<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1997.
1933 ACT FILE NO.
1940 ACT FILE NO. 811-07946
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 8 [X]
(CHECK APPROPRIATE BOX OR BOXES)
EV CLASSIC SENIOR FLOATING-RATE FUND
--------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 482-8260
------------------------------------------------------------------
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
=========================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of Beneficial Interest 10,030,090.271 $9.97 $100,000,000 $30,303.03
=========================================================================================================
</TABLE>
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>
EV CLASSIC SENIOR FLOATING-RATE FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-2
--------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1. ........... Outside Front Cover Cover Page
2. ........... Inside Front and Outside Back Cover Pages
Cover Page
3. ........... Fee Table and Synopsis Shareholder and Fund Expenses
4. ........... Financial Highlights The Fund's Financial
Highlights
5. ........... Plan of Distribution How to Buy Fund Shares; The
Lifetime Investing Account/
Distribution Options;
Service Plan
6. ........... Selling Shareholders Not Applicable; Rescission
Offer
7. ........... Use of Proceeds Valuing Fund Shares;
Investment Policies and Risks
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 Debt, Organization of the Fund and
and Other Securities the Portfolio; Valuing Fund
Shares; Management of the
Fund and the Portfolio
11. ........... Defaults and Arrears on Senior Not Applicable
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 Principal Control Persons and Principal
Holders of Securities Holders of Shares
20. ........... Investment Advisory and Other Investment Advisory and Other
Services Services
21. ........... Brokerage Allocation and Other Portfolio Trading
Practices
22. ........... Tax Status Taxes; Rescission Offer
23. ........... Financial Statements Financial Statements
<PAGE>
[letterhead of EV Classic Senior Floating-Rate Fund]
March __, 1997
Dear Shareholder:
Enclosed are a Recission Offer package and the current Prospectus of the
Fund dated February 21, 1997. These documents are being sent to you in
connection with a recission offer for certain shares recently sold by the Fund.
As explained in the attached materials, Fund shares sold during the
period of January 16, 1997 to February 19, 1997, were not registered with the
Securities and Exchange Commission at the time of sale. This was caused by an
inadvertent administrative error which has been corrected. The Fund's
registration as an investment company under the Investment Company Act of 1940
was not affected. No loss to you or the Fund has or will occur as a result.
Pursuant to the recission offer, you may elect to sell unregistered
shares back to the Fund on the terms described herewith. If you wish to retain
your shares, you should not respond to this offer; registration of your shares
will then occur automatically.
Please read these materials carefully. You should consider whether it is
to your advantage to participate in this recission offer, which is open until
April __, 1997. IF THE OFFER WERE TO CONCLUDE TODAY, YOU WOULD SUFFER A LOSS IF
YOU ACCEPTED THIS OFFER.
If you have any questions, please call Eaton Vance Shareholder Services
at 1-800-225-6265, Option 4.
Sincerely,
James B. Hawkes
President
<PAGE>
RESCISSION OFFER
EV CLASSIC SENIOR FLOATING-RATE FUND
______ SHARES
OF BENEFICIAL INTEREST, NO PAR VALUE PER SHARE
EV Classic Senior Floating-Rate Fund (the "Fund"), upon the terms and
conditions set forth in this Prospectus, is offering to rescind the previous
sales of those common shares of beneficial interest, no par value per share (the
"Shares"), sold by the Fund during the period January 16, 1997 through February
19, 1997 (the "Rescission Period"), for the consideration paid for such Shares,
plus interest at 6% from the date of purchase, less any dividends declared and
paid or payable with respect to such Shares (the "Rescission Offer").
THE RESCISSION OFFER WILL EXPIRE AT 11:59 P.M. EASTERN TIME, ON APRIL
__, 1997, UNLESS EXTENDED BY THE FUND ("EXPIRATION DATE").
THE RESCISSION OFFER APPLIES ONLY TO SHARES SOLD BY THE FUND DURING THE
RESCISSION PERIOD. The net asset value ("NAV") per Share of the Fund remained
constant at $9.97 during the Rescission Period. The NAV per Share on March __,
1997, was $9.97. IF THE NAV PER SHARE AND THE ANNUALIZED RATE OF DIVIDENDS
DECLARED AND PAID OR PAYABLE BY THE FUND REMAIN AT OR ABOVE THEIR MARCH __, 1997
LEVELS THROUGH THE EXPIRATION DATE, IT WILL NOT BE IN THE ECONOMIC INTEREST OF
ANY RESCISSION OFFEREE TO ACCEPT THE RESCISSION OFFER. See "Amount and Source of
Funds."
RESCISSION OFFEREES ARE NOT REQUIRED TO ACCEPT THE RESCISSION OFFER.
RESCISSION OFFEREES WHO DO NOT RESPOND TO THE RESCISSION OFFER BY THE EXPIRATION
DATE WILL BE DEEMED BY THE FUND TO HAVE DECLINED THE RESCISSION OFFER. SHARES
HELD BY SUCH RESCISSION OFFEREES WILL AUTOMATICALLY BE DEEMED TO BE REGISTERED
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, EFFECTIVE AS OF THE DATE OF
THIS PROSPECTUS, WITHOUT ANY FURTHER ACTION ON THE PART OF SUCH OFFEREES.
This document, together with Appendix I hereto and the attached Prospectus
for the Fund dated February 21, 1997 (collectively, the "Prospectus"), are
designed to provide Rescission Offerees with information they should know before
determining whether to accept or reject the Rescission Offer. A Statement of
Additional Information for the Fund dated February 21, 1997, is incorporated
herein by reference. The Fund's Statement of Additional Information is available
without charge from the Fund's principal underwriter, Eaton Vance Distributors,
Inc., 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Fund has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form N-2 (together with all
amendments, schedules and exhibits, referred to as the "Registration Statement")
under the Securities Act and the Investment Company Act of 1940 ("1940 Act")
relating to the Rescission Offer. As permitted by the rules and regulations of
the Commission, this Prospectus does not contain all of the information set
forth in the Registration Statement, of which this Prospectus (and the Statement
of Additional Information) is a part. The Registration Statement, including the
exhibits and schedules thereto, may be inspected, without charge, at the public
reference facilities of the Commission, and copies may be obtained therefrom
upon payment of the Commission's customary charges.
- - - -
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- - - -
The date of this Prospectus is March __, 1997.
<PAGE>
THE RESCISSION OFFER
BACKGROUND AND REASONS FOR THE RESCISSION OFFER
The Securities Act of 1933, as amended (the "Securities Act") requires
that the sales of common shares of beneficial interest (the "Shares") of the EV
Classic Senior Floating-Rate Fund (the "Fund") be registered under the
Securities Act. During the period January 16, 1997 through February 19, 1997
(the "Rescission Period"), up to 9,388,417 Shares were sold without registration
under the Securities Act due to an inadvertent administrative error in
calculating the number of registered Shares available for sale (the
"Unregistered Shares"). Subsequently, up to ____________ Shares were issued by
the Fund pursuant to the reinvestment of dividends paid on the Unregistered
Shares (the "Dividend Shares").
If the sale of Unregistered Shares during the Rescission Period violated
the registration provisions of the Securities Act, purchasers of Shares during
the Rescission Period (the "Rescission Offerees") may have the right to have
their purchases rescinded by the Fund. This Rescission Offer is made to ensure
compliance with the registration provisions of the Securities Act.
The Fund's Board of Trustees has also approved the Rescission Offer in
order to limit any contingent liability the Fund may have as a result of
possible noncompliance with applicable registration requirements in connection
with the sale of the Shares described above. For purposes of the federal
securities laws, nonacceptance of the Rescission Offer may not terminate a
Rescission Offeree's right to bring a civil action against the Fund before
expiration of the applicable statute of limitations for failure to register the
Unregistered Shares under the Securities Act. The statute of limitations under
the Securities Act for enforcement of such rights by a shareholder is one year
after the date of the sale of Unregistered Shares sold in violation of the
federal registration requirements, but in no event later than three years after
the Unregistered Shares were offered to the shareholders. The Fund intends to
assert, among other defenses, in any litigation initiated by a Rescission
Offeree who does not accept the Rescission Offer, that such Rescission Offeree
is estopped or otherwise precluded from asserting such claims.
The Fund does not believe that registration of the Unregistered Shares was
required under the laws of any State in which such Unregistered Shares were
sold. To the extent that a Rescission Offeree may have a right, following
enactment of the federal National Securities Markets Improvement Act of 1996, to
bring a civil action against the Fund for rescission or other relief under state
securities laws or other state laws relevant to purchases of shares of a public
company, any such actions may be subject to different limitations periods than
the one year federal limitations period described above. In any litigation under
state securities or other state laws initiated by a Rescission Offeree who does
not accept the Rescission Offer, the Fund also intends to assert, among other
defenses, that such Rescission Offeree is estopped or otherwise precluded from
asserting such claims.
The total amount paid to the Fund for the Unregistered Shares was
approximately $93,602,517 million.
TERMS OF THE RESCISSION OFFER
Pursuant to this Prospectus, the Fund hereby offers to repurchase from
each Rescission Offeree (1) all Unregistered Shares held as of the April __,
1997 expiration date of the Rescission Offer (the "Expiration Date") by such
Rescission Offeree, at the price paid by such Rescission Offeree for such
Shares, plus interest at 6%, less distributions due or paid by the Fund with
respect to such Shares, and (2) all Dividend Shares (i.e., Shares issued by the
Fund pursuant to the reinvestment of dividends paid on the Unregistered Shares)
held as of the Expiration Date by such Rescission Offeree, at the NAV as of the
date of reinvestment, in each case upon receipt by the Fund of (A) a properly
completed and executed Acceptance of Rescission Offer in the form of Appendix I
hereto, and (B) certificates, if any representing such Shares. No early
withdrawal charge will be assessed with respect to Shares tendered for
rescission pursuant to the Rescission Offer.
The Fund may reject an improperly completed Acceptance of Rescission
Offer Form, or require that it be properly completed. Rescission Offerees who
accept any portion of the Rescission Offer and who do not desire the Fund to
withhold any amount for federal income taxes should complete a Substitute Form
W-9, unless a Form W-9 or a substitute therefor is already on file with the
Fund.
Interest to be paid on tendered Unregistered Shares will be calculated for
the period from the date of purchase of the tendered Unregistered Shares by the
Rescission Offeree to the date of repurchase of those Unregistered Shares by the
Fund. The interest rate for the Rescission Offer will be 6%. Payment will be
made by check mailed promptly after the Expiration Date to Rescission Offerees
validly accepting the Rescission Offer.
AMOUNT AND SOURCE OF FUNDS
The actual cost to the Fund of the Rescission Offer cannot be determined
at this time because the number of Shares whose sale is rescinded by the Fund
will depend on the number of Shares tendered for rescission by Rescission
Offerees.
IF THE NAV PER SHARE AND THE ANNUALIZED RATE OF DIVIDENDS DECLARED AND
PAID OR PAYABLE BY THE FUND ("DIVIDEND RATE") REMAIN AT OR ABOVE THEIR MARCH __,
1997 LEVELS THROUGH THE EXPIRATION DATE, IT WILL NOT BE IN THE ECONOMIC INTEREST
OF ANY RESCISSION OFFEREE TO ACCEPT THE RESCISSION OFFER.
On March __, 1997, the NAV per Share was $9.97, which is equal to the NAV
per Share during the entirety of the Rescission Period. For the period January
16, 1997 through March __, 1997, the Dividend Rate was ___%, which exceeds the
annualized interest rate of 6% payable pursuant to the Rescission Offer.
The Fund does not currently anticipate that there will be a significant
decline in the NAV per Share or in the Dividend Rate prior to the Expiration
Date. However, in the event of such a decline, it could be in the economic
interest of Rescission Offerees to accept the Rescission Offer, but only if the
per Share amount payable by the Fund pursuant to the Rescission Offer (which
will reflect any difference between the Distribution Rate and the 6% interest
rate) is greater than the NAV per Share on the Expiration Date. Between the date
of this Prospectus and the Expiration Date, the current NAV per Share of the
Fund may be obtained by calling Eaton Vance Shareholder Services at
1-800-225-6265, Option 4.
The Fund invests its assets in the Senior Debt Portfolio ("Portfolio"), a
separate, closed-end, non-diversified management investment company. The Fund
expects to withdraw cash from the Portfolio sufficient to pay for Shares, if
any, tendered pursuant to the Rescission Offer. The Portfolio will not be
required to sell portfolio securities. Accordingly, it is not anticipated that
the Portfolio's or the Fund's NAVs will be adversely affected if the Recission
Offer were accepted in full.
Eaton Vance Management ("Eaton Vance"), the Fund's sponsor, has agreed to
pay the special expenses associated with the Rescission Offer (i.e., legal and
accounting expenses, printing and mailing expenses, and NASD filing fees) and
any net loss to the Fund resulting from the Rescission Offer. (A net loss for
these purposes would occur only if (1) the sum of the price paid by tendering
Rescission Offerees for their Unregistered Shares plus interest exceeds the sum
of the NAV of such tendered Unregistered Shares on the Expiration Date plus
distributions declared and paid or payable on such Unregistered Shares, and/or
(2) the NAV of the tendered Dividend Shares on the Expiration Date exceeds their
NAV as of the date of reinvestment.)
HOW TO ACCEPT OR DECLINE THE RESCISSION OFFER
Acceptance of the Rescission Offer is optional for each Rescission Offeree
who purchased Shares covered by the Rescission Offer. RESCISSION OFFEREES ARE
NOT REQUIRED TO ACCEPT THE RESCISSION OFFER. RESCISSION OFFEREES WHO DO NOT
RESPOND TO THE RESCISSION OFFER BY THE EXPIRATION DATE WILL BE DEEMED BY THE
FUND TO HAVE DECLINED THE RESCISSION OFFER. UNREGISTERED SHARES HELD BY SUCH
RESCISSION OFFEREES WILL AUTOMATICALLY BE DEEMED TO BE REGISTERED SHARES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, EFFECTIVE AS OF THE DATE OF THIS
PROSPECTUS, WITHOUT TENDER OF CERTIFICATES OR ANY OTHER FURTHER ACTION ON THE
PART OF SUCH OFFEREES.
Rescission Offerees electing to accept the Rescission Offer must detach
and complete the "Acceptance of Rescission Offer" form, attached hereto as
Appendix I, and mail or return it to the Fund, Attention: Eaton Vance
Shareholder Services, as soon as practicable after the date of receipt of this
Prospectus but in no event having a postmark later than the Expiration Date.
Rescission Offerees may withdraw their acceptance of the Rescission Offer by
written notice satisfactory to the Fund at the address shown on the Acceptance
of Rescission Offer Form at any time prior to the Expiration Date.
ANY RESCISSION OFFEREE WHO DOES NOT NOTIFY THE FUND IN WRITING OF HIS OR
HER ACCEPTANCE OF THE RESCISSION OFFER ON OR PRIOR TO THE EXPIRATION DATE WILL
BE DEEMED TO HAVE REJECTED THE RESCISSION OFFER. SUCH REJECTION MAY NOT BE
DETERMINATIVE OF A RESCISSION OFFEREE'S ACTUAL LEGAL RIGHTS.
QUESTIONS ABOUT THE RESCISSION OFFER
Rescission Offerees who have questions about the Rescission Offer may call
Eaton Vance Shareholder Services at 1-800-225-6265, Option 4 on weekdays between
9:00 a.m. and 5:00 p.m., Eastern Time.
USE OF SHARES TENDERED TO THE FUND IN RESCISSION OFFER
The Shares, if any, repurchased by the Fund in the Rescission Offer will
become treasury shares. The Fund has no present plans to sell such treasury
shares.
TAX EFFECTS OF THE RESCISSION OFFER
A repurchase of Shares by the Fund pursuant to the Rescission Offer will
be a taxable transaction to the tendering Rescission Offeree. That transaction
generally will result in the recognition of gain or loss to the Rescission
Offeree, depending on whether the amount of the Fund's payment for the tendered
Shares exceeds or is less than the Rescission Offeree's adjusted tax basis for
the Shares (which generally will equal the amount paid for the Shares including,
in the case of Dividend Shares, the dollar amount of the dividends used to
acquire those Dividend Shares).
Because the Fund's payment for tendered Unregistered Shares will reimburse
a Rescission Offeree for (1) his or her purchase price of the Shares ($9.97)
plus (2) interest at 6% per year for the period the Rescission Offeree held the
Unregistered Shares less (3) the yield during that period (which is expected to
exceed the interest rate of 6%), that payment is expected to be less than the
Rescission Offeree's adjusted tax basis therefor, in which event a loss would be
sustained and recognized. (The Fund's payment for tendered Dividend Shares will
reimburse a Rescission Offeree for the dollar amount of dividends used to
acquire those Dividend Shares.) In the unlikely event that the Fund's payment
for the tendered Shares exceeds a Rescission Offeree's adjusted tax basis
therefor, however, the Rescission Offeree would realize and recognize a gain to
the extent of that excess. Any recognized gain or loss will be treated as a
short-term capital gain or loss (because the tendered Shares will not have been
held for more than one year at the time of consummation of the Rescission
Offer), assuming the tendered Shares were held as capital assets by the
tendering Rescission Offeree. All or part of any such loss will not be currently
deductible, however, if the Rescission Offeree buys other Shares within thirty
days before or after the Expiration Date.
Under certain circumstances, if a Rescission Offeree tenders less than all
of his or her Shares (including those constructively owned and those purchased
before or after the Rescission Period), the Fund's payment for Shares tendered
by the Rescission Offeree pursuant to the Rescission Offer could be treated not
as payment for the tendered Shares but instead as wholly or partly a dividend
distribution, with significantly different tax consequences to the Rescission
Offeree than those described above. Because the tax consequences may vary
depending on the particular facts relating to each Rescission Offeree, the Fund
recommends that Rescission Offerees consult their tax advisers.
EXPERTS
The financial highlights of the Fund (included in the Prospectus dated
February 21, 1997 herewith), have been audited by Deloitte & Touche LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of said firm as experts in accounting and auditing.
<PAGE>
APPENDIX I
RESCISSION OFFEREE'S ACCEPTANCE
OF RESCISSION OFFER
YOU MAY ELECT TO ACCEPT OR REJECT THE RESCISSION OFFER. IF YOU WISH TO REJECT
THE RESCISSION OFFER, DO NOT EXECUTE AND RETURN THIS FORM. YOU NEED TO DO
NOTHING TO REJECT THE RESCISSION OFFER. IF YOU DO NOTHING, UNREGISTERED SHARES
(AS DEFINED HEREIN) HELD BY YOU WILL AUTOMATICALLY BE DEEMED TO BE
REGISTERED SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, EFFECTIVE AS OF
THE DATE OF THIS PROSPECTUS, WITHOUT TENDER OF CERTIFICATES OR ANY OTHER FURTHER
ACTION ON YOUR PART.
IF YOU WISH TO ACCEPT THE RESCISSION OFFER, PLEASE EXECUTE AND RETURN THIS FORM
PURSUANT TO THE INSTRUCTIONS SET FORTH BELOW.
EV Classic Senior Floating-Rate Fund
24 Federal Street
Boston, Massachusetts 02110
Ladies and Gentleman:
The undersigned acknowledges receipt of the Description of Rescission
Offer and the prospectus dated February 21, 1997, of EV Classic Senior
Floating-Rate Fund (the "Fund") (collectively with the Appendix, the
"Prospectus"), pursuant to which the Fund offers, upon the terms and conditions
set forth in this Prospectus, to rescind sales (the "Rescission Offer") of
shares of beneficial interest of the Fund sold during the period January 16,
1997 through February 19, 1997 (the "Unregistered Shares"), and shares issued by
the Fund pursuant to the reinvestment of dividends paid on the Unregistered
Shares (the "Dividend Shares").
I hereby accept, on the terms set forth in this Prospectus, the Rescission
Offer for the Shares described below, which I represent are, as applicable,
either Unregistered Shares or Dividend Shares. I direct that all of the payment
to be made for Shares surrendered herewith for repurchase be made to me at the
address appearing below on this Acceptance of Rescission Offer Form. I
understand that as a result of accepting the Rescission Offer, I will no longer
hold the Shares tendered herewith for repurchase pursuant to the Rescission
Offer and may incur a loss.
<PAGE>
COMPLETE AND RETURN THIS FORM ONLY IF YOU WISH TO TENDER SHARES PURSUANT TO THE
RESCISSION OFFER.
- ------------------------------- ------------------------------
Name (please print) Signature
- ------------------------------- ------------------------------
Street Address Date
- ------------------------------- ------------------------------
City, State and Social Security or
Zip Code Taxpayer Identification
Number
TENDER ELECTION
If you wish to tender any shares pursuant to this Rescission Offer, please
complete the following, as applicable:
____ I hereby tender all Unregistered and Dividend Shares held
by me.
____ I hereby tender Unregistered Shares that were purchased by me in the
following amounts on the following dates:
Number of Shares Purchased Date of Purchase
-------------------------- ----------------
-------------------------- -----------------, 1997
-------------------------- -----------------, 1997
-------------------------- -----------------, 1997
-------------------------- -----------------, 1997
I also hereby tender all Dividend Shares issued with
respect to the Unregistered Shares listed above:
YES ____ NO ____
<PAGE>
REGISTRATION
Please fill in name exactly as Shares are registered
------------------------------
------------------------------
------------------------------
Account number
--------------------------
CERTIFICATED SHARES
If your Shares are certificated, please complete the following:
Certificate Nos. Issue Date Number of Shares
- ---------------- ---------- -----------------
- ---------------- ---------- -----------------
THIS FORM SHOULD BE MAILED TO THE FUND AS SOON AS PRACTICABLE, BUT IN NO EVENT
WITH A POSTMARK LATER THAN THE EXPIRATION DATE OF THE RESCISSION OFFER, WHICH IS
11:59 P.M., EASTERN TIME ON APRIL __, 1997 (THE EXPIRATION DATE), UNLESS
EXTENDED BY THE FUND.
RESCISSION OFFEREES ACCEPTING THE RESCISSION OFFER MUST ALSO COMPLETE, SIGN AND
SUBMIT A SUBSTITUTE FORM W-9, UNLESS A FORM W-9 OR A SUBSTITUTE THEREFOR IS
ALREADY ON FILE WITH THE FUND. FOR ASSISTANCE IN OBTAINING SUCH A FORM, PLEASE
CALL EATON VANCE SHAREHOLDER SERVICES AT 1-800-225-625, OPTION 4.
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Except as set forth below, signatures on
the Acceptance of Rescission Offer Form need not be guaranteed.
2. DELIVERY OF ACCEPTANCE OF RESCISSION OFFER FORMS; WITHDRAWAL.
Rescission Offerees must properly complete and duly execute and mail or deliver
this Acceptance of Rescission Offer Form, together with certificate(s), if any,
representing Shares to be surrendered in acceptance of the Rescission Offer, and
with any other required documents, to the Fund at the address set forth above.
IN ORDER TO ACCEPT THE RESCISSION OFFER, ALL MATERIALS MUST HAVE A POSTMARK NO
LATER THAN 11:59 P.M., EASTERN TIME, ON APRIL __, 1997 (THE EXPIRATION DATE).
The Fund reserves the absolute right to reject any and all surrenders of
Shares and Acceptance of Rescission Offer Forms (i) that are not in proper form
or otherwise not valid or (ii) the acceptance of which would be, in the opinion
of the Fund's counsel, unlawful. The Fund's interpretation of the terms and
conditions of the Rescission Offer, this Acceptance of Rescission Offer Form and
the Instructions hereto will be final and binding. The Fund reserves the
absolute right to waive any defect or irregularity in the surrender of Shares or
Acceptance of Rescission Offer Forms.
Acceptance of the Rescission Offer may be withdrawn by a Rescission
Offeree by written notice satisfactory to the Fund at the address shown on this
Acceptance of Rescission Form at any time prior to the Expiration Date.
3. SIGNATURES ON THE RESCISSION OFFER ACCEPTANCE FORM. This Acceptance of
Rescission Offer Form is to be completed and signed by each Rescission Offeree
that desires to accept the Rescission Offer. If Shares surrendered hereby are
owned of record by two or more joint owners, all such owners must sign this
Acceptance of Rescission Offer Form. If any such Shares are registered in
different names, it will be necessary to complete, sign and submit as many
separate Acceptance of Rescission Offer Forms as there are different
registrations. Except as provided below, signatures must correspond exactly with
the names as registered (including as written on the face of any certificate
surrendered).
If certificates surrendered hereby are surrendered by a person other than
the record holder appearing on the certificates, such certificates must be
endorsed or surrendered with an appropriate instrument of transfer, in either
case signed exactly as the name or names of the registered holder or holders
appear on the certificates.
4. MUTILATED, LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
which a Rescission Offeree desires to tender to the Fund for repurchase pursuant
to the Rescission Offer has been mutilated, lost, destroyed or stolen, the
holder should promptly notify the Fund. The holder will then be directed as to
the steps that must be taken in order to replace the certificate. The Acceptance
of Rescission Offer Form and related documents cannot be processed until the
procedures for replacing lost, mutilated, destroyed or stolen certificates have
been followed.
5. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Fund, at the
address and the telephone number set forth in the Prospectus.
6. FORM W-9 AND TAXPAYER IDENTIFICATION NUMBER. Federal income tax law
requires any Rescission Offeree accepting the Rescission Offer to provide the
Fund with a correct Taxpayer Identification Number ("TIN") by completing a
Substitute Form W-9. Most Rescission Offerees have already supplied this
information to the Fund. In the case of a Rescission Offeree who is an
individual, the TIN is his or her social security number. Failure to provide the
Fund with a correct TIN may subject the Rescission Offeree to a penalty and to
backup withholding at a rate of 31% on any payments made to the Rescission
Offeree pursuant to the Rescission Offer. Certain shareholders (including, among
others, most corporations and certain foreign persons) are exempt from backup
withholding requirements. A shareholder should consult his or her tax adviser as
to his or her qualification for exemption and the procedure for obtaining an
exemption. If you need assistance in determining whether a Substitute Form W-9
must be provided to the Fund, please call.
7. DELIVERY. The method of delivery of this Acceptance of Rescission Offer
Form, any certificates for Shares, and all other required documents is at the
election and risk of the holder and the delivery will be deemed made only when
actually received by the Fund. If delivery is to be made by mail, registered
mail, with return receipt requested and properly insured, is recommended.
Delivery of this Acceptance of Rescission Offer Form to an address other
than the Fund at 24 Federal Street, Boston, Massachusetts 02110, Attn: Eaton
Vance Shareholder Services will not constitute a valid acceptance.
<PAGE>
EV CLASSIC
SENIOR FLOATING-RATE FUND
- --------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF EV CLASSIC SENIOR FLOATING-RATE FUND (THE "FUND") IS
TO PROVIDE AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH THE
PRESERVATION OF CAPITAL, BY INVESTING IN A PORTFOLIO PRIMARILY OF SENIOR SECURED
FLOATING RATE LOANS. 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 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 8.
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 is designed to provide you with information you should know
before investing in the Fund. Please retain this document for future reference.
A Statement of Additional Information for the Fund dated February 21, 1997, 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.
- --------------------------------------------------------------------------------
PRICE TO PUBLIC SALES LOAD(2) PROCEEDS TO FUND
--------------- ------------- ----------------
Per Share(1) . $9.97 None $9.97
Total ........ $2,994,500,000 None to be paid by the Fund $2,994,500,000
- ------------
(1) The shares are offered on a best efforts basis at a price equal to the net
asset value, which, as of February 19, 1997, was $9.97 per share. See "How
to Buy Fund Shares."
(2) 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."
- --------------------------------------------------------------------------------
EATON VANCE DISTRIBUTORS, INC.
PROSPECTUS DATED FEBRUARY 21, 1997
<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 1%
will be imposed on most shares held for less than one year 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 .................................. 5
Investment Policies and Risks .................................... 5
Yield and Performance Information ................................ 11
Organization of the Fund and the Portfolio ....................... 12
Management of the Fund and the Portfolio ......................... 14
Service Plan ..................................................... 15
Valuing Fund Shares .............................................. 15
How to Buy Fund Shares ........................................... 16
Tender Offers to Purchase Shares ................................. 18
Early Withdrawal ................................................. 19
Reports to Shareholders .......................................... 20
The Lifetime Investing Account/Distribution Options .............. 20
Eaton Vance Shareholder Services ................................. 21
Distributions and Taxes .......................................... 21
Table of Contents of the Statement of Additional Information ..... 23
- ------------------------------------------------------------------------
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Sales Load (as a percentage of offering price) None
Dividend Reinvestment Fees None
Early Withdrawal Charge Imposed on Tender of Entire Account During the First Year
(as a percentage of tender proceeds exclusive of all reinvestments and capital
appreciation in the account) 1.00%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets attributable to shares of beneficial interest)
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisory Fee 0.91%
Interest Payments on Borrowed Funds 0.04%
Other Expenses (including administration fees of .25% and service fees of .15%) 0.58%
-----
Total Annual Expenses 1.53%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including an early
withdrawal charge in the case of tender during the first year
after purchase) on a $1,000 investment, assuming (a) 5% annual
return and (b) tender at the end of each period: $26 $48 $83 $182
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear directly or indirectly by investing in the Fund. Information for
the Fund is based on its expenses for the most recent fiscal year.
The Example should not be considered a representation of past or future expenses
since future expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual return
will vary. For further information regarding the expenses of the Fund and the
Portfolio see "The Fund's Financial Highlights", "Management of the Fund and the
Portfolio", "How to Buy Fund Shares", "Service Plan" and "Tender Offers to
Purchase Shares".
No early withdrawal charge is imposed on (a) shares purchased more than one year
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"). In the Example above,
expenses would be $10 less in the first year if there was no redemption.
The Investment Advisory and Administration Fees are based upon a percentage of
the Portfolio's average daily gross assets, which were approximately the same as
its average daily net assets for the fiscal year ended December 31, 1996.
The Fund invests exclusively in the Portfolio. Other investment companies and
investors 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 should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995*
-------- --------
<S> <C> <C>
Net asset value -- Beginning of year $ 9.990 $ 10.000
-------- --------
Income from operations:
Net investment income(1) $ 0.667 $ 0.634
Net realized and unrealized gain (loss) on investments (0.021) (0.008)++
-------- --------
Total income from operations $ 0.646 $ 0.626
-------- --------
Less distributions:
From net investment income $ (0.666) $ (0.633)
From net realized gain on investment transactions -- (0.003)
-------- --------
Total distributions $ (0.666) $ (0.636)
-------- --------
Net asset value -- end of year $ 9.970 $ 9.990
======== ========
TOTAL RETURN(2) 6.67% 6.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) $1,316,849 $501,301
Ratio of net expenses to average daily net assets(1) 1.49% 1.53%+
Ratio of interest expense to average daily net assets(1) 0.04% 0.13%+
Ratio of net investment income to average daily net assets 6.61% 7.04%+
<FN>
(1)Includes the Fund's share of the Portfolio's allocated expenses.
(2)Total return is calculated assuming a purchase at the net asset value on the first day and
a sale at the net asset value on the last day of each period reported. Distributions, if
any, are assumed to be invested at the net asset value on the payable date.
*For the period from the start of business, February 24, 1995, to December 31, 1995.
+Annualized.
++The per share amount is not in accord with the net realized and unrealized gain for the
period because of the timing of sales of Fund shares and the amount of the per share
realized and unrealized gains and losses at such time.
</FN>
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
EV Classic Senior Floating-Rate Fund (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.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
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 assets 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 February
20, 1997, the Portfolio had a dollar weighted average period to adjustment of
approximately 42 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 the
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 (the "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 (the "Code"). 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 participates in a multiseller asset-backed commercial paper
program called Eureka Securitization plc administered by Citicorp North America,
Inc. and Citibank N.A., London Branch. In addition, the Portfolio has access to
a $250 million fully committed back-up revolving credit facility from Citibank
North America, Inc. The Portfolio may use the proceeds from the program 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 program 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 has agreed
that, in the event of default under said Eureka, it will apply all cash receipts
first, to the Custodian, in an amount equal to its fees, costs and expenses
owed under the custodian agreement; and second, to the extent of any funds
remaining to the payment of the unpaid principal of and accrued interest on the
sum of any advances made under the program. In the event of such a default, the
Portfolio's inability to distribute 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. The Portfolio
did not have any borrowings outstanding during fiscal year ended December 31,
1996. 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 (such as during abnormal market
or economic conditions) 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 generally 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,
approximately 1% of the Portfolio's assets were invested in Loan Interests of
non-U.S. Borrowers. The Portfolio has no current intention to invest more than
5% of its net assets in such Loan Interests.
INTEREST RATE SWAPS. In order to attempt to protect the value of the Portfolio's
assets from interest rate fluctuations and to maintain a dollar weighted average
period to next interest rate adjustment of approximately 90 days or less, the
Portfolio may enter into interest rate swaps. The Portfolio intends to use
interest rate swaps as a hedge and not as a speculative investment and will
typically use interest rate swaps to shorten the average time to interest rate
reset of the Portfolio. Interest rate swaps involve the exchange by the
Portfolio with another party of their respective commitments to pay or receive
interest, e.g., an exchange of fixed rate payments for floating rate payments.
The use of interest rate swaps is a highly specialized activity 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 and an 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.
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 will cause the level of the Fund's effective
yield for this period to be 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 be able to achieve an effective
yield approximating the Prime Rate. However, there is not yet evidence that this
will occur in 1997.
From time to time, the Fund may quote a current and/or effective yield based on
a specific one-month period. The Fund seeks to provide an effective yield that
is higher than short-term instrument alternatives. 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
distributions 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. The Fund may quote total
return for the period prior to commencement of operations which would reflect
the Portfolio's total return (or that of its predecessor) adjusted to reflect
any applicable Fund sales charge. 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 August 5, 1993, 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." There are no annual meetings of
shareholders, but special meetings may be held as required by law to elect
Trustees and consider certain other matters. 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 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.
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.
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, 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 mutual fund structures, including funds that have multiple classes of
shares. Information regarding other pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting the Principal Underwriter,
24 Federal Street, Boston, MA 02110, (617) 482-8260.
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 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. 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.
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.
The Trustees of the Portfolio have voted to accept a waiver of BMR's
compensation so that the aggregate advisory fees paid by the Portfolio under the
Advisory Agreement during any fiscal year or portion thereof after 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. The Portfolio paid BMR advisory fees equivalent to 0.91% of the
Portfolio's average daily gross assets for the fiscal year ended December 31,
1996.
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 over $17 billion, of which approximately $15
billion is in investment companies, including approximately $3 billion in the
Portfolio. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp., a
publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
Scott H. Page and Payson F. Swaffield have acted as co-portfolio managers of
the Portfolio since August 1, 1996. Mr. Page has been a Vice President of
Eaton Vance and BMR since 1992 and an employee of Eaton Vance since 1989. Mr.
Swaffield has been a Vice President of Eaton Vance and BMR since 1992 and an
employee of Eaton Vance since 1990.
The Fund, the Portfolio and BMR have adopted Codes of Ethics relating to
personal securities transactions. The Codes permit Eaton Vance personnel to
invest in securities (including securities that may be purchased or held by the
Portfolio) for their own accounts, subject to certain pre-clearance, reporting
and other restrictions and procedures contained in such Codes.
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, 1996, the amount of administration fees paid by
the Fund to Eaton Vance was equal to 0.25% (annually) of the average daily gross
assets of the Portfolio attributable to the Fund.
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 the Principal Underwriter, 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 the Principal
Underwriter as early withdrawal charges on the repurchase of shares held for
less than one year.
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 the Principal Underwriter under its Distribution Agreement. See
"Investment Advisory and Other Services" in the Statement of Additional
Information.
SERVICE PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the service fee
requirements of the sales charge rule of the National Association of Securities
Dealers, Inc., as if such rule were applicable. THE PLAN PROVIDES THAT THE FUND
MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF
SHAREHOLDER ACCOUNTS TO THE PRINCIPAL UNDERWRITER AND AUTHORIZED FIRMS AND OTHER
PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR
ANY FISCAL YEAR. The Trustees of the Fund have initially implemented the Plan by
authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .15% of the
Fund's average daily net assets for each fiscal year. The Principal Underwriter
will retain the service fee in the first year (as reimbursement for an initial
service fee payment of .15% to Authorized Firms at the time of sale) and each
quarter thereafter only with respect to shares that are tendered. However, the
Plan authorizes the Trustees of the Fund to increase payments without further
action by shareholders of the Fund, provided that the aggregate amount of
payments made to such persons under the Plan in any fiscal year of the Fund does
not exceed .25% of the Fund's average daily net assets. For the fiscal year
ended December 31, 1996, the Fund paid and accrued service fees under the Plan
equivalent to 0.15% (annualized) of the Fund's average daily net assets for such
year. The Plan is further described in the Statement of Additional Information.
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 determined 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, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Net asset value is computed by dividing the value of the
Fund's total assets, less its liabilities by the number of shares outstanding.
Because the Fund invests its assets in an interest in the Portfolio, the Fund's
net asset value will reflect the value of its interest in the Portfolio (which,
in turn, reflects the underlying value of the Portfolio's assets and
liabilities).
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT Fund Services (Canada) Inc. (as agent for the
Portfolio) in the manner authorized by the Trustees of the Portfolio. Net asset
value is computed by determining the value of the Portfolio's total assets (the
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 Portfolio assets, see "Determination of Net Asset Value" in the
Statement of Additional Information.
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.
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
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 the Principal
Underwriter, will be imposed on most shares held for less than one year 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 February 19, 1997 was $9.97. Pursuant
to its Distribution Agreement with the Principal Underwriter, the Fund has
authorized the Principal Underwriter to distribute its shares on a "best
efforts" basis through Authorized Firms. An Authorized Firm may charge its
customers a fee in connection with transactions executed by that Firm.
The Principal Underwriter compensates the Authorized Firms at the rate of 1.0%
of the dollar amount of the shares being purchased, consisting of .85% of sales
commission and .15% of service fee (for the first year's services).
If the shares remain outstanding for at least one year, the Principal
Underwriter will compensate the Authorized Firms at an annual rate, paid
monthly, equal to .60% 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 monthly payments mentioned above do not represent an additional
expense to shareholders since such payments will be made from BMR's, the
Principal Underwriter's and Eaton Vance's own assets, which may include amounts
received by the Principal Underwriter 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. For
the fiscal year ended December 31, 1996, the Principal Underwriter made
compensation payments to Authorized Firms in the aggregate amount of
approximately $9,200,726. The compensation paid to Authorized Firms and the
Principal Underwriter, including the compensation paid at the time of purchase,
the monthly payments mentioned above, any additional incentives mentioned below,
and the early withdrawal charge, if any, will not in the aggregate exceed any
applicable limit, 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 $500 or more at any time directly to the Fund's
Transfer Agent as follows: First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. 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 on the day of their receipt 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 the Principal
Underwriter or an Authorized Firm, together with a completed and signed Letter
of Transmittal in approved form (available from the Principal Underwriter 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 EV Classic Senior Floating-Rate Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Senior Floating-Rate Fund
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. 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 $1.4 billion,
all of which was invested in the Portfolio. The Portfolio invests its assets in
Loan Interests. The Fund may suspend sales of its shares 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 by the Portfolio 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 Code; 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 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 one year. 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 one year 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 one year 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 one year preceding the acceptance) over the purchase price
of such shares. The early withdrawal charge will be paid to the Principal
Underwriter. 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. The early withdrawal charge will be equal to 1% of
the value of shares accepted for repurchase pursuant to a tender offer. No early
withdrawal charge will be imposed on Fund shares sold to Eaton Vance, or its
affiliates, or to their respective employees or clients. The early withdrawal
charge will also be waived for shares repurchased as part of a required
distribution from a tax-sheltered retirement plan, provided that the aggregate
amount of such repurchase does not exceed 12% of the account balance. During the
fiscal year ended December 31, 1996, the Principal Underwriter received $646,100
in early withdrawal charges.
EXCHANGES: The Fund makes available to tendering shareholders the privilege of
exchanging Fund shares at net asset value for shares of one or more open-end
investment companies in the Eaton Vance Classic Group of Funds or Eaton Vance
Money Market Fund, which are subject to a contingent deferred sales charge. Any
such exchange will be made on the basis of the net asset value per share of each
fund at the time of exchange. Exchange offers are available only in states where
shares of the fund acquired may legally be sold. 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 a charge
in the event of a redemption of the shares acquired in the exchange. Shares of
certain other funds advised or administered by Eaton Vance may be exchanged for
shares of the Fund at net asset value per share, but subject to any restrictions
or qualifications set forth in the current prospectus of any such fund. For the
purposes of calculating the early withdrawal or contingent deferred sales charge
applicable to shares acquired in an exchange, the schedule of charges applicable
to the shares at the time of purchase will apply and, the purchase of shares is
deemed to have occurred at the time of the original purchase of the exchanged
shares.
The 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.
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 TRANSFER AGENT
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 Transfer Agent.
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 Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (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, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. 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 $500 or more payable to the order of EV
Classic Senior Floating-Rate Fund may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123 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 $500 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 next determined net asset value 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 certain tax-sheltered retirement plans. Detailed information
concerning these plans, including certain exceptions to minimum investment
requirements, and copies of the plans are available from the Principal
Underwriter. This information should be read carefully and consultation with an
attorney or tax adviser may be advisable. The information sets forth the service
fee charged for retirement plans and describes the federal income tax
consequences of establishing a plan. Participant accounting services (including
trust fund reconciliation services) will be offered only through third party
recordkeepers and not by the Principal Underwriter. Under all such plans,
dividends and 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 business day
after collected funds for the purchase of Fund shares are available at the
Transfer Agent, even if orders to purchase shares had been placed with
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 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 with their tax advisers concerning the applicability
of state, local or other taxes with respect to an investment in the Fund.
<PAGE>
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 ............................. 8
Determination of Net Asset Value ................................... 9
Portfolio Trading .................................................. 10
Taxes .............................................................. 11
Service Plan ....................................................... 13
Custodian .......................................................... 13
Transfer and Dividend Paying Agent and Registrar ................... 13
Performance Information ............................................ 14
Other Information .................................................. 16
Auditors ........................................................... 17
Financial Statements ............................................... 17
- --------------------------------------------------------------------------
<PAGE>
[LOGO]
EATON VANCE
=================
Mutual Funds
EV CLASSIC SENIOR
FLOATING-RATE FUND
- ----------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 21, 1997
EV CLASSIC SENIOR
FLOATING-RATE FUND
24 FEDERAL STREET
BOSTON, MA 02110
- ----------------------------------------------------------------------------
INVESTMENT ADVISER OF SENIOR DEBT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC SENIOR FLOATING-RATE FUND
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, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-SFRP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
February 21, 1997
EV CLASSIC SENIOR FLOATING-RATE FUND
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 ............................... 8
Determination of Net Asset Value ..................................... 9
Portfolio Trading .................................................... 10
Taxes ................................................................ 11
Service Plan ......................................................... 13
Custodian ............................................................ 13
Transfer and Dividend Paying Agent and Registrar ..................... 13
Performance Information .............................................. 14
Other Information .................................................... 16
Auditors ............................................................. 17
Financial Statements ................................................. 17
- ------------------------------------------------------------------------------
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 EV CLASSIC SENIOR FLOATING-RATE FUND (THE
"FUND") DATED FEBRUARY 21, 1997, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. 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
EV Classic Senior Floating-Rate Fund (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 August 5,
1993, as amended, and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund was originally called Eaton Vance Senior
Short-Term Trust and changed its name to EV Classic Senior Floating-Rate Fund on
December 7, 1994. 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 Swaps. The Portfolio may enter into interest rate swaps on either
an asset-based or liability-based basis, depending on whether it is hedging its
assets or its liabilities. For example, if the Portfolio holds a Loan Interest
with an interest rate that is reset only once each year, it may swap the right
to receive interest at this fixed rate for the right to receive interest at a
rate that is reset daily. Such a swap position would offset changes in the value
of the Loan Interest because of subsequent changes in interest rates. This would
protect the Portfolio from a decline in the value of the Loan Interest due to
rising interest rates, but would also limit its ability to benefit from falling
interest rates.
The Portfolio will enter into interest rate swaps only on a net basis, i.e.,
the two payment streams are netted out, with the Portfolio receiving or paying,
as the case may be, only the net amount of the two payments. Inasmuch as these
transactions are entered into for good faith hedging purposes and because a
segregated account will be used, the Portfolio will not treat them as being
subject to the Portfolio's borrowing restrictions. The net amount of the excess,
if any, of the Portfolio's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis and an amount of cash
or liquid 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. Pursuant to the closing of a recapitalization effective May 31,
1995, the Portfolio had Loan Interests in London Fog Industries, Inc. which
had carrying values below par, although the Company had not defaulted on these
loans.
In the last decade, the federal agencies that regulate banking institutions
subjected certain loans made in connection with highly leveraged transactions to
increased scrutiny during bank examinations. Such regulatory action resulted in
certain banks disposing of Loan Interests at low prices. If such regulatory
action became likely again, banks might decide to reduce the amount of Loans to
highly leveraged Borrowers, which might reduce the availability of Loans
suitable for the Portfolio's ownership. As of the date of this Statement of
Additional Information, such Loan Interests constituted substantially all of the
Portfolio's Loan Interests.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this 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) above, 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 investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have each adopted the following nonfundamental
investment policy which may be changed with respect to the Fund by the Trustees
of the Fund without approval by the Fund's shareholders or may be changed with
respect to the Portfolio by the Trustees of the Portfolio without the approval
of the Fund or the Portfolio's other investors. As a matter of nonfundamental
policy, neither the Fund nor the Portfolio may make short sales of securities or
maintain a short position, unless at all times when a short position is open it
either owns an equal amount of such securities or owns securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short.
In addition, neither the Fund nor the Portfolio currently intends to invest
more than 10% of its total assets in Loans of any single Borrower.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this Statement of Additional Information states a maximum
percentage of assets that may be invested in any security or other asset or
describes a policy regarding quality standards, such percentage limitation or
standard shall be determined immediately after and as a result of the Fund's or
the Portfolio's acquisition of such security or asset. Accordingly, any later
increase or decrease resulting from a change in values, assets or other
circumstances will not compel the Fund or the Portfolio, as the case may be, to
dispose of such security or other asset. Notwithstanding the foregoing, under
normal market conditions the Fund and the Portfolio must take actions necessary
to comply with the policy of investing at least 80% of total assets in interests
in Loans. Moreover, the Fund and the Portfolio must always be in compliance with
the borrowing policies set forth above.
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"), 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 or the Portfolio, as defined in the 1940
Act, by virtue of their affiliation with BMR, Eaton Vance, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE FUND AND THE PORTFOLIO
JAMES B. HAWKES (55), President and Trustee*
President and Chief Executive Officer 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 (66), 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 (63), Vice President and Trustee*
Vice Chairman 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.
SAMUEL L. HAYES, III (62), 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 (61), Trustee
President and Director -- United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director of UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (70), Trustee
Formerly 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 (67), 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
WILLIAM CHISHOLM (36), Vice President of the Portfolio
Senior Trust Officer of IBT Trust Company (Cayman), Ltd. 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: IBT Trust Company (Cayman) Ltd., The Bank of Nova Scotia Building,
P.O. Box 501, George Town, Grand Cayman, Cayman Islands, British West Indies
MICHEL NORMANDEAU (45), Vice President of the Portfolio
Assistant Manager -- Trust Services, IBT Trust Company (Cayman), Ltd. 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: IBT Trust Company (Cayman) Ltd., The Bank of Nova Scotia Building,
P.O. Box 501, George Town, Grand Cayman, Cayman Islands, British West Indies
RAYMOND O'NEILL (35), 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
SCOTT H. PAGE (37), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV since 1992 and an employee of Eaton
Vance since 1989. Mr. Page was elected Vice President of the Portfolio on
October 18, 1996.
PAYSON F. SWAFFIELD (40), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV since 1992 and an employee of Eaton
Vance since 1990. Mr. Swaffield was elected Vice President of the Portfolio
on October 18, 1996.
JAMES L. O'CONNOR (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (65), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (61), 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 (34), 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 (39), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr. Woodbury
was elected Assistant Secretary on June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Fund and of the Portfolio. The purpose
of the Special Committee is to consider, evaluate and make recommendations to
the full Board of Trustees concerning (i) all contractual arrangements with
service providers to the Fund, including administrative services, transfer
agency, custodial and fund accounting and distribution services, and (ii) all
other matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Fund or its shareholders.
The Nominating Committee of the Board of Trustees of the Fund and the
Portfolio is comprised of four Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The Committee has
four-year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and to
assure that at least a majority of the Board of Trustees is independent of Eaton
Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Fund and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent certified public accountants, and reviewing matters relative
to trading and brokerage policies and practices, accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian and transfer agent of the Fund and of
the Portfolio.
The fees and expenses of those Trustees of the Fund and of the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Fund and the Portfolio, respectively. (The Trustees of the Fund and
the Portfolio who are members of the Eaton Vance organization receive no
compensation from the Fund or the Portfolio). During the fiscal year ended
December 31, 1996, the noninterested Trustees of the Fund and the Portfolio
earned the following compensation in their capacities as Trustees from the Fund,
the Portfolio, and the funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM FUND AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- -------------- -------------- --------------------
Donald R. Dwight ....... $696 $5,876(2) $145,000(5)
Samuel L. Hayes, III ... 628 5,680(3) 157,500(6)
Norton H. Reamer ....... 620 5,547 145,000
John L. Thorndike ...... 641 5,797(4) 150,000(7)
Jack L. Treynor ........ 686 5,997 150,000
- ----------
(1) The Eaton Vance fund complex consists of 212 registered investment
companies or series thereof.
(2) Includes $2,428 of deferred compensation.
(3) Includes $963 of deferred compensation.
(4) Includes $1,447 of deferred compensation.
(5) Includes $45,000 of deferred compensation.
(6) Includes $20,429 of deferred compensation.
(7) Includes $28,125 of deferred compensation.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services of
any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. Neither the Portfolio nor the Fund has a retirement
plan for its Trustees.
Each interested Trustee and officer holds comparable positions with certain
affiliates of BMR or with certain other funds of which BMR or Eaton Vance is the
investment adviser or distributor.
Messrs. Chisholm, Normandeau and O'Neill are not U.S. residents. It may be
difficult to effect service of process within the U.S. or to realize judgments
of U.S. courts upon them. It is uncertain whether courts in other countries
would entertain original actions against them.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SHARES
As of January 31, 1997, the Trustees and officers of the Fund, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. To
the knowledge of the Fund, no person owned of record or beneficially 5% or more
of the Fund's outstanding shares as of such date.
INVESTMENT ADVISORY AND OTHER SERVICES
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Bombay. Together Eaton Vance and Lloyd George manage over
$18 billion in assets. Eaton Vance mutual funds are distributed by Eaton Vance
Distributors both within the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide you
with tailored financial advice.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. For the period
from the start of business, February 22, 1995, to the fiscal year ended December
31, 1995, the Portfolio paid BMR advisory fees aggregating $8,544,646, which was
equal to 0.94% (annualized) of the Portfolio's average daily gross assets for
such period. For the fiscal year ended December 31, 1996, the Portfolio paid BMR
advisory fees aggregating $21,643,760 which was equal to 0.91% of the
Portfolio's average daily gross assets. As at December 31, 1996, the gross
assets of the Portfolio were $3,010,074,456. BMR's fee waiver described in the
Prospectus is indefinite, but could be removed or changed upon agreement of BMR
and the Portfolio's Board of Trustees at any time.
The Fund has engaged Eaton Vance to act as its administrator under an
Administration Agreement. For a description of the compensation the Fund pays
Eaton Vance under its Administration Agreement, see the Fund's current
Prospectus. For the fiscal year ended December 31, 1996, the Fund paid Eaton
Vance an administration fee of $2,348,205, which was equal to 0.25% of the
Fund's average daily gross assets. For the period from the start of business,
February 24, 1995, to the fiscal year ended December 31, 1995, the Fund paid
Eaton Vance an administration fee of $433,285, which was equal to 0.25%
(annualized) of the average daily gross assets of the Portfolio attributable to
the Fund for such period.
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.
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 any litigation in which the
Portfolio or the Fund, as the case may be, is a party and any legal obligation
to indemnify its respective officers and Trustees with respect thereto, to the
extent not covered by insurance.
The Advisory Agreement and Administration Agreement will remain in effect
until February 28, 1998. The Portfolio's Advisory Agreement may be continued
from year to year thereafter so long as such continuance after February 28, 1998
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, 1998 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, to the extent not covered by
insurance.
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, 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, Mr. Gardner is vice chairman
and Mr. Hawkes 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, 1997, the Voting Trustees of which
are Messrs. Clay, Gardner, Hawkes and Rowland and Thomas E. Faust, Jr. The
Voting Trustees have unrestricted voting rights for the election of Directors of
EVC. All of the outstanding voting trust receipts issued under said Voting Trust
are owned by certain of the officers of BMR and Eaton Vance who are also
officers or officers and Directors of EV and EVC. As of February 20, 1997,
Messrs. Clay, Gardner and Hawkes each owned 24% of such voting trust receipts,
and Messrs. Rowland and Faust owned 15% and 13%, respectively, of such voting
trust receipts. Messrs. Gardner, Hawkes and Otis are officers or Trustees of the
Fund and/or the Portfolio and are members of the EVC, BMR, Eaton Vance and EV
organizations. Messrs. Murphy, O'Connor, Page, Swaffield and Woodbury and Ms.
Campbell and Ms. Sanders are officers of the Fund and/or 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 Energex Energy Corporation, which engages in
oil and gas exploration and development. Eaton Vance owns all of the stock of
Northeast Properties, Inc., which is engaged in real estate investment. EVC also
owns 24% of the Class A shares of Lloyd George Management (B.V.I.) Limited, a
registered investment adviser. EVC owns all of the stock of Fulcrum Management,
Inc. and MinVen Inc., which are engaged in precious metal mining venture
investment and management. 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 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. Each investor's percentage of the aggregate interest in the Portfolio
will then be recomputed as a percentage equal to the fraction (i) the numerator
of which is the value of such investor's investment in the Portfolio as of the
Portfolio Valuation Time on the prior Portfolio Business Day plus or minus, as
the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio on the current Portfolio Business Day and
(ii) the denominator of which is the aggregate net asset value of the Portfolio
as of the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio Business
Day by all investors in the Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio for
the current Portfolio Business Day.
Non-Loan Portfolio holdings (other than short term obligations, but
including listed issues) may be valued on the basis of prices furnished by one
or more pricing services which determine prices for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. In certain circumstances,
portfolio securities will be valued at the last sale price on the exchange that
is the primary market for such securities, or the average of the last quoted bid
price and asked price for those securities for which the over-the-counter market
is the primary market or for listed securities in which there were no sales
during the day. The value of interest rate swaps will be determined in
accordance with a discounted present value formula and then confirmed by
obtaining a bank quotation.
Short-term obligations which mature in 60 days or less are valued at
amortized cost, if their original term to maturity when acquired by the
Portfolio was 60 days or less, or are valued at amortized cost using their value
on the 61st day prior to maturity, if their original term to maturity when
acquired by the Portfolio was more than 60 days, unless in each case this is
determined not to represent fair value. Repurchase agreements will be valued by
the Portfolio at cost plus accrued interest. Securities for which there exist no
price quotations or valuations and all other assets are valued at fair value as
determined in good faith by or on behalf of the Trustees of the Portfolio.
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 Portfolio paid no brokerage
commissions during the fiscal year ended December 31, 1996 and for the period
from the start of business, February 22, 1995, to the fiscal year ended December
31, 1995.
The frequency of portfolio purchases and sales, known as the "turnover
rate," will vary from year to year. The Portfolio's turnover rate for the fiscal
years ended December 31, 1995 and 1996 were 39% and 75%, respectively.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates. BMR
will attempt to allocate in a manner it deems equitable portfolio security
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. However, there may be instances when the Portfolio will not
participate in a securities transaction that is allocated among other accounts.
While these procedures 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 from exposure to
simultaneous transactions.
TAXES
The Fund has elected to be treated, and intends to qualify each year, as a
regulated investment company ("RIC") under 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. The Fund
so qualified for its taxable year ended December 31, 1996 (see the Notes to the
Financial Statements incorporated by reference in this Statement of Additional
Information). Because the Fund invests its assets in the Portfolio, the
Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to satisfy them. 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 (provided that any Portfolio
tender offers are 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 RIC, 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 RIC 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 enable the Fund to maintain its qualification as a RIC.
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, generally computed on the basis of the one-year period
ending on October 31 of such year or, by election, December 31 of such year,
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.
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 may be disallowed under "wash sale" rules 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. The Portfolio may have to
dispose of investments that it would otherwise have continued to hold in order
to provide cash to enable the Fund 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 their correct taxpayer identification number and
certain certifications required by the Internal Revenue Service (the "IRS"), as
well as shareholders with respect to whom the Fund has received notification
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax from the Fund's taxable dividends and other distributions (including
the proceeds received upon acceptance of any tender offer) at a rate of 31%. An
individual's taxpayer identification number is generally his or her social
security number.
Nonresident alien individuals, foreign corporations and certain other
foreign 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 amount treated as 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
include in income, and 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.
SERVICE PLAN
In addition to the fees and expenses described herein under "Investment
Advisory and Other Services," the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the sales charge rule of the
National Association of Securities Dealers, Inc., as if such rule were
applicable. The Plan has been approved by the Independent Trustees of the Fund,
who have no direct or indirect financial interest in the Plan, and by all of the
Trustees of the Fund.
The Plan provides that the Fund may make payments of service fees for
personal services and/or the maintenance of shareholder accounts to the
Principal Underwriter and Authorized Firms and other persons in amounts not
exceeding .25% of the Fund's average daily net assets for any fiscal year. The
Trustees of the Fund have initially implemented the Plan by authorizing the Fund
to make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed .15% of the Fund's average
daily net assets for each fiscal year. For the fiscal year ended December 31,
1996, $1,415,273 in such fees were paid and accrued, which was equal to .15% of
the Fund's average daily net assets.
The Plan remains in effect through and including April 28, 1998, and shall
continue in effect indefinitely thereafter for so long as such continuance is
approved at least annually by the vote of both a majority of (i) the Trustees of
the Fund who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Plan Trustees") and (ii) all of the Trustees then in
office cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan. The Plan may not be amended to increase materially the
payments described herein without approval of the shareholders of the Fund, and
all material amendments of the Plan must also be approved by the Trustees of the
Fund in the manner described above. The Plan may be terminated any time by vote
of a majority of the Plan Trustees or by a vote of a majority of the outstanding
voting securities of the Fund. Under the Plan, the President or a Vice President
of the Fund shall provide to the Trustees for their review, and the Trustees
shall review at least quarterly, a written report of the amounts expended under
the Plan and the purposes for which such expenditures were made.
So long as the Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Fund shall be committed to the discretion
of the Trustees who are not such interested persons. The Trustees have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
CUSTODIAN
IBT, 89 South Street, Boston, Massachusetts, acts as custodian for the Fund
and the Portfolio. IBT has the custody of all cash and securities representing
the Fund's interest in the Portfolio, has custody of all the Portfolio's assets,
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. IBT also provides services in connection with
the preparation of shareholder reports and the electronic filing of such reports
with the Commission, for which it receives a separate fee. 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. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
parent company of IBT. Management believes that such ownership does not create
an affiliated person relationship between the Fund or the Portfolio and IBT
under the 1940 Act.
TRANSFER AND DIVIDEND PAYING AGENT AND REGISTRAR
First Data Investor Services Group serves with respect to the shares as
transfer and dividend paying agent and as registrar. The principal business
address of First Data Investor Services Group, 4400 Computer Drive, Westborough,
MA 01581-5120.
PERFORMANCE INFORMATION
The Fund's current yield for the one-month period ended December 31, 1996
was 6.60%. The Fund's effective yield for the one-month period ended December
31, 1996 was 6.81%. Yields will fluctuate from time to time and are not
necessarily representative of future results.
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund from August 4, 1989 through
December 31, 1996 and for the one- and five-year periods ended December 31,
1996. The total return for the period prior to the Fund's commencement of
operations, February 24, 1995, reflects the Portfolio's total return (or that of
its predecessor) adjusted to reflect any applicable Fund sales charge. Total
return for this time period has not been adjusted to reflect the Fund's service
fees and certain other expenses.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT TOTAL RETURN
PERIOD DATE INVESTMENT ON 12/31/96 CUMULATIVE ANNUALIZED
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Life of the Fund 8/4/89 $1,000 $1,662.28 66.23% 7.10%
5 Years Ended 12/31/96 12/31/91 $1,000 $1,358.74 35.87% 6.32%
1 Year Ended 12/31/96 12/31/95 $1,000 $1,066.72 6.67% 6.67%
</TABLE>
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. Total return prior to the Fund's commencement
of operations reflects the Portfolio's total return (or that of its predecessor)
and has not been adjusted to reflect the Fund's service fees and certain other
expenses. If such adjustments were made, performance would have been lower.
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.
<PAGE>
Total Return Performance...
A $100,000 investment in EV Classic Senior Floating-Rate Fund at the Portfolio's
inception, Aug. 4, 1989, would have grown to $166,222 on December 31, 1996.
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 146427
3/95 147588
4/95 148359
5/95 149314
6/95 150244
7/95 151194
8/95 152119
9/95 153020
10/95 153985
11/95 154889
12/95 155828
1/96 156758
2/96 157586
3/96 158319
4/96 159030
5/96 159939
6/96 160801
7/96 161713
8/96 162612
9/96 163480
10/96 164408
11/96 165463
12/96 166222
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.
Total return prior to the Fund's commencement of operations reflects the
Portfolio's total return (or that of its predecessor). Such performance has not
been adjusted to reflect the Fund's distribution fees and/or service fees and
certain other expenses. If such adjustments were made, the performance would
have been lower. 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.
Comparative information about the Fund's yield and total return, about the
Prime Rate and LIBOR, 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.
From time to time, advertisements and other material furnished to present
and prospective shareholders may include information on the history of the
Fund's net asset value per share. From inception through December 31, 1996, the
high was $10.00 (on August 30 through October 26, 1993 and February 1 through
April 3, 1995) and the low was $9.91 (from February 3 through August 26, 1992).
Such materials may include illustrations such as the following chart:
Principal performance......
Month-end share value history
month end nav
start 9.96
aug 89 9.96
sep 9.96
oct 9.96
nov 9.96
dec 89 9.96
jan 9.96
feb 9.96
mar 9.96
apr 9.96
may 9.96
jun 9.96
jul 9.96
aug 9.96
sep 9.96
oct 9.96
nov 9.95
dec 90 9.94
jan 9.92
feb 9.92
mar 9.92
apr 9.92
may 9.92
jun 9.92
jul 9.92
aug 9.92
sep 9.92
oct 9.92
nov 9.92
dec 91 9.92
jan 9.92
feb 9.91
mar 9.91
apr 9.91
may 9.91
jun 9.91
jul 9.91
aug 9.91
sep 9.93
oct 9.96
nov 9.96
dec 92 9.97
jan 9.98
feb 9.96
mar 9.95
apr 9.96
may 9.97
jun 9.99
jul 9.98
aug 9.98
sep 10.00
oct 10.00
nov 9.99
dec 93 9.99
jan 9.98
feb 9.99
mar 9.97
apr 9.96
may 9.95
jun 9.95
jul 9.95
aug 9.93
sep 9.93
oct 9.92
nov 9.93
dec 94 9.95
jan 9.98
feb 10.00
mar 10.00
apr 9.99
may 9.99
jun 9.99
jul 9.99
aug 9.99
sep 9.99
oct 9.99
nov 9.99
dec 95 9.99
jan 9.99
feb 9.99
mar 9.98
apr 9.97
may 9.97
jun 9.97
jul 9.97
aug 9.97
sep 9.97
oct 9.97
nov 9.98
dec 96 9.97
Low $9.91
High $10.00
Chart shows the Fund's month-end net asset value per share for the Fund from the
Portfolio's inception (8/4/89) to 12/31/96. Net asset values prior to the Fund's
commencement of operations reflect the Portfolio's share values (or that of its
predecessor). Past performance is not indicative of future results.
Advertisements and communications about the Fund may include a comparison of
loan interests and other corporate debt instruments. These may describe the
credit agreements used in connection with loan interests. Moreover, the markets
for loan interests may be described. The comparison may also be made to relevant
indices.
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Information in advertisements
and materials furnished to present and prospective investors may also include
quotations (including editorial comments) and statistics concerning investing in
securities, as well as investing in particular types of securities and the
performance of such securities.
BMR was one of the first investment management firms to manage a portfolio
of loan interests. BMR has former commercial bank lending officers and
investment bank corporate finance officers dedicated to this investment
discipline. The services of leading law and accounting firms are used in the
research, analysis and management process.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
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 Portfolio's Declaration of Trust 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.
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 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.
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.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference into
this Statement of Additional Information and have been so incorporated in
reliance on the reports of Deloitte & Touche LLP and Deloitte & Touche,
independent certified public accountants, as experts in accounting and auditing.
A copy of the Fund's most recent Annual Report accompanies this Statement of
Additional Information.
Registrant incorporates by reference the audited financial information for
the Fund and the Portfolio for the fiscal year ended December 31, 1996 as
previously filed electronically with the Securities and Exchange Commission
(Accession No. 0000950156-97-000159).
<PAGE>
[LOGO]
EATON VANCE
======================
Mutual Funds
EV CLASSIC
SENIOR FLOATING-RATE FUND
- ----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 21, 1997
EV CLASSIC
SENIOR FLOATING-RATE FUND
24 FEDERAL STREET
BOSTON, MA 02110
- ----------------------------------------------------------------------------
INVESTMENT ADVISER OF SENIOR DEBT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC SENIOR FLOATING-RATE FUND
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, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-SFRSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
INCLUDED IN PART A:
Financial Highlights for the year ended December 31, 1996 and for
the period from the start of business, February 24, 1995, to
December 31, 1995
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORT DATED DECEMBER 31, 1995
(ACCESSION NO. 0000950156-97-000159), FILED ELECTRONICALLY PURSUANT
TO SECTION 30(B)(2) OF THE INVESTMENT COMPANY ACT OF 1940.
Financial Statements for EV CLASSIC SENIOR FLOATING-RATE FUND:
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Changes in Net Assets for the year ended December
31, 1996 and for the period from the start of business,
February 24, 1995, to December 31, 1995
Statement of Cash Flows for the year ended December 31, 1996
Financial Highlights for the year ended December 31, 1996 and
for the period from the start of business, February 24, 1995,
to December 31, 1995
Notes to Financial Statements
Independent Auditors' Report
Financial Statements for SENIOR DEBT PORTFOLIO:
Portfolio of Investments as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statement of Cash Flows for the year ended December 31, 1996
Statement of Changes in Net Assets for the year ended December
31, 1996 and for the period from the start of business,
February 22, 1995, to December 31, 1995
Supplementary Data for the year ended December 31, 1996 and for
the period from the start of business, February 22, 1995, to
December 31, 1995
Notes to Financial Statements
Independent Auditors' Report
(2) EXHIBITS:
(a) Amended and Restated Agreement and Declaration of Trust dated
December 7, 1994 filed as Exhibit (a) to the Registration Statement
under the Securities Act of 1933 (1933 Act File No. 33-64321) and
Amendment No. 5 to the Registration Statement under the Investment
Company Act of 1940 (1940 Act File No. 811-07946) filed with the
Commission on November 16, 1995 (Amendment No. 5) and incorporated
herein by reference.
(b) Amended and Restated By-Laws filed as Exhibit (b) to Amendment No. 5
and incorporated herein by reference.
(c) Not applicable
(d) Not applicable
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) (a) Distribution Agreement dated February 22, 1995 filed as
Exhibit (h)(a) to the Registration Statement under the
Securities Act of 1933 (1933 Act File No. 33-59143) and
Amendment No. 3 to the Registration Statement under the
Investment Company Act of 1940 (1940 Act File No. 811-07946)
filed with the Commission on May 5, 1995 (Amendment No. 3) and
incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc.
and Authorized Dealers filed as Exhibit (6)(b) to
Post-Effective Amendment No. 61 to the Registration Statement
of Eaton Vance Growth Trust (File Nos. 2-22019 and 811-1241)
and incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as
Exhibit (6)(c) to Post- Effective Amendment No. 59 to the
Registration Statement of Eaton Vance Growth Trust (File Nos.
2-22019 and 811-1241) and incorporated herein by reference.
(i) The Securities and Exchange Commission has granted the Registrant an
exemptive order that permits the Registrant to enter into deferred
compensation arrangements with its independent Trustees. See in the
Matter of Capital Exchange Fund, Inc., Release No. IC-20671
(November 1, 1994).
(j) (a) Custodian Agreement dated February 22, 1995 filed as Exhibit
(j) to Amendment No. 5 and incorporated herein by reference.
(b) Amendment to Custodian Agreement dated October 23, 1995 filed
as Exhibit (j)(b) to the Post-Effective Amendment No. 1 to the
Registration Statement under the Securities Act of 1933 (1933
Act File No. 33-64321) and Amendment No. 6 to the Registration
Statement under the Investment Company Act of 1940 (1940 Act
File No. 811-07946) filed with the Commission on April 1, 1996
(Amendment No. 6) and incorporated herein by reference.
(k) (a) Administration Agreement dated February 22, 1995 filed as
Exhibit (k)(a) to Amendment No. 3 and incorporated herein by
reference.
(b) Service Plan dated February 22, 1995 filed as Exhibit (k)(b)
to Amendment No. 3 and incorporated herein by reference.
(l) Opinion and Consent of Counsel dated March 10, 1997, filed
herewith.
(m) (a) Consent of Independent Auditors for EV Classic Senior
Floating-Rate Fund filed herewith.
(m) (b) Consent of Independent Auditors for Senior Debt Portfolio
filed herewith.
(n) Not applicable
(o) Not applicable
(p) Letter Agreement with Eaton Vance Management dated December 7, 1994
filed as Exhibit (p) to Amendment No. 5 and incorporated herein by
reference.
(q) Not applicable
(r) Power of Attorney for EV Classic Senior Floating-Rate Fund dated
October 23, 1995 filed as Exhibit (r) to Amendment No. 5 and
incorporated herein by reference.
(s) Power of Attorney for Senior Debt Portfolio filed with Pre-Effective
Amendment No. 2 to the Registration Statement under the Securities
Act of 1933 (1933 Act File No. 33-67118) and Amendment No. 2 to the
Registration Statement under the Investment Company Act of 1940
(1940 Act File No. 811-07946) filed with the Commission on December
16, 1994 (Amendment No. 2) and incorporated herein by reference.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the approximate expenses incurred in
connection with the offerings of Registrant:
<TABLE>
<S> <C>
Registration fees ................................................... $ 998,151.30
National Association of Securities Dealers, Inc. Fees ............... $ 91,500.00
Printing (other than stock certificates) ............................ $ 50,000.00
Engraving and printing stock certificates ........................... $ 0.00
Fees and expenses of qualification under state securities laws
(excluding fees of counsel) ....................................... $ 65,000.00
Accounting fees and expenses ........................................ $ 5,000.00
Legal fees and expenses ............................................. $ 50,000.00
-------------
Total ....................................................... $1,259,651.30(1)
=============
(1)These amounts include expenses for the shares registered pursuant to the Registration
Statements declared effective on February 21, 1995 (File No. 33-67118), May 5, 1995
(File No. 33-59143) and December 15, 1995 (File No. 33-64321) and February
21, 1997 (File No. 333-22163).
</TABLE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest 39,190
as of
February 19, 1997
ITEM 29. INDEMNIFICATION
The Registrant's By-Laws filed as Exhibit (b) to Amendment No. 5 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, 89 South Street,
Boston, MA 02111, and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581-5120, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston,
MA 02110. 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
service plan 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 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 7th
day of March, 1997.
EV CLASSIC SENIOR FLOATING-RATE FUND
By /s/ JAMES B. HAWKES
--------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
/s/ JAMES B. HAWKES Principal Executive Officer March 7, 1997
- --------------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer March 7, 1997
- --------------------------------------
JAMES L. O'CONNOR
Trustee and Vice
M. DOZIER GARDNER* President March 7, 1997
- --------------------------------------
M. DOZIER GARDNER
DONALD R. DWIGHT* Trustee March 7, 1997
- --------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee March 7, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee March 7, 1997
- --------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee March 7, 1997
- --------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee March 7, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ JAMES B. HAWKES
-----------------------------
JAMES B. HAWKES
Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Senior Debt Portfolio has duly caused the Registration Statement on Form
N-2 of EV Classic Senior Floating-Rate Fund to be signed on its behalf by the
undersigned, thereunto duly authorized, in Hamilton, Bermuda on the 14th day
of February, 1997.
SENIOR DEBT PORTFOLIO
By /s/ JAMES B. HAWKES
--------------------------
JAMES B. HAWKES, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
/s/ JAMES B. HAWKES Principal Executive Officer February 14, 1997
- --------------------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
JAMES L. O'CONNOR* Officer February 14, 1997
- --------------------------------------
JAMES L. O'CONNOR
/s/ DONALD R. DWIGHT Trustee February 14, 1997
- --------------------------------------
DONALD R. DWIGHT
/s/ M. DOZIER GARDNER Trustee February 14, 1997
- --------------------------------------
M. DOZIER GARDNER
/s/ SAMUEL L. HAYES, III Trustee February 14, 1997
- --------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 14, 1997
- --------------------------------------
NORTON H. REAMER
/s/ JOHN L. THORNDIKE Trustee February 14, 1997
- --------------------------------------
JOHN L. THORNDIKE
/s/ JACK L. TREYNOR Trustee February 14, 1997
- --------------------------------------
JACK L. TREYNOR
*By: /s/ JAMES B. HAWKES
-----------------------------
JAMES B. HAWKES
As attorney-in-fact
</TABLE>
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
<S> <C> <C>
(l) Opinion and Consent of Counsel dated March 10, 1997
(m)(a) Consent of Independent Auditors for EV Classic Senior Floating-Rate Fund
(m)(b) Consent of Independent Auditors for Senior Debt Portfolio
</TABLE>
<PAGE>
Exhibit (L)
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
March 10, 1997
EV Classic Senior Floating-Rate Fund
24 Federal Street
Boston, MA 02110
Gentlemen:
EV Classic Senior Floating-Rate Fund (the "Trust") is a Massachusetts
business trust created under a Declaration of Trust dated August 5, 1993
executed and delivered in Boston, Massachusetts and Amended and Restated
December 7, 1994 (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 duly adopted, the Trustees of the Trust authorized the issuance
of an additional 10,030,090.271 common shares of beneficial interest, without
par value, of the Trust. The Trust is now registering on Form N-2 with the
Securities and Exchange Commission such 10,030,090.271 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 registration of shares.
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/drb
opinion2.sen
<PAGE>
EXHIBIT (M)(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
EV Classic Senior Floating-Rate Fund of our report relating to EV Classic
Senior Floating-Rate Fund dated February 7, 1997, which report is included in
the Annual Report to Shareholders for the year ended December 31, 1996 which
is incorporated by reference in the Statement of Additional Information.
We also consent to the reference to our Firm under the heading "Experts" in the
Rescission Offer Prospectus, and under the heading "The Fund's Financial
Highlights" appearing in the Prospectus, and under the captions "Auditors" and
"Financial Statements" in the Statement of Additional Information of the
Registration Statement.
/s/ Deloitte & Touche LLP
- ----------------------
Deloitte & Touche LLP
Boston, Massachusetts
March 7, 1997
<PAGE>
EXHIBIT (M)(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
EV Classic Senior Floating-Rate Fund of our report relating to Senior Debt
Portfolio dated February 7, 1997, in the Statement of Additional Information,
which is part of such Registration Statement.
We also consent to the reference to our Firm under the captions "Auditors" and
"Financial Statements" in the Statement of Additional Information of the
Registration Statement.
/s/ Deloitte & Touche
- --------------------
Deloitte & Touche
Grand Cayman, Cayman Islands
British West Indies
March 7, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1311750
<INVESTMENTS-AT-VALUE> 1310864
<RECEIVABLES> 7615
<ASSETS-OTHER> 189
<OTHER-ITEMS-ASSETS> 292
<TOTAL-ASSETS> 1318960
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2111
<TOTAL-LIABILITIES> 2111
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1318161
<SHARES-COMMON-STOCK> 132048
<SHARES-COMMON-PRIOR> 50152
<ACCUMULATED-NII-CURRENT> 163
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (588)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (886)
<NET-ASSETS> 1316849
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 67514
<EXPENSES-NET> 4928
<NET-INVESTMENT-INCOME> 62585
<REALIZED-GAINS-CURRENT> (588)
<APPREC-INCREASE-CURRENT> (836)
<NET-CHANGE-FROM-OPS> 61161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 62453
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 92516
<NUMBER-OF-SHARES-REDEEMED> 15097
<SHARES-REINVESTED> 4476
<NET-CHANGE-IN-ASSETS> 815818
<ACCUMULATED-NII-PRIOR> 30
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4928
<AVERAGE-NET-ASSETS> 946704
<PER-SHARE-NAV-BEGIN> 9.99
<PER-SHARE-NII> 0.667
<PER-SHARE-GAIN-APPREC> (0.021)
<PER-SHARE-DIVIDEND> 0.666
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.97
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2897294
<INVESTMENTS-AT-VALUE> 2891420
<RECEIVABLES> 18371
<ASSETS-OTHER> 108766
<OTHER-ITEMS-ASSETS> 962
<TOTAL-ASSETS> 3019520
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9445
<TOTAL-LIABILITIES> 9445
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3015948
<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> 0
<NET-ASSETS> 3010074
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 190545
<OTHER-INCOME> 5007
<EXPENSES-NET> 24305
<NET-INVESTMENT-INCOME> 171247
<REALIZED-GAINS-CURRENT> (2510)
<APPREC-INCREASE-CURRENT> (1388)
<NET-CHANGE-FROM-OPS> 167349
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1388736
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 21644
<INTEREST-EXPENSE> 1003
<GROSS-EXPENSE> 24305
<AVERAGE-NET-ASSETS> 2387807
<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> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
