<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 1995
1933 ACT FILE NO.
1940 ACT FILE NO. 811-05808
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 14 [X]
(CHECK APPROPRIATE BOX OR BOXES)
EATON VANCE PRIME RATE RESERVES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (617) 482-8260
H. DAY BRIGHAM, JR.
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Registration Statement becomes effective.
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]
----------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED PER UNIT PRICE FEE
- - --------------------------------------------------------------------------------
Shares of
Beneficial Interest 100,000,000 $10.03 $1,003,000,000 $345,862.06
================================================================================
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
----------------
Senior Debt Portfolio has also executed this Registration Statement.
================================================================================
<PAGE>
EATON VANCE PRIME RATE RESERVES
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 Cover Pages
Back Cover Page
3. ............. Fee Table and Synopsis Shareholder and Fund Expenses;
4. ............. Financial Highlights The Fund's Financial
Highlights
5. ............. Plan of Distribution How to Buy Fund Shares; The
Lifetime Investing Account/
Distribution Options
6. ............. Selling Shareholders Not Applicable
7. ............. Use of Proceeds Valuing Fund Shares; How the
Fund and the Portfolio
Invest their Assets
8. ............. General Description of the Organization of the Fund and
Registrant the Portfolio
9. ............. Management Management of the Fund and the
Portfolio
10. ............. Capital Stock, Long-Term Organization of the Fund and
Debt, and Other the Portfolio; Valuing Fund
Securities Shares; Management of the
Fund and the Portfolio
11. ............. Defaults and Arrears on Not Applicable
Senior Securities
12. ............. Legal Proceedings How the Fund and the Portfolio
Invest their Assets
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 General Information and
History History; Other Information
17. ............. Investment Objective and Additional Information about
Policies Investment Policies;
Investment Restrictions
18. ............. Management Trustees and Officers;
Investment Advisory and
Other Services
19. ............. Control Persons and Control Persons and Principal
Principal Holders of Holders of Shares
Securities
20. ............. Investment Advisory and Investment Advisory and Other
Other Services Services
21. ............. Brokerage Allocation and Portfolio Trading
Other Practices
22. ............. Tax Status Taxes
23. ............. Financial Statements Financial Statements
<PAGE>
EATON VANCE
PRIME RATE RESERVES
- - ------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF EATON VANCE PRIME RATE RESERVES (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. THE FUND CURRENTLY SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ITS
ASSETS IN SENIOR DEBT PORTFOLIO (THE "PORTFOLIO"). THE PORTFOLIO HAS THE SAME
INVESTMENT OBJECTIVE AS THE FUND. THE FUND, A CONTINUOUSLY OFFERED, CLOSED-END,
NON-DIVERSIFIED MANAGEMENT INVESTMENT COMPANY, INVESTS DIRECTLY IN THE
PORTFOLIO, A SEPARATE, CLOSED-END, NON- DIVERSIFIED MANAGEMENT INVESTMENT
COMPANY, RATHER THAN, AS WITH AN HISTORICALLY STRUCTURED INVESTMENT COMPANY,
INVESTING DIRECTLY IN AND MANAGING ITS OWN PORTFOLIO OF LOANS AND SECURITIES.
THE PORTFOLIO AND THE FUND MAY BORROW, PRIMARILY IN CONNECTION WITH THE FUND'S
TENDER OFFERS FOR ITS SHARES.
SEE "USE OF LEVERAGE" ON PAGE 9.
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.
This Prospectus sets forth information about the Fund that an investor should
know before investing. It should be read and retained for future reference. A
Statement of Additional Information for the Fund dated November 3, 1995, as
supplemented from time to time, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Table of Contents of the
Statement of Additional Information appears at the end of this Prospectus. The
Statement of Additional Information is available without charge from the Fund's
principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
- - ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO PUBLIC SALES LOAD<F2> PROCEEDS TO FUND
--------------- ------------ ----------------
<S> <C> <C> <C>
Per Share<F1> .............. $10.03 None $10.03
Total ...................... $4,003,000,000 None to be paid by the Fund $4,003,000,000
<FN>
- - ----------
<F1> The shares are offered on a best efforts basis at a price equal to the net
asset value, which, as of October 13, 1995, was $10.03 per share. See "How
to Buy Fund Shares."
<F2> Because Eaton Vance Distributors, Inc. and its affiliates will pay all
sales commissions to authorized firms from their own assets, the net
proceeds of the offering will be available to the Fund for investment in
the Portfolio. See "How to Buy Fund Shares."
</TABLE>
- - -------------------------------------------------------------------------------
EATON VANCE DISTRIBUTORS, INC.
PROSPECTUS DATED NOVEMBER 3, 1995
- - ----------
Copyright (C) 1995. Eaton Vance Management
<PAGE>
The Fund is engaged in a continuous public offering of its shares at net asset
value without an initial sales charge. An early withdrawal charge of up to 3%
will be imposed on most shares held for less than four years which are accepted
for repurchase pursuant to a tender offer, as set forth below. See "How to Buy
Fund Shares" and "Early Withdrawal." The address of the Fund is 24 Federal
Street, Boston, MA 02110 (telephone (800) 225-6265).
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 24 Federal Street, Boston, MA 02110.
NO MARKET PRESENTLY EXISTS FOR THE FUND'S SHARES AND IT IS NOT CURRENTLY
ANTICIPATED THAT A SECONDARY MARKET WILL DEVELOP FOR THE FUND'S SHARES. Fund
shares are not readily marketable. To provide investor liquidity, the Trustees
of the Fund presently intend each quarter to consider the making of a tender
offer to purchase all or a portion of the Fund's shares at net asset value.
See "Tender Offers to Purchase Shares."
TABLE OF CONTENTS
- - ------------------------------------------------------------------------------
PAGE
Shareholder and Fund Expenses ............................................ 3
The Fund's Financial Highlights .......................................... 4
The Fund's Investment Objective .......................................... 6
How the Fund and the Portfolio Invest their Assets
(including "Risk Factors") ............................................. 6
Yield and Performance Information ........................................ 12
Organization of the Fund and the Portfolio ............................... 13
Management of the Fund and the Portfolio ................................. 16
Valuing Fund Shares ...................................................... 17
How to Buy Fund Shares ................................................... 18
Tender Offers to Purchase Shares ......................................... 19
Early Withdrawal ......................................................... 21
Reports to Shareholders .................................................. 22
The Lifetime Investing Account/Distribution Options ...................... 22
Eaton Vance Shareholder Services ......................................... 23
Distribution and Taxes ................................................... 24
Table of Contents of the Statement of Additional Information ............. 25
- - --------------------------------------------------------------------------------
<PAGE>
- - --------------------------------------------------------------------------------
SHAREHOLDER AND FUND EXPENSES(1)
- - --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- - --------------------------------------------------------------------------------
Sales Load (as a percentage of offering price) None
Dividend Reinvestment Fees None
Range of Early Withdrawal Charges Imposed on Tender of Entire Account During
the First Five Years (as a percentage of tender proceeds exclusive of all
reinvestments and capital appreciation in the account)(F2) 3.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of
average net assets attributable to shares of beneficial interest)
------------------------------------------------------------------------------
Investment Advisory Fee(3) 0.95%
Administration Fee(3) 0.25
Interest Payments on Borrowed Funds 0.15
Other Expenses 0.40
-----
Total Annual Expenses 1.80%
=====
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------
An investor would pay the following early withdrawal charge and expenses on a
$1,000 investment, assuming (a) 5% annual return and
(b) tender at the end of each period: $48 $75 $95 $206
An investor would pay the following
expenses on the same investment,
assuming (a) 5% annual return and
(b) no tenders: $18 $55 $95 $206
NOTES:
(1) The purpose of the above table and the Example is to summarize the aggregate
expenses of the Fund and the Portfolio and to assist investors in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. The Trustees Fund believe the aggregate per
share expenses of the Fund and the Portfolio should approximate, and over
time may be less than, the per share expenses which the Fund would incur if
the Fund were instead to retain the services of an investment adviser and
the assets of the Fund were invested directly in the type of securities
being held by the Portfolio. The costs and expenses included in the table
and the Example are estimated based on the Fund's and the Portfolio's
projected fees for the fiscal year ending December 31, 1995, and reflect the
Fund's current policy of investing its assets in the Portfolio. The Example
should not be considered a representation of past or future expenses since
future expenses may be greater or less than those shown. For further
information regarding the expenses of both the Fund and the Portfolio see
"The Fund's Financial Highlights", "Organization of the Fund and the
Portfolio", "Management of the Fund and the Portfolio", "How to Buy Fund
Shares" and "Tender Offers to Purchase Shares".
<PAGE>
(2) No early withdrawal charge is imposed on (a) shares purchased more than four
years prior to the acceptance for tender, (b) shares acquired through the
reinvestment of dividends and distributions and (c) any appreciation in
value of other shares in the account (see "Tender Offers to Purchase
Shares").
(3) As of the close of business on February 21, 1995, the Fund transferred its
assets to the Portfolio in exchange for an interest in the Portfolio. Prior
to such date, the Fund retained Eaton Vance as its investment adviser. After
such transfer of assets the Fund has continued to retain Eaton Vance as
administrator. The Investment Advisory and Administration Fees are based
upon a percentage of the Portfolio's average daily gross assets, which are
estimated to be approximately the same as its average daily net assets for
the fiscal year ending December 31, 1995.
(4) Other investment companies with different distribution arrangements are
investing in the Portfolio and others may do so in the future. See
"Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
The following information through December 31, 1994 should be read in
conjunction with the audited financial statements included in the Statement of
Additional Information, all of which have been so included in reliance upon the
report of Deloitte & Touche LLP, independent certified public accountants, as
experts in accounting and auditing, which report is contained in the Fund's
Statement of Additional Information. Unaudited financial statements for the six
months ended June 30, 1995 are also contained in the Statement of Additional
Information. Further information regarding the performance of the Fund is
contained in the Fund's semi-annual and annual reports to shareholders which may
be obtained without charge by contacting the Fund's Principal Underwriter, Eaton
Vance Distributors, Inc.
<TABLE>
- - --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 -------------------------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990 1989<F1>
-------------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value and
market value --
Beginning of year $ 10.02 $ 10.03 $ 10.02 $ 9.96 $ 9.97 $ 10.00 $ 10.00
-------- -------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment
income<F4> $ 0.3935 $ 0.5966 $ 0.4970 $ 0.5415 $ 0.7500 $ 0.9505 $ 0.3535
Net realized and
unrealized gain
(loss) on
investments 0.0099 (0.0059) 0.0258 0.0575 (0.0035)<F2> (0.0305) --
-------- -------- -------- -------- -------- -------- --------
Total income
from investment
operations $ 0.4034 $ 0.5907 $ 0.5228 $ 0.5990 $ 0.7465 $ 0.9200 $ 0.3535
-------- -------- -------- -------- -------- -------- --------
Less distributions:
From net
investment income $(0.3934) $(0.5966) $(0.5110) $(0.5296) $(0.7522) $(0.9500) $(0.3535)
In excess of net
investment income -- (0.0041) -- -- -- -- --
From net realized
gain on investments -- -- -- (0.0094) (0.0043) -- --
In excess of net
realized gain on
investment
transactions -- -- (0.0018) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total
distributions $(0.3934) $(0.6007) $(0.5128) $(0.5390) $(0.7565) $(0.9500) $(0.3535)
-------- -------- -------- -------- -------- -------- --------
Net asset value and
market value --
End of year $ 10.03 $ 10.02 $ 10.03 $ 10.02 $ 9.96 $ 9.97 $ 10.00
======== ======== ======== ======== ======== ======== ========
TOTAL INVESTMENT
RETURN<F3> 4.1% 6.1% 5.3% 6.2% 7.8% 9.6% 3.6%
RATIOS (as a percentage
of average daily net
assets)<F5>:
Operating expenses<F4> 1.68%<F9> 1.63% 1.55% 1.44% 1.37% 1.43% 1.30%<F9>
Interest expense<F4> 0.08%<F9><F8> 0.21% 0.22% 0.18% 0.16% -- --
Net investment income 7.84%<F9> 5.95% 4.98% 5.33% 7.42% 9.48% 8.52%<F9>
SUPPLEMENTAL DATA:
Net Assets, End of
Year (000 omitted) $808,779 $611,588 $683,393 $1,011,006 $1,694,332 $2,095,692 $1,751,363
Portfolio turnover<F6> 5% 60% 37% 26% 16% 43% 18%
Number of Shares
Outstanding at
End of Year
(000 omitted) 80,630 61,040 68,165 100,877 170,032 210,285 175,136
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS -- CONTINUED
- - --------------------------------------------------------------------------------------------------------------------------------
LEVERAGE ANALYSIS:
Borrowings by the Fund from issuance of commercial paper:
<CAPTION>
AVERAGE WEEKLY
AVERAGE DAILY BALANCE
AMOUNT OF DEBT BALANCE OF SHARES AVERAGE AMOUNT OF
OUTSTANDING AT OF DEBT OUTSTANDING OUTSTANDING DEBT PER SHARE
YEAR ENDED END OF YEAR DURING YEAR DURING YEAR DURING YEAR
- - ----------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
December 31, 1991 $ -- $34,893,000 189,758,055 $0.1839
December 31, 1992 $39,764,710 $37,304,000 132,343,142 $0.2819
December 31, 1993 $17,981,224 $24,585,000 85,859,000 $0.2863
December 31, 1994 $20,403,169 $10,236,000 63,465,000 $0.1613
June 30, 1995<F7> $ -- $ 9,688,000 62,118,000 $0.1560
<FN>
- - -------------
(a) For the period from the start of business, August 4, 1989, to December 31,
1989.
(b) The per share amount is not in accordance with the net realized and
unrealized gain for the period because of the timing of sales of Fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
(c) Total investment 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 to be
reinvested at the net asset value on the payable date.
(d) Includes the Fund's share of Senior Debt Portfolio's allocated expenses for
the period from February 22, 1995 to June 30, 1995.
(e) For the year ended December 31, 1991, and for the period from the start of
business, August 4, 1989, to December 31, 1989, the expenses related to the
operation of the Fund were reduced by a reduction of the investment advisory
fee. Had such action not been taken, the ratios would have been as follows:
YEAR ENDED DECEMBER 31,
-----------------------
1991 1989(A)
------ -------
RATIOS (as a percentage of average
daily net assets):
Operating expenses 1.40% 1.34%(i)
Interest expense 0.16% --
Net investment income 7.39% 8.48%(i)
(f) Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included in the Fund's semi-annual report to
shareholders.
(g) The Leverage Analysis is for the period January 1, 1995 to February 21,
1995, when the Trust transferred the commercial paper program to the
Portfolio.
(h) Interest expense is for the period from January 1, 1995 to February 21,
1995.
(i) Computed on an annualized basis.
Note: During each of the fiscal years shown above the Fund invested directly in
loans and securities. As of the close of business on February 21, 1995,
the Fund transferred its assets to the Portfolio in exchange for an
interest in the Portfolio (unaudited).
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- - --------------------------------------------------------------------------------
Eaton Vance Prime Rate Reserves (the "Fund") is a closed-end, non-diversified
management investment company which continuously offers its shares of beneficial
interest ("shares") to the public. The 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. 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 management investment company with the same investment objective
as the Fund. There is no assurance that the Fund's objective, or any specific
yield on Fund shares, will be achieved. See "Yield and Performance Information."
An investment in shares of the Fund is not a complete investment program.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- - ------------------------------------------------------------------------------
The Portfolio will invest primarily in senior secured floating rate loans, and
also in other institutionally traded senior secured floating rate debt
obligations (collectively, "Loans"). Under normal market conditions, the
Portfolio will invest at least 80% of its total assets in interests in Loans
("Loan Interests"). These Loans are made primarily to U.S. companies or their
affiliates or issuers of asset-backed interests (collectively, "Borrowers") and
have floating interest rates. Up to 20% of the Portfolio's total assets may be
held in cash, invested in investment grade short-term debt obligations, and
invested in interests in Loans that are unsecured ("Unsecured Loans"). See
"Other Investment Policies" below.
The Loans in which the Portfolio acquires Loan Interests will, in the judgment
of Boston Management and Research (the "Investment Adviser" or "BMR"), be in the
category of senior debt of the Borrower and will generally hold the most senior
position in the capitalization structure of the Borrower. Loans will consist
primarily of direct obligations of U.S. companies or their affiliates undertaken
to finance a capital restructuring or in connection with recapitalizations,
acquisitions, leveraged buy-outs, refinancings or other financially leveraged
transactions. Such Loans may include those made to a Borrower for the purpose of
acquiring ownership or control of a company, whether as a purchase of equity or
of assets, or for a leveraged recapitalization with no change in ownership.
Except for Unsecured Loans, each Loan will be secured by collateral which BMR
believes to have a market value, at the time of acquiring the Loan Interest,
which equals or exceeds the principal amount of the Loan. Subsequent to
purchase, the value of the collateral may decline, and the Loan may no longer be
as secured. The Loans will typically have a stated term of five to eight years.
However, since the Loans typically amortize principal over their stated life and
are frequently prepaid, their effective maturity is expected to be two to three
years. The Portfolio will maintain a segregated account with its custodian of
liquid, high grade debt obligations with a value equal to the amount, if any, of
the Loan which the Portfolio has obligated itself to make to the Borrower, but
which has not yet been requested from the Portfolio. The Portfolio will attempt
to maintain a portfolio of Loan Interests that will have a dollar weighted
average period to next interest rate adjustment of approximately 90 days or
less. As of August 31, 1995, the Portfolio had a dollar weighted average period
to adjustment of approximately 53 days.
The Portfolio will purchase Loan Interests only if, in BMR's judgment, the
Borrower can meet debt service on the Loan. In addition, a Borrower must meet
other criteria established by BMR and deemed by it to be appropriate to the
analysis of the Borrower, the Loan and the Loan Interest. The Loan Interests in
which the Portfolio invests are not currently rated by any nationally recognized
rating service. The primary consideration in selecting such Loan Interests for
investment by the Portfolio is the creditworthiness of the Borrower. The quality
ratings assigned to other debt obligations of a Borrower are generally not a
material factor in evaluating Loans in which the Portfolio may acquire a Loan
Interest, since such obligations will typically be subordinated to the Loans and
be unsecured. Instead, BMR will perform its own independent credit analysis of
the Borrower in addition to utilizing information prepared and supplied by the
Agent (as defined below) or other participants in the Loans. Such analysis will
include an evaluation of the industry and business of the Borrower, the
management and financial statements of the Borrower, and the particular terms of
the Loan and the Loan Interest which the Portfolio may acquire. BMR's analysis
will continue on an ongoing basis for any Loan Interest purchased and held by
the Portfolio. No assurance can be given regarding the availability at
acceptable prices of Loan Interests that satisfy the Portfolio's investment
criteria.
A Loan in which the Portfolio may acquire a Loan Interest is typically
originated, negotiated and structured by a U.S. or foreign commercial bank,
insurance company, finance company or other financial institution (the "Agent")
for a lending syndicate of financial institutions. The Agent typically
administers and enforces the loan on behalf of the other lenders in the
syndicate. In addition, an institution, typically but not always the Agent (the
"Collateral Bank"), holds any collateral on behalf of the lenders. The
Collateral Bank must be a qualified custodian under the Investment Company Act
of 1940, as amended (the "1940 Act"). These Loan Interests generally take the
form of direct interests acquired during a primary distribution and may also
take the form of participation interests in, assignments of, or novations of a
Loan acquired in secondary markets. Such Loan Interests may be acquired from
U.S. or foreign commercial banks, insurance companies, finance companies or
other financial institutions who have made loans or are members of a lending
syndicate or from other holders of Loan Interests. The Portfolio may also
acquire Loan Interests under which the Portfolio derives its rights directly
from the Borrower. Such Loan Interests are separately enforceable by the
Portfolio against the Borrower and all payments of interest and principal are
typically made directly to the Portfolio from the Borrower. In the event that
the Portfolio and other lenders become entitled to take possession of shared
collateral, it is anticipated that such collateral would be held in the custody
of a Collateral Bank for their mutual benefit. The Portfolio may not act as an
Agent, a Collateral Bank, a guarantor or sole negotiator or structurer with
respect to a Loan.
BMR also analyzes and evaluates the financial condition of the Agent and, in the
case of Loan Interests in which the Portfolio does not have privity with the
Borrower, those institutions from or through whom the Portfolio derives its
rights in a Loan (the "Intermediate Participants"). The Portfolio will invest in
Loan Interests only if the outstanding debt obligations of the Agent and
Intermediate Participants, if any, are, at the time of investment, investment
grade, i.e., (a) rated BBB or better by Standard and Poor's Ratings Group
("S&P") or Baa or better by Moody's Investors Service, Inc. ("Moody's"); or (b)
rated A-2 by S&P or P-2 by Moody's; or (c) determined to be of comparable
quality by BMR.
The Portfolio may from time to time acquire Loan Interests in transactions in
which the current yield to the Portfolio exceeds the stated interest rate on the
Loan. These Loan Interests are referred to herein as "Discount Loan Interests"
because they are usually acquired at a discount from their nominal value or with
a facility fee that exceeds the fee traditionally received in connection with
the acquisition of Loan Interests. The Borrowers with respect to such Loans may
have experienced, or may be perceived to be likely to experience, credit
problems, including involvement in or recent emergence from bankruptcy
reorganization proceedings or other forms of credit restructuring. In addition,
Discount Loan Interests may become available as a result of an imbalance in the
supply of and demand for certain Loan Interests. The Portfolio may acquire
Discount Loan Interests in order to realize an enhanced yield or potential
capital appreciation when BMR believes that such Loan Interests are undervalued
by the market due to an excessively negative assessment of a Borrower's
creditworthiness or an imbalance between supply and demand. The Portfolio may
benefit from any appreciation in value of a Discount Loan Interest, even if the
Portfolio does not obtain 100% of the Loan Interest's face value or the Borrower
is not wholly successful in resolving its credit problems.
From time to time BMR and its affiliates may borrow money from various banks in
connection with their business activities. Such banks may also sell interests in
Loans to or acquire such interests from the Portfolio or may be Intermediate
Participants with respect to Loans in which the Portfolio owns interests. Such
banks may also act as Agents for Loans in which the Portfolio owns interests.
RISK FACTORS
BMR expects the Fund's net asset value to be relatively stable during normal
market conditions because the Portfolio's assets will consist primarily of
interests in floating rate Loans and of short-term instruments. Accordingly, the
value of the Portfolio's assets may fluctuate significantly less as a result of
interest rate changes than would a portfolio of fixed-rate obligations.
Nevertheless, a default in a Loan in which the Portfolio owns a Loan Interest, a
material deterioration of a Borrower's perceived or actual creditworthiness or a
sudden and extreme increase in prevailing interest rates may cause a decline in
the Fund's net asset value. Conversely, a sudden and extreme decline in interest
rates could result in an increase in the Fund's net asset value. 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.
Investments in Loan Interests by the Portfolio bear certain risks common to
investing in many secured debt instruments of nongovernmental issuers, including
the risk of nonpayment of principal and interest by the Borrower, that Loan
collateral may become impaired, that any losses will be proportionate to the
degree of Loan Interest diversification and Borrower industry concentration, and
that the Portfolio may obtain less than full value for Loan Interests sold
because they are illiquid.
CREDIT RISK. Loan Interests are primarily dependent upon the creditworthiness of
the Borrower for payment of interest and principal. The nonreceipt of scheduled
interest or principal on a Loan Interest may adversely affect the income of the
Portfolio or the value of its investments, which may in turn reduce the amount
of dividends or the net asset value of the shares of the Fund. The Portfolio's
ability to receive payment of principal of and interest on a Loan Interest also
depends upon the creditworthiness of any institution interposed between the
Portfolio and the Borrower. To reduce credit risk, BMR actively manages the
Portfolio as described above. For information regarding the status of holdings
of the Portfolio, see the Fund's financial statements.
Loan Interests in Loans made in connection with leveraged buy-outs,
recapitalizations and other highly leveraged transactions are subject to greater
credit risks than many of the other Loan Interests in which the Portfolio may
invest. As of the date of this Prospectus, such Loan Interests constituted
substantially all of the Portfolio's Loan Interests. These credit risks include
the possibility of a default on the Loan or bankruptcy of the Borrower. The
value of such Loan Interests are subject to a greater degree of volatility in
response to interest rate fluctuations and may be less liquid than other Loan
Interests.
The Portfolio may acquire interests in Loans 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 Loan Interests of Borrowers who
have obtained bridge loans from other parties. A Borrower's use of bridge loans
involves a risk that the Borrower may be unable to locate permanent financing to
replace the bridge loan, which may impair the Borrower's perceived
creditworthiness.
Although Loans in which the Portfolio invests will generally hold the most
senior position in the capitalization structure of the Borrowers, the
capitalization of many Borrowers will include non-investment grade subordinated
debt. During periods of deteriorating economic conditions, a Borrower may
experience difficulty in meeting its payment obligations under such bonds and
other subordinated debt obligations. Such difficulties may detract from the
Borrower's perceived creditworthiness or its ability to obtain financing to
cover short-term cash flow needs and may force the Borrower into bankruptcy or
other forms of credit restructuring.
COLLATERAL IMPAIRMENT. Loans (excluding Unsecured Loans) will be secured unless
(i) the value of the collateral declines below the amount of the Loans, (ii) the
Portfolio's security interest in the collateral is invalidated for any reason by
a court or (iii) the collateral is partially or fully released under the terms
of the Loan Agreement as the creditworthiness of the Borrower improves. There is
no assurance that the liquidation of collateral would satisfy the Borrower's
obligation in the event of nonpayment of scheduled interest or principal, or
that collateral could be readily liquidated. The value of collateral generally
will be determined by reference to financial statements of the Borrower, an
independent appraisal performed at the request of the Agent at the time the Loan
was initially made, the market value of such collateral (e.g., cash or
securities) if it is readily ascertainable and/or by other customary valuation
techniques considered appropriate in the judgment of BMR. Collateral is
generally valued on the basis of the Borrower's status as a going concern and
such valuation may exceed the immediate liquidation value of the collateral.
Collateral may include (i) working capital assets, such as accounts receivable
and inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. To the extent that collateral consists of the stock
of the Borrower's subsidiaries or other affiliates, the Portfolio will be
subject to the risk that this stock will decline in value. Such a decline,
whether as a result of bankruptcy proceedings or otherwise, could cause the Loan
to be undercollateralized or unsecured. In most credit agreements there is no
formal requirement to pledge additional collateral. In the case of Loans made to
non-public companies, the company's shareholders or owners may provide
collateral in the form of secured guarantees and/or security interests in assets
that they own. In addition, the Portfolio may invest in Loans guaranteed by, or
fully secured by assets of, such shareholders or owners, even if the Loans are
not otherwise collateralized by assets of the Borrower; provided, however, that
such guarantees are fully secured. There may be temporary periods when the
principal asset held by a Borrower is the stock of a related company, which may
not legally be pledged to secure a Loan. On occasions when such stock cannot be
pledged, the Loan will be temporarily unsecured until the stock can be pledged
or is exchanged for or replaced by other assets, which will be pledged as
security for the Loan. However, the Borrower's ability to dispose of such
securities, other than in connection with such pledge or replacement, will be
strictly limited for the protection of the holders of Loans and, indirectly,
Loan Interests.
If a Borrower becomes involved in bankruptcy proceedings, a court may invalidate
the Portfolio's security interest in the Loan collateral or subordinate the
Portfolio's rights under the Loan to the interests of the Borrower's unsecured
creditors. Such action by a court could be based, for example, on a "fraudulent
conveyance" claim to the effect that the Borrower did not receive fair
consideration for granting the security interest in the Loan collateral to the
Portfolio. For Loans made in connection with a highly leveraged transaction,
consideration for granting a security interest may be deemed inadequate if the
proceeds of the Loan were not received or retained by the Borrower, but were
instead paid to other persons (such as shareholders of the Borrower) in an
amount which left the Borrower insolvent or without sufficient working capital.
There are also other events, such as the failure to perfect a security interest
due to faulty documentation or faulty official filings, which could lead to the
invalidation of the Portfolio's security interest in Loan collateral. If the
Portfolio's security interest in Loan collateral is invalidated or the Loan is
subordinated to other debt of a Borrower in bankruptcy or other proceedings, it
is unlikely that the Portfolio would be able to recover the full amount of the
principal and interest due on the Loan.
DIVERSIFICATION AND INDUSTRY CONCENTRATION. The Fund and the Portfolio have each
registered with the U.S. Securities and Exchange Commission as a
"non-diversified" investment company. As a result, the Fund and the Portfolio
are required to comply only with the diversification requirements of Subchapter
M of the Internal Revenue Code of 1986, as amended. See "Taxes" in the Statement
of Additional Information for a description of these requirements. Because the
Portfolio may invest a relatively high percentage of its assets in the
obligations of a limited number of issuers, the value of the Portfolio's
investments will be more affected by any single adverse economic, political or
regulatory occurrence than will the value of the investments of a diversified
investment company. It is the Portfolio's current intention not to invest more
than 10% of its total assets in Loans of any single Borrower. The Portfolio may
invest more than 10% (but not more than 25%) of its total assets in Loan
Interests for which the same Intermediate Participant is interposed between the
Borrower and the Portfolio. The Portfolio may acquire Loan Interests in Loans
made to Borrowers in any industry. However, the Portfolio will not concentrate
in any one industry with respect to Borrowers in whose Loans the Portfolio
acquires Loan Interests or interpositioned persons that the Portfolio determines
to be issuers for the purpose of this policy. See "Investment Restrictions" in
the Statement of Additional Information.
ILLIQUID INSTRUMENTS. Loan Interests are, at present, not readily marketable and
may be subject to legal and contractual restrictions on resale. Although Loan
Interests are traded among certain financial institutions, some of the Loan
Interests acquired by the Portfolio will be considered illiquid. The Portfolio's
ability to dispose of a Loan Interest may be reduced to the extent that there
has been a perceived or actual deterioration in the creditworthiness of an
individual Borrower or the creditworthiness of Borrowers in general, or by
events that reduce the level of confidence in the market for Loan Interests. As
the market for Loan Interests becomes more seasoned, liquidity is expected to
improve. However, the Portfolio has no limitation on the amount of its
investments which can be not readily marketable or subject to restrictions on
resale. Such investments may affect the Portfolio's ability to realize its net
asset value in the event of a voluntary or involuntary liquidation of its
assets. To the extent that such investments are illiquid, the Portfolio may have
difficulty disposing of portfolio securities in order to make its tender offer
payment obligations, if any. The Trustees of the Portfolio will consider the
liquidity of the Portfolio's investments in determining whether a tender offer
should be effected by the Portfolio. Tender offer decisions of the Portfolio
directly affect the ability of the Fund to make its tender offers.
USE OF LEVERAGE
The Portfolio may from time to time (i) borrow money on a secured or unsecured
basis at variable or fixed rates, and (ii) issue indebtedness such as commercial
paper, bonds, debentures, notes or similar obligations or instruments and invest
the capital raised in additional portfolio investments and/or meet its
obligations pursuant to tender offers, if any. BMR currently expects that the
Portfolio may incur borrowings and issue such debt in order to remain fully
invested by managing anticipated cash infusions from the prepayment of Loans and
the sale of Fund shares and cash outflows from the repurchase of Fund shares in
connection with tender offers. For example, the Portfolio may use borrowed cash
to purchase Loan Interests and repay such borrowings from the proceeds of
expected sales of 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. The amount of any
such borrowing or issuance will depend upon market or economic conditions
existing at that time.
However, as prescribed by the 1940 Act, the Portfolio will be required to
maintain specified asset coverages of at least 300% with respect to any bank
borrowing or issuance of indebtedness immediately following any such borrowing
or issuance and on an ongoing basis as a condition of declaring dividends. The
Portfolio's inability to make distributions as a result of these requirements
could cause 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.
Capital raised through leverage will be subject to interest costs which may or
may not exceed the interest earned on the assets purchased. The Portfolio may
also be required to maintain minimum average balances in connection with
borrowings or to pay a commitment or other fee to maintain a line of credit;
either of these requirements will increase the cost of borrowing over the stated
interest rate. The issuance of additional classes of debt involves offering
expenses and other costs and may limit the Portfolio's freedom to pay dividends
or to engage in other activities. Borrowings and the issuance of indebtedness
create an opportunity to be more fully invested and to earn greater income.
However, any such borrowing or issuance is a speculative technique in that it
will increase the Portfolio's exposure to capital risk. Such risks may be
mitigated through the use of borrowings and issuances of indebtedness that have
floating rates of interest. Unless the income and appreciation, if any, on
assets acquired with borrowed funds or offering proceeds exceeds the cost of
borrowing or issuing debt, the use of leverage will diminish the investment
performance of the Fund compared with what it would have been without leverage.
The Portfolio will not always borrow money or issue debt to finance additional
investments. The Portfolio may borrow money to finance its tender offer payment
obligations, if any, or for temporary, extraordinary or emergency purposes. The
Portfolio's willingness to borrow money and issue debt for investment purposes,
and the amount it will borrow, will depend on many factors, the most important
of which are the investment outlook, market conditions and interest rates. To
the extent that the Portfolio invests borrowed money in short-term fixed-rate
debt obligations, successful use of a leveraging strategy depends on BMR's
ability to correctly predict interest rates and market movements over these
short-term periods. There is no assurance that a leveraging strategy will be
successful during any period in which it is employed.
The Portfolio has established a $245 million commercial paper program, pursuant
to which it may from time to time sell its unsecured notes ("commercial paper")
with short-term maturities of up to 270 days from the issuance thereof to
accredited investors. Prior to its investment in the Portfolio, the Fund
maintained the same commercial paper program. During the most recent fiscal year
ended December 31, 1994 (prior to the Fund's investment in the Portfolio), the
amount of commercial paper that the Fund had outstanding averaged $10,236,000
and ranged from $0 to $46,288,000. The annual interest rates on such paper
ranged from 3.25% to 6.10%. The amount of commercial paper that the Portfolio
had outstanding on August 31, 1995 was $0. The Portfolio may use the proceeds
from the sale of its commercial paper to finance on a short-term basis the cash
payments made for tender offers and may repay such borrowings from principal and
interest payments made on the Loans. The Portfolio expects to continue to use
commercial paper borrowings to finance such payments in the future as well as
for investment purposes, and for paying interest or principal in respect of its
obligations. The Portfolio's commercial paper will be issued pursuant to an
Issuing and Paying Agency Agreement between the Portfolio and Citibank, N.A.,
and will be entitled to the benefits of a commercial paper surety bond made by
Capital Markets Assurance Corporation in favor of Citibank, N.A. as a limited
fiduciary for the holders of the commercial paper. The Portfolio has entered
into an Insurance and Indemnity Agreement with Capital Markets Assurance
Corporation, pursuant to which the Portfolio has agreed that, in the event of
default under said Agreement, it will not distribute dividends or other
distributions on, or repurchase or otherwise acquire, an interest of the
Portfolio or pay fees to BMR as compensation for the provision of managerial or
administrative services. In the event of such a default, the Portfolio's
inability to declare dividends and distributions as a result of these
requirements could cause the Fund to fail to qualify as a regulated investment
company and/or subject it to income or excise taxes. Although the Fund has no
current intention to engage in borrowing, because the Portfolio will borrow the
Fund will be affected thereby.
OTHER INVESTMENT POLICIES
The Portfolio will, during normal market conditions, invest at least 80% of its
total assets in Loan Interests that conform to the requirements described above.
However, up to 20% of the Portfolio's total assets may be held in cash, invested
in short-term debt obligations, and invested in interests in Loans that are
unsecured. The Portfolio will invest in only those Unsecured Loans that have
been determined by BMR to have a credit quality at least equal to that of the
collateralized Loans in which the Portfolio primarily invests. Should the
Borrower of an Unsecured Loan default on its obligation there will be no
specific collateral on which the Portfolio can foreclose, although the Borrower
will typically have assets believed by BMR at the time of purchase of the
Unsecured Loans to exceed the amount of the Loan. The short-term debt
obligations in which the Portfolio may invest include, but are not limited to,
interests in senior Unsecured Loans with a remaining maturity of one year or
less ("Short-Term Loans"), certificates of deposit, commercial paper, short-term
and medium-term notes, bonds with remaining maturities of less than five years,
obligations issued by the U.S. Government or any of its agencies or
instrumentalities and repurchase agreements. The credit quality of Short-Term
Loans must be determined by BMR to be at least equal to that of the Portfolio's
investments in Loans. All of such other debt instruments will be investment
grade (i.e., rated Baa, P-3 or better by Moody's or BBB, A-3 or better by S&P
or, if unrated, determined by BMR to be of comparable quality). Securities rated
Baa, BBB, P-3 or A-3 are considered to have adequate capacity for payment of
principal and interest, but are more susceptible to adverse economic conditions.
Securities rated BBB or Baa (or comparable unrated securities) have speculative
characteristics. Also, the capacity of their issuers to make principal and
interest payments would be weakened by changes in economic conditions or other
circumstances to a greater extent than for issuers of higher grade bonds.
Pending investment of the proceeds of Fund sales by the Portfolio or when BMR
believes that investing for defensive purposes is appropriate, more than 20% of
the Portfolio's total assets may be temporarily held in cash or in the
short-term debt obligations described above.
Although the Portfolio currently holds Loan Interests only in Loans for which
the Agent and Intermediate Participants, if any, are banks, it may acquire Loan
Interests from non-bank financial institutions and in Loans originated,
negotiated and structured by non-bank financial institutions, if such Loan
Interests conform to the credit requirements described above. As these other
types of Loan Interests are developed and offered to investors, BMR will,
consistent with the Portfolio's investment objective, policies and quality
standards, and in accordance with applicable custody and other requirements of
the 1940 Act, consider making investments in such Loan Interests. Also, the
Portfolio has acquired and may continue to acquire warrants and other equity
securities as part of a unit combining Loan Interests and equity securities of
the Borrower or its affiliates. The acquisition of such equity securities will
only be incidental to the Portfolio's purchase of a Loan Interest. The Portfolio
may also acquire equity securities issued in exchange for a Loan or issued in
connection with the debt restructuring or reorganization of a Borrower, or if
such acquisition, in the judgment of BMR, may enhance the value of a Loan or
would otherwise be consistent with the Portfolio's investment policies.
The Portfolio will limit its investments to those which are eligible for
purchase by national banks for their own portfolios. The conditions and
restrictions governing the purchase of 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.
FOREIGN INVESTMENTS. The Portfolio may also acquire U.S. dollar denominated Loan
Interests in Loans which are made to non-U.S. Borrowers in developed countries;
provided, however, that any such Borrower meets the credit standards established
by BMR for U.S. Borrowers, and no more than 35% of its net assets are invested
in Loan Interests of such Borrowers. Investing in Loan Interests of non-U.S.
Borrowers involves certain special considerations, which are not typically
associated with investing in U.S. Borrowers. Since foreign companies are not
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to U.S. Borrowers,
there may be less publicly available information about a foreign company than
about a domestic company. There is generally less government supervision and
regulation of financial markets and listed companies than in the United States.
Mail service between the United States and foreign countries may be slower or
less reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions. As of the date of this Prospectus, none
of the Portfolio's assets were invested in Loan Interests of non-U.S. Borrowers.
Moreover, the Portfolio has no current intention to invest more than 5% of its
net assets in such Loan Interests.
INTEREST RATE TRANSACTIONS. In order to attempt to protect the value of the
Portfolio's assets from interest rate fluctuations and to maintain a dollar
weighted average period to next interest rate adjustment of approximately 90
days or less, the Portfolio may enter into interest rate swaps. The Portfolio
intends to use interest rate swaps as a hedge and not as a speculative
investment and will typically use interest rate swaps to shorten the average
time to interest rate reset of the Portfolio. Interest rate swaps involve the
exchange by the Portfolio with another party of their respective commitments to
pay or receive interest, e.g., an exchange of fixed rate payments for floating
rate payments. The use of interest rate swaps is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. BMR has not been involved in
the use of interest rate swaps but has utilized other types of hedging
techniques. If BMR is incorrect in its forecasts of market values, interest
rates and other applicable factors, the investment performance of the Fund would
be less favorable than what it would have been if this investment technique was
never used. The Portfolio has not engaged in such transactions and has no
current intention to invest more than 5% of its net assets in such transactions.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to its permitted investments, but currently intends to do so only with
member banks of the Federal Reserve System or with primary dealers in U.S.
Government securities. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. The Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement, and will be marked to market daily.
The repurchase date is usually within seven days of the original purchase date.
Repurchase agreements are deemed to be loans under the 1940 Act. In all cases,
BMR must be satisfied with the creditworthiness of the other party to the
agreement before entering into a repurchase agreement. In the event of the
bankruptcy of the other party to a repurchase agreement, the Portfolio might
experience delays in recovering its cash. To the extent that, in the meantime,
the value of the securities the Portfolio purchased may have declined, the
Portfolio could experience a loss. To date, the Portfolio has not engaged in
repurchase agreements.
CERTAIN INVESTMENT RESTRICTIONS AND POLICIES. The Fund and the Portfolio have
adopted certain fundamental investment restrictions and policies which are
enumerated in detail in the Statement of Additional Information and which may
not be changed unless authorized by a shareholder or investor vote,
respectively. Among these fundamental restrictions, the Portfolio may not
purchase any security if, as a result of such purchase, 25% or more of the
Portfolio's total assets (taken at current value) would be invested in the
securities of Borrowers and other issuers having their principal business
activities in the same industry (the electric, gas, water and telephone utility
industries, commercial banks, thrift institutions and finance companies being
treated as separate industries for the purpose of this restriction); provided
that there is no limitation with respect to obligations issued or guaranteed by
the U.S. Government or any of its agencies or instrumentalities. Except for the
fundamental restrictions and policies enumerated in the Fund's Statement of
Additional Information, the investment objective and policies of the Fund and
the Portfolio are not fundamental policies and accordingly may be changed by the
Trustees of the Fund and the Portfolio without obtaining the approval of the
Fund's shareholders or the investors in the Portfolio, as the case may be. If
any changes were made, the Fund might have an investment objective different
from the objective which an investor considered appropriate at the time the
investor became a shareholder of the Fund.
YIELD AND PERFORMANCE INFORMATION
- - ------------------------------------------------------------------------------
The rate of interest payable on Loans is established as the sum of a base
lending rate plus a specified spread. These base lending rates are generally the
Prime Rate of a designated U.S. bank, the London InterBank Offered Rate
("LIBOR"), the Certificate of Deposit ("CD") rate of a designated U.S. bank or
another base lending rate used by commercial lenders. The Prime Rate is the rate
banks typically use as a base for a wide range of loans to individuals and
midsize and small businesses. LIBOR is the rate typically used by banks
worldwide as a base for loans to large commercial and industrial companies. A
Borrower usually has the right to select the base lending rate and to change the
base lending rate at specified intervals. The interest rate on Prime Rate- based
Loans floats daily as the Prime Rate changes, while the interest rate on
LIBOR-based and CD-based Loans is periodically reset with reset periods
typically ranging from 30 to 180 days. At the time of acquisition of a Loan
Interest, the Portfolio may also receive an upfront facility fee.
The yield on a Loan Interest held by the Portfolio will primarily depend on the
terms of the underlying Loan and the base lending rate chosen by the Borrower
initially and on subsequent dates specified in the applicable loan agreement.
The relationship between the Prime Rate, the CD rate and LIBOR will vary as
market conditions change. In the past, the relationship between the Prime Rate
and the other possible base lending rates was reasonably stable, and Loans were
structured with appropriate spreads over the base rates so that the income
earned by the Portfolio was approximately the same no matter which alternative
the Borrower selected. Since Borrowers tend to select the base lending rate
which results in the lowest interest cost, the distribution of the Portfolio's
investments among Prime Rate, CD rate and LIBOR based Loans is likely to shift
in favor of Loans with the base lending rate that generates the lowest rate of
return to the Portfolio. BMR anticipates that, during normal market conditions,
the effective yield of the Fund may approximate the average Prime Rate of
leading U.S. banks as published in The Wall Street Journal. When the traditional
spread between the Prime Rate and other base lending rates widens, the Fund will
be unable to achieve an effective yield approximating the average published
Prime Rate of leading U.S. banks. Such has been the case since February 1991.
Currently, the Borrowers with respect to over 90% of the value of Loans held by
the Portfolio have selected LIBOR as the base lending rate for such Loans, which
has lowered their interest cost and reduced the level of the Fund's effective
yield for this period to below the Prime Rate. Although BMR believes the present
wide differential between the Prime Rate and LIBOR is unusual, it has occurred
before at low points in the economic cycle. BMR hopes that, as the economy
continues to improve, the long-term relationship between the Prime Rate and
LIBOR may be restored and the Fund should again be able to achieve an effective
yield approximating the Prime Rate. However, there is not yet evidence that this
will occur by the end of 1995 or thereafter.
From time to time, the Fund may quote a current and/or effective yield based on
a specific one-month period. The current yield is calculated by annualizing the
most recent monthly distribution (i.e., multiplying by 365/31 for a 31 day
month) and dividing the product by the current maximum offering price. The
effective yield is calculated by dividing the current yield by 365/31 and adding
1. The resulting quotient is then taken to the 365/31st power and reduced by 1.
The result is the effective yield. Yields will fluctuate from time to time and
are 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 and effective yield reflects
the effect of compounding inasmuch as all dividends and disributions are assumed
to be reinvested in additional shares of the Fund at net asset value. In
addition, the calculation of total return, current yield and effective yield
does not reflect the imposition of any Early Withdrawal charges or the amount of
any shareholder income tax liability. If reflected, an Early Withdrawal Charge
would reduce the performance quoted. 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 performance the Fund may earn or what an
investor's yield or total return may be in the future.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- - ------------------------------------------------------------------------------
The Fund is organized as a business trust established under Massachusetts law
pursuant to a Declaration of Trust dated May 2, 1989, 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
"Tender Offers to Purchase Shares." Shareholders are entitled to one vote for
each full share held. Fractional shares may be voted in proportion to the amount
of the Fund's net asset value which they represent. 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 Securities and Exchange Commission, for the full text
of these provisions. See "Other Information" in the Fund's Statement of
Additional Information.
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.
SENIOR DEBT 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.
The Portfolio, as well as the Fund, intends to comply with all applicable
federal and state securities laws. 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.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike other investment companies which
directly acquire and manage their own portfolios of securities, seeks to achieve
its investment objective by investing its assets in an interest in the
Portfolio, which is a separate investment company with an identical investment
objective (although the Fund may temporarily hold a de minimus amount of cash).
Therefore, the Fund's interest in the securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may sell
interests to other affiliated and non-affiliated investment companies or
institutional investors. Such investors will invest in the Portfolio on the same
terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in the Fund should be aware that these differences may result in
differences in returns experienced by investors in the various funds that invest
in the Portfolio. Such differences in returns are also present in other fund
structures, including funds that have multiple classes of shares. For
information regarding the investment objective, policies and restrictions, see
"The Fund's Investment Objective" and "How the Fund and the Portfolio Invest
their Assets." Further information regarding investment practices may be found
in the Statement of Additional Information.
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
offers opportunities for substantial growth in the assets of the Portfolio, and
affords economies of scale for the Fund, at least when the assets of the
Portfolio exceed $1 billion. The shareholders of the Fund have previously
approved the policy of investing the Fund's assets in an interest in the
Portfolio.
The Fund may withdraw (completely redeem) all or any part of its interest in the
Portfolio only pursuant to tender offers of the Portfolio. The Portfolio's Board
of Trustees presently intends each quarter to consider the making of such tender
offers. However, there can be no assurance that the Portfolio's Board of
Trustees will, in fact, decide to undertake the making of such a tender offer.
See "Tender Offers to Purchase Shares" below. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be changed
by the Trustees of the Fund and the Portfolio without obtaining the approval of
the shareholders of the Fund or the investors in the Portfolio, as the case may
be. Any such change of the investment objective will be preceded by thirty days'
advance written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. If a shareholder tenders shares because of a
change in the nonfundamental objective or policies of a Fund, those shares may
be subject to an early withdrawal charge, as described in "Early Withdrawal." In
the event the Fund withdraws all of its assets from the Portfolio, or the Board
of Trustees of the Fund determines that the investment objective of the
Portfolio is no longer consistent with the investment objective of the Fund,
such 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 of its assets from the Portfolio. Of course, a complete withdrawal of Fund
assets could be accomplished only pursuant to a Portfolio tender offer.
Information regarding other pooled investment entities or funds which invest in
the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, (617)
482-8260. Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large investor
withdraws a significant amount of assets from the Portfolio, the remaining
investors may experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk, and experience decreasing economies of scale. However,
this possibility exists as well for historically structured funds which have
large or institutional investors.
Until recently, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the investment company industry and,
therefore, the Fund may be subject to additional regulations that are
inapplicable to historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the 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 Loans and noncash assets (as opposed to a cash distribution from
the Portfolio). If Loans and noncash assets are distributed, the Fund could
incur brokerage, tax or other charges in converting them to cash. In addition,
the distribution in kind may result in a less diversified portfolio of
investments and will adversely affect the liquidity of the Fund. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing.
The Trustees of the Fund, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Trustees of the Fund and
the Trustees of the Portfolio are the same. Such procedures require each Board
to take actions to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Trustees and officers of the
Fund and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- - ------------------------------------------------------------------------------
The Portfolio engages BMR, a wholly-owned subsidiary of Eaton Vance, to act as
its investment adviser under an Investment Advisory Agreement (the "Advisory
Agreement"). Under the general supervision of the Portfolio's Board of Trustees,
BMR will carry out the investment and reinvestment of the assets of the
Portfolio, will furnish continuously an investment program with respect to the
Portfolio, will determine which securities should be purchased, sold or
exchanged, and will implement such determinations. BMR will furnish to the
Portfolio investment advice and office facilities, equipment and personnel for
servicing the investments of the Portfolio. BMR will compensate all Trustees and
officers of the Portfolio who are members of the BMR organization and who render
investment services to the Portfolio, and will also compensate all other BMR
personnel who provide research and investment services to the Portfolio. In
return for these services, facilities and payments, the Portfolio has agreed to
pay BMR as compensation under the Advisory Agreement a monthly fee in the amount
of 19/240 of 1% (equivalent to 0.95% annually) of the average daily gross assets
of the Portfolio. Gross assets of the Portfolio shall be calculated by deducting
all liabilities of the Portfolio except the principal amount of any indebtedness
for money borrowed, including debt securities issued by the Portfolio. While
this advisory fee is greater than that paid by most other funds, it is similar
to fees paid by other closed-end funds investing primarily in Loans and Loan
Interests.
On October 24, 1994, the Trustees of the Portfolio voted to accept a waiver of
BMR's compensation so that the aggregate advisory fees paid by the Portfolio
under the Advisory Agreement during any fiscal year or portion thereof after the
Fund begins to invest its assets in the Portfolio will not exceed on an annual
basis: (a) 0.95% of average daily gross assets of the Portfolio up to and
including $1 billion; (b) 0.90% of average daily gross assets in excess of $1
billion up to and including $2 billion; and (c) 0.85% of average daily gross
assets in excess of $2 billion. Prior to February 21, 1995 (when the Fund
transferred its assets to the Portfolio in exchange for an interest in the
Portfolio), the Fund retained Eaton Vance as its investment adviser. The Fund
paid Eaton Vance advisory fees equivalent to 0.95% of the Fund's average daily
gross assets for the fiscal year ended December 31, 1994.
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 $15 billion, of which
approximately $13 billion is in investment companies, including approximately
$943 million in the Fund. Eaton Vance, through its subsidiaries and affiliates,
engages in investment management and marketing activities; fiduciary and related
banking services; oil and gas operations; real estate investment, consulting and
management; and development of precious metals properties.
The Fund has engaged Eaton Vance to act as its administrator under an
Administration Agreement (the "Administration Agreement"). 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
contemplated quarterly tender offers and other administrative services necessary
to conduct the Fund's business. In return for these services, facilities and
payments, the Fund pays Eaton Vance as compensation under the Administration
Agreement a monthly fee in the amount of 1/48 of 1% (equivalent to 0.25%
annually) of the average daily gross assets of the Portfolio attributable to the
Fund. In calculating the gross assets of the Portfolio, all liabilities of the
Portfolio shall be deducted except the principal amount of any indebtedness for
money borrowed, including debt securities issued by the Portfolio. For the
fiscal year ended December 31, 1994, the amount of administration fees paid by
the Fund to Eaton Vance was equal to 0.25% annually of the Fund's average daily
gross assets.
As indicated under "How to Buy Fund Shares", the payments of compensation to
Authorized Firms (as defined below) at the time Fund shares are sold and
quarterly thereafter on outstanding Fund shares will be made from the assets of
BMR, Eaton Vance and EVD, which may include amounts received by BMR under its
Advisory Agreement with the Portfolio, by Eaton Vance under its Administration
Agreement with the Fund and by EVD as early withdrawal charges on the repurchase
of shares held for less than four years.
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, by Eaton Vance under the Administration Agreement
or by EVD under its Distribution Agreement. See "Investment Advisory and Other
Services" in the Statement of Additional Information.
Jeffrey S. Garner, Vice President of Eaton Vance since January 1988 and Vice
President of the Portfolio and the Fund since their inception, is the Portfolio
Manager of the Portfolio.
VALUING FUND 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 detemined by IBT Fund Services (Canada) Inc. (as agent for the Fund) in
the manner authorized by the Trustees of the Fund. IBT Fund Services (Canada)
Inc. is a subsidiary of Investors Bank & Trust Company ("IBT"), the Fund's and
the Portfolio's custodian. The Fund will be closed for business and will not
price its shares on the following business holidays: New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. 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 Fund Services (Canada) Inc. (as agent for the
Portfolio). The Portfolio's net asset value is computed by determining the value
of the Portfolio's total assets (the loans and securities it holds plus any cash
or other assets, including interest accrued but not yet received), and
subtracting all of the Portfolio's liabilities (including the outstanding
principal amount of any indebtedness issued and any unpaid interest thereon).
For further information regarding the valuation of each interest in the
Portfolio, see "Determination of Net Asset Value" in the Statement of Additional
Information. Eaton Vance Corp. owns 77.3% of the outstanding stock of IBT, the
Fund's and the Portfolio's custodian. Eaton Vance Corp. has announced its
intention to sell its interest in IBT in 1995.
Because Loan Interests are not actively traded in a public market, BMR,
following procedures established by the Portfolio's Trustees, will value the
Loan Interests held by the Portfolio at fair value. In valuing a Loan Interest,
BMR will consider relevant factors, data, and information, including: (i) the
characteristics of and fundamental analytical data relating to the Loan
Interest, including the cost, size, current interest rate, period until next
interest rate reset, maturity and base lending rate of the Loan Interest, the
terms and conditions of the Loan and any related agreements, and the position of
the Loan in the Borrower's debt structure; (ii) the nature, adequacy and value
of the collateral, including the Portfolio's rights, remedies and interests with
respect to the collateral; (iii) the creditworthiness of the Borrower, based on
an evaluation of its financial condition, financial statements and information
about the Borrower's business, cash flows, capital structure and future
prospects; (iv) information relating to the market for the Loan Interest,
including price quotations (if considered reliable) for and trading in the Loan
Interest and interests in similar Loans and the market environment and investor
attitudes towards the Loan Interest and interests in similar Loans; (v) the
reputation and financial condition of the Agent and any Intermediate
Participants in the Loan; and (vi) general economic and market conditions
affecting the fair value of the Loan Interest.
Other Portfolio holdings (other than short term obligations, but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by 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.
HOW TO BUY FUND SHARES
- - ------------------------------------------------------------------------------
The Fund is engaged in a continuous public offering of its shares at net asset
value without an initial sales charge. The Fund does not currently intend to
list its shares on any national securities exchange. The Principal Underwriter,
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110, will make
payments from its own assets to certain financial service firms who have sales
agreements with the Principal Underwriter ("Authorized Firms"). In addition, an
early withdrawal charge, which is paid to EVD, will be imposed on most shares
held for less than four years which are accepted for repurchase pursuant to a
tender offer, as set forth under "Early Withdrawal."
From time to time the Fund may suspend the continuous offering of its shares.
During any such suspension, shareholders who reinvest their distributions in
additional shares will be permitted to continue such reinvestments, and the Fund
may permit tax sheltered retirement plans which own shares to purchase
additional shares of the Fund.
HOW TO BUY SHARES FOR CASH. Investors may purchase shares of the Fund through
Authorized Firms at the net asset value per share of the Fund next determined
after an order is effective, which, as of October 13, 1995, was $10.03. Pursuant
to its Distribution Agreement with EVD, the Fund has authorized EVD to
distribute its shares on a "best efforts" basis through Authorized Firms. EVD
will furnish the names of Authorized Firms to an investor upon request. An
Authorized Firm may charge their customers a fee in connection with transactions
executed by that Firm.
EVD compensates the Authorized Firms at the rate of 3.0% of the dollar amount of
the shares being purchased.
If the shares remain outstanding for at least one year from the date of their
original purchase, EVD will compensate the Authorized Firms at an annual rate,
paid quarterly, equal to .10% for the second year, .15% for the third year, .20%
for the fourth year, .25% for the fifth year and .30% for the sixth year and
subsequent years, of the value of Fund shares sold by such Authorized Firms and
remaining outstanding. Compensation paid to Authorized Firms at the time of
purchase and the quarterly payments mentioned above do not represent an
additional expense to shareholders since such payments will be made from BMR's,
EVD's and Eaton Vance's own assets, which may include amounts received by EVD as
early withdrawal charges, amounts received by BMR under its Advisory Agreement
with the Portfolio and amounts received by Eaton Vance under its Administration
Agreement with the Fund. As at the fiscal year ended December 31, 1994, EVD had
made compensation payments to Authorized Firms in the aggregate amount of
approximately $57,245,400 since inception of the Fund. (Prior to February 22,
1995, the rate of compensation was different.) See "Early Withdrawal." The
compensation paid to Authorized Firms and EVD, including the compensation paid
at the time of purchase, the quarterly payments mentioned above, any additional
incentives mentioned below, and the early withdrawal charge, if any, will not in
the aggregate exceed the applicable limit (currently 8%), unless the approval of
the National Association of Securities Dealers, Inc. ("NASD") has been received.
The Principal Underwriter may also, from time to time, at its own expense,
provide additional cash incentives to Authorized Firms which employ registered
representatives who sell a minimum dollar amount of the Fund's shares and/or
shares of other funds distributed by the Principal Underwriter. Upon NASD
approval, the Principal Underwriter may provide non-cash incentives to
Authorized Firms.
An initial investment in the Fund must be at least $5,000 ($2,000 in the case of
Individual Retirement Accounts). Once an account has been established, the
investor may send investments of $50 or more at any time directly to the Fund's
Transfer Agent as follows: The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104. See "Eaton Vance Shareholder Services".
The Fund may suspend the offering of shares at any time and may refuse any order
for the purchase of shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at the then current net asset value. The minimum value of securities
(or securities and cash) accepted for deposit is $5,000. Securities accepted
will be sold by IBT as agent for the account of their owner on the day of their
receipt by IBT or as soon thereafter as possible. The number of Fund shares to
be issued in exchange for securities will be the aggregate proceeds from the
sale of such securities divided by the applicable net asset value per Fund share
on the day such proceeds are received. Eaton Vance will use reasonable efforts
to obtain the then current market price for such securities but does not
guarantee the best available price. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through EVD or an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from EVD or Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C Eaton Vance Prime Rate Reserves
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: Eaton Vance Prime Rate Reserves
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities to IBT. Eaton
Vance reserves the right to reject any securities. Exchanging securities for
Fund shares may create a taxable gain or loss. Each investor should consult his
or her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
USE OF PROCEEDS. As of the date of this Prospectus, the net proceeds from the
sale of the Fund's shares currently outstanding were approximately $893,550,678,
substantially all of which is now invested in the Portfolio. The Portfolio
invests its assets in Loan Interests. Prior to its investment in the Portfolio,
sales of Fund shares were suspended between November 1, 1989 and July 30, 1990
and between October 19, 1990 to March 18, 1991 to allow the Fund to more fully
invest its assets in Loan Interests. The Fund may suspend sales of its shares in
the future to allow the Portfolio to more fully invest in Loan Interests.
Proceeds from the continuous offering of Fund shares will be used to increase
the Fund's interest in the Portfolio. The investment in interests in Loans and
Unsecured Loans of any additional net proceeds that the Portfolio receives from
the Fund may take one to three months, up to a maximum of six months, from the
date the Portfolio receives such proceeds. Pending such investment, the proceeds
will be held in cash or invested in investment grade short-term debt
obligations.
TENDER OFFERS TO PURCHASE SHARES
- - ------------------------------------------------------------------------------
It is presently contemplated by the Board of Trustees, recognizing the
likelihood that a secondary market for the Fund's shares will not exist, that
the Fund may take actions which will provide liquidity to shareholders. The Fund
may from time to time make tender offers at net asset value for the purchase of
all or a portion of its shares. The price will be established at the close of
business on the last day the tender offer is open. The Fund's Trustees presently
intend each quarter to consider the making of such tender offers. However, there
are no assurances that the Fund's Board of Trustees will, in fact, decide to
undertake the making of such a tender offer. The Fund's assets consist primarily
of its interest in the Portfolio. Therefore, in order to finance the repurchase
of Fund shares pursuant to such tender offers, the Fund will find it necessary
to liquidate all or a portion of its interest in the Portfolio. Because
interests in the Portfolio may not be transferred, the Fund may withdraw a
portion of its interest only pursuant to tender offers of the Portfolio. The
Fund will not conduct a tender offer for Fund shares unless the Portfolio
simultaneously conducts a tender offer for Portfolio interests. The Portfolio's
Trustees presently intend each quarter to consider the making of such tender
offers. However, there are no assurances that the Portfolio's Board of Trustees
will, in fact, decide to undertake the making of such a tender offer. The Fund
cannot make a tender offer larger than the Portfolio's. The Portfolio will make
tender offers, if any, to all of its investors, including the Fund, on the same
terms, which practice may affect the size of the Portfolio's offers. Subject to
the Portfolio's investment restriction with respect to borrowings, the Portfolio
may borrow money or issue debt obligations to finance its repurchase obligations
pursuant to any such tender offers.
The Fund expects that there will ordinarily be no secondary market for the
Fund's shares and that periodic tender offers will be the only source of
liquidity for Fund shareholders. Moreover, the Principal Underwriter is
prohibited under applicable law from making a market in Fund shares while the
Fund is making either a public offering of or a tender offer to purchase shares.
Similarly, the Principal Underwriter prohibits dealers that have signed sales
agreements to sell Fund shares from making a market in such shares.
Nevertheless, if a secondary market develops for shares of the Fund, the market
price of the shares may vary from net asset value from time to time. The market
price may be affected by, among other factors, relative demand and supply of
shares and the performance of the Fund, especially as it affects the yield on
and investment performance of the shares of the Fund. Should there be a
secondary market for Fund shares, it is expected that shares of the Fund will
not trade at a premium because the Fund intends to engage in a continuous
offering of its shares at net asset value. A tender offer for shares of the Fund
at net asset value, as contemplated and described above, is expected to reduce
any spread between net asset value and market price that may otherwise develop.
However, there are no assurances that tender offers would result in the Fund's
shares trading at a price which is equal to or approximates their net asset
value.
Although the Trustees believe that tender offers generally would be beneficial
to the Fund's shareholders, the acquisition of shares by the Fund will decrease
the total assets of the Fund and therefore have the possible effect of
increasing the Fund's expense ratio. Furthermore, if the Portfolio borrows to
finance the making of tender offers for the Portfolio's interests, interest on
such borrowing will reduce the Fund's net investment income.
There are circumstances under which the purchase of shares in a tender offer,
even if approved by the Board and made to shareholders, may not be effected by
the Fund. These circumstances would arise if, in the judgment of the Trustees,
(i) the Fund would not be able to liquidate the requisite portion of its
interest in the Portfolio and/or such liquidation would have an adverse effect
on the net asset value of the Fund to the detriment of the non-tendering Fund
shareholders; (ii) the Fund's income would be taxed at the Fund level in
addition to the taxation of shareholders who receive dividends and distributions
from the Fund (see "Distributions and Taxes") as a result of the Fund being
deemed a taxable entity occasioned by the impairment of the Fund's status as a
regulated investment company under the Internal Revenue Code of 1986, as
amended; or (iii) there exists (a) a limitation imposed by federal or state
authorities on the extension of credit by lenders which affects the Fund, the
Borrowers of Loans in which the Portfolio holds Loan Interests or the
Intermediate Participants, (b) a banking moratorium declared by federal or state
authorities or any suspension of payments by banks in the United States, (c) a
legal action or proceeding instituted or threatened which materially adversely
affects the Fund, (d) a legal action or proceeding instituted or threatened
which challenges such purchase, (e) an international or national calamity, such
as commencement of war or armed hostilities, which directly or indirectly
involves the United States, or (f) an event or condition not listed herein which
would materially adversely affect the Fund if the tendered shares are purchased.
The Fund has obtained an exemption from the Securities and Exchange Commission
relating to tender offers which includes representations by the Fund that no
secondary market for Fund shares is expected to exist. This exemption is
conditioned on the absence of a secondary market. In the event that
circumstances arise under which the Fund does not conduct periodic tender
offers, the Board would consider alternative means of providing liquidity for
shareholders. Such action would include an evaluation of any secondary market
that then existed and a determination as to whether such market provided
liquidity for shareholders. If the Board determines that such market, if any,
fails to provide liquidity for Fund shareholders, the Board expects that it will
consider all then available alternatives to provide such liquidity. Among the
alternatives which the Board would consider is the listing of the Fund's shares
on a major domestic stock exchange or on the NASDAQ National Market System in
order to provide such liquidity. The Board may also consider causing the Fund to
repurchase its shares from time to time in open-market or private transactions
when it can do so on terms that represent a favorable investment opportunity. In
any event, the Board expects it will cause the Fund to take whatever action it
deems necessary or appropriate to provide liquidity for Fund shareholders in
light of the facts and circumstances existing at such time.
If the Portfolio must liquidate portfolio securities in order to meet its tender
obligations, the Portfolio, and therefore the Fund, may realize gains and
losses. Such gains may be realized on securities held for less than three
months. Because less than 30% of the Fund's annual gross income must be derived
from the sale or disposition of securities held less than three months (in order
to retain the Fund's tax status as a regulated investment company), such gains
could reduce the ability of the Portfolio to sell other securities held for less
than three months that the Portfolio may wish to sell in the ordinary course of
its portfolio management, which may adversely affect the Portfolio's yield.
Each tender offer will be made and shareholders notified in accordance with the
requirements of the Securities Exchange Act of 1934, as amended, and the 1940
Act, either by publication or mailing or both. Each offering document will
contain such information as is prescribed by such laws and the rules and
regulations promulgated thereunder. The repurchase of tendered shares by the
Fund is a taxable event. See "Distributions and Taxes." The Fund will pay all
costs and expenses associated with the making of any such tender offers by the
Fund. An Early Withdrawal Charge will be imposed on most shares accepted for
tender which have been held for less than four years. See "Early Withdrawal".
EARLY WITHDRAWAL
- - ------------------------------------------------------------------------------
An Early Withdrawal Charge to recover distribution expenses will be charged in
connection with most shares held for less than four years which are accepted by
the Fund for repurchase pursuant to tender offers. The Early Withdrawal Charge
will be imposed on those shares accepted for tender the amount of which exceeds
the aggregate value at the time the tender is accepted of (a) all shares in the
account purchased more than four years prior to such acceptance, (b) all shares
in the account acquired through reinvestment of distributions, and (c) the
increase, if any, of value of all other shares in the account (namely those
purchased within the four years preceding the acceptance) over the purchase
price of such shares. The Early Withdrawal Charge will be paid to EVD. In
determining whether an Early Withdrawal Charge is payable, it is assumed that
the acceptance of a repurchase offer would be made from the earliest purchase of
shares. Any Early Withdrawal Charge which is required to be imposed will be made
in accordance with the following schedule:
YEAR OF REPURCHASE
AFTER PURCHASE EARLY WITHDRAWAL CHARGE
------------------------------------------------------------------------------
First 3.00%
Second 2.50%
Third 2.00%
Fourth 1.00%
Fifth and following 0%
No Early Withdrawal Charge will be imposed on shares purchased on or after
January 27, 1995 and tendered following the death of all beneficial owners of
such shares, provided the redemption is requested within one year of death (a
death certificate and other applicable documents may be required). At the time
of acceptance of the tender offer, the shareholder must notify the Transfer
Agent either directly or through EVD that the Early Withdrawal Charge should be
waived. Such waiver, subject to confirmation of the investor's entitlement, will
then be granted; otherwise, the waiver will be lost.
EXCHANGES: The Fund may make available to tendering shareholders the privilege
of exchanging Fund shares at net asset value for shares of certain open-end
investment companies managed by Eaton Vance or BMR which have a contingent
deferred sales charge identical to that of the Early Withdrawal Charge imposed
on tendering Fund shareholders. The funds currently available for such exchange
privilege are: EV Marathon Strategic Income Fund and Class I shares of any EV
Marathon Limited Maturity Tax Free Fund. No Early Withdrawal Charge will be
imposed on shareholders choosing to exchange their Fund shares for shares of any
such fund; however, the exchanging shareholder will be subject to the applicable
contingent deferred sales charge imposed by such fund. For the purpose of
calculating the applicable contingent deferred sales charge, the purchase of
shares of such fund will be deemed to have occurred at the time of the purchase
of the Fund shares. Any such exchange will be made on the basis of the relative
net asset value per share of each fund at the time of exchange, provided that
such exchange offers are available only in states where shares of the fund
acquired may legally be sold.
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. 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.
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.
THE FOLLOWING EXAMPLE WILL ILLUSTRATE THE OPERATION OF THE EARLY WITHDRAWAL
CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES FOR
CASH THROUGH AN AUTHORIZED FIRM AND THAT 21 MONTHS LATER THE VALUE OF THE
ACCOUNT HAS GROWN THROUGH THE REINVESTMENT OF DIVIDENDS AND CAPITAL
APPRECIATION TO $12,000. THE INVESTOR THEN MAY SUBMIT FOR REPURCHASE PURSUANT
TO A TENDER OFFER UP TO $2,000 OF SHARES WITHOUT INCURRING AN EARLY WITHDRAWAL
CHARGE. IF THE INVESTOR SHOULD SUBMIT FOR REPURCHASE PURSUANT TO A TENDER
OFFER $5,000 OF SHARES, AN EARLY WITHDRAWAL CHARGE WOULD BE IMPOSED ON $3,000
OF THE SHARES SUBMITTED. THE CHARGE WOULD BE IMPOSED AT THE RATE OF 2.5%
BECAUSE IT IS IN THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE CHARGE
WOULD BE $75.
During the Fund's fiscal year ended December 31, 1994, EVD received $423,222 in
Early Withdrawal Charges.
REPORTS TO SHAREHOLDERS
- - ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish its shareholders with
information necessary for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- - ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. Shares are held in non- certificated form by
the Fund's Transfer Agent for the account of the shareholder. The Fund will not
issue share certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE TO The Shareholder Services Group,
Inc.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2 or in writing to The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104. The currently effective option will appear on each
account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, all dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
EATON VANCE SHAREHOLDER SERVICES
- - ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $5,000 minimum
investment has been made, checks of $50 or more payable to the order of Eaton
Vance Prime Rate Reserves may be mailed directly to The Shareholder Services
Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether or
not distributions are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
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.
REINVESTMENT PRIVILEGE: A shareholder whose shares have been repurchased
pursuant to a tender offer may reinvest, with credit for any Early Withdrawal
Charge paid on the value of the repurchased shares, any portion or all of his or
her tender proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such repurchase.
For purposes of determining any Early Withdrawal Charge upon acceptance of a
subsequent tender offer, the shareholder's prior period of ownership will be
included in this calculation. Shares are sold to a reinvesting shareholder at
the net asset value next determined following timely receipt of a written
purchase order by the Principal Underwriter or by the Fund (or by the Fund's
Transfer Agent). The amount of any Early Withdrawal Charge related to the prior
purchase will be credited to the shareholder's account and also reinvested at
the then current net asset value. A reinvesting shareholder may realize a gain
or loss for federal tax purposes as a result of such prior sale in the tender
offer, but to the extent that the shareholder realizes a loss upon a repurchase
of shares by the Fund and the proceeds are reinvested in shares of the Fund (or
other shares of the Fund are purchased through reinvestment of dividends or
otherwise) within the period beginning 30 days before and ending 30 days after
the date of the repurchase by the Fund, some or all of the loss generally will
be disallowed under the "wash sale" rules of federal income tax law, depending
upon the relationship between the number of shares repurchased and the number of
shares sold by the Fund.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
PENSION AND PROFIT SHARING PLANS for self-employed individuals,
corporations and non-profit organizations;
INDIVIDUAL RETIREMENT ACCOUNT PLANS for individuals and their non-employed
spouses; and
403(B) RETIREMENT PLANS for employees of public school systems, hospitals,
colleges and other non-profit organizations meeting certain requirements of
the Internal Revenue Code.
Detailed information concerning these plans 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. Under each
tax-sheltered retirement plan, all distributions will be automatically
reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- - ------------------------------------------------------------------------------
DISTRIBUTIONS
Distributions will be declared daily and paid monthly. Realized net capital
gains (the Fund's realized net capital gains generally consist of the realized
net capital gains from the sale of portfolio assets allocated to the Fund by the
Portfolio), if any, will be distributed at least annually. Substantially all of
the investment income allocated to the Fund by the Portfolio, less its expenses,
will be declared daily as a distribution to shareholders of record at the time
of declaration. Daily distribution crediting will commence on the 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 Authorized Firms.
Such distributions, whether received in cash or reinvested in additional shares,
will ordinarily be paid at the end of each month. Realized capital gains, if
any, will usually be distributed in December after offset by any capital loss
carryovers.
TAXES
In order to qualify as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"), the Fund must satisfy certain
requirements relating to the sources of its income, the distribution of its
income, and the diversification of its assets. In satisfying these requirements,
the Fund will treat itself as owning its proportionate share of each of the
Portfolio's assets and as entitled to the income of the Portfolio properly
attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
does not pay federal income or excise taxes. Further, under current law,
provided that the Fund qualifies as a regulated investment company for federal
tax purposes and the Portfolio is treated as a partnership for Massachusetts and
federal tax purposes, neither the Fund nor the Portfolio is liable for any
income, corporate excise or franchise tax in the Commonwealth of Massachusetts.
Certain distributions of the Fund which are paid in January of a given year but
are declared in the prior October, November or December to shareholders of
record on a date in such a month will be taxable to shareholders as if received
on December 31.
Distributions of ordinary income and the excess of net short-term capital gain
over net long-term capital loss will be treated as ordinary income in the hands
of shareholders. Distributions of the excess of net long-term capital gain over
net short-term capital loss are taxable to shareholders as long-term capital
gain, regardless of the length of time the shares of the Fund have been held by
such shareholders. Distributions will be taxed as described above, whether
received in shares or in cash. It is not expected that any portion of such
distributions will be eligible for the corporate dividends-received deduction.
Distributions that are treated for federal income tax purposes as a return of
capital will reduce each shareholder's basis in his shares and, to the extent
the return of capital exceeds such basis, will be treated as gain to the
shareholder from a sale of shares.
In general, any gain or loss realized upon a taxable disposition of shares of
the Fund held by a shareholder as a capital asset will be treated as long-term
capital gain or loss if the shares have been held for more than one year and
otherwise as short-term capital gain or loss. Different tax consequences may
apply for tendering and nontendering shareholders in connection with a tender
offer, and these consequences will be disclosed in the related offering
documents. For example, it is possible that tenders 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. Shareholders may wish to consult their tax advisers
prior to tendering.
The Fund will send written notices to shareholders regarding the federal income
tax status of all distributions made during each calendar year.
Shareholders should consult their tax advisers regarding the applicability of
state or local taxes with respect to an investment in the Fund.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
- - --------------------------------------------------------------------------------
PAGE
General Information and History .......................................... 2
Additional Information about Investment Policies ......................... 2
Investment Restrictions .................................................. 4
Trustees and Officers .................................................... 5
Control Persons and Principal Holders of Shares .......................... 7
Investment Advisory and Other Services ................................... 7
Determination of Net Asset Value ......................................... 10
Portfolio Trading ........................................................ 10
Taxes .................................................................... 11
Custodian ................................................................ 12
Transfer and Dividend Paying Agent and Registrar ......................... 13
Auditors ................................................................. 13
Performance Information .................................................. 13
Other Information ........................................................ 15
Financial Statements ..................................................... 16
Appendix A ............................................................... A-1
- - --------------------------------------------------------------------------------
<PAGE>
[LOGO]
EATON VANCE
- - -----------------
MUTUAL FUNDS
EATON VANCE
PRIME RATE
RESERVES
PROSPECTUS
NOVEMBER 3, 1995
EATON VANCE
PRIME RATE RESERVES
24 FEDERAL STREET
BOSTON, MA 02110
- - --------------------------------------------------------------------------------
INVESTMENT ADVISER OF SENIOR DEBT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE PRIME RATE RESERVES
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 24 Federal Street, Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
BANKING COUNSEL
Mayer, Brown & Platt, 787 Seventh Avenue, New York, NY 10019
PRP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
November 3, 1995
EATON VANCE PRIME RATE RESERVES
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
TABLE OF CONTENTS
Page
General Information and History ....................................... 2
Additional Information about Investment Policies ...................... 2
Investment Restrictions ............................................... 4
Trustees and Officers ................................................. 5
Control Persons and Principal Holders of Shares ....................... 7
Investment Advisory and Other Services ................................ 7
Determination of Net Asset Value ...................................... 10
Portfolio Trading ..................................................... 10
Taxes ................................................................. 11
Custodian ............................................................. 12
Transfer and Dividend Paying Agent and Registrar ...................... 13
Auditors .............................................................. 13
Performance Information ............................................... 13
Other Information ..................................................... 15
Financial Statements .................................................. 16
Appendix A ............................................................ a-1
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE PRIME RATE RESERVES (THE "FUND")
DATED NOVEMBER 3, 1995, AS SUPPLEMENTED FROM TIME TO TIME. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING THE FUND'S PRINCIPAL
UNDERWRITER, EATON VANCE DISTRIBUTORS, INC. (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
<PAGE>
GENERAL INFORMATION AND HISTORY
Eaton Vance Prime Rate Reserves (the "Fund") is a closed-end, non-
diversified management investment company which continuously offers its shares
of beneficial interest to the public. The Fund was organized as a business trust
under the laws of the Commonwealth of Massachusetts on May 2, 1989, and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund's principal office is located at 24 Federal Street, Boston,
Massachusetts 02110.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
The 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. The Fund currently
seeks to achieve its investment objective by investing its assets in Senior Debt
Portfolio (the "Portfolio"), which has the same investment objective as the
Fund. The Fund is subject to the same investment policies as those of the
Portfolio. Capitalized terms used in this Statement of Additional Information
and not otherwise defined have the meanings given them in the Fund's Prospectus.
Lending Fees. In the process of buying, selling and holding Loan Interests the
Portfolio may receive and/or pay certain fees. These fees are in addition to
interest payments received and may include facility fees, commitment fees,
commissions and prepayment penalty fees. When the Portfolio buys a Loan Interest
it may receive a facility fee and when it sells a Loan Interest it may pay a
facility fee. On an ongoing basis, the Portfolio may receive a commitment fee
based on the undrawn portion of the underlying line of credit portion of a Loan.
In certain circumstances, the Portfolio may receive a prepayment penalty fee
upon the prepayment of a Loan by a Borrower. Other fees received by the
Portfolio may include covenant waiver fees and covenant modification fees.
Borrower Covenants. A Borrower must comply with various restrictive covenants
contained in a loan agreement or note purchase agreement between the Borrower
and the lender or lending syndicate (the "Loan Agreement"). Such covenants, in
addition to requiring the scheduled payment of interest and principal, may
include restrictions on dividend payments and other distributions to
stockholders, provisions requiring the Borrower to maintain specific minimum
financial ratios, and limits on total debt. In addition, the Loan Agreement may
contain a covenant requiring the Borrower to prepay the Loan with any free cash
flow. Free cash flow is generally defined as net cash flow after scheduled debt
service payments and permitted capital expenditures, and includes the proceeds
from asset dispositions or sales of securities. A breach of a covenant which is
not waived by the Agent, or by the lenders directly, as the case may be, is
normally an event of acceleration; i.e., the Agent, or the lenders directly, as
the case may be, has the right to call the outstanding Loan. The typical
practice of an Agent or a lender in relying exclusively or primarily on reports
from the Borrower may involve a risk of fraud by the Borrower. In the case of a
Loan Interest in the form of a participation interest, the agreement between the
buyer and seller may limit the rights of the holder of the Loan Interest to vote
on certain changes which may be made to the Loan Agreement, such as waiving a
breach of a covenant. However, the holder of a Loan Interest will, in almost all
cases, have the right to vote on certain fundamental issues such as changes in
principal amount, payment dates and interest rate.
Administration of Loans. In a typical Loan the Agent administers the terms of
the Loan Agreement. In such cases, the Agent is normally responsible for the
collection of principal and interest payments from the Borrower and the
apportionment of these payments to the credit of all institutions which are
parties to the Loan Agreement. The Portfolio will generally rely upon the Agent
or an Intermediate Participant to receive and forward to the Portfolio its
portion of the principal and interest payments on the Loan. Furthermore, unless
under the terms of a Participation Agreement the Portfolio has direct recourse
against the Borrower, the Portfolio will rely on the Agent and the other members
of the lending syndicate to use appropriate credit remedies against the
Borrower. The Agent is typically responsible for monitoring compliance with
covenants contained in the Loan Agreement based upon reports prepared by the
Borrower. The seller of the Loan Interest usually does, but is often not
obligated to, notify holders of Loan Interests of any failures of compliance.
The Agent may monitor the value of the collateral and, if the value of the
collateral declines, may accelerate the Loan, may give the Borrower an
opportunity to provide additional collateral or may seek other protection for
the benefit of the participants in the Loan. The Agent is compensated by the
Borrower for providing these services under a Loan Agreement, and such
compensation may include special fees paid upon structuring and funding the Loan
and other fees paid on a continuing basis. With respect to Loan Interests for
which the Agent does not perform such administrative and enforcement functions,
the Portfolio will perform such tasks on its own behalf, although a Collateral
Bank will typically hold any collateral on behalf of the Portfolio and the other
lenders pursuant to the applicable Loan Agreement.
A financial institution's appointment as Agent may usually be terminated in
the event that it fails to observe the requisite standard of care or becomes
insolvent, enters Federal Deposit Insurance Corporation ("FDIC") receivership,
or, if not FDIC insured, enters into bankruptcy proceedings. A successor Agent
would generally be appointed to replace the terminated Agent, and assets held by
the Agent under the Loan Agreement should remain available to holders of Loan
Interests. However, if assets held by the Agent for the benefit of the Portfolio
were determined to be subject to the claims of the Agent's general creditors,
the Portfolio might incur certain costs and delays in realizing payment on a
Loan Interest, or suffer a loss of principal and/or interest. In situations
involving Intermediate Participants similar risks may arise.
Prepayments. The Loans in which the Portfolio acquires Loan Interests will
usually require, in addition to scheduled payments of interest and principal,
the prepayment of the Loan from free cash flow, as defined above. The degree to
which Borrowers prepay Loans, whether as a contractual requirement or at their
election, may be affected by general business conditions, the financial
condition of the Borrower and competitive conditions among lenders, among
others. As such, prepayments cannot be predicted with accuracy. Upon a
prepayment, either in part or in full, the actual outstanding debt on which the
Portfolio derives interest income will be reduced. However, the Portfolio may
receive both a prepayment penalty fee from the prepaying Borrower and a facility
fee upon the purchase of a new Loan Interest with the proceeds from the
prepayment of the former. Prepayments generally will not materially affect the
Fund's performance because the Portfolio should be able to reinvest prepayments
in other Loan Interests in floating rate Loans that have similar or identical
yields and because receipt of such fees may mitigate any adverse impact on the
Fund's yield.
Interest Rate Transactions. The Portfolio may enter into interest rate swaps on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or its liabilities. For example, if the Portfolio holds a
Loan Interest with an interest rate that is reset only once each year, it may
swap the right to receive interest at this fixed rate for the right to receive
interest at a rate that is reset daily. Such a swap position would offset
changes in the value of the Loan Interest because of subsequent changes in
interest rates. This would protect the Portfolio from a decline in the value of
the Loan Interest due to rising interest rates, but would also limit its ability
to benefit from falling interest rates.
The Portfolio will enter into interest rate swaps only on a net basis, i.e.,
the two payment streams are netted out, with the Portfolio receiving or paying,
as the case may be, only the net amount of the two payments. Inasmuch as these
transactions are entered into for good faith hedging purposes and because a
segregated account will be used, the Portfolio will not treat them as being
subject to the Portfolio's borrowing restrictions. The net amount of the excess,
if any, of the Portfolio's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis and an amount of cash
or liquid high grade debt securities having an aggregate net asset value at
least equal to the accrued excess will be maintained in a segregated account by
the Portfolio's custodian. The Portfolio will not enter into any interest rate
swap unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto is considered to be investment grade by BMR.
If there is a default by the other party to such a transaction, the Portfolio
will have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing 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 Loan Interests and its rights and obligations to receive and
pay interest pursuant to interest rate swaps.
Credit Risks. As of August 31, 1995 and pursuant to the closing of a
recapitalization effective May 31, 1995 of London Fog Industries, Inc. (the
"Company"), the Portfolio had Loan Interests in Loans to the Company which were
carried on the books at less than par, although the Company has not defaulted on
these Loans.
On December 23, 1993 (prior to the Fund's investment in the Portfolio), the
Fund sold its Best Products Co., Inc. ("Best") Loan Interest, and the purchaser
thereof assumed all of the Fund's obligations and liabilities (including costs,
expenses and damage awards relating to litigation matters) with respect to the
Loan Interest pursuant to the contract transferring ownership thereof. Best had
previously petitioned for relief under Chaper 11 of the Bankruptcy Code. The
Resolution Trust Corporation ("RTC") initiated litigation in the U.S. Bankruptcy
Court for the Southern District of New York (the "Court") against various
entities, including the Fund. Best's Plan of Reorganization (the "Plan") was
confirmed effective as of June 14, 1994. On January 20, 1995, the Court
dismissed as moot an appeal of the RTC from the order confirming the Plan. The
RTC has appealed the dismissal order and the appeal is currently pending before
the U.S. Court of Appeals for the Second Circuit.
In the last decade, the federal agencies that regulate banking institutions
subjected certain loans made in connection with highly leveraged transactions to
increased scrutiny during bank examinations. Such regulatory action resulted in
certain banks disposing of Loan Interests at low prices. If such regulatory
action became likely again, banks might decide to reduce the amount of Loans to
highly leveraged Borrowers, which might reduce the availability of Loans
suitable for the Portfolio's ownership. As of the date of this Statement of
Additional Information, such Loan Interests constituted substantially all of the
Portfolio's Loan Interests.
INVESTMENT RESTRICTIONS
The Fund's investment restrictions 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 Statement of
Additional Information 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 shares are present or represented at the meeting or (b) more than 50% of the
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 restrictions (1), (2) and (3) above and
nonfundamental investment policy (a) below, the arrangements (including escrow,
margin and collateral arrangements) made by the Fund with respect to
transactions in all types of options and futures contract transactions shall not
be considered to be (i) a borrowing of money or the issuance of securities
(including senior securities) by the Fund, (ii) a pledge of its assets, (iii)
the purchase of a security on margin, or (iv) a short sale or position. The Fund
has no present intention of engaging in options or futures transactions.
Although permitted pursuant to investment restriction (2), the Fund has no
present intention of issuing preferred shares.
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), the Fund will construe the phrase "more than 25%" to
be "25% or more".
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all or part of its investable assets in a management investment
company 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 numbered 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, which as used in this
Statement of Additional Information means the lesser of (a) 67% of the
outstanding voting securities of the Portfolio present or represented by proxy
at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or (b)
more than 50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in the
1940 Act. Whenever the Fund is requested to vote on a change in the investment
restrictions of the Portfolio, the Fund will hold a meeting of Fund shareholders
and will cast its vote as instructed by the shareholders.
The Fund and the Portfolio have each adopted the following nonfundamental
investment policies 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: (a) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it either owns an equal amount of such securities or owns
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short; (b) purchase oil, gas or other mineral leases or purchase
partnership interests in oil, gas or other mineral exploration or development
programs; or (c) invest more than 10% of its total assets (taken at current
value) in the securities of issuers which together with any predecessors have a
record of less than three years continuous operation, except U.S. Government
securities, securities of issuers which are rated by at least one nationally
recognized statistical rating organization, municipal obligations and
obligations issued or guaranteed by any foreign government or its agencies or
instrumentalities.
In addition, neither the Fund nor the Portfolio currently intends to invest
more than 10% of its total assets in Loans to any single Borrower.
Whenever an investment policy or investment restriction set forth in this
Statement of Additional Information states a maximum percentage of the Fund's or
the Portfolio's assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage limitation or
standard shall be determined immediately after and as a result of its
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances will
not compel the Fund or the Portfolio to dispose of such security or other asset.
TRUSTEES AND OFFICERS
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 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR" or the "Investment Adviser"), a
wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Fund,
the Portfolio, BMR, Eaton Vance, EVC or EV, as defined in the 1940 Act, by
virtue of their affiliation with any one or more of the Fund, the Portfolio,
BMR, Eaton Vance, EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE FUND AND THE PORTFOLIO
JAMES B. HAWKES (53), President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and Director of EVC
and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
M. DOZIER GARDNER (62), Vice President and Trustee*
President of BMR, Eaton Vance and EV, and Director of EVC and EV. Director or
Trustee and officer of various investment companies managed by Eaton Vance or
BMR. Mr. Gardner was elected Vice President and Trustee of the Fund on
December 16, 1991.
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University, Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University, Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director of The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE FUND AND THE PORTFOLIO
JEFFREY S. GARNER (38), Vice President and Portfolio Manager
Vice President of BMR, Eaton Vance and EV.
WILLIAM CHISHOLM (35), Vice President of the Portfolio
Senior Trust Officer of the Bank of Nova Scotia Trust Company (Cayman)
Limited. Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Chisholm was elected Vice President of the Portfolio on June 19,
1995.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of Nova
Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman Islands,
British West Indies.
MICHEL NORMANDEAU (44), Vice President of the Portfolio
Assistant Manager -- Trust Services, The Bank of Nova Scotia Trust Company
(Cayman) Limited. Officer of various investment companies managed by Eaton
Vance or BMR. Mr. Normandeau was elected Vice President of the Portfolio on
June 19, 1995.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of Nova
Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman Islands,
British West Indies.
RAYMOND O'NEILL (33), Vice President of the Portfolio
Managing Director of IBT Trust and Custodian Services (Ireland) Limited since
January, 1995. Vice President, Atlantic Corporate Management Limited,
Warwick, Bermuda (1991-1994). Officer, The Bank of Bermuda Limited,
Hamilton, Bermuda (1987-1991). Officer of various investment companies
managed by Eaton Vance or BMR.
Address: Earlsfort Terrace, Dublin 2, Ireland.
JAMES L. O'CONNOR (49), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
BARBARA E. CAMPBELL (38), Assistant Treasurer
Assistant Vice President of BMR, Eaton Vance and EV since January 17, 1992;
employee of Eaton Vance since October 23, 1991. Audit Manager -- Financial
Services Industry Practice, Deloitte & Touche (1987-1991). Officer of various
investment companies managed by Eaton Vance or BMR. Ms. Campbell was elected
Assistant Treasurer of the Fund on December 16, 1991.
JANET E. SANDERS (59), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (32), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management &
Research Co. (1986-1991). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Fund on
March 27, 1995 and of the Portfolio on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr. Woodbury
was elected Assistant Secretary on June 19, 1995.
The fees and expenses of those Trustees of the Fund who are not members of
the Eaton Vance organization (the noninterested Trustees) are paid by the Fund.
(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, 1994, the Trustees of the Fund earned the
following compensation in their capacities as Trustees of the Fund and the other
funds in the Eaton Vance fund complex(1):
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FUND AND
NAME FROM FUND FUND COMPLEX
- - --- --------- -----------
Donald R. Dwight .................... $4,119(2) $135,000(4)
Samuel L. Hayes, III ................ 4,079(3) 142,500(5)
Norton H. Reamer .................... 4,002 135,000
John L. Thorndike ................... 4,140 140,000
Jack L. Treynor ..................... 4,247 140,000
- - ----------
(1) The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof.
(2) Includes $331 of deferred compensation.
(3) Includes $334 of deferred compensation.
(4) Includes $8,750 of deferred compensation.
(5) Includes $8,864 of deferred compensation.
Trustees of the Portfolio who are not affiliated with BMR may elect to defer
receipt of all or a percentage of their annual fees in accordance with the terms
of a Trustees Deferred Compensation Plan (the "Plan"). Under the Plan, an
eligible Trustee may elect to have his deferred fees invested by the Portfolio
in the shares of one or more funds in the Eaton Vance Family of Funds, and the
amount paid to the Trustees under the Plan will be determined based upon the
performance of such investments. Deferral of Trustees' fees in accordance with
the Plan will have a negligible effect on the Portfolio's assets, liabilities,
and net income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee.
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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SHARES
As of September 29, 1995, 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
September 29, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc. of New
Brunswick, New Jersey, was the record owner of approximately 42.7% 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 OTHER SERVICES
The Portfolio has engaged BMR to act as its investment adviser under an
Investment Advisory Agreement (the "Advisory Agreement"). Under the general
supervision of the Portfolio's Board of Trustees, BMR will carry out the
investment and reinvestment of the assets of the Portfolio, will furnish
continuously an investment program with respect to the Portfolio, will determine
which securities and loans should be purchased, sold or exchanged, and will
implement such determinations. BMR will furnish to the Portfolio investment
advice and office facilities, equipment and personnel for servicing the
investments of the Portfolio. BMR will compensate all Trustees and officers of
the Portfolio who are members of the BMR organization and who render investment
services to the Portfolio, and will also compensate all other BMR personnel who
provide research and investment services to the Portfolio. In return for these
services, facilities and payments, the Portfolio has agreed to pay BMR as
compensation under the Advisory Agreement a monthly fee in the amount of 19/240
of 1% (equivalent to 0.95% annually) of the average daily gross assets of the
Portfolio. In calculating the gross assets of the Portfolio for this purpose,
there will be deducted all liabilities of the Portfolio except the principal
amount of any indebtedness for money borrowed, including debt securities issued
by the Portfolio. While this advisory fee is greater than that paid by most
other funds, it is similar to fees paid by other closed-end funds investing
primarily in Loans and Loan Interests. On October 24, 1994, the Trustees of the
Portfolio voted to accept a waiver of BMR compensation 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 on an annual basis not exceed: (a) 0.95% of average daily gross
assets of the Portfolio up to and including $1 billion; (b) 0.90% of average
daily gross assets in excess of $1 billion up to and including $2 billion; and
(c) 0.85% of average daily gross assets in excess of $2 billion. The fee waiver
is indefinite, but could be removed or changed upon agreement of BMR and the
Portfolio's Board of Trustees at any time.
Prior to the close of business on February 21, 1995 (when the Fund
transferred substantially all of its assets to the Portfolio in exchange for an
interest in the Portfolio), the Fund retained Eaton Vance as its investment
adviser. For the fiscal year ended December 31, 1992, the Fund paid Eaton Vance
advisory fees aggregating $12,845,317, which was equal to 0.94% of the Fund's
average daily gross assets. For the fiscal year ended December 31, 1993, the
Fund paid Eaton Vance advisory fees aggregating $8,562,326, which was equal to
0.95% of the Fund's average daily gross assets. For the fiscal year ended
December 31, 1994, the Fund paid Eaton Vance advisory fees aggregating
$6,116,870, which was equal to 0.95% of the Fund's average daily gross assets.
As at December 31, 1994, the gross assets of the Fund were $631,990,687.
The Fund has engaged Eaton Vance to act as its administrator under an
Administration Agreement. 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 contemplated quarterly tender
offers and other administrative services necessary to conduct the Fund's
business. In return for these services, facilities and payments, the Fund pays
Eaton Vance as compensation under the Administration Agreement a monthly fee in
the amount of 1/48 of 1% (equivalent to 0.25% annually) of the average daily
gross assets of the Portfolio attributable to the Fund. In calculating the gross
assets of the Portfolio for this purpose, there will be deducted all liabilities
of the Portfolio except the principal amount of any indebtedness for money
borrowed, including debt securities issued by the Portfolio. For the fiscal
years ended December 31, 1994, 1993 and 1992, the Fund paid Eaton Vance
administration fees of $1,609,703, $2,253,980 and $3,429,255, respectively,
which was equal to 0.25% of the Fund's average daily gross assets for each
fiscal year.
IBT Trust Company (Cayman), Ltd. maintains the Portfolio's principal office
and certain of its records and provides administrative assistance in connection
with meetings of the Portfolio's Trustees and interestholders, for which
services the Portfolio pays $1,500 per annum.
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 EVD 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 tender
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 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.
Commitments have been made to certain state securities authorities that
Eaton Vance will reimburse the Fund for certain expenses paid or incurred by the
Fund in any fiscal year of the Fund that exceeds the expense limitation
requirements of such states. These commitments may be amended or rescinded by
Eaton Vance in response to changes in the requirements of the various states or
for other reasons.
The Advisory Agreement and Administration Agreement will remain in effect
until February 28, 1996. The Portfolio's Advisory Agreement may be continued
from year to year thereafter so long as such continuance after February 28, 1996
is approved at least annually (i) by the vote of a majority of the Trustees of
the Portfolio who are not "interested persons" of the Portfolio or BMR cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Trustees of the Portfolio or by vote of a majority of
the outstanding interests of the Portfolio. The Fund's Administration Agreement
may be continued from year to year after February 28, 1996 so long as such
continuance is approved 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.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1996, the Voting Trustees of which are Messrs. Clay,
Brigham, Gardner, Hawkes and Rowland. The Voting Trustees have unrestricted
voting rights for the election of Directors of EVC. All of the outstanding
voting trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers and Directors of EV and
EVC. As of September 29, 1995, Messrs. Clay, Gardner and Hawkes each owned 24%
of such voting trust receipts, and Messrs. Rowland and Brigham owned 15% and
13%, respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and
Otis are officers or Trustees of the Fund and the Portfolio and are members of
the EVC, BMR, Eaton Vance and EV organizations. Messrs. Garner, Murphy, O'Connor
and Woodbury and Ms. Campbell and Ms. Sanders are officers of the Fund and the
Portfolio and are members of the BMR, Eaton Vance and EV organizations. BMR will
receive the fees paid under the Advisory Agreement and Eaton Vance will receive
the fees paid under the Administration Agreement, and its wholly-owned
subsidiary, Eaton Vance Distributors, Inc., as Principal Underwriter, will
receive the Early Withdrawal Charges payable upon the repurchase of shares of
the Fund.
EVC owns all of the stock of Marblehead Energy Corp., which engages in oil
and gas operations, and 77.3% of the stock of Investors Bank & Trust Company,
custodian of the Fund and the Portfolio, which provides custodial, trustee and
other fiduciary services to investors, including individuals, employee benefit
plans, corporations, investment companies, savings banks and other institutions.
In addition, Eaton Vance owns all of the stock of Northeast Properties, Inc.,
which is engaged in real estate investment, consulting and management. EVC owns
all of the stock of Fulcrum Management, Inc. and MinVen Inc., which are engaged
in the development of precious metal properties. EVC, Eaton Vance, BMR and EV
may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Fund or the Portfolio and such banks.
DETERMINATION OF NET ASSET VALUE
Each investor in the Portfolio, including the Fund, may add to its
investment in the Portfolio on each day the New York Stock Exchange (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 tender offers) for the current
Portfolio Business Day will then be recorded. The 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.
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 Loan Interests from major international banks,
selected domestic regional banks, insurance companies, finance companies and
other financial institutions. In selecting financial institutions from which
Loan Interests may be acquired, BMR will consider, among other factors, the
financial strength, professional ability, level of service and research
capability of the institution. While these financial institutions are generally
not required to repurchase Loan Interests which they have sold, they may act as
principal or on an agency basis in connection with the Portfolio's disposition
of Loan Interests.
Other fixed-income obligations which may be purchased and sold by the
Portfolio are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through broker-dealers or banks acting for their own
account rather than as brokers, or otherwise involve transactions directly with
the issuers of such obligations. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price of
the market for such obligations, and the difference between the bid and asked
price is customarily referred to as the spread. The Portfolio may also purchase
fixed-income and other securities from underwriters, the cost of which may
include undisclosed fees and concessions to the underwriters. While it is
anticipated that the Portfolio will not pay significant brokerage commissions,
on occasion it may be necessary or desirable to purchase or sell a security
through a broker on an agency basis, in which case the Portfolio will incur a
brokerage commission. Although spreads or commissions on portfolio transactions
will, in the judgment of BMR, be reasonable in relation to the value of the
services provided, spreads or commissions exceeding those which another firm
might charge may be paid to firms who were selected to execute transactions on
behalf of the Portfolio and BMR's other clients for providing brokerage and
research services to BMR. The Portfolio will not purchase securities from its
affiliates in principal transactions. The Fund paid no brokerage commissions
during the three year period ended December 31, 1994.
The frequency of portfolio purchases and sales, known as the "turnover
rate," will vary from year to year. It is anticipated that the Portfolio's
turnover rate will be between 50% and 100%.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Subject to applicable laws and regulations, BMR will attempt to allocate
equitably portfolio transactions among the Portfolio and the portfolios of its
other investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be considered
are the respective investment objectives of the Portfolio and such other
accounts, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment by the Portfolio and such
accounts, the size of investment commitments generally held by the Portfolio and
such accounts and the opinions of the persons responsible for recommending
investments to the Portfolio and such accounts. While this procedure could have
a detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Fund and
the Portfolio that the benefits available from the BMR organization outweigh any
disadvantage that may arise in simultaneous transactions.
TAXES
The Fund has qualified and elected to be treated and intends to continue to
qualify each year as a regulated investment company under the Internal Revenue
Code of 1986, as amended (the "Code"). Accordingly, the Fund intends to satisfy
certain requirements relating to sources of its income and diversification of
its assets and to distribute its net investment income and net realized capital
gains in accordance with the timing requirements imposed by the Code, so as to
avoid any federal income or excise tax on the Fund. Because the Fund invests
substantially all of 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. 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. The Portfolio will
make allocations to the Fund in accordance with the Code and applicable
regulations and will make monies available for withdrawal at appropriate times
(consistent with any Fund tender offers) and in sufficient amounts to enable the
Fund to satisfy the tax distribution requirements that apply to the Fund and
that must be satisfied in order to avoid federal income and/or excise tax on the
Fund. For purposes of applying the requirements of the Code regarding
qualification as a regulated investment company, the Fund will be deemed (i) to
own its proportionate share of each of the assets of the Portfolio and (ii) to
be entitled to the gross income of the Portfolio attributable to such share.
In order to qualify as a regulated investment company for any taxable year,
the Fund must, among other things, (i) derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of securities, and certain other related income;
(ii) derive less than 30% of its gross income from gains from the sale or other
disposition of securities held less than three months; and (iii) diversify its
investments so that at the close of each quarter of its taxable year (x) at
least 50% of the market value of the Fund's total assets is represented by cash
and cash items, U.S. Government securities, securities of other regulated
investment companies and other securities limited in respect of any one issuer
to not more than 5% of the value of the Fund's total assets and not more than
10% of the voting securities of such issuer, and (y) not more than 25% of the
value of the Fund's total assets is invested in the securities (other than U.S.
Government securities and securities of other regulated investment companies) of
any one issuer, or of two or more issuers controlled by the Fund and engaged in
the same, similar or related trades or businesses. For purposes of these
requirements, Loan Interests will be treated as securities, and the issuer will
be identified on the basis of market risk and credit risk associated with any
particular interest. Certain payments received by the Portfolio, such as
commitment fees, may not be treated as qualifying income under the 90%
requirement described above.
The federal income tax rules governing the taxation of interest rate swaps
are not entirely clear and may require the Fund to treat 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 in order to maintain its qualification as a regulated investment
company.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses, after reduction by any available capital loss
carryforwards, and 100% of any income from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
federal income tax.
As of the close of business, February 21, 1995, the Fund contributed
substantially all of its assets to the Portfolio in exchange for an interest in
the Portfolio. The Fund has obtained an opinion of tax counsel to the effect
that, although there is no judicial authority directly on point, this
contribution will not result in the recognition of gain or loss by the Fund for
federal income tax purposes. If it were determined that this contribution by the
Fund was a taxable transaction, the Fund could be required to recognize gain on
the transfer of its assets to the Portfolio and to make additional distributions
to its shareholders in order to avoid Fund-level federal income taxes, and any
such distributions would be taxable to the shareholders who receive them; and in
such case, the Fund might also be required to pay penalties and/or interest to
the Internal Revenue Service.
Any loss realized upon a taxable disposition of shares with a tax holding
period of six months or less will be treated as a long-term capital loss to the
extent of any amounts treated by shareholders as long-term capital gains with
respect to such shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares will be disallowed if other Fund shares are purchased
within 30 days before or after such disposition.
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, and may have to dispose of
investments that it would otherwise have continued to hold in order to satisfy
its distribution requirements with respect to such income.
Distributions by the Fund may result in a reduction in the fair market value
of the Fund's shares. Should a distribution reduce the fair market value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or capital gain, even though, from an investment
standpoint, it may constitute a partial return of the purchase price. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of any forthcoming distribution, and such
investors will then receive a distribution representing a return of a portion of
their investment which will nevertheless be taxable to them.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with a correct taxpayer identification number and
certain required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding at a rate of 31%. An individual's
taxpayer identification number is generally his social security number.
Nonresident alien individuals and certain foreign corporations and other
entities generally will be subject to a U.S. withholding tax at a rate of 30% on
distributions from ordinary income and the excess of net short-term capital gain
over net long-term capital loss unless the tax is reduced or eliminated by an
applicable tax treaty. Distributions from the excess of net long-term capital
gain over net short-term capital loss received by such shareholders and any gain
from the sale or other disposition of shares of the Fund generally will not be
subject to U.S. taxation, provided that nonresident alien status has been
certified by the shareholder. Different U.S. tax consequences may result if the
shareholder is engaged in a trade or business in the United States or is present
in the United States for a sufficient period of time during a taxable year to be
treated as a U.S. resident. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The Portfolio may be subject to foreign withholding taxes with respect to
income on certain loans to foreign Borrowers. As not more than 50% of the value
of the Fund's total assets taking into account its allocable share of the
Portfolio's total assets at the close of any taxable year of the Fund will
consist of loans to foreign borrowers, the Fund will not be eligible to pass
through to shareholders their proportionate share of foreign taxes paid by the
Portfolio and allocated to the Fund, with the result that shareholders will not
be entitled to take any foreign tax credits or deductions for foreign taxes paid
by the Portfolio and allocated to the Fund. However, the Fund may deduct such
taxes in calculating its distributable income earned by the Portfolio and
allocated to the Fund. These taxes may be reduced or eliminated under the terms
of an applicable U.S. income tax treaty.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts, a 77.3% owned subsidiary of EVC, acts as custodian for the Fund
and the Portfolio. Eaton Vance Corp. has announced its intention to sell its
interest in IBT in 1995. 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, and its subsidiary, IBT Fund Services (Canada) Inc., 1 First
Canadian Place, King Street West, Toronto, Ontario, Canada, maintains the
general ledgers of the Portfolio and the Fund and computes the daily net asset
value of interests in the Portfolio and the net asset value of shares of the
Fund. In its capacity as custodian, IBT attends to details in connection with
the sale, exchange, substitution, transfer or other dealings with the
Portfolio's investments, receives and disburses all funds and performs various
other ministerial duties upon receipt of proper instructions from the Fund and
the Portfolio. IBT charges custody fees based on a percentage of Fund and
Portfolio assets which are competitive within the industry. These fees are then
reduced by a credit for cash balances of the particular investment company at
the custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate
applied to the particular investment company's average daily collected balances
for the week. In view of the ownership of EVC in IBT, the Portfolio is treated
as a self-custodian pursuant to Rule 17f-2 under the 1940 Act, and the
Portfolio's investments held by IBT as custodian are thus subject to the
additional examinations by the Portfolio's independent certified public
accountants as called for by such Rule. For the fiscal year ended December 31,
1994 the Fund paid IBT custody fees of $278,996.
TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR
The Shareholder Services Group, Inc. serves with respect to the shares as
transfer and dividend paying agent and as registrar. The principal business
address of The Shareholder Services Group, Inc. is One Exchange Place, Boston,
Massachusetts 02104.
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent accountants for the Fund, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the Securities and Exchange Commission. Deloitte & Touche, Grand
Cayman, Cayman Islands, British West Indies, are the independent accountants for
the Portfolio.
PERFORMANCE INFORMATION
The Fund's current yield for the one-month period ended December 31, 1993
was 5.37%. The Fund's effective yield for the one-month period ended December
31, 1993 was 5.50%. The Fund's current yield for the one-month period ended
December 31, 1994 and for the one-month period ended June 30, 1995 was 7.72%.
The Fund's effective yield for the one-month period ended December 31, 1994 and
for the one-month period ended June 30, 1995 was 8.00%. Yields will fluctuate
from time to time and are not necessarily representative of future results.
The table below indicates the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund through June 30, 1995.
VALUE OF A $1,000 INVESTMENT
INVESTMENT INVESTMENT AMOUNT OF VALUE OF TOTAL RETURN
PERIOD DATE INVESTMENT INVESTMENT CUMULATIVE ANNUALIZED
- - --------------------------------------------------------------------------------
Life of the
Fund* 8/4/89 $1,000 $1,510.86 51.09% 7.24%
5 Years Ended
6/30/95 6/30/90 $1,000 $1,391.91 39.19% 6.84%
1 Year Ended
6/30/95 6/30/94 $1,000 $1,078.98 7.90% 7.90%
- - ----------
*Investment operations began August 4, 1989.
Past performance is not indicative of future results. Investment return and
principal value will fluctuate and shares, when redeemed, may be worth more or
less than their original cost.
The calculation of total return, current yield and effective yield does not
reflect the imposition of any Early Withdrawal Charges or the amount of any
shareholder income tax liability. If reflected, an Early Withdrawal Charge would
reduce the performance quoted. Information about the performance of the Fund or
other investments should not be considered a representation of future
performance the Fund may earn or what an investor's yield or total return may be
in the future.
TOTAL RETURN PERFORMANCE...
A $100,000 investment in Eaton Vance Prime Rate Reserves at the Fund's
inception, Aug. 4, 1989, would have grown to $151,082 on June 30, 1995.
prime rate
reserves
start $100000
8/89 100614
9/89 100614
10/89 102039
11/89 102786
12/89 103586
1/90 104406
2/90 105158
3/90 105997
4/90 106823
5/90 107691
6/90 108541
7/90 109425
8/90 110317
9/90 111185
10/90 112088
11/90 112858
12/90 113528
1/91 114292
2/91 115029
3/91 115852
4/91 116631
5/91 117396
6/91 118114
7/91 118851
8/91 119593
9/91 120293
10/91 120997
11/91 121663
12/91 122335
1/92 122823
2/92 123378
3/92 123973
4/92 124553
5/92 125134
6/92 125758
7/92 126319
8/92 127001
9/92 127899
10/92 128305
11/92 129077
12/92 129897
1/93 130463
2/93 130560
3/93 130840
4/93 131761
5/93 132572
6/93 133262
7/93 133693
8/93 134532
9/93 135234
10/93 135580
11/93 136178
12/93 136834
1/94 137407
2/94 137943
3/94 138124
4/94 138568
5/94 139227
6/94 140025
7/94 140719
8/94 140897
9/94 141645
10/94 142631
11/94 143481
12/94 145146
1/95 146135
2/95 147349
3/95 148359
4/95 149152
5/95 150130
6/95 151082
The chart reflects total return (change in net asset value with all
distributions reinvested) in a hypothetical investment of $100,000 at 8/4/89.
Results do not include the Fund's early withdrawal charge. Past performance is
not indicative of future results. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Sources: Eaton Vance Management, The Wall Street Journal.
The rates for the Fund shown in the table below are effective yields, and
assume that all interest and dividends are reinvested.
The Fund has delivered a consistent yield advantage over short-term interest
rates
3-month Federal Prime Rate
London Interbank Funds Reserves
Offered Rate Rate Effective Yield
Month-end (%) (%) (%)
Aug. 1989 9.00 8.99 8.30
Sept. 1989 9.19 9.02 8.58
Oct. 1989 8.69 8.84 9.01
Nov. 1989 8.50 8.55 9.28
Dec. 1989 8.38 8.45 9.55
Jan. 1990 8.38 8.23 9.74
Feb. 1990 8.38 8.24 9.80
March 1990 8.50 8.28 9.82
April 1990 8.69 8.26 9.90
May 1990 8.38 8.18 10.00
June e 1990 8.38 8.29 10.03
July 1990 7.94 8.15 10.03
Aug. 1990 8.13 8.13 10.03
Sept. 1990 8.31 8.20 10.00
Oct. 1990 8.06 8.11 10.00
Nov. 1990 8.44 7.81 10.01
Dec. 1990 7.56 7.31 9.78
Jan. 1991 7.06 6.91 9.50
Feb. 1991 6.88 6.25 8.75
March 1991 6.38 6.12 8.75
April 1991 6.19 5.91 8.50
May 1991 6.06 5.78 8.00
June e 1991 6.19 5.90 7.70
July 1991 6.06 5.82 7.60
Aug. 1991 5.69 5.66 7.60
Sept. 1991 5.63 5.45 7.35
Oct. 1991 5.25 5.21 7.12
Nov. 1991 4.94 4.81 6.90
Dec. 1991 4.25 4.43 6.70
Jan. 1992 4.19 4.03 6.07
Feb. 1992 4.25 4.06 5.85
March 1992 4.38 3.98 5.85
April 1992 4.06 3.73 5.85
May 1992 4.06 3.82 5.65
June 1992 3.94 3.76 5.65
July 1992 3.44 3.25 5.40
Aug. 1992 3.56 3.30 5.30
Sept. 1992 3.25 3.22 5.05
Oct. 1992 3.56 3.10 5.05
Nov. 1992 4.00 3.09 5.00
Dec. 1992 3.44 2.92 5.25
Jan. 1993 3.25 3.02 5.25
Feb. 1993 3.25 3.03 5.00
March 1993 3.25 3.07 5.00
April 1993 3.19 2.96 5.00
May 1993 3.38 3.00 5.00
June 1993 3.31 3.04 5.00
July 1993 3.31 3.06 5.10
Aug. 1993 3.25 3.03 5.15
Sept. 1993 3.38 3.09 5.25
Oct. 1993 3.44 2.99 5.50
Nov. 1993 3.50 3.02 5.50
Dec. 1993 3.38 2.96 5.82
Jan. 1994 3.25 3.05 5.41
Feb. 1994 3.75 3.25 5.20
March 1994 3.94 3.34 5.20
April 1994 4.31 3.56 5.26
May 1994 4.63 4.01 5.75
June 1994 4.88 4.25 5.90
July 1994 4.88 4.26 6.00
Aug. 1994 5.00 4.47 6.40
Sept. 1994 5.50 4.73 6.66
Oct. 1994 5.63 4.76 7.24
Nov. 1994 6.19 5.29 7.50
Dec. 1994 6.50 5.45 8.00
Jan. 1995 6.31 5.86 8.32
Feb 1995 6.25 6.1 8.53
March 1995 6.25 6.3 8.38
April 1995 6.19 6.06 8.00
May 1995 6.06 6.17 8.00
June 1995 6.06 6.11 8.00
EV Prime Rate
Reserves: 8.00%
3-Month London
Interbank Offered
Rate: 6.06%
Federal Funds
Rate: 6.11%
Chart shows month-end effective yields over the life of the Fund (August 4,
1989, to June 30, 1995). The value and return of an investment in the Fund will
fluctuate with changes in market conditions so that shares, when redeemed, may
be worth more or less than their original cost. Past performance is not
indicative of future results. Sources: Eaton Vance Management, Bloomberg, L.P.
Comparative information about the Fund's yield and total return, about the
Prime Rate and about average rates of return on certificates of deposit, bank
money market deposit accounts, money market mutual funds and other short-term
investments may also be included in advertisements and communications of the
Fund. A bank certificate of deposit, unlike the Fund's shares, pays a fixed rate
of interest and entitles the depositor to receive the face amount of the
certificate of deposit at maturity. A bank money market deposit account is a
form of savings account which pays a variable rate of interest. Unlike the
Fund's shares, bank certificates of deposit and bank money market deposit
accounts are ordinarily insured by the Federal Deposit Insurance Corporation. A
money market mutual fund is designed to maintain a constant value of $1.00 per
share and, thus, a money market fund's shares are ordinarily subject to less
price fluctuation than the Fund's shares.
For the period January 1, 1980 through June 30, 1995 the national average
prime rate exceeded the average yield of money market mutual funds and the
average yield of 3-month bank CDs. Such amounts for each year are as follows:
Average prime rate over Average prime rate over
money market funds: 3-month bank CDs:
1980 2.46% 1988 2.20% 1980 3.80% 1988 1.21%
1981 1.99 1989 2.01 1981 5.09 1989 3.06
1982 2.63 1990 2.17 1982 3.53 1990 2.60
1983 2.22 1991 2.62 1983 1.58 1991 2.91
1984 2.00 1992 2.91 1984 3.15 1992 3.17
1985 1.68 1993 3.30 1985 2.05 1993 3.51
1986 1.89 1994 3.43 1986 2.41 1994 4.03
1987 2.08 1995* 3.31 1987 0.95 1995* 4.61
*As of June 30, 1995.
Sources: Federal Reserve Bank, Donoghue's Money Fund Averages, and Rate Gram
and The Wall Street Journal.
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 June 30, 1995, the high was
$10.07 (on October 18, 1993) and the low was $9.95 (from January 28 through
August 26, 1992). Such materials may include illustrations such as the following
chart:
PRINCIPAL PERFORMANCE
MONTH-END SHARE VALUE HISTORY
aug 89 10.00
s 10.00
o 10.00
n 10.00
dec 89 10.00
j 10.00
f 10.00
m 10.00
a 10.00
m 10.00
j 10.00
j 10.00
a 10.00
s 10.00
o 10.00
n 9.99
dec 90 9.97
j 9.96
f 9.96
m 9.96
a 9.96
m 9.96
j 9.96
j 9.96
a 9.96
s 9.96
o 9.96
n 9.96
dec 91 9.96
j 9.95
f 9.95
m 9.95
a 9.95
m 9.95
j 9.95
j 9.95
a 9.96
s 9.99
o 9.98
n 10.00
dec 92 10.02
j 10.02
f 9.99
m 9.97
a 10.00
m 10.02
j 10.03
j 10.02
a 10.04
s 10.05
o 10.03
n 10.03
dec 93 10.03
j 10.03
f 10.03
m 10.00
a 9.99
m 9.99
j 10.00
j 10
a 9.96
s 9.96
o 9.97
n 9.97
d94 10.02
jan 10.02
feb 10.04
march 10.04
april 10.03
may 10.03
june 95 10.03
Low $9.98
High $10.07
Chart shows the Funds month-end net asset value per share for the life of the
Fund since its inception (8/4/89 to 6/30/95). Past performance is not indicative
of future results.
OTHER INFORMATION
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 extremely 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.
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 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 Fund's Prospectus and Statement of Additional Information do not contain
all of the information set forth in the Registration Statement that the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by its Rules and Regulations.
FINANCIAL STATEMENTS
Registrant incorporates by reference the audited financial information for
the Fund contained in the Fund's shareholder report for the fiscal year ended
December 31, 1994 as previously filed electronically with the Securities and
Exchange Commission (Accession Number 0000898432-95-000140), and the unaudited
financial information for the Fund and the audited financial information for the
Portfolio contained in the Fund's shareholder report for the six months ended
June 30, 1995 as previously filed electronically with the Securities and
Exchange Commission (Accession Number 0000950156-95-000622).
<PAGE>
APPENDIX A
[LOGO]
EATON VANCE
MUTUAL FUNDS
* EATON VANCE
PRIME RATE RESERVES
* EV CLASSIC SENIOR
FLOATING-RATE FUND
[Photo of a fountain pen, pair of eyeglasses
and a laptop computer resting on the financial
pages of a newspaper.]
<PAGE>
THE EATON VANCE SENIOR FLOATING-RATE FUNDS
- - ------------------------ - EATON VANCE PRIME RATE RESERVES
EATON VANCE NOW OFFERS
TWO FUNDS INVESTING IN A - EATON CLASSIC SENIOR FLOATING-RATE FUND
PORTFOLIO OF SENIOR
FLOATING-RATE LOANS... Using the patented Hub & Spoke Registration Mark
structure, Eaton Vance is able to offer a wide
variety of investors efficient access to a single
portfolio of senior floating-rate loans made by
major U.S. banks and other financial
institutions to large corporate customers.
DESIGNED FOR INVESTORS SEEKING...
- - ------------------------
OBJECTIVE: TO PROVIDE - HIGH CURRENT MONTHLY INCOME
AS HIGH A LEVEL OF
CURRENT INCOME AS Each Fund's goal is to provide investors with
IS CONSISTENT WITH an effective (compound) yield that maintains a
CAPITAL PRESERVATION... favorable spread over other short-term
alternatives. The Portfolio invests primarily
in floating-rate loans, with rates that keep a
fixed spread over widely accepted base rates,
such as the London Interbank Offered Rate or
the U.S. average prime rate. Please see a Fund
prospectus and page 8 of this brochure for
more information.
- CAPITAL PRESERVATION
A portfolio of senior, floating-rate loans can
help protect an investor's purchasing power
against the eroding effects of inflation.
Higher inflation rates usually result in
higher interest rates. Unlike investments that
pay a fixed income, the Portfolio's
floating-rate loans generate income that
resets as interest rates change.
- RELATIVELY STABLE NET ASSET VALUE
The Portfolio invests primarily in senior,
floating-rate loans made to corporations,
whose interest rates are adjusted regularly to
move with current rates. While the Funds' net
asset values will fluctuate, this investment
strategy is expected to minimize such
fluctuations in response to changes in
interest rates. However, a default in a loan
in which the Portfolio owns an interest, a
material deterioration of a borrower's
creditworthiness, or a sudden or extreme
increase in prevailing interest rates may
cause a decline in each Fund's share value.
- 2 -
<PAGE>
- - ----------------------
TENDER OFFERS ARE MADE - LIQUIDITY THROUGH TENDER OFFERS
AT NET ASSET VALUE...
To accommodate shareholders' liquidity needs,
the Funds' Trustees intend to consider
quarterly the making of a tender offer for all
or a portion of outstanding shares at net
asset value. Although there can be no
assurance that the Funds will tender for their
shares every quarter, such offers have been
made in each quarter since Eaton Vance Prime
Rate Reserves began operations on August 4,
1989. EV Classic Senior Floating-Rate Fund,
introduced in 1995, will follow the same
[PHOTO] tender offer procedures.*
- NO INITIAL SALES CHARGE
Every dollar invested starts earning dividends
as soon as the account is opened. The minimum
initial investment in Eaton Vance Prime Rate
Reserves or EV Classic Senior Floating-Rate
Fund is only $5,000 ($2,000 for Individual
Retirement Accounts). Additions to the account
($50 or more) may be made at any time.*
Eaton Vance Prime Rate Reserves and EV Classic
Senior Floating-Rate Fund are continuously
offered, closed-end funds, registered under the
Investment Company Act of 1940. Using the Hub
("Portfolio") & Spoke ("Funds") structure, both
invest in the Senior Debt Portfolio, a separate
investment company with an identical investment
objective to that of the Funds. The Portfolio
invests primarily in "loan interests" - portions
of senior, floating-rate loans made by U.S.
banks and other financial institutions to large
corporate customers.
* Shares repurchased by the Fund may be subject
to an early withdrawal charge (please see a
prospectus for details).
----------------------------------------------
Fund shares are not insured by the FDIC and are
not deposits or other obligations of, or
guaranteed by, any depository institution.
Shares are subject to investment risks, including
possible loss of principal invested.
----------------------------------------------
- 3 -
<PAGE>
COMMONLY ASKED QUESTIONS
ABOUT THE FUNDS' STRUCTURE
- - -------------------- WHY AREN'T THE FUNDS 'OPEN-END' FUNDS?
'CONTINUOUSLY
OFFERED, CLOSED- Loans, in which the Funds' Portfolio invests, are not
END' FUNDS... considered "liquid securities," and an open-end fund,
by law, must invest at least 85 percent of its assets
in liquid securities. The Funds are designed,
therefore, as continuously offered, closed-end funds.
HOW DOES A CONTINUOUSLY OFFERED,
CLOSED-END FUND OPERATE?
[Photo] "Continuously offered" means that shares of either
Fund may be purchased at 100 percent of their net
asset value on any business day. Because the Funds
are "closed-end," however, withdrawals are handled
differently than in a traditional, open-end fund.
Shares may be redeemed quarterly, by means of a
"tender offer," in which the Funds repurchase shares
from shareholders at 100 percent of net asset value.
(Shares repurchased by the Funds may be subject to an
early withdrawal charge. See a prospectus for details.)
WHY DON'T FUND SHARES TRADE ON A NATIONAL
EXCHANGE, LIKE OTHER CLOSED-END FUNDS?
Eaton Vance believes that the Funds better meet
shareholders' needs for liquidity by having
non-listed shares. These can be redeemed at 100 percent
of net asset value on a quarterly basis, rather than
listed shares that may be sold daily, but at a
fluctuating discount or premium to net asset value.
- - -------------------- HOW ARE TENDER OFFERS MADE?
Tender offers
provide liquidity... The Trustees intend to consider quarterly the making
of a tender offer for all or a portion of outstanding
shares at net asset value. Although there can be no
assurance that the Funds will tender for their shares
every quarter, it has been and continues to be the
policy of the Trustees to do so.
Eaton Vance Prime Rate Reserves began operations on
August 4, 1989. Tender offers have been made in every
quarter since that Fund's inception, and all shares
tendered by shareholders were redeemed.
- 4 -
<PAGE>
HOW DO THE FUNDS MEET TENDER OFFERS WITHOUT
DISADVANTAGING EXISTING SHAREHOLDERS?
The Portfolio has five sources of liquidity which
generate cash to meet redemptions:
- Ordinary cash on hand
- Scheduled quarterly interest income on loans
- Scheduled quarterly principal payments on loans
- Contractually required principal prepayments on
loans
- A borrowing program that allows the Portfolio to
issue over $100 million of short-term,
investment-grade commercial paper.
Therefore, the Portfolio can remain fully invested on a
consistent basis, despite quarterly tender offers.
ARE THERE EXCHANGE OPTIONS?
In the case of Eaton Vance Prime Rate Reserves,
shareholders may elect to exchange tendered shares for
shares of certain EV Marathon Funds. An exchange option
may be available for EV Classic Senior Floating-Rate
Fund. Please ask your financial adviser or see a
prospectus for more information.
CAN THE FUNDS BE USED FOR QUALIFIED RETIREMENT PLANS?
Shares of both Funds may be purchased in connection
with pension and profit-sharing plans, Individual
Retirement Accounts (IRAs), and 403(b) retirement
plans. Please see a prospectus for more information
about any of these services.
WHAT ARE THE FUNDS' MINIMUM INVESTMENTS?
- The minimum initial investment in either Fund is
$5,000 ($2,000 for IRAs). Shareholders can add to
their accounts on any business day, in amounts of $50
or more.
[Photo]
- Dividends are paid monthly and may be taken in cash
or reinvested in additional shares at net asset value.
- The Funds also offer bank draft investing, where
regular additional investments may be made directly
from a bank checking account (minimum $50 per month
or quarter).
- 5 -
<PAGE>
COMMERCIAL LOANS ARE AN IMPORTANT
PART OF THE U.S. DEBT MARKETS
- - -----------------------
LOANS REPRESENT A The $5.1 trillion U.S. debt market is composed
$300 BILLION MARKET... of several types of instruments, including:
Treasury obligations, corporate debt and
mortgages. Loans made by banks to commercial
and industrial borrowers represent a $300
billion slice of this market.
----------------------------------------------
<TABLE>
THE U.S. DEBT MARKET ($ billions)
<CAPTION>
Instrument Percentages Amount
---------- ----------- ------
<S> <C> <C>
U.S. Treasuries 44% $2,250
Corporate bonds 29% $1,480
Mortgages 21% $1,100
Senior secured loans 6% $ 300
<FN>
Data as of 9/30/94. Sources: Bloomberg, L.P.,
and Eaton Vance Management.
</TABLE>
----------------------------------------------
- - ----------------------- According to Standard & Poor's, there are fewer
BANK LOANS ARE A WIDELY than 800 companies in the U.S. that issue
USED METHOD OF RAISING investment-grade bonds. These usually issue
CORPORATE CASH... short-term commercial paper as well. Generally,
high-grade issuers have higher creditworthiness
than high-yield issuers, and their obligations
have a lower risk of default. Thousands of
other U.S. companies - which have unrated or
non-investment-grade bonds - turn to the banks
for loans.
----------------------------------------------
<TABLE>
HOW CORPORATIONS RAISE CAPITAL
<CAPTION>
High-grade High-yield
---------- ----------
<S> <C>
Senior
Commercial floating-rate
paper loans
High-grade High-yield
bonds bonds
Equities Equities
</TABLE>
----------------------------------------------
Over the past five years, commercial banks, in
turn, have increasingly permitted large,
sophisticated institutional investors, such as
Eaton Vance's Senior Debt Portfolio, to acquire
interests in loans banks have made. Selling
pieces of loans allows banks to originate new
loans, and to maintain a more diversified loan
portfolio. Today, the making and selling of
large corporate loans can be compared to the
underwriting and syndication of bonds, despite
the sharp differences between loans and bonds.
- 6 -
<PAGE>
FLOATING-RATE LOANS MAY OFFER
MANY ADVANTAGES TO INVESTORS
<TABLE>
-----------------------------------------------------------------------
HOW FLOATING-RATE LOANS DIFFER FROM FIXED-RATE BONDS
FLOATING-RATE LOANS FIXED-RATE BONDS
------------------- ----------------
<S> <C> <C>
Claim on assets Senior Subordinated
Collateral Secured Unsecured or secured
Rate paid Floating Fixed
Principal repayment Amortizing At call or maturity
-----------------------------------------------------------------------
</TABLE>
- - ------------------- BORROWERS SIGN BINDING CONTRACTS CALLED
LOANS ARE SENIOR... CREDIT AGREEMENTS
Loans are typically the most senior source of
capital in a borrower's capital structure. By a
contract, called the "Credit Agreement," senior
loans have the highest priority of claim on a
borrower's cash flow. Although a borrower may
have other debt obligations, these may be
junior, unsecured and/or subordinated debts. In
addition, a Credit Agreement may contain legal
covenants governing how the borrower must
operate. Tough covenants can include
prohibitions on additional debt, mergers, or
sales of assets.
- - ------------------- BORROWERS PLEDGE COLLATERAL
...SECURED...
<TABLE>
-------------------------------------------------------------------------------------
<CAPTION>
LOAN COLLATERAL CAN INCLUDE...
<S> <C> <C> <C>
Working capital Tangible fixed Intangible Security
assets... assets... assets... interests...
[PHOTO] [PHOTO] [PHOTO] [PHOTO]
...Accounts ...Real property ...Trademarks ...Stock in
receivable and buildings and and patents company and
inventory equipment subsidiaries
-------------------------------------------------------------------------------------
</TABLE>
Loans also typically have all of the borrower's
assets pledged as collateral to secure the
debt, an additional incentive for the borrower
to meet its obligations. Nonetheless, a decline
in the value of collateral could cause a loan
to be substantially unsecured. When collateral
consists of stock alone, the Portfolio will be
subject to the risk of decline in the stock's
value, and to other risks associated with
investments in equity securities. (The
Portfolio can invest up to 20 percent of its
assets in other short-term debt obligations and
unsecured loans.)
-7-
<PAGE>
- - ----------------------- LOAN RATES ADJUST AS INTEREST RATES CHANGE
...FLOATING-RATE...
The value of floating-rate loans is generally
not affected by changes in interest rates.
Under a Credit Agreement, the corporate
borrower agrees to borrow at a rate that
"floats," keeping a fixed spread over a widely
accepted benchmark, and fluctuating as the base
rate moves. Two frequently used base rates are:
- The LONDON INTERBANK OFFERED RATE (LIBOR),
used by banks worldwide as a base for loans
to large commercial and industrial companies.
Most of the Portfolio's loans have interest
rates based on LIBOR.
- The PRIME RATE, the rate U.S. banks use as a
base for a wide range of loans to individuals
and mid-size and small businesses. This base
rate is infrequently used for loans to
multi-million-dollar corporations.
LIBOR is generally quoted for 30-, 60- and
90-day periods, whereas the prime rate is
quoted for an overnight period.
- - ----------------------- REPAYMENT FEATURE REDUCES INVESTOR'S CREDIT
...AND AMORTIZING... EXPOSURE
Loans generally require that principal be
repaid over the life of the loan. The
self-amortizing schedule of loans is an
important reason that a loan investor quickly
builds a growing cash balance. By comparison,
bonds have subordinated claims on a borrower's
cash flow, and the principal is only repaid at
or near maturity. The cash flow provided by the
loans reduces the overall level of credit
exposure to the borrower and allows the
investor to reinvest the cash in another loan.
- - ----------------------- SECONDARY MARKET FOR LOANS HAS GROWN RAPIDLY
LIKE BONDS, LOANS Another important element of liquidity is the
ARE NOW TRADED IN fast-growing secondary market trading of loans
THE SECONDARY MARKET... among commercial banks, investment banks, loan
funds and other institutional investors.
Trading volume in 1994 exceeded $20 billion,
according to Loan Pricing Corporation.
All of the largest commercial banks and many of
the largest investment banks have fully staffed
trading desks focused exclusively on loans.
These include such banks as Chase Manhattan,
Chemical Bank, Bankers Trust and Citibank, and
such investment banks as Goldman Sachs, Lehman
Bros., Merrill Lynch and C.S. First Boston.
-8-
<PAGE>
MANAGING RISKS
Like any investment, floating-
rate loans do carry specific [PHOTO]
risks. The features of floating-
rate loans and Eaton Vance's
active management are designed to
minimize credit, interest rate and
foreign exchange risks.
- - -------------------
CREDIT RISK. . . 'DEFAULT' DOESN'T ALWAYS RESULT IN A LOSS
When difficulties arise in a borrower's
operations, provisions of the Credit Agreement may
be broken, commonly called a "default." A default
often can be remedied quickly - without loss of
principal or delay of interest payments - or may
lead to a worsened situation for a borrower. If a
borrower defaults on the Credit Agreement governing
its loans, usually it also has defaulted on its
bonds.The frequency of defaults relates to the
creditworthiness of the borrower and to the general
level of economic activity - in recessions, the
frequency of defaults rises across all parts of the
capital market.
WHAT'S MORE, COLLATERAL CAN REDUCE SEVERITY OF
LOSSES
Once a situation has worsened to the
point at which the lender, such as the Portfolio,
feels the loan's value is impaired or has not been
paid as agreed, a loss is recognized. The severity
of the loss is generally lower for loans than
bonds, because loans are senior to bonds and are
normally secured by collateral.
- - -----------------------
INTEREST RATE RISK. . . 'FLOATING RATES' MEAN MINIMAL INTEREST RATE RISK
Unlike fixed-rate bonds, the value of
floating-rate loans is generally not affected by
changes in interest rates because loans' rates
reset regularly to maintain a fixed spread over
LIBOR or another specific base rate. The interest
rate sensitivity of the Portfolio is normally less
than 60 days. In contrast, while long-term bond
funds may offer higher yields than a portfolio of
floating-rate loans, they generally measure their
duration in terms of years.
- - ------------------------
FOREIGN EXCHANGE RISK. . U.S. DOLLAR-DENOMINATED MEANS NO FOREIGN EXCHANGE
RISK
By investing exclusively in dollar-denominated
debt obligations of U.S.-based companies, an
investor in loans can be fully insulated from moves
in the foreign currency market. Although permitted
by prospectus to invest up to 5 percent of its
asset in foreign loans, the Portfolio's management
has not done so, and does not anticipate buying
foreign loans in the foreseeable future.
-9-
<PAGE>
THE EATON VANCE PORTFOLIO
- - ---------------------------
BOTH EATON VANCE FUNDS To manage the Senior Debt Portfolio, Eaton
INVEST IN THE Vance has established a clearly articulated
SENIOR DEBT PORTFOLIO. . . process for investing in loans, working down
from a $300 billion universe of loans to an
approximately $600 million portfolio (as
of December 31, 1994).
<TABLE>
<CAPTION>
------------------------------------------------------------------------
EATON VANCE SCREENS, ANALYZES, SELECTS AND CONSTRUCTS
<S> <C>
SCREEN . . . Loan universe: $300 billion
REVIEW AND EXCLUDE
ANALYZE . . . Generally acceptable: $150 billion
FUNDAMENTAL RESEARCH
SELECT . . . Meets criteria: $6 billion
RISK/RETURN ASSESSMENT
CONSTRUCT . . . Purchase: $0.6 billion
BROAD SPECTRUM OF CREDITS
------------------------------------------------------------------------
</TABLE>
- - -------------------------
PORTFOLIO EXAMPLES . . . The following are examples of borrowers whose
loans were in the Senior Debt Portfolio as of
January 31, 1995, including percentage of the
Portfolio's total net assets that each represented.
- American Standard, Inc. - One of the largest
manufacturers of plumbing products and of air
conditioning systems, with American Standard and
Trane brand names (4.0%).
- Formica Corp. - A major manufacturer of
laminates, under the Formica brand name (2.2%).
- Jerrico, Inc. - Operates the popular-priced
Long John Silver's seafood restaurants (2.8%).
- Pathmark Stores - A leading supermarket chain
in the metropolitan New York and Philadelphia
areas (5.6%).
- Silgan Corp. - Primary food packager for
companies such as DelMonte and Nestle (1.2%).
- Spalding and Evenflo Companies - Manufacturer
of Spalding sports equipment and Evenflo baby and
juvenile products (2.0%).
- Specialty Foods Corp. - Produces and
distributes food products such as Mother's
cookies, Stella bread products and Guggenheimer
pickles (1.8%).
- Stone Container Corp. - An industry leader in
the production of container board, corrugated
containers, kraft paper and paper bags (5.1%).
PLEASE SEE YOUR
FINANCIAL ADVISER
FOR INFORMATION ON
THE PORTFOLIO'S
CURRENT HOLDINGS.
- 10 -
<PAGE>
WHY INVEST WITH EATON VANCE?
- - ----------------------
A BOSTON TRADITION Eaton Vance Management and its predecessor companies
SINCE 1924... - Eaton & Howard, and Vance Sanders - have been
managing assets ofindividuals and institutions
since 1924. Eaton Vance currently manages over $15
billion in assets for more than 150 mutual funds,
whose investment objectives range from tax free
and taxable income to maximum capital
appreciation, as well as individual and
institutional accounts for retirement plans,
pension funds and endowments.
As the investment picture has changed over the past
seven decades, Eaton Vance has remained focused on
fundamental research.
- - ---------------------- Eaton Vance is one of the pioneers in
A SUCCESSFUL TRACK professionally managing portfolios of senior,
RECORD IN LOANS SINCE floating-rate loans, with over $600 million under
1989. . . management at December 31, 1994.
[Photo]
Jeffrey S. Garner
Portfolio Manager
The tradition of fundamental research led the
firm to establish and build one of the country's
largest teams of investment professionals
exclusively dedicated to the management of senior,
floating-rate loans. Eaton Vance's unique team
includes former commercial bank lending officers and
investment bank corporate finance officers.
Complementing their years of experience, the Senior
Debt Portfolio also uses the services of leading
law and accounting firms in the research, analysis
and management process.
- - ----------------------
ASK YOUR INVESTMENT FOR MORE COMPLETE INFORMATION ABOUT EATON VANCE
ADVISER IF EATON PRIME RATE RESERVES, EV CLASSIC SENIOR
VANCE'S SENIOR FLOATING-RATE FUND, OR ANY OTHER EATON VANCE FUND,
FLOATING-RATE FUNDS INCLUDING DISTRIBUTION PLANS, CHARGES AND EXPENSES,
ARE RIGHT FOR YOU! PLEASE WRITE OR CALL YOUR FINANCIAL ADVISER FOR A
PROSPECTUS. READ THE PROSPECTUS(ES) CAREFULLY
BEFORE YOU INVEST OR SEND MONEY.
-11-
<PAGE>
[LOGO] Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
30903 - 2/95 SF/PRCB
<PAGE>
[LOGO]
EATON VANCE
- - -----------------
MUTUAL FUNDS
EATON VANCE
PRIME RATE
RESERVES
STATEMENT OF
ADDITIONAL INFORMATION
NOVEMBER 3, 1995
EATON VANCE
PRIME RATE RESERVES
24 FEDERAL STREET
BOSTON, MA 02110
- - --------------------------------------------------------------------------------
INVESTMENT ADVISER OF SENIOR DEBT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE PRIME RATE RESERVES
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 24 Federal Street, Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
BANKING COUNSEL
Mayer, Brown & Platt, 787 Seventh Avenue, New York, NY 10019
PRSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
INCLUDED IN PART A:
Financial Highlights for the six months ended June 30, 1995
(Unaudited) and for each of the five years in the period ended
December 31, 1994, and for the period from the start of business,
August 4, 1989, to December 31, 1989
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORT DATED DECEMBER 31, 1994
(ACCESSION NO. 0000898432-95-000140) AND THE SEMI-ANNUAL REPORT DATED
JUNE 30, 1995 (ACCESSION NO. 0000950156-95-000622), FILED
ELECTRONICALLY PURSUANT TO SECTION 30(B)(2) OF THE INVESTMENT COMPANY
ACT OF 1940.
Financial Statements for EATON VANCE PRIME RATE RESERVES:
Statement of Assets and Liabilities as of June 30, 1995
(Unaudited)
Statement of Operations for the six months ended June 30, 1995
(Unaudited)
Statement of Cash Flows for the six months ended June 30, 1995
(Unaudited)
Statement of Changes in Net Assets for the six months ended June
30, 1995 (Unaudited) and for the year ended December 31, 1994
Financial Highlights for the six months ended June 30, 1995
(Unaudited) and for the five years ended December 31, 1994
Notes to Financial Statements
Portfolio of Investments as of December 31, 1994
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Cash Flows for the year ended December 31, 1994
Statement of Changes in Net Assets for each of the two years in
the period ended December 31, 1994
Financial Highlights for the five years ended December 31, 1994
Notes to Financial Statements
Independent Auditors' Report
Financial Statements for SENIOR DEBT PORTFOLIO:
Portfolio of Investments as of June 30, 1995
Statement of Assets and Liabilities for the period from the start
of business, February 22, 1995, to June 30, 1995
Statement of Operations for the period from the start of business,
February 22, 1995, to June 30, 1995
Statement of Cash Flows for the period from the start of business,
February 22, 1995, to June 30, 1995
Statement of Changes in Net Assets for the period from the start
of business, February 22, 1995, to June 30, 1995
Supplementary data for the period from the start of business,
February 22, 1995, to June 30, 1995
Notes to Financial Statements
Independent Auditors' Report
(2) EXHIBITS:
(a) (a) Declaration of Trust dated May 2, 1989, as amended and
restated June 30, 1989, filed herewith.
(b) (a) By-Laws (as amended June 12, 1989) filed herewith.
(b) By-Laws Amendment dated December 13, 1993 filed herewith.
(c) Not applicable
(d) Not applicable
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) (a) Distribution Agreement dated July 14, 1989 filed herewith.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc.
and Authorized Dealers filed as Exhibit (6)(b) 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.
(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) Not applicable
(j) Custodian Agreement dated December 17, 1990 filed herewith.
(k) (a) Administration Agreement dated July 14, 1989 filed herewith.
(b) Administration Agreement Amendment dated October 24, 1994 filed
herewith.
(l) Opinion and Consent of Counsel dated October 24, 1995 filed
herewith.
(m) (a) Consent of Independent Auditors for Eaton Vance Prime Rate
Reserves filed herewith.
(b) Consent of Independent Auditors for Senior Debt Porfolio filed
herewith.
(n) Not applicable
(o) Not applicable
(p) Not applicable
(q) Not applicable
(r) Power of Attorney filed as Exhibit (16) to Post-Effective Amendment
No. 2 (1933 Act File No. 33-34922) and Amendment No. 9 (1940 Act
File No. 811-05808) filed with the Commission on March 13, 1992 and
incorporated herein by reference.
(s) Power of Attorney for Senior Debt Portfolio filed as Exhibit (s) to
Post-Effective Amendment No. 5 (1933 Act File No. 33-34922) filed
with the Commission on November 25, 1994 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 offering described in this Registration Statement:
Registration fees ............................................ $ 995,862(1)
National Association of Securities Dealers, Inc. ............. $ 46,000(1)
Printing (other than stock certificates) ..................... $ 168,300
Engraving and printing stock certificates .................... $ 4,800
Fees and expenses of qualification under state securities laws
(excluding fees of counsel) ................................. $ 269,225
Accounting fees and expenses .................................. $ 13,500
Legal fees and expenses ....................................... $ 230,000
----------
Total ................................................. $1,727,687
==========
- - -------------
(1) These amounts include the expense amounts for the 100 million shares
registered pursuant to the Registration Statement, as well as the expense
amounts for the 100 million shares registered pursuant to a separate
Registration Statement filed with the Commission each of (a) (File No.
33-34922) on May 16, 1990 and declared effective on July 3, 1990, (b) (File
No. 33-30268) on August 2, 1989 and declared effective August 9, 1989, and
(c) (File No. 33-28516) on May 3, 1989 and declared effective on July 14,
1989, and which are incorporated herein by reference.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest 25,108
as of September 29, 1995
ITEM 29. INDEMNIFICATION
The Registrant's By-Laws filed as Exhibit (b) 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 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
constituting Parts A and B, respectively, of this Registration Statement,
which summary is 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, 24 Federal Street,
Boston, MA 02111 and 89 South Street, Boston, MA 02111, and its transfer
agent, The Shareholder Services Group, Inc., 53 State Street, Boston, MA
02104, with the exception of certain corporate documents and portfolio trading
documents which are in the possession and custody of Eaton Vance Management,
24 Federal Street, Boston, MA 02110. Certain corporate documents of Senior
Debt Portfolio (the "Portfolio") are also maintained by IBT Trust Company
(Cayman), Ltd., The Bank of Nova Scotia Building, P.O. Box 501, George Town,
Grand Cayman, Cayman Islands, British West Indies, and certain investor
account, Portfolio and the Registrant's accounting records are held by IBT
Fund Services (Canada) Inc., 1 First Canadian Place, King Street West, Suite
2800, P.O. Box 231, Toronto, Ontario, Canada M5X 1C8. 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; and
(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.
(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 has duly caused this Amendment to
its 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 20th day of October, 1995.
EATON VANCE PRIME RATE RESERVES
By JAMES B. HAWKES*
---------------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
JAMES B. HAWKES* Principal Executive
- - --------------------------- Officer October 20, 1995
JAMES B. HAWKES
Treasurer and Principal
Financial and
JAMES L. O'CONNOR* Accounting Officer October 20, 1995
- - ---------------------------
JAMES L. O'CONNOR
Trustee and Vice
M. DOZIER GARDNER* President October 20, 1995
- - ---------------------------
M. DOZIER GARDNER
DONALD R. DWIGHT* Trustee October 20, 1995
- - ---------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee October 20, 1995
- - ---------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee October 20, 1995
- - ---------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee October 20, 1995
- - ---------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee October 20, 1995
- - ---------------------------
JACK L. TREYNOR
*By /s/ H. DAY BRIGHAM, JR.
-----------------------
Attorney-in-fact
<PAGE>
SIGNATURES
Senior Debt Portfolio has duly caused this Amendment to the Registration
Statement on Form N-2 of Eaton Vance Prime Rate Reserves to be signed on its
behalf by the undersigned, thereunto duly authorized, in Bermuda on the 23th
day of October, 1995.
SENIOR DEBT PORTFOLIO
By /s/ JAMES B. HAWKES
--------------------------
JAMES B. HAWKES, President
This Amendment to the Registration Statement on Form N-2 Eaton Vance Prime
Rate Reserves has been signed below by the following persons in the capacities
and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
/s/ JAMES B. HAWKES* Principal Executive
- - --------------------------- Officer October 23, 1995
JAMES B. HAWKES
Treasurer and Principal
Financial and
JAMES L. O'CONNOR* Accounting Officer October 23, 1995
- - ---------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee October 23, 1995
- - ---------------------------
DONALD R. DWIGHT
M. DOZIER GARDNER* Trustee October 23, 1995
- - ---------------------------
M. DOZIER GARDNER
SAMUEL L. HAYES, III* Trustee October 23, 1995
- - ---------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee October 23, 1995
- - ---------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee October 23, 1995
- - ---------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee October 23, 1995
- - ---------------------------
JACK L. TREYNOR
*By /s/ H. DAY BRIGHAM, JR.
-----------------------
H. DAY BRIGHAM, JR.
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE
- - -------- ----------- ----
(a)(a) Amended and Restated Declaration of Trust
dated June 30, 1989
(b)(a) By-Laws (as amended June 12, 1989)
(b)(b) By-Laws Amendment dated December 13, 1993
(h)(a) Distribution Agreement dated July 14, 1989
(j) Custodian Agreement dated December 17, 1990
(k)(a) Administration Agreement dated July 14, 1989
(k)(b) Administration Agreement Amendment dated
October 24, 1994
(l) Opinion and Consent of Counsel dated October 24, 1995
(m)(a) Consent of Independent Auditors for Eaton Vance
Prime Rate Reserves
(m)(b) Consent of Independent Auditors for Senior Debt Portfolio
<PAGE>
EATON VANCE PRIME RATE RESERVES EXHIBIT 99.(a)(a)
AMENDED AND RESTATED
DECLARATION OF TRUST
Dated June 30, 1989
AMENDED AND RESTATED DECLARATION OF TRUST, made June 30, 1989 by James
G. Baur, James B. Hawkes, Norton H. Reamer, John L. Thorndike and Jack L.
Treynor, being a majority of the Trustees, hereinafter referred to collectively
as the "Trustees" and individually as a "Trustee", which terms shall include any
successor Trustees or Trustee and any present Trustees who are not signatories
to this instrument.
WHEREAS, the Trustees desire to amend and restate the Declaration of
Trust dated May 2, 1989, which established a trust fund for the investment and
reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees hereby amend and restate said Declaration
of Trust and declare that all money and property contributed to the trust fund
hereunder shall be held and managed under this amended and restated Declaration
of Trust IN TRUST as herein set forth below.
ARTICLE I
NAME
This Trust shall be known as Eaton Vance Prime Rate Reserves.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors with a continuous
source of managed investment primarily in securities and interests in loans.
ARTICLE III
MANAGEMENT OF THE TRUST
The business and affairs of the Trust shall be managed by the Trustees
and they shall have all powers necessary and appropriate to perform that
function. The number, term of office, manner of election, resignation, filling
of vacancies and procedures with respect to meetings of Trustees shall be as
prescribed in the By-Laws of the Trust.
ARTICLE IV
OWNERSHIP OF ASSETS OF THE TRUST
The legal title to all cash, securities and property held by the Trust
shall at all times be vested in the Trustees. Shareholders (hereinafter referred
to as "Shareholders", or individually as a "Shareholder") of the Trust shall not
have title to any such assets held by the Trust, but each Shareholder shall be
deemed to own a proportionate undivided beneficial interest in the Trust equal
to the number of Shares of a class, if more than one class of Shares is
established by the Trustees as provided in Section 2 of Article VI, of which
such Shareholder is the record owner divided by the total number of Shares of
such class outstanding (subject to such rights and preferences as may have been
established and designated with respect to classes of Shares and with respect to
any series of Preferred Shares).
ARTICLE V
POWERS OF THE TRUSTEES
The Trustees in all instances shall act as principals. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. The Trustees
shall not be bound or limited by present or future laws or customs in regard to
trust investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. The Trustees shall have full power and
authority to adopt such accounting and tax accounting practices as they consider
appropriate. Without limiting the generality of the foregoing, the Trustees
shall have power and authority:
(a) To buy, and invest funds of the Trust in, own, hold for investment
or otherwise, and to sell or otherwise dispose of, all types of
securities and interests in loans, including, but not limited to,
bonds, debentures, warrants and rights to purchase securities, and
interests in loans, certificates of beneficial interest, notes,
evidences of indebtedness, and other participations in securities or
loans, however named or described, issued by corporations, trusts,
associations or other persons, domestic or foreign, or issued or
guaranteed by the United States of America or any agency or
instrumentality thereof, by the government of any foreign country, by
any State of the United States, or by any political subdivision or
agency of any State or foreign country; to deposit any assets of the
Trust in any bank, trust company or banking institution or retain any
such assets in cash; to purchase and sell (or write) options on
securities, currency, precious metals and other commodities, indices,
futures contracts and other financial instruments and enter into
closing transactions in connection therewith; to enter into all types
of commodities contracts, including without limitation the purchase and
sale of futures contracts on securities, currency, precious metals and
other commodities, indices and other financial instruments; to enter
into forward foreign currency exchange contracts; to purchase and sell
gold and silver bullion, precious or strategic metals, coins and
currency of all countries; to engage in "when issued" and delayed
delivery transactions; to enter into repurchase agreements and reverse
repurchase agreements; and to employ all kinds of hedging techniques
and investment management strategies; and from time to time change the
investments of funds of the Trust.
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust, which By-Laws
shall bind the Shareholders, and to amend and repeal such By-Laws to
the extent that such authority is not otherwise reserved to the
Shareholders.
(c) To elect and remove such officers of the Trust and to appoint and
terminate such agents of the Trust as they consider appropriate.
(d) To employ one or more banks, trust companies or banking
institutions as custodian of any assets of the Trust subject to any
conditions set forth in this Declaration of Trust or in the By-Laws.
(e) To retain one or more transfer agents and shareholder servicing
agents, or both, which may be the same entity, for the Trust.
(f) From time to time to sell Shares of the Trust ( including Common
Shares and any Preferred Shares or series thereof hereafter created by
the Trustees) either for cash or property whenever and in such amounts
as the Trustees may deem desirable and to provide for the distribution
of Shares of the Trust (including Common Shares and any Preferred
Shares or series thereof hereafter created by the Trustees) through one
or more underwriters or by the Trust itself, or otherwise.
(g) To set record dates or direct that the Share transfer books be
closed for a stated period for the purpose of making a determination
with respect to Shareholders, including which Shareholders are entitled
to notice of a meeting, vote at a meeting, consent to actions or other
matters, receive a distribution or dividend, or exercise or be allotted
other rights.
(h) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, administrator,
agent, custodian or underwriter.
(i) To sell or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property held by the Trust, and
to execute and deliver powers of attorney to such person or persons as
the Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to stock or other securities or
property as the Trustees shall deem proper.
(j) To exercise all of the rights of the Trust as owner of any
securities which might be exercised by any individual owning such
securities in his own right, including without limitation the right to
vote by proxy for any and all purposes (including the right to
authorize any officer or agent of the Trust to execute proxies), to
consent to the reorganization, merger or consolidation of any company,
or to consent to the sale or lease of all or substantially all of the
property and assets of any company to any other company; to exchange
any of the securities of any company for the securities, including
shares of stock, issued therefor upon any such reorganization, merger,
consolidation, sale or lease; to exercise any conversion or
subscription privileges, rights, options and warrants incident to the
ownership of any security owned by it or acquired therewith; to hold
any securities acquired in the name of any custodian of the assets of
the Trust, or in the name of its nominee or a nominee of the Trust, or
in any manner permitted herein or in the By-Laws; and to execute any
and all instruments and do any and all things incidental to the Trust
not inconsistent with the provisions hereof, the execution or
performance of which the Trustees may deem expedient.
(k) To hold any security or interest in a loan or other property in a
form not indicating any trust, whether in bearer, unregistered or other
negotiable or non-negotionable form; or either in its own name or in
the name of a custodian or sub-custodian or a nominee or nominees of
the Trust or of a custodian or sub-custodian, subject in either case to
proper safeguards according to the usual practice of Massachusetts
trust companies or investment companies.
(l) To compromise, arbitrate, or otherwise adjust claims of the Trust
in favor of or against the Trust or any matter in controversy
including, but not limited to, claims for taxes.
(m) To make distributions of the earnings or profits, surplus
(including paid-in surplus), capital or assets of the Trust to
Shareholders in the manner hereinafter provided for, the amount of such
distributions and their payment to be solely at the discretion of the
Trustees.
(n) To pay any and all taxes or liens of whatever nature or kind
imposed upon or against the Trust or any part thereof, or imposed upon
any of the Trustees herein, individually or jointly, by reason of the
Trust, or of the business conducted by said Trustees under the terms of
this Declaration of Trust, out of the funds of the Trust available for
such purpose.
(o) To engage in and to prosecute, compound, compromise, abandon, or
adjust, by arbitration, or otherwise, any actions, suits, proceedings,
disputes, claims, demands, and things relating to the Trust, and out of
the assets of the Trust to pay, or to satisfy, any debts, claims or
expenses incurred in connection therewith, including those of
litigation, upon any evidence that the Trustees may deem sufficient.
The powers aforesaid are to include any actions, suits, proceedings,
disputes, claims, demands and things relating to the Trust wherein any
of the Trustees may be named individually, but the subject matter of
which arises by reason of business for and on behalf of the Trust.
(p) To buy or join with any person or persons in buying the property of
any corporation, association, or other organization any of the
securities of which are included in the Trust, or any property in which
the Trustees, as such, shall have or may hereafter acquire an interest,
and to allow the title to any property so bought to be taken in the
name or names of, and to be held by, such person, or persons as the
Trustees shall name or approve.
(q) From time to time in their discretion to enter into, modify and
terminate agreements with Federal or state regulatory authorities,
which agreements may restrict but not amplify their powers under this
Declaration of Trust.
(r) To borrow money and in this connection issue notes or other
evidences of indebtedness; to secure borrowings by mortgaging, pledging
or otherwise subjecting as security the Trust property; to endorse,
guarantee, or undertake the performance of any obligation or engagement
of any other person and to lend the portfolio securities or other
assets of the Trust to other persons.
(s) From time to time in their discretion to charge all or any part of
any cost, expense or expenditure (including without limitation any
expense of selling or distributing the Shares of the Trust) or tax
against the principal or capital of the Trust, and to credit all or any
part of any profit, income or receipt (including without limitation, if
applicable, any deferred sales charge or fee, whether contingent or
otherwise, paid or payable to the Trust on any redemption or repurchase
of Shares of the Trust) to the principal or capital of the Trust.
(t) To issue one or more classes of senior securities (as defined in
the Investment Company Act of 1940, as amended) including without
limitation general unsecured obligations of the Trust, and to enter
into indentures or agreements relating thereto.
The foregoing enumeration of specific powers shall not be held to limit
or restrict in any manner the general powers of the Trustees.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order. The Trustees may authorize one of their number to sign, execute,
acknowledge, and deliver any agreement, contract, note, deed, certificate or
other instrument in the name of, and in behalf of, the Trust, and upon such
authorization such signature, acknowledgement or delivery shall have full force
and effect as the act of all of the Trustees.
ARTICLE VI
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest Initially, the beneficial
interest in the Trust shall be divided into an unlimited number of transferable
common shares (herein referred to as the "Common Shares" and individually as a
"Common Share"), without par value. The Trustees may, in their discretion and as
provided by Section 2 of this Article VI, divide the beneficial interest in the
Trust into two classes of an unlimited number of Shares (namely Common Shares
and Preferred Shares), and they may in addition authorize the division of
Preferred Shares into two or more series. The Trustees may vary the relative
rights and preferences between the Common Shares and the Preferred Shares and
between the different series of Preferred Shares, subject to any applicable
provisions of the Investment Company Act of 1940, as from time to time amended
(the "1940 Act"). Each Common Share represents an equal proportional interest in
the Trust with each other outstanding Common Share of the Trust, subject to such
rights and preferences as may have been established and designated with respect
to the Preferred Shares. Each Preferred Share represents an equal proportionate
interest in the Trust with each other outstanding Preferred Share of the Trust,
subject to such rights and preferences as may have been established and
designated with respect to series of Preferred Shares. Contributions to the
Trust may be accepted for, and Common and Preferred Shares may be redeemed or
repurchased as, whole Common and Preferred Shares and/or fractional Common and
Preferred Shares as the Trustees may in their discretion determine. The Trustees
may issue such certificates of beneficial interest to evidence ownership of the
Shares as they may determine from time to time. Common Shares and Preferred
Shares may be referred to herein collectively as "Shares" and individually as a
"Share".
Section 2. Preferred Series Designation The Trustees, in their
discretion, may divide the beneficial interest in the Trust into two classes of
Shares by establishing and designating an additional class of Preferred Shares,
and the variations in the relative rights and preferences as between the
different classes shall be fixed and determined by the Trustees. The Trustees,
in their discretion, may also authorize the division of the Preferred Shares
into two or more series, and the different series shall be established and
designated, and the variations in the relative rights and preferences as between
the different series shall be fixed and determined, by the Trustees. All
references to Preferred Shares in this Declaration shall be deemed to be
Preferred Shares of any or all series as the context may require.
The number of authorized Common and Preferred Shares and the number of
Preferred Shares of each series that may be issued shall be unlimited. The
Trustees may hold as treasury shares, reissue for such consideration and on such
terms as they may determine, or cancel any Common and Preferred Shares
reacquired by the Trust at their discretion from time to time.
The division of the beneficial interest in the Trust into Common and
Preferred Shares, and the establishment and designation of such classes of
Shares (and of any series of Preferred Shares) shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and designation, and the relative rights and preferences of each
such class (or series), or as otherwise provided in such instrument. At any time
that there are no Shares outstanding of any particular class (or series)
previously established and designated, the Trustees may by an instrument
executed by a majority of their number abolish that class (or series) and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration in
accordance with Section 7 of Article XIV hereof, and a copy of each such
instrument shall be filed in accordance with Section 5 of Article XIV hereof.
Section 3. Ownership of Shares The ownership of Shares shall be
recorded in the books of the Trust or of one or more transfer agents. The
Trustees may make such rules and adopt such procedures as they consider
appropriate for the transfer of Shares and similar matters. The record books of
the Trust or of any transfer agent, as the case may be, shall be conclusive
evidence as to who are the holders of Shares and as to the number of Shares held
from time to time by each such holder.
Section 4. Investments in the Trust The Trustees shall accept
investments in the Trust from such persons and on such terms as they may from
time to time authorize. After the date of the initial contribution of capital,
the number of Common Shares representing the initial contribution may, in the
Trustees' discretion, be considered as outstanding and the amount received by
the Trustees on account of the contribution shall be treated as an asset of the
Trust. Subsequent investments in the Trust shall be credited to the
Shareholder's account in the form of full and fractional Shares of the Trust.
Section 5. Preemptive Rights Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust, except as the Trustees may determine with respect to any Preferred
Shares or series thereof.
Section 6. Voting Except as otherwise provided by law or by this
Declaration of Trust, as amended from time to time, the voting rights of the
Shares shall be as set forth from time to time in the By-Laws.
ARTICLE VII
CUSTODY OF ASSETS
The Trust shall at all times employ by contract a bank or trust company
having an aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least two million dollars ($2,000,000) as the principal
custodian of the Trust (the "Custodian") with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in the By-Laws:
(a) To hold the securities and other property owned by the Trust and
deliver the same upon written order;
(b) To receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or, as the Trustees may direct,
in any bank, trust company or banking institution approved by the
Custodian, provided that all such deposits shall be subject only to the
draft or order of the Custodian; and
(c) To disburse such funds upon orders or vouchers.
The Trust may also employ such Custodian as its agent:
(a) To keep the books and accounts of the Trust and furnish clerical
and accounting services; and
(b) To compute the net asset value per Common Share in accordance with
the provision of Article XII hereof.
All of the foregoing services shall be performed upon such basis of
compensation as may be agreed upon between the Trust and the Custodian. If so
directed by vote of the holders of a majority of the outstanding Shares, the
Custodian shall deliver and pay over all property of the Trust held by it as
specified in such vote.
The Trust may also authorize the Custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
Custodian and upon such terms and conditions as may be agreed upon between the
Custodian and such sub-custodian and approved by the Trustees.
Subject to such rules, regulations and orders as the Securities and
Exchange Commission (the "Commission") may adopt, the Trust may direct the
Custodian to deposit all or any part of the securities in a depository and
clearing system established by a national securities exchange or a national
securities association registered with the Commission under the Securities
Exchange Act of 1934, as from time to time amended, or such other person as may
be permitted by the Commission, or otherwise in accordance with the 1940 Act,
pursuant to which system all securities of any particular class or series of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or the Custodian. The Trustees may also authorize
the deposit with one or more eligible foreign custodians of all or part of the
Trust's foreign assets, securities, cash and cash equivalents in amounts
reasonably necessary to effect the Trust's foreign investment transactions, in
accordance with such rules, regulations and orders as the Commission may adopt.
ARTICLE VIII
CONTRACTS
Section 1. Adviser The Trustees may in their discretion from time to
time authorize the Trust to enter into an investment advisory agreement whereby
the other party to such agreement shall undertake to furnish to the Trustees
such investment advisory, statistical and research facilities and services and
such other facilities and services, if any, and all upon such terms and
conditions, as the Trustees may in their discretion determine. Notwithstanding
any provisions of this Declaration of Trust, the Trustees may authorize the
Adviser, in its discretion and without any prior consultation with the Trust, to
buy, sell, lend and otherwise trade in any and all securities, interests in
loans, commodity contracts and other investments and assets of the Trust and to
engage in and employ all types of transactions and strategies in connection
therewith. Any such action taken pursuant to such agreement shall be deemed to
have been authorized by all of the Trustees.
The Trustees may also employ, or authorize the Adviser to employ, one
or more sub-investment advisers from time to time to perform such of the acts
and services of the Adviser and upon such terms and conditions as may be agreed
upon between the Adviser and such sub-investment adviser and approved by the
Trustees.
Section 2. Administrator The Trustees may in their discretion from time
to time authorize the Trust to enter into an administration agreement whereby
the other party to such agreement shall undertake to manage the business affairs
of the Trust subject to the supervision of the Trustees, perform duties with
respect to the Trust, and furnish for the use of the Trust office space and
necessary office facilities, equipment and personnel for administering the
affairs of the Trust, all upon such terms and conditions as the Trustees may in
their discretion determine.
Section 3. Underwriters The Trustees may in their discretion from time
to time authorize the trust to enter into one or more contracts providing for
the sale of the Shares of the Trust. Pursuant to any such contract the Trust may
either agree to sell the Shares to the other party to the contract or appoint
such other party its sales agent for such Shares (such other party being herein
sometimes called the "underwriter.") In either case, any such contract shall be
on such terms and conditions as may be prescribed in the By-Laws, if any, and
such further terms and conditions as the Trustees may in their discretion
determine; and any such contract may also provide for the repurchase or sale of
Shares of the Trust by such other party as principal or as agent of the Trust.
Section 4. Transfer Agents The Trustees may in their discretion from
time to time appoint one or more transfer agents for the Trust. Any contract
with a transfer agent shall be on such terms and conditions as the Trustees may
in their discretion determine. The Trustees may employ a transfer agent as the
Trust's agent to (a) keep the books and accounts of the Trust and furnish
clerical and accounting services and (b) compute the net asset value per Common
Share in accordance with the provisions of Article XII hereof.
Section 5. Parties to Contract Any contract of the character described
in Sections 1, 2, 3 and 4 of this Article VIII or in Article VII hereof may be
entered into with any corporation, firm, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship, nor shall any person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article
VIII, Article VII or the By-Laws. The same person (including a firm,
corporation, trust, or association) may be the other party to contracts entered
into pursuant to Sections 1, 2, 3 and 4 above or Article VII, and any individual
may be financially interested or otherwise affiliated with persons who are
parties to any or all of the contracts mentioned in this Section 5.
ARTICLE IX
COMPENSATION AND REIMBURSEMENT OF TRUSTEES
The Trustees shall be entitled to reasonable compensation from the
Trust and shall be reimbursed from the Trust estate for their expenses and
disbursements incurred by them in connection with the administration and
management of the Trust.
ARTICLE X
SALE OF SHARES
The Trustees shall have the power from time to time to issue and sell
or cause to be issued and sold an unlimited number of Shares of the Trust for
cash or for property, which shall in every case be paid to the Custodian as
agent of the Trust before the delivery of any certificate for such Shares. The
Shares of the Trust, including any Shares which may have been redeemed or
repurchased by the Trust (herein sometimes referred to as "treasury shares"),
may be sold at a price as specified in the current prospectus of the Trust or at
any other price which does not contravene the 1940 Act. Such price may include a
sales charge or other commission, fee or profit.
ARTICLE XI
REDEMPTIONS AND REPURCHASES
Section 1. Redemption and Repurchases of Shares From time to time the
Trust may redeem or repurchase its Shares, all upon such terms and conditions as
may be determined by the Trustees and subject to any applicable provisions of
the 1940 Act. The Trust may require Shareholders to pay a withdrawal charge, a
sales charge, or any other form of charge to the Trust, to the underwriter or to
any other person designated by the Trustees upon redemption or repurchase of
Trust Shares in such amount as shall be determined from time to time by the
Trustees. The Trust may also charge a redemption or repurchase fee in such
amount as may be determined from time to time by the Trustees.
Section 2. Manner of Payment Payment for Shares redeemed or repurchased
may at the option of the Trustees or such officer or officers as they may duly
authorize for the purpose, in their complete discretion, be made in cash, or in
kind, or partially in cash and partially in kind. In case of payment in kind the
Trustees, or their delegate, shall have absolute discretion as to what security
or securities shall be distributed in kind and the amount of the same, and the
securities shall be valued for purposes of distribution at the figure at which
they were appraised in computing the net asset value of the Common Shares,
provided that any Shareholder who cannot legally acquire securities so
distributed in kind by reason of the prohibitions of the 1940 Act shall receive
cash.
Section 3. Involuntary Redemptions If the Trustees shall, at any time
and in good faith, be of the opinion that direct or indirect ownership of Shares
of any class or series or other securities of the Trust has or may become
concentrated in any person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption by any such person a number, or principal amount, of Shares or
other securities of the Trust sufficient to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other securities of the Trust to any person whose acquisition of
the Shares or other securities of the Trust in question would result in such
disqualification. The redemption shall be effected upon such terms and
conditions as shall be determined by the Trustees.
The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
ARTICLE XII
NET ASSET VALUE PER COMMON SHARE
The net asset value of each Common Share of the Trust outstanding shall
be determined by or on behalf of the Trustees not less frequently than as may be
required by the 1940 Act and at such time and in such manner as the Trustees may
determine. The power and duty to determine net asset value may be delegated by
the Trustees from time to time to one or more of the Trustees and officers of
the Trust, to the other party to any contract entered into pursuant to Article
VIII hereof, or to the Custodian or a transfer agent.
The Trustees may declare a suspension of the determination of net asset
value, subject to any applicable provisions of the 1940 Act.
In connection with the determination of net asset value per Common
Share, the value of the assets of the Trust shall be determined in a manner
approved or authorized by the Trustees.
ARTICLE XIII
DIVIDENDS AND DISTRIBUTIONS
(a) The Trustees may from time to time distribute ratably among all
holders of the Common shares and among all holders of a particular series of
Preferred Shares such proportion of the earnings or profits, surplus (including
paid-in surplus), capital, or assets held by the Trustees as they may deem
proper. Such distributions may be made in cash, additional Shares or property
(including without limitation any type of obligations of the Trust or any assets
thereof), and the Trustees may distribute ratably among the Shareholders
entitled thereto additional Shares issuable hereunder in the form of a stock
dividend or otherwise in such manner, at such times, and on such terms as the
Trustees may deem proper. Such distributions may be among the Shareholders of
record at the time of declaring a distribution or among the Shareholders of
record at such other date or time or dates or times as the Trustees shall
determine. The Trustees may in their discretion determine that, solely for the
purposes of such distributions, outstanding Shares shall exclude Shares for
which orders have been placed subsequent to a specified time on the date the
distribution is declared. The Trustees may always retain from the net profits
such amount as they may deem necessary to pay the debts or expenses of the Trust
or to meet obligations of the Trust, or as they may deem desirable to use in the
conduct of its affairs or to retain for future requirements or extensions of the
business. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or other distribution plans as
the Trustees shall deem appropriate.
(b) The Trustees may prescribe, in their absolute discretion, such
bases and times for determining the amounts for the declaration and payment of
dividends and distributions as they may deem necessary or desirable.
ARTICLE XIV
MISCELLANEOUS
Section 1. Trust Not a Partnership It is hereby expressly declared that
a trust and not a partnership is created hereby. No Trustee hereunder shall have
any power to bind personally either the Trust's officers or any Shareholders.
Section 2. Limitation of Personal Liability The Trustees shall not have
the power to bind the Shareholders or to call upon them or any of them for the
payment of any sum of money or any assessment whatever other than such sums as
the Shareholders at any time personally agree to pay by way of subscription for
Shares or otherwise. All persons or corporations dealing or contracting with the
Trustees as such shall have recourse only to the Trust for the payment of their
claims or for the payment or satisfaction of claims or obligations arising out
of such dealings or contracts, so that neither the Trustees nor the
Shareholders, nor the agents or attorneys of the Trust, past, present or future,
shall be personally liable therefor. In all contracts or instruments creating
liability it may be expressly stipulated, either by such reference to this
instrument as shall accomplish such purpose or otherwise, that the liability of
the Trustees and Shareholders under such contracts or instruments shall be
limited to the assets which may from time to time constitute the Trust.
Section 3. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety The exercise by the Trustees of their powers and discretions hereunder in
good faith shall be binding upon everyone interested. The Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Declaration of Trust, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
Unless otherwise required by the By-Laws, the Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.
Section 4. Termination of Trust
(a) This Trust shall continue without limitation of time but subject to
the provisions of sub-sections (b), (c) and (d) of this Section 4.
(b) The Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange
all or substantially all of the Trust property, including its good
will, upon such terms and conditions and for such consideration when
and as authorized at a meeting of Shareholders called for the purpose
by the affirmative vote of the holders of two-thirds of each class of
Shares outstanding and entitled to vote (with each such class
separately voting thereon as a separate class), or by an instrument or
instruments in writing without a meeting, consented to by the holders
of two-thirds of each class of Shares (with each such class separately
consenting thereto as a separate class); provided, however, that, if
such merger, consolidation, sale, lease or exchange is recommended by
the Trustees, the vote or written consent of the holders of a majority
of the Common Shares outstanding and entitled to vote shall be
sufficient authorization; and any such merger, consolidation, sale,
lease or exchange shall be deemed for all purposes to have been
accomplished under and pursuant to the statutes of the Commonwealth of
Massachusetts. Upon making provision for the payment of all outstanding
obligations, taxes and other liabilities, (whether accrued or
contingent) of the Trust, the Trustees shall distribute the remaining
assets of the Trust ratably among the holders of the outstanding
Shares, except as may be otherwise provided by the Trustees with
respect to any class of Preferred Shares or series thereof.
(c) Subject to authorization by the Shareholders as indicated below in
this sub-section (c), the Trust may at any time sell and convert into
money all of the assets of the Trust, and, upon making provision for
the payment of all outstanding obligations, taxes and other liabilities
(whether accrued or contingent) of the Trust, the Trustees shall
distribute the remaining assets of the Trust ratably among the holders
of the outstanding Shares, except as may be otherwise provided by the
Trustees with respect to any class of Preferred Shares or series
thereof. Such action shall first have been authorized at a meeting of
Shareholders called for the purpose by the affirmative vote of the
holders of two-thirds of each class of Shares outstanding and entitled
to vote (with each such class separately voting thereon as a separate
class), or by an instrument or instruments in writing without a
meeting, consented to by the holders of two-thirds of each class of
Shares (with each such class separately consenting thereto as a
separate class); provided, however, that if such action is recommended
by the Trustees, the vote or written consent of the holders of a
majority of the Common Shares outstanding and entitled to vote shall be
sufficient authorization.
(d) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-sections (b) or (c), the Trust
shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder and the right, title and
interest of all parties shall be cancelled and discharged.
Section 5. Certain Transactions
(a) Notwithstanding any other provision of this Declaration and subject
to the exceptions provided in sub-section (d) of this Section 5, the
types of transactions described in sub-section (c) of this Section 5
shall require the affirmative vote or consent of the holders of
seventy-five percent (75%) of each class of Shares outstanding and
entitled to vote (with each such class separately voting thereon or
consenting thereto as a separate class), when a Principal Shareholder
(as defined in sub-section (b) of this Section 5) is a party to the
transaction. Such affirmative vote or consent shall be in addition to
the vote or consent of the holders of Shares otherwise required by law
or by the terms of any class or series of Preferred Shares, whether now
or hereafter authorized, or by any agreement between the Trust and any
national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation, person
or other entity which is the beneficial owner, directly or indirectly,
of more than five percent (5%) of the outstanding Common Shares and
shall include any affiliate or associate, as such terms are defined in
clause (ii) below, of a Principal Shareholder. For the purpose of this
Section 5, in addition to the Common Shares which a corporation, person
or other entity beneficially owns directly, (a) any corporation, person
or other entity shall be deemed to be the beneficial owner of any
Common Shares (i) which it has the right to acquire pursuant to any
agreement or upon exercise of conversion rights or warrants, or
otherwise (but excluding Share options granted by the Trust) or (ii)
which are beneficially owned, directly or indirectly (including Common
Shares deemed owned through application of clause (i) above), by any
other corporation, person or entity with which it or its "affiliate" or
"associate" (as defined below) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of Common Shares, or which is its "affiliate", or "associate"
as those terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, and (b) the
outstanding Common Shares shall include Common Shares deemed owned
through application of clauses (i) and (ii) above but shall not include
any other Common Shares which may be issuable pursuant to any
agreement, or upon exercise of conversion rights or warrants, or
otherwise.
(c) This Section 5 shall apply to the following transactions:
(i) The merger or consolidation of the Trust or any
subsidiary of the Trust with or into any Principal
Shareholder.
(ii) The issuance of any securities of the Trust to any
Principal Shareholder for cash.
(iii) The sale, lease or exchange of all or any substantial
part of the assets of the Trust to any Principal
Shareholder (except assets having an aggregate fair
market value of less than $1,000,000, aggregating for
the purpose of such computation all assets sold,
leased or exchanged in any series of similar
transactions within a twelve-month period or assets
sold in the ordinary course of business).
(iv) The sale, lease or exchange to the Trust or any
subsidiary thereof, in exchange for securities of the
Trust of any assets of any Principal Shareholder
(except assets having an aggregate fair market value
of less than $1,000,000 aggregating for the purpose
of such computation all assets sold, leased or
exchanged in any series of similar transactions
within a twelve-month period).
(d) The provisions of this Section 5 shall not be applicable to (i) any
of the transactions described in sub-section (c) of this Section 5 if
the Board of Trustees of the Trust shall by resolution have approved a
memorandum of understanding with such Principal Shareholder with
respect to and substantially consistent with such transaction, or (ii)
any such transaction with any corporation of which a majority of the
outstanding shares of all classes of stock normally entitled to vote in
elections of directors is owned or record or beneficially by the Trust
and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine
for the purposes of this Section 5 on the basis of information known to
the Trust, whether (i) a corporation, person or entity beneficially
owns more than fiver percent (5%) of the outstanding Common Shares,
(ii) a corporation, person or entity is an "affiliate" or "associate"
(as defined above) of another, (iii) the assets being acquired or
leased to or by the Trust or any subsidiary thereof, constitute a
substantial part of the assets of the Trust and have an aggregate fair
market value of less than $1,000,000, and (iv) the memorandum of
understanding referred to in sub-section (d) hereof is substantially
consistent with the transaction covered thereby. Any such determination
shall be conclusive and binding for all purposes of this Section 5.
Section 6. Conversion Notwithstanding any other provisions of this
Declaration, the conversion of the Trust from a "closed-end company" to an
"open-end company," as those terms are defined in Sections 5(a)(2) and 5(a)(1),
respectively, of the 1940 Act, shall require the affirmative vote or consent of
the holders of two-thirds of each class of the Shares outstanding and entitled
to vote (with each class separately voting thereon or consenting thereto as a
separate class). Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of the Shares otherwise required by law or by the
terms of any class or series of Preferred Shares, whether now or hereafter
authorized, or by any agreement between the Trust and any national securities
exchange. However, if such conversion is recommended by the Trustees, the vote
or written consent of the holders of a majority of the outstanding voting
securities of the Trust (which voting securities shall, unless otherwise
provided by the Trustees, vote together on the matter as a single class) shall
be sufficient to authorize such conversion.
Section 7. Filing of Copies, References, Headings and Counterparts The
original or a copy of this instrument, of any amendment hereto and of each
declaration or trust supplemental hereto, shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument,
of any amendment hereto, and of each supplemental declaration of trust shall be
filed by the Trustees with the Massachusetts Secretary of State and with any
other governmental office where such filing may from time to time be required.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such amendments or supplemental declarations of
trust have been made and as to any matters in connection with the Trust
hereunder, and with the same effect as if it were the original, may rely on a
copy certified by a Trustee or an officer of the Trust to be a copy of this
instrument or of any such amendment hereto or supplemental declaration of trust.
In this instrument or in any such amendment or supplemental declaration of
trust, references to this instrument, and all expressions such as "herein",
"hereof" and "hereunder", shall be deemed to refer to this instrument as amended
or affected by any such supplemental declaration of trust. Headings are placed
herein for convenience of reference only and, in case of any conflict, the text
of this instrument, rather than the headings, shall control. This instrument may
be executed in any number of counterparts, each of which shall be deemed an
original, but such counterparts shall constitute one instrument.
Section 8. Applicable Law The Trust set forth in this instrument is
made in the Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a Massachusetts
business trust, and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust.
Section 9. Amendments
(a) The execution of an instrument setting forth the establishment and
designation and the relative rights of any class (or series) of Shares
in accordance with Section 2 of Article VI hereof shall, without any
authorization, consent or vote of the Shareholders, effect an amendment
of this Declaration. Except as otherwise provided in this Section 9, if
authorized by a majority of the Trustees and by vote of a majority of
the outstanding voting securities of the Trust affected by the
amendment (which voting securities shall, unless otherwise provided by
the Trustees, vote together on such amendment as a single class), or by
any larger vote which may be required by applicable law or this
Declaration of Trust in any particular case, the Trustees may amend or
otherwise supplement this Declaration. The Trustees may also amend this
Declaration without the vote or consent of Shareholders to change the
name of the Trust or to make such other changes as do not have a
materially adverse effect on the rights or interests of Shareholders
hereunder or if they deem it necessary to conform this Declaration to
the requirements of applicable Federal laws or regulations or the
requirements of the regulated investment company provisions of Internal
Revenue Code, but the Trustees shall not be liable for failing so to
do. Copies of any amendment or of the supplemental Declaration of Trust
shall be filed as specified in Section 7 of this Article XIV.
(b) No amendment may be made under this Section 9 which shall amend,
alter, change or repeal any of the provisions of Sections 4, 5, 6, or 9
of Article XIV unless the amendment effecting such amendment,
alteration, change or repeal shall receive the affirmative vote or
consent of the holders of two-thirds of each class of Shares
outstanding and entitled to vote (with each such class separately
voting thereon or consenting thereto as a separate class). Such
affirmative vote or consent shall be in addition to the vote or consent
of the holders of Shares otherwise required by law or by the terms of
any class or series of Preferred Shares, whether now or hereafter
authorized, or by any agreement between the Trust and any national
securities exchange.
(c) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or
to permit assessments upon Shareholders.
(d) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended,
covering the first public offering of securities of the Trust shall
have become effective, this Declaration may be terminated or amended in
any respect by the affirmative vote of a majority of the Trustees or by
an instrument signed by a majority of the Trustees.
Section 10. Definitions
(a) The term "vote of a majority of the outstanding voting securities",
when used herein, shall have the meaning specified in the 1940 Act as
now in effect or as hereafter amended.
(b) The term "vote of a majority of the outstanding Common Shares",
when used herein, shall mean the vote, as a meeting of Shareholders of
the Trust duly called, of the lesser of (1) sixty-seven percent (67%)
or more of the Common Shares present at such meeting, if the holders of
fifty per cent (50%) of the outstanding Common Shares of the Trust are
present or represented by proxy, or (2) more than fifty per cent (50%)
of the outstanding Common Shares of the Trust.
IN WITNESS WHEREOF, the undersigned have executed this instrument this
30th day of June, 1989.
/s/ James G. Baur /s/ James B. Hawkes
----------------------- ------------------------
James G. Baur James B. Hawkes
----------------------- ------------------------
Donald R. Dwight Samuel L. Hayes, III
/s/ Norton H. Reamer /s/ John L. Thorndike
----------------------- ------------------------
Norton H. Reamer John L. Thorndike
/s/ Jack L. Treynor
--------------------
Jack L. Treynor
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
June 30, 1989
Suffolk, ss. Boston, Massachusetts
Then personally appeared the above named James G. Baur, James B.
Hawkes, Norton H. Reamer, John L. Thorndike and Jack L. Treynor, being a
majority of the Trustees then in office, who severally acknowledged the
foregoing instrument to be their free act and deed.
Before me,
/s/ Ruth E. McDonald
--------------------------
Notary Public
My commission expires June 4, 1993
----------------
<PAGE>
EATON VANCE PRIME RATE RESERVES
The Address of the Trust is:
24 Federal Street
Boston, Massachusetts 02110
The Addresses of the Trustees are as follows:
James G. Baur 2 King George Drive
Boxford, Massachusetts 01921
Donald R. Dwight 20 Martin Dale
Greenwich, Connecticut 06830
James B. Hawkes 11 Quincy Park
Beverly, Massachusetts 01915
Samuel L. Hayes, III 345 Nahatan Street
Westwood, Massachusetts 02090
Norton H. Reamer 70 Circuit Road
Brookline, Massachusetts 02146
John L. Thorndike 10 Main Street
Dover, Massachusetts 02030
Jack L. Treynor 504 Via Almar
Palos Verdes Estates, California 90274
<PAGE>
EXHIBIT 99.(b)(a)
BY-LAWS
OF
EATON VANCE PRIME RATE RESERVES
(as amended June 12, 1989)
ARTICLE I
The Trustees
SECTION 1. Initial Trustees, Election and Term of Office. In the year 1990 or
1991, on a date fixed by the Trustees, the shareholders of the Trust shall elect
the number of Trustees to be fixed as provided herein. The initial Trustees
named in the Preamble of the Declaration of Trust dated May 2, 1989, as from
time to time amended (the "Declaration of Trust"), and any additional Trustees
appointed pursuant to Section 4 of this Article I, shall serve as Trustees until
the 1990 or 1991 election and until their successors are elected and qualified.
The Trustees elected at such 1990 or 1991 election shall serve as Trustees
during the lifetime of the Trust, except as otherwise provided below.
SECTION 2. Number of Trustees. The number of Trustees shall be fixed by the
Trustees, provided, however, that such number shall at no time exceed eighteen.
SECTION 3. Resignation and Removal. Any Trustee may resign his trust by written
instrument signed by him and delivered to the other Trustees, which shall take
effect upon such delivery or upon such later date as is specified therein. Any
Trustee who requests in writing to be retired or who has become incapacitated by
illness or injury may be retired by written instruments signed by a majority of
the other Trustees, specifying the date of his retirement. Any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective.
No natural person shall serve as a Trustee of the Trust after the
holders of record of not less than two-thirds of the outstanding shares of
beneficial interest of the Trust (the "shares") have declared that he be removed
from that office by a declaration in writing signed by such holders and filed
with the Custodian of the assets of the Trust or by votes cast by such holders
in person or by proxy at a meeting called for the purpose. Solicitation of such
a declaration shall be deemed a solicitation of a proxy within the meaning of
Section 20(a) of the Investment Company Act of 1940, as amended (the "Act").
The Trustees of the Trust 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.
Whenever ten or more shareholders of record of the Trust who have been
such for at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least $25,000 or at
least 1 per centum of the outstanding shares, whichever is less, shall apply to
the Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to a request for a meeting of
shareholders pursuant to this Section 3 and accompanied by a form of
communication and request which they wish to transmit, the Trustees shall within
five business days after receipt of such application either
(1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or
(2) inform such applicants as to the approximate number of
shareholders of record, and the approximate cost of mailing to them the proposed
communication and form of request.
If the Trustees elect to follow the course specified in subparagraph
(2) above of this Section 3, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addresses as recorded on the
books, unless within five business days after such tender the Trustees shall
mail to such applicants and file with the Securities and Exchange Commission
(the "Commission"), together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the basis
of such opinion.
After the Commission has had an opportunity for hearing upon the
objections specified in the written statement so filed by the Trustees, the
Trustees or such applicants may demand that the Commission enter an order either
sustaining one or more of such objections or refusing to sustain any of such
objections. If the Commission shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one or more of
such objections, the Commission shall find, after notice and opportunity for
hearing, that all objections so sustained have been met, and shall enter an
order so declaring, the Trustees shall mail copies of such material to all
shareholders with reasonable promptness after the entry of such order and the
renewal of such tender.
Until such provisions become null, void, inoperative and removed from
these By-Laws pursuant to the next sentence, the provisions of all but the first
paragraph of this Section 3 may not be amended or repealed without the vote of a
majority of the Trustees and a majority of the outstanding shares of the Trust.
These same provisions shall be deemed null, void, inoperative and removed from
these By-Laws upon the effectiveness of any amendment to the Act which
eliminates them from Section 16 of the Act or the effectiveness of any successor
Federal law governing the operation the Trust which does not contain such
provisions.
SECTION 4. Vacancies. In case of the declination, death, resignation,
retirement, removal, or inability of any of the Trustees, or in case a vacancy
shall, by reason of an increase in number, or for any other reason, exist, the
remaining Trustees shall fill such vacancy by appointing such other person as
they in their discretion shall see fit. Such appointment shall be evidenced by a
written instrument signed by a majority of the Trustees in office whereupon the
appointment shall take effect. Within three months of such appointment the
Trustees shall cause notice of such appointment to be mailed to each shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder and under the Declaration of Trust. The power of
appointment is subject to the provisions of Section 16(a) of the Act.
Whenever a vacancy among the Trustees shall occur, until such vacancy
is filled, or while any Trustee is absent from the Commonwealth of Massachusetts
or, if not a domiciliary of Massachusetts, is absent from his state of domicile,
or is physically or mentally incapacitated by reason of disease or otherwise,
the other Trustees shall have all the powers hereunder and the certificate of
the other Trustees of such vacancy, absence or incapacity shall be conclusive,
provided, however, that no vacancy shall remain unfilled for a period longer
than six calendar months.
SECTION 5. Temporary Absence of Trustee. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any one time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided. No such delegation shall be deemed to confer power to
approve the terms of any contract or agreement referred to in Section 15(c) of
the Act and submitted to the Trustees for their approval at a meeting of the
Trustees called for the purpose of voting on such approval.
SECTION 6. Effect of Death, Resignation, Removal, Etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of the Trustees, or
any one of them, shall not operate to annul the Trust or to revoke any existing
agency created pursuant to the terms of the Declaration of Trust or these
By-Laws.
ARTICLE II
Officers and Their Election
SECTION 1. Officers. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and such other officers or agents as the Trustees may
from time to time elect. It shall not be necessary for any Trustee or other
officer to be a holder of shares in the Trust.
SECTION 2. Election of Officers. The Treasurer and Secretary shall be chosen
annually by the Trustees. The President shall be chosen annually by and from the
Trustees.
Except for the offices of President and Secretary, two or more offices
may be held by a single person. The officers shall hold office until their
successors are chosen and qualified.
SECTION 3. Resignations and Removals. Any officer of the Trust may resign by
filing a written resignation with the President or with the Trustees or with the
Secretary, which shall take effect on being so filed or at such time as may
otherwise be specified therein. The Trustees may at any meeting remove an
officer.
ARTICLE III
Powers and Duties of Trustees and Officers
SECTION 1. Trustees. The business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility, so far as such powers are not inconsistent with the
laws of the Commonwealth of Massachusetts, the Declaration of Trust, or these
By-Laws.
SECTION 2. Executive and Other Committees. The Trustees may elect from their own
number an executive committee to consist of not less than three nor more than
five members, which shall have the power and duty to conduct the current and
ordinary business of the Trust, including the purchase and sale of securities,
while the Trustees are not in session, and such other powers and duties as the
Trustees may from time to time delegate to such committee. The Trustees may also
elect from their own number other committees from time to time, the number
composing such committees and the powers conferred upon the same to be
determined by vote of the Trustees.
SECTION 3. Chairman of the Trustees. The Trustees may, but need not, appoint
from among their number a Chairman. When present he shall preside at the
meetings of the shareholders and of the Trustees. He may call meetings of the
Trustees and of any committee thereof whenever he deems it necessary. He shall
be an executive officer of this Trust and shall have, with the President,
general supervision over the business and policies of this Trust, subject to the
limitations imposed upon the President, as provided in Section 4 of this Article
III.
SECTION 4. President. In the absence of the Chairman of the Trustees, the
President shall preside at all meetings of the shareholders. Subject to the
Trustees and to any committees of the Trustees, within their respective spheres,
as provided by the Trustees, he shall at all times exercise a general
supervision and direction over the affairs of the Trust. He shall have the power
to employ attorneys and counsel for the Trust and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust. He shall also have the power to grant, issue, execute or
sign such powers of attorney, proxies or other documents as may be deemed
advisable or necessary in furtherance of the interests of the Trust. The
President shall have such other powers and duties as, from time to time, may be
conferred upon or assigned to him by the Trustees.
SECTION 5. Treasurer. The Treasurer shall be the principal financial and
accounting officer of the Trust. He shall deliver all funds and securities of
the Trust which may come into his hands to such bank or trust company as the
Trustees shall employ as custodian in accordance with Article VII of the
Declaration of Trust. He shall make annual reports in writing of the business
conditions of the Trust, which reports shall be preserved upon its records, and
he shall furnish such other reports regarding the business and condition as the
Trustees may from time to time require. The Treasurer shall perform such duties
additional to foregoing as the Trustees may from time to time designate.
SECTION 6. Secretary. The Secretary shall record in books kept for the purpose
all votes and proceedings of the Trustees and the shareholders at their
respective meetings. He shall have custody of the seal, if any, of the Trust and
shall perform such duties additional to the foregoing as the Trustees may from
time to time designate.
SECTION 7. Other Officers. Other officers elected by the Trustees shall perform
such duties as the Trustees may from time to time designate.
SECTION 8. Compensation. The Trustees and officers of the Trust may receive such
reasonable compensation from the Trust for the performance of their duties as
the Trustees may from time to time determine.
ARTICLE IV
Meetings of Shareholders
SECTION 1. Meetings. Meetings of the shareholders may be called at any time by
the President, and shall be called by the President or the Secretary at the
request, in writing or by resolution, of a majority of the Trustees, or at the
written request of the holder or holders of ten percent (10%) or more of the
total number of shares of the then issued and outstanding shares of the Trust
entitled to vote at such meeting. Any such request shall state the purposes of
the proposed meeting.
SECTION 2. Place of Meetings. Meetings of the shareholders shall be held at the
principal place of business of the Trust in Boston, Massachusetts, unless a
different place within the United States is designated by the Trustees and
stated as specified in the respective notices or waivers of notice with respect
thereto.
SECTION 3. Notice of Meetings. Notice of all meetings of the shareholders,
stating the time, place and the purposes for which the meetings are called,
shall be given by the Secretary to each shareholder entitled to vote thereat,
and to each shareholder who under the By-Laws is entitled to such notice, by
mailing the same postage paid, addressed to him at his address as it appears
upon the books of the Trust, at least seven (7) days before the time fixed for
the meeting, and the person giving such notice shall make an affidavit with
respect thereto. If any shareholder shall have failed to inform the Trust of his
post office address, no notice need be sent to him. No notice need be given to
any shareholder if a written waiver of notice, executed before or after the
meeting by the shareholder or his attorney thereunto authorized, is filed with
the records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by law, to constitute a quorum
for the transaction of any business at any meeting of shareholders, there must
be present, in person or by proxy, holders of a majority of the total number of
shares of the then issued and outstanding shares of the Trust entitled to vote
at such meeting; provided that if a class (or series) of shares is entitled to
vote as a separate class (or series) on any matter, then in the case of that
matter a quorum shall consist of the holders of a majority of the total number
of shares of the then issued and outstanding shares of that class (or series)
entitled to vote at the meeting. Shares owned directly or indirectly by the
Trust, if any, shall not be deemed outstanding for this purpose.
If a quorum, as above defined, shall not be present for the purpose of
any vote that may properly come before any meeting of shareholders at the time
and place of any meeting, the shareholders present in person or by proxy and
entitled to vote at such meeting on such matter holding a majority of the shares
present and entitled to vote on such matter may by vote adjourn the meeting from
time to time to be held at the same place without further notice than by
announcement to be given at the meeting until a quorum, as above defined,
entitled to vote on such matter, shall be present, whereupon any such matter may
be voted upon at the meeting as though held when originally convened.
SECTION 5. Voting. At each meeting of the shareholders every shareholder of the
Trust shall be entitled to one (1) vote in person or by proxy for each of the
then issued and outstanding shares of the Trust then having voting power in
respect of the matter upon which the vote is to be taken, standing in his name
on the books of the Trust at the time of the closing of the transfer books for
the meeting, or, if the books be not closed for any meeting, on the record date
fixed as provided in Section 4 of Article VI of these By-Laws for determining
the shareholders entitled to vote at such meeting, or if the books be not closed
and no record date be fixed, at the time of the meeting. The record holder of a
fraction of a share shall be entitled in like manner to a corresponding fraction
of a vote. Notwithstanding the foregoing, the Trustees may, in connection with
the establishment of any class (or series) of shares, establish conditions under
which the several classes (or series) shall have separate voting rights or no
voting rights.
All elections of Trustees shall be conducted in any manner approved at
the meeting of the shareholders at which said election is held, and shall be by
ballot if so requested by any shareholder entitled to vote thereon. The persons
receiving the greatest number of votes shall be deemed and declared elected.
Except as otherwise required by law or by the Declaration of Trust or by these
By-Laws, all matters shall be decided by a majority of the votes cast, as
hereinabove provided, by persons entitled to vote thereon.
SECTION 6. Proxies. Any shareholder entitled to vote upon any matter at any
meeting of the shareholders may so vote by proxy. A proxy may be in writing
subscribed by the shareholder or by his duly authorized representative, agent or
attorney. A written proxy shall be dated; if an undated written proxy solicited
by the management of the Trust is delivered to the Trust or its agent or
representative, such proxy shall be deemed dated by the shareholder on the date
of its receipt by the Trust or its agent or representative. A written proxy need
not be sealed, witnessed or acknowledged. The shareholder may also authorize and
empower the persons named as proxies, representatives, agents or attorneys (or
their duly appointed substitutes), or any one of them on any form of proxy
solicited by the management of the Trust to vote all shares of the Trust which
he is entitled to vote upon any matter at any meeting of the shareholders by
recording his voting instructions on any recording device maintained for the
purpose by the Trust or its agent or representative; such recorded instructions
shall be deemed to constitute a written proxy subscribed by the shareholder and
delivered by him to the Trust or its agent or representative and shall be deemed
to be dated as of the date such instructions were transmitted, and the
shareholder shall be deemed to have approved and ratified all actions taken by
such persons in accordance with the voting instructions so recorded. No proxy
which is dated (or deemed dated) more than six months before the initial session
of the meeting shall be accepted and no such proxy shall be valid after the
final adjournment of the meeting. A proxy solicited by the management of the
Trust purporting to be executed or transmitted by or on behalf of a shareholder
shall be valid unless challenged at or prior to exercise of the proxy, and the
burden of providing any invalidity shall be borne by the person asserting the
challenge. A proxy solicited by the management of the Trust with respect to
shares held in the name of two or more persons shall be valid if executed or
transmitted by one of them unless at or prior to its exercise the Trust receives
a specific written notice to the contrary from any one of them.
SECTION 7. Consents. Any action which may be taken by shareholders may be taken
without a meeting if a majority of shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by law, the Declaration
of Trust or these By-Laws for approval of such matter) consent to the action in
writing and the written consents are filed with the records of the meetings of
shareholders. Such contents shall be treated for all purposes as a vote taken at
a meeting of shareholders.
ARTICLE V
Trustees Meetings
SECTION 1. Meetings. The Trustees may in their discretion provide for regular or
stated meetings of the Trustees. Meetings of the Trustees other than regular or
stated meetings shall be held whenever called by the Chairman, President or by
any other Trustee at the time being in office. Any or all of the Trustees may
participate in a meeting by means of a conference telephone or similar
communications equipment through which all persons participating in the meeting
can hear each other at the same time, and participation by such means shall
constitute presence in person at a meeting; provided, however, that for the
purposes of Section 15(c) of the Act only the votes of those Trustees who are
physically present at a meeting of the Trustees shall be deemed to be cast in
person at such meeting.
SECTION 2. Notices. Notice of regular or stated meetings need not be given.
Notice of the time and place of each meeting other than regular or stated
meetings shall be given by the Secretary or by the Trustee calling the meeting
and shall be mailed to each Trustee at least two (2) days before the meeting, or
shall be telegraphed, cabled, or wirelessed to each Trustee at his business
address or personally delivered to him at least one (1) day before the meeting.
Such notice may, however, be waived by all the Trustees. Notice of a meeting
need not be given to any Trustee if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. A notice or waiver of notice need not
specify the purpose of any special meeting.
SECTION 3. Consents. Any action required or permitted to be taken at any meeting
of the Trustees may be taken by the Trustees without a meeting if a written
consent thereto is signed by all the Trustees and filed with the records of the
Trustees' meetings. Such consent may be signed in several counterparts and shall
be treated as a vote at a meeting for all purposes. The Trustees may not act by
written consent to approve the terms of any contract or agreement referred to in
Section 15(c) of the Act.
SECTION 4. Place of Meetings. The Trustees may hold their meetings within or
without the Commonwealth of Massachusetts.
SECTION 5. Quorum and Manner of Acting. A majority of the Trustees in office
shall be present in person at any regular stated or special meeting of the
Trustees in order to constitute a quorum for the transaction of business at such
meeting and (except as otherwise required by the Declaration of Trust, by these
By-Laws or by statute) the act of a majority of the Trustees present at any such
meeting, at which a quorum is present, shall be the act of the Trustees. In the
absence of quorum, a majority of the Trustees present may adjourn the meeting
from time to time until a quorum shall be present. Notice of any adjourned
meeting need not be given.
ARTICLE VI
Shares of Beneficial Interest
SECTION 1. Certificates for Shares of Beneficial Interest. Certificates for
shares of beneficial interest of any class (or series thereof) of shares of the
Trust, if issued, shall be in such form as shall be approved by the Trustees.
They shall be signed by, or in the name of, the Trust by the President and by
the Treasurer and may, but need not be, sealed with seal of the Trust; provided,
however, that where such certificate is signed by a transfer agent or a transfer
clerk acting on behalf of the Trust or a registrar other than a Trustee, officer
or employee of the Trust, the signature of the President and Treasurer and the
seal may be facsimile. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on any such
certificate or certificates, shall cease to be such officer or officers of the
Trust whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Trust, such
certificate or certificates may nevertheless be adopted by the Trust and be
issued and delivered as though the person or persons who signed such certificate
or certificates or whose facsimile signatures shall have been used thereon had
not ceased to be such officer or officers of the Trust.
SECTION 2. Transfer of Shares. Transfers of shares of beneficial interest of any
class (or series thereof) of shares of the Trust shall be made only on the books
of the Trust by the owner thereof or by his attorney thereunto authorized by a
power of attorney duly executed and filed with the Secretary or a transfer
agent, and only upon the surrender of any certificate or certificates for such
shares. The Trust shall not impose any restrictions upon the transfer of the
shares of any class (or series thereof) of the Trust, but this requirement shall
not prevent the charging of customary transfer agent fees.
SECTION 3. Transfer Agent and Registrar; Regulations. The Trust shall, if and
whenever the Trustees shall so determine, maintain one or more transfer offices
or agencies, each in the charge of a transfer agent designated by the Trustees,
where the shares of beneficial interest of the Trust shall be directly
transferable. The Trust shall, if and whenever the Trustees shall so determine,
maintain one or more registry offices, each in the charge of a registrar
designated by the Trustees, where such shares shall be registered, and no
certificate for shares of the Trust in respect of which a transfer agent and/or
registrar shall have been designated shall be valid unless countersigned by such
transfer agent and/or registered by such registrar. The principal transfer agent
may be located within or without the Commonwealth of Massachusetts and shall
have charge of the share transfer books, lists and records, which shall be kept
within or without Massachusetts in an office which shall be deemed to be the
share transfer office of the Trust. The Trustees may also make such additional
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates for shares of the Trust.
SECTION 4. Closing of Transfer Books and Fixing Record Date. The Trustees may
fix in advance a time which shall be not more than sixty (60) days before the
date of any meeting of shareholders, or the date for the payment of any dividend
or the making of any distribution to shareholders or the last day on which the
consent or dissent of shareholders may be effectively expressed for any purpose,
as the record date for determining the shareholders having the right to notice
of and to vote at such meeting, and any adjournment thereof, or the right to
receive such dividend or distribution or the right to give such consent or
dissent, and in such case only shareholders of record on such record date shall
have such right, notwithstanding any transfer of shares on the books of the
Trust after the record date. The Trustees may, without fixing such record date,
close the transfer books for all or any part of such period for any of the
foregoing purposes.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of any shares
of a class (or series) of the Trust shall immediately notify the Trust of any
loss, destruction or mutilation of the certificate therefor, and the Trustees
may, in their discretion, cause new certificate or certificates to be issued to
him, in case of mutilation of the certificate, upon the surrender of the
mutilated certificate, or, in case of loss or destruction of the certificate,
upon satisfactory proof of such loss or destruction and, in any case, if the
Trustees shall so determine, upon the delivery of a bond in such form and in
such sum and with such surety or sureties as the Trustees may direct, to
indemnify the Trust against any claim that may be made against it on account of
the alleged loss or destruction of any such certificate.
SECTION 6. Record Owner of Shares. The Trust shall be entitled to treat the
person in whose name any share of a class (or series) of the Trust is registered
on the books of the Trust as the owner thereof, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person.
ARTICLE VII
Fiscal Year
The fiscal year of the Trust shall end on December 31, of each year,
provided, however, that the Trustees may from time to time change the fiscal
year.
ARTICLE VIII
Seal
The Trustees may adopt a seal of the Trust which shall be in such form
and shall have such inscription thereon as the Trustees may from time to time
prescribe.
ARTICLE IX
Inspection of Books
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
law or authorized by the Trustees or by resolution of the shareholders.
ARTICLE X
Custodian
The following provisions shall apply to the employment of a Custodian
pursuant to Article VII of the Declaration of Trust and to any contract entered
into with the Custodian so employed:
(a) The Trustees shall cause to be delivered to the Custodian all
securities owned by the Trust or to which it may become
entitled, and shall order the same to be delivered by the
Custodian only in completion of a sale, exchange, transfer,
pledge, loan, or other disposition thereof, against receipt by
the Custodian of the consideration therefor or a certificate of
deposit or a receipt of an issuer or of its transfer agent, or
to a securities depository as defined in Rule 17f-4 under the
Act, all as the Trustees may generally or from time to time
require or approve, or to a successor Custodian; and the
Trustees shall cause all funds owned by the Trust or to which it
may become entitled to be paid to the Custodian, and shall order
the same disbursed only for investment against delivery of the
securities acquired, or in payment of expenses, including
management compensation, and liabilities of the Trust, including
distributions to shareholders, or to a successor Custodian.
(b) In case of the resignation, removal or inability to serve of any
such Custodian, the Trustees shall promptly appoint another bank
or trust company meeting the requirements of said Article VII as
successor Custodian. The agreement with the Custodian shall
provide that the retiring Custodian shall, upon receipt of
notice of such appointment, deliver the funds and property of
the Trust in its possession to and only to such successor, and
that pending appointment of a successor Custodian, or a vote of
the shareholders to function without a Custodian, the Custodian
shall not deliver funds and property of the Trust to the
Trustees, but may deliver them to a bank or trust company doing
business in Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus and undivided profits, as shown by
its last published report, of not less than $2,000,000, as the
property of the Trust to be held under terms similar to those on
which they were held by the retiring Custodian.
ARTICLE XI
Limitation of Liability and Indemnification
SECTION 1. Limitation of Liability. Provided they have exercised reasonable care
and have acted under the reasonable belief that their actions are in the best
interest of the Trust, the Trustees shall not be responsible for or liable in
any event for neglect or wrongdoing of them or any officer, agent, employee or
investment adviser of the Trust, but nothing contained in the Declaration of
Trust or herein shall protect any Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
SECTION 2. Indemnification of Trustees and Officers. The Trust shall indemnify
each person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
has been a Trustee, officer, employee or agent of the Trust, or is or has been
serving at the request of the Trust as a Trustee, director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding, provided that:
(a) such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
Trust,
(b) with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful,
(c) unless ordered by a court, indemnification shall be made only as
authorized in the specific case upon a determination that
indemnification of the Trustee, officer, employee or agent is
proper in the circumstances because he has met the applicable
standard of conduct set forth in subparagraphs (a) and (b) above
and (e) below, such determination to be made based upon a review
of readily available facts (as opposed to a full trial-type
inquiry) by (i) vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter) or (ii)
by independent legal counsel in a written opinion.
(d) in the case of an action or suit by or in the right of the Trust
to procure a judgment in its favor, no indemnification shall be
made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Trust unless
and only to the extent that the court in which such action or
suit is brought, or a court of equity in the county in which the
Trust has its principal office, shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, he is fairly and reasonably
entitled to indemnity for such expenses which such court shall
deem proper, and
(e) no indemnification or other protection shall be made or given to
any Trustee or officer of the Trust against any liability to the
Trust or to its security holders 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.
Expenses (including attorneys' fees) incurred with respect to any
claim, action, suit or proceeding of the character described in the preceding
paragraph shall be paid by the Trust in advance of the final disposition thereof
upon receipt of an undertaking by or on behalf of such person to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Trust as authorized by this Article, provided that either:
(1) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust
shall be insured against losses arising out of any such
advances; or
(2) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on
the matter) or an independent legal counsel in a written opinion
shall determine, based upon a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason
to believe that the recipient ultimately will be found entitled
to indemnification.
As used in this Section 2, a "Disinterested Trustee" is one who is not
(i) an "Interested Person", as defined in the Act, of the Trust (including
anyone who has been exempted from being an "Interested Person" by any rule,
regulation, or order of the Securities and Exchange Commission), or (ii)
involved in the claim, action, suit or proceeding.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Trust, or with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 3. Indemnification of Shareholders. In case any shareholder or former
shareholder shall be held to be personally liable solely by reason of his being
or having been a shareholder and not because of his acts or omissions or for
some other reason, the shareholder or former shareholder (or his heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust shall, upon
request by the shareholder, assume the defense of any claim made against any
shareholder for any act or obligation of the Trust and satisfy any judgment
thereon.
ARTICLE XII
Underwriting Arrangements
Any contract entered into for the sale of shares of the Trust pursuant
to Article VIII, Section 3 of the Declaration of Trust shall require the other
party thereto (hereinafter called the "underwriter") whether acting as principal
or as agent to use reasonable efforts, consistent with the other business of the
underwriter, to secure purchasers for the shares of the Trust.
ARTICLE XIII
Report to Shareholders
The Trustees shall at least semi-annually submit to the shareholders a
written financial report of the transactions of the Trust including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XIV
Certain Transactions
SECTION 1. Long and Short Positions. Except as hereinafter provided, no officer
or Trustee of the Trust and no partner, officer, director or shareholder of the
manager, administrator or investment adviser of the Trust or of the underwriter
of the Trust, and no manager, administrator or investment adviser or underwriter
of the Trust, shall take long or short positions in the securities issued by the
Trust.
(a) The foregoing provision shall not prevent the underwriter from
purchasing shares of the Trust from the Trust if such purchases
are limited (except for reasonable allowances for clerical
errors, delays and errors of transmission and cancellation of
orders) to purchases for the purpose of filling orders for such
shares received by the underwriter, and provided that orders to
purchase from the Trust are entered with the Trust or the
Custodian promptly upon receipt by the underwriter of purchase
orders for such shares, unless the underwriter is otherwise
instructed by its customer.
(b) The foregoing provision shall not prevent the underwriter from
purchasing shares of the Trust as agent for the account of the
Trust.
(c) The foregoing provision shall not prevent the purchase from the
Trust or from the underwriter of shares issued by the Trust by
any officer or Trustee of the Trust or by any partner, officer,
director or shareholder of the manager, administrator or
investment adviser of the Trust at the price available to the
public generally at the moment of such purchase or, to the
extent that any such person is a shareholder, at the price
available to shareholders of the Trust generally at the moment
of such purchase, or as described in the current Prospectus of
the Trust.
SECTION 2. Loans of Trust Assets. The Trust shall not lend assets of the Trust
to any officer or Trustee of the Trust, or to any partner, officer, director or
shareholder of, or person financially interested in, the manager, administrator,
or investment adviser of the Trust, or the underwriter of the Trust, or to the
manager, administrator or investment adviser of the Trust or to the underwriter
of the Trust.
SECTION 3. Miscellaneous. The Trust shall not permit any officer or Trustee, or
any officer or director of the manager, administrator or investment adviser or
underwriter of the Trust, to deal for or on behalf of the Trust with himself as
principal or agent, or with any partnership, association or corporation in which
he has a financial interest; provided that the foregoing provisions shall not
prevent (i) officers and Trustees of the Trust from buying, holding or selling
shares in the Trust, or from being partners, officers or directors of or
otherwise financially interested in the manager, administrator or investment
adviser or underwriter of the Trust; (ii) purchases or sales of securities or
other property by the Trust from or to an affiliated person or to the manger,
administrator or investment adviser or underwriter of the Trust if such
transaction is exempt from the applicable provisions of the Act; (iii) purchases
of investments from the portfolio of the Trust or sales of investments owned by
the Trust through a security dealer who is, or one or more of whose partners,
shareholders, officers or directors is, an officer or Trustee of the Trust, if
such transactions are handled in the capacity of broker only and commissions
charged do not exceed customary brokerage charges for such services; (iv)
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian who is, or has a partner, shareholder, officer or director
who is, an officer or Trustee of the Trust if only customary fees are charged
for services to the Trust; (v) sharing statistical, research, legal and
management expenses and office hire and expenses with any other investment
company in which an officer or Trustee of the Trust is an officer, trustee or
director or otherwise financially interested; or (vi) the purchase for the
portfolio of the Trust of securities issued by an issuer having an officer,
director or security holder who is an officer, Trustee or director of the Trust
or of the manager, administrator or investment adviser of the Trust, unless such
purchase would violate the Trust's investment policies and restrictions.
References to the manager or investment adviser of the Trust contained
in this Article XIV shall also be deemed to refer to any sub-adviser appointed
in accordance with Article VIII, Section 1 of the Declaration of Trust.
ARTICLE XV
Amendments
Except as provided in Section 3 of Article I of these By-Laws for the
portions of such Section 3 referred to therein, these By-Laws may be amended at
any meeting of the Trustees by a vote of a majority of the Trustees then in
office.
**********
<PAGE>
EXHIBIT 99.(b)(b)
AMENDMENT TO
BY-LAWS
OF
EATON VANCE PRIME RATE RESERVES
December 13, 1993
Pursuant to ARTICLE XV of the BY-LAWS of Eaton Vance Prime Rate Reserves, (the
"Trust") upon vote of a majority of the Trustees of the Trust SECTION 2. of
ARTICLE II of the BY-LAWS of the Trust was amended to read as follows:
SECTION 2. Election of Officers. The President, Treasurer and Secretary shall be
chosen annually by the Trustees.
Except for the offices of President and Secretary, two or more offices
may be held by a single person. The officers shall hold office until their
successors are chosen and qualified.
********************
<PAGE>
EXHIBIT 99.(h)(a)
EATON VANCE PRIME RATE RESERVES
DISTRIBUTION AGREEMENT
AGREEMENT dated July 14, 1989 between EATON VANCE PRIME RATE RESERVES,
a Massachusetts business trust having its principal place of business in Boston
in the Commonwealth of Massachusetts, hereinafter called the "Fund", and EATON
VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal place
of business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Fund grants to the Principal Underwriter the right to purchase
common shares of the Fund upon the terms hereinbelow set forth during the term
of this Agreement. While this Agreement is in force, the Principal Underwriter
agrees to use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by dealers or investors as set forth in
the current Prospectus relating to shares of the Fund. The price which the
Principal Underwriter shall pay for the shares so purchased shall be equal to
the net asset value used in determining the public offering price to be paid by
investors upon purchasing such shares. The Principal Underwriter shall notify
the Custodian of the Fund, at the end of each business day, or as soon
thereafter as the orders placed with it have been compiled, of the number of
shares and the prices thereof which the Principal Underwriter is to purchase as
principal for resale. The Principal Underwriter shall take down and pay for
shares ordered from the Fund on or before the eleventh business day (excluding
Saturdays) after the shares have been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of net investment income or
realized capital gains of the Fund payable in shares or in cash at the option of
the shareholder.
2. The shares may be resold by the Principal Underwriter to dealers
having selling group agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or dealer purchasing shares from the Principal Underwriter
may sell shares to the public, shall be equal to the public offering price as
set forth in the current Prospectus relating to the shares, but not to exceed
the net asset value at which the Principal Underwriter is to purchase the
shares, plus a sales charge not to exceed 8.5% of the public offering price (the
net asset value divided by .915). If the resulting public offering price does
not come out to an even cent, the public offering price shall be adjusted to the
nearer cent.
The net asset value of shares of the Fund shall be determined by the
Fund or the Custodian, as the agent of the Fund, as of the close of trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Fund. The Fund may also cause the net asset value to be
determined in substantially the same manner or estimated in such manner and as
of such other time or times as may from time to time be agreed upon by the Fund
and Principal Underwriter. The Fund will notify the Principal Underwriter each
time the net asset value of shares is determined and when such value is so
determined it shall be applicable to transactions as set forth in the current
Prospectus relating to shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended, except to the Principal
Underwriter, in the manner and upon the terms above set forth to cover contracts
of sale made by the Principal Underwriter with its customers prior to any such
suspension, and except as provided in the last paragraph of paragraph 1 hereof.
The Fund shall also have the right to suspend the sale of its shares if in the
judgment of the Fund conditions obtaining at any time render such action
advisable. The Principal Underwriter shall have the right to suspend sales at
any time, to refuse to accept or confirm any order from an investor or dealer,
or to accept or confirm any such order in part only, if in the judgment of the
Principal Underwriter such action is in the best interests of the Fund.
3. The Fund agrees that it will, from time to time, but subject to the
necessary approval of the shareholders, take such steps as may be necessary to
register its shares under the federal Securities Act of 1933, as amended from
time to time (the "1933 Act"), to the end that there will be available for sale
such number of shares as the Principal Underwriter may reasonably be expected to
sell. The Fund agrees to indemnify and hold harmless the Principal Underwriter
and each person, if any, who controls the Principal Underwriter within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages or expense and reasonable counsel
fees incurred in connection therewith), arising by reason of any person
acquiring any shares, which may be based upon the 1933 Act or on any other
statute or at common law, on the ground that the Registration Statement or
Prospectus, as from time to time amended and supplemented, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished in writing to the Fund in connection
therewith by or on behalf of the Principal Underwriter; provided, however, that
in no case (i) is the indemnity of the Fund in favor of the Principal
Underwriter and any such controlling person to be deemed to protect such
Principal Underwriter or any such controlling person against any liability to
the Fund or its security holders to which such Principal Underwriter or any such
controlling person would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its duties or by reason of
its reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Fund to be liable under its indemnity agreement contained in this
paragraph 3 with respect to any claim made against the Principal Underwriter or
any such controlling person unless the Principal Underwriter or such controlling
person, as the case may be, shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or upon such controlling person (or after such Principal Underwriter
or such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve it from any liability which it may have to the person against whom such
action is brought otherwise than on account of its indemnity agreement contained
in this paragraph 3. The Fund shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but if the Fund elects to assume the
defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Fund elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
securities, and will indemnify and hold harmless the Fund and each of its
Trustees and officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and reasonable counsel
fees incurred in connection therewith), arising by reason of any person
acquiring any shares, which may be based upon the 1933 Act or any other statute
or at common law, on account of any wrongful act of the Principal Underwriter or
any of its employees (including any failure to conform with any requirement of
any state or federal law relating to the sale of such securities) or on the
ground that the Registration Statement or Prospectus, as from time to time
amended and supplemented, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, insofar as any such
statement or omission was made in reliance upon, and in conformity with
information furnished in writing to the Fund in connection therewith by or on
behalf of the Principal Underwriter, provided, however, that in no case (i) is
the indemnity of the Principal Underwriter in favor of any person indemnified to
be deemed to protect the Fund or any such person against any liability to which
the Fund or any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its or his
duties or by reason of its or his reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Principal Underwriter to be liable
under its indemnity agreement contained in this paragraph 4 with respect to any
claim made against the Fund or any person indemnified unless the Fund or such
person, as the case may be, shall have notified the Principal Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Fund or upon such person (or after the Fund or such person shall have received
notice of such service on any designated agent), but failure to notify the
Principal Underwriter of any such claim shall not relieve it from any liability
which it may have to the Fund or any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this paragraph
4. The Principal Underwriter shall be entitled to participate, at its own
expense, in the defense, or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but if the Principal Underwriter elects
to assume the defense, such defense shall be conducted by counsel chosen by it
and satisfactory to the Fund, or to its officers or Trustees, or to any
controlling person or persons, defendant or defendants in the suit. In the event
that the Principal Underwriter elects to assume the defense of any such suit and
retains such counsel, the Fund or such officers or Trustees or controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Principal
Underwriter does not elect to assume the defense of any such suit, it shall
reimburse the Fund, any such officers and Trustees or controlling person or
persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them. The Principal Underwriter agrees
promptly to notify the Fund of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the shares.
Neither the Principal Underwriter nor any dealer nor any other person
is authorized by the Fund to give any information or to make any
representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission under the 1933 Act,
as amended (as said Registration Statement and Prospectus may be amended or
supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any dealer nor any other person is authorized to act
as agent for the Fund in connection with the offering or sale of shares of the
Fund to the public or otherwise. All such sales made by the Principal
Underwriter shall be made by it as principal, for its own account. The Principal
Underwriter may, however, act as agent in connection with "exchanges" between
investment companies for which the Principal Underwriter acts as Principal
Underwriter or investment manager as provided in the agreement among such
companies as from time to time in effect.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act,
covering its shares and all amendments and supplements thereto, and preparing
and mailing periodic reports and Prospectuses to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares purchased by it
as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares purchased by
the Principal Underwriter hereunder;
(v) all expenses of registration and maintaining registration
of the shares for sale under federal and state securities laws, and, if
necessary or advisable in connection therewith, of qualifying the Fund as a
dealer or broker, in such states as shall be selected by the Principal
Underwriter and the fees payable to each such state for continuing the
qualification therein until the Principal Underwriter notifies the Fund that it
does not wish such qualification continued; and
(vi) all costs and expenses of conducting the Fund's periodic
tender offers for, or other repurchases or redemptions of, shares issued by the
Fund.
(b). All other costs and expenses of conducting the continuous
offering of the Fund's shares shall be borne in such manner as shall be agreed
upon from time to time by the Fund and the Principal Underwriter.
(c). The Principal Underwriter shall be entitled to receive all Early
Withdrawal Charges paid or payable on repurchases of shares by the Fund pursuant
to any tender offer made by the Fund.
6. If, at any time during the existence of this Agreement, the Fund
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission (the "Commission") or
other governmental authority or to obtain any advantage under Massachusetts or
federal tax laws, and shall notify the Principal Underwriter of the form of
amendment which it deems necessary or advisable and the reasons therefor, and,
if the Principal Underwriter declines to assent to such amendment, the Fund may
terminate this Agreement forthwith by written notice to the Principal
Underwriter. If, at any time during the existence of its agreement upon request
by the Principal Underwriter, the Fund fails (after a reasonable time) to make
any changes in its Declaration of Trust, as amended, or in its methods of doing
business which are necessary in order to comply with any requirement of federal
law or regulations of the Commission or of a national securities association of
which the Principal Underwriter is or may be a member, relating to the sale of
the shares of the Fund, the Principal Underwriter may terminate this Agreement
forthwith by written notice to the Fund.
7. In connection with purchases or sales of portfolio securities for
the account of the Fund, neither the Principal Underwriter nor any officer or
director of the Principal Underwriter shall act as a principal. The Principal
Underwriter convenants that it and its officers and directors shall comply with
the provisions of Article XIV of the Fund's By-Laws applicable to them.
8. The Principal Underwriter agrees that it will not take any long or
short positions in the shares of the Fund except as permitted by paragraph 1
hereof, and that, so far as it can control the situation, it will prevent any
officer, director or owner of voting common stock of the Principal Underwriter
from taking any long or short position in the shares of the Fund, except as
permitted by the By-Laws of the Fund as from time to time in effect.
9. The term "net asset value" of a common share as used in this
Agreement with reference to the shares of the Fund shall have the same meaning
as the term "net asset value" as used in the Declaration of Trust of the Fund,
as amended, and as defined in Article XII thereof.
10. (a) The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, and during the life of
this Agreement will continue to be so resident in the United States, so
organized and a member in good standing of said Association. The Principal
Underwriter will comply with the Fund's Declaration of Trust and By-Laws, and
the 1940 Act and the rules promulgated thereunder, insofar as they are
applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States
and preserve therein for such period or periods as the Commission shall
prescribe by rules and regulations applicable to it as Principal Underwriter of
a closed-end investment company registered under the 1940 Act such accounts,
books and other documents as are necessary or appropriate to record its
transactions with the Fund. Such accounts, books and other documents shall be
subject at any time and from time to time to such reasonable periodic, special
and other examinations by the Commission or any member or representative thereof
as the Commission may prescribe. The Principal Underwriter shall furnish to the
Commission within such reasonable time as the Commission may prescribe copies of
or extracts from such records which may be prepared without effort, expense or
delay as the Commission may by order require.
11. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect for a period of more
than two (2) years from the date of its original execution only so long as such
continuance is specifically approved at least annually (i) by the vote of a
majority of the Trustees of the Fund who are not "interested persons" (as
defined in Section 2(a)(19) of the 1940 Act) of the Fund or of the Principal
Underwriter cast in person at a meeting called for the purchase of voting on
such approval, and (ii) by the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act) of the Fund;
(b) either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other party;
and
(c) the Fund shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 7 hereof.
12. In the event of the assignment (as defined in Section 2(a)(4) of
the 1940 Act) of this Agreement by the Principal Underwriter, this Agreement
shall automatically terminate.
13. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Fund, and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
14. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other investment companies, and (b) engage
in other businesses and activities from time to time.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
July 14, 1989.
EATON VANCE PRIME RATE RESERVES
By /s/ James B. Hawkes
-----------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ Duane E. Waldenburg
-----------------------------
President
<PAGE>
EXHIBIT 99.(j)
December 17, 1990
Eaton Vance Prime Rate Reserves hereby adopts and agrees to become a party to
the attached Master Custodian Agreement between the Eaton Vance Group of Funds
and Investors Bank & Trust Company.
EATON VANCE PRIME RATE RESERVES
BY: /s/ James B. Hawkes
--------------------------
President
Accepted and agreed to:
INVESTORS BANK & TRUST COMPANY
BY: /s/ Henry M. Joyce
---------------------------
Title: Vice President
<PAGE>
MASTER CUSTODIAN AGREEMENT
between
EATON VANCE GROUP OF FUNDS
and
INVESTORS BANK & TRUST COMPANY
TABLE OF CONTENTS
1. Definitions.....................................................1-2
2. Employment of Custodian and Property to be held by it...........2-3
3. Duties of the Custodian with Respect to
Property of the Fund..............................................3
A. Safekeeping and Holding of Property...........................3
B. Delivery of Securities......................................3-6
C. Registration of Securities....................................6
D. Bank Accounts.................................................6
E. Payments for Shares of the Fund...............................6
F. Investment and Availability of Federal Funds..................6
G. Collections...................................................7
H. Payment of Fund Moneys......................................8-9
I. Liability for Payment in Advance of
Receipt of Securities Purchased...............................9
J. Payments for Repurchases of Redemptions
of Shares of the Fund......................................9-10
K. Appointment of Agents by the Custodian.......................10
L. Deposit of Fund Portfolio Securities
in Securities Systems.....................................10-11
M. Deposit of Fund Commercial Paper in an Approved
Book-Entry System for Commercial Paper....................12-13
N. Segregated Account........................................13-14
O. Ownership Certificates for Tax Purposes......................14
P. Proxies......................................................14
Q. Communications Relating to Fund Portfolio Securities.........14
R. Exercise of Rights; Tender Offers........................14-15
S. Depository Receipts..........................................15
T. Interest Bearing Call or Time Deposits..... .................15
U. Options, Futures Contracts and Foreign
Currency Transactions.....................................15-17
V. Actions Permitted Without Express Authority..................17
4. Duties of Bank with Respect to Books of Account and
Calculations of Net Asset Value..................................17
5. Records and Miscellaneous Duties.................................18
6. Opinion of Fund`s Independent Public Accountants.................18
7. Compensation and Expenses of Bank................................18
8. Responsibility of Bank........................................18-19
9. Persons Having Access to Assets of the Fund......................19
10. Effective Period, Termination and Amendment;
Successor Custodian..............................................20
11. Interpretive and Additional Provisions...........................20
12. Notices..........................................................21
13. Massachusetts Law to Apply.......................................21
14. Adoption of the Agreement by the Fund............................21
<PAGE>
MASTER CUSTODIAN AGREEMENT
This Agreement is made between each investment company advised by Eaton
Vance Management which has adopted this Agreement in the manner provided herein
and Investors Bank & Trust Company (hereinafter called "Bank", "Custodian" and
"Agent"), a trust company established under the laws of Massachusetts with a
principal place of business in Boston, Massachusetts.
Whereas, each such investment company is registered under the
Investment Company Act of 1940 and has appointed the Bank to act as Custodian of
its property and to perform certain duties as its Agent, as more fully
hereinafter set forth; and
Whereas, the Bank is willing and able to act as each such investment
company's Custodian and Agent, subject to and in accordance with the provisions
hereof;
Now, therefore, in consideration of the premises and of the mutual
covenants and agreements herein contained, each such investment company and the
Bank agree as follows:
1. Definitions
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Fund" shall mean the investment company which has adopted this
Agreement. If the Fund is a Massachusetts business trust, it may in the future
establish and designate other separate and distinct series of shares, each of
which may be called a "portfolio"; in such case, the term "Fund" shall also
refer to each such separate series or portfolio.
(b) "Board" shall mean the board of directors/trustees/managing
general partners/director general partners of the Fund, as the case may be.
(c) "The Depository Trust Company", a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(d) "Participants Trust Company", a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities Exchange
Act of 1934 which acts as a securities depository and which has been
specifically approved as a securities depository for the Fund by the Board.
(e) "Approved Clearing Agency" shall mean any other domestic clearing
agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934 which acts as a securities depository but
only if the Custodian has received a certified copy of a vote of the Board
approving such clearing agency as a securities depository for the Fund.
(f) "Federal Book-Entry System" shall mean the book-entry system
referred to in Rule 17f-4(b) under the Investment Company Act of 1940 for United
States and federal agency securities (i.e., as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350, and the book-entry
regulations of federal agencies substantially in the form of Subpart O).
(g) "Approved Foreign Securities Depository" shall mean a foreign
securities depository or clearing agency referred to in Rule 17f-4 under the
Investment Company Act of 1940 for foreign securities but only if the Custodian
has received a certified copy of a vote of the Board approving such depository
or clearing agency as a foreign securities depository for the Fund.
(h) "Approved Book-Entry System for Commercial Paper" shall mean a
system maintained by the Custodian or by a subcustodian employed pursuant to
Section 2 hereof for the holding of commercial paper in book-entry form but only
if the Custodian has received a certified copy of a vote of the Board approving
the participation by the Fund in such system.
(i) The Custodian shall be deemed to have received "proper
instructions" in respect of any of the matters referred to in this Agreement
upon receipt of written or facsimile instructions signed by such one or more
person or persons as the Board shall have from time to time authorized to give
the particular class of instructions in question. Electronic instructions for
the purchase and sale of securities which are transmitted by Eaton Vance
Management to the Custodian through the Eaton Vance equity trading system and
the Eaton Vance fixed income trading system shall be deemed to be proper
instructions; the Fund shall cause all such instructions to be confirmed in
writing. Different persons may be authorized to give instructions for different
purposes. A certified copy of a vote of the Board may be received and accepted
by the Custodian as conclusive evidence of the authority of any such person to
act and may be considered as in full force and effect until receipt of written
notice to the contrary. Such instructions may be general or specific in terms
and, where appropriate, may be standing instructions. Unless the vote delegating
authority to any person or persons to give a particular class of instructions
specifically requires that the approval of any person, persons or committee
shall first have been obtained before the Custodian may act on instructions of
that class, the Custodian shall be under no obligation to question the right of
the person or persons giving such instructions in so doing. Oral instructions
will be considered proper instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. The Fund authorizes the Custodian to tape record any and
all telephonic or other oral instructions given to the Custodian. Upon receipt
of a certificate signed by two officers of the Fund as to the authorization by
the President and the Treasurer of the Fund accompanied by a detailed
description of the communication procedures approved by the President and the
Treasurer of the Fund, "proper instructions" may also include communications
effected directly between electromechanical or electronic devices provided that
the President and Treasurer of the Fund and the Custodian are satisfied that
such procedures afford adequate safeguards for the Fund's assets. In performing
its duties generally, and more particularly in connection with the purchase,
sale and exchange of securities made by or for the Fund, the Custodian may take
cognizance of the provisions of the governing documents and registration
statement of the Fund as the same may from time to time be in effect (and votes,
resolutions or proceedings of the shareholders or the Board), but, nevertheless,
except as otherwise expressly provided herein, the Custodian may assume unless
and until notified in writing to the contrary that so-called proper instructions
received by it are not in conflict with or in any way contrary to any provisions
of such governing documents and registration statement, or votes, resolutions or
proceedings of the shareholders or the Board.
2. Employment of Custodian and Property to be Held by It
The Fund hereby appoints and employs the Bank as its Custodian and
Agent in accordance with and subject to the provisions hereof, and the Bank
hereby accepts such appointment and employment. The Fund agrees to deliver to
the Custodian all securities, participation interests, cash and other assets
owned by it, and all payments of income, payments of principal and capital
distributions and adjustments received by it with respect to all securities and
participation interests owned by the Fund from time to time, and the cash
consideration received by it for such new or treasury shares ("Shares") of the
Fund as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of the Fund held by the Fund and not delivered by
the Fund to the Custodian. The Fund will also deliver to the Bank from time to
time copies of its currently effective charter (or declaration of trust or
partnership agreement, as the case may be), by-laws, prospectus, statement of
additional information and distribution agreement with its principal
underwriter, together with such resolutions, votes and other proceedings of the
Fund as may be necessary for or convenient to the Bank in the performance of its
duties hereunder.
The Custodian may from time to time employ one or more subcustodians to
perform such acts and services upon such terms and conditions as shall be
approved from time to time by the Board of Directors. Any such subcustodian so
employed by the Custodian shall be deemed to be the agent of the Custodian, and
the Custodian shall remain primarily responsible for the securities,
participation interests, moneys and other property of the Fund held by such
subcustodian. Any foreign subcustodian shall be a bank or trust company which is
an eligible foreign custodian within the meaning of Rule 17f-5 under the
Investment Company Act of 1940, and the foreign custody arrangements shall be
approved by the Board of Directors and shall be in accordance with and subject
to the provisions of said Rule. For the purposes of this Agreement, any property
of the Fund held by any such subcustodian (domestic or foreign) shall be deemed
to be held by the Custodian under the terms of this Agreement.
3. Duties of the Custodian with Respect to Property of the Fund
A. Safekeeping and Holding of Property The Custodian shall keep
safely all property of the Fund and on behalf of the Fund shall
from time to time receive delivery of Fund property for
safekeeping. The Custodian shall hold, earmark and segregate on
its books and records for the account of the Fund all property
of the Fund, including all securities, participation interests
and other assets of the Fund (1) physically held by the
Custodian, (2) held by any subcustodian referred to in Section 2
hereof or by any agent referred to in Paragraph K hereof, (3)
held by or maintained in The Depository Trust Company or in
Participants Trust Company or in an Approved Clearing Agency or
in the Federal Book-Entry System or in an Approved Foreign
Securities Depository, each of which from time to time is
referred to herein as a "Securities System", and (4) held by the
Custodian or by any subcustodian referred to in Section 2 hereof
and maintained in any Approved Book-Entry System for Commercial
Paper.
B. Delivery of Securities The Custodian shall release and deliver
securities or participation interests owned by the Fund held (or
deemed to be held) by the Custodian or maintained in a
Securities System account or in an Approved Book-Entry System
for Commercial Paper account only upon receipt of proper
instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
1) Upon sale of such securities or participation interests
for the account of the Fund, but only against receipt of
payment therefor; if delivery is made in Boston or New
York City, payment therefor shall be made in accordance
with generally accepted clearing house procedures or by
use of Federal Reserve Wire System procedures; if delivery
is made elsewhere payment therefor shall be in accordance
with the then current "street delivery" custom or in
accordance with such procedures agreed to in writing from
time to time by the parties hereto; if the sale is
effected through a Securities System, delivery and payment
therefor shall be made in accordance with the provisions
of Paragraph L hereof; if the sale of commercial paper is
to be effected through an Approved Book-Entry System for
Commercial Paper, delivery and payment therefor shall be
made in accordance with the provisions of Paragraph M
hereof; if the securities are to be sold outside the
United States, delivery may be made in accordance with
procedures agreed to in writing from time to time by the
parties hereto; for the purposes of this subparagraph, the
term "sale" shall include the disposition of a portfolio
security (i) upon the exercise of an option written by the
Fund and (ii) upon the failure by the Fund to make a
successful bid with respect to a portfolio security, the
continued holding of which is contingent upon the making
of such a bid;
2) Upon the receipt of payment in connection with any
repurchase agreement or reverse repurchase agreement
relating to such securities and entered into by the Fund;
3) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
4) To the issuer thereof or its agent when such securities or
participation interests are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
5) To the issuer thereof, or its agent, for transfer into the
name of the Fund or into the name of any nominee of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Paragraph K hereof or into the name
or nominee name of any subcustodian employed pursuant to
Section 2 hereof; or for exchange for a different number
of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided
that, in any such case, the new securities or
participation interests are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
6) To the broker selling the same for examination in
accordance with the "street delivery" custom; provided
that the Custodian shall adopt such procedures as the Fund
from time to time shall approve to ensure their prompt
return to the Custodian by the broker in the event the
broker elects not to accept them;
7) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the Issuer of such
securities, or pursuant to provisions for conversion of
such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and
cash, if any, are to be delivered to the Custodian or any
subcustodian employed pursuant to Section 2 hereof;
8) In the case of warrants, rights or similar securities, the
surrender thereof in connection with the exercise of such
warrants, rights or similar securities, or the surrender
of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian or any subcustodian employed pursuant to Section
2 hereof;
9) For delivery in connection with any loans of securities
made by the Fund (such loans to be made pursuant to the
terms of the Fund's current registration statement), but
only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund, which may
be in the form of cash or obligations issued by the United
States government, its agencies or instrumentalities;
except that in connection with any securities loans for
which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of Treasury, the Custodian will not be held
liable or responsible for the delivery of securities
loaned by the Fund prior to the receipt of such
collateral;
10) For delivery as security in connection with any borrowings
by the Fund requiring a pledge or hypothecation of assets
by the Fund (if then permitted under circumstances
described in the current registration statement of the
Fund), provided, that the securities shall be released
only upon payment to the Custodian of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made, further
securities may be released for that purpose; upon receipt
of proper instructions, the Custodian may pay any such
loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
11) When required for delivery in connection with any
redemption or repurchase of Shares of the Fund in
accordance with the provisions of Paragraph J hereof;
12) For delivery in accordance with the provisions of any
agreement between the Custodian (or a subcustodian
employed pursuant to Section 2 hereof) and a broker-dealer
registered under the Securities Exchange Act of 1934 and,
if necessary, the Fund, relating to compliance with the
rules of The Options Clearing Corporation or of any
registered national securities exchange, or of any similar
organization or organizations, regarding deposit or escrow
or other arrangements in connection with options
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian (or a subcustodian
employed pursuant to Section 2 hereof), and a futures
commissions merchant, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or
of any contract market or commodities exchange or similar
organization, regarding futures margin account deposits or
payments in connection with futures transactions by the
Fund;
14) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board specifying the
securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose
to be proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
C. Registration of Securities Securities held by the Custodian
(other than bearer securities) for the account of the Fund shall
be registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian, or in
the name or nominee name of any agent appointed pursuant to
Paragraph K hereof, or in the name or nominee name of any
subcustodian employed pursuant to Section 2 hereof, or in the
name or nominee name of The Depository Trust Company or
Participants Trust Company or Approved Clearing Agency or
Federal Book-Entry System or Approved Book-Entry System for
Commercial Paper; provided, that securities are held in an
account of the Custodian or of such agent or of such
subcustodian containing only assets of the Fund or only assets
held by the Custodian or such agent or such subcustodian as a
custodian or subcustodian or in a fiduciary capacity for
customers. All certificates for securities accepted by the
Custodian or any such agent or subcustodian on behalf of the
Fund shall be in "street" or other good delivery form or shall
be returned to the selling broker or dealer who shall be advised
of the reason thereof.
D. Bank Accounts The Custodian shall open and maintain a separate
bank account or accounts in the name of the Fund, subject only
to draft or order by the Custodian acting in pursuant to the
terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for the Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as the
Custodian may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall
be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall
be approved in writing by two officers of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian
and shall be subject to withdrawal only by the Custodian in that
capacity.
E. Payment for Shares of the Fund The Custodian shall make
appropriate arrangements with the Transfer Agent and the
principal underwriter of the Fund to enable the Custodian to
make certain it promptly receives the cash or other
consideration due to the Fund for such new or treasury Shares as
may be issued or sold from time to time by the Fund, in
accordance with the governing documents and offering prospectus
and statement of additional information of the Fund. The
Custodian will provide prompt notification to the Fund of any
receipt by it of payments for Shares of the Fund.
F. Investment and Availability of Federal Funds Upon agreement
between the Fund and the Custodian, the Custodian shall, upon
the receipt of proper instructions, which may be continuing
instructions when deemed appropriate by the parties,
1) invest in such securities and instruments as may be set
forth in such instructions on the same day as received all
federal funds received after a time agreed upon between
the Custodian and the Fund; and
2) make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for
Shares of the Fund which are deposited into the Fund's
account.
G. Collections The Custodian shall promptly collect all income and
other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall
promptly collect all income and other payments with respect to
bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or agent thereof and shall
credit such income, as collected, to the Fund's custodian
account.
The Custodian shall do all things necessary and proper in
connection with such prompt collections and, without limiting
the generality of the foregoing, the Custodian shall
1) Present for payment all coupons and other income items
requiring presentations;
2) Present for payment all securities which may mature or be
called, redeemed, retired or otherwise become payable;
3) Endorse and deposit for collection, in the name of the
Fund, checks, drafts or other negotiable instruments;
4) Credit income from securities maintained in a Securities
System or in an Approved Book-Entry System for Commercial
Paper at the time funds become available to the Custodian;
in the case of securities maintained in The Depository
Trust Company funds shall be deemed available to the Fund
not later than the opening of business on the first
business day after receipt of such funds by the Custodian.
The Custodian shall notify the Fund as soon as reasonably
practicable whenever income due on any security is not
promptly collected. In any case in which the Custodian does
not receive any due and unpaid income after it has made demand
for the same, it shall immediately so notify the Fund in
writing, enclosing copies of any demand letter, any written
response thereto, and memoranda of all oral responses thereto
and to telephonic demands, and await instructions from the
Fund; the Custodian shall in no case have any liability for
any nonpayment of such income provided the Custodian meets the
standard of care set forth in Section 8 hereof. The Custodian
shall not be obligated to take legal action for collection
unless and until reasonably indemnified to its satisfaction.
The Custodian shall also receive and collect all stock
dividends, rights and other items of like nature, and deal
with the same pursuant to proper instructions relative
thereto.
H. Payment of Fund Moneys Upon receipt of proper instructions,
which may be continuing instructions when deemed appropriate
by the parties, the Custodian shall pay out moneys of the Fund
in the following cases only:
1) Upon the purchase of securities, participation interests,
options, futures contracts, forward contracts and options
on futures contracts purchased for the account of the Fund
but only (a) against the receipt of
(i) such securities registered as provided in
Paragraph C hereof or in proper form for transfer or
(ii) detailed instructions signed by an officer of the
Fund regarding the participation interests to be
purchased or
(iii) written confirmation of the purchase by the Fund
of the options, futures contracts, forward contracts or
options on futures contracts
by the Custodian (or by a subcustodian employed pursuant
to Section 2 hereof or by a clearing corporation of a
national securities exchange of which the Custodian is a
member or by any bank, banking institution or trust
company doing business in the United States or abroad
which is qualified under the Investment Company Act of
1940 to act as a custodian and which has been designated
by the Custodian as its agent for this purpose or by the
agent specifically designated in such instructions as
representing the purchasers of a new issue of privately
placed securities); (b) in the case of a purchase effected
through a Securities System, upon receipt of the
securities by the Securities System in accordance with the
conditions set forth in Paragraph L hereof; (c) in the
case of a purchase of commercial paper effected through an
Approved Book-Entry System for Commercial Paper, upon
receipt of the paper by the Custodian or subcustodian in
accordance with the conditions set forth in Paragraph M
hereof; (d) in the case of repurchase agreements entered
into between the Fund and another bank or a broker-dealer,
against receipt by the Custodian of the securities
underlying the repurchase agreement either in certificate
form or through an entry crediting the Custodian's
segregated, non-proprietary account at the Federal Reserve
Bank of Boston with such securities along with written
evidence of the agreement by the bank or broker-dealer to
repurchase such securities from the Fund; or (e) with
respect to securities purchased outside of the United
States, in accordance with written procedures agreed to
from time to time in writing by the parties hereto;
2) When required in connection with the conversion, exchange
or surrender of securities owned by the Fund as set forth
in Paragraph B hereof;
3) When required for the redemption or repurchase of Shares
of the Fund in accordance with the provisions of Paragraph
J hereof;
4) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: advisory fees,
distribution plan payments, interest, taxes, management
compensation and expenses, accounting, transfer agent and
legal fees, and other operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends or other distributions to
holders of Shares declared or authorized by the Board; and
6) For any other proper corporate purpose, but only upon
receipt of, in addition to proper instructions, a
certified copy of a vote of the Board, specifying the
amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
I. Liability for Payment in Advance of Receipt of Securities
Purchased In any and every case where payment for purchase of
securities for the account of the Fund is made by the Custodian
in advance of receipt of the securities purchased in the absence
of specific written instructions signed by two officers of the
Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian; except that
in the case of a repurchase agreement entered into by the Fund
with a bank which is a member of the Federal Reserve System, the
Custodian may transfer funds to the account of such bank prior
to the receipt of (i) the securities in certificate form subject
to such repurchase agreement or (ii) written evidence that the
securities subject to such repurchase agreement have been
transferred by book-entry into a segregated non-proprietary
account of the Custodian maintained with the Federal Reserve
Bank of Boston or (iii) the safekeeping receipt, provided that
such securities have in fact been so transfered by book-entry
and the written repurchase agreement is received by the
Custodian in due course; and except that if the securities are
to be purchased outside the United States, payment may be made
in accordance with procedures agreed to in writing from time to
time by the parties hereto.
J. Payments for Repurchases or Redemptions of Shares of the Fund
From such funds as may be available for the purpose, but subject
to any applicable votes of the Board and the current redemption
and repurchase procedures of the Fund, the Custodian shall, upon
receipt of written instructions from the Fund or from the Fund's
transfer agent or from the principal underwriter, make funds
and/or portfolio securities available for payment to holders of
Shares who have caused their Shares to be redeemed or
repurchased by the Fund or for the Fund`s account by its
transfer agent or principal underwriter.
The Custodian may maintain a special checking account upon which
special checks may be drawn by shareholders of the Fund holding
Shares for which certificates have not been issued. Such
checking account and such special checks shall be subject to
such rules and regulations as the Custodian and the Fund may
from time to time adopt. The Custodian or the Fund may suspend
or terminate use of such checking account or such special checks
(either generally or for one or more shareholders) at any time.
The Custodian and the Fund shall notify the other immediately of
any such suspension or termination.
K. Appointment of Agents by the Custodian The Custodian may at any
time or times in its discretion appoint (and may at any time
remove) any other bank or trust company (provided such bank or
trust company is itself qualified under the Investment Company
Act of 1940 to act as a custodian or is itself an eligible
foreign custodian within the meaning of Rule 17f-5 under said
Act) as the agent of the Custodian to carry out such of the
duties and functions of the Custodian described in this Section
3 as the Custodian may from time to time direct; provided,
however, that the appointment of any such agent shall not
relieve the Custodian of any of its responsibilities or
liabilities hereunder, and as between the Fund and the Custodian
the Custodian shall be fully responsible for the acts and
omissions of any such agent. For the purposes of this Agreement,
any property of the Fund held by any such agent shall be deemed
to be held by the Custodian hereunder.
L. Deposit of Fund Portfolio Securities in Securities Systems The
Custodian may deposit and/or maintain securities owned by the
Fund
(1) in The Depository Trust Company;
(2) in Participants Trust Company;
(3) in any other Approved Clearing Agency;
(4) in the Federal Book-Entry System; or
(5) in an Approved Foreign Securities Depository
in each case only in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, and at all times subject to the following
provisions:
(a) The Custodian may (either directly or through one
or more subcustodians employed pursuant to Section 2 keep
securities of the Fund in a Securities System provided that
such securities are maintained in a non-proprietary account
("Account") of the Custodian or such subcustodian in the
Securities System which shall not include any assets of the
Custodian or such subcustodian or any other person other than
assets held by the Custodian or such subcustodian as a
fiduciary, custodian, or otherwise for its customers.
(b) The records of the Custodian with respect to
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities belonging
to the Fund, and the Custodian shall be fully and completely
responsible for maintaining a recordkeeping system capable of
accurately and currently stating the Fund's holdings
maintained in each such Securities System.
(c) The Custodian shall pay for securities purchased
in book-entry form for the account of the Fund only upon (i)
receipt of notice or advice from the Securities System that
such securities have been transferred to the Account, and (ii)
the making of any entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account
of the Fund only upon (i) receipt of notice or advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all notices or
advices from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be promptly
provided to the Fund at its request. The Custodian shall
promptly send to the Fund confirmation of each transfer to or
from the account of the Fund in the form of a written advice
or notice of each such transaction, and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund on the next business day.
(d) The Custodian shall promptly send to the Fund any
report or other communication received or obtained by the
Custodian relating to the Securities System's accounting
system, system of internal accounting controls or procedures
for safeguarding securities deposited in the Securities
System; the Custodian shall promptly send to the Fund any
report or other communication relating to the Custodian's
internal accounting controls and procedures for safeguarding
securities deposited in any Securities System; and the
Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Securities System. The Custodian's books and records relating
to the Fund's participation in each Securities System will at
all times during regular business hours be open to the
inspection of the Fund's authorized officers, employees or
agents.
(e) The Custodian shall not act under this Paragraph
L in the absence of receipt of a certificate of an officer of
the Fund that the Board has approved the use of a particular
Securities System; the Custodian shall also obtain appropriate
assurance from the officers of the Fund that the Board has
annually reviewed the continued use by the Fund of each
Securities System, and the Fund shall promptly notify the
Custodian if the use of a Securities System is to be
discontinued; at the request of the Fund, the Custodian will
terminate the use of any such Securities System as promptly as
practicable.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund for
any loss or damage to the Fund resulting from use of the
Securities System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or
subcustodians or of any of its or their employees or from any
failure of the Custodian or any such agent or subcustodian to
enforce effectively such rights as it may have against the
Securities System or any other person; at the election of the
Fund, it shall be entitled to be subrogated to the rights of
the Custodian with respect to any claim against the Securities
System or any other person which the Custodian may have as a
consequence of any such loss or damage if and to the extent
that the Fund has not been made whole for any such loss or
damage.
M. Deposit of Fund Commercial Paper in an Approved Book-Entry
System for Commercial Paper Upon receipt of proper instructions
with respect to each issue of direct issue commercial paper
purchased by the Fund, the Custodian may deposit and/or maintain
direct issue commercial paper owned by the Fund in any Approved
Book-Entry System for Commercial Paper, in each case only in
accordance with applicable Securities and Exchange Commission
rules, regulations, and no-action correspondence, and at all
times subject to the following provisions:
(a) The Custodian may (either directly or through one
or more subcustodians employed pursuant to Section 2) keep
commercial paper of the Fund in an Approved Book-Entry System
for Commercial Paper, provided that such paper is issued in
book entry form by the Custodian or subcustodian on behalf of
an issuer with which the Custodian or subcustodian has entered
into a book-entry agreement and provided further that such
paper is maintained in a non-proprietary account ("Account")
of the Custodian or such subcustodian in an Approved
Book-Entry System for Commercial Paper which shall not include
any assets of the Custodian or such subcustodian or any other
person other than assets held by the Custodian or such
subcustodian as a fiduciary, custodian, or otherwise for its
customers.
(b) The records of the Custodian with respect to
commercial paper of the Fund which is maintained in an
Approved Book-Entry System for Commercial Paper shall identify
by book-entry each specific issue of commercial paper
purchased by the Fund which is included in the System and
shall at all times during regular business hours be open for
inspection by authorized officers, employees or agents of the
Fund. The Custodian shall be fully and completely responsible
for maintaining a recordkeeping system capable of accurately
and currently stating the Fund's holdings of commercial paper
maintained in each such System.
(c) The Custodian shall pay for commercial paper
purchased in book-entry form for the account of the Fund only
upon contemporaneous (i) receipt of notice or advice from the
issuer that such paper has been issued, sold and transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such purchase, payment and
transfer for the account of the Fund. The Custodian shall
transfer such commercial paper which is sold or cancel such
commercial paper which is redeemed for the account of the Fund
only upon contemporaneous (i) receipt of notice or advice that
payment for such paper has been transferred to the Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer or redemption and payment
for the account of the Fund. Copies of all notices, advices
and confirmations of transfers of commercial paper for the
account of the Fund shall identify the Fund, be maintained for
the Fund by the Custodian and be promptly provided to the Fund
at its request. The Custodian shall promptly send to the Fund
confirmation of each transfer to or from the account of the
Fund in the form of a written advice or notice of each such
transaction, and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
System for the account of the Fund on the next business day.
(d) The Custodian shall promptly send to the Fund any
report or other communication received or obtained by the
Custodian relating to each System's accounting system, system
of internal accounting controls or procedures for safeguarding
commercial paper deposited in the System; the Custodian shall
promptly send to the Fund any report or other communication
relating to the Custodian's internal accounting controls and
procedures for safeguarding commercial paper deposited in any
Approved Book-Entry System for Commercial Paper; and the
Custodian shall ensure that any agent appointed pursuant to
Paragraph K hereof or any subcustodian employed pursuant to
Section 2 hereof shall promptly send to the Fund and to the
Custodian any report or other communication relating to such
agent's or subcustodian's internal accounting controls and
procedures for safeguarding securities deposited in any
Approved Book-Entry System for Commercial Paper.
(e) The Custodian shall not act under this Paragraph
M in the absence of receipt of a certificate of an officer of
the Fund that the Board has approved the use of a particular
Approved Book-Entry System for Commercial Paper; the Custodian
shall also obtain appropriate assurance from the officers of
the Fund that the Board has annually reviewed the continued
use by the Fund of each Approved Book-Entry System for
Commercial Paper, and the Fund shall promptly notify the
Custodian if the use of an Approved Book-Entry System for
Commercial Paper is to be discontinued; at the request of the
Fund, the Custodian will terminate the use of any such System
as promptly as practicable.
(f) The Custodian (or subcustodian, if the Approved
Book-Entry System for Commercial Paper is maintained by the
subcustodian) shall issue physical commercial paper or
promissory notes whenever requested to do so by the Fund or in
the event of an electronic system failure which impedes
issuance, transfer or custody of direct issue commercial paper
by book-entry.
(g) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the Fund for
any loss or damage to the Fund resulting from use of any
Approved Book-Entry System for Commercial Paper by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or subcustodians or of any of its or their
employees or from any failure of the Custodian or any such
agent or subcustodian to enforce effectively such rights as it
may have against the System, the issuer of the commercial
paper or any other person; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the System, the
issuer of the commercial paper or any other person which the
Custodian may have as a consequence of any such loss or damage
if and to the extent that the Fund has not been made whole for
any such loss or damage.
N. Segregated Account The Custodian shall upon receipt of proper
instructions establish and maintain a segregated account or
accounts for and on behalf of the Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Paragraph L hereof, (i) in accordance with the provisions of any
agreement among the Fund, the Custodian and any registered
broker-dealer (or any futures commission merchant), relating to
compliance with the rules of the Options Clearing Corporation
and of any registered national securities exchange (or of the
Commodity Futures Trading Commission or of any contract market
or commodities exchange), or of any similar organization or
organizations, regarding escrow or deposit or other arrangements
in connection with transactions by the Fund, (ii) for purposes
of segregating cash or U.S. Government securities in connection
with options purchased, sold or written by the Fund or futures
contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666,
or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other
proper purposes, but --- only, in the case of clause (iv), upon
receipt of, in addition to proper instructions, a ----
certificate signed by two officers of the Fund, setting forth
the purpose such segregated account and declaring such purpose
to be a proper purpose.
O. Ownership Certificates for Tax Purposes The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of the Fund
held by it and in connection with transfers of securities.
P. Proxies The Custodian shall, with respect to the securities held
by it hereunder, cause to be promptly delivered to the Fund all
forms of proxies and all notices of meetings and any other
notices or announcements or other written information affecting
or relating to the securities, and upon receipt of proper
instructions shall execute and deliver or cause its nominee to
execute and deliver such proxies or other authorizations as may
be required. Neither the Custodian nor its nominee shall vote
upon any of the securities or execute any proxy to vote thereon
or give any consent or take any other action with respect
thereto (except as otherwise herein provided) unless ordered to
do so by proper instructions.
Q. Communications Relating to Fund Portfolio Securities The
Custodian shall deliver promptly to the Fund all written
information (including, without limitation, pendency of call and
maturities of securities and participation interests and
expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers and other persons
relating to the securities and participation interests being
held for the Fund. With respect to tender or exchange offers,
the Custodian shall deliver promptly to the Fund all written
information received by the Custodian from issuers and other
persons relating to the securities and participation interests
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer.
R. Exercise of Rights; Tender Offers In the case of tender offers,
similar offers to purchase or exercise rights (including,
without limitation, pendency of calls and maturities of
securities and participation interests and expirations of rights
in connection therewith and notices of exercise of call and put
options and the maturity of futures contracts) affecting or
relating to securities and participation interests held by the
Custodian under this Agreement, the Custodian shall have
responsibility for promptly notifying the Fund of all such
offers in accordance with the standard of reasonable care set
forth in Section 8 hereof. For all such offers for which the
Custodian is responsible as provided in this Paragraph R, the
Fund shall have responsibility for providing the Custodian with
all necessary instructions in timely fashion. Upon receipt of
proper instructions, the Custodian shall timely deliver to the
issuer or trustee thereof, or to the agent of either, warrants,
puts, calls, rights or similar securities for the purpose of
being exercised or sold upon proper receipt therefor and upon
receipt of assurances satisfactory to the Custodian that the new
securities and cash, if any, acquired by such action are to be
delivered to the Custodian or any subcustodian employed pursuant
to Section 2 hereof. Upon receipt of proper instructions, the
Custodian shall timely deposit securities upon invitations for
tenders of securities upon proper receipt therefor and upon
receipt of assurances satisfactory to the Custodian that the
consideration to be paid or delivered or the tendered securities
are to be returned to the Custodian or subcustodian employed
pursuant to Section 2 hereof. Notwithstanding any provision of
this Agreement to the contrary, the Custodian shall take all
necessary action, unless otherwise directed to the contrary by
proper instructions, to comply with the terms of all mandatory
or compulsory exchanges, calls, tenders, redemptions, or similar
rights of security ownership, and shall thereafter promptly
notify the Fund in writing of such action.
S. Depository Receipts The Custodian shall, upon receipt of proper
instructions, surrender or cause to be surrendered foreign
securities to the depository used by an issuer of American
Depository Receipts or International Depository Receipts
(hereinafter collectively referred to as "ADRs") for such
securities, against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the Custodian that the depository has acknowledged receipt of
instructions to issue with respect to such securities ADRs in
the name of a nominee of the Custodian or in the name or nominee
name of any subcustodian employed pursuant to Section 2 hereof,
for delivery to the Custodian or such subcustodian at such place
as the Custodian or such subcustodian may from time to time
designate. The Custodian shall, upon receipt of proper
instructions, surrender ADRs to the issuer thereof against a
written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian
that the issuer of the ADRs has acknowledged receipt of
instructions to cause its depository to deliver the securities
underlying such ADRs to the Custodian or to a subcustodian
employed pursuant to Section 2 hereof.
T. Interest Bearing Call or Time Deposits The Custodian shall, upon
receipt of proper instructions, place interest bearing fixed
term and call deposits with the banking department of such
banking institution (other than the Custodian) and in such
amounts as the Fund may designate. Deposits may be denominated
in U.S. Dollars or other currencies. The Custodian shall include
in its records with respect to the assets of the Fund
appropriate notation as to the amount and currency of each such
deposit, the accepting banking institution and other appropriate
details and shall retain such forms of advice or receipt
evidencing the deposit, if any, as may be forwarded to the
Custodian by the banking institution. Such deposits shall be
deemed portfolio securities of the applicable Fund for the
purposes of this Agreement, and the Custodian shall be
responsible for the collection of income from such accounts and
the transmission of cash to and from such accounts.
U. Options, Futures Contracts and Foreign Currency Transactions
1. Options. The Custodians shall, upon receipt of
proper instructions and in accordance with the
provisions of any agreement between the Custodian,
any registered broker-dealer and, if necessary, the
Fund, relating to compliance with the rules of the
Options Clearing Corporation or of any registered
national securities exchange or similar organization
or organizations, receive and retain confirmations or
other documents, if any, evidencing the purchase or
writing of an option on a security or securities
index or other financial instrument or index by the
Fund; deposit and maintain in a segregated account
for each Fund separately, either physically or by
book-entry in a Securities System, securities subject
to a covered call option written by the Fund; and
release and/or transfer such securities or other
assets only in accordance with a notice or other
communication evidencing the expiration, termination
or exercise of such covered option furnished by the
Options Clearing Corporation, the securities or
options exchange on which such covered option is
traded or such other organization as may be
responsible for handling such options transactions.
The Custodian and the broker-dealer shall be
responsible for the sufficiency of assets held in
each Fund's segregated account in compliance with
applicable margin maintenance requirements.
2. Futures Contracts The Custodian shall, upon
receipt of proper instructions, receive and retain
confirmations and other documents, if any, evidencing
the purchase or sale of a futures contract or an
option on a futures contract by the Fund; deposit and
maintain in a segregated account, for the benefit of
any futures commission merchant, assets designated by
the Fund as initial, maintenance or variation
"margin" deposits (including mark-to-market payments)
intended to secure the Fund's performance of its
obligations under any futures contracts purchased or
sold or any options on futures contracts written by
Fund, in accordance with the provisions of any
agreement or agreements among the Fund, the Custodian
and such futures commission merchant, designed to
comply with the rules of the Commodity Futures
Trading Commission and/or of any contract market or
commodities exchange or similar organization
regarding such margin deposits or payments; and
release and/or transfer assets in such margin
accounts only in accordance with any such agreements
or rules. The Custodian and the futures commission
merchant shall be responsible for the sufficiency of
assets held in the segregated account in compliance
with the applicable margin maintenance and
mark-to-market payment requirements.
3. Foreign Exchange Transactions The Custodian shall,
pursuant to proper instructions, enter into or cause
a subcustodian to enter into foreign exchange
contracts or options to purchase and sell foreign
currencies for spot and future delivery on behalf and
for the account of the Fund. Such transactions may be
undertaken by the Custodian or subcustodian with such
banking or financial institutions or other currency
brokers, as set forth in proper instructions. Foreign
exchange contracts and options shall be deemed to be
portfolio securities of the Fund; and accordingly,
the responsibility of the Custodian therefor shall be
the same as and no greater than the Custodian's
responsibility in respect of other portfolio
securities of the Fund. The Custodian shall be
responsible for the transmittal to and receipt of
cash from the currency broker or banking or financial
institution with which the contract or option is
made, the maintenance of proper records with respect
to the transaction and the maintenance of any
segregated account required in connection with the
transaction. The Custodian shall have no duty with
respect to the selection of the currency brokers or
banking or financial institutions with which the Fund
deals or for their failure to comply with the terms
of any contract or option. Without limiting the
foregoing, it is agreed that upon receipt of proper
instructions and insofar as funds are made available
to the Custodian for the purpose, the Custodian may
(if determined necessary by the Custodian to
consummate a particular transaction on behalf and for
the account of the Fund) make free outgoing payments
of cash in the form of U.S. dollars or foreign
currency before receiving confirmation of a foreign
exchange contract or confirmation that the
countervalue currency completing the foreign exchange
contact has been delivered or received. The Custodian
shall not be responsible for any costs and interest
charges which may be incurred by the Fund or the
Custodian as a result of the failure or delay of
third parties to deliver foreign exchange; provided
that the Custodian shall nevertheless be held to the
standard of care set forth in, and shall be liable to
the Fund in accordance with, the provisions of
Section 8.
V. Actions Permitted Without Express Authority The Custodian may in
its discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided, that all such
payments shall be accounted for by the Custodian to the
Treasurer of the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments; and
4) in general, attend to all nondiscretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities
and property of the Fund except as otherwise directed by
the Fund.
4. Duties of Bank with Respect to Books of Account and Calculations of
Net Asset Value
The Bank shall as Agent (or as Custodian, as the case may be) keep such
books of account (including records showing the adjusted tax costs of the Fund's
portfolio securities) and render as at the close of business on each day a
detailed statement of the amounts received or paid out and of securities
received or delivered for the account of the Fund during said day and such other
statements, including a daily trial balance and inventory of the Fund's
portfolio securities; and shall furnish such other financial information and
data as from time to time requested by the Treasurer or any executive officer of
the Fund; and shall compute and determine, as of the close of business of the
New York Stock Exchange, or at such other time or times as the Board may
determine, the net asset value of a Share in the Fund, such computation and
determination to be made in accordance with the governing documents of the Fund
and the votes and instructions of the Board at the time in force and applicable,
and promptly notify the Fund and its investment adviser and such other persons
as the Fund may request of the result of such computation and determination. In
computing the net asset value the Custodian may rely upon security quotations
received by telephone or otherwise from sources or pricing services designated
by the Fund by proper instructions, and may further rely upon information
furnished to it by any authorized officer of the Fund relative (a) to
liabilities of the Fund not appearing on its books of account, (b) to the
existence, status and proper treatment of any reserve or reserves, (c) to any
procedures established by the Board regarding the valuation of portfolio
securities, and (d) to the value to be assigned to any bond, note, debenture,
Treasury bill, repurchase agreement, subscription right, security, participation
interests or other asset or property for which market quotations are not readily
available.
5. Records and Miscellaneous Duties
The Bank shall create, maintain and preserve all records relating to
its activities and obligations under this Agreement in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. All books of account and
records maintained by the Bank in connection with the performance of its duties
under this Agreement shall be the property of the Fund, shall at all times
during the regular business hours of the Bank be open for inspection by
authorized officers, employees or agents of the Fund, and in the event of
termination of this Agreement shall be delivered to the Fund or to such other
person or persons as shall be designated by the Fund. Disposition of any account
or record after any required period of preservation shall be only in accordance
with specific instructions received from the Fund. The Bank shall assist
generally in the preparation of reports to shareholders, to the Securities and
Exchange Commission, including Forms N-SAR and N-1Q, to state "blue sky"
authorities and to others, audits of accounts, and other ministerial matters of
like nature; and, upon request, shall furnish the Fund's auditors with an
attested inventory of securities held with appropriate information as to
securities in transit or in the process of purchase or sale and with such other
information as said auditors may from time to time request. The Custodian shall
also maintain records of all receipts, deliveries and locations of such
securities, together with a current inventory thereof, and shall conduct
periodic verifications (including sampling counts at the Custodian) of
certificates representing bonds and other securities for which it is responsible
under this Agreement in such manner as the Custodian shall determine from time
to time to be advisable in order to verify the accuracy of such inventory. The
Bank shall not disclose or use any books or records it has prepared or
maintained by reason of this Agreement in any manner except as expressly
authorized herein or directed by the Fund, and the Bank shall keep confidential
any information obtained by reason of this Agreement.
6. Opinion of Fund's Independent Public Accountants
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to enable the Fund to obtain from year to year favorable
opinions from the Fund's independent public accountants with respect to its
activities hereunder in connection with the preparation of the Fund's
registration statement and Form N-SAR or other periodic reports to the
Securities and Exchange Commission and with respect to any other requirements of
such Commission.
7. Compensation and Expenses of Bank
The Bank shall be entitled to reasonable compensation for its services
as Custodian and Agent, as agreed upon from time to time between the Fund and
the Bank. The Bank shall be entitled to receive from the Fund on demand
reimbursement for its cash disbursements, expenses and charges, including
counsel fees, in connection with its duties as Custodian and Agent hereunder,
but excluding salaries and usual overhead expenses.
8. Responsibility of Bank
So long as and to the extent that it is in the exercise of reasonable
care, the Bank as Custodian and Agent shall be held harmless in acting upon any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed by the proper party or parties.
The Bank as Custodian and Agent shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Fund) on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice.
The Bank as Custodian and Agent shall be held to the exercise of
reasonable care in carrying out the provisions of this Agreement but shall be
liable only for its own negligent or bad faith acts or failures to act.
Notwithstanding the foregoing, nothing contained in this paragraph is intended
to nor shall it be construed to modify the standards of care and responsibility
set forth in Section 2 hereof with respect to subcustodians and in subparagraph
f of Paragraph L of Section 3 hereof with respect to Securities Systems and in
subparagraph g of Paragraph M of Section 3 hereof with respect to an Approved
Book-Entry System for Commercial Paper.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution to the same extent as set forth with respect to
subcustodians generally in Section 2 hereof, provided that, regardless of
whether assets are maintained in the custody of a foreign banking institution, a
foreign securities depository or a branch of a U.S. bank, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim resulting
from, or caused by, the direction of or authorization by the Fund to maintain
custody of any securities or cash of the Fund in a foreign county including, but
not limited to, losses resulting from nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, revolution,
military or usurped powers, nuclear fission, fusion or radiation, earthquake,
storm or other disturbance of nature or acts of God.
If the Fund requires the Bank in any capacity to take any action with
respect to securities, which action involves the payment of money or which
action may, in the opinion of the Bank, result in the Bank or its nominee
assigned to the Fund being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
9. Persons Having Access to Assets of the Fund
(i) No trustee, director, general partner, officer, employee or agent
of the Fund shall have physical access to the assets of the Fund held by the
Custodian or be authorized or permitted to withdraw any investments of the Fund,
nor shall the Custodian deliver any assets of the Fund to any such person. No
officer or director, employee or agent of the Custodian who holds any similar
position with the Fund or the investment adviser of the Fund shall have access
to the assets of the Fund.
(ii) Access to assets of the Fund held hereunder shall only be
available to duly authorized officers, employees, representatives or agents of
the Custodian or other persons or entities for whose actions the Custodian shall
be responsible to the extent permitted hereunder, or to the Fund's independent
public accountants in connection with their auditing duties performed on behalf
of the Fund.
(iii) Nothing in this Section 9 shall prohibit any officer, employee or
agent of the Fund or of the investment adviser of the Fund from giving
instructions to the Custodian or executing a certificate so long as it does not
result in delivery of or access to assets of the Fund prohibited by paragraph
(i) of this Section 9.
10. Effective Period, Termination and Amendment; Successor Custodian
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided, that
the Fund may at any time by action of its Board, (i) substitute another bank or
trust company for the Custodian by giving notice as described above to the
Custodian, or (ii) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by the Federal
Deposit Insurance Corporation or by the Banking Commissioner of The Commonwealth
of Massachusetts or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction. Upon
termination of the Agreement, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
Unless the holders of a majority of the outstanding Shares of the Fund
vote to have the securities, funds and other properties held hereunder delivered
and paid over to some other bank or trust company, specified in the vote, having
not less than $2,000,000 of aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other qualifications for
custodians set forth in the Investment Company Act of 1940, the Board shall,
forthwith, upon giving or receiving notice of termination of this Agreement,
appoint as successor custodian, a bank or trust company having such
qualifications. The Bank, as Custodian, Agent or otherwise, shall, upon
termination of the Agreement, deliver to such successor custodian, all
securities then held hereunder and all funds or other properties of the Fund
deposited with or held by the Bank hereunder and all books of account and
records kept by the Bank pursuant to this Agreement, and all documents held by
the Bank relative thereto. In the event that no such vote has been adopted by
the shareholders and that no written order designating a successor custodian
shall have been delivered to the Bank on or before the date when such
termination shall become effective, then the Bank shall not deliver the
securities, funds and other properties of the Fund to the Fund but shall have
the right to deliver to a bank or trust company doing business in Boston,
Massachusetts of its own selection, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all funds, securities and properties of the Fund held by or
deposited with the Bank, and all books of account and records kept by the Bank
pursuant to this Agreement, and all documents held by the Bank relative thereto.
Thereafter such bank or trust company shall be the successor of the Custodian
under this Agreement.
11. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the governing instruments of the Fund. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Agreement.
12. Notices
Notices and other writings delivered or mailed postage prepaid to the
Fund addressed to 24 Federal Street, Boston, Massachusetts 02110, or to such
other address as the Fund may have designated to the Bank, in writing, or to
Investors Bank & Trust Company, 24 Federal Street, Boston, Massachusetts 02110,
shall be deemed to have been properly delivered or given hereunder to the
respective addressees.
13. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
If the Fund is a Massachusetts business trust, the Custodian expressly
acknowledges the provision in the Fund's declaration of Trust limiting the
personal liability of the trustees and shareholders of the Fund; and the
Custodian agrees that it shall have recourse only to the assets of the Fund for
the payment of claims or obligations as between the Custodian and the Fund
arising out of this Agreement, and the Custodian shall not seek satisfaction of
any such claim or obligation from the trustees or shareholders of the Fund.
14. Adoption of the Agreement by the Fund
The Fund represents that its Board has approved this Agreement and has
duly authorized the Fund to adopt this Agreement, such adoption to be evidenced
by a letter agreement between the Fund and the Bank reflecting such adoption,
which letter agreement shall be dated and signed by a duly authorized officer of
the Fund and duly authorized officer of the Bank. This Agreement shall be deemed
to be duly executed and delivered by each of the parties in its name and behalf
by its duly authorized officer as of the date of such letter agreement, and this
Agreement shall be deemed to supersede and terminate, as of the date of such
letter agreement, all prior agreements between the Fund and the Bank relating to
the custody of the Fund's assets.
* * * * *
<PAGE>
EXHIBIT 99.(k)(a)
EATON VANCE PRIME RATE RESERVES
ADMINISTRATION AGREEMENT
AGREEMENT originally made on the 14th day of July, 1989, by and between
Eaton Vance Prime Rate Reserves, a Massachusetts business trust (hereinafter
sometimes called the "Fund"), and Eaton Vance Management, Inc., a Massachusetts
corporation, and re-executed this 1st day of November, 1990, by and between the
Fund and Eaton Vance Management, a Massachusetts business trust (hereinafter
sometimes called the "Administrator") which is the successor to Eaton Vance
Management, Inc. in a transaction qualifying under Rule 2a-6 under the
Investment Company of 1940.
1. Duties of the Administrator. The Fund hereby employs the
Administrator to administer the affairs of the Fund, subject to the supervision
of the Trustees of the Fund for the period and on the terms set forth in this
Agreement. The shares of beneficial interest of the Fund are of a single series
and class; however, shares may be issued in additional classes or divided into
additional series of the Fund that may be established from time to time by
action of the Trustees.
The Administrator hereby accepts such employment, and agrees to
administer the Fund's business affairs and, in connection therewith, to furnish
for the use of the Fund office space and all necessary office facilities,
equipment and personnel for administering the affairs of the Fund. The
Administrator shall also pay the salaries and compensation of all officers and
Trustees of the Fund who are members of the Administrator's organization and who
render executive and administrative services to the Fund, and the salaries and
compensation of all other personnel of the Administrator performing management
and administrative services for the Fund. The Administrator shall for all
purposes herein be deemed to be an independent contractor and shall, except as
otherwise expressly provided or authorized, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
In connection with its responsibilities as Administrator of the Fund,
the Administrator (i) will prepare all annual, semi-annual and other reports
required to be sent to Fund shareholders, and arrange for the printing and
dissemination of such reports to shareholders; (ii) will prepare and assemble
all reports required to be filed by the Fund with the Securities and Exchange
Commission ("SEC") on Form N-SAR, or on such other form as the SEC may
substitute for Form N-SAR, and file such reports with the SEC; (iii) will review
the provision of services by the Fund's independent accountants, including but
not limited to the preparation by such accountants of audited financial
statements of the Fund and the Fund's Federal, state and local tax returns; and
make such reports and recommendations to the Trustees of the Fund concerning the
performance of the independent accountants as the Trustees deem appropriate;
(iv) will arrange for the filing with the appropriate authorities all required
Federal, state and local tax returns; (v) will arrange for the dissemination to
shareholders of the Fund's proxy materials, and will oversee the tabulation of
proxies by the Fund's transfer agent; (vi) will review and supervise the
provision of custodian services to the Fund; and make such reports and
recommendations to the Trustees concerning the provision of such services as the
Trustees deem appropriate; (vii) will value all such portfolio investments and
other assets of the Fund as may be designated by the Trustees (subject to any
guidelines, directions and instructions of the Trustees), and review and
supervise the calculation of the net asset value of the Fund's shares by the
custodian; (viii) will negotiate the terms and conditions under which transfer
agency and dividend disbursing services will be provided to the Fund, and the
fees to be paid by the Fund in connection therewith; review and supervise the
provision of transfer agency and dividend disbursing services to the Fund; and
make such reports and recommendations to the Trustees concerning the performance
of the Fund's transfer and dividend disbursing agent as the Trustees deem
appropriate; (ix) will establish the accounting policies of the Fund; reconcile
accounting issues which may arise with respect to the Fund's operations; and
consult with the Fund's independent accountants, legal counsel, custodian,
accounting and bookkeeping agents and transfer and dividend disbursing agent as
necessary in connection therewith; (x) will determine the amount of all
distributions to be paid by the Fund to its shareholders; prepare and arrange
for the printing of notices to shareholders regarding such distributions and
provide the Fund's transfer and dividend disbursing agent and custodian with
such information as is required for such parties to effect the payment of
distributions and to implement the Fund's distribution reinvestment plan; (xi)
will review the Fund's bills and authorize payments of such bills by the Fund's
custodian; (xii) will make recommendations to the Trustees as to whether the
Fund should make tender offers for its own shares; arrange for the preparation
and filing of all issuer tender offer statements required to be filed by the
Fund with the SEC on Schedule 13E-4, or on such other form as the SEC may
substitute for Schedule 13E-4; arrange for the preparation and dissemination of
all appropriate tender offer documents and papers on behalf of the Fund; and
supervise and conduct the Fund's periodic tender offers for its own shares;
(xiii) will review and supervise the payment of early withdrawal charges (as
described in the Fund's current offering prospectus); (xiv) will review and
supervise the continuous offering of the Fund's shares through the principal
underwriter, and arrange for the payment by the principal underwriter of all
compensation to Authorized Dealers in accordance with the Fund's current
offering prospectus; (xv) will arrange for the preparation and filing of all
other reports, forms, registration statements and documents required to be filed
by the Fund with the SEC; (xvi) will arrange for the preparation and filing of
all reports, forms, registration statements and documents required to be filed
by the Fund with state securities administrators or blue sky authorities; (xvii)
will arrange for the preparation of all advertisements and promotional material
relating to the continuous offering of the Fund's shares, and all communications
by the Fund to its shareholders; and (xviii) will provide to the Fund such other
internal legal, auditing and accounting services and internal executive
management and administrative services as the Trustees deem appropriate to
conduct the Fund's business affairs.
The Administrator shall not be responsible for providing investment
advisory services to the Fund under this Agreement. Eaton Vance Management in
its capacity of investment adviser to the Fund, shall be responsible for
managing the investment and reinvestment of the assets of the Fund under the
Fund's Investment Advisory Contract with the investment adviser.
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 equal to 1/48 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.
In case of initiation or termination of the Agreement during any month,
the fee for that month shall be reduced proportionately on the basis of the
number of calendar days during which the Agreement is in effect and the fee
shall be computed upon the basis of the average gross assets for the business
days the Agreement is so in effect for that month.
The Administrator may, from time to time, waive all or a part of the
above compensation.
3. Allocation of Charges and Expenses. It is understood that the Fund
will pay all its expenses other than those expressly stated to be payable by the
Administrator hereunder or by Eaton Vance Management in its capacity as
investment adviser to the Fund under the Fund's Investment Advisory Contract
with the Adviser, which expenses payable by the Fund shall include, without
implied limitation, (i) expenses of maintaining the Fund and continuing its
existence, (ii) registration of the Fund under the Investment Company Act of
1940, (iii) commissions, fees and other expenses connected with the purchase or
sale of securities, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption (if any) of shares, including all expenses incurred in conducting
tender offers for the purpose of repurchasing Fund shares, (viii) expenses of
registering and qualifying the Fund and its shares under Federal and state
securities laws and of preparing and printing prospectuses for such purposes and
for distributing the same to shareholders and investors, and fees and expenses
of registering and maintaining registrations of the Fund and of the Fund's
principal underwriter, if any, as a broker-dealer or agent under state
securities laws, (ix) expenses of reports and notices to shareholders and of
meetings of shareholders and proxy solicitations therefor, (x) expenses of
reports to governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Fund (including without
limitation safekeeping of funds and securities, keeping of books and accounts
and determination of net asset value), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xv) expenses for servicing shareholder
accounts, (xvi) any direct charges to shareholders approved by the Trustees of
the Fund, (xvii) compensation of and any expenses of Trustees of the Fund,
(xviii) all payments to be made and expenses to be assumed by the Fund in
connection with the distribution of Fund shares, (xix) pricing and valuation
services employed by the Fund, (xx) the investment advisory fee payable to the
Fund's investment adviser under the Fund's Investment Advisory Contract with the
adviser, and (xxi) such non-recurring items as may arise, including expenses
incurred in connection with litigation, proceedings and claims and obligation of
the Fund to indemnify its Trustees, officers and with respect thereto.
4. Other Interests. It is understood that Trustees, officers and
shareholders of the Fund are or may be or become interested in the Administrator
as trustees, officers, employees, shareholders or otherwise and that trustees,
officers, employees and shareholders of the Administrator are or may be or
become similarly interested in the Fund, and that the Administrator may be or
become interested in the Fund as a shareholder or otherwise. It is also
understood that trustees, officers, employees and shareholders of the
Administrator may be or become interested (as directors, trustees, officers,
employees, stockholders or otherwise) in other companies or entities (including,
without limitation, other investment companies) which the Administrator may
organize, sponsor or acquire, or with which it may merge or consolidate, and
that the Administrator or its subsidiaries or affiliates may enter into
advisory, management or administration agreements or other contracts or
relationship with such other companies or entities.
5. Limitation of Liability of the Administrator. The services of the
Administrator to the Fund are not to be deemed to be exclusive, the
Administrator being free to render services to others and engage in other
business activities. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Administrator, the Administrator shall not be subject to liability to the
Fund or to any shareholder of the Fund for any act or omission in the course of,
or connected with, rendering services hereunder.
6. Duration and Termination of this Agreement. This Agreement shall
become effective upon the date of its execution, and, unless terminated as
herein provided, shall remain in full force and effect to and including February
28, 1991 and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance after February 28, 1991 is specifically
approved at least annually (i) by the Boards of Trustees of the Fund, and (ii)
by the vote of a majority of those Trustees of the Fund who are not interested
persons of the Administrator or the Fund.
Either party hereto may, at any time on sixty (60) days' prior written
notice to the other, terminate this Agreement by action of the Trustees of the
Fund or the trustees of the Administrator, and the Fund may, at any time upon
such written notice to the Administrator, terminate the Agreement by vote of a
majority of the outstanding voting securities of the Fund. This Agreement shall
terminate automatically in the event of its assignment.
7. Amendments of the Agreement. This Agreement may be amended by a
writing signed by both parties hereto, provided that no amendment to this
Agreement shall be effective until approved by the vote of a majority of those
Trustees of the Fund who are not interested persons of the Administrator or the
Fund.
8. Limitation of Liability. The Administrator expressly acknowledges
the provision in the Declaration of Trust of the Fund (Article XIV, Section 2)
limiting the personal liability of the Trustees and shareholders of the Fund,
and the Administrator hereby agrees that it shall have recourse to the Fund for
payment of claims or obligations as between the Fund and the Administrator
arising out of this Agreement and shall not seek satisfaction from the Trustees
or shareholders of the Fund.
9. Certain Definitions. The terms "assignment" and "interested persons"
when used herein shall have the respective meanings specified in the Investment
Company Act of 1940 as now in effect or as hereafter amended subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
by any rule, regulation or order.
EATON VANCE PRIME RATE RESERVES EATON VANCE MANAGEMENT
By /s/ James B. Hawkes By /s/ Curtis H. Jones
President Vice President,
and not individually
<PAGE>
EXHIBIT 99.(k)(b)
EATON VANCE PRIME RATE RESERVES
Administration Agreement Amendment
Pursuant to Section 7 (Amendments to the Agreement) of the
existing Administration Agreement between the undersigned, the parties agree
that upon investment of substantially all of the assets of the Fund in another
investment company with substantially the same investment objective, policies
and restrictions as the Fund, Section (compensation of the Administrator) shall
be amended by the addition of the following two sentences to the first paragraph
of such Section: "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 equal to 1/48 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 PRIME RATE RESERVES EATON VANCE MANAGEMENT
By: /s/ James B. Hawkes By: /s/ H. Day Brigham Jr.
October 24, 1994
<PAGE>
Exhibit 99(l)
October 24, 1995
Eaton Vance Prime Rate Reserves
24 Federal Street
Boston, MA 02110
Gentlemen:
Eaton Vance Prime Rate Reserves (the "Trust") is a Massachusetts
business trust created under a Declaration of Trust dated May 2, 1989 executed
and delivered in Boston, Massachusetts and Amended and Restated June 30, 1989
(the "Declaration of Trust").
I am of the opinion that all legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the Trustees may authorize one or more
classes of shares and the number of shares of each class authorized is
unlimited. Furthermore, the Trustees may from time to time issue and sell or
cause to be issued and sold shares of the Trust for cash or for property. All
such shares, when so issued, shall be fully paid and nonassessable by the Trust.
By votes adopted October 23, 1995, the Trustees of the Trust authorized
the issuance of an additional 100,000,000 common shares of beneficial interest,
without par value, of the Fund. The Trust is now registering on Form N-2 with
the Securities and Exchange Commission such 100,000,000 common shares of
beneficial interest under the Securities Act of 1933, as amended.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as we have
deemed necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, and with respect to Massachusetts law (other
than the Massachusetts Uniform Securities Act), only to the extent that
Massachusetts law may be applicable and without reference to the laws of the
other several states or of the United States of America, I am of the opinion
that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of The Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of The Commonwealth
of Massachusetts.
2. Common shares of beneficial interest of the Trust registered by Form
N-2 may be legally and validly issued in accordance with the Declaration of
Trust upon receipt by the Trust of payment in compliance with the Declaration of
Trust and, when so issued and sold, will be fully paid and nonassessable by the
Trust.
I am a member of the Massachusetts bar and have acted as internal legal
counsel of the Trust in connection with the transaction contemplated by the
Agreement.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Trust's Registration Statement on Form
N-2 pursuant to the Securities Act of 1933, as amended.
Very truly yours,
/s/ Eric G. Woodbury
-------------------------
Eric G. Woodbury, Esq.
Vice President
EGW/mmr
EXHIBIT (M)(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Eaton Vance Prime Rate Reserves of our report relating to Eaton Vance Prime Rate
Reserves dated February 8, 1995, in the Statement of Additional Information,
which is part of such Registration Statement. We also consent to the reference
to us under the heading "The Fund's Financial Highlights" appearing in the
Prospectus, which is part of such Registration Statement.
Deloitte & Touche LLP
Boston, Massachusetts
October 18, 1995
EXHIBIT (M)(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Eaton Vance Prime Rate Reserves of our report relating to Senior Debt Portfolio
dated August 11, 1995, in the Statement of Additional Information, which is part
of such Registration Statement.
Deloitte & Touche
Grand Cayman, Cayman Islands
British West Indies
October 18, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 616,329
<INVESTMENTS-AT-VALUE> 619,298
<RECEIVABLES> 9,967
<ASSETS-OTHER> 10,056
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 639,321
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,733
<TOTAL-LIABILITIES> 27,733
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 614,490
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 22
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,893)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,969
<NET-ASSETS> 611,588
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 46,031
<OTHER-INCOME> 3,267
<EXPENSES-NET> 11,602
<NET-INVESTMENT-INCOME> 37,696
<REALIZED-GAINS-CURRENT> 6,890
<APPREC-INCREASE-CURRENT> (7,115)
<NET-CHANGE-FROM-OPS> 37,471
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 37,696
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 282
<NUMBER-OF-SHARES-SOLD> 5,997
<NUMBER-OF-SHARES-REDEEMED> 14,991
<SHARES-REINVESTED> 1,868
<NET-CHANGE-IN-ASSETS> (71,806)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 166
<GROSS-ADVISORY-FEES> 7,727
<INTEREST-EXPENSE> 1,300
<GROSS-EXPENSE> 11,602
<AVERAGE-NET-ASSETS> 633,287
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> 0.60
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 806396
<INVESTMENTS-AT-VALUE> 801959
<RECEIVABLES> 10246
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 812205
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3426
<TOTAL-LIABILITIES> 3426
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 811021
<SHARES-COMMON-STOCK> 80630
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 40
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2156
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4437)
<NET-ASSETS> 808779
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8329
<OTHER-INCOME> 21041
<EXPENSES-NET> 2958
<NET-INVESTMENT-INCOME> 26412
<REALIZED-GAINS-CURRENT> 8049
<APPREC-INCREASE-CURRENT> (7407)
<NET-CHANGE-FROM-OPS> 27054
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26394)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 226415
<NUMBER-OF-SHARES-REDEEMED> (44116)
<SHARES-REINVESTED> 14232
<NET-CHANGE-IN-ASSETS> 197191
<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> 2958
<AVERAGE-NET-ASSETS> 679631
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> 0.394
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (0.393)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.03
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> FEB-22-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 954271
<INVESTMENTS-AT-VALUE> 949778
<RECEIVABLES> 5769
<ASSETS-OTHER> 3185
<OTHER-ITEMS-ASSETS> 838
<TOTAL-ASSETS> 959570
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4982
<TOTAL-LIABILITIES> 4982
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 959081
<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> (4494)
<NET-ASSETS> 954587
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24104
<OTHER-INCOME> 1324
<EXPENSES-NET> 3202
<NET-INVESTMENT-INCOME> 22226
<REALIZED-GAINS-CURRENT> 1095
<APPREC-INCREASE-CURRENT> (1769)
<NET-CHANGE-FROM-OPS> 21552
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 987469
<NUMBER-OF-SHARES-REDEEMED> 54634
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 954387
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2524
<INTEREST-EXPENSE> 374
<GROSS-EXPENSE> 3202
<AVERAGE-NET-ASSETS> 753096
<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> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
