As filed with the Securities and Exchange Commission on April __, 1996
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. 3 [X]
SENIOR DEBT PORTFOLIO
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(Exact Name of Registrant as Specified in Charter)
The Bank of Nova Scotia Building
P.O. Box 501, George Town, Grand Cayman
Cayman Islands, British West Indies
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (809) 949-2001
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Thomas Otis
24 Federal Street, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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
"feeder" fund investing its assets in the Portfolio (the "master" fund).
The Trustees of the Fund transferred the Fund's assets to the Portfolio on
February 21, 1995, thereby converting the Fund to a master-feeder
structure.
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. As of April 19, 1996,
the Portfolio had a dollar weighted average period to adjustment of
approximately 40 days.
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 ("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
supply of and demand for certain Loan Interests. The Portfolio may acquire
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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. For information regarding the
status of holdings of the Portfolio, see the Portfolio's financial
statements.
Loan Interests in Loans made in connection with leveraged
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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
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
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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
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,
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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
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
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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
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 had no
commercial paper outstanding during the fiscal year ended December 31,
1995. The Portfolio may use the proceeds from the sale of its commercial
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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 distribute 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 distribute
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
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
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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
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 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, approximately 1% of the Portfolio's assets were
invested in Loan Interests of non-U.S. Borrowers. The Portfolio has no
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current intention to invest more than 5% of its net assets in such Loan
Interests.
Interest Rate Swaps. 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
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
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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.
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.
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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
1996 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
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
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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
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"). 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.
A - 14
BMR's principal business address is 24 Federal Street, Boston,
Massachusetts 02110.
The Trustees of the Portfolio have 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. The Portfolio paid BMR
advisory fees equivalent to 0.94% of the Portfolio's average daily gross
assets for the period from the start of business, February 22, 1995, to
the fiscal year ended December 31, 1995.
Jeffrey S. Garner, Vice President of Eaton Vance since January
1988 and of BMR since 1992, and Vice President of the Portfolio since its
inception, is the Portfolio Manager of the Portfolio.
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 over $16 billion, of which
approximately $14 billion is in investment companies; including
approximately $2 billion in the Portfolio. Eaton Vance, its affiliates and
predecessor companies have been managing assets of individuals and
institutions since 1924 and managing investment companies since 1931.
Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp., a publicly-
held holding company. Eaton Vance Corp., through its subsidiaries and
affiliates, engages primarily in investment management, administration,
and marketing activities.
Custodian. Investors Bank & Trust Company ("IBT"), 89 South
Street, Boston, Massachusetts 02111, 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. IBT 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
A - 15
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 April 1, 1996, Eaton Vance Prime Rate
Reserves and EV Classic Senior Floating-Rate Fund owned approximately
61.5% and 36.2%, respectively, of the outstanding voting interests in the
Portfolio.
A - 16
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
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 investors in the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining funds may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may hold fewer securities, resulting in
increased portfolio risk, and experience decreasing economies of scale.
However, this possibility exists as well for historically structured funds
which have large or institutional investors.
A - 17
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, Presidents' 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).
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
A - 18
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.
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. Each investor's percentage of the
aggregate interests in the Portfolio will then be recomputed as a
percentage equal to a fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may
be, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii)
the denominator of which is the aggregate net asset value of the Portfolio
as of the Portfolio Valuation Time on the prior Portfolio Business Day
plus or minus, as the case may be, the amount of the net additions to or
withdrawals from the aggregate investment in the Portfolio on the current
Portfolio Business Day by all investors in the Portfolio. The percentage
so determined will then be applied to determine the value of the
investor's interest in the Portfolio for the current Portfolio Business
Day.
The Portfolio will allocate at least annually among its investors
its net investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. The Portfolio's net
investment income consists of all income accrued on the Portfolio's
assets, less all actual and accrued expenses of the Portfolio, determined
in accordance with generally accepted accounting principles.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any federal income tax. See 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
A - 19
the Portfolio, which are intended to comply with the requirements of the
Code and the regulations promulgated thereunder.
It is intended that the Portfolio's assets and income will be
managed in such a way that an investor in the Portfolio that seeks to
qualify as a regulated investment company under the Code will be able to
satisfy the requirements for such qualification.
Item 11. Defaults and Arrears on Senior Securities
Not applicable.
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Item 12. Legal Proceedings
Not applicable.
Item 13. Table of Contents of Statement of Additional Information
Not applicable.
A - 21
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-11
Investment Advisory and Other Services . . . . . . . . . . . . . . . B-11
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . B-14
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . B-17
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 Swaps. 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. As of April 19, 1996, the Portfolio had a Loan Interest in
a Term Loan to Camelot Music, Inc. which was in default and was carried on
the books at less than par. Pursuant to the closing of a recapitalization
effective May 31, 1995, the Portfolio had Loan Interests in London Fog
Industries, Inc. which had carrying values below par, although the Company
had not defaulted on these loans.
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.
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:
(1) Borrow money, except as permitted by the Investment
Company Act of 1940;
B - 4
(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
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
B - 5
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.
Whenever an investment policy or investment restriction set forth
in Part A or 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 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.
Notwithstanding the foregoing, under normal market conditions the
Portfolio must take actions necessary to comply with the policy of
investing at least 80% of total assets in interests in Loans. Moreover,
the Portfolio must always be in compliance with the borrowing policy set
forth above.
B - 6
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"), a wholly-owned
subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton Vance's
parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's trustee,
Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the
Portfolio, BMR, Eaton Vance, 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 (54), 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 (65), 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 (62), 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 (61), Trustee
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, MA 02134
B - 7
NORTON H. REAMER (60), Trustee
President and Director of United Asset Management Corporation (holding
company owning institutional investment management firms); Chairman,
President and Director of UAM Funds (mutual funds). Director or Trustee
of various investment companies managed by BMR or Eaton Vance.
Address: One International Place, Boston, MA 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by BMR or Eaton Vance.
Address: 175 Federal Street, Boston, MA 02110.
JACK L. TREYNOR (66), 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, CA 90274
OFFICERS OF THE PORTFOLIO
JEFFREY S. GARNER (39), Vice President and Portfolio Manager
Vice President of BMR, Eaton Vance and EV.
WILLIAM CHISHOLM (35), Vice President
Senior Trust Officer of IBT Trust Company (Cayman) Limited. Officer of
various investment companies managed by Eaton Vance or BMR. Mr Chisholm
was elected Vice President on June 19, 1995.
Address: IBT Trust Company (Cayman) Ltd., The Bank of Nova Scotia
Building, P.O. Box 501, George Town, Grand Cayman, Cayman Islands, British
West Indies.
MICHEL NORMANDEAU (44), Vice President
Assistant Manager-Trust Services, IBT Trust Company (Cayman) Limited.
Officer of various investment companies managed by Eaton Vance or BMR.
Mr. Normandeau was elected Vice President on June 19, 1995.
Address: IBT 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 (34) Vice President
Managing Director of IBT Trust and Custodian Services (Ireland) Limited
since January, 1995. Vice President, Atlantic Corporate Management
Limited, Warwick, Bermuda (1991-1994). Officer, The Bank of Bermuda
B - 8
Limited, Hamilton, Bermuda (1987-1991). Officer of various investment
companies managed by Eaton Vance or BMR.
Address: Earlsfort Terrace, Dublin 2, Ireland.
JAMES L. O'CONNOR (51), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by BMR or Eaton Vance.
THOMAS OTIS (64), 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 (38), 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 (1987-1991).
Officer of various investment companies managed by BMR or Eaton Vance.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officers of various investment
companies managed by BMR or Eaton Vance.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor,
The Boston Company (1991-1993) and Registration Specialist, Fidelity
Management and Research Co. (1986-1991). Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Murphy was elected Assistant
Secretary on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr.
Woodbury was elected Assistant Secretary on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the
Special Committee of the Board of Trustees of the Portfolio. The purpose
of the Special Committee is to consider, evaluate and make recommendations
to the full Board of Trustees concerning (i) all contractual arrangements
with service providers to the Portfolio, including investment advisory,
fund accounting, and custodial services, and (ii) all other matters in
which Eaton Vance or its affiliates has any actual or potential conflict
of interest with the Portfolio or its interestholders.
B - 9
The Nominating Committee is comprised of four Trustees who are
not "interested persons" as that term is defined under the 1940 Act
("noninterested Trustees"). The Committee has four-year staggered terms,
with one member rotating off the Committee to be replaced by another
noninterested Trustee of the Portfolio. Messrs. Hayes (Chairman), Reamer,
Thorndike and Treynor are currently serving on the Committee. The purpose
of the Committee is to recommend to the Board nominees for the position of
noninterested Trustee and to assure that at least a majority of the Board
of Trustees is independent of Eaton Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit
Committee of the Board of Trustees of the Portfolio. The Audit
Committee's functions include making recommendations to the Trustees
regarding the selection of the independent accountants, and reviewing with
such accountants and the Treasurer of the Portfolio matters relative to
trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian of the Portfolio.
The fees and expenses of those Trustees who are not members of
the Eaton Vance organization (the noninterested Trustees) are paid by the
Portfolio. (The Trustees who are members of the Eaton Vance organization
receive no compensation from the Portfolio.) For the period from the
start of business, February 22, 1995, to the fiscal year ended December
31, 1995, the noninterested Trustees of the Portfolio earned the following
compensation in their capacities as Trustees of the Portfolio, and for the
year ended December 31, 1995, the noninterested Trustees of the Portfolio
earned the following compensation in their capacities as Trustees of the
other funds in the Eaton Vance fund complex(1):
Aggregate Total Compensation
Compensation from Portfolio and
Name from Portfolio Fund Complex
---- -------------- -------------------
Donald R.
Dwight $3,263(2) $135,000(4)
Samuel L.
Hayes, III 4,222(3) 150,000(5)
Norton H.
Reamer 4,203 135,000
John L.
Thorndike 4,325 140,000
Jack L.
B - 10
Treynor 4,452 140,000
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $1,103 of deferred compensation.
(3) Includes $1,141 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
Trustees of the Portfolio who are not affiliated with BMR may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his
deferred fees invested by the Portfolio in the shares of one or more funds
in the Eaton Vance Family of Funds, and the amount paid to the Trustee
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will
have a negligible effect on the Portfolio's assets, liabilities and net
income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular
level of compensation to the Trustee. The Portfolio does not have a
retirement plan for its Trustees.
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.
Messrs. Chisholm, Normandeau and O'Neill are not U.S. residents.
It may be difficult to effect service of process within the U.S. or to
realize judgments of U.S. courts upon them. It is uncertain whether
courts in other countries would entertain original actions against them.
Item 19. Control Persons and Principal Holders of Securities
As of April 1, 1996, Eaton Vance Prime Rate Reserves (the "Prime
Rate Fund") and EV Classic Senior Floating-Rate Fund (the "Classic Fund")
owned approximately 61.5% and 36.2%, respectively, of the value of the
outstanding voting interests in the Portfolio. Each Fund's principal
business address is 24 Federal Street, Boston, Massachusetts 02110. The
Prime Rate Fund may take actions without the approval of any other
investor. Each 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. Each Fund is a
business trust organized under the laws of the Commonwealth of
Massachusetts.
Item 20. Investment Advisory and Other Services
B - 11
For a description of the compensation that the Portfolio pays BMR
under the Advisory Agreement, see "Management of the Portfolio" in Part A.
For the period from the start of business, February 22, 1995, to the
fiscal year ended December 31, 1995, the Portfolio paid BMR advisory fees
aggregating $8,544,646, which was equal to 0.94% (annualized) of the
Portfolio's average daily gross assets for such period. As at December
31, 1995, the gross assets of the Portfolio were $1,621,338,852. 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 or 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
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 of funds, securities and other
investments, keeping of books, accounts and records, and determination of
net asset values, book capital account balances and tax capital account
balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, 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,
1997. The Advisory Agreement may be continued from year to year thereafter
B - 12
so long as such continuance after February 28, 1997 is approved at least
annually (i) by the vote of a majority of the Trustees of the Portfolio
who are not "interested persons" of the Portfolio or 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 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
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 March 31, 1996, 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, Murphy, O'Connor and Woodbury 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.
EVC owns all of the stock of Energex Energy Corporation, which is
engaged in oil and gas exploration and development. Eaton Vance owns all
of the stock of Northeast Properties, Inc., which is engaged in real
estate investment. EVC also owns 24% of the Class A shares of Lloyd
George Management (B.V.I.) Limited, a registered investment adviser. EVC
owns all of the stock of Fulcrum Management, Inc. and MinVen Inc., which
are engaged in precious metal mining venture investment and management.
BMR, EVC, Eaton Vance and EV may also enter into other businesses.
B - 13
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"), 89 South
Street, Boston, Massachusetts 02111, 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., 1 First Canadian Place, King Street West,
Toronto, Ontario, Canada, 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, or transfer of or other dealings with the
Portfolio's investments, receives and disburses all funds, and performs
various other ministerial duties upon receipt of proper instructions from
the Portfolio. IBT charges 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 Portfolio at
the custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate
applied to the Portfolio's average daily collected balances for the week.
Landon T. Clay, a Director of EVC and an officer, Trustee or Director of
other entities in the Eaton Vance organization, owns approximately 13% of
the voting stock of Investors Financial Services Corp., the holding
company parent of IBT. Management believes that such ownership does not
create an affiliated person relationship between the Portfolio and IBT
under the 1940 Act.
Independent 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
B - 14
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.
For the period from the start of business, February 22, 1995, to the
fiscal year ended December 31, 1995, the Portfolio paid no brokerage
commissions.
The frequency of portfolio purchases and sales, known as the
"turnover rate," will vary from year to year. The Portfolio's turnover
rate for the fiscal year ended December 31, 1995 was 39%.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its
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
B - 15
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
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
B - 16
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 loans to foreign Borrowers. 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
to the RIC will be treated as ordinary income and losses. Certain uses of
foreign currency and investment by the Portfolio in the stock of certain
"passive foreign investment companies" may be limited or a tax election
may be made, if available, in order to enable an investor that is a RIC to
preserve its qualification as a RIC or 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.
B - 17
Item 23. Financial Statements
The following audited financial statements of the Portfolio are
incorporated by reference into this Part B and have been so incorporated
in reliance upon the report of Deloitte & Touche, independent certified
public accountants, as experts in accounting and auditing.
Portfolio of Investments as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the period from the start of business,
February 22, 1995, to December 31, 1995
Statement of Changes in Net Assets for the period from the start
of business, February 22, 1995, to December 31, 1995
Statement of Cash Flows for the period from the start of business,
February 22, 1995, to December 31, 1995
Supplementary Data for the period from the start of business,
February 22, 1995, to December 31, 1995
Notes to Financial Statements
For purposes of the EDGAR filing of this amendment to the
Portfolio's registration statement, the Portfolio incorporates by
reference the above audited financial statements, as previously filed
electronically with the Commission (Accession Number 0000950156-96-
000303).
B - 18
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements:
The financial statements called for by this item are incorporated by
reference in Part B and listed in Item 23 hereof.
(2) Exhibits:
(a) Amended and Restated Declaration of Trust dated as of November
21, 1994, filed herewith
(b) By-Laws adopted May 1, 1992, filed herewith
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Investment Advisory Agreement between the Registrant and Boston
Management and Research dated February 22, 1995, filed herewith.
(h) Placement Agent Agreement with Eaton Vance Distributors, Inc.
dated February 22, 1995, filed herewith.
(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) (1) Custodian Agreement with Investors Bank & Trust Company
dated December 30, 1994, filed as Exhibit (j)(1) to Amendment
No. 2, which was filed with the Commission on March 6, 1995, and
incorporated herein by reference (Accession number 0000898432-
95-000065).
(2) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995, filed herewith.
(k) (1) Accounting and Interestholder Services Agreement with IBT
C - 1
Fund Services (Canada) Inc. dated December 30, 1994, filed as
Exhibit (k)(1) to Amendment No. 2, which was filed with the
Commission on March 6, 1995, and incorporated herein by
reference (Accession number 0000898432-95-000065).
(2) Administration Agreement with IBT Trust Company (Cayman)
Ltd. dated October 23, 1995, filed herewith.
(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 herewith.
(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.
Item 28. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class As of April 1, 1996
-------------- ------------------------
Interests 4
Item 29. Indemnification
Reference is hereby made to Article V of the Registrant's Amended
and Restated Declaration of Trust, filed herewith as Exhibit (a).
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
C - 2
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, 89 South Street, Boston, MA 02111, 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 IBT 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
None.
Item 33. Undertakings
Not applicable.
C - 3
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 Tijuana, Mexico on the 26th day of March,
1996.
SENIOR DEBT PORTFOLIO
By: /s/ James B. Hawkes
----------------------
-------
James B. Hawkes
President
C - 4
EXHIBIT INDEX
Description of Exhibit
(a) Amended and Restated Declaration of Trust dated as of November 21,
1994
(b) By-Laws adopted May 1, 1992
(g) Investment Advisory Agreement between the Registrant and
Boston Management and Research dated February 22, 1995
(h) Placement Agent Agreement with Eaton Vance Distributors,
Inc. dated February 22, 1995
(j)(2) Amendment to Custodian Agreement with Investors Bank &
Trust Company dated October 23, 1995
(k)(2) Administration Agreement with IBT Trust Company (Cayman)
Ltd. dated October 23, 1995
(p) Investment representation letter of Boston Management and
Research dated October 25, 1994
SENIOR DEBT PORTFOLIO
----------------------
AMENDED AND RESTATED
DECLARATION OF TRUST
Dated as of November 21, 1994
TABLE OF CONTENTS
AGE
ARTICLE I--The Trust . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . . 1
ARTICLE II--Trustees . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Number and Qualification . . . . . . . . . . 3
Section 2.2 Term and Election . . . . . . . . . . . . . . 3
Section 2.3 Resignation, Removal and Retirement . . . . . 3
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . . 4
Section 2.5 Meetings . . . . . . . . . . . . . . . . . . 4
Section 2.6 Officers; Chairman of the Board . . . . . . . 5
Section 2.7 By-Laws . . . . . . . . . . . . . . . . . . . 5
ARTICLE III--Powers of Trustees . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 General . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Investments . . . . . . . . . . . . . . . . . 5
Section 3.3 Legal Title . . . . . . . . . . . . . . . . . 6
Section 3.4 Sale and Increases of Interests . . . . . . . 6
Section 3.5 Decreases and Redemptions of Interests . . . 6
Section 3.6 Borrow Money . . . . . . . . . . . . . . . . 6
Section 3.7 Delegation; Committees . . . . . . . . . . . 6
Section 3.8 Collection and Payment . . . . . . . . . . . 7
Section 3.9 Expenses . . . . . . . . . . . . . . . . . . 7
Section 3.10 Miscellaneous Powers . . . . . . . . . . . . 7
Section 3.11 Further Powers . . . . . . . . . . . . . . . 7
Section 3.12 Litigation . . . . . . . . . . . . . . . . . 8
ARTICLE IV--Investment Advisory, Administration and Placement Agent
Arrangements . . . . . . . . . . . . . . . . 8
Section 4.1 Investment Advisory, Administration and Other
Arrangements . . . . . . . . . . . . 8
Section 4.2 Parties to Contract . . . . . . . . . . . . . 8
ARTICLE V--Liability of Holders; Limitations of Liability of Trustees,
Officers, etc. . . . . . . . . . . . . . . . 9
Section 5.1 Liability of Holders; Indemnification . . . . 9
Section 5.2 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Third Parties . . . . . . . . 9
Section 5.3 Limitations of Liability of Trustees,
Officers, Employees, Agents, Independent
Contractors to Trust, Holders, etc. . . . . 9
Section 5.4 Mandatory Indemnification . . . . . . . . . . 9
i
Section 5.5 No Bond Required of Trustees . . . . . . . . 10
Section 5.6 No Duty of Investigation; Notice in Trust
Instruments, etc . . . . . . . . . . . . . 10
Section 5.7 Reliance on Experts, etc . . . . . . . . . . 10
ARTICLE VI--Interests . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.1 Interests . . . . . . . . . . . . . . . . . . 11
Section 6.2 Non-Transferability . . . . . . . . . . . . . 11
Section 6.3 Register of Interests . . . . . . . . . . . . 11
ARTICLE VII--Increases, Decreases And Redemptions of Interests . . . . 11
ARTICLE VIII--Determination of Book Capital Account Balances,
and Distributions . . . . . . . . . . . . . . 12
Section 8.1 Book Capital Account Balances . . . . . . . . 12
Section 8.2 Allocations and Distributions to Holders . . 12
Section 8.3 Power to Modify Foregoing Procedures . . . . 12
ARTICLE IX--Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9.1 Rights of Holders . . . . . . . . . . . . . . 12
Section 9.2 Meetings of Holders . . . . . . . . . . . . . 12
Section 9.3 Notice of Meetings . . . . . . . . . . . . . 13
Section 9.4 Record Date for Meetings, Distributions,
etc. . . . . . . . . . . . . . . . . . . . . 13
Section 9.5 Proxies, etc. . . . . . . . . . . . . . . . . 13
Section 9.6 Reports . . . . . . . . . . . . . . . . . . . 14
Section 9.7 Inspection of Records . . . . . . . . . . . . 14
Section 9.8 Holder Action by Written Consent . . . . . . 14
Section 9.9 Notices . . . . . . . . . . . . . . . . . . . 14
ARTICLE X--Duration; Termination; Amendment; Mergers; Etc. . . . . . . 14
Section 10.1 Duration . . . . . . . . . . . . . . . . . . 14
Section 10.2 Termination . . . . . . . . . . . . . . . . . 15
Section 10.3 Dissolution . . . . . . . . . . . . . . . . . 16
Section 10.4 Amendment Procedure . . . . . . . . . . . . . 16
Section 10.5 Merger, Consolidation and Sale of Assets . . 17
Section 10.6 Incorporation . . . . . . . . . . . . . . . . 17
ARTICLE XI--Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11.1 Governing Law . . . . . . . . . . . . . . . . 18
Section 11.2 Counterparts . . . . . . . . . . . . . . . . 18
Section 11.3 Reliance by Third Parties . . . . . . . . . . 18
Section 11.4 Provisions in Conflict With Law
or Regulations . . . . . . . . . . . . . . . 18
ii
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
SENIOR DEBT PORTFOLIO
-----------------------
This AMENDED AND RESTATED DECLARATION OF TRUST of Senior Debt
Portfolio, made as of the 21st day of November, 1994 by the undersigned,
being a majority of the Trustees, hereinafter referred to collectively as
the "Trustees" and individually as a "Trustee", which terms shall include
any successor Trustees or Trustee and any present Trustees who are not
signatories to this instrument.
W I T N E S S E T H:
WHEREAS, the Trustees desire to amend and restate the Declaration
of Trust dated May 1, 1992, which established a trust fund under the laws
of the State of New York for the investment and reinvestment of funds
contributed thereto;
NOW, THEREFORE, the Trustees hereby amend and restate said
Declaration of Trust and declare that all money and property contributed
to the trust fund hereunder shall be held and managed under this Amended
and Restated Declaration of Trust IN TRUST as herein set forth below.
ARTICLE I
The Trust
1.1. Name. The name of the trust created hereby (the "Trust")
shall be Senior Debt Portfolio and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not
individually, and shall not refer to the officers, employees, agents or
independent contractors of the Trust or holders of interests in the Trust.
1.2. Definitions. As used in this Declaration, the following
terms shall have the following meanings:
"Administrator" shall mean any party furnishing services to the
Trust pursuant to any administration contract described in Section 4.1
hereof.
"Book Capital Account" shall mean, for any Holder at any time,
the Book Capital Account of the Holder for such day, determined in
accordance with Section 8.1 hereof.
"Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended from time to time, as well as any non-superseded provisions of the
U.S. Internal Revenue Code of 1954, as amended (or any corresponding
provision or provisions of succeeding law).
"Commission" shall mean the U.S. Securities and Exchange
Commission.
"Declaration" shall mean this Declaration of Trust as amended
from time to time. References in this Declaration to "Declaration",
"hereof", "herein" and "hereunder" shall be deemed to refer to this
Declaration rather than the article or section in which any such word
appears.
"Fiscal Year" shall mean an annual period determined by the
Trustees which ends on March 31 of each year or on such other day as is
permitted or required by the Code.
"Holders" shall mean as of any particular time all holders of
record of Interests in the Trust.
"Institutional Investor(s)" shall mean any regulated investment
company, segregated asset account, foreign investment company, common
trust fund, group trust or other investment arrangement, whether organized
within or without the United States of America, other than an individual,
S corporation, partnership or grantor trust beneficially owned by any
individual, S corporation or partnership.
"Interest(s)" shall mean the interest of a Holder in the Trust,
including all rights, powers and privileges accorded to Holders by this
Declaration, which interest may be expressed as a percentage, determined
by calculating, at such times and on such basis as the Trustees shall from
time to time determine, the ratio of each Holder's Book Capital Account
balance to the total of all Holders' Book Capital Account balances.
Reference herein to a specified percentage of, or fraction of, Interests,
means Holders whose combined Book Capital Account balances represent such
specified percentage or fraction of the combined Book Capital Account
balances of all, or a specified group of, Holders.
"Interested Person" shall have the meaning given it in the 1940
Act.
"Investment Adviser" shall mean any party furnishing services to
the Trust pursuant to any investment advisory contract described in
Section 4.1 hereof.
"Majority Interests Vote" shall mean the vote, at a meeting of
Holders, of (A) 67% or more of the Interests present or represented at
such meeting, if Holders of more than 50% of all Interests are present or
represented by proxy, or (B) more than 50% of all Interests, whichever is
less.
2
"Person" shall mean and include individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"Redemption" shall mean the complete withdrawal of an Interest of
a Holder the result of which is to reduce the Book Capital Account balance
of that Holder to zero, and the term "redeem" shall mean to effect a
Redemption.
"Trustees" shall mean each signatory to this Declaration, so long
as such signatory shall continue in office in accordance with the terms
hereof, and all other individuals who at the time in question have been
duly elected or appointed and have qualified as Trustees in accordance
with the provisions hereof and are then in office, and reference in this
Declaration to a Trustee or Trustees shall refer to such individual or
individuals in their capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is
owned or held by or for the account of the Trust or the Trustees.
The "1940 Act" shall mean the U.S. Investment Company Act of
1940, as amended from time to time, and the rules and regulations
thereunder.
ARTICLE II
Trustees
2.1. Number and Qualification. The number of Trustees shall
be fixed from time to time by action of the Trustees taken as provided in
Section 2.5 hereof; provided, however, that the number of Trustees so
fixed shall in no event be less than three or more than 15. Any vacancy
created by an increase in the number of Trustees may be filled by the
appointment of an individual having the qualifications described in this
Section 2.1 made by action of the Trustees taken as provided in Section
2.5 hereof. Any such appointment shall not become effective, however,
until the individual named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be
bound by the terms of this Declaration. No reduction in the number of
Trustees shall have the effect of removing any Trustee from office.
Whenever a vacancy occurs, until such vacancy is filled as provided in
Section 2.4 hereof, the Trustees continuing in office, regardless of their
number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration. A
Trustee shall be an individual at least 21 years of age who is not under
legal disability.
2.2. Term and Election. Each Trustee named herein, or elected
or appointed prior to the first meeting of Holders, shall (except in the
3
event of resignations, retirements, removals or vacancies pursuant to
Section 2.3 or Section 2.4 hereof) hold office until a successor to such
Trustee has been elected at such meeting and has qualified to serve as
Trustee, as required under the 1940 Act. Subject to the provisions of
Section 16(a) of the 1940 Act and except as provided in Section 2.3
hereof, each Trustee shall hold office during the lifetime of the Trust
and until its termination as hereinafter provided.
2.3. Resignation, Removal and Retirement. Any Trustee may
resign his or her trust (without need for prior or subsequent accounting)
by an instrument in writing executed by such Trustee and delivered or
mailed to the Chairman, if any, the President or the Secretary of the
Trust and such resignation shall be effective upon such delivery, or at a
later date according to the terms of the instrument. Any Trustee may be
removed by the affirmative vote of Holders of two-thirds of the Interests
or (provided the aggregate number of Trustees, after such removal and
after giving effect to any appointment made to fill the vacancy created by
such removal, shall not be less than the number required by Section 2.1
hereof) with cause, by the action of two-thirds of the remaining Trustees.
Removal with cause includes, but is not limited to, the removal of a
Trustee due to physical or mental incapacity or failure to comply with
such written policies as from time to time may be adopted by at least
two-thirds of the Trustees with respect to the conduct of the Trustees and
attendance at meetings. Any Trustee who has attained a mandatory
retirement age, if any, established pursuant to any written policy adopted
from time to time by at least two-thirds of the Trustees shall,
automatically and without action by such Trustee or the remaining
Trustees, be deemed to have retired in accordance with the terms of such
policy, effective as of the date determined in accordance with such
policy. Any Trustee who has become incapacitated by illness or injury as
determined by a majority of the other Trustees, may be retired by written
instrument executed by a majority of the other Trustees, specifying the
date of such Trustee's retirement. Upon the resignation, retirement or
removal of a Trustee, or a Trustee otherwise ceasing to be a Trustee, such
resigning, retired, removed or former Trustee shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Trust or the remaining Trustees any Trust Property held
in the name of such resigning, retired, removed or former Trustee. Upon
the death of any Trustee or upon removal, retirement or resignation due to
any Trustee's incapacity to serve as Trustee, the legal representative of
such deceased, removed, retired or resigning Trustee shall execute and
deliver on behalf of such deceased, removed, retired or resigning Trustee
such documents as the remaining Trustees shall require for the purpose set
forth in the preceding sentence.
2.4. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of the death,
resignation, retirement, adjudicated incompetence or other incapacity to
perform the duties of the office, or removal, of a Trustee. No such
vacancy shall operate to annul this Declaration or to revoke any existing
agency created pursuant to the terms of this Declaration. In the case of
a vacancy, Holders of at least a majority of the Interests entitled to
4
vote, acting at any meeting of Holders held in accordance with Section 9.2
hereof, or, to the extent permitted by the 1940 Act, a majority vote of
the Trustees continuing in office acting by written instrument or
instruments, may fill such vacancy, and any Trustee so elected by the
Trustees or the Holders shall hold office as provided in this Declaration.
2.5. Meetings. Meetings of the Trustees shall be held from
time to time upon the call of the Chairman, if any, the President, the
Secretary, an Assistant Secretary or any two Trustees, at such time, on
such day and at such place, as shall be designated in the notice of the
meeting. The Trustees shall hold an annual meeting for the election of
officers and the transaction of other business which may come before such
meeting. Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given by mail, by telegram
(which term shall include a cablegram), by telecopier or delivered
personally (which term shall include by telephone). If notice is given by
mail, it shall be mailed not later than 48 hours preceding the meeting and
if given by telegram, telecopier or personally, such notice shall be sent
or delivery made not later than 24 hours preceding the meeting. Notice of
a meeting of Trustees may be waived before or after any meeting by signed
written waiver. Neither the business to be transacted at, nor the purpose
of, any meeting of the Trustees need be stated in the notice or waiver of
notice of such meeting. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except in the situation in
which a Trustee attends a meeting for the express purpose of objecting, at
the commencement of such meeting, to the transaction of any business on
the ground that the meeting was not lawfully called or convened. The
Trustees may act with or without a meeting, but no notice need be given of
action proposed to be taken by written consent. A quorum for all meetings
of the Trustees shall be a majority of the Trustees. Unless provided
otherwise in this Declaration, any action of the Trustees may be taken at
a meeting by vote of a majority of the Trustees present (a quorum being
present) or without a meeting by written consent of a majority of the
Trustees.
Any committee of the Trustees, including an executive committee,
if any, may act with or without a meeting. A quorum for all meetings of
any such committee shall be a majority of the members thereof. Unless
provided otherwise in this Declaration, any action of any such committee
may be taken at a meeting by vote of a majority of the members present (a
quorum being present) or without a meeting by written consent of a
majority of the members.
With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or otherwise
interested in any action to be taken may be counted for quorum purposes
under this Section 2.5 and shall be entitled to vote to the extent
permitted by the 1940 Act.
All or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of a conference telephone
5
or similar communications equipment by means of which all individuals
participating in the meeting can hear each other and participation in a
meeting by means of such communications equipment shall constitute
presence in person at such meeting.
2.6. Officers; Chairman of the Board. The Trustees shall,
from time to time, elect a President, a Secretary and a Treasurer. The
Trustees may elect or appoint, from time to time, a Chairman of the Board
who shall preside at all meetings of the Trustees and carry out such other
duties as the Trustees may designate. The Trustees may elect or appoint
or authorize the President to appoint such other officers, agents or
independent contractors with such powers as the Trustees may deem to be
advisable. The Chairman, if any, shall be and each other officer may, but
need not, be a Trustee.
2.7. By-Laws. The Trustees may adopt and, from time to time,
amend or repeal By-Laws for the conduct of the business of the Trust.
ARTICLE III
Powers of Trustees
3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the
same extent as if the Trustees were the sole owners of the Trust Property
and such business in their own right, but with such powers of delegation
as may be permitted by this Declaration. The Trustees may perform such
acts as in their sole discretion they deem proper for conducting the
business of the Trust. The enumeration of or failure to mention any
specific power herein shall not be construed as limiting such exclusive
and absolute control. The powers of the Trustees may be exercised without
order of or resort to any court.
3.2. Investments. The Trustees shall have power to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase
or otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of U.S. and foreign currencies
and related instruments including forward contracts, and securities,
including common and preferred stock, warrants, bonds, debentures, time
notes and all other evidences of indebtedness, negotiable or non-
negotiable instruments, obligations, certificates of deposit or
indebtedness, commercial paper, repurchase agreements, reverse repurchase
agreements, convertible securities, forward contracts, options, futures
contracts, and other securities, including, without limitation, those
issued, guaranteed or sponsored by any state, territory or possession of
the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the U.S. Government,
6
any foreign government, or any agency, instrumentality or political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank, savings institution,
corporation or other business entity organized under the laws of the
United States or under any foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any
and all such investments of any kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto,
with power to designate one or more Persons to exercise any of such
rights, powers and privileges in respect of any of such investments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional instruments in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the
Trustees be limited by any law limiting the investments which may be made
by fiduciaries.
3.3. Legal Title. Legal title to all Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall
have the power to cause legal title to any Trust Property to be held by or
in the name of one or more of the Trustees, or in the name of the Trust,
or in the name or nominee name of any other Person on behalf of the Trust,
on such terms as the Trustees may determine.
The right, title and interest of the Trustees in the Trust
Property shall vest automatically in each individual who may hereafter
become a Trustee upon his due election and qualification. Upon the
resignation, removal or death of a Trustee, such resigning, removed or
deceased Trustee shall automatically cease to have any right, title or
interest in any Trust Property, and the right, title and interest of such
resigning, removed or deceased Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered.
3.4. Sale and Increases of Interests. The Trustees, in their
discretion, may, from time to time, without a vote of the Holders, permit
any Institutional Investor to purchase an Interest, or increase its
Interest, for such type of consideration, including cash or property, at
such time or times (including, without limitation, each business day), and
on such terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject to, and
in connection with the assumption of, liabilities) and businesses.
Individuals, S corporations, partnerships and grantor trusts that are
beneficially owned by any individual, S corporation or partnership may not
purchase Interests. A Holder which has redeemed its Interest may not be
permitted to purchase an Interest until the later of 60 calendar days
after the date of such Redemption or the first day of the Fiscal Year next
succeeding the Fiscal Year during which such Redemption occurred.
3.5 Decreases and Redemptions of Interests. Subject to
7
Article VII hereof, the Trustees, in their discretion, may, from time to
time, without a vote of the Holders, permit a Holder to redeem its
Interest, or decrease its Interest, for either cash or property, at such
time or times (including, without limitation, each business day), and on
such terms as the Trustees may deem best.
3.6. Borrow Money. The Trustees shall have power to borrow
money or otherwise obtain credit and to secure the same by mortgaging,
pledging or otherwise subjecting as security the assets of the Trust,
including the lending of portfolio securities, and to endorse, guarantee,
or undertake the performance of any obligation, contract or engagement of
any other Person.
3.7. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive and absolute control over the
Trust Property and over the business of the Trust, to delegate from time
to time to such of their number or to officers, employees, agents or
independent contractors of the Trust the doing of such things and the
execution of such instruments in either the name of the Trust or the names
of the Trustees or otherwise as the Trustees may deem expedient.
3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; and to pay all claims, including
taxes, against the Trust Property; to prosecute, defend, compromise or
abandon any claims relating to the Trust or the Trust Property; to
foreclose any security interest securing any obligation, by virtue of
which any property is owed to the Trust; and to enter into releases,
agreements and other instruments.
3.9. Expenses. The Trustees shall have power to incur and pay
any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of this Declaration, and to
pay reasonable compensation from the Trust Property to themselves as
Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees. The Trustees may pay themselves such compensation
for special services, including legal and brokerage services, as they in
good faith may deem reasonable, and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust.
3.10. Miscellaneous Powers. The Trustees shall have power to:
(a) employ or contract with such Persons as the Trustees may deem
appropriate for the transaction of the business of the Trust and terminate
such employees or contractual relationships as they consider appropriate;
(b) enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Trust Property, insurance
policies insuring the Investment Adviser, Administrator, placement agent,
Holders, Trustees, officers, employees, agents or independent contractors
of the Trust against all claims arising by reason of holding any such
position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not the Trust would have the power to indemnify
such Person against such liability; (d) establish pension, profit-sharing
and other retirement, incentive and benefit plans for the Trustees,
8
officers, employees or agents of the Trust; (e) make donations,
irrespective of benefit to the Trust, for charitable, religious,
educational, scientific, civic or similar purposes; (f) to the extent
permitted by law, indemnify any Person with whom the Trust has dealings,
including the Investment Adviser, Administrator, placement agent, Holders,
Trustees, officers, employees, agents or independent contractors of the
Trust, to such extent as the Trustees shall determine; (g) guarantee
indebtedness or contractual obligations of others; (h) determine and
change the Fiscal Year and the method by which the accounts of the Trust
shall be kept; and (i) adopt a seal for the Trust, but the absence of such
a seal shall not impair the validity of any instrument executed on behalf
of the Trust.
3.11. Further Powers. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of
its branches and maintain offices, whether within or without the State of
New York, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities of the
United States of America and of foreign governments, and to do all such
other things and execute all such instruments as they deem necessary,
proper, appropriate or desirable in order to promote the interests of the
Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust which is made by
the Trustees in good faith shall be conclusive. In construing the
provisions of this Declaration, the presumption shall be in favor of a
grant of power to the Trustees. The Trustees shall not be required to
obtain any court order in order to deal with Trust Property.
3.12 Litigation. The Trustees shall have full power and
authority, in the name and on behalf of the Trust, to engage in and to
prosecute, defend, compromise, settle, abandon, or adjust by arbitration
or otherwise, any actions, suits, proceedings, disputes, claims and
demands relating to the Trust, and out of the assets of the Trust to pay
or to satisfy any liabilities, losses, debts, claims or expenses
(including without limitation attorneys' fees) incurred in connection
therewith, including those of litigation, and such power shall include
without limitation the power of the Trustees or any committee thereof, in
the exercise of their or its good faith business judgment, to dismiss or
terminate any action, suit, proceeding, dispute, claim or demand,
derivative or otherwise, brought by any Person, including a Holder in its
own name or in the name of the Trust, whether or not the Trust or any of
the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Trust.
ARTICLE IV
Investment Advisory, Administration
and Placement Agent Arrangements
4.1. Investment Advisory, Administration and Other
9
Arrangements. The Trustees may in their discretion, from time to time,
enter into investment advisory contracts, administration contracts or
placement agent agreements whereby the other party to such contract or
agreement shall undertake to furnish the Trustees such investment
advisory, administration, placement agent and/or other services as the
Trustees shall, from time to time, consider appropriate or desirable and
all upon such terms and conditions as the Trustees may in their sole
discretion determine. Notwithstanding any provision of this Declaration,
the Trustees may authorize any Investment Adviser (subject to such general
or specific instructions as the Trustees may, from time to time, adopt) to
effect purchases, sales, loans or exchanges of Trust Property on behalf of
the Trustees or may authorize any officer, employee or Trustee to effect
such purchases, sales, loans or exchanges pursuant to recommendations of
any such Investment Adviser (all without any further action by the
Trustees). Any such purchase, sale, loan or exchange shall be deemed to
have been authorized by the Trustees.
4.2. Parties to Contract. Any contract of the character
described in Section 4.1 hereof or in the By-Laws of the Trust may be
entered into with any corporation, firm, trust or association, although
one or more of the Trustees or officers of the Trust may be an officer,
director, Trustee, shareholder or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable
by reason of the existence of any such relationship, nor shall any
individual holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of
any such contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this
Article IV or the By-Laws of the Trust. The same Person may be the other
party to one or more contracts entered into pursuant to Section 4.1 hereof
or the By-Laws of the Trust, and any individual may be financially
interested or otherwise affiliated with Persons who are parties to any or
all of the contracts mentioned in this Section 4.2 or in the By-Laws of
the Trust.
ARTICLE V
Liability of Holders; Limitations of
Liability of Trustees, Officers, etc.
5.1. Liability of Holders; Indemnification. Each Holder shall
be jointly and severally liable (with rights of contribution inter se in
proportion to their respective Interests in the Trust) for the liabilities
and obligations of the Trust in the event that the Trust fails to satisfy
such liabilities and obligations; provided, however, that, to the extent
assets are available in the Trust, the Trust shall indemnify and hold each
Holder harmless from and against any claim or liability to which such
Holder may become subject by reason of being or having been a Holder to
the extent that such claim or liability imposes on the Holder an
obligation or liability which, when compared to the obligations and
liabilities imposed on other Holders, is greater than such Holder's
10
Interest (proportionate share), and shall reimburse such Holder for all
legal and other expenses reasonably incurred by such Holder in connection
with any such claim or liability. The rights accruing to a Holder under
this Section 5.1 shall not exclude any other right to which such Holder
may be lawfully entitled, nor shall anything contained herein restrict the
right of the Trust to indemnify or reimburse a Holder in any appropriate
situation even though not specifically provided herein. Notwithstanding
the indemnification procedure described above, it is intended that each
Holder shall remain jointly and severally liable to the Trust's creditors
as a legal matter.
5.2. Limitations of Liability of Trustees, Officers, Employees,
Agents, Independent Contractors to Third Parties. No Trustee, officer,
employee, agent or independent contractor (except in the case of an agent
or independent contractor to the extent expressly provided by written
contract) of the Trust shall be subject to any personal liability
whatsoever to any Person, other than the Trust or the Holders, in
connection with Trust Property or the affairs of the Trust; and all such
Persons shall look solely to the Trust Property for satisfaction of claims
of any nature against a Trustee, officer, employee, agent or independent
contractor (except in the case of an agent or independent contractor to
the extent expressly provided by written contract) of the Trust arising in
connection with the affairs of the Trust.
5.3. Limitations of Liability of Trustees, Officers,
Employees, Agents, Independent Contractors to Trust, Holders, etc. No
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
provided by written contract) of the Trust shall be liable to the Trust or
the Holders for any action or failure to act (including, without
limitation, the failure to compel in any way any former or acting Trustee
to redress any breach of trust) except for such Person's own bad faith,
willful misfeasance, gross negligence or reckless disregard of such
Person's duties.
5.4. Mandatory Indemnification. The Trust shall indemnify, to
the fullest extent permitted by law (including the 1940 Act), each
Trustee, officer, employee, agent or independent contractor (except in the
case of an agent or independent contractor to the extent expressly
provided by written contract) of the Trust (including any Person who
serves at the Trust's request as a director, officer or trustee of another
organization in which the Trust has any interest as a shareholder,
creditor or otherwise) against all liabilities and expenses (including
amounts paid in satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by such Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such Person may be
involved or with which such Person may be threatened, while in office or
thereafter, by reason of such Person being or having been such a Trustee,
officer, employee, agent or independent contractor, except with respect to
any matter as to which such Person shall have been adjudicated to have
acted in bad faith, willful misfeasance, gross negligence or reckless
11
disregard of such Person's duties; provided, however, that as to any
matter disposed of by a compromise payment by such Person, pursuant to a
consent decree or otherwise, no indemnification either for such payment or
for any other expenses shall be provided unless there has been a
determination that such Person did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such Person's office by the court or other body approving
the settlement or other disposition or by a reasonable determination,
based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that such Person did not engage in such conduct by
written opinion from independent legal counsel approved by the Trustees.
The rights accruing to any Person under these provisions shall not exclude
any other right to which such Person may be lawfully entitled; provided
that no Person may satisfy any right of indemnity or reimbursement granted
in this Section 5.4 or in Section 5.2 hereof or to which such Person may
be otherwise entitled except out of the Trust Property. The Trustees may
make advance payments in connection with indemnification under this
Section 5.4, provided that the indemnified Person shall have given a
written undertaking to reimburse the Trust in the event it is subsequently
determined that such Person is not entitled to such indemnification.
5.5. No Bond Required of Trustees. No Trustee shall, as such,
be obligated to give any bond or surety or other security for the
performance of any of such Trustee's duties hereunder.
5.6. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender or other Person dealing with any Trustee,
officer, employee, agent or independent contractor of the Trust shall be
bound to make any inquiry concerning the validity of any transaction
purporting to be made by such Trustee, officer, employee, agent or
independent contractor or be liable for the application of money or
property paid, loaned or delivered to or on the order of such Trustee,
officer, employee, agent or independent contractor. Every obligation,
contract, instrument, certificate or other interest or undertaking of the
Trust, and every other act or thing whatsoever executed in connection with
the Trust shall be conclusively taken to have been executed or done by the
executors thereof only in their capacity as Trustees, officers, employees,
agents or independent contractors of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the
Trust made or sold by any Trustee, officer, employee, agent or independent
contractor of the Trust, in such capacity, shall contain an appropriate
recital to the effect that the Trustee, officer, employee, agent or
independent contractor of the Trust shall not personally be bound by or
liable thereunder, nor shall resort be had to their private property for
the satisfaction of any obligation or claim thereunder, and appropriate
references shall be made therein to the Declaration, and may contain any
further recital which they may deem appropriate, but the omission of such
recital shall not operate to impose personal liability on any Trustee,
officer, employee, agent or independent contractor of the Trust. Subject
to the provisions of the 1940 Act, the Trust may maintain insurance for
the protection of the Trust Property, the Holders, and the Trustees,
officers, employees, agents and independent contractors of the Trust in
12
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
5.7. Reliance on Experts, etc. Each Trustee, officer,
employee, agent or independent contractor of the Trust shall, in the
performance of such Person's duties, be fully and completely justified and
protected with regard to any act or any failure to act resulting from
reliance in good faith upon the books of account or other records of the
Trust (whether or not the Trust would have the power to indemnify such
Persons against such liability), upon an opinion of counsel, or upon
reports made to the Trust by any of its officers or employees or by any
Investment Adviser or Administrator, accountant, appraiser or other
experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
ARTICLE VI
Interests
6.1. Interests. The beneficial interest in the Trust Property
shall consist of non-transferable Interests. The Interests shall be
personal property giving only the rights in this Declaration specifically
set forth. The value of an Interest shall be equal to the Book Capital
Account balance of the Holder of the Interest.
6.2. Non-Transferability. A Holder may not transfer, sell or
exchange its Interest.
6.3. Register of Interests. A register shall be kept at the
Trust under the direction of the Trustees which shall contain the name,
address and Book Capital Account balance of each Holder. Such register
shall be conclusive as to the identity of the Holders, and the Trust shall
not be bound to recognize any equitable or legal claim to or interest in
an Interest which is not contained in such register. No Holder shall be
entitled to receive payment of any distribution, nor to have notice given
to it as herein provided, until it has given its address to such officer
or agent of the Trust as is keeping such register for entry thereon.
ARTICLE VII
Increases, Decreases And Redemptions of Interests
Subject to applicable law, to the provisions of this Declaration
and to such restrictions as may from time to time be adopted by the
Trustees, each Holder shall have the right to increase its investment in
the Trust (through a capital contribution) at any time without limitation.
An increase in the investment of a Holder in the Trust shall be reflected
as an increase in the Book Capital Account balance of that Holder. From
13
time to time the Trust may permit Holders to decrease their investment in
the Trust (through a capital withdrawal) or to redeem their interests in
the Trust, all upon such terms and conditions as may be determined by the
Trustees and subject to any applicable provisions of the 1940 Act. A
decrease in the investment of a Holder in the Trust or the Redemption of
the Interest of a Holder shall be reflected as a decrease in the Book
Capital Account balance of that Holder. Subject to the foregoing, the
Trust shall, upon appropriate and adequate notice from any Holder
increase, decrease or redeem such Holder's Interest for an amount
determined by the application of a formula adopted for such purpose by
resolution of the Trustees; provided that (a) the amount received by the
Holder upon any such decrease or Redemption shall not exceed the decrease
in the Holder's Book Capital Account balance effected by such decrease or
Redemption of its Interest, and (b) if so authorized by the Trustees, the
Trust may, at any time and from time to time, charge fees for effecting
any such decrease or Redemption, at such rates as the Trustees may
establish. The procedures for effecting decreases or Redemptions shall be
as determined by the Trustees from time to time.
ARTICLE VIII
Determination of Book Capital Account
Balances and Distributions
8.1. Book Capital Account Balances. The Book Capital Account
balance of each Holder shall be determined on such days and at such time
or times as the Trustees may determine. The Trustees shall adopt
resolutions setting forth the method of determining the Book Capital
Account balance of each Holder. The power and duty to make calculations
pursuant to such resolutions may be delegated by the Trustees to the
Investment Adviser, Administrator, custodian, or such other Person as the
Trustees may determine. Upon the Redemption of an Interest, the Holder of
that Interest shall be entitled to receive the balance of its Book Capital
Account. A Holder may not transfer, sell or exchange its Book Capital
Account balance.
8.2. Allocations and Distributions to Holders. The Trustees
shall, in compliance with the Code, the 1940 Act and generally accepted
accounting principles, establish the procedures by which the Trust shall
make (i) the allocation of unrealized gains and losses, taxable income and
tax loss, and profit and loss, or any item or items thereof, to each
Holder, (ii) the payment of distributions, if any, to Holders, and
(iii) upon liquidation, the final distribution of items of taxable income
and expense. Such procedures shall be set forth in writing and be
furnished to the Trust's accountants. The Trustees may amend the
procedures adopted pursuant to this Section 8.2 from time to time. The
Trustees may retain from the net profits such amount as they may deem
necessary to pay the liabilities and expenses of the Trust, to meet
obligations of the Trust, and as they may deem desirable to use in the
conduct of the affairs of the Trust or to retain for future requirements
14
or extensions of the business.
8.3. Power to Modify Foregoing Procedures. Notwithstanding
any of the foregoing provisions of this Article VIII, the Trustees may
prescribe, in their absolute discretion, such other bases and times for
determining the net income of the Trust, the allocation of income of the
Trust, the Book Capital Account balance of each Holder, or the payment of
distributions to the Holders as they may deem necessary or desirable to
enable the Trust to comply with any provision of the 1940 Act or any order
of exemption issued by the Commission or with the Code.
ARTICLE IX
Holders
9.1. Rights of Holders. The ownership of the Trust Property
and the right to conduct any business described herein are vested
exclusively in the Trustees, and the Holders shall have no right or title
therein other than the beneficial interest conferred by their Interests
and they shall have no power or right to call for any partition or
division of any Trust Property.
9.2. Meetings of Holders. Meetings of Holders may be called
at any time by a majority of the Trustees and shall be called by any
Trustee upon written request of Holders holding, in the aggregate, not
less than 10% of the Interests, such request specifying the purpose or
purposes for which such meeting is to be called. Any such meeting shall
be held within or without the State of New York and within or without the
United States of America on such day and at such time as the Trustees
shall designate. Holders of one-third of the Interests, present in person
or by proxy, shall constitute a quorum for the transaction of any
business, except as may otherwise be required by the 1940 Act, other
applicable law, this Declaration or the By-Laws of the Trust. If a quorum
is present at a meeting, an affirmative vote of the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the
Holders present, either in person or by proxy, at such meeting constitutes
the action of the Holders, unless a greater number of affirmative votes is
required by the 1940 Act, other applicable law, this Declaration or the
By-Laws of the Trust. All or any one of more Holders may participate in a
meeting of Holders by means of a conference telephone or similar
communications equipment by means of which all persons participating in
the meeting can hear each other and participation in a meeting by means of
such communications equipment shall constitute presence in person at such
meeting.
9.3. Notice of Meetings. Notice of each meeting of Holders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Holder, at its registered address, mailed at
least 10 days and not more than 60 days before the meeting. Notice of any
meeting may be waived in writing by any Holder either before or after such
meeting. The attendance of a Holder at a meeting shall constitute a
15
waiver of notice of such meeting except in the situation in which a Holder
attends a meeting for the express purpose of objecting to the transaction
of any business on the ground that the meeting was not lawfully called or
convened. At any meeting, any business properly before the meeting may be
considered whether or not stated in the notice of the meeting. Any
adjourned meeting may be held as adjourned without further notice.
9.4. Record Date for Meetings, Distributions, etc. For the
purpose of determining the Holders who are entitled to notice of and to
vote or act at any meeting, including any adjournment thereof, or to
participate in any distribution, or for the purpose of any other action,
the Trustees may from time to time fix a date, not more than 90 days prior
to the date of any meeting of Holders or the payment of any distribution
or the taking of any other action, as the case may be, as a record date
for the determination of the Persons to be treated as Holders for such
purpose. If the Trustees do not, prior to any meeting of the Holders, so
fix a record date, then the date of mailing notice of the meeting shall be
the record date.
9.5. Proxies, etc. At any meeting of Holders, any Holder
entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such
vote is to be taken. A proxy may be revoked by a Holder at any time
before it has been exercised by placing on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct,
a later dated proxy or written revocation. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of the
Trust or of one or more Trustees or of one or more officers of the Trust.
Only Holders on the record date shall be entitled to vote. Each such
Holder shall be entitled to a vote proportionate to its Interest. When an
Interest is held jointly by several Persons, any one of them may vote at
any meeting in person or by proxy in respect of such Interest, but if more
than one of them is present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to
be cast, such vote shall not be received in respect of such Interest. A
proxy purporting to be executed by or on behalf of a Holder shall be
deemed valid unless challenged at or prior to its exercise, and the burden
of proving invalidity shall rest on the challenger. No proxy shall be
valid after one year from the date of execution, unless a longer period is
expressly stated in such proxy. The Trust may also permit a Holder to
authorize and empower individuals named as proxies on any form of proxy
solicited by the Trustees to vote that Holder's Interest on any matter by
recording his voting instructions on any recording device maintained for
that purpose by the Trust or its agent, provided the Holder complies with
such procedures as the Trustees may designate to be necessary or
appropriate to determine the authenticity of the voting instructions so
recorded; such instructions shall be deemed to constitute a written proxy
signed by the Holder and delivered to the Trust and shall be deemed to be
dated as of the date such instructions were transmitted, and the Holder
shall be deemed to have approved and ratified all actions taken by such
16
proxies in accordance with the voting instructions so recorded.
9.6. Reports. The Trustees shall cause to be prepared and
furnished to each Holder, at least annually as of the end of each Fiscal
Year, a report of operations containing a balance sheet and a statement of
income of the Trust prepared in conformity with generally accepted
accounting principles and an opinion of an independent public accountant
on such financial statements. The Trustees shall, in addition, furnish to
each Holder at least semi-annually interim reports of operations
containing an unaudited balance sheet as of the end of such period and an
unaudited statement of income for the period from the beginning of the
then-current Fiscal Year to the end of such period.
9.7. Inspection of Records. The books and records of the
Trust shall be open to inspection by Holders during normal business hours
for any purpose not harmful to the Trust.
9.8. Holder Action by Written Consent. Any action which may
be taken by Holders may be taken without a meeting if Holders holding more
than 50% of all Interests entitled to vote (or such larger proportion
thereof as shall be required by any express provision of this Declaration)
consent to the action in writing and the written consents are filed with
the records of the meetings of Holders. Such consents shall be treated
for all purposes as a vote taken at a meeting of Holders. Each such
written consent shall be executed by or on behalf of the Holder delivering
such consent and shall bear the date of such execution. No such written
consent shall be effective to take the action referred to therein unless,
within one year of the earliest dated consent, written consents executed
by a sufficient number of Holders to take such action are filed with the
records of the meetings of Holders.
9.9. Notices. Any and all communications, including any and
all notices to which any Holder may be entitled, shall be deemed duly
served or given if mailed, postage prepaid, addressed to a Holder at its
last known address as recorded on the register of the Trust.
ARTICLE X
Duration; Termination;
Amendment; Mergers; Etc.
10.1. Duration. Subject to possible termination or dissolution
in accordance with the provisions of Section 10.2 and Section 10.3 hereof,
respectively, the Trust created hereby shall continue until the expiration
of 20 years after the death of the last survivor of the initial Trustees
named herein and the following named persons:
Date of
Name Address Birth
-------- ---------- --------
17
Cassius Marcellus Cornelius 742 Old Dublin Road November 9, 1990
Clay Hancock, NH 03449
Sara Briggs Sullivan 1308 Rhodes Street September 17, 1990
Dubois, WY 82513
Myles Bailey Rawson Winhall Hollow Road May 13, 1990
R.R. #1, Box 178B
Bondville, VT 05340
Zeben Curtis Kopchak Box 1126 October 31, 1989
Cordova, AK 99574
Landon Harris Clay 742 Old Dublin Road February 15, 1989
Hancock, NH 03449
Kelsey Ann Sullivan 1308 Rhodes Street May 1, 1988
Dubois, WY 82513
Carter Allen Rawson Winhall Hollow Road January 28, 1988
R.R. #1, Box 178B
Bondville, VT 05340
Obadiah Barclay Kopchak Box 1126 August 29, 1987
Cordova, AK 99574
Richard Tubman Clay 742 Old Dublin Road April 12, 1987
Hancock, NH 03449
Thomas Moragne Clay 742 Old Dublin Road April 11, 1985
Hancock, NH 03449
Zachariah Bishop Kopchak Box 1126 January 11, 1985
Cordova, AK 99574
Sager Anna Kopchak Box 1126 May 22, 1983
Cordova, AK 99574
10.2. Termination.
(a) The Trust may be terminated (i) by the affirmative
vote of Holders of not less than two-thirds of all Interests at any
meeting of Holders or by an instrument in writing without a meeting,
executed by a majority of the Trustees and consented to by Holders of not
less than two-thirds of all Interests, or (ii) by the Trustees by written
notice to the Holders. Upon any such termination,
(i) the Trust shall carry on no business except for the
purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this
18
Declaration shall continue until the affairs of the Trust have been
wound up, including the power to fulfill or discharge the contracts
of the Trust, collect the assets of the Trust, sell, convey,
assign, exchange or otherwise dispose of all or any part of the
Trust Property to one or more Persons at public or private sale for
consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay the
liabilities of the Trust, and do all other acts appropriate to
liquidate the business of the Trust; provided that any sale,
conveyance, assignment, exchange or other disposition of all or
substantially all the Trust Property shall require approval of the
principal terms of the transaction and the nature and amount of the
consideration by the vote of Holders holding more than 50% of all
Interests; and
(iii) after paying or adequately providing for the payment
of all liabilities, and upon receipt of such releases, indemnities
and refunding agreements as they deem necessary for their
protection, the Trustees shall distribute the remaining Trust
Property, in cash or in kind or partly each, among the Holders
according to their respective rights as set forth in the procedures
established pursuant to Section 8.2 hereof.
(b) Upon termination of the Trust and distribution to the
Holders as herein provided, a majority of the Trustees shall execute and
file with the records of the Trust an instrument in writing setting forth
the fact of such termination and distribution. Upon termination of the
Trust, the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Holders shall thereupon cease.
10.3. Dissolution. Upon the bankruptcy of any Holder, or upon the
Redemption of any Interest, the Trust shall be dissolved effective 120
days after the event. However, the Holders (other than such bankrupt or
redeeming Holder) may, by a unanimous affirmative vote at any meeting of
such Holders or by an instrument in writing without a meeting executed by
a majority of the Trustees and consented to by all such Holders, agree to
continue the business of the Trust even if there has been such a
dissolution.
10.4. Amendment Procedure.
(a) This Declaration may be amended by the vote of Holders
of more than 50% of all Interests at any meeting of Holders or by an
instrument in writing without a meeting, executed by a majority of the
Trustees and consented to by the Holders of more than 50% of all
Interests. Notwithstanding any other provision hereof, this Declaration
may be amended by an instrument in writing executed by a majority of the
Trustees, and without the vote or consent of Holders, for any one or more
of the following purposes: (i) to change the name of the Trust, (ii) to
supply any omission, or to cure, correct or supplement any ambiguous,
defective or inconsistent provision hereof, (iii) to conform this
19
Declaration to the requirements of applicable federal law or regulations
or the requirements of the applicable provisions of the Code, (iv) to
change the state or other jurisdiction designated herein as the state or
other jurisdiction whose law shall be the governing law hereof, (v) to
effect such changes herein as the Trustees find to be necessary or
appropriate (A) to permit the filing of this Declaration under the law of
such state or other jurisdiction applicable to trusts or voluntary
associations, (B) to permit the Trust to elect to be treated as a
"regulated investment company" under the applicable provisions of the
Code, or (C) to permit the transfer of Interests (or to permit the
transfer of any other beneficial interest in or share of the Trust,
however denominated), (vi) in conjunction with any amendment contemplated
by the foregoing clause (iv) or the foregoing clause (v) to make any and
all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (v) or the foregoing clause (vi) to be
conclusively evidenced by the execution of any such amendment by a
majority of the Trustees, and (vii) change, modify or rescind any
provision of this Declaration provided such change, modification or
rescission is found by the Trustees to be necessary or appropriate and to
not have a materially adverse effect on the financial interests of the
Holders, any such finding to be conclusively evidenced by the execution of
any such amendment by a majority of the Trustees; provided, however, that
unless effected in compliance with the provisions of Section 10.4(b)
hereof, no amendment otherwise authorized by this sentence may be made
which would reduce the amount payable with respect to any Interest upon
liquidation of the Trust and; provided, further, that the Trustees shall
not be liable for failing to make any amendment permitted by this Section
10.4(a).
(b) No amendment may be made under Section 10.4(a) hereof
which would change any rights with respect to any Interest by reducing the
amount payable thereon upon liquidation of the Trust, except with the vote
or consent of Holders of two-thirds of all Interests.
(c) A certification in recordable form executed by a
majority of the Trustees setting forth an amendment and reciting that it
was duly adopted by the Holders or by the Trustees as aforesaid or a copy
of the Declaration, as amended, in recordable form, and executed by a
majority of the Trustees, shall be conclusive evidence of such amendment
when filed with the records of the Trust.
Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees at any
meeting of Trustees or by an instrument executed by a majority of the
Trustees.
10.5. Merger, Consolidation and Sale of Assets. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of
the Trust Property, including good will, upon such terms and conditions
20
and for such consideration when and as authorized at any meeting of
Holders called for such purpose by a Majority Interests Vote, and any such
merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of
the State of New York.
10.6. Incorporation. Upon a Majority Interests Vote, the Trustees
may cause to be organized or assist in organizing a corporation or
corporations under the law of any jurisdiction or a trust, partnership,
association or other organization to take over the Trust Property or to
carry on any business in which the Trust directly or indirectly has any
interest, and to sell, convey and transfer the Trust Property to any such
corporation, trust, partnership, association or other organization in
exchange for the equity interests thereof or otherwise, and to lend money
to, subscribe for the equity interests of, and enter into any contract
with any such corporation, trust, partnership, association or other
organization, or any corporation, trust, partnership, association or other
organization in which the Trust holds or is about to acquire equity
interests. The Trustees may also cause a merger or consolidation between
the Trust or any successor thereto and any such corporation, trust,
partnership, association or other organization if and to the extent
permitted by law. Nothing contained herein shall be construed as
requiring approval of the Holders for the Trustees to organize or assist
in organizing one or more corporations, trusts, partnerships, associations
or other organizations and selling, conveying or transferring a portion of
the Trust Property to one or more of such organizations or entities.
ARTICLE XI
Miscellaneous
11.1. Governing Law. This Declaration is executed by the Trustees
and delivered in the State of New York and with reference to the law
thereof, and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed in accordance
with the law of the State of New York and reference shall be specifically
made to the trust law of the State of New York as to the construction of
matters not specifically covered herein or as to which an ambiguity
exists.
11.2. Counterparts. This Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original,
and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any one such original
counterpart.
11.3. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust or of any recording
office in which this Declaration may be recorded, appears to be a Trustee
hereunder, certifying to: (a) the number or identity of Trustees or
21
Holders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Holders, (d) the fact that the number of Trustees or Holders present at
any meeting or executing any written instrument satisfies the requirements
of this Declaration, (e) the form of any By-Laws adopted by or the
identity of any officer elected by the Trustees, or (f) the existence of
any fact or facts which in any manner relate to the affairs of the Trust,
shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees.
11.4. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable, and
if the Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, or with other applicable
law and regulations, the conflicting provision shall be deemed never to
have constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of this Declaration shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction
and shall not in any manner affect such provision in any other
jurisdiction or any other provision of this Declaration in any
jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of the day and year first above written.
/s/ Donald R. Dwight /s/ Norton H. Reamer
--------------------------------- ---------------------------------
Donald R. Dwight, as Trustee and Norton H. Reamer, as Trustee and
not individually not individually
/s/ M. Dozier Gardner /s/ John L. Thorndike
--------------------------------- --------------------------------
M. Dozier Gardner, as Trustee and John L. Thorndike, as Trustee and
not individually not individually
/s/ James B. Hawkes
--------------------------------- ---------------------------------
James B. Hawkes, as Trustee and Jack L. Treynor, as Trustee and
not individually not individually
---------------------------------
Samuel L. Hayes, III, as Trustee
and not individually
22
PRIME RATE RESERVES PORTFOLIO
-----------------------------
BY-LAWS
As Adopted May 1, 1992
TABLE OF CONTENTS
PAGE
ARTICLE I -- Meetings of Holders . . . . . . . . . . . . . . . . . . 1
Section 1.1 Records at Holder Meetings . . . . 1
Section 1.2 Inspectors of Election . . . . . . 1
ARTICLE II -- Officers . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Officers of the Trust . . . . . . . 2
Section 2.2 Election and Tenure . . . . . . . . 2
Section 2.3 Removal of Officers . . . . . . . . 2
Section 2.4 Bonds and Surety . . . . . . . . . 2
Section 2.5 Chairman, President and Vice
President . . . . . . . . . . . . 2
Section 2.6 Secretary . . . . . . . . . . . . . 3
Section 2.7 Treasurer . . . . . . . . . . . . . 3
Section 2.8 Other Officers and Duties . . . . . 3
ARTICLE III -- Miscellaneous . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Depositories . . . . . . . . . . . 4
Section 3.2 Signatures . . . . . . . . . . . . 4
Section 3.3 Seal . . . . . . . . . . . . . . . . 4
Section 3.4 Indemnification . . . . . . . . . . 4
Section 3.5 Distribution Disbursing Agents and the
Like . . . . . . . . . . . . . . 4
ARTICLE IV -- Regulations; Amendment of By-Laws . . . . . . . . . . . 5
Section 4.1 Regulations . . . . . . . . . . . . 5
Section 4.2 Amendment and Repeal of By-Laws . . 5
i
BY-LAWS
OF
PRIME RATE RESERVES PORTFOLIO
-----------------------------
These By-Laws are made and adopted pursuant to Section 2.7 of the
Declaration of Trust establishing PRIME RATE RESERVES PORTFOLIO (the
"Trust"), dated as of May 1, 1992, as from time to time amended (the
"Declaration"). All words and terms capitalized in these By-Laws shall
have the meaning or meanings set forth for such words or terms in the
Declaration.
ARTICLE I
Meetings of Holders
Section 1.1. Records at Holder Meetings. At each meeting of the
Holders there shall be open for inspection the minutes of the last
previous meeting of Holders of the Trust and a list of the Holders of the
Trust, certified to be true and correct by the Secretary or other proper
agent of the Trust, as of the record date of the meeting. Such list of
Holders shall contain the name of each Holder in alphabetical order and
the address and Interest owned by such Holder on such record date.
Section 1.2. Inspectors of Election. In advance of any meeting
of the Holders, the Trustees may appoint Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not
so appointed, the chairman, if any, of any meeting of the Holders may, and
on the request of any Holder or his proxy shall, appoint Inspectors of
Election. The number of Inspectors of Election shall be either one or
three. If appointed at the meeting on the request of one or more Holders
or proxies, a Majority Interests Vote shall determine whether one or three
Inspectors of Election are to be appointed, but failure to allow such
determination by the Holders shall not affect the validity of the
appointment of Inspectors of Election. In case any individual appointed
as an Inspector of Election fails to appear or fails or refuses to so act,
the vacancy may be filled by appointment made by the Trustees in advance
of the convening of the meeting or at the meeting by the individual acting
as chairman of the meeting. The Inspectors of Election shall determine
the Interest owned by each Holder, the Interests represented at the
meeting, the existence of a quorum, the authenticity, validity and effect
of proxies, shall receive votes, ballots or consents, shall hear and
determine all challenges and questions in any way arising in connection
with the right to vote, shall count and tabulate all votes or consents,
shall determine the results, and shall do such other acts as may be proper
to conduct the election or vote with fairness to all Holders. If there
are three Inspectors of Election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate
of all. On request of the chairman, if any, of the meeting, or of any
Holder or its proxy, the Inspectors of Election shall make a report in
writing of any challenge or question or matter determined by them and
shall execute a certificate of any facts found by them.
ARTICLE II
Officers
Section 2.1. Officers of the Trust. The officers of the Trust
shall consist of a Chairman, if any, a President, a Secretary, a Treasurer
and such other officers or assistant officers, including Vice Presidents,
as may be elected by the Trustees. Any two or more of the offices may be
held by the same individual. The Trustees may designate a Vice President
as an Executive Vice President and may designate the order in which the
other Vice Presidents may act. The Chairman shall be a Trustee, but no
other officer of the Trust, including the President, need be a Trustee.
Section 2.2. Election and Tenure. At the initial organization
meeting and thereafter at each annual meeting of the Trustees, the
Trustees shall elect the Chairman, if any, the President, the Secretary,
the Treasurer and such other officers as the Trustees shall deem necessary
or appropriate in order to carry out the business of the Trust. Such
officers shall hold office until the next annual meeting of the Trustees
and until their successors have been duly elected and qualified. The
Trustees may fill any vacancy in office or add any additional officer at
any time.
Section 2.3. Removal of Officers. Any officer may be removed at
any time, with or without cause, by action of a majority of the Trustees.
This provision shall not prevent the making of a contract of employment
for a definite term with any officer and shall have no effect upon any
cause of action which any officer may have as a result of removal in
breach of a contract of employment. Any officer may resign at any time by
notice in writing signed by such officer and delivered or mailed to the
Chairman, if any, the President or the Secretary, and such resignation
shall take effect immediately, or at a later date according to the terms
of such notice in writing.
Section 2.4. Bonds and Surety. Any officer may be required by
the Trustees to be bonded for the faithful performance of his duties in
such amount and with such sureties as the Trustees may determine.
Section 2.5. Chairman, President and Vice Presidents. The
Chairman, if any, shall, if present, preside at all meetings of the
Holders and of the Trustees and shall exercise and perform such other
powers and duties as may be from time to time assigned to him by the
Trustees. Subject to such supervisory powers, if any, as may be given by
the Trustees to the Chairman, if any, the President shall be the chief
executive officer of the Trust and, subject to the control of the
Trustees, shall have general supervision, direction and control of the
business of the Trust and of its employees and shall exercise such general
powers of management as are usually vested in the office of President of a
corporation. In the absence of the Chairman, if any, the President shall
-2-
preside at all meetings of the Holders and, in the absence of the
Chairman, the President shall preside at all meetings of the Trustees.
The President shall be, ex officio, a member of all standing committees of
Trustees. Subject to the direction of the Trustees, the President shall
have the power, in the name and on behalf of the Trust, to execute any and
all loan documents, contracts, agreements, deeds, mortgages and other
instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the President
shall have full authority and power to attend, to act and to vote, on
behalf of the Trust, at any meeting of any business organization in which
the Trust holds an interest, or to confer such powers upon any other
person, by executing any proxies duly authorizing such person. The
President shall have such further authorities and duties as the Trustees
shall from time to time determine. In the absence or disability of the
President, the Vice Presidents in order of their rank or the Vice
President designated by the Trustees, shall perform all of the duties of
the President, and when so acting shall have all the powers of and be
subject to all of the restrictions upon the President. Subject to the
direction of the President, each Vice President shall have the power in
the name and on behalf of the Trust to execute any and all loan documents,
contracts, agreements, deeds, mortgages and other instruments in writing,
and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees or by the President.
Section 2.6. Secretary. The Secretary shall keep the minutes of
all meetings of, and record all votes of, Holders, Trustees and the
Executive Committee, if any. The results of all actions taken at a
meeting of the Trustees, or by written consent of the Trustees, shall be
recorded by the Secretary. The Secretary shall be custodian of the seal
of the Trust, if any, and (and any other person so authorized by the
Trustees) shall affix the seal or, if permitted, a facsimile thereof, to
any instrument executed by the Trust which would be sealed by a New York
corporation executing the same or a similar instrument and shall attest
the seal and the signature or signatures of the officer or officers
executing such instrument on behalf of the Trust. The Secretary shall
also perform any other duties commonly incident to such office in a New
York corporation, and shall have such other authorities and duties as the
Trustees shall from time to time determine.
Section 2.7. Treasurer. Except as otherwise directed by the
Trustees, the Treasurer shall have the general supervision of the monies,
funds, securities, notes receivable and other valuable papers and
documents of the Trust, and shall have and exercise under the supervision
of the Trustees and of the President all powers and duties normally
incident to his office. The Treasurer may endorse for deposit or
collection all notes, checks and other instruments payable to the Trust or
to its order and shall deposit all funds of the Trust as may be ordered by
the Trustees or the President. The Treasurer shall keep accurate account
of the books of the Trust's transactions which shall be the property of
the Trust, and which together with all other property of the Trust in his
possession, shall be subject at all times to the inspection and control of
the Trustees. Unless the Trustees shall otherwise determine, the
-3-
Treasurer shall be the principal accounting officer of the Trust and shall
also be the principal financial officer of the Trust. The Treasurer shall
have such other duties and authorities as the Trustees shall from time to
time determine. Notwithstanding anything to the contrary herein
contained, the Trustees may authorize the Investment Adviser or the
Administrator to maintain bank accounts and deposit and disburse funds on
behalf of the Trust.
Section 2.8. Other Officers and Duties. The Trustees may elect
such other officers and assistant officers as they shall from time to time
determine to be necessary or desirable in order to conduct the business of
the Trust. Assistant officers shall act generally in the absence of the
officer whom they assist and shall assist that officer in the duties of
his office. Each officer, employee and agent of the Trust shall have such
other duties and authorities as may be conferred upon him by the Trustees
or delegated to him by the President.
ARTICLE III
Miscellaneous
Section 3.1. Depositories. The funds of the Trust shall be
deposited in such depositories as the Trustees shall designate and shall
be drawn out on checks, drafts or other orders signed by such officer,
officers, agent or agents (including the Investment Adviser or the
Administrator) as the Trustees may from time to time authorize.
Section 3.2. Signatures. All contracts and other instruments
shall be executed on behalf of the Trust by such officer, officers, agent
or agents as provided in these By-Laws or as the Trustees may from time to
time by resolution provide.
Section 3.3. Seal. The seal of the Trust, if any, may be
affixed to any document, and the seal and its attestation may be
lithographed, engraved or otherwise printed on any document with the same
force and effect as if it had been imprinted and attested manually in the
same manner and with the same effect as if done by a New York corporation.
Section 3.4. Indemnification. Insofar as the conditional
advancing of indemnification monies under Section 5.4 of the Declaration
for actions based upon the 1940 Act may be concerned, such payments will
be made only on the following conditions: (i) the advances must be limited
to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written
promise by, or on behalf of, the recipient to repay the amount of the
advance which exceeds the amount to which it is ultimately determined that
he is entitled to receive from the Trust by reason of indemnification; and
(iii) (a) such promise must be secured by a surety bond, other suitable
insurance or an equivalent form of security which assures that any
repayment may be obtained by the Trust without delay or litigation, which
bond, insurance or other form of security must be provided by the
-4-
recipient of the advance, or (b) a majority of a quorum of the Trust's
disinterested, non-party Trustees, or an independent legal counsel in a
written opinion, shall determine, based upon a review of readily available
facts, that the recipient of the advance ultimately will be found entitled
to indemnification.
Section 3.5. Distribution Disbursing Agents and the Like. The
Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such
agents shall have such power and authority as is delegated to any of them
by the Trustees.
ARTICLE IV
Regulations; Amendment of By-Laws
Section 4.1. Regulations. The Trustees may make such additional
rules and regulations, not inconsistent with these By-Laws, as they may
deem expedient concerning the sale and purchase of Interests of the Trust.
Section 4.2. Amendment and Repeal of By-Laws. In accordance
with Section 2.7 of the Declaration, the Trustees shall have the power to
alter, amend or repeal the By-Laws or adopt new By-Laws at any time.
Action by the Trustees with respect to the By-Laws shall be taken by an
affirmative vote of a majority of the Trustees. The Trustees shall in no
event adopt By-Laws which are in conflict with the Declaration.
The Declaration refers to the Trustees as Trustees, but not as
individuals or personally; and no Trustee, officer, employee or agent of
the Trust shall be held to any personal liability, nor shall resort be had
to their private property for the satisfaction of any obligation or claim
or otherwise in connection with the affairs of the Trust.
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SENIOR DEBT PORTFOLIO
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 22nd day of February, 1995, between Senior
Debt Portfolio, a New York trust (the "Trust"), and Boston Management and
Research, a Massachusetts business trust (the "Adviser").
1. Duties of the Adviser. The Trust hereby employs the
Adviser to act as investment adviser for and to manage the investment and
reinvestment of the assets of the Trust and to administer its affairs,
subject to the supervision of the Trustees of the Trust, for the period
and on the terms set forth in this Agreement.
The Adviser hereby accepts such employment, and undertakes to
afford to the Trust the advice and assistance of the Adviser's
organization in the choice of investments and in the purchase and sale of
interests in Loans (as defined in the Trust's registration statement) for
the Trust and to furnish for the use of the Trust office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Trust and for administering its affairs and to pay the
salaries and fees of all officers and Trustees of the Trust who are
members of the Adviser's organization and all personnel of the Adviser
performing services relating to research and investment activities. The
Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as otherwise expressly provided or
authorized, have no authority to act for or represent the Trust in any way
or otherwise be deemed an agent of the Trust.
The Adviser shall provide the Trust with such investment
management and supervision as the Trust may from time to time consider
necessary for the proper supervision of the Trust. As investment adviser
to the Trust, the Adviser shall furnish continuously an investment program
and shall determine from time to time what interests in Loans and other
securities shall be purchased, sold or exchanged and what portion of the
Trust's assets shall be held uninvested, subject always to the applicable
restrictions of the Declaration of Trust, By-Laws and registration
statement of the Trust under the Investment Company Act of 1940, all as
from time to time amended. The Adviser is authorized, in its discretion
and without prior consultation with the Trust, to buy, sell, lend and
otherwise trade in any interests in Loans, stocks, bonds, debt
instruments, options and other securities and investment instruments on
behalf of the Trust, to purchase, write or sell options on securities,
futures contracts or indices on behalf of the Trust, to enter into
commodities contracts on behalf of the Trust, including contracts for the
future delivery of securities or currency and futures contracts on
securities or other indices, and to execute any and all agreements and
instruments and to do any and all things incidental thereto in connection
with the investment management of the Trust. Should the Trustees of the
Trust at any time, however, make any specific determination as to
investment policy for the Trust and notify the Adviser thereof in writing,
the Adviser shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such
determination has been revoked. The Adviser shall take, on behalf of the
Trust, all actions which it deems necessary or desirable to implement the
investment policies of the Trust.
The Adviser shall place all orders for the purchase or sale of
portfolio securities for the account of the Trust with brokers or dealers
or banks selected by the Adviser, or directly with a Co-Lender or other
participant in Loans (as defined in the Trust's registration statement),
and to that end the Adviser is authorized as the agent of the Trust to
give instructions to the custodian of the Trust as to deliveries of
securities and payments of cash for the account of the Trust. In
connection with the selection of such brokers or dealers or banks and the
placing of such orders, the Adviser shall use its best efforts to seek to
execute portfolio security transactions at prices which are advantageous
to the Trust and (when a disclosed commission is being charged) at
reasonably competitive commission rates. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers may be
selected who also provide brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934) to
the Adviser and the Adviser is expressly authorized to cause the Trust to
pay any broker or dealer who provides such brokerage and research services
a commission for executing a security transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the overall
responsibilities which the Adviser and its affiliates have with respect to
accounts over which they exercise investment discretion. Subject to the
requirement set forth in the second sentence of this paragraph, the
Adviser is authorized to consider, as a factor in the selection of any
broker or dealer with whom purchase or sale orders may be placed, the fact
that such broker or dealer has sold or is selling shares of any one or
more investment companies sponsored by the Adviser or its affiliates or
shares of any other investment company investing in the Trust.
2. Compensation of the Adviser. For the services, payments
and facilities to be furnished hereunder by the Adviser, the Adviser shall
be entitled to receive from the Trust compensation in an amount equal to
19/240 of 1% (equivalent to .95% annually) of average daily gross assets
of the Trust throughout each month. (Gross assets shall be calculated by
deducting all liabilities of the Trust except the principal amount of any
indebtedness for money borrowed, including debt securities issued by the
Trust.)
Such daily compensation shall be paid monthly in arrears on the
last business day of each month. The Trust's daily net assets shall be
computed in accordance with the Declaration of Trust of the Trust and any
applicable votes and determinations of the Trustees of the Trust.
In case of initiation or termination of the Agreement during any
month, the fee for that month shall be reduced proportionately on the
basis of the number of calendar days during which the Agreement is in
2
effect and the fee shall be computed upon the basis of the average gross
assets for the business days the Agreement is so in effect for that month.
The Adviser may, from time to time, waive all or a part of the
above compensation.
3. Allocation of Charges and Expenses. It is understood
that the Trust will pay all expenses other than those expressly stated to
be payable by the Adviser hereunder, which expenses payable by the Trust
shall include, without implied limitation, (i) expenses of maintaining the
Trust and continuing its existence, (ii) registration of the Trust under
the Investment Company Act of 1940, (iii) commissions, fees and other
expenses connected with the purchase or 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 Trust, including expenses of conducting tender offers for
the purpose of repurchasing Trust interests, (viii) expenses of
registering and qualifying the Trust and Interests in the Trust under
federal and state securities laws and of preparing and printing
registration statements or other offering statements or memoranda for such
purposes and for distributing the same to Holders and investors, and fees
and expenses of registering and maintaining registrations of the Trust and
of the Trust's placement agent as broker-dealer or agent under state
securities laws, (ix) expenses of reports and notices to Holders and of
meetings of Holders and proxy solicitations therefor, (x) expenses of
reports to governmental officers and commissions, (xi) insurance expenses,
(xii) association membership dues, (xiii) fees, expenses and disbursements
of custodians and subcustodians for all services to the Trust (including
without limitation safekeeping of funds, securities and other investments,
keeping of books, accounts and records, and determination of net asset
values, book capital account balances and tax capital account balances),
(xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, Holder servicing agents and registrars for all services
to the Trust, (xv) expenses for servicing the accounts of Holders, (xvi)
any direct charges to Holders approved by the Trustees of the Trust,
(xvii) compensation and expenses of Trustees of the Trust who are not
members of the Adviser's organization, (xviii) pricing and valuation
services employed by the Trust, and (xix) such non-recurring items as may
arise, including expenses incurred in connection with litigation,
proceedings and claims and the obligation of the Trust to indemnify its
Trustees, officers and Holders with respect thereto.
4. Other Interests. It is understood that Trustees and
officers of the Trust and Holders of Interests in the Trust are or may be
or become interested in the Adviser as trustees, shareholders or otherwise
and that trustees, officers and shareholders of the Adviser are or may be
or become similarly interested in the Trust, and that the Adviser may be
or become interested in the Trust as Holder or otherwise. It is also
understood that trustees, officers, employees and shareholders of the
Adviser may be or become interested (as directors, trustees, officers,
employees, shareholders or otherwise) in other companies or entities
(including, without limitation, other investment companies) which the
3
Adviser may organize, sponsor or acquire, or with which it may merge or
consolidate, and which may include the words "Eaton Vance" or "Boston
Management and Research" or any combination thereof as part of their name,
and that the Adviser or its subsidiaries or affiliates may enter into
advisory or management agreements or other contracts or relationships with
such other companies or entities.
5. Limitation of Liability of the Adviser. The services of
the Adviser to the Trust are not to be deemed to be exclusive, the Adviser
being free to render services to others and engage in other business
activities. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part of the Adviser, the Adviser shall not be subject to liability to the
Trust or to any Holder of Interests in the Trust for any act or omission
in the course of, or connected with, rendering services hereunder or for
any losses which may be sustained in the acquisition, holding or
disposition of any interest in a Loan or of any security, investment or
other asset.
6. Sub-Investment Advisers. The Adviser may employ one or
more sub-investment advisers from time to time to perform such of the acts
and services of the Adviser, including the selection of brokers or dealers
to execute the Trust's portfolio security transactions, and upon such
terms and conditions as may be agreed upon between the Adviser and such
investment adviser and approved by the Trustees of the Trust.
7. Duration and Termination of this Agreement. This
Agreement shall become effective upon the date of its execution, and,
unless terminated as herein provided, shall remain in full force and
effect through and including February 28, 1996 and shall continue in full
force and effect indefinitely thereafter, but only so long as such
continuance after February 28, 1996 is specifically approved at least
annually (i) by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Trust and (ii) by the
vote of a majority of those Trustees of the Trust who are not interested
persons of the Adviser or the Trust cast in person at a meeting called for
the purpose of voting on such approval.
Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Agreement without the payment
of any penalty, by action of Trustees of the Trust or the trustees of the
Adviser, as the case may be, and the Trust may, at any time upon such
written notice to the Adviser, terminate this Agreement by vote of a
majority of the outstanding voting securities of the Trust. This
Agreement shall terminate automatically in the event of its assignment.
8. Amendments of the Agreement. This Agreement may be
amended by a writing signed by both parties hereto, provided that no
amendment to this Agreement shall be effective until approved (i) by the
vote of a majority of those Trustees of the Trust who are not interested
persons of the Adviser or the Trust cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of
4
the outstanding voting securities of the Trust.
9. Limitation of Liability. The Adviser expressly
acknowledges the provision in the Declaration of Trust of the Trust
(Section 5.2 and 5.6) limiting the personal liability of the Trustees and
officers of the Trust, and the Adviser hereby agrees that it shall have
recourse to the Trust for payment of claims or obligations as between the
Trust and the Adviser arising out of this Agreement and shall not seek
satisfaction from any Trustee or officer of the Trust.
10. Certain Definitions. The terms "assignment" and
"interested persons" when used herein shall have the respective meanings
specified in the Investment Company Act of 1940 as now in effect or as
hereafter amended subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission by any rule, regulation or
order. The term "vote of a majority of the outstanding voting securities"
shall mean the vote, at a meeting of Holders, of the lesser of (a) 67 per
centum or more of the Interests in the Trust present or represented by
proxy at the meeting if the Holders of more than 50 per centum of the
outstanding Interests in the Trust are present or represented by proxy at
the meeting, or (b) more than 50 per centum of the outstanding Interests
in the Trust. The terms "Holders" and "Interests" when used herein shall
have the respective meanings specified in the Declaration of Trust of the
Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the day and year first above written.
SENIOR DEBT PORTFOLIO
By: /s/ James B. Hawkes
-------------------------------------
President
in Toronto, Ontario, Canada
BOSTON MANAGEMENT AND RESEARCH
By: /s/ H. Day Brigham, Jr.
----------------------------------------
5
PLACEMENT AGENT AGREEMENT
February 22, 1995
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, Massachusetts 02110
Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, Senior Debt Portfolio (the
"Trust"), an closed-end non-diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), organized as a New York trust, has agreed that Eaton Vance
Distributors, Inc. ("EVD") shall be the placement agent (the "Placement
Agent") of Interests in the Trust ("Trust Interests").
1. Services as Placement Agent.
1.1 EVD will act as Placement Agent of the Trust Interests
covered by the Trust's registration statement then in effect under the
1940 Act. In acting as Placement Agent under this Placement Agent
Agreement, neither EVD nor its employees or any agents thereof shall make
any offer or sale of Trust Interests in a manner which would require the
Trust Interests to be registered under the Securities Act of 1933, as
amended (the "1933 Act").
1.2 All activities by EVD and its agents and employees as
Placement Agent of Trust Interests shall comply with all applicable laws,
rules and regulations, including, without limitation, all rules and
regulations adopted pursuant to the 1940 Act by the Securities and
Exchange Commission (the "Commission").
1.3 Nothing herein shall be construed to require the Trust to
accept any offer to purchase any Trust Interests, all of which shall be
subject to approval by the Board of Trustees.
1.4 The Portfolio shall furnish from time to time for use in
connection with the sale of Trust Interests such information with respect
to the Trust and Trust Interests as EVD may reasonably request. The Trust
shall also furnish EVD upon request with: (a) unaudited semiannual
statements of the Trust's books and accounts prepared by the Trust, and
(b) from time to time such additional information regarding the Trust's
financial or regulatory condition as EVD may reasonably request.
1.5 The Trust represents to EVD that all registration statements
filed by the Trust with the Commission under the 1940 Act with respect to
Trust Interests have been prepared in conformity with the requirements of
such statute and the rules and regulations of the Commission thereunder.
As used in this Agreement the term "registration statement" shall mean any
registration statement filed with the Commission as modified by any
amendments thereto that at any time shall have been filed with the
Commission by or on behalf of the Trust. The Trust represents and
warrants to EVD that any registration statement will contain all
statements required to be stated therein in conformity with both such
statute and the rules and regulations of the Commission; that all
statements of fact contained in any registration statement will be true
and correct in all material respects at the time of filing of such
registration statement or amendment thereto; and that no registration
statement will include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading to a purchaser of Trust Interests.
The Trust may but shall not be obligated to propose from time to time such
amendment to any registration statement as in the light of future
developments may, in the opinion of the Trust's counsel, be necessary or
advisable. If the Trust shall not propose such amendment and/or
supplement within fifteen days after receipt by the Trust of a written
request from EVD to do so, EVD may, at its option, terminate this
Agreement. The Trust shall not file any amendment to any registration
statement without giving EVD reasonable notice thereof in advance;
provided, however, that nothing contained in this Agreement shall in any
way limit the Trust's right to file at any time such amendment to any
registration statement as the Trust may deem advisable, such right being
in all respects absolute and unconditional.
1.6 The Trust agrees to indemnify, defend and hold EVD, its
several officers and directors, and any person who controls EVD within the
meaning of Section 15 of the 1933 Act or Section 20 of the Securities and
Exchange Act of 1934 (the "1934 Act") (for purposes of this paragraph 1.6,
collectively, "Covered Persons") free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which any Covered Person
may incur under the 1933 Act, the 1934 Act, common law or otherwise,
arising out of or based on any untrue statement of a material fact
contained in any registration statement, private placement memorandum or
other offering material ("Offering Material") or arising out of or based
on any omission to state a material fact required to be stated in any
Offering Material or necessary to make the statements in any Offering
Material not misleading; provided, however, that the Trust's agreement to
indemnify Covered Persons shall not be deemed to cover any claims,
demands, liabilities or expenses arising out of any financial and other
statements as are furnished in writing to the Trust by EVD in its capacity
as Placement Agent for use in the answers to any items of any registration
statement or in any statements made in any Offering Material, or arising
out of or based on any omission or alleged omission to state a material
fact in connection with the giving of such information required to be
stated in such answers or necessary to make the answers not misleading;
and further provided that the Trust's agreement to indemnify EVD and the
Trust's representations and warranties hereinbefore set forth in this
paragraph 1.6 shall not be deemed to cover any liability to the Trust or
its investors to which a Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
-2-
performance of its duties, or by reason of a Covered Person's reckless
disregard of its obligations and duties under this Agreement. The Trust
should be notified of any action brought against a Covered Person, such
notification to be given by a writing addressed to the Trust, 24 Federal
Street Boston, Massachusetts 02110, with a copy to the Adviser of the
Trust, Boston Management and Research, at the same address, promptly after
the summons or other first legal process shall have been duly and
completely served upon such Covered Person. The failure to so notify the
Trust of any such action shall not relieve the Trust from any liability
except to the extent the Trust shall have been prejudiced by such failure,
or from any liability that the Trust may have to the Covered Person
against whom such action is brought by reason of any such untrue statement
or omission, otherwise than on account of the Trust's indemnity agreement
contained in this paragraph. The Trust will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or
liability, but in such case such defense shall be conducted by counsel of
good standing chosen by the Trust and approved by EVD, which approval
shall not be unreasonably withheld. In the event the Trust elects to
assume the defense of any such suit and retain counsel of good standing
approved by EVD, the defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by any of them; but
in case the Trust does not elect to assume the defense of any such suit or
in case EVD reasonably does not approve of counsel chosen by the Trust,
the Trust will reimburse the Covered Person named as defendant in such
suit, for the fees and expenses of any counsel retained by EVD or it. The
Trust's indemnification agreement contained in this paragraph and the
Trust's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation
made by or on behalf of Covered Persons, and shall survive the delivery of
any Trust Interests. This agreement of indemnity will inure exclusively
to Covered Persons and their successors. The Trust agrees to notify EVD
promptly of the commencement of any litigation or proceedings against the
Trust or any of its officers or Trustees in connection with the issue and
sale of any Trust Interests.
1.7 EVD agrees to indemnify, defend and hold the Trust, its
several officers and trustees, and any person who controls the Trust
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934
Act (for purposes of this paragraph 1.7, collectively, "Covered Persons")
free and harmless from and against any and all claims, demands,
liabilities and expenses (including the costs of investigating or
defending such claims, demands, liabilities and any counsel fees incurred
in connection therewith) that Covered Persons may incur under the 1933
Act, the 1934 Act or common law or otherwise, but only to the extent that
such liability or expense incurred by a Covered Person resulting from such
claims or demands shall arise out of or be based on any untrue statement
of a material fact contained in information furnished in writing by EVD in
its capacity as Placement Agent to the Trust for use in the answers to any
of the items of any registration statement or in any statements in any
other Offering Material or shall arise out of or be based on any omission
to state a material fact in connection with such information furnished in
writing by EVD to the Trust required to be stated in such answers or
-3-
necessary to make such information not misleading. EVD shall be notified
of any action brought against a Covered Person, such notification to be
given by a writing addressed to EVD at 24 Federal Street, Boston,
Massachusetts 02110, promptly after the summons or other first legal
process shall have been duly and completely served upon such Covered
Person. EVD shall have the right of first control of the defense of the
action with counsel of its own choosing satisfactory to the Trust if such
action is based solely on such alleged misstatement or omission on EVD's
part, and in any other event each Covered Person shall have the right to
participate in the defense or preparation of the defense of any such
action. The failure to so notify EVD of any such action shall not relieve
EVD from any liability except to the extent the Trust shall have been
prejudiced by such failure, or from any liability that EVD may have to
Covered Persons by reason of any such untrue or alleged untrue statement,
or omission or alleged omission, otherwise than on account of EVD's
indemnity agreement contained in this paragraph.
1.8 No Trust Interests shall be offered by either EVD or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Trust Interests hereunder shall be accepted by the
Trust if and so long as the effectiveness of the registration statement or
any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act or the 1940 Act; provided, however, that
nothing contained in this paragraph shall in any way restrict or have an
application to or bearing on the Trust's obligation to redeem Trust
Interests from any investor in accordance with the provisions of the
Trust's registration statement or Declaration of Trust, as amended from
time to time.
1.9 The Trust agrees to advise EVD as soon as reasonably
practical by a notice in writing delivered to EVD or its counsel:
(a) of any request by the Commission for amendments to the
registration statement then in effect or for additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement then in
effect or the initiation by service of process on the Trust of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement then in
effect or that requires the making of a change in such registration
statement in order to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement that may from time to time be
filed with the Commission.
For purposes of this paragraph 1.9, informal requests by or acts
of the Staff of the Commission shall not be deemed actions of or requests
by the Commission.
-4-
1.10 EVD agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and
other information not otherwise publicly available relative to the Trust
and its prior, present or potential investors and not to use such records
and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where EVD may be exposed to
civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
2. Duration and Termination of this Agreement.
This Agreement shall become effective upon the date of its
execution, and, unless terminated as herein provided, shall remain in full
force and effect through and including February 28, 1996 and shall
continue in full force and effect indefinitely thereafter, but only so
long as such continuance after February 28, 1996 is specifically approved
at least annually (i) by the Board of Trustees of the Trust or by vote of
a majority of the outstanding voting securities of the Trust and (ii) by
the vote of a majority of those Trustees of the Trust who are not
interested persons of EVD or the Trust cast in person at a meeting called
for the purpose of voting on such approval.
Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this agreement without the payment
of any penalty, by action of Trustees of the Trust or the Directors of
EVD, as the case may be, and the Trust may, at any time upon such written
notice to EVD, terminate this Agreement by vote of a majority of the
outstanding voting securities of the Trust. This Agreement shall
terminate automatically in the event of its assignment.
3. Representations and Warranties.
EVD and the Trust each hereby represents and warrants to the
other that it has all requisite authority to enter into, execute, deliver
and perform its obligations under this Agreement and that, with respect to
it, this Agreement is legal, valid and binding, and enforceable in
accordance with its terms.
4. Limitation of Liability.
EVD expressly acknowledges the provision in the Declaration of
Trust of the Trust (Sections 5.2 and 5.6) limiting the personal liability
of the Trustees and officers of the Trust, and EVD hereby agrees that it
shall have recourse to the Trust for payment of claims or obligations as
between the Trust and EVD arising out of this Agreement and shall not seek
satisfaction from any Trustee or officer of the Trust.
5. Certain Definitions.
-5-
The terms "assignment" and "interested persons" when used herein
shall have the respective meanings specified in the Investment Company Act
of 1940 as now in effect or as hereafter amended subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission by
any rule, regulation or order. The term "vote of a majority of the
outstanding voting securities" shall mean the vote, at a meeting of
Holders, of the lesser of (a) 67 per centum or more of the Interests in
the Trust present or represented by proxy at the meeting if the Holders of
more than 50 per centum of the outstanding Interests in the Trust are
present or represented by proxy at the meeting, or (b) more than 50 per
centum of the outstanding Interests in the Trust. The terms "Holders" and
"Interests" when used herein shall have the respective meanings specified
in the Declaration of Trust of the Trust.
6. Concerning Applicable Provisions of Law, etc.
This Agreement shall be subject to all applicable provisions of
law, including the applicable provisions of the 1940 Act and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control.
The laws of the Commonwealth of Massachusetts shall, except to
the extent that any applicable provisions of federal law shall be
controlling, govern the construction, validity and effect of this
Agreement, without reference to principles of conflicts of law.
If the contract set forth herein is acceptable to you, please so
indicate by executing the enclosed copy of this Agreement and returning
the same to the undersigned, whereupon this Agreement shall constitute a
binding contract between the parties hereto effective at the closing of
business on the date hereof.
Yours very truly,
SENIOR DEBT PORTFOLIO
By: /s/ James B. Hawkes
----------------------------------
President
in Toronto, Ontario, Canada
Accepted:
EATON VANCE DISTRIBUTORS, INC.
By: /s/ H. Day Brigham, Jr.
------------------------------
Vice President
-6-
AMENDMENT TO
CUSTODIAN AGREEMENT
between
HIGH INCOME AND SENIOR DEBT PORTFOLIOS
and
INVESTORS BANK & TRUST COMPANY
This Amendment, dated as of October 23, 1995, is made to the
CUSTODIAN AGREEMENT dated December 30, 1994 (the "Agreement") between High
Income and Senior Debt Portfolios (the "Trusts") and Investors Bank &
Trust Company (the "Custodian") pursuant to Section 9 of the Agreement.
The Trusts and the Custodian agree that Section 9 of the
Agreement shall, as of October 23, 1995, be amended to read as follows:
Unless otherwise defined herein, terms which are defined in the
Agreement and used herein are so used as so defined.
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 by either party after
August 31, 2000 by an instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
that the Trust may at any time by action of its Board, (i) substitute
another bank or trust company for the Custodian by giving notice as
described above to the Custodian in the event the Custodian assigns this
Agreement to another party without consent of the noninterested Trustees
of the Trust, 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).
This Agreement may be amended at any time by the written
agreement of the parties hereto. If a majority of the non-interested
trustees of any of the Trusts determines that the performance of the
Custodian has been unsatisfactory or adverse to the interests of Trust
holders of any Trust or Trusts or that the terms of the Agreement are no
longer consistent with publicly available industry standards, then the
Trust or Trusts shall give written notice to the Custodian of such
determination and the Custodian shall have 60 days to (1) correct such
performance to the satisfaction of the non-interested trustees or (2)
renegotiate terms which are satisfactory to the non-interested trustees of
the Trusts. If the conditions of the preceding sentence are not met then
the Trust or Trusts may terminate this Agreement on sixty (60) days
written notice.
The Board of the Trust shall, forthwith, upon giving or receiving
notice of termination of this Agreement, appoint as successor custodian, a
bank or trust company having the qualifications required by the Investment
Company Act of 1940 and the Rules thereunder. 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 written order designating a successor custodian shall
have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Trust to the Trust but shall
have the right to deliver to a bank or trust company doing business in
Boston, Massachusetts of its own selection meeting the above required
qualifications, all funds, securities and properties of the Fund 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.
Except as expressly provided herein, the Agreement shall remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their duly authorized officers, as of the day and year
first above written.
HIGH INCOME PORTFOLIO
By: /s/ M. Dozier Gardner
----------------------------------
M. Dozier Gardner, President
SENIOR DEBT PORTFOLIO
By: /s/ James B. Hawkes
-----------------------------------
James B. Hawkes, President
Executed in Bermuda
INVESTORS BANK & TRUST COMPANY
By: /s/ Michael F. Rogers
----------------------------------
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of the 23rd day of October, 1995.
BETWEEN: (1) Senior Debt Portfolio, a New York trust the
principal office of which is at IBT Trust Company
(Cayman) Ltd., The Bank of Nova Scotia Building,
George Town, Grand Cayman, Cayman, Island,
British West Indies (the "Trust") OF THE ONE PART
AND (2) IBT Trust Company (Cayman), Ltd., a company duly
incorporated in the Cayman Islands the Registered
Office of which is at The Bank of Nova Scotia
Building, 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;
-2-
(e) at any time during business hours to permit any duly
appointed agent or representative of the Trust, at the
expense of the Trust to inspect the Register of Holders
or any other documents or records in the possession of
the Administrator and give such agent or representative
during business hours all information, explanations and
assistance as such agent or representative may reasonably
require, and permit representatives of the U.S.
Securities and Exchange Commission to examine books and
records of the Trust;
(f) maintain and safeguard the Register of Holders of
Interests and other documents in connection therewith and
enter on such Register all original issues and allotments
of an all increases, decreases and redemptions of such
interests all in accordance with the provisions of the
Declaration of Trust and Trustee instructions and to
prepare all such lists of Holders of Interests of the
Trust and account numbers of Holders as may be required
by the Trust.
DEALINGS OF THE ADMINISTRATOR
5. Nothing herein contained shall prevent the Administrator or any
firm, person or company associated in any way with the
Administrator from contracting with or entering into any
financial, banking or other transaction with the Trust, any
shareholder or any company or body of persons any of whose
securities are held by or for the account of the Trust or from
being interested in such transaction.
6. Nothing herein contained shall prevent the Administrator or any
associate of the Administrator from acting as administrator or
general corporate manager or in any other capacity whatsoever for
any other company or body of persons on such terms as the
Administrator or such associate may arrange, and the
Administrator or such associate shall not be deemed to be
affected with notice of or to be under any duty to disclose the
Trust any fact or thing which may come to its knowledge or that
of any of its servants or agents in the course of so doing or in
any manner whatever otherwise than in the course of carrying out
its duties hereunder.
AGENTS AND ADVICE
7. The Administrator shall be at liberty in the performance of its
duties and in the exercise of any of the powers vested in it
hereunder to act by responsible officers or a responsible officer
for the time being and to employ and pay an agent who may (but
need not) be an associate of the Administrator to perform or
concur in performing any of the services required to be performed
hereunder and may act or rely upon the opinion or advice or any
-3-
information obtained from any broker, lawyer, valuer, surveyor,
auctioneer or other expert, whether reporting to the Trust, to
the Administrator or not, and the Administrator shall not be
responsible for any loss occasioned by its so acting.
8. The Administrator may at the expense of the Trust refer any legal
question to the legal advisers of the Trust for the time being
(whose name shall from time to time be notified by or on behalf
of the Trust to the Administrator) or legal advisers that it may
select with the prior approval of the Trust and may authorize any
such legal adviser to take the opinion of counsel on any matter
of difficulty and may act on any opinion given by such legal
advisers or counsel without being responsible for the correctness
thereof or for any result which may follow from so doing.
REMUNERATION
9. In consideration of the services performed by the Administrator
hereunder the Administrator shall be entitled to receive such
fees as are agreed upon by the parties as set forth in Schedule A
of this agreement.
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,
except for loss arising to the Trust by reason of act of,
or omissions due to negligence or willful default on the
part of any such persons as aforesaid.
(b) The Trust shall indemnify, defend and hold harmless the
Administrator and each of its subsidiaries, agents,
advisors, shareholders, directors, officers, servants and
employees from and against any loss, liability, damage,
cost or expense (including legal fees and expenses and
any amounts paid in settlement), resulting from its or
their actions or capacities hereunder or otherwise
concerning the business or activities undertaken on
behalf of the Trust under this Agreement or sustained by
any of them including (without restricting the generality
of the foregoing) loss sustained as a result of delay,
mis-delivery or error in transmission of any cable,
telefax, telex or telegraphic communication. Subject as
aforesaid all actions taken by the Administrator shall be
-4-
taken in good faith and in the reasonable belief that
such actions are taken in the best interests of the Trust
PROVIDED THAT termination of any action, proceeding,
demand, claim or lawsuit by judgment, order or settlement
shall not, or 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 off the expiration or termination
of this Agreement.
RIGHT TO ADVISE AND MANAGE THE FUNDS OR OTHERS
12. The Trust acknowledges that an important part of the
Administrator's business is, and that is 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
-5-
under this Agreement and shall fail within ten days of
receipt of notice served by the Administrator requiring
it so to do, to make good such breach; and
(c) at any time without such notice as is referred to in sub-
paragraphs (a) and (b) of this clause if the Trust shall
go into liquidation (other than for the purpose of
reconstruction or amalgamation upon terms previously
approved in writing by the Administrator) or if a
receiver of any of the assets of the Trust is appointed.
16. The Trust may terminate the appointment of the Administrator:
(a) by giving no less than two (2) month's notice in writing
to the Administrator;
(b) if the Administrator shall commit any breach of its
obligations under this Agreement and shall fail within
ten days of receipt of notice served by the Trust
requiring it so to do, to make good such breach; and
(c) at any time without such notice as is referred to in sub-
paragraphs (a) and (b) or this clause if the
Administrator goes into liquidation (except a voluntary
liquidation for the purpose of reconstruction or
amalgamation upon terms previously approved in writing by
the Trust) or if a receiver is appointed of any of the
assets of the Administrator.
17. On termination of the appointment of the administrator under the
provisions of the preceding clauses, such termination shall be
without prejudice to any antecedent liability of the
Administrator or the Trust. The Administrator shall be entitled
to receive all fees and other moneys accrued up to the date of
such termination but shall not be entitled to compensation in
respect of such termination.
18. The administrator shall, on the termination of its appointment:
(a) Forthwith hand over to the Trust or as it shall direct
all books of account, registers, correspondence and
records of all and every description relating to the
affairs of the Trust which are in the Administrator's
possession but not including any promotional material
bearing the style or any trade mark or symbol of the
Administrator. The Administrator shall also in such
circumstance deliver or cause to be delivered to the
succeeding administrator or as the Trust shall direct all
funds or other properties of the Trust deposited with or
otherwise held by the Administrator or to its order
hereunder and do all such further acts as the Trust may
reasonably require of it.
-6-
(b) have the right by written request to require the Trust in
its Registration Statement and any other material made
available to investors and prospective investors to (as
may reasonably be approved by the Administrator) indicate
that the Administrator and its delegate(s) (if any) have
ceased to be its administrator.
REPRESENTATIONS AND WARRANTIES
19. (a) The Administrator represents and warrants to the Trust as
follows:
(i) The Administrator has full power and authority to
enter into and perform this Agreement and this
Agreement has been duly authorized by all
requisite corporate action, executed and
delivered by or on behalf of the Administrator
and constitutes a valid and binding agreement of
the Administrator.
(ii) Neither the execution, delivery nor performance
of this Agreement by the Administrator will
result in a breach of 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 of 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
-7-
performance of this Agreement by the trust except
such as have been obtained by the Trust.
INDEPENDENT CONTRACTOR
20. For all purposes of this Agreement, the Administrator shall be an
independent contractor and not an employee or dependent agent of
the Trust, nor shall anything herein be construed as making the
Trust a partner or co-venturer with the Administrator or any of
its affiliates or other clients. Except as provided in this
Agreement, the Administrator shall have no authority to bind,
obligate or represent the Trust.
COMPLETE AGREEMENT
21. This Agreement constitutes the entire agreement between the
parties relating to the subject matter hereof.
ASSIGNMENT
22. This Agreement shall be binding upon the parties hereto and their
respective successors and assigns but may not be assigned by any
party without the express written consent of the other party
which shall not be reasonably withheld or delayed.
23. This Agreement may not be amended except by the written consent
of each of the parties hereto.
NOTICES
24. Any notice delivered under this agreement shall be in writing and
signed by a duly authorized officer of the party giving such
notice and shall be delivered personally or sent by registered or
certified mail, postage prepaid, to the registered office of the
party for whom it is intended. A notice so posted shall be deemed
to be served at the expiration of seventy-two (72) hours after
posting and in proving service by post it shall be sufficient to
prove that an envelope containing the notice was duly addressed,
stamped and posted.
GOVERNING LAW
25. This Agreement shall be governed by and construed in accordance
with the laws of the Cayman Islands and the parties hereto agree
to submit to the non-exclusive jurisdiction of the Courts of the
Cayman Islands.
IN WITNESS WHEREOF this Agreement has been duly executed for an on behalf
of the parties hereto in manner binding upon them the day and year first
above written.
-8-
Signed by ) /s/ James B. Hawkes
for and on behalf of the said ) ------------------------------
High Income Portfolio ) President
in the presence of: )
------------------------------
SIGNED by ) /s/ Michael F. Rogers
for and on behalf of the said ) ------------------------------
IBT Trust Company (Cayman), Ltd. ) Director
in the presence of: )
) /s/ Stephen Hixon
------------------------------
Signed in Toronto, Ontario 1/31/96
Witness
-9-
Schedule A
IBT Trust Company (Cayman), Ltd.
Fee Schedule for Administration Services
Senior Debt Portfolio
Annual Offshore Administration Fee $ 1,500
This fee will be charged to each Portfolio (Hub) annually for the
following Principal Office and Administrative services.
Principal Office
The following services will be provided for each Portfolio (Hub):
Register Portfolio with Inspector of Financial Services
Safekeeping of original contracts, agreements, and
board minutes
Provide officers to Portfolio
Ensure compliance with Cayman Islands Law
Administrative Services
The following services will be provided for each Portfolio (Hub):
Authorize expense budget and amendments
Authorize expense payments
Mail Board materials
Maintain register of holders
Authorize Subscriptions and redemptions
Authorize Portfolio distributions (if Applicable)
Distribute annual, semi-annual, quarterly reports to
shareholders
-10-
Boston Management and Research
24 Federal Street
Boston, MA 02110
(617) 482-8260
October 25, 1994
Senior Debt Portfolio
24 Federal Street
Boston, MA 02110
Ladies and Gentlemen:
With respect to our purchase from you, at the purchase price of
$100,000, of an interest (an "Initial Interest") in Senior Debt Portfolio
(the "Portfolio"), we hereby advise you that we are purchasing such
Initial Interest for investment purposes without any present intention of
redeeming or reselling.
The amount paid by the Portfolio on any withdrawal by us of any
portion of such Initial Interest will be reduced by a portion of any
unamortized organization expenses, determined by the proportion of the
amount of such Initial Interest withdrawn to the aggregate Initial
Interests of all holders of similar Initial Interests then outstanding
after taking into account any prior withdrawals of any such Initial
Interest.
Very truly yours,
BOSTON MANAGEMENT AND RESEARCH
By: /s/ Curtis H. Jones
-----------------------------
Vice President
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> FEB-22-1995
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<PER-SHARE-NAV-BEGIN> 0
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