As filed with the Securities and Exchange Commission on March 6, 1995
1940 Act File No. 811-8876
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
SENIOR DEBT PORTFOLIO
(Exact Name of Registrant as Specified in Charter)
The Bank of Nova Scotia Building
P.O. Box 501, George Town, Grand Cayman
Cayman Islands, British West Indies
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code (809) 949-2001
Thomas Otis
24 Federal Street, Boston, Massachusetts 02110
(Name and Address of Agent for Service)
The Exhibit Index required by Rule 483(a) under the Securities Act of 1933
is located at sequentially numbered page _______ of the manually signed
copy of this Registration Statement.
Page 1 of _______ pages.
EXPLANATORY NOTES
(1) 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 (the "1940 Act"). However, interests in the Registrant have
not been registered under the Securities Act of 1933, as amended (the
"1933 Act"), because such interests will be issued solely in private
placement transactions that do not involve any "public offering" within
the meaning of Section 4(2) of the 1933 Act. Investments in the
Registrant may be made only by U.S. and foreign investment companies,
common or commingled trust funds, organizations or trusts described in
Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as
amended, or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement, as amended, does not constitute an offer to sell,
or the solicitation of an offer to buy, any interest in the Registrant.
(2) At a Special Meeting of Shareholders held on January 11, 1995,
the shareholders of Eaton Vance Prime Rate Reserves (the "Fund"),
currently a closed-end management investment company registered with the
Securities and Exchange Commission under the 1940 Act (File No. 811-05808)
and the 1933 Act (File No. 33-34922), approved the Fund's conversion from
a "stand alone" closed-end management investment company investing
directly in a portfolio of loans and market securities, to the initial
"Spoke" fund investing its assets in the Portfolio (the "Hub" fund). The
Trustees of the Fund transferred the Fund's assets to the Portfolio on
February 21, 1995, thereby converting the Fund to a Hub and Spoke *
structure.
* "Hub and Spoke" is a registered service mark of Signature Financial
Group, Inc.
PART A
Responses to Items 1, 2, 3.2, and 4 through 7 of Part A have been
omitted pursuant to Paragraph 3 of Instruction G of the General
Instructions to Form N-2.
Item 3. Fee Table and Synopsis
Not Applicable.
Item 8. General Description of Registrant
Senior Debt Portfolio (the "Portfolio") is a closed-end,
non-diversified management investment company which was organized as a
trust under the laws of the State of New York on May 1, 1992. Interests
in the Portfolio are issued solely in private placement transactions that
do not involve any "public offering" within the meaning of Section 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"). Investments in
the Portfolio may be made only by U.S. and foreign investment companies,
common or commingled trust funds, organizations or trusts described in
Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement, as amended, does not constitute an offer to sell,
or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio's investment objective is to provide as high a
level of current income as is consistent with the preservation of capital,
by investing in a portfolio primarily of senior secured floating rate
loans. The foregoing investment objective is not fundamental and,
accordingly, may be changed by the Trustees without obtaining the approval
of the investors in the Portfolio.
Additional information about the investment policies of the
Portfolio appears in Part B. The Portfolio is not intended to be a
complete investment program, and a prospective investor should take into
account its objectives and other investments when considering the purchase
of an interest in the Portfolio. The Portfolio cannot assure achievement
of its investment objective.
How the Portfolio Invests Its Assets
The Portfolio will invest primarily in senior secured floating
rate loans, and also in other institutionally traded senior secured
floating rate debt obligations (collectively, "Loans"). Under normal
market conditions, the Portfolio will invest at least 80% of its total
assets in interests in Loans ("Loan Interests"). These Loans are made
primarily to U.S. companies or their affiliates or issuers of asset-backed
interests (collectively, "Borrowers") and have floating interest rates.
Up to 20% of the Portfolio's total assets may be held in cash, invested in
investment grade short-term debt obligations, and invested in interests in
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Loans that are unsecured ("Unsecured Loans"). See "Other Investment
Policies" below.
The Loans in which the Portfolio acquires Loan Interests will, in
the judgment of Boston Management and Research (the "Investment Adviser"
or "BMR"), be in the category of senior debt of the Borrower and will
generally hold the most senior position in the capitalization structure of
the Borrower. Loans will consist primarily of direct obligations of U.S.
companies or their affiliates undertaken to finance a capital
restructuring or in connection with recapitalizations, acquisitions,
leveraged buy-outs, refinancings or other financially leveraged
transactions. Such Loans may include those made to a Borrower for the
purpose of acquiring ownership or control of a company, whether as a
purchase of equity or of assets, or for a leveraged recapitalization with
no change in ownership. Except for Unsecured Loans, each Loan will be
secured by collateral which BMR believes to have a market value, at the
time of acquiring the Loan Interest, which equals or exceeds the principal
amount of the Loan. Subsequent to purchase, the value of the collateral
may decline, and the Loan may no longer be as secured. The Loans will
typically have a stated term of five to eight years. However, because the
Loans typically amortize principal over their stated life and are
frequently prepaid, their effective maturity is expected to be two to
three years. The Portfolio will maintain with its custodian a segregated
account of liquid, high grade debt obligations with a value equal to the
amount, if any, of the Loan that the Portfolio has obligated itself to
make to the Borrower, but which has not yet been requested from the
Portfolio. The Portfolio will attempt to maintain a portfolio of Loan
Interests that will have a dollar weighted average period to next interest
rate adjustment of approximately 90 days or less.
The Portfolio will purchase Loan Interests only if, in BMR's
judgment, the Borrower can meet debt service on the Loan. In addition, a
Borrower must meet other criteria established by BMR and deemed by it to
be appropriate to the analysis of the Borrower, the Loan and the Loan
Interest. The Loan Interests in which the Portfolio invests are not
currently rated by any nationally recognized rating service. The primary
consideration in selecting such Loan Interests for investment by the
Portfolio is the creditworthiness of the Borrower. The quality ratings
assigned to other debt obligations of a Borrower are generally not a
material factor in evaluating Loans in which the Portfolio may acquire a
Loan Interest, because such obligations will typically be subordinated to
the Loans and be unsecured. Instead, BMR will perform its own independent
credit analysis of the Borrower in addition to utilizing information
prepared and supplied by the Agent (as defined below) or other
participants in the Loans. Such analysis will include an evaluation of the
industry and business of the Borrower, the management and financial
statements of the Borrower, and the particular terms of the Loan and the
Loan Interest that the Portfolio may acquire. BMR's analysis will continue
on an ongoing basis for any Loan Interest purchased and held by the
Portfolio. No assurance can be given regarding the availability at
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acceptable prices of Loan Interests that satisfy the Portfolio's
investment criteria.
A Loan in which the Portfolio may acquire a Loan Interest is
typically originated, negotiated and structured by a U.S. or foreign
commercial bank, insurance company, finance company or other financial
institution (the "Agent") for a lending syndicate of financial
institutions. The Agent typically administers and enforces the loan on
behalf of the other lenders in the syndicate. In addition, an institution,
typically but not always the Agent (the "Collateral Bank"), holds any
collateral on behalf of the lenders. The Collateral Bank must be a
qualified custodian under the Investment Company Act of 1940, as amended
(the "1940 Act"). These Loan Interests generally take the form of direct
interests acquired during a primary distribution and may also may take the
form of participation interests in, assignments of, or novations of a Loan
acquired in secondary markets. Such Loan Interests may be acquired from
U.S. or foreign commercial banks, insurance companies, finance companies
or other financial institutions that have made loans or are members of a
lending syndicate or from other holders of Loan Interests. The Portfolio
may also acquire Loan Interests under which the Portfolio derives its
rights directly from the Borrower. Such Loan Interests are separately
enforceable by the Portfolio against the Borrower and all payments of
interest and principal are typically made directly to the Portfolio from
the Borrower. In the event that the Portfolio and other lenders become
entitled to take possession of shared collateral, it is anticipated that
such collateral would be held in the custody of a Collateral Bank for
their mutual benefit. The Portfolio may not act as an Agent, a Collateral
Bank, a guarantor or sole negotiator or structurer with respect to a Loan.
BMR also analyzes and evaluates the financial condition of the
Agent and, in the case of Loan Interests in which the Portfolio does not
have privity with the Borrower, those institutions from or through whom
the Portfolio derives its rights in a Loan (the "Intermediate
Participants"). The Portfolio will invest in Loan Interests only if the
outstanding debt obligations of the Agent and Intermediate Participants,
if any, are, at the time of investment, investment grade (i.e., (a) rated
BBB or better by Standard and Poor's Ratings Group ("S&P") or Baa or
better by Moody's Investors Service, Inc. ("Moody's"); or (b) rated A-2 by
S&P or P-2 by Moody's; or (c) determined to be of comparable quality by
BMR).
The Portfolio may from time to time acquire Loan Interests in
transactions in which the current yield to the Portfolio exceeds the
stated interest rate on the Loan. These Loan Interests are referred to
herein as "Discount Loan Interests" because they are usually acquired at a
discount from their nominal value or with a facility fee that exceeds the
fee traditionally received in connection with the acquisition of Loan
Interests. The Borrowers with respect to such Loans may have experienced,
or may be perceived to be likely to experience, credit problems, including
involvement in or recent emergence from bankruptcy reorganization
proceedings or other forms of credit restructuring. In addition, Discount
Loan Interests may become available as a result of an imbalance in the
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supply of and demand for certain Loan Interests. The Portfolio may acquire
Discount Loan Interests in order to realize an enhanced yield or potential
capital appreciation when BMR believes that such Loan Interests are
undervalued by the market due to an excessively negative assessment of a
Borrower's creditworthiness or an imbalance between supply and demand. The
Portfolio may benefit from any appreciation in value of a Discount Loan
Interest, even if the Portfolio does not obtain 100% of the Loan
Interest's face value or the Borrower is not wholly successful in
resolving its credit problems.
From time to time BMR and its affiliates may borrow money from
various banks in connection with their business activities. Such banks may
also sell interests in Loans to or acquire such interests from the
Portfolio or may be Intermediate Participants with respect to Loans in
which the Portfolio owns interests. Such banks may also act as Agents for
Loans in which the Portfolio owns interests.
Risk Factors
BMR expects the Portfolio's net asset value to be relatively
stable during normal market conditions, because the Portfolio's assets
will consist primarily of interests in floating rate Loans and of
short-term instruments. Accordingly, the value of the Portfolio's assets
may fluctuate significantly less as a result of interest rate changes than
would a portfolio of fixed-rate obligations. Nevertheless, a default in a
Loan in which the Portfolio owns a Loan Interest, a material deterioration
of a Borrower's perceived or actual creditworthiness or a sudden and
extreme increase in prevailing interest rates may cause a decline in the
Portfolio's net asset value. Conversely, a sudden and extreme decline in
interest rates could result in an increase in the Portfolio's net asset
value.
Investments in Loan Interests by the Portfolio bear certain risks
common to investing in many secured debt instruments of nongovernmental
issuers, including the risk of nonpayment of principal and interest by the
Borrower, that Loan collateral may become impaired, that any losses will
be proportionate to the degree of Loan Interest diversification and
Borrower industry concentration, and that the Portfolio may obtain less
than full value for Loan Interests sold because they are illiquid.
Credit Risk. Loan Interests are primarily dependent upon the
creditworthiness of the Borrower for payment of interest and principal.
The nonreceipt of scheduled interest or principal on a Loan Interest may
adversely affect the income of the Portfolio or the value of its
investments, which may in turn reduce the amount of dividends or the net
asset value of the interests of the Portfolio. The Portfolio's ability to
receive payment of principal of and interest on a Loan Interest also
depends upon the creditworthiness of any institution interposed between
the Portfolio and the Borrower. To reduce credit risk, BMR actively
manages the Portfolio as described above.
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Loan Interests in Loans made in connection with leveraged
buy-outs, recapitalizations and other highly leveraged transactions are
subject to greater credit risks than many of the other Loan Interests in
which the Portfolio may invest. As of the date hereof, such Loan Interests
constituted substantially all of the Portfolio's Loan Interests. These
credit risks include the possibility of a default on the Loan or
bankruptcy of the Borrower. The value of such Loan Interests is subject to
a greater degree of volatility in response to interest rate fluctuations
and may be less liquid than other Loan Interests.
The Portfolio may acquire interests in Loans that are designed to
provide temporary or "bridge" financing to a Borrower pending the sale of
identified assets or the arrangement of longer-term loans or the issuance
and sale of debt obligations. The Portfolio may also invest in Loan
Interests of Borrowers who have obtained bridge loans from other parties.
A Borrower's use of bridge loans involves a risk that the Borrower may be
unable to locate permanent financing to replace the bridge loan, which may
impair the Borrower's perceived creditworthiness.
Although Loans in which the Portfolio invests will generally hold
the most senior position in the capitalization structure of the Borrowers,
the capitalization of many Borrowers will include non-investment grade
subordinated debt. During periods of deteriorating economic conditions, a
Borrower may experience difficulty in meeting its payment obligations
under such bonds and other subordinated debt obligations. Such
difficulties may detract from the Borrower's perceived creditworthiness or
its ability to obtain financing to cover short-term cash flow needs and
may force the Borrower into bankruptcy or other forms of credit
restructuring.
Collateral Impairment. Loans (excluding Unsecured Loans) will be fully
secured unless (i) the value of the collateral declines below the amount
of the Loans, (ii) the Portfolio's security interest in the collateral is
invalidated for any reason by a court or (iii) the collateral is partially
or fully released under the terms of the Loan Agreement (as defined below
in "Borrower Covenants" under Item 17 in Part B) as the creditworthiness
of the Borrower improves. There is no assurance that the liquidation of
collateral would satisfy the Borrower's obligation in the event of
nonpayment of scheduled interest or principal, or that collateral could be
readily liquidated. The value of collateral generally will be determined
by reference to financial statements of the Borrower, an independent
appraisal performed at the request of the Agent (as defined below) at the
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time the Loan was initially made, the market value of such collateral
(e.g., cash or securities) if it is readily ascertainable, and/or by other
customary valuation techniques considered appropriate in the judgment of
BMR. Collateral is generally valued on the basis of the Borrower's status
as a going concern and such valuation may exceed the immediate liquidation
value of the collateral.
Collateral may include: (i) working capital assets, such as
accounts receivable and inventory; (ii) tangible fixed assets, such as
real property, buildings and equipment; (iii) intangible assets, such as
trademarks and patent rights (but excluding goodwill); and (iv) security
interests in shares of stock of subsidiaries or affiliates. To the extent
that collateral consists of the stock of the Borrower's subsidiaries or
other affiliates, the Portfolio will be subject to the risk that this
stock will decline in value. Such a decline, whether as a result of
bankruptcy proceedings or otherwise, could cause the Loan to be
undercollateralized or unsecured. In most credit agreements there is no
formal requirement to pledge additional collateral. In the case of Loans
made to non-public companies, the company's shareholders or owners may
provide collateral in the form of secured guarantees and/or security
interests in assets that they own. In addition, the Portfolio may invest
in Loans guaranteed by, or fully secured by assets of, such shareholders
or owners, even if the Loans are not otherwise collateralized by assets of
the Borrower; provided, however, that such guarantees are fully secured.
There may be temporary periods when the principal asset held by a Borrower
is the stock of a related company, which may not legally be pledged to
secure a Loan. On occasions when such stock cannot be pledged, the Loan
will be temporarily unsecured until the stock can be pledged or is
exchanged for or replaced by other assets, which will be pledged as
security for the Loan. However, the Borrower's ability to dispose of such
securities, other than in connection with such pledge or replacement, will
be strictly limited for the protection of the holders of Loans and,
indirectly, Loan Interests.
If a Borrower becomes involved in bankruptcy proceedings, a court
may invalidate the Portfolio's security interest in the Loan collateral or
subordinate the Portfolio's rights under the Loan to the interests of the
Borrower's unsecured creditors. Such action by a court could be based, for
example, on a "fraudulent conveyance" claim to the effect that the
Borrower did not receive fair consideration for granting the security
interest in the Loan collateral to the Portfolio. For Loans made in
connection with a highly leveraged transaction, consideration for granting
a security interest may be deemed inadequate if the proceeds of the Loan
were not received or retained by the Borrower, but were instead paid to
other persons (such as shareholders of the Borrower) in an amount which
left the Borrower insolvent or without sufficient working capital. There
are also other events, such as the failure to perfect a security interest
due to faulty documentation or faulty official filings, which could lead
to the invalidation of the Portfolio's security interest in Loan
collateral. If the Portfolio's security interest in Loan collateral is
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invalidated or the Loan is subordinated to other debt of a Borrower in
bankruptcy or other proceedings, it is unlikely that the Portfolio would
be able to recover the full amount of the principal and interest due on
the Loan.
Diversification and Industry Concentration. The Portfolio has registered
with the U.S. Securities and Exchange Commission as a "non-diversified"
investment company. As a result, the Portfolio is required to comply only
with the diversification requirements of Subchapter M of the Code. See
Item 22 in Part B for a description of these requirements. Because the
Portfolio may invest a relatively high percentage of its assets in the
obligations of a limited number of issuers, the value of the Portfolio's
investments will be more affected by any single adverse economic,
political or regulatory occurrence than will the value of the investments
of a diversified investment company. It is the Portfolio's current
intention not to invest more than 10% of its total assets in Loans of any
single Borrower. The Portfolio may invest more than 10% (but not more than
25%) of its total assets in Loan Interests for which the same Intermediate
Participant is interposed between the Borrower and the Portfolio. The
Portfolio may acquire Loan Interests in Loans made to Borrowers in any
industry. However, the Portfolio will not concentrate in any one industry
with respect to Borrowers in whose Loans the Portfolio acquires Loan
Interests or interpositioned persons that the Portfolio determines to be
issuers for the purpose of this policy. See "Investment Restrictions"
under Item 17 in Part B.
Illiquid Instruments. Loan Interests are, at present, not readily
marketable and may be subject to legal and contractual restrictions on
resale. Although Loan Interests are traded among certain financial
institutions, some of the Loan Interests acquired by the Portfolio will be
considered illiquid. The Portfolio's ability to dispose of a Loan Interest
may be reduced to the extent that there has been a perceived or actual
deterioration in the creditworthiness of an individual Borrower or the
creditworthiness of Borrowers in general, or by events that reduce the
level of confidence in the market for Loan Interests. As the market for
Loan Interests becomes more seasoned, liquidity is expected to improve.
However, the Portfolio has no limitation on the amount of its investments
which can be not readily marketable or subject to restrictions on resale.
Such investments may affect the Portfolio's ability to realize its net
asset value in the event of a voluntary or involuntary liquidation of its
assets. To the extent that such investments are illiquid, the Portfolio
may have difficulty disposing of portfolio securities in order to make its
tender offer payment obligations, if any. The Trustees of the Portfolio
will consider the liquidity of the Portfolio's investments in determining
whether a tender offer should be effected by the Portfolio. See "Tender
Offers to Purchase Interests" below.
Use of Leverage
The Portfolio may from time to time (i) borrow money on a secured
or unsecured basis at variable or fixed rates, and (ii) issue indebtedness
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such as commercial paper, bonds, debentures, notes or similar obligations
or instruments and invest the capital raised in additional portfolio
investments and/or meet its obligations pursuant to tender offers, if any.
BMR currently expects that the Portfolio may incur borrowings and issue
such debt in order to remain fully invested by managing anticipated cash
infusions from the prepayment of Loans and the sale of Portfolio interests
and cash outflows from the repurchase of Portfolio interests in connection
with tender offers. For example, the Portfolio may use borrowed cash to
purchase Loan Interests and repay such borrowings from the proceeds of
expected sales of Portfolio interests. The Portfolio may also borrow and
issue debt for the purpose of acquiring additional income-producing
investments when it believes that the interest payments and other costs
with respect to such borrowings or indebtedness will be exceeded by the
anticipated total return (a combination of income and appreciation) on
such investments. The amount of any such borrowing or issuance will depend
upon market or economic conditions existing at that time.
However, as prescribed by the 1940 Act, the Portfolio will be
required to maintain specified asset coverages of at least 300% with
respect to any bank borrowing or issuance of indebtedness immediately
following any such borrowing or issuance and on an ongoing basis as a
condition of declaring dividends. The Portfolio's inability to make
distributions as a result of these requirements could cause an investor in
the Portfolio to fail to qualify as a regulated investment company and/or
subject an investor to income or excise taxes. See Item 22 in Part B.
The Portfolio may be required to dispose of portfolio investments on
unfavorable terms if market fluctuations or other factors reduce the
required asset coverage to less than the prescribed amount.
Capital raised through leverage will be subject to interest costs
which may or may not exceed the interest earned on the assets purchased.
The Portfolio may also be required to maintain minimum average balances in
connection with borrowings or to pay a commitment or other fee to maintain
a line of credit; either of these requirements will increase the cost of
borrowing over the stated interest rate. The issuance of additional
classes of debt involves offering expenses and other costs and may limit
the Portfolio's freedom to pay dividends or to engage in other activities.
Borrowings and the issuance of indebtedness create an opportunity to be
more fully invested and to earn greater income. However, any such
borrowing or issuance is a speculative technique in that it will increase
the Portfolio's exposure to capital risk. Such risks may be mitigated
through the use of borrowings and issuances of indebtedness that have
floating rates of interest. Unless the income and appreciation, if any, on
assets acquired with borrowed funds or offering proceeds exceeds the cost
of borrowing or issuing debt, the use of leverage will diminish the
investment performance of the Portfolio compared with what it would have
been without leverage.
The Portfolio will not always borrow money or issue debt to
finance additional investments. The Portfolio may borrow money to finance
its tender offer payment obligations, if any, or for temporary,
extraordinary or emergency purposes. The Portfolio's willingness to borrow
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money and issue debt for investment purposes, and the amount it will
borrow, will depend on many factors, the most important of which are the
investment outlook, market conditions and interest rates. To the extent
that the Portfolio invests borrowed money in short-term, fixed-rate debt
obligations, successful use of a leveraging strategy depends on BMR's
ability to correctly predict interest rates and market movements over
these short-term periods. There is no assurance that a leveraging strategy
will be successful during any period in which it is employed.
The Portfolio has established a $245 million commercial paper
program, pursuant to which it may from time to time sell its unsecured
notes ("commercial paper") with short-term maturities of up to 270 days
from the issuance thereof to accredited investors. The Portfolio may use
the proceeds from the sale of its commercial paper to finance on a
short-term basis the cash payments made for tender offers and may repay
such borrowings from principal and interest payments made on the Loans.
The Portfolio expects to continue to use commercial paper borrowings to
finance such payments in the future as well as for investment purposes,
and for paying interest or principal in respect of its obligations. The
Portfolio's commercial paper will be issued pursuant to an Issuing and
Paying Agency Agreement between the Portfolio and Citibank, N.A., and will
be entitled to the benefits of a commercial paper surety bond made by
Capital Markets Assurance Corporation in favor of Citibank, N.A. as a
limited fiduciary for the holders of the commercial paper. The Portfolio
has entered into an Insurance and Indemnity Agreement with Capital Markets
Assurance Corporation, pursuant to which the Portfolio has agreed that, in
the event of default under said agreement, it will not declare dividends
or other distributions on, or repurchase or otherwise acquire, an interest
of the Portfolio or pay fees to BMR as compensation for the provision of
managerial or administrative services. In the event of such a default, the
Portfolio's inability to declare dividends and distributions as a result
of these requirements could cause an investor in the Portfolio (that is
otherwise eligible) to fail to qualify as a regulated investment company
and/or subject such an investor to income or excise taxes.
Other Investment Policies
The Portfolio will, during normal market conditions, invest at
least 80% of its total assets in Loan Interests that conform to the
requirements described above. However, up to 20% of the Portfolio's total
assets may be held in cash, invested in short-term debt obligations, and
invested in interests in Loans that are unsecured. The Portfolio will
invest in only those Unsecured Loans that have been determined by BMR to
have a credit quality at least equal to that of the collateralized Loans
in which the Portfolio primarily invests. Should the Borrower of an
Unsecured Loan default on its obligation there will be no specific
collateral on which the Portfolio can foreclose, although the Borrower
will typically have assets believed by BMR at the time of purchase of the
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Unsecured Loans to exceed the amount of the Loan. The short-term debt
obligations in which the Portfolio may invest include, but are not limited
to, interests in senior Unsecured Loans with a remaining maturity of one
year or less ("Short-Term Loans"), certificates of deposit, commercial
paper, short-term and medium-term notes, bonds with remaining maturities
of less than five years, obligations issued by the U.S. Government or any
of its agencies or instrumentalities and repurchase agreements. The credit
quality of Short-Term Loans must be determined by BMR to be at least equal
to that of the Portfolio's investments in Loans. All of such other debt
instruments will be investment grade (i.e., rated Baa, P-3 or better by
Moody's or BBB, A-3 or better by S&P or, if unrated, determined by BMR to
be of comparable quality). Securities rated Baa, BBB, P-3 or A-3 are
considered to have adequate capacity for payment of principal and
interest, but are more susceptible to adverse economic conditions.
Securities rated BBB or Baa (or comparable unrated securities) have
speculative characteristics. Also, the capacity of their issuers to make
principal and interest payments would be weakened by changes in economic
conditions or other circumstances to a greater extent than for issuers of
higher grade bonds. Pending investment of the proceeds resulting from
further investment by the Portfolio or when BMR believes that investing
for defensive purposes is appropriate, more than 20% of the Portfolio's
total assets may be temporarily held in cash or in the short-term debt
obligations described above.
Although the Portfolio currently holds Loan Interests only in
Loans for which the Agent and Intermediate Participants, if any, are
banks, it may acquire Loan Interests from non-bank financial institutions
and in Loans originated, negotiated and structured by non-bank financial
institutions, if such Loan Interests conform to the credit requirements
described above. As these other types of Loan Interests are developed and
offered to investors, BMR will, consistent with the Portfolio's investment
objective, policies and quality standards, and in accordance with
applicable custody and other requirements of the 1940 Act, consider making
investments in such Loan Interests. Also, the Portfolio has acquired and
may continue to acquire warrants and other equity securities as part of a
unit combining Loan Interests and equity securities of the Borrower or its
affiliates. The acquisition of such equity securities will only be
incidental to the Portfolio's purchase of a Loan Interest. The Portfolio
may also acquire equity securities issued in exchange for a Loan or issued
in connection with the debt restructuring or reorganization of a Borrower,
or if such acquisition, in the judgment of BMR, may enhance the value of a
Loan or would otherwise be consistent with the Portfolio's investment
policies.
The Portfolio will limit its investments to those which are
eligible for purchase by national banks for their own portfolios. The
conditions and restrictions governing the purchase of Portfolio interests
by national banks are set forth in the U.S. Comptroller of the Currency's
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Banking Circular 220. Subject to such conditions and restrictions,
national banks may acquire Portfolio interests for their own investment
portfolio.
Foreign Investments. The Portfolio may also acquire U.S. dollar
denominated Loan Interests in Loans which are made to non-U.S. Borrowers
in developed countries; provided, however, that any such Borrower meets
the credit standards established by BMR for U.S. Borrowers and no more
than 35% of its net assets are invested in Loan Interests of such
Borrowers. Investing in Loan Interests of non-U.S. Borrowers involves
certain special considerations that are not typically associated with
investing in U.S. Borrowers. Because foreign companies are not subject to
uniform accounting, auditing and financial reporting standards, practices
and requirements comparable to those applicable to U.S. Borrowers, there
may be less publicly available information about a foreign company than
about a domestic company. There is generally less government supervision
and regulation of financial markets, brokers and listed companies than in
the United States. Mail service between the United States and foreign
countries may be slower or less reliable than within the United States,
thus increasing the risk of delayed settlements of portfolio transactions.
As of the date hereof, none of the Portfolio's assets were invested in
Loan Interests of non-U.S. Borrowers. Moreover, the Portfolio has no
current intention to invest more than 5% of its net assets in such Loan
Interests.
Interest Rate Transactions. In order to attempt to protect the value of
the Portfolio's assets from interest rate fluctuations and to maintain a
dollar weighted average period to next interest rate adjustment of
approximately 90 days or less, the Portfolio may enter into interest rate
swaps. The Portfolio intends to use interest rate swaps as a hedge and not
as a speculative investment and will typically use interest rate swaps to
shorten the average time to interest rate reset of the Portfolio. Interest
rate swaps involve the exchange by the Portfolio with another party of
their respective commitments to pay or receive interest, e.g., an exchange
of fixed rate payments for floating rate payments. The use of interest
rate swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary
portfolio securities transactions. BMR has not been involved in the use of
interest rate swaps, but has utilized other types of hedging techniques.
If BMR is incorrect in its forecasts of market values, interest rates and
other applicable factors, the investment performance of the Portfolio
would be less favorable than what it would have been if this investment
technique was never used. The Portfolio has not engaged in such
transactions and has no current intention to invest more than 5% of its
net assets in such transactions.
Repurchase Agreements. The Portfolio may enter into repurchase agreements
with respect to its permitted investments, but currently intends to do so
only with member banks of the Federal Reserve System or with primary
dealers in U.S. Government securities. Under a repurchase agreement the
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Portfolio buys a security at one price and simultaneously promises to sell
that same security back to the seller at a higher price. The Portfolio's
repurchase agreements will provide that the value of the collateral
underlying the repurchase agreement will always be at least equal to the
repurchase price, including any accrued interest earned on the repurchase
agreement, and will be marked to market daily. The repurchase date is
usually within seven days of the original purchase date. Repurchase
agreements are deemed to be loans under the 1940 Act. In all cases, BMR
must be satisfied with the creditworthiness of the other party to the
agreement before entering into a repurchase agreement. In the event of the
bankruptcy of the other party to a repurchase agreement, the Portfolio
might experience delays in recovering its cash. To the extent that, in
the meantime, the value of the securities the Portfolio purchased may have
declined, the Portfolio could experience a loss. To date, the Portfolio
has not engaged in repurchase agreements.
Certain Investment Restrictions and Policies. The Portfolio has adopted
certain fundamental investment restrictions and policies which are
enumerated in detail in Part B and which may not be changed unless
authorized by investor vote. Among these fundamental restrictions, the
Portfolio may not purchase any security if, as a result of such purchase,
25% or more of the Portfolio's total assets (taken at current value) would
be invested in the securities of Borrowers and other issuers having their
principal business activities in the same industry (the electric, gas,
water and telephone utility industries, commercial banks, thrift
institutions and finance companies being treated as separate industries
for the purpose of this restriction); provided, that there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities. Except for the
fundamental restrictions and policies enumerated in Part B, the investment
objective and policies of the Portfolio are not fundamental policies and,
accordingly, may be changed by the Trustees without obtaining the approval
of investors in the Portfolio.
Yield and Performance Information
The rate of interest payable on Loans is established as the sum
of a base lending rate plus a specified spread. These base lending rates
are generally the Prime Rate of a designated U.S. bank, the London
InterBank Offered Rate ("LIBOR"), the Certificate of Deposit ("CD") rate
of a designated U.S. bank or another base lending rate used by commercial
lenders. The Prime Rate is the rate banks typically use as a base for a
wide range of loans to individuals and midsize and small businesses.
LIBOR is the rate typically used by banks worldwide as a base for loans to
large commercial and industrial companies. A Borrower usually has the
right to select the base lending rate and to change the base lending rate
at specified intervals. The interest rate on Prime Rate-based Loans floats
daily as the Prime Rate changes, while the interest rate on LIBOR-based
and CD-based Loans is periodically reset with reset periods typically
ranging from 30 to 180 days. At the time of acquisition of a Loan
Interest, the Portfolio may also receive an upfront facility fee.
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The yield on a Loan Interest held by the Portfolio will primarily
depend on the terms of the underlying Loan and the base lending rate
chosen by the Borrower initially and on subsequent dates specified in the
applicable Loan Agreement. The relationship between the Prime Rate, the CD
rate and LIBOR will vary as market conditions change. In the past, the
relationship between the Prime Rate and the other possible base lending
rates was reasonably stable, and Loans were structured with appropriate
spreads over the base rates so that the income earned by the Portfolio was
approximately the same no matter which alternative the Borrower selected.
Because Borrowers tend to select the base lending rate which results in
the lowest interest cost, the distribution of the Portfolio's investments
among Prime Rate, CD rate and LIBOR-based Loans is likely to shift in
favor of Loans with the base lending rate that generates the lowest rate
of return to the Portfolio. BMR anticipates that, during normal market
conditions, the effective yield of the Portfolio may approximate the
average Prime Rate of leading U.S. banks as published in The Wall Street
Journal. When the traditional spread between the Prime Rate and other
base lending rates widens, the Portfolio will be unable to achieve an
effective yield approximating the average published Prime Rate of leading
U.S. banks. Such has been the case since February 1991. Currently, the
Borrowers with respect to over 90% of the value of Loans held by the
Portfolio have selected LIBOR as the base lending rate for such Loans,
which has lowered their interest cost and reduced the level of the
Portfolio's effective yield for this period to below the Prime Rate.
Although BMR believes the present wide differential between the Prime Rate
and LIBOR is unusual, it has occurred before at low points in the economic
cycle. BMR hopes that, as the economy continues to improve, the long-term
relationship between the Prime Rate and LIBOR may be restored and the
Portfolio should again be able to achieve an effective yield approximating
the Prime Rate. However, there is not yet evidence that this will occur in
1995 or thereafter.
Tender Offers to Purchase Interests
Investments in the Portfolio may not be transferred. However,
the Portfolio may from time to time make tender offers at net asset value
for the purchase of a portion of its interests. The price will be
established at the close of business on the last day the tender offer is
open. The Trustees presently intend each quarter to consider the making of
such tender offers. However, there are no assurances that the Board of
Trustees will, in fact, decide to undertake the making of such a tender
offer. The Portfolio will make tender offers, if any, to all investors in
the Portfolio on the same terms, which practice may affect the size of the
Portfolio's offers. Subject to the Portfolio's investment restriction
with respect to borrowings, the Portfolio may borrow money or issue debt
obligations to finance its repurchase obligations pursuant to any such
tender offers. See "Investment Restrictions" under Item 17 in Part B.
Although the Trustees believe that tender offers generally would
be beneficial to the Portfolio's investors, the acquisition of interests
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by the Portfolio will decrease the total assets of the Portfolio and
therefore have the possible effect of increasing the Portfolio's expense
ratio. Furthermore, if the Portfolio borrows to finance the making of
tender offers, interest on such borrowing will reduce the Portfolio's net
investment income.
There are circumstances under which the purchase of interests in
a tender offer, even if approved by the Board and made to investors, may
not be effected by the Portfolio. These circumstances would arise if, in
the judgment of the Trustees, (i) the Portfolio would not be able to
liquidate assets in an orderly manner in light of existing market
conditions and/or such liquidation would have an adverse effect on the net
asset value of the Portfolio to the detriment of some Portfolio investors;
(ii) the Portfolio's income would be taxed at the investor level because
the investor would fail to qualify as a regulated investment company under
the Code; or (iii) there exists (a) a limitation imposed by Federal or
state authorities on the extension of credit by lenders that affects the
Portfolio, the Borrowers of Loans in which the Portfolio holds Loan
Interests or the Intermediate Participants, (b) a banking moratorium
declared by Federal or state authorities or any suspension of payments by
banks in the United States, (c) a legal action or proceeding instituted or
threatened which materially adversely affects the Portfolio, (d) a legal
action or proceeding instituted or threatened which challenges such
purchase, (e) an international or national calamity, such as commencement
of war or armed hostilities, which directly or indirectly involves the
United States, or (f) an event or condition not listed herein which would
materially adversely affect the Portfolio if the tendered interests are
purchased.
If the Portfolio must liquidate portfolio securities in order to
meet its tender obligations, the Portfolio, and therefore an investor in
the Portfolio, may realize gains and losses. Such gains may be realized on
securities held for less than three months. Because less than 30% of the
Portfolio's annual gross income may be derived from the sale or
disposition of securities held less than three months (in order for an
investor in the Portfolio to retain its tax status as a regulated
investment company), such gains could reduce the ability of the Portfolio
to sell other securities held for less than three months that the
Portfolio may wish to sell in the ordinary course of its portfolio
management, which may adversely affect the Portfolio's yield.
Each tender offer will be made and investors notified in
accordance with the applicable requirements of the Securities Exchange Act
of 1934, as amended, and the 1940 Act, by publication or mailing or both.
Each offering document will contain such information as is prescribed by
such laws and the rules and regulations promulgated thereunder. The
Portfolio will pay all costs and expenses associated with the making of
any such tender offers by the Portfolio.
Item 9. Management of the Portfolio
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Investment Adviser. The Portfolio engages BMR, a wholly-owned
subsidiary of Eaton Vance Management ("Eaton Vance"), to act as its
investment adviser under an Investment Advisory Agreement (the "Advisory
Agreement"). Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.
("EVC"), a publicly held holding company. Eaton Vance, its affiliates and
predecessor companies have been managing assets of individuals and
institutions since 1924 and managing investment companies since 1931.
BMR's principal business address is 24 Federal Street, Boston,
Massachusetts 02110.
Under the general supervision of the Portfolio's Board of
Trustees, BMR will carry out the investment and reinvestment of the assets
of the Portfolio, will furnish continuously an investment program with
respect to the Portfolio, will determine which securities and loans should
be purchased, sold or exchanged, and will implement such determinations.
BMR will furnish to the Portfolio investment advice and office facilities,
equipment and personnel for servicing the investments of the Portfolio.
BMR will compensate all Trustees and officers of the Portfolio who are
members of the BMR organization and who render investment services to the
Portfolio, and will also compensate all other BMR personnel who provide
research and investment services to the Portfolio. In return for these
services, facilities and payments, the Portfolio has agreed to pay BMR as
compensation under the Advisory Agreement a monthly fee in the amount of
19/240 of 1% (equivalent to 0.95% annually) of the average daily gross
assets of the Portfolio. The gross assets of the Portfolio shall be
calculated by deducting all liabilities of the Portfolio except the
principal amount of any indebtedness for money borrowed, including debt
securities issued by the Portfolio. While this advisory fee is greater
than that paid by most other funds, it is similar to fees paid by other
closed-end funds investing primarily in Loans and Loan Interests. The
Portfolio will be responsible for all of its costs and expenses not
expressly stated to be payable by BMR under the Advisory Agreement. For a
description of such costs and expenses, see Item 20 in Part B.
On October 24, 1994, the Trustees voted to accept a waiver of
BMR's compensation so that the aggregate advisory fees paid by the
Portfolio under the Advisory Agreement during any fiscal year or portion
thereof after Eaton Vance Prime Rate Reserves begins to invest its assets
in the Portfolio (see "Explanatory Note (2)" above) will not exceed on an
annual basis: (a) 0.95% of average daily gross assets of the Portfolio up
to and including $1 billion; (b) 0.90% of average daily gross assets in
excess of $1 billion up to and including $2 billion; and (c) 0.85% of
average daily gross assets in excess of $2 billion. The fee waiver is
indefinite, but could be removed or changed at any time upon agreement of
BMR and the Portfolio's Board of Trustees.
Jeffrey S. Garner, Vice President of Eaton Vance since January
1988 and Vice President of the Portfolio since its inception, is the
Portfolio Manager of the Portfolio.
A - 15
BMR or Eaton Vance currently serves as the investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of approximately $15 billion, of which
approximately $13 billion is in investment companies. Eaton Vance, through
its subsidiaries and affiliates, engages in investment management and
marketing activities; fiduciary and related banking services; oil and gas
operations; real estate investment, consulting and management; and
development of precious metals properties.
Custodian. Investors Bank & Trust Company ("IBT"), 24 Federal
Street, Boston, Massachusetts 02110 (a 77.3% owned subsidiary of EVC),
acts as custodian for the Portfolio. For a general description of the
custody services provided by IBT, see "Custodian" under Item 20 in Part B.
Administrator. The Bank of Nova Scotia Trust Company (Cayman)
Ltd., The Bank of Nova Scotia Building, P.O. Box 501, George Town, Grand
Cayman, Cayman Islands, British West Indies, maintains the Portfolio's
principal office and certain of its records and provides administrative
assistance in connection with meetings of the Portfolio's Trustees and
interestholders, for which services the Portfolio pays $1,500 per annum.
Transfer Agent. IBT Fund Services (Canada) Inc., 1 First
Canadian Place, King Street West, Suite 2800, P.O. Box 231, Toronto,
Ontario, Canada M5X 1C8, a subsidiary of IBT, serves as transfer agent and
dividend-paying agent of the Portfolio and computes the daily net asset
value of interests in the Portfolio.
Control Persons. As of February 23, 1995, Eaton Vance Prime Rate
Reserves controlled the Portfolio by virtue of owning more than 99% of the
outstanding voting interests of the Portfolio.
Item 10. Capital Stock, Long-Term Debt, 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. Investors in
the Portfolio will each be liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss
on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust of the Portfolio provides that the
Portfolio will terminate 120 days after the complete withdrawal of any
investor in the Portfolio unless either the remaining investors, by
unanimous vote at a meeting of such investors, or a majority of the
Trustees of the Portfolio, by written instrument consented to by all
investors, agree to continue the business of the Portfolio. This provision
A - 16
is consistent with the treatment of the Portfolio as a partnership for
Federal income tax purposes.
Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable by the Portfolio, except as
set forth above. The Portfolio is not required and has no current
intention to hold annual meetings of investors, but the Portfolio may hold
special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote. Changes in
fundamental policies or restrictions will be submitted to investors for
approval. The investment objective and all nonfundamental investment
policies of the Portfolio may be changed by the Trustees of the Portfolio
without obtaining the approval of the investors in the Portfolio.
Investors have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified
number of investors) the right to communicate with other investors in
connection with requesting a meeting of investors for the purpose of
removing one or more Trustees. Any Trustee may be removed by the
affirmative vote of holders of two-thirds of the interests in the
Portfolio.
Information regarding pooled investment entities or funds that
invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc., 24 Federal Street, Boston, MA 02110 (617) 482-8260.
Smaller funds investing in the Portfolio may be adversely affected by the
actions of larger funds investing in the Portfolio. For example, if a
large fund withdraws from the Portfolio, the remaining funds 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.
The Portfolio's net asset value is determined each day on which
the New York Stock Exchange (the "Exchange") is open for trading
("Portfolio Business Day"). This determination is made each Portfolio
Business Day as of the close of regular trading on the Exchange (currently
4:00 p.m., New York time) (the "Portfolio Valuation Time"). The
Portfolio's net asset value is determined by IBT Fund Services (Canada)
Inc. (as agent for the Portfolio) in the manner authorized by the Trustees
of the Portfolio. The Portfolio will be closed for business and will not
determine its net asset value on the following business holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Portfolio's net asset
value is computed by determining the value of the Portfolio's total assets
(the loans and securities it holds plus any cash or other assets,
including interest accrued but not yet received) and subtracting all of
the Portfolio's liabilities (including the outstanding principal amount of
any indebtedness issued and any unpaid interest thereon).
A - 17
Because Loan Interests are not actively traded in a public
market, BMR, following procedures established by the Portfolio's Trustees,
will value the Loan Interests held by the Portfolio at fair value. In
valuing a Loan Interest, BMR will consider relevant factors, data, and
information, including: (i) the characteristics of and fundamental
analytical data relating to the Loan Interest, including the cost, size,
current interest rate, period until next interest rate reset, maturity and
base lending rate of the Loan Interest, the terms and conditions of the
Loan and any related agreements, and the position of the Loan in the
Borrower's debt structure, (ii) the nature, adequacy and value of the
collateral, including the Portfolio's rights, remedies and interests with
respect to the collateral; (iii) the creditworthiness of the Borrower,
based on an evaluation of its financial condition, financial statements
and information about the Borrower's business, cash flows, capital
structure and future prospects, (iv) information relating to the market
for the Loan Interest, including price quotations (if considered reliable)
for and trading in the Loan Interest and interests in similar Loans and
the market environment and investor attitudes towards the Loan Interest
and interests in similar Loans; (v) the reputation and financial condition
of the Agent and any Intermediate Participants in the Loan; and (vi)
general economic and market conditions affecting the fair value of the
Loan Interest.
Other Portfolio holdings (other than short term obligations, but
including listed issues) may be valued on the basis of prices furnished by
one or more pricing services which determine prices for normal,
institutional-size trading units of such securities using market
information, transactions for comparable securities and various
relationships between securities which are generally recognized by the
institutional traders. In certain circumstances, portfolio securities
will be valued at the last sale price on the exchange that is the primary
market for such securities, or the average of the last quoted bid price
and asked price for those securities for which the over-the-counter market
is the primary market or for listed securities in which there were no
sales during the day. The value of interest rate swaps will be determined
in accordance with a discounted present value formula and then confirmed
by obtaining a bank quotation.
Short-term obligations which mature in 60 days or less are valued
at amortized cost, if their original term to maturity when acquired by the
Portfolio was 60 days or less, or are valued at amortized cost using their
value on the 61st day prior to maturity, if their original term to
maturity when acquired by the Portfolio was more than 60 days, unless in
each case this is determined not to represent fair value. Repurchase
agreements will be valued by the Portfolio at cost plus accrued interest.
Securities for which there exist on price quotations or valuations and all
other assets are valued at fair value as determined in good faith by or on
behalf of the Trustees of the Portfolio.
A - 18
Each investor in the Portfolio may add to its investment in the
Portfolio on each Portfolio Business Day as of the Portfolio Valuation
Time. The value of each investor's interest in the Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage, determined on the prior Portfolio Business Day, which
represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals (which would be
made pursuant to Portfolio tender offers) for the current Portfolio
Business Day will then be recorded. The investor's percentage of the
aggregate interests in the Portfolio will then be recomputed as a
percentage equal to the fraction (i) the numerator of which is the value
of such investor's investment in the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the
case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio on the current Portfolio Business
Day and (ii) the denominator of which is the aggregate net asset value of
the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investment in the Portfolio
on the current Portfolio Business Day by all investors in the Portfolio.
The percentage so determined will then be applied to determine the value
of the investor's interest in the Portfolio for the current Portfolio
Business Day.
The Portfolio will allocate at least annually among its investors
its net investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. The Portfolio's net
investment income consists of all income accrued on the Portfolio's
assets, less all actual and accrued expenses of the Portfolio, determined
in accordance with generally accepted accounting principles.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any Federal income tax. See Item 22 in
Part B. However, each investor in the Portfolio will take into account
its allocable share of the Portfolio's ordinary income and capital gain in
determining its Federal income tax liability. The determination of each
such share will be made in accordance with the governing instruments of
the Portfolio, which are intended to comply with the requirements of the
Code, and the regulations promulgated thereunder.
It is intended that the Portfolio's assets and income will be
managed in such a way that an investor in the Portfolio that seeks to
qualify as a regulated investment company ("RIC") under the Code will be
able to satisfy the requirements for such qualification.
Item 11. Defaults and Arrears on Senior Securities
Not applicable.
A - 19
Item 12. Legal Proceedings
Not applicable.
Item 13. Table of Contents of Statement of Additional Information
Not applicable.
A - 20
PART B
Item 14. Cover Page
Not applicable.
Item 15. Table of Contents
General Information and History . . . . . . . . . . . . . . . . . . B-1
Investment Objective and Policies . . . . . . . . . . . . . . . . . B-1
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-6
Control Persons and Principal Holders of Securities . . . . . . . . B-9
Investment Advisory and Other Services . . . . . . . . . . . . . . . B-9
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . B-12
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . B-15
Item 16. General Information and History
Not applicable.
Item 17. Investment Objective and Policies
Part A contains additional information about the investment
objective and policies of the Senior Debt 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.
Lending Fees. In the process of buying, selling and holding Loan
Interests the Portfolio may receive and/or pay certain fees. These fees
are in addition to interest payments received and may include facility
fees, commitment fees, commissions and prepayment penalty fees. When the
Portfolio buys a Loan Interest it may receive a facility fee and when it
sells a Loan Interest it may pay a facility fee. On an ongoing basis, the
Portfolio may receive a commitment fee based on the undrawn portion of the
underlying line of credit portion of a Loan. In certain circumstances,
the Portfolio may receive a prepayment penalty fee upon the prepayment of
a Loan by a Borrower. Other fees received by the Portfolio may include
covenant waiver fees and covenant modification fees.
Borrower Covenants. A Borrower must comply with various restrictive
covenants contained in a loan agreement or note purchase agreement between
the Borrower and the lender or lending syndicate (the "Loan Agreement").
Such covenants, in addition to requiring the scheduled payment of interest
and principal, may include restrictions on dividend payments and other
distributions to stockholders, provisions requiring the Borrower to
maintain specific minimum financial ratios, and limits on total debt. In
addition, the Loan Agreement may contain a covenant requiring the Borrower
to prepay the Loan with any free cash flow. Free cash flow is generally
defined as net cash flow after scheduled debt service payments and
permitted capital expenditures, and includes the proceeds from asset
B - 1
dispositions or sales of securities. A breach of a covenant which is not
waived by the Agent, or by the lenders directly, as the case may be, is
normally an event of acceleration; i.e., the Agent, or the lenders
directly, as the case may be, has the right to call the outstanding Loan.
The typical practice of an Agent or a lender in relying exclusively or
primarily on reports from the Borrower may involve a risk of fraud by the
Borrower. In the case of a Loan Interest in the form of a participation
interest, the agreement between the buyer and seller may limit the rights
of the holder of the Loan Interest to vote on certain changes which may be
made to the Loan Agreement, such as waiving a breach of a covenant.
However, the holder of a Loan Interest will, in almost all cases, have the
right to vote on certain fundamental issues such as changes in principal
amount, payment dates and interest rate.
Administration of Loans. In a typical Loan, the Agent administers the
terms of the Loan Agreement. In such cases, the Agent is normally
responsible for the collection of principal and interest payments from the
Borrower and the apportionment of these payments to the credit of all
institutions which are parties to the Loan Agreement. The Portfolio will
generally rely upon the Agent or an Intermediate Participant to receive
and forward to the Portfolio its portion of the principal and interest
payments on the Loan. Furthermore, unless under the terms of a
Participation Agreement the Portfolio has direct recourse against the
Borrower, the Portfolio will rely on the Agent and the other members of
the lending syndicate to use appropriate credit remedies against the
Borrower. The Agent is typically responsible for monitoring compliance
with covenants contained in the Loan Agreement based upon reports prepared
by the Borrower. The seller of the Loan Interest usually does, but is
often not obligated to, notify holders of Loan Interests of any failures
of compliance. The Agent may monitor the value of the collateral and, if
the value of the collateral declines, may accelerate the Loan, may give
the Borrower an opportunity to provide additional collateral or may seek
other protection for the benefit of the participants in the Loan. The
Agent is compensated by the Borrower for providing these services under a
Loan Agreement, and such compensation may include special fees paid upon
structuring and funding the Loan and other fees paid on a continuing
basis. With respect to Loan Interests for which the Agent does not perform
such administrative and enforcement functions, the Portfolio will perform
such tasks on its own behalf, although a Collateral Bank will typically
hold any collateral on behalf of the Portfolio and the other lenders
pursuant to the applicable Loan Agreement.
A financial institution's appointment as Agent may usually be
terminated in the event that it fails to observe the requisite standard of
care or becomes insolvent, enters Federal Deposit Insurance Corporation
("FDIC") receivership, or, if not FDIC insured, enters into bankruptcy
proceedings. A successor Agent would generally be appointed to replace the
terminated Agent, and assets held by the Agent under the Loan Agreement
should remain available to holders of Loan Interests. However, if assets
held by the Agent for the benefit of the Portfolio were determined to be
subject to the claims of the Agent's general creditors, the Portfolio
might incur certain costs and delays in realizing payment on a Loan
B - 2
Interest, or suffer a loss of principal and/or interest. In situations
involving Intermediate Participants similar risks may arise.
Prepayments. The Loans in which the Portfolio acquires Loan Interests
will usually require, in addition to scheduled payments of interest and
principal, the prepayment of the Loan from free cash flow, as defined
above. The degree to which Borrowers prepay Loans, whether as a
contractual requirement or at their election, may be affected by general
business conditions, the financial condition of the Borrower and
competitive conditions among lenders, among others. As such, prepayments
cannot be predicted with accuracy. Upon a prepayment, either in part or in
full, the actual outstanding debt on which the Portfolio derives interest
income will be reduced. However, the Portfolio may receive both a
prepayment penalty fee from the prepaying Borrower and a facility fee upon
the purchase of a new Loan Interest with the proceeds from the prepayment
of the former. Prepayments generally will not materially affect the
Portfolio's performance because the Portfolio should be able to reinvest
prepayments in other Loan Interests in floating rate Loans that have
similar or identical yields and because receipt of such fees may mitigate
any adverse impact on the Portfolio's yield.
Interest Rate Transactions. The Portfolio may enter into interest rate
swaps on either an asset-based or liability-based basis, depending on
whether it is hedging its assets or its liabilities. For example, if the
Portfolio holds a Loan Interest with an interest rate that is reset only
once each year, it may swap the right to receive interest at this fixed
rate for the right to receive interest at a rate that is reset daily. Such
a swap position would offset changes in the value of the Loan Interest
because of subsequent changes in interest rates. This would protect the
Portfolio from a decline in the value of the Loan Interest due to rising
interest rates, but would also limit its ability to benefit from falling
interest rates.
The Portfolio will enter into interest rate swaps only on a net
basis, i.e., the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these transactions are entered into for good faith
hedging purposes and because a segregated account will be used, the
Portfolio will not treat them as being subject to the Portfolio's
borrowing restrictions. The net amount of the excess, if any, of the
Portfolio's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis and an amount of cash
or liquid high grade debt securities having an aggregate net asset value
at least equal to the accrued excess will be maintained in a segregated
account by the Portfolio's custodian. The Portfolio will not enter into
any interest rate swap unless the credit quality of the unsecured senior
debt or the claims-paying ability of the other party thereto is considered
to be investment grade by BMR. If there is a default by the other party to
such a transaction, the Portfolio will have contractual remedies pursuant
to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing
B - 3
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with the markets for other similar
instruments which are traded in the interbank market.
The Portfolio may enter into interest rate swaps only with
respect to positions held in its portfolio. Interest rate swaps do not
involve the delivery of securities or other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate
swaps is limited to the net amount of interest payments that the Portfolio
is contractually obligated to make or receive. Because interest rate swaps
are individually negotiated, the Portfolio expects to achieve an
acceptable degree of correlation between its rights to receive interest on
Loan Interests and its rights and obligations to receive and pay interest
pursuant to interest rate swaps.
Credit Risks. In the last decade, the Federal agencies that regulate
banking institutions subjected certain loans made in connection with
highly leveraged transactions to increased scrutiny during bank
examinations. Such regulatory action resulted in certain banks disposing
of Loan Interests at low prices. If such regulatory action became likely
again, banks might decide to reduce the amount of Loans to highly
leveraged Borrowers, which might reduce the availability of Loans suitable
for the Portfolio's ownership. As of the date hereof, such Loan Interests
constituted substantially all of the Portfolio's Loan Interests.
Portfolio Turnover
The Portfolio cannot accurately predict its portfolio turnover
rate, but it is anticipated that the annual turnover rate will be between
50% and 100%. A 100% annual turnover rate would occur, for example, if
all of 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
The Portfolio has adopted the following fundamental investment
restrictions, which cannot 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% of the
outstanding voting securities of the Portfolio present or represented by
proxy at a meeting if the holders of more than 50% of the outstanding
voting securities of the Portfolio are present or represented at the
meeting or (b) more than 50% of the outstanding voting securities of the
Portfolio. The term "voting securities" as used in this paragraph has the
same meaning as in the 1940 Act. As a matter of fundamental policy, the
Portfolio may not:
B - 4
(1) Borrow money, except as permitted by the Investment
Company Act of 1940;
(2) Issue senior securities, as defined in the Investment
Company Act of 1940, other than (i) preferred shares which immediately
after issuance will have asset coverage of at least 200%, (ii)
indebtedness which immediately after issuance will have asset coverage of
at least 300%, or (iii) the borrowings permitted by investment restriction
(1) above;
(3) Purchase securities on margin (but the Portfolio may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities). The purchase of Loan Interests,
securities or other investment assets with the proceeds of a permitted
borrowing or securities offering will not be deemed to be the purchase of
securities on margin;
(4) Underwrite securities issued by other persons, except
insofar as it may technically be deemed to be an underwriter under the
Securities Act of 1933, in selling or disposing of a portfolio investment;
(5) Make loans to other persons, except by (a) the
acquisition of Loan Interests, debt securities and other obligations in
which the Portfolio is authorized to invest in accordance with its
investment objective and policies, (b) entering into repurchase agreements
and (c) lending its portfolio securities;
(6) Purchase any security if, as a result of such purchase,
more than 25% of the Portfolio's total assets (taken at current value)
would be invested in the securities of Borrowers and other issuers having
their principal business activities in the same industry (the electric,
gas, water and telephone utility industries, commercial banks, thrift
institutions and finance companies being treated as separate industries
for the purpose of this restriction); provided that there is no limitation
with respect to obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities;
(7) Purchase or sell real estate, although it may purchase and
sell securities which are secured by interests in real estate and
securities of issuers which invest or deal in real estate. The Portfolio
reserves the freedom of action to hold and to sell real estate acquired as
a result of the ownership of securities; or
(8) Purchase or sell physical commodities or contracts for the
purchase or sale of physical commodities. Physical commodities do not
include futures contracts with respect to securities, securities indices
or other financial instruments.
For the purpose of investment restrictions (1), (2) and (3) above
and investment policy (a) below, the arrangements (including escrow,
margin and collateral arrangements) made by the Portfolio with respect to
transactions in all types of options and futures contract transactions
B - 5
shall not be considered to be (i) a borrowing of money or the issuance of
securities (including senior securities) by the Portfolio, (ii) a pledge
of its assets, (iii) the purchase of a security on margin, or (iv) a short
sale or position. The Portfolio has no present intention of engaging in
options or futures transactions.
Although permitted pursuant to investment restriction (2) above,
the Portfolio has no present intention of issuing preferred shares.
For the purpose of investment restriction (6) above, the
Portfolio will consider all relevant factors in determining who is the
issuer of the Loan Interest, including: the credit quality of the
Borrower, the amount and quality of the collateral, the terms of the Loan
Agreement and other relevant agreements (including inter-creditor
agreements), the degree to which the credit of such interpositioned person
was deemed material to the decision to purchase the Loan Interest, the
interest rate environment, and general economic conditions applicable to
the Borrower and such interpositioned person. In addition, with respect
to investment restriction (6) above, the Portfolio will construe the
phrase "more than 25%" to be "25% or more".
The Portfolio has adopted the following nonfundamental investment
policies, which may be changed by the Trustees without the approval of the
investors in the Portfolio. As a matter of nonfundamental policy, the
Portfolio may not: (a) make short sales of securities or maintain a
short position, unless at all times when a short position is open it
either owns an equal amount of such securities or owns 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; (b) purchase oil, gas or other mineral
leases or purchase partnership interests in oil, gas or other mineral
exploration or development programs; or (c) invest more than 10% of its
total assets (taken at current value) in the securities of issuers which
together with any predecessors have a record of less than three years
continuous operation, except U.S. Government securities, securities of
issuers which are rated by at least one nationally recognized statistical
rating organization, municipal obligations and obligations issued or
guaranteed by any foreign government or its agencies or instrumentalities.
In addition, the Portfolio does not intend to invest more than
10% of its total assets in Loans to any single Borrower.
B - 6
Whenever an investment policy or investment restriction set forth
in this Part B states a maximum percentage of the Portfolio's 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 will not compel the Portfolio to dispose of such security or
other asset.
Item 18. Management
The Portfolio's Trustees and officers are listed below. Except as
indicated, each individual has held the office shown or other offices in
the same company for the last five years. 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"), 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 and officers who are
"interested persons" of the Portfolio, BMR, Eaton Vance, EV or EVC, as
defined in the 1940 Act by virtue of their affiliation with any one or
more of the Portfolio, BMR, Eaton Vance, EV or EVC, are indicated by an
asterisk(*).
TRUSTEES OF THE PORTFOLIO
JAMES B. HAWKES (53), President and Trustee* Executive Vice President of
BMR, EVC, EV and Eaton Vance, and Director of EVC and EV. Director or
Trustee and officer of various investment companies managed by BMR or
Eaton Vance.
DONALD R. DWIGHT (63), 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 BMR or Eaton Vance. Address:
Clover Mill Lane, Lyme, NH 03768.
M. DOZIER GARDNER (61), Vice President and Trustee*
President of BMR, Eaton Vance and EV, and Director of EVC and EV. Director
or Trustee and officer of various investment companies managed by BMR or
Eaton Vance.
SAMUEL L. HAYES, III (59), Trustee
B - 7
Jacob H. Schiff Professor of Investment Banking, Harvard University
Graduate School of Business Administration. Director or Trustee of various
investment companies managed by BMR or Eaton Vance.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134.
NORTON H. REAMER (59), Trustee
President and Director of United Asset Management Corporation (holding
company owning institutional investment management firms); Chairman,
President and Director of The Regis Fund, Inc. (mutual fund). Director or
Trustee of various investment companies managed by BMR or Eaton Vance.
Address: One International Place, Boston, Massachusetts 02110.
JOHN L. THORNDIKE (68), Trustee
Director of Fiduciary Trust Company. Director or Trustee of various
investment companies managed by BMR or Eaton Vance.
Address: 175 Federal Street, Boston, Massachusetts 02110.
JACK L. TREYNOR (64), Trustee
Investment Adviser and Consultant. Director or Trustee of various
investment companies managed by BMR or Eaton Vance.
Address: 504 Via Almar, Palos Verdes Estates, California 90274.
OFFICERS OF THE PORTFOLIO
JEFFREY S. GARNER (38), Vice President and Portfolio Manager*
Vice President of BMR, Eaton Vance and EV.
JAMES L. O'CONNOR (49), Treasurer*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by BMR or Eaton Vance.
THOMAS OTIS (63), Secretary*
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by BMR or Eaton Vance.
BARBARA E. CAMPBELL (37), Assistant Treasurer*
Assistant Vice President of BMR, Eaton Vance and EV since January 17,
1992, employee of Eaton Vance (since October 23, 1991). Audit Manager--
Financial Services Industry Practice, Deloitte & Touche LLP (1987-1991).
Officer of various investment companies managed by BMR or Eaton Vance.
JANET E. SANDERS (59), Assistant Treasurer and Assistant Secretary*
B - 8
Vice President of BMR, Eaton Vance and EV. Officers of various investment
companies managed by BMR or Eaton Vance.
CARMEN THOMPSON (41), Vice President
Trust Officer of The Bank of Nova Scotia Trust Company (Cayman) Limited.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of
Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman
Islands, British West Indies.
PAUL LAURET (53), Vice President
Senior Trust Officer of The Bank of Nova Scotia Trust Company (Cayman)
Limited.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of
Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman
Islands, British West Indies.
RAYMOND O'NEILL (33), Vice President
Managing Director of IBT Trust and Custodian Services (Ireland) Limited.
Address: Earlsfort Terrace, Dublin 2, Ireland
The fees and expenses of those Trustees who are not members of
the Eaton Vance organization are paid by the Portfolio. The Trustees also
receive additional payments from other investment companies for which BMR
provides investment advisory services or Eaton Vance provides investment
advisory, administrative or management services for serving in similar
capacities.
Trustees of the Portfolio who are not affiliated with BMR may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his
deferred fees invested by the Portfolio in the shares of one or more funds
in the Eaton Vance Family of Funds, and the amount paid to the Trustee
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will
have a negligible effect on the Portfolio's assets, liabilities and net
income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular
level of compensation to the Trustee.
Each interested Trustee and officer holds comparable positions
with certain affiliates of BMR or with certain other funds of which BMR or
Eaton Vance is the investment adviser or distributor.
Item 19. Control Persons and Principal Holders of Securities
As of February 23, 1995, Eaton Vance Prime Rate Reserves (the
"Fund") controlled the Portfolio by virtue of owning more than 99% of the
value of the outstanding voting interests in the Portfolio. The Fund's
principal business address is 24 Federal Street, Boston, Massachusetts
B - 9
02110. Because the Fund controls the Portfolio, the Fund may take actions
without the approval of any other investor. The 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 20. Investment Advisory and Other Services
The Portfolio engages BMR to act as its investment adviser under
an Investment Advisory Agreement (the "Advisory Agreement"). Under the
general supervision of the Portfolio's Board of Trustees, BMR will carry
out the investment and reinvestment of the assets of the Portfolio, will
furnish continuously an investment program with respect to the Portfolio,
will determine which securities and loans should be purchased, sold or
exchanged, and will implement such determinations. BMR will furnish to the
Portfolio investment advice and office facilities, equipment and personnel
for servicing the investments of the Portfolio. BMR will compensate all
Trustees and officers of the Portfolio who are members of the BMR
organization and who render investment services to the Portfolio, and will
also compensate all other BMR personnel who provide research and
investment services to the Portfolio. In return for these services,
facilities and payments, the Portfolio has agreed to pay BMR as com-
pensation under the Advisory Agreement a monthly fee in the amount of
19/240 of 1% (equivalent to 0.95% annually) of the average daily gross
assets of the Portfolio. In calculating the gross assets of the Portfolio
for this purpose, there will be deducted all liabilities of the Portfolio
except the principal amount of any indebtedness for money borrowed,
including debt securities issued by the Portfolio. While this advisory fee
is greater than that paid by most other funds, it is similar to fees paid
by other closed-end funds investing primarily in Loans and Loan Interests.
For a description of the waiver applicable to the Portfolio's investment
advisory fee, see Item 9 in Part A.
The Portfolio will be responsible for all of its costs and
expenses not expressly stated to be payable by BMR under the Advisory
Agreement. Such costs and expenses to be borne by the Portfolio include,
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
purchase and sale of securities, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale, repurchase and redemption (if any) of interests in the
Portfolio, including expenses of conducting tender offers for the purpose
of repurchasing Portfolio interests, (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
B - 10
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 Investment Adviser's organization,
and (xviii) pricing and valuation services employed by the Portfolio, and
(xix) such nonrecurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the obligation of
the Portfolio to indemnify its Trustees, officers and investors with
respect thereto.
The Advisory Agreement will remain in effect until February 28,
1996. The Advisory Agreement may be continued from year to year thereafter
so long as such continuance after February 28, 1996 is approved at least
annually (i) by the vote of a majority of the Trustees who are not
"interested persons" of the Portfolio or BMR cast in person at a meeting
specifically called for the purpose of voting on such approval and (ii) by
the Trustees of the Portfolio or by vote of a majority of the outstanding
interests of the Portfolio. The Advisory Agreement may be terminated at
any time without penalty on sixty (60) days' written notice by the
Portfolio's Trustees or BMR, or by vote of the majority of the outstanding
interests of the Portfolio. The Advisory Agreement will terminate
automatically in the event of its assignment. The Advisory Agreement
provides that BMR may render services to others and engage in other
business activities. The Advisory Agreement also provides that, in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties to the Portfolio thereunder, BMR
will not be liable to the Portfolio or any interestholder for any loss
incurred.
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 Eaton Vance
and BMR. The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M.
Dozier Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors
of EVC consist of the same persons and John G. L. Cabot and Ralph Z.
Sorenson. Mr. Clay is chairman and Mr. Gardner is president and chief
executive officer of BMR, EVC, EV and Eaton Vance. 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
B - 11
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 EV and EVC. As of January 31, 1995, Messrs.
Clay, Gardner and Hawkes each owned 24% of such voting trust receipts, and
Messrs. Rowland and Brigham owned 15% and 13%, respectively, of such
voting trust receipts. Messrs. Gardner, Hawkes and Otis are officers or
Trustees of the Portfolio and are members of the BMR, EVC, Eaton Vance and
EV organizations. Messrs. Garner and O'Connor and Ms. Campbell and Ms.
Sanders are officers of the Portfolio and are members of the BMR, Eaton
Vance and EV organizations. BMR will receive the fees paid under the
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. BMR, EVC, 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 02110 (a 77.3% owned subsidiary of EVC),
acts as custodian for the Portfolio. IBT has the custody of all of the
Portfolio's assets and its subsidiary, IBT Fund Services (Canada) Inc.,
maintains the general ledger of the Portfolio and computes the daily net
asset value of interests in the Portfolio. In its capacity as custodian,
IBT attends to details in connection with the sale, exchange,
substitution, transfer of 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 custody fees based on a percentage of Portfolio assets, which fees
are competitive within the industry. 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
B - 12
1940 Act, and the Portfolio's investments held by IBT as custodian are
thus subject to the additional examinations by the Portfolio's independent
accountants as called for by such Rule.
Independent Auditors. Deloitte & Touche, Grand Cayman, Cayman
Islands, British West Indies, are the independent accountants for the
Portfolio.
Item 21. Brokerage Allocation and Other Practices
Specific decisions to purchase or sell securities for the
Portfolio are made by employees of BMR who are appointed and supervised by
its senior officers. Such employees may serve other clients of BMR in a
similar capacity. Changes in the Portfolio's investments are reviewed by
the Board of Trustees.
The Portfolio will acquire Loan Interests from major
international banks, selected domestic regional banks, insurance
companies, finance companies and other financial institutions. In
selecting financial institutions from which Loan Interests may be
acquired, BMR will consider, among other factors, the financial strength,
professional ability, level of service and research capability of the
institution. While these financial institutions are generally not required
to repurchase Loan Interests which they have sold, they may act as
principal or on an agency basis in connection with the Portfolio's
disposition of Loan Interests.
Other fixed-income obligations which may be 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 or banks acting
for their own account rather than as brokers, or otherwise involve
transactions directly with the issuers 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 fixed-income and other
securities 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, on occasion it
may be necessary or desirable 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
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. The Portfolio will
not purchase securities from its affiliates in principal transactions.
Securities considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its
B - 13
affiliates. Subject to applicable laws and regulations, BMR will attempt
to allocate equitably portfolio transactions among the Portfolio and its
other investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and
such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the
Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such
accounts. While this procedure could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees that the benefits available from
the BMR organization outweigh any disadvantage that may arise in
simultaneous transactions.
Item 22. Tax Status
The Portfolio has received a revenue ruling from the Internal
Revenue Service that, provided the Portfolio is operated at all times
during its existence in accordance with certain organizational and
operational documents, the Portfolio should be classified as a partnership
under the Internal Revenue Code of 1986, as amended (the "Code"), and it
should not be a "publicly traded partnership" within the meaning of
Section 7704 of the Code. Consequently, the Portfolio does not expect
that it will be required to pay any Federal income tax.
Under Subchapter K of the Code, a partnership is considered to be
either an aggregate of its members or a separate entity, depending upon
the factual and legal context in which the question arises. Under the
aggregate approach, each partner is treated as an owner of an undivided
interest in partnership assets and operations. Under the entity approach,
the partnership is treated as a separate entity in which partners have no
direct interest in partnership assets and operations. The Portfolio
believes that, in the case of an investor in the Portfolio that seeks to
qualify as a regulated investment company ("RIC") under the Code, the
aggregate approach should apply, and each such investor 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. Tax counsel has advised the Portfolio that
such an investor should be treated as the owner of a proportionate share
of the Portfolio's assets and income for purposes of all requirements of
Sections 851(b) and 852(b)(5) of the Code. Further, the Portfolio
believes that each investor in the Portfolio 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 investor has been a partner in the Portfolio, for purposes of
Subchapter K of the Code, whichever is shorter. Investors should consult
their tax advisers regarding whether the entity or the aggregate approach
B - 14
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 an investor in the Portfolio that is otherwise
eligible to qualify as a RIC under the Code, 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 of its net tax-exempt
investment income (if any), its taxable net investment income, and any net
realized capital gains in a manner that will enable an investor that is a
RIC to comply with the qualification requirements imposed by Subchapter M
of the Code. The Portfolio will allocate at least annually among its
investors each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of
income, gain, loss, deduction or credit in a manner intended to comply
with the Code and applicable Treasury regulations. Tax counsel has
advised the Portfolio that the Portfolio's allocations of taxable income
and loss should have "economic effect" under applicable Treasury
regulations.
To the extent cash proceeds of any withdrawal exceed an
investor's adjusted basis of his partnership interest in the Portfolio,
the investor will generally realize a gain for Federal income tax
purposes. If, upon a complete withdrawal (repurchase of the entire
partnership interest), the investor's adjusted basis of his partnership
interest exceeds the proceeds of such withdrawal, the investor will
generally realize a loss for Federal income tax purposes. An investor's
adjusted basis of a partnership interest in the Portfolio will be the
aggregate prices paid therefor, increased by the amounts of such 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 such 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) received by such holder. Cash distributions in excess of a
holder's adjusted basis in the holder's interest in the Portfolio
immediately prior thereto generally will result in the recognition of gain
to such holder in the amount of such excess.
The Portfolio may be subject to foreign withholding taxes with
respect to income on certain foreign securities. These taxes may be
reduced or eliminated under the terms of an applicable U.S. income tax
treaty. The anticipated extent of the Portfolio's investment in foreign
securities is such that it is not expected that an investor that is a RIC
will be eligible to pass through to its shareholders foreign taxes paid by
the Portfolio and allocated to the investor, so that shareholders of such
a RIC will not be entitled to foreign tax credits or deductions for
foreign taxes paid by the Portfolio and allocated to the RIC. Certain
foreign exchange gains and losses realized by the Portfolio and allocated
B - 15
to the RIC will be treated as ordinary income and losses. Certain uses of
foreign currency and investment by the Portfolio is certain "passive
foreign investment companies" may be limited or a tax election may be
made, if available, in order to enable an investor that is a RIC to
preserve its qualification as a RIC or to avoid imposition of a tax on
such an investor.
An entity that is treated as a partnership under the Code, such
as the Portfolio, is generally treated as a partnership under state and
local tax laws, but certain states may have different entity
classification criteria and may therefore reach a different conclusion.
Entities that are classified as partnerships are not treated as separate
taxable entities under most state and local tax laws, and the income of a
partnership is considered to be income of partners both in timing and in
character. The laws of the various states and local taxing authorities
vary with respect to the taxation of such interest income, as well as to
the status of a partnership interest under state and local tax laws, and
each holder of an interest in the Portfolio is advised to consult his own
tax adviser.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Investors should consult
their own tax advisers with respect to special tax rules that may apply in
their particular situations, as well as the state, local or foreign tax
consequences of investing in the Portfolio.
Item 23. Financial Statements
The following financial statements of the Portfolio are contained
in and are incorporated by reference to Eaton Vance Prime Rate Reserves's
Annual Shareholder Report for the fiscal year ended December 31, 1994:
Statement of Assets and Liabilities as at October 25, 1994
Independent Auditors' Consent
B - 16
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements:
The financial statements called for by this item are listed in Item 23
hereof and are contained in and are incorporated by reference to Eaton
Vance Prime Rate Reserves's Annual Shareholder Report for the fiscal year
ended December 31, 1994, which was filed electronically with the
Commission on February 17, 1995 (Accession No. 0000950156-95-000042).
(2) Exhibits:
(a) Amended and Restated Declaration of Trust dated November 21,
1994 filed as Exhibit (a) to the initial Registration Statement,
which was filed with the Commission on November 25, 1994, and
incorporated by reference herein.
(b) By-Laws adopted May 1, 1992 filed as Exhibit (b) to the initial
Registration Statement, which was filed with the Commission on
November 25, 1994, and incorporated by reference herein.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Form of Investment Advisory Agreement between the Registrant and
Boston Management and Research filed as Exhibit (g) to the
initial Registration Statement, which was filed with the
Commission on November 25, 1994, and incorporated by reference
herein.
(h) Form of Placement Agent Agreement with Eaton Vance Distributors,
Inc. filed as Exhibit (h) to the initial Registration Statement,
which was filed with the Commission on November 25, 1994, and
incorporated by reference herein.
(i) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See In the Matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).
(j) Custodian Agreement with Investors Bank & Trust Company.
C - 1
(k) (1) Accounting and Interestholder Services Agreement with IBT
Fund Services (Canada) Inc.
(2) Administration Agreement with The Bank of Nova Scotia Trust
Company (Cayman) Ltd.
(l) Not applicable.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
(p) Investment representation letter of Boston Management and
Research dated October 25, 1994 filed as Exhibit (p) to the
initial Registration Statement, which was filed with the
Commission on November 25, 1994, and incorporated by reference
herein.
(q) Not applicable.
(r) Not applicable.
Item 25. Marketing Arrangements
Not applicable.
Item 26. Other Expenses of Issuance and Distribution
Not applicable.
Item 27. Persons Controlled by or under Common Control with Registrant
None.
C - 2
Item 28. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders
Interests As of February 23, 1995
4
Item 29. Indemnification
Reference is hereby made to Article V of the Registrant's Amended and
Restated Declaration of Trust, filed as Exhibit (a) to the initial
Registration Statement, which was filed with the Commission on November
25, 1994, and incorporated by reference herein.
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 30. Business and Other Connections of the Investment Adviser
To the knowledge of the Portfolio, none of the trustees or officers of
the Portfolio's investment adviser, except as set forth on its Form ADV as
filed with the Securities and Exchange Commission, is engaged in any other
business, profession, vocation or employment of a substantial nature,
except that certain trustees and officers also hold various positions with
and engage in business for affiliates of the investment adviser.
Item 31. Location of Accounts and Records
All applicable accounts, books and documents required to be maintained
by the Registrant by Section 31(a) of the Investment Company Act of 1940,
as amended, and the Rules promulgated thereunder are in the possession and
custody of the Registrant's custodian, Investors Bank & Trust Company, 24
Federal Street, Boston, MA 02110, with the exception of certain corporate
documents and portfolio trading documents that are in the possession and
custody of the Registrant's investment adviser, Boston Management and
Research Management, 24 Federal Street, Boston, MA 02110. Certain
corporate documents are also maintained by The Bank of Nova Scotia Trust
Company (Cayman) Ltd., The Bank of Nova Scotia Building, P.O. Box 501,
George Town, Grand Cayman, Cayman Islands, British West Indies, and
certain investor account and Portfolio accounting records are held by IBT
Fund Services (Canada) Inc., 1 First Canadian Place, King Street West,
Suite 2800, P.O. Box 231, Toronto, Ontario, Canada
M5X 1C8. The Registrant is informed that all applicable accounts, books
and documents required to be maintained by registered investment advisers
are in the custody and possession of Registrant's investment adviser.
Item 32. Management Services
C - 3
None.
Item 33. Undertakings
Not applicable.
C - 4
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Amendment to its Registration
Statement on Form N-2 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Toronto, and Province of
Ontario, Canada, on the 22nd day of February, 1995.
SENIOR DEBT PORTFOLIO
By:/s/ James B. Hawkes
James B. Hawkes
President
C - 5
EXHIBIT INDEX
Description of Exhibit
(a) Amended and Restated Declaration of Trust dated
November 21, 1994 filed as Exhibit (a) to the initial
Registration Statement, which was filed with the
Commission on November 25, 1994, and incorporated by
reference herein.
(b) By-Laws adopted May 1, 1992 filed as Exhibit (b) to the
initial Registration Statement, which was filed with
the Commission on November 25, 1994, and incorporated
by reference herein.
(g) Form of Investment Advisory Agreement between the
Registrant and Boston Management and Research filed as
Exhibit (g) to the initial Registration Statement,
which was filed with the Commission on November 25,
1994, and incorporated by reference herein.
(h) Form of Placement Agent Agreement with Eaton Vance
Distributors, Inc. filed as Exhibit (h) to the initial
Registration Statement, which was filed with the
Commission on November 25, 1994, and incorporated by
reference herein.
(i) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the
Registrant to enter into deferred compensation
arrangements with its independent Trustees. See In the
Matter of Capital Exchange Fund, Inc., Release No. IC-
20671 (November 1, 1994).
(j) Custodian Agreement with Investors Bank & Trust
Company.
(k) (1) Accounting and Interestholder Services Agreement
with IBT Fund Services (Canada) Inc.
(2) Administration Agreement with The Bank of Nova
Scotia Trust Company (Cayman) Ltd.
(p) Investment representation letter of Boston Management
and Research dated October 25, 1994 filed as Exhibit
(p) to the initial Registration Statement, which was
filed with the Commission on November 25, 1994, and
incorporated by reference herein.
CUSTODIAN AGREEMENT
between
GOVERNMENT OBLIGATIONS, HIGH INCOME AND
SENIOR DEBT PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3
2. Employment of Custodian and Property to be Held by it . . . . . . 3
3. Duties of the Custodian with Respect to Property of the Trust . . 4
A. Safekeeping and Holding of Property . . . . . . . . . . . . . 4
B. Delivery of Securities . . . . . . . . . . . . . . . . . . 4-7
C. Registration of Securities . . . . . . . . . . . . . . . . . 7
D. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . 7-8
E. Payments for Interests, or Increases in Interests,
in the Trust . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Investment and Availability of U.S. Federal Funds . . . . . . 8
G. Collections . . . . . . . . . . . . . . . . . . . . . . . . 8-9
H. Payment of Trust Monies . . . . . . . . . . . . . . . . . . 9-11
I. Liability for Payment in Advance of Receipt of
Securities Purchased . . . . . . . . . . . . . . . . . . . . 11
J. Payments for Reductions or Redemptions of Interests
of the Trust . . . . . . . . . . . . . . . . . . . . . . . . 11
K. Appointment of Agents by the Custodian . . . . . . . . . 11-12
L. Deposit of Trust Portfolio Securities in Securities
Systems . . . . . . . . . . . . . . . . . . . . . . . . . 12-14
M. Deposit of Trust Commercial Paper in an Approved
Book-Entry System for Commercial Paper . . . . . . . . . 14-16
N. Segregated Account . . . . . . . . . . . . . . . . . . . 16-17
O. Ownership Certificates for Tax Purposes . . . . . . . . . . . 17
P. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Q. Communications Relating to Trust Portfolio Securities . . . . 17
R. Exercise of Rights; Tender Offers . . . . . . . . . . . 17-18
S. Depository Receipts . . . . . . . . . . . . . . . . . . . . . 18
T. Interest Bearing Call or Time Deposits . . . . . . . . . 18-19
U. Options, Futures Contracts and Foreign Currency
Transactions . . . . . . . . . . . . . . . . . . . . . . 19-21
V. Actions Permitted Without Express Authority . . . . . . . . . 21
4. Records and Miscellaneous Duties . . . . . . . . . . . . . . 22-23
5. Opinion of Trust's Independent Public Accountants . . . . . . . . 23
6. Compensation and Expenses of Bank . . . . . . . . . . . . . . . . 23
7. Responsibility of Bank . . . . . . . . . . . . . . . . . . . 23-24
8. Persons Having Access to Assets of the Trust . . . . . . . . . 24
9. Effective Period, Termination and Amendment;
Successor Custodian . . . . . . . . . . . . . . . . . . . . . 24-25
10. Interpretive and Additional Provisions . . . . . . . . . . . 25-26
11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12. Massachusetts Law to Apply . . . . . . . . . . . . . . . . . . . 26
- ii - a:\gohisdp.cus
CUSTODIAN AGREEMENT
This Agreement is made between each of the Government Obligations,
High Income and Senior Debt Portfolios (hereinafter called "Trusts"), each
a New York trust having its principal place of business in George Town,
Grand Cayman, Cayman Islands, BWI, and Investors Bank & Trust Company
(hereinafter called "Bank", "Custodian" and "Agent"), a trust company
established under the laws of Massachusetts with a principal place of
business in Boston, Massachusetts.
Whereas, each Trust is registered under the Investment Company Act of
1940 and has appointed the Bank to act as Custodian of its property and to
perform certain duties as its Agent, as more fully hereinafter set forth;
and
Whereas, the Bank is willing and able to act as the Trusts' Custodian
and Agent, subject to and in accordance with the provisions hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each Trust and the Bank agree
as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Board" shall mean the board of trustees of a Trust.
(b) "The Depository Trust Company", a clearing agency registered
with the U.S. Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(c) "Participants Trust Company", a clearing agency registered with
the U.S. Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934 which acts as a securities depository and
which has been specifically approved as a securities depository for the
Trust by the Board.
(d) "Approved Clearing Agency" shall mean any other domestic
clearing agency registered with the U.S. Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 which
acts as a securities depository.
(e) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for
United States and federal agency securities (i.e., as provided in Subpart
O of Treasury Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350,
and the book-entry regulations of federal agencies substantially in the
form of Subpart O).
(f) "Approved Foreign Securities Depository" shall mean a non-U.S.
securities depository or clearing agency referred to in Rule 17f-4 under
the Investment Company Act of 1940 for non-U.S. securities.
(g) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant
to Section 2 hereof for the holding of commercial paper in book-entry
form.
(h) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this
Agreement upon receipt of written or facsimile instructions signed by such
one or more person or persons as the Board shall have from time to time
authorized to give the particular class of instructions in question.
Different persons may be authorized to give instructions for different
purposes. A certified copy of a resolution of the Board may be received
and accepted by the Custodian as conclusive evidence of the authority of
any such person to act and may be considered as in full force and effect
until receipt of written notice to the contrary. Such instructions may be
general or specific in terms and, where appropriate, may be standing
instructions. Unless the resolution delegating authority to any person or
persons to give a particular class of instructions specifically requires
that the approval of any person, persons or committee shall first have
been obtained before the Custodian may act on instructions of that class,
the Custodian shall be under no obligation to question the right of the
person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably
believes them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Trust shall
cause all oral instructions to be confirmed in writing. The Trust
authorizes the Custodian to tape record any and all telephonic or other
oral instructions given to the Custodian. Upon receipt of a certificate
signed by two officers of the Trust as to the authorization by the
President and the Treasurer of the Trust accompanied by a detailed
description of the communication procedures approved by the President and
the Treasurer of the Trust, "proper instructions" may also include
communications effected directly between electromechanical or electronic
devices provided that the President and Treasurer of the Trust and the
Custodian are satisfied that such procedures afford adequate safeguards
for the Trust's assets. In performing its duties generally, and more
particularly in connection with the purchase, sale and exchange of
securities made by or for the Trust, the Custodian may take cognizance of
the provisions of the governing documents and registration statement of
the Trust as the same may from time to time be in effect (and resolutions
or proceedings of the holders of interests in the Trust or the Board),
but, nevertheless, except as otherwise expressly provided herein, the
Custodian may assume unless and until notified in writing to the contrary
- 2 - a:\gohisdp.cus
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.
(i) "Trust" shall mean one or all of the Trusts, as the context may
require.
(j) The term "Vote" when used with respect to the Board or the
Holders of Interests in the Trust shall include a vote, resolution,
consent, proceeding and other action taken by the Board or Holders in
accordance with the Declaration of Trust or By-Laws of the Trust.
2. Employment of Custodian and Property to be Held by It
The Trust hereby appoints and employs the Bank as its Custodian and
Agent in accordance with and subject to the provisions hereof, and the
Bank hereby accepts such appointment and employment. The Trust agrees to
deliver to the Custodian all securities, participation interests, cash and
other assets owned by it, and all payments of income, payments of
principal and capital distributions and adjustments received by it with
respect to all securities and participation interests owned by the Trust
from time to time, and the cash consideration received by it from time to
time in exchange for an interest in the Trust or for an increase in such
an interest. The Custodian shall not be responsible for any property of
the Trust held by the Trust and not delivered by the Trust to the
Custodian. The Trust will also deliver to the Bank from time to time
copies of its currently effective declaration of trust, by-laws,
registration statement and placement agent agreement with its placement
agent, together with such resolutions, and other proceedings of the Trust
as may be necessary for or convenient to the Bank in the performance of
its duties hereunder.
The Custodian may from time to time employ one or more subcustodians
to perform such acts and services upon such terms and conditions as shall
be approved from time to time by the Board. Any such subcustodian so
employed by the Custodian shall be deemed to be the agent of the
Custodian, and the Custodian shall remain primarily responsible for the
securities, participation interests, moneys and other property of the
Trust held by such subcustodian. Any non-U.S. subcustodian shall be a
bank or trust company which is an eligible foreign custodian within the
meaning of Rule 17f-5 under the Investment Company Act of 1940, and the
non-U.S. custody arrangements shall be approved by the Board and shall be
in accordance with and subject to the provisions of said Rule. For the
purposes of this Agreement, any property of the Trust held by any such
subcustodian (domestic or foreign) shall be deemed to be held by the
Custodian under the terms of this Agreement.
- 3 - a:\gohisdp.cus
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
U.S. Federal Reserve Wire System procedures; if delivery is
made elsewhere payment therefor shall be in accordance with
the then current "street delivery" custom or in accordance
with such procedures agreed to in writing from time to time
by the parties hereto; if the sale is effected through a
Securities System, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph L
hereof; if the sale of commercial paper is to be effected
through an Approved Book-Entry System for Commercial Paper,
delivery and payment therefor shall be made in accordance
with the provisions of Paragraph M hereof; if the
securities are to be sold outside the United States,
delivery of the securities for the account of the Trust may
be made either (a) in advance of receipt of payment
therefor in the absence of specific instructions to do so
provided such actions are consistent with local settlement
practices and customs, subject to the Custodian's standard
- 4 - a:\gohisdp.cus
of care, or (b) in accordance with procedures agreed to in
writing from time to time by the parties hereto; for the
purposes of this subparagraph, the term "sale" shall
include the disposition of a portfolio security (i) upon
the exercise of an option written by the Trust and (ii)
upon the failure by the Trust to make a successful bid with
respect to a portfolio security, the continued holding of
which is contingent upon the making of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Trust;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Trust;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Trust or into the name of any nominee of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different number of
bonds, certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities or participation
interests are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided that
the Custodian shall adopt such procedures as the Trust from
time to time shall approve to ensure their prompt return to
the Custodian by the broker in the event the broker elects
not to accept them;
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 - a:\gohisdp.cus
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
reduction of or redemption of an interest in the Trust
in accordance with the provisions of Paragraph J
hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a
broker-dealer registered under the Securities Exchange
Act of 1934 and, if necessary, the Trust, relating to
compliance with the rules of The Options Clearing
Corporation or of any registered national securities
exchange, or of any similar organization or
- 6 - a:\gohisdp.cus
organizations, regarding deposit or escrow or other
arrangements in connection with options transactions
by the Trust;
13) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian (or a
subcustodian employed pursuant to Section 2 hereof),
and a futures commissions merchant, relating to
compliance with the rules of the Commodity Futures
Trading Commission and/or of any contract market or
commodities exchange or similar organization,
regarding futures margin account deposits or payments
in connection with futures transactions by the Trust;
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a resolution of the Board specifying
the securities to be delivered, setting forth the
purpose for which such delivery is to be made,
declaring such purpose to be proper corporate purpose,
and naming the person or persons to whom delivery of
such securities shall be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Trust
shall be registered in the name of the Trust or in the name of
any nominee of the Trust or of any nominee of the Custodian, or
in the name or nominee name of any agent appointed pursuant to
Paragraph K hereof, or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, or in the
name or nominee name of The Depository Trust Company or
Participants Trust Company or Approved Clearing Agency or
Federal Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in an
account of the Custodian or of such agent or of such
subcustodian containing only assets of the Trust or only assets
held by the Custodian or such agent or such subcustodian as a
custodian or subcustodian or in a fiduciary capacity for
customers. All certificates for securities accepted by the
Custodian or any such agent or subcustodian on behalf of the
Trust shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a separate
bank account or accounts in the name of the Trust, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of the Trust other than cash maintained by
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the Trust in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940. Funds
held by the Custodian for the Trust may be deposited by it to
its credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies as the
Custodian may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall
be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall
be approved in writing by two officers of the Trust. Such funds
shall be deposited by the Custodian in its capacity as Custodian
and shall be subject to withdrawal only by the Custodian in that
capacity.
E. Payment for Interests, or Increases in Interests, in the Trust
The Custodian shall make appropriate arrangements with the
Transfer Agent of the Trust to enable the Custodian to make
certain it promptly receives the cash or other consideration due
to the Trust for payment of interests in the Trust, or increases
in such interests, in accordance with the governing documents
and registration statement of the Trust. The Custodian will
provide prompt notification to the Trust of any receipt by it of
such payments.
F. Investment and Availability of U.S. Federal Funds Upon
agreement between the Trust and the Custodian, the Custodian
shall, upon the receipt of proper instructions, which may be
continuing instructions when deemed 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;
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2) Present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Trust, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial
Paper at the time funds become available to the Custodian;
in the case of securities maintained in The Depository
Trust Company funds shall be deemed available to the Trust
not later than the opening of business on the first
business day after receipt of such funds by the Custodian.
The Custodian shall notify the Trust as soon as reasonably
practicable whenever income due on any security is not
promptly collected. In any case in which the Custodian
does not receive any due and unpaid income after it has
made demand for the same, it shall immediately so notify
the Trust in writing, enclosing copies of any demand
letter, any written response thereto, and memoranda of all
oral responses thereto and to telephonic demands, and await
instructions from the Trust; the Custodian shall in no case
have any liability for any nonpayment of such income
provided the Custodian meets the standard of care set forth
in 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
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(iii) written confirmation of the purchase by the Trust of
the options, futures contracts, forward contracts or
options on futures contracts by the Custodian (or by a
subcustodian employed pursuant to Section 2 hereof or by a
clearing corporation of a national securities exchange of
which the Custodian is a member or by any bank, banking
institution or trust company doing business in the United
States or abroad which is qualified under the Investment
Company Act of 1940 to act as a custodian and which has
been designated by the Custodian as its agent for this
purpose or by the agent specifically designated in such
instructions as representing the purchasers of a new issue
of privately placed securities); (b) in the case of a
purchase effected through a Securities System, upon receipt
of the securities by the Securities System in accordance
with the conditions set forth in Paragraph L hereof; (c) in
the case of a purchase of commercial paper effected through
an Approved Book-Entry System for Commercial Paper, upon
receipt of the paper by the Custodian or subcustodian in
accordance with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements entered
into between the Trust and another bank or a broker-dealer,
against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate
form or through an entry crediting the Custodian's
segregated, non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with written
evidence of the agreement by the bank or broker-dealer to
repurchase such securities from the Trust; or (e) in the
case of securities purchased outside the United States, the
Custodian may make payment therefor either (i) in advance
of receipt of such securities in the absence of specific
instructions to do so provided such actions are consistent
with local settlement practices and customs, subject to the
Custodian's standard of care, or (ii) in accordance with
procedures agreed to in writing from time to time by the
parties hereto;
2) When required in connection with the conversion, exchange
or surrender of securities owned by the Trust as set forth
in Paragraph B hereof;
3) When required for the reduction or redemption of an
interest in the Trust in accordance with the provisions of
Paragraph J hereof;
4) For the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments
for the account of the Trust: advisory fees, interest,
taxes, management compensation and expenses, accounting,
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transfer agent and legal fees, and other operating expenses
of the Trust whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
and
5) For distributions or payments to Holders of Interest of the
Trust.
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a certified
copy of a resolution of the Board, specifying the amount of
such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons
to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Trust is made by the Custodian
in advance of receipt of the securities purchased in the absence
of specific written instructions signed by two officers of the
Trust to so pay in advance, the Custodian shall be absolutely
liable to the Trust for such securities to the same extent as if
the securities had been received by the Custodian; except that
in the case of a repurchase agreement entered into by the Trust
with a bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank prior
to the receipt of (i) the securities in certificate form subject
to such repurchase agreement or (ii) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve
Bank of Boston or (iii) the safekeeping receipt, provided that
such securities have in fact been so transferred by book-entry
and the written repurchase agreement is received by the
Custodian in due course; and except that if the securities are
to be purchased outside the United States, payment may be made
in accordance with procedures agreed to in writing from time to
time by the parties hereto. Notwithstanding any other provision
in this Agreement to the contrary, where securities are
purchased or sold outside the United States, delivery of
securities for the account of the Trust may be made by the
Custodian in advance of receipt of payment for the securities
sold, and the Custodian may pay for securities in advance of
receipt of the securities purchased for the account of the
Trust, in the absence of specific instructions to do so provided
such actions are consistent with local settlement practices and
customs, subject to the Custodian's standard of care.
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J. Payments for Reductions or Redemptions of Interests in the Trust
From such funds as may be available for the purpose, but subject
to any applicable resolutions of the Board and the current
procedures of the Trust, the Custodian shall, upon receipt of
written instructions from the Trust or from the Trust's transfer
agent make funds and/or portfolio securities available for
payment to holders of interest in the Trust which have caused
the amount of their interests to be reduced, or for their
interest to be redeemed.
K. Appointment of Agents by the Custodian The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company
Act of 1940 to act as a custodian or is itself an eligible
foreign custodian within the meaning of Rule 17f-5 under said
Act) as the agent of the Custodian to carry out such of the
duties and functions of the Custodian described in this Section
3 as the Custodian may from time to time direct; provided,
however, that the appointment of any such agent shall not
relieve the Custodian of any of its responsibilities or
liabilities hereunder, and as between the Trust and the
Custodian the Custodian shall be fully responsible for the acts
and omissions of any such agent. For the purposes of this
Agreement, any property of the Trust held by any such agent
shall be deemed to be held by the Custodian hereunder.
L. Deposit of Trust Portfolio Securities in Securities Systems The
Custodian may deposit and/or maintain securities owned by the
Trust
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one or
more subcustodians employed pursuant to Section 2 keep
securities of the Trust in a Securities System provided that
such securities are maintained in a non-proprietary account
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("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 an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Trust; except
that when such securities are purchased outside the United
States, payment therefor may be made by the Custodian in advance
of receipt of such notice or advice and the making of such entry
in the absence of specific instructions to do so provided such
actions are consistent with local settlement practices and
customs, subject to the Custodian's standard of care. The
Custodian shall transfer securities sold for the account of the
Trust only upon (i) receipt of notice or advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Trust; except that when such
securities are sold outside the United States, transfer thereof
may be made by the Custodian in advance of receipt of such
notice or advice and the making of such entry in the absence of
specific instructions to do so provided such actions are
consistent with local settlement practices and customs, subject
to the Custodian's standard of care. Copies of all notices or
advices from the Securities System of transfers of securities
for the account of the Trust shall identify the Trust, be
maintained for the Trust by the Custodian and be promptly
provided to the Trust at its request. The Custodian shall
promptly send to the Trust confirmation of each transfer to or
from the account of the Trust in the form of a written advice or
notice of each such transaction, and shall furnish to the Trust
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Trust on the next business day.
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(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 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
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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 System and shall at all times
during regular business hours be open for inspection by
authorized officers, employees or agents of the Trust. The
Custodian shall be fully and completely responsible for
maintaining a recordkeeping system capable of accurately and
currently stating the Trust's holdings of commercial paper
maintained in each such System.
(c) The Custodian shall pay for commercial paper purchased
in book-entry form for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice from the issuer
that such paper has been issued, sold and transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such purchase, payment and transfer for the
account of the Trust. The Custodian shall transfer such
commercial paper which is sold or cancel such commercial paper
which is redeemed for the account of the Trust only upon
contemporaneous (i) receipt of notice or advice that payment for
such paper has been transferred to the Account, and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer or redemption and payment for the account of the
Trust. Copies of all notices, advices and confirmations of
transfers of commercial paper for the account of the Trust shall
identify the Trust, be maintained for the Trust by the Custodian
and be promptly provided to the Trust at its request. The
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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
its agents or subcustodians or of any of its or their employees
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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
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nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its
nominee shall vote upon any of the securities or execute any
proxy to vote thereon or give any consent or take any other
action with respect thereto (except as otherwise herein
provided) unless ordered to do so by proper instructions.
Q. Communications Relating to Trust Portfolio Securities The
Custodian shall deliver promptly to the Trust all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Trust and the
maturity of futures contracts purchased or sold by the Trust)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Trust. With respect to tender or exchange offers,
the Custodian shall deliver promptly to the Trust all written
information received by the Custodian from issuers and other
persons relating to the securities and participation interests
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender offers,
similar offers to purchase or exercise rights (including,
without limitation, pendency of calls and maturities of
securities and participation interests and expirations of rights
in connection therewith and notices of exercise of call and put
options and the maturity of futures contracts) affecting or
relating to securities and participation interests held by the
Custodian under this Agreement, the Custodian shall have
responsibility for promptly notifying the Trust of all such
offers in accordance with the standard of reasonable care set
forth in Section 8 hereof. For all such offers for which the
Custodian is responsible as provided in this Paragraph R, the
Trust shall have responsibility for providing the Custodian with
all necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to the
issuer or trustee thereof, or to the agent of either, warrants,
puts, calls, rights or similar securities for the purpose of
being exercised or sold upon proper receipt therefor and upon
receipt of assurances satisfactory to the Custodian that the new
securities and cash, if any, acquired by such action are to be
delivered to the Custodian or any subcustodian employed pursuant
to Section 2 hereof. Upon receipt of proper instructions, the
Custodian shall timely deposit securities upon invitations for
tenders of securities upon proper receipt therefor and upon
receipt of assurances satisfactory to the Custodian that the
consideration to be paid or delivered or the tendered securities
are to be returned to the Custodian or subcustodian employed
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pursuant to Section 2 hereof. Notwithstanding any provision of
this Agreement to the contrary, the Custodian shall take all
necessary action, unless otherwise directed to the contrary by
proper instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and shall thereafter promptly
notify the Trust in writing of such action.
S. Depository Receipts The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts or International Depository Receipts
(hereinafter collectively referred to as "ADRs") for such
securities, against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the Custodian that the depository has acknowledged receipt of
instructions to issue with respect to such securities ADRs in
the name of a nominee of the Custodian or in the name or nominee
name of any subcustodian employed pursuant to Section 2 hereof,
for delivery to the Custodian or such subcustodian at such place
as the Custodian or such subcustodian may from time to time
designate. The Custodian shall, upon receipt of proper
instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian
that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian
employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall,
upon receipt of proper instructions, place interest bearing
fixed term and call deposits with the banking department of such
banking institution (other than the Custodian) and in such
amounts as the Trust may designate. Deposits may be denominated
in U.S. Dollars 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
- 19 - a:\gohisdp.cus
1. Options The Custodian shall, upon receipt of proper
instructions and in accordance with the provisions of any
agreement between the Custodian, any registered
broker-dealer and, if necessary, the Trust, relating to
compliance with the rules of the Options Clearing
Corporation or of any registered national securities
exchange or similar organization or organizations, receive
and retain confirmations or other documents, if any,
evidencing the purchase or writing of an option on a
security or securities index or other financial instrument
or index by the Trust; deposit and maintain in a segregated
account for the Trust, either physically or by book-entry
in a Securities System, securities subject to a covered
call option written by the Trust; and release and/or
transfer such securities or other assets only in accordance
with a notice or other communication evidencing the
expiration, termination or exercise of such covered option
furnished by the Options Clearing Corporation, the
securities or options exchange on which such covered option
is traded or such other organization as may be responsible
for handling such options transactions. The Custodian and
the broker-dealer shall be responsible for the sufficiency
of assets held in the Trust's segregated account in
compliance with applicable margin maintenance requirements.
2. Futures Contracts The Custodian shall, upon receipt
of proper instructions, receive and retain confirmations
and other documents, if any, evidencing the purchase or
sale of a futures contract or an option on a futures
contract by the Trust; deposit and maintain in a segregated
account, for the benefit of any futures commission
merchant, assets designated by the Trust as initial,
maintenance or variation "margin" deposits (including
mark-to-market payments) intended to secure the Trust's
performance of its obligations under any futures contracts
purchased or sold or any options on futures contracts
written by the Trust, in accordance with the provisions of
any agreement or agreements among the Trust, the Custodian
and such futures commission merchant, designed to comply
with the rules of the Commodity Futures Trading Commission
and/or of any contract market or commodities exchange or
similar organization regarding such margin deposits or
payments; and release and/or transfer assets in such margin
accounts only in accordance with any such agreements or
rules. The Custodian and the futures commission merchant
shall be responsible for the sufficiency of assets held in
the segregated account in compliance with the applicable
margin maintenance and mark-to-market payment requirements.
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3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause a
subcustodian to enter into currency exchange contracts or
options to purchase and sell non-U.S. currencies for spot
and future delivery on behalf and for the account of the
Trust. Such transactions may be undertaken by the
Custodian or subcustodian with such banking or financial
institutions or other currency brokers, as set forth in
proper instructions. Currency exchange contracts and
options shall be deemed to be portfolio securities of the
Trust; and accordingly, the responsibility of the Custodian
therefor shall be the same as and no greater than the
Custodian's responsibility in respect of other portfolio
securities of the Trust. The Custodian shall be
responsible for the transmittal to and receipt of cash from
the currency broker or banking or financial institution
with which the contract or option is made, the maintenance
of proper records with respect to the transaction and the
maintenance of any segregated account required in
connection with the transaction. The Custodian shall have
no duty with respect to the selection of the currency
brokers or banking or financial institutions with which the
Trust deals or for their failure to comply with the terms
of any contract or option. Without limiting the foregoing,
it is agreed that upon receipt of proper instructions and
insofar as funds are made available to the Custodian for
the purpose, the Custodian may (if determined necessary by
the Custodian to consummate a particular transaction on
behalf and for the account of the Trust) make free outgoing
payments of cash in the form of U.S. dollars or other
currency before receiving confirmation of a currency
exchange contract or confirmation that the countervalue
currency completing the currency exchange contract has been
delivered or received. The Custodian shall not be
responsible for any costs and interest charges which may be
incurred by the Trust or the Custodian as a result of the
failure or delay of third parties to deliver currency
exchange; provided that the Custodian shall nevertheless be
held to the standard of care set forth in, and shall be
liable to the Trust in accordance with, the provisions of
Section 8.
V. Actions Permitted Without Express Authority The Custodian may
in its discretion, without express authority from the Trust:
1) make payments to itself or others for minor expenses
of handling securities or other similar items relating
to its duties under this Agreement, provided, that all
such payments shall be accounted for by the Custodian
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to the Treasurer of the Trust and shall be subject to
subsequent approval by an officer of the Trust;
2) surrender securities in temporary form for securities
in definitive form;
3) endorse for collection, in the name of the Trust,
checks, drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of the Trust except as
otherwise directed by the Trust.
4. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to
its activities and obligations under this Agreement in such manner as will
meet the obligations of the Trust under the Investment Company Act of
1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable U.S. federal and state tax laws and any other
law or administrative rules or procedures which may be applicable to the
Trust. All books of account and records maintained by the Bank in
connection with the performance of its duties under this Agreement shall
be the property of the Trust, shall at all times during the regular
business hours of the Bank be open for inspection by authorized officers,
employees or agents of the Trust, and in the event of termination of this
Agreement shall be delivered to the Trust or to such other person or
persons as shall be designated by the Trust. Disposition of any account
or record after any required period of preservation shall be only in
accordance with specific instructions received from the Trust. At the
request of the Trustees or duly authorized agent of the Trust located
outside the United States, The Bank shall assist generally in the
preparation of reports to holders of interest in the Trust, to the
Securities and Exchange Commission, including Form N-SAR, and to others,
audits of accounts, and other ministerial matters of like nature; and,
upon request, shall furnish the Trust's auditors with an attested
inventory of securities held with appropriate information as to securities
in transit or in the process of purchase or sale and with such other
information as said auditors may from time to time request. The Custodian
shall also maintain records of all receipts, deliveries and locations of
such securities, together with a current inventory thereof, and shall
conduct periodic verifications (including sampling counts at the
Custodian) of certificates representing bonds and other securities for
which it is responsible under this Agreement in such manner as the
Custodian shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. The Bank shall not disclose or use
any books or records it has prepared or maintained by reason of this
Agreement in any manner except as expressly authorized herein or directed
- 22 - a:\gohisdp.cus
by the Trust, and the Bank shall keep confidential any information
obtained by reason of this Agreement.
5. Opinion of Trust's Independent Public Accountants
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to enable the Trust to obtain from year to year
favorable opinions from the Trust's independent public accountants with
respect to its activities hereunder in connection with the preparation of
the Trust's registration statement and Form N-SAR or other periodic
reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
6. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its
services as Custodian and Agent, as agreed upon from time to time between
the Trust and the Bank. The Bank shall be entitled to receive from the
Trust on demand reimbursement for its cash disbursements, expenses and
charges, including counsel fees, in connection with its duties as
Custodian and Agent hereunder, but excluding salaries and usual overhead
expenses.
7. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable
care, the Bank as Custodian and Agent shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper
party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall
be liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is
intended to nor shall it be construed to modify the standards of care and
responsibility set forth in Section 2 hereof with respect to subcustodians
and in subparagraph f of Paragraph L of Section 3 hereof with respect to
Securities Systems and in subparagraph g of Paragraph M of Section 3
hereof with respect to an Approved Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a non-U.S.
banking institution to the same extent as set forth with respect to
subcustodians generally in Section 2 hereof, provided that, regardless of
whether assets are maintained in the custody of a non-U.S. banking
- 23 - a:\gohisdp.cus
institution, a non-U.S. securities depository or a branch of a U.S. bank,
the Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from, or caused by, the direction of or
authorization by the Trust to maintain custody of any securities or cash
of the Trust in other than the U.S. and Canada including, but not limited
to, losses resulting from governmental actions and restrictions,
nationalization, expropriation, currency restrictions, acts of war, civil
war or terrorism, insurrection, revolution, military or usurped powers,
nuclear fission, fusion or radiation, earthquake, storm or other
disturbance of nature or acts of God.
If the Trust requires the Bank in any capacity to take any action
with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Bank, result in the Bank or its
nominee assigned to the Trust being liable for the payment of money or
incurring liability of some other form, the Trust, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to
the Custodian in an amount and form satisfactory to it.
8. Persons Having Access to Assets of the Trust
(i) No trustee, officer, employee or agent of the Trust shall have
physical access to the assets of the Trust held by the Custodian or be
authorized or permitted to withdraw any investments of the Trust, nor
shall the Custodian deliver any assets of the Trust to any such person.
No officer or director, employee or agent of the Custodian who holds any
similar position with the Trust or the investment adviser or the
administrator of the Trust shall have access to the assets of the Trust.
(ii) Access to assets of the Trust held hereunder shall only be
available to duly authorized officers, employees, representatives or
agents of the Custodian or other persons or entities for whose actions the
Custodian shall be responsible to the extent permitted hereunder, or to
the Trust's independent public accountants in connection with their
auditing duties performed on behalf of the Trust.
(iii) Nothing in this Section 8 shall prohibit any officer, employee
or agent of the Trust or of the investment adviser of the Trust from
giving instructions to the Custodian or executing a certificate so long as
it does not result in delivery of or access to assets of the Trust
prohibited by paragraph (i) of this Section 8.
9. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party, such termination
to take effect not sooner than sixty (60) days after the date of such
- 24 - a:\gohisdp.cus
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
shareholders and that no written order designating a successor custodian
shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Trust to the Trust but shall
have the right to deliver to a bank or trust company doing business in
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Boston, Massachusetts of its own selection, having an aggregate capital,
surplus and undivided profits, as shown by its last published report, of
not less than $2,000,000, all funds, securities and properties of the
Trust held by or deposited with the Bank, and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents
held by the Bank relative thereto. Thereafter such bank or trust company
shall be the successor of the Custodian under this Agreement.
10. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and
the Trust may from time to time agree on such provisions interpretive of
or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable U.S.
federal or state regulations or any provision of the governing instruments
of the Trust. No interpretive or additional provisions made as provided
in the preceding sentence shall be deemed to be an amendment of this
Agreement.
11. Notices
Notices and other writings delivered or mailed postage prepaid to the
Trust addressed to The Bank of Nova Scotia Trust Company (Cayman) Limited,
The Bank of Nova Scotia Building, George Town, Grand Cayman, Cayman
Islands, WMI, or to such other address as the Trust may have designated to
the Bank, in writing with a copy to Eaton Vance Management at 24 Federal
Street, Boston, Massachusetts 02110, or to Investors Bank & Trust Company,
24 Federal Street, Boston, Massachusetts 02110 with a copy to Eaton Vance
Management at 24 Federal Street, Boston, Massachusetts 02110, shall be
deemed to have been properly delivered or given hereunder to the
respective addressees.
12. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
The Custodian expressly acknowledges the provision in the Declaration
of Trust of the Trust (Section 5.2 and 5.6) limiting the personal
liability of the Trustees and officers of the Trust, and the Custodian
hereby agrees that it shall have recourse to the Trust for payment of
claims or obligations as between the Trust and the Custodian arising out
of this Agreement and shall not seek satisfaction from any Trustee or
officer of the Trust.
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IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement on December 30, 1994.
GOVERNMENT OBLIGATIONS PORTFOLIO
HIGH INCOME PORTFOLIO
By: /s/ James B. Hawkes
_____________________________________
James B. Hawkes, Vice President
SENIOR DEBT PORTFOLIO
By: /s/ James B. Hawkes
_____________________________________
James B. Hawkes, President
INVESTORS BANK & TRUST COMPANY
By: /s/ Michael F. Rogers
_____________________________________
Michael F. Rogers, EMD
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ACCOUNTING AND INTERESTHOLDER SERVICES AGREEMENT
AGREEMENT made as of this 30th day of December, 1994, between Senior Debt
Portfolio, a New York trust (the "Trust"), and IBT Fund Services (Canada)
Inc., an Ontario corporation ("IBT").
WHEREAS, the Trust is registered under the Investment Company Act of 1940
as an open-end management investment company and desires to engage IBT to
provide certain trust accounting and interestholder recordkeeping services
with respect to the Trust and IBT has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. IBT Appointed. The Trust hereby appoints IBT to provide the
services as hereinafter described and IBT agrees to act as such upon the
terms and conditions hereinafter set forth.
2. Definitions. Whenever used herein, the terms listed below will
have the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on
behalf of the Trust by appropriate resolution of its Board, and set forth
in a certificate as required by Section 3 hereof.
2.2 Board. Board will mean the Board of Trustees of the Trust.
2.3 Portfolio Security. Portfolio Security will mean any
security owned by the Trust.
2.4 Interests. Interests will mean participation interests of
the Trust.
3. Certification as to Authorized Persons. The Secretary or
Assistant Secretary of the Trust will at all times maintain on file with
IBT his or her certification to IBT, in such form as may be acceptable to
IBT, of (i) the names and signatures of the Authorized Persons and (ii)
the names of the Board members, it being understood that upon the
occurrence of any change in the information set forth in the most recent
certification on file (including without limitation any person named in
the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Trust,
will sign a new or amended certification setting forth the change and the
new, additional or omitted names or signatures. IBT will be entitled to
rely and act upon the most recent Officers' Certificate given to it by the
Trust.
4. Maintenance of Records. IBT will maintain records with respect
to the services provided by IBT hereunder and will furnish the Trust daily
with a statement of condition of the Trust. The books and records of IBT
pertaining to its actions under this Agreement and reports by IBT or its
-2-
independent accountants concerning its accounting systems and internal
accounting controls will be open to inspection and audit at reasonable
times by officers of or auditors employed by the Trust, and the staff of
The U.S. Securities and Exchange Commission, and will be preserved by IBT
in accordance with procedures established by the Trust.
IBT shall keep the books of account and render statements or copies
from time to time as reasonably requested by the Treasurer or any
executive officer of the Trust.
IBT, as fund accounting agent, shall assist generally in the
preparation of reports of a financial nature to Holders and others, audits
of accounts, and other ministerial matters of like nature.
5. Duties of Bank with Respect to Books of Account and Calculations
of Net Asset Value. Inasmuch as the Trust is treated as a partnership for
federal income tax purposes, the Bank shall as Agent keep and maintain the
books and records of the Trust in accordance with the Procedures for
Allocations and Distributions adopted by the Trustees of the Trust, as
such Procedures may be in effect from time to time. A copy of the current
Procedures is attached to this Agreement, and the Trust agrees promptly to
furnish all revisions to or restatements of such Procedures to the Bank.
The Bank shall as Agent keep such books of account (including records
showing the adjusted tax costs of the Trust's portfolio securities) and
render as at the close of business on each day a detailed statement of the
amounts received or paid out and of securities received or delivered for
the account of the Trust during said day and such other statements,
including a daily trial balance and inventory of the Trust's portfolio
securities; and shall furnish such other financial information and data as
from time to time requested by the Treasurer or any executive officer of
the Trust; and shall compute and determine, as of the close of business of
the New York Stock Exchange, or at such other time or times as the Board
may determine, the net asset value of the Trust and the net asset value of
each interest in the Trust, such computations and determinations to be
made in accordance with the governing documents of the Trust and the votes
and instructions of the Board and of the investment adviser at the time in
force and applicable, and promptly notify the Trust and its investment
adviser and such other persons as the Trust may request of the result of
such computation and determination. In computing the net asset value IBT
may rely upon security quotations received by telephone or otherwise from
sources or pricing services designated by the Trust by proper
instructions, and may further rely upon information furnished to it by any
authorized officer of the Trust relative (a) to liabilities of the Trust
not appearing on its books of account, (b) to the existence, status and
proper treatment of any reserve or reserves, (c) to any procedures or
policies established by the Board regarding the valuation of portfolio
securities or other assets, and (d) to the value to be assigned to any
bond, note, debenture, Treasury bill, repurchase agreement, subscription
right, security, participation interests or other asset or property for
which market quotations are not readily available. IBT shall also compute
and determine at such time or times as the Trust may designate the portion
-3-
of each item which has significance for a holder of an interest in the
Trust in computing and determining its U.S. federal income tax liability
including, but not limited to, each item of income, expense and realized
and unrealized gain or loss of the Trust which is attributable for Federal
income tax purposes to each such holder.
6. Interestholder Services. IBT shall keep appropriate records of
the holdings of each interestholder on a daily basis. IBT shall also keep
each interestholder's subscription agreement with the Portfolio.
7. Compensation of IBT. For the services to be rendered and the
facilities provided by IBT hereunder, the Trust shall pay to IBT a fee
from the assets of the Trust computed and paid monthly, in accordance with
Schedule B attached hereto, as the same may be changed by mutual agreement
of the parties from time to time.
8. Concerning IBT.
8.1 Performance of Duties and Standard of Care. IBT shall not
be liable for any error of judgment or mistake of law or for any act or
omission in the performance of its duties hereunder, except for willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties hereunder.
IBT will be entitled to receive and act upon the advice of
independent counsel of its own selection, which may be counsel for the
Trust, and will be without liability for any action taken or thing done or
omitted to be done in accordance with this Agreement in good faith in
conformity with such advice. In the performance of its duties hereunder,
IBT will be protected and not be liable, and will be indemnified and held
harmless by the Trust for any reasonable action taken or omitted to be
taken by it in good faith reliance upon the terms of this Agreement, any
Officers' Certificate, and or written instructions received from an
Authorized Person, resolution of the Board, telegram, notice, request,
certificate or other instrument reasonably believed by IBT to be genuine
and for any other loss to the Trust except in the case of IBT's gross
negligence, willful misfeasance or bad faith in the performance of its
duties or reckless disregard of its obligations and duties hereunder.
Notwithstanding anything in this Agreement to the contrary, in no
event shall IBT be liable hereunder or to any third party:
(a) for any losses or damages of any kind resulting from
acts of God, earthquakes, fires, floods, storms or other disturbances of
restrictions, acts of war, civil war or terrorism, insurrection, nuclear
fusion, fission or radiation, the interruption, loss or malfunction or
utilities, transportation, or computers (hardware or software) and
computer facilities, the unavailability of energy sources and other
similar happenings or events except as results from IBT's own gross
negligence, willful misfeasance or bad faith in the performance of its
duties; or
-4-
(b) for special, punitive or consequential damages arising
from the provision of services hereunder, even if IBT has been advised of
the possibility of such damages.
8.2 Subcontractors. IBT, subject to approval of the Trust, may
subcontract for the performance of IBT's obligations hereunder with any
one or more persons, provided, however, that unless the Trust otherwise
expressly agrees in writing, IBT shall be as fully responsible to the
Trust for the acts and omissions of any subcontractor as it would be for
its own acts or omissions. In the event IBT obtains a judgment,
settlement or other monetary recovery for the wrongful conduct of the
subcontractor, the Trust shall be entitled to such recovery if such
conduct resulted in a loss to the Trust and IBT agrees to pursue such
claims vigorously. To the extent possible, such sub-contractors shall
provide services outside the United States.
8.3 Activities of IBT. The services provided by IBT to the
Trust are not to be deemed to be exclusive, IBT being free to render
administrative, fund accounting and/or other services to other parties.
It is understood that members of the Board, officers, and shareholders of
the Trust are or may become similarly interested in the Trust and that IBT
and/or any of its affiliates may become interested in the Trust as a
shareholder of the Trust or otherwise.
8.4 Insurance. IBT need not maintain any special insurance for
the benefit of the Trust, but will maintain customary insurance for its
obligations hereunder.
9. Termination. This Agreement may be terminated at any time
without penalty upon sixty days written notice delivered by either party
to the other by means of registered mail, and upon the expiration of such
sixty days, this Agreement will terminate. At any time after the
termination of this Agreement, the Fund will have access to the records of
IBT relating to the performance of its duties hereunder and IBT shall
cooperate in the transfer of such records to its successor.
10. Confidentiality. Both parties hereto agree that any non-public
information obtained hereunder concerning the other party is confidential
and may not be disclosed to any other person without the consent of the
other party, except as may be required by applicable law or at the request
of a governmental agency. The parties further agree that a breach of this
provision would irreparably damage the other party and accordingly agree
that each of them is entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of this provision.
11. Notices. Any notice or other instrument in writing authorized
or required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to
it at its office at the address set forth below; namely:
(a) In the case of notices sent to the Trust to:
-5-
C/O The Bank of Nova Scotia Trust Company (Cayman) Ltd.
The Bank of Nova Scotia Building
P. O. Box 501
George Town
Grand Cayman, Cayman Island
British West Indies
(b) In the case of notices sent to IBT to:
IBT Fund Services (Canada), Inc.
Suite 5850, One First Canadian Place
P. O. Box 231
Toronto, Ontario M5X 1A4
Attention: Evelyn Foo
or at such other place as such party may from time to time designate in
writing.
12. Amendments. This Agreement may not be altered or amended,
except by an instrument in writing, executed by both parties, and in the
case of the Trust, duly authorized and approved by its respective Board.
13. Governing Law. This Agreement will be governed by the laws of
Ontario.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the
day and year first written above.
Senior Debt Portfolio
By: /s/ James S. Hawkes
______________________________________
Name James B. Hawkes
Title President
ATTEST:
/s/ H. Day Brigham, Jr.
________________________________________
H. Day Brigham, Jr.
-6-
IBT Fund Services (Canada), Inc.
By: /s/ Michael F. Rogers
______________________________________
Name Michael F. Rogers
Title EMD
ATTEST:
/s/ Robert Donahoe
________________________________________
Robert Donahoe
DATE: 2/22/95
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of the 30th day of December, 1994.
BETWEEN: (1) Senior Debt Portfolio, a New York trust the principal
office of which is at The Bank of Nova Scotia Trust Company
(Cayman) Limited, The Bank Nova Scotia Building, George
Town, Grand Cayman, Cayman Island, British West Indies (the
"Trust") OF THE ONE PART
AND: (2) The Bank of Nova Scotia Trust Company (Cayman) Ltd., a
company duly incorporated in the Cayman Islands the
Registered Office of which is at Albert Panton Street,
George Town, Grand Cayman, Cayman Islands, British West
Indies aforesaid (the "Administrator") OF THE OTHER PART.
WHEREAS:
(A) The Trust is registered under the United States Investment
Company Act of 1940 as a management investment company.
(B) The Administrator has agreed to provide general administration
services to the Trust, and the Trust wishes to appoint the
Administrator as general administrator of the Trust upon the
terms and conditions hereinafter appearing.
AGREEMENT:
1. (a) In this Agreement the words standing in the first column of the
table next hereinafter contained shall bear the meanings set
opposite to them in the second column thereof, if not
inconsistent with the subject or context:
Words Meanings
"Declaration of Trust" The Declaration of Trust of the Trust
for the time being in force.
"Trustees" The Trustees of the Trust for the time
being, or as the case may be, the
Trustees assembled as a board.
"Registration Statement" The Registration Statement of the Trust
as amended and filed with the
Securities and Exchange Commission.
(b) Unless the context otherwise requires and except as varied or
otherwise specified in this agreement, words and expressions
contained in this agreement shall bear the same meaning as in
the Registration Statement PROVIDED THAT any alteration or
amendment of the Registration Statement shall not be effective
for the purposes of this Agreement unless the administrator
shall by endorsement hereon or otherwise have assented in
writing thereto.
(c) The headings are intended for convenience only and shall not
affect the construction of this Agreement.
APPOINTMENT OF ADMINISTRATOR
2. The Trust hereby appoints the Administrator and the Administrator
hereby agrees to act as general administrator of the Trust in
accordance with the terms and conditions hereof with effect from the
date hereof.
DUTIES AS GENERAL CORPORATE ADMINISTRATOR
3. The Administrator shall from time to time deliver such information
explanations and reports to the Trust as the Trust may reasonably
require regarding the conduct of the business of the Trust.
4. The Administrator shall provide the principal office of the Trust;
and
(a) conduct on behalf of the Trust all the day to day business of
the Trust, other than investment activities, and provide the or
procure such office accommodation, secretarial staff and other
facilities as may be required for the purposes of fulfilling its
duties under this Agreement;
(b) receive and approve notices of subscriptions and redemptions of
Trust interests;
(c) at the request of the Trust, arrange execution and filing with
the U.S. Securities and Exchange Commission (the "SEC") of
amendments to the Trust's Registration Statement, and of any
other regulatory filings required to be made by the Trust;
(d) deal with and reply to all correspondence and other
communications addressed to the Trust at its principal office,
whether in relation to the subscription, purchase or redemption
of interests in the Trust or otherwise PROVIDE THAT in the event
of any dispute in connection with the issue, ownership,
redemption or otherwise of any interests the matter shall be
referred to the Trust, and the Administrator shall take such
action as may reasonably be required by the Trust;
(e) at any time during business hours to permit any duly appointed
agent or representative of the Trust, at the expense of the
Trust to inspect the Register of Holders or any other documents
or records in the possession of the Administrator and give such
agent or representative during business hours all information,
explanations and assistance as such agent or representative may
reasonably require, and permit representatives of the U.S.
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Securities and Exchange Commission to examine books and records
of the Trust;
(f) maintain and safeguard the Register of Holders of Interests and
other documents in connection therewith and enter on such
Register all original issues and allotments of and all
increases, decreases and redemptions of such interests all in
accordance with the provisions of the Declaration of Trust and
Trustee instructions and to prepare all such lists of Holders of
Interests of the Trust and account numbers of Holders as may be
required by the Trust.
DEALINGS OF THE ADMINISTRATOR
5. Nothing herein contained shall prevent the Administrator or any firm,
person or company associated in any way with the Administrator from
contracting with or entering into any financial, banking or other
transaction with the Trust, any shareholder or any company or body of
persons any of whose securities are held by or for the account of the
Trust or from being interested in such transaction.
6. Nothing herein contained shall prevent the Administrator or any
associate of the Administrator from acting as administrator or
general corporate manager or in any other capacity whatsoever for any
other company or body of persons on such terms as the Administrator
or such associate may arrange, and the Administrator or such
associate shall not be deemed to be affected with notice of or to be
under any duty to disclose the Trust any fact or thing which may come
to its knowledge or that of any of its servants or agents in the
course of so doing or in any manner whatever otherwise than in the
course of carrying out its duties hereunder.
AGENTS AND ADVICE
7. The Administrator shall be at liberty in the performance of its
duties and in the exercise of any of the powers vested in it
hereunder to act by responsible officers or a responsible officer for
the time being and to employ and pay an agent who may (but need not)
be an associate of the Administrator to perform or concur in
performing any of the services required to be performed hereunder and
may act or rely upon the opinion or advice or any information
obtained from any broker, lawyer, valuer, surveyor, auctioneer or
other expert, whether reporting to the Trust, to the Administrator or
not, and the Administrator shall not be responsible for any loss
occasioned by its so acting.
8. The Administrator may at the expense of the Trust refer any legal
question to the legal advisers of the Trust for the time being (whose
name shall from time to time be notified by or on behalf of the Trust
to the Administrator) or legal advisers that it may select with the
prior approval of the Trust and may authorize any such legal adviser
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to take the opinion of counsel on any matter of difficulty and may
act on any opinion given by such legal advisers or counsel without
being responsible for the correctness thereof or for any result which
may follow from so doing.
REMUNERATION
9. In consideration of the services performed by the Administrator
hereunder the Administrator shall be entitled to receive such fees as
are agreed upon in writing by the parties.
REIMBURSEMENT BY THE TRUST TO THE ADMINISTRATOR
10. In addition to the fees set out in clause 9 above the Trust shall
reimburse to the Administrator all reasonable costs and expenses
incurred by the Administrator in the performance of its duties
hereunder.
LIABILITY AND INDEMNITY
11. (a) The Administrator, its subsidiaries, agents, advisors,
shareholders, directors, officers, servants and employees shall
not be liable to the Trust or a Holder of its Interests, or any
of its or their successors or assigns, expect for loss arising
to the Trust by reason of act of, or omissions due to negligence
or willful default on the part of any such persons as aforesaid.
(b) The Trust shall indemnify, defend and hold harmless the
Administrator and each of its subsidiaries, agents, advisors,
shareholders, directors, officers, servants and employees from
and against any loss, liability, damage, cost or expense
(including legal fees and expenses and any amounts paid in
settlement), resulting from its or their actions or capacities
hereunder or otherwise concerning the business or activities
undertaken on behalf of the Trust under this Agreement or
sustained by any of them including (without restricting the
generality of the foregoing) loss sustained as a result of
delay, mis-delivery or error in transmission of any cable,
telefax, telex or telegraphic communication. Subject as
aforesaid all actions taken by the Administrator shall be taken
in good faith and in the reasonable belief that such actions are
taken in the best interests of the Trust PROVIDED THAT
termination of any action, proceeding, demand, claim or lawsuit
by judgment, order or settlement shall not, of itself, create a
presumption that the conduct in question was not undertaken in
good faith with due care and in a manner reasonably believed to
be in or not opposed to the best interest of the Trust. The
right of indemnification hereunder shall remain in full force
and effect regardless of the expiration or termination of this
Agreement.
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RIGHT TO ADVISE AND MANAGE THE FUNDS OR OTHERS
12. The Trust acknowledges that an important part of the Administrator's
business is, and that it derives profits from, managing the affairs
of its affiliates and other entities and that the Administrator will
be managing such affiliates and entities during the same period that
it is managing the affairs of the Trust. The administrator and its
officers and employees shall be free to manage such other affiliates
and entities and to retain for its own or their benefit all profits
and revenues derived therefrom PROVIDED THAT the Administrator shall
not knowingly prefer affiliates of the Administrator or other
entities to the detriment of the affairs of the Trust.
RESTRICTIONS
13. Neither of the parties hereto shall do or commit any act, matter or
thing which would or might prejudice or bring into disrepute in any
manner the business or reputation of the other or any director,
officer or employee of the other.
14. Except as required by the law and save as contemplated by the
Declaration of Trust, neither of the parties hereto shall either
before or after the termination of this Agreement disclose to any
person not authorized by the other party to receive the same
information relating to such party or to the affairs of such party of
which the party disclosing the same shall have become possessed
during the period of this agreement, and both parties shall use all
reasonable endeavors to prevent any such disclosure as aforesaid.
TERMINATION
15. The Administrator shall be entitled to resign its appointment
hereunder:
(a) by giving not less than two (2) month's notice in writing to the
Trust;
(b) if the Trust shall commit any breach of its obligations under
this Agreement and shall fail within ten days of receipt of
notice served by the Administrator requiring it so to do, to
make good such breach; and
(c) at any time without such notice as is referred to in sub-
paragraphs (a) and (b) of this clause if the Trust shall go into
liquidation (other than for the purpose of reconstruction or
amalgamation upon terms previously approved in writing by the
Administrator) or if a receiver of any of the assets of the
Trust is appointed.
16. The Trust may terminate the appointment of the Administrator:
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(a) by giving no less than two (2) month's notice in writing to the
Administrator;
(b) if the Administrator shall commit any breach of its obligations
under this Agreement and shall fail within ten days of receipt
of notice served by the Trust requiring it so to do, to make
good such breach; and
(c) at any time without such notice as is referred to in sub-
paragraphs (a) and (b) or this clause if the Administrator goes
into liquidation (except a voluntary liquidation for the purpose
of reconstruction or amalgamation upon terms previously approved
in writing by the Trust) or if a receiver is appointed of any of
the assets of the Administrator.
17. On termination of the appointment of the administrator under the
provisions of the preceding clauses, such termination shall be
without prejudice to any antecedent liability of the Administrator or
the Trust. The Administrator shall be entitled to receive all fees
and other moneys accrued up to the date of such termination but shall
not be entitled to compensation in respect of such termination.
18. The administrator shall, on the termination of its appointment:
(a) Forthwith hand over to the Trust or as it shall direct all books
of account, registers, correspondence and records of all and
every description relating to the affairs of the Trust which are
in the Administrator's possession but not including any
promotional material bearing the style or any trade mark or
symbol of the Administrator. The Administrator shall also in
such circumstance deliver or cause to be delivered to the
succeeding administrator or as the Trust shall direct all funds
or other properties of the Trust deposited with or otherwise
held by the Administrator or to its order hereunder and do all
such further acts as the Trust may reasonably require of it.
(b) have the right by written request to require the Trust in its
Registration Statement and any other material made available to
investors and prospective investors to (as may reasonably be
approved by the Administrator) indicate that the Administrator
and its delegate(s) (if any) have ceased to be its
administrator.
REPRESENTATIONS AND WARRANTIES
19. (a) The Administrator represents and warrants to the Trust as
follows:
(i) The Administrator has full power and authority to enter
into and perform this Agreement and this Agreement has been
duly authorized by all requisite corporate action, executed
and delivered by or on behalf of the Administrator and
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constitutes a valid and binding agreement of the
Administrator.
(ii) Neither the execution, delivery nor performance of this
Agreement by the Administrator will result in a breach or
violation of any statute, law, rule or of the material
provisions of any debenture or other material agreement
binding upon the Administrator and no consent, approval,
authorization or license by any court or governmental
agency is required for the execution, delivery or
performance of this Agreement by The Administrator, except
such as have been obtained by the Administrator.
(b) the Trust represents and warrants to the Administrator as
follows:
(i) The Trust has full power and authority to enter into and
perform this Agreement and this Agreement has been duly
authorized by all requisite corporate action, executed and
delivered by or on behalf of the Trust and constitutes a
valid and binding agreement of the Trust.
(ii) Neither the execution, delivery nor performance of this
Agreement by the Trust will result in a breach or violation
of any statute, law, rule or of the material provisions of
any debentures or other material agreement binding upon the
Trust and no consent, approval, authorization or license by
any court or governmental agency is required for the
execution, delivery or performance of this Agreement by the
Trust except such as have been obtained by the Trust.
INDEPENDENT CONTRACTOR
20. For all purposes of this Agreement, the Administrator shall be an
independent contractor and not an employee or dependent agent of the
Trust, nor shall anything herein be construed as making the Trust a
partner or co-venturer with the Administrator or any of its
affiliates or other clients. Except as provided in this Agreement,
the Administrator shall have no authority to bind, obligate or
represent the Trust.
COMPLETE AGREEMENT
21. This Agreement constitutes the entire agreement between the parties
relating to the subject matter hereof.
ASSIGNMENT
22. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns but may not be assigned by any
party without the express written consent of the other party which
shall not be reasonably withheld or delayed.
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23. This Agreement may not be amended except by the written consent of
each of the parties hereto.
NOTICES
24. Any notice delivered under this agreement shall be in writing and
signed by a duly authorized officer of the party giving such notice
and shall be delivered personally or sent by registered or certified
mail, postage prepaid, to the registered office of the party for whom
it is intended. a notice so posted shall be deemed to be served at
the expiration of seventy-two (72) hours after posting and in proving
service by post it shall be sufficient to prove that an envelope
containing the notice was duly addressed, stamped and posted.
GOVERNING LAW
25. This Agreement shall be governed by and construed in accordance with
the laws of the Cayman Islands and the parties hereto agree to submit
to the non-exclusive jurisdiction of the Courts of the Cayman
Islands.
IN WITNESS WHEREOF this Agreement has been duly executed for and on behalf
of the parties hereto in manner binding upon them the day and year first
above written.
Signed by ) /s/ James B. Hawkes
for and on behalf ) _______________________________________
of the said Senior ) James B. Hawkes
Debt Portfolio ) President
in the presence of: )
Witness
/s/ H. Day Brigham, Jr.
__________________________
H. Day Brigham, Jr.
SIGNED by ) _______________________________________
for and on behalf )
of the said Bank ) Director
of Nova Scotia Trust )
Company (Cayman) Ltd. )
in the presence of: ) _______________________________________
Director
Witness
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