U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 27 [X]
(Check appropriate box or boxes)
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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 pursuant to Rule 486: [ ] immediately upon filing pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a) [X] on April 20, 2001 pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (a) |
Senior Debt Portfolio has also executed this Registration Statement.
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
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1. Outside Front Cover Cover Page
2. Inside Front and Outside Back Cover Page Cover Pages
3. Fee Table and Synopsis Shareholder and Fund Expenses
4. Financial Highlights Financial Highlights
5. Plan of Distribution Purchasing Shares; Shareholder Account Features; Sales Charges
6. Selling Shareholders Not Applicable
7. Use of Proceeds Purchasing Shares; Investment Objective, Policies and Risks
8. General Description of the Registrant Organization of the Fund; Investment Objective,
Policies and Risks
9. Management Management of the Fund; Organization of the Fund
10. Capital Stock, Long-Term Debt, and Other Organization of the Fund; Distributions and Taxes;
Securities Shareholder Account Features
11. Defaults and Arrears on Senior Securities Not Applicable
12. Legal Proceedings Not Applicable
13. Table of Contents of the Statement of Table of Contents of the Statement of Additional Information
Additional Information
PART B
ITEM NO. ITEM CAPTION STATEMENT OF ADDITIONAL INFORMATION CAPTION
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14. Cover Page Cover Page
15. Table of Contents Table of Contents
16. General Information and History Management and Organization
17. Investment Objective and Policies Investment Policies and Risks; Investment Restrictions
18. Management Management and Organization; Investment Advisory
and Other Services
19. Control Persons and Principal Holders of Control Persons and Principal Holders of Shares
Securities
20 Investment Advisory and Other Services Investment Advisory and Other Services
21. Brokerage Allocation and Other Practices Portfolio Trading
22. Tax Status Taxes
23. Financial Statements Financial Statements
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LOGO
Investing
for the
21st
Century(R)
EATON VANCE
PRIME RATE RESERVES
THE INVESTMENT OBJECTIVE OF EATON VANCE PRIME RATE RESERVES (THE "FUND") IS TO PROVIDE AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL, BY INVESTING IN A PORTFOLIO PRIMARILY OF SENIOR SECURED FLOATING RATE LOANS ("SENIOR LOANS"). THE FUND IS A CONTINUOUSLY OFFERED, CLOSED-END, NON-DIVERSIFIED INVESTMENT COMPANY. SENIOR LOANS TYPICALLY ARE OF BELOW INVESTMENT GRADE QUALITY AND HAVE BELOW INVESTMENT GRADE CREDIT RATINGS, WHICH RATINGS ARE ASSOCIATED WITH SECURITIES HAVING HIGH RISK, SPECULATIVE CHARACTERISTICS. BECAUSE OF THE PROTECTIVE FEATURES OF SENIOR LOANS (BEING SENIOR IN A BORROWER'S CAPITAL STRUCTURE AND SECURED BY SPECIFIC COLLATERAL), THE INVESTMENT ADVISER BELIEVES, BASED ON ITS EXPERIENCE, THAT SENIOR LOANS TEND TO HAVE MORE FAVORABLE LOSS RECOVERY RATES COMPARED TO MOST OTHER TYPES OF BELOW INVESTMENT GRADE DEBT OBLIGATIONS.
Eaton Vance was one of the first investment advisers to manage a portfolio of Senior Loans in a publicly offered investment company, and has done so continuously since 1989. Senior Loan assets under management by Eaton Vance exceed $9 billion.
NO MARKET PRESENTLY EXISTS FOR RESALE OF THE FUND'S SHARES AND IT IS NOT CURRENTLY ANTICIPATED THAT A SECONDARY MARKET WILL DEVELOP FOR THEM. Fund shares are not redeemable or readily marketable. To provide investor liquidity, the Fund ordinarily will make each February, May, August and November an offer to repurchase between 5% and 25% of the Fund's outstanding shares at net asset value. See "Repurchase Offers" at page 15.
(continued on the following page)
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION IN THIS PROSPECTUS
Page Page
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Shareholder and Fund Expenses 3 Valuing Shares 13
Financial Highlights 4 Purchasing Shares 13
Performance Information 6 Sales Charges 14
Investment Objective, Policies Repurchase Offers
and Risks 7 Shareholder Account 15
Organization of the Fund 11 Features 15
Management of the Fund 12 Distributions and Taxes 17
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Prospectus dated April 20, 2001
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE
FUND AND THE SERVICES AVAILABLE TO SHAREHOLDERS. PLEASE
SAVE IT FOR REFERENCE.
(continued from cover page)
Public Offering Information: Per Share(1) Total(3) -------------------------------------------------------------------------------- Public Offering Price $9.46 $8,977,000,000 Sales Loads(2) None None Proceeds to the Fund $9.46 $8,977,000,000 ----------------- |
(1) The shares are offered on a best efforts basis at a price equal to their net asset value, which on March 30, 2001 was $9.46 per share.
(2) Because Eaton Vance Distributors, Inc. and its affiliates will pay all sales commissions to investment dealers from their own assets, the net proceeds of the offering will be available to the Fund for investment.
More information is available in the Statement of Additional Information dated
April 20, 2001, as may be amended from time to time. The Statement of Additional
Information is incorporated by reference into this prospectus. The Table of
Contents of the Statement of Additional Information appears immediately below.
Additional information about the Portfolio's investments is available in the
annual and semi-annual reports to shareholders. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the past year. You may
obtain free copies of the Statement of Additional Information and the
shareholder reports by contacting: Eaton Vance Distributors, Inc., The Eaton
Vance Building, 255 State Street, Boston, MA 02109, 1-800-225-6265, website:
www.eatonvance.com. You will find and may copy information about the Fund
(including the Statement of Additional Information and shareholder reports) at
the Securities and Exchange Commission's public reference room in Washington, DC
(call 1-202-942-8090 for information on the operation of the public reference
room); on the EDGAR Database on the SEC's Internet site (http://www.sec.gov);
or, upon payment of copying fees, by writing to the SEC's public reference
section, Washington, DC 20549-0102, or by electronic mail at publicinfo@sec.gov.
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Page Page
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Investment Policies and Risks 2 Portfolio Trading 14
Investment Restrictions 5 Taxes 15
Management and Organization 6 Performance 16
Control Persons and Principal Financial Statements 18
Holders of Shares 10 Appendix A: Ratings of
Investment Advisory and Other Corporate Bonds 19
Services 10
Shareholder Account Information 12
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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.
The Fund's SEC File No. is 811-05808.
SHAREHOLDER AND FUND EXPENSES
FEES AND EXPENSES. These tables describe the fees and expenses that you may pay if you buy and hold shares.
Shareholder Fees (fees paid directly from your investment) -------------------------------------------------------------------------------- Maximum Sales Charge (Load) (as a percentage of offering price) None Dividend Reinvestment Fees None Maximum Early Withdrawal Charge 3.00% |
Investment Advisory Fee (after fee waiver) 0.41% Distribution Fee 0.70% Other Expenses (after administration fee waiver) 0.14% Total Annual Fund Operating Expenses (after fee waivers) 1.25% |
NOTES: The Fund invests exclusively in Senior Debt Portfolio (the "Portfolio"). See "Organization of the Fund". The table and Example summarize the aggregate expenses of the Fund and the Portfolio and are designed to help investors understand the costs and expenses they will bear, directly or indirectly, by investing in the Fund. Information for the Fund is based on its expenses for the most recent fiscal year. If the distribution fee were eliminated, the investment advisory fee and administration fee waivers would be reduced by the same aggregate amount. It is possible that the Trustees of the Fund or Portfolio could reduce or eliminate these waivers even if the distribution fee remained the same, which would increase Fund expenses. If no fee waivers existed, the Investment Advisory Fee would be 0.95%, the Administration Fee would be 0.25% and Total Annual Fund Operating Expenses would be approximately 2.04%. Only the Independent Trustees of the Fund and Portfolio can reduce or eliminate these fee waivers. See "Management of the Fund".
Example. This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other investment companies. The Example assumes that you invest $1,000 in the Fund for the time periods indicated and then have all of your shares repurchased at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
You would pay the following expenses if you did not have your shares repurchased:
FINANCIAL HIGHLIGHTS
The following information should be read in conjunction with the audited financial statements that appear in the Fund's annual report to shareholders. The Fund's financial statements have been audited by Deloitte & Touche LLP, independent certified public accountants, as experts in accounting and auditing. The financial statements and the independent auditors' report are incorporated by reference into the Statement of Additional Information.
Year Ended December 31,
------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
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Net asset value - beginning of year $ 9.890 $ 9.980 $ 9.990 $ 9.990 $ 10.010
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Income (loss) from operations
Net investment income $ 0.768 $ 0.661 $ 0.679 $ 0.676 $ 0.684
Net realized and unrealized gain (loss) (0.390) (0.090) (0.009) --+ (0.021)
--------- --------- --------- -------- ---------
Total income from operations $ 0.378 $ 0.571 $ 0.670 $ 0.676 $ 0.663
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Less distributions
From net investment income $ (0.768) $ (0.661) $ (0.680) $ (0.676) $ (0.683)
In excess of net investment income -- -- -- -- --
From net realized gain -- -- -- -- --
In excess of net realized gain -- -- -- -- --
--------- --------- --------- --------- ---------
Total distributions $ (0.768) $ (0.661) $ (0.680) $ (0.676) $ (0.683)
--------- --------- --------- --------- ---------
Net asset value - end of year $ 9.500 $ 9.890 $ 9.980 $ 9.990 $ 9.990
--------- --------- --------- --------- ---------
Total return(b) 3.89% 5.90% 6.92% 6.98% 6.84%
Ratios/Supplemental Data(d)
Net assets, end of year (000's omitted) $3,975,140 $4,058,075 $2,839,989 $1,909,266 $1,61,735
Ratios (as a percentage of average daily
net assets):
Operating expenses(c) 1.24% 1.24% 1.29% 1.31% 1.35%
Interest expense(c) 0.01% 0.01% 0.01% 0.01% 0.04%
Net investment income 7.86% 6.66% 6.76% 6.76% 6.81%
Portfolio Turnover of the Fund(e) -- -- -- -- --
Portfolio Turnover of the Portfolio 47% 64% 56% 81% 75%
Year Ended December 31,
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1995 1994 1993 1992 1991
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Net asset value - beginning of year $ 10.020 $ 10.030 $ 10.020 $ 9.960 $ 9.970
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Income (loss) from operations
Net investment income $ 0.769 $ 0.597 $ 0.497 $ 0.542 $ 0.750
Net realized and unrealized gain (loss) 0.012 (0.006) 0.026 (0.057) (0.004)(a)
--------- --------- -------- --------- ---------
Total income from operations $ 0.781 $ 0.591 $ 0.523 $ 0.599 $ 0.746
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Less distributions
From net investment income $ (0.770) $ (0.597) $ (0.511) $ (0.530) $ (0.752)
In excess of net investment income -- (0.004) -- -- --
From net realized gain (0.021) -- -- (0.009) (0.004)
In excess of net realized gain -- -- (0.002) -- --
--------- --------- --------- --------- ---------
Total distributions $ (0.791) $ (0.601) $ (0.513) $ (0.539) $ (0.756)
--------- --------- --------- --------- ---------
Net asset value - end of year $ 10.010 $ 10.020 $ 10.030 $ 10.020 $ 9.960
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Total return(b) 8.10% 6.08% 5.34% 6.18% 7.76%
Ratios/Supplemental Data(d)
Net assets, end of year (000's omitted) $1,092,186 $ 611,588 $ 683,393 $1,011,006 $1,694,332
Ratios (as a percentage of average daily
net assets):
Operating expenses(c) 1.45% 1.63% 1.55% 1.44% 1.37%
Interest expense(c) 0.16% 0.21% 0.22% 0.18% 0.16%
Net investment income 7.57% 5.95% 4.98% 5.33% 7.42%
Portfolio Turnover of the Fund(e) 5% 60% 37% 26% 16%
Portfolio Turnover of the Portfolio 39% -- -- -- --
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LEVERAGE ANALYSIS
Borrowings
from Issuance Amount of Debt Average Daily Balance Average Weekly Balance Average Amount of
of Commercial Outstanding at of Debt Outstanding of Shares Outstanding Debt Per Share
Paper -- Year Ended End of Year During Year During Year During Year
-------------------------------------------------------------------------------------------------------------------------------
December 31,1991 $ -- $ 34,893,000 $189,758,055 $ 0.1839
December 31,1992 39,764,710 37,304,000 132,343,142 0.2819
December 31,1993 17,981,224 24,585,000 85,859,000 0.2863
December 31,1994 20,403,169 10,236,000 63,465,000 0.1613
December 31,1995(f) -- 9,688,000 62,118,000 0.1560
(See footnotes on following page.)
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FINANCIAL HIGHLIGHTS (CONTINUED)
+ Represents less than $0.001 per share.
(a) The per share amount is not in accord with the net realized gain for the period because of the timing of sales of Fund shares and the amount of per share realized and unrealized gains and losses at such time.
(b) Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on the last day of each period reported. Dividends and distributions, if any, are assumed reinvested at the net asset value on the reinvestment date. Total return is not computed on an annualized basis.
(c) Includes the Fund's share of the Portfolio's allocated expenses subsequent to February 22, 1995.
(d) For the year ended December 31, 1991, the expenses related to the operation of the Fund were reduced by a reduction of the investment advisory fee. Had such action not been taken, the ratios would have been as follows:
YEAR ENDED DECEMBER 31, 1991
RATIOS (as a percentage of average daily net
assets): Operating expenses 1.40% Interest expense 0.16% Net investment income 7.39% |
(e) Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in securities.
(f) The Leverage Analysis is for the period from January 1, 1995 to February 21, 1995, when the Fund transferred its commercial paper program to the Portfolio.
PERFORMANCE INFORMATION
The following bar chart and table provide information about the Fund's performance, including a comparison of the Fund's performance to the performance of a representative index of tradable, senior, secured, U.S. dollar-denominated leveraged loans. Although past performance is no guarantee of future results, this performance information demonstrates the risk that the value of your investment will change. The bar chart provides the annual total returns for the Fund for each calendar year through December 31, 2000.
7.76% 6.18% 5.34% 6.08% 8.07% 6.84% 6.98% 6.92% 5.90% 3.89%
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
The highest quarterly total return was 2.47% for the quarter ended December 31, 1994, and the lowest quarterly return was -0.34% for the quarter ended December 31, 2000.
One Five Ten
Average Annual Total Returns as of December 31, 2000 Year Years Years
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Fund Shares 1.01% 6.10% 6.39%
DLJ Leveraged Loan Index Plus 4.94% 6.13% N/A
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Fund returns in the table reflect the applicable early withdrawal charge in the
most recent four years. The DLJ Leveraged Loan Index Plus (the "DLJ Index") is a
representative index of tradable, senior, secured, U.S. dollar-denominated
leveraged loans. Investors cannot invest directly in an Index. Source:
Donaldson, Lufkin & Jenrette. The DLJ Index commenced in January 1992.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
Eaton Vance Prime Rate Reserves' 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 Borrower's underlying Senior Loans and changes in Senior Loan market prices. Some Borrowers default on their Senior Loan payments. The Portfolio attempts to manage credit risk through portfolio diversification and ongoing analysis and monitoring of Borrowers.
The Portfolio's investment adviser is Boston Management and Research (the "Investment Adviser" or "BMR"), a wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"), and Eaton Vance is the administrator (the "Administrator") of the Fund. The offices of the Investment Adviser and the Administrator are located at The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109.
GENERAL COMPOSITION OF THE PORTFOLIO
In normal market conditions, at least 80% of the Portfolio's total assets will be invested (generally by the purchase of assignments) in interests in Senior Loans 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/or 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, which would not be consistent with the Fund's investment objective. While temporarily invested, the Fund may not achieve its investment objective.
It is anticipated that the proceeds of the Senior Loans in which the Portfolio will acquire interests primarily will be used to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, and, to a lesser extent, to finance internal growth and for other corporate purposes of Borrowers. Senior Loans have the most senior position in a Borrower's capital structure, although some Senior Loans may hold an equal ranking with other senior securities of the Borrower. The capital structure of a Borrower may include Senior Loans, senior and junior subordinated debt, preferred stock and common stock issued by the Borrower, typically in descending order of seniority with respect to claims on the Borrower's assets (discussed below). Senior Loans are secured by specific collateral.
In order to borrow money pursuant to a Senior Loan, a Borrower will frequently, for the term of the Senior Loan, pledge collateral, including but not limited to, (i) working capital assets, such as accounts receivable and inventory; (ii) tangible fixed assets, such as real property, buildings and equipment; (iii) intangible assets, such as trademarks and patent rights (but excluding goodwill); and (iv) security interests in shares of stock of subsidiaries or affiliates. In the case of Senior Loans made to non-public companies, the company's shareholders or owners may provide collateral in the form of secured guarantees and/or security interests in assets that they own. In many 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 may hold interests in Senior Loans of any maturity. Senior Loans typically have a stated term of between two 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. The base lending rate primarily is the London Inter-Bank Offered Rate ("LIBOR"), but can also be the prime rate offered by one or more major United States banks (the "Prime Rate"), 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 four years. As of March 30, 2001, the Portfolio had a dollar weighted average period to adjustment of approximately 56 days.
The Portfolio may purchase and retain in its portfolio Senior Loans where the Borrowers have experienced, or may be perceived to be likely to experience, credit problems, including involvement in or recent emergence from bankruptcy reorganization proceedings or other forms of debt restructuring. Such investments may provide opportunities for enhanced income as well as capital appreciation.
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.
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. 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 Investment Company Act of 1940, as amended (the "1940 Act"), the Portfolio will be required to maintain specified asset coverages of at least 300% with respect to any bank borrowing or issuance of indebtedness immediately following any such borrowing or issuance and on an ongoing basis as a condition of declaring dividends and repurchasing shares. The Portfolio's inability to make distributions as a result of these requirements could cause the Fund to fail to qualify as a regulated investment company and/or subject the Fund to income or excise taxes. The Portfolio may be required to dispose of portfolio investments on unfavorable terms if market fluctuations or other factors reduce the required asset coverage to less than the prescribed amount. The Portfolio may be required to maintain minimum average balances in connection with borrowings or to pay a commitment or other fee to maintain a line of credit; either of these requirements will increase the cost of borrowing over the stated interest rate. The issuance of additional classes of debt involves
offering expenses and other costs and may limit the Portfolio's freedom to pay dividends or to engage in other activities. Any such borrowing or debt issuance is a speculative technique in that it will magnify any changes to the Fund's net asset value. The Portfolio may also borrow for temporary, extraordinary or emergency purposes.
ADDITIONAL RISK CONSIDERATIONS
The Fund is subject to numerous investment risks. The Fund is not a money market fund and its net asset value will fluctuate, reflecting any fluctuations in the Portfolio's net asset value.
CREDIT RISK. Senior Loans, like other corporate debt obligations, are subject to the risk of non-payment of scheduled interest or principal. Such non-payment would result in a reduction of income to the Portfolio, a reduction in the value of the Senior Loan experiencing non-payment and a potential decrease in the net asset value of the Portfolio. Although, with respect to Senior Loans, the Portfolio generally will invest only in Senior Loans that BMR believes are secured by specific collateral the value of which equals or exceeds the principal amount of the Senior Loan at the time of initial investment, there can be no assurance that the liquidation of any such collateral would satisfy the Borrower's obligation in the event of non-payment of scheduled interest or principal payments, or that such collateral could be readily liquidated. In the event of bankruptcy of a Borrower, the Portfolio could experience delays or limitations with respect to its ability to realize the benefits of the collateral securing a Senior Loan. As with other collateral, where stock of the Borrower or its subsidiaries collateralizes a Senior Loan, such stock may lose all or substantially all of its value in the event of the bankruptcy of the Borrower. The loan 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 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 Borrower than do 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.
Senior Loans in which the Portfolio will invest may not be rated by a Rating Agency, and may 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. Rating Agencies are now rating Senior Loans and most Senior Loans have been assigned a rating below investment grade. 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 Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("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 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 does not view ratings as a primary factor in its investment decisions and, relies more upon its credit analysis abilities than upon ratings.
MARKET AND LIQUIDITY RISK. Most Senior Loans are valued by an independent pricing service that uses market quotations of investors and traders in Senior Loans. Economic and other events (whether real or perceived) can reduce the demand for certain Senior Loans or Senior Loans generally, which may reduce market prices and cause the Fund's net asset value per share to fall. The frequency and magnitude of such changes cannot be predicted.
Some Senior Loans are not readily marketable and may be subject to restrictions on resale. Senior Loans generally are not listed on any national securities exchange or automated quotation system and no active trading market may exist for some of the Senior Loans in which the Portfolio will invest. Where a secondary market exists, such market for some Senior Loans may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. Senior Loans that are illiquid 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 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.
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, 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%.
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 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.
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, other indices or 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. To date, the Portfolio has made limited use of these techniques.
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 interest rate reset time of the Portfolio's holdings. 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. If BMR is incorrect in its forecasts of market values, interest rates and other applicable factors, the investment performance of the Portfolio would be unfavorably affected.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements (the purchase of a security coupled with an agreement to resell at a higher price) with respect to its permitted investments. 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 decreased, the Portfolio could experience a loss. 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 agreement, and will be marked to market daily.
LENDING PORTFOLIO SECURITIES. The Portfolio may seek to earn income by lending portfolio securities to broker-dealers or other institutional 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. In the judgment of the investment adviser the loans will be made only to organizations whose credit quality or claims paying ability is considered to be at least investment grade and when the expected returns, net of administrative expenses and any finders' fees, justifies the attendant risk. Securities loans currently are required to be secured continuously by collateral in cash, cash equivalents (such as money market instruments) or other liquid securities held by the custodian and maintained in an amount at least equal to the market value of the securities loaned. The financial condition of the borrower will be monitored by the investment adviser. To date, the Portfolio has not utilized securities lending.
ORGANIZATION OF THE FUND
The Fund is organized as a business trust established under Massachusetts law pursuant to a Declaration of Trust dated May 2, 1989, as amended, and is registered under the 1940 Act. The Trustees of the Fund are responsible for the overall management and supervision of its affairs. The Fund currently has one class of shares of beneficial interest which may be issued in an unlimited number by the Trustees. Each share represents an equal proportionate beneficial interest in the Fund and, when issued and outstanding, the shares are fully paid and nonassessable by the Fund and may be repurchased only as described under "Repurchase Offers". There are no annual meetings of shareholders, but special meetings may be held as required by law to elect or remove Trustees and consider certain other matters. Because the Fund invests in the Portfolio, it may be asked to vote on certain Portfolio matters (like changes in certain Portfolio investment restrictions). When necessary, the Fund will hold a meeting of its shareholders to consider the Portfolio matter and then vote its interest in the Portfolio in proportion to the votes cast by its shareholders. The Fund can withdraw from the Portfolio at any time. Shareholders are entitled to one vote for each full share held. Fractional shares may be voted proportionately. Shares have no preemptive or conversion rights and are freely transferable. In the event of liquidation of the Fund, shareholders are entitled to share pro rata in the net assets of the Fund available for distribution to shareholders.
The Fund's Declaration of Trust may not be amended without the affirmative vote of a majority of the outstanding shares of the Fund (or such greater vote as is described below under "Anti-Takeover Provisions"), except that the Declaration of Trust may be amended by the Trustees to change the name of the Fund, to make such other changes as do not have a materially adverse effect on the rights or interests of shareholders and to conform the Declaration of Trust to applicable federal laws or regulations. The Fund may be terminated (i) upon the merger or consolidation with or sale of the Fund's assets to another company, if approved by the holders of two-thirds of the outstanding shares of the Fund, except that if the Trustees recommend such transaction, the approval by vote of the holders of a majority of the outstanding shares will be sufficient, or (ii) upon liquidation and distribution of the assets of the Fund, if approved by the holders of two-thirds of the Fund's outstanding shares, except that if the Trustees recommend such transaction, the approval by vote of the holders of a majority of the outstanding shares will be sufficient. If not so terminated, the Fund may continue indefinitely.
ANTI-TAKEOVER PROVISIONS. The Fund presently has certain anti-takeover provisions in its Declaration of Trust which are intended to limit, and could have the effect of limiting, the ability of other entities or persons to acquire control of the Fund, to cause it to engage in certain transactions or to modify its structure. As indicated above, a two-thirds vote is required for certain transactions. The affirmative vote or consent of the holders of two-thirds of the shares of the Fund (a greater vote than that required by the 1940 Act and, in some cases, greater than the required vote applicable to business corporations under state law) is required to authorize the conversion of the Fund from a closed-end to an open-end investment company (except that if the
Trustees recommend such conversion, the approval by vote of the holders of a
majority of the outstanding shares will be sufficient) and the affirmative vote
or consent of the holders of three-quarters of the shares of the Fund is
required to authorize any of the following transactions (the "Transactions"):
(i) merger or consolidation of the Fund with or into any corporation; (ii)
issuance of any securities of the Fund to any person or entity for cash; (iii)
sale, lease or exchange of all or any substantial part of the assets of the Fund
to any entity or person (except assets having an aggregate fair market value of
less than $1,000,000 or assets sold in the ordinary course of business); or (iv)
sale, lease or exchange to the Fund, in exchange for securities of the Fund, of
any assets of any entity or person (except assets having an aggregate fair
market value of less than $1,000,000) if such corporation, person or entity is
directly, or indirectly through affiliates, the beneficial owner of 5% or more
of the outstanding shares of the Fund. However, such vote or consent will not be
required with respect to the Transactions if the Board of Trustees under certain
conditions approves the Transaction. Further, the provisions of the Fund's
Declaration of Trust relating to conversion of the Fund to an open-end
investment company, the Transactions, the merger or consolidation with or sale
of the Fund's assets, and the liquidation and distribution of the Fund's assets
may not be amended without the affirmative vote or consent of two-thirds of the
outstanding shares of the Fund. Reference is made to the Declaration of Trust of
the Fund, on file with the SEC, for the full text of these provisions.
The foregoing provisions will make more difficult the conversion of the Fund to an open-end investment company and the consummation of the Transactions without the Trustees' approval, and could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices, in the event that a secondary market for the Fund shares does develop, by discouraging a third party from seeking to obtain control of the Fund in a tender offer or similar transaction. However, the Board of Trustees has considered these anti-takeover provisions and believes that they are in the shareholders' best interests and benefit shareholders by providing the advantage of potentially requiring persons seeking control of the Fund to negotiate with its management regarding the price to be paid.
MASTER-FEEDER STRUCTURE. The Trustees of the Fund have considered the advantages and disadvantages of investing the assets of the Fund in the Portfolio, as well as the advantages and disadvantages of the two-tier format. The Trustees believe that the structure may offer opportunities for growth in the assets of the Portfolio, and may afford the potential for economies of scale for the Fund. The other investors in the Portfolio will affect its liquidity, and therefore, could reduce the amount of the Fund's repurchase offers.
MANAGEMENT OF THE FUND
The Portfolio engages BMR, a wholly-owned subsidiary of Eaton Vance, to manage the investments of the Portfolio. In return, the Portfolio has agreed to pay BMR a fee in the amount of 0.95% annually of the average daily gross assets of the Portfolio. Gross assets of the Portfolio are calculated by deducting all liabilities of the Portfolio except the principal amount of any indebtedness for money borrowed, including debt securities issued by the Portfolio.
The Trustees of the Portfolio have accepted 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 will not exceed on an annual
basis: (a) 0.50% of average daily gross assets of the Portfolio up to and
including $1 billion; (b) 0.45% of average daily gross assets in excess of $1
billion up to and including $2 billion; (c) 0.40% of average daily gross assets
in excess of $2 billion up to and including $7 billion; (d) 0.3875% of average
daily gross assets in excess of $7 billion up to and including $10 billion; and
(e) 0.375% of average daily gross assets in excess of $10 billion. The Portfolio
paid BMR advisory fees equivalent to 0.41% of the Portfolio's average daily
gross assets for the fiscal year ended December 31, 2000. The waiver of BMR's
advisory fees will be eliminated or reduced in the event that the distribution
fee of certain funds investing in the Portfolio is eliminated or reduced. In
addition, Eaton Vance will be paid an administration fee so that the Fund's
total fixed expenses remain the same provided, however, the Fund continues to
qualify as a regulated investment company for federal income tax purposes. Such
actions by Eaton Vance are expected to be sufficient to prevent an increase in
the overall operating expenses borne by the Fund.
Eaton Vance, its affiliates and predecessor companies have been managing assets of individuals and institutions since 1924 and managing investment companies since 1931. BMR or Eaton Vance currently serves as the investment adviser to investment companies and various individual and institutional clients with combined assets under management of over $45 billion. Eaton Vance is an indirect wholly-owned subsidiary of Eaton Vance Corp., a publicly-held holding company which through its subsidiaries and affiliates engages primarily in investment management, administration and marketing activities. The principal underwriter is a wholly-owned subsidiary of Eaton Vance.
Scott H. Page and Payson F. Swaffield, Vice Presidents of Eaton Vance and BMR, have acted as co-portfolio managers of the Portfolio since August 1, 1996. Prior thereto, Messrs. Page and Swaffield were senior analysts of Eaton Vance since 1989 and 1990, respectively.
Eaton Vance serves as administrator of the Fund. In this capacity Eaton Vance administers the affairs of the Fund and provides certain office facilities. In return, the Fund may pay Eaton Vance a fee in the amount of 0.25% annually of the average daily gross assets of the Portfolio attributable to the Fund. Eaton Vance has agreed to waive its administration fee as long as the distribution fee described below is being paid by the Fund.
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 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. 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. 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 the Portfolio, the Fund's net asset value will reflect the value of its interest in the Portfolio (which, in turn, reflects the underlying value of the Portfolio's assets and liabilities).
The Portfolio's net asset value is also determined as of the close of regular trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the manner authorized by the Trustees of the Portfolio. Net asset value is computed by determining the value of the Portfolio's total assets (the Senior Loans and securities it holds plus any cash or other assets, including interest accrued but not yet received), and subtracting all of the Portfolio's liabilities (including the outstanding principal amount of any indebtedness issued and any unpaid interest thereon).
BMR values interests in Senior Loans held by the Portfolio pursuant to valuation procedures approved by the Portfolio's Trustees. Under these procedures, Senior Loans, when initially acquired by the Portfolio, are valued at cost. Most Senior Loans are deemed to be "liquid" because reliable market quotations are readily available for them. BMR uses an independent pricing service to value these liquid Senior Loans at their market value, so that they are marked to market daily. BMR values all other Senior Loans at their fair value. The fair value of each Senior Loan is reviewed by BMR's Valuation Committee and by the Portfolio's Trustees. The value of Senior Loans will fluctuate, causing the net asset value of Fund shares to fluctuate.
PURCHASING SHARES
You may purchase Fund shares through your investment dealer or by mailing the account application form included in this prospectus to the transfer agent (see back cover for address). Your initial investment must be at least $5,000 ($2,000 in the case of Individual Retirement Accounts). The price of Fund shares is the net asset value.
After your initial investment, additional investments of $50 or more may be made at any time by sending a check payable to the order of the Fund or the transfer agent directly to the transfer agent (see back cover for address). Please include your name and account number and the name of the Fund with each investment.
Once the $5,000 minimum investment has been made, you may also make automatic investments of $50 or more each month or quarter from your bank account. You can establish bank automated investing on the account application or by calling 1-800-262-1122.
You may purchase Fund shares for cash or in exchange for securities. Please call 1-800-225-6265 for information about exchanging securities for Fund shares. If you purchase shares through an investment dealer (which includes brokers, dealers and other financial institutions), that dealer may charge you a fee for executing the purchase for you. The Fund may suspend the sale of its shares at any time and any purchase order may be refused.
The Portfolio intends to limit its investments to those which are eligible for purchase by national banks for their own portfolios. The conditions and restrictions governing the purchase of Fund shares by national banks are set forth in the U.S. Comptroller of the Currency's Banking Circular 220. Subject to such conditions and restrictions, national banks may acquire Fund shares for their own investment portfolio.
SALES CHARGES
Shareholders pay no sales load when purchasing shares. The principal underwriter will make payments from its own assets at the rate of 3.0% of the dollar amount of the shares being purchased to investment dealers who have sales agreements with the principal underwriter.
If the shares remain outstanding for at least one year from the date of their original purchase, the principal underwriter will compensate the investment dealers at an annual rate, paid quarterly, equal to .10% for the second year, .15% for the third year, .20% for the fourth year, .25% for the fifth year and .30% for the sixth year and subsequent years, of the value of Fund shares sold by such investment dealers and remaining outstanding. All compensation paid to investment dealers 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 distribution 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. The compensation paid to investment dealers and the principal underwriter is subject to applicable limitations imposed by the National Association of Securities Dealers, Inc. ("NASD").
The principal underwriter may also, from time to time, at its own expense, provide additional cash incentives to investment dealers 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 investment dealers.
EARLY WITHDRAWAL CHARGE. An early withdrawal charge ("EWC") to recover distribution expenses will be charged in connection with most shares held for less than four years which are accepted by the Fund for repurchase pursuant to repurchase offers. The EWC is based on the lower of the net asset value at the time of purchase or at the time of repurchase. Shares acquired through the reinvestment of distributions are exempt from the EWC. Redemptions are made first from shares that are not subject to an EWC. The EWC will be paid to the principal underwriter. Fund shares are subject to the following EWC schedule:
Year of Repurchase
After Purchase EWC
--------------------------------------------------------------------------------
First 3.00%
Second 2.50%
Third 2.00%
Fourth 1.00%
Fifth and following 0%
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EWCs are waived following the death of all beneficial owners of such shares, but only if the repurchase occurs within one year of death (a death certificate and other applicable documents may be required). At the time of acceptance of the repurchase offer, the shareholder must notify the transfer agent either directly or through the principal underwriter that the EWC should be waived. Such waiver, subject to confirmation of the investor's entitlement, will then be granted; otherwise, the waiver will be lost. No EWC will be imposed on Fund shares sold to Eaton Vance, or its affiliates, or to their respective employees or clients. The EWC will also be waived in connection with minimum required distributions from tax-sheltered retirement plans by applying the rate required to be withdrawn under the applicable rules and regulations of the Internal Revenue Service to the balance of your account. Amendments to EWC waivers are prospective only (apply only to shares subsequently purchased).
If your shares are repurchased, you may reinvest at net asset value any portion or all of the repurchase proceeds in shares of the Fund, provided that the reinvestment occurs within 60 days of the repurchase, and the privilege has not been used more than once in the prior 12 months. Your account will be credited with any EWC paid in connection with the repurchase. Reinvestment requests must be in writing. If you reinvest, you will be sold shares at the next determined net asset value following receipt of your request.
DISTRIBUTION PLAN. The Fund has adopted a plan that allows the Fund to pay distribution fees for the sale and distribution of shares. The Fund currently pays distribution fees of 0.70% of average daily net assets annually. This fee cannot be increased without shareholder approval.
REPURCHASE OFFERS
As a matter of fundamental policy which cannot be changed without shareholder approval, the Fund is required in the months of FEBRUARY, MAY, AUGUST AND NOVEMBER 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 and has not yet done 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 #32).
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. (This notice may be included in a shareholder report or other Fund document.) The repurchase request deadline will be strictly observed. Shareholders and financial intermediaries failing to submit repurchase requests in good order (as set forth in the repurchase form) by such deadline will be unable to liquidate shares until a subsequent repurchase offer.
If more shares are tendered for repurchase than the Fund has offered to repurchase, the Board may, but is not obligated to, increase the number of shares to be repurchased by 2% of the value of the Portfolio, the investment company in which the Fund invests; if there are still more shares tendered than are offered for repurchase, shares will be repurchased on a pro-rata basis. Thus, shareholders may be unable to liquidate all or a given percentage of their shares and some shareholders may tender more shares than they wish to have repurchased in order to ensure repurchase of at least a specific number of shares. Shareholders may withdraw shares tendered for repurchase at any time prior to the repurchase request deadline.
Repurchase offers and the need to fund repurchase obligations may affect the ability of the Portfolio to be fully invested, which may reduce returns. Moreover, diminution in the size of the Portfolio through repurchases without offsetting new sales may result in untimely sales of portfolio securities and a higher expense ratio, and may limit the ability of the Portfolio to participate in new investment opportunities. Repurchases resulting in portfolio turnover will result in additional expenses being borne by the Portfolio. The Portfolio may borrow to meet repurchase obligations which entails certain risks and costs. See "Borrowings and Leverage". The Portfolio may also sell portfolio securities to meet repurchase obligations which, in certain circumstances, may adversely affect the market for Senior Loans and reduce the Fund's value.
The Fund may suspend or postpone a repurchase offer only: (A) if making or effecting the repurchase offer would cause the Fund to lose its status as a regulated investment company under the Internal Revenue Code; (B) for any period during which the Exchange or any market in which the securities owned by the Portfolio are principally traded is closed, other than customary weekend and holiday closings, or during which trading in such market is restricted; (C) for any period during which an emergency exists as a result of which disposal by the Portfolio of securities owned by it is not reasonably practicable, or during which it is not reasonably practicable for the Portfolio or Fund fairly to determine the value of its net assets; or (D) for such other periods as the SEC may by order permit for the protection of shareholders of the Fund.
SHAREHOLDER ACCOUNT FEATURES
Once you purchase shares, the transfer agent establishes a Lifetime Investing Account/(R)/ for you. Share certificates are issued only on request.
DISTRIBUTIONS. You may have your Fund distributions paid in one of the following ways:
* Full Reinvest Option Dividends and capital gains are reinvested in additional shares. This option will be assigned if you do not specify an option.
* Partial Reinvest Option Dividends are paid in cash and capital gains are reinvested in additional shares.
* Cash Option Dividends and capital gains are paid in cash.
* Exchange Option Dividends and/or capital gains are reinvested in additional shares of another Eaton Vance fund chosen by you. Before selecting this option, you must obtain a prospectus of the other fund and consider its objectives and policies carefully.
INFORMATION FROM THE FUND. From time to time, you may be mailed the following:
* Quarterly repurchase offer notices.
* Annual and Semi-Annual Reports, containing performance information and financial statements.
* Periodic account statements, showing recent activity and total share balance.
* Form 1099 and tax information needed to prepare your income tax returns.
* Proxy materials, in the event a shareholder vote is required.
* Special notices about significant events affecting your Fund.
TAX-SHELTERED RETIREMENT PLANS. Fund shares are available for purchase in connection with certain tax-sheltered retirement plans. Call 1-800-225-6265 for information. Distributions will be invested in additional shares for all tax-sheltered retirement plans.
EXCHANGE PRIVILEGE. You may exchange your Fund shares at the time of a Fund repurchase at net asset value for Class B 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. No EWC will be imposed on Fund shares exchanged; however, the new fund shares will be subject to a contingent deferred sales charge in the event of a redemption. 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 contingent deferred sales charge applicable to shares acquired in an exchange, your shares will age from the date of your original purchase.
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.
Before exchanging, you should read the prospectus of the new fund carefully. Each exchange must involve shares which have a net asset value of at least $1,000. This privilege may not be used for "market timing". If an account (or group of accounts) makes more than two round-trip exchanges (exchanged from one fund to another and back again) within twelve months, it will be deemed to be market timing. The exchange privilege may be terminated for market timing accounts. The exchange privilege may be changed or discontinued at any time. You will receive 60 days' notice of any material change to the privilege.
TELEPHONE AND ELECTRONIC TRANSACTIONS. You can repurchase and exchange shares by telephone under certain circumstances. In addition, certain transactions may be conducted through the Internet. The transfer agent and the principal underwriter have procedures in place to authenticate telephone and electronic instructions (such as using security codes or verifying personal account information). As long as the transfer agent and principal underwriter follow reasonable procedures, they will not be responsible for unauthorized telephone or electronic transactions and you bear the risk of possible loss resulting from these transactions. Telephone instructions are tape recorded.
"STREET NAME" ACCOUNTS. If your shares are held in a "street name" account at an investment dealer, that dealer (and not the Fund or its transfer agent) will perform all recordkeeping, transaction processing and distribution payments. Because the Fund will have no record of your transactions, you should contact your investment dealer to purchase, repurchase or exchange shares, to make changes in your account, or to obtain account information. You will not be able to utilize a number of shareholder features, such as telephone transactions, directly with the Fund. The transfer of shares in a "street name" account to an account with another investment dealer or to an account directly with the Fund involves special procedures and you will be required to obtain historical information about your shares prior to the transfer. Before establishing a "street name" account with an investment dealer, you should determine whether that dealer allows reinvestment of distributions in "street name" accounts.
ACCOUNT QUESTIONS. If you have any questions about your account or the services available, please call Eaton Vance Shareholder Services at 1-800-225-6265, or write to the transfer agent (see back cover for address).
DISTRIBUTIONS AND TAXES
The Fund declares daily and distributes monthly substantially all of its net investment income and distributes annually (usually in December) its net realized short-term and long-term capital gains, if any. Your account will be credited with dividends beginning on the business day after the day when the funds used to purchase your shares are collected by the transfer agent. The Fund's distributions will not qualify for the dividends-received deduction for corporations. The Fund expects distributions to consist primarily of net investment income which, along with short-term capital gain distributions, are taxable to shareholders as ordinary income, whether paid in cash or additional shares of the Fund. Capital gain distributions (if any) will be taxable to shareholders as long-term capital gains, regardless of how long a shareholder has owned Fund shares. The Fund's distributions will be taxed as described above regardless of whether they are paid in cash or additional shares of the Fund. Investors who purchase shares at a time when the Fund's net asset value reflects gains that are either unrealized or realized but undistributed will pay the full price for the shares and then may receive some portion of the price back as a taxable distribution. 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 are disclosed in the Statement of Additional Information. For example, if a shareholder tenders fewer than all of his or her shares, such repurchase may not be treated as an exchange for federal income tax purposes and may result in deemed distributions to non-tendering shareholders. On the other hand, shareholders who tender all of their shares will be treated as having sold their shares and generally will realize a capital gain or loss.
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.
LOGO
Investing
for the
21st
Century(R)
Prospectus
April 20, 2001
INVESTMENT ADVISER OF SENIOR DEBT PORTFOLIO
Boston Management and Research, The Eaton Vance Building, 255 State Street,
Boston, MA 02109
ADMINISTRATOR OF EATON VANCE PRIME RATE RESERVES
Eaton Vance Management, The Eaton Vance Building, 255 State Street, Boston, MA
02109
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., The Eaton Vance Building, 255 State Street,
Boston, MA 02109 (800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
PFPC, Inc., P.O. Box 9653, Providence, RI 02940-9653 (800)262-1122
AUDITORS
Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA 02116
PRP
(C) 2001 Eaton Vance Management
STATEMENT OF
ADDITIONAL INFORMATION
April 20, 2001
EATON VANCE PRIME RATE RESERVES
The Eaton Vance Building
255 State Street
Boston, Massachusetts 02109
1-800-225-6265
This Statement of Additional Information ("SAI") provides general information about the Fund and the Portfolio. Capitalized terms used in this SAI and not otherwise defined have the meanings given to them in the prospectus. This SAI contains additional information about:
Page Page
Investment Policies and Risks 2 Portfolio Trading 14
Investment Restrictions 5 Taxes 15
Management and Organization 6 Performance 16
Control Persons and Principal 10 Financial Statements 18
Holders of Shares
Investment Advisory and Other 10 Appendix A: Ratings of 19
Services Corporate Bonds
Shareholder Account Information 12
|
This SAI is NOT a prospectus and is authorized for distribution to prospective investors only if preceded or accompanied by the Fund's prospectus dated April 20, 2001, as supplemented from time to time, which is incorporated herein by reference. This SAI should be read in conjunction with the prospectus, which may be obtained by calling 1-800-225-6265.
(C) 2001 Eaton Vance Management
The following defined terms may be used herein: "SEC" for the Securities and Exchange Commission; "CFTC" for the Commodities Futures Trading Commission; "Code" for the Internal Revenue Code of 1986, as amended; "1940 Act" for the Investment Company Act of 1940, as amended; and "NASD" for the National Association of Securities Dealers, Inc.
INVESTMENT POLICIES AND RISKS
STRUCTURE 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 group of loan investors ("Loan Investors"). The Agent typically administers and enforces the Senior Loan on behalf of the other Loan Investors in the syndicate. In addition, an institution, typically but not always the Agent, holds any collateral on behalf of the Loan Investors.
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 investors in loan interests.
The Portfolio typically purchases "Assignments" from the Agent or other Loan Investors. The purchase of an Assignment typically succeeds to all the rights and obligations under the Loan Agreement of the assigning Loan Investor and becomes a loan investor under the Loan Agreement with the same rights and obligations as the assigning party. 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 Loan Investor.
The Portfolio also may invest in "Participations". Participations by the Portfolio in a Loan Investor's portion of a Senior Loan typically will result in the Portfolio having a contractual relationship only with such Loan Investor, 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 Loan Investor selling the Participation and only upon receipt by such Loan Investor 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 Loan Investors 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 Loan Investor selling the Participation. In the event of the insolvency of the Loan Investor selling a Participation, the Portfolio may be treated as a general creditor of such Loan Investor. The selling Loan Investors and other persons interpositioned between such Loan Investors 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 Loan Investor selling the Participation, and any other persons interpositioned between the Portfolio and the Loan Investor, 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 the investment adviser to be of comparable quality. Securities rated Baa by Moody's have speculative characteristics. Similarly, the Portfolio will purchase an Assignment or Participation or act as a Loan Investor 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 the investment adviser 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 obligation, 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 senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced.
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 holders of the Senior Loan (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 Loan Investors directly, as the case may be, is normally an event of acceleration; i.e., the Agent, or the Loan Investors directly, as the case may be, has the right to call the outstanding Senior Loan. The typical practice of an Agent or a Loan Investor 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 Loan Investors 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 Loan Investors, 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 that 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 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.
DERIVATIVE INSTRUMENTS. Derivative instruments (which are instruments that derive their value from another instrument, security, index or currency) may be purchased or sold to enhance income (in the case of written options), to hedge against fluctuations in securities prices or market conditions, to change the duration of the overall portfolio, or as a substitute for the purchase or sale of securities or currencies. Such transactions may be in the U.S. or abroad and may include the purchase or sale of futures contracts on securities (such as U.S. Government securities), indicies, other financial instruments (such as certificates of deposit, Eurodollar time deposits and economic indicies); options on futures contracts; exchange-traded and over-the-counter options on securities or indicies; and interest rate swaps. Transactions in derivative instruments involve a risk of loss or depreciation due to: unanticipated adverse changes in securities prices, interest rates, indices or 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 an investment in these instruments. In addition, the entire premium paid for purchased options may be lost before they can be profitably exercised. Transaction costs are incurred in opening and closing positions. Derivative instruments may sometimes increase or leverage exposure to a particular market risk, thereby increasing price volatility. Over-the-counter ("OTC") derivative instruments involve an enhanced risk that the issuer or counterparty will fail to perform its contractual obligations. Some derivative instruments are not readily marketable or may become illiquid under adverse market conditions. In addition, during periods of market volatility, a commodity exchange may suspend or limit trading in an exchange-traded derivative instrument, which may make the contract temporarily illiquid and difficult to price. Commodity exchanges may also establish daily limits on the amount that the price of a futures contract or futures option can vary from the previous day's settlement price. Once the daily limit is reached, no trades may be made that day at a price beyond the limit. This may prevent the closing out of positions to limit losses. The staff of the SEC takes the position that certain purchased OTC options, and assets used as cover for written OTC options, are illiquid. The ability to terminate OTC derivative instruments may depend on the cooperation of the counterparties to such
contracts. For thinly traded derivative instruments, the only source of price quotations may be the selling dealer or counterparty. In addition, certain provisions of the Code limit the use of derivative instruments. Under regulations of the CFTC, the use of futures transactions for non-hedging purposes is limited. There can be no assurance that the use of derivative instruments will be advantageous.
Foreign exchange traded futures contracts and options thereon may be used only if the investment adviser determines that trading on such foreign exchange does not entail risks, including credit and liquidity risks, that are materially greater than the risks associated with trading on CFTC-regulated exchanges.
A put option on a security may be written only if the investment adviser intends to acquire the security.
INVESTMENT COMPANY SECURITIES. The Portfolio may invest in closed-end investment companies which invest in floating rate instruments. The value of common shares of closed-end investment companies, which are generally traded on an exchange, is affected by the demand for those securities regardless of the demand for the underlying portfolio assets. These companies bear fees and expenses that the Portfolio will incur indirectly, so investors in the Fund will be subject to duplication of fees.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as fundamental policies and as such cannot be changed without the approval of the holders of a majority of the Fund's outstanding voting securities, which as used in this SAI means the lesser of (a) 67% of the shares of the Fund present or represented by proxy at a meeting if the holders of more than 50% of the outstanding shares are present or represented at the meeting or (b) more than 50% of the outstanding shares of the Fund. Accordingly, the Fund may not:
(1) Borrow money, except as permitted by the Investment Company Act of 1940;
(2) Issue senior securities, as defined in the Investment Company Act of 1940, other than (i) preferred shares which immediately after issuance will have asset coverage of at least 200%, (ii) indebtedness which immediately after issuance will have asset coverage of at least 300%, or (iii) the borrowings permitted by investment restriction (1) above;
(3) Purchase securities on margin (but the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities). The purchase of loan interests, securities or other investment assets with the proceeds of a permitted borrowing or securities offering will not be deemed to be the purchase of securities on margin;
(4) Underwrite securities issued by other persons, except insofar as it may technically be deemed to be an underwriter under the Securities Act of 1933 in selling or disposing of a portfolio investment;
(5) Make loans to other persons, except by (a) the acquisition of loan interests, debt securities and other obligations in which the Fund is authorized to invest in accordance with its investment objective and policies, (b) entering into repurchase agreements, and (c) lending its portfolio securities;
(6) Purchase any security if, as a result of such purchase, more than 25% of the Fund's total assets (taken at current value) would be invested in the securities of Borrowers and other issuers having their principal business activities in the same industry (the electric, gas, water and telephone utility industries, commercial banks, thrift institutions and finance companies being treated as separate industries for the purpose of this restriction); provided that there is no limitation with respect to obligations issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities;
(7) Purchase or sell real estate, although it may purchase and sell securities which are secured by interests in real estate and securities of issuers which invest or deal in real estate. The Fund reserves the freedom of action to hold and to sell real estate acquired as a result of the ownership of securities; or
(8) Purchase or sell physical commodities or contracts for the purchase or sale of physical commodities. Physical commodities do not include futures contracts with respect to securities, securities indices or other financial instruments.
For the purpose of investment restriction (6), the Fund will consider all relevant factors in determining who is the issuer of the loan interest, including: the credit quality of the Borrower, the amount and quality of the collateral, the terms of the Loan Agreement and other relevant agreements (including inter-creditor agreements), the degree to which the credit of such interpositioned person was deemed material to the decision to purchase the loan
interest, the interest rate environment, and general economic conditions applicable to the Borrower and such interpositioned person. In addition, with respect to restriction (6), 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 February, May, August and November determined by the Board of Trustees with the repurchase pricing date and time being not later than the close of business 14 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 14 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 (i) it owns an equal amount of such securities or 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 or (ii) it holds in a segregated account cash or other liquid securities (to the extent required under the 1940 Act) in an amount equal to the current market value of the securities sold short, and unless not more than 25% of its net assets (taken at current value) is held as collateral for such sales at any one time.
Whenever an investment policy or investment restriction set forth in the prospectus or this SAI states a maximum percentage of assets that may be invested in any security or other asset or describes a policy regarding quality standards, such percentage limitation or standard shall be determined immediately after and as a result of the Fund's or the Portfolio's acquisition of such security or asset. Accordingly, any later increase or decrease resulting from a change in values, assets or other circumstances will not compel the Fund or the Portfolio 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 Senior Loans. Moreover, the Fund and the Portfolio must always be in compliance with the borrowing policies set forth above.
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of the Fund are responsible for the overall management and supervision of the Fund's affairs. The Trustees and officers of the Fund and the Portfolio are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. Unless otherwise noted, the business address of each Trustee and officer is The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109. Those Trustees who are "interested persons" of the Fund or the Portfolio, as defined in the 1940 Act, are indicated by an asterisk(*).
JESSICA M. BIBLIOWICZ (41), TRUSTEE*
President and Chief Executive Officer of National Financial Partners (a
financial services company) (since April, 1999). President and Chief Operating
Officer of John A. Levin & Co. (a registered investment advisor) (July, 1997 to
April, 1999) and a Director of Baker, Fentress & Company which owns John A.
Levin & Co. (July, 1997 to April, 1999). Formerly Executive Vice President of
Smith Barney Mutual Funds (from July, 1994 to June, 1997). Elected Trustee
October 30, 1998. Trustee of various investment companies managed by Eaton Vance
or BMR since October 30, 1998.
Address: 787 Seventh Avenue, New York, New York 10019
DONALD R. DWIGHT (70), TRUSTEE
President of Dwight Partners, Inc. (a corporate relations and communications
company). Trustee/Director of the Royce Funds (mutual funds). Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (59), 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.
SAMUEL L. HAYES, III (66), TRUSTEE
Jacob H. Schiff Professor of Investment Banking Emeritus, Harvard University
Graduate School of Business Administration. Trustee of the Kobrick 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 (65), TRUSTEE
Chairman and Chief Operating Officer, Hellman, Jordan Management Co., Inc. (an
investment management company) (since November, 2000) and President, Jordan
Simmons Capital LLC (manager of energy related investments) (since November,
2000). President, Unicorn Corporation (an investment and financial advisory
services company) (since September, 2000). Formerly Chairman of the Board,
United Asset Management Corporation (a holding company owning institutional
investment management firms) and Chairman, President and Director, UAM Funds
(mutual funds). Trustee of various investment companies managed by Eaton Vance
or BMR.
Address: One International Place, Boston, Massachusetts 02110
LYNN A. STOUT (43), TRUSTEE
Professor of Law, Georgetown University Law Center. Elected Trustee October 30,
1998. Trustee of various investment companies managed by Eaton Vance or BMR
since October 30, 1998.
Address: 600 New Jersey Avenue, NW, Washington, DC 20001
JACK L. TREYNOR (71), Trustee
Investment Adviser and Consultant. Trustee of various investment companies
managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
SCOTT H. PAGE (41), Vice President
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
PAYSON F. SWAFFIELD (44), Vice President Vice President of BMR and Eaton Vance. Officer of various investment companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (56), Treasurer
Vice President of BMR and Eaton Vance. Officer of various investment companies
managed by Eaton Vance or BMR.
ALAN R. DYNNER (60), Secretary
Vice President, Secretary and Chief Legal Officer of BMR, Eaton Vance and EVC.
Prior to joining Eaton Vance on November 1, 1996, he was a Partner of the law
firm of Kirkpatrick & Lockhart LLP, New York and Washington, D.C. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (65), Assistant Secretary Vice President of BMR and Eaton Vance. Officer of various investment companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (38), Assistant Secretary Vice President of BMR and Eaton Vance. Officer of various investment companies managed by Eaton Vance or BMR.
ERIC G. WOODBURY (43), Assistant Secretary Vice President of BMR and Eaton Vance. Officer of various investment companies managed by Eaton Vance or BMR.
The Nominating Committee of the Board of Trustees of the Fund and the Portfolio is comprised of the Trustees who are not "interested persons" as that term is defined under the 1940 Act ("noninterested Trustees"). The purpose of the Committee is to recommend to the Board nominees for the position of noninterested Trustee and to assure that at least a majority of the Board of Trustees is independent of Eaton Vance or its affiliates.
Messrs. Hayes (Chairman), Dwight, Reamer and Ms. Stout are members of the Special Committee of the Board of Trustees of the Fund and 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.
Messrs. Treynor (Chairman), Dwight and Reamer 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 and performance of the independent accountants, and reviewing matters relative to accounting and auditing practices and procedures, accounting records, and the internal accounting controls, of the Fund and the Portfolio, and certain service providers.
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 Fund nor the Portfolio has a retirement plan for 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 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 and the Portfolio). During the fiscal year ended December 31, 2000, the noninterested Trustees of the Fund and the Portfolio earned the following compensation in their capacities as Trustees from the Fund and the Portfolio. For the year ended December 31, 2000, the noninterested Trustees earned the following compensation in their capacities as Trustees of the funds in the Eaton Vance fund complex(1):
Source of Compensation Jessica M. Bibliowicz Donald R. Dwight Samuel L. Hayes Norton H. Reamer Lynn A. Stout Jack L. Treynor
---------------------- --------------------- ---------------- --------------- ---------------- ------------- ---------------
Fund $ 778 $ 632 $ 729 $ 696 $ 766 $ 771
Portfolio 6,831 5,897(2) 6,560 6,236 6,816(3) 6,891
Total 160,000 162,500(4) 170,000 160,000 160,000(5) 170,000
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(1) As of April 20, 2001, the Eaton Vance fund complex consists of 155
registered investment companies or series thereof.
(2) Includes $3,227 of deferred compensation.
(3) Includes $1,007 of deferred compensation.
(4) Includes $60,000 of deferred compensation.
(5) Includes $16,000 of deferred compensation.
ORGANIZATION. The Fund is an organization of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the trust. The Fund's Declaration of Trust, as amended,
contains an express disclaimer of shareholder liability in connection with the
Fund property or the acts, obligations or affairs of the Fund. The Declaration
of Trust also provides for indemnification out of the Fund property of any
shareholder held personally liable for the claims and liabilities to which a
shareholder may become subject by reason of being or having been a shareholder.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself is
unable to meet its obligations. The Fund has been advised by its counsel that
the risk of any shareholder incurring any liability for the obligations of the
Fund is remote.
The Fund's Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law; but nothing in the Declaration of Trust protects a Trustee against any liability to the Fund or its shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. Voting rights are not cumulative, which means that the holders of more than 50% of the shares voting for the election of Trustees can elect 100% of the Trustees and, in such event, the holders of the remaining less than 50% of the shares voting on the matter will not be able to elect any Trustees. As permitted by Massachusetts law, there will normally be no meetings of Fund shareholders for the purpose of electing Trustees unless and until such time as less than a majority of the Trustees holding office have been elected by shareholders. In such an event, the Trustees of the Fund then in office will call a shareholders' meeting for the election of Trustees. Except for the foregoing circumstances, the Trustees shall continue to hold office and may appoint successor Trustees.
The Fund's by-laws provide that no person shall serve as a Trustee if shareholders holding two-thirds of the outstanding shares have removed him from that office either by a written declaration filed with the Fund's custodian or by votes cast at a meeting called for that purpose. The by-laws further provide that the Trustees of the Fund shall promptly call a meeting of the shareholders for the purpose of voting upon a question of removal of any such Trustee or Trustees when requested in writing so to do by the record holders of not less than 10 per centum of the outstanding shares.
The Portfolio was organized as a trust under the laws of the state of New York on May 1, 1992 and intends to be treated as a partnership for federal tax purposes. In accordance with the Declaration of Trust of the Portfolio, there will normally be no meetings of the investors for the purpose of electing Trustees unless and until such time as less than a majority of the Trustees of the Portfolio holding office have been elected by investors. In such an event the Trustees of the Portfolio then in office will call an investors' meeting for the election of Trustees. Except for the foregoing circumstances and unless removed by action of the investors in accordance with the Portfolio's Declaration of Trust, the Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall serve as a Trustee if investors holding two-thirds of the outstanding interests have removed him from that office either by a written declaration filed with the Portfolio's custodian or by votes cast at a meeting called for that purpose. The Declaration of Trust further provides that under certain circumstances the investors may call a meeting to remove a Trustee and that the Portfolio is required to provide assistance in communicating with investors about such a meeting.
The Portfolio's Declaration of Trust, as amended, provides that the Fund and other entities permitted to invest in the Portfolio (e.g., other U.S. and foreign investment companies, and common and commingled trust funds) will each be liable for all obligations of the Portfolio. However, the risk of the Fund incurring financial loss on account of such liability is limited to circumstances in which both inadequate insurance exists and the Portfolio itself is unable to meet its obligations. Accordingly, the Trustees of the Fund believe that neither the Fund nor its shareholders will be adversely affected by reason of the Fund investing in the Portfolio.
Whenever the Fund as an investor in the Portfolio is requested to vote on matters pertaining to the Portfolio (other than the termination of the Portfolio's business, which may be determined by the Trustees of the Portfolio without investor approval), the Fund will hold a meeting of Fund shareholders and will vote its interest in the Portfolio for or against such matters proportionately to the instructions to vote for or against such matters received from Fund shareholders. The Fund shall vote shares for which it receives no voting instructions in the same proportion as the shares for which it receives voting instructions. Other investors in the Portfolio may alone or collectively acquire sufficient voting interests in the Portfolio to control matters relating to the operation of the Portfolio, which may require the Fund to withdraw its investment in the Portfolio or take other appropriate action. Any such withdrawal could result in a distribution "in kind" of portfolio securities (as opposed to a cash distribution from the Portfolio). If Senior Loans and noncash assets are distributed, the Fund could incur brokerage, tax or other charges in converting the securities to cash. In addition, the distribution in kind may result in a less diversified portfolio of investments or adversely affect the liquidity of the Fund. Notwithstanding the above, there are other means for meeting shareholder repurchase requests, such as borrowing.
The Fund may withdraw all its assets from the Portfolio at any time if the Board of Trustees of the Fund determines that it is in the best interest of the Fund to do so. In the event the Fund withdraws all of its assets from the Portfolio, or the Board of Trustees of the 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 its assets (or the assets of another investor in the Portfolio) from the Portfolio.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SHARES
As of March 15, 2001, the Trustees and officers of the Fund, as a group, owned in the aggregate less than 1% of the outstanding shares of the Fund. As of March 15, 2001, Merrill Lynch, Pierce, Fenner & Smith, Inc. of Jacksonville, FL, was the record owner of approximately 17.4% of the outstanding shares, which were held on behalf of their customers who are the beneficial owners of such shares, and as to which they had voting power under certain limited circumstances. To the knowledge of the Fund, no other person owned of record or beneficially 5% or more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY SERVICES. Under the general supervision of the Portfolio's Board of Trustees, BMR will carry out the investment and reinvestment of the assets of the Portfolio, will furnish continuously an investment program with respect to the Portfolio, will determine which securities should be purchased, sold or exchanged, and will implement such determinations. BMR will furnish to the Portfolio investment advice and provide related office facilities and personnel for servicing the investments of the Portfolio. BMR will compensate all Trustees and officers of the Portfolio who are members of the BMR organization and who render investment services to the Portfolio, and will also compensate all other BMR personnel who provide research and investment services to the Portfolio.
For the fiscal years ended December 31, 2000, 1999 and 1998, the Portfolio paid BMR advisory fees aggregating $38,551,367, $45,057,800 and $44,484,347, respectively, equivalent to 0.41%, 0.54% and 0.88%, respectively of the Portfolio's average daily gross assets. As at December 31, 2000, the gross assets of the Portfolio were $8,021,786,675. BMR's fee waiver described in the prospectus is indefinite, but could be removed or changed upon agreement of BMR and the Portfolio's Board of Trustees at any time.
ADMINISTRATIVE SERVICES. Under the Administration Agreement, Eaton Vance is responsible for managing the business affairs of the Fund, subject to the supervision of the Fund's Board of Trustees. Eaton Vance will furnish to the Fund all office facilities, equipment and personnel for administering the affairs of the Fund. Eaton Vance will compensate all Trustees and officers of the Fund who are members of the Eaton Vance organization and who render executive and administrative services to the Fund, and will also compensate all other Eaton Vance personnel who perform management and administrative services for the Fund. Eaton Vance's administrative services include recordkeeping, preparation and filing of documents required to comply with federal and state securities laws, supervising the activities of the Fund's custodian and transfer agent, providing assistance in connection with the Trustees' and shareholders' meetings, providing services in connection with quarterly repurchase offers and other administrative services necessary to conduct the Fund's business.
Effective May 1, 1999, Eaton Vance agreed to waive its administration fee as long as the distribution fee described below is being paid by the Fund. For the period from January 1, 1999 to April 30, 1999, the Fund paid Eaton Vance administration fees of $2,529,762, which was equal to 0.25% (annualized) of the average daily gross assets of the Portfolio attributable to the Fund for such period. For the fiscal years ended December 31, 1998 and 1997, the Fund paid Eaton Vance administration fees of $5,673,343 and $4,386,074, respectively, which was equal to 0.25% of the average daily gross assets of the Portfolio attributable to the Fund for each fiscal year.
The Portfolio and the Fund, as the case may be, will each be responsible for all of its respective costs and expenses not expressly stated to be payable by BMR under the Advisory Agreement with the Portfolio, by Eaton Vance under the Administration Agreement with the Fund or by the principal underwriter under its Distribution Agreement with the Fund. Such costs and expenses to be borne by the Portfolio and the Fund, as the case may be, include, without limitation: custody and transfer agency fees and expenses, including those incurred for determining net asset value and keeping accounting books and records; expenses of pricing and valuation services; the cost of share certificates; membership dues in investment company organizations; expenses of acquiring, holding and disposing of securities and other investments; fees and expenses of registering under the securities laws and governmental fees; expenses of reports to shareholders and investors, proxy statements and other expenses of shareholders' or investors' meetings; insurance premiums; printing and mailing expenses; interest, taxes and corporate fees; legal and accounting expenses; compensation and expenses of Trustees not affiliated with BMR or Eaton Vance; expenses of conducting repurchase offers for the purpose of repurchasing Portfolio interests or Fund shares; and investment advisory and administration fees. The Portfolio and the Fund will also each bear expenses incurred in connection with any litigation in which the Portfolio or the Fund, as the case may be, is a party and any legal obligation to indemnify its respective officers and Trustees with respect thereto, to the extent not covered by insurance.
The Portfolio's Advisory Agreement continues in effect from year to year so long as such continuance is approved at least annually (i) by the vote of a majority of the noninterested Trustees of the Portfolio cast in person at a meeting specifically called for the purpose of voting on such approval and (ii) by the Trustees of the Portfolio or by vote of a majority of the outstanding interests
of the Portfolio. The Fund's Administration Agreement continues in effect from year to year so long as such continuance is approved at least annually by the vote of a majority of the Fund's Trustees. Each agreement may be terminated at any time without penalty on sixty (60) days' written notice by the Trustees of the Fund or the Portfolio, as the case may be, BMR or Eaton Vance, as applicable, or by vote of the majority of the outstanding shares of the Fund or interests of the Portfolio, as the case may be. Each agreement will terminate automatically in the event of its assignment. Each agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties to the Fund or the Portfolio under such agreements on the part of Eaton Vance or BMR, as applicable, Eaton Vance or BMR will not be liable to the Fund or the Portfolio, as applicable, for any loss incurred, to the extent not covered by insurance.
INFORMATION ABOUT BMR AND EATON VANCE. BMR and Eaton Vance are business trusts organized under Massachusetts law. Eaton Vance, Inc. ("EV") serves as trustee of BMR and Eaton Vance. EV is a wholly-owned subsidiary of Eaton Vance Corporation ("EVC"), a Maryland corporation and publicly-held holding company. EVC through its subsidiaries and affiliates engages primarily in investment management, administration and marketing activities. The Directors of EVC are James B. Hawkes, John G.L. Cabot, Leo I. Higdon, Jr., John M. Nelson, Vincent M. O'Reilly and Ralph Z. Sorenson. All of the issued and outstanding shares of BMR are owned by Eaton Vance and all of the shares of Eaton Vance are owned by Eaton Vance Business Trust which is owned by EVC. All shares of the outstanding Voting Common Stock of EVC are deposited in a Voting Trust, the Voting Trustees of which are Messrs. Hawkes, Jeffrey P. Beale, Alan R. Dynner, Thomas E. Faust, Jr., Thomas J. Fetter, Scott H. Page, Duncan W. Richardson, William M. Steul, Payson F. Swaffield, Michael W. Weilheimer, and Wharton P. Whitaker (all of whom are officers of Eaton Vance). The Voting Trustees have unrestricted voting rights for the election of Directors of EVC. All of the outstanding voting trust receipts issued under said Voting Trust are owned by certain of the officers of BMR and Eaton Vance who are also officers, or officers and Directors of EVC and EV. As indicated under "Management and Organization", all of the officers of the Fund (as well as Mr. Hawkes who is also a Trustee) hold positions in the Eaton Vance organization.
CODE OF ETHICS. The investment adviser and the Fund and the Portfolio have adopted Codes of Ethics governing personal securities transactions. Under the Codes, Eaton Vance employees may purchase and sell securities (including securities held by the Portfolio) subject to certain pre-clearance and reporting requirements and other procedures.
DISTRIBUTION PLAN. The Fund has adopted a compensation-type Distribution Plan ("Distribution Plan") as if Rule 12b-1 under the 1940 Act were applicable pursuant to an exemptive order obtained from the Securities and Exchange Commission. The Distribution Plan provides for payment of a monthly distribution fee to the principal underwriter in an amount equal to 0.70% of average daily net assets. The Distribution Plan is designed to permit an investor to purchase shares through an investment dealer without receiving an initial sales charge and at the same time permit the principal underwriter to compensate investment dealers in connection therewith. Early withdrawal charges are paid to the principal underwriter. Aggregate payments to the principal underwriter under the Distribution Plan are limited by a rule of the National Association of Securities Dealers, Inc. During the fiscal year ended December 31, 2000, the Fund made distribution payments to the principal underwriter under the Distribution Plan aggregating $29,162,846.
The Eaton Vance organization may profit by reason of operation of the Distribution Plan. The Distribution Plan continues in effect from year to year so long as such continuance is approved at least annually by the vote of a majority of (i) the noninterested Trustees of the Fund who have no direct or indirect financial interest in the operation of the Distribution Plan or any agreements related to the Distribution Plan (the "Plan Trustees") and (ii) all of the Trustees then in office. The Distribution Plan may be terminated at 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. The Distribution Plan requires quarterly Trustee review of a written report of the amount expended under the Distribution Plan and the purposes for which such expenditures were made. The Distribution Plan may not be amended to increase materially the payments described therein without approval of the shareholders of the Fund and Trustees. So long as the Distribution Plan is in effect, the selection and nomination of the noninterested Trustees shall be committed to the discretion of such Trustees. The Trustees of the Fund who are "interested" persons of the Fund have an indirect financial interest in the Distribution Plan because their employers (or affiliates thereof) receive distribution and/or service fees under the Distribution Plan or agreements related thereto.
The Trustees of the Fund believe that the Distribution Plan will be a significant factor in the expected growth of the Fund's assets, and will result in increased investment flexibility and advantages which will benefit the Fund and its shareholders. Payments made to the principal underwriter and investment dealers provide incentives to provide continuing personal services to investors and the maintenance of shareholder accounts. By providing incentives to the principal underwriter and investment dealers, the Distribution Plan is expected to result in the maintenance of, and possible future growth in, the assets of the Fund. Based on the foregoing and other relevant factors, the Trustees of the Fund have determined that in their judgment there is a reasonable likelihood that the Distribution Plan will benefit the Fund and its shareholders.
DEALER COMPENSATION. For the fiscal year ended December 31, 2000, the principal underwriter made compensation payments to investment dealers in the aggregate amount of approximately $20,714,806.
CUSTODIAN. Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116, serves as custodian to the Fund and Portfolio. IBT has custody of all cash and securities representing the Fund's interest in the Portfolio, has custody of the Portfolio's assets, maintains the general ledger of the Portfolio and the Fund and computes the daily net asset value of interests in the Portfolio and the net asset value of shares of the Fund. In such capacity it attends to details in connection with the sale, exchange, substitution, transfer or other dealings with the Portfolio's investments, receives and disburses all funds and performs various other ministerial duties upon receipt of proper instructions from the Fund and the Portfolio. IBT also provides services in connection with the preparation of shareholder reports and the electronic filing of such reports with the SEC. EVC and its affiliates and their officers and employees from time to time have transactions with various banks, including IBT. It is Eaton Vance's opinion that the terms and conditions of such transactions were not and will not be influenced by existing or potential custodial or other relationships between the Fund or the Portfolio and such banks.
INDEPENDENT ACCOUNTANTS. Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA 02116, are the independent accountants of the Fund and the Portfolio, providing audit services, tax return preparation, and assistance and consultation with respect to the preparation of filings with the SEC.
TRANSFER AGENT AND DIVIDEND PAYING AGENT AND REGISTRAR. PFPC, Inc., P.O. Box 9653, Providence, RI 02940-9653, serves with respect to the shares as transfer and dividend paying agent and as registrar.
SHAREHOLDER ACCOUNT INFORMATION
CALCULATION OF NET ASSET VALUE. Each investor in the Portfolio, including the Fund, may add to or reduce its investment in the Portfolio on each day the Exchange is open for trading ("Portfolio Business Day") as of the close of regular trading on the Exchange (the "Portfolio Valuation Time"). The value of each investor's interest in the Portfolio will be determined by multiplying the net asset value of the Portfolio by the percentage, determined on the prior Portfolio Business Day, which represented that investor's share of the aggregate interests in the Portfolio on such prior day. Any additions or withdrawals (which would be made pursuant to Portfolio repurchase offers) for the current Portfolio Business Day will then be recorded. Each investor's percentage of the aggregate interest in the Portfolio will then be recomputed as a percentage equal to the fraction (i) the numerator of which is the value of such investor's investment in the Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day plus or minus, as the case may be, the amount of any additions to or withdrawals from the investor's investment in the Portfolio on the current Portfolio Business Day and (ii) the denominator of which is the aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on the prior Portfolio Business Day plus or minus, as the case may be, the amount of the net additions to or withdrawals from the aggregate investment in the Portfolio on the current Portfolio Business Day by all investors in the Portfolio. The percentage so determined will then be applied to determine the value of the investor's interest in the Portfolio for the current Portfolio Business Day.
The Trustees have approved and monitor the procedures under which Senior Loans are valued. BMR and the Valuation Committee may implement new pricing methodologies or expand mark-to-market valuation of Senior Loans in the future, which may result in a change in the Fund's net asset value per share. The Fund's net asset value per share will also be affected by fair value pricing decisions and by changes in the market for Senior Loans. In determining the fair value of 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 Senior Loan and any related agreements, and the position of the Senior 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 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 experience, reputation, stability 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.
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 based upon a dealer 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.
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. 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 public offering price of shares acquired 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 an investment dealer, together with a completed and signed Letter of Transmittal in approved form (available from investment dealers). 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.
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.
EXCHANGE PRIVILEGE. In addition to exchanges into the same class of another Eaton Vance fund, Fund shares may be exchanged for shares of a money market fund sponsored by an investment dealer and approved by the principal underwriter (an "investment dealer fund"). For purposes of calculating the EWC applicable to investment dealer fund shares acquired in an exchange, the EWC schedule applicable to the exchanged shares will apply and the purchase of investment dealer fund shares is deemed to have occurred at the time of the original purchase of the exchanged shares, except that the time during which a shareholder holds such investment dealer fund shares will not be credited toward completing of the EWC period.
TAX-SHELTERED RETIREMENT PLANS. Shares of the Fund are available for purchase in connection with certain tax-sheltered retirement plans. Detailed information concerning these plans, including certain exceptions to minimum investment requirements, and copies of the plans are available from the principal underwriter. This information should be read carefully and consultation with an attorney or tax adviser may be advisable. The information sets forth the service fee charged for retirement plans and describes the federal income tax consequences of establishing a plan. Participant accounting services (including trust fund reconciliation services) will be offered only through third party recordkeepers and not by the principal underwriter. Under all plans, dividends and distributions will be automatically reinvested in additional shares.
During the fiscal year ended December 31, 2000, the principal underwriter received approximately $8,700,000 in EWCs.
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.
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 may 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 Fund and the Portfolio that the benefits from the BMR organization outweigh any disadvantage that may arise from exposure to simultaneous transactions.
For the three fiscal years ended December 31, 2000, the Portfolio paid no brokerage commissions.
The frequency of portfolio purchases and sales, known as the "turnover rate," will vary from year to year. The Portfolio's turnover rate for the fiscal years ended December 31, 2000 and 1999 were 47% and 64%, respectively.
TAXES
The Fund is treated as a separate entity for federal income tax purposes, and intends to qualify each year as a regulated investment company ("RIC"), under the Code. Accordingly, the Fund intends to satisfy certain requirements relating to sources of its income and diversification of its assets and to distribute 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 a federal excise tax, the Code requires the Fund to distribute by the end of each calendar year substantially all of its ordinary income for such year and capital gain net income (for the one-year period ended on October 31 unless an election is made to use the calendar year), plus certain other amounts. Under current law, provided that the Fund qualifies as a RIC, the Portfolio is treated as a partnership for Massachusetts and federal tax purposes and all the required distributions are made, neither the Fund nor the Portfolio should be liable for any income, corporate excise or franchise tax in the Commonwealth of Massachusetts.
If the Fund does not qualify for taxation as a RIC for any taxable year, the Fund's income will be subject to corporate income taxes, and all distributions from earnings and profits, including distributions of net capital gain (if any), will be taxable to shareholders as ordinary income. In addition, in order to requalify for taxation as a RIC, the Fund may be required to recognize unrealized gains, pay substantial taxes and interest, and make certain distributions.
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.
The Portfolio's investments in options, futures contracts, hedging transactions, forward contracts, swaps and certain other transactions will be subject to special tax rules (including mark-to-market, constructive sale, straddle, wash sale, short sale and other rules), the effect of which may be to accelerate income to the Portfolio, defer Portfolio losses, cause adjustments in the holding periods of Portfolio securities, convert capital gain into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to Fund shareholders.
The Portfolio may be subject to foreign taxes on its income (including, in some cases, capital gains) from foreign securities. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes.
Distributions of net investment income and short-term capital gains are taxable as ordinary income, whether paid in cash or additional shares of the Fund. Distributions of net capital gain are taxable to shareholders as long-term capital gain, whether paid in cash or additional shares of the Fund and regardless of the length of time Fund shares have been owned by the shareholder. A loss on the repurchase of shares held for six months or less may be treated as a long-term capital loss to the extent of any distribution of net capital gain with respect to such shares.
Shareholders should consult their tax advisers regarding the specific tax consequences, including state and local tax consequences, of participating in the repurchase. A tender of shares pursuant to the repurchase offer (including an exchange for shares of another Eaton Vance fund) will be treated as a taxable sale or exchange of the shares if the tender (i) completely terminates the shareholder's interest in the Fund, (ii) is treated as a distribution that is "substantially disproportionate" or (iii) is treated as a distribution that is "not essentially equivalent to a dividend". A "substantially disproportionate" distribution generally requires a reduction of at least 20% in the shareholder's proportionate interest in the Fund after all shares are tendered. A distribution "not essentially equivalent to a dividend" requires that there be a "meaningful reduction" in the shareholder's interest, which should be the case if the shareholder has a minimal interest in the Fund, exercises no control over Fund affairs and suffers a reduction in his or her proportionate interest.
The Fund intends to take the position that tendering shareholders will qualify for sale or exchange treatment. If the transaction is treated as a sale or exchange for tax purposes, any gain or loss recognized will be treated as a capital gain or loss by shareholders who hold their shares as a capital asset and as a long-term capital gain or loss if such shares have been held for more than 12 months. If the transaction is not treated as a sale or exchange, the amount received upon a sale of shares may consist in whole or in part of ordinary dividend income, a return of capital or capital gain, depending on the Fund's earnings and profits for its taxable year and the shareholder's tax basis in the shares. In addition, if any amounts received are treated as a dividend to tendering shareholders, a constructive dividend may be received by non-tendering shareholders whose proportionate interest in the Fund has been increased as a result of the tender.
PERFORMANCE
From time to time, the Fund may quote yield based on a specific one-month period. 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 yield may not reflect the imposition of any early withdrawal charges. If the fees or expenses of the Fund or the Portfolio are waived or reimbursed, the Fund's performance will be higher. Information about the performance of the Fund or other investments should not be considered a representation of future Fund performance.
The Fund's SEC yield for the 30-day period ended December 31, 2000 was 8.19%. Yields will fluctuate from time to time and are not necessarily representative of future results.
The calculation of total return and yield do not reflect the amount of any shareholder income tax liability.
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. Past performance is no guarantee of future results. Investment return and principal value will fluctuate and shares, when repurchased, may be worth more or less than their original cost.
VALUE OF A $1,000 INVESTMENT
Total Return
Period Ended ------------
December 31, 2000 Investment Date Initial Value Value on December 31, 2000 Cumulative Annualized
----------------- --------------- ------------- -------------------------- ---------- ----------
Ten Years 12/31/90 $1,000 $1,857.50 85.75% 6.39%
Five Years 12/31/95 $1,000 $1,344.53 34.45% 6.10%
One Year 12/31/99 $1,000 $1,038.93 3.89% 3.89%
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Investors may be provided with information on income producing investments, which may include comparative performance information, evaluations of Fund performance, charts and/or illustrations prepared by independent sources, and narratives (including editorial comments). Performance may be compared to relevant indices, comparable and/or alternative investments, tax-deferred vehicles and to averages, performance rankings or ratings, or other information prepared by recognized mutual fund statistical services. Information included in advertisements and materials furnished to present and prospective investors may also include charts and illustrations showing the effects of inflation and taxes (including their effects on the dollar and the return on various investments), the effects of compounding earnings, and statistics, data and performance studies prepared by independent organizations or included in various publications reflecting the performance achieved by various asset classes or types of investments. Such information may also include commentary prepared by Eaton Vance investment professionals, including portfolio managers.
From time to time, advertisements and other material furnished to current and prospective shareholders may include information on the history of the Fund's net asset value per share for the life of the Fund since its inception.
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.
Investors may be provided with information concerning Fund volatility or risk, including but not limited to beta, standard deviation and Sharpe ratio. Beta is a measure of risk which shows Fund volatility relative to a market index. A fund with a beta of 1 would have performed exactly like the market index; a beta of 2 would mean its performance was twice as volatile as the index, positive or negative. Standard deviation is a measure of a security's volatility, or variability, in expected return. Sharpe ratio is a measure of risk-adjusted performance. The higher the Sharpe ratio the better a fund's historical risk-adjusted return. Information concerning Fund distribution payments (or the payment record of issuers in which the Fund may invest) may also be provided to investors.
Information used in advertisements and materials furnished to present and prospective investors may include statements or illustrations relating to the appropriateness of certain types of securities and/or mutual funds to meet specific financial goals. Such information may address:
. cost associated with aging parents;
. funding a college education (including its actual and estimated cost);
. health care expenses (including actual and projected expenses);
. long-term disabilities (including the availability of, and coverage provided by, disability insurance); and
. retirement (including the availability of social security benefits, the tax treatment of such benefits and statistics and other information relating to maintaining a particular standard of living and outliving existing assets).
Such information may also address different methods for saving money and the results of such methods, as well as the benefits of investing in particular types of securities or in mutual funds. Information provided to investors may also include profiles of different types of investors and different strategies for achieving investment goals (such as asset allocation strategies). Hypothetical examples may be used to demonstrate the foregoing.
Information about portfolio allocation, portfolio turnover and portfolio holdings of the Portfolio at a particular date may be included in advertisements and other material furnished to present and prospective shareholders. Descriptions of Eaton Vance and other Fund and Portfolio service providers, their investment styles, other investment products, personnel and Fund distribution channels, as well as information on the use of investment professionals, also may be provided.
BMR was one of the first investment management firms to manage a portfolio of Senior Loans. BMR has former commercial bank lending officers and investment bank corporate finance officers dedicated to this investment discipline. The services of leading law and accounting firms are used as well.
The Fund's performance may differ from that of other investors in the Portfolio, including other investment companies.
FINANCIAL STATEMENTS
The audited financial statements of, and the independent auditors' reports for, the Fund and Portfolio appear in the Fund's most recent annual report to shareholders and are incorporated by reference into this SAI. A copy of the annual report accompanies this SAI.
Householding. Consistent with applicable law, duplicate mailings of shareholder reports and certain other Fund information to shareholders residing at the same address may be eliminated.
Registrant incorporates by reference the audited financial information for the Fund and the Portfolio for the fiscal year ended December 31, 2000, as previously filed electronically with the SEC (Accession No. 0000950156-01-000134).
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
The ratings indicated herein are believed to be the most recent ratings available at the date of this SAI for the securities listed. Ratings are generally given to securities at the time of issuance. While the rating agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings indicated do not necessarily represent ratings which would be given to these securities on the date of the Portfolio's fiscal year end.
Bonds which are unrated expose the investor to risks with respect to capacity to pay interest or repay principal which are similar to the risks of lower-rated speculative bonds. The Portfolio is dependent on the investment adviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating service may not reflect the effect of recent developments on the issuer's ability to make interest and principal payments.
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." 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 are generally 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 risk appear somewhat larger than the 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 thereby not well safeguarded during other 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 represent 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.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been suspended or withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating classification from Aa through B. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
STANDARD & Poor's Ratings Group
AAA: An obligation rated AAA has the highest rating assigned by S&P. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest rated obligations only to a small degree. The obligor's capacity to meet its financial commitment is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However, 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.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken but payments on this obligation are being continued. C is also used for a preferred stock that is in arrears (as well as for junior debt of issuers rated CCC and CC).
D: The D rating, unlike other ratings, is not prospective; rather, it is used only where a default has actually occurred - and not where a default is only expected. Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
NR: NR indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.
Notes: An obligation which is unrated exposes the investor to risks with respect to capacity to pay interest or repay principal which are similar to the risks of lower-rated speculative obligations. The Portfolio is dependent on the investment adviser's judgment, analysis and experience in the evaluation of such debt.
Investors should note that the assignment of a rating to a bond by a rating service may not reflect the effect of recent developments on the issuer's ability to make interest and principal payments.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
INCLUDED IN PART A:
Financial highlights for each of the ten years ended December 31, 2000
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORT DATED DECEMBER 31, 2000
(ACCESSION NO. 0000950156-01-000134), FILED ELECTRONICALLY PURSUANT TO
SECTION 30(B)(2) OF THE INVESTMENT COMPANY ACT OF 1940.
Financial Statements for EATON VANCE PRIME RATE RESERVES:
Statement of Assets and Liabilities as of December 31, 2000
Statement of Operations for the year ended December 31, 2000
Statements of Changes in Net Assets for each of the two years ended
December 31, 2000
Statement of Cash Flows for the year ended December 31, 2000
Financial Highlights for the five years ended December 31, 2000
Notes to Financial Statements
Independent Auditors' Report
Financial Statements for SENIOR DEBT PORTFOLIO:
Portfolio of Investments as of December 31, 2000
Statement of Assets and Liabilities as of December 31, 2000
Statement of Operations for the year ended December 31, 2000
Statements of Changes in Net Assets for each of the two years ended
December 31, 2000
Statement of Cash Flows for the year ended December 31, 2000
Supplementary Data for the five years ended December 31, 2000
Notes to Financial Statements
Independent Auditors' Report
(2) EXHIBITS (with inapplicable items deleted):
(a) Amended and Restated Agreement and Declaration of Trust dated April 26, 2000 filed as Exhibit (a)(b) to Post-Effective Amendment No. 1 to the Registration Statement under the Securities Act of 1933 (1933 Act File No. 333-32268) and Amendment No. 23 to the Registration Statement under the Investment Company Act of 1940 (1940 Act File No. 811-05808) filed with the Commission on June 16, 2000 (Amendment No. 23) and incorporated herein by reference.
(b)(a) By-Laws (as amended June 12, 1989) filed as Exhibit (b)(a) to Amendment No. 14 and incorporated herein by reference.
(b) By-Laws Amendment dated December 13, 1993 filed as Exhibit (b)(b) to Amendment No. 14 and incorporated herein by reference.
(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.
333-25731) and Amendment No. 17 to the Registration Statement
under the Investment Company Act of 1940 (1940 Act File No.
011-05808) filed with the Commission on July 2, 1997 (Amendment
No. 17) and incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and Authorized Dealers filed as Exhibit (6)(b) to the Post-Effective Amendment No. 61 filed December 28, 1995 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 December 17, 1990 filed as Exhibit (j) to Amendment No. 14 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. 33-63623) and Amendment No. 15 to the Registration Statement under the Investment Company Act of 1940 (1940 Act File No. 811-05808) filed with the Commission on April 1, 1996 (Amendment No. 15) and incorporated herein by reference.
(c) Amendment to Master Custodian Agreement with Investors Bank & Trust Company dated December 21, 1998 as Exhibit (g)(3) to the Registration Statement of Eaton Vance Municipals Trust (File Nos. 33-572 and 811-4409) (Accession No. 0000950156-99-000050) filed January 25, 1999 and incorporated herein by reference.
(d) Extension Agreement dated August 31, 2000 to Master Custodian
Agreement with Investors Bank & Trust Company filed as Exhibit
(j)(d) to the Post-Effective Amendment No. 4 to the Registration
Statement under the Securities Act of 1933 (1933 Act File No.
333-32268) and Amendment No. 26 to the Registration Statement
under the Investment Company Act of 1940 (1940 Act File No.
811-05808) filed with the Commission on January 18, 2001
(Amendment No. 26) and incorporated herein by reference.
(e) Delegation Agreement dated December 11, 2000 with Investors Bank & Trust Company filed herewith.
(k)(a) Administration Agreement dated July 14, 1989 filed as Exhibit
(k)(a) to Amendment No. 14 and incorporated herein by reference.
(b) Administration Agreement Amendment dated October 24, 1994 filed as Exhibit (k)(b) to Amendment No. 14 and incorporated herein by reference.
(c) Distribution Plan adopted December 21, 1998 filed as Exhibit
(k)(c) to the Registration Statement under the Securities Act of
1933 (1933 Act File No. 333-72711) and Amendment No. 20 to the
Registration Statement under the Investment Company Act of 1940
(1940 Act File No. 811-05808) filed with the Commission on
February 22, 1999 (Amendment No. 20) and incorporated herein by
reference.
(d) 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) filed February
25, 1998 and incorporated herein by reference.
(e) Amendment to the Transfer Agency Agreement dated October 18, 1999 filed as Exhibit (h)(2)(b) to the Registration Statement of Eaton Vance Municipals Trust (File Nos. 33-572 and 811-4409) (Accession No. 000950156-99-000723) and incorporated herein by reference.
(l) Opinion and Consent of Counsel dated March 10, 2000 filed as Exhibit (l) to the Registration Statement under the Securities Act of 1933 (1933 Act File No. 333-32268) and Amendment No. 22 to the Registration Statement under the Investment Company Act of 1940 (1940 Act File No. 811-05808) filed with the Commission on March 13, 2000 (Amendment No. 22) and incorporated herein by reference.
(n) Independent Auditors' Consent filed herewith.
(r) Code of Ethics adopted by Eaton Vance Corp., Eaton Vance Management, Boston Management and Research, Eaton Vance Distributors, Inc. and the Eaton Vance Funds effective September 1, 2000 as revised November 6, 2000 filed as Exhibit (p)(1) to Post-Effective Amendment No. 75 of Eaton Vance Growth Trust (File Nos. 02-22019, 811-1241) filed December 21, 2000 and incorporated herein by reference.
(s)(a) Power of Attorney for Eaton Vance Prime Rate Reserves dated February 14, 1997 filed as Exhibit (r) to Amendment No. 17 and incorporated herein by reference.
(b) Power of Attorney for Eaton Vance Prime Rate Reserves dated November 16, 1998 filed as Exhibit (s)(b) to Amendment No. 20 and incorporated herein by reference.
(t)(a) Power of Attorney for Senior Debt Portfolio dated February 14, 1997 filed as Exhibit (s) to Amendment No. 17 and incorporated herein by reference.
(b) Power of Attorney for Senior Debt Portfolio dated November 16, 1998 filed as Exhibit (t)(b) to Amendment No. 20 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 $2,392,930(1)
National Association of Securities Dealers, Inc. Fees $ 168,000(1)
Printing (other than stock certificates) $ 208,000
Engraving and printing stock certificates $ 4,800
Fees and expenses of qualification under state securities laws
(excluding fees of counsel) $ 282,350
Accounting fees and expenses $ 13,500
Legal fees and expenses $ 230,000
----------
Total $3,299,580(1)
==========
-------------------------------
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(1) These amounts include expenses for the shares registered pursuant to the Registration Statements declared effective on May 3, 1989 (File No. 33-28516); August 9, 1989 (File No. 33-30268); July 3, 1990 (File No. 33-34922); November 28, 1995 (File No. 33-63623); May 1, 1997 (File No. 333-25731); November 2, 1998 (File No. 333-65869); May 3, 1999 (File No. 333-72711); and March 15, 2000 (File No. 333-32268).
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 benefical interest 91,368
as of
March 15, 2001
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ITEM 29. INDEMNIFICATION
The Registrant's By-Laws contain provisions limiting the liability, and providing for indemnification, of the Trustees and officers under certain circumstances. Registrant's Trustees and officers are insured under a standard investment company errors and omissions insurance policy covering loss incurred by reason of negligent errors and omissions committed in their capacities as such.
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" in the Prospectus and "Investment Advisory and Administrative 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, 16th Floor, Boston, MA 02116, and its transfer agent, PFPC, Inc., 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, The Eaton Vance Building, 255 State Street, Boston, MA 02109. Registrant is informed that all applicable accounts, books and documents required to be maintained by registered investment advisers are in the custody and possession of Eaton Vance Management and Boston Management and Research.
ITEM 32. MANAGEMENT SERVICES
None.
ITEM 33. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the continuous offering of the shares; and
(4) To send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Amendment to the Registration Statement pursuant to Rule 486(b) under the Securities Act of 1933 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Boston, and the Commonwealth of Massachusetts, on April 2, 2001.
EATON VANCE PRIME RATE RESERVES
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on April 2, 2001.
SIGNATURE TITLE
--------- -----
James B. Hawkes*
---------------- Trustee, President and Principal Executive Officer
James B. Hawkes
/s/ James L. O'Connor
--------------------- Treasurer (Principal Financial and Accounting Officer)
James L. O'Connor
Jessica M. Bibliowicz*
---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
-------------- Trustee
Lynn A. Stout
Jack L. Treynor*
----------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
-----------------------------------
Alan R. Dynner (As attorney-in-fact)
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SIGNATURES
Senior Debt Portfolio has duly caused this Amendment to the Registration Statement on Form N-2 of Eaton Vance Prime Rate Reserves (File No. 333-32268) to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Boston and the Commonwealth of Massachusetts, on April 2, 2001.
SENIOR DEBT PORTFOLIO
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in their capacities and on April 2, 2001.
SIGNATURE TITLE
--------- -----
James B. Hawkes* Trustee, President and Principal Executive Officer
----------------
James B. Hawkes
/s/ James L. O'Connor Treasurer and Principal Financial and Accounting Officer
---------------------
James L. O'Connor
Jessica M. Bibliowicz*
---------------------- Trustee
Jessica M. Bibliowicz
Donald R. Dwight*
----------------- Trustee
Donald R. Dwight
Samuel L. Hayes, III*
--------------------- Trustee
Samuel L. Hayes
Norton H. Reamer*
----------------- Trustee
Norton H. Reamer
Lynn A. Stout*
-------------- Trustee
Lynn A. Stout
Jack L. Treynor*
---------------- Trustee
Jack L. Treynor
*By: /s/ Alan R. Dynner
---------------------------------
Alan R. Dynner (As attorney-in-fact)
|
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
(j)(e) Delegation Agreement dated December 11, 2000 with Investors Bank
& Trust Company
(n) Independent Auditors' Consent
|
AGREEMENT, dated as of December 11, 2000 by and between INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the "Delegate"), and each of the funds listed on Appendix A (each a "Fund").
WHEREAS, pursuant to the provisions of Rule 17f-5 ("Rule 17f-5") under the Investment Company Act of 1940, as amended (the "1940 Act"), and subject to the terms and conditions set forth herein, the Board of the Fund desires to delegate to the Delegate certain responsibilities concerning Foreign Assets (as defined below), and the Delegate hereby agrees to accept such delegation, as described herein; and
WHEREAS, pursuant to the provisions of Rule 17f-7 ("Rule 17f-7") under the 1940 Act, and subject to the terms and conditions set forth herein, the Board of the Fund desires to retain the Delegate to perform certain duties concerning Securities Depositories outside the United States, and the Delegate hereby agrees to perform such duties , as described herein;
NOW THEREFORE, in consideration of the premises and of the mutual agreements contained herein, the parties hereto agree as follows:
Capitalized terms in this Agreement have the following meanings:
a. AUTHORIZED REPRESENTATIVE
Authorized Representative means any one of the persons who are empowered, on behalf of the parties to this Agreement, to receive notices from the other party and to send notices to the other party.
b. BOARD
Board means the Board of Directors (or the body authorized to exercise authority similar to that of the board of directors of a corporation) of a Fund.
c. COUNTRY RISK
Country Risk means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's financial infrastructure (including any risks related to Securities Depositories operating in such country); prevailing custody and settlement practices; and laws applicable to the safekeeping and recovery of Foreign Assets held in custody.
d. ELIGIBLE FOREIGN CUSTODIAN
Eligible Foreign Custodian has the meaning set forth in Rule
17f-5(a)(1) and it is understood that such term includes any bank as defined in
Section 2(a)(5) of the 1940 Act meeting the requirements of Section 17(f) of the
1940 Act for a custodian.
e. FOREIGN ASSETS
Foreign Assets has the meaning set forth in Rule 17f-5(a)(2).
f. FOREIGN CUSTODY MANAGER
Foreign Custody Manager has the meaning set forth in Rule 17f-5(a)(3).
g. SECURITIES DEPOSITORY
Securities Depository has the meaning set forth in Rule 17f-4(a).
h. MONITOR
Monitor means to re-assess or re-evaluate, at reasonable intervals, a decision, determination or analysis previously made.
a. DELEGATE'S REPRESENTATIONS
Delegate represents that it is a trust company chartered under the laws of the Commonwealth of Massachusetts. Delegate further represents that the persons executing this Agreement and any amendment or appendix hereto on its behalf are duly authorized to so bind the Delegate with respect to the subject matter of this Agreement.
b. FUND'S REPRESENTATIONS
Each Fund represents that its Board has determined that it is reasonable to rely on Delegate to perform the responsibilities described in this Agreement. Each Fund further represents that the persons executing this Agreement and any amendment or appendix hereto on its behalf are duly authorized to so bind the Fund with respect to the subject matter of this Agreement.
a. INITIAL JURISDICTIONS AND DEPOSITORIES
The authority delegated by this Agreement in connection with Rule 17f-5 applies only with respect to a Fund's Foreign Assets held in the jurisdictions listed in Appendix B1. Delegate's responsibilities under this Agreement in connection with Rule 17f-7 apply only with respect to the Securities Depositories listed in Appendix B2. Upon the creation of a new Securities Depository in any of the jurisdictions listed in Appendix B1 at the time of such creation, such Securities Depository will automatically be deemed to be listed in Appendix B2 and will be covered by the terms of this Agreement provided Delegate has delivered to each Fund or its investment adviser (as used in this Agreement, "investment adviser" shall mean the entity responsible for the day to day management of the Fund's investment program, be it an investment adviser or a sub-adviser) the information specified in Section 6(c) of this Agreement relating to the Securities Depository's qualification as an Eligible
Securities Depository and if such creation occurs on or after July 1, 2001, a risk analysis for such Securities Depository in accordance with Rule 17f-7(a)(1)(i)(A).
b. ADDED JURISDICTIONS AND DEPOSITORIES
Jurisdictions and related Securities Depositories may be added to Appendix B1 and Appendix B2, respectively, by written agreement in the form of Appendix C. Delegate's responsibility and authority with respect to any jurisdiction or Securities Depository, respectively, so added will commence at the later of (i) the time that Delegate's Authorized Representative and Board's Authorized Representative have both executed a copy of Appendix C listing such jurisdiction and/or Securities Depository, or (ii) the time that Delegate's Authorized Representative receives a copy of such fully executed Appendix C, provided that, with respect to the addition of any Securities Depository to Appendix B2 pursuant to this Section 3(b), such addition shall be effective only if Delegate has delivered to each Fund or its investment adviser the information specified in Section 6(c) of this Agreement relating to the Securities Depository's qualification as an Eligible Securities Depository and if such creation occurs on or after July 1, 2001, a risk analysis for such Securities Depository in accordance with Rule 17f-7(a)(1)(i)(A).
c. WITHDRAWN JURISDICTIONS
Each Fund's Board may withdraw its (i) delegation to Delegate
with respect to any jurisdiction or (ii) retention of Delegate with respect to
any Securities Depository, upon written notice to Delegate. Delegate may
withdraw its (i) acceptance of delegation with respect to any jurisdiction or
(ii) retention with respect to any Securities Depository, upon written notice to
any Board. Thirty days (or, if such time period is less than reasonably
practicable, such longer period as to which the parties agree in such event)
after receipt of any such notice by the Authorized Representative of the party
other than the party giving notice, Delegate shall have no further
responsibility or authority under this Agreement with respect to the
jurisdiction(s) or Securities Depository as to which delegation is withdrawn.
a. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS
Subject to the provisions of this Agreement and the requirements of Rule 17f-5 (and any other applicable law), Delegate is authorized to place and maintain a Fund's Foreign Assets in the care of any Eligible Foreign Custodian(s) selected by Delegate in each jurisdiction to which this Agreement applies, except that Delegate does not accept such authorization with regard to Securities Depositories.
b. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS
Subject to the provisions of this Agreement and the requirements of Rule 17f-5 (and any other applicable law), Delegate is responsible for entering into a written contract with each Eligible Foreign Custodian Delegate selects to custody a Fund's Foreign Assets.
In each case in which Delegate has exercised the authority delegated under this Agreement to place Foreign Assets with an Eligible Foreign Custodian, Delegate shall establish a system to Monitor the appropriateness of maintaining the Fund's Foreign Assets with such Eligible Foreign Custodian under Section 7(b) of this Agreement and the performance of the contract entered into with such Eligible Foreign Custodian under Section 7(c) of this Agreement. If Delegate's arrangements with an Eligible Foreign Custodian for custody of a Fund's Foreign Assets no longer meet the requirements of Rule 17f-5, Delegate shall withdraw the Fund's Foreign Assets from the custody of such Eligible Foreign Custodian and make arrangements for the custody of such Foreign Assets with a successor Eligible Foreign Custodian meeting the requirements of Rule 17f-5 in accordance with the terms of this Agreement, as soon as reasonably practicable; the Fund shall bear all reasonable expenses relating to the relocation of Foreign Assets under such circumstances provided Delegate's performance of its duties with respect to the custody of such Foreign Assets has met the standard of care set forth in Section 8 of this Agreement. If Delegate determines that no successor custodian will meet the requirements of this Agreement and Rule 17f-5, then Delegate shall promptly notify the Fund or its investment adviser of such fact and shall comply with such instructions as the Fund or its investment adviser may reasonably give in order to permit the Fund to withdraw such Foreign Assets as soon as reasonably practicable in accordance with Rule 17f-5.
Notwithstanding anything herein to the contrary, beginning 30 days after Delegate has notified a Fund or its investment adviser that no custodian in a particular jurisdiction will meet the requirements of this Agreement and Rule 17f-5, Delegate shall no longer be responsible, and Delegate shall not be liable and shall be held harmless, for such jurisdiction under this Agreement.
a. Delegate shall, by no later than July 2, 2001, provide the Fund or its investment adviser with an analysis of the custody risks associated with maintaining assets with each Securities Depository listed on Appendix B2 hereto in accordance with Rule 17f-7(a)(1)(i)(A).
b. In accordance with the requirements of Rule 17f-7, Delegate shall Monitor the custody risks associated with maintaining assets with each Securities Depository listed on Appendix B2 hereto on a continuing basis, and shall promptly notify the Fund or its investment adviser of any material change in such risks.
c. Delegate shall, concurrent with the execution of this Agreement, provide each Fund or its investment adviser with information which will enable such Fund or its investment adviser to determine whether each Securities Depository listed in Appendix B2 is an Eligible Securities Depository as defined in Rule 17f-7(b)(1). Delegate shall notify each Fund or its investment adviser of any material change in any information provided by Delegate regarding whether a Securities Depository meets the definition of Eligible Securities Depository promptly after becoming aware of any such change.
a. DETERMINATIONS REGARDING COUNTRY RISK
Delegate shall not be responsible for such Country Risk as is incurred by placing and maintaining Foreign Assets in the jurisdictions to which this Agreement applies except as provided in this Agreement and Rules 17f-5and 17f-7. Except as specifically described herein, nothing in this Agreement shall require Delegate to make any selection or to engage in any Monitoring on behalf of Fund that would entail consideration of Country Risk.
b. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS
Delegate may place and maintain a Fund's Foreign Assets with an Eligible Foreign Custodian only if Delegate determines that the Fund's Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the relevant market after considering all factors relevant to the safekeeping of such Foreign Assets, including, without limitation;
i. The Eligible Foreign Custodian's practices, procedures, and internal controls, including, but not limited to, the physical protections available for certificated securities (if applicable), the method of keeping custodial records, and the security and data protection practices;
ii. Whether the Eligible Foreign Custodian has the requisite financial strength to provide reasonable care for Foreign Assets;
iii. The Eligible Foreign Custodian's general reputation and standing;
iv. Whether Fund will have jurisdiction over and be able to enforce judgments against the Eligible Foreign Custodian, such as by virtue of the existence of any offices of the Eligible Foreign Custodian in the United States or the Eligible Foreign Custodian's consent to service of process in the United States;
c. WRITTEN CONTRACTS
The arrangement with each Eligible Foreign Custodian pursuant to this Agreement shall be governed by a written contract. Delegate shall determine that each such contract provides reasonable care for a Fund's Foreign Assets based on the standards specified in Section 7(b) of this Agreement. Delegate shall ensure that each such contract meets the requirements of Rule 17f-5(c)(2)(i)-(ii).
a. In exercising the authority delegated under this Agreement with regard to its duties under Rule 17f-5, Delegate agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of Foreign Assets of an investment company registered under the 1940 Act would exercise.
b. In carrying out its responsibilities under this Agreement with regard to Rule 17f-7, Delegate agrees to exercise reasonable care, prudence and diligence.
Delegate agrees to provide written reports notifying a Fund's Board of the placement of Foreign Assets with a particular Eligible Foreign Custodian and of any material change in a Fund's arrangements with Eligible Foreign Custodians. Such reports shall be provided to Board quarterly for consideration at the next regularly scheduled meeting of the Board or earlier if deemed necessary or advisable by the Delegate in its sole discretion or requested by the Board.
With respect to the jurisdictions listed in Appendix B1, or added thereto pursuant to Article 3, Delegate agrees to provide the Board and the Fund's investment adviser with access to Eyes to the WorldTM, a service available through the Delegate's Web Site at www.ibtco.com, containing information relating to Country Risk, if available, as is specified in Appendix D to this Agreement. Such information relating to Country Risk shall be updated from time to time as the Delegate deems necessary.
a. Notwithstanding anything in this Agreement to the contrary, in no event shall the Delegate or any of its officers, directors, employees or agents (collectively, the "Indemnified Parties") be liable to the Fund or any third party, and the Fund shall indemnify and hold the Delegate and the Indemnified Parties harmless from and against any and all loss, damage, liability, actions, suits, claims, costs and expenses, including legal fees, (a "Claim") arising as a result of any act or omission of the Delegate or any Indemnified Party under this Agreement, except to the extent any Claim results from the negligence, willful misfeasance or bad faith of the Delegate or any Indemnified Party. Without limiting the foregoing, neither the Delegate nor the Indemnified Parties shall be liable for, and the Delegate and the Indemnified Parties shall be indemnified against, any Claim arising as a result of:
i. Any act or omission by the Delegate or any Indemnified Party in reasonable good faith reliance upon the terms of this Agreement, any resolution of the Board, telegram, telecopy, notice, request, certificate or other instrument reasonably believed by the Delegate to be genuine;
ii. Any information which the Delegate provides or does not provide under Section 10 hereof, except for any information provided under Section 10 hereof that comprises information concerning Securities Depositories provided pursuant to Section 6 hereof;
iii. Any acts of God, earthquakes, fires, floods, storms or other disturbances of nature, epidemics, strikes, riots, nationalization, expropriation, currency restrictions, acts of war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation, the interruption, loss or malfunction of utilities, transportation or computers (hardware or software)
and computer facilities, the unavailability of energy sources and other similar happenings or events.
b. Notwithstanding anything to the contrary in this Agreement, in no event shall the Delegate or the Indemnified Parties be liable to the Fund or any third party for lost profits or lost revenues or any special, consequential, punitive or incidental damages of any kind whatsoever in connection with this Agreement or any activities hereunder.
This Agreement shall be effective as of the later of the date of execution on behalf of each Fund or Delegate and shall remain in effect until terminated as provided herein. This Agreement may be terminated with respect to any Fund at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective 30 days after receipt by the non-terminating party of such notice. Termination of this Agreement with respect to any Fund shall not affect this Agreement as it applies to Delegate and any other Fund.
The respective Authorized Representatives of each Fund and its Board, and the addresses to which notices and other documents under this Agreement are to be sent to each, are as set forth in Appendix E. Any Authorized Representative of a party may add or delete persons from that party's list of Authorized Representatives by written notice to an Authorized Representative of the other party.
This Agreement shall be constructed in accordance with the laws of the Commonwealth of Massachusetts without regard to principles of choice of law.
Delegate expressly acknowledges the provision in the Declaration of Trust or equivalent instrument of each Fund organized as a business trust which limits the personal liability of the trustees, officers, employees and shareholders of such Fund, and hereby agrees that they shall have recourse only to such Fund for payment of claims or obligations as between such Fund and Delegate arising out of this Agreement and shall not seek satisfaction from any trustee, officer, employee or shareholders of such Fund. In addition, Delegate expressly acknowledges and agrees that each Fund listed on Appendix A hereto is executing this Agreement in its individual capacity and that it will not be responsible for any obligation of any other Fund under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first written above.
Investors Bank & Trust Company
By: /s/ Michael Rogers
------------------
Name: Michael Rogers
Title: Executive Vice President
|
Each of the Funds listed on Appendix A hereto.
By: /s/ James L. O'Connor
---------------------
Name: James L. O'Connor
Title: Treasurer
|
A -- Eaton Vance Funds
B1 -- Jurisdictions Covered
B2 -- Securities Depositories Covered
C -- Form for Adding Jurisdictions/Securities Depositories Covered
D-- Information Regarding Country Risk
E -- Authorized Representatives
SPOKE FUNDS HUB FUNDS ----------- --------- EATON VANCE GROWTH TRUST Eaton Vance Asian Small Companies Fund Asian Small Companies Portfolio Eaton Vance Growth Fund Growth Portfolio Eaton Vance Greater China Growth Fund Greater China Growth Portfolio Eaton Vance Information Age Fund Information Age Portfolio Eaton Vance Worldwide Health Sciences Worldwide Health Sciences Portfolio Fund |
EATON VANCE MUTUAL FUNDS TRUST
Eaton Vance Cash Management Fund Cash Management Portfolio
Eaton Vance Floating-Rate Fund Floating Rate Portfolio
Eaton Vance Floating-Rate High Income Fund Floating Rate Portfolio
High Income Portfolio
Eaton Vance Government Obligations Fund Government Obligations Portfolio
Eaton Vance High Income Fund High Income Portfolio
Eaton Vance Insured High Income Fund High Income Portfolio
Eaton Vance Insured Tax-Managed Emerging Tax-Managed Emerging Growth
Growth Fund Portfolio
Eaton Vance Insured Tax-Managed Growth Fund Tax-Managed Growth Portfolio
Eaton Vance Insured Tax-Managed Tax-Managed International Growth
International Growth Fund Portfolio
Eaton Vance Money Market Fund Cash Management Portfolio
Eaton Vance Municipal Bond Fund N/A
Eaton Vance Strategic Income Fund Strategic Income Portfolio
Eaton Vance Tax Free Reserves N/A
Eaton Vance Tax-Managed Capital Capital Appreciation Portfolio
Appreciation Fund
Eaton Vance Tax-Managed Emerging Growth Tax-Managed Emerging Growth
Fund Portfolio (1)
Eaton Vance Tax-Managed New America Fund Tax-Managed Emerging Growth
Portfolio (1)
Eaton Vance Tax-Managed Growth Fund Tax-Managed Growth Portfolio
Eaton Vance Tax-Managed America Fund Tax-Managed Growth Portfolio
Eaton Vance Tax-Managed International Tax-Managed International Growth
Growth Fund Portfolio
Eaton Vance Tax-Managed Value Fund N/A
Eaton Vance Tax-Managed Young Shareholder Capital Appreciation Portfolio
Fund
|
EATON VANCE SERIES TRUST
Capital Exchange Fund Tax-Managed Growth Portfolio
EATON VANCE SPECIAL INVESTMENT TRUST
Eaton Vance Balanced Fund Capital Growth Portfolio/
Investment Grade Income Portfolio
Eaton Vance Emerging Markets Fund Emerging Markets Portfolio
Eaton Vance Greater India Fund South Asia Portfolio
|
Eaton Vance Growth & Income Fund Growth & Income Portfolio Eaton Vance Institutional Emerging Markets Emerging Markets Portfolio Fund Eaton Vance Institutional Short Term N/A Treasury Fund Eaton Vance Special Equities Fund Special Equities Portfolio Eaton Vance Small Company Growth Fund Small Company Growth Portfolio Eaton Vance Utilities Fund Utilities Portfolio |
EATON VANCE VARIABLE TRUST
Eaton Vance VT Floating-Rate Income Fund N/A Eaton Vance VT Income Fund of Boston N/A Eaton Vance VT Information Age Fund N/A Eaton Vance VT Worldwide Health Sciences N/A Fund |
OTHER FUNDS
Eaton Vance Advisers Senior Floating-Rate Senior Debt Portfolio Fund Eaton Vance Prime Rate Reserves Senior Debt Portfolio Eaton Vance Senior Income Trust N/A EV Classic Senior Floating-Rate Fund Senior Debt Portfolio Eaton Vance Institutional Senior Senior Debt Portfolio Floating-Rate Fund |
Argentina Kenya Austria Korea Australia Latvia Bahrain Lebanon Bangladesh Lithuania Belgium Luxembourg Bermuda Malaysia Bolivia Mauritius Botswana Mexico Brazil Morocco Bulgaria Namibia Canada Netherlands Chile New Zealand China Norway Clearstream (Cedel) Oman Colombia Pakistan Costa Rica Panama Croatia Papau New Guinea Cyprus Peru Czech Republic Philippines Denmark Poland Ecuador Portugal Egypt Romania Estonia Russia Euroclear Singapore Finland Slovak Republic France Slovenia Germany South Africa Ghana Spain Greece Sri Lanka Hong Kong Swaziland Hungary Sweden Iceland Switzerland India Taiwan Indonesia Thailand Ireland Turkey Israel Ukraine Italy United Kingdom Ivory Coast Uruguay Japan Venezuela Jordan Zambia Kazakhstan Zimbabwe |
Argentina CDV
CRYL
Australia Austraclear Ltd.
CHESS
RITS
Austria OeKB AG
Bahrain None
Bangladesh None
Belgium BKB
CIK
Bermuda None
Botswana None
Brazil CBLC
CETIP
SELIC
Bulgaria The Bulgarian National Bank
The Central Depository
Canada Bank of Canada
CDS
Chile DCV
China SSCC
SSCCRC
Clearstream
Colombia DCV
DECEVAL
Costa Rica CEVAL
|
Croatia CNB
Ministry of Finance
SDA
Czech Republic SCP
TKD
Denmark VP
Ecuador DECEVALE, S.A.
Egypt Misr for Clearing, Settlement
& Dep.
Estonia ECDSL
Euroclear
Finland APK
France Sicovam SA
Germany Clearstream
Ghana None
Greece Bank of Greece
CSD
Hong Kong CCASS
CMU
Hungary Keler Ltd.
India CDSL
NSDL
Indonesia Bank Indonesia
PT.KSEI
Ireland CREST
Gilt Settlement Office
Israel TASE Clearing House Ltd.
Italy Banca d-Italia
Monte Titoli
Ivory Coast* Depositaire Central/Banque de
Reglement
Japan Bank of Japan
|
JASDEC
Jordan SDC
Kazakhstan Kazakhstan Central Securities
Depository
Kenya Central Bank of Kenya Central
Depository
Korea KSD
Latvia Bank of Latvia
LCD
Lebanon Banque de Liban
MIDCLEAR
Lithuania CSDL
Luxembourg Clearstream
Malaysia BNM (SSTS)
MCD
Mauritius CDS
Mexico S.D. Indeval
Morocco Maroclear S.A.
Netherlands NECIGEF
New Zealand New Zealand Central Securities
Depository
Norway VPS
Oman MDSRC
Pakistan Central Depository Co. of
Pakistan Limited
State Bank of Pakistan
Peru CAVALI
Philippines PCD
RoSS
Poland CRBS
NDS
Portugal Central de Valores Mobiliarios
|
Romania NBR
SNCDD
Stock Exchange Registry,
Clearing & Settlement
Russia DCC
NDC
VTB
Singapore CDP
MAS
Slovak Republic NBS
SCP
Slovenia KDD
South Africa STRATE
The Central Depository (Pty)
Ltd.
Spain Banco de Espana
SCLV
Sri Lanka CDS
Sweden VPC AB
Switzerland SIS SegaIntersettle AG
Taiwan TSCD
Thailand TSD
Turkey CBT
Takasbank
Ukraine Depository of the National
Bank of Ukraine
MFS Depository
Uruguay None
United Kingdom CMO
CREST
Venezuela BCV
CVV
Zambia Bank of Zambia
LuSE CSD
Zimbabwe None
|
* Benin, Burkina-Faso, Guinea Bissau, Mali, Nigeria, Senegal, and Togo are available through the Ivory Coast
Pursuant to Article 3 of this Agreement, Delegate and Board agree that the following jurisdictions and Securities Depositories shall be added to Appendices B1 and B2, respectively:
[insert additional countries/depositories]
INVESTORS BANK & TRUST COMPANY
By: ___________________________________
Name:
Title:
[FUND]
By:____________________________________
Name:
Title:
DATE: ______________________________
To aid the Board in its determinations regarding Country Risk, Delegate will furnish Board annually with respect to the jurisdictions specified in Article 3, the following information:
1. Copy of Addenda or Side Letters to Subcustodian Agreements
2. Legal Opinion, if available, with regard to:
a) Access to books and records by the Fund's accountants
b) Ability to recover assets in the event of bankruptcy of a custodian
c) Ability to recover assets in the event of a loss
d) Likelihood of expropriation or nationalization, if available
e) Ability to repatriate or convert cash or cash equivalents
3. Audit Report
4. Copy of Balance Sheet from Annual Report
5. Country Profile Matrix containing market practice for:
a) Delivery versus payment
b) Settlement method
c) Currency restrictions
d) Buy-in practice
e) Foreign ownership limits
f) Unique market arrangements
The names and addresses of each party's authorized representatives are set forth below:
A. BOARD
The Eaton Vance Funds
The Eaton Vance Building
255 State Street
Boston, MA 02109
Attention: James O'Connor, Treasurer
Fax: (617) 482-3836
With a copy to:
Eaton Vance Management
The Eaton Vance Building
255 State Street
Boston, MA 02109
Attention: Robert Toner, Esq., Vice President and Counsel
Fax: (617) 338-8054
B. DELEGATE
Investors Bank & Trust Company
200 Clarendon Street
P.O. Box 9130
Boston, MA 02117-9130
Attention: Chris Smith, Director, Client Management
Fax: (617) 330-6033
With a copy to:
Investors Bank & Trust Company
200 Clarendon Street
P.O. Box 9130
Boston, MA 02117-9130
Attention: Andrew S. Josef, Assistant General Counsel
Fax: (617) 946-1929
EXHIBIT (n)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment No. 5 to the Registration Statement (1933 Act File No. 333-32268) on Form N-2 of Eaton Vance Prime Rate Reserves (the "Fund") of our reports each dated February 16, 2001, of the Fund and Senior Debt Portfolio included in the December 31, 2000 Annual Report to Shareholders of the Fund.
We also consent to the reference to our Firm under the heading "Financial Highlights" in the Prospectus and under the heading "Other Service Providers" in the Statement of Additional Information of the Registration Statement.
/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Boston, Massachusetts
April 2, 2001
|