<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1999
1933 ACT FILE NO. 333-72707
1940 ACT FILE NO. 811-08671
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 3 [X]
(CHECK APPROPRIATE BOX OR BOXES)
EATON VANCE ADVISERS SENIOR FLOATING-RATE FUND
----------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 482-8260
------------------------------------------------------------------
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
If any of the securities being registered on this Form will be offered on
a delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [X]
It is proposed that this filing will become effective (check appropriate box):
[ ] when declared effective pursuant
to section 8(c)
[ ] immediately upon filing pursuant [ ] 60 days after filing pursuant
to paragraph (b) to paragraph (a)
[X] on May 3, 1999 pursuant [ ] on (date) pursuant
to paragraph (b) to paragraph (a)
If appropriate, check the following box:
[ ] This [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement].
[ ] This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration
statement for the same offering is .
Senior Debt Portfolio has also executed this Registration Statement.
================================================================================
<PAGE>
EATON VANCE ADVISERS SENIOR FLOATING-RATE FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-2
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1. ........... Outside Front Cover Cover Page
2. ........... Inside Front and Outside Back Cover Pages
Cover Page
3. ........... Fee Table and Synopsis Shareholder and Fund Expenses
4. ........... Financial Highlights Financial Highlights
5. ........... Plan of Distribution Purchasing Shares;
Shareholder Account Features
6. ........... Selling Shareholders Not Applicable
7. ........... Use of Proceeds Purchasing Shares; Investment
Objective, Policies and Risks
8. ........... General Description of the Organization of the Fund;
Registrant Investment Policies and Risks
9. ........... Management Management of the Fund;
Organization of the Fund
10. ........... Capital Stock, Long-Term Debt, Organization of the Fund;
and Other Securities Distributions and Taxes;
Shareholder Account Features
11. ........... Defaults and Arrears on Senior Not Applicable
Securities
12. ........... Legal Proceedings Not Applicable
13. ........... Table of Contents of the Table of Contents of the
Statement of Additional Statement of Additional
Information Information
PART B STATEMENT OF
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION CAPTION
- -------- ------------ ------------------------------
14. ........... Cover Page Cover Page
15. ........... Table of Contents Table of Contents
16. ........... General Information and Management and Organization
History
17. ........... Investment Objective and Investment Policies and
Policies Risks; Investment
Restrictions
18. ........... Management Management and Organization;
Investment Advisory and
Administrative Services
19. ........... Control Persons and Principal Control Persons and Principal
Holders of Securities Holders of Shares
20. ........... Investment Advisory and Other Investment Advisory and
Services Administrative Services;
Other Service Providers
21. ........... Brokerage Allocation and Other Portfolio Trading
Practices
22. ........... Tax Status Taxes
23. ........... Financial Statements Financial Statements
<PAGE>
[Logo] Investing EATON VANCE ADVISERS
EATON VANCE for the SENIOR FLOATING-RATE FUND
- ----------- 21st
Century(R)
THE INVESTMENT OBJECTIVE OF EATON VANCE ADVISERS SENIOR FLOATING-RATE FUND
(THE "FUND") 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 ("SENIOR LOANS"). THE FUND IS A
CONTINUOUSLY OFFERED, CLOSED-END, NON-DIVERSIFIED INVESTMENT COMPANY. SENIOR
LOANS ARE TYPICALLY OF BELOW INVESTMENT GRADE QUALITY AND MAY HAVE BELOW
INVESTMENT GRADE RATINGS, WHICH RATINGS ARE ASSOCIATED WITH SECURITIES HAVING
HIGH RISK, SPECULATIVE CHARACTERISTICS. NEVERTHELESS, BECAUSE OF THE
PROTECTIVE FEATURES OF SENIOR LOANS (BEING SENIOR IN A BORROWER'S CAPITAL
STRUCTURE AND SECURED BY SPECIFIC COLLATERAL), THE INVESTMENT ADVISER
BELIEVES, BASED ON ITS EXPERIENCE, THAT THESE RATINGS DO NOT NECESSARILY
REFLECT THE TRUE RISK OF LOSS OF PRINCIPAL OR INTEREST.
Eaton Vance was one of the first investment advisers to manage a portfolio of
Senior Loans in a publicly offered investment company, and has done so
continuously since 1989. Senior Loan assets under management by Eaton Vance
exceed $8 billion.
NO MARKET PRESENTLY EXISTS FOR THE FUND'S SHARES AND IT IS NOT CURRENTLY
ANTICIPATED THAT A SECONDARY MARKET WILL DEVELOP FOR THEM. Fund shares are not
readily marketable. To provide investor liquidity, the Fund ordinarily will
make each JANUARY, APRIL, JULY and OCTOBER an offer to repurchase between 5%
and 25% of the Fund's outstanding shares at net asset value. See "Repurchase
Offers" at page 14.
(continued on the following page)
The Securities and Exchange Commission has not approved or disapproved
these securities or determined whether this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
INFORMATION IN THIS PROSPECTUS
Page Page
- --------------------------------------------------------------------------------
Shareholder and Fund Expenses 3 Valuing Shares 13
Financial Highlights 4 Purchasing Shares 13
Performance Information 5 Repurchase Offers 14
Investment Objective, Policies Shareholder Account Features 15
and Risks 6 Distributions and Taxes 16
Organization of the Fund 11
Management of the Fund 12
- --------------------------------------------------------------------------------
PROSPECTUS DATED MAY 3, 1999
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND AND THE SERVICES
AVAILABLE TO SHAREHOLDERS. PLEASE SAVE IT FOR REFERENCE.
<PAGE>
(continued from cover page)
Public Offering Information: Per Share(1) Total(2)
- --------------------------------------------------------------------------------
Public Offering Price $9.98 $399,600,000
Sales Loads None None
Proceeds to the Fund $9.98 $399,600,000
- ----------
(1) The shares are offered on a best efforts basis at a price equal to their
net asset value, which on April 16, 1999 was $9.98 per share.
(2) Amounts are cumulative since the Fund commenced operations.
- --------------------------------------------------------------------------------
A Statement of Additional Information dated May 3, 1999 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated herein by reference. The
Table of Contents of the Statement of Additional Information appears
immediately below. The Statement of Additional Information is available
without charge from the Fund, 255 State Street, Boston, MA 02109 (telephone
(800) 225-6265) (web site: www.eatonvance.com). The Statement of Additional
Information is also available along with other Fund-related materials at the
SEC's internet web set (http://www.sec.gov).
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Page Page
- --------------------------------------------------------------------------------
Investment Policies and Risks 2 Shareholder Account Information 11
Investment Restrictions 4 Portfolio Trading 12
Management and Organization 5 Taxes 13
Control Persons and Principal Performance 13
Holders of Shares 8 Financial Statements 15
Investment Advisory and Appendix A: Corporate Bond
Administrative Services 9 Ratings a-1
Other Service Providers 10
- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF
SOME OR ALL OF THE PRINCIPAL INVESTMENT.
<PAGE>
SHAREHOLDER AND FUND EXPENSES
FEES AND EXPENSES. These tables describe the fees and expenses that you may
pay if you buy and hold shares.
Shareholder Fees (fees paid directly from your investment)
---------------------------------------------------------------------------
Maximum Sales Charge (as a percentage of offering price) None
Dividend Reinvestment Fees None
Exchange Fee None
Maximum Early Withdrawal Charge None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
---------------------------------------------------------------------------
Investment Advisory Fee (after fee waiver)* 0.43%
Interest Payments on Borrowed Funds 0.01%
Other Expenses 0.76%
Total Annual Fund Operating Expenses (after fee waiver)* 1.20%
*Eaton Vance will reimburse the Fund to the extent Total Annual Fund
Operating Expenses exceeds 1.20% of average daily net assets.
NOTES: The Fund invests exclusively in Senior Debt Portfolio (the
"Portfolio"). See "Organization of the Fund". The table and Example summarize
the aggregate expenses of the Fund and the Portfolio and are designed to help
investors understand the costs and expenses they will bear, directly or
indirectly, by investing in the Fund. Information for the Fund is based on its
expenses for the most recent fiscal year, adjusted for a revised advisory fee
waiver and administration fee and the establishment of a service fee. If the
distribution fee of certain funds investing in the Portfolio were reduced or
eliminated, the investment advisory fee waiver would be reduced and part of
the administration and service fees would be waived to result in total
expenses in the same aggregate amount. It is possible that the Trustees of the
Fund or Portfolio could reduce or eliminate the advisory fee waiver even if
the distribution fee of such other funds remained the same, which would
increase Fund expenses. If no advisory fee waiver existed, the Investment
Advisory Fee would be .95% and Total Annual Fund Operating Expenses would be
approximately 1.72%. Only the Independent Trustees of the Fund and Portfolio
can reduce or eliminate fee waivers.
EXAMPLE. This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other investment companies. The Example
assumes that you invest $1,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year and that the operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
$12 $38 $66 $145
<PAGE>
FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the audited
financial statements that appear in the Fund's annual report to shareholders.
The Fund's financial statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, as experts in accounting and
auditing. The financial statements and the independent auditors' report are
incorporated by reference into the Statement of Additional Information.
Further information regarding the performance of the Fund is contained in its
annual report to shareholders which may be obtained without charge by
contacting the principal underwriter.
For the Period Ended
December 31, 1998(1)(2)
- --------------------------------------------------------------------------------
Net asset value -- beginning of period $10.000
-------
Income (loss) from operations
Net investment income $ 0.531
Net realized and unrealized loss (0.002)
-------
Total income from operations $ 0.529
-------
Less distributions
From net investment income $(0.531)
In excess of net investment income (0.008)
-------
Total distributions $(0.539)
-------
Net asset value -- end of period $ 9.990
=======
Total Return(3) 5.41%
Ratios/Supplemental Data+
Net assets, end of period (000's omitted) $57,273
Ratios (As a percentage of average daily net assets):
Net operating expenses(4) 1.40%+
Net interest expense(4) 0.01%+
Net investment income 6.60%+
+ The operating expenses of the Fund reflect an allocation of expenses to the
Administrator. Had such action not been taken, the ratios and net investment
income per share would have been as follows:
Ratios (As a percentage of average daily net assets):
Operating expenses(4) 1.57%+
Interest expense(4) 0.01%+
Net investment income 6.43%+
Net investment income per share $ 0.517
Portfolio Turnover of the Portfolio 56%
+ Annualized.
(1) For the period from the start of business, March 20, 1998 to December 31,
1998.
(2) Net investment income per share was computed using average shares
outstanding.
(3) Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed reinvested at the
net asset value on the reinvestment date. Total return is not computed on an
annualized basis.
(4) Includes the Fund's share of the Portfolio's allocated expenses.
<PAGE>
PERFORMANCE INFORMATION
The following bar chart and table provide information about the Fund's
performance including a comparison of the Fund's performance to the
performance of a representative index of tradable, senior, secured, U.S.
dollar-denominated leveraged loans. Although past performance is no guarantee
of future results, this performance information demonstrates the risk that the
value of your investment will change. The bar chart provides the annual total
returns for the Fund for the period March 20, 1998 through December 31, 1998,
and the annual total returns for another investment company that invests in
the Portfolio for the period prior to March 20, 1998. The predecessor total
return has not been adjusted to reflect differences in operating expenses
between the Fund and such other investment company. If such adjustments were
made, the performance would have been higher.
1990 9.6%
1991 7.8%
1992 6.2%
1993 5.3%
1994 6.1%
1995 8.1%
1996 6.8%
1997 7.0%
1998 6.6%
The Fund's highest quarterly total return was 2.5% for the quarter ended
December 31, 1994, and its lowest quarterly return was 0.7% for the quarter
ended March 31, 1993.
Average Annual Total Returns as of One Five Life of
December 31, 1998 Year Years Fund
- -------------------------------------------------------------------------------
Fund Shares 6.6% 6.9% 7.1%
Donaldson, Lufkin & Jenrette Leveraged
Loan Index 5.6% 8.2% N/A
The performance shown above for the period prior to March 20, 1998, is the
performance of another investment company that invests in the Portfolio (not
adjusted for differences in the Fund expenses). The Donaldson, Lufkin &
Jenrette Leveraged Loan Index (the "DLJ Index") is a representative index of
tradable, senior, secured, U.S. dollar-denominated leveraged loans. Investors
cannot invest directly in an index. Source: Donaldson, Lufkin & Jenrette. The
DLJ Index commenced in January 1992.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
Eaton Vance Advisers Senior Floating-Rate Fund'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 ("Senior Loans"). The Fund currently seeks to
achieve its objective by investing its assets in the Senior Debt Portfolio
(the "Portfolio"), a separate closed-end, non-diversified investment company
with the same investment objective as the Fund. There is no assurance that the
Fund's objective will be achieved. An investment in shares of the Fund is not
a complete investment program.
Senior Loans are made to corporations, partnerships and other business
entities ("Borrowers") which operate in various industries and geographical
regions. Senior Loans pay interest at rates which are redetermined
periodically on the basis of a floating base lending rate plus a premium.
Senior Loans hold the most senior position in the capital structure of the
Borrower, are secured with specific collateral (discussed below) and will have
a claim on the assets of the Borrower that is senior to that of subordinated
debt, preferred stock and common stock of the Borrower. Investment in floating
rate instruments is expected to minimize changes in the underlying principal
value of Senior Loans, and therefore the Fund's net asset value, resulting
from changes in market interest rates. Nevertheless, the Fund's net asset
value and distribution rate will vary, and may be affected by several factors,
including changes in the credit quality of the Borrowers underlying Senior
Loans. Some Borrowers default on their Senior Loan payments. The Portfolio
attempts to manage these risks through portfolio diversification and ongoing
analysis and monitoring of Borrowers.
The Portfolio's investment adviser is Boston Management and Research (the
"Investment Adviser" or "BMR"), a wholly-owned subsidiary of Eaton Vance
Management ("Eaton Vance"), and Eaton Vance is the administrator (the
"Administrator") of the Fund. The offices of the Investment Adviser and the
Administrator are located at 255 State Street, Boston, MA 02109.
GENERAL COMPOSITION OF THE PORTFOLIO
In normal market conditions, at least 80% of the Portfolio's total assets will
be invested in interests in Senior Loans (either as an original Lender or as a
purchaser of an Assignment or Participation, each as defined below) of
domestic or foreign Borrowers (so long as foreign loans are U.S. dollar-
denominated and payments of interest and repayments of principal are required
to be made in U.S. dollars). 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 loan interests that are not fully secured ("Unsecured Loans"). If
BMR determines that market conditions temporarily warrant a defensive
investment policy, the Portfolio may invest up to 100% of its assets in cash
and high quality, short-term debt securities. While temporarily invested, the
Portfolio may not achieve its investment objective.
It is anticipated that the proceeds of the Senior Loans in which the Portfolio
will acquire interests primarily will be used to finance leveraged buyouts,
recapitalizations, mergers, acquisitions, stock repurchases, and, to a lesser
extent, to finance internal growth and for other corporate purposes of
Borrowers. Senior Loans have the most senior position in a Borrower's capital
structure, although some Senior Loans may hold an equal ranking with other
senior securities of the Borrower. The capital structure of a Borrower may
include Senior Loans, senior and junior subordinated debt, preferred stock and
common stock issued by the Borrower, typically in descending order of
seniority with respect to claims on the Borrower's assets (discussed below).
Senior Loans are secured by specific collateral.
In order to borrow money pursuant to a Senior Loan, a Borrower will
frequently, for the term of the Senior Loan, pledge collateral, including but
not limited to, (i) working capital assets, such as accounts receivable and
inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. In the case of Senior 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 certain instances, a Senior Loan may be secured only by stock in the
Borrower or its subsidiaries. Collateral may consist of assets that may not be
readily liquidated, and there is no assurance that the liquidation of such
assets would satisfy fully a Borrower's obligations under a Senior Loan. The
Portfolio will not invest in a Senior Loan unless, at the time of investment,
BMR determines that the value of the collateral equals or exceeds the
aggregate outstanding principal amount of the Senior Loan.
The Portfolio is not subject to any restrictions with respect to the maturity
of Senior Loans held in its portfolio. Senior Loans typically have a stated
term of between five and nine years, and have rates of interest which
typically are redetermined either daily, monthly, quarterly or semi-annually.
Senior Loans generally pay interest at rates which are redetermined
periodically by reference to a base lending rate, plus a premium. These base
lending rates generally are the prime rate offered by one or more major United
States banks (the "Prime Rate"), the London Inter-Bank Offered Rate ("LIBOR"),
the certificate of deposit ("CD") rate or other base lending rates used by
commercial lenders. Longer interest rate reset periods generally increase
fluctuations in the Fund's net asset value as a result of changes in market
interest rates. The Senior Loans held by the Portfolio will have a dollar-
weighted average period until the next interest rate adjustment of
approximately 90 days or less. As a result, as short-term interest rates
increase, interest payable to the Portfolio from its investments in Senior
Loans should increase, and as short-term interest rates decrease, interest
payable to the Portfolio from its investments in Senior Loans should decrease.
The Portfolio may utilize certain investment practices to, among other things,
shorten the effective interest rate redetermination period of Senior Loans in
its portfolio. In the experience of BMR over the last decade, because of
prepayments the average life of Senior Loans has been two to three years. As
of April 16, 1999, the Portfolio had a dollar weighted average period to
adjustment of approximately 50 days.
The Portfolio may purchase and retain in its portfolio a Senior Loan where the
Borrower has 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 debt restructuring. Such
investments may provide opportunities for enhanced income as well as capital
appreciation. At times, in connection with the restructuring of a Senior Loan
either outside of bankruptcy court or in the context of bankruptcy court
proceedings, the Portfolio may determine or be required to accept equity
securities or junior debt securities in exchange for all or a portion of a
Senior Loan.
The Fund and the Portfolio have adopted certain fundamental investment
restrictions set forth in the Statement of Additional Information which may
not be changed unless authorized by a shareholder and an interestholder vote,
respectively. Except for such restrictions, the investment objective and
policies of the Fund and the Portfolio may be changed by the Trustees of the
Fund and the Portfolio without obtaining the approval of Fund shareholders.
CERTAIN CHARACTERISTICS OF SENIOR LOANS
A Senior Loan 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
("Lenders"). The Agent typically administers and enforces the Senior Loan on
behalf of the other Lenders in the syndicate. In addition, an institution,
typically but not always the Agent, holds any collateral on behalf of the
Lenders.
Senior Loans include senior secured floating rate loans and institutionally
traded senior secured floating rate debt obligations issued by an asset-backed
pool, and interests therein. Loan interests generally take the form of direct
interests acquired during a primary distribution and may also take the form of
participation interests in, assignments of, or novations of a Senior 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 who have made loans or are members of a lending
syndicate or from other holders of loan interests.
The Portfolio may purchase "Assignments" from Lenders. The purchase of an
Assignment typically succeeds to all the rights and obligations under the Loan
Agreement of the assigning Lender and becomes a Lender under the Loan
Agreement with the same rights and obligations as the assigning Lender.
Assignments may, however, be arranged through private negotiations between
potential assignees and potential assignors, and the rights and obligations
acquired by the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.
The Portfolio also may invest without limit in "Participations".
Participations by the Portfolio in a Lender's portion of a Senior Loan
typically will result in the Portfolio having a contractual relationship only
with such Lender, not with the Borrower. As a result, the Portfolio may have
the right to receive payments of principal, interest and any fees to which it
is entitled only from the Lender selling the Participation and only upon
receipt by such Lender of such payments from the Borrower. In connection with
purchasing Participations, the Portfolio generally will have no right to
enforce compliance by the Borrower with the terms of the loan agreement, nor
any rights with respect to any funds acquired by other Lenders through set-off
against the Borrower and the Portfolio may not directly benefit from the
collateral supporting the Senior Loan in which it has purchased the
Participation. As a result, the Portfolio may assume the credit risk of both
the Borrower and the Lender selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Portfolio may be treated
as a general creditor of such Lender. The selling Lenders and other persons
interpositioned between such Lenders and the Portfolio with respect to such
Participations will likely conduct their principal business activities in the
banking, finance and financial services industries. Persons engaged in such
industries may be more susceptible to, among other things, fluctuations in
interest rates, changes in the Federal Open Market Committee's monetary
policy, governmental regulations concerning such industries and concerning
capital raising activities generally and fluctuations in the financial markets
generally.
The Portfolio will only acquire Participations if the Lender selling the
Participation, and any other persons interpositioned between the Portfolio and
the Lender, at the time of investment has outstanding debt or deposit
obligations rated investment grade (BBB or A-3 or higher by Standard & Poor's
Ratings Group ("S&P") or Baa or P-3 or higher by Moody's Investors Service,
Inc. ("Moody's") or comparably rated by another nationally recognized rating
agency (each a "Rating Agency")) or determined by BMR to be of comparable
quality. Securities rated Baa by Moody's have speculative characteristics.
Similarly, the Portfolio will purchase an Assignment or Participation or act
as a Lender with respect to a syndicated Senior Loan only where the Agent with
respect to such Senior Loan at the time of investment has outstanding debt or
deposit obligations rated investment grade or determined by BMR to be of
comparable quality. Long-term debt rated BBB by S&P is regarded by S&P as
having adequate capacity to pay interest and repay principal and debt rated
Baa by Moody's is regarded by Moody's as a medium grade obligations, i.e., it
is neither highly protected nor poorly secured. Commercial paper rated A-3 by
S&P indicates that S&P believes such obligations exhibit adequate protection
parameters but that adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation and issues of commercial paper rated
P-3 by Moody's are considered by Moody's to have an acceptable ability for
repayment of short-term debt obligations but the effect of industry
characteristics and market compositions may be more pronounced. A description
of the corporate bond ratings of Moody's and S&P is included as Appendix A to
the Statement of Additional Information.
OTHER INVESTMENTS
As stated above, 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
Unsecured Loans. 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 Senior 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 asset value 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 investments in Senior Loans. All of such
other debt instruments will be investment grade. Downgraded securities may be
retained by the Portfolio.
The Portfolio may acquire warrants and other equity securities as part of a
unit combining a Senior Loan and equity securities of a Borrower or its
affiliates. The acquisition of such equity securities will only be incidental
to the Portfolio's purchase of a Senior Loan. The Portfolio may also acquire
equity securities issued in exchange for a Senior 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 Senior Loan or
would otherwise be consistent with the Portfolio's investment policies.
BORROWINGS AND 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. BMR expects that the Portfolio will do so to remain fully
invested after accounting for anticipated cash infusions from the prepayment
of Senior Loans and the sale of Fund shares, and cash outflows from the
fulfillment of settlement obligations (including the funding of revolving
Senior Loans) and the repurchase of Fund shares. 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.
Successful use of a leveraging strategy depends on BMR's ability to predict
correctly interest rates and market movements. Historically, the Portfolio has
not used leverage for investment purposes. There is no assurance that a
leveraging strategy will be successful.
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 and
repurchasing shares. The Portfolio's inability to make distributions as a
result of these requirements could cause the Fund to fail to qualify as a
regulated investment company and/or subject the Fund to income or excise
taxes. 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. The Portfolio may 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. Any such borrowing or debt issuance is a
speculative technique in that it will magnify any changes to the Fund's net
asset value. The Portfolio may also borrow for temporary, extraordinary or
emergency purposes.
ADDITIONAL RISK CONSIDERATIONS
The Fund is subject to numerous investment risks. The Fund is not a money
market fund and its net asset value will fluctuate, reflecting any
fluctuations in the Portfolio's net asset value.
CREDIT RISK. Senior Loans, like other corporate debt obligations, are subject
to the risk of non-payment of scheduled interest or principal. Such non-
payment would result in a reduction of income to the Portfolio, a reduction in
the value of the Senior Loan experiencing non-payment and a potential decrease
in the net asset value of the Portfolio. Although, with respect to Senior
Loans, the Portfolio generally will invest only in Senior Loans that BMR
believes are secured by specific collateral the value of which equals or
exceeds the principal amount of the Senior Loan at the time of initial
investment, there can be no assurance that the liquidation of any such
collateral would satisfy the Borrower's obligation in the event of non-payment
of scheduled interest or principal payments, or that such collateral could be
readily liquidated. In the event of bankruptcy of a Borrower, the Portfolio
could experience delays or limitations with respect to its ability to realize
the benefits of the collateral securing a Senior Loan. To the extent that a
Senior Loan is collateralized by stock in the Borrower or its subsidiaries,
such stock may lose all or substantially all of its value in the event of
bankruptcy of a Borrower. The Agent generally is responsible for determining
that the Lenders have obtained a perfected security interest in the collateral
securing the Senior Loan. Some Senior Loans in which the Portfolio may invest
are subject to the risk that a court, pursuant to fraudulent conveyance or
other similar laws, could subordinate such Senior Loans to presently existing
or future indebtedness of the Borrower or take other action detrimental to the
holders of Senior Loans, such as the Portfolio, including, in certain
circumstances, invalidating such Senior Loans.
Senior Loans in which the Portfolio will invest often are not rated by a
Rating Agency, will not be registered with the SEC or any state securities
commission and will not be listed on any national securities exchange.
Although the Portfolio will generally have access to financial and other
information made available to the Lenders in connection with Senior Loans, the
amount of public information available with respect to Senior Loans will
generally be less extensive than that available for rated, registered or
exchange listed securities. In evaluating the creditworthiness of Borrowers,
BMR will consider, and may rely in part, on analyses performed by others.
Borrowers may have outstanding debt obligations that are rated below
investment grade by a Rating Agency. More recently, such Rating Agencies have
begun rating Senior Loans and many Senior Loans have been assigned a rating
below investment grade. The Portfolio will invest in such Senior Loans. Debt
securities which are unsecured and rated below investment grade are viewed by
the Rating Agencies as having speculative characteristics and are commonly
known as "junk bonds". A description of the ratings of corporate bonds by
Moody's and S&P is included as Appendix A to the Statement of Additional
Information. Because of the protective features of Senior Loans (being senior
and secured by specific collateral), BMR believes, based on its experience,
that these ratings do not necessarily reflect the true risk of loss of
principal or interest on a Senior Loan. For example, BMR believes that Senior
Loans tend to have more favorable loss recovery rates as compared to most
other types of below investment grade debt obligations. Accordingly, BMR
generally does not take ratings into account when determining whether to
invest in a Senior Loan and, in any event, does not view ratings as a
determinative factor in its investment decisions. As a result, the Portfolio
is more dependent on BMR's credit analysis abilities than a fund that invests
in other types of debt securities.
Securities rated below investment grade or unrated securities of comparable
quality ("lower quality securities") are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations (credit
risk) and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). The prices of lower quality
securities are also more likely to react to real or perceived developments
affecting market and credit risk than are prices of investment grade quality
securities ("higher quality securities"), which react primarily to movements
in the general level of interest rates. Senior Loans issued in connection with
mergers, acquisitions, leveraged buy-outs, recapitalizations and other highly
leveraged transactions, pose a higher risk of default or bankruptcy of the
issuer than other higher quality debt securities, particularly during periods
of deteriorating economic conditions and contraction in the credit markets.
The investments in the Portfolio will have speculative characteristics, and
companies obligated by such debt are generally more vulnerable in an economic
downturn.
INTEREST RATE RISK. When interest rates decline, the value of a portfolio
invested in fixed-rate obligations can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio invested in fixed-rate
obligations can be expected to decline. Although the Fund's net asset value
will vary, the Fund's management expects the Portfolio's policy of acquiring
interests in floating rate Senior Loans to minimize fluctuations in net asset
value as a result of changes in market interest rates. However, because
floating rates on Senior Loans only reset periodically, changes in prevailing
interest rates can be expected to cause some fluctuation in the Fund's net
asset value. Similarly, a sudden and significant increase in market interest
rates may cause a decline in the Fund's net asset value.
FOREIGN SECURITIES. Although the Portfolio will only invest in U.S. dollar-
denominated income securities, the Portfolio may invest in Senior Loans and
other debt securities of non-U.S. issuers. Investment in securities of non-
U.S. issuers involves special risks, including that non-U.S. issuers may be
subject to less rigorous accounting and reporting requirements than U.S.
issuers, less rigorous regulatory requirements, differing legal systems and
laws relating to creditors' rights, the potential inability to enforce legal
judgments and the potential for political, social and economic adversity. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in the payment or
delivery of securities and interest or in the recovery of assets held abroad)
and expenses not present in the settlement of domestic investments. There may
be a possibility of nationalization or expropriation of assets, imposition of
currency exchange controls, confiscatory taxation, political or financial
instability, armed conflict and diplomatic developments which could affect the
value of the Portfolio's investments in certain foreign countries. The
Portfolio will not invest more than 35% of its net assets in foreign Senior
Loans, and has no current intention to invest more than 10%.
LIQUIDITY RISK. Senior Loans, at present, are generally not readily
marketable and are subject to restrictions on resale. Interests in Senior
Loans generally are not listed on any national securities exchange or
automated quotation system and no active trading market may exist for many of
the Senior Loans in which the Portfolio will invest. Where a secondary market
exists, such market may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods. Senior Loans are thus
relatively illiquid, which illiquidity may impair the Portfolio's ability to
realize the full value of its assets in the event of a voluntary or
involuntary liquidation of such assets. The Portfolio has no limitation on the
amount of its assets which may be invested in securities which are not readily
marketable or are subject to restrictions on resale. The substantial portion
of the Portfolio's assets invested in Senior Loan interests may restrict the
ability of the Portfolio to dispose of its investments in a timely fashion and
at a fair price, and could result in capital losses. The risks associated with
illiquidity are particularly acute in situations where the Fund's operations
require cash, such as when the Fund conducts repurchase offers for its shares,
and may result in borrowings to meet short-term cash requirements. The
Trustees of the Fund will consider the liquidity of the Portfolio's
investments in determining the amount of quarterly repurchase offers.
REGULATORY CHANGES. To the extent that legislation or state or federal
regulators that regulate certain financial institutions impose additional
requirements or restrictions with respect to the ability of such institutions
to make loans, particularly in connection with highly leveraged transactions,
the availability of Senior Loans for investment by the Portfolio may be
adversely affected. Further, such legislation or regulation could depress the
market value of Senior Loans held by the Portfolio.
NON-DIVERSIFICATION. The Fund and the Portfolio have each registered as a
"non-diversified" investment company under the Investment Company Act of 1940,
as amended (the "1940 Act") so that, subject to its investment restrictions
and in connection with federal income tax rules, with respect to 50% of its
total assets, the Portfolio will be able to invest more than 5% of the value
of its assets in the obligations of any single issuer, including Senior Loans
of a single Borrower or single Lender, although it has no current intention to
do so. The Portfolio will not invest more than 10% of the value of its assets
in securities (including interests in Senior Loans) of any single Borrower.
Moreover, the Portfolio may invest more than 10% (but not more than 25%) of
its total assets in Senior Loan interests for which the same intermediate
participant is interposed between the Portfolio and the Borrower. To the
extent the Portfolio invests a relatively high percentage of its assets in
obligations of a limited number of issuers, the Portfolio will be more
susceptible than a more widely diversified investment company to any single
corporate, economic, political or regulatory occurrence.
SPECIAL INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices to seek to
enhance income or reduce investment risk, but has no current intention to do
so.
INTEREST RATE AND OTHER HEDGING TRANSACTIONS. The Portfolio may purchase or
sell derivative instruments (which are instruments that derive their value
from another instrument, security or index) to seek to hedge against
fluctuations in securities prices or interest rates. The Portfolio's
transactions in derivative instruments may include the purchase or sale of
futures contracts on securities, securities indices or other indices, other
financial instruments; options on futures contracts; exchange-traded and over-
the-counter options on securities or indices; index-linked securities; and
interest rate swaps. The Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to: unanticipated adverse changes
in securities prices, interest rates, the other financial instruments' prices;
the inability to close out a position; default by the counterparty; imperfect
correlation between a position and the desired hedge; tax constraints on
closing out positions; and portfolio management constraints on securities
subject to such transactions. The loss on derivative instruments (other than
purchased options) may substantially exceed the Portfolio's initial investment
in these instruments. In addition, the Portfolio may lose the entire premium
paid for purchased options that expire before they can be profitably exercised
by the Portfolio. Transaction costs will be incurred in opening and closing
positions in derivative instruments. There can be no assurance that BMR's use
of derivative instruments will be advantageous to the Portfolio.
The Portfolio may use interest rate swaps for risk management purposes and not
as a speculative investment and would 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 interests, e.g., an exchange of fixed
rate payments for floating rate payments. The use of interest rate swaps is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. BMR has had limited experience 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 were never used.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers of other institutional borrowers.
During the existence of a loan, the Portfolio will continue to receive the
equivalent of the interest paid by the issuer on the securities loaned and
will also receive a fee, or all or a portion of the interest on investment of
the collateral, if any. However, the Portfolio may pay lending fees to such
borrowers. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of
the securities fails financially. However, the loans will be made only to
organizations deemed by BMR to be of good standing and when, in the judgement
of the Portfolio's management, the consideration which can be earned from
securities loans of this type, net of administrative expenses and any finders
or other fees, justifies the attendant risk. The financial condition of the
borrower will be monitored by BMR on an ongoing basis. The value of the
securities loaned will not exceed 30% of the Portfolio's total assets.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
with member banks of the Federal Reserve System or primary dealers in U.S.
Government securities. Under a repurchase agreement, the Portfolio buys
securities at one price and simultaneously promises to sell back those
securities 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. 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.
ORGANIZATION OF THE FUND
The Fund is organized as a business trust established under Massachusetts law
pursuant to a Declaration of Trust dated February, 19, 1998, as amended, and
is registered under the 1940 Act. The Trustees of the Fund are responsible for
the overall management and supervision of its affairs. The Fund currently has
one class of shares of beneficial interest which may be issued in an unlimited
number by the Trustees. Each share represents an equal proportionate
beneficial interest in the Fund and, when issued and outstanding, the shares
are fully paid and nonassessable by the Fund and may be repurchased only as
described under "Repurchase Offers". There are no annual meetings of
shareholders, but special meetings may be held as required by law to elect or
remove Trustees and consider certain other matters. Because the Fund invests
in the Portfolio, it may be asked to vote on certain Portfolio matters (like
changes in certain Portfolio investment restrictions). When necessary, the
Fund will hold a meeting of its shareholders to consider the Portfolio matter
and then vote its interest in the Portfolio in proportion to the votes cast by
its shareholders. The Fund can withdraw from the Portfolio at any time.
Shareholders are entitled to one vote for each full share held. Fractional
shares may be voted proportionately. Shares have no preemptive or conversion
rights and are freely transferable. In the event of liquidation of the Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to shareholders.
The Fund's Declaration of Trust may not be amended without the affirmative
vote of a majority of the outstanding shares of the Fund (or such greater vote
as is described below under "Anti-Takeover Provisions"), except that the
Declaration of Trust may be amended by the Trustees to change the name of the
Fund, to make such other changes as do not have a materially adverse effect on
the rights or interests of shareholders and to conform the Declaration of
Trust to applicable federal laws or regulations. The Fund may be terminated
(i) upon the merger or consolidation with or sale of the Fund's assets to
another company, if approved by the holders of two-thirds of the outstanding
shares of the Fund, except that if the Trustees recommend such transaction,
the approval by vote of the holders of a majority of the outstanding shares
will be sufficient, or (ii) upon liquidation and distribution of the assets of
the Fund, if approved by the holders of two-thirds of the Fund's outstanding
shares, except that if the Trustees recommend such transaction, the approval
by vote of the holders of a majority of the outstanding shares will be
sufficient. If not so terminated, the Fund may continue indefinitely.
ANTI-TAKEOVER PROVISIONS. The Fund presently has certain anti-takeover
provisions in its Declaration of Trust which are intended to limit, and could
have the effect of limiting, the ability of other entities or persons to
acquire control of the Fund, to cause it to engage in certain transactions or
to modify its structure. As indicated above, a two-thirds vote is required for
certain transactions. The affirmative vote or consent of the holders of two-
thirds of the shares of the Fund (a greater vote than that required by the
1940 Act and, in some cases, greater than the required vote applicable to
business corporations under state law) is required to authorize the conversion
of the Fund from a closed-end to an open-end investment company (except that
if the Trustees recommend such conversion, the approval by vote of the holders
of a majority of the outstanding shares will be sufficient) and the
affirmative vote or consent of the holders of three-quarters of the shares of
the Fund is required to authorize any of the following transactions (the
"Transactions"): (i) merger or consolidation of the Fund with or into any
corporation; (ii) issuance of any securities of the Fund to any person or
entity for cash; (iii) sale, lease or exchange of all or any substantial part
of the assets of the Fund to any entity or person (except assets having an
aggregate fair market value of less than $1,000,000 or assets sold in the
ordinary course of business); or (iv) sale, lease or exchange to the Fund, in
exchange for securities of the Fund, of any assets of any entity or person
(except assets having an aggregate fair market value of less than $1,000,000)
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of 5% or more of the outstanding shares of
the Fund. However, such vote or consent will not be required with respect to
the Transactions if the Board of Trustees under certain conditions approves
the Transaction. Further, the provisions of the Fund's Declaration of Trust
relating to conversion of the Fund to an open-end investment company, the
Transactions, the merger or consolidation with or sale of the Fund's assets,
and the liquidation and distribution of the Fund's assets may not be amended
without the affirmative vote or consent of two-thirds of the outstanding
shares of the Fund. Reference is made to the Declaration of Trust of the Fund,
on file with the SEC, for the full text of these provisions.
The foregoing provisions will make more difficult the conversion of the Fund
to an open-end investment company and the consummation of the Transactions
without the Trustees' approval, and could have the effect of depriving
shareholders of an opportunity to sell their shares at a premium over
prevailing market prices, in the event that a secondary market for the Fund
shares does develop, by discouraging a third party from seeking to obtain
control of the Fund in a tender offer or similar transaction. However, the
Board of Trustees has considered these anti-takeover provisions and believes
that they are in the shareholders' best interests and benefit shareholders by
providing the advantage of potentially requiring persons seeking control of
the Fund to negotiate with its management regarding the price to be paid.
MASTER-FEEDER STRUCTURE. The Trustees of the Fund have considered the
advantages and disadvantages of investing the assets of the Fund in the
Portfolio, as well as the advantages and disadvantages of the two-tier format.
The Trustees believe that the structure may offer opportunities for growth in
the assets of the Portfolio, and may afford the potential for economies of
scale for the Fund. The other investors in the Portfolio will affect its
liquidity, and, therefore, could reduce the amount of the Fund's repurchase
offers.
MANAGEMENT OF THE FUND
The Portfolio engages BMR, a wholly-owned subsidiary of Eaton Vance, to manage
the investments of the Portfolio and provide related office facilities,
administrative services and personnel. In return, the Portfolio has agreed to
pay BMR 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. Gross assets of
the Portfolio are 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.
The Trustees of the Portfolio have voted to accept a waiver of BMR's
compensation effective May 1, 1999 so that the aggregate advisory fees paid by
the Portfolio under the advisory agreement during any fiscal year or portion
thereof after the Fund begins to invest its assets in the Portfolio will not
exceed on an annual basis: (a) 0.50% of average daily gross assets of the
Portfolio up to and including $1 billion; (b) 0.45% of average daily gross
assets in excess of $1 billion up to and including $2 billion; (c) 0.40% of
average daily gross assets in excess of $2 billion up to and including $7
billion; (d) 0.3875% of average daily gross assets in excess of $7 billion up
to and including $10 billion; and (e) 0.375% of average daily gross assets in
excess of $10 billion. The Portfolio paid BMR advisory fees equivalent to
0.88% of the Portfolio's average daily gross assets for the fiscal year ended
December 31, 1998, when a different waiver schedule was in effect. The waiver
of BMR's advisory fees will be eliminated or reduced in the event that the
distribution fee of certain funds investing in the Portfolio is eliminated or
reduced. To offset the increase in advisory fees that will result, Eaton Vance
will waive its part of its administration fee and service fee, provided
however, the Fund continues to qualify as a regulated investment company for
federal income tax purposes. Such actions by Eaton Vance are expected to be
sufficient to prevent an increase in the overall operating expenses borne by
the Fund.
Eaton Vance, its affiliates and predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. BMR or Eaton Vance currently serves as the investment
adviser to investment companies and various individual and institutional
clients with combined assets under management of approximately $36 billion, of
which approximately $34 billion is in investment companies, including over $8
billion in the Portfolio and an investment company that invests primarily in
Senior Loans. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp., a
publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The principal underwriter is a wholly-owned subsidiary of Eaton
Vance.
Scott H. Page and Payson F. Swaffield, Vice Presidents of Eaton Vance and BMR,
have acted as co-portfolio managers of the Portfolio since August 1, 1996.
Messrs. Page and Swaffield have been employees of Eaton Vance for more than 5
years.
The Fund, the Portfolio and BMR have adopted Codes of Ethics relating to
personal securities transactions. The Codes permit Eaton Vance personnel to
invest in securities (including securities that may be purchased or held by
the Portfolio) for their own accounts, subject to certain pre-clearance,
reporting and other restrictions and procedures contained in such Codes.
Eaton Vance serves as administrator, providing the Fund with administrative
services and related office facilities. In return, the Fund is authorized to
pay Eaton Vance a fee in the amount of 0.35% of the average daily gross assets
of the Portfolio attributable to the Fund. For the fiscal year ended December
31, 1998, the amount of administration fees paid by the Fund to Eaton Vance
was equal to 0.15% (annually) of the average daily gross assets of the
Portfolio attributable to the Fund.
Like most investment companies, the Fund and the Portfolio rely on computers
in conducting daily business and processing information. There is a concern
that on January 1, 2000 some computer programs will be unable to recognize the
new year and as a consequence computer malfunctions will occur. The
Administrator is taking steps that it believes are reasonably designed to
address this potential problem and to obtain satisfactory assurance from other
service providers to the Fund and Portfolio that they are also taking steps to
address the issue. There can, however, be no assurance that these steps will
be sufficient to avoid any adverse impact on the Fund, the Portfolio or
shareholders. The Year 2000 concern may also adversely impact issuers of
Senior Loans held by the Portfolio and the markets in which Senior Loans are
traded. The foregoing statement is subject to the Year 2000 Information and
Readiness Disclosure Act.
VALUING SHARES
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by the Fund's custodian, Investors Bank & Trust Company
("IBT") (as agent for the Fund) in the manner authorized by the Trustees of
the Fund. The Fund will be closed for business and will not price its shares
on the following business holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value is computed by dividing
the value of the Fund's total assets, less its liabilities by the number of
shares outstanding. Because the Fund invests its assets in an interest in the
Portfolio, the Fund's net asset value will reflect the value of its interest
in the Portfolio (which, in turn, reflects the underlying value of the
Portfolio's assets and liabilities).
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by determining the value of the Portfolio's total assets (the Senior
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 Senior Loans are not actively traded in a public market, BMR,
following procedures established by the Portfolio's Trustees, will value the
Senior Loans held by the Portfolio at fair value. In valuing a Senior Loan,
BMR will consider relevant factors, data, and information, including: (i) the
characteristics of and fundamental analytical data relating to the Senior
Loan, including the cost, size, current interest rate, period until next
interest rate reset, maturity and base lending rate of the Senior Loan, 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 Senior Loan, including price quotations (if considered reliable) for and
trading in the Senior Loan and interests in similar Senior Loans and the
market environment and investor attitudes towards the Senior Loan and
interests in similar Senior Loans; (v) the reputation and financial condition
of the Agent and any intermediate participants in the Senior Loan; and (vi)
general economic and market conditions affecting the fair value of the Senior
Loan.
PURCHASING SHARES
The Fund is engaged in a continuous public offering of its shares at net asset
value without an initial sales charge. Fund shares are offered to clients of
financial intermediaries who charge an advisory, management, consulting or
similar fee for their services, accounts affiliated with those financial
intermediaries; investment clients of Eaton Vance; certain persons affiliated
with Eaton Vance; and certain Eaton Vance and fund service providers. Your
initial investment must be at least $5,000. Subsequent investments may be made
at any time. The investment minimum is waived for persons affiliated with
Eaton Vance and its service providers.
The Fund's shares may be made available through financial service firms who
have a service agreement with the Fund, which are also investment dealers. The
Fund has approved the acceptance of purchase and repurchase request orders
effective as of the time of their receipt by certain authorized financial
intermediaries.
You may purchase Fund shares through your investment dealer or by mailing the
account application form included in this prospectus to the transfer agent
(see back cover for address). The price of Fund shares is the net asset value.
The principal underwriter will make payments from its own assets to certain
investment dealers who have sales agreements with the principal underwriter.
You may purchase Fund shares for cash through investment dealers. If you
purchase shares through an investment dealer (which includes brokers, dealers
and other financial institutions), that dealer may charge you a fee for
executing the purchase for you. The Fund may suspend the sale of its shares at
any time and any purchase order may be refused.
After your initial investment, additional investments of $50 or more may be
made at any time by sending a check payable to the order of the Fund or the
transfer agent directly to the transfer agent (see back cover for address).
Please include your name and account number and the name of the Fund with each
investment.
The Portfolio intends to 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 Fund shares 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 Fund shares
for their own investment portfolio.
SERVICE PLAN. Effective May 1, 1999, the Fund pays service fees pursuant to a
Service Plan designed to meet the service fee requirements of the sales charge
rule of the National Association of Securities Dealers, Inc., as if such rule
were applicable. The Fund currently makes service fee payments for personal
services and/or the maintenance of shareholder accounts to the principal
underwriter, investment dealers and other persons in amounts not exceeding
.25% of the Fund's average daily net assets for any fiscal year.
REPURCHASE OFFERS
As a matter of fundamental policy which cannot be changed without shareholder
approval, the Fund is required in the months of JANUARY, APRIL, JULY and
OCTOBER to offer to repurchase at least 5% and up to 25% of its shares. Under
normal market conditions, the Trustees expect to authorize a 25% offer. (The
Fund may also make a discretionary repurchase offer once every two years but
has no current intention to do so.) The repurchase price will be the net asset
value determined not more than 14 days following the repurchase request
deadline and payment for all shares repurchased pursuant to these offers will
be made not later than 7 days after the repurchase pricing date. Under normal
circumstances, it is expected that net asset value will be determined on the
repurchase request deadline and payment for shares tendered will be made
within 3 business days after such deadline. During the period the offer to
repurchase is open shareholders may obtain the current net asset value by
calling 1-800-225-6265, option 2 (fund #532).
At least 21 days prior to the repurchase request deadline the Fund will mail
written notice to each shareholder setting forth the number of shares the Fund
will repurchase, the repurchase request deadline and other terms of the offer
to repurchase, and the procedures for shareholders to follow to request a
repurchase. THE REPURCHASE REQUEST DEADLINE WILL BE STRICTLY OBSERVED.
Shareholders and financial intermediaries failing to submit repurchase
requests in good order (as set forth in the repurchase form) by such deadline
will be unable to liquidate shares until a subsequent repurchase offer.
If more shares are tendered for repurchase than the Fund has offered to
repurchase, the Board may, but is not obligated, to increase the number of
shares to be repurchased by 2% of the Fund shares outstanding; if there are
still more shares tendered than are offered for repurchase, shares will be
repurchased on a pro-rata basis. Thus, shareholders may be unable to liquidate
all or a given percentage of their shares and some shareholders may tender
more shares than they wish to have repurchased in order to ensure repurchase
of at least a specific number of shares. Shareholders may withdraw shares
tendered for repurchase at any time prior to the repurchase request deadline.
Repurchase offers and the need to fund repurchase obligations may affect the
ability of the Portfolio to be fully invested, which may reduce returns.
Moreover, diminution in the size of the Portfolio through repurchases without
offsetting new sales may result in untimely sales of portfolio securities and
a higher expense ratio, and may limit the ability of the Portfolio to
participate in new investment opportunities. Repurchases resulting in
portfolio turnover will result in additional expenses being borne by the
Portfolio. The Portfolio may borrow to meet repurchase obligations which
entails certain risks and costs. See "Borrowings and Leverage". The Portfolio
may also sell portfolio securities to meet repurchase obligations which, in
certain circumstances, may adversely affect the market for Senior Loans and
reduce the Fund's value.
The Fund may suspend or postpone a repurchase offer only: (A) if making or
effecting the repurchase offer would cause the Fund to lose its status as a
regulated investment company under the Internal Revenue Code; (B) for any
period during which the Exchange or any market in which the securities owned
by the Portfolio are principally traded is closed, other than customary
weekend and holiday closings, or during which trading in such market is
restricted; (C) for any period during which an emergency exists as a result of
which disposal by the Portfolio of securities owned by it is not reasonably
practicable, or during which it is not reasonably practicable for the
Portfolio or Fund fairly to determine the value of its net assets; or (D) for
such other periods as the SEC may by order permit for the protection of
shareholders of the Fund.
SHAREHOLDER ACCOUNT FEATURES
ONCE YOU PURCHASE SHARES, THE TRANSFER AGENT ESTABLISHES A LIFETIME INVESTING
ACCOUNT FOR YOU. SHARE CERTIFICATES ARE ISSUED ONLY ON REQUEST.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following
ways:
o FULL REINVEST OPTION Dividends and capital gains are reinvested in
additional shares. This option will be assigned
if you do not specify an option.
o PARTIAL REINVEST OPTION Dividends are paid in cash and capital gains
are reinvested in additional shares.
o CASH OPTION Dividends and capital gains are paid in cash.
o EXCHANGE OPTION Dividends and/or capital gains are reinvested
in additional shares of another Eaton Vance
fund chosen by you. Before selecting this
option, you must obtain a prospectus of the
other fund and consider its objectives and
policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
o Quarterly repurchase offer notices.
o Annual and Semi-Annual Reports, containing performance information and
financial statements.
o Periodic account statements, showing recent activity and total share
balance.
o Form 1099 and tax information needed to prepare your income tax returns.
o Proxy materials, in the event a shareholder vote is required.
o Special notices about significant events affecting your Fund.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Once the $5,000
minimum investment has been made, cash investments of $50 or more may be made
automatically each month or quarter from the shareholder's bank account.
TAX-SHELTERED RETIREMENT PLANS: Fund shares are available for purchase in
connection with certain tax-sheltered retirement plans. Call 1-800-225-6265
for information. Distributions will be invested in additional shares for all
tax-sheltered retirement plans.
EXCHANGES: The Fund makes available to shareholders who are submitting shares
for repurchase the privilege or exchanging Fund shares for Class A shares of
one or more open-end investment companies in the Eaton Vance Group of Fund,
Eaton Vance Cash Management Fund, Eaton Vance Income Fund of Boston or Eaton
Vance Tax Free Reserves. Any such exchange will be made on the basis of the
net asset value per share of each fund at the time of exchange. Exchange
offers are available only in states where shares of the fund acquired may
legally be sold. Shares of certain other funds advised or administered by
Eaton Vance may be exchanged for shares of the Fund at net asset value per
share, but subject to any restrictions or qualifications set forth in the
current prospectus of any such fund. For the purposes of calculating the early
withdrawal or contingent deferred sales charge applicable to shares acquired
in an exchange, the schedule of charges, if any, applicable to the shares at
the time of purchase will apply and the purchase of shares is deemed to have
occurred at the time of the original purchase of the exchanged shares.
The Fund may implement an automatic exchange program whereby shareholders can
elect to have a fixed amount invested in another Eaton Vance Fund quarterly.
Such investments would be subject to the Fund's repurchase offer limitations,
but shareholders would not be required to submit a repurchase offer request
each quarter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange. Each exchange must involve
shares which have a net asset value of at least $1,000. This privilege may not
be used for "market timing". If an account (or group of accounts) makes more
than two round-trip exchanges within twelve months, it will be deemed to be
market timing. The exchange privilege may be terminated for market timing
accounts. The exchange privilege may be changed or discontinued without
penalty. Shareholders will be given sixty (60) days' notice prior to any
termination or material amendment of the exchange privilege. An exchange may
result in a taxable gain or loss.
TELEPHONE TRANSACTIONS. The transfer agent and the principal underwriter have
procedures in place (such as verifying personal account information) to
authenticate telephone instructions. As long as the transfer agent and
principal underwriter follow these procedures, they will not be responsible
for unauthorized telephone transactions and you bear the risk of possible loss
resulting from such transactions. Telephone instructions are tape recorded.
ACCOUNT QUESTIONS. If you have any questions about your account or the
services available, please call Eaton Vance Shareholder Services at
1-800-225-6265, or write to the transfer agent (see back cover for address).
DISTRIBUTIONS AND TAXES
The Fund declares daily and distributes monthly substantially all of its net
investment income and distributes annually (usually in December) its net
realized short-term and long-term capital gains, if any. Daily distribution
crediting will commence on the business day after collected funds for the
purchase of Fund shares are available at the transfer agent, even if orders to
purchase shares had been placed with investment dealers. Investors who
purchase shares shortly before the record date of a capital gain distribution
will pay the full price for the shares and then receive some portion of the
price back as a taxable distribution. The Fund's distributions will not
qualify for the dividends-received deduction for corporations. The Fund
expects distributions to consist primarily of net investment income which,
along with short-term capital gain distributions, are taxable to shareholders
as ordinary income, whether paid in cash or additional shares of the Fund.
Certain distributions paid in January will be taxable to shareholders as if
received on December 31 of the prior year.
The repurchase of Fund shares may result in a taxable gain or loss to the
redeeming shareholder, depending on whether the amount received is greater or
less than such shareholder's adjusted tax basis in the shares. An exchange of
shares of the Fund for shares of another Eaton Vance fund generally will have
similar tax consequences. Different tax consequences may apply for tendering
and nontendering shareholders in connection with a repurchase offer, and these
consequences will be disclosed in the related offering documents. For example,
it is possible that repurchases not treated as an exchange for federal income
tax purposes might result in different tax characterizations of the
distributions to tendering shareholders and in deemed distributions to non-
tendering shareholders.
Taxable distributions to certain shareholders, including those who have not
provided the Fund with their correct taxpayer identification number and other
required certifications, may be subject to "backup" federal tax withholding of
31%.
The foregoing only summarizes some of the federal tax consequences to
shareholders of investing in shares of the Fund, and does not address special
tax rules applicable to certain types of investors, such as corporate and
foreign investors, individual retirement accounts and other retirement plans.
Investors should consult their tax advisers.
<PAGE>
[Logo] Investing
EATON VANCE for the
- ----------- 21st
Century(R)
- --------------------------------------------------------------------------------
EATON VANCE
ADVISERS SENIOR
FLOATING-RATE
FUND
PROSPECTUS
MAY 3, 1999
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF SENIOR DEBT PORTFOLIO
Boston Management and Research, 255 State Street, Boston, MA 02109
ADMINISTRATOR OF EATON VANCE INSTITUTIONAL SENIOR FLOATING-RATE FUND
Eaton Vance Management, 255 State Street, Boston, MA 02109
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 255 State Street, Boston, MA 02109
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
ASFRP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
May 3, 1999
EATON VANCE ADVISERS SENIOR
FLOATING-RATE FUND
255 State Street
Boston, Massachusetts 02109
(800) 225-6265
This Statement of Additional Information ("SAI") provides general
information about the Fund and the Portfolio. Capitalized terms used in this
SAI and not otherwise defined have the meanings given to them in the
prospectus. This SAI contains additional information about:
Page
Investment Policies and Risks ......................................... 2
Investment Restrictions ............................................... 4
Management and Organization ........................................... 5
Control Persons and Principal Holders of Shares ....................... 8
Investment Advisory and Administrative Services ....................... 9
Other Service Providers ............................................... 10
Shareholder Account Information ....................................... 11
Portfolio Trading ..................................................... 12
Taxes ................................................................. 13
Performance ........................................................... 13
Financial Statements .................................................. 15
Appendix A: Ratings of Corporate Bonds ................................ a-1
THIS IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY
3, 1999, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY
REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH
MAY BE OBTAINED BY CALLING 1-800-225-6265.
<PAGE>
INVESTMENT POLICIES AND RISKS
LENDING FEES. In the process of buying, selling and holding Senior Loans 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 Senior Loan
it may receive a facility fee and when it sells a Senior Loan 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
Senior Loan. In certain circumstances, the Portfolio may receive a prepayment
penalty fee upon the prepayment of a Senior 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 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
Senior 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 Senior Loan in the form of a
Participation, the agreement between the buyer and seller may limit the rights
of the holder 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 the
Participation 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 Senior 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 Senior 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 Senior Loan usually
does, but is often not obligated to, notify holders of Senior Loans 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 Senior Loan, may
give the Borrower an opportunity to provide additional collateral or may seek
other protection for the benefit of the participants in the Senior 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 Senior Loan and other fees paid on a continuing
basis. With respect to Senior Loans 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 Senior Loans. 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 Senior Loan, or suffer a loss of principal and/or
interest. In situations involving intermediate participants similar risks may
arise.
PREPAYMENTS. Senior Loans will usually require, in addition to scheduled
payments of interest and principal, the prepayment of the Senior Loan from
free cash flow, as defined above. The degree to which Borrowers prepay Senior
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 Senior Loan with the proceeds from the prepayment of the
former. Prepayments generally will not materially affect the Fund's
performance because the Portfolio should be able to reinvest prepayments in
other Senior Loans that have similar or identical yields and because receipt
of such fees may mitigate any adverse impact on the Fund's yield.
OTHER INFORMATION REGARDING SENIOR LOANS. 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 Senior Loans to or
acquire them from the Portfolio or may be intermediate participants with
respect to Senior Loans in which the Portfolio owns interests. Such banks may
also act as Agents for Senior Loans held by the Portfolio.
The Portfolio may acquire interests in Senior Loans which 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 Senior Loans 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.
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 Senior Loan to be
undercollateralized or unsecured. In most credit agreements there is no formal
requirement to pledge additional collateral. In addition, the Portfolio may
invest in Senior Loans guaranteed by, or fully secured by assets of,
shareholders or owners, even if the Senior 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 Senior Loan. On occasions when such
stock cannot be pledged, the Senior 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 Senior 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 Senior Loans and, indirectly, Senior Loans.
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 Senior 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 Senior 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 Senior 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.
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
Senior Loan 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 Senior Loan because of subsequent changes in
interest rates. This would protect the Portfolio from a decline in the value
of the Senior Loan 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 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 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. Since interest rate swaps are individually negotiated, the
Portfolio expects to achieve an acceptable degree of correlation between its
rights to receive interest on Senior Loans and its rights and obligations to
receive and pay interest pursuant to interest rate swaps.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this SAI means the lesser of (a) 67% of the shares of the Fund present
or represented by proxy at a meeting if the holders of more than 50% of the
outstanding shares are present or represented at the meeting or (b) more than
50% of the outstanding shares of the Fund. As a matter of fundamental policy
the Fund may not:
(1) Borrow money, except as permitted by the Investment Company Act of
1940;
(2) Issue senior securities, as defined in the Investment Company Act of
1940, other than (i) preferred shares which immediately after issuance will
have asset coverage of at least 200%, (ii) indebtedness which immediately
after issuance will have asset coverage of at least 300%, or (iii) the
borrowings permitted by investment restriction (1) above;
(3) Purchase securities on margin (but the Fund 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 Fund 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 Fund'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 Fund 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 restriction (6), the Fund 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 restriction (6) above, the Fund will construe the phrase "more than
25%" to be "25% or more".
The Fund, as a matter of fundamental policy which may not be changed
without a vote of a majority of its outstanding voting securities and in
accord with the provisions of Rule 23c-3 (as amended from time to time) under
the 1940 Act, shall make repurchase offers for its common shares of beneficial
interest at periodic intervals of three months between repurchase request
deadlines, such deadlines to be dates in the months of January, April, July
and October determined by the Board of Trustees with the repurchase pricing
date and time being not later than the close of business fourteen days after
the repurchase request deadline (or the next business day if the 14th day is
not a business day).
The Portfolio, as a matter of fundamental policy which may not be changed
without a vote of a majority of its outstanding voting securities and in
accord with the provisions of Rule 23c-3 (as amended from time to time) under
the 1940 Act, shall make repurchase offers for its interests at periodic
intervals of three months to each holder of its interests between repurchase
request deadlines, such deadlines to be dates determined by the Board of
Trustees in the months when each such holder conducts its periodic repurchases
with the repurchase pricing date and time being not later than the close of
business fourteen days after the repurchase request deadline (or the next
business day if the 14th day is not a business day).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its investable assets in another management investment company
(a Portfolio) with substantially the same investment objective, policies and
restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have each adopted the following nonfundamental
investment policy which may be changed with respect to the Fund by the
Trustees of the Fund without approval by the Fund's shareholders or may be
changed with respect to the Portfolio by the Trustees of the Portfolio without
the approval of the Fund or the Portfolio's other investors. As a matter of
nonfundamental policy, neither the Fund nor the Portfolio may 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.
Whenever an investment policy or investment restriction set forth in the
prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset or describes a policy regarding
quality standards, such percentage limitation or standard shall be determined
immediately after and as a result of the Fund's or 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 Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Notwithstanding the foregoing, under normal market
conditions the Fund and 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 Fund and the Portfolio must always be in compliance with
the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Fund are responsible for the overall
management and supervision of the Fund's affairs. The Trustees and officers of
the Fund and the Portfolio are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is 255 State Street, Boston, Massachusetts 02109. Those
Trustees who are "interested persons" of the Fund or the Portfolio as defined
in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (39), Trustee
Chief Executive Officer of National Financial Partners (a financial services
company) (since April, 1999). President and Chief Operating Officer of John
A. Levin & Co. (a registered investment advisor) (July, 1997 to April, 1999)
and a Director of Baker, Fentress & Company which owns John A. Levin & Co.
(July, 1997 to April, 1999). Formerly Executive Vice President of Smith
Barney Mutual Funds (from July, 1994 to June, 1997). Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 1301 Avenue of the Americas, New York, New York 10019
JAMES B. HAWKES (57), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); and Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (68), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (64), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cendant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (63), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director of UAM Funds (mutual funds).
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (41), Trustee
Professor of Law, Georgetown University Law Center. Elected Trustee October
30, 1998. Trustee of various investment companies managed by Eaton Vance or
BMR since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JOHN L. THORNDIKE (72), Trustee
Former Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR. Mr. Thorndike will be
retiring from the Board of Trustees in July, 1999.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (69), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
SCOTT H. PAGE (39), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
PAYSON F. SWAFFIELD (42), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (54), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR.
JANET E. SANDERS (63), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (35), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
Messrs. Hayes (Chairman), Dwight and Reamer and Ms. Stout are members of
the Special Committee of the Board of Trustees of the Fund and 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 Fund and the Portfolio,
including investment advisory (Portfolio only), administrative, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance or its affiliates has any actual or
potential conflict of interest with the Fund, the Portfolio or investors
therein.
The Nominating Committee of the Board of Trustees of the Fund and the
Portfolio is comprised of the Trustees (except Mr. Thorndike) who are not
"interested persons" as that term is defined under the 1940 Act
("noninterested Trustees"). 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 and Ms. Bibliowicz are members of
the Audit Committee of the Board of Trustees of the Fund and of the Portfolio.
The Audit Committee's functions include making recommendations to the Trustees
regarding the selection of the independent certified public accountants, and
reviewing 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, transfer
agent and dividend disbursing agent of the Fund and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' 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. Neither the Portfolio nor the Fund has 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.
The fees and expenses of the noninterested Trustees of the Fund and of the
Portfolio are paid by the Fund and the Portfolio, respectively. (The Trustees
of the Fund and the Portfolio who are members of the Eaton Vance organization
receive no compensation from the Fund or the Portfolio). During the fiscal
year ended December 31, 1998, the noninterested Trustees of the Portfolio
earned the compensation set forth below in their capacities as Trustees from
the Portfolio, and the funds in the Eaton Vance fund complex(1).
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM FUND AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
------------ -------------- ------------------
Jessica M. Bibliowicz(8) $183 $1,156 $ 33,334
Donald R. Dwight ........ 10 6,608(2) 160,000(5)
Samuel L. Hayes, III .... 10 6,787(3) 170,000(6)
Norton H. Reamer ........ 9 6,439 160,000
Lynn A Stout(8) ......... 193 1,619 33,333
John L. Thorndike ....... 9 6,568(4) 160,000(7)
Jack L. Treynor ......... 631 7,224 170,000
- ------------
(1) As of January 1, 1999 the Eaton Vance fund complex consists of 97
registered investment companies or series thereof.
(2) Includes $3,426 of deferred compensation.
(3) Includes $2,237 of deferred compensation.
(4) Includes $6,513 of deferred compensation.
(5) Includes $60,000 of deferred compensation.
(6) Includes $41,523 of deferred compensation.
(7) Includes $119,091 of deferred compensation.
(8) Ms. Bibliowicz and Ms. Stout were elected Trustees on October 30, 1998.
ORGANIZATION. The Fund is an organization of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such
a trust may, under certain circumstances, be held personally liable as
partners for the obligations of the trust. The Fund's Declaration of Trust, as
amended, contains an express disclaimer of shareholder liability in connection
with the Fund property or the acts, obligations or affairs of the Fund. The
Declaration of Trust also provides for indemnification out of the Fund
property of any shareholder held personally liable for the claims and
liabilities to which a shareholder may become subject by reason of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself is unable to meet its obligations. The Fund has been advised
by its counsel that the risk of any shareholder incurring any liability for
the obligations of the Fund is remote.
The Fund's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to the Fund or
its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Voting rights are not cumulative, which
means that the holders of more than 50% of the shares voting for the election
of Trustees can elect 100% of the Trustees and, in such event, the holders of
the remaining less than 50% of the shares voting on the matter will not be
able to elect any Trustees. As permitted by Massachusetts law, there will
normally be no meetings of Fund shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders. In such an event, the
Trustees of the Fund then in office will call a shareholders' meeting for the
election of Trustees. Except for the foregoing circumstances, the Trustees
shall continue to hold office and may appoint successor Trustees.
The Fund's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Fund's
custodian or by votes cast at a meeting called for that purpose. The by-laws
further provide that the Trustees of the Fund shall promptly call a meeting of
the shareholders for the purpose of voting upon a question of removal of any
such Trustee or Trustees when requested in writing so to do by the record
holders of not less than 10 per centum of the outstanding shares.
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. In
accordance with the Declaration of Trust of the Portfolio, there will normally
be no meetings of the investors for the purpose of electing Trustees unless
and until such time as less than a majority of the Trustees of the Portfolio
holding office have been elected by investors. In such an event the Trustees
of the Portfolio then in office will call an investors' meeting for the
election of Trustees. Except for the foregoing circumstances and unless
removed by action of the investors in accordance with the Portfolio's
Declaration of Trust, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding
interests have removed him from that office either by a written declaration
filed with the Portfolio's custodian or by votes cast at a meeting called for
that purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The Portfolio's Declaration of Trust, as amended, provides that the Fund
and other entities permitted to invest in the Portfolio (e.g., other U.S. and
foreign investment companies, and common and commingled trust funds) will each
be liable for all obligations of the Portfolio. However, the risk of the Fund
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. Accordingly, the Trustees of the
Fund believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
Whenever the Fund as an investor in a Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. The Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If Senior
Loans and noncash assets are distributed, the Fund could incur brokerage, tax
or other charges in converting the securities to cash. In addition, the
distribution in kind may result in a less diversified portfolio of investments
or adversely affect the liquidity of the Fund. Notwithstanding the above,
there are other means for meeting shareholder redemption requests, such as
borrowing.
The Fund may withdraw (completely redeem) all its assets from the
Portfolio at any time if the Board of Trustees of the Trust determines that it
is in the best interest of the Fund to do so. In the event the Fund withdraws
all of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets (or the assets of another investor in the Portfolio) from the
Portfolio.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SHARES
As of March 31, 1999, the Trustees and officers of the Fund, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As
of March 31, 1999, Charles Schwab & Co., Inc., San Francisco, CA, was the
record owner of approximately 33.1% of the outstanding shares, which were held
on behalf of their customers who are the beneficial owners of such shares, and
as to which they had voting power under certain limited circumstances. To the
knowledge of the Fund, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
INVESTMENT ADVISORY SERVICES. 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 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.
For the fiscal years ended December 31, 1998, 1997 and 1996, the Portfolio
paid BMR advisory fees aggregating $44,484,347, $31,751,900 and $21,643,760,
respectively, equivalent to 0.88%, 0.89% and 0.91%, respectively of the
Portfolio's average daily gross assets. As at December 31, 1998, the gross
assets of the Portfolio were $6,430,333,682. BMR's fee waiver described in the
prospectus is indefinite, but could be removed or changed upon agreement of
BMR and the Portfolio's Board of Trustees at any time.
ADMINISTRATIVE SERVICES. Under the Administration Agreement, Eaton Vance is
responsible for managing the business affairs of the Fund, subject to the
supervision of the Fund's Board of Trustees. Eaton Vance will furnish to the
Fund all office facilities, equipment and personnel for administering the
affairs of the Fund. Eaton Vance will compensate all Trustees and officers of
the Fund who are members of the Eaton Vance organization and who render
executive and administrative services to the Fund, and will also compensate
all other Eaton Vance personnel who perform management and administrative
services for the Fund. Eaton Vance's administrative services include
recordkeeping, preparation and filing of documents required to comply with
federal and state securities laws, supervising the activities of the Fund's
custodian and transfer agent, providing assistance in connection with the
Trustees' and shareholders' meetings, providing services in connection with
quarterly repurchase offers and other administrative services necessary to
conduct the Fund's business.
For the period from the start of business, March 20, 1998, to the fiscal
year ended December 31, 1998, the Fund paid Eaton Vance an administration fee
of $28,789, which was equal to 0.15% (annualized) of the average daily gross
assets of the Portfolio attributable to the Fund for such period.
The Portfolio and the Fund, as the case may be, will each be responsible
for all of its respective costs and expenses not expressly stated to be
payable by BMR under the Advisory Agreement with the Portfolio, by Eaton Vance
under the Administration Agreement with the Fund or by the principal
underwriter under its Distribution Agreement with the Fund. Such costs and
expenses to be borne by the Portfolio and the Fund, as the case may be,
include, without limitation: custody and transfer agency fees and expenses,
including those incurred for determining net asset value and keeping
accounting books and records; expenses of pricing and valuation services; the
cost of share certificates; membership dues in investment company
organizations; expenses of acquiring, holding and disposing of securities and
other investments; fees and expenses of registering under the securities laws
and governmental fees; expenses of reports to shareholders and investors,
proxy statements and other expenses of shareholders' or investors' meetings;
insurance premiums; printing and mailing expenses; interest, taxes and
corporate fees; legal and accounting expenses; compensation and expenses of
Trustees not affiliated with BMR or Eaton Vance; expenses of conducting
repurchase offers for the purpose of repurchasing Portfolio interests or Fund
shares; and investment advisory and administration fees. The Portfolio and
the Fund will also each bear expenses incurred in connection with any
litigation in which the Portfolio or the Fund, as the case may be, is a party
and any legal obligation to indemnify its respective officers and Trustees
with respect thereto, to the extent not covered by insurance.
The Portfolio's Advisory Agreement continues in effect from year to year
so long as such continuance is approved at least annually (i) by the vote of a
majority of the noninterested Trustees of the Portfolio 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 Fund's Administration Agreement
continues in effect from year to year so long as such continuance is approved
at least annually by the vote of a majority of the Fund's Trustees. Each
agreement may be terminated at any time without penalty on sixty (60) days'
written notice by the Trustees of the Fund or the Portfolio, as the case may
be, BMR or Eaton Vance, as applicable, or by vote of the majority of the
outstanding shares of the Fund or interests of the Portfolio, as the case may
be. Each agreement will terminate automatically in the event of its
assignment. Each agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties to the Fund or the Portfolio under such agreements on
the part of Eaton Vance or BMR, as applicable, Eaton Vance or BMR will not be
liable to the Fund or the Portfolio, as applicable, for any loss incurred, to
the extent not covered by insurance.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business trusts
organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee
of BMR and Eaton Vance. BMR, Eaton Vance and EV are wholly-owned subsidiaries
of Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held
holding company. EVC through its subsidiaries and affiliates engages primarily
in investment management, administration and marketing activities. The
Directors of EVC are James B. Hawkes, Benjamin A. Rowland, Jr., John G.L.
Cabot, John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of the
issued and outstanding shares of Eaton Vance 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,
the Voting Trustees of which are Messrs. Hawkes and Rowland, and Alan R.
Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Duncan W. Richardson, William
M. Steul, and Wharton P. Whitaker (all of whom are officers of Eaton Vance).
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, or officers and Directors of EVC and EV. As indicated
under "Management and Organization", all of the officers of the Fund (as well
as Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance
organization.
SERVICE PLAN. The Fund's Service Plan was approved by the Independent Trustees
of the Fund, who have no direct or indirect financial interest in the Plan,
and by all of the Trustees of the Fund on December 21, 1998.
The principal underwriter will retain the service fee in the first year
(as reimbursement for an initial service fee payment of .25% to investment
dealers at the time of sale) and each quarter thereafter only with respect to
shares that are repurchased. During the fiscal year ended December 31, 1998,
the Fund made no service fee payments under the Plan.
The Plan remains in effect through and including April 28, 2000, and shall
continue in effect indefinitely thereafter for so long as such continuance is
approved at least annually by the vote of both a majority of (i) the Trustees
of the Fund who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Plan Trustees") and (ii) all of the Trustees then in
office cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan. The Plan may not be amended to increase materially the
payments described herein without approval of the shareholders of the Fund,
and all material amendments of the Plan must also be approved by the Trustees
of the Fund in the manner described above. The Plan may be terminated any time
by vote of a majority of the Plan Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. Under the Plan, the President or a
Vice President of the Fund shall provide to the Trustees for their review,
and the Trustees shall review at least quarterly, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
So long as the Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Fund shall be committed to the
discretion of the Trustees who are not such interested persons. The Trustees
have determined that in their judgment there is a reasonable likelihood that
the Plan will benefit the Fund and its shareholders.
OTHER SERVICE PROVIDERS
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street,
Boston, MA 02116, serves as custodian to the Fund and the Portfolio. IBT has
the custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of all the Portfolio's assets, maintains the general
ledger of the Fund and the Portfolio, and computes the daily net asset value
of interests in the Portfolio and the net asset value of shares of the Fund.
In such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Fund and the Portfolio. IBT also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC. EVC and its affiliates
and their officers and employees from time to time have transactions with
various banks, including IBT. 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 Fund or the
Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 125 Summer Street, Boston,
Massachusetts, are the independent accountants of the Fund and the Portfolio,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the SEC.
TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR. First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5120 serves with respect to the
shares as transfer and dividend paying agent and as registrar.
SHAREHOLDER ACCOUNT INFORMATION
CALCULATION OF NET ASSET VALUE. Each investor in the Portfolio, including the
Fund, may add to or reduce its investment in the Portfolio on each day the
Exchange is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (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 repurchase offers) for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed
as a percentage equal to the fraction (i) the numerator of which is the value
of such investor's investment in the Portfolio as of the Portfolio Valuation
Time on the prior Portfolio Business Day plus or minus, as the case may be,
the amount of any additions to or withdrawals from the investor's investment
in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
The Trustees monitor the market liquidity of Senior Loans and may require
use of a pricing service or mark-to-market procedures for some or all of such
holdings in the future, which may result in a change in the Fund's net asset
value per share.
Non-Loan 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 institutional traders. In certain circumstances,
portfolio securities will be valued at the last sale price on the exchange
that is the primary market for such securities, or the average of the last
quoted bid price and asked price for those securities for which the over-the-
counter market is the primary market or for listed securities in which there
were no sales during the day. The value of interest rate swaps will be
determined in accordance with a discounted present value formula and then
confirmed by obtaining a bank quotation.
Short-term obligations which mature in 60 days or less are valued at
amortized cost, if their original term to maturity when acquired by the
Portfolio was 60 days or less, or are valued at amortized cost using their
value on the 61st day prior to maturity, if their original term to maturity
when acquired by the Portfolio was more than 60 days, unless in each case this
is determined not to represent fair value. Repurchase agreements will be
valued by the Portfolio at cost plus accrued interest. Securities for which
there exist no 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.
ELIGIBLE INVESTORS. Fund shares may be sold to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolio; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of investment dealers and bank employees who
refer customers to registered representatives of invetment dealers; to
officers and employees of IBT and the transfer agent; persons associated with
law firms, accounting firms and consulting firms providing services to Eaton
Vance and Eaton Vance funds; and to such persons' spouses, parents, siblings
and children and their beneficial accounts. Such shares may also be issued (1)
in connection with the merger of an investment company or series thereof with
the Fund, (2) to investors making an investment as part of a fixed fee program
whereby an entity unaffiliated with the investment adviser provides multiple
investment services, such as management, brokerage and custody, and (3) to
investment advisors, financial planners or other intermediaries who place
trades for their own accounts or the accounts of their clients and who charge
a management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent. Such shares are also offered to
retirement and deferred compensation plans and trusts used to fund those
plans, including, but not limited to, those defined in Section 401(a), 403(b)
or 457 of the Internal Revenue Code of 1986, as amended (the "Code") and
"rabbi trusts". Fund shares may be sold to any investment advisory, agency,
custodial or trust account managed or administered by Eaton Vance or by any
parent, subsidiary or other affiliate of Eaton Vance. Such shares are offered
to the foregoing persons and in the foregoing situations because either (i)
there is no sales effort involved in the sale of shares or (ii) the investor
is paying a fee (other than the sales charge) to the investment dealer
involved in the sale.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
principal underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the principal underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
PORTFOLIO TRADING
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.
The Portfolio will acquire Senior Loans from major international banks,
selected domestic regional banks, insurance companies, finance companies and
other financial institutions. In selecting financial institutions from which
Senior Loans 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 Senior Loans which they have sold, they
may act as principal or on an agency basis in connection with their sale by
the Portfolio.
Other fixed-income obligations which may be purchased and sold by the
Portfolio are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through broker-dealers or banks acting for their
own account rather than as brokers, or otherwise involve transactions directly
with the issuers of such obligations. 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 paid no brokerage commissions during
its last three fiscal years.
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 years ended December 31, 1997 and 1998 were 81% and 56%, respectively.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order
may not be allocated on a pro rata basis where, for example: (i) consideration
is given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust
and the Portfolio that the benefits from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
TAXES
The Fund is treated as a separate corporation, and intends to qualify each
year as a regulated investment company ("RIC"), under the Internal Revenue
Code of 1986, as amended (the "Code") to avoid federal income tax.
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute a
sufficient amount of its investment company taxable income so as to effect
such qualification. The Fund may also distribute part or all of its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to reduce or avoid any federal income
or excise tax to the Fund.
Because the Fund invests its assets in the Portfolio, the Portfolio
normally must satisfy the applicable source of income and diversification
requirements in order for the Fund to satisfy them, and the Portfolio intends
to do so. For federal income tax purposes, the Portfolio intends to be treated
as a partnership that is not a "publicly traded partnership" and, as a result,
will not be subject to federal income tax. The Fund, as an investor in the
Portfolio, will be required to take into account in determining its federal
income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any cash
distributions from the Portfolio.
The Portfolio will allocate at least annually among its investors,
including the Fund, 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. For purposes of applying the requirements of
the Code regarding qualification as a RIC, the Fund (i) will be deemed to own
its proportionate share of each of the assets of the Portfolio and (ii) will
be entitled to the gross income of the Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires the Fund to
distribute by the end of each calendar year substantially all of its ordinary
income for such year and capital gain net income (for the one-year period
ended on October 31 unless an election is made to use the calendar year), plus
certain other amounts. Under current law, provided that the Fund qualifies as
a RIC and the Portfolio is treated as a partnership for Massachusetts and
federal tax purposes, neither the Fund nor the Portfolio should be liable for
any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
The federal income tax rules governing the taxation of interest rate swaps
are not entirely clear and may require the Fund to treat certain payments
received by the Portfolio under such arrangements as ordinary income and to
amortize such payments under certain circumstances. The Portfolio will limit
its activity in this regard if necessary in order to enable the Fund to
maintain its qualification as a RIC.
Certain investments of the Portfolio may bear original issue discount or
market discount for tax purposes. The Fund will be required to include in
income each year a portion of such original issue discount and may elect to
include in income each year a portion of such market discount. The Portfolio
may have to dispose of investments that it would otherwise have continued to
hold to provide cash to enable the Fund to satisfy its distribution
requirements with respect to such income.
Distributions of net capital gain are taxable to shareholders as long-term
capital gain, whether paid in cash or additional shares of the Fund and
regardless of the length of time Fund shares have been owned by the
shareholder. A loss on the repurchase of shares held for six months or less
may be treated as a long-term capital loss to the extent of any distribution
of net capital gain with respect to such shares.
PERFORMANCE
From time to time, the Fund may quote current yield based on a specific
one-month period. Current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share of the Fund on the last day of the period and annualizing the
resulting figure. Yield will fluctuate from time to time and is not
necessarily representative of future results. Advertisements and
communications to present or prospective shareholders may also cite a total
return for any period. Total return will be calculated by subtracting the net
asset value of a single purchase of shares at a given date from the net asset
value of those shares (assuming reinvestment of distributions) on a subsequent
date. The difference divided by the original net asset value is the total
return. The calculation of the Fund's total return reflects the effect of
compounding inasmuch as all dividends and distributions are assumed to be
reinvested in additional shares of the Fund at net asset value. The Fund may
quote total return for the period prior to commencement of operations which
would reflect the total return of another investment company that invests in
the Portfolio. If the fees or expenses of the Fund or the Portfolio are waived
or reimbursed, the Fund's performance will be higher. Information about the
performance of the Fund or other investments should not be considered a
representation of future Fund performance.
The Fund's current yield for the one-month period ended December 31, 1998
was 6.68%. Yields will fluctuate from time to time and are not necessarily
representative of future results.
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in shares for the periods shown in the
table. Total return prior to the Fund's commencement of operations, March 20,
1998, reflects the total return of another investment company that invests in
the Portfolio. This total return has not been adjusted to reflect differences
in operating expenses between the Fund and such other investment company. If
such adjustments were made, performance would have been higher. Past
performance is no guarantee of future results. Investment return and principal
value will fluctuate and shares, when repurchased, may be worth more or less
than their original cost.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT TOTAL RETURN
PERIOD DATE INVESTMENT ON 12/31/98 CUMULATIVE ANNUALIZED
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Life of the Fund 8/4/89 $1,000 $1,910.47 91.05% 7.12%
5 Years Ended 12/31/98 12/31/93 $1,000 $1,396.31 39.63% 6.90%
1 Year Ended 12/31/98 12/31/97 $1,000 $1,065.75 6.58% 6.58%
</TABLE>
Comparative information about the Fund's current yield, net asset value
and total return, about the Prime Rate, LIBOR and other base lending rates,
may also be included in advertisements and communications of the Fund.
Comparisons may be made to CD rates; money market mutual funds and deposit
accounts; and Treasury bills.
From time to time, advertisements and other material furnished to present
and prospective shareholders may include information on the history of the
Fund's net asset value per share. From inception through December 31, 1998,
the high was $10.01 (on July 7, 1998) and the low was $9.99 (on December 21,
1998). Such materials may include illustrations such as the following chart:
Principal Performance as of December 31, 1998
Mar-98 10.00
10.00
10.00
Jun-98 10.00
10.01
10.01
Sep-98 10.01
10.00
10.00
Dec-98 10.00
Chart shows the Fund's month-end net asset value per share for the life of the
Fund since its inception (3/20/98 to 12/31/98). Past performance is no guarantee
of future results.
Advertisements and communications about the Fund may include a comparison
of loan interests and other corporate debt instruments. These may describe the
credit agreements used in connection with loan interests. Moreover, the
markets for loan interests may be described. The comparison may also be made
to relevant indices and other asset classes.
The Fund's performance may be compared in publications to the performance
of various indices and investments for which reliable data is available, and
to averages, performance rankings or ratings, or other information prepared by
recognized mutual fund statistical services.
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Information in advertisements
and materials furnished to present and prospective investors may also include
quotations (including editorial comments) and statistics concerning investing
in securities, as well as investing in particular types of securities and the
performance of such securities.
Information used in advertisements and in materials provided to present
and prospective shareholders may include descriptions of Eaton Vance and other
Fund and Portfolio service providers, their investment styles, other
investment products, personnel and Fund distribution channels.
BMR was one of the first investment management firms to manage a portfolio
of Senior Loans. BMR has former commercial bank lending officers and
investment bank corporate finance officers dedicated to this investment
discipline. The services of leading law and accounting firms are used as well.
The Fund (or principal underwriter) may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for, the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders, which is incorporated by reference into this SAI. A copy of
the Fund's annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended December 31, 1998, as
previously filed electronically with the Commission (Accession No.
0000950156-99-000208).
APPENDIX A
RATINGS OF CORPORATE BONDS
DESCRIPTION OF CORPORATE BOND RATINGS OF S&P:
AAA -- Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher
rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
BB -- Bonds rated BB have less near-term vulnerability to default than
other speculative grade debt. However, they face major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B -- Bonds rated B have a greater vulnerability to default but presently
have the capacity to meeting interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
CCC -- Bonds rated CCC have a current identifiable vulnerability to
default and are dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
CC -- The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC rating.
C -- The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating.
D -- Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
DESCRIPTION OF BOND RATINGS OF MOODY'S:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally are referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and, therefore, not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca present obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
<PAGE>
[Logo] Investing
EATON VANCE for the
- ----------- 21st
Century(R)
- --------------------------------------------------------------------------------
EATON VANCE ADVISERS SENIOR
FLOATING-RATE FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 3, 1999
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF SENIOR DEBT PORTFOLIO
Boston Management and Research, 255 State Street, Boston, MA 02109
ADMINISTRATOR OF EATON VANCE ADVISERS SENIOR FLOATING-RATE FUND
Eaton Vance Management, 255 State Street, Boston, MA 02109
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 255 State Street, Boston, MA 02109
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
ASFRSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
INCLUDED IN PART A:
Financial highlights for the period from the start of business,
March 20, 1998, to Decem- ber 31, 1998
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORT DATED DECEMBER 31,
1998 (ACCESSION NO. 0000950156-99-208), FILED ELECTRONICALLY PURSUANT
TO SECTION 30(b)(2) OF THE INVESTMENT COMPANY ACT OF 1940.
Financial Statements for EATON VANCE ADVISERS SENIOR FLOATING-RATE
FUND:
Statement of Assets and Liabilities as of December 31, 1998
Statement of Operations for the period from the start of
business, March 20, 1998, to December 31, 1998
Statements of Changes in Net Assets for each of the period from
the start of business, March 20, 1998, to December 31, 1998
Statement of Cash Flows for the period from the start of
business, March 20, 1998, to December 31, 1998
Financial Highlights for the period from the start of business,
March 20, 1998, to December 31, 1998
Notes to Financial Statements
Financial Statements for SENIOR DEBT PORTFOLIO:
Portfolio of Investments as of December 31, 1998
Statement of Assets and Liabilities as of December 31, 1998
Statement of Operations for the year ended December 31, 1998
Statements of Changes in Net Assets for each of the two years
ended December 31, 1998
Statement of Cash Flows for the year ended December 31, 1998
Supplementary Data for the three years ended December 31, 1998
and for the period from the start of business, February 22,
1995, to December 31, 1995
Notes to Financial Statements
Independent Auditors' Report
(2) EXHIBITS:
(a) Agreement and Declaration of Trust dated February 19, 1998 filed as
Exhibit (a) to the Registration Statement under the Securities Act
of 1933 (1933 Act File No. 333-46853) and to the Registration
Statement under the Investment Company Act of 1940 (1940 Act File
No. 811-08671) filed with the Commission on February 25, 1998
(Registration Statement) and incorporated herein by reference.
(b) By-Laws filed as Exhibit (b) to the Registration Statement and
incorporated herein by reference.
(c) Not applicable
(d) Not applicable
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) (a) Distribution Agreement dated February 20, 1998 filed as Exhibit
(h)(a) to the Registration Statement and incorporated herein by
reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc.
and Authorized Dealers filed as Exhibit (6)(b) to
Post-Effective Amendment No. 61 to the Registration Statement
of Eaton Vance Growth Trust (File Nos. 2-22019 and 811-1241)
and incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit
(6)(c) to Post- Effective Amendment No. 59 to the Registration
Statement of Eaton Vance Growth Trust (File Nos. 2-22019 and
811-1241) and incorporated herein by reference.
(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) (a) Custodian Agreement dated February 20, 1998 filed as Exhibit
(j) to the Registration Statement and incorporated herein by
reference.
(b) Amendment to Master Custodian Agreement with Investors Bank &
Trust Company dated December 21, 1998 filed As Exhibit (g)(3)
to the Registration Statement of Eaton Vance Municipals Trust
(File Nos. 33-572, 811-4409) (Accession No.
0000950156-99-000050) and incorporated herein by reference.
(k) (a) Administration Agreement dated February 20, 1998 filed as
Exhibit (k)(a) to the Registration Statement and incorporated
herein by reference.
(b) Amendment dated December 21, 1998 to the Administration
Agreement dated February 20, 1998 filed herewith.
(c) Service Plan adopted December 21, 1998 filed as Exhibit (k)(b)
to the Registration Statement under the Securities Act of 1933
(1933 Act File No. 333-72707) and Amendment No. 2 to the
Registration under the Investment Company Act of 1940 (1940 Act
File No. 811-08671) filed with the Commission on February 22,
1999 (Amendment No. 2) and incorporated herein by reference.
(d) Transfer Agency Agreement as of January 1, 1998 filed as
Exhibit (k)(b) to the Registration Statement and incorporated
herein by reference.
(l) Opinion and Consent of Counsel dated February 22, 1999 filed as
Exhibit (l) to Amendment No. 2 and incorporated herein by
reference.
(m) Not applicable
(n) Consent of Independent Auditors filed herewith.
(o) Not applicable
(p) Letter Agreement with Eaton Vance Management dated February 20,
1998 filed as Exhibit (p) to the Registration Statement and
incorporated herein by reference.
(q) Not applicable
(r) (a) Financial Data Schedule for the fiscal year ended December 31,
1998 for Eaton Vance Advisers Senior Floating-Rate Fund filed
herewith.
(b) Financial Data Schedule for the fiscal year ended December 31,
1998 for Senior Debt Portfolio filed herewith.
(s) (a) Power of Attorney for Eaton Vance Advisers Senior Floating-Rate
Fund dated February 20, 1998 filed as Exhibit (r) to the
Registration Statement and incorporated herein by reference.
(b) Power of Attorney for Eaton Vance Advisers Senior Floating-Rate
Fund dated November 16, 1998 filed as Exhibit (s)(b) to
Amendment No. 2 and incorporated herein by reference.
(t) (a) Power of Attorney for Senior Debt Portfolio dated February 20,
1998 filed as Exhibit (s) to the Registration Statement and
incorporated herein by reference.
(b) Power of Attorney for Senior Debt Portfolio dated December 21,
1998 filed as Exhibit (t)(b) to Amendment No. 2 and
incorporated herein by reference.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the approximate expenses incurred in
connection with the offerings of Registrant:
Registration fees ............................................... $114,489
National Association of Securities Dealers, Inc. Fees ........... $ 40,960
Printing (other than stock certificates) ........................ $ 27,500
Engraving and printing stock certificates ....................... $ 1,000
Fees and expenses of qualification under state securities laws
(excluding fees of counsel) ................................... $ 55,000
Accounting fees and expenses .................................... $ 5,000
Legal fees and expenses ......................................... $ 2,000
--------
Total ................................................... $245,949(1)
========
- ------------
(1) These amounts include expenses for the shares registered pursuant to the
Registration Statement declared effective on March 20, 1998 (File No.
333-46853) and of the Registration Statement which becomes effective on
May 3, 1999 (File No. 333-72707).
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest 1,171
as of
March 31, 1999
ITEM 29. INDEMNIFICATION
The Registrant's By-Laws filed herewith contain provisions limiting the
liability, and providing for indemnification, of the Trustees and officers
under certain circumstances.
Registrant's Trustees and officers are insured under a standard investment
company errors and omissions insurance policy covering loss incurred by reason
of negligent errors and omissions committed in their capacities as such.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Reference is made to: (i) the information set forth under the captions
"Management of the Fund and the Portfolio" in the Prospectus and "Investment
Advisory and Other Services" in the Statement of Additional Information; (ii)
the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934
(File No. 1-8100); and (iii) the Forms ADV of Eaton Vance Management (File No.
801-15930) and Boston Management and Research (File No. 801-43127) filed with
the Commission, all of which are incorporated herein by reference.
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 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
Boston, MA 02116, and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581-5120, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston,
MA 02110. Registrant is informed that all applicable accounts, books and
documents required to be maintained by registered investment advisers are in
the custody and possession of Eaton Vance Management and Boston Management and
Research.
ITEM 32. MANAGEMENT SERVICES
None.
ITEM 33. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the continuous offering of the shares; and.
(4) To send by first class mail or other means designed to ensure
equally prompt delivery, within two business days of receipt of a written
or oral request, any Statement of Additional Information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 486(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston
and Commonwealth of Massachusetts, on the 21st day of April, 1999.
EATON VANCE ADVISERS SENIOR
FLOATING-RATE FUND
By /s/ JAMES B. HAWKES
-----------------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
Principal Executive
/s/ JAMES B. HAWKES Officer April 21, 1999
- ------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 21, 1999
- ------------------------------
JAMES L. O'CONNOR
JESSICA M. BIBLIOWICZ* Trustee April 21, 1999
- ------------------------------
JESSICA M. BIBLIOWICZ
DONALD R. DWIGHT* Trustee April 21, 1999
- ------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 21, 1999
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 21, 1999
- ------------------------------
NORTON H. REAMER
LYNN A. STOUT* Trustee April 21, 1999
- ------------------------------
LYNN A. STOUT
JOHN L. THORNDIKE* Trustee April 21, 1999
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 21, 1999
- ------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- ------------------------------
ALAN R. DYNNER
Attorney-in-fact
<PAGE>
SIGNATURES
Senior Debt Portfolio has duly caused this Amendment to the Registration
Statement on Form N-2 of Eaton Vance Advisers Senior Floating-Rate Fund (File
No. 333-72707) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and Commonwealth of Massachusetts, on the
21st day of April, 1999.
SENIOR DEBT PORTFOLIO
By /s/ JAMES B. HAWKES
-----------------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons
in the capacities on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
Principal Executive
/s/ JAMES B. HAWKES Officer April 21, 1999
- ------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 21, 1999
- ------------------------------
JAMES L. O'CONNOR
JESSICA M. BIBLIOWICZ* Trustee April 21, 1999
- ------------------------------
JESSICA M. BIBLIOWICZ
DONALD R. DWIGHT* Trustee April 21, 1999
- ------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 21, 1999
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 21, 1999
- ------------------------------
NORTON H. REAMER
LYNN A. STOUT* Trustee April 21, 1999
- ------------------------------
LYNN A. STOUT
JOHN L. THORNDIKE* Trustee April 21, 1999
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 21, 1999
- ------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- ------------------------------
ALAN R. DYNNER
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
(k)(b) Amendment dated December 21, 1998 to the
Administration Agreement dated February
20, 1998.
(n) Consent of Independent Auditors
(r)(a) Financial Data Schedule for the fiscal year
ended December 31, 1998 for Eaton
Vance Advisers Senior Floating-Rate Fund
(r)(b) Financial Data Schedule for the fiscal year
ended December 31, 1998 for Senior
Debt Portfolio
EATON VANCE ADVISERS SENIOR FLOATING-RATE FUND
AMENDMENT TO
ADMINISTRATION AGREEMENT
AMENDMENT made this 21st day of December, 1998 to the Administration
Agreement dated February 20, 1998 (the "Agreement"), between Eaton Vance
Advisers Senior Floating-Rate Fund, a Massachusetts business trust (the "Fund"),
and Eaton Vance Management, a Massachusetts business trust (the
"Administrator").
Pursuant to Section 7 of the Agreement, the first paragraph of section 2.
is amended to read as follows:
2. COMPENSATION OF THE ADMINISTRATOR. For the services, payments and
facilities to be furnished hereunder by the Administrator, the Fund shall pay to
the Administrator on the last day of each month a fee not to exceed 7/240 of 1%
of the average daily gross assets of the Fund throughout the month. In
calculating the gross assets of the Fund for this purpose, there shall be
deducted therefrom all liabilities of the Fund except the principal amount of
any indebtedness for money borrowed including debt securities issued by the
Fund. Upon and after the investment by the Fund of substantially all of its
assets in another investment company with substantially the same investment
objective, policies and restrictions as the Fund, the Fund shall pay to the
Administrator on the last day of each month a fee not to exceed 7/240 of 1% of
that portion of the average daily gross assets of such other investment company
throughout the month which is attributable to the Fund's interest in such other
investment company. In calculating the gross assets of such other investment
company, all liabilities of the other investment company shall be deducted
except the principal amount of any indebtedness for money borrowed including
debt securities issued by the other investment company.
EATON VANCE ADVISERS SENIOR EATON VANCE MANAGEMENT
FLOATING-RATE FUND
By /s/ James B. Hawkes By /s/ William M. Steul
--------------------------------- ------------------------------------
President, and not individually Vice President, and not individually
<PAGE>
EXHIBIT (n)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Eaton Vance Advisers
Senior Floating-Rate Fund of our report dated February 12, 1999, relating to
Eaton Vance Advisers Senior Floating-Rate Fund and of our report dated
February 12, 1999 relating to Senior Debt Portfolio, which reports are
included in the Annual Report to shareholders for the year ended December 31,
1998, which is incorporated by reference in the Statement of Additional
Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "Financial
Highlights" in the Prospectus and under the heading "Other Service Providers"
in the Statement of Additional Information of the Registration Statement.
/s/ Deloitte & Touche
- ----------------------
Deloitte & Touche
Boston, Massachusetts
April 21, 1999
[ARTICLE] 6
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] MAR-20-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 56481
[INVESTMENTS-AT-VALUE] 56438
[RECEIVABLES] 1296
[ASSETS-OTHER] 119
[OTHER-ITEMS-ASSETS] 7
[TOTAL-ASSETS] 57860
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 587
[TOTAL-LIABILITIES] 587
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 57333
[SHARES-COMMON-STOCK] 5733
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 18
[ACCUMULATED-NET-GAINS] 1
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (43)
[NET-ASSETS] 57273
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 1541
[EXPENSES-NET] 270
[NET-INVESTMENT-INCOME] 1270
[REALIZED-GAINS-CURRENT] 1
[APPREC-INCREASE-CURRENT] (43)
[NET-CHANGE-FROM-OPS] 1229
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1270
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 18
[NUMBER-OF-SHARES-SOLD] 6830
[NUMBER-OF-SHARES-REDEEMED] 1167
[SHARES-REINVESTED] 69
[NET-CHANGE-IN-ASSETS] 57273
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 303
[AVERAGE-NET-ASSETS] 24493
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.531
[PER-SHARE-GAIN-APPREC] (0.002)
[PER-SHARE-DIVIDEND] 0.531
[PER-SHARE-DISTRIBUTIONS] 0.008
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.99
[EXPENSE-RATIO] 1.41
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 6357118
[INVESTMENTS-AT-VALUE] 6353575
[RECEIVABLES] 51186
[ASSETS-OTHER] 35302
[OTHER-ITEMS-ASSETS] 1157
[TOTAL-ASSETS] 6441220
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 10886
[TOTAL-LIABILITIES] 10886
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6433877
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (3543)
[NET-ASSETS] 6430334
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 404432
[OTHER-INCOME] 3953
[EXPENSES-NET] 47545
[NET-INVESTMENT-INCOME] 360840
[REALIZED-GAINS-CURRENT] 936
[APPREC-INCREASE-CURRENT] (6219)
[NET-CHANGE-FROM-OPS] 355557
[EQUALIZATION] 2039704
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 2395262
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 44484
[INTEREST-EXPENSE] 355
[GROSS-EXPENSE] 47545
[AVERAGE-NET-ASSETS] 5066454
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0.94
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
