<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 1998.
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. 11 [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)
If any of the securities being registered on this Form will be offered on
a delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [X]
It is proposed that this filing will become effective (check appropriate box):
[ ] when declared effective pursuant to section 8(c)
[ ] immediately upon filing [ ] 60 days after filing
pursuant to paragraph (b) pursuant to paragraph (a)
[X] on November 2, 1998 [ ] on (date) pursuant to paragraph (a)
pursuant to paragraph (b)
If appropriate, check the following box:
[ ] This [post-effective] amendment designates a new effective date for a
previously filed [post-effective amendment] [registration statement].
[ ] This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration
statement for the same offering is 333-48873.
Senior Debt Portfolio has also executed this Registration Statement.
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
- -------------------------------------------------------------------------------
Common Shares
of Beneficial
Interest 100,000,000 $9.97 $997,000,000 $294,115
- --------------------------------------------------------------------------------
<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 Shares; The
Lifetime Investing Account/
Distribution Options; Service
Plan
6. ........... Selling Shareholders Not Applicable
7. ........... Use of Proceeds How to Buy Shares; Investment
Policies and Risks
8. ........... General Description of the Organization of the Fund and
Registrant the Portfolio; Investment
Policies and Risks
9. ........... Management Management of the Fund and
the Portfolio; Organization
of the Fund and the Portfolio
10. ........... Capital Stock, Long-Term Debt, Organization of the Fund and
and Other Securities the Portfolio; Distributions
and Taxes; Reports to
Shareholders
11. ........... Defaults and Arrears on Senior Not Applicable
Securities
12. ........... Legal Proceedings Not Applicable
13. ........... Table of Contents of the Table of Contents of the
Statement of Additional Statement of Additional
Information Information
PART B STATEMENT OF
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION CAPTION
- -------- ------------ ------------------------------
14. ........... Cover Page Cover Page
15. ........... Table of Contents Table of Contents
16. ........... General Information and Other Information
History
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
23. ........... Financial Statements Financial Statements
<PAGE>
Investing
[logo] for the EV Classic Senior
EATON VANCE 21st Floating-Rate Fund
=========== Century
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"), WHICH HAS
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY INVESTING DIRECTLY
IN AND MANAGING ITS OWN PORTFOLIO OF LOANS AND SECURITIES. THE FUND, AS WELL
AS THE PORTFOLIO, IS A CONTINUOUSLY OFFERED, CLOSED-END, NON-DIVERSIFIED
INVESTMENT COMPANY.
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. Please retain this document for future reference. A
Statement of Additional Information dated November 2, 1998 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated herein by reference. The
Table of Contents of the Statement of Additional Information appears 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). The Statement of Additional Information
is available along with other Fund-related materials at the SEC's internet web
site (http://www.sec.gov).
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 $4,988,500,000 None to be paid by the Fund $4,988,500,000
- ------------
(1) The shares are offered on a best efforts basis at a price equal to the net
asset value, which, as of October 15, 1998, was $9.97 per share. See "How
to Buy 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 Shares".
NO MARKET PRESENTLY EXISTS FOR THE FUND'S SHARES AND IT IS NOT CURRENTLY
ANTICIPATED THAT A SECONDARY MARKET WILL DEVELOP FOR THEM. Fund shares are not
readily marketable. To provide investor liquidity, the Fund ordinarily will
make each March, June, September and December an offer to repurchase between
5% and 25% of the Fund's outstanding shares at net asset value. 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. See "Fund Repurchase Offers".
<TABLE>
<CAPTION>
CONTENTS
Page Page
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<S> <C> <C> <C>
Shareholder and Fund Expenses 2 Valuing Shares 12
The Fund's Financial Highlights 3 How to Buy Shares 13
The Fund's Investment Objective 4 Fund Repurchase Offers 14
Investment Policies and Risks 4 Reports to Shareholders 15
Yield and Performance Information 9 The Lifetime Investing Account/Distribution Options 15
Organization of the Fund and the Portfolio 9 Eaton Vance Shareholder Services 16
Management of the Fund and the Portfolio 11 Distributions and Taxes 16
Service Plan 12 Table of Contents of the Statement of Additional
Information 18
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prospectus dated November 2, 1998
<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 Repurchase of Entire Account During the First Year
(as a percentage of repurchase proceeds exclusive of all reinvestments and capital
appreciation in the account) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS ATTRIBUTABLE TO SHARES OF BENEFICIAL INTEREST)
- ----------------------------------------------------------------------------------------------------------
Investment Advisory Fee 0.89%
Interest Payments on Borrowed Funds 0.01
Other Expenses (including administration fees of .25% and service fees of .15%) 0.57
Total Annual Expenses 1.47
<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 repurchase during the
first year after purchase) on a $1,000 investment, assuming
(a) 5% annual return and (b) repurchase at the end of each
period: $25 $46 $80 $176
</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. Expenses for the six months ended June 30, 1998 were lower.
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 Shares", "Service Plan" and "Fund
Repurchase Offers".
No early withdrawal charge is imposed on (a) shares purchased more than one
year prior to the acceptance for repurchase, (b) shares acquired through the
reinvestment of distributions and (c) any appreciation in value of other
shares in the account (see "Fund Repurchase Offers"). 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, 1997.
The Fund invests exclusively in the Portfolio. Other investment companies and
investors with different distribution arrangements and fees are investing in
the Portfolio. See "Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The following information through December 31, 1997 should be read in
conjunction with the audited financial statements that appear in the Fund's
annual report to shareholders. The Fund's financial statements have been
audited by Deloitte & Touche LLP, independent certified public accountants, as
experts in accounting and auditing. The financial statements and the
independent auditors' report are incorporated by reference into the Statement
of Additional Information. Unaudited financial statements for the six months
ended June 30, 1998 are also incorporated by reference in the Statement of
Additional Information. Further information regarding the performance of the
Fund is contained in the semiannual and annual reports to shareholders which
may be obtained without charge by contacting the Principal Underwriter.
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1998 ------------------------------------------------------
(Unaudited) 1997 1996 1995*
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value -- beginning of period $ 9.970 $ 9.970 $ 9.990 $ 10.000
------- -------- -------- ---------
Income (loss) from operations
Net investment outcome $ 0.332 $ 0.660 $ 0.667 $ 0.634
Net realized and unrealized
loss (gain) (0.001) 0.001++ (0.021) (0.008)++
------- -------- -------- ---------
Total income from operations $ 0.331 $ 0.661 $ 0.646 $ 0.626
------- -------- -------- ---------
Less distributions
From net investment income $(0.331) $ (0.661) $ (0.666) $ (0.633)
From net realized gain -- -- -- (0.003)
------- -------- -------- ---------
Total distributions $(0.331) $ (0.661) $ (0.666) $ (0.636)
------- -------- -------- ---------
Net asset value -- end of period $ 9.970 $ 9.970 $ 9.970 $ 9.990
======= ======== ======== ========
Total Return(1) 3.36% 6.83% 6.67% 6.42%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $2,437,448 $1,970,593 $1,316,849 $501,031
Ratios (As a percentage of
average daily net assets):
Operating expenses(2) 1.42%+ 1.46% 1.49% 1.53%+
Interest expense(2) 0.01%+ 0.01% 0.04% 0.13%+
Net investment income 6.69%+ 6.60% 6.61% 7.04%+
Portfolio Turnover of the
Portfolio 39% 81% 75% 39%
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized gain (loss) 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.
* For the period from the start of business, February 24, 1995, to December 31, 1995.
(1) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value
on the last day of each period reported. Dividends and distributions, if any, are assumed to be invested at the net asset
value on the reinvestment date. Total return is computed on a non-annualized basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
EV Classic Senior Floating-Rate Fund's investment objective is to provide as
high a level of current income as is consistent with the preservation of
capital, by investing in a portfolio primarily of senior secured floating rate
loans ("Senior Loans"). The Fund currently seeks to achieve its objective by
investing its assets in the Senior Debt Portfolio (the "Portfolio"), a
separate closed-end, non-diversified investment company with the same
investment objective as the Fund. There is no assurance that the Fund's
objective will be achieved. An investment in shares of the Fund is not a
complete investment program.
Senior Loans are made to corporations, partnerships and other business
entities ("Borrowers") which operate in various industries and geographical
regions. Senior Loans pay interest at rates which are redetermined
periodically on the basis of a floating base lending rate plus a premium.
Senior Loans hold the most senior position in the capital structure of the
Borrower, are secured with specific collateral (discussed below) and will have
a claim on the assets of the Borrower that is senior to that of subordinated
debt, preferred stock and common stock of the Borrower. Investment in floating
rate instruments is expected to minimize changes in the underlying principal
value of Senior Loans, and therefore the Fund's net asset value, resulting
from changes in market interest rates. Nevertheless, the Fund's net asset
value and distribution rate will vary, and may be affected by several factors,
including changes in the credit quality of the Borrowers underlying Senior
Loans.
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.
INVESTMENT POLICIES AND RISKS
GENERAL COMPOSITION OF THE PORTFOLIO
In normal market conditions, at least 80% of the Portfolio's total assets will
be invested in interests in Senior Loans (either as an original Lender or as a
purchaser of an Assignment or Participation, each as defined below) of
domestic or foreign Borrowers (so long as foreign loans are U.S. dollar-
denominated and payments of interest and repayments of principal are required
to be made in U.S. dollars). Up to 20% of the Portfolio's total assets may be
held in cash, invested in investment grade short-term debt obligations, and
invested in loan interests that are not fully secured ("Unsecured Loans"). If
BMR determines that market conditions temporarily warrant a defensive
investment policy, the Portfolio may invest up to 100% of its assets in cash
and high quality, short-term debt securities.
It is anticipated that the proceeds of the Senior Loans in which the Portfolio
will acquire interests primarily will be used to finance leveraged buyouts,
recapitalizations, mergers, acquisitions, stock repurchases, and, to a lesser
extent, to finance internal growth and for other corporate purposes of
Borrowers. Senior Loans have the most senior position in a Borrower's capital
structure, although some Senior Loans may hold an equal ranking with other
senior securities of the Borrower. The capital structure of a Borrower may
include Senior Loans, senior and junior subordinated debt, preferred stock and
common stock issued by the Borrower, typically in descending order of
seniority with respect to claims on the Borrower's assets (discussed below).
Senior Loans are secured by specific collateral.
In order to borrow money pursuant to a Senior Loan, a Borrower will
frequently, for the term of the Senior Loan, pledge collateral, including but
not limited to, (i) working capital assets, such as accounts receivable and
inventory; (ii) tangible fixed assets, such as real property, buildings and
equipment; (iii) intangible assets, such as trademarks and patent rights (but
excluding goodwill); and (iv) security interests in shares of stock of
subsidiaries or affiliates. In the case of Senior Loans made to non-public
companies, the company's shareholders or owners may provide collateral in the
form of secured guarantees and/or security interests in assets that they own.
In certain instances, a Senior Loan may be secured only by stock in the
Borrower or its subsidiaries. Collateral may consist of assets that may not be
readily liquidated, and there is no assurance that the liquidation of such
assets would satisfy fully a Borrower's obligations under a Senior Loan. The
Portfolio will not invest in a Senior Loan unless, at the time of investment,
BMR determines that the value of the collateral equals or exceeds the
aggregate outstanding principal amount of the Senior Loan.
The Portfolio is not subject to any restrictions with respect to the maturity
of Senior Loans held in its portfolio. Senior Loans typically have a stated
term of between five and nine years, and have rates of interest which
typically are redetermined either daily, monthly, quarterly or semi-annually.
Senior Loans generally pay interest at rates which are redetermined
periodically by reference to a base lending rate, plus a premium. These base
lending rates generally are the prime rate offered by one or more major United
States banks (the "Prime Rate"), the London Inter-Bank Offered Rate ("LIBOR"),
the certificate of deposit ("CD") rate or other base lending rates used by
commercial lenders. Longer interest rate reset periods generally increase
fluctuations in the Fund's net asset value as a result of changes in market
interest rates. The Senior Loans held by the Portfolio will have a dollar-
weighted average period until the next interest rate adjustment of
approximately 90 days or less. As a result, as short-term interest rates
increase, interest payable to the Portfolio from its investments in Senior
Loans should increase, and as short-term interest rates decrease, interest
payable to the Portfolio from its investments in Senior Loans should decrease.
The Portfolio may utilize certain investment practices to, among other things,
shorten the effective interest rate redetermination period of Senior Loans in
its portfolio. In the experience of BMR over the last decade, because of
prepayments the average life of Senior Loans has been two to three years. As
of October 1, 1998, the Portfolio had a dollar weighted average period to
adjustment of approximately 47 days.
The Portfolio may purchase and retain in its portfolio a Senior Loan where the
Borrower has experienced, or may be perceived to be likely to experience,
credit problems, including involvement in or recent emergence from bankruptcy
reorganization proceedings or other forms of debt restructuring. Such
investments may provide opportunities for enhanced income as well as capital
appreciation. At times, in connection with the restructuring of a Senior Loan
either outside of bankruptcy court or in the context of bankruptcy court
proceedings, the Portfolio may determine or be required to accept equity
securities or junior debt securities in exchange for all or a portion of a
Senior Loan.
The Fund and the Portfolio have adopted certain fundamental investment
restrictions set forth in the Statement of Additional Information which may
not be changed unless authorized by a shareholder and an interestholder vote,
respectively. Except for such restrictions, the investment objective and
policies of the Fund and the Portfolio may be changed by the Trustees of the
Fund and the Portfolio without obtaining the approval of Fund shareholders.
CERTAIN CHARACTERISTICS OF SENIOR LOANS
A Senior Loan is typically originated, negotiated and structured by a U.S. or
foreign commercial bank, insurance company, finance company or other financial
institution (the "Agent") for a lending syndicate of financial institutions
("Lenders"). The Agent typically administers and enforces the Senior Loan on
behalf of the other Lenders in the syndicate. In addition, an institution,
typically but not always the Agent, holds any collateral on behalf of the
Lenders.
Senior Loans include senior secured floating rate loans and institutionally
traded senior secured floating rate debt obligations issued by an asset-backed
pool, and interests therein. Loan interests generally take the form of direct
interests acquired during a primary distribution and may also take the form of
participation interests in, assignments of, or novations of a Senior Loan
acquired in secondary markets. Such loan interests may be acquired from U.S.
or foreign commercial banks, insurance companies, finance companies or other
financial institutions who have made loans or are members of a lending
syndicate or from other holders of loan interests.
The Portfolio may purchase "Assignments" from Lenders. The purchase of an
Assignment typically succeeds to all the rights and obligations under the Loan
Agreement of the assigning Lender and becomes a Lender under the Loan
Agreement with the same rights and obligations as the assigning Lender.
Assignments may, however, be arranged through private negotiations between
potential assignees and potential assignors, and the rights and obligations
acquired by the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.
The Portfolio also may invest without limit in "Participations".
Participations by the Portfolio in a Lender's portion of a Senior Loan
typically will result in the Portfolio having a contractual relationship only
with such Lender, not with the Borrower. As a result, the Portfolio may have
the right to receive payments of principal, interest and any fees to which it
is entitled only from the Lender selling the Participation and only upon
receipt by such Lender of such payments from the Borrower. In connection with
purchasing Participations, the Portfolio generally will have no right to
enforce compliance by the Borrower with the terms of the loan agreement, nor
any rights with respect to any funds acquired by other Lenders through set-off
against the Borrower and the Portfolio may not directly benefit from the
collateral supporting the Senior Loan in which it has purchased the
Participation. As a result, the Portfolio may assume the credit risk of both
the Borrower and the Lender selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Portfolio may be treated
as a general creditor of such Lender. The selling Lenders and other persons
interpositioned between such Lenders and the Portfolio with respect to such
Participations will likely conduct their principal business activities in the
banking, finance and financial services industries. Persons engaged in such
industries may be more susceptible to, among other things, fluctuations in
interest rates, changes in the Federal Open Market Committee's monetary
policy, governmental regulations concerning such industries and concerning
capital raising activities generally and fluctuations in the financial markets
generally.
The Portfolio will only acquire Participations if the Lender selling the
Participation, and any other persons interpositioned between the Portfolio and
the Lender, at the time of investment has outstanding debt or deposit
obligations rated investment grade (BBB or A-3 or higher by Standard & Poor's
Ratings Group ("S&P") or Baa or P-3 or higher by Moody's Investors Service,
Inc. ("Moody's") or comparably rated by another nationally recognized rating
agency (each a "Rating Agency")) or determined by BMR to be of comparable
quality. Similarly, the Portfolio will purchase an Assignment or Participation
or act as a Lender with respect to a syndicated Senior Loan only where the
Agent with respect to such Senior Loan at the time of investment has
outstanding debt or deposit obligations rated investment grade or determined
by BMR to be of comparable quality. Long-term debt rated BBB by S&P is
regarded by S&P as having adequate capacity to pay interest and repay
principal and debt rated Baa by Moody's is regarded by Moody's as a medium
grade obligations, i.e., it is neither highly protected nor poorly secured.
Commercial paper rated A-3 by S&P indicates that S&P believes such obligations
exhibit adequate protection parameters but that adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation and issues of
commercial paper rated P-3 by Moody's are considered by Moody's to have an
acceptable ability for repayment of short-term debt obligations but the effect
of industry characteristics and market compositions may be more pronounced. A
description of the corporate bond ratings of Moody's and S&P is included as
Appendix A to the Statement of Additional Information.
OTHER INVESTMENTS
As stated above, up to 20% of the Portfolio's total assets may be held in
cash, invested in short-term debt obligations, and invested in interests in
Unsecured Loans. The Portfolio will invest in only those Unsecured Loans that
have been determined by BMR to have a credit quality at least equal to that of
the collateralized Senior Loans in which the Portfolio primarily invests.
Should the Borrower of an Unsecured Loan default on its obligation there will
be no specific collateral on which the Portfolio can foreclose, although the
Borrower will typically have asset value believed by BMR at the time of
purchase of the Unsecured Loans to exceed the amount of the loan. The short-
term debt obligations in which the Portfolio may invest include, but are not
limited to, interests in senior Unsecured Loans with a remaining maturity of
one year or less ("Short-Term Loans"), certificates of deposit, commercial
paper, short-term and medium-term notes, bonds with remaining maturities of
less than five years, obligations issued by the U.S. Government or any of its
agencies or instrumentalities and investments in Senior Loans. All of such
other debt instruments will be investment grade. Downgraded securities may be
retained by the Portfolio.
The Portfolio may acquire warrants and other equity securities as part of a
unit combining a Senior Loan and equity securities of a Borrower or its
affiliates. The acquisition of such equity securities will only be incidental
to the Portfolio's purchase of a Senior Loan. The Portfolio may also acquire
equity securities issued in exchange for a Senior Loan or issued in connection
with the debt restructuring or reorganization of a Borrower, or if such
acquisition, in the judgment of BMR, may enhance the value of a Senior Loan or
would otherwise be consistent with the Portfolio's investment policies.
BORROWINGS AND LEVERAGE
The Portfolio may from time to time (i) borrow money on a secured or unsecured
basis at variable or fixed rates, and (ii) issue indebtedness such as
commercial paper, bonds, debentures, notes or similar obligations or
instruments. BMR expects that the Portfolio will do so to remain fully
invested after accounting for anticipated cash infusions from the prepayment
of Senior Loans and the sale of Fund shares, and cash outflows from the
fulfillment of settlement obligations (including the funding of revolving
Senior Loans) and the repurchase of Fund shares. The Portfolio may also borrow
and issue debt for the purpose of acquiring additional income-producing
investments when it believes that the interest payments and other costs with
respect to such borrowings or indebtedness will be exceeded by the anticipated
total return (a combination of income and appreciation) on such investments.
Successful use of a leveraging strategy depends on BMR's ability to predict
correctly interest rates and market movements. Historically, the Portfolio has
not used leverage for investment purposes. There is no assurance that a
leveraging strategy will be successful.
As prescribed by the 1940 Act, the Portfolio will be required to maintain
specified asset coverages of at least 300% with respect to any bank borrowing
or issuance of indebtedness immediately following any such borrowing or
issuance and on an ongoing basis as a condition of declaring dividends and
repurchasing shares. The Portfolio's inability to make distributions as a
result of these requirements could cause the Fund to fail to qualify as a
regulated investment company and/or subject the Fund to income or excise
taxes. The Portfolio may be required to dispose of portfolio investments on
unfavorable terms if market fluctuations or other factors reduce the required
asset coverage to less than the prescribed amount. The Portfolio may be
required to maintain minimum average balances in connection with borrowings or
to pay a commitment or other fee to maintain a line of credit; either of these
requirements will increase the cost of borrowing over the stated interest
rate. The issuance of additional classes of debt involves offering expenses
and other costs and may limit the Portfolio's freedom to pay dividends or to
engage in other activities. Any such borrowing or debt issuance is a
speculative technique in that it will increase the Portfolio's exposure to
capital risk. The Portfolio may also borrow for temporary, extraordinary or
emergency purposes.
ADDITIONAL RISK CONSIDERATIONS
The Fund is subject to numerous investment risks. The Fund is not a money
market fund and its net asset value will fluctuate, reflecting any
fluctuations in the Portfolio's net asset value.
CREDIT RISK. Senior Loans, like other corporate debt obligations, are subject
to the risk of non-payment of scheduled interest or principal. Such non-
payment would result in a reduction of income to the Portfolio, a reduction in
the value of the Senior Loan experiencing non-payment and a potential decrease
in the net asset value of the Portfolio. Although, with respect to Senior
Loans, the Portfolio generally will invest only in Senior Loans that BMR
believes are secured by specific collateral the value of which equals or
exceeds the principal amount of the Senior Loan at the time of initial
investment, there can be no assurance that the liquidation of any such
collateral would satisfy the Borrower's obligation in the event of non-payment
of scheduled interest or principal payments, or that such collateral could be
readily liquidated. In the event of bankruptcy of a Borrower, the Portfolio
could experience delays or limitations with respect to its ability to realize
the benefits of the collateral securing a Senior Loan. To the extent that a
Senior Loan is collateralized by stock in the Borrower or its subsidiaries,
such stock may lose all or substantially all of its value in the event of
bankruptcy of a Borrower. The Agent generally is responsible for determining
that the Lenders have obtained a perfected security interest in the collateral
securing the Senior Loan. Some Senior Loans in which the Portfolio may invest
are subject to the risk that a court, pursuant to fraudulent conveyance or
other similar laws, could subordinate such Senior Loans to presently existing
or future indebtedness of the Borrower or take other action detrimental to the
holders of Senior Loans, such as the Portfolio, including, in certain
circumstances, invalidating such Senior Loans.
Senior Loans in which the Portfolio will invest often are not rated by a
Rating Agency, will not be registered with the SEC or any state securities
commission and will not be listed on any national securities exchange.
Although the Portfolio will generally have access to financial and other
information made available to the Lenders in connection with Senior Loans, the
amount of public information available with respect to Senior Loans will
generally be less extensive than that available for rated, registered or
exchange listed securities. In evaluating the creditworthiness of Borrowers,
BMR will consider, and may rely in part, on analyses performed by others.
Borrowers may have outstanding debt obligations that are rated below
investment grade by a Rating Agency. More recently, such Rating Agencies have
begun rating Senior Loans and many Senior Loans have been assigned a rating
below investment grade. The Portfolio will invest in such Senior Loans. Debt
securities which are unsecured and rated below investment grade are viewed by
the Rating Agencies as having speculative characteristics and are commonly
known as "junk bonds". A description of the ratings of corporate bonds by
Moody's and S&P is included as Appendix A to the Statement of Additional
Information. Because of the protective features of Senior Loans (being senior
and secured by specific collateral), BMR believes, based on its experience,
that these ratings do not necessarily reflect the true risk of loss of
principal or interest on a Senior Loan. For example, BMR believes that Senior
Loans tend to have more favorable loss recovery rates as compared to most
other types of below investment grade debt obligations. Accordingly, BMR
generally does not take ratings into account when determining whether to
invest in a Senior Loan and, in any event, does not view ratings as a
determinative factor in its investment decisions. As a result, the Portfolio
is more dependent on BMR's credit analysis abilities than a fund that invests
in other types of debt securities.
Securities rated below investment grade or unrated securities of comparable
quality ("lower quality securities") are subject to the risk of an issuer's
inability to meet principal and interest payments on the obligations (credit
risk) and may also be subject to price volatility due to such factors as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity (market risk). The prices of lower quality
securities are also more likely to react to real or perceived developments
affecting market and credit risk than are prices of investment grade quality
securities ("high quality securities"), which react primarily to movements in
the general level of interest rates. Senior Loans issued in connection with
mergers, acquisitions, leveraged buy-outs, recapitalizations and other highly
leveraged transactions, pose a higher risk of default or bankruptcy of the
issuer than other higher quality debt securities, particularly during periods
of deteriorating economic conditions and contraction in the credit markets.
The investments in the Portfolio will have speculative characteristics, and
companies obligated by such debt are generally more vulnerable in an economic
downturn.
INTEREST RATE RISK. When interest rates decline, the value of a portfolio
invested in fixed-rate obligations can be expected to rise. Conversely, when
interest rates rise, the value of a portfolio invested in fixed-rate
obligations can be expected to decline. Although the Fund's net asset value
will vary, the Fund's management expects the Portfolio's policy of acquiring
interests in floating rate Senior Loans to minimize fluctuations in net asset
value as a result of changes in market interest rates. However, because
floating rates on Senior Loans only reset periodically, changes in prevailing
interest rates can be expected to cause some fluctuation in the Fund's net
asset value. Similarly, a sudden and significant increase in market interest
rates may cause a decline in the Fund's net asset value.
FOREIGN SECURITIES. Although the Portfolio will only invest in U.S. dollar-
denominated income securities, the Portfolio may invest in Senior Loans and
other debt securities of non-U.S. issuers. Investment in securities of non-
U.S. issuers involves special risks, including that non-U.S. issuers may be
subject to less rigorous accounting and reporting requirements than U.S.
issuers, less rigorous regulatory requirements, differing legal systems and
laws relating to creditors' rights, the potential inability to enforce legal
judgments and the potential for political, social and economic adversity. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in the payment or
delivery of securities and interest or in the recovery of assets held abroad)
and expenses not present in the settlement of domestic investments. There may
be a possibility of nationalization or expropriation of assets, imposition of
currency exchange controls, confiscatory taxation, political or financial
instability, armed conflict and diplomatic developments which could affect the
value of the Portfolio's investments in certain foreign countries. The
Portfolio will not invest more than 35% of its net assets in foreign Senior
Loans, and has no current intention to invest more than 10%.
LIQUIDITY RISK. Senior Loans, at present, are generally not readily
marketable and are subject to restrictions on resale. Interests in Senior
Loans generally are not listed on any national securities exchange or
automated quotation system and no active trading market may exist for many of
the Senior Loans in which the Portfolio will invest. Where a secondary market
exists, such market may be subject to irregular trading activity, wide bid/ask
spreads and extended trade settlement periods. Senior Loans are thus
relatively illiquid, which illiquidity may impair the Portfolio's ability to
realize the full value of its assets in the event of a voluntary or
involuntary liquidation of such assets. The Portfolio has no limitation on the
amount of its assets which may be invested in securities which are not readily
marketable or are subject to restrictions on resale. The substantial portion
of the Portfolio's assets invested in Senior Loan interests may restrict the
ability of the Portfolio to dispose of its investments in a timely fashion and
at a fair price, and could result in capital losses. The risks associated with
illiquidity are particularly acute in situations where the Fund's operations
require cash, such as when the Fund conducts repurchase offers for its shares,
and may result in borrowings to meet short-term cash requirements. The
Trustees of the Fund will consider the liquidity of the Portfolio's
investments in determining the amount of quarterly repurchase offers.
REGULATORY CHANGES. To the extent that legislation or state or federal
regulators that regulate certain financial institutions impose additional
requirements or restrictions with respect to the ability of such institutions
to make loans, particularly in connection with highly leveraged transactions,
the availability of Senior Loans for investment by the Portfolio may be
adversely affected. Further, such legislation or regulation could depress the
market value of Senior Loans held by the Portfolio.
NON-DIVERSIFICATION. The Fund and the Portfolio have each registered as a
"non-diversified" investment company under the Investment Company Act of 1940,
as amended (the "1940 Act") so that, subject to its investment restrictions
and in connection with federal income tax rules, with respect to 50% of its
total assets, the Portfolio will be able to invest more than 5% of the value
of its assets in the obligations of any single issuer, including Senior Loans
of a single Borrower or single Lender, although it has no current intention to
do so. The Portfolio will not invest more than 10% of the value of its assets
in securities (including interests in Senior Loans) of any single Borrower.
Moreover, the Portfolio may invest more than 10% (but not more than 25%) of
its total assets in Senior Loan interests for which the same intermediate
participant is interposed between the Portfolio and the Borrower. To the
extent the Portfolio invests a relatively high percentage of its assets in
obligations of a limited number of issuers, the Portfolio will be more
susceptible than a more widely diversified investment company to any single
corporate, economic, political or regulatory occurrence.
SPECIAL INVESTMENT PRACTICES
The Portfolio may engage in the following investment practices to seek to
enhance income or reduce investment risk, but has no current intention to do
so.
INTEREST RATE AND OTHER HEDGING TRANSACTIONS. The Portfolio may purchase or
sell derivative instruments (which are instruments that derive their value
from another instrument, security or index) to seek to hedge against
fluctuations in securities prices or interest rates. The Portfolio's
transactions in derivative instruments may include the purchase or sale of
futures contracts on securities, securities indices or other indices, other
financial instruments; options on futures contracts; exchange-traded and over-
the-counter options on securities or indices; index-linked securities; and
interest rate swaps. The Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to: unanticipated adverse changes
in securities prices, interest rates, the other financial instruments' prices;
the inability to close out a position; default by the counterparty; imperfect
correlation between a position and the desired hedge; tax constraints on
closing out positions; and portfolio management constraints on securities
subject to such transactions. The loss on derivative instruments (other than
purchased options) may substantially exceed the Portfolio's initial investment
in these instruments. In addition, the Portfolio may lose the entire premium
paid for purchased options that expire before they can be profitably exercised
by the Portfolio. Transaction costs will be incurred in opening and closing
positions in derivative instruments. There can be no assurance that BMR's use
of derivative instruments will be advantageous to the Portfolio.
The Portfolio may use interest rate swaps for risk management purposes and not
as a speculative investment and would typically use interest rate swaps to
shorten the average time to interest rate reset of the Portfolio. Interest
rate swaps involve the exchange by the Portfolio with another party of their
respective commitments to pay or receive interests, e.g., an exchange of fixed
rate payments for floating rate payments. The use of interest rate swaps is a
highly specialized activity which involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. BMR has had limited experience in the use of interest rate swaps
but has utilized other types of hedging techniques. If BMR is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Portfolio would be less favorable than what it
would have been if this investment technique were never used.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers of other institutional borrowers.
During the existence of a loan, the Portfolio will continue to receive the
equivalent of the interest paid by the issuer on the securities loaned and
will also receive a fee, or all or a portion of the interest on investment of
the collateral, if any. However, the Portfolio may pay lending fees to such
borrowers. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of
the securities fails financially. However, the loans will be made only to
organizations deemed by BMR to be of good standing and when, in the judgement
of the Portfolio's management, the consideration which can be earned from
securities loans of this type, net of administrative expenses and any finders
or other fees, justifies the attendant risk. The financial condition of the
borrower will be monitored by BMR on an ongoing basis. The value of the
securities loaned will not exceed 30% of the Portfolio's total assets.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
with member banks of the Federal Reserve System or primary dealers in U.S.
Government securities. Under a repurchase agreement, the Portfolio buys
securities at one price and simultaneously promises to sell back those
securities at a higher price. The Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreement
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement, and will be marked to market
daily. The repurchase date is usually within seven days of the original
purchase date. In all cases, BMR must be satisfied with the creditworthiness
of the other party to the agreement before entering into a repurchase
agreement. In the event of the bankruptcy of the other party to a repurchase
agreement, the Portfolio might experience delays in recovering its cash. To
the extent that, in the meantime, the value of the securities the Portfolio
purchased may have declined, the Portfolio could experience a loss.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may quote current yield based on a specific one-
month period. Current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share of the Fund on the last day of the period and annualizing the
resulting figure. Yield will fluctuate from time to time and is not
necessarily representative of future results. Advertisements and
communications to present or prospective shareholders may also cite a total
return for any period. Total return will be calculated by subtracting the net
asset value of a single purchase of shares at a given date from the net asset
value of those shares (assuming reinvestment of distributions) on a subsequent
date. The difference divided by the original net asset value is the total
return. The calculation of the Fund's total return reflects the effect of
compounding inasmuch as all dividends and distributions are assumed to be
reinvested in additional shares of the Fund at net asset value. In addition,
the calculation of total return and current yield may not reflect the
imposition of any early withdrawal charges. The Fund may quote total return
for the period prior to commencement of operations which would reflect the
Portfolio's total return (and that of its predecessor). If the fees or
expenses of the Fund or the Portfolio are waived or reimbursed, the Fund's
performance will be higher. Information about the performance of the Fund or
other investments should not be considered a representation of future Fund
performance.
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 "Fund Repurchase Offers". There are no annual meetings of
shareholders, but special meetings may be held as required by law to elect or
remove Trustees and consider certain other matters. Shareholders are entitled
to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of liquidation of the Fund, shareholders are
entitled to share pro rata in the net assets of the Fund available for
distribution to shareholders.
The Fund's Declaration of Trust may not be amended without the affirmative
vote of a majority of the outstanding shares of the Fund (or such greater vote
as is described below under "Anti-Takeover Provisions"), except that the
Declaration of Trust may be amended by the Trustees to change the name of the
Fund, to make such other changes as do not have a materially adverse effect on
the rights or interests of shareholders and to conform the Declaration of
Trust to applicable federal laws or regulations. The Fund may be terminated
(i) upon the merger or consolidation with or sale of the Fund's assets to
another company, if approved by the holders of two-thirds of the outstanding
shares of the Fund, except that if the Trustees recommend such transaction,
the approval by vote of the holders of a majority of the outstanding shares
will be sufficient, or (ii) upon liquidation and distribution of the assets of
the Fund, if approved by the holders of two-thirds of the Fund's outstanding
shares, except that if the Trustees recommend such transaction, the approval
by vote of the holders of a majority of the outstanding shares will be
sufficient. If not so terminated, the Fund may continue indefinitely.
ANTI-TAKEOVER PROVISIONS. Each Fund presently has certain anti-takeover
provisions in its Declaration of Trust which are intended to limit, and could
have the effect of limiting, the ability of other entities or persons to
acquire control of the Fund, to cause it to engage in certain transactions or
to modify its structure. As indicated above, a two-thirds vote is required for
certain transactions. The affirmative vote or consent of the holders of two-
thirds of the shares of the Fund (a greater vote than that required by the
1940 Act and, in some cases, greater than the required vote applicable to
business corporations under state law) is required to authorize the conversion
of the Fund from a closed-end to an open-end investment company (except that
if the Trustees recommend such conversion, the approval by vote of the holders
of a majority of the outstanding shares will be sufficient) and the
affirmative vote or consent of the holders of three-quarters of the shares of
the Fund is required to authorize any of the following transactions (the
"Transactions"): (i) merger or consolidation of the Fund with or into any
corporation; (ii) issuance of any securities of the Fund to any person or
entity for cash; (iii) sale, lease or exchange of all or any substantial part
of the assets of the Fund to any entity or person (except assets having an
aggregate fair market value of less than $1,000,000 or assets sold in the
ordinary course of business); or (iv) sale, lease or exchange to the Fund, in
exchange for securities of the Fund, of any assets of any entity or person
(except assets having an aggregate fair market value of less than $1,000,000)
if such corporation, person or entity is directly, or indirectly through
affiliates, the beneficial owner of 5% or more of the outstanding shares of
the Fund. However, such vote or consent will not be required with respect to
the Transactions if the Board of Trustees under certain conditions approves
the Transaction. Further, the provisions of the Fund's Declaration of Trust
relating to conversion of the Fund to an open-end investment company, the
Transactions, the merger or consolidation with or sale of the Fund's assets,
and the liquidation and distribution of the Fund's assets may not be amended
without the affirmative vote or consent of two-thirds of the outstanding
shares of the Fund. Reference is made to the Declaration of Trust of the Fund,
on file with the SEC, for the full text of these provisions.
The foregoing provisions will make more difficult the conversion of the Fund
to an open-end investment company and the consummation of the Transactions
without the Trustees' approval, and could have the effect of depriving
shareholders of an opportunity to sell their shares at a premium over
prevailing market prices, in the event that a secondary market for the Fund
shares does develop, by discouraging a third party from seeking to obtain
control of the Fund in a tender offer or similar transaction. However, the
Board of Trustees has considered these anti-takeover provisions and believes
that they are in the shareholders' best interests and benefit shareholders by
providing the advantage of potentially requiring persons seeking control of
the Fund to negotiate with its management regarding the price to be paid.
MASTER-FEEDER STRUCTURE. The Trustees of the Fund have considered the
advantages and disadvantages of investing the assets of the Fund in the
Portfolio, as well as the advantages and disadvantages of the two-tier format.
The Trustees believe that the structure may offer opportunities for growth in
the assets of the Portfolio, and may afford the potential for economies of
scale for the Fund. The other investors in the Portfolio will affect its
liquidity, and therefore, could reduce the amount of the Fund's repurchase
offers.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. In
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 may invest in the Portfolio. Such differences in
returns are also present in other fund structures, including mutual 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.
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 Senior Loans
and noncash assets (as opposed to a cash distribution from the Portfolio). If
Senior Loans and noncash assets are distributed, the Fund could incur
brokerage, tax or other charges in converting 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.
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,
the Trustees would consider what action might be taken, including investing
the assets of the Fund in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its
investment objective. The Fund's investment performance may be affected by a
withdrawal of all of its assets (or the assets of another investor in the
Portfolio) from the Portfolio.
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 0.89% of the Portfolio's average daily gross assets for the
fiscal year ended December 31, 1997.
Eaton Vance, its affiliates and predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. BMR or Eaton Vance currently serves as the investment
adviser to investment companies and various individual and institutional
clients with combined assets under management of approximately $ billion, of
which approximately $ billion is in investment companies, including over $
billion in the Portfolio and an investment company that invests primarily in
Senior Loans. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp., a
publicly-held holding company which through its subsidiaries and affiliates
engages primarily in investment management, administration and marketing
activities. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
Scott H. Page and Payson F. Swaffield 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 quarterly repurchase 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, 1997, 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.
Like most investment companies, the Fund and the Portfolio rely on computers
in conducting daily business and processing information. There is a concern
that on January 1, 2000 some computer programs will be unable to recognize the
new year and as a consequence computer malfunctions will occur. The
Administrator is taking steps that it believes are reasonably designed to
address this potential problem and to obtain satisfactory assurance from other
service providers to the Fund and Portfolio that they are also taking steps to
address the issue. There can, however, be no assurance that these steps will
be sufficient to avoid any adverse impact on the Fund, the Portfolio or
shareholders.
The 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.
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, FINANCIAL
SERVICE FIRMS ("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 repurchased. 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, 1997, the Fund paid or accrued service fees under the
Plan equivalent to 0.15% of the Fund's average daily net assets for such year.
VALUING SHARES
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by the Fund's custodian, Investors Bank & Trust Company
("IBT") (as agent for the Fund) in the manner authorized by the Trustees of
the Fund. The Fund will be closed for business and will not price its shares
on the following business holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Net asset value is computed by dividing
the value of the Fund's total assets, less its liabilities by the number of
shares outstanding. Because the Fund invests its assets in an interest in the
Portfolio, the Fund's net asset value will reflect the value of its interest
in the Portfolio (which, in turn, reflects the underlying value of the
Portfolio's assets and liabilities).
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by determining the value of the Portfolio's total assets (the loans
and securities it holds plus any cash or other assets, including interest
accrued but not yet received), and subtracting all of the Portfolio's
liabilities (including the outstanding principal amount of any indebtedness
issued and any unpaid interest thereon).
Because Senior Loans are not actively traded in a public market, BMR,
following procedures established by the Portfolio's Trustees, will value the
Senior Loans held by the Portfolio at fair value. In valuing a Senior Loan,
BMR will consider relevant factors, data, and information, including: (i) the
characteristics of and fundamental analytical data relating to the Senior
Loan, including the cost, size, current interest rate, period until next
interest rate reset, maturity and base lending rate of the Senior Loan, the
terms and conditions of the Loan and any related agreements, and the position
of the Loan in the Borrower's debt structure; (ii) the nature, adequacy and
value of the collateral, including the Portfolio's rights, remedies and
interests with respect to the collateral; (iii) the creditworthiness of the
Borrower, based on an evaluation of its financial condition, financial
statements and information about the Borrower's business, cash flows, capital
structure and future prospects; (iv) information relating to the market for
the Senior Loan, including price quotations (if considered reliable) for and
trading in the Senior Loan and interests in similar Senior Loans and the
market environment and investor attitudes towards the Senior Loan and
interests in similar Senior Loans; (v) the reputation and financial condition
of the Agent and any intermediate participants in the Senior Loan; and (vi)
general economic and market conditions affecting the fair value of the Senior
Loan.
HOW TO BUY 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 Authorized Firms who have
sales agreements with the Principal Underwriter.
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. The Fund may also refuse any order for the
purchase of shares.
HOW TO BUY SHARES FOR CASH. Investors in the Fund may not 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. 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.
An initial investment in the Fund must be at least $5,000 ($2,000 in the case
of Individual Retirement Accounts). Once an account has been established, the
investor may send investments of $50 or more at any time directly to the
Fund's Transfer Agent as follows: First Data Investor Services Group, P.O. Box
5123, Westborough, MA 01581-5123. See "Eaton Vance Shareholder Services".
The Principal Underwriter compensates the Authorized Firms at the rate of .75%
of the dollar amount of the shares being purchased, consisting of .60% of
sales commission and .15% of service fee (for the first year's services). No
compensation is paid for exchanges from another Eaton Vance fund, and
exchanges will be refused if shares in such other fund (and any prior Eaton
Vance funds) have been held for less than 30 days.
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 or service fees, 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,
1997, the Principal Underwriter made compensation payments to Authorized Firms
in the aggregate amount of approximately $9,092,204. 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.
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.
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 their net asset value as determined above. 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:
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<S> <C>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: EV Classic Senior Floating-Rate Fund
Investors Bank & Trust Company Physical Securities Processing Settlement Area
For A/C EV Classic Senior Floating-Rate Fund 200 Clarendon Street
Boston, MA 02116
</TABLE>
Investors who are contemplating an exchange of securities for shares, 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 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.
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 $2.8
billion, all of which was invested in the Portfolio. Proceeds from the
continuous offering of Fund shares will be used to increase the Fund's
interest in the Portfolio. Pending investment in Senior Loans, the proceeds
will be held by the Portfolio in cash or invested in investment grade short-
term debt obligations.
FUND REPURCHASE OFFERS
As a matter of fundamental policy which cannot be changed without shareholder
approval, the Fund is required in the months of MARCH, JUNE, SEPTEMBER and
DECEMBER to offer to repurchase at least 5% and up to 25% of its shares. Under
normal market conditions, the Trustees expect to authorize a 25% offer. (The
Fund may also make a discretionary repurchase offer once every two years but
has no current intention to do so.) The repurchase price will be the net asset
value determined not more than 14 days following the repurchase request
deadline and payment for all shares repurchased pursuant to these offers will
be made not later than 7 days after the repurchase pricing date. Under normal
circumstances, it is expected that net asset value will be determined on the
repurchase request deadline and payment for shares tendered will be made
within 3 business days after such deadline. During the period the offer to
repurchase is open shareholders may obtain the current net asset value by
calling 1-800-225-6265, option 2 (fund #132).
At least 21 days prior to the repurchase request deadline the Fund will mail
written notice to each shareholder setting forth the number of shares the Fund
will repurchase, the repurchase request deadline and other terms of the offer
to repurchase, and the procedures for shareholders to follow to request a
repurchase. THE REPURCHASE REQUEST DEADLINE WILL BE STRICTLY OBSERVED.
Shareholders and financial intermediaries failing to submit repurchase
requests in good order by such deadline will be unable to liquidate shares
until a subsequent repurchase offer.
If more shares are tendered for repurchase than the Fund has offered to
repurchase, the Board may, but is not obligated, to increase the number of
shares to be repurchased by 2% of the Fund shares outstanding; if there are
still more shares tendered than are offered for repurchase, shares will be
repurchased on a pro-rata basis. Thus, shareholders may be unable to liquidate
all or a given percentage of their shares and some shareholders may tender
more shares than they wish to have repurchased in order to ensure repurchase
of at least a specific number of shares. Shareholders may withdraw shares
tendered for repurchase at any time prior to the repurchase request deadline.
Repurchase offers and the need to fund repurchase obligations may affect the
ability of the Portfolio to be fully invested, which may reduce returns.
Moreover, diminution in the size of the Portfolio through repurchases without
offsetting new sales may result in untimely sales of portfolio securities and
a higher expense ratio, and may limit the ability of the Portfolio to
participate in new investment opportunities. Repurchases resulting in
portfolio turnover will result in additional expenses being borne by the
Portfolio. The Portfolio may borrow to meet repurchase obligations which
entails certain risks and costs. See "Borrowings and Leverage". The Portfolio
may also sell portfolio securities to meet repurchase obligations which, in
certain circumstances, may adversely affect the market for Senior Loans and
reduce the Fund's value.
The Fund may suspend or postpone a repurchase offer only: (A) if making or
effecting the repurchase offer would cause the Fund to lose its status as a
regulated investment company under the Internal Revenue Code; (B) for any
period during which the Exchange or any market in which the securities owned
by the Portfolio are principally traded is closed, other than customary
weekend and holiday closings, or during which trading in such market is
restricted; (C) for any period during which an emergency exists as a result of
which disposal by the Portfolio of securities owned by it is not reasonably
practicable, or during which it is not reasonably practicable for the
Portfolio or Fund fairly to determine the value of its net assets; or (D) for
such other periods as the SEC may by order permit for the protection of
shareholders of the Fund.
EARLY WITHDRAWAL CHARGE: An early withdrawal charge to recover distribution
expenses will not be charged in connection with most shares held for less than
one year which are accepted by the Fund for repurchase pursuant to repurchase
offers. The early withdrawal charge will be imposed on those shares accepted
for repurchase the amount of which exceeds the aggregate value at the time the
repurchase 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 repurchase 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, 1997, the Principal Underwriter received approximately
$1,191,000 in early withdrawal charges.
EXCHANGES: The Fund makes available to shareholders who are submitting shares
for repurchase the privilege of exchanging Fund shares at net asset value for
Class C shares of one or more open-end investment companies in the Eaton Vance
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 Fund may implement an automatic exchange program whereby shareholders can
elect to have a fixed amount invested in another Eaton Vance Fund quarterly.
Such investments would be subject to the Fund's repurchase offer limitations,
but shareholders would not be required to submit a repurchase offer request
each quarter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange. Each exchange must involve
shares which have a net asset value of at least $1,000. 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 independent accountants. Shortly after the end of
each calendar year, shareholders will be furnished with information necessary
for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF 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 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 share 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 shareholder communications are
returned by the United States Postal Service or other delivery service as not
deliverable, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option. No interest will accrue on amounts represented by uncashed
distribution or repurchase checks.
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, is available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $5,000 minimum
investment has been made, checks of $50 or more payable to the order of 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 $50 or more may be made
automatically each month or quarter from the shareholder's bank account.
REINVESTMENT PRIVILEGE: A shareholder whose shares have been repurchased
pursuant to a repurchase offer may reinvest, with credit for any early
withdrawal charge paid on the value of the repurchased shares, any portion or
all of the repurchase 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 repurchase 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 repurchase 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 not be allowed as a tax
deduction. Shareholders should consult their tax advisers.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
The Fund declares daily and distributes monthly substantially all of its
investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain, if any) and distributes
annually net capital gain, if any (usually in December). 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. Investors who purchase
shares shortly before the record date of a capital gain distribution will pay
the full price for the shares and then receive some portion of the price back
as a taxable distribution. The Fund's distributions will not qualify for the
dividends-received deduction for corporations. The Fund expects distributions
to consist primarily of investment company taxable income which is taxable to
shareholders as ordinary income, whether paid in cash or additional shares of
the Fund. Certain distributions paid in January will be taxable to
shareholders as if received on December 31 of the prior year.
The repurchase of Fund shares may result in a taxable gain or loss to the
redeeming shareholder, depending on whether the amount received is greater or
less than such shareholder's adjusted tax basis in the shares. An exchange of
shares of the Fund for shares of another Eaton Vance fund generally will have
similar tax consequences. Different tax consequences may apply for tendering
and nontendering shareholders in connection with a repurchase offer, and these
consequences will be disclosed in the related offering documents. For example,
it is possible that repurchases not treated as an exchange for federal income
tax purposes might result in different tax characterizations of the
distributions to tendering shareholders and in deemed distributions to non-
tendering shareholders.
Taxable distributions to certain shareholders, including those who have not
provided the Fund with their correct taxpayer identification number and other
required certifications, may be subject to "backup" federal tax withholding of
31%.
The foregoing only summarizes some of the federal tax consequences to
shareholders of investing in shares of the Fund, and does not address special
tax rules applicable to certain types of investors, such as corporate and
foreign investors, individual retirement accounts and other retirement plans.
Investors should consult their tax advisers.
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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Additional Information about Investment Policies 2 Service Plan 11
Investment Restrictions 4 Custodian 12
Trustees and Officers 5 Transfer and Dividend Paying Agent and Registrar 12
Control Persons and Principal Holders of Shares 7 Performance Information 12
Investment Advisory and Other Services 7 Other Information 14
Determination of Net Asset Value 9 Auditors 15
Portfolio Trading 10 Financial Statements 16
Taxes 10 Appendix A: Corporate Bond Ratings a-1
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</TABLE>
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
Investing
[logo] for the
EATON VANCE 21st
=========== Century
- -------------------------------------------------------------------------------
EV Classic Senior
Floating-Rate Fund
Prospectus
November 2, 1998
- -------------------------------------------------------------------------------
Investment Adviser 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
(617) 482-8260
Principal Underwriter
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
Custodian
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
Transfer Agent
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
Auditors
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
CSFRP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
November 2, 1998
EV CLASSIC SENIOR FLOATING-RATE FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Additional Information about Investment Policies ...................... 2
Investment Restrictions ............................................... 4
Trustees and Officers ................................................. 5
Control Persons and Principal Holders of Shares ....................... 7
Investment Advisory and Other Services ................................ 7
Determination of Net Asset Value ...................................... 9
Portfolio Trading ..................................................... 10
Taxes ................................................................. 10
Service Plan .......................................................... 11
Custodian ............................................................. 12
Transfer and Dividend Paying Agent and Registrar ...................... 12
Performance Information ............................................... 12
Other Information ..................................................... 14
Auditors .............................................................. 15
Financial Statements .................................................. 16
Appendix A: Ratings of Corporate Bonds ................................ a-1
- ------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EV CLASSIC SENIOR FLOATING-RATE FUND (THE
"FUND") DATED NOVEMBER 2, 1998, 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>
Capitalized terms used in this Statement of Additional Information and not
otherwise defined have the meanings given them in the Fund's Prospectus.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
Lending Fees. In the process of buying, selling and holding Senior Loans the
Portfolio may receive and/or pay certain fees. These fees are in addition to
interest payments received and may include facility fees, commitment fees,
commissions and prepayment penalty fees. When the Portfolio buys a Senior Loan
it may receive a facility fee and when it sells a Senior Loan it may pay a
facility fee. On an ongoing basis, the Portfolio may receive a commitment fee
based on the undrawn portion of the underlying line of credit portion of a
Senior Loan. In certain circumstances, the Portfolio may receive a prepayment
penalty fee upon the prepayment of a Senior Loan by a Borrower. Other fees
received by the Portfolio may include covenant waiver fees and covenant
modification fees.
Borrower Covenants. A Borrower must comply with various restrictive covenants
contained in a loan agreement or note purchase agreement between the Borrower
and the Lender or lending syndicate (the "Loan Agreement"). Such covenants,
in addition to requiring the scheduled payment of interest and principal, may
include restrictions on dividend payments and other distributions to
stockholders, provisions requiring the Borrower to maintain specific minimum
financial ratios, and limits on total debt. In addition, the Loan Agreement
may contain a covenant requiring the Borrower to prepay the Loan with any free
cash flow. Free cash flow is generally defined as net cash flow after
scheduled debt service payments and permitted capital expenditures, and
includes the proceeds from asset dispositions or sales of securities. A breach
of a covenant which is not waived by the Agent, or by the lenders directly, as
the case may be, is normally an event of acceleration; i.e., the Agent, or the
lenders directly, as the case may be, has the right to call the outstanding
Senior Loan. The typical practice of an Agent or a Lender in relying
exclusively or primarily on reports from the Borrower may involve a risk of
fraud by the Borrower. In the case of a Senior Loan in the form of a
Participation, the agreement between the buyer and seller may limit the rights
of the holder to vote on certain changes which may be made to the Loan
Agreement, such as waiving a breach of a covenant. However, the holder of the
Participation will, in almost all cases, have the right to vote on certain
fundamental issues such as changes in principal amount, payment dates and
interest rate.
Administration of Loans. In a typical Senior Loan the Agent administers the
terms of the Loan Agreement. In such cases, the Agent is normally responsible
for the collection of principal and interest payments from the Borrower and
the apportionment of these payments to the credit of all institutions which
are parties to the Loan Agreement. The Portfolio will generally rely upon the
Agent or an intermediate participant to receive and forward to the Portfolio
its portion of the principal and interest payments on the Senior Loan.
Furthermore, unless under the terms of a Participation Agreement the Portfolio
has direct recourse against the Borrower, the Portfolio will rely on the Agent
and the other members of the lending syndicate to use appropriate credit
remedies against the Borrower. The Agent is typically responsible for
monitoring compliance with covenants contained in the Loan Agreement based
upon reports prepared by the Borrower. The seller of the Senior Loan usually
does, but is often not obligated to, notify holders of Senior Loans of any
failures of compliance. The Agent may monitor the value of the collateral and,
if the value of the collateral declines, may accelerate the Senior Loan, may
give the Borrower an opportunity to provide additional collateral or may seek
other protection for the benefit of the participants in the Senior Loan. The
Agent is compensated by the Borrower for providing these services under a Loan
Agreement, and such compensation may include special fees paid upon
structuring and funding the Senior Loan and other fees paid on a continuing
basis. With respect to Senior Loans for which the Agent does not perform such
administrative and enforcement functions, the Portfolio will perform such
tasks on its own behalf, although a collateral bank will typically hold any
collateral on behalf of the Portfolio and the other lenders pursuant to the
applicable Loan Agreement.
A financial institution's appointment as Agent may usually be terminated
in the event that it fails to observe the requisite standard of care or
becomes insolvent, enters Federal Deposit Insurance Corporation ("FDIC")
receivership, or, if not FDIC insured, enters into bankruptcy proceedings. A
successor Agent would generally be appointed to replace the terminated Agent,
and assets held by the Agent under the Loan Agreement should remain available
to holders of Senior Loans. However, if assets held by the Agent for the
benefit of the Portfolio were determined to be subject to the claims of the
Agent's general creditors, the Portfolio might incur certain costs and delays
in realizing payment on a Senior Loan, or suffer a loss of principal and/or
interest. In situations involving intermediate participants similar risks may
arise.
Prepayments. Senior Loans will usually require, in addition to scheduled
payments of interest and principal, the prepayment of the Senior Loan from
free cash flow, as defined above. The degree to which Borrowers prepay Senior
Loans, whether as a contractual requirement or at their election, may be
affected by general business conditions, the financial condition of the
Borrower and competitive conditions among lenders, among others. As such,
prepayments cannot be predicted with accuracy. Upon a prepayment, either in
part or in full, the actual outstanding debt on which the Portfolio derives
interest income will be reduced. However, the Portfolio may receive both a
prepayment penalty fee from the prepaying Borrower and a facility fee upon the
purchase of a new Senior Loan with the proceeds from the prepayment of the
former. Prepayments generally will not materially affect the Fund's
performance because the Portfolio should be able to reinvest prepayments in
other Senior Loans that have similar or identical yields and because receipt
of such fees may mitigate any adverse impact on the Fund's yield.
Other Information Regarding Senior Loans. From time to time BMR and its
affiliates may borrow money from various banks in connection with their
business activities. Such banks may also sell interests in Senior Loans to or
acquire them from the Portfolio or may be intermediate participants with
respect to Senior Loans in which the Portfolio owns interests. Such banks may
also act as Agents for Senior Loans held by the Portfolio.
The Portfolio may acquire interests in Senior Loans which are designed to
provide temporary or "bridge" financing to a Borrower pending the sale of
identified assets or the arrangement of longer-term loans or the issuance and
sale of debt obligations. The Portfolio may also invest in Senior Loans of
Borrowers who have obtained bridge loans from other parties. A Borrower's use
of bridge loans involves a risk that the Borrower may be unable to locate
permanent financing to replace the bridge loan, which may impair the
Borrower's perceived creditworthiness.
To the extent that collateral consists of the stock of the Borrower's
subsidiaries or other affiliates, the Portfolio will be subject to the risk
that this stock will decline in value. Such a decline, whether as a result of
bankruptcy proceedings or otherwise, could cause the Senior Loan to be
undercollateralized or unsecured. In most credit agreements there is no formal
requirement to pledge additional collateral. In addition, the Portfolio may
invest in Senior Loans guaranteed by, or fully secured by assets of,
shareholders or owners, even if the Senior Loans are not otherwise
collateralized by assets of the Borrower; provided, however, that such
guarantees are fully secured. There may be temporary periods when the
principal asset held by a Borrower is the stock of a related company, which
may not legally be pledged to secure a Senior Loan. On occasions when such
stock cannot be pledged, the Senior Loan will be temporarily unsecured until
the stock can be pledged or is exchanged for or replaced by other assets,
which will be pledged as security for the Senior Loan. However, the Borrower's
ability to dispose of such securities, other than in connection with such
pledge or replacement, will be strictly limited for the protection of the
holders of Senior Loans and, indirectly, Senior Loans.
If a Borrower becomes involved in bankruptcy proceedings, a court may
invalidate the Portfolio's security interest in the loan collateral or
subordinate the Portfolio's rights under the Senior Loan to the interests of
the Borrower's unsecured creditors. Such action by a court could be based, for
example, on a "fraudulent conveyance" claim to the effect that the Borrower
did not receive fair consideration for granting the security interest in the
loan collateral to the Portfolio. For Senior Loans made in connection with a
highly leveraged transaction, consideration for granting a security interest
may be deemed inadequate if the proceeds of the Loan were not received or
retained by the Borrower, but were instead paid to other persons (such as
shareholders of the Borrower) in an amount which left the Borrower insolvent
or without sufficient working capital. There are also other events, such as
the failure to perfect a security interest due to faulty documentation or
faulty official filings, which could lead to the invalidation of the
Portfolio's security interest in loan collateral. If the Portfolio's security
interest in loan collateral is invalidated or the Senior Loan is subordinated
to other debt of a Borrower in bankruptcy or other proceedings, it is unlikely
that the Portfolio would be able to recover the full amount of the principal
and interest due on the Loan.
Interest Rate Swaps. The Portfolio may enter into interest rate swaps on
either an asset-based or liability-based basis, depending on whether it is
hedging its assets or its liabilities. For example, if the Portfolio holds a
Senior Loan with an interest rate that is reset only once each year, it may
swap the right to receive interest at this fixed rate for the right to receive
interest at a rate that is reset daily. Such a swap position would offset
changes in the value of the Senior Loan because of subsequent changes in
interest rates. This would protect the Portfolio from a decline in the value
of the Senior Loan due to rising interest rates, but would also limit its
ability to benefit from falling interest rates.
The Portfolio will enter into interest rate swaps only on a net basis,
i.e., the two payment streams are netted out, with the Portfolio receiving or
paying, as the case may be, only the net amount of the two payments. Inasmuch
as these transactions are entered into for good faith hedging purposes and
because a segregated account will be used, the Portfolio will not treat them
as being subject to the Portfolio's borrowing restrictions. The net amount of
the excess, if any, of the Portfolio's obligations over its entitlements with
respect to each interest rate swap will be accrued on a daily basis and an
amount of cash or liquid securities having an aggregate net asset value at
least equal to the accrued excess will be maintained in a segregated account
by the Portfolio's custodian. The Portfolio will not enter into any interest
rate swap unless the credit quality of the unsecured senior debt or the
claims-paying ability of the other party thereto is considered to be
investment grade by BMR. If there is a default by the other party to such a
transaction, the Portfolio will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid in
comparison with the markets for other similar instruments which are traded in
the interbank market.
The Portfolio may enter into interest rate swaps only with respect to
positions held in its portfolio. Interest rate swaps do not involve the
delivery of securities or other underlying assets or principal. Accordingly,
the risk of loss with respect to interest rate swaps is limited to the net
amount of interest payments that the Portfolio is contractually obligated to
make or receive. Since interest rate swaps are individually negotiated, the
Portfolio expects to achieve an acceptable degree of correlation between its
rights to receive interest on Senior Loans and its rights and obligations to
receive and pay interest pursuant to interest rate swaps.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this 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.
The Fund has no present intention of engaging in options or futures
transactions or 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".
The Fund, as a matter of fundamental policy which may not be changed
without a vote of a majority of its outstanding voting securities and in
accord with the provisions of Rule 23c-3 (as amended from time to time) under
the 1940 Act, shall make repurchase offers for its common shares of beneficial
interest at periodic intervals of three months between repurchase request
deadlines, such deadlines to be dates in the months of March, June, September
and December determined by the Board of Trustees with the repurchase pricing
date and time being not later than the close of business fourteen days after
the repurchase request deadline (or the next business day if the 14th day is
not a business day).
The Portfolio, as a matter of fundamental policy which may not be changed
without a vote of a majority of its outstanding voting securities and in
accord with the provisions of Rule 23c-3 (as amended from time to time) under
the 1940 Act, shall make repurchase offers for its interests at periodic
intervals of three months to each holder of its interests between repurchase
request deadlines, such deadlines to be dates determined by the Board of
Trustees in the months when each such holder conducts its periodic repurchases
with the repurchase pricing date and time being not later than the close of
business fourteen days after the repurchase request deadline (or the next
business day if the 14th day is not a business day).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest 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.
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. Those Trustees who are "interested persons" of the Fund
or the Portfolio as defined in the 1940 Act, are indicated by an asterisk(*).
TRUSTEES OF THE FUND AND THE PORTFOLIO
JAMES B. HAWKES (57), President and Trustee*
Chairman, President and Chief Executive Officer of BMR, Eaton Vance and their
corporate parent and trustee (EVC and EV); Director of EVC and EV. Trustee
and officer of various investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (67), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee of various investment companies managed by Eaton Vance or
BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (63), Trustee
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick-Cendant
Investment Trust (mutual funds). Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 345 Nahatan Road, Westwood, Massachusetts 02090
NORTON H. REAMER (63), Trustee
Chairman of the Board and Chief Executive Officer, United Asset Management
Corporation (a holding company owning institutional investment management
firms); Chairman, President and Director of UAM Funds (mutual funds).
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (72), Trustee
Former Director of Fiduciary Company Incorporated. Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (68), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE FUND AND THE PORTFOLIO
SCOTT H. PAGE (38), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
PAYSON F. SWAFFIELD (42), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (53), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (58), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance and EVC since
November 1, 1996. Previously, he was a Partner of the law firm of
Kirkpatrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR.
JANET E. SANDERS (62), Assistant Treasurer and Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
A. JOHN MURPHY (35), Assistant Secretary
Assistant Vice President of BMR and Eaton Vance. Officer of various investment
companies managed by Eaton Vance or BMR.
ERIC G. WOODBURY (41), Assistant Secretary
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
Messrs. Hayes (Chairman), 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 and the Portfolio, including
investment advisory (Portfolio only), administrative, transfer agency,
custodial and fund accounting and distribution services, and (ii) all other
matters in which Eaton Vance or its affiliates has any actual or potential
conflict of interest with the Fund, the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Fund and the
Portfolio is comprised of 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, transfer agent and
dividend disbursing agent of the Fund and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' Plan, an eligible Trustee may elect to
have his deferred fees invested by the Portfolio in the shares of one or more
funds in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' Plan
will have a negligible effect on the Portfolio's assets, liabilities, and net
income per share, and will not obligate the Portfolio to retain the services
of any Trustee or obligate the Portfolio to pay any particular level of
compensation to the Trustee. Neither the Portfolio nor the Fund has a
retirement plan for its Trustees.
Each interested Trustee and officer holds comparable positions with
certain affiliates of BMR or with certain other funds of which BMR or Eaton
Vance is the investment adviser or distributor.
The fees and expenses of the noninterested Trustees of the Fund and of the
Portfolio are paid by the Fund and the Portfolio, respectively. (The Trustees
of the Fund and the Portfolio who are members of the Eaton Vance organization
receive no compensation from the Fund or the Portfolio). During the fiscal
year ended December 31, 1997, 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 ........ $701 $5,994(2) $145,000(5)
Samuel L. Hayes, III .... 645 5,963(3) 155,000(6)
Norton H. Reamer ........ 628 5,684 145,000
John L. Thorndike ....... 657 5,910(4) 145,000(7)
Jack L. Treynor ......... 705 6,277 150,000
- ------------
(1) As of January 1, 1998, the Eaton Vance fund complex consists of 159
registered investment companies or series thereof.
(2) Includes $2,651 of deferred compensation.
(3) Includes $2,051 of deferred compensation.
(4) Includes $5,910 of deferred compensation.
(5) Includes $45,000 of deferred compensation.
(6) Includes $38,750 of deferred compensation.
(7) Includes $107,925 of deferred compensation.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SHARES
As of September 30, 1998, 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 a family of mutual funds,
and 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 Mumbai. Together Eaton Vance and Lloyd George
manage over $28 billion in assets. Eaton Vance mutual funds are distributed by
the Principal Underwriter both within the United States and offshore.
The Principal Underwriter 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 the period from the start of business, February 22, 1995, to the 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. For the fiscal
year ended December 31, 1997, the Portfolio paid BMR advisory fees aggregating
$31,751,900 which was equal to 0.89% of the Portfolio's average daily gross
assets. As at December 31, 1997, the gross assets of the Portfolio were
$4,035,071,925. 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.
For the fiscal years ended December 31, 1997 and 1996 the Fund paid Eaton
Vance administration fees of $4,213,131 and $2,348,205, respectively, which
was equal to 0.25% of the average daily gross assets of the Portfolio
attributable to the Fund for each fiscal year. 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.
The Portfolio and the Fund, as the case may be, will each be responsible
for all of its respective costs and expenses not expressly stated to be
payable by BMR under the Advisory Agreement with the Portfolio, by Eaton Vance
under the Administration Agreement with the Fund or by the Principal
Underwriter under its Distribution Agreement with the Fund. Such costs and
expenses to be borne by the Portfolio and the Fund, as the case may be,
include, without limitation: custody and transfer agency fees and expenses,
including those incurred for determining net asset value and keeping
accounting books and records; expenses of pricing and valuation services; the
cost of share certificates; membership dues in investment company
organizations; expenses of acquiring, holding and disposing of securities and
other investments; fees and expenses of registering under the securities laws
and governmental fees; expenses of reports to shareholders and investors,
proxy statements and other expenses of shareholders' or investors' meetings;
insurance premiums; printing and mailing expenses; interest, taxes and
corporate fees; legal and accounting expenses; compensation and expenses of
Trustees not affiliated with BMR or Eaton Vance; expenses of conducting
repurchase offers for the purpose of repurchasing Portfolio interests or Fund
shares; and investment advisory and administration fees. The Portfolio and
the Fund will also each bear expenses incurred in connection with any
litigation in which the Portfolio or the Fund, as the case may be, is a party
and any legal obligation to indemnify its respective officers and Trustees
with respect thereto, to the extent not covered by insurance.
The Portfolio's Advisory Agreement continues in effect from year to year
so long as such continuance is approved at least annually (i) by the vote of a
majority of the noninterested Trustees of the Portfolio cast in person at a
meeting specifically called for the purpose of voting on such approval and
(ii) by the Trustees of the Portfolio or by vote of a majority of the
outstanding interests of the Portfolio. The Fund's Administration Agreement
continues in effect from year to year so long as such continuance is approved
at least annually by the vote of a majority of the Fund's Trustees. Each
agreement may be terminated at any time without penalty on sixty (60) days'
written notice by the Trustees of the Fund or the Portfolio, as the case may
be, BMR or Eaton Vance, as applicable, or by vote of the majority of the
outstanding shares of the Fund or interests of the Portfolio, as the case may
be. Each agreement will terminate automatically in the event of its
assignment. Each agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties to the Fund or the Portfolio under such agreements on
the part of Eaton Vance or BMR, as applicable, Eaton Vance or BMR will not be
liable to the Fund or the Portfolio, as applicable, for any loss incurred, to
the extent not covered by insurance.
BMR and Eaton Vance are business trusts organized under Massachusetts law.
Eaton Vance, Inc. ("EV") serves as trustee of BMR and Eaton Vance. BMR, Eaton
Vance and EV are wholly-owned subsidiaries of Eaton Vance Corporation ("EVC"),
a Maryland corporation and publicly-held holding company. EVC through its
subsidiaries and affiliates engages primarily in investment management,
administration and marketing activities. The Directors of EVC are M. Dozier
Gardner, James B. Hawkes, Benjamin A. Rowland, Jr., John G.L. Cabot, John M.
Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of the issued and
outstanding shares of Eaton Vance are owned by EVC. All of the issued and
outstanding shares of BMR are owned by Eaton Vance. All shares of the
outstanding Voting Common Stock of EVC are deposited in a Voting Trust, the
Voting Trustees of which are Messrs. Gardner, Hawkes, Rowland, and Alan R.
Dynner, Thomas E. Faust, Jr., William M. Steul, and Wharton P. Whitaker. The
Voting Trustees have unrestricted voting rights for the election of Directors
of EVC. All of the outstanding voting trust receipts issued under said Voting
Trust are owned by certain of the officers of BMR and Eaton Vance who are also
officers, or officers and Directors of EVC and EV. As indicated under
"Trustees and Officers", all of the officers of the Fund (as well as Mr.
Hawkes who is also a Trustee) hold positions in the Eaton Vance organization.
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, IBT. It is Eaton Vance's opinion that the terms and conditions
of such transactions were not and will not be influenced by existing or
potential custodial or other relationships between the Fund or the Portfolio
and such banks.
DETERMINATION OF NET ASSET VALUE
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the Exchange is open for trading
("Portfolio Business Day") as of the close of regular trading on the Exchange
(the "Portfolio Valuation Time"). The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business Day,
which represented that investor's share of the aggregate interests in the
Portfolio on such prior day. Any additions or withdrawals (which would be made
pursuant to Portfolio repurchase offers) for the current Portfolio Business
Day will then be recorded. Each investor's percentage of the aggregate
interest in the Portfolio will then be recomputed as a percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of the Portfolio Valuation Time on the prior Portfolio
Business Day plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in the Portfolio on the current
Portfolio Business Day and (ii) the denominator of which is the aggregate net
asset value of the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of the
net additions to or withdrawals from the aggregate investment in the Portfolio
on the current Portfolio Business Day by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio for the current Portfolio Business Day.
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 Senior Loans from major international banks,
selected domestic regional banks, insurance companies, finance companies and
other financial institutions. In selecting financial institutions from which
Senior Loans may be acquired, BMR will consider, among other factors, the
financial strength, professional ability, level of service and research
capability of the institution. While these financial institutions are
generally not required to repurchase Senior Loans which they have sold, they
may act as principal or on an agency basis in connection with their sale by
the Portfolio.
Other fixed-income obligations which may be purchased and sold by the
Portfolio are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through broker-dealers or banks acting for their
own account rather than as brokers, or otherwise involve transactions directly
with the issuers of such obligations. The Portfolio may also purchase fixed-
income and other securities from underwriters, the cost of which may include
undisclosed fees and concessions to the underwriters. While it is anticipated
that the Portfolio will not pay significant brokerage commissions, on occasion
it may be necessary or desirable to purchase or sell a security through a
broker on an agency basis, in which case the Portfolio will incur a brokerage
commission. Although spreads or commissions on portfolio transactions will, in
the judgment of BMR, be reasonable in relation to the value of the services
provided, spreads or commissions exceeding those which another firm might
charge may be paid to firms who were selected to execute transactions on
behalf of the Portfolio and BMR's other clients for providing brokerage and
research services to BMR. The Portfolio paid no brokerage commissions during
its last three fiscal years.
The frequency of portfolio purchases and sales, known as the "turnover
rate," will vary from year to year. The Portfolio's turnover rate for the
fiscal years ended December 31, 1996 and 1997 were 75% and 81%, respectively.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may
be instances where the Portfolio will not participate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order
may not be allocated on a pro rata basis where, for example: (i) consideration
is given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust
and the Portfolio that the benefits from the BMR organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
TAXES
The Fund is treated as a separate corporation, and intends to qualify each
year as a regulated investment company ("RIC"), under the Internal Revenue
Code of 1986, as amended (the "Code") to avoid federal income tax.
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute a
sufficient amount of its investment company taxable income so as to effect
such qualification. The Fund may also distribute part or all of its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to reduce or avoid any federal income
or excise tax to the Fund.
Because the Fund invests its assets in the Portfolio, the Portfolio
normally must satisfy the applicable source of income and diversification
requirements in order for the Fund to satisfy them, and the Portfolio intends
to do so. For federal income tax purposes, the Portfolio intends to be treated
as a partnership that is not a "publicly traded partnership" and, as a result,
will not be subject to federal income tax. The Fund, as an investor in the
Portfolio, will be required to take into account in determining its federal
income tax liability its share of the Portfolio's income, gains, losses,
deductions, and credits, without regard to whether it has received any cash
distributions from the Portfolio.
The Portfolio will allocate at least annually among its investors,
including the Fund, each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit. For purposes of applying the requirements of
the Code regarding qualification as a RIC, the Fund (i) will be deemed to own
its proportionate share of each of the assets of the Portfolio and (ii) will
be entitled to the gross income of the Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires the Fund to
distribute by the end of each calendar year substantially all of its ordinary
income and capital gain net income for such year, plus certain other amounts.
Under current law, provided that the Fund qualifies as a RIC and the Portfolio
is treated as a partnership for Massachusetts and federal tax purposes,
neither the Fund nor the Portfolio should be liable for any income, corporate
excise or franchise tax in the Commonwealth of Massachusetts.
The federal income tax rules governing the taxation of interest rate swaps
are not entirely clear and may require the Fund to treat 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.
Certain investments of the Portfolio may bear original issue discount or
market discount for tax purposes. The Fund will be required to include in
income each year a portion of such original issue discount and may elect to
include in income each year a portion of such market discount. The Portfolio
may have to dispose of investments that it would otherwise have continued to
hold to provide cash to enable the Fund to satisfy its distribution
requirements with respect to such income.
Distributions of net capital gain are taxable to shareholders as long-term
capital gain, whether paid in cash or additional shares of the Fund and
regardless of the length of time Fund shares have been owned by the
shareholder. Long-term capital gain is separated into different tax rate
groups depending on the length of time the asset is held by the Fund prior to
sale.
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 was approved by the Independent Trustees of the Fund, who
have no direct or indirect financial interest in the Plan, and by all of the
Trustees of the Fund on February 21, 1995.
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. During the fiscal year ended December
31, 1997, the Fund made service fee payments under the Plan aggregating
$2,530,372 all of which was paid to Authorized Firms.
The Plan remains in effect through and including April 28, 1999, 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 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, maintains the general ledger of the
Fund and the Portfolio, and computes the daily net asset value of interests in
the Portfolio and the net asset value of shares of the Fund. In 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 also
provides services in connection with the preparation of shareholder reports
and the electronic filing of such reports with the SEC.
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, 1997
was 6.73%. The Fund's current yield for the one-month period ended June 30,
1998 was 6.78%. Yields will fluctuate from time to time and are not
necessarily representative of future results.
The total return for the period prior to the Fund's commencement of
operations, February 24, 1995, reflects the total return of the Portfolio's
predecessors. This total return has not been adjusted to reflect operating
expenses (such as service fees). If such adjustments were made, the
performance would have been lower. Past performance is no guarantee 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 table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in shares for the periods shown in the
table.
VALUE OF A $1,000 INVESTMENT
VALUE OF
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT TOTAL RETURN
PERIOD DATE INVESTMENT ON 6/30/98 CUMULATIVE ANNUALIZED
- -------------------------------------------------------------------------------
Life of the Fund 8/4/89 $1,000 $1,835.59 83.56% 7.05%
5 Years Ended
6/30/98 6/30/93 $1,000 $1,377.31 37.73% 6.61%
1 Year Ended
6/30/98 6/30/97 $1,000 $1,069.20 6.92% 6.92%
Total Return Performance*
A $100,000 investment in EV Classic Senior Floating-Rate Fund from its
predecessor fund's inception, Aug. 4, 1989, would have grown to $183,550 on
June 30, 1998.
Aug-89 100000
1989 103586
1990 113528
1991 122335
1992 129897
1993 136834
1994 145146
1995 155828
1996 166222
1997 177577
Jun-98 183550
* Past performance is not guarantee 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. Total return is calculated by
determining the percentage change in net asset value with all distributions
reinvested. The chart reflects total return of a hypothetical investment of
$100,000 at 8/4/89. Results do not include the Fund's early withdrawal charge.
Total return for the Fund prior to its commencement of operations reflects
the total return of predecessors. Predecessor total return has not been
adjusted to reflect operating expenses (such as service fees). If such
adjustments were made, the performance would have been lower.
Comparative information about the Fund's current yield, net asset value
and total return, about the Prime Rate and LIBOR may also be included in
advertisements and communications of the Fund.
From time to time, advertisements and other material furnished to present
and prospective shareholders may include information on the history of the
Fund's net asset value per share. From inception through June 30, 1998, the
high was $10.01 (on April 3, 1995) and the low was $9.97 (on April 17, 1996).
Such materials may include illustrations such as the following chart:
<PAGE>
Principal Performance
as of June 30, 1998
Feb-95 10
10
9.99
9.99
9.99
9.99
9.99
9.99
9.99
9.99
1995 9.99
9.99
9.99
9.98
9.97
9.97
9.97
9.97
9.97
9.97
9.97
9.97
1996 9.97
9.97
9.97
9.97
9.97
9.97
9.97
9.97
9.97
9.97
9.97
9.97
1997 9.97
9.97
9.97
9.97
9.97
9.97
Jun-98 9.97
Chart shows the Fund's month-end net asset value per share for the life of the
Fund since its inception (2/28/95 to 6/30/98). Past performance is no
guarantee of future results.
Advertisements and communications about the Fund may include a comparison
of loan interests and other corporate debt instruments. These may describe the
credit agreements used in connection with loan interests. Moreover, the
markets for loan interests may be described. The comparison may also be made
to relevant indices.
The Fund's performance may be compared in publications to the performance
of various indices and investments for which reliable data is available, and
to averages, performance rankings or other information prepared by recognized
mutual fund statistical services.
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Information in advertisements
and materials furnished to present and prospective investors may also include
quotations (including editorial comments) and statistics concerning investing
in securities, as well as investing in particular types of securities and the
performance of such securities.
BMR was one of the first investment management firms to manage a portfolio
of Senior Loans. BMR has former commercial bank lending officers and
investment bank corporate finance officers dedicated to this investment
discipline. The services of leading law and accounting firms are used in the
research, analysis and management process.
The Fund or the Principal Underwriter may provide information about Eaton
Vance, its affiliates and other investment advisers to the funds in the Eaton
Vance Family of Funds in sales material or advertisements provided to
investors or prospective investors. Such material or advertisements may also
provide information on the use of investment professionals by such investors.
OTHER INFORMATION
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 is an organization of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. The Fund's Declaration of Trust, as amended,
contains an express disclaimer of shareholder liability in connection with the
Fund property or the acts, obligations or affairs of the Fund. The Declaration
of Trust also provides for indemnification out of the Fund property of any
shareholder held personally liable for the claims and liabilities to which a
shareholder may become subject by reason of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the Fund
itself is unable to meet its obligations. The Fund has been advised by its
counsel that the risk of any shareholder incurring any liability for the
obligations of the Fund is remote.
The Fund's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to the Fund or
its shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Voting rights are not cumulative, which
means that the holders of more than 50% of the shares voting for the election
of Trustees can elect 100% of the Trustees and, in such event, the holders of
the remaining less than 50% of the shares voting on the matter will not be
able to elect any Trustees. As permitted by Massachusetts law, there will
normally be no meetings of Fund shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders. In such an event, the
Trustees of the Fund then in office will call a shareholders' meeting for the
election of Trustees. Except for the foregoing circumstances, the Trustees
shall continue to hold office and may appoint successor Trustees.
The Fund's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him
from that office either by a written declaration filed with the Fund's
custodian or by votes cast at a meeting called for that purpose. The by-laws
further provide that the Trustees of the Fund shall promptly call a meeting of
the shareholders for the purpose of voting upon a question of removal of any
such Trustee or Trustees when requested in writing so to do by the record
holders of not less than 10 per centum of the outstanding shares.
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, 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 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 SEC. The complete Registration Statement may be
obtained from the SEC 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 and the Portfolio, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the SEC.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' report
for, the Fund and the Portfolio appear in the Fund's most recent annual report
to shareholders and the unaudited financial statements of the Fund, the
audited financial statements of, and the independent auditors' report for the
Portfolio appear in the Fund's most recent semiannual report to shareholders,
both of which are incorporated by reference into this Statement of Additional
Information. A copy of the annual report and the semiannual 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, 1997, as
previously filed electronically with the Commission (Accession No.
0000950156-98-000175), and the unaudited information for the Fund and the
audited information for the Portfolio for the six-months ended June 30, 1998
(Accession No. 0000950156-98-000609).
<PAGE>
APPENDIX A
RATINGS OF CORPORATE BONDS
DESCRIPTION OF CORPORATE BOND RATINGS OF S&P:
AAA -- Bonds rated AAA have the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher
rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
BB -- Bonds rated BB have less near-term vulnerability to default than
other speculative grade debt. However, they face major ongoing uncertainties
or exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B -- Bonds rated B have a greater vulnerability to default but presently
have the capacity to meeting interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
CCC -- Bonds rated CCC have a current identifiable vulnerability to
default and are dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
CC -- The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC rating.
C -- The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating.
D -- Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus (+) or a
minus (-) sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
DESCRIPTION OF BOND RATINGS OF MOODY'S:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally are referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and, therefore, not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca present obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
the categories below B. The modifier 1 indicates a ranking for the security in
the higher end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end of a rating
category.
<PAGE>
Investing
[logo] for the
EATON VANCE 21st
Century
- -------------------------------------------------------------------------------
EV Classic Senior
Floating-Rate Fund
Statement of Additional Information
November 2, 1998
- -------------------------------------------------------------------------------
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, 200 Clarendon Street, Boston, MA 02116
Transfer Agent
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
Auditors
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
CSFRSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
INCLUDED IN PART A:
Financial Highlights for the six months ended June 30, 1998
(unaudited), for each of the two years ended December 31, 1997, 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 SEMIANNUAL REPORT DATED JUNE 30, 1998
(ACCESSION NO. 0000950156-98-000609), 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 June 30, 1998
(Unaudited)
Statement of Operations for the six months ended June 30, 1998
(Unaudited)
Statements of Changes in Net Assets for the six months ended
June 30, 1998 (Unaudited) and for the year ended December
31, 1997
Statement of Cash Flows for the six months ended June 30, 1998
(Unaudited)
Financial Highlights for the six months ended June 30, 1998
(Unaudited) for each of the two years ended December 31, 1997
and for the period from the start of business, February 24,
1995, to December 31, 1995
Notes to Financial Statements
Financial Statements for SENIOR DEBT PORTFOLIO:
Portfolio of Investments as of June 30, 1998
Statement of Assets and Liabilities as of June 30, 1998
Statement of Operations for the six months ended June 30, 1998
Statements of Changes in Net Assets for the six months ended June
30, 1998 and for the year ended December 31, 1997
Statement of Cash Flows for the six months ended June 30, 1998
Supplementary Data for the six months ended June 30, 1998, for
each of the two years ended December 31, 1997 and for the
period from the start of business, February 22, 1995, to
December 31, 1995
Notes to Financial Statements
Independent Auditors' Report
INCORPORATED BY REFERENCE TO THE ANNUAL REPORT DATED DECEMBER 31, 1997
(ACCESSION NO. 0000950156-98-000175), 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, 1997
Statement of Operations for the year ended December 31, 1997
Statements of Changes in Net Assets for each of the two years
ended December 31, 1997
Statement of Cash Flows for the year ended December 31, 1997
Financial Highlights for each of the two years ended
December 31, 1997 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, 1997
Statement of Assets and Liabilities as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statements of Changes in Net Assets for each of the two years
ended December 31, 1997
Statement of Cash Flows for the year ended December 31, 1997
Supplementary Data for each of the two years ended December 31,
1997 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 November 1, 1996 filed as
Exhibit (h)(a) to Post- Effective Amendment No. 1 to the
Registration Statement under the Securities Act of 1933 (1933
Act File No. 333-22163) and Amendment No. 9 to the
Registration Statement under the Investment Company Act of
1940 (1940 Act File No. 811-07946) filed with the Commission
on July 2, 1997 (Amendment No. 9) 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.
(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.
(c) Transfer Agency Agreement as of January 1, 1998 filed as
Exhibit (k)(b) to the Registration Statement on Form N-2 of
Eaton Vance Advisers Senior Floating-Rate Fund (File Nos.
333-46853, 811-08671) (Accession No. 0000950156-98-000172)
and incorporated herein by reference.
(l) Opinion and Consent of Counsel dated October 19, 1998,
filed herewith.
(m) Not applicable
(n) (a) Consent of Independent Auditors for EV Classic Senior
Floating-Rate Fund filed herewith.
(b) Consent of Independent Auditors for Senior Debt Portfolio
filed herewith.
(c) Consent of Independent Auditors for Senior Debt Portfolio
filed herewith.
(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)
(a) Financial Data Schedule for the fiscal year ended December
31, 1997 for EV Classic Senior Floating-Rate Fund filed
herewith.
(b) Financial Data Schedule for the six months ended June 30,
1998 for EV Classic Senior Floating-Rate Fund filed herewith.
(c) Financial Data Schedule for the fiscal year ended December
31, 1997 for Senior Debt Portfolio filed herewith.
(d) Financial Data Schedule for the six months ended June 30,
1998 for Senior Debt Portfolio filed herewith.
(s) Power of Attorney for EV Classic Senior Floating-Rate Fund dated
February 14, 1997 filed as Exhibit (r) to Amendment No. 9 and
incorporated herein by reference.
(t) Power of Attorney for Senior Debt Portfolio dated February 14,
1997 filed as Exhibit (s) to Amendment No. 9 and incorporated
herein by reference.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the approximate expenses incurred in
connection with the offerings of Registrant:
Registration fees ......................................... $1,586,381
National Association of Securities Dealers, Inc. Fees ..... $ 152,500
Printing (other than stock certificates) .................. $ 80,000
Engraving and printing stock certificates ................. $ 0
Fees and expenses of qualification under state
securities laws (excluding fees of counsel) ............. $ 72,200
Accounting fees and expenses .............................. $ 5,000
Legal fees and expenses ................................... $ 50,000
----------
Total ............................................. $1,946,081(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), February 21, 1997 (File No. 333-22163) March 10, 1997 (File No.
333-23031), and April 1, 1998 (File No. 333-48873).
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 68,944
as of
September 30, 1998
ITEM 29. INDEMNIFICATION
Article IV of the Registrant's Amended and Restated Agreement and
Declaration of Trust dated December 7, 1994 permits Trustee and officer
indemnification by By-Law, contract and vote. Article XI of the By-Laws contains
indemnification provisions. 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.
The distribution agreement of the Registrant also provides for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Reference is made to: (i) the information set forth under the captions
"Management of the Fund and the Portfolio" in the Prospectus and "Investment
Advisory and Other Services" in the Statement of Additional Information; (ii)
the Eaton Vance Corp. 10-K filed under the Securities Exchange Act of 1934 (File
No. 1-8100); and (iii) the Forms ADV of Eaton Vance Management (File No.
801-15930) and Boston Management and Research (File No. 801-43127) filed with
the Commission, all of which are incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
Boston, MA 02116, and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581-5120, with the exception of certain
corporate documents and portfolio trading documents which are in the possession
and custody of Eaton Vance Management, 24 Federal Street, Boston, MA 02110.
Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of Eaton Vance Management and Boston Management and Research.
ITEM 32. MANAGEMENT SERVICES
None.
ITEM 33. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the
service plan or the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the continuous offering of the shares; and
(4) To send by first class mail or other means designed to ensure
equally prompt delivery, within two business days of receipt of a written or
oral request, any Statement of Additional Information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 486(b) under the Securities Act of 1933 and 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
19th day of October, 1998.
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.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
/s/ JAMES B. HAWKES Principal Executive Officer October 19, 1998
-------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer October 19, 1998
-------------------------
JAMES L. O'CONNOR
Trustee and Vice
/s/ M. DOZIER GARDNER President October 19, 1998
-------------------------
M. DOZIER GARDNER
DONALD R. DWIGHT* Trustee October 19, 1998
-------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee October 19, 1998
-------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee October 19, 1998
-------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee October 19, 1998
-------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee October 19, 1998
-------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
-------------------------
ALAN R. DYNNER
Attorney-in-fact
<PAGE>
SIGNATURES
Senior Debt Portfolio has duly caused this Registration Statement on Form
N-2 of EV Classic Senior Floating-Rate Fund (File No. ) to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston and Commonwealth of Massachusetts, on the 19th day of October, 1998.
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.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
/s/ JAMES B. HAWKES Principal Executive Officer October 19, 1998
-------------------------
JAMES B. HAWKES
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer October 19, 1998
-------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee October 19, 1998
-------------------------
DONALD R. DWIGHT
/s/ M. DOZIER GARDNER Trustee October 19, 1998
-------------------------
M. DOZIER GARDNER
SAMUEL L. HAYES, III* Trustee October 19, 1998
-------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee October 19, 1998
-------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee October 19, 1998
-------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee October 19, 1998
-------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
-------------------------
ALAN R. DYNNER
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE
- -------- ----------- ----
(l) Opinion and Consent of Counsel dated October 19, 1998.
(n)(a) Consent of Independent Auditors for EV Classic Senior
Floating-Rate Fund
(n)(b) Consent of Independent Auditors for Senior Debt
Portfolio
(n)(c) Consent of Independent Auditors for Senior Debt
Portfolio
(r)(a) Financial Data Schedule for the fiscal year ended
December 31, 1997 for EV Classic Senior Floating-Rate
Fund
(r)(b) Financial Data Schedule for the six months ended
June 30, 1998 for EV Classic Senior Floating-Rate Fund
(r)(c) Financial Data Schedule for the fiscal year ended
December 31, 1997 for Senior Debt Portfolio
(r)(d) Financial Data Schedule for the six months ended
June 30, 1998 for Senior Debt Portfolio
<PAGE>
EXHIBIT 99(1)
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
October 19, 1998
EV Classic Senior Floating-Rate Fund
24 Federal Street
Boston, MA 02110
Gentlemen:
EV Classic Senior Floating-Rate Fund (the "Trust") is a voluntary
association (commonly referred to as a "business trust") established under
Massachusetts law with the powers and authority set forth under its Declaration
of Trust dated August 5, 1993 as 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 100,000,000 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 100,000,000 common shares of beneficial
interest under the Securities Act of 1933, as amended.
I have examined originals, or copies, certified or otherwise identified to
my satisfaction, of such certificates, records and other documents as we have
deemed necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, and with respect to Massachusetts law (other than
the Massachusetts Uniform Securities Act), only to the extent that Massachusetts
law may be applicable and without reference to the laws of the other several
states or of the United States of America, I am of the opinion that under
existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of the Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of the Commonwealth
of Massachusetts.
<PAGE>
EV Classic Senior Floating-Rate Fund
October 19, 1998
Page 2
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
<PAGE>
EXHIBIT (n)(a)
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 EV Classic Senior
Floating-Rate Fund dated February 13, 1998, which report is included in the
Annual Report to Shareholders for the year ended December 31, 1997.
We also consent to the reference to our Firm 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, which is part of the Registration Statement.
/s/ Deloitte & Touche LLP
- ----------------------
Deloitte & Touche LLP
Boston, Massachusetts
October 19, 1998
<PAGE>
EXHIBIT (n)(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 13, 1998, 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, which is part
of such Registration Statement.
/s/ Deloitte & Touche
- --------------------
Deloitte & Touche
Grand Cayman, Cayman Islands
British West Indies
October 19, 1998
EXHIBIT (n)(c)
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 September 18, 1998, 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, which is part
of such Registration Statement.
/s/ Deloitte & Touche
- --------------------
Deloitte & Touche
Boston, Massachusetts
October 19, 1998
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