made in accordance
4
<PAGE>
with the provisions of Paragraph M hereof; if the
securities are to be sold outside the United States,
delivery may be made in accordance with procedures agreed
to in writing from time to time by the parties hereto; for
the purposes of this subparagraph, the term "sale" shall
include the disposition of a portfolio security (i) upon
the exercise of an option written by the Trust and (ii)
upon the failure by the Trust to make a successful bid with
respect to a portfolio security, the continued holding of
which is contingent upon the making of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Trust;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Trust;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Trust or into the name of any nominee of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different number of
bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities or participation
interests are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided that
the Custodian shall adopt such procedures as the Trust from
time to time shall approve to ensure their prompt return to
the Custodian by the broker in the event the broker elects
not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion of
such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
5
<PAGE>
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 or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of an interest in the Trust in
accordance with the provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian employed
pursuant to Section 2 hereof) and a broker-dealer
registered under the Securities Exchange Act of 1934 and,
if necessary, the Trust, relating to compliance with the
rules of The Options Clearing Corporation or of any
registered national securities exchange, or of any similar
organization or organizations, regarding deposit or escrow
or other arrangements in connection with options
transactions by the Trust;
6
<PAGE>
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 Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in an
account of the Custodian or of such agent or of such
subcustodian containing only assets of the Trust or only assets
held by the Custodian or such agent or such subcustodian as a
custodian or subcustodian or in a fiduciary capacity for
customers. All certificates for securities accepted by the
Custodian or any such agent or subcustodian on behalf of the
Trust shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a separate
bank account or accounts in the name of the Trust, subject only
to draft or order by the Custodian acting in pursuant to the
terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Trust other than cash
maintained by the Trust in a bank account established and used
in accordance with Rule 17f-3 under the Investment Company Act
of 1940. Funds held by the Custodian for the Trust may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as the Custodian may in its discretion deem necessary
or desirable; provided, however, that every such bank or trust
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company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or
trust company shall be approved in writing by two officers of
the Trust. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be subject to withdrawal
only by the Custodian in that capacity.
E. Payments for Interests, or Increases in Interests, in the Trust
The Custodian shall make appropriate arrangements with the
Transfer Agent of the Trust to enable the Custodian to make
certain it promptly receives the cash or other consideration due
to the Trust for payment of interests in the Trust, or increases
in such interests, in accordance with the governing documents
and registration statement of the Trust. The Custodian will
provide prompt notification to the Trust of any receipt by it of
such payments.
F. Investment and Availability of Federal Funds Upon agreement
between the Trust and the Custodian, the Custodian shall, upon
the receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties, invest in
such securities and instruments as may be set forth in such
instructions on the same day as received all federal funds
received after a time agreed upon between the Custodian and the
Trust.
G. Collections The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Trust shall be entitled either by law or
pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect to
bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Trust's custodian
account. The Custodian shall do all things necessary and proper
in connection with such prompt collections and, without limiting
the generality of the foregoing, the Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Trust, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial
Paper at the time funds become available to the Custodian;
in the case of securities maintained in The Depository
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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 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
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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 subcustodian
in accordance with the conditions set forth in
Paragraph M hereof; (d) in the case of repurchase
agreements entered into between the Trust and another
bank or a broker-dealer, against receipt by the
Custodian of the securities underlying the repurchase
agreement either in certificate form or through an
entry crediting the Custodian's segregated,
non-proprietary account at the Federal Reserve Bank of
Boston with such securities along with written
evidence of the agreement by the bank or broker-dealer
to repurchase such securities from the Trust; or (e)
with respect to securities purchased outside of the
United States, in accordance with written procedures
agreed to from time to time in writing by the parties
hereto;
2) When required in connection with the conversion,
exchange or surrender of securities owned by the Trust
as set forth in Paragraph B hereof;
3) When required for the reduction or redemption of an
interest in the Trust in accordance with the
provisions of Paragraph J hereof;
4) For the payment of any expense or liability incurred
by the Trust, including but not limited to the
following payments for the account of the Trust:
advisory fees, interest, taxes, management
compensation and expenses, accounting, transfer agent
and legal fees, and other operating expenses of the
Trust whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For distributions or payment to Holders of Interest in
the Trust; and
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a resolution of the Board,
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made.
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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 trusts to the account of such bank prior
to the receipt of (i) the securities in certificate form subject
to such repurchase agreement or (ii) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve
Bank of Boston or (iii) the safekeeping receipt, provided that
such securities have in fact been so transferred by book-entry
and the written repurchase agreement is received by the
Custodian in due course; and except that if the securities are
to be purchased outside the United States, payment may be made
in accordance with procedures agreed to in writing from time to
time by the parties hereto.
J. Payments for Repurchases or Redemptions of Interests in the
Trust From such funds as may be available for the purpose, but
subject to any applicable resolutions of the Board and the
current procedures of the Trust, the Custodian shall, upon
receipt of written instructions from the Trust or from the
Trust's Transfer Agent, make funds and/or portfolio securities
available for payment to Holders of Interest in the Trust who
have caused the amount of their interests to be reduced, or for
their interest to be redeemed.
K. Appointment of Agents by the Custodian The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company
Act of 1940 to act as a custodian or is itself an eligible
foreign custodian within the meaning of Rule 17f-5 under said
Act) as the agent of the Custodian to carry out such of the
duties and functions of the Custodian described in this Section
3 as the Custodian may from time to time direct; provided,
however, that the appointment of any such agent shall not
relieve the Custodian of any of its responsibilities or
liabilities hereunder, and as between the Trust and the
Custodian the Custodian shall be fully responsible for the acts
and omissions of any such agent. For the purposes of this
Agreement, any property of the Trust held by any such agent
shall be deemed to be held by the Custodian hereunder.
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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
currently stating the Trust's holdings maintained in each such
Securities System.
(c) The Custodian shall pay for securities purchased in
book-entry form for the account of the Trust only upon (i)
receipt of notice or advice from the Securities System that such
securities have been transferred to the Account, and (ii) the
making of any entry on the records of the Custodian to reflect
such payment and transfer for the account of the Trust. The
Custodian shall transfer securities sold for the account of the
Trust only upon (i) receipt of notice or advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Trust. Copies of all notices or
advices from the Securities System of transfers of securities
for the account of the Trust shall identify the Trust, be
maintained for the Trust by the Custodian and be promptly
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<PAGE>
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 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
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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 correspondence, and
at all times subject to the following provisions:
(a) The Custodian may (either directly or through one or more
subcustodians employed pursuant to Section 2) keep commercial
paper of the Trust in an Approved Book-Entry System for
Commercial Paper, provided that such paper is issued in book
entry form by the Custodian or subcustodian on behalf of an
issuer with which the Custodian or subcustodian has entered into
a book-entry agreement and provided further that such paper is
maintained in a non-proprietary account ("Account") of the
Custodian or such subcustodian in an Approved Book-Entry System
for Commercial Paper which shall not include any assets of the
Custodian or such subcustodian or any other person other than
assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to commercial
paper of the Trust which is maintained in an Approved Book-Entry
System for Commercial Paper shall identify by book-entry each
specific issue of commercial paper purchased by the Trust which
is included in the Securities System and shall at all times
during regular business hours be open for inspection by
authorized officers, employees or agents of the Trust. The
Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and
currently stating the Trust's holdings of commercial paper
maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased in
book-entry form for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice from the issuer
that such paper has been issued, sold and transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such purchase, payment and transfer for the
account of the Trust. The Custodian shall transfer such
commercial paper which is sold or cancel such commercial paper
which is redeemed for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice that payment for
such paper has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer or redemption and payment for the account of the
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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 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 Paper by reason of any
negligence, misfeasance or misconduct of the Custodian or any of
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its agents or subcustodians or of any of its or their employees
or from any failure of the Custodian or any such agent or
subcustodian to enforce effectively such rights as it may have
against the System, the issuer of the commercial paper or any
other person; at the election of the Trust, it shall be entitled
to be subrogated to the rights of the Custodian with respect to
any claim against the System, the issuer of the commercial paper
or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent that
the Trust has not been made whole for any such loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Trust, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation
and of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market
or commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other arrangements
in connection with transactions by the Trust, (ii) for purposes
of segregating cash or U.S. Government securities in connection
with options purchased, sold or written by the Trust or futures
contracts or options thereon purchased or sold by the Trust,
(iii) for the purposes of compliance by the Trust with the
procedures required by Investment Company Act Release No. 10666,
or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper purposes, but only, in the case of clause (iv), upon
receipt of, in addition to proper instructions, a certificate
signed by two officers of the Trust, setting forth the purpose
such segregated account and declaring such purpose to be a
proper purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Trust
held by it and in connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities
held by it hereunder, cause to be promptly delivered to the
Trust all forms of proxies and all notices of meetings and 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
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authorizations as may be required. Neither the Custodian nor its
nominee shall vote upon any of the securities or execute any
proxy to vote thereon or give any consent or take any other
action with respect thereto (except as otherwise herein
provided) unless ordered to do so by proper instructions.
Q. Communications Relating to Trust Portfolio Securities The
Custodian shall deliver promptly to the Trust all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Trust and the
maturity of futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Trust. With respect to tender or exchange offers,
the Custodian shall deliver promptly to the Trust all written
information received by the Custodian from issuers and other
persons relating to the securities and participation interests
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender offers,
similar offers to purchase or exercise rights (including,
without limitation, pendency of calls and maturities of
securities and participation interests and expirations of rights
in connection therewith and notices of exercise of call and put
options and the maturity of futures contracts) affecting or
relating to securities and participation interests held by the
Custodian under this Agreement, the Custodian shall have
responsibility for promptly notifying the Trust of all such
offers in accordance with the standard of reasonable care set
forth in Section 8 hereof. For all such offers for which the
Custodian is responsible as provided in this Paragraph R, the
Trust shall have responsibility for providing the Custodian with
all necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to the
issuer or trustee thereof, or to the agent of either, warrants,
puts, calls, rights or similar securities for the purpose of
being exercised or sold upon proper receipt therefor and upon
receipt of assurances satisfactory to the Custodian that the new
securities and cash, if any, acquired by such action are to be
delivered to the Custodian or any subcustodian employed pursuant
to Section 2 hereof. Upon receipt of proper instructions, the
Custodian shall timely deposit securities upon invitations for
tenders of securities upon proper receipt therefor and upon
receipt of assurances satisfactory to the Custodian that the
consideration to be 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
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proper instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and shall thereafter promptly
notify the Trust in writing of such action.
S. Depository Receipts The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts or International Depository Receipts
(hereinafter collectively referred to as "ADRs") for such
securities, against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the Custodian that the depository has acknowledged receipt of
instructions to issue with respect to such securities in the
name of a nominee of the Custodian or in the name or nominee
name of any subcustodian employed pursuant to Section 2 hereof,
for delivery to the Custodian or such subcustodian at such place
as the Custodian or such subcustodian may from time to time
designate. The Custodian shall, upon receipt of proper
instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian
that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian
employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall,
upon receipt of proper instructions, place interest bearing
fixed term and call deposits with the banking department of such
banking institution (other than the Custodian) and in such
amounts as the Trust may designate. Deposits may be denominated
in U.S. Dollars or other currencies. The Custodian shall
include in its records with respect to the assets of the Trust
appropriate notation as to the amount and currency of each such
deposit, the accepting banking institution and other appropriate
details and shall retain such forms of advice or receipt
evidencing the deposit, if any, as may be forwarded to the
Custodian by the banking institution. Such deposits shall be
deemed portfolio securities of the Trust for the purposes of
this Agreement, and the Custodian shall be responsible for the
collection of income from such accounts and the transmission of
cash to and from such accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
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
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organizations, receive and retain confirmations or other
documents, if any, evidencing the purchase or writing of an
option on a security or securities index or other financial
instrument or index by the Trust; deposit and maintain in a
segregated account for the Trust, either physically or by
book-entry in a Securities System, securities subject to a
covered call option written by the Trust; and release and/or
transfer such securities or other assets only in accordance with
a notice or other communication evidencing the expiration,
termination or exercise of such covered option furnished by the
Options Clearing Corporation, the securities or options exchange
on which such covered option is traded or such other
organization as may be responsible for handling such options
transactions. The Custodian and the broker-dealer shall be
responsible for the sufficiency of assets held in the Trust's
segregated account in compliance with applicable margin
maintenance requirements.
2. Futures Contracts The Custodian shall, upon receipt
of proper instructions, receive and retain confirmations and
other documents, if any, evidencing the purchase or sale of a
futures contract or an option on a futures contract by the
Trust; deposit and maintain in a segregated account, for the
benefit of any futures commission merchant, assets designated by
the Trust as initial, maintenance or variation "margin" deposits
(including mark-to-market payments) intended to secure the
Trust's performance of its obligations under any futures
contracts purchased or sold or any options on futures contracts
written by Trust, in accordance with the provisions of any
agreement or agreements among the Trust, the Custodian and such
futures commission merchant, designed to comply with the rules
of the Commodity Futures Trading Commission and/or of any
contract market or commodities exchange or similar organization
regarding such margin deposits or payments; and release and/or
transfer assets in such margin accounts only in accordance with
any such agreements or rules. The Custodian and the futures
commission merchant shall be responsible for the sufficiency of
assets held in the segregated account in compliance with the
applicable margin maintenance and mark-to-market payment
requirements.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into foreign exchange contracts or options
to purchase and sell foreign currencies for spot and future
delivery on behalf and for the account of the Trust. Such
transactions may be undertaken by the Custodian or subcustodian
with such banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign exchange
contracts and options shall be deemed to be portfolio securities
of the Trust; and accordingly, the responsibility of the
Custodian therefor shall be the same as and no greater than the
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Custodian's responsibility in respect of other portfolio
securities of the Trust. The Custodian shall be responsible for
the transmittal to and receipt of cash from the currency broker
or banking or financial institution with which the contract or
option is made, the maintenance of proper records with respect
to the transaction and the maintenance of any segregated account
required in connection with the transaction. The Custodian
shall have no duty with respect to the selection of the currency
brokers or banking or financial institutions with which the
Trust deals or for their failure to comply with the terms of any
contract or option. Without limiting the foregoing, it is
agreed that upon receipt of proper instructions and insofar as
funds are made available to the Custodian for the purpose, the
Custodian may (if determined necessary by the Custodian to
consummate a particular transaction on behalf and for the
account of the Trust) make free outgoing payments of cash in the
form of U.S. dollars or foreign currency before receiving
confirmation of a foreign exchange contract or confirmation that
the countervalue currency completing the foreign exchange
contract has been delivered or received. The Custodian shall
not be responsible for any costs and interest charges which may
be incurred by the Trust or the Custodian as a result of the
failure or delay of third parties to deliver foreign exchange;
provided that the Custodian shall nevertheless be held to the
standard of care set forth in, and shall be liable to the Trust
in accordance with, the provisions of Section 8.
V. Actions Permitted Without Express Authority The Custodian may
in its discretion, without express authority from the Trust:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided, that all such
payments shall be accounted for by the Custodian to the
Treasurer of the Trust;
2) surrender securities in temporary form for securities in
definitive form;
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.
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<PAGE>
4. Duties of Bank with Respect to Books of Account and Calculations of
Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep
such books of account (including records showing the adjusted tax costs of
the Trust's portfolio securities) and render as at the close of business
on each day a detailed statement of the amounts received or paid out and
of securities received or delivered for the account of the Trust during
said day and such other statements, including a daily trial balance and
inventory of the Trust's portfolio securities; and shall furnish such
other financial information and data as from time to time requested by the
Treasurer or any executive officer of the Trust; and shall compute and
determine, as of the close of business of the New York Stock Exchange, or
at such other time or times as the Board may determine, the net asset
value of the Trust and the net asset value of each interest in the Trust,
such computations and determinations to be made in accordance with the
governing documents of the Trust and the votes and instructions of the
Board and of the investment adviser at the time in force and applicable,
and promptly notify the Trust and its investment adviser and such other
persons as the Trust may request of the result of such computation and
determination. In computing the net asset value the Custodian may rely
upon security quotations received by telephone or otherwise from sources
or pricing services designated by the Trust by proper instructions, and
may further rely upon information furnished to it by any authorized
officer of the Trust relative (a) to liabilities of the Trust not
appearing on its books of account, (b) to the existence, status and proper
treatment of any reserve or reserves, (c) to any procedures or policies
established by the Board regarding the valuation of portfolio securities
or other assets, and (d) to the value to be assigned to any bond, note,
debenture, Treasury bill, repurchase agreement, subscription right,
security, participation interests or other asset or property for which
market quotations are not readily available. The Custodian shall also
compute and determine at such time or times as the Trust may designate the
portion of each item which has significance for a holder of an interest in
the Trust in computing and determining its federal income tax liability
including, but not limited to, each item of income, expense and realized
and unrealized gain or loss of the Trust which is attributable for Federal
income tax purposes to each such holder.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to
its activities and obligations under this Agreement in such manner as will
meet the obligations of the Trust under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable federal and state tax laws and any other law
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
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<PAGE>
Agreement shall be delivered to the Trust or to such other person or
persons as shall be designated by the Trust. Disposition of any account
or record after any required period of preservation shall be only in
accordance with specific instructions received from the Trust. The Bank
shall assist generally in the preparation of reports to holder of interest
in the Trust, to the Securities and Exchange Commission, including Form
N-SAR, and to others, audits of accounts, and other ministerial matters of
like nature; and, upon request, shall furnish the Trust's auditors with an
attested inventory of securities held with appropriate information as to
securities in transit or in the process of purchase or sale and with such
other information as said auditors may from time to time request. The
Custodian shall also maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory thereof,
and shall conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for
which it is responsible under this Agreement in such manner as the
Custodian shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. The Bank shall not disclose or use
any books or records it has prepared or maintained by reason of this
Agreement in any manner except as expressly authorized herein or directed
by the Trust, and the Bank shall keep confidential any information
obtained by reason of this Agreement.
6. Opinion of Trust's Independent Public Accountants
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to enable the Trust to obtain from year to year
favorable opinions from the Trust's independent public accountants with
respect to its activities hereunder in connection with the preparation of
the Trust's registration statement and Form N-SAR or other periodic
reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its
services as Custodian and Agent, as agreed upon from time to time between
the Trust and the Bank. The Bank shall be entitled to receive from the
Trust on demand reimbursement for its cash disbursements, expenses and
charges, including counsel fees, in connection with its duties as
Custodian and Agent hereunder, but excluding salaries and usual overhead
expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable
care, the Bank as Custodian and Agent shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties.
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<PAGE>
The Bank as Custodian and Agent shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall
be liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is
intended to nor shall it be construed to modify the standards of care and
responsibility set forth in Section 2 hereof with respect to subcustodians
and in subparagraph f of Paragraph L of Section 3 hereof with respect to
Securities Systems and in subparagraph g of Paragraph M of Section 3
hereof with respect to an Approved Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
subcustodians generally in Section 2 hereof, provided that, regardless of
whether assets are maintained in the custody of a foreign banking
institution, a foreign securities depository or a branch of a U.S. bank,
the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Trust to maintain custody of any securities or cash
of the Trust in a foreign country including, but not limited to, losses
resulting from nationalization, expropriation, currency restrictions, acts
of war, civil war or terrorism, insurrection, revolution, military or
usurped powers, nuclear fission, fusion or radiation, earthquake, storm or
other disturbance of nature or acts of God.
If the Trust requires the Bank in any capacity to take any action
with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Bank, result in the Bank or its
nominee assigned to the Trust being liable for the payment of money or
incurring liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
9. Persons Having Access to Assets of the Trust
(i) No trustee, officer, employee, or agent of the Trust shall have
physical access to the assets of the Trust held by the Custodian or be
authorized or permitted to withdraw any investments of the Trust, nor
shall the Custodian deliver any assets of the Trust to any such person.
No officer or director, employee or agent of the Custodian who holds any
similar position with the Trust or the investment adviser or the
administrator of the Trust shall have access to the assets of the Trust.
(ii) Access to assets of the Trust held hereunder shall only be
available to duly authorized officers, employees, representatives or
agents of the Custodian or other persons or entities for whose actions the
Custodian shall be responsible to the extent permitted hereunder, or to
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<PAGE>
the Trust's independent public accountants in connection with their
auditing duties performed on behalf of the Trust.
(iii) Nothing in this Section 9 shall prohibit any officer, employee
or agent of the Trust or of the investment adviser of the Trust from
giving instructions to the Custodian or executing a certificate so long as
it does not result in delivery of or access to assets of the Trust
prohibited by paragraph (i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination
to take effect not sooner than sixty (60) days after the date of such
delivery or mailing; provided, that the Trust may at any time by action of
its Board, (i) substitute another bank or trust company for the Custodian
by giving notice as described above to the Custodian, or
(ii) immediately terminate this Agreement in the event of the appointment
of a conservator or receiver for the Custodian by the Federal Deposit
Insurance Corporation or by the Banking Commissioner of The Commonwealth
of Massachusetts or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction. Upon
termination of the Agreement, the Trust shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and
disbursements.
Unless the holders of a majority of the outstanding "voting
securities" of the Trust (as defined in the Investment Company Act of
1940) vote to have the securities, funds and other properties held
hereunder delivered and paid over to some other bank or trust company,
specified in the vote, having not less than $2,000,000 of aggregate
capital, surplus and undivided profits, as shown by its last published
report, and meeting such other qualifications for custodians set forth in
the Investment Company Act of 1940, the Board shall, forthwith, upon
giving or receiving notice of termination of this Agreement, appoint as
successor custodian, a bank or trust company having such qualifications.
The Bank, as Custodian, Agent or otherwise, shall, upon termination of the
Agreement, deliver to such successor custodian, all securities then held
hereunder and all funds or other properties of the Trust deposited with or
held by the Bank hereunder and all books of account and records kept by
the Bank pursuant to this Agreement, and all documents held by the Bank
relative thereto. In the event that no such vote has been adopted by the
Holders of Interest in the Trust and that no written order designating a
successor custodian shall have been delivered to the Bank on or before the
date when such termination shall become effective, then the Bank shall not
deliver the securities, funds and other properties of the Trust to the
Trust but shall have the right to deliver to a bank or trust company doing
business in Boston, Massachusetts of its own selection, having an
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<PAGE>
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.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and
the Trust may from time to time agree on such provisions interpretive of
or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the governing instruments of the Trust.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
12. Notices
Notices and other writings delivered or mailed postage prepaid to the
Trust addressed to 24 Federal Street, Boston, Massachusetts 02110, or to
such other address as the Trust may have designated to the Bank, in
writing with a copy to Eaton Vance Management at 24 Federal Street,
Boston, Massachusetts 02110, or to Investors Bank & Trust Company, 24
Federal Street, Boston, Massachusetts 02110 with a copy to Eaton Vance
Management at 24 Federal Street, Boston, Massachusetts 02110, shall be
deemed to have been properly delivered or given hereunder to the
respective addressees.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
The Custodian expressly acknowledges the provision in the Declaration
of Trust of the Trust (Section 5.2 and 5.6) limiting the personal
liability of the Trustees and officers of the Trust, and the Custodian
hereby agrees that it shall have recourse to the Trust for payment of
claims or obligations as between the Trust and the Custodian arising out
of this Agreement, and the Custodian shall not seek satisfaction from any
Trustee or officer of the Trust.
14. Adoption of the Agreement by the Trust
The Trust represents that its Board has approved this Agreement and
has duly authorized the Trust to adopt this Agreement, such adoption to be
evidenced by a letter agreement between the Trust and the Bank reflecting
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such adoption, which letter agreement shall be dated and signed by a duly
authorized officer of the Trust and duly authorized officer of the Bank.
This Agreement shall be deemed to be duly executed and delivered by each
of the parties in its name and behalf by its duly authorized officer as of
the date of such letter agreement, and this Agreement shall be deemed to
supersede and terminate, as of the date of such letter agreement, all
prior agreements between the Trust and the Bank relating to the custody of
the Trust's assets.
* * * * *
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VIRGINIA LIMITED MATURITY TAX FREE PORTFOLIO
_______________________
PROCEDURES FOR ALLOCATIONS
AND DISTRIBUTIONS
August 10, 1994
<PAGE>
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
<PAGE>
PROCEDURES FOR
ALLOCATIONS AND DISTRIBUTIONS
OF
VIRGINIA LIMITED MATURITY TAX FREE 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
August 10, 1994, 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.
<PAGE>
"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
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<PAGE>
(ii) Any expenditures of the Trust for such year or period
described in Section 705(a)(2)(B) of the 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 Virginia Limited Maturity Tax Free Portfolio, a
trust fund formed under the law of the State of New York by the
Declaration.
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<PAGE>
"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
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.
3.3. Tax Capital Accounts. The Tax Capital Account balance of each
Holder shall be adjusted at the following times by the following amounts:
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<PAGE>
(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
<PAGE>
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 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)
6
<PAGE>
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 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
7
<PAGE>
(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 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
8
<PAGE>
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).
9
<PAGE>
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:
(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
<PAGE>
August 15, 1994
Virginia Limited Maturity Tax Free 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 Virginia Limited
Maturity Tax Free Portfolio (the "Portfolio"), we hereby advise you that
we are purchasing such Initial Interest for investment purposes without
any present intention of redeeming or reselling.
The amount paid by the Portfolio on any withdrawal by us of any
portion of such Initial Interest will be reduced by a portion of any
unamortized organization expenses, determined by the proportion of the
amount of such Initial Interest withdrawn to the aggregate Initial
Interests of all holders of similar Initial Interests then outstanding
after taking into account any prior withdrawals of any such Initial
Interest.
Very truly yours,
EATON VANCE MANAGEMENT
By /s/Curtis H. Jones
---------------------
Vice President
<PAGE>
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