As filed with the Securities and Exchange
Commission on October 27, 2020
1933 Act File No. 333-227968
1940 Act File No. 811-09013
SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM N-2
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT of 1933
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¨
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PRE-EFFECTIVE AMENDMENT NO.
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¨
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POST-EFFECTIVE AMENDMENT NO. 4
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x
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and/or
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REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
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o
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AMENDMENT NO. 23
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x
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EATON VANCE SENIOR INCOME TRUST
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(Exact Name of Registrant as Specified in Charter)
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Two International Place, Boston, Massachusetts 02110
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(Address of Principal Executive Offices)
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(617) 482-8260
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(Registrant’s Telephone Number)
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Maureen A. Gemma
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Two International Place, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities
being registered on this form are to be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, as amended, other than securities offered in connection with a dividend reinvestment plan, check the following box. x
It is proposed that this filing will become effective (check appropriate
box):
¨ When
declared effective pursuant to Section 8(c)
x Immediately
upon filing pursuant to no-action relief granted to Registrant on June 26, 2013
Prospectus Supplement
(To Prospectus dated October 27, 2020)
Eaton Vance Senior Income Trust
Up
to 1,838,575 Common Shares
Important Note. Beginning on January 1, 2021,
as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Trust’s annual and semi-annual
shareholder reports will no longer be sent by mail unless you specifically request paper copies of the reports. Instead, the reports
will be made available on the Trust’s website (funds.eatonvance.com/closed-end-fund-and-term-trust-documents.php), and you
will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder
reports electronically, you will not be affected by this change and you need not take any action. If you hold shares at the Trust’s
transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you may elect to receive shareholder reports
and other communications from the Trust electronically by contacting AST. If you own your shares through a financial intermediary
(such as a broker-dealer or bank), you must contact your financial intermediary to sign up.
You may elect to receive all future Trust
shareholder reports in paper free of charge. If you hold shares at AST, you can inform AST that you wish to continue receiving
paper copies of your shareholder reports by calling 1-866-439-6787. If you own these shares through a financial intermediary, you
must contact your financial intermediary or follow instructions included with this disclosure, if applicable, to elect to continue
to receive paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with
AST or to all funds held through your financial intermediary, as applicable.
Eaton Vance Senior Income Trust (the “Trust,”
“we,” or “our”) is a diversified, closed-end management investment company which commenced operations on
October 30, 1998. Our investment objective is to provide a high level of current income, consistent with the preservation of capital.
The Trust has entered into a distribution
agreement dated February 28, 2019 (the “Distribution Agreement”) with Eaton Vance Distributors, Inc. (the “Distributor”)
relating to the Common Shares offered by this Prospectus Supplement and the accompanying Prospectus dated October 27, 2020. The
Distributor has entered into a dealer agreement, dated February 28, 2019, (the “Dealer Agreement”) with UBS Securities
LLC (the “Dealer”) with respect to the Trust relating to the Common Shares offered by this Prospectus Supplement and
the accompanying Prospectus. In accordance with the terms of the Dealer Agreement, we may offer and sell our Common Shares, $0.01
par value per share, from time to time through the Dealer as sub-placement agent for the offer and sale of the Common Shares. Under
the Investment Company Act of 1940, as amended (the “1940 Act”), the Trust may not sell any Common Shares at a price
below the current net asset value of such Common Shares, exclusive of any distributing commission or discount.
Our Common Shares are listed on the New York
Stock Exchange (“NYSE”) under the symbol “EVF.” As of October 23, 2020, the last reported sale price for
our Common Shares on the NYSE was $5.95 per share.
Sales of our Common Shares, if any, under this
Prospectus Supplement and the accompanying Prospectus may be made in negotiated transactions or transactions that are deemed to
be “at the market” as defined in Rule 415 under the Securities Act of 1933, as amended (the “1933 Act”),
including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange.
The Trust will compensate the Distributor with
respect to sales of the Common Shares at a commission rate of 1% of the gross proceeds of the sale of Common Shares. The Distributor
will compensate the Dealer out of this commission at a certain percentage rate of the gross proceeds of the sale of Common Shares
sold under the Dealer Agreement, with the exact amount of such compensation to be mutually agreed upon by the Distributor and the
Dealer from time to time. In connection with the sale of the Common Shares on the Trust’s behalf, the Distributor may be
deemed to be an “underwriter” within the meaning of the 1933 Act and the compensation of the Dealer may be deemed to
be underwriting commissions or discounts.
The Common Shares have traded both at a premium
and a discount to net asset value (“NAV”). The Trust cannot predict whether Common Shares will trade in the future
at a premium or discount to NAV. The provisions of the 1940 Act, generally require that the public offering price of common shares
(less any underwriting commissions and discounts) must equal or exceed the NAV per share of a company’s common stock (calculated
within 48 hours of pricing). The Trust’s issuance of Common Shares may have an adverse effect on prices in the secondary
market for the Trust’s Common Shares by increasing the number of Common Shares available, which may put downward pressure
on the market price for the Trust’s Common Shares. Shares of common stock of closed-end investment companies frequently trade
at a discount from NAV, which may increase investors’ risk of loss.
Investing in our securities involves certain
risks. You could lose some or all of your investment. See “Investment Objective, Policies and Risks” beginning on page
22 of the accompanying Prospectus. You should consider carefully these risks together with all of the other information contained
in this Prospectus Supplement and the accompanying Prospectus before making a decision to purchase our securities.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus Supplement
or the accompanying Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Prospectus Supplement dated October
27, 2020
This Prospectus Supplement, together with the
accompanying Prospectus, sets forth concisely information about the Trust that you should know before investing. You should read
this Prospectus Supplement and the accompanying Prospectus, which contain important information, before deciding whether to invest
in our securities. You should retain the accompanying Prospectus and this Prospectus Supplement for future reference. A Statement
of Additional Information (“SAI”), dated October 27, 2020 as supplemented from time to time, containing additional
information about the Trust, has been filed with the Securities and Exchange Commission (the “SEC”) and is incorporated
by reference in its entirety into this Prospectus Supplement and the accompanying Prospectus. This Prospectus Supplement, the accompanying
Prospectus and the SAI are part of a “shelf” registration statement that we filed with the SEC. This Prospectus Supplement
describes the specific details regarding this offering, including the method of distribution. If information in this Prospectus
Supplement is inconsistent with the accompanying Prospectus or the SAI, you should rely on this Prospectus Supplement. You may
request a free copy of the SAI, the table of contents of which is on page 55 of the accompanying Prospectus, a free copy of our
annual and semi-annual reports to shareholders (when available), obtain other information or make shareholder inquiries, by calling
toll-free 1-800-262-1122 or by writing to the Trust at Two International Place, Boston, Massachusetts 02110. The Trust’s
SAI and annual and semi-annual reports also are available free of charge on our website at http://www.eatonvance.com and on the
SEC’s website (http://www.sec.gov). You may also obtain these documents, after paying a duplication fee, by electronic request
at the following email address: publicinfo@sec.gov.
Our securities do not represent a deposit or
obligation of, and are not 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.
TABLE OF CONTENTS
You should rely only on the information contained
in, or incorporated by reference into, this Prospectus Supplement and the accompanying Prospectus in making your investment decisions.
The Trust has not authorized any person to provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it. The Trust is not making an offer to sell the securities in any jurisdiction where the offer
or sale is not permitted. You should assume that the information in this Prospectus Supplement and the accompanying Prospectus
is accurate only as of the dates on their covers. The Trust’s business, financial condition and prospects may have changed
since the date of its description in this Prospectus Supplement or the date of its description in the accompanying Prospectus.
Prospectus Supplement
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Prospectus Supplement Summary
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1
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Capitalization
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2
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Summary of Trust Expenses
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3
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Market and Net Asset Value Information
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4
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Use of Proceeds
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5
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Plan of Distribution
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6
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Legal Matters
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6
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Available Information
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7
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Prospectus
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Prospectus Summary
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5
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Summary of Trust Expenses
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17
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Financial Highlights and Investment Performance
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18
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The Trust
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21
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Use of Proceeds
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21
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Portfolio Composition
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21
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Investment Objective, Policies and Risks
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22
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Management of the Trust
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45
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Plan of Distribution
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46
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Distributions
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47
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Federal Income Tax Matters
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47
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Dividend Reinvestment Plan
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49
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Description of Capital Structure
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50
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Custodian and Transfer Agent
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53
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Legal Matters
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53
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Reports to Shareholders
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54
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Independent Registered Public Accounting Firm
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54
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Additional Information
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54
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Table of Contents for the Statement of Additional Information
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55
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The Trust’s Privacy Policy
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56
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Until November 21, 2020 (25 days
after the date of this Prospectus Supplement), all dealers that buy, sell or trade the Common Shares, whether or not participating
in this offering, may be required to deliver the Prospectus and this Prospectus Supplement. This requirement is in addition to
the dealers’ obligation to deliver the Prospectus and this Prospectus Supplement when acting as underwriters and with respect
to their unsold allotments or subscriptions.
CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement, the accompanying
Prospectus and the SAI contain “forward-looking statements.” Forward-looking statements can be identified by the words
“may,” “will,” “intend,” “expect,” “estimate,” “continue,”
“plan,” “anticipate,” and similar terms and the negative of such terms. Such forward-looking statements
may be contained in this Prospectus Supplement as well as in the accompanying Prospectus. By their nature, all forward-looking
statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking
statements. Several factors that could materially affect our actual results are the performance of the portfolio of securities
we hold, the price at which our shares will trade in the public markets and other factors discussed in our periodic filings with
the SEC.
Although we believe that the expectations expressed
in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our
forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements,
are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the “Investment Objective,
Policies and Risks” section of the accompanying Prospectus. All forward-looking statements contained or incorporated by reference
in this Prospectus Supplement or the accompanying Prospectus are made as of the date of this Prospectus Supplement or the accompanying
Prospectus, as the case may be. Except for our ongoing obligations under the federal securities laws, we do not intend, and we
undertake no obligation, to update any forward-looking statement. The forward-looking statements contained in this Prospectus Supplement,
the accompanying Prospectus and the SAI are excluded from the safe harbor protection provided by section 27A of the 1933 Act.
Currently known risk factors that could cause
actual results to differ materially from our expectations include, but are not limited to, the factors described in the “Investment
Objective, Policies and Risks” section of the accompanying Prospectus. We urge you to review carefully that section for a
more detailed discussion of the risks of an investment in our securities.
Prospectus Supplement Summary
The following summary is qualified in its
entirety by reference to the more detailed information included elsewhere in this Prospectus Supplement and in the accompanying
Prospectus and in the SAI.
THE TRUST
Eaton Vance Senior Income Trust (the “Trust,”
“we,” or “our”) is a diversified, closed-end management investment company, which commenced operations
on October 30, 1998. The Trust offers investors the opportunity to receive a high level of current income, through a professionally
managed portfolio investing primarily in senior, secured floating-rate loans (“Senior Loans”), which are normally accessible
only to financial institutions and large corporate and institutional investors, and are not widely available to individual investors.
To the extent consistent with this objective, the Trust may also offer an opportunity for preservation of capital. Investments
are based on Eaton Vance Management’s (“Eaton Vance” or the “Adviser”) internal research and ongoing
credit analysis, which is generally not available to individual investors. An investment in the Trust may not be appropriate for
all investors. There is no assurance that the Trust will achieve its investment objective.
THE ADVISER
Eaton Vance acts as the Trust’s investment
adviser under an Investment Advisory Agreement (the “Advisory Agreement”). The Adviser’s principal office is
located at Two International Place, Boston, MA 02110. Eaton Vance, its affiliates and predecessor companies have been managing
assets of individuals and institutions since 1924 and of investment companies since 1931. As of September 30, 2020, Eaton Vance
and its affiliates managed approximately $517.0 billion of fund and separate account assets on behalf of clients, including approximately
$29.3 billion in floating-rate income assets. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp., a publicly-held holding
company, which through its subsidiaries and affiliates engages primarily in investment management, administration and marketing
activities.
Under the general supervision of the Trust’s
Board, the Adviser will carry out the investment and reinvestment of the assets of the Trust, will furnish continuously an investment
program with respect to the Trust, will determine which securities should be purchased, sold or exchanged, and will implement such
determinations. The Adviser will furnish to the Trust investment advice and office facilities, equipment and personnel for servicing
the investments of the Trust. The Adviser will compensate all Trustees and officers of the Trust who are members of the Adviser’s
organization and who render investment services to the Trust, and will also compensate all other Adviser personnel who provide
research and investment services to the Trust. In return for these services, facilities and payments, the Trust has agreed to pay
the Adviser as compensation under the Advisory Agreement a fee in the amount of 0.74% (0.75% prior to May 1, 2020) of the average
weekly gross assets of the Trust. Gross assets of the Trust shall be calculated by deducting accrued liabilities of the Trust not
including the amount of any preferred shares outstanding or the principal amount of any indebtedness for money borrowed. During
periods in which the Trust is using leverage, the fees paid to Eaton Vance for investment advisory services will be higher than
if the Trust did not use leverage because the fees paid will be calculated on the basis of the Trust’s gross assets, including
proceeds from any borrowings and from the issuance of preferred shares.
THE OFFERING
The Trust has entered into a distribution
agreement dated February 28, 2019 (the “Distribution Agreement”) with Eaton Vance Distributors, Inc. (the “Distributor”)
relating to the common shares of beneficial interest (the “Common Shares”), offered by this Prospectus Supplement and
the accompanying Prospectus dated October 27, 2020 (the “Offering”). The Distributor has entered into a dealer agreement
dated February 28, 2019 (the “Dealer Agreement”) with UBS Securities LLC (the “Dealer”) with respect to
the Trust relating to the Common Shares offered by this Prospectus Supplement and the accompanying Prospectus. In accordance with
the terms of the Dealer Agreement, the Trust may offer and sell up to 1,838,575 Common Shares, par value $0.01 per Common Share,
from time to time through the Dealer as sub-placement agent for the offer and sale of the Common Shares.
Offerings of the Common Shares will be subject
to the provisions of the 1940 Act, which generally require that the public offering price of common shares of a closed-end investment
company (exclusive of distribution commissions and discounts) must equal or exceed the net asset value per share of the company’s
common shares (calculated within 48 hours of pricing), absent shareholder approval or under certain other circumstances.
Sales of the Common Shares, if any, under this
Prospectus Supplement and the accompanying Prospectus may be made in negotiated transactions or transactions that are deemed to
be “at the market” as defined in Rule 415 under the 1933 Act, including sales made directly on the New York Stock Exchange
(“NYSE”) or sales made to or through a market maker other than on an exchange. The Common Shares may not be sold through
agents, underwriters or dealers without delivery or deemed delivery of a Prospectus and an accompanying Prospectus Supplement describing
the method and terms of the offering of Common Shares.
LISTING AND SYMBOL
The Trust’s currently outstanding
Common Shares are listed on the NYSE under the symbol “EVF.” Any new Common Shares offered and sold hereby are expected
to be listed on the NYSE and trade under this symbol. The net asset value of the Common Shares on October 23, 2020 was $6.51 per
share. As of October 23, 2020, the last reported sale price for the Common Shares was $5.95.
USE OF PROCEEDS
The Trust currently intends to invest substantially
all of the net proceeds of any sales of Common Shares pursuant to this Prospectus Supplement in accordance with its investment
objective and policies as described in the accompanying Prospectus under “Investment Objective, Policies and Risks”
within three months of receipt of such proceeds. Such investments may be delayed up to three months if suitable investments are
unavailable at the time or for other reasons, such as market volatility and lack of liquidity in the markets of suitable investments.
Pending such investment, the Trust anticipates that it will invest the proceeds in short-term money market instruments, securities
with remaining maturities of less than one year, cash or cash equivalents. A delay in the anticipated use of proceeds could lower
returns and reduce the Trust’s distribution to the holders of Common Shares (“Common Shareholders”) or result
in a distribution consisting principally of a return of capital.
Capitalization
We may offer and sell up to 1,838,575 of our Common Shares,
$0.01 par value per share, from time to time through the Dealer as sub-placement agent under this Prospectus Supplement and the
accompanying Prospectus. Of the 1,838,575 Common Shares, 1,073,798 have been issued and 764,777 are unsold. In addition, the Trust
has registered, and may take down, additional shares at a later date. There is no guarantee that there will be any sales of our
Common Shares pursuant to this Prospectus Supplement and the accompanying Prospectus. The table below assumes that we will sell
764,777 Common Shares at a price of $5.95 per share (the last reported sale price per share of our Common Shares on the NYSE on
October 23, 2020). Actual sales, if any, of our Common Shares under this Prospectus Supplement and the accompanying Prospectus
may be greater or less than $5.95 per share, depending on the market price of our Common Shares at the time of any such sale. To
the extent that the market price per share of our Common Shares on any given day is less than the net asset value per share on
such day, we will instruct the Dealer not to make any sales on such day.
The following table sets forth our capitalization:
• on a historical
basis as of June 30, 2020 (audited); and
• on a pro
forma as adjusted basis to reflect the assumed sale of 764,777 Common Shares at $5.95 per share (the last reported sale price for
our Common Shares on the NYSE on October 23, 2020), in an offering under this Prospectus Supplement and the accompanying Prospectus,
after deducting the assumed commission of $45,504 (representing an estimated commission to the Distributor of 1.00% of the gross
proceeds of the sale of Common Shares, of which a certain percentage will be paid to the Dealer in connection with sales of Common
Shares effected in this Offering).
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As of
June 30, 2020
(audited)
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Pro Forma
(unaudited)
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Actual
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As
Adjusted
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Net
assets
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$234,657,434
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$239,162,353
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$0.01 par value per share of common shares outstanding
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$ 378,666
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$ 386,314
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Additional paid-in capital
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$ 277,541,221
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$ 282,046,140
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Accumulated loss
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$ (43,262,453)
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$ (43,270,101)
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Net assets
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$ 234,657,434
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$ 239,162,353
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Net asset value per share
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$6.20
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$6.19
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Common shares issued and outstanding
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37,866,607
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38,631,384
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Summary of Trust Expenses
The purpose of the table below is to
help you understand all fees and expenses that you, as a Common Shareholder, would bear directly or indirectly. The table reflects
the issuance of preferred shares in an amount equal to 9.61% of the Trust’s total assets and borrowings in an amount equal
to 26.15% of the Trust’s total assets (including the proceeds of all such leverage) and shows Trust expenses as a percentage
of net assets attributable to Common Shares for the year ended June 30, 2020.
Common Shareholder transaction expenses
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Sales load paid by you (as a percentage of offering price)
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1.00%(1)
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Offering expenses (as a percentage of offering price)
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None(2)
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Dividend reinvestment plan fees
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$5.00(3)
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Annual expenses
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Percentage of net assets attributable
to
Common Shares(4)
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Investment advisory fee
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1.17%(5)
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Interest payments on borrowed funds
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1.19%(6)
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Other expenses
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0.56%
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Acquired Fund Fees and Expenses
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0.06%
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Total annual Trust operating expenses
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2.98%
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Dividends on preferred shares
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0.25%(6)
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Total annual Trust operating expenses and dividends on preferred shares
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3.23%
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EXAMPLE
The following example illustrates the
expenses that Common Shareholders would pay on a $1,000 investment in Common Shares, assuming (i) total annual expenses of 3.23%
of net assets attributable to Common Shares in years 1 through 10; (ii) a sales load of 1.00%; (iii) a 5% annual return; and (iv)
all distributions are reinvested at NAV:
1 Year
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3 Years
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5 Years
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10 Years
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$42
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$109
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$177
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$360
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The above table and example and the assumption
in the example of a 5% annual return are required by regulations of the SEC that are applicable to all investment companies; the
assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the Trust’s
Common Shares. For more complete descriptions of certain of the Trust’s costs and expenses, see “Management of the
Trust.” In addition, while the example assumes reinvestment of all dividends and distributions at NAV, participants in the
Trust’s dividend reinvestment plan may receive Common Shares purchased or issued at a price or value different from NAV.
See “Distributions” and “Dividend Reinvestment Plan.” The example does not include estimated offering costs,
which would cause the expenses shown in the example to increase.
The example should not be considered a
representation of past or future expenses, and the Trust’s actual expenses may be greater or less than those shown. Moreover,
the Trust’s actual rate of return may be greater or less than the hypothetical 5% return shown in the example.
___________________
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(1)
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Represents the estimated commission with respect to the Trust’s Common Shares being sold in
this Offering. There is no guarantee that there will be any sales of the Trust’s Common Shares pursuant to this Prospectus
Supplement and the accompanying Prospectus. Actual sales of the Trust’s Common Shares under this Prospectus Supplement and
the accompanying Prospectus, if any, may be less than as set forth under “Capitalization” above. In addition, the price
per share of any such sale may be greater or less than the price set forth under “Capitalization” above, depending
on market price of the Trust’s Common Shares at the time of any such sale.
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(2)
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Eaton Vance will pay the expenses of the Offering (other than the applicable commissions); therefore,
Offering expenses are not included in the Summary of Trust Expenses. Offering expenses generally include, but are not limited to,
the preparation, review and filing with the SEC of the Trust’s registration statement (including this Prospectus Supplement
and the accompanying Prospectus and the SAI), the preparation, review and filing of any associated marketing or similar materials,
costs associated with the printing, mailing or other distribution of this Prospectus Supplement, the accompanying Prospectus, SAI
and/or marketing materials, associated filing fees, NYSE listing fees, and legal and auditing fees associated with the Offering.
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(3)
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You will be charged a $5.00 service charge and pay brokerage charges if you direct the plan agent
to sell your Common Shares held in a dividend reinvestment account.
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(4)
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Stated as percentage of average net assets attributable to Common Shares for the year ended June
30, 2020.
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(5)
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The advisory fee paid by the Trust to the Adviser is based on the average weekly gross assets of
the Trust, including all assets attributable to any form of investment leverage that the Trust may utilize. Accordingly, if the
Trust were to increase investment leverage in the future, the advisory fee will increase as a percentage of net assets. Pursuant
to the investment advisory agreement and fee reduction agreement between the Trust and the Adviser, the fee is computed at an annual
rate of 0.74% (0.75% prior to May 1, 2020) of the Trust’s average weekly gross assets and is payable monthly. Pursuant to
a fee reduction agreement between the Trust and Eaton Vance that commenced on May 1, 2010, the annual adviser fee rate is reduced
by 0.01% every May 1 thereafter for the next twenty-nine years.
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(6)
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As of June 30, 2020, the outstanding borrowings and APS represented approximately 36.1% leverage.
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Market and Net Asset Value Information
Our Common Shares are listed on the NYSE under
the symbol “EVF.” Our Common Shares commenced trading on the NYSE in 1998.
Our Common Shares have traded both at a premium
and a discount to net asset value or NAV. We cannot predict whether our shares will trade in the future at a premium or discount
to NAV. The provisions of the 1940 Act generally require that the public offering price of Common Shares (less any underwriting
commissions and discounts) must equal or exceed the NAV per share of a company’s common stock (calculated within 48 hours
of pricing). Our issuance of Common Shares may have an adverse effect on prices in the secondary market for our Common Shares by
increasing the number of Common Shares available, which may put downward pressure on the market price for our Common Shares. Shares
of Common Stock of closed-end investment companies frequently trade at a discount from NAV. See “Prospectus Summary—Special
Risk Considerations—Discount from or premium to NAV” on page 9 of the accompanying Prospectus.
The following table sets forth for
the period indicated the high and low closing market prices for Common Shares on the NYSE, and the corresponding NAV per share
and the premium or discount to NAV per share at which the Trust’s Common Shares were trading as of the same date. NAV is
determined no less frequently than daily, generally on each day of the week that the NYSE is open for trading. See “Determination
of Net Asset Value” on page 30 of the accompanying SAI for information as to the determination of the Trust’s net asset
value.
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Market Price
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NAV per Share on Date of Market Price
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NAV Premium/(Discount) on Date of Market Price
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Fiscal Quarter Ended
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High
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Low
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High
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Low
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High
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Low
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September 30, 2020
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$6.01
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$5.29
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$6.53
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$6.20
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(7.96)%
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(14.68)%
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The last reported sale price, NAV
per Common Share and percentage premium/(discount) to NAV per Common Share on October 23, 2020, were $5.95, $6.51 and (8.60)% respectively.
As of October 23, 2020, the net
assets of the Trust were $246,328,891. The following table provides information about our outstanding Common Shares as of October
23, 2020:
Title of Class
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Amount Authorized
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Amount Held by the Trust or for its Account
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Amount Outstanding
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Common Shares
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Unlimited
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0
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37,866,607
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Use of Proceeds
Sales of our Common Shares, if any, under
this Prospectus Supplement and the accompanying Prospectus may be made in negotiated transactions or transactions that are deemed
to be “at the market” as defined in Rule 415 under the 1933 Act, including sales made directly on the NYSE or
sales made to or through a market maker other than on an exchange. There is no guarantee that there will be any sales of our Common
Shares pursuant to this Prospectus Supplement and the accompanying Prospectus. Actual sales, if any, of our Common Shares under
this Prospectus Supplement and the accompanying Prospectus may be less than as set forth below in this paragraph. In addition,
the price per share of any such sale may be greater or less than the price set forth in this paragraph, depending on the market
price of our Common Shares at the time of any such sale. As a result, the actual net proceeds we receive may be more or less than
the amount of net proceeds estimated in this Prospectus Supplement. Assuming the sale of all of the Common Shares offered under
this Prospectus Supplement and the accompanying Prospectus, at the last reported sale price of $5.95 per share for our Common Shares
on the NYSE as of October 23, 2020, we estimate that the net proceeds of this Offering will be approximately $4,504,919 after deducting
the estimated sales load and the estimated offering expenses payable by the Trust, if any.
Subject to the remainder of this section, the
Trust currently intends to invest substantially all of the net proceeds of any sales of Common Shares pursuant to this Prospectus
Supplement in accordance with its investment objective and policies as described in the accompanying Prospectus under “Investment
Objective, Policies and Risks” within three months of receipt of such proceeds. Such investments may be delayed up to three
months if suitable investments are unavailable at the time or for other reasons, such as market volatility and lack of liquidity
in the markets of suitable investments. Pending such investment, the Trust anticipates that it will invest the proceeds in short-term
money market instruments, securities with remaining maturities of less than one year, cash or cash equivalents. A delay in the
anticipated use of proceeds could lower returns and reduce the Trust’s distribution to Common Shareholders or result in a
distribution consisting principally of a return of capital.
Plan of Distribution
Under the Dealer Agreement between the Distributor
and the Dealer, upon written instructions from the Distributor, the Dealer will use its reasonable best efforts, to sell, as sub-placement
agent, the Common Shares under the terms and subject to the conditions set forth in the Dealer Agreement. The Dealer’s solicitation
will continue until the Distributor instructs the Dealer to suspend the solicitations and offers. The Distributor will instruct
the Dealer as to the amount of Common Shares to be sold by the Dealer. The Distributor may instruct the Dealer not to sell Common
Shares if the sales cannot be effected at or above the price designated by the Distributor in any instruction. To the extent that
the market price per share of the Trust’s Common Shares on any given day is less than the net asset value per share on such
day, the Distributor will instruct the Dealer not to make any sales on such day. The Distributor or the Dealer may suspend the
offering of Common Shares upon proper notice and subject to other conditions.
The Dealer will provide written confirmation
to the Distributor following the close of trading on the day on which Common Shares are sold under the Dealer Agreement. Each confirmation
will include the number of shares sold on the preceding day, the net proceeds to the Trust and the compensation payable by the
Distributor to the Dealer in connection with the sales.
The Trust will compensate the Distributor with
respect to sales of the Common Shares at a commission rate of 1.00% of the gross proceeds of the sale of Common Shares. The Distributor
will compensate the Dealer for its services in acting as sub-placement agent in the sale of Common Shares out of this commission
at a certain percentage rate of the gross proceeds of the sale of Common Shares sold under the Dealer Agreement, with the exact
amount of such compensation to be mutually agreed upon by the Distributor and the Dealer from time to time. There is no guarantee
that there will be any sales of the Common Shares pursuant to this Prospectus Supplement and the accompanying Prospectus. Actual
sales, if any, of the Common Shares under this Prospectus Supplement and the accompanying Prospectus may be conducted at a price
that is greater or less than the last reported sale price set forth in this Prospectus Supplement, depending on the market price
of Common Shares at the time of any such sale. Eaton Vance will pay the expenses of the Offering (other than the applicable commissions).
Settlement for sales of Common Shares will
occur on the second trading day following the date on which such sales are made, in return for payment of the net proceeds to the
Trust. There is no arrangement for funds to be received in an escrow, trust or similar arrangement.
The Distributor has agreed to provide indemnification
and contribution to the Dealer against certain civil liabilities, including liabilities under the 1933 Act.
The Dealer Agreement will remain in full force
and effect unless terminated by either party upon 5 days’ written notice to the other party.
The principal business address of the Dealer
is 1285 Avenue of the Americas, New York, NY 10019.
The Dealer and its affiliates hold or may hold
in the future, directly or indirectly, investment interests in the Distributor and its funds. The interests held by the Dealer
or its affiliates are not attributable to, and no investment discretion is held by, the Dealer or its affiliates.
Legal Matters
Certain legal matters in connection with the
Common Shares will be passed upon for the Trust by internal counsel for Eaton Vance.
On July 15, 2020, after the Trust’s
Board of Trustees received a demand letter from counsel to Saba Capital Management, L.P. and a hedge fund it advises (together
“Saba”), the Trust filed a complaint against Saba in Suffolk County Superior Court in Massachusetts seeking a declaratory
judgment as to the validity of an amendment to its by-laws requiring trustee nominees in contested elections to obtain affirmative
votes of a majority of eligible shares in order to be elected. Saba subsequently answered this complaint and asserted counterclaims
for breach of contract and fiduciary duty against the Trust and certain of its affiliates including Eaton Vance Floating-Rate Income
Trust, Eaton Vance Senior Floating-Rate Trust and Eaton Vance Limited Duration Income Fund (collectively, the “Affiliate
Funds”), the Adviser, as well as the Board. The answer and counterclaims seek, with respect to the Affiliate Funds rescission
of this by-law provision, other by-law provisions related to “control share” acquisitions and related relief. As of
the date of this filing, the court has not ruled on these matters.
Available Information
We are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the 1940 Act and are required to file
reports, including annual and semi-annual reports, proxy statements and other information with the SEC. These documents are available
on the SEC’s EDGAR system.
This Prospectus Supplement, the accompanying
Prospectus and the SAI do not contain all of the information in our registration statement, including amendments, exhibits, and
schedules that the Trust has filed with the SEC (File No. 333-227968). Statements in this Prospectus Supplement and the accompanying
Prospectus about the contents of any contract or other document are not necessarily complete and in each instance reference is
made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being
qualified in all respects by this reference.
Additional information about us can be found
in our registration statement (including amendments, exhibits, and schedules) on Form N-2 filed with the SEC. The SEC maintains
a web site (http://www.sec.gov) that contains our registration statement, other documents incorporated by reference, and other
information we have filed electronically with the SEC, including proxy statements and reports filed under the Exchange Act.
BASE PROSPECTUS
Up to 4,551,438 Shares
Eaton Vance Senior Income Trust
Common Shares
Important Note. Beginning on January 1, 2021,
as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Trust’s annual and semi-annual
shareholder reports will no longer be sent by mail unless you specifically request paper copies of the reports. Instead, the reports
will be made available on the Trust’s website (funds.eatonvance.com/closed-end-fund-and-term-trust-documents.php), and you
will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports
electronically, you will not be affected by this change and you need not take any action. If you hold shares at the Trust’s
transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you may elect to receive shareholder reports
and other communications from the Trust electronically by contacting AST. If you own your shares through a financial intermediary
(such as a broker-dealer or bank), you must contact your financial intermediary to sign up.
You may elect to receive all future Trust shareholder
reports in paper free of charge. If you hold shares at AST, you can inform AST that you wish to continue receiving paper copies
of your shareholder reports by calling 1-866-439-6787. If you own these shares through a financial intermediary, you must contact
your financial intermediary or follow instructions included with this disclosure, if applicable, to elect to continue to receive
paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held with AST
or to all funds held through your financial intermediary, as applicable.
Investment
objective and policies. Eaton Vance Senior Income Trust (the “Trust”) is a diversified, closed-end
management investment company, which commenced operations on October 30, 1998. The Trust’s investment objective is to provide
a high level of current income, consistent with the preservation of capital. The Trust will seek to achieve its investment objective
by investing primarily in senior, secured floating-rate loans (“Senior Loans”).
Investment
Adviser. The Trust’s investment adviser is Eaton Vance Management (“Eaton Vance” or the “Adviser”).
As of September 30, 2020, Eaton Vance and its affiliates managed approximately $517 billion of fund and separate account assets
on behalf of clients, including approximately $29.3 billion in floating-rate income assets.
The
Offering. The Trust may offer, from time to time, in one or more offerings (each, an “Offering”), the Trust’s
common shares of beneficial interest, $0.01 par value (“Common Shares”). Common Shares may be offered at prices and
on terms to be set forth in one or more supplements to this Prospectus (each, a “Prospectus Supplement”). You should
read this Prospectus and the applicable Prospectus Supplement carefully before you invest in Common Shares. Common Shares may be
offered directly to one or more purchasers, through agents designated from time to time by us, or to or through underwriters or
dealers. The Prospectus Supplement relating to the Offering will identify any agents, underwriters or dealers involved in the offer
or sale of Common Shares, and will set forth any applicable offering price, sales load, fee, commission or discount arrangement
between the Trust and its agents or underwriters, or among its underwriters, or the basis upon which such amount may be calculated,
net proceeds and use of proceeds, and the terms of any sale. The Trust may not sell any Common Shares through agents, underwriters
or dealers without delivery of a Prospectus Supplement describing the method and terms of the particular Offering of the Common
Shares. (continued on inside cover page)
The
Common Shares have traded both at a premium and a discount to net asset value (“NAV”). The Trust cannot
predict whether Common Shares will trade in the future at a premium or discount to NAV. The provisions of the Investment Company
Act of 1940, as amended (the “1940 Act”), generally require that the public offering price of common shares (less any
underwriting commissions and discounts) must equal or exceed the NAV per share of a company’s common stock (calculated within
48 hours of pricing). The Trust’s issuance of Common Shares may have an adverse effect on prices in the secondary market
for the Trust’s Common Shares by increasing the number of Common Shares available, which may put downward pressure on the
market price for the Trust’s Common Shares. Shares of common stock of closed-end investment companies frequently trade at
a discount from NAV, which may increase investors’ risk of loss.
Investing in shares involves certain risks, including
that the Trust will invest substantial portions of its assets in below investment grade quality securities with speculative characteristics.
See “Investment Objective, Policies and Risks” beginning at page 22.
Neither the Securities and Exchange Commission (“SEC”)
nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
(continued from previous page)
Portfolio
contents. The Trust will pursue its objective by investing its assets primarily in Senior Loans. Under normal market
conditions, the Trust will invest at least 80% of its total assets in Senior Loans of domestic and foreign borrowers that are denominated
in U.S. dollars, euros, British pounds, Swiss francs, Canadian dollars and Australian dollars (each, an “Authorized Foreign
Currency”) making payments in such Authorized Foreign Currency. For the purposes of the 80% test, total assets is defined
as net assets plus any borrowings for investment purposes, including any outstanding preferred shares. Senior Loans typically are
secured with specific collateral and have a claim on the assets and/or stock that is senior to subordinated debtholders and stockholders
of the borrower. Senior Loans are made to corporations, partnerships and other business entities (“Borrowers”) that
operate in various industries and geographical regions, including foreign Borrowers. Senior Loans pay interest at rates that are
reset periodically on the basis of a floating base lending rate plus a premium. 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 (sometimes referred to as “junk”).
Leverage.
The Trust currently uses leverage created by issuing Auction Preferred Shares (“APS”) as well as by loans acquired
with borrowings. On June 27, 2001, the Trust issued 2,200 Series A APS and 2,200 Series B APS, with a liquidation preference per
share of $25,000 plus accumulated but unpaid dividends. On September 23, 2016, the Trust repurchased 968 Series A APS and 968 Series
B APS. On September 14, 2018, the Trust repurchased 480 Series A APS and 480 Series B APS. In addition, in connection with this
repurchase, the Trust increased its borrowing limits under its Revolving Credit and Security Agreement, as amended (the “Agreement”)
with conduit lenders and a bank to allow it to borrow up to $125 million. The proceeds of which were used to invest in accordance
with the Trust’s investment practices and to partially redeem the Trust’s APS. The Trust is required to maintain certain
net asset levels during the term of the Agreement. As of June 30, 2020, the Trust had $95 million in outstanding borrowings, at
an interest rate of 0.35%, in addition to outstanding APS.
The Adviser anticipates that the use of leverage (from the
issuance of APS and borrowings) will result in higher income to holders of Common Shares (“Common Shareholders”) over
time. Use of financial leverage creates an opportunity for increased income but, at the same time, creates special risks. There
can be no assurance that a leveraging strategy will be successful. The fee paid to Eaton Vance will be calculated on the basis
of the Trust’s gross assets, including proceeds from the issuance of APS and borrowings, so the fees will be higher when
leverage is utilized. In this regard, holders of debt or preferred securities do not bear the investment advisory fee. Rather,
Common Shareholders bear the portion of the investment advisory fee attributable to the assets purchased with the proceeds, which
means that Common Shareholders effectively bear the entire advisory fee. See “Investment Objective, Policies and Risks -
Use of Leverage and Related Risks” at page 35, “Investment Objective, Policies and Risks - Additional Risk Considerations”
at page 38 and “Description of Capital Structure” at page 50.
Exchange
Listing. As of October 23, 2020, the Trust had 37,866,607 Common Shares outstanding as well as 1,504 APS outstanding.
The Trust’s Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “EVF.”
As of October 23, 2020, the last reported sale price of a Common Share of the Trust on the NYSE was $5.95. Common Shares offered
and sold pursuant to this Registration Statement will also be listed on the NYSE and trade under this symbol.
This Prospectus, together with any applicable Prospectus Supplement,
sets forth concisely information you should know before investing in the shares of the Trust. Please read and retain this Prospectus
for future reference. A Statement of Additional Information (“SAI”) dated October 27, 2020, has been filed with the
SEC and is incorporated by reference into this Prospectus. You may request a free copy of the SAI, the table of contents of which
is on page 55 of this Prospectus, a free copy of our annual and semi-annual reports to shareholders (when available), obtain other
information or make shareholder inquiries, by calling toll-free 1-800-262-1122 or by writing to the Trust at Two International
Place, Boston, Massachusetts 02110. The Trust’s SAI and annual and semi-annual reports also are available free of charge
on our website at http://www.eatonvance.com and on the SEC’s website (http://www.sec.gov). You may also obtain these documents,
after paying a duplication fee, by electronic request at the following email address: publicinfo@sec.gov.
The Trust’s shares do not represent a deposit or obligation
of, and are not 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.
You should rely only on the information contained or incorporated
by reference in this Prospectus. The Trust has not authorized anyone to provide you with different information. The Trust is not
making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information
contained in this Prospectus is accurate as of any date other than the date on the front of this Prospectus.
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Table of Contents
Prospectus Summary
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5
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Summary of Trust Expenses
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17
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Financial Highlights and Investment Performance
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18
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The Trust
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21
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Use of Proceeds
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21
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Portfolio Composition
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21
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Investment Objective, Policies and Risks
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22
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Management of the Trust
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45
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Plan of Distribution
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46
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Distributions
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47
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Federal Income Tax Matters
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47
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Dividend Reinvestment Plan
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49
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Description of Capital Structure
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50
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Custodian and Transfer Agent
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53
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Legal Matters
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53
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Reports to Shareholders
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54
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Independent Registered Public Accounting Firm
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54
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Additional Information
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54
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Table of Contents for the Statement of Additional Information
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55
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The Trust's Privacy Policy
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56
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, any accompanying Prospectus Supplement and the
SAI contain “forward-looking statements.” Forward-looking statements can be identified by the words “may,”
“will,” “intend,” “expect,” “estimate,” “continue,” “plan,”
“anticipate,” and similar terms and the negative of such terms. Such forward-looking statements may be contained in
this Prospectus as well as in any accompanying Prospectus Supplement. By their nature, all forward-looking statements involve risks
and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several
factors that could materially affect our actual results are the performance of the portfolio of securities we hold, the price at
which our shares will trade in the public markets and other factors discussed in our periodic filings with the SEC.
Although we believe that the expectations expressed in our forward-looking
statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements.
Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and
are subject to inherent risks and uncertainties, such as those disclosed in the “Investment Objective, Policies and Risks”
section of this Prospectus. All forward-looking statements contained or incorporated by reference in this Prospectus or any accompanying
Prospectus Supplement are made as of the date of this Prospectus or the accompanying Prospectus Supplement, as the case may be.
Except for our ongoing obligations under the federal securities laws, we do not intend, and we undertake no obligation, to update
any forward-looking statement. The forward-looking statements contained in this Prospectus, any accompanying Prospectus Supplement
and the SAI are excluded from the safe harbor protection provided by section 27A of the Securities Act of 1933, as amended (the
“1933 Act”).
Currently known risk factors that could cause actual results
to differ materially from our expectations include, but are not limited to, the factors described in the “Investment Objective,
Policies and Risks” section of this Prospectus. We urge you to review carefully that section for a more detailed discussion
of the risks of an investment in our securities.
Prospectus dated October 27, 2020
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Prospectus Summary
The following summary is qualified in its entirety by
reference to the more detailed information included elsewhere in this Prospectus, in any related Prospectus Supplement, and in
the SAI.
THE TRUST
Eaton Vance Senior Income Trust (the “Trust”) is
a diversified, closed-end management investment company, which commenced operations on October 30, 1998. The Trust offers investors
the opportunity to receive a high level of current income, through a professionally managed portfolio investing primarily in senior,
secured floating-rate loans (“Senior Loans”), which are normally accessible only to financial institutions and large
corporate and institutional investors, and are not widely available to individual investors. To the extent consistent with this
objective, the Trust may also offer an opportunity for preservation of capital. Investments are based on Eaton Vance Management's
(“Eaton Vance” or the “Adviser”) internal research and ongoing credit analysis, which is generally not
available to individual investors. An investment in the Trust may not be appropriate for all investors. There is no assurance that
the Trust will achieve its investment objective.
THE OFFERING
The Trust may offer, from time to time, in one or more offerings
(each, an “Offering”), up to 4,551,438 of the Trust’s common shares of beneficial interest, $0.01 par value (“Common
Shares”), on terms to be determined at the time of the Offering. The Common Shares may be offered at prices and on terms
to be set forth in one or more prospectus supplements. You should read this Prospectus and the applicable Prospectus Supplement
carefully before you invest in Common Shares. Common Shares may be offered directly to one or more purchasers, through agents designated
from time to time by the Trust, or to or through underwriters or dealers. The Prospectus Supplement relating to the Offering will
identify any agents, underwriters or dealers involved in the offer or sale of Common Shares, and will set forth any applicable
offering price, sales load, fee, commission or discount arrangement between the Trust and its agents or underwriters, or among
its underwriters, or the basis upon which such amount may be calculated, net proceeds and use of proceeds, and the terms of any
sale. See “Plan of Distribution.” The Trust may not sell any of Common Shares through agents, underwriters or dealers
without delivery of a Prospectus Supplement describing the method and terms of the particular Offering of Common Shares.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Trust's investment objective is to provide a high level
of current income, consistent with the preservation of capital. The Trust pursues its objective by investing primarily in Senior
Loans. Senior Loans are loans in which the interest rate paid fluctuates based on a reference rate. Senior Loans typically are
secured with specific collateral and have a claim on the assets and/or stock that is senior to subordinated debtholders and stockholders
of the borrower. Senior Loans are made to corporations, partnerships and other business entities (“Borrowers”) that
operate in various industries and geographical regions. Senior Loans pay interest at rates that are reset periodically by reference
to a base lending rate, primarily the London Interbank Offered Rate (“LIBOR”), plus a premium. Under normal market
conditions, at least 80% of the Trust's total assets will be invested in interests in Senior Loans of domestic and foreign borrowers
that are denominated in U.S. dollars, euros, British pounds, Swiss francs, Canadian dollars and Australian dollars (each an “Authorized
Foreign Currency”) making payments in such Authorized Foreign Currency. The remaining investment assets of the Trust may
include, among other types of investments, equity securities that are acquired in connection with an investment in a Senior Loan.
For the purpose of the 80% test, total assets is defined as net assets plus any borrowings for investment purposes, including any
outstanding preferred shares. The Trust may also invest up to 15% of its net assets in foreign Senior Loans denominated in an Authorized
Foreign Currency. For all foreign Senior Loan investments denominated in an Authorized Foreign Currency, the Adviser currently
intends to hedge against foreign currency fluctuations through the use of currency exchange contracts and other appropriate permitted
hedging strategies. It is anticipated that the proceeds of the Senior Loans in which the Trust will acquire interests primarily
will be used to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, refinancing, and to finance
internal growth and for other corporate purposes of Borrowers.
The Trust may invest up to 20% of its total assets in (i) loan
interests which have (a) a second lien on collateral (“Second Lien”), (b) no security interest in the collateral, or
(c) lower than a senior claim on collateral; (ii) other income-producing securities, such as investment and non-investment grade
corporate debt securities and U.S. government and U.S. dollar-denominated foreign government or supranational debt securities;
and (iii) warrants and equity securities issued by a Borrower or its affiliates as part of a package of investments in the Borrower
or its affiliates. Corporate bonds of below investment grade quality (“Non-Investment Grade Bonds”), commonly referred
to as “junk bonds,” which are bonds that are rated below investment grade by each of the nationally recognized statistical
rating agencies (“Rating Agencies”) who cover the security, or, if unrated, are determined to be of comparable quality
by the Adviser. S&P Global Ratings (“S&P”) and Fitch Ratings (“Fitch”) consider securities rated
below BBB- to be below investment grade and Moody’s Investors Service, Inc. (“Moody’s”) considers securities
rated below Baa3 to be below investment grade. The Trust’s credit quality
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policies apply only at the time a security is purchased, and
the Trust is not required to dispose of a security in the event of a downgrade of an assessment of credit quality or the withdrawal
of a rating. Securities rated in the lowest investment grade rating (BBB- or Baa3) may have certain speculative characteristics.
Below investment grade quality securities are considered to be predominantly speculative because of the credit risk of the issuers.
See “Investment Objective, Policies and Risks - Risk Considerations - Non-Investment Grade Bonds Risk.”
Investing in loans involves investment risk. Some Borrowers default
on their loan payments. The Trust attempts to manage this credit risk through portfolio diversification and ongoing analysis and
monitoring of Borrowers. The Trust also is subject to market, liquidity, interest rate and other risks. See “Investment Objective,
Policies and Risks.”
William E. Holt, Catherine C. McDermott, Daniel P. McElaney,
John Redding and Andrew N. Sveen are portfolio managers of the Trust. Mr. Redding is a Vice President of Eaton Vance and has been
portfolio manager of the Trust since November 2001. Messrs. Holt, McElaney and Sveen and Ms. McDermott are Vice Presidents of Eaton
Vance, have been employed by Eaton Vance for more than five years and have been portfolio managers of the Trust since March 2019.
The Trust’s investments are actively managed, and Senior
Loans and other securities may be bought or sold on a daily basis. The Adviser’s staff monitors the credit quality and price
of Senior Loans and other securities held by the Trust, as well as other securities that are available to the Trust. The Trust
may invest in individual Senior Loans and other securities of any credit quality. Although the Adviser considers ratings when making
investment decisions, it generally performs its own credit and investment analysis and does not rely primarily on the ratings assigned
by the Rating Agencies. In evaluating the quality of particular Senior Loans or other securities, whether rated or unrated, the
Adviser will normally take into consideration, among other things, the issuer’s financial resources and operating history,
its sensitivity to economic conditions and trends, the ability of its management, its debt maturity schedules and borrowing requirements,
and relative values based on anticipated cash flow, interest and asset coverage, and earnings prospects.
The Trust may invest up to 15% of net assets in Senior Loans
denominated in Authorized Foreign Currencies and may invest in other securities of non-United States issuers. The Trust’s
investments may have significant exposure to certain sectors of the economy and thus may react differently to political or economic
developments than the market as a whole. The Trust may accept equity securities in connection with a debt restructuring or reorganization
of a Borrower either inside or outside of bankruptcy. The Trust may hold equity securities issued in exchange for a Senior Loan
or issued in connection with the debt restructuring or reorganization of a Borrower. The Trust may also acquire additional equity
securities of such Borrower or its affiliates if, in the judgment of the Adviser, such an investment may enhance the value of a
Senior Loan held or would otherwise be consistent with the Trust’s investment policies. The Trust will not invest more than
10% of its assets in securities (including interests in Senior Loans) of any single Borrower.
The Trust may purchase or sell derivative instruments (which
derive their value from another instrument, security or index) for risk management purposes, such as hedging against fluctuations
in Senior Loans and other securities prices or interest rates. Transactions in derivative instruments may include the purchase
or sale of futures contracts on securities, indices and other financial instruments, credit-linked notes, tranches of collateralized
loan obligations and/or collateralized debt obligations, options on futures contracts, and exchange-traded and over-the-counter
options on securities or indices, forward foreign currency exchange contracts, and interest rate, total return and credit default
swaps. Guidelines of any rating organization that rates any preferred shares issued by the Trust may limit the Trust’s ability
to engage in such transactions. Subject to the Trust’s policy of investing at least 80% of its total assets in Senior Loans
and subject to the thresholds on the use of futures contracts and related options imposed by Rule 4.5 under the Commodity Exchange
Act, as amended (the “CEA”) as promulgated by the Commodity Futures Trading Commission (“CFTC”), the Trust
may invest, without limitation, in the foregoing derivative instruments for the purposes stated herein.
LISTING
As of October 23, 2020, the Trust had 37,866,607 Common Shares
outstanding as well as 1,504 APS outstanding. The Trust’s Common Shares are traded on the New York Stock Exchange (“NYSE”)
under the symbol “EVF.” As of October 23, 2020, the last reported sales price of a Common Share of the Trust on the
NYSE was $5.95. Common Shares offered and sold pursuant to this Registration Statement will also be listed on the NYSE and trade
under this symbol.
LEVERAGE
Generally, leverage involves the use of proceeds from the
issuance of preferred shares, borrowed funds or various financial instruments (such as derivatives) to seek to increase a trust’s
potential returns. The Trust currently uses leverage created by issuing APS as well as by loans acquired with borrowings. On June
27, 2001, the Trust issued 2,200 Series A APS and 2,200 Series B APS, with a liquidation preference per share of $25,000 plus accumulated
but unpaid dividends. The APS have seniority over the Common Shares. On September 23, 2016, the Trust repurchased 968 Series A
APS and 968 Series B APS. On September 14, 2018, the Trust repurchased 480 Series A APS and 480 Series B APS. In addition, in connection
with this repurchase, the Trust increased its borrowing limits under its Revolving Credit
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and Security Agreement, as amended (the “Agreement”)
with conduit lenders and a bank to allow it to borrow up to $125 million. The proceeds of which were used to invest in accordance
with the Trust’s investment practices and to partially redeem the Trust’s APS. Borrowings under the Agreement are secured
by the assets of the Trust. Interest is charged at a rate above the conduits’ commercial paper issuance rate and is payable
monthly. Under the terms of the Agreement, in effect through March 8, 2021, the Trust also pays a program fee of 0.85% per annum
on its outstanding borrowings to administer the facility and a liquidity fee of 0.15% (0.25% if the outstanding loan amount is
less than or equal to 60% of the total facility size) per annum on the unused portion of the total commitment under the Agreement.
Program and liquidity fees for the year ended June 30, 2020 totaled $918,353. In connection with the renewal of the Agreement on
March 9, 2020, the Trust paid upfront fees of $125,000 and, shortly thereafter on March 20, 2020, the Trust paid waiver fees of
$156,250 in connection with a reduction of Trust net asset value during the month of March 2020 due to market volatility; these
aggregate upfront and waiver fees are being amortized to interest expense through March 8, 2021. As of June 30, 2020, the Trust
had $95 million in outstanding borrowings, at an interest rate of 0.35%, in addition to outstanding APS. The Adviser anticipates
that the use of leverage (from such issuance of APS and borrowings) may result in higher income to holders of Common Shares (“Common
Shareholders”) over time. Use of financial leverage creates an opportunity for increased income but, at the same time, creates
special risks. There can be no assurance that a leveraging strategy will be successful.
The costs of the financial leverage program (from any issuance
of preferred shares and any borrowings) are borne by Common Shareholders and consequently result in a reduction of the NAV of Common
Shares. During periods in which the Trust is using leverage, the fees paid to Eaton Vance for investment advisory services will
be higher than if the Trust did not use leverage because the fees paid will be calculated on the basis of the Trust’s gross
assets, which include proceeds from the issuance of preferred shares and any borrowings. In this regard, holders of debt or preferred
securities do not bear the investment advisory fee. Rather, Common Shareholders bear the portion of the investment advisory fee
attributable to the assets purchased with the proceeds, which means that Common Shareholders effectively bear the entire advisory
fee. See “Investment Objective, Policies and Risks - Use of Leverage and Related Risks” and “Management of the
Trust - The Adviser.”
Financial leverage may also be achieved through the purchase
of certain derivative instruments. The Trust’s use of derivative instruments exposes the Trust to special risks. See “Investment
Objective, Policies and Risks - Additional Investment Practices” and “Investment Objective, Policies and Risks - Additional
Risk Considerations.”
INVESTMENT ADVISER AND ADMINISTRATOR
Eaton Vance, a wholly-owned subsidiary of Eaton Vance Corp.,
is the Trust's investment adviser and administrator. As of September 30, 2020, Eaton Vance and its affiliates managed approximately
$517 billion of fund and separate account assets on behalf of clients, including approximately $29.3 billion in floating-rate income
assets. See “Management of the Trust.”
PLAN OF DISTRIBUTION
The Trust may sell the Common Shares being offered under this
Prospectus in any one or more of the following ways: (i) directly to purchasers; (ii) through agents; (iii) to or through underwriters;
or (iv) through dealers. The Prospectus Supplement relating to the Offering will identify any agents, underwriters or dealers involved
in the offer or sale of Common Shares, and will set forth any applicable offering price, sales load, fee, commission or discount
arrangement between the Trust and its agents or underwriters, or among its underwriters, or the basis upon which such amount may
be calculated, net proceeds and use of proceeds, and the terms of any sale.
The Trust may distribute Common Shares from time to time in one
or more transactions at: (i) a fixed price or prices that may be changed; (ii) market prices prevailing at the time of sale; (iii)
prices related to prevailing market prices; or (iv) negotiated prices; provided, however, that in each case the offering price
per Common Share (less any underwriting commission or discount) must equal or exceed the NAV per Common Share.
The Trust from time to time may offer its Common Shares through
or to certain broker-dealers, including UBS Securities LLC, that have entered into selected dealer agreements relating to at-the-market
offerings.
The Trust may directly solicit offers to purchase Common Shares,
or the Trust may designate agents to solicit such offers. The Trust will, in a Prospectus Supplement relating to such Offering,
name any agent that could be viewed as an underwriter under the 1933 Act, and describe any commissions the Trust must pay to such
agent(s). Any such agent will be acting on a reasonable best efforts basis for the period of its appointment or, if indicated in
the applicable Prospectus Supplement or other offering materials, on a firm commitment basis. Agents, dealers and underwriters
may be customers of, engage in transactions with, or perform services for the Trust in the ordinary course of business.
If any underwriters or agents are used in the sale of Common
Shares in respect of which this Prospectus is delivered, the Trust will enter into an underwriting agreement or other agreement
with them at the time of sale to them, and the Trust will set forth in the Prospectus Supplement relating to such Offering
their names and the terms of the Trust’s agreement with them.
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If a dealer is utilized in the sale of Common Shares in respect
of which this Prospectus is delivered, the Trust will sell such Common Shares to the dealer, as principal. The dealer may then
resell such Common Shares to the public at varying prices to be determined by such dealer at the time of resale.
The Trust may engage in at-the-market offerings to or through
a market maker or into an existing trading market, on an exchange or otherwise, in accordance with Rule 415(a)(4) under the 1933
Act. An at-the-market offering may be through an underwriter or underwriters acting as principal or agent for the Trust.
Agents, underwriters and dealers may be entitled under agreements
which they may enter into with the Trust to indemnification by the Trust against certain civil liabilities, including liabilities
under the 1933 Act, and may be customers of, engage in transactions with or perform services for the Trust in the ordinary course
of business.
In order to facilitate the Offering of Common Shares, any underwriters
may engage in transactions that stabilize, maintain or otherwise affect the price of Common Shares or any other Common Shares the
prices of which may be used to determine payments on the Common Shares. Specifically, any underwriters may over-allot in connection
with the Offering, creating a short position for their own accounts. In addition, to cover over-allotments or to stabilize the
price of Common Shares or of any such other Common Shares, the underwriters may bid for, and purchase, Common Shares or any such
other Common Shares in the open market. Finally, in any Offering of Common Shares through a syndicate of underwriters, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing Common Shares in the Offering
if the syndicate repurchases previously distributed Common Shares in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the market price of Common Shares above independent
market levels. Any such underwriters are not required to engage in these activities and may end any of these activities at any
time.
The Trust may enter into derivative transactions with third parties,
or sell Common Shares not covered by this Prospectus to third parties in privately negotiated transactions. If the applicable Prospectus
Supplement indicates, in connection with those derivatives, the third parties may sell Common Shares covered by this Prospectus
and the applicable Prospectus Supplement or other offering materials, including in short sale transactions. If so, the third parties
may use Common Shares pledged by the Trust or borrowed from the Trust or others to settle those sales or to close out any related
open borrowings of securities, and may use Common Shares received from the Trust in settlement of those derivatives to close out
any related open borrowings of securities. The third parties in such sale transactions will be underwriters and, if not identified
in this Prospectus, will be identified in the applicable Prospectus Supplement or other offering materials (or a post-effective
amendment).
The maximum amount of compensation to be received by any member
of the Financial Industry Regulatory Authority, Inc. will not exceed 8% of the initial gross proceeds from the sale of any security
being sold with respect to each particular Offering of Common Shares made under a single Prospectus Supplement.
Any underwriter, agent or dealer utilized in the initial Offering
of Common Shares will not confirm sales to accounts over which it exercises discretionary authority without the prior specific
written approval of its customer.
DISTRIBUTIONS
The Trust intends to make monthly distributions of net investment
income to Common Shareholders, after payment of any dividends on any outstanding APS. The amount of each monthly distribution will
vary depending on a number of factors, including dividends payable on the Trust's preferred shares or other costs of financial
leverage. As portfolio and market conditions change, the rate of dividends on the Common Shares and the Trust's dividend policy
could change. Over time, the Trust will distribute all of its net investment income (after it pays accrued dividends on any outstanding
preferred shares) or other costs of financial leverage. In addition, at least annually, the Trust intends to distribute all or
substantially all of its net realized capital gains (reduced by available capital loss carryforwards from prior years, if any).
Distributions to Common Shareholders are recorded on the ex-dividend date. Distributions to preferred shareholders are recorded
daily and are payable at the end of each dividend period.
Beginning February 13, 2008 and consistent with the patterns
in the broader market for auction-rate securities, the Trust’s APS auctions were unsuccessful in clearing due to an imbalance
of sell orders over bids to buy the APS. As a result, the dividend rates of the APS were reset to the maximum applicable rates.
The Trust distinguishes between distributions on a tax basis
and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions
in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Permanent differences
between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions
from short-term capital gains are considered to be from ordinary income.
Common Shareholders will automatically have distributions reinvested
in additional Common Shares under the Trust's dividend reinvestment plan unless they elect otherwise through their investment
dealer. See “Distributions” and “Dividend Reinvestment Plan.”
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DIVIDEND REINVESTMENT PLAN
The Trust has established a dividend reinvestment plan (the “Plan”).
Under the Plan, unless a Common Shareholder elects to receive distributions in cash, all distributions will be automatically reinvested
in additional Common Shares. American Stock Transfer & Trust Company, LLC (“AST” or the “Plan Agent”)
serves as agent for the Common Shareholders in administering the Plan. Common Shareholders who elect not to participate in the
Plan will receive all Trust distributions in cash paid by check mailed directly to the Common Shareholder of record (or, if the
Common Shares are held in street or other nominee name, then to the nominee) by AST, as disbursing agent. Participation in the
Plan is completely voluntary and may be terminated or resumed at any time without penalty by written notice if received by the
Plan Agent prior to any distribution record date. See “Dividend Reinvestment Plan.”
CLOSED-END STRUCTURE
Closed-end funds differ from open-end management investment companies
(commonly referred to as mutual funds) in that closed-end funds generally list their shares for trading on a securities exchange
and do not redeem their shares at the option of the shareholder. By comparison, mutual funds issue securities redeemable at NAV
at the option of the shareholder and typically engage in a continuous offering of their shares. Mutual funds are subject to continuous
asset in-flows and out-flows that can complicate portfolio management, whereas closed-end funds generally can stay more fully invested
in securities consistent with the closed-end fund's investment objective(s) and policies. In addition, in comparison to open-end
funds, closed-end funds have greater flexibility in the employment of financial leverage and in the ability to make certain types
of investments, including investments in illiquid securities.
However, shares of closed-end funds frequently trade at a discount
from their net asset value. Since inception, the market price of the Common Shares has fluctuated and at times traded below the
Trust’s NAV, and at times has traded above NAV. In recognition of the possibility that the Common Shares might trade at a
discount to net asset value and that any such discount may not be in the interest of Common Shareholders, the Trust's Board of
Trustees (the “Board”), in consultation with Eaton Vance, from time to time may review possible actions to reduce any
such discount. The Board might consider open market repurchases or tender offers for Common Shares at net asset value. There can
be no assurance that the Board will decide to undertake any of these actions or that, if undertaken, such actions would result
in the Common Shares trading at a price equal to or close to net asset value per Common Share. The Board might also consider the
conversion of the Trust to an open-end management investment company. The Board believes, however, that the closed-end structure
is desirable, given the Trust's investment objective and policies. Investors should assume, therefore, that it is highly unlikely
that the Board would vote to convert the Trust to an open-end management investment company. Investors should note that any outstanding
preferred shares issued by the Trust could make a conversion to open-end form more difficult because of the voting rights of preferred
shareholders, the costs of redeeming preferred shares and other factors. See “Description of Capital Structure.”
SPECIAL RISK CONSIDERATIONS
Risk is inherent in all investing. Investing in any investment
company security involves risk, including the risk that you may receive little or no return on your investment or even that you
may lose part or all of your investment.
Discount
From or Premium to NAV. The Offering will be conducted only when Common Shares of the Trust are trading at a price equal
to or above the Trust’s NAV per Common Share plus the per Common Share amount of commissions. As with any security, the market
value of the Common Shares may increase or decrease from the amount initially paid for the Common Shares. The Trust’s Common
Shares have traded both at a premium and at a discount relative to net asset value. The shares of closed-end management investment
companies frequently trade at a discount from their NAV. This is a risk separate and distinct from the risk that the Trust’s
NAV may decrease.
Market
Discount Risk. As with any security, the market value of the Common Shares may increase or decrease from the amount
initially paid for the Common Shares. The Trust’s Common Shares have traded both at a premium and at a discount relative
to NAV. The shares of closed-end management investment companies frequently trade at a discount from their NAV. This is a risk
separate and distinct from the risk that the Trust’s NAV may decrease.
Secondary
Market for the Common Shares. The issuance of Common Shares through the Offering may have an adverse effect on the secondary
market for the Common Shares. The increase in the amount of the Trust’s outstanding Common Shares resulting from the Offering
may put downward pressure on the market price for the Common Shares of the Trust. Common Shares will not be issued pursuant to
the Offering at any time when Common Shares are trading at a price lower than a price equal to the Trust’s NAV per Common
Share plus the per Common Share amount of commissions.
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The Trust also issues Common Shares of the Trust through its
dividend reinvestment plan. See “Dividend Reinvestment Plan.” Common Shares may be issued under the plan at a discount
to the market price for such Common Shares, which may put downward pressure on the market price for Common Shares of the Trust.
When the Common Shares are trading at a premium, the Trust may
also issue Common Shares of the Trust that are sold through transactions effected on the NYSE. The increase in the amount of the
Trust’s outstanding Common Shares resulting from that offering may also put downward pressure on the market price for the
Common Shares of the Trust.
The voting power of current shareholders will be diluted to the
extent that such shareholders do not purchase shares in any future Common Share offerings or do not purchase sufficient shares
to maintain their percentage interest. In addition, if the Adviser is unable to invest the proceeds of such offering as intended,
the Trust’s per share distribution may decrease (or may consist of return of capital) and the Trust may not participate in
market advances to the same extent as if such proceeds were fully invested as planned.
Income
Risk. The income investors receive from the Trust is based primarily on the interest it earns from its investments,
which can vary widely over the short and long-term. If prevailing market interest rates drop, investors’ income from the
Trust could drop as well. The Trust’s income could also be affected adversely when prevailing short-term interest rates increase
and the Trust is utilizing leverage, although this risk is mitigated by the Trust’s investment in Senior Loans, which pay
floating-rates of interest.
Market
Risk. The value of investments held by the Trust
may increase or decrease in response to economic, political, financial, public health crises (such as epidemics or pandemics) or
other disruptive events (whether real, expected or perceived) in the U.S. and global markets. The frequency and magnitude of such
changes in value cannot be predicted. Certain securities and other investments held by the Trust may experience increased volatility,
illiquidity, or other potentially adverse effects in reaction to changing market conditions. Monetary and/or fiscal actions
taken by U.S. or foreign governments to stimulate or stabilize the global economy may not be effective and could lead to higher
market volatility. No active trading market may exist for certain investments held by the Trust, which may impair the ability of
the Trust to sell or to realize the current valuation of such investments in the event of the need to liquidate such assets.
Senior
Loans Risk. The risks associated with Senior Loans are similar to the risks of Non-Investment Grade Bonds (discussed
below), although Senior Loans are typically senior and secured in contrast to Non-Investment Grade Bonds, which are often subordinated
and unsecured. Senior Loans’ higher standing has historically resulted in generally higher recoveries in the event of a corporate
reorganization or other restructuring. In addition, because their interest rates are adjusted for changes in short-term interest
rates, Senior Loans generally have less interest rate risk than Non-Investment Grade Bonds, which are typically fixed rate. The
Trust’s investments in Senior Loans are typically below investment grade and are considered speculative because of the credit
risk of their issuers. Such companies are more likely to default on their payments of interest and principal owed to the Trust,
and such defaults could reduce the Trust’s net asset value and income distributions. An economic downturn generally leads
to a higher non-payment rate, and a debt obligation may lose significant value before a default occurs. Moreover, any specific
collateral used to secure a loan may decline in value or lose all its value or become illiquid, which would adversely affect the
loan’s value. “Junior Loans” are secured and unsecured subordinated loans, second lien loans and subordinate
bridge loans. Senior Loans and Junior Loans are referred to together herein as “loans.”
Loans and other debt securities are also subject to the risk
of price declines and to increases in prevailing interest rates, although floating-rate debt instruments are less exposed to this
risk than fixed-rate debt instruments. Interest rate changes may also increase prepayments of debt obligations and require the
Trust to invest assets at lower yields.
Loans are traded in a private, unregulated inter-dealer or
inter-bank resale market and are generally subject to contractual restrictions that must be satisfied before a loan can be bought
or sold. These restrictions may impede the Trust’s ability to buy or sell loans (thus affecting their liquidity) and may
negatively impact the transaction price. See also “Market Risk” above. It also may take longer than seven days for
transactions in loans to settle. The types of covenants included in loan agreements generally vary depending on market conditions,
the creditworthiness of the issuer, the nature of the collateral securing the loan and possibly other factors. Loans with fewer
covenants that restrict activities of the borrower may provide the borrower with more flexibility to take actions that may be detrimental
to the loan holders and provide fewer investor protections in the event of such actions or if covenants are breached. The Trust
may experience relatively greater realized or unrealized losses or delays and expense in enforcing its rights with respect to loans
with fewer restrictive covenants. Loans to entities located outside of the U.S. may have substantially different lender protections
and covenants as compared to loans to U.S. entities and may involve greater risks. The Trust may have difficulties and incur expense
enforcing its rights with respect to non-U.S. loans and such loans could be subject to bankruptcy laws that are materially different
than in the U.S. Loans may be structured such that they are not securities under securities law, and in the event of fraud or misrepresentation
by a borrower, lenders may not have the protection of the anti-fraud provisions of the federal securities laws. Loans are also
subject to risks associated with other types of income investments, including credit risk and risks of lower rated investments.
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Credit
Risk. Investments in loans and other debt obligations (referred to below as “debt instruments”) are subject
to the risk of non-payment of scheduled principal and interest. Changes in economic conditions or other circumstances may reduce
the capacity of the party obligated to make principal and interest payments on such instruments and may lead to defaults. Such
non-payments and defaults may reduce the value of Trust shares and income distributions. The value of debt instruments also may
decline because of concerns about the issuer’s ability to make principal and interest payments. In addition, the credit ratings
of debt instruments may be lowered if the financial condition of the party obligated to make payments with respect to such instruments
deteriorates. In the event of bankruptcy of the issuer of a debt instrument, the Trust could experience delays or limitations with
respect to its ability to realize the benefits of any collateral securing the instrument. In order to enforce its rights in the
event of a default, bankruptcy or similar situation, the Trust may be required to retain legal or similar counsel, which may increase
the Trust’s operating expenses and adversely affect net asset value. The Trust is also exposed to credit risk when it engages
in certain types of derivatives transactions and when it engages in transactions that expose the Trust to counterparty risk. See
“Derivatives.” Due to their lower place in the borrower’s capital structure, Junior Loans involve a higher degree
of overall risk than Senior Loans to the same borrower.
In evaluating the quality of a particular instrument, the
investment adviser may take into consideration, among other things, a credit rating assigned by a credit rating agency, the issuer’s
financial resources and operating history, its sensitivity to economic conditions and trends, the ability of its management, its
debt maturity schedules and borrowing requirements, and relative values based on anticipated cash flow, interest and asset coverage,
and earnings prospects. Credit rating agencies are private services that provide ratings of the credit quality of certain investments.
Credit ratings issued by rating agencies are based on a number of factors including, but not limited to, the issuer’s financial
condition and the rating agency’s credit analysis, if applicable, at the time of rating. As such, the rating assigned to
any particular security is not necessarily a reflection of the issuer’s current financial condition. The ratings assigned
are not absolute standards of credit quality and do not evaluate market risks or necessarily reflect the issuer’s current
financial condition or the volatility or liquidity of the security.
A credit rating may have a modifier (such as plus, minus or a
numerical modifier) to denote its relative status within the rating. The presence of a modifier does not change the security credit
rating (for example, BBB- and Baa3 are within the investment grade rating) for purposes of the Trust’s investment limitations.
Interest
Rate Risk. In general, the value of income securities
will fluctuate based on changes in interest rates. The value of these securities is likely to increase when interest rates fall
and decline when interest rates rise. Duration measures the time-weighted expected cash flows of a fixed-income security, while
maturity refers to the amount of time until a fixed-income security matures. Generally, securities with longer durations or maturities
are more sensitive to changes in interest rates than securities with shorter durations or maturities, causing them to be more volatile.
Conversely, fixed-income securities with shorter durations or maturities will be less volatile but may provide lower returns than
fixed-income securities with longer durations or maturities. The impact of interest rate changes is significantly less for floating
rate instruments that have relatively short periodic rate resets (e.g., ninety days or less). In a rising interest rate environment,
the duration of income securities that have the ability to be prepaid or called by the issuer may be extended. In a declining interest
rate environment, the proceeds from prepaid or maturing instruments may have to be reinvested at a lower interest rate. Because
floating or variable rates on loans only reset periodically, changes in prevailing interest rates may cause some fluctuations in
the Trust’s net asset value. Similarly, a sudden and significant increase in market interest rates may cause a decline in
the Trust’s net asset value. A material decline in the Trust’s net asset value may impair the Trust’s ability
to maintain required levels of asset coverage. Certain instruments held by the Trust pay an interest rate based on the London Interbank
Offered Rate (“LIBOR”), which is the average offered rate for various maturities of short-term loans between certain
major international banks. LIBOR is expected to be phased out by the end of 2021. While the effect of the phase out cannot yet
be determined, it may result in, among other things, increased volatility or illiquidity in markets for instruments based on LIBOR
and changes in the value of such instruments.
Non-Investment
Grade Bonds Risk. The Trust’s investments in Non-Investment Grade Bonds, commonly referred to as “junk bonds,”
are predominantly speculative because of the credit risk of their issuers. While offering a greater potential opportunity for capital
appreciation and higher yields, Non-Investment Grade Bonds typically entail greater potential price volatility and may be less
liquid than higher-rated securities. Issuers of Non-Investment Grade Bonds are more likely to default on their payments of interest
and principal owed to the Trust, and such defaults will reduce the Trust’s net asset value and income distributions. The
prices of these lower rated obligations are more sensitive to negative developments than higher rated securities. Adverse business
conditions, such as a decline in the issuer’s revenues or an economic downturn, generally lead to a higher non-payment rate.
In addition, a security may lose significant value before a default occurs as the market adjusts to expected higher non-payment
rates.
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Lower
Rated Investments Risk. Investments rated below investment grade and comparable unrated investments (sometimes referred
to as “junk”) have speculative characteristics because of the credit risk associated with their issuers. Changes in
economic conditions or other circumstances typically have a greater effect on the ability of issuers of lower rated investments
to make principal and interest payments than they do on issuers of higher rated investments. An economic downturn generally leads
to a higher non-payment rate, and a lower rated investment may lose significant value before a default occurs. Lower rated investments
typically are subject to greater price volatility and illiquidity than higher rated investments.
Prepayment
Risk. During periods of declining interest rates or for other purposes, Borrowers may exercise their option to prepay
principal earlier than scheduled. For fixed-income securities, such payments often occur during periods of declining interest rates,
forcing the Trust to reinvest in lower yielding securities. This is known as call or prepayment risk. Non-Investment Grade Bonds
frequently have call features that allow the issuer to redeem the security at dates prior to its stated maturity at a specified
price (typically greater than par) only if certain prescribed conditions are met (“call protection”). An issuer may
redeem a Non-Investment Grade Bond if, for example, the issuer can refinance the debt at a lower cost due to declining interest
rates or an improvement in the credit standing of the issuer. Senior Loans typically have no such call protection. For premium
bonds (bonds acquired at prices that exceed their par or principal value) purchased by the Trust, prepayment risk may be enhanced.
Issuer Risk. The value
of corporate income-producing securities held by the Trust may decline for a number of reasons, which directly relate to the issuer,
such as management performance, financial leverage and reduced demand for the issuer’s goods and services.
Derivatives
Risk. The Trust’s exposure to derivatives involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other investments. The use of derivatives can lead to losses because of adverse movements
in the price or value of the security, instrument, index, currency, commodity, economic indicator or event underlying a derivative
(“reference instruments”), due to failure of a counterparty or due to tax or regulatory constraints. Derivatives may
create leverage in the Trust, which represents a non-cash exposure to the reference instrument. Leverage can increase both the
risk and return potential of the Trust. Derivatives risk may be more significant when derivatives are used to enhance return or
as a substitute for a cash investment position, rather than solely to hedge the risk of a position held by the Trust. Use of derivatives
involves the exercise of specialized skill and judgment, and a transaction may be unsuccessful in whole or in part because of market
behavior or unexpected events. Changes in the value of a derivative (including one used for hedging) may not correlate perfectly
with the underlying reference instrument. Derivative instruments traded in over-the-counter markets may be difficult to value,
may be illiquid, and may be subject to wide swings in valuation caused by changes in the value of the underlying reference instrument.
If a derivative’s counterparty is unable to honor its commitments, the value of Trust shares may decline and the Trust could
experience delays in the return of collateral or other assets held by the counterparty. The loss on derivative transactions may
substantially exceed the initial investment, particularly when there is no stated limit on the Trust’s use of derivatives.
A derivative investment also involves the risks relating to the reference instrument underlying the investment.
Leverage
Risk. Certain fund transactions may give rise to leverage. Leverage can result from a non-cash exposure to the underlying
reference instrument. Leverage can increase both the risk and return potential of the Trust. The Trust is required to segregate
liquid assets or otherwise cover the Trust’s obligation created by a transaction that may give rise to leverage. The use
of leverage may cause the Trust to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations
or to meet segregation requirements. Leverage may cause the Trust’s share price to be more volatile than if it had not been
leveraged, as certain types of leverage may exaggerate the effect of any increase or decrease in the value of the Trust’s
portfolio securities. The loss on leveraged investments may substantially exceed the initial investment.
As discussed above, the Trust currently uses leverage created
by issuing APS and borrowings. On June 27, 2001, the Trust issued 2,200 Series A APS and 2,200 Series B APS, with a liquidation
preference per share of $25,000 plus accumulated but unpaid dividends. On September 23, 2016, the Trust repurchased 968 Series
A APS and 968 Series B APS. On September 14, 2018, the Trust repurchased 480 Series A APS and 480 Series B APS. In addition, in
connection with this repurchase, the Trust increased its borrowing limits under its Revolving Credit and Security Agreement, as
amended (the “Agreement”) with conduit lenders and a bank to allow it to borrow up to $125 million. The proceeds of
which were used to invest in accordance with the Trust’s investment practices and to partially redeem the Trust’s APS.
The Trust is required to maintain certain net asset levels during the term of the Agreement. As of June 30, 2020, the Trust had
$95 million in outstanding borrowings, at an interest rate of 0.35%, in addition to outstanding APS.
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The Adviser anticipates that the use of leverage (from the issuance
of APS and borrowings) may result in higher income to Common Shareholders over time. Leverage creates risks for Common Shareholders,
including the likelihood of greater volatility of NAV and market price of the Common Shares and the risk that fluctuations in dividend
rates on APS and costs of borrowings may affect the return to Common Shareholders. See
also “LIBOR Transition and Associated Risk.” To the extent the income derived from investments purchased
with funds received from leverage exceeds the cost of leverage, the Trust’s distributions will be greater than if leverage
had not been used. Conversely, if the income from the investments purchased with such funds is not sufficient to cover the cost
of leverage, the amount available for distribution to Common Shareholders will be less than if leverage had not been used. In the
latter case, Eaton Vance, in its best judgment, may nevertheless determine to maintain the Trust’s leveraged position if
it deems such action to be appropriate. While the Trust has preferred shares outstanding, an increase in short-term rates would
also result in an increased cost of leverage, which would adversely affect the Trust’s income available for distribution.
There can be no assurance that a leveraging strategy will be successful.
In addition, under current federal income tax law, the Trust
is required to allocate a portion of any net realized capital gains or other taxable income to APS holders. The terms of the Trust’s
APS require the Trust to pay to any APS holders additional dividends intended to compensate such holders for taxes payable on any
capital gains or other taxable income allocated to such holders. Any such additional dividends will reduce the amount available
for distribution to Common Shareholders. As discussed under “Management of the Trust,” the fee paid to Eaton Vance
is calculated on the basis of the Trust’s gross assets, including proceeds from the issuance of APS and borrowings, so the
fees will be higher when leverage is utilized. In this regard, holders of APS do not bear the investment advisory fee. Rather,
Common Shareholders bear the portion of the investment advisory fee attributable to the assets purchased with the proceeds, which
means that Common Shareholders effectively bear the entire advisory fee.
The APS have been rated Aa3 by Moody's. The Trust currently intends
to seek to maintain this rating or an equivalent credit rating on the APS or any preferred shares it issues. The Rating Agencies
which rate the preferred shares and any bank lender in connection with a credit facility or commercial paper program may also impose
specific restrictions as a condition to borrowing. Such restrictions may include asset coverage or portfolio composition requirements
that are more stringent than those imposed on the Trust by the 1940 Act. These covenants or guidelines do not currently and are
not expected to impede Eaton Vance in managing the Trust’s portfolio in accordance with its investment objective and policies
and it is not anticipated that they will so impede Eaton Vance in the future. See “Description of Capital Structure - Preferred
Shares.”
Financial leverage may also be achieved through the purchase
of certain derivative instruments. The Trust’s use of derivative instruments exposes the Trust to special risks. See “Investment
Objective, Policies and Risks - Additional Investment Practices” and “Investment Objective, Policies, and Risks - Additional
Risk Considerations.”
LIBOR
Transition and Associated Risk. The London Interbank Offered Rate or LIBOR is the average offered rate for various maturities
of short-term loans between major international banks who are members of the British Bankers Association. LIBOR is the most common
benchmark interest rate index used to make adjustments to variable-rate loans. It is used throughout global banking and financial
industries to determine interest rates for a variety of financial instruments (such as debt instruments and derivatives) and borrowing
arrangements, and to determine dividend rates for preferred shares.
The use of LIBOR started to come under pressure following manipulation
allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding
its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In July 2017, the Financial
Conduct Authority (the “FCA”), the United Kingdom financial regulatory body, announced a desire to phase out the use
of LIBOR by the end of 2021.
Although the period from the FCA announcement until the end of
2021 is generally expected to be enough time for market participants to transition to the use of a different benchmark for new
securities and transactions, there remains uncertainty regarding the future utilization of LIBOR and the specific replacement rate
or rates. As such, the potential effect of a transition away from LIBOR on the Trust or the financial instruments held by the Trust
cannot yet be determined. The transition process may involve, among other things, increased volatility or illiquidity in markets
for instruments that currently rely on LIBOR. The transition may also result in a change in (i) the value of certain instruments
held by the Trust, (ii) the cost of borrowing or the dividend rate for preferred shares, or (iii) the effectiveness of related
Trust transactions such as hedges, as applicable. When LIBOR is discontinued, the LIBOR replacement rate may be lower than market
expectations, which could have an adverse impact on the value of preferred and debt-securities with floating or fixed-to-floating
rate coupons. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to
the Trust. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur
prior to the end of 2021.
Eaton Vance Senior Income Trust
|
13
|
Prospectus dated October 27, 2020
|
Various financial industry groups have begun planning for
the transition away from LIBOR, but there are obstacles to converting certain longer term securities and transactions to a new
benchmark. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve,
announced its selection of a new Secured Overnight Funding Rate (“SOFR”), which is intended to be a broad measure of
secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began
publishing the SOFR earlier in 2018, with the expectation that it could be used on a voluntary basis in new instruments and transactions.
Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling
Overnight Interbank Average Rate in England.
Foreign
Investment Risk. Investments in foreign issuers could be affected by factors not present in the United States, including
expropriation, armed conflict, confiscatory taxation, lack of uniform accounting and auditing standards, less publicly available
financial and other information, and potential difficulties in enforcing contractual obligations. Because foreign issuers may not
be subject to uniform accounting, auditing and financial reporting standard practices and requirements and regulatory measures
comparable to those in the United States, there may be less publicly available information about such foreign issuers. Settlements
of securities transactions in foreign countries are subject to risk of loss, may be delayed and are generally less frequent than
in the United States, which could affect the liquidity of the Trust’s assets. Evidence of ownership of certain foreign investments
may be held outside the United States, and the Trust may be subject to the risks associated with the holding of such property overseas.
Foreign issuers may become subject to sanctions imposed by the
United States or another country, which could result in the immediate freeze of the foreign issuers’ assets or securities.
The imposition of such sanctions could impair the market value of the securities of such foreign issuers and limit the Trust’s
ability to buy, sell, receive or deliver the securities. Trading in certain foreign markets is also subject to liquidity risks.
Economic data as reported by sovereign entities may be delayed,
inaccurate or fraudulent. In the event of a default by a sovereign entity, there are typically no assets to be seized or cash flows
to be attached. Furthermore, the willingness or ability of a sovereign entity to restructure defaulted debt may be limited. Therefore,
losses on sovereign defaults may far exceed the losses from the default of a similarly rated U.S. debt issuer.
Political events in foreign countries may cause market disruptions.
In June 2016, the United Kingdom (“UK”) voted in a referendum to leave the European Union (“EU”) (“Brexit”).
Effective January 31, 2020, the UK ceased to be a member of the EU following a period of impasse within the UK Parliament, and
the holding of an early general election in December 2019 to break the deadlock. The European Parliament and UK Government are
expected to focus attention on the nature of the UK’s future relationship with the EU during an agreed transitional period.
There is significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible
political, regulatory, economic, and market outcomes in the UK, EU and beyond are difficult to predict. Brexit may cause greater
market volatility and illiquidity, currency fluctuations, deterioration in economic activity, a decrease in business confidence,
and increased likelihood of a recession in the UK. If one or more additional countries leave the EU or the EU dissolves, the world’s
securities markets likely will be significantly disrupted.
Currency
Risk. Exchange rates for currencies fluctuate daily. The value of foreign investments may be affected favorably or unfavorably
by changes in currency exchange rates in relation to the U.S. dollar. Currency markets generally are not as regulated as securities
markets and currency transactions are subject to settlement, custodial and other operational risks.
U.S.
Government Securities Risk. Although certain U.S. Government-sponsored agencies (such as the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association) may be chartered or sponsored by acts of Congress, their securities
are neither issued nor guaranteed by the U.S. Treasury. U.S. Treasury securities generally have a lower return than other obligations
because of their higher credit quality and market liquidity.
Pooled
Investment Vehicles Risk. Pooled investment vehicles are open- and closed-end investment companies and exchange-traded
funds (“ETFs”). Pooled investment vehicles are subject to the risks of investing in the underlying securities or other
investments. Shares of closed-end investment companies and ETFs may trade at a premium or discount to net asset value and are subject
to secondary market trading risks. In addition, the Trust will bear a pro rata portion of the operating expenses of a pooled investment
vehicle in which it invests.
Equity
Securities Risk. The value of equity securities and related instruments may decline in response to adverse changes in
the economy or the economic outlook; deterioration in investor sentiment; interest rate, currency, and commodity price fluctuations;
adverse geopolitical, social or environmental developments; issuer and sector-specific considerations or other factors. Market
conditions may affect certain types of stocks to a greater extent than other types of stocks. If the stock market declines in value,
the value of the Trust's equity securities will also likely decline. Although prices can rebound, there is no assurance that values
will return to previous levels.
Eaton Vance Senior Income Trust
|
14
|
Prospectus dated October 27, 2020
|
Liquidity
Risk. The Trust may invest without limitation in Senior Loans and other investments for which there is no readily available
trading market or which are otherwise illiquid. The Trust may not be able to dispose readily of such investments at prices that
approximate those at which the Trust could sell such investments if they were more widely traded and, as a result of such illiquidity,
the Trust may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations.
In addition, the limited liquidity could affect the market price of the investments, thereby adversely affecting the Trust's net
asset value and ability to make dividend distributions.
Some loans are not readily marketable and may be subject to
contractual restrictions that must be satisfied before a loan can be bought or sold. 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 loans in which the Trust
will invest. Where a secondary market exists, such market for some loans may be subject to irregular activity, wide bid/ask spreads
and extended trade settlement periods. Loans that are illiquid may impair the Trust’s ability to realize the full value of
its assets in the event of a voluntary or involuntary liquidation of such assets and thus may cause a decline in the Trust’s
net asset value.
In addition, the limited liquidity could affect the market price
of the investments, thereby adversely affecting the Trust’s NAV and ability to make dividend distributions. The financial
markets in general have in recent years experienced periods of extreme secondary market supply and demand imbalance, resulting
in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value.
During such periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market
dislocation may occur again at any time. The Trust has no limitation on the amount of its assets which may be invested in investments
which are not readily marketable or are subject to restrictions on resale.
Money
Market Instrument Risk. Money market instruments may be adversely affected by market and economic events, such as a
sharp rise in prevailing short-term interest rates; adverse developments in the banking industry, which issues or guarantees many
money market instruments; adverse economic, political or other developments affecting issuers of money market instruments; changes
in the credit quality of issuers; and default by a counterparty.
Reinvestment
Risk. Income from the Trust’s portfolio will decline if and when the Trust invests the proceeds from matured,
traded or called debt obligations into lower yielding instruments.
Inflation
Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future
as inflation decreases the value of money. As inflation increases, the real value of the Common Shares and distributions thereon
can decline. In addition, during any periods of rising inflation, dividend rates of preferred shares would likely increase, which
would tend to further reduce returns to Common Shareholders. This risk is mitigated to some degree by the Trust's investments in
Senior Loans.
Management
Risk. The Trust is subject to management risk because it is actively managed. Eaton Vance and the individual portfolio
managers invest the assets of the Trust as they deem appropriate in implementing the Trust’s investment strategy. Accordingly,
the success of the Trust depends upon the investment skills and analytical abilities of Eaton Vance and the individual portfolio
managers to develop and effectively implement strategies that achieve the Trust’s investment objective. There is no assurance
that Eaton Vance and the individual portfolio managers will be successful in developing and implementing the Trust’s investment
strategy. Subjective decisions made by Eaton Vance and the individual portfolio managers may cause the Trust to incur losses or
to miss profit opportunities.
Cybersecurity
Risk. With the increased use of technologies by Trust service providers to conduct business, such as the Internet, the
Trust is susceptible to operational, information security and related risks. The Trust relies on communications technology, systems,
and networks to engage with clients, employees, accounts, shareholders, and service providers, and a cyber incident may inhibit
the Trust’s ability to use these technologies. In general, cyber incidents can result from deliberate attacks or unintentional
events. Cyber attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking”
or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational
disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing
denial-of-service attacks on websites. A denial-of-service attack is an effort to make network services unavailable to intended
users, which could cause shareholders to lose access to their electronic accounts, potentially indefinitely. Employees and service
providers also may not be able to access electronic systems to perform critical duties for the Trust, such as trading and NAV calculation,
during a denial-of-service attack. There is also the possibility for systems failures due to malfunctions, user error and misconduct
by employees and agents, natural disasters, or other foreseeable and unforeseeable events.
Because technology is consistently changing, new ways to carry
out cyber attacks are always developing. Therefore, there is a chance that some risks have not been identified or prepared for,
or that an attack may not be detected, which puts limitations on the Trust's ability to plan for or respond to a cyber attack.
Like other Trusts and business enterprises, the Trust and its service providers have experienced, and will continue to experience,
cyber incidents consistently. In addition to deliberate cyber attacks, unintentional cyber incidents can occur, such as the inadvertent
release of confidential information by the Trust or its service providers.
To date, cyber incidents have not had a material adverse effect on the Trust’s business operations or performance.
Eaton Vance Senior Income Trust
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15
|
Prospectus dated October 27, 2020
|
The Trust uses third party service providers who are also
heavily dependent on computers and technology for their operations. Cybersecurity failures or breaches by the Trust’s investment
adviser or administrator and other service providers (including, but not limited to, the custodian or transfer agent), and the
issuers of securities in which the Trust invests, may disrupt and otherwise adversely affect their business operations. This may
result in financial losses to the Trust, impede Trust trading, interfere with the Trust’s ability to calculate its NAV, or
cause violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other
compensation costs, litigation costs, or additional compliance costs. While many of the Trust service providers have established
business continuity plans and risk management systems intended to identify and mitigate cyber attacks, there are inherent limitations
in such plans and systems including the possibility that certain risks have not been identified. The Trust cannot control the cybersecurity
plans and systems put in place by service providers to the Trust and issuers in which the Trust invests. The Trust and its shareholders
could be negatively impacted as a result.
Recent
Market Conditions. An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December
2019 and subsequently spread internationally. This coronavirus has resulted in closing borders, enhanced health screenings, healthcare
service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general
concern and uncertainty. The impact of this coronavirus may last for an extended period of time and result in a substantial economic
downturn. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political,
social and economic risks and disrupt normal market conditions and operations. The impact of this outbreak, and other epidemics
and pandemics that may arise in the future, could negatively affect the worldwide economy, as well as the economies of individual
countries, individual companies and the market in general in significant and unforeseen ways. Any such impact could adversely
affect the Trust’s performance, or the performance of the securities in which the Trust invests and may lead to losses on
your investment in the Trust.
Regulatory
Risk. 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 may be adversely affected. Further, such legislation
or regulation could depress the market value of Senior Loans.
Market
Disruption. Global instability, war, geopolitical tensions and terrorist attacks in the United States and around the
world have previously resulted, and may continue to result in market volatility and may have long-term effects on the United States
and worldwide financial markets and may cause further economic uncertainties in the United States and worldwide. The Trust cannot
predict the effects of significant future events on the global economy and securities markets. A similar disruption of the financial
markets could impact interest rates, auctions, secondary trading, ratings, credit risk, inflation and other factors relating to
the Common Shares. In particular, Non-Investment Grade Bonds and Senior Loans tend to be more volatile than higher rated fixed-income
securities so that these events and any actions resulting from them may have a greater impact on the prices and volatility of Non-Investment
Grade Bonds and Senior Loans than on higher rated fixed-income securities.
Anti-Takeover
Provisions. The Trust’s Agreement and Declaration of Trust (the “Declaration of Trust”) and Amended
and Restated By-Laws (the “By-Laws” and together with the Declaration of Trust, the “Organizational Documents”)
include provisions that could have the effect of limiting the ability of other persons or entities to acquire control of the Trust
or to change the composition of its Board. For example, pursuant to the Trust’s Declaration of Trust, the Trust Board is
divided into three classes of Trustees with each class serving for a three-year term and certain types of transactions require
the favorable vote of holders of at least 75% of the outstanding shares of the Trust. See “Description of Capital Structure
- Certain Provisions of the Organizational Documents - Anti-Takeover Provisions in the Organizational Documents.”
Eaton Vance Senior Income Trust
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16
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Prospectus dated October 27, 2020
|
Summary of Trust Expenses
The purpose of the table below is to help you understand all
fees and expenses that you, as a holder of Common Shares (“Common Shareholder”), would bear directly or indirectly.
The table reflects the issuance of preferred shares in an amount equal to 9.61% of the Trust’s total assets and borrowings
in an amount equal to 26.15% of the Trust’s total assets (including the proceeds of all such leverage) and shows Trust expenses
as a percentage of net assets attributable to Common Shares for the year ended June 30, 2020.
Common Shareholder transaction expenses
|
|
Sales load paid by you (as a percentage of offering price)
|
--%(1)
|
Offering expenses (as a percentage of offering price)
|
None(2)
|
Dividend reinvestment plan fees
|
$5.00(3)
|
Annual expenses
|
Percentage of net assets attributable to
Common Shares(4)
|
Investment advisory fee
|
1.17%(5)
|
Interest payments on borrowed funds
|
1.19%(6)
|
Other expenses
|
0.56%
|
Acquired fund fees and expenses
|
0.06%
|
Total annual Trust operating expenses
|
2.98%
|
Dividends on preferred shares
|
0.25%(6)
|
Total annual Trust operating expenses and dividends on preferred shares
|
3.23%
|
EXAMPLE
The following example illustrates the expenses that Common
Shareholders would pay on a $1,000 investment in Common Shares, assuming (i) total annual expenses of 3.23% of net assets attributable
to Common Shares in years 1 through 10; (ii) a 5% annual return; and (iii) all distributions are reinvested at NAV:
1 Year
|
3 Years
|
5 Years
|
10 Years
|
$33
|
$99
|
$169
|
$353
|
The above table and example and the assumption in the example
of a 5% annual return are required by regulations of the SEC that are applicable to all investment companies; the assumed 5% annual
return is not a prediction of, and does not represent, the projected or actual performance of the Trust’s Common Shares.
For more complete descriptions of certain of the Trust’s costs and expenses, see “Management of the Trust.” In
addition, while the example assumes reinvestment of all dividends and distributions at NAV, participants in the Trust’s dividend
reinvestment plan may receive Common Shares purchased or issued at a price or value different from NAV. See “Distributions”
and “Dividend Reinvestment Plan.” The example does not include sales load or estimated offering costs, which would
cause the expenses shown in the example to increase.
The example should not be considered a representation of
past or future expenses, and the Trust’s actual expenses may be greater or less than those shown. Moreover, the Trust’s
actual rate of return may be greater or less than the hypothetical 5% return shown in the example.
|
(1)
|
If Common Shares are sold to or through underwriters, the Prospectus Supplement will set forth any applicable sales load.
|
|
(2)
|
The Adviser will pay the expenses of the Offering (other than the applicable commissions); therefore, Offering expenses
are not included in the Summary of Trust Expenses. Offering expenses generally include, but are not limited to, the preparation,
review and filing with the SEC of the Trust’s registration statement (including this Prospectus and the SAI), the preparation,
review and filing of any associated marketing or similar materials, costs associated with the printing, mailing or other distribution
of this Prospectus, the SAI and/or marketing materials, associated filing fees, NYSE listing fees, and legal and auditing fees
associated with the Offering.
|
|
(3)
|
You will be charged a $5.00 service charge and pay brokerage charges if you direct the plan agent to sell your Common Shares
held in a dividend reinvestment account.
|
|
(4)
|
Stated as a percentage of average net assets attributable to Common Shares for the year ended June 30, 2020.
|
|
(5)
|
The advisory fee paid by the Trust to the Adviser is based on the average weekly gross assets of the Trust, including all
assets attributable to any form of investment leverage that the Trust may utilize. Accordingly, if the Trust were to increase investment
leverage in the future, the advisory fee will increase as a percentage of net assets. Pursuant to the investment advisory agreement
and fee reduction agreement between the Trust and the Adviser, the fee is computed at an annual rate of 0.74% (0.75% prior to May
1, 2020) of the Trust’s average weekly gross assets and is payable monthly. Pursuant to a fee reduction agreement between the Trust and EVM that
commenced on May 1, 2010, the annual adviser fee rate is reduced by 0.01% every May 1 thereafter for the next twenty-nine years.
|
|
(6)
|
As of June 30, 2020, the outstanding borrowings and APS represented approximately 36.1% leverage.
|
Eaton Vance Senior Income Trust
|
17
|
Prospectus dated October 27, 2020
|
Financial Highlights and Investment Performance
FINANCIAL HIGHLIGHTS
This table details the financial performance of the Common Shares,
including total return information showing how much an investment in the Trust has increased or decreased each period. This information
has been audited by Deloitte & Touche LLP, an independent registered public accounting firm. The report of Deloitte & Touche LLP and the Trust’s financial statements are incorporated by reference and included in the Trust’s annual report, which is available upon request.
Selected data for a Common Share outstanding during the periods
stated.
|
Year Ended June 30,
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
Net asset value – Beginning of year (Common shares)
|
$7.050
|
$7.180
|
$7.150
|
$6.650
|
$7.020
|
Income (Loss) From Operations
|
|
|
|
|
|
Net investment income(1)
|
$0.394
|
$0.410
|
$0.385
|
$0.404
|
$0.422
|
Net realized and unrealized gain (loss)
|
(0.817)
|
(0.172)
|
0.038
|
0.436
|
(0.371)
|
Distributions to preferred shareholders
–
From net investment income(1)
|
(0.017)
|
(0.031)
|
(0.028)
|
(0.014)
|
(0.009)
|
Discount on redemption and repurchase of auction preferred shares(1)
|
—
|
0.051
|
—
|
0.064
|
—
|
Total income from operations
|
$(0.440)
|
$0.258
|
$0.395
|
$0.890
|
$0.042
|
Less Distributions to Common Shareholders
|
|
|
|
|
|
From net investment income
|
$(0.410)
|
$(0.388)
|
$(0.365)
|
$(0.390)
|
$(0.412)
|
Total distributions to common shareholders
|
$(0.410)
|
$(0.388)
|
$(0.365)
|
$(0.390)
|
$(0.412)
|
Net asset value – End of year (Common shares)
|
$6.200
|
$7.050
|
$7.180
|
$7.150
|
$6.650
|
Market value – End of year (Common shares)
|
$5.330
|
$6.230
|
$6.380
|
$6.650
|
$6.010
|
Total Investment Return on Net Asset Value(2)
|
(5.64)%
|
4.46%(3)
|
6.12%
|
14.02%(4)
|
1.57%
|
Total Investment Return on Market Value(2)
|
(8.20)%
|
3.88%
|
1.39%
|
17.34%
|
3.77%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net assets applicable to common shares, end of year (000’s omitted)
|
$234,657
|
$266,926
|
$272,016
|
$270,810
|
$251,789
|
Ratios (as a percentage of average daily net assets applicable to common shares)(5)†
|
|
|
|
|
|
Expenses excluding interest and fees(6)
|
1.73%
|
1.73%
|
1.82%
|
1.87%
|
1.96%
|
Interest and fee expense(7)
|
1.19%
|
1.40%
|
0.83%
|
0.52%
|
0.28%
|
Total expenses(6)
|
2.92%
|
3.13%
|
2.65%
|
2.39%
|
2.24%
|
Net investment income
|
5.93%
|
5.74%
|
5.36%
|
5.75%
|
6.38%
|
Portfolio Turnover
|
57%
|
26%
|
34%
|
42%
|
31%
|
Senior Securities:
|
|
|
|
|
|
Total notes payable outstanding (in 000’s)
|
$95,000
|
$103,000
|
$93,000
|
$92,000
|
$25,000
|
Asset coverage per $1,000 of notes payable(8)
|
$3,866
|
$3,957
|
$4,587
|
$4,613
|
$15,472
|
Total preferred shares outstanding
|
1,504
|
1,504
|
2,464
|
2,464
|
4,400
|
Asset coverage per preferred share(9)
|
$69,242
|
$72,464
|
$68,989
|
$69,078
|
$71,629
|
Involuntary liquidation preference per preferred share(10)
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
Approximate market value per preferred share(10)
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
(See
related footnotes.)
Eaton Vance Senior Income Trust
|
18
|
Prospectus dated October 27, 2020
|
Financial Highlights (continued)
|
Year Ended June 30,
|
|
2015
|
2014
|
2013
|
2012
|
2011
|
Net asset value – Beginning of year (Common shares)
|
$7.340
|
$7.350
|
$7.160
|
$7.240
|
$6.710
|
Income (Loss) From Operations
|
|
|
|
|
|
Net investment income(1)
|
$0.401
|
$0.406
|
$0.468
|
$0.435
|
$0.420
|
Net realized and unrealized gain (loss)
|
(0.316)
|
0.029
|
0.194
|
(0.071)
|
0.557
|
Distributions to preferred shareholders
–
From net investment income(1)
|
(0.003)
|
(0.002)
|
(0.003)
|
(0.003)
|
(0.006)
|
Total income from operations
|
$0.082
|
$0.433
|
$0.659
|
$0.361
|
$0.971
|
Less Distributions to Common Shareholders
|
|
|
|
|
|
From net investment income
|
$(0.402)
|
$(0.443)
|
$(0.476)
|
$(0.441)
|
$(0.441)
|
Total distributions to common shareholders
|
$(0.402)
|
$(0.443)
|
$(0.476)
|
$(0.441)
|
$(0.441)
|
Premium from common shares sold through shelf offering(1)
|
$—
|
$—
|
$0.007
|
$—
|
$—
|
Net asset value – End of year (Common shares)
|
$7.020
|
$7.340
|
$7.350
|
$7.160
|
$7.240
|
Market value – End of year (Common shares)
|
$6.210
|
$6.810
|
$7.520
|
$7.020
|
$7.200
|
Total Investment Return on Net Asset Value(2)
|
1.71%
|
6.34%
|
9.49%
|
5.58%
|
14.80%
|
Total Investment Return on Market Value(2)
|
(3.02)%
|
(3.57)%
|
14.26%
|
4.09%
|
15.55%
|
Ratios/Supplemental Data
|
|
|
|
|
|
Net assets applicable to common shares, end of year (000’s omitted)
|
$266,009
|
$278,045
|
$278,364
|
$263,168
|
$265,927
|
Ratios (as a percentage of average daily net assets applicable to common shares)(5)†
|
|
|
|
|
|
Expenses excluding interest and fees(6)
|
1.99%
|
1.98%
|
1.98%
|
2.01%
|
1.95%
|
Interest and fee expense(7)
|
0.28%
|
0.27%
|
0.23%
|
0.23%
|
0.23%
|
Total expenses(6)
|
2.27%
|
2.25%
|
2.21%
|
2.24%
|
2.18%
|
Net investment income
|
5.61%
|
5.51%
|
6.35%
|
6.17%
|
5.90%
|
Portfolio Turnover
|
33%
|
33%
|
52%
|
38%
|
53%
|
Senior Securities:
|
|
|
|
|
|
Total notes payable outstanding (in 000’s)
|
$60,000
|
$65,000
|
$65,000
|
$46,000
|
$36,000
|
Asset coverage per $1,000 of notes payable(8)
|
$7,267
|
$6,970
|
$6,975
|
$9,112
|
$11,442
|
Total preferred shares outstanding
|
4,400
|
4,400
|
4,400
|
4,400
|
4,400
|
Asset coverage per preferred share(9)
|
$64,119
|
$64,721
|
$64,766
|
$67,174
|
$70,536
|
Involuntary liquidation preference per preferred share(10)
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
Approximate market value per preferred share(10)
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
$25,000
|
(See
related footnotes.)
Eaton Vance Senior Income Trust
|
19
|
Prospectus dated October 27, 2020
|
|
(1)
|
Computed using average common shares outstanding.
|
|
(2)
|
Returns are historical and are calculated by determining the percentage change in net asset value or market value with all
distributions reinvested. Distributions are assumed to be reinvested at prices obtained under the Trust’s dividend reinvestment
plan.
|
|
(3)
|
The total return based on net asset value reflects the impact of the tender and repurchase by the Trust of a portion of its
Auction Preferred Shares at 92% of the per share liquidation preference. Absent this transaction, the total return based on net
asset value would have been 3.71%.
|
|
(4)
|
The total return based on net asset value reflects the impact of the tender and repurchase by the Trust of a portion of its
Auction Preferred Shares at 95% of the per share liquidation preference. Absent this transaction, the total return based on net
asset value would have been 13.00%.
|
|
(5)
|
Ratios do not reflect the effect of dividend payments to preferred shareholders.
|
|
(6)
|
Excludes the effect of custody fee credits, if any, of less than 0.005%. Effective September 1, 2015, custody fee credits,
which were earned on cash deposit balances, were discontinued by the custodian.
|
|
(7)
|
Interest and fee expense relates to the notes payable to partially redeem the Trust’s Auction Preferred Shares and/or
to fund investments.
|
|
(8)
|
Calculated by subtracting the Trust’s total liabilities (not including the notes payable and preferred shares) from the
Trust’s total assets, and dividing the result by the notes payable balance in thousands.
|
|
(9)
|
Calculated by subtracting the Trust’s total liabilities (not including the notes payable and preferred shares) from
the Trust’s total assets, dividing the result by the sum of the value of the notes payable and liquidation value of the preferred
shares, and multiplying the result by the liquidation value of one preferred share. Such amount equates to 277%, 290%, 276%, 276%,
287%, 256%, 259%, 259%, 269% and 282% at June 30, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012 and 2011, respectively.
|
|
(10)
|
Plus accumulated and unpaid dividends.
|
|
†
|
Ratios based on net assets applicable to common shares plus preferred shares and borrowings are presented below. Ratios do
not reflect the effect of dividend payments to preferred shareholders and exclude the effect of custody fee credits, if any.
|
|
Year Ended June 30,
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
2015
|
2014
|
2013
|
2012
|
2011
|
Expenses excluding interest and fees
|
1.11%
|
1.12%
|
1.17%
|
1.21%
|
1.21%
|
1.21%
|
1.22%
|
1.25%
|
1.27%
|
1.26%
|
Interest and fee expense
|
0.76%
|
0.91%
|
0.54%
|
0.34%
|
0.17%
|
0.17%
|
0.17%
|
0.15%
|
0.15%
|
0.15%
|
Total expenses
|
1.87%
|
2.03%
|
1.71%
|
1.55%
|
1.38%
|
1.38%
|
1.39%
|
1.40%
|
1.42%
|
1.41%
|
Net investment income
|
3.81%
|
3.73%
|
3.46%
|
3.72%
|
3.93%
|
3.42%
|
3.39%
|
4.03%
|
3.93%
|
3.82%
|
TRADING AND NAV INFORMATION
The Trust’s Common Shares have traded both at a premium
and a discount to NAV. The Trust cannot predict whether its shares will trade in the future at a premium or discount to NAV. The
provisions of the 1940 Act generally require that the public offering price of Common Shares (less any underwriting commissions
and discounts) must equal or exceed the NAV per share of a company’s common stock (calculated within 48 hours of pricing).
The issuance of Common Shares may have an adverse effect on prices in the secondary market for the Trust’s Common Shares
by increasing the number of Common Shares available, which may put downward pressure on the market price for the Trust’s
Common Shares. Shares of common stock of closed-end investment companies frequently trade at a discount from NAV. See “Additional
Risk Considerations - Discount from or Premium to NAV”.
In addition, the Trust’s Board of Trustees has authorized
the Trust to repurchase up to 10% of its outstanding Common Shares as of the day of the prior calendar year-end at market prices
when shares are trading at a discount to net asset value. The share repurchase program does not obligate the Trust to purchase
a specific amount of shares. The results of the share repurchase program are disclosed in the Trust’s annual and semi-annual
reports to shareholders. See “Description of Capital Structure - Repurchase of Common Shares and Other Discount Measures.”
The following table sets forth for each of the periods indicated
the high and low closing market prices for Common Shares on the NYSE, and the corresponding NAV per share and the premium or discount
to NAV per share at which the Trust’s Common Shares were trading as of such date.
Eaton Vance Senior Income Trust
|
20
|
Prospectus dated October 27, 2020
|
|
Market Price
|
NAV per Share on Date of Market Price
|
NAV Premium/(Discount) on Date of Market Price
|
Fiscal Quarter Ended
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
9/30/2020
|
$6.01
|
$5.29
|
$6.53
|
$6.20
|
(7.96)%
|
(14.68)%
|
6/30/2020
|
$5.57
|
$4.48
|
$6.36
|
$5.42
|
(12.42)%
|
(17.34)%
|
3/31/2020
|
$6.58
|
$3.84
|
$7.07
|
$4.80
|
(6.93)%
|
(20.00)%
|
12/31/2019
|
$6.41
|
$6.09
|
$7.01
|
$6.98
|
(8.56)%
|
(12.75)%
|
9/30/2019
|
$6.32
|
$6.03
|
$7.04
|
$7.00
|
(10.23)%
|
(13.86)%
|
6/30/2019
|
$6.39
|
$6.08
|
$7.17
|
$7.08
|
(10.88)%
|
(14.12)%
|
3/31/2019
|
$6.31
|
$5.92
|
$7.09
|
$6.82
|
(11.00)%
|
(13.20)%
|
12/31/2018
|
$6.48
|
$5.69
|
$7.33
|
$6.87
|
(11.60)%
|
(17.18)%
|
9/30/2018
|
$6.53
|
$6.32
|
$7.33
|
$7.18
|
(10.91)%
|
(11.98)%
|
The last reported sale price, NAV per share and percentage
premium/(discount) to NAV per share of the Common Shares as of October 23, 2020 were $5.95, $6.51 and (8.60)%, respectively.
As of October 23, 2020, the Trust had net assets of $246,328,891.
The following table provides information about our outstanding Common Shares as of October 23, 2020:
Title of Class
|
Amount Authorized
|
Amount Held by the Trust for its Account
|
Amount Outstanding
|
Common Shares
|
Unlimited
|
0
|
37,866,607
|
The Trust
The Trust is a diversified, closed-end management investment
company registered under the 1940 Act. The Trust was organized as a Massachusetts business trust on September 23, 1998, pursuant
to a Declaration of Trust, as amended August 11, 2008, governed by the laws of The Commonwealth of Massachusetts. The Trust’s
principal office is located at Two International Place, Boston, MA 02110, and its telephone number is 1-800-262-1122.
Use of Proceeds
Subject to the remainder of this section, and unless otherwise
specified in a Prospectus Supplement, the Trust currently intends to invest substantially all of the net proceeds of any sales
of Common Shares pursuant to this Prospectus in accordance with its Trust’s investment objective and policies within three
months of receipt of such proceeds. Such investments may be delayed up to three months if suitable investments are unavailable
at the time or for other reasons, such as market volatility and lack of liquidity in the markets of suitable investments. Pending
such investment, the Trust anticipates that it will invest the proceeds in short-term money market instruments, securities with
remaining maturities of less than one year, cash or cash equivalents. A delay in the anticipated use of proceeds could lower returns
and reduce the Trust’s distribution to Common Shareholders or result in a distribution consisting principally of a return
of capital.
Eaton Vance Senior Income Trust
|
21
|
Prospectus dated October 27, 2020
|
Portfolio Composition
As of June 30, 2020, the following table indicates the approximate
percentage of the Trust's portfolio invested in long-term and short-term obligations and also includes other information with respect
to the composition of the Trust’s investment portfolio:
S&P(1)
|
Number of issues
|
Mkt Value
|
Percent
|
BBB
|
19
|
$11,108,613
|
3.01%
|
BB
|
123
|
$52,622,420
|
14.25%
|
B
|
249
|
$230,913,378
|
62.52%
|
CCC
|
46
|
$36,371,370
|
9.85%
|
|
|
|
|
D
|
8
|
$4,697,940
|
1.27%
|
NR
|
40
|
$19,091,980
|
5.17%
|
|
|
|
|
Cash and cash equivalents
|
|
$14,529,910
|
3.93%
|
|
|
|
|
Total
|
485
|
$369,335,611
|
100%
|
|
|
|
|
|
(1)
|
Ratings: Using S&P’s ratings on the Trust’s investments. S&P rating categories may be modified further
by a plus (+) or minus (—) in AA, A, BBB, BB, B, and CCC ratings.
|
Investment Objective, Policies and Risks
INVESTMENT OBJECTIVE
The Trust's investment objective is to provide shareholders with
a high level of current income, consistent with the preservation of capital. The Trust pursues its objective by investing its assets
primarily in senior, secured floating-rate loans (“Senior Loans”). Senior Loans are loans in which the interest rate
paid fluctuates based on a reference rate. Investment in such floating-rate instruments is expected to minimize changes in the
underlying principal value of the Senior Loans, and therefore the Trust's net asset value, resulting from changes in market interest
rates. Senior Loans typically are secured with specific collateral and have a claim on the assets and/or stock that is senior to
subordinated debtholders and stockholders of the borrower. Senior Loans are made to corporations, partnerships and other business
entities (“Borrowers”) that operate in a variety of industries and geographical regions. Senior Loans pay interest
at rates that are reset periodically by reference to a base lending rate, primarily LIBOR, plus a premium.
PRIMARY INVESTMENT POLICIES
General
Composition of the Trust. Under normal market conditions, the Trust will invest at least 80% of its total assets in
Senior Loans of domestic and foreign borrowers that are denominated in U.S. dollars, euros, British pounds, Swiss francs, Canadian
dollars and Australian dollars (each, an “Authorized Foreign Currency”) making payments in such Authorized Foreign
Currency. For the purposes of the 80% test, total assets is defined as net assets plus any borrowings for investment purposes,
including any outstanding preferred shares. The Trust may also invest up to 15% of its net assets in foreign Senior Loans denominated
in an Authorized Foreign Currency. For all foreign Senior Loan investments denominated in an Authorized Foreign Currency, the Adviser
currently intends to hedge against foreign currency fluctuations through the use of currency exchange contracts and other appropriate
permitted hedging strategies. The Trust may invest up to 20% of its total assets in (i) loan interests which have (a) a
second lien on collateral, (b) no security interest in the collateral, or (c) lower than a senior claim on collateral; (ii) other
income-producing securities, such as investment and non-investment grade corporate debt securities and U.S. government and U.S.
dollar-denominated foreign government or supranational debt securities; and (iii) warrants and equity securities issued by a Borrower
or its affiliates as part of a package of investments in the Borrower or its affiliates. During unusual market conditions, the
Trust may invest up to 100% of assets in cash or cash equivalents which may be inconsistent with its investment objective and other
policies. Corporate bonds of below investment grade quality (“Non-Investment Grade Bonds”), commonly referred to as
“junk bonds,” which are bonds that are rated below investment grade by each of the Rating Agencies who cover the security,
or, if unrated, are determined to be of comparable quality by the Adviser. S&P and Fitch consider securities rated below BBB-
to be below investment grade and Moody’s considers securities rated below Baa3 to be below investment
Eaton Vance Senior Income Trust
|
22
|
Prospectus dated October 27, 2020
|
grade. The Trust’s credit quality policies apply only at
the time a security is purchased, and the Trust is not required to dispose of a security in the event of a downgrade of an assessment
of credit quality, the withdrawal of a rating, or in the event of a default. In determining whether to retain or sell such a security,
Eaton Vance may consider such factors as Eaton Vance’s assessment of the credit quality of the issuers of such security,
the price at which such security could be sold and the rating, if any, assigned to such security by other Rating Agencies. Securities
rated in the lowest investment grade rating (BBB- or Baa3) may have certain speculative characteristics. Below investment grade
quality securities are considered to be predominantly speculative because of the credit risk of the issuers. See “Investment
Objective, Policies and Risks - Risk Considerations - Non-Investment Grade Bonds Risk.”
The Trust’s policy of investing, under normal market conditions,
at least 80% of its total assets in Senior Loans is not considered to be fundamental by the Trust and can be changed without a
vote of the Trust’s shareholders. However, this policy may only be changed by the Trust’s Board following the provision
of 60 days prior written notice to the Trust’s shareholders.
The Trust is not subject to any restrictions with respect to
the maturity of Senior Loans held in its portfolio.
A lender may have certain obligations pursuant to a loan agreement
relating to Senior Loans, which may include the obligation to make additional loans in certain circumstances. The Trust generally
will reserve against such contingent obligations by segregating a sufficient amount of cash, liquid securities and liquid Senior
Loans, subject to the Trust's borrowing limitations. The Trust will not purchase interests in Senior Loans that would require the
Trust to make any such additional loans if such additional loan commitments in the aggregate would exceed 20% of the Trust's total
assets or would cause the Trust to fail to meet its tax diversification requirements.
The Adviser’s staff monitors the credit quality and the
price of Senior Loans and other securities held by the Trust, as well as other securities that are available to the Trust. The
Trust may invest in Senior Loans and other securities of any credit quality. Although the Adviser considers ratings when making
investment decisions, it generally performs its own credit and investment analysis and does not rely primarily on the ratings assigned
by the Rating Agencies. In evaluating the quality of a particular security, whether rated or unrated, the Adviser will normally
take into consideration, among other things, the issuer’s financial resources and operating history, its sensitivity to economic
conditions and trends, the ability of its management, its debt maturity schedules and borrowing requirements, and relative values
based on anticipated cash flow, interest and asset coverage, and earnings prospects. The Adviser will attempt to reduce the risks
of investing in lower rated or unrated debt instruments through active portfolio management, credit analysis and attention to current
developments and trends in the economy and the financial markets.
The Trust is not required to dispose of a security in the event
that a Rating Agency downgrades its assessment of the credit characteristics of a particular issue or withdraws its assessment,
including in the event of a default. In determining whether to retain or sell such a security, Eaton Vance may consider such factors
as Eaton Vance's assessment of the credit quality of the issuers of such security, the price at which such security could be sold
and the rating, if any, assigned to such security by other Rating Agencies.
The Trust may invest up to 15% of net assets in Senior Loans
denominated in Authorized Foreign Currencies and may invest in other securities of non-United States issuers. The Trust’s
investments may have significant exposure to certain sectors of the economy and thus may react differently to political or economic
developments than the market as a whole. The Trust may accept equity securities in connection with a debt restructuring or reorganization
of a Borrower either inside or outside of bankruptcy. The Trust may hold equity securities issued in exchange for a Senior Loan
or issued in connection with the debt restructuring or reorganization of a Borrower. The Trust may also acquire additional equity
securities of such Borrower or its affiliates if, in the judgment of the Adviser, such an investment may enhance the value of a
Senior Loan held or would otherwise be consistent with the Trust’s investment policies. The Trust will not invest more than
10% of its assets in securities (including interests in Senior Loans) of any single Borrower.
The Trust may purchase shares of other investment companies,
including open- and closed-end investment companies and exchange-traded funds, with a similar investment objective and policies
as permitted under the 1940 Act. Such investments are limited to 10% of total assets overall, with no more than 5% invested in
any one issuer. The value of shares of other closed-end investment companies and exchange-traded funds is affected by risks similar
to those of the Trust, such as demand for those securities regardless of the demand for the underlying portfolio assets. Investment
companies bear fees and expenses that the Trust will bear indirectly, so investors in the Trust will be subject to duplication
of fees. The Trust also may invest up to 5% of its total assets in structured notes with rates of return determined by reference
to the total rate of return on one or more Senior Loans referenced in such notes. The rate of return on the structured note may
be determined by applying a multiplier to the rate of total return on the referenced Senior Loan or Loans. Application of a multiplier
is comparable to the use of financial leverage, a speculative technique. Leverage magnifies the potential for gain and the risk
of loss; as a result, a relatively small decline in the value of a referenced Senior Loan could result in a relatively large loss
in the value of a structured note. Common Shares of other investment companies and structured notes as discussed above that invest
in Senior Loans or baskets of Senior Loans will be treated as Senior Loans for purposes of the Trust’s policy of normally
investing at least 80% of its assets in Senior Loans, and may be subject to the Trust’s leverage limitations.
Eaton Vance Senior Income Trust
|
23
|
Prospectus dated October 27, 2020
|
Senior
Loans. Senior Loans hold a senior position in the capital structure of a Borrower, are typically secured with specific
collateral and have a claim on the assets and/or stock of the Borrower that is senior to that held by subordinated debt holders
and stockholders 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. Senior Loans are typically secured by specific collateral. As also discussed above, the proceeds
of Senior Loans primarily are used to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, refinancing
and internal growth and for other corporate purposes.
Senior Loans in which the Trust will invest generally pay interest
at rates, which are reset periodically by reference to a base lending rate, plus a premium. Senior Loans typically have rates of
interest which are reset either daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium
or credit spread. These base lending rates are primarily LIBOR, and secondarily the prime rate offered by one or more major United
States banks (the “Prime Rate”) and the certificate of deposit (“CD”) rate or other base lending rates
used by commercial lenders. Floating-rate loans typically have rates of interest which are re-determined daily, monthly, quarterly
or semi-annually by reference to a base lending rate, plus a premium. As floating-rate loans, the frequency of how often a loan
resets its interest rate will impact how closely such loans track current market interest rate. The Senior Loans held by the Trust
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 Trust from its investments in Senior Loans should increase, and
as short-term interest rates decrease, interest payable to the Trust from its investments in Senior Loans should decrease. The
Trust may utilize derivative instruments to shorten the effective interest rate redetermination period of Senior Loans in its portfolio.
Senior Loans typically have a stated term of between one and ten years. In the experience of the Adviser over the last decade,
however, the average life of Senior Loans has been two to four years because of prepayments. Junior Loans are secured and unsecured
subordinated loans, second lien loans and subordinate bridge loans. Senior Loans and Junior Loans are referred to together herein
as “loans.”
Loans may be primary, direct investments or investments in loan
assignments or participation interests. A loan assignment represents a portion of the entirety of a loan and a portion of
the entirety of a position previously attributable to a different lender. The purchaser of an assignment typically succeeds to
all the rights and obligations under the loan agreement and has the same rights and obligations as the assigning investor.
However, assignments through private negotiations may cause the purchaser of an assignment to have different and more limited rights
than those held by the assigning investor. Loan participation interests are interests issued by a lender or other entity
and represent a fractional interest in a loan. The Trust typically will have a contractual relationship only with the financial
institution that issued the participation interest. As a result, the Trust may have the right to receive payments of principal,
interest and any fees to which it is entitled only from the financial institution and only upon receipt by such entity of such
payments from the borrower. In connection with purchasing a participation interest, the Trust 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 investors
through set-off against the borrower and the Trust may not directly benefit from the collateral supporting the loan in which it
has purchased the participation interest. As a result, the Trust may assume the credit risk of both the borrower and the financial
institution issuing the participation interest. In the event of the insolvency of the entity issuing a participation interest,
the Trust may be treated as a general creditor of such entity. No active trading market may exist for certain loans, which may
impair the ability of the Trust to realize full value in the event of the need to sell a loan and which may make it difficult to
value the loan. To the extent that a secondary market does exist for certain loans, the market may be subject to irregular
trading activity, wide bid/ask spreads and extended trade settlement periods. Most loans are rated below investment grade or, if
unrated, are of similar credit quality.
Loan investments may be made at par or at a discount or premium
to par. The interest payable on a loan may be fixed or floating rate, and paid in cash or in-kind. In connection with
transactions in loans, the Trust may be subject to facility or other fees. Loans may be secured by specific collateral or
other assets of the borrower, guaranteed by a third party, unsecured or subordinated. During the term of a loan, the value
of any collateral securing the loan may decline in value, causing the loan to be under collateralized. 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 the loan. In addition, if a loan is foreclosed, the Trust could become part owner of the collateral
and would bear the costs and liabilities associated with owning and disposing of such collateral.
A lender’s repayment and other rights primarily are determined
by governing loan, assignment or participation documents, which (among other things) typically establish the priority of payment
on the loan relative to other indebtedness and obligations of the borrower. A borrower typically is required to comply with certain
covenants contained in a loan agreement between the borrower and the holders of the loan. The types of covenants included in loan
agreements generally vary depending on market conditions, the creditworthiness of the issuer, and the nature of the collateral
securing
Eaton Vance Senior Income Trust
|
24
|
Prospectus dated October 27, 2020
|
the loan. Loans with fewer covenants that restrict activities
of the borrower may provide the borrower with more flexibility to take actions that may be detrimental to the loan holders and
provide fewer investor protections in the event covenants are breached. The Trust may experience relatively greater realized or
unrealized losses or delays and expense in enforcing its rights with respect to loans with fewer restrictive covenants. Loans to
entities located outside of the U.S. have substantially different lender protections and covenants as compared to loans to U.S.
entities and may involve greater risks. In the event of bankruptcy, applicable law may impact a lender’s ability to enforce
its rights. Bankruptcy laws in foreign jurisdictions, including emerging markets, may differ significantly from U.S. bankruptcy
law and the Trust’s rights with respect to a loan governed by the laws of a foreign jurisdiction may be more limited.
Loans may be originated by a lending agent, such as a financial
institution or other entity, on behalf of a group or “syndicate” of loan investors (the “Loan Investors”).
In such a case, the agent administers the terms of the loan agreement and is responsible for the collection of principal, and interest
payments from the borrower and the apportionment of these payments to the Loan Investors. Failure by the agent to fulfill its obligations
may delay or adversely affect receipt of payment by the Trust. Furthermore, unless under the terms of a loan agreement or participation
(as applicable) the Trust has direct recourse against the borrower, the Trust must rely on the agent and the other Loan Investors
to pursue appropriate remedies against the borrower.
The Trust expects primarily to purchase Senior Loans by assignment
from a participant in the original syndicate of lenders or from subsequent assignees of such interests. The purchaser of an assignment
typically succeeds to all the rights and obligations under the loan agreement and has the same rights and obligations as the assigning
investor. However, assignments through private negotiations may cause the purchaser of an assignment to have different and more
limited rights than those held by the assigning investor. The Trust may also purchase participations in the original syndicate
making Senior Loans. Such indebtedness may be secured or unsecured. Loan participations typically represent direct participations
in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. The
Trust may participate in such syndications, or can buy part of a loan, becoming a part lender. When purchasing loan participations,
the Trust assumes the credit risk associated with the corporate Borrower and may assume the credit risk associated with an interposed
bank or other financial intermediary. The participation interests in which the Trust intends to invest may not be rated by any
Rating Agency.
The Trust may purchase and retain in its portfolio loans where
the Borrowers have experienced, or may be perceived to be likely to experience, credit problems, including default, involvement
in or recent emergence from bankruptcy reorganization proceedings or other forms of debt restructuring. At times, in connection
with the restructuring of a loan either outside of bankruptcy court or in the context of bankruptcy court proceedings, the Trust
may determine or be required to accept equity securities or junior debt securities in exchange for all or a portion of a loan.
The Trust may also purchase unsecured loans, other floating-rate
debt securities such as notes, bonds and asset-backed securities (such as special purpose trusts investing in bank loans), credit-linked
notes, tranches of collateralized loan obligations, investment grade fixed-income debt obligations and money market instruments,
such as commercial paper.
Loans are subject to the risk that a court, pursuant to fraudulent
conveyance or other similar laws, could subordinate a loan to presently existing or future indebtedness of the borrower, or take
other action detrimental to the holders of a loan including, in certain circumstances, invalidating the loans or causing interest
previously paid to be returned to the borrower. Any such actions by a court could negatively affect the Trust’s performance.
Loans that are secured and senior to other debtholders of a borrower tend to have more favorable loss recovery rates as compared
to more junior types of below investment grade debt obligations. Due to their lower place in the borrower’s capital structure
and, in some cases, their unsecured status, junior loans involve a higher degree of overall risk than senior loans of the same
borrower.
Investing in loans involves the risk of default by the borrower
or other party obligated to repay the loan. In the event of insolvency of the borrower or other obligated party, the Trust
may be treated as a general creditor of such entity unless it has rights that are senior to that of other creditors or secured
by specific collateral or assets of the borrower. Fixed rate loans are also subject to the risk that their value will decline
in a rising interest rate environment. This risk is mitigated for floating-rate loans, where the interest rate payable on
the loan resets periodically by reference to a base lending rate.
Many loans in which the Trust will invest may not be rated by
a Rating Agency, will not be registered with the SEC or any state securities commission and will not be listed on any national
securities exchange. In evaluating the creditworthiness of Borrowers, the Adviser 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.
Many of the loans held by the Trust will have been assigned ratings below investment grade by Rating Agencies. In the event loans
are not rated, they are likely to be the equivalent of below investment grade quality. Because of the protective features of Senior
Loans, the Adviser believes, based on its experience, that Senior Loans tend to have more favorable loss recovery rates as compared
to more junior types of below investment grade debt obligations.
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U.S. federal securities laws afford certain protections against
fraud and misrepresentation in connection with the offering or sale of a security, as well as against manipulation of trading markets
for securities. The typical practice of a lender in relying exclusively or primarily on reports from the borrower
may involve the risk of fraud, misrepresentation, or market manipulation by the borrower. It is unclear whether U.S. federal securities
law protections are available to an investment in a loan. In certain circumstances, loans may not be deemed to be securities, and
in the event of fraud or misrepresentation by a borrower, lenders may not have the protection of the anti-fraud provisions of the
federal securities laws. However, contractual provisions in the loan documents may offer some protections, and lenders may also
avail themselves of common-law fraud protections under applicable state law.
In addition to the risks generally associated with debt instruments,
such as credit, market, interest rate and liquidity risks, loans are also subject to the risk that the value of any collateral
securing a loan may decline, be insufficient to meet the obligations of the borrower or be difficult to liquidate. The specific
collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan’s value.
The Trust’s access to collateral may be limited by bankruptcy, other insolvency laws or by the type of loan the Trust has
purchased. For example, if the Trust purchases a participation instead of an assignment, it would not have direct access
to collateral of the borrower. As a result, a floating rate loan may not be fully collateralized and can decline significantly
in value. Additionally, collateral on loan instruments may not be readily liquidated, and there is no assurance that the
liquidation of such assets will satisfy a borrower’s obligations under the investment.
When interest rates decline, the value of a fund invested in
fixed-rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a fund invested in fixed-rate
obligations can be expected to decline. Although changes in prevailing interest rates can be expected to cause some fluctuations
in the value of Senior Loans (due to the fact that floating-rates on Senior Loans only reset periodically), the value of Senior
Loans is less sensitive to changes in market interest rates than fixed-rate instruments. As a result, the Adviser expects the Trust’s
policy of investing a portion of its assets in floating-rate Senior Loans will make the Trust less volatile and less sensitive
to changes in market interest rates than if the Trust invested exclusively in fixed-rate obligations. Similarly, a sudden and significant
increase in market interest rates may cause a decline in the value of these investments and in the Trust’s net asset value.
Other factors (including, but not limited to, rating downgrades, credit deterioration, a large downward movement in stock prices,
a disparity in supply and demand of certain Senior Loans and other securities or market conditions that reduce liquidity) can reduce
the value of Senior Loans and other debt obligations, impairing the Trust’s net asset value.
Although the overall size and number of participants in the market
for loans has grown over the past decade, loans continue to trade in a private, unregulated inter-dealer or inter-bank secondary
market. The amount of public information available with respect to Senior Loans will generally be less extensive than that available
for registered or exchange listed securities. With limited exceptions, the adviser will take steps intended to ensure that it does
not receive material nonpublic information about the issuers of Senior Loans that also issue publicly traded securities. Therefore
the adviser may have less information than other investors about certain of the Senior Loans in which it seeks to invest. Purchases
and sales of loans are generally subject to contractual restrictions that must be satisfied before a loan can be bought or sold.
These restrictions may (i) impede the Trust’s ability to buy or sell loans, (ii) negatively impact the transaction price,
(iii) impact the counterparty credit risk borne by the Trust, (iv) impede the Trust’s ability to timely vote or otherwise
act with respect to loans, (v) expose the Trust to adverse tax or regulatory consequences and (vi) result in delayed settlement
of loan transactions. It may take longer than seven days for transactions in loans to settle. This is partly due to the nature
of loans and the contractual restrictions noted above, which require a written assignment agreement and various ancillary documents
for each transfer, and frequently require discretionary consents from both the borrower and the administrative agent. In light
of the foregoing, the Trust may hold cash, sell securities or temporarily borrow from banks or other lenders to meet short-term
liquidity needs due to the extended loan settlement process.
The Adviser uses an independent pricing service to value most
loans and other debt securities at their market value. The Adviser may use the fair value method to value loans or other securities
if a security or a loan is not priced by a pricing service, a pricing service’s price is deemed unreliable, or if events
occur after the close of a securities market (usually a foreign market) and before the Trust values its assets would materially
affect net asset value. A security that is fair valued may be valued at a price higher or lower than actual market quotations or
the value determined by other funds using their own fair valuation procedures. Because foreign securities trade on days when the
Common Shares are not priced, net asset value can change at times when Common Shares cannot be sold.
ADDITIONAL INVESTMENT PRACTICES
Second
Lien Loans and Debt Securities. The Trust may invest in loans and other debt securities that have the same characteristics
as Senior Loans except that such loans are second in lien priority rather than first. Such “second lien” loans and
securities like Senior Loans typically have adjustable floating-rate interest payments. Accordingly, the risks associated with
“second lien” loans are higher than the risks of loans with first priority over the collateral. In the event of default
on a “second lien” loan, the first priority lien holder has first claim to the underlying collateral of the loan. It
is possible that no collateral value would remain for the second priority lien holder, and therefore result in a loss of investment
to the Trust.
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Collateralized
Loan Obligations (“CLOs”). The Trust may invest in certain asset-backed securities as discussed below. Asset-backed
securities are payment claims that are securitized in the form of negotiable paper that is issued by a financing company (generically
called a Special Purpose Vehicle or “SPV”). These securitized payment claims are, as a rule, corporate financial assets
brought into a pool according to specific diversification rules. The SPV is a company founded solely for the purpose of securitizing
these claims and its only asset is the risk arising out of this diversified asset pool. On this basis, marketable securities are
issued which, due to the diversification of the underlying risk, generally represent a lower level of risk than the original assets.
The redemption of the securities issued by the SPV takes place at maturity out of the cash flow generated by the collected claims.
A CLO is a structured credit security issued by an SPV that was
created to reapportion the risk and return characteristics of a pool of assets. The assets, typically Senior Loans, are used as
collateral supporting the various debt tranches issued by the SPV. The key feature of the CLO structure is the prioritization of
the cash flows from a pool of debt securities among the several classes of CLO holders, thereby creating a series of obligations
with varying rates and maturities appealing to a wide range of investors. CLOs generally are secured by an assignment to a trustee
under the indenture pursuant to which the bonds are issued of collateral consisting of a pool of debt instruments, usually, non-investment
grade bank loans. Payments with respect to the underlying debt securities generally are made to the trustee under the indenture.
CLOs are designed to be retired as the underlying debt instruments are repaid. In the event of sufficient early prepayments on
such debt instruments, the class or series of CLO first to mature generally will be retired prior to maturity. Therefore, although
in most cases the issuer of CLOs will not supply additional collateral in the event of such prepayments, there will be sufficient
collateral to secure their priority with respect to other CLO tranches that remain outstanding. The credit quality of these securities
depends primarily upon the quality of the underlying assets, their priority with respect to other CLO tranches and the level of
credit support and/or enhancement provided.
The underlying assets (e.g., loans) are subject to prepayments
which shorten the securities’ weighted average maturity and may lower their return. If the credit support or enhancement
is exhausted, losses or delays in payment may result if the required payments of principal and interest are not made. The value
of these securities also may change because of changes in market value, that is changes in the market’s perception of the
creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or fund providing
the credit support or enhancement. The Trust will indirectly bear any management fees and expenses incurred by a CLO.
Collateralized
Debt Obligations (“CDOs”). The Trust may invest in CDOs. A CDO is a structured credit security issued by
an SPV that was created to reapportion the risk and return characteristics of a pool of assets. The assets, typically non-investment
grade bonds, leveraged loans, and other asset-backed obligations, are used as collateral supporting the various debt and equity
tranches issued by the SPV. The key feature of the CDO structure is the prioritization of the cash flows from a pool of debt securities
among the several classes of CDO holders, thereby creating a series of obligations with varying rates and maturities appealing
to a wide range of investors. CDOs generally are secured by an assignment to a trustee under the indenture pursuant to which the
bonds are issued of collateral consisting of a pool of debt securities, usually, non-investment grade bonds. Payments with respect
to the underlying debt securities generally are made to the trustee under the indenture. CDOs are designed to be retired as the
underlying debt securities are repaid. In the event of sufficient early prepayments on such debt securities, the class or series
of CDO first to mature generally will be retired prior to maturity. Therefore, although in most cases the issuer of CDOs will not
supply additional collateral in the event of such prepayments, there will be sufficient collateral to secure CDOs that remain outstanding.
The credit quality of these securities depends primarily upon the quality of the underlying assets and the level of credit support
and/or enhancement provided. CDOs operate similarly to CLOs and are subject to the same inherent risks.
Foreign
Securities. The Trust 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
willingness and ability of sovereign issuers to pay principal and interest on government securities depends on various economic
factors, including among others the issuer’s balance of payments, overall debt level, and cash flow considerations related
to the availability of tax or other revenues to satisfy the issuer’s obligations. 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. Investments may include securities issued
by the governments of lesser-developed countries, which are sometimes referred to as “emerging markets.” There may
be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability, armed conflict and diplomatic developments which could affect the value of the Trust’s
investments in certain foreign countries. Foreign issuers may become subject to sanctions imposed by the United States or another
country, which could result in the immediate freeze of the foreign issuers’ assets or securities. The imposition of such
sanctions could impair the market value of the securities of such foreign issuers and limit the
Trust’s ability to buy, sell, receive or deliver the securities. Trading in certain foreign markets is also subject to liquidity
risks.
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The value of foreign assets and currencies as measured in U.S.
dollars may be affected favorably or unfavorably by changes in foreign currency rates and exchange control regulations, application
of foreign tax laws (including withholding tax), governmental administration of economic or monetary policies (in this country
or abroad), and relations between nations and trading. Foreign currencies also are subject to settlement, custodial and other
operational risks. Currency exchange rates can be affected unpredictably by intervention, or the failure to intervene, by U.S.
or foreign governments or central banks or by currency controls or political developments in the United States or abroad.
If the U.S. dollar rises in value relative to a foreign currency, a security denominated in that foreign currency will be worth
less in U.S. dollars. If the U.S. dollar decreases in value relative to a foreign currency, a security denominated in that foreign
currency will be worth more in U.S. dollars. A devaluation of a currency by a country’s government or banking authority
will have a significant impact on the value of any investments denominated in that currency. Costs are incurred in connection
with conversions between currencies.
The Trust may invest in securities and other instruments (including
loans) issued, guaranteed, or backed by sovereign or government entities. Economic data as reported by sovereign or government
entities and other issuers may be delayed, inaccurate or fraudulent. Many sovereign or government debt obligations may be rated
below investment grade. Any restructuring of a sovereign or government debt obligation held by the Trust will likely have a significant
adverse effect on the value of the obligation. In the event of default of a sovereign or government debt, the Trust may be unable
to pursue legal action against the issuer or secure collateral on the debt, as there are typically no assets to be seized or cash
flows to be attached. Furthermore, the willingness or ability of a sovereign or government entity to restructure defaulted debt
may be limited. Therefore, losses on sovereign or government defaults may far exceed the losses from the default of a similarly
rated U.S. corporate debt issuer.
Political events in foreign countries may cause market disruptions.
In June 2016, the United Kingdom (“UK”) voted in a referendum to leave the European Union (“EU”) (“Brexit”).
Effective January 31, 2020, the UK ceased to be a member of the EU following a period of impasse within the UK Parliament, and
the holding of an early general election in December 2019 to break the deadlock. The European Parliament and UK Government are
expected to focus attention on the nature of the UK’s future relationship with the EU during an agreed transitional period.
There is significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible
political, regulatory, economic, and market outcomes in the UK, EU and beyond are difficult to predict. Brexit may cause greater
market volatility and illiquidity, currency fluctuations, deterioration in economic activity, a decrease in business confidence,
and increased likelihood of a recession in the UK. If one or more additional countries leave the EU or the EU dissolves, the world’s
securities markets likely will be significantly disrupted.
Corporate
Bonds and Other Debt Securities. The Trust may invest in a wide variety of bonds, debentures and similar debt securities
of varying maturities and durations issued by corporations and other business entities, including limited liability companies.
Debt securities in which the Trust may invest may pay fixed or variable rates of interest. Bonds and other debt securities generally
are issued by corporations and other issuers to borrow money from investors. The issuer pays the investor a fixed or variable rate
of interest and normally must repay the amount borrowed on or before maturity. Certain debt securities are “perpetual”
in that they have no maturity date. The Trust may invest in bonds and other debt securities of any quality. As discussed below,
Non-Investment Grade Bonds, commonly known as “junk bonds,” are considered to be predominantly speculative in nature
because of the credit risk of the issuers.
Non-Investment
Grade Bonds. As indicated above, Non-Investment Grade Bonds are those rated lower than investment grade (i.e., bonds
rated lower than Baa3 by Moody’s and lower than BBB- by S&P and Fitch) or are unrated and of comparable quality as determined
by the Adviser. Non-Investment Grade Bonds rated BB and Ba have speculative characteristics, while lower rated Non-Investment Grade
Bonds are predominantly speculative.
The Trust may hold securities that are unrated or in the lowest
rating categories (rated C by Moody’s or D by S&P or Fitch). Bonds rated C by Moody’s are regarded as having extremely
poor prospects of ever attaining any real investment standing. Bonds rated D by S&P or Fitch are in payment default or a bankruptcy
petition has been filed and debt service payments are jeopardized. In order to enforce its rights with defaulted securities, the
Trust may be required to retain legal counsel and/or a financial adviser. This may increase the Trust’s operating expenses
and adversely affect net asset value.
The credit quality of most securities held by the Trust reflects
a greater than average possibility that adverse changes in the financial condition of an issuer, or in general economic conditions,
or both, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability)
of issuers to make timely payment of interest and principal would likely make the values of securities held by the Trust more volatile
and could limit the Trust’s ability to sell its securities at favorable prices. In the absence of a liquid trading market
for securities held by it, the Trust may have difficulties determining the fair market value of such securities.
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Because of the greater number of investment considerations involved
in investing in investments that receive lower ratings, investing in lower rated investments depends more on the Adviser’s
judgment and analytical abilities than may be the case for investing in investments with higher ratings. While the Adviser will
attempt to reduce the risks of investing in lower rated or unrated securities through active portfolio management, diversification,
credit analysis and attention to current developments and trends in the economy and the financial markets, there can be no assurance
that a broadly diversified portfolio of such securities would substantially lessen the risks of defaults brought about by an economic
downturn or recession.
Investments in obligations rated below investment grade and comparable
unrated securities (sometimes referred to as “junk”) generally entail greater economic, credit and liquidity risks
than investment grade securities. Lower rated investments have speculative characteristics because of the credit risk associated
with their issuers. Changes in economic conditions or other circumstances typically have a greater effect on the ability of issuers
of lower rated investments to make principal and interest payments than they do on issuers of higher rated investments. An economic
downturn generally leads to a higher non-payment rate, and a lower rated investment may lose significant value before a default
occurs. Lower rated investments generally are subject to greater price volatility and illiquidity than higher rated investments.
The Trust’s high yield securities may have fixed or variable
principal payments and all types of interest rate and dividend payment and reset terms, including fixed rate, adjustable rate,
zero coupon, contingent, deferred, and payment in kind features.
Convertible
Securities. The Trust may invest in convertible securities.
A convertible security is a bond, debenture, note, preferred security, or other security that entitles the holder to acquire common
stock or other equity securities of the same or a different issuer. A convertible security entitles the holder to receive
interest paid or accrued or dividends paid until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to nonconvertible income securities. The Trust may invest
in convertible securities of any rating.
Holders of convertible securities generally have a claim on the
assets of the issuer prior to the common stockholders but may be subordinated to other debt securities of the same issuer. Certain
convertible debt securities may provide a put option to the holder, which entitles the holder to cause the securities to be redeemed
by the issuer at a premium over the stated principal amount of the debt securities under certain circumstances. Certain convertible
securities may include loss absorption characteristics that make the securities more debt-like. This is particularly true
of convertible securities issued by companies in the financial services sector.
The value of a convertible security may be influenced by changes
in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the convertible security’s investment value. A convertible
security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing
instrument.
Government
Securities. U.S. Government securities include (1) U.S. Treasury obligations, which differ in their interest rates,
maturities and times of issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury notes (maturities of one
year to ten years) and U.S. Treasury bonds (generally maturities of greater than ten years) and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities that are supported by any of the following: (a) the full faith and credit of
the U.S. Treasury, (b) the right of the issuer to borrow an amount limited to a specific line of credit from the U.S. Treasury,
(c) discretionary authority of the U.S. Government to purchase certain obligations of the U.S. Government agency or instrumentality
or (d) the credit of the agency or instrumentality. The Trust may also invest in any other security or agreement collateralized
or otherwise secured by U.S. Government securities. Agencies and instrumentalities of the U.S. Government include but are not limited
to: Federal Land Banks, Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Government National Mortgage
Association, Student Loan Marketing Association, United States Postal Service, Small Business Administration, Tennessee Valley
Authority and any other enterprise established or sponsored by the U.S. Government. Because the U.S. Government generally is not
obligated to provide support to its instrumentalities, the Trust will invest in obligations issued by these instrumentalities only
if the Adviser determines that the credit risk with respect to such obligations is minimal.
The principal of and/or interest on certain U.S. Government securities
which may be purchased by the Trust could be (a) payable in foreign currencies rather than U.S. dollars or (b) increased or diminished
as a result of changes in the value of the U.S. dollar relative to the value of foreign currencies. The value of such portfolio
securities may be affected favorably by changes in the exchange rate between foreign currencies and the U.S. dollar.
Because of their high credit quality and market liquidity, U.S.
Treasury and Agency Securities generally provide a lower current return than obligations of other issuers. While the U.S. Government
has provided financial support to Fannie Mae and Freddie Mac in the past, but there can be no assurance that it will support these
or other government-sponsored enterprises in the future.
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Commercial
Paper. Commercial paper represents short-term unsecured promissory notes issued in bearer form by corporations such
as banks or bank holding companies and finance companies. The rate of return on commercial paper may be linked or indexed to the
level of exchange rates between the U.S. dollar and a foreign currency or currencies.
Forward
Commitments and When-Issued Securities. The Trust may purchase securities on a “forward commitment” or “when-issued”
basis (meaning securities are purchased or sold with payment and delivery taking place in the future). In such a transaction, the
Trust is securing what is considered to be an advantageous price and yield at the time of entering into the transaction.
The yield on a comparable security when the transaction is consummated
may vary from the yield on the security at the time that the forward commitment or when-issued transaction was made. From the time
of entering into the transaction until delivery and payment is made at a later date, the securities that are the subject of the
transaction are subject to market fluctuations. In forward commitment or when-issued transactions, if the seller or buyer, as the
case may be, fails to consummate the transaction, the counterparty may miss the opportunity of obtaining a price or yield considered
to be advantageous. Forward commitment or when-issued transactions may be expected to occur a month or more before delivery is
due. No payment or delivery is made, however, until payment is received or delivery is made from the other party to the transaction.
These transactions may create leverage in the Trust.
Restricted
Securities. Securities held by the Trust may be legally restricted as to resale (such as those issued in private placements),
including commercial paper issued pursuant to Section 4(a)(2) of the 1933 Act and securities eligible for resale pursuant to Rule
144A thereunder, and securities of U.S. and non- U.S. issuers initially offered and sold outside the United States pursuant to
Regulation S thereunder. Restricted securities may not be listed on an exchange and may have no active trading market. The Trust
may incur additional expense when disposing of restricted securities, including all or a portion of the cost to register the securities.
The Trust also may acquire securities through private placements under which it may agree to contractual restrictions on the resale
of such securities that are in addition to applicable legal restrictions. In addition, if the Adviser receives material non-public
information about the issuer, the Trust may as a result be unable to sell the securities. Restricted securities may be difficult
to value properly and may involve greater risks than securities that are not subject to restrictions on resale. It may be difficult
to sell restricted securities at a price representing fair value until such time as the securities may be sold publicly. Under
adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Trust could
find it more difficult to sell such securities when the Adviser believes it advisable to do so or may be able to sell such securities
only at prices lower than if such securities were more widely held. Holdings of restricted securities may increase the level of
Trust illiquidity if eligible buyers become uninterested in purchasing them. Restricted securities may involve a high degree of
business and financial risk, which may result in substantial losses.
Illiquid
Investments. The Trust may invest up to 15% of its total assets in investments for which there is no readily available
trading market or that are otherwise illiquid. Illiquid investments include securities legally restricted as to resale, such as
commercial paper issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and securities eligible for resale
pursuant to Rule 144A thereunder. Section 4(a)(2) and Rule 144A securities may, however, be treated as liquid by the Adviser pursuant
to procedures adopted by the Board, which require consideration of factors such as trading activity, availability of market quotations
and number of dealers willing to purchase the security. The Trust may incur additional expense when disposing of illiquid investments,
including all or a portion of the cost to register the investments. If the Trust invests in Rule 144A securities, the level of
portfolio illiquidity may be increased to the extent that eligible buyers become uninterested in purchasing such securities.
It may be difficult to sell illiquid investments at a price
representing their fair value until such time as such investments may be sold publicly. Where registration is required, a considerable
period may elapse between a decision by the Trust to sell the investments and the time when it would be permitted to sell. Thus,
the Trust may not be able to obtain as favorable a price as that prevailing at the time of the decision to sell. The Trust may
also acquire investments through private placements under which it may agree to contractual restrictions on the resale of such
investments. Such restrictions might prevent their sale at a time when such sale would otherwise be desirable.
At times, a portion of the Trust’s assets may be invested
in investments as to which the Trust, by itself or together with other accounts managed by the investment adviser and its affiliates,
holds a major portion or all of such investments. Under adverse market or economic conditions or in the event of adverse changes
in the financial condition of the issuer, the Trust could find it more difficult to sell such investments when the investment adviser
believes it advisable to do so or may be able to sell such investments only at prices lower than if such investments were more
widely held. It may also be more difficult to determine the fair value of such investments for purposes of computing the Trust’s
net asset value.
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Equity
Securities. Equity securities include: common stocks; preferred stocks, including convertible and contingent convertible
preferred stocks; equity interests in trusts, partnerships, joint ventures and other unincorporated entities or enterprises; depositary
receipts, rights and warrants in underlying equity interests; and other securities that are treated as equity for U.S. federal
income tax purposes. The Trust cannot predict the income it might receive from equity securities because issuers generally have
discretion as to the payment of any dividends or distributions.
The value of equity securities and related instruments may
decline in response to adverse changes in the economy or the economic outlook; deterioration in investor sentiment; interest rate,
currency, and commodity price fluctuations; adverse geopolitical, social or environmental developments; issuer- and sector-specific
considerations; and other factors. Market conditions may affect certain types of stocks to a greater extent than other types of
stocks. Although stock prices can rebound, there is no assurance that values will return to previous levels.
Pooled
Investment Vehicles. Pooled investment vehicles include other open-end or closed-end investment companies affiliated
or unaffiliated with the investment adviser, exchange-traded funds and other collective investment pools in accordance with the
requirements of the 1940 Act. Closed-end investment company securities are usually traded on an exchange. The demand for a closed-end
fund’s securities is independent of the demand for the underlying portfolio assets, and accordingly, such securities can
trade at a discount from, or a premium over, their net asset value. The Trust generally will indirectly bear its proportionate
share of any management fees paid by a pooled investment vehicle in which it invests in addition to the investment advisory fee
paid by the Trust.
Warrants.
Equity warrants are securities that give the holder the right, but not the obligation, to subscribe for equity issues of the issuing
company or a related company at a fixed price either on a certain date or during a set period. Changes in the value of a warrant
do not necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than
the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect to the underlying security and do not represent any
rights in the assets of the issuing company. A warrant ceases to have value if it is not exercised prior to its expiration date.
These factors can make warrants more speculative than other types of investments. The sale of a warrant results in a long or short
term capital gain or loss depending on the period for which a warrant is held.
Cash
and Money Market Instruments. The Trust may invest in cash or money market instruments, including high quality short-term
instruments or an affiliated investment company that invests in such instruments. During unusual market conditions, the Trust may
invest up to 100% of its assets in cash or money market instruments temporarily, which may be inconsistent with its investment
objective(s) and other policies.
Money market instruments may be adversely affected by market
and economic events, such as a sharp rise in prevailing short-term interest rates; adverse developments in the banking industry,
which issues or guarantees many money market instruments; adverse economic, political or other developments affecting issuers of
money market instruments; changes in the credit quality of issuers; and default by a counterparty.
Derivatives.
Generally, derivatives can be characterized as financial instruments whose performance is derived at least in part from the performance
of an underlying reference instrument. Derivative instruments may be acquired in the United States or abroad consistent with the
Trust’s investment strategy and may include the various types of exchange-traded and over-the-counter (“OTC”)
instruments described herein and other instruments with substantially similar characteristics and risks. Trust obligations created
pursuant to derivative instruments may give rise to leverage, which would subject the Trust to the requirements described under
“Asset Coverage” in the Trust’s SAI. The Trust may invest in a derivative transaction if it is permitted to own,
invest in, or otherwise have economic exposure to the reference instrument. Depending on the type of derivative instrument and
the Trust’s investment strategy, a reference instrument could be a security, instrument, index, currency, commodity, economic
indicator or event (“reference instruments”). As described more specifically below, the Trust 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 or for the purpose of leveraging the Trust. The Trust’s transactions
in derivatives instruments may include the purchase or sale of futures contracts on securities, indices and other financial instruments,
credit-linked notes, tranches of collateralized loan obligations and/or collateralized debt obligations, options on futures contracts,
forward foreign currency contracts, and exchange-traded and over-the-counter options on securities or indices, index-linked securities,
and interest rate, total return and credit default swaps. The Trust may trade in the specific type(s) and/or combinations of derivative
transactions listed below.
Derivative instruments are subject to a number of risks, including
adverse or unexpected movements in the price of the reference instrument, and counterparty, credit, interest rate, liquidity, market,
tax and leverage risks. In addition, derivatives also involve the risk that changes in their value may not correlate perfectly
with the assets, rates, indices or instruments they are designed to hedge or closely track. Use of derivative instruments may cause
the realization of higher amounts of short-term capital gains (generally taxed at ordinary income tax rates) than if such instruments
had not
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been used. Success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative instruments and the hedged asset. Imperfect correlation
may be caused by several factors, including temporary price disparities among the trading markets for the derivative instrument,
the reference instrument and the Trust’s assets. To the extent that a derivative instrument is intended to hedge against
an event that does not occur, the Trust may realize losses.
OTC derivative instruments involve an additional risk in that
the issuer or counterparty may 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, an option or commodity
exchange or swap execution facility or clearinghouse 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 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 Internal Revenue Code of 1986, as amended (the “Code”), limit the use of derivative
instruments. Derivatives permit the Trust to increase or decrease the level of risk, or change the character of the risk, to which
its portfolio is exposed in much the same way as the Trust can increase or decrease the level of risk, or change the character
of the risk, of its portfolio by making investments in specific securities. There can be no assurance that the use of derivative
instruments will benefit the Trust.
The U.S. and non-U.S. derivatives markets have undergone substantial
change in recent years as a result of changes under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”) in the United States and regulatory changes in Europe, Asia and other non-U.S. jurisdictions. In particular, the Dodd-Frank
Act and related regulations require many derivatives to be cleared and traded on an exchange, expand entity registration requirements,
impose business conduct requirements on counterparties, and impose other regulatory requirements that will continue to change derivatives
markets as regulations are implemented. Additional future regulation of the derivatives markets may make the use of derivatives
more costly, may limit the availability or reduce the liquidity of derivatives, and may impose limits or restrictions on the counterparties
with which the Trust engages in derivative transactions. Trust management cannot predict the effects of any new governmental regulation
that may be implemented, and future regulation may impair the effectiveness of the Trust’s derivative transactions and its
ability to achieve its investment objectives.
Futures
Contracts. Futures are standardized, exchange-traded contracts. Futures contracts on securities obligate a purchaser
to take delivery, and a seller to make delivery, of a specific amount of the financial instrument called for in the contract at
a specified future date at a specified price. An index futures contract obligates the purchaser to take, and a seller to deliver,
an amount of cash equal to a specific dollar amount times the difference between the value of a specific index at the close of
the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying securities
in the index is made. It is the practice of holders of futures contracts to close out their positions on or before the expiration
date by use of offsetting contract positions, and physical delivery of financial instruments or delivery of cash, as applicable,
is thereby avoided. An option on a futures contract gives the holder the right to enter into a specified futures contract.
Credit-Linked
Notes. The Trust may invest in credit-linked notes (“CLN”) for risk management purposes, including diversification.
A CLN is a type of hybrid instrument in which a special purpose entity issues a structured note (the “note issuer”)
with respect to which the reference instrument is a single bond, a portfolio of bonds or the unsecured credit of an issuer, in
general (each a “reference credit”). The purchaser of the CLN (the “note purchaser”) invests a par amount
and receives a payment during the term of the CLN that equals a fixed or floating rate of interest equivalent to a high-rated funded
asset (such as a bank certificate of deposit) plus an additional premium that relates to taking on the credit risk of the reference
credit. Upon maturity of the CLN, the note purchaser will receive a payment equal to: (i) the original par amount paid to the note
issuer, if there is no occurrence of a designated event of default, restructuring or other credit event (each a “credit event”)
with respect to the issuer of the reference credit; or (ii) the market value of the reference credit, if a credit event has occurred.
Depending upon the terms of the CLN, it is also possible that the note purchaser may be required to take physical delivery of the
reference credit in the event of credit event. Most CLNs use a corporate bond (or a portfolio of corporate bonds) as the reference
credit. However, almost any type of fixed-income security (including foreign government securities), index or derivative contract
(such as a credit default swap) can be used as the reference credit.
Swaps.
Swap contracts may be purchased or sold to hedge against fluctuations in securities prices, interest rates or market conditions,
to change the duration of the overall portfolio, or to mitigate default risk. In a standard “swap” transaction, two
parties agree to exchange the returns (or differentials in rates of return) to be exchanged or “swapped” between the
parties, which returns are calculated with respect to a “notional amount,” i.e., the return on or increase in value
of a particular dollar amount invested at a particular interest rate or in a “basket” of securities representing a
particular index.
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Interest
Rate Swaps. The Trust will enter into interest rate and total return swaps only on a net basis, i.e., the two payment
streams are netted out, with the Trust receiving or paying, as the case may be, only the net amount of the two payments. Interest
rate swaps involve the exchange by the Trust with another party of their respective commitments to pay or receive interest (e.g.,
an exchange of fixed rate payments for floating-rate payments). The Trust will only enter into interest rate swaps on a net basis.
If the other party to an interest rate swap defaults, the Trust’s risk of loss consists of the net amount of payments that
the Trust is contractually entitled to receive. The net amount of the excess, if any, of the Trust’s obligations over its
entitlements will be maintained in a segregated account by the Trust’s custodian. The Trust will not enter into any interest
rate swap unless the claims-paying ability of the other party thereto is considered to be investment grade by the Adviser. If there
is a default by the other party to such a transaction, the Trust will have contractual remedies pursuant to the agreements related
to the transaction. These instruments are traded in the over-the-counter market.
The Trust may use interest rate swaps for risk management
purposes only and not as a speculative investment and would typically use interest rate swaps to shorten the average interest rate
reset time of the Trust’s holdings. Interest rate swaps involve the exchange by the Trust with another party of their respective
commitments to pay or receive interest (e.g., an exchange of fixed rate payments for floating-rate payments). The use of interest
rate swaps is a highly specialized activity which involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Adviser is incorrect in its forecasts of market values, interest rates and other
applicable factors, the investment performance of the Trust would be unfavorably affected.
Total
Return Swaps. As stated above, the Trust will enter into total return swaps only on a net basis. A total return swap
is a contract in which one party agrees to make periodic payments to another party based on the change in market value of a reference
instrument during the specified period, in return for periodic payments from the other party that are based on a fixed or variable
interest rate or the total return of the reference instrument or another reference instrument. Total return swap agreements may
be used to obtain exposure to a security or market without owning or taking physical custody of such security or investing directly
in such market.
Credit
Default Swaps. The Trust may enter into credit default swap contracts for risk management purposes, including diversification.
When the Trust is the buyer of a credit default swap contract, the Trust is entitled to receive the par (or other agreed-upon)
value of a referenced debt obligation from the counterparty to the contract in the event of a default by a third party, such as
a U.S. or foreign corporate issuer, on the debt obligation. In return, the Trust would pay the counterparty a periodic stream of
payments over the term of the contract provided that no event of default has occurred. If no default occurs, the Trust would have
spent the stream of payments and received no benefit from the contract. When the Trust is the seller of a credit default swap contract,
it receives the stream of payments, but is obligated to pay upon default of the referenced debt obligation. As the seller, the
Trust would effectively add leverage to its portfolio because, in addition to its total net assets, the Trust would be subject
to investment exposure on the notional amount of the swap. These transactions involve certain risks, including the risk that the
seller may be unable to fulfill the transaction.
Credit default swap agreements (“CDS”)
enable the Trust to buy or sell credit protection on an individual issuer or basket of issuers (i.e., the reference instrument).
The Trust may enter into CDS to gain or short exposure to a reference instrument. Long CDS positions are utilized to gain exposure
to a reference instrument (similar to buying the instrument) and are akin to selling insurance on the instrument. Short CDS positions
are utilized to short exposure to a reference instrument (similar to shorting the instrument) and are akin to buying insurance
on the instrument.
Under a CDS, the protection “buyer” in
a credit default contract is generally obligated to pay the protection “seller” an upfront or a periodic stream of
payments over the term of the contract, provided that no credit event, such as a default, on a reference instrument has occurred.
If a credit event occurs, the seller generally must pay the buyer the “par value” (full notional value) of the reference
instrument in exchange for an equal face amount of the reference instrument described in the swap, or the seller may be required
to deliver the related net cash amount, if the swap is cash settled. If the Trust is a buyer and no credit event occurs, the Trust
may recover nothing if the swap is held through its termination date. As a seller, the Trust generally receives an upfront payment
or a fixed rate of income throughout the term of the swap provided that there is no credit event. The Trust’s obligations
under a CDS will be accrued daily (offset against any amounts owed to the Trust).
In response to market events, federal and certain
state regulators have proposed regulation of the CDS market. These regulations may limit the Trust’s ability to use CDS and/or
the benefits of CDS. CDS may be difficult to value and generally pay a return to the party that has paid the premium only in the
event of an actual default by the issuer of the underlying obligation (as opposed to a credit downgrade or other indication of
financial difficulty). The Trust may have difficulty, be unable or may incur additional costs to acquire any securities or instruments
it is required to deliver under a CDS. The Trust may have limited ability to eliminate its exposure under a CDS either by assignment
or other disposition, or by entering into an offsetting swap agreement. The Trust also may have limited ability to eliminate its
exposure under a CDS if the reference instrument has declined in value.
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Futures
and Options on Futures. The Trust may purchase and sell various kinds of financial futures contracts and options thereon
to seek to hedge against changes in interest rates or for other risk management purposes. Futures contracts may be based on various
debt securities and securities indices. Such transactions involve a risk of loss or depreciation due to unanticipated adverse changes
in securities prices, which may exceed the Trust’s initial investment in these contracts. The Trust will only purchase or
sell futures contracts or related options in compliance with the rules of the CFTC. These transactions involve transaction costs.
There can be no assurance that Eaton Vance’s use of futures will be advantageous to the Trust. Rating Agency guidelines on
any preferred shares issued by the Trust, including APS, may limit use of these transactions.
Options.
Options may be traded on an exchange and OTC. By buying a put option on a particular instrument, the Trust acquires a right to
sell the underlying instrument at the exercise price. By buying a put option on an index, the Trust acquires a right to receive
the cash difference between the strike price of the option and the index price at expiration. A purchased put position also typically
can be sold at any time by selling at prevailing market prices. Purchased put options generally are expected to limit the Trust's
risk of loss through a decline in the market value of the underlying security or index until the put option expires. When buying
a put, the Trust pays a premium to the seller of the option. If the price of the underlying security or index is above the exercise
price of the option as of the option valuation date, the option expires worthless and the Trust will not be able to recover the
option premium paid to the seller. The Trust may purchase uncovered put options on securities, meaning it will not own the securities
underlying the option.
The Trust may also write (i.e., sell) put options. The Trust
will receive a premium for selling a put option, which may increase the Trust's return. In selling a put option on a security,
the Trust has the obligation to buy the security at an agreed upon price if the price of such instrument decreases below the exercise
price. By selling a put option on an index, the Trust has an obligation to make a payment to the buyer to the extent that the value
of the index decreases below the exercise price as of the option valuation date. If the value of the underlying security or index
on the option’s expiration date is above the exercise price, the option will generally expire worthless and the Trust, as
option seller, will have no obligation to the option holder.
The Trust may purchase call options. By purchasing a call option
on a security, the Trust has the right to buy the security at the option’s exercise price. By buying a call option on an
index, the Trust acquires the right to receive the cash difference between the market price of the index and strike price at expiration.
Call options typically can be exercised any time prior to option maturity or, sold at the prevailing market price.
The Trust may also write (i.e., sell) a call option on a security
or index in return for a premium. A call written on a security obligates the Trust to deliver the underlying security at the option
exercise price. Written index call options obligate the Trust to make a cash payment to the buyer at expiration if the market price
of the index is above the option strike price. Calls typically can also be bought back by the Trust at prevailing market prices
and the Trust also may enter into closing purchase transactions with respect to written call options.
The Trust’s options positions are marked to market daily.
The value of options is affected by changes in the value and dividend rates of their underlying instruments, changes in interest
rates, changes in the actual or perceived volatility of the relevant index or market and the remaining time to the options’
expiration, as well as trading conditions in the options market. The hours of trading for options may not conform to the hours
during which the underlying instruments are traded. To the extent that the options markets close before markets for the underlying
instruments, significant price and rate movements can take place in the markets that would not be reflected concurrently in the
options markets.
The Trust's ability to sell the instrument underlying a call
option may be limited while the option is in effect unless the Trust enters into a closing purchase transaction. Uncovered call
options have speculative characteristics and are riskier than covered call options because there is no underlying instrument held
by the Trust that can act as a partial hedge. As the seller of a covered call option or an index call option, the Trust may forego,
during the option’s life, the opportunity to profit from increases in the market value of the underlying instrument covering
the call option above the sum of the premium received by the Trust and the exercise price of the call. The Trust also retains the
risk of loss, minus the option premium received, should the price of the underlying instrument decline.
Participants in OTC markets are typically not subject to the
same credit evaluation and regulatory oversight as are members of “exchange-based” markets. OTC option contracts generally
carry greater liquidity risk than exchange-traded contracts. This risk may be increased in times of financial stress, if the trading
market for OTC options becomes restricted. The ability of the Trust to transact business with any one or a number of counterparties
may increase the potential for losses to the Trust, due to the lack of any independent evaluation of the counterparties or their
financial capabilities, and the absence of a regulated market to facilitate settlement of the options.
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Forward
Foreign Currency Exchange Contracts. Forward foreign currency exchange contracts are OTC contracts to purchase or sell
a specified amount of a specified currency or multinational currency unit at a price and future date set at the time of the contract.
Spot foreign exchange transactions are similar but require current, rather than future, settlement. The Trust will enter into foreign
exchange transactions for purposes of hedging either a specific transaction or the Trust position or, to seek to enhance returns.
Proxy hedging is often used when the currency to which the Trust is exposed is difficult to hedge or to hedge against the dollar.
Proxy hedging entails entering into a forward contract to sell a currency whose changes in value are generally considered to be
linked to a currency or currencies in which some or all of the Trust's securities are, or are expected to be, denominated, and
to buy U.S. dollars. Proxy hedging involves some of the same risks and considerations as other transactions with similar instruments.
Currency transactions can result in losses to the Trust if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. In addition, there is the risk that the perceived linkage between various currencies may not be present
or may not be present during the particular time that the Trust is engaged in proxy hedging. The Trust may also cross-hedge currencies
by entering into forward contracts to sell one or more currencies that are expected to decline in value relative to other currencies
to which the Trust has or in which the Trust expects to have portfolio exposure. Some of the forward foreign currency contracts
entered into by the Trust are classified as non-deliverable forwards (“NDF”). NDFs are cash-settled, short-term forward
contracts that may be thinly traded or are denominated in non-convertible foreign currency, where the profit or loss at the time
at the settlement date is calculated by taking the difference between the agreed upon exchange rate and the spot rate at the time
of settlement, for an agreed upon notional amount of funds. NDFs are commonly quoted for time periods of one month up to two years,
and are normally quoted and settled in U.S. dollars. They are often used to gain exposure to and/or hedge exposure to foreign currencies
that are not internationally traded.
Counterparty
Risk. A financial institution or other counterparty with whom the Trust does business (such as trading or as a derivatives
counterparty), or that underwrites, distributes or guarantees any instruments that the Trust owns or is otherwise exposed to, may
decline in financial condition and become unable to honor its commitments. This could cause the value of Trust shares to decline
or could delay the return or delivery of collateral or other assets to the Trust. Counterparty risk is increased for contracts
with longer maturities.
Securities
Lending. The Trust may lend its portfolio securities to broker-dealers and other institutional borrowers. During the
existence of a loan, the Trust will continue to receive the equivalent of the interest paid by the issuer on the securities loaned,
or all or a portion of the interest on investment of the collateral, if any. The Trust may pay lending fees to such borrowers.
Loans will only be made to firms that have been approved by the investment adviser, and the investment adviser or the securities
lending agent will periodically monitor the financial condition of such firms while such loans are outstanding. Securities loans
will only be made when the investment adviser believes that the expected returns, net of expenses, justify the attendant risks.
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 Trust may engage in securities lending to generate income. Upon return of the loaned securities, the
Trust would be required to return the related collateral to the borrower and may be required to liquidate portfolio securities
in order to do so. The Trust may lend up to one-third of the value of its total assets or such other amount as may be permitted
by law.
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. To the extent
that the portfolio securities acquired with such collateral have decreased in value, it may result in the Trust realizing a loss
at a time when it would not otherwise do so. As such, securities lending may introduce leverage into the Trust. The Trust also
may incur losses if the returns on securities that it acquires with cash collateral are less than the applicable rebate rates paid
to borrowers and related administrative costs.
Borrowings.
The Trust may borrow money to the extent permitted under the 1940 Act as interpreted, modified or otherwise permitted by the regulatory
authority having jurisdiction. Under the 1940 Act, the Trust is not permitted to incur indebtedness, including through the issuance
of debt securities, unless immediately thereafter the total asset value of the Trust’s portfolio is at least 300% of the
liquidation value of the outstanding indebtedness (i.e., such liquidation value may not exceed 33 1/3% of the Trust’s total
assets). The Trust may also borrow money for temporary administrative purposes.
The Trust has entered into a Revolving Credit and Security
Agreement (the “Agreement”) with conduit lenders and a bank to allow it to borrow up to $125 million. The proceeds
of which were used to invest in accordance with the Trust’s investment practices and to partially redeem the Trust’s
APS. Borrowings under the Agreement are secured by the assets of the Trust. Interest is charged at a rate above the conduits’
commercial paper issuance rate and is payable monthly. Under the terms of the Agreement, in effect through March 8, 2021, the Trust
also pays a program fee of 0.85% per annum on its outstanding borrowings to administer the facility and a liquidity fee of 0.15%
(0.25% if the outstanding loan amount is less than or equal to 60% of the total facility size) per annum on the unused portion
of the total commitment under the Agreement. Program and liquidity fees for the year ended June 30, 2020 totaled $918,353. In connection
with the renewal of the Agreement on March 9, 2020, the Trust paid upfront fees of $125,000 and, shortly thereafter on March 20,
2020, the Trust paid waiver fees of $156,250 in connection with a reduction of Trust net asset
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value during the month of March 2020 due to market volatility;
these aggregate upfront and waiver fees are being amortized to interest expense through March 8, 2021. The Trust is required to
maintain certain net asset levels during the term of the Agreement. At June 30, 2020 the Trust had borrowings outstanding under
the Agreement of $95 million at an interest rate of 0.35%. Based on the short-term nature of the borrowings under the Agreement
and the variable interest rate, the carrying amount of the borrowings at June 30, 2020 approximated its fair value. For the year
ended June 30, 2020 the average borrowings under the Agreement and the average interest rate (excluding fees) were $102,256,831
and 1.83%, respectively. In addition, the credit facility may in the future be replaced or refinanced by one or more credit facilities
having substantially different terms or by the issuance of preferred shares or debt securities.
Repurchase
Agreements. The Trust 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. A repurchase agreement is the purchase by the Trust of securities
from a counterparty in exchange for cash that is coupled with an agreement to resell those securities to the counterparty at a
specified date and price. Repurchase agreements maturing in more than seven days that the investment adviser believes may not be
terminated within seven days at approximately the amount at which the Trust has valued the agreements are considered illiquid securities.
When a repurchase agreement is entered into, the Trust typically receives securities with a value that equals or exceeds the repurchase
price, including any accrued interest earned on the agreement. The value of such securities will be marked to market daily, and
cash or additional securities will be exchanged between the parties as needed. Except in the case of a repurchase agreement entered
into to settle a short sale, the value of the securities delivered to the Trust will be at least equal to repurchase price during
the term of the repurchase agreement. The terms of a repurchase agreement entered into to settle a short sale may provide that
the cash purchase price paid by the Trust is more than the value of purchased securities that effectively collateralize the repurchase
price payable by the counterparty. Since in such a transaction the Trust normally will have used the purchased securities to settle
the short sale, the Trust will segregate liquid assets equal to the marked to market value of the purchased securities that it
is obligated to return to the counterparty under the repurchase agreement.
In the event of the insolvency of the counterparty to a repurchase
agreement, recovery of the repurchase price owed to the Trust may be delayed. In a repurchase agreement, such an insolvency may
result in a loss to the extent that the value of the purchased securities decreases during the delay or that value has otherwise
not been maintained at an amount equal to the repurchase price. Repurchase agreements may create leverage in the Trust.
Reverse
Repurchase Agreements. While the Trust has no current intention to enter into reverse repurchase agreements, the Trust
reserves the right to enter into reverse repurchase agreements in the future, at levels that may vary over time. Under a reverse
repurchase agreement, the Trust temporarily transfers possession of a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash. At the same time, the Trust agrees to repurchase the instrument at an agreed upon time and price,
which reflects an interest payment. The Trust may enter into such agreements when it is able to invest the cash acquired at a rate
higher than the cost of the agreement, which would increase earned income.
In the event of the insolvency of the counterparty to a reverse
repurchase agreement, recovery of the securities sold by the Trust may be delayed. In a reverse repurchase agreement, the counterparty’s
insolvency may result in a loss equal to the amount by which the value of the securities sold by the Trust exceeds the repurchase
price payable by the Trust.
When the Trust enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another party or the securities in which the proceeds
may be invested would affect the market value of the Trust’s assets. As a result, such transactions may increase fluctuations
in the market value of the Trust’s assets. While there is a risk that large fluctuations in the market value of the Trust’s
assets could affect net asset value, this risk is not significantly increased by entering into reverse repurchase agreements, in
the opinion of the Adviser. Because reverse repurchase agreements may be considered to be the practical equivalent of borrowing
funds, they constitute a form of leverage. The SEC views reverse repurchase transactions as collateralized borrowings by a fund.
Such agreements will be treated as subject to investment restrictions regarding “borrowings.” If the Trust reinvests
the proceeds of a reverse repurchase agreement at a rate lower than the cost of the agreement, entering into the agreement will
lower the Trust’s yield.
Research
Process. The Trust’s portfolio management utilizes the information provided by, and the expertise of,
the research staff of the investment adviser and its affiliates in making investment decisions. As part of the research process,
portfolio management may consider financially material environmental, social and governance (“ESG”) factors. Such factors,
alongside other relevant factors, may be taken into account in the Trust’s securities selection process.
Temporary
Investments. During unusual market conditions, the Trust may invest up to 100% of its assets in cash or cash equivalents
temporarily, which may be inconsistent with its investment objectives, principal strategies and other policies. Cash equivalents
are highly liquid, short-term securities such as commercial paper, time deposits, certificates of deposit, short-term notes and
short-term U.S. government obligations. In moving to a substantial temporary investments position and in transitioning from such
a position back into conformity with the Trust’s normal investment policies, the Trust may incur transaction costs that would not be incurred
if the Trust had remained fully invested in accordance with such normal policies. The Trust’s investment in such temporary
investments under unusual market circumstances may not be in furtherance of the Trust’s investment objectives.
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Portfolio
Turnover. The Trust cannot accurately predict its portfolio turnover rate, but the annual turnover rate may exceed 100%
(excluding turnover of securities having a maturity of one year or less). A high turnover rate (100% or more) necessarily involves
greater expenses to the Trust. The portfolio turnover rate(s) for the Trust for the fiscal years ended June 30, 2020 and 2019 were
57% and 26%, respectively.
USE OF LEVERAGE AND RELATED RISKS
Generally, leverage involves the use of proceeds from the
issuance of preferred shares, borrowed funds or various financial instruments (such as derivatives) to seek to increase a trust’s
potential returns. The Trust currently uses leverage created by issuing APS as well as by loans acquired with borrowings. The Trust
currently uses leverage created by issuing APS. On June 27, 2001, the Trust issued 2,200 Series A APS and 2,200 Series B APS, with
a liquidation preference per share of $25,000 plus accumulated but unpaid dividends. The APS have seniority over the Common Shares.
On September 23, 2016, the Trust repurchased 968 Series A APS and 968 Series B APS. On September 14, 2018, the Trust repurchased
480 Series A APS and 480 Series B APS. In addition, in connection with this repurchase, the Trust increased its borrowing limits
under its Revolving Credit and Security Agreement, as amended (the “Agreement”) with conduit lenders and a bank to
allow it to borrow up to $125 million. The proceeds of which were used to invest in accordance with the Trust’s investment
practices and to partially redeem the Trust’s APS. Borrowings under the Agreement are secured by the assets of the Trust.
Interest is charged at a rate above the conduits’ commercial paper issuance rate and is payable monthly. Under the terms
of the Agreement, in effect through March 8, 2021, the Trust also pays a program fee of 0.85% per annum on its outstanding borrowings
to administer the facility and a liquidity fee of 0.15% (0.25% if the outstanding loan amount is less than or equal to 60% of the
total facility size) per annum on the unused portion of the total commitment under the Agreement. Program and liquidity fees for
the year ended June 30, 2020 totaled $918,353. In connection with the renewal of the Agreement on March 9, 2020, the Trust paid
upfront fees of $125,000 and, shortly thereafter on March 20, 2020, the Trust paid waiver fees of $156,250 in connection with a
reduction of Trust net asset value during the month of March 2020 due to market volatility; these aggregate upfront and waiver
fees are being amortized to interest expense through March 8, 2021. The Trust is required to maintain certain net asset levels
during the term of the Agreement. As of June 30, 2020, the Trust had $95 million in outstanding borrowings, at an interest rate
of 0.35%, in addition to outstanding APS. The Adviser anticipates that the use of leverage (from such issuance of APS and any borrowings)
may result in higher income to Common Shareholders over time. Use of financial leverage creates an opportunity for increased income
but, at the same time, creates special risks. There can be no assurance that a leveraging strategy will be successful.
The costs of the financial leverage program (from any issuance
of preferred shares and any borrowings) are borne by Common Shareholders and consequently result in a reduction of the NAV of Common
Shares. During periods in which the Trust is using leverage, the fees paid to Eaton Vance for investment advisory services will
be higher than if the Trust did not use leverage because the fees paid will be calculated on the basis of the Trust’s gross
assets, including proceeds from the issuance of preferred shares and any borrowings. In this regard, holders of debt or preferred
securities do not bear the investment advisory fee. Rather, Common Shareholders bear the portion of the investment advisory fee
attributable to the assets purchased with the proceeds, which means that Common Shareholders effectively bear the entire advisory
fee.
Leverage creates risks for holders of the Common Shares, including
the likelihood of greater volatility of NAV and market price of the Common Shares. There is a risk that fluctuations in the distribution
rates on any outstanding preferred shares may adversely affect the return to the holders of the Common Shares. If the income from
the investments purchased with the proceeds of leverage is not sufficient to cover the cost of leverage, the return on the Trust
will be less than if leverage had not been used, and, therefore, the amount available for distribution to Common Shareholders will
be reduced. The Adviser in its best judgment nevertheless may determine to maintain the Trust’s leveraged position if it
deems such action to be appropriate in the circumstances.
Changes in the value of the Trust’s investment portfolio
(including investments bought with the proceeds of leverage) will be borne entirely by the Common Shareholders. If there is a net
decrease (or increase) in the value of the Trust’s investment portfolio, the leverage will decrease (or increase) the NAV
per Common Share to a greater extent than if the Trust were not leveraged. During periods in which the Trust is using leverage,
the fees paid to Eaton Vance for investment advisory services will be higher than if the Trust did not use leverage because the
fees paid will be calculated on the basis of the Trust’s gross assets, including the proceeds from the issuance of preferred
shares and any borrowings. As discussed under “Description of Capital Structure,” the Trust’s issuance of preferred
shares may alter the voting power of Common Shareholders.
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Capital raised through leverage will be subject to distribution
and/or interest payments, which may exceed the income and appreciation on the assets purchased. The issuance of preferred shares
involves offering expenses and other costs and may limit the Trust’s freedom to pay distributions on Common Shares or to
engage in other activities. The issuance of a class of preferred shares having priority over the Common Shares creates an opportunity
for greater return per Common Share, but at the same time such leveraging is a speculative technique that will increase the Trust’s
exposure to capital risk. Unless the income and appreciation, if any, on assets acquired with offering proceeds exceed the cost
of issuing additional classes of securities (and other Trust expenses), the use of leverage will diminish the investment performance
of the Common Shares compared with what it would have been without leverage.
The Trust is subject to certain restrictions on investments imposed
by guidelines of one or more Rating Agencies that issued ratings for preferred shares issued by the Trust. These guidelines impose
asset coverage or Trust composition requirements that are more stringent than those imposed on the Trust by the 1940 Act. These
covenants or guidelines do not currently and are not expected to impede Eaton Vance in managing the Trust’s portfolio in
accordance with its investment objective and policies and it is not anticipated that they will so impede Eaton Vance in the future.
Under the 1940 Act, the Trust is not permitted to issue preferred
shares unless immediately after such issuance the total asset value of the Trust’s portfolio is at least 200% of the liquidation
value of the outstanding preferred shares plus the amount of any senior security representing indebtedness (i.e., such liquidation
value and amount of indebtedness may not exceed 50% of the Trust’s total assets). In addition, the Trust is not permitted
to declare any cash distribution on its Common Shares unless, at the time of such declaration, the NAV of the Trust’s portfolio
(determined after deducting the amount of such distribution) is at least 200% of such liquidation value plus amount of indebtedness.
The Trust intends, to the extent possible, to purchase or redeem preferred shares, from time to time, to maintain coverage of any
preferred shares of at least 200%. As of June 30, 2020, the outstanding APS and the outstanding borrowings represented 36.1% leverage,
and there was an asset coverage of the APS of 277%. Holders of preferred shares, voting as a class, shall be entitled to elect
two of the Trust’s Trustees. The holders of both the Common Shares and the preferred shares (voting together as a single
class with each share entitling its holder to one vote) shall be entitled to elect the remaining Trustees of the Trust. In the
event the Trust fails to pay distributions on its preferred shares for two years, preferred shareholders would be entitled to elect
a majority of the Trustees until the preferred distributions in arrears are paid.
Under the 1940 Act, the Trust is not permitted to incur indebtedness,
including through the issuance of debt securities, unless immediately thereafter the total asset value of the Trust’s portfolio
is at least 300% of the liquidation value of the outstanding indebtedness (i.e., such liquidation value may not exceed 33 1/3%
of the Trust’s total assets). In addition, the Trust is not permitted to declare any cash distribution on its Common Shares
unless, at the time of such declaration, the NAV of the Trust’s portfolio (determined after deducting the amount of such
distribution) is at least 300% of such liquidation value. If the Trust borrows money or enters into a commercial paper program,
the Trust intends, to the extent possible, to retire outstanding debt, from time to time, to maintain coverage of any outstanding
indebtedness of at least 300%. As of June 30, 2020, there were $95 million in outstanding borrowings.
To qualify for federal income taxation as a “regulated
investment company,” the Trust must distribute in each taxable year at least 90% of its net investment income (including
net interest income and net short-term gain). The Trust also will be required to distribute annually substantially all of its income
and capital gain, if any, to avoid imposition of a nondeductible 4% federal excise tax. If the Trust is precluded from making distributions
on the Common Shares because of any applicable asset coverage requirements, the terms of the preferred shares may provide that
any amounts so precluded from being distributed, but required to be distributed for the Trust to meet the distribution requirements
for qualification as a regulated investment company, will be paid to the holders of the preferred shares as a special distribution.
This distribution can be expected to decrease the amount that holders of preferred shares would be entitled to receive upon redemption
or liquidation of the shares.
Successful use of a leveraging strategy may depend on the Adviser’s
ability to predict correctly interest rates and market movements, and there is no assurance that a leveraging strategy will be
successful during any period in which it is employed.
The following table is designed to illustrate the effect on
the return to a holder of the Common Shares of leverage in the amount of approximately 36.1% of the Trust’s gross assets,
assuming hypothetical annual returns of the Trust’s portfolio of minus 10% to plus 10%. As the table shows, leverage generally
increases the return to Common Shareholders when portfolio return is positive and greater than the cost of leverage and decreases
the return when the portfolio return is negative or less than the cost of leverage. The figures appearing in the table are hypothetical
and actual returns may be greater or less than those appearing in the table.
Assumed Portfolio Return (Net of Expenses)
|
|
(10)%
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(5)%
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0%
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5%
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10%
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Corresponding Common Share Total Return
|
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(17.13)%
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(9.30)%
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(1.47)%
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6.35%
|
14.18%
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Assuming the utilization of leverage in the amount of 36.1%
of the Trust’s gross assets, the cost of leverage is 2.61%. The additional income that the Trust must earn (net of expenses)
in order to cover such costs is approximately 0.94% of net assets. The Trust’s actual costs of leverage will be based on
market rates at the time the Trust undertakes a leveraging strategy, and such actual costs of leverage may be higher or lower than
that assumed in the previous example.
ADDITIONAL RISK CONSIDERATIONS
Risk is inherent in all investing. Investing in any investment
company security involves risk, including the risk that you may receive little or no return on your investment or even that you
may lose part or all of your investment.
Discount
From or Premium to NAV. The Offering will be conducted only when Common Shares of the Trust are trading at a price equal
to or above the Trust’s NAV per Common Share plus the per Common Share amount of commissions. As with any security, the market
value of the Common Shares may increase or decrease from the amount initially paid for the Common Shares. The Trust’s Common
Shares have traded both at a premium and at a discount relative to net asset value. The shares of closed-end management investment
companies frequently trade at a discount from their NAV. This is a risk separate and distinct from the risk that the Trust’s
NAV may decrease.
Market
Discount Risk. As with any security, the market value of the Common Shares may increase or decrease from the amount
initially paid for the Common Shares. The Trust’s Common Shares have traded both at a premium and at a discount relative
to NAV. The shares of closed-end management investment companies frequently trade at a discount from their NAV. This is a risk
separate and distinct from the risk that the Trust’s NAV may decrease.
Secondary
Market for the Common Shares. The issuance of Common Shares through the Offering may have an adverse effect on the secondary
market for the Common Shares. The increase in the amount of the Trust’s outstanding Common Shares resulting from the Offering
may put downward pressure on the market price for the Common Shares of the Trust. Common Shares will not be issued pursuant to
the Offering at any time when Common Shares are trading at a price lower than a price equal to the Trust’s NAV per Common
Share plus the per Common Share amount of commissions.
The Trust also issues Common Shares of the Trust through its
dividend reinvestment plan. See “Dividend Reinvestment Plan.” Common Shares may be issued under the plan at a discount
to the market price for such Common Shares, which may put downward pressure on the market price for Common Shares of the Trust.
When the Common Shares are trading at a premium, the Trust may
also issue Common Shares of the Trust that are sold through transactions effected on the NYSE. The increase in the amount of the
Trust’s outstanding Common Shares resulting from that offering may also put downward pressure on the market price for the
Common Shares of the Trust.
The voting power of current shareholders will be diluted to the
extent that such shareholders do not purchase shares in any future Common Share offerings or do not purchase sufficient shares
to maintain their percentage interest. In addition, if the Adviser is unable to invest the proceeds of such offering as intended,
the Trust’s per share distribution may decrease (or may consist of return of capital) and the Trust may not participate in
market advances to the same extent as if such proceeds were fully invested as planned.
Income
Risk. The income investors receive from the Trust is based primarily on the interest it earns from its investments,
which can vary widely over the short and long-term. If prevailing market interest rates drop, investors’ income from the
Trust could drop as well. The Trust’s income could also be affected adversely when prevailing short-term interest rates increase
and the Trust is utilizing leverage, although this risk is mitigated by the Trust’s investment in Senior Loans, which pay
floating-rates of interest.
Market
Risk. The value of investments held by the Trust
may increase or decrease in response to economic, political, financial, public health crises (such as epidemics or pandemics) or
other disruptive events (whether real, expected or perceived) in the U.S. and global markets. The frequency and magnitude of such
changes in value cannot be predicted. Certain securities and other investments held by the Trust may experience increased volatility,
illiquidity, or other potentially adverse effects in reaction to changing market conditions. Monetary and/or fiscal actions
taken by U.S. or foreign governments to stimulate or stabilize the global economy may not be effective and could lead to higher
market volatility. No active trading market may exist for certain investments held by the Trust, which may impair the ability of
the Trust to sell or to realize the current valuation of such investments in the event of the need to liquidate such assets.
Senior
Loans Risk. The risks associated with Senior Loans are similar to the risks of Non-Investment Grade Bonds (discussed
below), although Senior Loans are typically senior and secured in contrast to Non-Investment Grade Bonds, which are often subordinated
and unsecured. Senior Loans’ higher standing has historically resulted in generally higher recoveries in the event of a corporate
reorganization or other restructuring. In addition, because their interest rates are adjusted for changes in short-term interest
rates, Senior Loans generally have less interest rate risk than Non-Investment Grade Bonds, which are typically fixed rate. The
Trust’s investments in Senior Loans are typically below investment grade and are considered speculative because of the credit
risk of their issuers. Such companies are more likely to default on
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their payments of interest and principal owed to the Trust, and
such defaults could reduce the Trust’s net asset value and income distributions. An economic downturn generally leads to
a higher non-payment rate, and a debt obligation may lose significant value before a default occurs. Moreover, any specific collateral
used to secure a loan may decline in value or lose all its value or become illiquid, which would adversely affect the loan’s
value. “Junior Loans” are secured and unsecured subordinated loans, second lien loans and subordinate bridge loans.
Senior Loans and Junior Loans are referred to together herein as “loans.”
Loans and other debt securities are also subject to the risk
of price declines and to increases in prevailing interest rates, although floating-rate debt instruments are less exposed to this
risk than fixed-rate debt instruments. Interest rate changes may also increase prepayments of debt obligations and require the
Trust to invest assets at lower yields.
Loans are traded in a private, unregulated inter-dealer or
inter-bank resale market and are generally subject to contractual restrictions that must be satisfied before a loan can be bought
or sold. These restrictions may impede the Trust’s ability to buy or sell loans (thus affecting their liquidity) and may
negatively impact the transaction price. See also “Market Risk” above. It also may take longer than seven days for
transactions in loans to settle. The types of covenants included in loan agreements generally vary depending on market conditions,
the creditworthiness of the issuer, the nature of the collateral securing the loan and possibly other factors. Loans with fewer
covenants that restrict activities of the borrower may provide the borrower with more flexibility to take actions that may be detrimental
to the loan holders and provide fewer investor protections in the event of such actions or if covenants are breached. The Trust
may experience relatively greater realized or unrealized losses or delays and expense in enforcing its rights with respect to loans
with fewer restrictive covenants. Loans to entities located outside of the U.S. may have substantially different lender protections
and covenants as compared to loans to U.S. entities and may involve greater risks. The Trust may have difficulties and incur expense
enforcing its rights with respect to non-U.S. loans and such loans could be subject to bankruptcy laws that are materially different
than in the U.S. Loans may be structured such that they are not securities under securities law, and in the event of fraud or misrepresentation
by a borrower, lenders may not have the protection of the anti-fraud provisions of the federal securities laws. Loans are also
subject to risks associated with other types of income investments, including credit risk and risks of lower rated investments.
Credit
Risk. Investments in loans and other debt obligations (referred to below as “debt instruments”) are subject
to the risk of non-payment of scheduled principal and interest. Changes in economic conditions or other circumstances may reduce
the capacity of the party obligated to make principal and interest payments on such instruments and may lead to defaults. Such
non-payments and defaults may reduce the value of Trust shares and income distributions. The value of debt instruments also may
decline because of concerns about the issuer’s ability to make principal and interest payments. In addition, the credit ratings
of debt instruments may be lowered if the financial condition of the party obligated to make payments with respect to such instruments
deteriorates. In the event of bankruptcy of the issuer of a debt instrument, the Trust could experience delays or limitations with
respect to its ability to realize the benefits of any collateral securing the instrument. In order to enforce its rights in the
event of a default, bankruptcy or similar situation, the Trust may be required to retain legal or similar counsel, which may increase
the Trust’s operating expenses and adversely affect net asset value. The Trust is also exposed to credit risk when it engages
in certain types of derivatives transactions and when it engages in transactions that expose the Trust to counterparty risk. See
“Derivatives.” Due to their lower place in the borrower’s capital structure, Junior Loans involve a higher degree
of overall risk than Senior Loans to the same borrower.
In evaluating the quality of a particular instrument, the
investment adviser may take into consideration, among other things, a credit rating assigned by a credit rating agency, the issuer’s
financial resources and operating history, its sensitivity to economic conditions and trends, the ability of its management, its
debt maturity schedules and borrowing requirements, and relative values based on anticipated cash flow, interest and asset coverage,
and earnings prospects. Credit rating agencies are private services that provide ratings of the credit quality of certain investments.
Credit ratings issued by rating agencies are based on a number of factors including, but not limited to, the issuer’s financial
condition and the rating agency’s credit analysis, if applicable, at the time of rating. As such, the rating assigned to
any particular security is not necessarily a reflection of the issuer’s current financial condition. The ratings assigned
are not absolute standards of credit quality and do not evaluate market risks or necessarily reflect the issuer’s current
financial condition or the volatility or liquidity of the security.
A credit rating may have a modifier (such as plus, minus or a
numerical modifier) to denote its relative status within the rating. The presence of a modifier does not change the security credit
rating (for example, BBB- and Baa3 are within the investment grade rating) for purposes of the Trust’s investment limitations.
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Interest
Rate Risk. In general, the value of income securities
will fluctuate based on changes in interest rates. The value of these securities is likely to increase when interest rates fall
and decline when interest rates rise. Duration measures the time-weighted expected cash flows of a fixed-income security, while
maturity refers to the amount of time until a fixed-income security matures. Generally, securities with longer durations or maturities
are more sensitive to changes in interest rates than securities with shorter durations or maturities, causing them to be more volatile.
Conversely, fixed-income securities with shorter durations or maturities will be less volatile but may provide lower returns than
fixed-income securities with longer durations or maturities. The impact of interest rate changes is significantly less for floating
rate instruments that have relatively short periodic rate resets (e.g., ninety days or less). In a rising interest rate environment,
the duration of income securities that have the ability to be prepaid or called by the issuer may be extended. In a declining interest
rate environment, the proceeds from prepaid or maturing instruments may have to be reinvested at a lower interest rate. Because
floating or variable rates on loans only reset periodically, changes in prevailing interest rates may cause some fluctuations in
the Trust’s net asset value. Similarly, a sudden and significant increase in market interest rates may cause a decline in
the Trust’s net asset value. A material decline in the Trust’s net asset value may impair the Trust’s ability
to maintain required levels of asset coverage. Certain instruments held by the Trust pay an interest rate based on the London Interbank
Offered Rate (“LIBOR”), which is the average offered rate for various maturities of short-term loans between certain
major international banks. LIBOR is expected to be phased out by the end of 2021. While the effect of the phase out cannot yet
be determined, it may result in, among other things, increased volatility or illiquidity in markets for instruments based on LIBOR
and changes in the value of such instruments.
Non-Investment
Grade Bonds Risk. The Trust’s investments in Non-Investment Grade Bonds, commonly referred to as “junk bonds,”
are predominantly speculative because of the credit risk of their issuers. While offering a greater potential opportunity for capital
appreciation and higher yields, Non-Investment Grade Bonds typically entail greater potential price volatility and may be less
liquid than higher-rated securities. Issuers of Non-Investment Grade Bonds are more likely to default on their payments of interest
and principal owed to the Trust, and such defaults will reduce the Trust’s net asset value and income distributions. The
prices of these lower rated obligations are more sensitive to negative developments than higher rated securities. Adverse business
conditions, such as a decline in the issuer’s revenues or an economic downturn, generally lead to a higher non-payment rate.
In addition, a security may lose significant value before a default occurs as the market adjusts to expected higher non-payment
rates.
Lower
Rated Investments Risk. Investments rated below investment grade and comparable unrated investments (sometimes referred
to as “junk”) have speculative characteristics because of the credit risk associated with their issuers. Changes in
economic conditions or other circumstances typically have a greater effect on the ability of issuers of lower rated investments
to make principal and interest payments than they do on issuers of higher rated investments. An economic downturn generally leads
to a higher non-payment rate, and a lower rated investment may lose significant value before a default occurs. Lower rated investments
typically are subject to greater price volatility and illiquidity than higher rated investments.
Prepayment
Risk. During periods of declining interest rates or for other purposes, Borrowers may exercise their option to prepay
principal earlier than scheduled. For fixed-income securities, such payments often occur during periods of declining interest rates,
forcing the Trust to reinvest in lower yielding securities. This is known as call or prepayment risk. Non-Investment Grade Bonds
frequently have call features that allow the issuer to redeem the security at dates prior to its stated maturity at a specified
price (typically greater than par) only if certain prescribed conditions are met (“call protection”). An issuer may
redeem a Non-Investment Grade Bond if, for example, the issuer can refinance the debt at a lower cost due to declining interest
rates or an improvement in the credit standing of the issuer. Senior Loans typically have no such call protection. For premium
bonds (bonds acquired at prices that exceed their par or principal value) purchased by the Trust, prepayment risk may be enhanced.
Issuer Risk. The value
of corporate income-producing securities held by the Trust may decline for a number of reasons, which directly relate to the issuer,
such as management performance, financial leverage and reduced demand for the issuer’s goods and services.
Derivatives
Risk. The Trust’s exposure to derivatives involves risks different from, or possibly greater than, the risks associated
with investing directly in securities and other investments. The use of derivatives can lead to losses because of adverse movements
in the price or value of the security, instrument, index, currency, commodity, economic indicator or event underlying a derivative
(“reference instruments”), due to failure of a counterparty or due to tax or regulatory constraints. Derivatives may
create leverage in the Trust, which represents a non-cash exposure to the reference instrument. Leverage can increase both the
risk and return potential of the Trust. Derivatives risk may be more significant when derivatives are used to enhance return or
as a substitute for a cash investment position, rather than solely to hedge the risk of a position held by the Trust. Use of derivatives
involves the exercise of specialized skill and judgment, and a transaction may be unsuccessful in whole or in part because of market
behavior or unexpected events. Changes in the value of a derivative (including one used for hedging) may not correlate perfectly
with the underlying reference instrument. Derivative instruments traded in over-the-counter markets may be difficult to value,
may be illiquid,
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and may be subject to wide swings in valuation caused by changes
in the value of the underlying reference instrument. If a derivative’s counterparty is unable to honor its commitments, the
value of Trust shares may decline and the Trust could experience delays in the return of collateral or other assets held by the
counterparty. The loss on derivative transactions may substantially exceed the initial investment, particularly when there is no
stated limit on the Trust’s use of derivatives. A derivative investment also involves the risks relating to the reference
instrument underlying the investment.
Leverage
Risk. Certain fund transactions may give rise to leverage. Leverage can result from a non-cash exposure to the underlying
reference instrument. Leverage can increase both the risk and return potential of the Trust. The Trust is required to segregate
liquid assets or otherwise cover the Trust’s obligation created by a transaction that may give rise to leverage. The use
of leverage may cause the Trust to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations
or to meet segregation requirements. Leverage may cause the Trust’s share price to be more volatile than if it had not been
leveraged, as certain types of leverage may exaggerate the effect of any increase or decrease in the value of the Trust’s
portfolio securities. The loss on leveraged investments may substantially exceed the initial investment.
As discussed above, the Trust currently uses leverage created
by issuing APS and borrowings. On June 27, 2001, the Trust issued 2,200 Series A APS and 2,200 Series B APS, with a liquidation
preference per share of $25,000 plus accumulated but unpaid dividends. On September 23, 2016, the Trust repurchased 968 Series
A APS and 968 Series B APS. On September 14, 2018, the Trust repurchased 480 Series A APS and 480 Series B APS. In addition, in
connection with this repurchase, the Trust increased its borrowing limits under its Revolving Credit and Security Agreement, as
amended (the “Agreement”) with conduit lenders and a bank to allow it to borrow up to $125 million. The proceeds of
which were used to invest in accordance with the Trust’s investment practices and to partially redeem the Trust’s APS.
The Trust is required to maintain certain net asset levels during the term of the Agreement. As of June 30, 2020, the Trust had
$95 million in outstanding borrowings, at an interest rate of 0.35%, in addition to outstanding APS.
The Adviser anticipates that the use of leverage (from the issuance
of APS and borrowings) may result in higher income to Common Shareholders over time. Leverage creates risks for Common Shareholders,
including the likelihood of greater volatility of NAV and market price of the Common Shares and the risk that fluctuations in dividend
rates on APS and costs of borrowings may affect the return to Common Shareholders. See
also “LIBOR Transition and Associated Risk.” To the extent the income derived from investments purchased
with funds received from leverage exceeds the cost of leverage, the Trust’s distributions will be greater than if leverage
had not been used. Conversely, if the income from the investments purchased with such funds is not sufficient to cover the cost
of leverage, the amount available for distribution to Common Shareholders will be less than if leverage had not been used. In the
latter case, Eaton Vance, in its best judgment, may nevertheless determine to maintain the Trust’s leveraged position if
it deems such action to be appropriate. While the Trust has preferred shares outstanding, an increase in short-term rates would
also result in an increased cost of leverage, which would adversely affect the Trust’s income available for distribution.
There can be no assurance that a leveraging strategy will be successful.
In addition, under current federal income tax law, the Trust
is required to allocate a portion of any net realized capital gains or other taxable income to APS holders. The terms of the Trust’s
APS require the Trust to pay to any APS holders additional dividends intended to compensate such holders for taxes payable on any
capital gains or other taxable income allocated to such holders. Any such additional dividends will reduce the amount available
for distribution to Common Shareholders. As discussed under “Management of the Trust,” the fee paid to Eaton Vance
is calculated on the basis of the Trust’s gross assets, including proceeds from the issuance of APS and borrowings, so the
fees will be higher when leverage is utilized. In this regard, holders of APS do not bear the investment advisory fee. Rather,
Common Shareholders bear the portion of the investment advisory fee attributable to the assets purchased with the proceeds, which
means that Common Shareholders effectively bear the entire advisory fee.
The APS have been rated Aa3 by Moody's. The Trust currently intends
to seek to maintain this rating or an equivalent credit rating on the APS or any preferred shares it issues. The Rating Agencies
which rate the preferred shares and any bank lender in connection with a credit facility or commercial paper program may also impose
specific restrictions as a condition to borrowing. Such restrictions may include asset coverage or portfolio composition requirements
that are more stringent than those imposed on the Trust by the 1940 Act. These covenants or guidelines do not currently and are
not expected to impede Eaton Vance in managing the Trust’s portfolio in accordance with its investment objective and policies
and it is not anticipated that they will so impede Eaton Vance in the future. See “Description of Capital Structure - Preferred
Shares.”
Financial leverage may also be achieved through the purchase
of certain derivative instruments. The Trust’s use of derivative instruments exposes the Trust to special risks. See “Investment
Objective, Policies and Risks - Additional Investment Practices” and “Investment Objective, Policies, and Risks - Additional
Risk Considerations.”
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LIBOR
Transition and Associated Risk. The London Interbank Offered Rate or LIBOR is the average offered rate for various
maturities of short-term loans between major international banks who are members of the British Bankers Association. LIBOR is
the most common benchmark interest rate index used to make adjustments to variable-rate loans. It is used throughout global banking
and financial industries to determine interest rates for a variety of financial instruments (such as debt instruments and derivatives)
and borrowing arrangements, and to determine dividend rates for preferred shares.
The use of LIBOR started to come under pressure following manipulation
allegations in 2012. Despite increased regulation and other corrective actions since that time, concerns have arisen regarding
its viability as a benchmark, due largely to reduced activity in the financial markets that it measures. In July 2017, the Financial
Conduct Authority (the “FCA”), the United Kingdom financial regulatory body, announced a desire to phase out the use
of LIBOR by the end of 2021.
Although the period from the FCA announcement until the end of
2021 is generally expected to be enough time for market participants to transition to the use of a different benchmark for new
securities and transactions, there remains uncertainty regarding the future utilization of LIBOR and the specific replacement rate
or rates. As such, the potential effect of a transition away from LIBOR on the Trust or the financial instruments held by the Trust
cannot yet be determined. The transition process may involve, among other things, increased volatility or illiquidity in markets
for instruments that currently rely on LIBOR. The transition may also result in a change in (i) the value of certain instruments
held by the Trust, (ii) the cost of borrowing or the dividend rate for preferred shares, or (iii) the effectiveness of related
Trust transactions such as hedges, as applicable. When LIBOR is discontinued, the LIBOR replacement rate may be lower than market
expectations, which could have an adverse impact on the value of preferred and debt-securities with floating or fixed-to-floating
rate coupons. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to
the Trust. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur
prior to the end of 2021.
Various financial industry groups have begun planning for
the transition away from LIBOR, but there are obstacles to converting certain longer term securities and transactions to a new
benchmark. In June 2017, the Alternative Reference Rates Committee, a group of large U.S. banks working with the Federal Reserve,
announced its selection of a new Secured Overnight Funding Rate (“SOFR”), which is intended to be a broad measure of
secured overnight U.S. Treasury repo rates, as an appropriate replacement for LIBOR. The Federal Reserve Bank of New York began
publishing the SOFR earlier in 2018, with the expectation that it could be used on a voluntary basis in new instruments and transactions.
Bank working groups and regulators in other countries have suggested other alternatives for their markets, including the Sterling
Overnight Interbank Average Rate in England.
Foreign
Investment Risk. Investments in foreign issuers could be affected by factors not present in the United States, including
expropriation, armed conflict, confiscatory taxation, lack of uniform accounting and auditing standards, less publicly available
financial and other information, and potential difficulties in enforcing contractual obligations. Because foreign issuers may not
be subject to uniform accounting, auditing and financial reporting standard practices and requirements and regulatory measures
comparable to those in the United States, there may be less publicly available information about such foreign issuers. Settlements
of securities transactions in foreign countries are subject to risk of loss, may be delayed and are generally less frequent than
in the United States, which could affect the liquidity of the Trust’s assets. Evidence of ownership of certain foreign investments
may be held outside the United States, and the Trust may be subject to the risks associated with the holding of such property overseas.
Foreign issuers may become subject to sanctions imposed by the
United States or another country, which could result in the immediate freeze of the foreign issuers’ assets or securities.
The imposition of such sanctions could impair the market value of the securities of such foreign issuers and limit the Trust’s
ability to buy, sell, receive or deliver the securities. Trading in certain foreign markets is also subject to liquidity risks.
Economic data as reported by sovereign entities may be delayed,
inaccurate or fraudulent. In the event of a default by a sovereign entity, there are typically no assets to be seized or cash flows
to be attached. Furthermore, the willingness or ability of a sovereign entity to restructure defaulted debt may be limited. Therefore,
losses on sovereign defaults may far exceed the losses from the default of a similarly rated U.S. debt issuer.
Political events in foreign countries may cause market disruptions.
In June 2016, the United Kingdom (“UK”) voted in a referendum to leave the European Union (“EU”) (“Brexit”).
Effective January 31, 2020, the UK ceased to be a member of the EU following a period of impasse within the UK Parliament, and
the holding of an early general election in December 2019 to break the deadlock. The European Parliament and UK Government are
expected to focus attention on the nature of the UK’s future relationship with the EU during an agreed transitional period.
There is significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible
political, regulatory, economic, and market outcomes in the UK, EU and beyond are difficult to predict. Brexit may cause greater
market volatility and illiquidity, currency fluctuations, deterioration in economic activity, a decrease in business confidence,
and increased likelihood of a recession in the UK. If one or more additional countries leave the EU or the EU dissolves, the world’s
securities markets likely will be significantly disrupted.
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Currency
Risk. Exchange rates for currencies fluctuate daily. The value of foreign investments may be affected favorably or unfavorably
by changes in currency exchange rates in relation to the U.S. dollar. Currency markets generally are not as regulated as securities
markets and currency transactions are subject to settlement, custodial and other operational risks.
U.S.
Government Securities Risk. Although certain U.S. Government-sponsored agencies (such as the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Association) may be chartered or sponsored by acts of Congress, their securities
are neither issued nor guaranteed by the U.S. Treasury. U.S. Treasury securities generally have a lower return than other obligations
because of their higher credit quality and market liquidity.
Pooled
Investment Vehicles Risk. Pooled investment vehicles are open- and closed-end investment companies and exchange-traded
funds (“ETFs”). Pooled investment vehicles are subject to the risks of investing in the underlying securities or other
investments. Shares of closed-end investment companies and ETFs may trade at a premium or discount to net asset value and are subject
to secondary market trading risks. In addition, the Trust will bear a pro rata portion of the operating expenses of a pooled investment
vehicle in which it invests.
Equity
Securities Risk. The value of equity securities and related instruments may decline in response to adverse changes in
the economy or the economic outlook; deterioration in investor sentiment; interest rate, currency, and commodity price fluctuations;
adverse geopolitical, social or environmental developments; issuer and sector-specific considerations or other factors. Market
conditions may affect certain types of stocks to a greater extent than other types of stocks. If the stock market declines in value,
the value of the Trust's equity securities will also likely decline. Although prices can rebound, there is no assurance that values
will return to previous levels.
Liquidity
Risk. The Trust may invest without limitation in Senior Loans and other investments for which there is no readily available
trading market or which are otherwise illiquid. The Trust may not be able to dispose readily of such investments at prices that
approximate those at which the Trust could sell such investments if they were more widely traded and, as a result of such illiquidity,
the Trust may have to sell other investments or engage in borrowing transactions if necessary to raise cash to meet its obligations.
In addition, the limited liquidity could affect the market price of the investments, thereby adversely affecting the Trust's net
asset value and ability to make dividend distributions.
Some loans are not readily marketable and may be subject to
contractual restrictions that must be satisfied before a loan can be bought or sold. 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 loans in which the Trust
will invest. Where a secondary market exists, such market for some loans may be subject to irregular activity, wide bid/ask spreads
and extended trade settlement periods. Loans that are illiquid may impair the Trust’s ability to realize the full value of
its assets in the event of a voluntary or involuntary liquidation of such assets and thus may cause a decline in the Trust’s
net asset value.
In addition, the limited liquidity could affect the market price
of the investments, thereby adversely affecting the Trust’s NAV and ability to make dividend distributions. The financial
markets in general have in recent years experienced periods of extreme secondary market supply and demand imbalance, resulting
in a loss of liquidity during which market prices were suddenly and substantially below traditional measures of intrinsic value.
During such periods, some investments could be sold only at arbitrary prices and with substantial losses. Periods of such market
dislocation may occur again at any time. The Trust has no limitation on the amount of its assets which may be invested in investments
which are not readily marketable or are subject to restrictions on resale.
Money
Market Instrument Risk. Money market instruments may be adversely affected by market and economic events, such as a
sharp rise in prevailing short-term interest rates; adverse developments in the banking industry, which issues or guarantees many
money market instruments; adverse economic, political or other developments affecting issuers of money market instruments; changes
in the credit quality of issuers; and default by a counterparty.
Reinvestment
Risk. Income from the Trust’s portfolio will decline if and when the Trust invests the proceeds from matured,
traded or called debt obligations into lower yielding instruments.
Inflation
Risk. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future
as inflation decreases the value of money. As inflation increases, the real value of the Common Shares and distributions thereon
can decline. In addition, during any periods of rising inflation, dividend rates of preferred shares would likely increase, which
would tend to further reduce returns to Common Shareholders. This risk is mitigated to some degree by the Trust's investments in
Senior Loans.
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Management
Risk. The Trust is subject to management risk because it is actively managed. Eaton Vance and the individual portfolio
managers invest the assets of the Trust as they deem appropriate in implementing the Trust’s investment strategy. Accordingly,
the success of the Trust depends upon the investment skills and analytical abilities of Eaton Vance and the individual portfolio
managers to develop and effectively implement strategies that achieve the Trust’s investment objective. There is no assurance
that Eaton Vance and the individual portfolio managers will be successful in developing and implementing the Trust’s investment
strategy. Subjective decisions made by Eaton Vance and the individual portfolio managers may cause the Trust to incur losses or
to miss profit opportunities.
Cybersecurity
Risk. With the increased use of technologies by Trust service providers to conduct business, such as the Internet, the
Trust is susceptible to operational, information security and related risks. The Trust relies on communications technology, systems,
and networks to engage with clients, employees, accounts, shareholders, and service providers, and a cyber incident may inhibit
the Trust’s ability to use these technologies. In general, cyber incidents can result from deliberate attacks or unintentional
events. Cyber attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through “hacking”
or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational
disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing
denial-of-service attacks on websites. A denial-of-service attack is an effort to make network services unavailable to intended
users, which could cause shareholders to lose access to their electronic accounts, potentially indefinitely. Employees and service
providers also may not be able to access electronic systems to perform critical duties for the Trust, such as trading and NAV calculation,
during a denial-of-service attack. There is also the possibility for systems failures due to malfunctions, user error and misconduct
by employees and agents, natural disasters, or other foreseeable and unforeseeable events.
Because technology is consistently changing, new ways to carry
out cyber attacks are always developing. Therefore, there is a chance that some risks have not been identified or prepared for,
or that an attack may not be detected, which puts limitations on the Trust's ability to plan for or respond to a cyber attack.
Like other Trusts and business enterprises, the Trust and its service providers have experienced, and will continue to experience,
cyber incidents consistently. In addition to deliberate cyber attacks, unintentional cyber incidents can occur, such as the inadvertent
release of confidential information by the Trust or its service providers. To date, cyber incidents have not had a material adverse
effect on the Trust’s business operations or performance.
The Trust uses third party service providers who are also
heavily dependent on computers and technology for their operations. Cybersecurity failures or breaches by the Trust’s investment
adviser or administrator and other service providers (including, but not limited to, the custodian or transfer agent), and the
issuers of securities in which the Trust invests, may disrupt and otherwise adversely affect their business operations. This may
result in financial losses to the Trust, impede Trust trading, interfere with the Trust’s ability to calculate its NAV, or
cause violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other
compensation costs, litigation costs, or additional compliance costs. While many of the Trust service providers have established
business continuity plans and risk management systems intended to identify and mitigate cyber attacks, there are inherent limitations
in such plans and systems including the possibility that certain risks have not been identified. The Trust cannot control the cybersecurity
plans and systems put in place by service providers to the Trust and issuers in which the Trust invests. The Trust and its shareholders
could be negatively impacted as a result.
Recent
Market Conditions. An outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December
2019 and subsequently spread internationally. This coronavirus has resulted in closing borders, enhanced health screenings, healthcare
service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general
concern and uncertainty. The impact of this coronavirus may last for an extended period of time and result in a substantial economic
downturn. Health crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate other pre-existing political,
social and economic risks and disrupt normal market conditions and operations. The impact of this outbreak, and other epidemics
and pandemics that may arise in the future, could negatively affect the worldwide economy, as well as the economies of individual
countries, individual companies and the market in general in significant and unforeseen ways. Any such impact could adversely
affect the Trust’s performance, or the performance of the securities in which the Trust invests and may lead to losses on
your investment in the Trust.
Regulatory
Risk. 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 may be adversely affected. Further, such legislation
or regulation could depress the market value of Senior Loans.
Market
Disruption. Global instability, war, geopolitical tensions and terrorist attacks in the United States and around the
world have previously resulted, and may continue to result in market volatility and may have long-term effects on the United States
and worldwide financial markets and may cause further economic uncertainties in the United States and worldwide. The Trust cannot
predict the effects of significant future events on the global economy and securities markets.
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A similar disruption of the financial markets could impact interest
rates, auctions, secondary trading, ratings, credit risk, inflation and other factors relating to the Common Shares. In particular,
Non-Investment Grade Bonds and Senior Loans tend to be more volatile than higher rated fixed-income securities so that these events
and any actions resulting from them may have a greater impact on the prices and volatility of Non-Investment Grade Bonds and Senior
Loans than on higher rated fixed-income securities.
Anti-Takeover
Provisions. The Trust’s Agreement and Declaration of Trust (the “Declaration of Trust”) and Amended
and Restated By-Laws (the “By-Laws” and together with the Declaration of Trust, the “Organizational Documents”)
include provisions that could have the effect of limiting the ability of other persons or entities to acquire control of the Trust
or to change the composition of its Board. For example, pursuant to the Trust’s Declaration of Trust, the Trust Board is
divided into three classes of Trustees with each class serving for a three-year term and certain types of transactions require
the favorable vote of holders of at least 75% of the outstanding shares of the Trust. See “Description of Capital Structure
- Certain Provisions of the Organizational Documents - Anti-Takeover Provisions in the Organizational Documents.”
Management of the Trust
BOARD OF TRUSTEES
The management of the Trust, including general supervision of
the duties performed by the Adviser under the Advisory Agreement (as defined below), is the responsibility of the Trust’s
Board under the laws of The Commonwealth of Massachusetts and the 1940 Act.
THE ADVISER
Eaton Vance acts as the Trust's investment adviser under an
Investment Advisory Agreement (the “Advisory Agreement”). The Adviser's principal office is located at Two International
Place, Boston, MA 02110. Eaton Vance, its affiliates and predecessor companies have been managing assets of individuals and institutions
since 1924 and of investment companies since 1931. As of September 30, 2020, Eaton Vance and its affiliates managed approximately
$517 billion of fund and separate account assets on behalf of clients, including approximately $29.3 billion in floating-rate income
assets. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp., a publicly-held holding company, which through its subsidiaries
and affiliates engages primarily in investment management, administration and marketing activities.
On October 8, 2020, Morgan Stanley and Eaton Vance Corp. (“EVC”)
announced that they had entered into a definitive agreement under which Morgan Stanley would acquire EVC. Under the Investment
Company Act of 1940, as amended, consummation of this transaction may result in the automatic termination of the Trust’s
investment advisory agreement, and any related sub-advisory agreement(s), if applicable. Thus, the Trust’s Board will be
asked to approve a new investment advisory agreement (and new sub-advisory agreement(s), if applicable). If approved by the Trust’s
Board, the new investment advisory agreement (and new sub-advisory agreement(s), if applicable) is expected to be presented to
Trust shareholders for approval, and, if approved, would take effect upon the closing of the transaction.
Under the general supervision of the Trust’s Board,
the Adviser will carry out the investment and reinvestment of the assets of the Trust, will furnish continuously an investment
program with respect to the Trust, will determine which securities should be purchased, sold or exchanged, and will implement such
determinations. The Adviser will furnish to the Trust investment advice and office facilities, equipment and personnel for servicing
the investments of the Trust. The Adviser will compensate all Trustees and officers of the Trust who are members of the Adviser’s
organization and who render investment services to the Trust, and will also compensate all other Adviser personnel who provide
research and investment services to the Trust. In return for these services, facilities and payments, the Trust has agreed to pay
the Adviser as compensation under the Advisory Agreement a fee in the amount of 0.74% (0.75% prior to May 1, 2020) of the average
weekly gross assets of the Trust. Gross assets of the Trust shall be calculated by deducting accrued liabilities of the Trust not
including the amount of any preferred shares outstanding or the principal amount of any indebtedness for money borrowed.
During periods in which the Trust is using leverage, the fees paid to Eaton Vance for investment advisory services will be higher
than if the Trust did not use leverage because the fees paid will be calculated on the basis of the Trust’s gross assets,
including proceeds from any borrowings and from the issuance of preferred shares. The Trust is responsible for all expenses not
expressly stated to be payable by another party (such as the expenses required to be paid pursuant to an agreement with the investment
adviser or administrator).
William E. Holt, Catherine C. McDermott, Daniel P. McElaney,
John Redding and Andrew N. Sveen comprise the investment team responsible for the overall and day-to-day management of the Trust’s
investments. Mr. Redding is a Vice President of Eaton Vance and has been portfolio manager of the Trust since November 2001. Messrs.
Holt, McElaney and Sveen and Ms. McDermott are Vice Presidents of Eaton Vance, have been employed by Eaton Vance for more than
five years and have been portfolio managers of the Trust since March 2019.
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Additional Information Regarding Portfolio Managers
The SAI provides additional information about the portfolio managers’
compensation, other accounts managed by the portfolio managers, and the portfolio managers’ ownership of securities in the
Trust. The SAI is available free of charge by calling 1-800-262-1122 or by visiting the Trust’s website at http://www.eatonvance.com.
The information contained in, or that can be accessed through, the Trust’s website is not part of this Prospectus or the
SAI.
The Trust and the Adviser have adopted codes of ethics relating
to personal securities transactions (the “Codes of Ethics”). The Codes of Ethics permit Adviser personnel to invest
in securities (including securities that may be purchased or held by the Trust) for their own accounts, subject to the provisions
of the Codes of Ethics and certain employees are also subject to certain pre-clearance, reporting and other restrictions and procedures
contained in such Codes of Ethics.
The Trust’s annual shareholder report contains information
regarding the basis for the Trustees’ approval of the Trust’s Advisory Agreement.
THE ADMINISTRATOR
Eaton Vance serves as administrator of the Trust and receives
an administration fee computed at an annual rate of 0.25% of the Trust’s average weekly gross assets. Under an Amended and
Restated Administrative Services Agreement with the Trust (“Administration Agreement”), Eaton Vance is responsible
for managing the business affairs of the Trust, subject to the supervision of the Trust’s Board. Eaton Vance will furnish
to the Trust all office facilities, equipment and personnel for administering the affairs of the Trust. 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 Trust’s custodian and transfer agent, providing assistance in connection with the Trustees’
and shareholders’ meetings, providing service in connection with any repurchase offers and other administrative services
necessary to conduct the Trust’s business.
Plan of Distribution
The Trust may sell the Common Shares being offered under this
Prospectus in any one or more of the following ways: (i) directly to purchasers; (ii) through agents; (iii) to or through underwriters;
or (iv) through dealers. The Prospectus Supplement relating to the Offering will identify any agents, underwriters or dealers involved
in the offer or sale of Common Shares, and will set forth any applicable offering price, sales load, fee, commission or discount
arrangement between the Trust and its agents or underwriters, or among its underwriters, or the basis upon which such amount may
be calculated, net proceeds and use of proceeds, and the terms of any sale.
The Trust may distribute Common Shares from time to time in one
or more transactions at: (i) a fixed price or prices that may be changed; (ii) market prices prevailing at the time of sale; (iii)
prices related to prevailing market prices; or (iv) negotiated prices; provided, however, that in each case the offering price
per Common Share (less any underwriting commission or discount) must equal or exceed the NAV per Common Share.
The Trust from time to time may offer its Common Shares through
or to certain broker-dealers, including UBS Securities LLC, that have entered into selected dealer agreements relating to at-the-market
offerings.
The Trust may directly solicit offers to purchase Common Shares,
or the Trust may designate agents to solicit such offers. The Trust will, in a Prospectus Supplement relating to such Offering,
name any agent that could be viewed as an underwriter under the 1933 Act, and describe any commissions the Trust must pay to such
agent(s). Any such agent will be acting on a reasonable best efforts basis for the period of its appointment or, if indicated in
the applicable Prospectus Supplement or other offering materials, on a firm commitment basis. Agents, dealers and underwriters
may be customers of, engage in transactions with, or perform services for the Trust in the ordinary course of business.
If any underwriters or agents are used in the sale of Common
Shares in respect of which this Prospectus is delivered, the Trust will enter into an underwriting agreement or other agreement
with them at the time of sale to them, and the Trust will set forth in the Prospectus Supplement relating to such Offering their
names and the terms of the Trust’s agreement with them.
If a dealer is utilized in the sale of Common Shares in respect
of which this Prospectus is delivered, the Trust will sell such Common Shares to the dealer, as principal. The dealer may then
resell such Common Shares to the public at varying prices to be determined by such dealer at the time of resale.
The Trust may engage in at-the-market offerings to or through
a market maker or into an existing trading market, on an exchange or otherwise, in accordance with Rule 415(a)(4) under the 1933
Act. An at-the-market offering may be through an underwriter or underwriters acting as principal or agent for the Trust.
Agents, underwriters and dealers may be entitled under agreements
which they may enter into with the Trust to indemnification by the Trust against certain civil liabilities, including liabilities
under the 1933 Act, and may be customers of, engage in transactions with or perform services for the Trust in the ordinary course
of business.
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In order to facilitate the Offering of Common Shares, any underwriters
may engage in transactions that stabilize, maintain or otherwise affect the price of Common Shares or any other Common Shares the
prices of which may be used to determine payments on the Common Shares. Specifically, any underwriters may over-allot in connection
with the Offering, creating a short position for their own accounts. In addition, to cover over-allotments or to stabilize the
price of Common Shares or of any such other Common Shares, the underwriters may bid for, and purchase, Common Shares or any such
other Common Shares in the open market. Finally, in any Offering of Common Shares through a syndicate of underwriters, the underwriting
syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing Common Shares in the Offering
if the syndicate repurchases previously distributed Common Shares in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the market price of Common Shares above independent
market levels. Any such underwriters are not required to engage in these activities and may end any of these activities at any
time.
The Trust may enter into derivative transactions with third parties,
or sell Common Shares not covered by this Prospectus to third parties in privately negotiated transactions. If the applicable Prospectus
Supplement indicates, in connection with those derivatives, the third parties may sell Common Shares covered by this Prospectus
and the applicable Prospectus Supplement or other offering materials, including in short sale transactions. If so, the third parties
may use Common Shares pledged by the Trust or borrowed from the Trust or others to settle those sales or to close out any related
open borrowings of securities, and may use Common Shares received from the Trust in settlement of those derivatives to close out
any related open borrowings of securities. The third parties in such sale transactions will be underwriters and, if not identified
in this Prospectus, will be identified in the applicable Prospectus Supplement or other offering materials (or a post-effective
amendment).
The maximum amount of compensation to be received by any member
of the Financial Industry Regulatory Authority, Inc. will not exceed 8% of the initial gross proceeds from the sale of any security
being sold with respect to each particular Offering of Common Shares made under a single Prospectus Supplement.
Any underwriter, agent or dealer utilized in the initial Offering
of Common Shares will not confirm sales to accounts over which it exercises discretionary authority without the prior specific
written approval of its customer.
Distributions
The Trust intends to make monthly distributions of net investment
income to Common Shareholders, after payment of any dividends on any outstanding APS. The amount of each monthly distribution will
vary depending on a number of factors, including dividends payable on the Trust's preferred shares or other costs of financial
leverage. As portfolio and market conditions change, the rate of dividends on the Common Shares and the Trust's dividend policy
could change. Over time, the Trust will distribute all of its net investment income (after it pays accrued dividends on any outstanding
preferred shares) or other costs of financial leverage. In addition, at least annually, the Trust intends to distribute all or
substantially all of its net realized capital gains (reduced by available capital loss carryforwards from prior years, if any).
Distributions to Common Shareholders are recorded on the ex-dividend date. Distributions to preferred shareholders are recorded
daily and are payable at the end of each dividend period.
Beginning February 13, 2008 and consistent with the patterns
in the broader market for auction-rate securities, the Trust’s APS auctions were unsuccessful in clearing due to an imbalance
of sell orders over bids to buy the APS. As a result, the dividend rates of the APS were reset to the maximum applicable rates.
The Trust distinguishes between distributions on a tax basis
and a financial reporting basis. Accounting principles generally accepted in the United States of America require that only distributions
in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Permanent differences
between book and tax accounting relating to distributions are reclassified to paid-in capital. For tax purposes, distributions
from short-term capital gains are considered to be from ordinary income.
Common Shareholders will automatically have distributions reinvested
in additional Common Shares under the Trust's dividend reinvestment plan unless they elect otherwise through their investment
dealer. See “Distributions” and “Dividend Reinvestment Plan.”
While there are any borrowings or preferred shares outstanding,
the Trust may not be permitted to declare any cash dividend or other distribution on its Common Shares in certain circumstances.
See “Description of Capital Structure.”
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Federal Income Tax Matters
The Trust has elected to be treated as and intends to qualify
each year as a regulated investment company (“RIC”) under the Code. Accordingly, the Trust intends to satisfy certain
requirements relating to sources of its income and diversification of its assets and to distribute substantially all of its net
investment income, net tax-exempt interest income, if any, and capital gains, if any, (after reduction by any available capital
loss carryforwards) in accordance with the timing requirements imposed by the Code, so as to maintain its RIC status. If it qualifies
for treatment as a RIC and satisfies the above-mentioned distribution requirements, the Trust will not be subject to U.S. federal
income tax on income paid to its shareholders in the form of dividends.
To qualify as a RIC for U.S. federal income tax purposes, the
Trust must derive at least 90% of its annual gross income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to its business of investing in stock, securities and
currencies, and net income derived from an interest in a qualified publicly traded partnership. The Trust must also distribute
to its shareholders at least the sum of 90% of its investment company taxable income (as that term is defined in the Code, but
determined without regard to the deduction for dividends paid) and 90% of its net tax-exempt interest income for each taxable year.
The Trust must also satisfy certain requirements with respect
to the diversification of its assets. The Trust must have, at the close of each quarter of its taxable year, at least 50% of the
value of its total assets represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities
that, in respect of any one issuer, do not represent more than 5% of the value of the assets of the Trust or more than 10% of the
voting securities of that issuer. In addition, at those times, not more than 25% of the value of the Trust’s assets may be
invested, including through corporations in which the Trust owns a 20% or more voting stock interest, in securities (other than
U.S. Government securities or the securities of other RICs) of any one issuer, or of two or more issuers that the Trust controls
and which are engaged in the same or similar trades or businesses or related trades or businesses, or of one or more qualified
publicly traded partnerships.
In order to avoid incurring a nondeductible 4% U.S. federal excise
tax obligation, the Code requires that the Trust distribute (or be deemed to have distributed) by December 31 of each calendar
year an amount at least equal to the sum of (i) 98% of its ordinary income for such year, (ii) 98.2% of its capital gain
net income, generally computed on the basis of the one-year period ending on October 31 of such year, after reduction by any
available capital loss carryforwards and (iii) 100% of any ordinary income and capital gain net income from the prior year
(as previously computed) that was not paid out during such year and on which the Trust paid no U.S. federal income tax.
If the Trust does not qualify as a RIC for any taxable year,
the Trust’s taxable income will be subject to corporate income taxes, and all distributions from earnings and profits, including
distributions of net capital gain (if any), will generally be taxable to the shareholder as ordinary income. Such distributions
will be treated as qualified dividend income with respect to shareholders who are individuals and will be eligible for the dividends
received deduction in the case of shareholders taxed as corporations, provided certain holding period and other requirements are
met. In order to requalify for taxation as a RIC, the Trust may be required to recognize unrealized gains, pay substantial taxes
and interest, and make substantial distributions.
The Trust intends to make monthly distributions of net investment
income after payment of dividends on any outstanding preferred shares or interest on any outstanding borrowings.
The Trust may also distribute its net realized capital gains,
if any, generally not more than once per year. Taxes on distributions of capital gains are determined by how long the Trust owned
(or is deemed to have owned) the investments that generated them, rather than how long a shareholder has owned his or her shares.
Distributions of the Trust’s net capital gains that are properly reported (“capital gain dividends”), if any,
are taxable to shareholders as long-term capital gains. (Net capital gain is the excess (if any) of net long-term capital gain
over net short-term capital loss.) Dividends paid to shareholders out of the Trust’s current and accumulated earnings and
profits will, except in the case of capital gain dividends, be taxable as ordinary income. Distributions, if any, in excess of
the Trust’s earnings and profits will first reduce the adjusted tax basis of a holder’s shares and, after that basis
has been reduced to zero, will constitute capital gains to the shareholder. Dividends paid by the Trust generally will not qualify
for the reduced tax rates applicable to qualified dividend income received by individual shareholders or the dividends received
deduction generally available to corporate shareholders.
Distributions will be treated in the manner described above regardless
of whether such distributions are paid in cash or invested in additional shares of the Trust. Shareholders receiving any distribution
from the Trust in the form of additional shares pursuant to a dividend reinvestment plan will be treated as receiving a taxable
distribution in the amount they would have received if they had elected to receive the distribution in cash, unless the Trust issues
new shares that are trading at or above net asset value, in which case, such shareholders will be treated as receiving a distribution
in the amount equal to the fair market value of the shares received, determined as of the reinvestment date.
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As described in “Distributions” above, the Trust
may retain some or all of its net capital gain. If the Trust retains any net capital gain, it will be subject to tax at regular
corporate rates on the amount retained and will report the retained amount as undistributed capital gains as part of its annual
reporting to its shareholders who, if subject to U.S. federal income tax on long-term capital gains, (i) will be required
to include in income for U.S. federal income tax purposes, as long-term capital gain, their share of such undistributed amount;
and (ii) will be entitled to credit their proportionate shares of the tax paid by the Trust on such undistributed amount against
their U.S. federal income tax liabilities, if any, and will be entitled to claim refunds to the extent the credit exceeds such
liabilities. For U.S. federal income tax purposes, the tax basis of Common Shares owned by a Common Shareholder will be increased
by an amount equal to the difference between the amount of undistributed capital gains included in the shareholder’s gross
income and the tax deemed paid by the Common Shareholder under clause (ii) of the preceding sentence.
The Internal Revenue Service (“IRS”) currently requires
that a RIC that has two or more classes of stock allocate to each such class proportionate amounts of each type of its income (such
as ordinary income and capital gains) based on the percentage of total dividends paid to each class for the tax year. Accordingly,
if the Trust issues preferred shares, such as VRTP Shares, it will designate dividends made with respect to Common Shares and preferred
shares as consisting of particular types of income (e.g., net capital gain and ordinary income) in accordance with the proportionate
share of each class in the total dividends paid by the Trust during the year.
Gains or losses attributable to fluctuations in exchange rates
between the time the Trust accrues income or receivables or expenses or other liabilities denominated in a foreign currency and
the time the Trust actually collects such income or receivables or pays such liabilities are generally treated as ordinary income
or loss. Transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options,
futures contracts, forward contracts and similar instruments (to the extent permitted) may give rise to ordinary income or loss
to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
The Trust will inform shareholders of the source and tax status
of all distributions promptly after the close of each calendar year.
Selling Common Shareholders will generally recognize capital
gain or loss in an amount equal to the difference between the Common Shareholder’s adjusted tax basis in the shares sold
and the sale proceeds. Any loss on a disposition of shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends received (or amounts designated as undistributed capital gains) with respect to those
shares. For purposes of determining whether shares have been held for six months or less, the holding period is suspended for any
periods during which the shareholder’s risk of loss is diminished as a result of holding one or more other positions in substantially
similar or related property, or through certain options or short sales. Any loss realized on a sale or exchange of shares will
be disallowed to the extent those shares are replaced by other substantially identical shares within a period of 61 days beginning
30 days before and ending 30 days after the date of disposition of the shares (including through the reinvestment of distributions,
which could occur, for example, if the shareholder is a participant in the Plan or otherwise). In that event, the basis of the
replacement shares will be adjusted to reflect the disallowed loss.
The net investment income of certain U.S. individuals, estates
and trusts is subject to a 3.8% Medicare contribution tax. For individuals, the tax is on the lesser of the “net investment
income” and the excess of modified adjusted gross income over $200,000 (or $250,000 if married filing jointly). Net investment
income includes, among other things, interest, dividends, and gross income and capital gains derived from passive activities and
trading in securities or commodities. Net investment income is reduced by deductions “properly allocable” to this income.
Investments in foreign securities may be subject to foreign withholding
taxes or other foreign taxes with respect to income (possibly including, in some cases, capital gains) which may decrease the yield
on such securities. These taxes may be reduced or eliminated under the terms of an applicable tax treaty. Shareholders generally
will not be entitled to claim a credit or deduction with respect to foreign taxes paid by the Trust. In addition, investments in
foreign securities or foreign currencies may increase or accelerate the Trust’s recognition of ordinary income and may affect
the timing or amount of the Trust’s distributions.
An investor should be aware that, if shares are purchased shortly
before the record date for any taxable dividend (including a capital gain dividend), the purchase price likely will reflect the
value of the dividend and the investor then would receive a taxable distribution likely to reduce the trading value of such shares,
in effect resulting in a taxable return of some of the purchase price. Taxable distributions to individuals and certain other non-corporate
shareholders who have not provided their correct taxpayer identification number and other required certifications, may be subject
to “backup” U.S. federal income tax withholding.
An investor should also be aware that the benefits of the reduced
tax rate applicable to long-term capital gains may be impacted by the application of the alternative minimum tax to individual
shareholders.
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Certain foreign entities including foreign entities acting as
intermediaries may be subject to a 30% withholding tax on ordinary dividend income paid under the Foreign Account Tax Compliance
Act (“FATCA”). To avoid withholding, foreign financial institutions subject to FATCA must agree to disclose to the
relevant revenue authorities certain information regarding their direct and indirect U.S. owners and other foreign entities must
certify certain information regarding their direct and indirect U.S. owners to the Trust. In addition, the IRS and the Department
of Treasury have issued proposed regulations providing that these withholding rules will not be applicable to the gross proceeds
of share redemptions or capital gain dividends the Trust pays. For more detailed information regarding FATCA withholding and compliance,
please refer to the SAI.
The foregoing briefly summarizes some of the important U.S. federal
income tax consequences to shareholders of investing in shares, reflects the federal tax law as of the date of this prospectus,
and does not address special tax rules applicable to certain types of investors, such as corporate and foreign investors. A more
complete discussion of the tax rules applicable to the Trust and the shareholders can be found in the SAI that is incorporated
by reference into this prospectus. Unless otherwise noted, this discussion assumes that an investor is a United States person and
holds shares as a capital asset. This discussion is based upon current provisions of the Code, the regulations promulgated thereunder,
and judicial and administrative ruling authorities, all of which are subject to change or differing interpretations by the courts
or the IRS retroactively or prospectively. Investors should consult their tax advisors regarding other federal, state or local
tax considerations that may be applicable in their particular circumstances, as well as any proposed tax law changes.
Dividend Reinvestment Plan
The Trust offers a dividend reinvestment plan (the “Plan”)
pursuant to which Common Shareholders automatically have distributions reinvestment in Common Shares of the Trust unless they elect
otherwise through their investment dealer. Common Shareholders who elect not to participate in the Plan will receive all Trust
distributions in cash paid by check mailed directly to the Common Shareholder of record (or, if the Common Shares are held in street
or other nominee name, then to the nominee) by American Stock Transfer & Trust Company, LLC (“AST” or the “Plan
Agent”), as disbursing agent. On the distribution payment date, if the net asset value per Common Share is equal to or less
than the market price per Common Share plus estimated brokerage commissions, then new Common Shares will be issued. The number
of Common Shares shall be determined by the greater of the net asset value per Common Share or 95% of the market price. Otherwise,
Common Shares generally will be purchased on the open market by the Plan Agent. Distributions subject to income tax (if any) are
taxable whether or not shares are reinvested.
If your shares are in the name of a brokerage firm, bank, or
other nominee, you can ask the firm or nominee to participate in the Plan on your behalf. If the nominee does not offer the Plan,
you will need to request that your shares be re-registered in your name with the Trust’s transfer agent, AST, or you will
not be able to participate.
The Plan Agent’s service fee for handling distributions
will be paid by the Trust. Each participant will be charged their pro rata share of brokerage commissions on all open-market purchases.
Plan participants may withdraw from the Plan at any time by
writing to the Plan Agent at the address noted on page 53. If you withdraw, you will receive shares in your name for all Common
Shares credited to your account under the Plan. If a participant elects by written notice to the Plan Agent to have the Plan Agent
sell part or all of his or her Common Shares and remit the proceeds, the Plan Agent is authorized to deduct a $5.00 fee plus brokerage
commissions from the proceeds.
Any inquiries regarding the Plan can be directed to the Plan
Agent, AST, at 1-866-439-6787.
Description of Capital Structure
The Trust is an unincorporated business trust established
under the laws of The Commonwealth of Massachusetts by the Declaration of Trust dated and filed with the Secretary of The Commonwealth
on April 28, 2004. The Declaration of Trust provides that the Board may authorize separate classes of shares of beneficial interest.
The Board has authorized an unlimited number of Common Shares. The Trust will hold annual meetings of shareholders so long as the
Common Shares are listed on a national securities exchange and annual meetings are required as a condition of such listing.
COMMON SHARES
The Declaration of Trust permits the Trust to issue an unlimited
number of full and fractional Common Shares. Each Common Share represents an equal proportionate interest in the assets of the
Trust with each other Common Share in the Trust. Common Shareholders are entitled to the payment of distributions when, as, and
if declared by the Board. The 1940 Act or the terms of any future borrowings or issuance of preferred shares may limit the payment
of distributions to the Common Shareholder. Each whole Common Share shall be entitled to one vote as to matters on which it is
entitled to vote pursuant to the terms of the Declaration of Trust on file with the SEC.
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The By-Laws establish qualification criteria applicable to
prospective Trustees and generally require that advance notice be given to the Trust in the event a shareholder desires to nominate
a person for election to the Board or to transact any other business at a meeting of shareholders. Any notice by a shareholder
must be accompanied by certain information as required by the By-Laws. No shareholder proposal will be considered at any meeting
of shareholders of the Trust if such proposal is submitted by a shareholder who does not satisfy all applicable requirements set
forth in the By-Laws.
In the event of the liquidation of the Trust, after paying
or adequately providing for the payment of all liabilities of the Trust and the liquidation preference with respect to any outstanding
preferred shares, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for their protection,
the Board may distribute the remaining assets of the Trust among the Common Shareholders. The Declaration of Trust provides that
Common Shareholders are not liable for any liabilities of the Trust and permits inclusion of a clause to that effect in every agreement
entered into by the Trust and, in coordination with the Trust's By-Laws, indemnifies shareholders against any such liability. Although
shareholders of an unincorporated business trust established under Massachusetts law may, in certain limited circumstances, be
held personally liable for the obligations of the business trust as though they were general partners, the provisions of the Trust’s
Organizational Documents described in the foregoing sentence make the likelihood of such personal liability remote.
While there are any borrowings or preferred shares outstanding,
the Trust may not be permitted to declare any cash dividend or other distribution on its Common Shares, unless at the time of such
declaration, (i) all accrued dividends on preferred shares or accrued interest on borrowings have been paid and (ii) the value
of the Trust's total assets (determined after deducting the amount of such dividend or other distribution), less all liabilities
and indebtedness of the Trust not represented by senior securities, is at least 300% of the aggregate amount of such securities
representing indebtedness and at least 200% of the aggregate amount of securities representing indebtedness plus the aggregate
liquidation value of the outstanding preferred shares (expected to equal the aggregate original purchase price of the outstanding
preferred shares plus redemption premium, if any, together with any accrued and unpaid dividends thereon, whether or not earned
or declared and on a cumulative basis). In addition to the requirements of the 1940 Act, the Trust may be required to comply with
other asset coverage requirements as a condition of the Trust obtaining a rating of the preferred shares from a Rating Agency.
These requirements may include an asset coverage test more stringent than under the 1940 Act. This limitation on the Trust's ability
to make distributions on its Common Shares could in certain circumstances impair the ability of the Trust to maintain its qualification
for taxation as a regulated investment company for federal income tax purposes. The Trust intends, however, to the extent possible
to purchase or redeem preferred shares or reduce borrowings from time to time to maintain compliance with such asset coverage requirements
and may pay special dividends to the holders of the preferred shares in certain circumstances in connection with any such impairment
of the Trust's status as a regulated investment company. See “Investment Objective, Policies and Risks,” “Distributions”
and “Federal Income Tax Matters.” Depending on the timing of any such redemption or repayment, the Trust may be required
to pay a premium in addition to the liquidation preference of the preferred shares to the holders thereof.
The Trust has no present intention of offering additional
Common Shares, except as described herein. Other offerings of its Common Shares, if made, will require approval of the Board. Any
additional offering will not be sold at a price per Common Share below the then current NAV (exclusive of underwriting discounts
and commissions) except in connection with an offering to existing Common Shareholders or with the consent of a majority of the
outstanding Common Shares. The Common Shares have no preemptive rights.
The Trust generally will not issue Common Share certificates.
However, upon written request to the Trust’s transfer agent, a share certificate will be issued for any or all of the full
Common Shares credited to an investor’s account. Common Share certificates that have been issued to an investor may be returned
at any time.
CREDIT FACILITY
The Trust currently leverages through borrowings, and has
entered into an Agreement with conduit lenders and a bank to allow it to borrow up to $125 million. The proceeds of which were
used to invest in accordance with the Trust’s investment practices and to partially redeem the Trust’s APS. Borrowings
under the Agreement are secured by the assets of the Trust. Interest is charged at a rate above the conduits’ commercial
paper issuance rate and is payable monthly. Under the terms of the Agreement, in effect through March 8, 2021, the Trust also
pays a program fee of 0.85% per annum on its outstanding borrowings to administer the facility and a liquidity fee of 0.15% (0.25%
if the outstanding loan amount is less than or equal to 60% of the total facility size) per annum on the unused portion of the
total commitment under the Agreement. Program and liquidity fees for the year ended June 30, 2020 totaled $918,353. In connection
with the renewal of the Agreement on March 9, 2020, the Trust paid upfront fees of $125,000 and, shortly thereafter on March 20,
2020, the Trust paid waiver fees of $156,250 in connection with a reduction of Trust net asset value during the month of March
2020 due to market volatility; these aggregate upfront and waiver fees are being amortized to interest expense through March 8,
2021. The Trust is required to maintain certain net asset levels during the term of the Agreement. As of June 30, 2020, the Trust
had borrowings outstanding under the Agreement of $95 million at an interest rate 0.35%, in addition to outstanding APS. Based
on the short-term nature of the borrowings under the Agreement and the variable interest rate, the carrying amount of the borrowings
at June 30, 2020 approximated its fair value. For the year ended June 30, 2020, the average borrowings under the Agreement and
the average interest rate (excluding fees) were $102,256,831 and 1.83%, respectively.
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In addition, the credit facility/program contains covenants that,
among other things, limit the Trust's ability to pay dividends in certain circumstances, incur additional debt, change its fundamental
investment policies and engage in certain transactions, including mergers and consolidations, and may require asset coverage ratios
in addition to those required by the 1940 Act. The Trust is required to pledge its assets and to maintain a portion of its assets
in cash or high-grade securities as a reserve against interest or principal payments and expenses. The credit facility/program
contains customary covenant, negative covenant and default provisions. In addition, any such credit facility/program entered into
in the future may be replaced or refinanced by one or more credit facilities having substantially different terms or by the issuance
of preferred shares or debt securities.
REPURCHASE OF COMMON SHARES AND OTHER DISCOUNT MEASURES
Because shares of closed-end management investment companies
frequently trade at a discount to their NAVs, the Board has determined that from time to time it may be in the interest of shareholders
for the Trust to take corrective actions. The Board, in consultation with Eaton Vance, will review at least annually the possibility
of open market repurchases and/or tender offers for the Common Shares and will consider such factors as the market price of the
Common Shares, the NAV of the Common Shares, the liquidity of the assets of the Trust, effect on the Trust's expenses, whether
such transactions would impair the Trust's status as a regulated investment company or result in a failure to comply with applicable
asset coverage requirements, general economic conditions and such other events or conditions which may have a material effect on
the Trust's ability to consummate such transactions. There are no assurances that the Board will, in fact, decide to undertake
either of these actions or if undertaken, that such actions will result in the Trust's Common Shares trading at a price which is
equal to or approximates their NAV. In recognition of the possibility that the Common Shares might trade at a discount to NAV and
that any such discount may not be in the interest of shareholders, the Board, in consultation with Eaton Vance, from time to time
may review possible actions to reduce any such discount.
The Board of Trustees initially approved a share repurchase
program for the Trust on November 11, 2013. The Board of Trustees of the Trust has authorized the continuation of the share repurchase
program and the Trust is authorized to repurchase up to 10% of its outstanding Common Shares as of the day of the prior calendar
year-end at market prices when shares are trading at a discount to net asset value. The share repurchase program does not obligate
the Trust to purchase a specific amount of shares. Results of the share repurchase program will be disclosed in the Trust’s
annual and semiannual reports to shareholders.
PREFERRED SHARES
The Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest with preference rights, including preferred shares, having a par value of $0.01 per share,
in one or more series, with rights as determined by the Board, by action of the Board without the approval of the Common Shareholders
On June 27, 2001, the Trust issued 2,200 Series A APS and 2,200 Series B APS, with a liquidation preference per share of $25,000
plus accumulated but unpaid dividends. On September 23, 2016, the Trust repurchased 968 Series A APS and 968 Series B APS. On September
14, 2018, the Trust repurchased 480 Series A APS and 480 Series B APS. The APS have seniority over the Common Shares.
Under the requirements of the 1940 Act, the Trust must, immediately
after the issuance of any preferred shares, have an “asset coverage” of at least 200%. Asset coverage means the ratio
which the value of the total assets of the Trust, less all liability and indebtedness not represented by senior securities (as
defined in the 1940 Act), bears to the aggregate amount of senior securities representing indebtedness of the Trust, if any, plus
the aggregate liquidation preference of the preferred shares. The liquidation value of the preferred shares is expected to equal
to their aggregate original purchase price plus the applicable redemption premium, if any, together with any accrued and unpaid
distributions thereon (on a cumulative basis), whether or not earned or declared. The terms of the preferred shares, including
their distribution rate, voting rights, liquidation preference and redemption provisions, are determined by the Board (subject
to applicable law and the Trust’s Declaration of Trust). The Trust may issue preferred shares that provide for the periodic
redetermination of the distribution rate at relatively short intervals through an auction or remarketing procedure, although the
terms of such preferred shares may also enable the Trust to lengthen such intervals. At times, the distribution rate on any preferred
shares may exceed the Trust’s return after expenses on the investment of proceeds from the preferred shares and the Trust’s
leverage structure, resulting in a lower rate of return to Common Shareholders than if the preferred shares were not outstanding.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Trust, the terms of any preferred shares may entitle the holders of preferred shares to receive a preferential
liquidating distribution (expected to equal to the original purchase price per share plus the applicable redemption premium, if
any, together with accrued and unpaid distributions, whether or not earned or declared and on a cumulative
basis) before any distribution of assets is made to holders of Common Shares. After payment of the full amount of the liquidating
distribution to which they are entitled, the preferred shareholders would not be entitled to any further participation in any distribution
of assets by the Trust.
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Holders of preferred shares, voting as a class, would be entitled
to elect two of the Trust’s Trustees. The holders of both the Common Shares and the preferred shares (voting together as
a single class with each share entitling its holder to one vote) would be entitled to elect the remaining Trustees of the Trust.
Under the 1940 Act, if at any time distributions on any preferred shares are unpaid in an amount equal to two full years’
distributions thereon, the holders of all outstanding preferred shares, voting as a class, will be allowed to elect a majority
of the Trust’s Trustees until all distributions in arrears have been paid or declared and set apart for payment. In addition,
if required by a Rating Agency rating any preferred shares or if the Board determines it to be in the best interests of the Common
Shareholders, issuance of such preferred shares may result in more restrictive provisions than required by the 1940 Act being imposed.
In this regard, holders of any preferred shares may be entitled to elect a majority of the Trust’s Board in other circumstances,
for example, if one payment on the preferred shares is in arrears. The differing rights of the holders of preferred and Common
Shares with respect to the election of Trustees do not affect the obligation of all Trustees to take actions they believe to be
consistent with the best interests of the Trust. All such actions must be consistent with (i) the obligations of the Trust with
respect to the holders of preferred shares (which obligations arise primarily from the contractual terms of the preferred shares,
as specified in the Trust’s Organizational Documents) and (ii) the fiduciary duties owed to the Trust, which include the
duties of loyalty and care.
The APS have been rated Aa3 by Moody's. The Trust currently intends
to seek to maintain this rating or an equivalent credit rating on the APS or any preferred shares it issues. The Rating Agencies
which rate the preferred shares and any bank lender in connection with a credit facility or commercial paper program may also impose
specific restrictions as a condition to borrowing. Such restrictions may include asset coverage or portfolio composition requirements
that are more stringent than those imposed on the Trust by the 1940 Act. These covenants or guidelines do not currently and are
not expected to impede Eaton Vance in managing the Trust’s portfolio in accordance with its investment objective and policies
and it is not anticipated that they will so impede Eaton Vance in the future.
CERTAIN PROVISIONS OF THE ORGANIZATIONAL DOCUMENTS
Anti-Takeover Provisions in the Organizational Documents
The Board is divided into three classes, with the term of
one class expiring at each annual meeting of holders of Common Shares and preferred shares. At each annual meeting, one class of
Trustees is elected to a three-year term. This provision could delay for up to two years the replacement of a majority of the Board.
In the event a Trustee is not elected at an annual meeting at which such Trustee’s term expires, and such Trustee’s
successor is also not elected, then the incumbent Trustee shall remain a member of the relevant class of Trustees and hold office
until the expiration of the term applicable to Trustees in that class. In a contested Trustee election, a nominee must receive
the affirmative vote of a majority of the shares outstanding and entitled to vote in order to be elected. A Trustee may be removed
from office only for cause by a written instrument signed by the remaining Trustees or by a vote of the holders of at least two-thirds
of the class of shares of the Trust that elects such Trustee and are entitled to vote on the matter.
The Organizational Documents establish supermajority voting
requirements with respect to certain matters. The Declaration of Trust requires the favorable vote of the holders of at least 75%
of the outstanding shares of each class of the Trust, voting as a class, then entitled to vote to approve, adopt or authorize certain
transactions with 5%-or-greater holders (“Principal Shareholders”) of a class of shares and their associates, unless
the Board shall by resolution have approved a memorandum of understanding with such holders, in which case normal voting requirements
would be in effect. For purposes of these provisions, a Principal Shareholder refers to any person who, whether directly or indirectly
and whether alone or together with its affiliates and associates, beneficially owns 5% or more of the outstanding shares of any
class of beneficial interest of the Trust. The transactions subject to these special approval requirements are: (i) the merger
or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder; (ii) the issuance of any securities
of the Trust to any Principal Shareholder for cash; (iii) the sale, lease or exchange of all or any substantial part of the assets
of the Trust to any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000, aggregating
for the purpose of such computation all assets sold, leased or exchanged in any series of similar transactions within a twelve-month
period); or (iv) the sale, lease or exchange to or with the Trust or any subsidiary thereof, in exchange for securities of the
Trust, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $1,000,000,
aggregating for the purposes of such computation all assets sold, leased or exchanged in any series of similar transactions within
a twelve-month period).
The Board has determined that all voting requirements described
above that are greater than the minimum requirements under Massachusetts law or the 1940 Act are in the best interest of holders
of Common Shares and preferred shares generally. Reference should be made to the Organizational Documents on file with the SEC
for the full text of these provisions.
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Conversion to Open-End Fund
The Trust may be converted to an open-end investment company
at any time if approved by the lesser of (i) two-thirds or more of the Trust’s then outstanding Common Shares and preferred
shares, each voting separately as a class, or (ii) more than 50% of the then outstanding Common Shares and preferred shares, voting
separately as a class if such conversion is recommended by at least 75% of the Trustees then in office. If approved in the foregoing
manner, conversion of the Trust could not occur until 90 days after the Common Shareholders’ meeting at which such conversion
was approved and would also require at least 30 days’ prior notice to all Common Shareholders. Conversion of the Trust to
an open-end management investment company also would require the redemption of any outstanding preferred shares, including APS,
and could require the repayment of borrowings. The Board believes that the closed-end structure is desirable, given the Trust’s
investment objective and policies. Investors should assume, therefore, that it is unlikely that the Board would vote to convert
the Trust to an open-end management investment company.
Custodian and Transfer Agent
State Street Bank and Trust Company (“State Street”),
State Street Financial Center, One Lincoln Street, Boston, MA 02111, is the custodian of the Trust and will maintain custody of
the securities and cash of the Trust. State Street maintains the Trust’s general ledger and computes NAV per share at least
weekly. State Street also attends to details in connection with the sale, exchange, substitution, transfer and other dealings with
the Trust’s investments, and receives and disburses all funds. State Street also assists in preparation of shareholder reports
and the electronic filing of such reports with the SEC.
American Stock Transfer & Trust Company, LLC, 6201 15th Avenue,
Brooklyn, NY 11219 is the transfer agent and dividend disbursing agent of the Trust.
Legal Matters
Certain legal matters in connection with the Common Shares will
be passed upon for the Trust by internal counsel for Eaton Vance.
On July 15, 2020, after the Trust’s Board of Trustees
received a demand letter from counsel to Saba Capital Management, L.P. and a hedge fund it advises (together “Saba”),
the Trust filed a complaint against Saba in Suffolk County Superior Court in Massachusetts seeking a declaratory judgment as to
the validity of an amendment to its by-laws requiring trustee nominees in contested elections to obtain affirmative votes of a
majority of eligible shares in order to be elected. Saba subsequently answered this complaint and asserted counterclaims for breach
of contract and fiduciary duty against the Trust and certain of its affiliates including Eaton Vance Floating-Rate Income Trust,
Eaton Vance Senior Floating-Rate Trust and Eaton Vance Limited Duration Income Fund (collectively, the “Affiliate Funds”),
the Adviser, as well as the Board. The answer and counterclaims seek, with respect to the Affiliate Funds rescission of this by-law
provision, other by-law provisions related to “control share” acquisitions and related relief. As of the date of this
filing, the court has not ruled on these matters.
Reports to Shareholders
The Trust will send to Common Shareholders unaudited semi-annual
and audited annual reports, including a list of investments held.
Independent Registered Public Accounting Firm
Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA 02116,
independent registered public accounting firm, audits the Trust’s financial statements and provides other audit, tax and
related services.
Additional Information
The Prospectus and the SAI do not contain all of the information
set forth in the Registration Statement that the Trust has filed with the SEC. The complete Registration Statement may be obtained
from the SEC upon payment of the fee prescribed by its rules and regulations. The SAI can be obtained without charge by calling
1-800-262-1122.
Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration Statement of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference.
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Table of Contents for the Statement of Additional Information
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Page
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Additional Investment Information and Restrictions
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2
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Trustees and Officers
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18
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Investment Advisory and Other Services
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26
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Determination of Net Asset Value
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30
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Portfolio Trading
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31
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Taxes
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33
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Other Information
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37
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Custodian
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38
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Independent Registered Public Accounting Firm
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38
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Financial Statements
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38
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APPENDIX A: Ratings
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39
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APPENDIX B: Proxy Voting Policy and Procedures
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48
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The Trust’s Privacy Policy
The Eaton Vance organization is committed to ensuring your
financial privacy. Each entity listed below has adopted a privacy policy and procedures (“Privacy Program”) Eaton Vance
believes is reasonably designed to protect your personal information and to govern when and with whom Eaton Vance may share your
personal information.
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At the time of opening an account, Eaton Vance generally requires you to provide us with certain information such as name,
address, social security number, tax status, account numbers, and account balances. This information is necessary for us to both
open an account for you and to allow us to satisfy legal requirements such as applicable anti-money laundering reviews and know-your-customer
requirements.
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On an ongoing basis, in the normal course of servicing your account, Eaton Vance may share your information with unaffiliated
third parties that perform various services for Eaton Vance and/or your account. These third parties include transfer agents, custodians,
broker/dealers and our professional advisers, including auditors, accountants, and legal counsel. Eaton Vance may additionally
share your personal information with our affiliates.
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We believe our Privacy Program is reasonably designed to protect the confidentiality of your personal information and to
prevent unauthorized access to that information.
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We reserve the right to change our Privacy Program at any time upon proper notification to you. You may want to review our
Privacy Program periodically for changes by accessing the link on our homepage: www.eatonvance.com.
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Our pledge of protecting your personal information applies
to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance
Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management (International) Limited,
Eaton Vance Advisers International Limited, Eaton Vance Global Advisors Limited, Eaton Vance Management’s Real Estate Investment
Group, Boston Management and Research, Calvert Research and Management, and Calvert Funds.
This Privacy Notice supersedes all previously issued privacy
disclosures.
For more information about our Privacy Program or about how
your personal information may be used, please call 1-800-262-1122.
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Up to 4,551,438 Shares
Eaton Vance Senior Income Trust
Common Shares
Prospectus October 27, 2020
Printed on recycled paper.
STATEMENT OF
ADDITIONAL INFORMATION
October 27, 2020
Eaton Vance Senior Income Trust
Two International Place
Boston, Massachusetts 02110
1-800-262-1122
Table of Contents
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Page
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Additional Investment Information and Restrictions
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2
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Trustees and Officers
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18
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Investment Advisory and Other Services
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26
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Determination of Net Asset Value
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30
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Portfolio Trading
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31
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Taxes
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33
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Other Information
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37
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Custodian
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38
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Independent Registered Public Accounting Firm
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38
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Financial Statements
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38
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APPENDIX A: Ratings
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39
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APPENDIX B: Proxy Voting Policy and Procedures
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48
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THIS STATEMENT OF ADDITIONAL INFORMATION (“SAI”)
IS NOT A PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY THE PROSPECTUS
OF EATON VANCE SENIOR INCOME TRUST (THE “TRUST”) DATED OCTOBER 27, 2020, AS SUPPLEMENTED FROM TIME TO TIME, WHICH IS
INCORPORATED HEREIN BY REFERENCE. THIS SAI SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED
WITHOUT CHARGE BY CONTACTING YOUR FINANCIAL INTERMEDIARY OR CALLING THE TRUST AT 1-800-262-1122.
Capitalized terms used in this SAI and not otherwise defined
have the meanings given them in the Trust’s Prospectus and any related Prospectus Supplements.
ADDITIONAL INVESTMENT INFORMATION AND
RESTRICTIONS
Primary investment strategies are described in the Prospectus.
The following is a description of the various investment practices that may be engaged in, whether as a primary or secondary strategy,
and a summary of certain attendant risks. The Adviser may not buy any of the following instruments or use any of the following
techniques unless it believes that doing so will help to achieve the Trust’s investment objective.
SENIOR LOANS
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 primarily include senior floating-rate loans to
corporations and secondarily institutionally traded senior floating-rate debt obligations issued by an asset-backed pool, and interests
therein. Loan interests primarily take the form of assignments purchased in the primary or secondary market. Loan interests may
also take the form of participation interests in a Senior Loan. 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 Loan Investors or from
other investors in loan interests.
The Trust typically purchases “Assignments” from
the Agent or other Loan Investors. The purchaser 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 Loan Investor. 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 Trust also may invest in “Participations.” Participations
by the Trust in a Loan Investor’s portion of a Senior Loan typically will result in the Trust having a contractual relationship
only with such Loan Investor, not with the Borrower. As a result, the Trust 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 Trust 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 Trust may not directly benefit from the collateral supporting
the Senior Loan in which it has purchased the Participation. As a result, the Trust 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
Trust 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 Trust 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 Trust generally will only acquire Participations if the
Loan Investor selling the Participation, and any other persons interpositioned between the Trust 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 S&P Global
Ratings (“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) or determined by the Adviser to be of comparable quality.
Securities rated Baa by Moody’s have speculative characteristics. 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. Indebtedness
of companies whose creditworthiness is poor involves substantially greater risks, and may be highly speculative. Some companies
may never pay off their indebtedness, or may pay only a small fraction of the amount owed. Consequently, when investing in indebtedness
of companies with poor credit, the Trust bears a substantial risk of losing the entire amount invested.
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Loan
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.
Certain
Fees Paid to the Trust. In the process of buying, selling and holding Senior Loans, the Trust may receive and/or pay
certain fees. These fees are in addition to interest payments received and may include facility fees, commitment fees, amendment
fees, commissions and prepayment penalty fees. When the Trust 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 Trust 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 Trust may receive a prepayment penalty
fee upon the prepayment of a Senior Loan by a Borrower. Other fees received by the Trust may include covenant waiver fees and covenant
modification fees.
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 that are parties to the Loan Agreement. The Trust will generally rely upon the Agent
or an intermediate participant to receive and forward to the Trust its portion of the principal and interest payments on the Senior
Loan. Furthermore, unless under the terms of a Participation Agreement the Trust has direct recourse against the Borrower, the
Trust will rely on the Agent and the other Loan Investors 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 Trust
will perform such tasks on its own behalf, although a collateral bank will typically hold any collateral on behalf of the Trust
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 Trust were determined
to be subject to the claims of the Agent’s general creditors, the Trust 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 a portion of 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 other factors. As such, prepayments cannot be predicted with accuracy. Upon a prepayment,
either in part or in full, the actual outstanding debt on which the Trust derives interest income will be reduced. However, the
Trust 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 Trust’s performance
because the Trust typically is able to reinvest prepayments in other Senior Loans that have similar yields and because receipt
of such fees may mitigate any adverse impact on the Trust’s yield.
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Other
Information Regarding Senior Loans. From time to time the Adviser 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 Trust
or may be intermediate participants with respect to Senior Loans in which the Trust owns interests. Such banks may also act as
Agents for Senior Loans held by the Trust.
The Trust may acquire interests in Senior Loans that 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 Trust 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.
The Trust will be subject to the risk that collateral securing
a loan will decline in value or have no 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 Trust 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 themselves.
If a Borrower becomes involved in bankruptcy proceedings, a court
may invalidate the Trust’s security interest in the loan collateral or subordinate the Trust’s rights under the Senior
Loan to the interests of the Borrower’s unsecured creditors or cause interest previously paid to be refunded to the Borrower.
If a court required interest to be refunded, it could negatively affect the Trust’s performance. 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 Trust. 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 that 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 Trust’s security
interest in loan collateral. If the Trust’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, the Trust would have substantially lower recovery, and perhaps
no recovery on the full amount of the principal and interest due on the Senior Loan.
Loans are also subject to the risk that their value will decline
in a rising interest rate environment. This risk is mitigated for floating-rate loans, where the interest rate payable on the loan
resets periodically by reference to a base lending rate. The base lending rate usually is the London Interbank Offered Rate (“LIBOR”),
the Federal Reserve federal funds rate, the prime rate or other base lending rates used by commercial lenders. LIBOR usually is
an average of the interest rates quoted by several designated banks as the rates at which they pay interest to major depositors
in the London interbank market on U.S. dollar-denominated deposits.
Many financial instruments use or may use a floating rate based
on LIBOR, which is the offered rate for short-term Eurodollar deposits between major international banks. On July 27, 2017, the
head of the United Kingdom’s Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021.
Due to the recency of this announcement, there remains uncertainty regarding the future utilization of LIBOR and the nature of
any replacement rate. As such, the potential effect of a transition away from LIBOR on the Trust or the financial instruments in
which the Trust invests cannot yet be determined.
The Trust 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 Trust’s purchase of a Senior Loan. The Trust may also acquire equity securities or debt securities
(including non-dollar denominated debt securities) issued in exchange for a Senior Loan or issued in connection with the debt restructuring
or reorganization of a Borrower, if such acquisition, in the judgment of the Adviser, may enhance the value of a Senior Loan or
if such acquisition would otherwise be consistent with the Trust’s investment policies.
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Debtor-in-Possession
Financing. The Trust may invest in debtor-in-possession financings (commonly called “DIP financings”). DIP
financings are arranged when an entity seeks the protections of the bankruptcy court under chapter 11 of the U.S. Bankruptcy Code.
These financings allow the entity to continue its business operations while reorganizing under chapter 11. Such financings are
senior liens on unencumbered security (i.e., security not subject to other creditors’ claims). There is a risk that the entity
will not emerge from chapter 11 and be forced to liquidate its assets under chapter 7 of the Bankruptcy Code. In such event, the
Trust’s only recourse will be against the property securing the DIP financing.
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 may be adversely affected. Further,
such legislation or regulation could depress the market value of Senior Loans.
Junior
Loans. The Trust may invest in secured and unsecured subordinated loans, second lien loans and subordinated bridge loans
(“Junior Loans”). Second lien loans are generally second in line in terms of repayment priority. A second lien loan
may have a claim on the same collateral pool as the first lien or it may be secured by a separate set of assets, such as property,
plants, or equipment. Second lien loans generally give investors priority over general unsecured creditors in the event of an asset
sale.
Junior Loans are subject to the same general risks inherent to
any loan investment, including credit risk, market and liquidity risk, and interest rate risk. Due to their lower place in the
Borrower’s capital structure and possible unsecured status, Junior Loans involve a higher degree of overall risk than Senior
Loans of the same Borrower.
The Trust may purchase Junior Loan interests either in the form
of an assignment or a loan participation. As the purchaser of an assignment, the Trust would typically succeed to all of the rights
and obligations of the assigning investor under the loan documents. In contrast, loan participations typically result in the purchaser
having a contractual relationship only with the seller of the loan interest, not with the Borrower. As a result, the loan is not
transferred to the loan participant. The loan participant’s right to receive payments from the Borrower derives from the
seller of the loan participation. The loan participant will generally have no right to enforce compliance by the Borrower with
the terms of the loan agreement. Lastly, the loan participant’s voting rights may be limited.
Bridge
Loans. Bridge loans or bridge facilities are short-term loan arrangements (e.g., 12 to 18 months) typically made by
a Borrower in anticipation of intermediate-term or long-term permanent financing. Most bridge loans are structured as floating-rate
debt with step-up provisions under which the interest rate on the bridge loan rises the longer the loan remains outstanding. In
addition, bridge loans commonly contain a conversion feature that allows the bridge loan investor to convert its loan interest
into senior exchange notes if the loan has not been prepaid in full on or prior to its maturity date. Bridge loans may be subordinate
to other debt and may be secured or unsecured. Like any loan, bridge loans involve credit risk. Bridge loans are generally made
with the expectation that the Borrower will be able to obtain permanent financing in the near future. Any delay in obtaining permanent
financing subjects the bridge loan investor to increased risk. A Borrower’s use of bridge loans also involves the risk that
the Borrower may be unable to locate permanent financing to replace the bridge loan, which may impair the Borrower’s perceived
creditworthiness. From time to time, the Trust may make a commitment to participate in a bridge loan facility, obligating itself
to participate in the facility if it funds. In return for this commitment, the Trust receives a fee.
Credit
Quality. Many Senior Loans in which the Trust may invest are of below investment grade credit quality. Accordingly,
these Senior Loans are subject to similar or identical risks and other characteristics described below in relation to Non-Investment
Grade Bonds.
LIBOR
Transition and Associated Risk. The London Interbank Offered Rate (“LIBOR”) is the average offered rate
for various maturities of short-term loans between major international banks who are members of the British Bankers Association
(BBA). LIBOR is the most common benchmark interest rate index used to make adjustments to variable-rate loans. It is used throughout
global banking and financial industries to determine interest rates for a variety of financial instruments (such as debt instruments
and derivatives) and borrowing arrangements, and to determine dividend rates for preferred shares. However, the use of LIBOR started
to come under pressure following manipulation allegations in 2012. Despite increased regulation and other corrective actions since
that time, concerns have arisen regarding its viability as a benchmark, due largely to reduced activity in the financial markets
that it measures.
In June 2017, the Alternative Reference Rates Committee,
a group of large U.S. banks working with the Federal Reserve, announced its selection of a new Secured Overnight Financing Rate
(“SOFR”), which is intended to be a broad measure of secured overnight U.S. Treasury repo rates, as an appropriate
replacement for LIBOR. The Federal Reserve Bank of New York began publishing the SOFR earlier in 2018, with the expectation that
it could be used on a voluntary basis in new instruments and transactions. Bank working groups and regulators in other countries
have suggested other alternatives for their markets, including the Sterling Overnight Interbank Average Rate (“SONIA”)
in England.
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In July 2017, the Financial Conduct Authority (the “FCA”),
the United Kingdom financial regulatory body, announced that after 2021 it will cease its active encouragement of UK banks to provide
the quotations needed to sustain LIBOR. That announcement suggests that LIBOR may cease to be published after that time.
Various financial industry groups have begun planning for
that transition, but there are obstacles to converting certain longer term securities and transactions to a new benchmark. Transition
planning is at an early stage, and neither the effect of the transition process nor its ultimate success can yet be known. The
transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine
interest rates. Although the period from the FCA announcement until the end of 2021 is generally expected to be enough time for
market participants to transition to the use of a different benchmark for new securities and transactions, there remains uncertainty
regarding the future utilization of LIBOR and the specific replacement rate or rates. The effectiveness of multiple alternative
reference rates as opposed to one primary reference rate has not been determined. The effectiveness of alternative reference rates
used in new or existing financial instruments and products has also not yet been determined. As such, the potential effect of a
transition away from LIBOR on the Trust or the financial instruments utilized by the Trust cannot yet be determined.
The transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that currently
rely on LIBOR. The transition may also result in a change in (i) the value of certain instruments held by the Trust, (ii)
the cost of borrowing or the dividend rate for preferred shares, or (iii) the effectiveness of related Trust transactions such
as hedges, as applicable. When LIBOR is discontinued, the LIBOR replacement rate may be lower than market expectations, which could
have an adverse impact on the value of preferred and debt-securities with floating or fixed-to-floating rate coupons. Any such
effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the Trust. Since
the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end
of 2021.
NON-INVESTMENT GRADE BONDS
Investments in Non-Investment Grade Bonds generally provide greater
income and increased opportunity for capital appreciation than investments in higher quality securities, but they also typically
entail greater price volatility and principal and income risk, including the possibility of issuer default and bankruptcy. Non-Investment
Grade Bonds are regarded as predominantly speculative with respect to the issuer’s continuing ability to meet principal and
interest payments. Debt securities in the lowest investment grade category also may be considered to possess some speculative characteristics
by certain rating agencies. In addition, analysis of the creditworthiness of issuers of Non-Investment Grade Bonds may be more
complex than for issuers of higher quality securities.
Non-Investment Grade Bonds may be more susceptible to real or
perceived adverse economic and competitive industry conditions than investment grade securities. A projection of an economic downturn
or of a period of rising interest rates, for example, could cause a decline in Non-Investment Grade Bond prices because the advent
of recession could lessen the ability of an issuer to make principal and interest payments on its debt obligations. If an issuer
of Non-Investment Grade Bonds defaults, in addition to risking payment of all or a portion of interest and principal, the Trust
may incur additional expenses to seek recovery. In the case of Non-Investment Grade Bonds structured as zero-coupon, step-up or
payment-in-kind securities, their market prices will normally be affected to a greater extent by interest rate changes, and therefore
tend to be more volatile than securities that pay interest currently and in cash. Eaton Vance seeks to reduce these risks through
diversification, credit analysis and attention to current developments in both the economy and financial markets.
The secondary market on which Non-Investment Grade Bonds are
traded may be less liquid than the market for investment grade securities. Less liquidity in the secondary trading market could
adversely affect the net asset value of the Common Shares. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of Non-Investment Grade Bonds, especially in a thinly traded market.
When secondary markets for Non-Investment Grade Bonds are less liquid than the market for investment grade securities, it may be
more difficult to value the securities because such valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is no reliable, objective data available. During periods of thin trading in these markets,
the spread between bid and asked prices is likely to increase significantly and the Trust may have greater difficulty selling these
securities. The Trust will be more dependent on Eaton Vance’s research and analysis when investing in Non-Investment Grade
Bonds. Eaton Vance seeks to minimize the risks of investing in all securities through in-depth credit analysis and attention to
current developments in interest rate and market conditions.
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A general description of the ratings of securities by S&P,
Fitch and Moody’s is set forth in Appendix A to this SAI. Such ratings represent these rating organizations’ opinions
as to the quality of the securities they rate. It should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, debt obligations with the same maturity, coupon and rating may have different yields while
obligations with the same maturity and coupon may have the same yield. For these reasons, the use of credit ratings as the sole
method of evaluating Non-Investment Grade Bonds can involve certain risks. For example, credit ratings evaluate the safety or principal
and interest payments, not the market value risk of Non-Investment Grade Bonds. Also, credit rating agencies may fail to change
credit ratings in a timely fashion to reflect events since the security was last rated. Eaton Vance does not rely solely on credit
ratings when selecting securities for the Trust, and develops its own independent analysis of issuer credit quality.
In the event that a rating agency or Eaton Vance downgrades its
assessment of the credit characteristics of a particular issue, the Trust is not required to dispose of such security. In determining
whether to retain or sell a downgraded security, Eaton Vance may consider such factors as Eaton Vance’s assessment of the
credit quality of the issuer of such security, the price at which such security could be sold and the rating, if any, assigned
to such security by other rating agencies. However, analysis of the creditworthiness of issuers of Non-Investment Grade Bonds may
be more complex than for issuers of high quality debt securities.
OTHER INVESTMENTS
Convertible
Securities. The Trust may invest in convertible securities. A convertible security is a bond, debenture, note, preferred
security, or other security that entitles the holder to acquire common stock or other equity securities of the same or a different
issuer. A convertible security entitles the holder to receive interest paid or accrued or the dividend paid on such security until
the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics
similar to nonconvertible income securities in that they ordinarily provide a stable stream of income with generally higher yields
than those of common stocks of the same or similar issuers, but lower yields than comparable nonconvertible securities. The value
of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase
and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible
security’s investment value. A convertible security ranks senior to common stock in a corporation’s capital structure
but is usually subordinated to comparable nonconvertible securities. Convertible securities may be purchased for their appreciation
potential when they yield more than the underlying securities at the time of purchase or when they are considered to present less
risk of principal loss than the underlying securities. Generally speaking, the interest or dividend yield of a convertible security
is somewhat less than that of a non-convertible security of similar quality issued by the same company. A convertible security
may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument.
Convertible securities are issued and traded in a number of securities
markets. Even in cases where a substantial portion of the convertible securities held by the Trust are denominated in U.S. dollars,
the underlying equity securities may be quoted in the currency of the country where the issuer is domiciled. As a result, fluctuations
in the exchange rate between the currency in which the debt security is denominated and the currency in which the share price is
quoted will affect the value of the convertible security. With respect to convertible securities denominated in a currency different
from that of the underlying equity securities, the conversion price may be based on a fixed exchange rate established at the time
the securities are issued, which may increase the effects of currency risk.
Holders of convertible securities generally have a claim on the
assets of the issuer prior to the common stockholders but may be subordinated to other debt securities of the same issuer. Certain
convertible debt securities may provide a put option to the holder, which entitles the holder to cause the securities to be redeemed
by the issuer at a premium over the stated principal amount of the debt securities under certain circumstances. Certain convertible
securities may include loss absorption characteristics that make the securities more equity-like. This is particularly true of
convertible securities issued by companies in the financial services sector.
Synthetic convertible securities may include either cash-settled
convertibles or manufactured convertibles. Cash-settled convertibles are instruments that are created by the issuer and have the
economic characteristics of traditional convertible securities but may not actually permit conversion into the underlying equity
securities in all circumstances. As an example, a private company may issue a cash-settled convertible that is convertible into
common stock only if the company successfully completes a public offering of its common stock prior to maturity and otherwise pays
a cash amount to reflect any equity appreciation. Manufactured convertibles are created by the investment adviser or another party
by combining separate securities that possess one of the two principal characteristics of a convertible security, i.e., fixed-income
(“fixed-income component”) or a right to acquire equity securities (“convertibility component”). The fixed-income
component is achieved by investing in nonconvertible fixed-income securities, such as nonconvertible bonds, preferred securities
and
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money market instruments. The convertibility component is achieved
by investing in call options, warrants, or other securities with equity conversion features (“equity features”) granting
the holder the right to purchase a specified quantity of the underlying stocks within a specified period of time at a specified
price or, in the case of a stock index option, the right to receive a cash payment based on the value of the underlying stock index.
A manufactured convertible differs from traditional convertible securities in several respects. Unlike a traditional convertible
security, which is a single security that has a unitary market value, a manufactured convertible is comprised of two or more separate
securities, each with its own market value. Therefore, the total “market value” of such a manufactured convertible
is the sum of the values of its fixed-income component and its convertibility component. More flexibility is possible in the creation
of a manufactured convertible than in the purchase of a traditional convertible security. Because many corporations have not issued
convertible securities, the investment adviser may combine a fixed-income instrument and an equity feature with respect to the
stock of the issuer of the fixed-income instrument to create a synthetic convertible security otherwise unavailable in the market.
The investment adviser may also combine a fixed-income instrument of an issuer with an equity feature with respect to the stock
of a different issuer when the investment adviser believes such a manufactured convertible would better promote the Trust’s
objective than alternative investments. For example, the investment adviser may combine an equity feature with respect to an issuer’s
stock with a fixed-income security of a different issuer in the same industry to diversify the Trust’s credit exposure, or
with a U.S. Treasury instrument to create a manufactured convertible with a higher credit profile than a traditional convertible
security issued by that issuer. A manufactured convertible also is a more flexible investment in that its two components may be
purchased separately and, upon purchasing the separate securities, “combined” to create a manufactured convertible.
For example, the Trust may purchase a warrant for eventual inclusion in a manufactured convertible while postponing the purchase
of a suitable bond to pair with the warrant pending development of more favorable market conditions. The value of a manufactured
convertible may respond to certain market fluctuations differently from a traditional convertible security with similar characteristics.
For example, in the event the Trust created a manufactured convertible by combining a short-term U.S. Treasury instrument and a
call option on a stock, the manufactured convertible would be expected to outperform a traditional convertible of similar maturity
that is convertible into that stock during periods when Treasury instruments outperform corporate fixed-income securities and underperform
during periods when corporate fixed-income securities outperform Treasury instruments.
Fixed-Income
Securities. Fixed-income securities include bonds, preferred, preference and convertible securities, notes, debentures,
asset-backed securities (including those backed by mortgages), loan participations and assignments, equipment lease certificates,
equipment trust certificates and conditional sales contracts. Generally, issuers of fixed-income securities pay investors periodic
interest and repay the amount borrowed either periodically during the life of the security and/or at maturity. Some fixed-income
securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values, and
values accumulate over time to face value at maturity. The market prices of fixed-income securities fluctuate depending on such
factors as interest rates, credit quality and maturity. In general, market prices of fixed-income securities decline when interest
rates rise and increase when interest rates fall. Fixed-income securities are subject to risk factors such as sensitivity to interest
rate and real or perceived changes in economic conditions, payment expectations, liquidity and valuation. Fixed-income securities
with longer maturities (for example, over ten years) are more affected by changes in interest rates and provide less price stability
than securities with short-term maturities (for example, one to ten years). Fixed-income securities bear the risk of principal
and interest default by the issuer, which will be greater with higher yielding, lower grade securities. During an economic downturn,
the ability of issuers to service their debt may be impaired. The rating assigned to a fixed-income security by a rating agency
does not reflect assessment of the volatility of the security’s market value or of the liquidity of an investment in the
securities. Credit ratings are based largely on the issuer’s historical financial condition and a rating agency’s investment
analysis at the time of rating, and the rating assigned to any particular security is not necessarily a reflection of the issuer’s
current financial condition. Credit quality can change from time to time, and recently issued credit ratings may not fully reflect
the actual risks posed by a particular high yield security. In addition to lower rated securities, the Trust may also invest in
higher rated securities. For a description of corporate ratings, see Appendix A.
Repurchase
Agreements. The Trust 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 Trust might experience delays in recovering its cash. To the extent that, in the meantime, the value of the securities
the Trust purchased may have decreased, the Trust could experience a loss. Repurchase agreements maturing in more than seven days
that the investment adviser believes may not be terminated within seven days at approximately the amount at which the Trust has
valued the agreements are considered illiquid securities. The Trust’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.
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Reverse
Repurchase Agreements. While the Trust has no current intention to enter into reverse repurchase agreements, the Trust
reserves the right to enter into reverse repurchase agreements in the future, at levels that may vary over time. Under a reverse
repurchase agreement, the Trust temporarily transfers possession of a portfolio instrument to another party, such as a bank or
broker-dealer, in return for cash. At the same time, the Trust agrees to repurchase the instrument at an agreed upon time and price,
which reflects an interest payment. The Trust may enter into such agreements when it is able to invest the cash acquired at a rate
higher than the cost of the agreement, which would increase earned income.
When the Trust enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another party or the securities in which the proceeds
may be invested would affect the market value of the Trust's assets. As a result, such transactions may increase fluctuations in
the market value of the Trust's assets. While there is a risk that large fluctuations in the market value of the Trust's assets
could affect net asset value, this risk is not significantly increased by entering into reverse repurchase agreements, in the opinion
of the Adviser. Because reverse repurchase agreements may be considered to be the practical equivalent of borrowing funds, they
constitute a form of leverage. The SEC views reverse repurchase transactions as collateralized borrowings by a fund. Such agreements
will be treated as subject to investment restrictions regarding “borrowings.” If the Trust reinvests the proceeds of
a reverse repurchase agreement at a rate lower than the cost of the agreement, entering into the agreement will lower the Trust's
yield.
Zero
Coupon and Deep Discount Bonds and Payment-in-Kind (“PIK”) Securities. Zero coupon bonds are debt obligations
that do not require the periodic payment of interest and are issued at a significant discount from face value. The discount approximates
the total amount of interest the bonds will accrue and compound over the period until maturity at a rate of interest reflecting
the market rate of the security at the time of purchase. The effect of owning debt obligations that do not make current interest
payments is that a fixed yield is earned not only on the original investment but also, in effect, on all discount accretion during
the life of the debt obligation. This implicit reinvestment of earnings at a fixed rate eliminates the risk of being unable to
invest distributions at a rate as high as the implicit yield on the zero coupon bond, but at the same time eliminates the holder’s
ability to reinvest at higher rates in the future. Deep discount bonds also are issued at a discount from face value, but may make
periodic interest payments at a below market interest rate.
Payment-in-kind securities (“PIKs”) are debt obligations
that pay “interest” in the form of other debt obligations, instead of in cash. Each of these instruments is normally
issued and traded at a deep discount from face value. Zero-coupon bonds, step-ups and PIKs allow an issuer to avoid or delay the
need to generate cash to meet current interest payments and, as a result, may involve greater credit risk than bonds that pay interest
currently or in cash. The Trust would be required to distribute the income on these instruments as it accrues, even though the
Trust will not receive the income on a current basis or in cash. Thus, the Trust may have to sell other investments, including
when it may not be advisable to do so, to make income distributions to its shareholders. PIKs and other obligations that do not
pay regular income distributions may experience greater volatility in response to interest rate changes and issuer developments.
PIKs generally carry higher interest rates compared to obligations that make cash payments of interest to reflect their payment
deferral and increased credit risk. Even if accounting conditions are met for accruing income payable at a future date under a
PIK, the issuer could still default when the collection date occurs at the maturity of or payment date for the PIK. PIKs may be
difficult to value accurately because they involve ongoing judgments as to the collectability of the deferred payments and the
value of any associated collateral. If the issuer of a PIK defaults the Trust may lose its entire investment. PIK interest has
the effect of generating investment income and increasing the incentive fees, if any, payable at a compounding rate. Generally,
the deferral of PIK interest increases the loan to value ratio.
Bonds and preferred stocks that make “in-kind” payments
and other securities that do not pay regular income distributions may experience greater volatility in response to interest rate
changes and issuer developments. PIK securities generally involve significantly greater credit risk than coupon loans because the
Trust receives no cash payments until the maturity date or a specified cash payment date. Even if accounting conditions are met
for accruing income payable at a future date under a PIK bond, the issuer could still default when the collection date occurs at
the maturity of or payment date for the PIK bond. PIK bonds may be difficult to value accurately because they involve ongoing judgments
as to the collectability of the deferred payments and the value of any associated collateral. If the issuer of a PIK security defaults,
the Trust may lose its entire investment.
The Trust is required to accrue income from zero coupon and deep
discount bonds and PIK securities on a current basis, even though it does not receive that income currently in cash, and the Trust
is required to distribute that income for each taxable year. Such distributions could reduce the Trust’s cash position and
require it to sell securities and incur a gain or loss at a time it may not otherwise want to in order to provide the cash necessary
for these distributions.
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Indexed
Securities. The Trust may invest in securities that fluctuate in value with an index. Such securities generally will
either be issued by the U.S. Government or one of its agencies or instrumentalities or, if privately issued, collateralized by
mortgages that are insured, guaranteed or otherwise backed by the U.S. Government, its agencies or instrumentalities. The interest
rate or, in some cases, the principal payable at the maturity of an indexed security may change positively or inversely in relation
to one or more interest rates, financial indices, securities prices or other financial indicators (“reference prices”).
An indexed security may be leveraged to the extent that the magnitude of any change in the interest rate or principal payable on
an indexed security is a multiple of the change in the reference price. Thus, indexed securities may decline in value due to adverse
market changes in reference prices. Because indexed securities derive their value from another instrument, security or index, they
are considered derivative debt securities, and are subject to different combinations of prepayment, extension, interest rate and/or
other market risks.
Short
Sales. The Trust may utilize short sales for hedging purposes. A short sale is effected by selling a security which
the Trust does not own, or, if the Trust does own the security, is not to be delivered upon consummation of the sale. The Trust
may engage in short sales “against the box” (i.e., short sales of securities the Trust already owns) for hedging purposes.
If the price of the security in the short sale decreases, the Trust will realize a profit to the extent that the short sale price
for the security exceeds the market price. If the price of the security increases, the Trust will realize a loss to the extent
that the market price exceeds the short sale price. Selling securities short runs the risk of losing an amount greater than the
initial investment therein.
Purchasing securities to close out the short position can itself
cause the price of the securities to rise further, thereby exacerbating the loss. Short-selling exposes the Trust to unlimited
risk with respect to that security due to the lack of an upper limit on the price to which an instrument can rise. Although the
Trust reserves the right to utilize short sales, the Adviser is under no obligation to utilize short-sales at all.
Foreign
Investments. The Trust may invest in U.S. dollar denominated securities of non-U.S. issuers. Because foreign companies
are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those
applicable to U.S. companies, there may be less publicly available information about a foreign company than about a domestic company.
Volume and liquidity in most foreign debt markets is less than in the United States and securities of some foreign companies are
less liquid and more volatile than securities of comparable U.S. companies. There is generally less government supervision and
regulation of securities exchanges, broker-dealers and listed companies than in the United States. Mail service between the United
States and foreign countries may be slower or less reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio securities. Payment for securities before delivery
may be required. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments that could affect investments in those countries. Moreover,
individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Foreign securities
markets, while growing in volume and sophistication, are generally not as developed as those in the United States, and securities
of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than securities
of comparable U.S. companies.
The Trust may invest in securities and other instruments (including
loans) issued, guaranteed, or backed by sovereign or government entities. Economic data as reported by sovereign or government
entities and other issuers may be delayed, inaccurate or fraudulent. Many sovereign or government debt obligations may be rated
below investment grade. Any restructuring of a sovereign or government debt obligation held by the Trust will likely have a significant
adverse effect on the value of the obligation. In the event of default of a sovereign or government debt, the Trust may be unable
to pursue legal action against the issuer or secure collateral on the debt, as there are typically no assets to be seized or cash
flows to be attached. Furthermore, the willingness or ability of a sovereign or government entity to restructure defaulted debt
may be limited. Therefore, losses on sovereign or government defaults may far exceed the losses from the default of a similarly
rated U.S. corporate debt issuer.
Political events in foreign countries may cause market disruptions.
In June 2016, the United Kingdom (“UK”) voted in a referendum to leave the European Union (“EU”) (“Brexit”).
Effective January 31, 2020, the UK ceased to be a member of the EU following a period of impasse within the UK Parliament, and
the holding of an early general election in December 2019 to break the deadlock. The European Parliament and UK Government are
expected to focus attention on the nature of the UK’s future relationship with the EU during an agreed transitional period.
There is significant market uncertainty regarding Brexit’s ramifications, and the range and potential implications of possible
political, regulatory, economic, and market outcomes in the UK, EU and beyond are difficult to predict. Brexit may cause greater
market volatility and illiquidity, currency fluctuations, deterioration in economic activity, a decrease in business confidence,
and increased likelihood of a recession in the UK. If one or more additional countries leave the EU or the EU dissolves, the world’s
securities markets likely will be significantly disrupted.
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American Depositary Receipts (“ADRs”), European Depositary
Receipts (“EDRs”) and Global Depositary Receipts (“GDRs”) may be purchased. ADRs, EDRs and GDRs are certificates
evidencing ownership of shares of a foreign issuer and are alternatives to purchasing directly the underlying foreign securities
in their national markets and currencies. However, they continue to be subject to many of the risks associated with investing directly
in foreign securities. These risks include foreign exchange risk as well as the political and economic risks of the underlying
issuer’s country. ADRs, EDRs and GDRs may be sponsored or unsponsored. Unsponsored receipts are established without the participation
of the issuer. Unsponsored receipts may involve higher expenses, they may not pass through voting or other shareholder rights,
and they may be less liquid.
Derivative
Instruments. Derivative instruments (which derive their value from another instrument, security or index) may be used
for risk management purposes, such as hedging against fluctuations in Senior Loans and other securities prices or interest rates.
Such transactions in derivative instruments may include the purchase or sale of futures contracts on securities, indices and other
financial instruments, credit-linked notes, tranches of collateralized loan obligations and/or collateralized debt obligations,
options on futures contracts, and exchange-traded and over-the-counter options on securities or indices, and interest rate, total
return and credit default swaps. The Trust may enter into derivatives transactions with respect to any security or other instrument
in which it is permitted to invest. The Trust incurs costs in opening and closing derivatives positions.
The Trust may use derivative instruments and trading strategies,
including the following:
Options
on Securities Indices and Currencies. The Trust may engage in transactions in exchange traded and over-the-counter (“OTC”)
options. In general, exchange-traded options have standardized exercise prices and expiration dates and require the parties to
post margin against their obligations, and the performance of the parties' obligations in connection with such options is guaranteed
by the exchange or a related clearing corporation. OTC options have more flexible terms negotiated between the buyer and the seller,
but generally do not require the parties to post margin and are subject to greater credit risk. The ability of the Trust to transact
business with any one or any number of counterparties, the lack of any independent evaluation of the counterparties or their financial
capabilities and the absence of a regulated market to facilitate settlement, may increase the potential for losses to the Trust.
OTC options also involve greater liquidity risk. This risk may be increased in times of financial stress if the trading market
for OTC options becomes limited.
Call
Options. A purchased call option gives the Trust the right to buy, and obligates the seller to sell, the underlying
instrument at the exercise price at any time during the option period. The Trust also may purchase and sell call options on indices.
Index options are similar to options on securities except that, rather than taking or making delivery of securities underlying
the option at a specified price upon exercise, an index option gives the holder the right to receive cash upon exercise of the
option if the level of the index upon which the option is based is greater than the exercise price of the option.
The Trust also is authorized to write (i.e., sell)
call options and to enter into closing purchase transactions with respect to certain of such options. A covered call option is
an option in which the Trust, in return for a premium, gives another party a right to buy specified securities owned by the Trust
at a specified future date and price set at the time of the contract.
The principal reason for writing call options is the
attempt to realize, through the receipt of premiums, a greater return than would be realized on the securities alone. By writing
covered call options, the Trust gives up the opportunity, while the option is in effect, to profit from any price increase in the
underlying security above the option exercise price. In addition, the Trust's ability to sell the underlying security will be limited
while the option is in effect unless the Trust enters into a closing purchase transaction. A closing purchase transaction cancels
out the Trust's position as the writer of an option by means of an offsetting purchase of an identical option prior to the expiration
of the option it has written. Covered call options also serve as a partial hedge to the extent of the premium received against
the price of the underlying security declining.
Put
Options. The Trust is authorized to purchase put options to seek to hedge against a decline in the value of its securities
or to enhance its return. By buying a put option, the Trust acquires a right to sell the underlying securities or instruments at
the exercise price, thus limiting the Trust's risk of loss through a decline in the market value of the securities or instruments
until the put option expires. The amount of any appreciation in the value of the underlying securities or instruments will be partially
offset by the amount of the premium paid for the put option and any related transaction costs. Prior to its expiration, a put option
may be sold in a closing sale transaction and profit or loss from the sale will depend on whether the amount received is more or
less than the premium paid for the put option plus the related transaction costs. A closing sale transaction
cancels out the Trust's position as the purchaser of an option by means of an offsetting sale of an identical option prior to the
expiration of the option it has purchased. The Trust also may purchase uncovered put options.
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The Trust also has authority to write (i.e., sell)
put options. The Trust will receive a premium for writing a put option, which increases the Trust's return. The Trust has the obligation
to buy the securities or instruments at an agreed upon price if the price of the securities or instruments decreases below the
exercise price. There are several risks associated with transactions in options on securities and indexes. For example, there are
significant differences between the securities and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. In addition, a liquid secondary market for particular options,
whether traded OTC or on a national securities exchange may be absent for reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed by a national securities exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series
of options or underlying securities; unusual or unforeseen circumstances may interrupt normal operations on a national securities
exchange; the facilities of a national securities exchange or the Options Clearing Corporation (the “OCC”) may not
at all times be adequate to handle current trading volume; or one or more national securities exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that national securities exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by the OCC as a result of trades on that national securities
exchange would continue to be exercisable in accordance with their terms.
Options positions are marked to market daily. The
value of options is affected by changes in the value and dividend rates of the securities underlying the option or represented
in the index underlying the option, changes in interest rates, changes in the actual or perceived volatility of the relevant index
or market and the remaining time to the options’ expiration, as well as trading conditions in the options market. The hours
of trading for options may not conform to the hours during which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying
markets that would not be reflected concurrently in the options markets.
Futures. The Trust may engage in transactions
in futures and options on futures. Futures are standardized, exchange-traded contracts. Futures contracts on securities obligate
a purchaser to take delivery, and a seller to make delivery, of a specific amount of the financial instrument called for in the
contract at a specified future date at a specified price. An index futures contract obligates the purchaser to take, and a seller
to deliver an amount of cash equal to a specific dollar amount times the difference between the value of a specific index at the
close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of the underlying
securities in the index is made. It is the practice of holders of futures contracts to close out their positions on or before the
expiration date by use of offsetting contract positions, and physical delivery of financial instruments or delivery of cash, as
applicable, is thereby avoided. No price is paid upon entering into a futures contract. Rather, upon purchasing or selling a futures
contract the Trust is required to deposit collateral (“margin”) equal to a percentage (generally less than 10%) of
the contract value. Each day thereafter until the futures position is closed, the Trust will pay additional margin representing
any loss experienced as a result of the futures position the prior day or be entitled to a payment representing any profit experienced
as a result of the futures position the prior day. Futures involve substantial leverage risk. The sale of a futures contract limits
the Trust's risk of loss from a decline in the market value of portfolio holdings correlated with the futures contract prior to
the futures contract's expiration date. In the event the market value of the Trust holdings correlated with the futures contract
increases rather than decreases, however, the Trust will realize a loss on the futures position and a lower return on the Trust
holdings than would have been realized without the purchase of the futures contract.
The purchase of a futures contract may protect the
Trust from having to pay more for securities as a consequence of increases in the market value for such securities during a period
when the Trust was attempting to identify specific securities in which to invest in a market the Trust believes to be attractive.
In the event that such securities decline in value or the Trust determines not to complete an anticipatory hedge transaction relating
to a futures contract, however, the Trust may realize a loss relating to the futures position.
The Trust is also authorized to purchase or sell call
and put options on futures contracts including financial futures and stock indices. Generally, these strategies would be used under
the same market and market sector conditions (i.e., conditions relating to specific types of investments) in which the Trust entered
into futures transactions. The Trust may purchase put options or write call options on futures contracts and stock indices in lieu
of selling the underlying futures contract in anticipation of a decrease in the market value of its securities. Similarly, the
Trust can purchase call options, or write put options on futures contracts and stock indices, as a substitute for the purchase
of such futures to hedge against the increased cost resulting from an
increase in the market value of securities which the Trust intends to purchase.
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Risks
Associated with Futures. The primary risks associated with the use of futures contracts and options are (a) the imperfect
correlation between the change in market value of the instruments held by the Trust and the price of the futures contract or option;
(b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when
desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the investment adviser’s
inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors;
and (e) the possibility that the counterparty will default in the performance of its obligations.
The Trust has claimed an exclusion from the definition
of the term Commodity Pool Operator (“CPO”) under the Commodity Exchange Act and therefore is not subject to registration
as a CPO.
Foreign
Currency Transactions. The Trust may engage in spot transactions and forward foreign currency exchange contracts and
currency swaps, purchase and sell options on currencies and purchase and sell currency futures and related options thereon (collectively,
“Currency Instruments”) for purposes of hedging against the decline in the value of currencies in which its portfolio
holdings are denominated against the U.S. dollar or, to seek to enhance returns. Such transactions could be effected with respect
to hedges on foreign dollar denominated securities owned by the Trust, sold by the Trust but not yet delivered, or committed or
anticipated to be purchased by the Trust.
As measured in U.S. dollars, the value of assets denominated
in foreign currencies may be affected favorably or unfavorably by changes in foreign currency rates and exchange control regulations.
Currency exchange rates can also be affected unpredictably by intervention by U.S. or foreign governments or central banks, or
the failure to intervene, or by currency controls or political developments in the United States or abroad. If the U.S. dollar
rises in value relative to a foreign currency, a security denominated in that foreign currency will be worth less in U.S. dollars.
If the U.S. dollar decreases in value relative to a foreign currency, a security denominated in that foreign currency will be worth
more in U.S. dollars. A devaluation of a currency by a country’s government or banking authority will have a significant
impact on the value of any investments denominated in that currency. Foreign currency exchange transactions may be conducted on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market or through entering into derivative
currency transactions. Currency transactions are subject to the risk of a number of complex political and economic factors applicable
to the countries issuing the underlying currencies. Furthermore, unlike trading in most other types of instruments, there is no
systematic reporting of last sale information with respect to the foreign currencies underlying the derivative currency transactions.
As a result, available information may not be complete. In an over-the-counter trading environment, there are no daily price fluctuation
limits.
Forward
Foreign Currency Exchange Contracts. Forward foreign currency exchange contracts are OTC contracts to purchase or sell
a specified amount of a specified currency or multinational currency unit at a price and future date set at the time of the contract.
Spot foreign exchange transactions are similar but require current, rather than future, settlement. The Trust will enter into foreign
exchange transactions for purposes of hedging either a specific transaction or the Trust position or, to seek to enhance returns.
Proxy hedging is often used when the currency to which the Trust is exposed is difficult to hedge or to hedge against the dollar.
Proxy hedging entails entering into a forward contract to sell a currency whose changes in value are generally considered to be
linked to a currency or currencies in which some or all of the Trust's securities are, or are expected to be, denominated, and
to buy U.S. dollars. Proxy hedging involves some of the same risks and considerations as other transactions with similar instruments.
Currency transactions can result in losses to the Trust if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. In addition, there is the risk that the perceived linkage between various currencies may not be present
or may not be present during the particular time that the Trust is engaged in proxy hedging. The Trust may also cross-hedge currencies
by entering into forward contracts to sell one or more currencies that are expected to decline in value relative to other currencies
to which the Trust has or in which the Trust expects to have portfolio exposure. Some of the forward foreign currency contracts
entered into by the Trust are classified as non-deliverable forwards (“NDF”). NDFs are cash-settled, short-term forward
contracts that may be thinly traded or are denominated in non-convertible foreign currency, where the profit or loss at the time
at the settlement date is calculated by taking the difference between the agreed upon exchange rate and the spot rate at the time
of settlement, for an agreed upon notional amount of funds. NDFs are commonly quoted for time periods of one month up to two years,
and are normally quoted and settled in U.S. dollars. They are often used to gain exposure to and/or hedge exposure to foreign currencies
that are not internationally traded.
Currency
Futures. The Trust may also seek to enhance returns or hedge against the decline in the value of a currency through
use of currency futures or options thereon. Currency futures are similar to forward foreign exchange transactions except that futures
are standardized, exchange-traded contracts while forward foreign exchange transactions are traded in the OTC market. Currency
futures involve substantial currency risk, and also involve leverage risk.
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Currency
Options. The Trust may also seek to enhance returns or hedge against the decline in the value of a currency through
the use of currency options. Currency options are similar to options on securities. For example, in consideration for an option
premium the writer of a currency option is obligated to sell (in the case of a call option) or purchase (in the case of a put option)
a specified amount of a specified currency on or before the expiration date for a specified amount of another currency. The Trust
may engage in transactions in options on currencies either on exchanges or OTC markets. Currency options involve substantial currency
risk, and may also involve credit, leverage or liquidity risk.
Risk
Factors in Hedging Foreign Currency. Hedging transactions involving Currency Instruments involve substantial risks,
including correlation risk. Although Currency Instruments will be used with the intention of hedging against adverse currency movements,
transactions in Currency Instruments involve the risk that anticipated currency movements will not be accurately predicted and
that the Trust's hedging strategies will be ineffective. To the extent that the Trust hedges against anticipated currency movements
that do not occur, the Trust may realize losses and decrease its total return as the result of its hedging transactions. Furthermore,
the Trust will only engage in hedging activities from time to time and may not be engaging in hedging activities when movements
in currency exchange rates occur.
Swap
Agreements. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns
(or differentials in rates of return) earned or realized on a particular predetermined reference instrument or instruments, which
can be adjusted for an interest rate factor. The gross returns to be exchanged or “swapped” between the parties are
generally calculated with respect to a “notional amount” (i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate or in a “basket” of securities representing a particular index).
Other types of swap agreements may calculate the obligations of the parties to the agreement on a “net basis.” Consequently,
a party’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid
or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net
amount”).
Whether the use of swap agreements will be successful
will depend on the investment adviser's ability to predict correctly whether certain types of reference instruments are likely
to produce greater returns than other instruments. Swap agreements may be subject to contractual restrictions on transferability
and termination and they may have terms of greater than seven days. The Trust’s obligations under a swap agreement will be
accrued daily (offset against any amounts owed to the Trust under the swap). Developments in the swaps market, including government
regulation, could adversely affect the Trust’s ability to terminate existing swap agreements or to realize amounts to be
received under such agreements, as well as to participate in swap agreements in the future. If there is a default by the counterparty
to a swap, the Trust will have contractual remedies pursuant to the swap agreement, but any recovery may be delayed depending on
the circumstances of the default. To limit the counterparty risk involved in swap agreements, the Trust will only enter into swap
agreements with counterparties that meet certain criteria. Although there can be no assurance that the Trust will be able to do
so, the Trust may be able to reduce or eliminate its exposure under a swap agreement either by assignment or other disposition,
or by entering into an offsetting swap agreement with the same party or another creditworthy party. The Trust may have limited
ability to eliminate its exposure under a credit default swap if the credit of the reference instrument has declined.
The swaps market was largely unregulated prior to
the enactment of federal legislation known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”), which was enacted in 2010 in response to turmoil in the financial markets and other market events. Among other things,
the Dodd-Frank Act sets forth a new regulatory framework for certain OTC derivatives, such as swaps, in which the Trust may invest.
The Dodd-Frank Act requires many swap transactions to be executed on registered exchanges or through swap execution facilities,
cleared through a regulated clearinghouse, and publicly reported. In addition, many market participants are now regulated as swap
dealers or major swap participants, and are, or will be, subject to certain minimum capital and margin requirements and business
conduct standards. The statutory requirements of the Dodd-Frank Act are being implemented primarily through rules and regulations
adopted by the SEC and/or the CFTC. There is a prescribed phase-in period during which most of the mandated rulemaking and regulations
are being implemented, and temporary exemptions from certain rules and regulations have been granted so that current trading practices
will not be unduly disrupted during the transition period.
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Currently, central clearing is only required for
certain market participants trading certain instruments, although central clearing for additional instruments is expected to be
implemented by the CFTC until the majority of the swaps market is ultimately subject to central clearing. In addition, uncleared
OTC swaps are subject to regulatory collateral requirements that may adversely affect the Trust’s ability to enter into swaps
in the OTC market. These developments may cause the Trust to terminate new or existing swap agreements or to realize amounts to
be received under such instruments at an inopportune time. Until the mandated rulemaking and regulations are implemented completely,
it will not be possible to determine the complete impact of the Dodd-Frank Act and related regulations on the Trust, and the establishment
of a centralized exchange or market for swap transactions may not result in swaps being easier to value or trade. However, it is
expected that swap dealers, major market participants, and swap counterparties will experience other new and/or additional regulations,
requirements, compliance burdens, and associated costs. The Dodd-Frank Act and rules promulgated thereunder may exert a negative
effect on the Trust’s ability to meet its investment objective, either through limits or requirements imposed on the Trust
or its counterparties. The swap market could be disrupted or limited as a result of this legislation, and the new requirements
may increase the cost of the Trust’s investments and of doing business, which could adversely affect the ability of the Trust
to buy or sell OTC derivatives.
Swap agreements include (but are not limited to):
Credit
Default Swaps. Under a credit default swap agreement, the protection “buyer” in a credit default contract
is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of
the contract, provided that no credit event, such as a default, on a reference instrument has occurred. If a credit event occurs,
the seller generally must pay the buyer the “par value” (full notional value) of the reference instrument in exchange
for an equal face amount of the reference instrument described in the swap, or the seller may be required to deliver the related
net cash amount, if the swap is cash settled. If the Trust is a buyer and no credit event occurs, the Trust may recover nothing
if the swap is held through its termination date. As a seller, the Trust generally receives an upfront payment or a fixed rate
of income throughout the term of the swap provided that there is no credit event. As the seller, the Trust would effectively add
leverage to its portfolio because, in addition to its total net assets, the Trust would be subject to investment exposure on the
notional amount of the swap. The determination of a credit event under the swap agreement will depend on the terms of the agreement
and may rely on the decision of persons that are not a party to the agreement. The Trust’s obligations under a credit default
swap agreement will be accrued daily (offset against any amounts owed to the Trust).
Total
Return Swaps. Total return swap agreements are contracts in which one party agrees to make periodic payments to another
party based on the change in market value of the assets underlying the contract, which may include a specified security, basket
of securities or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest
rate or the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security
or market without owning or taking physical custody of such security or investing directly in such market. Total return swap agreements
may effectively add leverage to the Trust’s portfolio because, in addition to its total net assets, the Trust would be subject
to investment exposure on the notional amount of the swap. Generally, the Trust will enter into total return swaps on a net basis
(i.e., the two payment streams are netted out, with the Trust receiving or paying, as the case may be, only the net amount of the
two payments). The net amount of the excess, if any, of the Trust’s obligations over its entitlements with respect to each
total return swap will be accrued on a daily basis. If the total return swap transaction is entered into on other than a net basis,
the full amount of the Trust’s obligations will be accrued on a daily basis, and the full amount of the Trust’s obligations
will be segregated by the Trust in an amount equal to or greater than the market value of the liabilities under the total return
swap or the amount it would have cost the Trust initially to make an equivalent direct investment, plus or minus any amount the
Trust is obligated to pay or is to receive under the total return swap agreement.
Interest
Rate Swaps, Caps and Floors. Interest rate swaps are OTC contracts in which each party agrees to make a periodic interest
payment based on an index or the value of an asset in return for a periodic payment from the other party based on a different index
or asset. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor.
The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index rises above a predetermined interest
rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The Trust usually
will enter into interest rate swap transactions on a net basis (i.e., the two payment streams are netted out, with the Trust receiving
or paying, as the case may be, only the net amount of the two payments). The net amount of the excess, if any, of the Trust’s
obligations over its entitlements with respect to each interest rate swap will be accrued on a daily basis. If the interest rate
swap transaction is entered into on other than a net basis, the full amount of the Trust’s obligations will be accrued on
a daily basis. Certain federal income tax requirements may limit the Trust’s ability to engage in certain interest rate transactions.
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The regulation of derivatives has undergone substantial
change in recent years and such change may continue. In particular, the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Dodd-Frank Act”), and regulations proposed to be promulgated thereunder require many derivatives to be cleared
and traded on an exchange, expand entity registration requirements, impose business conduct requirements on dealers that enter
into swaps with a pension plan, endowment, retirement plan or government entity, and require banks to move some derivatives trading
units to a nonguaranteed affiliate separate from the deposit-taking bank or divest them altogether. Although the CFTC has released
final rules relating to clearing, reporting, recordkeeping, required margin and registration requirements under the legislation,
many of the provisions are subject to further final rule making, and thus its ultimate impact remains unclear. See also “Swap
Agreements” herein. New regulations and the implementation of existing regulations could, among other things, restrict the
Trust’s ability to engage in derivatives transactions (for example, by making certain types of derivatives transactions no
longer available to the Trust) and/or increase the costs of such derivatives transactions (for example, by increasing margin or
capital requirements), and the Trust may be unable to fully execute its investment strategies as a result.
The SEC has re-proposed regulations that, if adopted,
could significantly alter a Trust’s regulatory obligations with regard to its derivatives usage. In particular, the proposed
regulations would impose value at risk limitations on a Trust’s use of derivatives, eliminate the current asset segregation
framework for covering derivatives and certain other financial instruments, require the Trust’s Board to adopt a derivative
risk management program, impose new responsibilities on the Board and establish new reporting and recordkeeping requirements. Implementations
of these proposed regulatory requirements may limit the ability of a Trust to use derivative instruments as part of its investment
strategy, increase the costs of using these instruments or make them less effective. Limits or restrictions applicable to the counterparties
with which a Trust engages in derivative transactions also could prevent the Trust from using these instruments or affect the pricing
or other factors relating to these instruments, or may change the availability of certain investments.
Legislation may be enacted that could negatively affect
the assets of the Trust. Legislation or regulation may also change the way in which the Trust itself is regulated. The effects
of any new governmental regulation cannot be predicted and there can be no assurance that any new governmental regulation will
not adversely affect the Trust’s ability to achieve its investment objective(s).
Regulatory bodies outside the U.S. have also passed,
proposed, or may propose in the future, legislation similar to Dodd-Frank Act or other legislation that could increase the costs
of participating in, or otherwise adversely impact the liquidity of, participating in the commodities markets. In addition,
regulations adopted by global prudential regulators that are now in effect require certain prudentially regulated entities and
certain of their affiliates and subsidiaries (including swap dealers) to include in their derivatives contracts, terms that delay
or restrict the rights of counterparties (such as the Trust) to terminate such contracts, foreclose upon collateral, exercise
other default rights or restrict transfers of credit support in the event that the prudentially regulated entity and/or its affiliates
are subject to certain types of resolution or insolvency proceedings. Similar regulations and laws have been adopted in non-U.S.
jurisdictions that may apply to the Trust’s counterparties located in those jurisdictions. It is possible that these requirements,
as well as potential additional related government regulation, could adversely affect the Trust’s ability to terminate existing
derivatives contracts, exercise default rights or satisfy obligations owed to it with collateral received under such contracts.
Asset
Coverage. To the extent required by SEC guidance, if a transaction creates a future obligation of the Trust to another
party the Trust will: (1) cover the obligation by entering into an offsetting position or transaction; and/or (2) segregate cash
and/or liquid securities with a value (together with any collateral posted with respect to the obligation) at least equal to the
marked-to market value of the obligations. Assets used as cover or segregated cannot be sold while the position(s) requiring cover
is open unless replaced with other appropriate assets. The types of transactions that may require asset coverage include (but are
not limited to) reverse repurchase agreements, repurchase agreements, short sales, securities lending, forward contracts, certain
options, forward commitments, futures contracts, when-issued securities, swap agreements, residual interest bonds, and participation
in revolving credit facilities.
Securities
Lending. As described in the Prospectus, the Trust may lend a portion of its portfolio Senior Loans or other securities
to broker-dealers or other institutional borrowers. Loans will be made only to organizations whose credit quality or claims paying
ability is considered by the Adviser to be at least investment grade. All securities loans will be collateralized on a continuous
basis by cash or U.S. government securities having a value, marked to market daily, of at least 100% of the market value of the
loaned securities. The Trust may receive loan fees in connection with loans that are collateralized by securities or on loans of
securities for which there is special demand. The Trust may also seek to earn income on securities loans by reinvesting cash collateral
in mortgage-backed securities (“MBS”) or other securities consistent with its investment objective and policies, seeking
to invest at rates that are higher than the “rebate” rate that it normally will pay to the borrower with respect to such cash collateral.
Any such reinvestment will be subject to the investment policies, restrictions and risk considerations described in the Prospectus
and in this SAI.
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Senior Loans and other securities may result in delays in recovering,
or a failure of the borrower to return, the loaned securities. The defaulting borrower ordinarily would be liable to the Trust
for any losses resulting from such delays or failures, and the collateral provided in connection with the loan normally would also
be available for that purpose. Securities loans normally may be terminated by either the Trust or the borrower at any time. Upon
termination and the return of the loaned securities, the Trust would be required to return the related cash or securities collateral
to the borrower and it may be required to liquidate longer term portfolio securities in order to do so. To the extent that such
securities have decreased in value, this may result in the Trust realizing a loss at a time when it would not otherwise do so.
The Trust also may incur losses if it is unable to reinvest cash collateral at rates higher than applicable rebate rates paid to
borrowers and related administrative costs. These risks are substantially the same as those incurred through investment leverage,
and will be subject to the investment policies, restrictions and risk considerations described in the Prospectus and in this SAI.
The Trust will receive amounts equivalent to any interest or
other distributions paid on securities while they are on loan, and the Trust will not be entitled to exercise voting or other beneficial
rights on loaned securities. The Trust will exercise its right to terminate loans and thereby regain these rights whenever the
Adviser considers it to be in the Trust’s interest to do so, taking into account the related loss of reinvestment income
and other factors.
Short-Term
Trading. Securities may be sold in anticipation of market decline (a rise in interest rates) or purchased in anticipation
of a market rise (a decline in interest rates) and later sold. In addition, a security may be sold and another purchased at approximately
the same time to take advantage of what the Adviser believes to be a temporary disparity in the normal yield relationship between
the two securities. Yield disparities may occur for reasons not directly related to the investment quality of particular issues
or the general movement of interest rates, such as changes in the overall demand for or supply of various types of fixed-income
securities or changes in the investment objectives of investors.
Cybersecurity
Risk. With the increased use of technologies by Trust service providers to conduct business, such as the Internet,
the Trust is susceptible to operational, information security and related risks. The Trust relies on communications technology,
systems, and networks to engage with clients, employees, accounts, shareholders, and service providers, and a cyber incident may
inhibit the Trust’s ability to use these technologies. In general, cyber incidents can result from deliberate attacks or
unintentional events. Cyber attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through
“hacking” or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting
data, or causing operational disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized
access, such as causing denial-of-service attacks on websites. A denial-of-service attack is an effort to make network services
unavailable to intended users, which could cause shareholders to lose access to their electronic accounts, potentially indefinitely.
Employees and service providers also may not be able to access electronic systems to perform critical duties for the Trust, such
as trading and NAV calculation, during a denial-of-service attack. There is also the possibility for systems failures due to malfunctions,
user error and misconduct by employees and agents, natural disasters, or other foreseeable and unforeseeable events.
Because technology is consistently changing, new ways to carry
out cyber attacks are always developing. Therefore, there is a chance that some risks have not been identified or prepared for,
or that an attack may not be detected, which puts limitations on the Trust's ability to plan for or respond to a cyber attack.
Like other funds and business enterprises, the Trust and its service providers have experienced, and will continue to experience,
cyber incidents consistently. In addition to deliberate cyber attacks, unintentional cyber incidents can occur, such as the inadvertent
release of confidential information by the Trust or its service providers. To date, cyber incidents have not had a material adverse
effect on the Trust’s business operations or performance.
The Trust uses third party service providers who are also
heavily dependent on computers and technology for their operations. Cybersecurity failures by or breaches of the Trust’s
investment adviser or administrator and other service providers (including, but not limited to, the custodian or transfer agent),
and the issuers of securities in which the Trust invests, may disrupt and otherwise adversely affect their business operations.
This may result in financial losses to the Trust, impede Trust trading, interfere with the Trust’s ability to calculate
its NAV, limit a shareholder’s ability to purchase or redeem shares of the Trust or cause violations of applicable privacy
and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, litigation costs,
or additional compliance costs. While many of the Trust’s service providers have established business continuity plans and
risk management systems intended to identify and mitigate cyber attacks, there are inherent limitations in such plans and systems,
including the possibility that certain risks have not been identified. The Trust cannot control the cybersecurity plans and systems
put in place by service providers to the Trust and issuers in which the Trust invests. The Trust and its shareholders could
be negatively impacted as a result.
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Operational
Risk. The Trust’s service providers, including the investment adviser, may experience disruptions or operating
errors that could negatively impact the Trust. While service providers are expected to have appropriate operational risk management
policies and procedures, their methods of operational risk management may differ from the Trust’s in the setting of priorities,
the personnel and resources available or the effectiveness of relevant controls. It also is not possible for Trust service providers
to identify all of the operational risks that may affect the Trust or to develop processes and controls to completely eliminate
or mitigate their occurrence or effects.
Portfolio
Trading and Turnover Rate. A change in the investments held by the Trust is known as “portfolio turnover”
and generally involves expense to the Trust, including brokerage commissions or dealer markups and other transaction costs on both
the sale of investments and the reinvestment of the proceeds in other investments. If sales of portfolio investments cause the
Trust to realize net short-term capital gains, such gains will be taxable as ordinary income to taxable shareholders. Portfolio
turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio investments to the monthly average
of the value of portfolio investments − excluding securities whose maturities at acquisition were one year or less. The portfolio
turnover rate(s) for the Trust for the fiscal years ended June 30, 2020 and June 30, 2019 were 57% and 26%, respectively. The increase
was attributable to a higher number of portfolio transactions during the period.
Temporary
Investments. The Trust may invest temporarily in cash or cash equivalents. Cash equivalents are highly liquid, short-term
securities such as commercial paper, time deposits, certificates of deposit, short-term notes and short-term U.S. Government obligations.
Investment
Restrictions. The following investment restrictions of the Trust are designated as fundamental policies and as such
cannot be changed without the approval of the holders of a majority of the Trust’s outstanding voting securities, which as
used in this SAI means the lesser of (a) 67% of the shares of the Trust 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 outstanding shares
of the Trust. As a matter of fundamental policy the Trust may not:
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(1)
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Borrow money, except as permitted by the Investment Company Act of 1940, as amended (the “1940 Act”). The 1940
Act currently requires that any indebtedness incurred by a closed-end investment company have an asset coverage of at least 300%;
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(2)
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Issue senior securities, as defined in the 1940 Act, 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. The 1940 Act currently defines “senior security”
as any bond, debenture, note or similar obligation or instrument constituting a security and evidencing indebtedness, and any stock
of a class having priority over any other class as to distribution of assets or payment of dividends. Debt and equity securities
issued by a closed-end investment company meeting the foregoing asset coverage provisions are excluded from the general 1940 Act
prohibition on the issuance of senior securities;
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(3)
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Purchase securities on margin (but the Trust 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;
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(4)
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Underwrite securities issued by other persons, except insofar as it may technically be deemed to be an underwriter under the
Securities Act of 1933, as amended, in selling or disposing of a portfolio investment;
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(5)
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Make loans to other persons, except by (a) the acquisition of loan interests, debt securities and other obligations in which
the Trust is authorized to invest in accordance with its investment objective and policies, (b) entering into repurchase agreements,
and (c) lending its portfolio securities;
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(6)
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Purchase any security if, as a result of such purchase, 25% or more of the Trust'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;
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(7)
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Purchase or sell real estate, although it may purchase and sell securities that are secured by interests in real estate and
securities of issuers that invest or deal in real estate. The Trust reserves the freedom of action to hold and to sell real estate
acquired as a result of the ownership of securities;
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(8)
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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; and
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(9)
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With respect to 75% of its total assets, invest more than 5% of its total assets in the securities of a single issuer or purchase
more than 10% of the outstanding voting securities of a single issuer, except obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities and except securities of other investment companies.
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The Trust may borrow money as a temporary measure for extraordinary
or emergency purposes, including the payment of dividends and the settlement of securities transactions which otherwise might require
untimely dispositions of Trust securities. The Trust’s borrowing policy is consistent with the 1940 Act and guidance of the
SEC or its staff, and will comply with any applicable SEC exemptive order.
For the purpose of investment restriction (6), the Trust 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
Senior Loan, the interest rate environment, and general economic conditions applicable to the Borrower and such interpositioned
person.
For purposes of construing restriction (9), securities of the
U.S. Government, its agencies, or instrumentalities are not considered to represent industries. Municipal obligations backed by
the credit of a governmental entity are also not considered to represent industries.
The Trust has adopted the following nonfundamental investment
policy, which may be changed by the Board without approval of the Trust’s shareholders. As a matter of nonfundamental policy,
the Trust may not make short sales of securities or maintain a short position, unless at all times when a short position is open
it either owns an equal amount of such securities or owns securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issuer as, and equal in amount to, the securities sold short.
The Trust may invest more than 10% of its total assets in one
or more other management investment companies (or may invest in affiliated investment companies) to the extent permitted by the
1940 Act and rules thereunder.
Whenever an investment policy or investment restriction set forth
in the Prospectus or this SAI states a requirement with respect to the 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 acquisition by the Trust of such security or asset. Accordingly, unless otherwise noted, any later
increase or decrease resulting from a change in values, assets or other circumstances or any subsequent rating change made by a
rating service (or as determined by the Adviser if the security is not rated by a rating agency) will not compel the Trust to dispose
of such security or other asset. Notwithstanding the foregoing, the Trust must always be in compliance with the borrowing policies
set forth above.
TRUSTEES AND OFFICERS
The Board of Trustees of the Trust (the “Board”)
is responsible for the overall management and supervision of the affairs of the Trust. The Board members and officers of the Trust
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. Each Trustee holds office until the annual meeting for the year in which his or her term expires and until his or her
successor is elected and qualified, subject to a prior death, resignation, retirement, disqualification or removal. Under the terms
of the Trust's current Trustee retirement policy, an Independent Trustee must retire and resign as a Trustee on the earlier of:
(i) the first day of July following his or her 74th birthday; or (ii), with limited exception, December 31st of the 20th year in
which he or she has served as a Trustee. However, if such retirement and resignation would cause the Trust to be out of compliance
with Section 16 of the Investment Company Act of 1940, as amended (the “1940 Act”) or any other regulations or guidance
of the Securities and Exchange Commission (“SEC”), then such retirement and resignation will not become effective until
such time as action has been taken for the Trust to be in compliance therewith. The “noninterested Trustees” consist
of those
Eaton Vance Senior Income Trust
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19
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SAI dated October 27, 2020
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Trustees who are not “interested persons” of the
Trust, as that term is defined under the 1940 Act. The business address of each Board member and officer is Two International Place,
Boston, Massachusetts 02110. As used in this SAI, “EVC” refers to Eaton Vance Corp., “EV” refers to Eaton
Vance, Inc., “BMR” refers to Boston Management and Research and “EVD” refers to Eaton Vance Distributors
Inc. EVC and EV are the corporate parent and trustee, respectively, of Eaton Vance and BMR. EVD is a wholly-owned subsidiary of
EVC. Each officer affiliated with Eaton Vance may hold a position with other Eaton Vance affiliates that is comparable to his or
her position with Eaton Vance listed below.
Name and Year of Birth
|
|
Trust
Position(s)(1)
|
|
Length of Service
|
|
Principal Occupation(s) During Past Five Years
and Other Relevant Experience
|
|
Number of Portfolios
in Fund Complex
Overseen By
Trustee(2)
|
|
Other Directorships Held
During Last Five Years
|
Interested Trustee
|
|
|
|
|
|
|
|
|
|
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THOMAS E. FAUST JR.
1958
|
|
Class I
Trustee
|
|
Until 2020. 3 years.
Since 2007.
|
|
Chairman, Chief Executive Officer and President of EVC, Director and President of EV, Chief Executive Officer and President of Eaton Vance and BMR, and Director of EVD. Trustee and/or officer of 142 registered investment companies. Mr. Faust is an interested person because of his positions with BMR, Eaton Vance, EVC, EVD and EV, which are affiliates of the Trust.
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142
|
|
Director of EVC and Hexavest Inc. (investment management firm).
|
Noninterested Trustees
|
|
|
|
|
|
|
|
|
|
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MARK R. FETTING
1954
|
|
Class II
Trustee
|
|
Until 2021. 3 years.
Since 2016.
|
|
Private investor. Formerly held various positions at Legg Mason, Inc. (investment management firm) (2000-2012), including President, Chief Executive Officer, Director and Chairman (2008-2012), Senior Executive Vice President (2004-2008) and Executive Vice President (2001-2004). Formerly, President of Legg Mason family of funds (2001-2008). Formerly, Division President and Senior Officer of Prudential Financial Group, Inc. and related companies (investment management firm) (1991-2000).
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143
|
|
None
|
CYNTHIA E. FROST
1961
|
|
Class I
Trustee
|
|
Until 2020. 3 years.
Since 2014.
|
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Private investor. Formerly, Chief Investment Officer of Brown University (university endowment) (2000-2012). Formerly, Portfolio Strategist for Duke Management Company (university endowment manager) (1995-2000). Formerly, Managing Director, Cambridge Associates (investment consulting company) (1989-1995). Formerly, Consultant, Bain and Company (management consulting firm) (1987-1989). Formerly, Senior Equity Analyst, BA Investment Management Company (1983-1985).
|
|
142
|
|
None
|
GEORGE J. GORMAN
1952
|
|
Class III
Trustee
|
|
Until 2022. 3 years.
Since 2014.
|
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Principal at George J. Gorman LLC (consulting firm). Formerly, Senior Partner at Ernst & Young LLP (a registered public accounting firm) (1974-2009).
|
|
143
|
|
Formerly, Trustee of the BofA Funds Series Trust (11 funds) (2011-2014) and of the Ashmore Funds (9 funds) (2010-2014).
|
Eaton Vance Senior Income Trust
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20
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SAI dated October 27, 2020
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Name and Year of Birth
|
|
Trust
Position(s)(1)
|
|
Length of Service
|
|
Principal Occupation(s) During Past Five Years
and Other Relevant Experience
|
|
Number of Portfolios
in Fund Complex
Overseen By
Trustee(2)
|
|
Other Directorships Held
During Last Five Years
|
VALERIE A. MOSLEY
1960
|
|
Class I
Trustee(3)
|
|
Until 2020. 3 years.
Since 2014.
|
|
Chairwoman and Chief Executive Officer of Valmo Ventures (a consulting and investment firm). Formerly, Partner and Senior Vice President, Portfolio Manager and Investment Strategist at Wellington Management Company, LLP (investment management firm) (1992-2012). Formerly, Chief Investment Officer, PG Corbin Asset Management (1990-1992). Formerly worked in institutional corporate bond sales at Kidder Peabody (1986-1990).
|
|
143
|
|
Director of DraftKings, Inc. (digital sports entertainment and gaming company) (since September 2020). Director of Groupon, Inc. (e-commerce provider) (since April 2020). Director of Envestnet, Inc. (provider of intelligent systems for wealth management and financial wellness) (since 2018). Formerly, Director of Dynex Capital, Inc. (mortgage REIT) (2013-2020).
|
WILLIAM H. PARK
1947
|
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Chairperson of the Board and Class III
Trustee(3)
|
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Until 2022. 3 years.
Chairperson of the Board since 2016 and Trustee since 2003.
|
|
Private investor. Formerly, Consultant (management and transactional) (2012-2014). Formerly, Chief Financial Officer, Aveon Group, L.P. (investment management firm) (2010-2011). Formerly, Vice Chairman, Commercial Industrial Finance Corp. (specialty finance company) (2006-2010). Formerly, President and Chief Executive Officer, Prizm Capital Management, LLC (investment management firm) (2002-2005). Formerly, Executive Vice President and Chief Financial Officer, United Asset Management Corporation (investment management firm) (1982-2001). Formerly, Senior Manager, Price Waterhouse (now PricewaterhouseCoopers) (a registered public accounting firm) (1972-1981).
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143
|
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None
|
HELEN FRAME PETERS
1948
|
|
Class II
Trustee
|
|
Until 2021. 3 years.
Since 2008.
|
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Professor of Finance, Carroll School of Management, Boston College. Formerly, Dean, Carroll School of Management, Boston College (2000-2002). Formerly, Chief Investment Officer, Fixed Income, Scudder Kemper Investments (investment management firm) (1998-1999). Formerly, Chief Investment Officer, Equity and Fixed Income, Colonial Management Associates (investment management firm) (1991-1998).
|
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143
|
|
None
|
Eaton Vance Senior Income Trust
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21
|
SAI dated October 27, 2020
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Name and Year of Birth
|
|
Trust
Position(s)(1)
|
|
Length of Service
|
|
Principal Occupation(s) During Past Five Years
and Other Relevant Experience
|
|
Number of Portfolios
in Fund Complex
Overseen By
Trustee(2)
|
|
Other Directorships Held
During Last Five Years
|
KEITH QUINTON
1958
|
|
Class II
Trustee
|
|
Until 2021. 3 years.
Since 2018.
|
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Private investor, researcher and lecturer. Independent Investment Committee Member at New Hampshire Retirement System (since 2017). Formerly, Portfolio Manager and Senior Quantitative Analyst at Fidelity Investments (investment management firm) (2001-2014).
|
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143
|
|
Director (since 2016) and Chairman (since 2019) of New Hampshire Municipal Bond Bank.
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MARCUS L. SMITH
1966
|
|
Class III
Trustee
|
|
Until 2022. 3 years. Since 2018.
|
|
Private investor. Member of Posse Boston Advisory Board (foundation) (since 2015). Formerly, Portfolio Manager at MFS Investment Management (investment management firm) (1994-2017).
|
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143
|
|
Director of MSCI Inc. (global provider of investment decision support tools) (since 2017). Formerly, Director of DCT Industrial Trust Inc. (logistics real estate company) (2017-2018).
|
SUSAN J. SUTHERLAND
1957
|
|
Class I
Trustee
|
|
Until 2020. 3 years.
Since 2015.
|
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Private investor. Director of Ascot Group Limited and certain of its subsidiaries (insurance and reinsurance) (since 2018). Formerly, Director of Hagerty Holding Corp. (insurance and reinsurance) (2015-2018). Formerly, Associate, Counsel and Partner at Skadden, Arps, Slate, Meagher & Flom LLP (law firm) (1982-2013).
|
|
143
|
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Formerly, Director of Montpelier Re Holdings Ltd. (global provider of customized insurance and reinsurance products) (2013-2015).
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SCOTT E. WENNERHOLM
1959
|
|
Class II
Trustee
|
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Until 2021. 3 years.
Since 2016.
|
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Private investor. Formerly, Trustee at Wheelock College (postsecondary institution) (2012-2018). Formerly, Consultant at GF Parish Group (executive recruiting firm) (2016-2017). Formerly, Chief Operating Officer and Executive Vice President at BNY Mellon Asset Management (investment management firm) (2005-2011). Formerly, Chief Operating Officer and Chief Financial Officer at Natixis Global Asset Management (investment management firm) (1997-2004). Formerly, Vice President at Fidelity Investments Institutional Services (investment management firm) (1994-1997).
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142
|
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None
|
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(1)
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The Board of Trustees is divided into three classes, each class having a term of three years to expire on the date of the third
annual meeting following its election.
|
|
(2)
|
Includes both master and feeder funds in a master-feeder structure.
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Eaton Vance Senior Income Trust
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22
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SAI dated October 27, 2020
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Principal Officers who are not Trustees
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Name and Year of Birth
|
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Trust Position(s)
|
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Length of Service
|
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Principal Occupation(s) During Past Five Years
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PAYSON F. SWAFFIELD
1956
|
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President(1)
|
|
Since 2017
|
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Vice President and Chief Income Investment Officer of Eaton Vance and BMR. Officer of 120 registered investment companies managed by Eaton Vance or BMR. Also Vice President of Calvert Research and Management (“CRM”) since 2016.
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MAUREEN A. GEMMA
1960
|
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Vice President, Secretary and Chief Legal Officer
|
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Vice President since 2011, Secretary since 2007 and Chief Legal Officer since 2008
|
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Vice President of Eaton Vance and BMR. Officer of 143 registered investment companies managed by Eaton Vance or BMR. Also Vice President of CRM and officer of 39 registered investment companies advised or administered by CRM since 2016.
|
JAMES F. KIRCHNER
1967
|
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Treasurer
|
|
Since 2013
|
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Vice President of Eaton Vance and BMR. Officer of 143 registered investment companies managed by Eaton Vance or BMR. Also Vice President of CRM and officer of 39 registered investment companies advised or administered by CRM since 2016.
|
RICHARD F. FROIO
1968
|
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Chief Compliance Officer
|
|
Since 2017
|
|
Vice President of Eaton Vance and BMR since 2017. Officer of 143 registered investment companies managed by Eaton Vance or BMR. Formerly, Deputy Chief Compliance Officer (Adviser/Funds) and Chief Compliance Officer (Distribution) at PIMCO (2012-2017) and Managing Director at BlackRock/Barclays Global Investors (2009-2012).
|
|
(1)
|
Effective November 1, 2020, Eric A. Stein will replace Payson Swaffield as President of the Trust. Mr. Stein is a Vice President
and, effective November 1, 2020, will be Chief Investment Officer, Fixed Income of Eaton Vance and BMR. Prior to November 1, 2020,
Mr. Stein was a co-Director of Eaton Vance’s Global Income Investments. Effective November 1, 2020, Mr. Stein will be an
officer of 118 registered investment companies managed by Eaton Vance or BMR. Mr. Stein is also Vice President of CRM since 2020.
|
The Board has general oversight responsibility with respect to
the business and affairs of the Trust. The Board has engaged an investment adviser and (if applicable) a sub-adviser(s) (collectively
the “adviser”) to manage the Trust and an administrator to administer the Trust and is responsible for overseeing
such adviser and administrator and other service providers to the Trust. The Board is currently composed of eleven Trustees, including
ten Trustees who are not “interested persons” of the Trust, as that term is defined in the 1940 Act (each a “noninterested
Trustee”). In addition to six regularly scheduled meetings per year, the Board holds special meetings or informal conference
calls to discuss specific matters that may require action prior to the next regular meeting. As discussed below, the Board has
established six committees to assist the Board in performing its oversight responsibilities.
The Board has appointed a noninterested Trustee to serve in the
role of Chairperson. The Chairperson’s primary role is to participate in the preparation of the agenda for meetings of the
Board and the identification of information to be presented to the Board with respect to matters to be acted upon by the Board.
The Chairperson also presides at all meetings of the Board and acts as a liaison with service providers, officers, attorneys, and
other Board members generally between meetings. The Chairperson may perform such other functions as may be requested by the Board
from time to time. In addition, the Board may appoint a noninterested Trustee to serve in the role of Vice-Chairperson. The Vice-Chairperson
has the power and authority to perform any or all of the duties and responsibilities of the Chairperson in the absence of the Chairperson
and/or as requested by the Chairperson. Except for any duties specified herein or pursuant to the Trust’s Declaration of
Trust or By-laws, the designation of Chairperson or Vice-Chairperson does not impose on such noninterested Trustee any duties,
obligations or liability that is greater than the duties, obligations or liability imposed on such person as a member of the Board,
generally.
The Trust is subject to a number of risks, including, among others,
investment, compliance, operational, and valuation risks. Risk oversight is part of the Board’s general oversight of the
Trust and is addressed as part of various activities of the Board and its Committees. As part of its oversight of the Trust, the
Board directly, or through a Committee, relies on and reviews reports from, among others, Trust management, the adviser, the administrator,
the principal underwriter, the Chief Compliance Officer (the “CCO”), and other Trust service providers responsible
for day-to-day oversight of Trust investments, operations and compliance to assist the Board in identifying and understanding the
nature and extent of risks and determining whether, and to what extent, such risks can or should be mitigated. The Board also interacts
with the CCO and with senior personnel of the adviser, administrator, principal underwriter and other Trust service providers and
provides input on risk management issues during meetings of the Board and its Committees. Each of the adviser, administrator, principal
underwriter and the other Trust service providers has its own, independent interest and responsibilities in risk management, and its policies and methods
for carrying out risk management functions will depend, in part, on its individual priorities, resources and controls. It is not
possible to identify all of the risks that may affect the Trust or to develop processes and controls to eliminate or mitigate
their occurrence or effects. Moreover, it is necessary to bear certain risks (such as investment-related risks) to achieve the Trust’s
goals.
Eaton Vance Senior Income Trust
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23
|
SAI dated October 27, 2020
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The Board, with the assistance of management and with input from
the Board's various committees, reviews investment policies and risks in connection with its review of Trust performance. The Board
has appointed a Trust CCO who oversees the implementation and testing of the Trust compliance program and reports to the Board
regarding compliance matters for the Trust and its principal service providers. In addition, as part of the Board’s periodic
review of the advisory, subadvisory (if applicable), distribution and other service provider agreements, the Board may consider
risk management aspects of their operations and the functions for which they are responsible. With respect to valuation, the Board
approves and periodically reviews valuation policies and procedures applicable to valuing the Trust’s shares. The administrator,
the investment adviser and the sub-adviser (if applicable) are responsible for the implementation and day-to-day administration
of these valuation policies and procedures and provides reports to the Audit Committee of the Board and the Board regarding these
and related matters. In addition, the Audit Committee of the Board or the Board receives reports periodically from the independent
public accounting firm for the Trust regarding tests performed by such firm on the valuation of all securities, as well as with
respect to other risks associated with mutual funds. Reports received from service providers, legal counsel and the independent
public accounting firm assist the Board in performing its oversight function.
The Trust’s Declaration of Trust does not set forth
any specific qualifications to serve as a Trustee. The Charter of the Governance Committee also does not set forth any specific
qualifications, but does set forth certain factors that the Committee may take into account in considering noninterested Trustee
candidates. In general, no one factor is decisive in the selection of an individual to join the Board. Among the factors the Board
considers when concluding that an individual should serve on the Board are the following: (i) knowledge in matters relating to
the mutual fund industry; (ii) experience as a director or senior officer of public companies; (iii) educational background; (iv)
reputation for high ethical standards and professional integrity; (v) specific financial, technical or other expertise, and the
extent to which such expertise would complement the Board members’ existing mix of skills, core competencies and qualifications;
(vi) perceived ability to contribute to the ongoing functions of the Board, including the ability and commitment to attend meetings
regularly and work collaboratively with other members of the Board; (vii) the ability to qualify as a noninterested Trustee for
purposes of the 1940 Act and any other actual or potential conflicts of interest involving the individual and the Trust; and (viii)
such other factors as the Board determines to be relevant in light of the existing composition of the Board.
Among the attributes or skills common to all Board members are
their ability to review critically, evaluate, question and discuss information provided to them, to interact effectively with the
other members of the Board, management, sub-advisers, other service providers, counsel and independent registered public accounting
firms, and to exercise effective and independent business judgment in the performance of their duties as members of the Board.
Each Board member’s ability to perform his or her duties effectively has been attained through the Board member’s business,
consulting, public service and/or academic positions and through experience from service as a member of the Boards of the Eaton
Vance family of funds (“Eaton Vance Fund Boards”) (and/or in other capacities, including for any predecessor funds),
public companies, or non-profit entities or other organizations as set forth below. Each Board member’s ability to perform
his or her duties effectively also has been enhanced by his or her educational background, professional training, and/or other
life experiences.
In respect of each current member of the Board, the individual’s
substantial professional accomplishments and experience, including in fields related to the operations of registered investment
companies, were a significant factor in the determination that the individual should serve as a member of the Board. The following
is a summary of each Board member’s particular professional experience and additional considerations that contributed to
the Board’s conclusion that he or she should serve as a member of the Board:
Thomas
E. Faust Jr. Mr. Faust has served as a member of the Eaton Vance Fund Boards since 2007. He has served as Chairman and
Chief Executive Officer of EVC since 2007 and as President of EVC since 2006. He is also Director and President of EV, Chief Executive
Officer and President of Eaton Vance and BMR, and Director of EVD. Mr. Faust has served as a Director of Hexavest Inc. since 2012.
From 2016 through 2019, Mr. Faust served as a Director of SigFig Wealth Management LLC. Mr. Faust previously served as an equity
analyst, portfolio manager, Director of Equity Research and Management and Chief Investment Officer of Eaton Vance from 1985-2007.
He holds B.S. degrees in Mechanical Engineering and Economics from the Massachusetts Institute of Technology and an MBA from Harvard
Business School. Mr. Faust has been a Chartered Financial Analyst since 1988. He is a Trustee and Vice Chairman of the Board of
Wellesley College and a Trustee and member of the executive committee of the Boston Symphony Orchestra, Inc.
Eaton Vance Senior Income Trust
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24
|
SAI dated October 27, 2020
|
Mark
R. Fetting. Mr. Fetting has served as a member of the Eaton Vance Fund Boards since 2016 and of the Ad Hoc Committee
for Closed-End Fund Matters. He has over 30 years of experience in the investment management industry as an executive and in various
leadership roles. From 2000 through 2012, Mr. Fetting served in several capacities at Legg Mason, Inc., including most recently
serving as President, Chief Executive Officer, Director and Chairman from 2008 to his retirement in 2012. He also served as a Director/Trustee
and Chairman of the Legg Mason family of funds from 2008-2012 and Director/Trustee of the Royce family of funds from 2001-2012.
From 2001 through 2008, Mr. Fetting also served as President of the Legg Mason family of funds. From 1991 through 2000, Mr. Fetting
served as Division President and Senior Officer of Prudential Financial Group, Inc. and related companies. Early in his professional
career, Mr. Fetting was a Vice President at T. Rowe Price and served in leadership roles within the firm’s mutual fund division
from 1981-1987.
Cynthia E. Frost. Ms. Frost has served as a member of
the Eaton Vance Fund Boards since 2014 and is the Chairperson of the Portfolio Management Committee. From 2000 through 2012, Ms.
Frost was the Chief Investment Officer of Brown University, where she oversaw the evaluation, selection and monitoring of the third
party investment managers who managed the university’s endowment. From 1995 through 2000, Ms. Frost was a Portfolio Strategist
for Duke Management Company, which oversaw Duke University’s endowment. Ms. Frost also served in various investment and consulting
roles at Cambridge Associates from 1989-1995, Bain and Company from 1987-1989 and BA Investment Management Company from 1983-1985.
She serves as a member of the investment committee of The MCNC Endowment.
George
J. Gorman. Mr. Gorman has served as a member of the Eaton Vance Fund Boards since 2014 and is the Chairperson of the
Audit Committee. From 1974 through 2009, Mr. Gorman served in various capacities at Ernst & Young LLP, including as a Senior
Partner in the Asset Management Group (from 1988) specializing in managing engagement teams responsible for auditing mutual funds
registered with the SEC, hedge funds and private equity funds. Mr. Gorman also has experience serving as an independent trustee
of other mutual fund complexes, including the Bank of America Money Market Funds Series Trust from 2011-2014 and the Ashmore Funds
from 2010-2014.
Valerie
A. Mosley. Ms. Mosley has served as a member of the Eaton Vance Fund Boards since 2014 and is the Chairperson of the
Governance Committee. She currently owns and manages a consulting and investment firm, Valmo Ventures, and founded Upward Wealth,
a company focused on helping everyday workers grow their net worth and reinforce their self-worth. From 1992 through 2012, Ms.
Mosley served in several capacities at Wellington Management Company, LLP, an investment management firm, including as a Partner,
Senior Vice President, Portfolio Manager and Investment Strategist. Ms. Mosley also served as Chief Investment Officer at PG Corbin
Asset Management from 1990-1992 and worked in institutional corporate bond sales at Kidder Peabody from 1986-1990. She was also
a Director of Progress Investment Management Company, a manager of emerging managers. She is a Director of Groupon, Inc., an ecommerce
provider, and a Director of Envestnet, Inc., a provider of intelligent systems for wealth management and financial wellness. She
is also a Director of DraftKings, Inc., a digital sports entertainment and gaming company. Ms. Mosley previously served as a Director
of Dynex Capital, Inc., a mortgage REIT from 2013-2020. She serves as a trustee or board member of several major non-profit organizations
and endowments, including New Profit, a social venture firm that identifies, invests in and helps scale social entrepreneurs. She
is a member of the Risk Audit Committee of the United Auto Workers Retiree Medical Benefits Trust and a member of the Investment
Advisory Committee of New York State Common Retirement Fund. Ms. Mosley serves on the Institutional Investors Advisory Council
of MiDA, a U.S. Agency for International Development partner focused on investment opportunities in Africa and also advises Impact
X and Zeal Capital, venture funds focused predominately on underrepresented entrepreneurs.
William
H. Park. Mr. Park has served as a member of the Eaton Vance Fund Boards since 2003 and is the Independent Chairperson
of the Board. Mr. Park was formerly a consultant from 2012-2014 and formerly the Chief Financial Officer of Aveon Group, L.P. from
2010-2011. Mr. Park also served as Vice Chairman of Commercial Industrial Finance Corp. from 2006-2010, as President and Chief
Executive Officer of Prizm Capital Management, LLC from 2002-2005, as Executive Vice President and Chief Financial Officer of United
Asset Management Corporation from 1982-2001 and as Senior Manager of Price Waterhouse (now PricewaterhouseCoopers) from 1972-1981.
Helen
Frame Peters. Dr. Peters has served as a member of the Eaton Vance Fund Boards since 2008. Dr. Peters is currently a
Professor of Finance at Carroll School of Management, Boston College and was formerly Dean of Carroll School of Management from
2000-2002. Dr. Peters was previously a Director of BJ’s Wholesale Club, Inc. from 2004-2011. In addition, Dr. Peters was
the Chief Investment Officer, Fixed Income at Scudder Kemper Investments from 1998-1999 and Chief Investment Officer, Equity and
Fixed Income at Colonial Management Associates from 1991-1998. Dr. Peters also served as a Trustee of SPDR Index Shares Funds and
SPDR Series Trust from 2000-2009 and as a Director of the Federal Home Loan Bank of Boston from 2007-2009.
Eaton Vance Senior Income Trust
|
25
|
SAI dated October 27, 2020
|
Keith
Quinton. Mr. Quinton has served as a member of the Eaton Vance Fund Boards since October 1, 2018. He had over thirty
years of experience in the investment industry before retiring from Fidelity Investments in 2014. Prior to joining Fidelity, Mr.
Quinton was a vice president and quantitative analyst at MFS Investment Management from 2000-2001. From 1997 through 2000, he was
a senior quantitative analyst at Santander Global Advisors and, from 1995 through 1997, Mr. Quinton was senior vice president in
the quantitative equity research department at Putnam Investments. Prior to joining Putnam Investments, Mr. Quinton served in various
investment roles at Eberstadt Fleming, Falconwood Securities Corporation and Drexel Burnham Lambert, where he began his career
in the investment industry as a senior quantitative analyst in 1983. Mr. Quinton currently serves as an Independent Investment
Committee Member of the New Hampshire Retirement System, a five member committee that manages investments based on the investment
policy and asset allocation approved by the board of trustees, and as a Director, since 2016 and Chairman, since 2019 of the New
Hampshire Municipal Bond Bank.
Marcus
L. Smith. Mr. Smith has served as a member of the Eaton Vance Fund Boards since October 1, 2018. Since 2017, Mr. Smith
has been a Director of MSCI Inc., a leading provider of investment decision support tools worldwide, where he serves on the Audit
and Strategy & Finance Committees. From 2017 through 2018, he served as a Director of DCT Industrial Trust Inc., a leading
logistics real estate company, where he served as a member of the Nominating and Corporate Governance and Audit Committees. From
1994 through 2017, Mr. Smith served in several capacities at MFS Investment Management, an investment management firm, where he
managed the MFS Institutional International Fund for 17 years and the MFS Concentrated International Fund for 10 years. In addition
to his portfolio management duties, Mr. Smith served as Director of Equity, Canada from 2012-2017, Director of Equity, Asia from
2010-2012, and Director of Asian Equity Research from 2005-2010. Prior to joining MFS, Mr. Smith was a senior consultant at Andersen
Consulting (now known as Accenture) from 1988-1992. Mr. Smith served as a United States Army Reserve Officer from 1987-1992. He
was also a trustee of the University of Mount Union from 2008-2020 and served as the chairman of the Finance Committee from 2015-2019.
Mr. Smith currently sits on the Boston advisory board of the Posse Foundation and the Harvard Medical School Advisory Council on
Education.
Susan
J. Sutherland. Ms. Sutherland has served as a member of the Eaton Vance Fund Boards since 2015 and is the Chairperson
of the Compliance Reports and Regulatory Matters Committee. She is also a Director of Ascot Group Limited and certain of its subsidiaries.
Ascot Group Limited, through its related businesses including Syndicate 1414 at Lloyd’s of London, is a leading global underwriter
of specialty property and casualty insurance and reinsurance. Ms. Sutherland was a Director of Montpelier Re Holdings Ltd., a global
provider of customized reinsurance and insurance products, from 2013 until its sale in 2015 and of Hagerty Holding Corp., a leading
provider of specialized automobile and marine insurance from 2015-2018. From 1982 through 2013, Ms. Sutherland was an associate,
counsel and then a partner in the Financial Institutions Group of Skadden, Arps, Slate, Meagher & Flom LLP, where she primarily
represented U.S. and international insurance and reinsurance companies, investment banks and private equity firms in insurance-related
corporate transactions. In addition, Ms. Sutherland is qualified as a Governance Fellow of the National Association of Corporate
Directors and has also served as a board member of prominent non-profit organizations.
Scott
E. Wennerholm. Mr. Wennerholm has served as a member of the Eaton Vance Fund Boards since 2016 and is the Chairperson
of the Contract Review Committee. He has over 30 years of experience in the financial services industry in various leadership and
executive roles. Mr. Wennerholm served as Chief Operating Officer and Executive Vice President at BNY Mellon Asset Management from
2005-2011. He also served as Chief Operating Officer and Chief Financial Officer at Natixis Global Asset Management from 1997-2004
and was a Vice President at Fidelity Investments Institutional Services from 1994-1997. In addition, Mr. Wennerholm served as a
Trustee at Wheelock College, a postsecondary institution from 2012-2018.
The Board(s) of the Trust has several standing Committees,
including the Governance Committee, the Audit Committee, the Portfolio Management Committee, the Compliance Reports and Regulatory
Matters Committee, the Contract Review Committee and the Ad Hoc Committee for Closed-End Fund Matters. Each of the Committees are
comprised of only noninterested Trustees.
Mmes. Mosley (Chairperson), Frost, Peters and Sutherland,
and Messrs. Fetting, Gorman, Park, Quinton, Smith and Wennerholm are members of the Governance Committee. The purpose of the Governance
Committee is to consider, evaluate and make recommendations to the Board with respect to the structure, membership and operation
of the Board and the Committees thereof, including the nomination and selection of noninterested Trustees and a Chairperson of
the Board and the compensation of such persons. During the fiscal year ended June 30, 2020, the Governance Committee convened five
times.
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The Governance Committee will, when a vacancy exists, consider
a nominee for Trustee recommended by a shareholder, provided that such recommendation is submitted in writing to the Trust’s
Secretary at the principal executive office of the Trust. Such recommendations must be accompanied by biographical and occupational
data on the candidate (including whether the candidate would be an “interested person” of the Trust), a written consent
by the candidate to be named as a nominee and to serve as Trustee if elected, record and ownership information for the recommending
shareholder with respect to the Trust, and a description of any arrangements or understandings regarding recommendation of the
candidate for consideration.
Messrs. Gorman (Chairperson), Park and Wennerholm and Ms.
Peters are members of the Audit Committee. The Board has designated Messrs. Gorman and Park, each a noninterested Trustee, as audit
committee financial experts. The Audit Committee’s purposes are to (i) oversee the Trust's accounting and financial
reporting processes, its internal control over financial reporting, and, as appropriate, the internal control over financial reporting
of certain service providers; (ii) oversee or, as appropriate, assist Board oversight of the quality and integrity of the Trust's
financial statements and the independent audit thereof; (iii) oversee, or, as appropriate, assist Board oversight of, the Trust's
compliance with legal and regulatory requirements that relate to the Trust's accounting and financial reporting, internal
control over financial reporting and independent audits; (iv) approve prior to appointment the engagement and, when appropriate,
replacement of the independent registered public accounting firm, and, if applicable, nominate the independent registered public
accounting firm to be proposed for shareholder ratification in any proxy statement of the Trust; (v) evaluate the qualifications,
independence and performance of the independent registered public accounting firm and the audit partner in charge of leading the
audit; and (vi) prepare, as necessary, audit committee reports consistent with the requirements of applicable SEC and stock exchange
rules for inclusion in the proxy statement of the Trust. During the fiscal year ended June 30, 2020, the Audit Committee convened
thirteen times.
Messrs. Wennerholm (Chairperson), Fetting, Gorman, Park, Quinton
and Smith, and Mmes. Frost, Mosley, Peters and Sutherland are members of the Contract Review Committee. The purposes of the Contract
Review Committee are to consider, evaluate and make recommendations to the Board concerning the following matters: (i) contractual
arrangements with each service provider to the Trust, including advisory, sub-advisory, transfer agency, custodial and fund accounting,
distribution services and administrative services; (ii) any and all other matters in which any service provider (including Eaton
Vance or any affiliated entity thereof) has an actual or potential conflict of interest with the interests of the Trust; and (iii)
any other matter appropriate for review by the noninterested Trustees, unless the matter is within the responsibilities of the
other Committees of the Board. During the fiscal year ended June 30, 2020, the Contract Review Committee convened six times.
Mmes. Frost (Chairperson), Mosley and Peters and Messrs. Smith
and Wennerholm are members of the Portfolio Management Committee. The purposes of the Portfolio Management Committee are to: (i)
assist the Board in its oversight of the portfolio management process employed by the Trust and its investment adviser and sub-adviser(s),
if applicable, relative to the Trust's stated objective(s), strategies and restrictions; (ii) assist the Board in its oversight
of the trading policies and procedures and risk management techniques applicable to the Trust; and (iii) assist the Board in its
monitoring of the performance results of all funds and portfolios, giving special attention to the performance of certain funds
and portfolios that it or the Board identifies from time to time. During the fiscal year ended June 30, 2020, the Portfolio Management
Committee convened eight times.
Ms. Sutherland (Chairperson) and Messrs. Fetting, Gorman and
Quinton are members of the Compliance Reports and Regulatory Matters Committee. The purposes of the Compliance Reports and Regulatory
Matters Committee are to: (i) assist the Board in its oversight role with respect to compliance issues and certain other regulatory
matters affecting the Trust; (ii) serve as a liaison between the Board and the Trust's CCO; and (iii) serve as a “qualified
legal compliance committee” within the rules promulgated by the SEC. During the fiscal year ended June 30, 2020, the Compliance
Reports and Regulatory Matters Committee convened nine times.
Messrs. Fetting (Chairperson) and Gorman and Ms. Mosley are
members of the Ad Hoc Committee for Closed-End Fund Matters. The purpose of the Ad Hoc Committee for Closed-End Fund Matters is
to consider, evaluate and make recommendations to the Board with respect to issues specifically related to Eaton Vance Closed-End
Funds. During the fiscal year ended June 30, 2020, the Ad Hoc Committee for Closed-End Fund Matters convened nine times.
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Share
Ownership. The following table shows the dollar range of equity securities beneficially owned by each Trustee in the
Trust and in the Eaton Vance family of funds overseen by the Trustee as of December 31, 2019.
Name of Trustee
|
Dollar Range of Equity Securities
Beneficially Owned in the Trust
|
Aggregate Dollar Range of Equity
Securities Beneficially Owned in Funds
Overseen by Trustee in the
Eaton Vance Family of Funds
|
Interested Trustee
|
|
|
Thomas E. Faust Jr.
|
None
|
Over $100,000
|
Noninterested Trustees
|
|
|
Mark R. Fetting
|
None
|
Over $100,000
|
Cynthia E. Frost
|
None
|
Over $100,000
|
George J. Gorman
|
None
|
Over $100,000
|
Valerie A. Mosley
|
None
|
Over $100,000
|
William H. Park
|
None
|
Over $100,000
|
Helen Frame Peters
|
None
|
Over $100,000
|
Keith Quinton
|
$10,001 - $50,000
|
Over $100,000
|
Marcus L. Smith
|
None
|
Over $100,000
|
Susan J. Sutherland
|
None
|
Over $100,000(1)
|
Scott E. Wennerholm
|
None
|
Over $100,000(1)
|
|
(1) Includes shares which may be deemed to be beneficially owned through the Trustee Deferred Compensation Plan.
|
As of December 31, 2019, no noninterested Trustee or
any of their immediate family members owned beneficially or of record any class of securities of EVC, EVD, any sub-adviser, if
applicable, or any person controlling, controlled by or under common control with EVC or EVD or any sub-adviser, if applicable,
collectively (“Affiliated Entity”).
During the calendar years ended December 31, 2018 and December
31, 2019, no noninterested Trustee (or their immediate family members) had:
|
(1)
|
Any direct or indirect interest in any Affiliated Entity;
|
|
(2)
|
Any direct or indirect material interest in any transaction or series of similar transactions with (i) the Trust; (ii) another
fund managed or distributed by any Affiliated Entity; (iii) any Affiliated Entity; or (iv) an officer of any of the above; or
|
|
(3)
|
Any direct or indirect relationship with (i) the Trust; (ii) another fund managed or distributed by any Affiliated Entity;
(iii) any Affiliated Entity; or (iv) an officer of any of the above.
|
During the calendar years ended December 31, 2018 and December
31, 2019, no officer of any Affiliated Entity served on the Board of Directors of a company where a noninterested Trustee of the
Trust or any of their immediate family members served as an officer.
Noninterested Trustees 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 “Deferred Compensation
Plan”). Under the Deferred Compensation Plan, an eligible Board member may elect to have all or a portion of his or her deferred
fees invested in the shares of one or more funds in the Eaton Vance family of funds, and the amount paid to the Board members under
the Deferred Compensation Plan will be determined based upon the performance of such investments. Deferral of Board members’
fees in accordance with the Deferred Compensation Plan will have a negligible effect on the assets, liabilities, and net income
of a participating fund or portfolio, and do not require that a participating Board member be retained. There is no retirement
plan for Board members.
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The fees and expenses of the Trustees of the Trust are paid
by the Trust. A Board member who is a member of the Eaton Vance organization receives no compensation from the Trust. During the
fiscal year ended June 30, 2020, the Trustees of the Trust earned the following compensation in their capacities as Board members
from the Trust. For the year ended December 31, 2019, the Board members earned the following compensation in their capacities as
members of the Eaton Vance Fund Boards(1):
Source of Compensation
|
Mark R.
Fetting
|
Cynthia E.
Frost
|
George J.
Gorman
|
Valerie A.
Mosley
|
William H.
Park
|
Helen Frame
Peters
|
Keith
Quinton
|
Marcus L.
Smith
|
Susan J.
Sutherland
|
Scott E.
Wennerholm
|
Trust
|
$1,891
|
$2,058
|
$2,120
|
$2,143(2)
|
$2,570
|
$1,896
|
$1,864
|
$1,864
|
$2,058(3)
|
$2,120
|
Trust and Fund Complex(1)
|
$333,750
|
$367,500
|
$375,000
|
$380,000(4)
|
$458,750
|
$333,750
|
$333,750
|
$333,750
|
$367,500(5)
|
$375,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
As of October 23, 2020, the Eaton Vance fund complex consists of 143 registered investment companies or series thereof.
Harriett Tee Taggart retired as a Trustee effective December 31, 2018. For the calendar year ended December 31, 2019, Ms. Taggart
received $82,500 from the Trust and Fund Complex.
|
|
(2)
|
Includes $225 of deferred compensation.
|
|
(3)
|
Includes $2,058 of deferred compensation.
|
|
(4)
|
Includes $40,000 of deferred compensation.
|
|
(5)
|
Includes $362,238 of deferred compensation.
|
Proxy
Voting Policy. The Board adopted a proxy voting policy and procedures (the “Trust Policy”), pursuant to
which the Board has delegated proxy voting responsibility to the Adviser and adopted the Adviser’s proxy voting policies
and procedures (the “Adviser Policies”). An independent proxy voting service has been retained to assist in the voting
of Trust proxies through the provision of vote analysis, implementation and recordkeeping and disclosure services. The members
of the Board will review the Trust’s proxy voting records from time to time and will review annually the Adviser Policies.
For a copy of the Trust Policy and the Adviser Policies, see Appendix B. Pursuant to certain provisions of the 1940 Act and certain
exemptive orders relating to funds investing in other funds, a Trust may be required or may elect to vote its interest in another
fund in the same proportion as the holders of all other shares of that fund. Information on how the Trust voted proxies relating
to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by
calling 1-800-262-1122, and (2) on the SEC’s website at http://www.sec.gov.
INVESTMENT ADVISORY AND OTHER SERVICES
The
Adviser. Eaton Vance, its affiliates and its predecessor companies have been managing assets of individuals and institutions
since 1924 and of investment companies since 1931. They maintain a large staff of experienced fixed-income, senior loan and equity
investment professionals to service the needs of their clients. The fixed-income group focuses on all kinds of taxable investment-grade
and high-yield securities, tax-exempt investment-grade and high-yield securities, and U.S. Government securities. The senior loan
group focuses on senior floating rate loans, unsecured loans and other floating rate debt securities such as notes, bonds and asset-backed
securities. The equity group covers stocks ranging from blue chip to emerging growth companies. Eaton Vance and its affiliates
act as adviser to a family of mutual funds, and individual and various institutional accounts, including corporations, hospitals,
retirement plans, universities, foundations and trusts.
The Trust will be responsible for all of its costs and expenses
not expressly stated to be payable by Eaton Vance under the Investment Advisory Agreement (the “Advisory Agreement”)
or the Amended and Restated Administrative Services Agreement (the “Administration Agreement”). Such costs and expenses
to be borne by the Trust include, without limitation: (i) expenses of maintaining the Trust and continuing its existence; (ii)
commissions, fees and other expenses connected with the acquisition and disposition of securities and other investments; (iii)
auditing, accounting and legal expenses; (iv) taxes and interest; (v) governmental fees; (vi) expenses of repurchase and redemption
(if any) of shares, including all expenses incurred in conducting repurchase and tender offers for the purpose of repurchasing
Trust shares; (vii) expenses of registering and qualifying the Trust and its shares under federal and state securities laws and
of preparing registration statements and amendments for such purposes, and fees and expenses of registering and maintaining registrations
of the Trust under state securities laws; (viii) registration of the Trust under the Investment Company Act of 1940; (ix) expenses
of reports and notices to shareholders and of meetings of shareholders and proxy solicitations therefor; (x) expenses of reports
to regulatory bodies; (xi) insurance expenses; (xii) association membership dues; (xiii) fees, expenses and disbursements of custodians
and subcustodians for all services to the Trust (including without limitation safekeeping of funds, securities and other investments,
keeping of books and accounts and determination of net asset values); (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, shareholder servicing agents and registrars for all services to the Trust; (xv) expenses of listing
shares with a stock
Eaton Vance Senior Income Trust
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exchange; (xvi) any direct charges to shareholders approved by
the Trustees of the Trust; (xvii) compensation and expenses of Trustees of the Trust who are not members of the Administrator’s
organization; (xviii) all payments to be made and expenses to be assumed by the Trust in connection with the distribution of Trust
shares; (xix) any pricing and valuation services employed by the Trust to value its investments including primary and comparative
valuation services; (xx) any investment advisory, sub-advisory or similar management fee payable by the Trust; (xxi) all expenses
incurred in connection with the Trust’s use of a line of credit, or issuing and maintaining preferred shares; and (xxii)
such non-recurring items as may arise, including expenses incurred in Trust connection with litigation, proceedings and claims
and the obligation of the Trust to indemnify its Trustees and officers with respect thereto.
The Advisory Agreement with the Adviser continues in effect indefinitely
so long as such continuance is approved at least annually (i) by the vote of a majority of those Trustees of the Trust who are
not interested persons of the Adviser or the Trust cast in person at a meeting specifically called for the purpose of voting on
such approval and (ii) by the Trust’s Board or by vote of a majority of the outstanding voting securities of the Trust. The
Trust’s Administration Agreement continues in effect indefinitely thereafter so long as such continuance is approved at least
annually by (i) the Trust’s Board and (ii) the vote of a majority of those Trustees of the Trust who are not interested persons
of the Eaton Vance or the Trust. Each agreement may be terminated at any time without penalty on sixty (60) days’ written
notice by either party or by vote of the majority of the outstanding shares of the Trust. Each agreement will terminate automatically
in the event of its assignment. The Advisory Agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations or duties to the Trust under the Advisory Agreement on the part of Eaton Vance, Eaton
Vance shall not be subject to liability to the Trust or to any shareholder of the Trust for any act or omission in the course of,
or connected with, rendering services hereunder or for any losses that may be sustained in the acquisition, holding or disposition
of any interest in a loan or of any security, investment or other asset. The Administration Agreement provides that in the absence
of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations or duties to the Trust under the Administration
Agreement on the part of the Eaton Vance, Eaton Vance shall not be subject to liability to the Trust or to any shareholder of the
Trust for any act or omission in the course of, or connected with, rendering services under the Administration Agreement or for
any losses which may be sustained in the acquisition, holding or disposition of any security or other investment.
As of May 1, 2020, pursuant to the investment advisory agreement
and subsequent fee reduction agreement between the Trust and Eaton Vance, the advisory fee is computed at an annual rate of 0.74%
of the Trust’s average weekly gross assets. The annual adviser fee rate will be reduced by 0.01% every May 1 to May 1, 2039.
As of June 30, 2020, the Trust had net assets of $234,657,434. For the fiscal years ended June 30, 2020, 2019 and 2018, the Trust
incurred $2,930,938, $3,155,995 and $3,232,473, respectively, in advisory fees.
The administration fee is earned by Eaton Vance for administering
the business affairs of the Trust and is computed at an annual rate of 0.25% of the Trust’s average weekly gross assets.
For the fiscal years ended June 30, 2020, 2019 and 2018, Eaton Vance earned administration fees from the Trust of $978,945, $1,040,435
and $1,051,810, respectively.
Information
About Eaton Vance. Eaton Vance is a business trust organized under the laws of the Commonwealth of Massachusetts.
EV serves as trustee of Eaton Vance. EV and Eaton Vance are wholly-owned subsidiaries of EVC, a Maryland corporation and publicly-held
holding company. BMR is an indirect subsidiary of EVC. EVC through its subsidiaries and affiliates engages primarily in investment
management, administration and marketing activities. The Directors of EVC are Thomas E. Faust Jr., Ann E. Berman, Leo I. Higdon,
Jr., Paula A. Johnson, Brian D. Langstraat, Dorothy E. Puhy, Winthrop H. Smith, Jr. and Richard A. Spillane, Jr. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust, the Voting Trustees of which are Mr. Faust, Paul W.
Bouchey, Craig R. Brandon, Daniel C. Cataldo, Michael A. Cirami, Cynthia J. Clemson, James H. Evans, Maureen A. Gemma, Laurie G.
Hylton, Mr. Langstraat, Thomas Lee, Frederick S. Marius, David C. McCabe, Edward J. Perkin, Lewis R. Piantedosi, Charles B. Reed,
Craig P. Russ, Thomas C. Seto, John L. Shea, Eric A. Stein, John H. Streur, Andrew N. Sveen, Payson F. Swaffield, R. Kelly Williams
and Matthew J. Witkos (all of whom are officers of Eaton Vance or its affiliates). 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 Eaton Vance who may also be officers, or officers and Directors of EVC and EV. As indicated under
“Management and Organization,” all of the officers of the Trust (as well as Mr. Faust who is also a Trustee) hold
positions in the Eaton Vance organization.
Code
of Ethics. The Adviser and the Trust have adopted codes of ethics (the “Codes of Ethics”) governing personal
securities transactions pursuant to Rule 17j-1 under the 1940 Act. Under the Codes of Ethics, employees of the Adviser may purchase
and sell securities (including securities held or eligible for purchase by the Trust) subject to the provisions of the Codes of
Ethics and certain employees are also subject to pre-clearance, reporting requirements and/or other procedures.
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The Codes of Ethics can be reviewed on the EDGAR Database on
the SEC’s Internet site (http://www.sec.gov), or a copy of the Codes of Ethics may be requested by electronic mail at publicinfo@sec.gov.
Portfolio
Managers. The portfolio managers of the Trust are listed below. The following table shows, as of the Trust’s most
recent fiscal year end, the number of accounts each portfolio manager managed in each of the listed categories and the total assets
(in millions of dollars) in the accounts managed within each category. The table also shows the number of accounts with respect
to which the advisory fee is based on the performance of the account, if any, and the total assets (in millions of dollars) in
those accounts.
|
Number of
All Accounts
|
Total Assets of
All Accounts
|
Number of Accounts
Paying a Performance Fee
|
Total Assets of Accounts
Paying a Performance Fee
|
William E. Holt
|
|
|
|
|
Registered Investment Companies
|
5
|
$2,618.3
|
0
|
$0
|
Other Pooled Investment Vehicles
|
0
|
$0
|
0
|
$0
|
Other Accounts
|
0
|
$0
|
0
|
$0
|
Catherine C. McDermott
|
|
|
|
|
Registered Investment Companies
|
8
|
$5,359.8
|
0
|
$0
|
Other Pooled Investment Vehicles
|
0
|
$0
|
0
|
$0
|
Other Accounts
|
0
|
$0
|
0
|
$0
|
Daniel P. McElaney
|
|
|
|
|
Registered Investment Companies
|
5
|
$2,618.3
|
0
|
$0
|
Other Pooled Investment Vehicles
|
0
|
$0
|
0
|
$0
|
Other Accounts
|
0
|
$0
|
0
|
$0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Redding
|
|
|
|
|
Registered Investment Companies
|
2
|
$892.9
|
0
|
$0
|
Other Pooled Investment Vehicles
|
2
|
$80.9
|
0
|
$0
|
Other Accounts
|
0
|
$0
|
0
|
$0
|
Andrew N. Sveen
|
|
|
|
|
Registered Investment Companies
|
11
|
$18,108.7
|
0
|
$0
|
Other Pooled Investment Vehicles
|
0
|
$0
|
0
|
$0
|
Other Accounts
|
0
|
$0
|
0
|
$0
|
Eaton Vance Senior Income Trust
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|
The following table shows the dollar range of equity securities
beneficially owned in the Trust by its portfolio manager(s) as of the Trust’s most recent fiscal year ended June 30, 2020
and in the Eaton Vance family of funds as of December 31, 2019.
Portfolio Managers
|
Dollar Range of Equity Securities
Beneficially Owned in the Trust
|
Aggregate Dollar Range of Equity
Securities Beneficially Owned in
the Eaton Vance Family of Funds
|
William E. Holt
|
None
|
$100,001 - $500,000
|
Catherine C. McDermott
|
None
|
$500,001 - $1,000,000
|
Daniel P. McElaney
|
None
|
$100,001 - $500,000
|
|
|
|
John Redding
|
$100,001 - $500,000
|
Over $1,000,000
|
Andrew N. Sveen
|
None
|
$100,001 - $500,000
|
It is possible that conflicts of interest may arise in connection
with a portfolio manager’s management of the Trust’s investments on the one hand and the investments of other accounts
for which a portfolio manager is responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating
management time, resources and investment opportunities among the Trust and other accounts he or she advises. In addition, due
to differences in the investment strategies or restrictions between the Trust and the other accounts, the portfolio manager may
take action with respect to another account that differs from the action taken with respect to the Trust. In some cases, another
account managed by a portfolio manager may compensate the investment adviser based on the performance of the securities held by
that account. The existence of such a performance based fee may create additional conflicts of interest for the portfolio manager
in the allocation of management time, resources and investment opportunities. Whenever conflicts of interest arise, the portfolio
manager will endeavor to exercise his or her discretion in a manner that he or she believes is equitable to all interested persons.
The Adviser has adopted several policies and procedures designed to address these potential conflicts including a code of ethics
and policies that govern the investment adviser's trading practices, including among other things the aggregation and allocation
of trades among clients, brokerage allocations, cross trades and best execution.
Compensation
Structure for Eaton Vance. Compensation of the Adviser's portfolio managers and other investment professionals has
the following primary components: (1) a base salary, (2) an annual cash bonus, (3) annual non-cash compensation consisting of options
to purchase shares of EVC nonvoting common stock and/or restricted shares of EVC nonvoting common stock that generally are subject
to a vesting schedule, and (4) (for equity portfolio managers) a Deferred Alpha Incentive Plan, which pays a deferred cash award
tied to future excess returns in certain equity strategy portfolios. The Adviser’s investment professionals also receive
certain retirement, insurance and other benefits that are broadly available to the Adviser’s employees. Compensation of the
Adviser’s investment professionals is reviewed primarily on an annual basis. Cash bonuses, stock-based compensation awards,
and adjustments in base salary are typically paid or put into effect at or shortly after the October 31st fiscal year end of EVC.
Method
to Determine Compensation. The Adviser compensates its portfolio managers based primarily on the scale and complexity
of their portfolio responsibilities and the total return performance of managed funds and accounts versus the benchmark(s) stated
in the prospectus, as well as an appropriate peer group (as described below). In addition to rankings within peer groups of funds
on the basis of absolute performance, consideration may also be given to relative risk-adjusted performance. Risk-adjusted performance
measures include, but are not limited to, the Sharpe ratio, which uses standard deviation and excess return to determine reward
per unit of risk. Performance is normally based on periods ending on the September 30th preceding fiscal year end. Fund performance
is normally evaluated primarily versus peer groups of funds as determined by Lipper Inc. and/or Morningstar, Inc. When a fund’s
peer group as determined by Lipper or Morningstar is deemed by the Adviser’s management not to provide a fair comparison,
performance may instead be evaluated primarily against a custom peer group or market index. In evaluating the performance of a
fund and its manager, primary emphasis is normally placed on three-year performance, with secondary consideration of performance
over longer and shorter periods. For funds that are tax-managed or otherwise have an objective of after-tax returns, performance
is measured net of taxes. For other funds, performance is evaluated on a pre-tax basis. For funds with an investment objective
other than total return (such as current income), consideration will also be given to the fund’s success in achieving its
objective. For managers responsible for multiple funds and accounts, investment performance is evaluated on an aggregate basis,
based on averages or weighted averages among managed funds and accounts. Funds
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and accounts that have performance-based advisory fees are
not accorded disproportionate weightings in measuring aggregate portfolio manager performance. Pursuant to the Deferred Alpha Incentive
Plan, a portion of the compensation payable to equity portfolio managers and investment professionals will be determined based
on the ability of one or more accounts managed by such manager, that are not advised by CRM, to achieve a specified target average
annual gross return over a three year period in excess of the account benchmark. The cash award to be payable at the end of the
three year term will be established at the inception of the term and will be adjusted positively or negatively to the extent that
the average annual gross return varies from the specified target return.
The compensation of portfolio managers with other job responsibilities
(such as heading an investment group or providing analytical support to other portfolios) will include consideration of the scope
of such responsibilities and the managers’ performance in meeting them.
The Adviser seeks to compensate portfolio managers commensurate
with their responsibilities and performance, and competitive with other firms within the investment management industry. The Adviser
participates in investment-industry compensation surveys and utilizes survey data as a factor in determining salary, bonus and
stock-based compensation levels for portfolio managers and other investment professionals. Salaries, bonuses and stock-based compensation
are also influenced by the operating performance of the Adviser and its parent company. The overall annual cash bonus pool is generally
based on a substantially fixed percentage of pre-bonus adjusted operating income. While the salaries of the Adviser’s portfolio
managers are comparatively fixed, cash bonuses and stock-based compensation may fluctuate significantly from year to year, based
on changes in manager performance and other factors as described herein. For a high performing portfolio manager, cash bonuses
and stock-based compensation may represent a substantial portion of total compensation.
Investment
Advisory Services. Under the general supervision of the Trust’s Board, Eaton Vance will carry out the investment
and reinvestment of the assets of the Trust, will furnish continuously an investment program with respect to the Trust, will determine
which securities should be purchased, sold or exchanged, and will implement such determinations. Eaton Vance will furnish to the
Trust investment advice and provide related office facilities and personnel for servicing the investments of the Trust. Eaton Vance
will compensate all Trustees and officers of the Trust who are members of the Eaton Vance organization and who render investment
services to the Trust, and will also compensate all other Eaton Vance personnel who provide research and investment services to
the Trust.
Commodity
Futures Trading Commission Registration. Effective December 31, 2012, the Commodity Futures Trading Commission (“CFTC”)
adopted certain regulatory changes that subject registered investment companies and advisers to regulation by the CFTC if a fund
invests more than a prescribed level of its assets in certain CFTC-regulated instruments (including futures, certain options and
swaps agreements) or markets itself as providing investment exposure to such instruments. The Adviser has claimed an exclusion
from the definition of “commodity pool operator” under the Commodity Exchange Act with respect to its management of
the Trust. Accordingly, neither the Trust nor the Adviser with respect to the operation of the Trust is subject to CFTC regulation.
Because of its management of other strategies, Eaton Vance is registered with the CFTC as a commodity pool operator. Eaton Vance
is also registered as a commodity trading advisor. The CFTC has neither reviewed nor approved the Trust's investment strategies
or this SAI.
Administrative
Services. Under the Amended and Restated Administrative Services Agreement, Eaton Vance is responsible for managing
the business affairs of the Trust, subject to the supervision of the Trust’s Board. Eaton Vance will furnish to the Trust
all office facilities, equipment and personnel for administering the affairs of the Trust. Eaton Vance will compensate all Trustees
and officers of the Trust who are members of the Eaton Vance organization and who render executive and administrative services
to the Trust, and will also compensate all other Eaton Vance personnel who perform management and administrative services for the
Trust. 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 Trust’s custodian and transfer agent, providing
assistance in connection with the Trustees and shareholders’ meetings, providing services in connection with repurchase offers,
if any, and other administrative services necessary to conduct the Trust’s business.
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DETERMINATION OF NET ASSET VALUE
The net asset value of the Trust is determined by State Street
Bank and Trust Company (as agent and custodian) by subtracting the liabilities of the Trust from the value of its total assets.
The Trust is closed for business and will not issue a net asset value on the following business holidays and any other business
day that the New York Stock Exchange (the “Exchange”) is closed: 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 Board has approved procedures pursuant to which investments
are valued for purposes of determining the Trust’s net asset value. Listed below is a summary of the methods generally used
to value investments (some or all of which may be held by the Trust) under the procedures.
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·
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Equity securities (including common stock, exchange-traded funds, closed-end funds, preferred equity securities, exchange-traded
notes and other instruments that trade on recognized stock exchanges) are valued at the last sale, official close or, if there
are no reported sales, at the mean between the bid and asked price on the primary exchange on which they are traded.
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·
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Most debt obligations are valued on the basis of market valuations furnished by a pricing service or at the mean of the bid
and asked prices provided by recognized broker/dealers of such securities. The pricing service may use a pricing matrix to determine
valuation.
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·
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Short-term instruments with remaining maturities of less than 397 days are valued on the basis of market valuations furnished
by a pricing service or based on dealer quotations.
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·
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Foreign securities and currencies are valued in U.S. dollars based on foreign currency exchange quotations supplied by a pricing
service.
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·
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Senior and Junior Loans are valued on the basis of prices furnished by a pricing service. The pricing service uses transactions
and market quotations from brokers in determining values.
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·
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Futures contracts are valued at the settlement or closing price on the primary exchange or board of trade on which they are
traded.
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·
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Exchange-traded options are valued at the mean of the bid and asked prices. Over-the-counter options are valued based on quotations
obtained from a pricing service or from a broker (typically the counterparty to the option).
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·
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Non-exchange traded derivatives (including swap agreements, forward contracts and equity participation notes) are generally
valued on the basis of valuations provided by a pricing service or using quotes provided by a broker/dealer (typically the counterparty)
or, for total return swaps, based on market index data.
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·
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Precious metals are valued at the New York Composite mean quotation.
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·
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Liabilities with a payment or maturity date of 364 days or less are stated at their principal value and longer dated liabilities
generally will be carried at their fair value.
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·
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Valuations of foreign equity securities and total return swaps and exchange-traded futures contracts on non-North American
equity indices are generally based on fair valuation provided by a pricing service.
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Investments which are unable to be valued in accordance with
the foregoing methodologies are valued at fair value using methods determined in good faith by or at the direction of the members
of the Board. Such methods may include consideration of relevant factors, including but not limited to (i) the type of security
and the existence of any contractual restrictions on the security’s disposition; (ii) the price and extent of public trading
in similar securities of the issuer or of comparable companies or entities; (iii) quotations or relevant information obtained from
broker-dealers or other market participants; (iv) information obtained from the issuer, analysts, and/or the appropriate stock
exchange (for exchange-traded securities); (v) an analysis of the company’s or entity’s financial statements; (vi)
an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; (vii) any
transaction involving the issuer of such securities; and (viii) any other factors deemed relevant by the investment adviser. For
purposes of fair valuation, the portfolio managers of one Eaton Vance fund that invests in Senior and Junior Loans may not possess
the same information about a Senior or Junior Loan as the portfolio managers of another Eaton Vance fund. As such, at times the
fair value of a Loan determined by certain Eaton Vance portfolio managers may vary from the fair value of the same Loan determined
by other portfolio managers.
The Trust may invest in Eaton Vance Cash Reserves Fund, LLC (Cash
Reserves Fund), an affiliated investment company managed by Eaton Vance. Cash Reserves Fund generally values its investment securities
utilizing the amortized cost valuation technique in accordance with Rule 2a-7 under the 1940
Act. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund may value
its investment securities in the same manner as debt obligations described above.
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PORTFOLIO TRADING
The Trust 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, the investment adviser 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 Trust.
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the broker-dealer firm, are made by the investment adviser. The Trust is responsible
for the expenses associated with its portfolio transactions. The investment adviser is also responsible for the execution of transactions
for all other accounts managed by it. The investment adviser places the portfolio security transactions for execution with one
or more broker-dealer firms. The investment adviser uses its best efforts to obtain execution of portfolio security transactions
at prices which in the investment adviser’s judgment are advantageous to the client and at a reasonably competitive spread
or (when a disclosed commission is being charged) at reasonably competitive commission rates. In seeking such execution, the investment
adviser will use its best judgment in evaluating the terms of a transaction, and will give consideration to various relevant factors,
which may include, without limitation, the full range and quality of the broker-dealer firm’s services, responsiveness of
the firm to the investment adviser, the size and type of the transaction, the nature and character of the market for the security,
the confidentiality, speed and certainty of effective execution required for the transaction, the general execution and operational
capabilities of the broker-dealer firm, the reputation, reliability, experience and financial condition of the firm, the value
and quality of the services rendered by the firm in this and other transactions, and the amount of the spread or commission, if
any. In addition, the investment adviser may consider the receipt of Research Services (as defined below), provided it does not
compromise the investment adviser’s obligation to seek best overall execution for the Trust and is otherwise in compliance
with applicable law. The investment adviser may engage in portfolio brokerage transactions with a broker-dealer firm that sells
shares of Eaton Vance funds, provided such transactions are not directed to that firm as compensation for the promotion or sale
of such shares.
Transactions on stock exchanges and other agency transactions
involve the payment of negotiated brokerage commissions. Such commissions vary among different broker-dealer firms, and a particular
broker-dealer may charge different commissions according to such factors as the difficulty and size of the transaction and the
volume of business done with such broker-dealer. Transactions in foreign securities often involve the payment of brokerage commissions,
which may be higher than those in the United States. There is generally no stated commission in the case of securities traded in
the over-the-counter markets including transactions in fixed-income securities which are generally purchased and sold on a net
basis (i.e., without commission) through broker-dealers and banks acting for their own account rather than as brokers. Such firms
attempt to profit from such transactions by buying at the bid price and selling at the higher asked price of the market for such
obligations, and the difference between the bid and asked price is customarily referred to as the spread. Fixed-income transactions
may also be transacted directly with the issuer of the obligations. In an underwritten offering the price paid often includes a
disclosed fixed commission or discount retained by the underwriter or dealer. Although spreads or commissions paid on portfolio
security transactions will, in the judgment of the investment adviser, be reasonable in relation to the value of the services provided,
commissions exceeding those which another firm might charge may be paid to broker-dealers who were selected to execute transactions
on behalf of the investment adviser’s clients in part for providing brokerage and research services to the investment adviser
as permitted by applicable law.
Pursuant to the safe harbor provided in Section 28(e) of the
Securities Exchange Act of 1934, as amended (“Section 28(e)”) and to the extent permitted by other applicable law,
a broker or dealer who executes a portfolio transaction on behalf of the investment adviser client may receive a commission that
is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if the investment
adviser determines in good faith that such compensation was reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that particular transaction or on the basis of the overall responsibility
which the investment adviser and its affiliates have for accounts over which they exercise investment discretion. “Research
Services” as used herein includes any and all brokerage and research services to the extent permitted by Section 28(e) and
other applicable law. Generally, Research Services may include, but are not limited to, such matters as research, analytical and
quotation services, data, information and other services products and materials which assist the
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investment adviser in the performance of its investment responsibilities.
More specifically, Research Services may include general economic, political, business and market information, industry and company
reviews, evaluations of securities and portfolio strategies and transactions, technical analysis of various aspects of the securities
markets, recommendations as to the purchase and sale of securities and other portfolio transactions, certain financial, industry
and trade publications, certain news and information services, and certain research oriented computer software, data bases and
services. Any particular Research Service obtained through a broker-dealer may be used by the investment adviser in connection
with client accounts other than those accounts which pay commissions to such broker-dealer, to the extent permitted by applicable
law. Any such Research Service may be broadly useful and of value to the investment adviser in rendering investment advisory services
to all or a significant portion of its clients, or may be relevant and useful for the management of only one client’s account
or of a few clients’ accounts, or may be useful for the management of merely a segment of certain clients’ accounts,
regardless of whether any such account or accounts paid commissions to the broker-dealer through which such Research Service was
obtained. The investment adviser evaluates the nature and quality of the various Research Services obtained through broker-dealer
firms and, to the extent permitted by applicable law, may attempt to allocate sufficient portfolio security transactions to such
firms to ensure the continued receipt of Research Services which the investment adviser believes are useful or of value to it in
rendering investment advisory services to its clients. The investment adviser may also receive brokerage and Research Services
from underwriters and dealers in fixed-price offerings, when permitted under applicable law.
Research Services provided by (and produced by) broker-dealers
that execute portfolio transactions or from affiliates of executing broker-dealers are referred to as “Proprietary Research.”
Except for trades executed in jurisdictions where such consideration is not permissible, the investment adviser may and does consider
the receipt of Proprietary Research Services as a factor in selecting broker dealers to execute client portfolio transactions,
provided it does not compromise the investment adviser’s obligation to seek best overall execution. In jurisdictions where
permissible, the investment adviser also may consider the receipt of Research Services under so called “client commission
arrangements” or “commission sharing arrangements” (both referred to as “CCAs”) as a factor in selecting
broker dealers to execute transactions, provided it does not compromise the investment adviser’s obligation to seek best
overall execution. Under a CCA arrangement, the investment adviser may cause client accounts to effect transactions through a broker-dealer
and request that the broker-dealer allocate a portion of the commissions paid on those transactions to a pool of commission credits
that are paid to other firms that provide Research Services to the investment adviser. Under a CCA, the broker-dealer that provides
the Research Services need not execute the trade. Participating in CCAs may enable the investment adviser to consolidate payments
for research using accumulated client commission credits from transactions executed through a particular broker-dealer to periodically
pay for Research Services obtained from and provided by other firms, including other broker-dealers that supply Research Services.
The investment adviser believes that CCAs offer the potential to optimize the execution of trades and the acquisition of a variety
of high quality Research Services that the investment adviser might not be provided access to absent CCAs. The investment adviser
will only enter into and utilize CCAs to the extent permitted by Section 28(e) and other applicable law.
Fund trades executed by an affiliate of the investment adviser
licensed in the United Kingdom may implicate laws of the United Kingdom, including rules of the UK Financial Conduct Authority,
which govern client trading commissions and Research Services (“UK Law”). Broadly speaking, under UK Law the investment
adviser may not accept any good or service when executing an order unless that good or service either is directly related to the
execution of trades on behalf of its clients/customers or amounts to the provision of substantive research (as defined under UK
Law). These requirements may also apply with respect to orders in connection with which the investment adviser receives goods and
services under a CCA or other bundled brokerage arrangement. Fund trades may also implicate UK Law requiring the investment adviser
to direct any research portion of a brokerage commission to an account controlled by the investment adviser.
The investment companies sponsored by the investment adviser
or its affiliates also may allocate brokerage commissions to acquire information relating to the performance, fees and expenses
of such companies and other investment companies, which information is used by the members of the Board of such companies to fulfill
their responsibility to oversee the quality of the services provided to various entities, including the investment adviser, to
such companies. Such companies may also pay cash for such information.
Securities considered as investments for the Trust may also be
appropriate for other investment accounts managed by the investment adviser or its affiliates. Whenever decisions are made to buy
or sell securities by the Trust and one or more of such other accounts simultaneously, the investment adviser will allocate the
security transactions (including “new” 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 Trust will not participate in a transaction that is allocated
among other accounts. If an aggregated order cannot be filled completely, allocations will generally be made on a pro rata basis.
An order may not be allocated on a pro rata basis where, for example: (i) consideration is given to portfolio managers who have
been instrumental in
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SAI dated October 27, 2020
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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
the investment adviser 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 Trust from time to
time, it is the opinion of the members of the Board that the benefits from the investment adviser organization outweigh any disadvantage
that may arise from exposure to simultaneous transactions.
The following table shows brokerage commissions paid during
the fiscal years ended June 30, 2020, 2019 and 2018, as well as the amount of Trust security transactions for the most recent fiscal
year (if any) that were directed to firms that provided some Research Services to the investment adviser or its affiliates (see
above), and the commissions paid in connection therewith. The Trust did not pay any brokerage commissions to any broker that (1)
is an affiliated person of the Trust; (2) is an affiliated person of an affiliated person of the Trust; or (3) has an affiliated
person that is an affiliated person of the Trust, adviser or principal underwriter.
Fiscal Year End
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Brokerage Commission Paid
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Amount of Transactions Directed to Firms Providing Research
|
Commissions Paid on Transactions Directed to Firms Providing Research
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June 30, 2020
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$3
|
$2,040
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$3
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June 30, 2019
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$0
|
|
|
June 30, 2018
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$75
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|
|
During the fiscal year ended June 30, 2020, the Trust held
securities of its “regular brokers or dealers”, as that term is defined in Rule 10b-1 of the 1940 Act, and the value
of such securities as of the Trust’s fiscal year end was as follows:
Regular Broker or Dealer (or Parent)
|
Aggregate Value
|
J.P. Morgan Securities
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$37,699
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TAXES
The Trust has elected and intends to qualify each year to be
treated as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”).
Accordingly, the Trust intends to satisfy certain requirements relating to sources of its income and diversification of its assets
and to distribute substantially all of its net investment income, net tax-exempt income, if any, and net capital gains, if any,
(after reduction by any available capital loss carryforwards) in accordance with the timing requirements imposed by the Code, so
as to maintain its RIC status and to avoid paying any federal income or excise tax. To the extent it qualifies for treatment as
a RIC and satisfies the above-mentioned distribution requirements, the Trust will not be subject to federal income tax on income
paid to its shareholders in the form of dividends.
To qualify as a RIC for federal income tax purposes, the Trust
must derive at least 90% of its annual gross income from dividends, interest, payments with respect to securities loans, gains
from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited to,
gains from options, futures or forward contracts) derived with respect to its business of investing in stock, securities and currencies,
and net income derived from an interest in a qualified publicly traded partnership. The Trust must also distribute to its shareholders
at least the sum of 90% of its investment company taxable income and 90% of its net tax-exempt interest income for each taxable
year.
The Trust must also satisfy certain requirements with respect
to the diversification of its assets. The Trust must have, at the close of each quarter of its taxable year, at least 50% of the
value of its total assets represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities
that, in respect of any one issuer, do not represent more than 5% of the value of the assets of the Trust or more than 10% of the
voting securities of that issuer. In addition, at those times, not more than 25% of the value of the Trust’s assets may be
invested, including through corporations in which the Trust owns a 20% or more voting stock interest, in securities (other than
U.S. Government securities or the securities of other RICs) of any one issuer, or of two or more issuers that the Trust controls
and which are engaged in the same or similar trades or businesses or related trades or businesses, or of one or more qualified
publicly traded partnerships. For purposes of asset diversification testing, obligations issued or guaranteed by certain agencies
or instrumentalities of the U.S. government are treated as U.S. government securities.
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The Trust also seeks to avoid the imposition of a federal excise
tax on its ordinary income and capital gain net income. In order to avoid incurring a federal excise tax obligation, the Code requires
that a RIC distribute (or be deemed to have distributed) by December 31 of each calendar year (i) at least 98% of its ordinary
income (not including tax-exempt income) for such year, (ii) at least 98.2% of its capital gain net income (which is the excess
of its capital gains over its capital losses), generally computed on the basis of the one-year period ending on October 31 (or
later if the Trust is permitted to elect and so elects) of such year, after reduction by any available capital loss carryforwards
and (iii) 100% of any income and capital gains from the prior year (as previously computed) that was not paid out during such year
and on which the Trust paid no federal income tax. If the Trust fails to meet these requirements it will be subject to a nondeductible
4% excise tax on the undistributed amounts. For the foregoing purposes, a RIC is treated as having distributed any amount on which
it is subject to income tax for any tax year ending in such calendar year and, if it so elects, the amounts on which qualified
estimated tax payments are made by it during such calendar year (in which case the amount it is treated as having distributed in
the following calendar year will be reduced.)
If the Trust does not qualify as a RIC for any taxable year,
the Trust’s taxable 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 the shareholder as ordinary income. Such distributions may be eligible
to be treated as qualified dividend income with respect to shareholders who are individuals and may be eligible for the dividends
received deduction (“DRD”) in the case of shareholders taxed as corporations, provided, in both cases, the shareholder
meets certain holding period and other requirements in respect to the Trust’s shares. In order to requalify for taxation
as a RIC, the Trust may be required to recognize unrealized gains, pay substantial taxes and interest, and make substantial distributions.
Distributions are taxable as described herein whether shareholders
receive them in cash or in additional shares of the Trust.
The Trust intends to make monthly distributions of net investment
income after payment of dividends on any outstanding preferred shares or interest on any outstanding borrowings. The Trust will
distribute annually any net short-term capital gain (which is taxable as ordinary income) and any net capital gain. Distributions
of the Trust’s net capital gains (“capital gain dividends”), if any, are generally taxable to shareholders as
long-term capital gains. Taxes on distributions of capital gains are determined by how long the Trust owned (or is deemed to have
owned) the investments that generated them, rather than how long a shareholder has owned his or her shares. The IRS and the Department
of the Treasury have issued proposed regulations that would impose special rules in respect of capital gain dividends received
through partnership interests constituting “applicable partnership interests” under Section 1061 of the Code. Dividends
paid to shareholders out of the Trust's current and accumulated earnings and profits, except in the case of capital gain dividends
and certain dividends received by individuals, will be taxable as ordinary income. Dividends with respect to the shares generally
will not constitute “qualified dividends” for federal income tax purposes and thus will not be eligible for the favorable
long-term capital gains tax rates. If, for any calendar year, the Trust's total distributions exceed the Trust's current and accumulated
earnings and profits, the excess will be treated as a tax-free return of capital to each Common Shareholder (up to the amount of
the Common Shareholder's basis in his or her Common Shares) and thereafter as gain from the sale of Common Shares (assuming the
Common Shares are held as a capital asset). The amount treated as a tax-free return of capital will reduce the Common Shareholder's
adjusted basis in his or her Common Shares, thereby increasing his or her potential gain or reducing his or her potential loss
on the subsequent sale or other disposition of his or her Common Shares. Dividends generally will not qualify for a dividends received
deduction generally available to corporate shareholders.
If the Trust fails to meet the annual gross income test described
above, the Trust would nevertheless be considered to have satisfied the test if (i) (a) such failure was due to reasonable cause
and not due to willful neglect and (b) the Trust reported the failure pursuant to a schedule for such tax year filed in the manner
provided by the Internal Revenue Service (“IRS”), and (ii) the Trust pays an excise tax equal to the excess non-qualifying
income. If the Trust failed to meet the asset diversification test described above with respect to any quarter, the Trust would
nevertheless be considered to have satisfied the requirements for such quarter if the Trust cured such failure within 6 months
and either (i) such failure was de minimis or (ii) (a) such failure was due to reasonable cause and not due to willful neglect
and (b) the Trust reports the failure pursuant to a schedule for the quarter filed as provided by the IRS and pays an excise tax.
Gains or losses attributable to fluctuations in exchange rates
between the time the Trust accrues income or receivables or expenses or other liabilities denominated in a foreign currency and
the time the Trust actually collects such income or receivables or pays such liabilities are generally treated as ordinary income
or loss. Transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options,
futures contracts, forward contracts and similar instruments (to the extent permitted) may give rise to ordinary income or loss
to the extent such income or loss results from fluctuations in the value of the foreign currency concerned.
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The Trust may be subject to foreign withholding or other foreign
taxes with respect to income (possibly including, in some cases, capital gains) on certain foreign securities. These taxes may
be reduced or eliminated under the terms of an applicable U.S. income tax treaty. If more than 50% of the value of the total assets
of the Trust consists of securities issued by foreign issuers, the Trust may be eligible to elect to pass through to shareholders
its proportionate share of any foreign taxes paid by the Trust, in which event shareholders will include in income, and (subject
to certain limitations imposed by the Code) will be entitled to take any foreign tax credits or deductions for, such foreign taxes.
It is not anticipated that the Trust will be eligible to make such election and, even if the Trust were eligible to make such an
election for a given year, it may determine not to do so.
The Trust's investment in zero coupon and certain other securities
will cause it to realize income prior to the receipt of cash payments with respect to these securities. Such income will be accrued
daily by the Trust and, in order to avoid a tax payable by the Trust, the Trust may be required to liquidate securities that it
might otherwise have continued to hold in order to generate cash so that the Trust may make required distributions to its shareholders.
Any recognized gain or income attributable to market discount
on long-term debt obligations (i.e., on obligations with a term of more than one year except to the extent of a portion of the
discount attributable to original issue discount) purchased by the Trust is taxable as ordinary income. A long-term debt obligation
is generally treated as acquired at a market discount if purchased after its original issue at a price less than (i) the stated
principal amount payable at maturity, in the case of an obligation that does not have original issue discount or (ii) in the case
of an obligation that does have original issue discount, the sum of the issue price and any original issue discount that accrued
before the obligation was purchased, subject to a de minimis exclusion.
The Trust may invest a portion of its total assets in “high
yield” securities, commonly known as “junk bonds.” Investments in these types of securities may present special
tax issues for the Trust. U.S. federal income tax rules are not entirely clear about issues such as when the Trust may cease to
accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless
securities, how payments received on obligations in default should be allocated between principal and income and whether exchanges
of debt obligations in a bankruptcy or workout context are taxable. These and other issues will be addressed by the Trust, in the
event it invests in such debt securities, in order to seek to preserve its status as a RIC and to not become subject to U.S. federal
income or excise tax.
The Trust's investments in options, futures contracts, hedging
transactions, forward contracts (to the extent permitted) 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 Trust, defer Trust losses, cause adjustments in the holding periods of securities held by the Trust, 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 shareholders. The Trust may be required to limit its activities in options and
futures contracts in order to enable it to maintain its RIC status.
Shareholders selling shares of the Trust will generally recognize
gain or loss in an amount equal to the difference between the shareholder’s adjusted tax basis in the shares sold and the
amount received. If the shares are held as a capital asset, the gain or loss will be a capital gain or loss. In general, any gain
or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been
held for more than 12 months. Otherwise, the gain or loss on the taxable disposition of shares of the Trust will be treated as
short-term capital gain or loss.
Any loss on a disposition of shares held for six months or
less will be treated as a long-term capital loss to the extent of any capital gain dividends received with respect to those shares.
For purposes of determining whether shares have been held for six months or less, the holding period is suspended for any periods
during which the shareholder's risk of loss is diminished as a result of holding one or more other positions in substantially similar
or related property, or through certain options or short sales. Any loss realized on a sale or exchange of shares will be disallowed
to the extent those shares are replaced by other shares within a period of 61 days beginning 30 days before and ending 30 days
after the date of disposition of the shares (including through the reinvestment of distributions, which could occur, for example,
if the shareholder is a participant in the dividend reinvestment plan or otherwise). In that event, the basis of the replacement
shares will be adjusted to reflect the disallowed loss.
Sales charges paid upon a purchase of shares cannot be taken
into account for purposes of determining gain or loss on a sale of the shares before the 91st day after their purchase to the extent
a sales charge is reduced or eliminated in a subsequent acquisition of shares of the Trust (or of another fund) during the period
beginning on the date of such sale and ending on January 31 of the calendar year following the calendar year that includes the
date of such sale pursuant to the reinvestment or exchange privilege. Any disregarded amounts will result in an adjustment to the
shareholder's tax basis in some or all of any other shares acquired.
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Certain net investment income received by an individual having
adjusted gross income in excess of $200,000 (or $250,000 for married individuals filing jointly) will be subject to a tax of 3.8
percent. Undistributed net investment income of trusts and estates in excess of a specified amount also will be subject to this
tax. Dividends and capital gains distributed by the Trust, and gain realized on the sale of shares, will constitute investment
income of the type subject to this tax.
Dividends and distributions on the Trust's shares are generally
subject to U.S. federal income tax as described herein to the extent they do not exceed the Trust's realized income and gains,
even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such
distributions are likely to occur in respect of shares purchased at a time when the Trust's net asset value reflects gains that
are either unrealized, or realized but not distributed. Such realized gains may be required to be distributed even when the Trust's
net asset value also reflects unrealized losses. Certain distributions declared in October, November or December and paid in the
following January will be taxed to shareholders as if received on December 31 of the year in which they were declared. In addition,
certain other distributions made after the close of a taxable year of the Trust may be “spilled back” and treated as
paid by the Trust (except for purposes of the 4% excise tax) during such taxable year. In such case, shareholders will be treated
as having received such dividends in the taxable year in which the distributions were actually made. Dividends paid out of the
Trust's investment company taxable income are generally taxable to a shareholder as ordinary income to the extent of the Trust's
earnings and profits. Dividends with respect to the shares generally will not constitute “qualified dividends” for
federal income tax purposes and thus will not be eligible for the favorable long-term capital gains tax rates.
Amounts paid by the Trust to individuals and certain other shareholders
who have not provided the Trust with their correct taxpayer identification number (“TIN”) and certain certifications
required by the IRS as well as shareholders with respect to whom the Trust has received certain information from the IRS or a broker
may be subject to “backup” withholding of federal income tax arising from the Trust's taxable dividends and other distributions
as well as the gross proceeds of sales of shares. An individual's TIN is generally his or her social security number. Backup withholding
is not an additional tax. Any amounts withheld under the backup withholding rules from payments made to a shareholder may be refunded
or credited against such shareholder's U.S. federal income tax liability, if any, provided that the required information is furnished
to the IRS and such shareholder makes a timely filing of an appropriate tax return or refund claim.
The Trust will inform shareholders of the source and tax status
of all distributions promptly after the close of each calendar year. The IRS has taken the position that if a RIC has more than
one class of shares, it may designate distributions made to each class in any year as consisting of no more than that class's proportionate
share of particular types of income for that year, including ordinary income and net capital gain. A class's proportionate share
of a particular type of income for a year is determined according to the percentage of total dividends paid by the RIC during that
year to the class. Accordingly, the Trust intends to designate a portion of its distributions in capital gain dividends in accordance
with the IRS position.
The Trust (or its administrative agent) is required to report
to the IRS and furnish to shareholders the cost basis information and holding period for shares purchased on or after January 1,
2012, and redeemed by the Trust on or after that date. The Trust will permit shareholders to elect from among several permitted
cost basis methods. In the absence of an election, the Trust will use a default cost basis method. The cost basis method a shareholder
elects may not be changed with respect to a redemption of shares after the settlement date of the redemption. Shareholders should
consult with their tax advisors to determine the best permitted cost basis method for their tax situation and to obtain more information
about how the cost basis reporting rules apply to them.
Properly reported dividends are generally exempt from U.S. federal
withholding tax where they (i) are paid in respect of the Trust’s “qualified net interest income” (generally,
the Trust’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation
or partnership in which the Trust is at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii)
are paid in respect of the Trust’s “qualified short-term capital gains” (generally, the excess of the Trust’s
net short-term capital gain over the Trust’s long-term capital loss for such taxable year). However, depending on its circumstances,
the Trust may report all, some or none of its potentially eligible dividends as such qualified net interest income or as qualified
short-term capital gains and/or treat such dividends, in whole or in part, as ineligible for this exemption from withholding. In
order to qualify for this exemption from withholding, a non-U.S. shareholder would need to comply with applicable certification
requirements relating to its non-U.S. status (including, in general, furnishing an IRS Form W-8BEN, IRS Form W-8BEN-E, or substitute
Form). In the case of shares held through an intermediary, the intermediary could withhold even if the Trust designates the payment
as qualified net interest income or qualified short-term capital gain. Non-U.S. shareholders should contact their intermediaries
with respect to the application of these rules to their accounts.
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The foregoing discussion may not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities, foreign investors, insurance companies and financial institutions.
Shareholders should consult their own tax advisers with respect to special tax rules that may apply in their particular situations,
as well as the state, local, and, where applicable, foreign tax consequences of investing in the Trust.
Although the matter is not free from doubt, due to the absence
of direct regulatory or judicial authority, the Trust intends to take the position that under current law the manner in which the
Trust intends to allocate items of ordinary income and net capital gain among the Trust's Common Shares and APS will be respected
for U.S. federal income tax purposes. It is possible that the IRS could disagree with this conclusion and attempt to reallocate
the Trust's net capital gain or other taxable income.
Under Treasury Regulations, if a shareholder realizes a loss
on disposition of the Trust’s shares of at least $2 million in any single taxable year or $4 million in any combination of
taxable years for an individual shareholder, or at least $10 million in any single taxable year or $20 million in any combination
of taxable years for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct
shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders
of a RIC are not excepted. The fact that a loss is reportable under these regulations does not affect the legal determination of
whether the Shareholder’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the
applicability of these regulations in light of their individual circumstances. Under certain circumstances, certain tax-exempt
entities and their managers may be subject to excise tax if they are parties to certain reportable transactions.
Compliance
with FATCA. The Foreign Account Tax Compliance Act, Code Sections 1471 through 1474 and the U.S. Treasury Regulations
and IRS guidance issued thereunder (collectively, “FATCA”) generally require a Trust to obtain information sufficient
to identify the status of each of its shareholders under FATCA or under an applicable intergovernmental agreement (an “IGA”)
between the United States and a foreign government. If a shareholder of a Trust fails to provide the requested information or otherwise
fails to comply with FATCA or an IGA, the Trust may be required to withhold under FATCA at a rate of 30% with respect to that shareholder
on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding
rules will not apply to the gross proceeds of share redemptions or capital gain dividends the Trust pays. If a payment by the Trust
is subject to withholding under FATCA, the Trust is required to withhold even if such payment would otherwise be exempt from withholding
under the rules applicable to foreign shareholders described above (e.g., dividends attributable to qualified net interest income).
Shareholders should consult their own tax advisors regarding the possible implications of these requirements on their investment
in the Trust.
The foregoing briefly summarizes some of the important U.S. federal
income tax consequences to Shareholders of investing in shares, reflects the federal tax law as of the date of this Statement of
Additional Information, and does not address special tax rules applicable to certain types of investors, such as tax-exempt entities,
corporate investors, foreign investors, insurance companies and financial institutions. This discussion is based upon current provisions
of the Code, the regulations promulgated thereunder, and judicial and administrative ruling authorities, all of which are subject
to change or differing interpretations by the courts or the IRS retroactively or prospectively. No attempt has been made to present
a complete explanation of the federal tax treatment of the Trust or the implications to Shareholders, and the discussions here
and in the prospectus are not intended as a substitute for careful tax planning. Investors should consult their tax advisors regarding
other federal, state, local and, where applicable, foreign tax considerations that may be applicable in their particular circumstances,
as well as any proposed tax law changes.
State
and Local Taxes. Shareholders should consult their own tax advisers as to the state or local tax consequences of investing
in the Trust.
OTHER INFORMATION
The Trust is an organization of the type commonly known as
a “Massachusetts business trust.” Under Massachusetts law, shareholders of such a trust may, in certain circumstances,
be held personally liable as partners for the obligations of the trust. The Declaration of Trust contains an express disclaimer
of shareholder liability in connection with the Trust property or the acts, obligations or affairs of the Trust. The Declaration
of Trust, in coordination with the Trust’s Amended and Restated By-laws, also provides for indemnification out of the Trust
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 Trust itself is unable to meet its obligations. The Trust has been advised by
its counsel that the risk of any shareholder incurring any liability for the obligations of the Trust is remote.
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The 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 Trust or its shareholders to which he or she 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 or her 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.
The Declaration of Trust provides 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 Trust’s custodian or by votes cast at a meeting called for that purpose. The Declaration of Trust
further provides that the Trustees of the Trust shall promptly call a meeting of the shareholders for the purpose of voting upon
a question of removal of any such Trustee or Trustees when requested in writing so to do by the record holders of not less than
10 per centum of the outstanding shares.
The Trust’s Prospectus, any related Prospectus Supplement,
and this SAI do not contain all of the information set forth in the Registration Statement that the Trust has filed with the SEC.
The complete Registration Statement may be obtained from the SEC through the website www.sec.gov, or upon payment of the fee prescribed
by its Rules and Regulations.
CUSTODIAN
State Street Bank and Trust Company (“State Street”),
State Street Financial Center, One Lincoln Street, Boston, MA 02111, is the custodian of the Trust and will maintain custody of
the securities and cash of the Trust. State Street maintains the Trust’s general ledger and computes net asset value per
share at least weekly. State Street also attends to details in connection with the sale, exchange, substitution, transfer and other
dealings with the Trust’s investments, and receives and disburses all funds. State Street also assists in preparation of
shareholder reports and the electronic filing of such reports with the SEC.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Deloitte & Touche LLP, 200 Berkeley Street, Boston, MA 02116,
independent registered public accounting firm, audits the Trust’s financial statements and provides other audit, tax and
related services.
FINANCIAL STATEMENTS
The audited financial statements and the report of the independent
registered public accounting firm of the Trust, for the fiscal year ended June 30, 2020, are incorporated herein by reference from
the Trust’s most recent Annual Report to Common Shareholders filed with the SEC on August 26, 2020 (Accession No. 0001193125-20-230900)
on Form N-CSR pursuant to Rule 30b2-1 under the 1940 Act.
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APPENDIX A
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 a particular date.
MOODY’S INVESTORS SERVICE, INC. (“Moody’s”)
Ratings assigned on Moody’s global long-term and short-term
rating scales are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates,
financial institutions, structured finance vehicles, project finance vehicles, and public sector entities. Long-term ratings are
assigned to issuers or obligations with an original maturity of one year or more and reflect both the likelihood of a default or
impairment on contractual financial obligations and the expected financial loss suffered in the event of default or impairment.
Short-term ratings are assigned to obligations with an original maturity of thirteen months or less and reflect the likelihood
of a default or impairment on contractual financial obligations and the expected financial loss suffered in the event of a default
or impairment.
GLOBAL LONG-TERM RATINGS SCALE
Aaa:
Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.
Aa:
Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A:
Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa:
Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative
characteristics
Ba:
Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.
B:
Obligations rated B are considered speculative and are subject to high credit risk.
Caa:
Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.
Ca:
Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal
and interest.
C:
Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.
Note:
Moody’s appends numerical modifiers, 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier
1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates a ranking in the lower end of that generic rating category.
GLOBAL SHORT-TERM RATING SCALE
Moody’s short-term ratings are opinions of the ability
of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual
short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly
noted.
P-1:
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2:
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3:
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
NP:
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime ratings categories.
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ISSUER RATINGS
Issuer Ratings are opinions of the ability of entities to
honor senior unsecured debt and debt like obligations. As such, Issuer Ratings incorporate any external support that is expected
to apply to all current and future issuance of senior unsecured financial obligations and contracts, such as explicit support stemming
from a guarantee of all senior unsecured financial obligations and contracts, and/or implicit support for issuers subject to joint
default analysis (e.g. banks and government-related issuers). Issuer Ratings do not incorporate support arrangements, such as guarantees,
that apply only to specific (but not to all) senior unsecured financial obligations and contracts.
US MUNICIPAL SHORT-TERM OBLIGATION RATINGS AND DEMAND OBLIGATION
RATINGS
SHORT-TERM OBLIGATION RATINGS
The global short-term ‘prime’ rating scale is
applied to commercial paper issued by U.S. municipalities and nonprofits. These commercial paper programs may be backed by external
letters of credit or liquidity facilities, or by an issuer’s self-liquidity.
For other short-term municipal obligations, Moody’s
uses one of two other short-term rating scales, the Municipal Investment Grade (MIG) and Variable Municipal Investment Grade (VMIG)
scales discussed below.
The MIG scale is used for U.S. municipal cash flow notes,
bond anticipation notes and certain other short-term obligations, which typically mature in three years or less. Under certain
circumstances, the MIG scale is used for bond anticipation notes with maturities of up to five years.
MIG
1 This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly
reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG
2 This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding
group.
MIG
3 This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access
for refinancing is likely to be less well-established.
SG
This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
Demand Obligation Ratings
In the case of variable rate demand obligations (VRDOs), a
two-component rating is assigned. The components are a long-term rating and a short-term demand obligation rating. The long-term
rating addresses the issuer’s ability to meet scheduled principal and interest payments. The short-term demand obligation
rating addresses the ability of the issuer or the liquidity provider to make payments associated with the purchase-price-upon demand
feature (“demand feature”) of the VRDO. The short-term demand obligation rating uses the VMIG scale. VMIG ratings with
liquidity support use as an input the short-term counterparty risk assessment of the support provider, or the long-term rating
of the underlying obligor in the absence of third party liquidity support. Transitions of VMIG ratings of demand obligations with
conditional liquidity support differ from transitions on the Prime scale to reflect the risk that external liquidity support will
terminate if the issuer’s long-term rating drops below investment grade.
VMIG
1: This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit
strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG
2: This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength
of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG
3: This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term
credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price
upon demand.
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SG:
This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity
provider that does not have a sufficiently strong short-term rating or may lack the structural or legal protections necessary to
ensure the timely payment of purchase price upon demand.
S&P GLOBAL RATINGS (“S&P”)
ISSUE CREDIT RATINGS DEFINITIONS
An S&P issue credit rating is a forward-looking opinion
about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations,
or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration
the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the
currency in which the obligation is denominated. The opinion reflects S&P’s view of the obligor's capacity and willingness
to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which
could affect ultimate payment in the event of default.
Issue credit ratings can be either long-term or short-term.
Short-term issue credit ratings are generally assigned to those obligations considered short-term in the relevant market. Short-term
issue credit ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations.
Medium-term notes are assigned long-term ratings.
LONG-TERM ISSUE CREDIT RATINGS:
Issue credit ratings are based, in varying degrees, on S&P’s
analysis of the following considerations:
· Likelihood
of payment—capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the
terms of the obligation;
· Nature of and
provisions of the financial obligation and the promise that it is imputed; and
· Protection
afforded by, and relative position of, the financial obligation in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights.
Issue ratings are an assessment of default risk, but may incorporate
an assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower
than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an entity
has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
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 obligors only to a small degree. The obligor’s capacity
to meet its financial commitments on the obligation 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 commitments
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 weaken the obligor’s capacity to meet its financial commitments on the obligation.
BB, B, CCC, CC and C
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 non-payment 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.
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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 commitments 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. The 'CC' rating is used when a default has not
yet occurred, but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.
C:
An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority
or lower ultimate recovery compared to obligations that are rated higher.
D:
An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category
is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within
five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days.
The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on
an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if
it is subject to a distressed exchange offer.
NR:
This indicates that a rating has not been assigned or is no longer assigned.
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.
SHORT-TERM ISSUE CREDIT RATINGS
A-1:
A short-term obligation rated ‘A-1’ is rated in the highest category by S&P. The obligor’s capacity to meet
its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign
(+). This indicates that the obligor’s capacity to meet its financial commitments on the obligation is extremely strong.
A-2:
A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial
commitment on the obligation is satisfactory.
A-3:
A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or
changing circumstances are more likely to weaken an obligor’s capacity to meet its financial commitment on the obligation.
B:
A short-term obligation rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to
the obligor's inadequate capacity to meet its financial commitments.
C:
A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial
and economic conditions for the obligor to meet its financial commitments on the obligation.
D:
A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D'
rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments
will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as
five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action
and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. A rating on an obligation
is lowered to 'D' if it is subject to a distressed exchange offer.
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ISSUER CREDIT RATINGS DEFINITIONS
S&P’s issuer credit rating is a forward-looking opinion
about an obligor's overall creditworthiness. This opinion focuses on the obligor's capacity and willingness to meet its financial
commitments as they come due. It does not apply to any specific financial obligation, as it does not take into account the nature
of and provisions of the obligation, its standing in bankruptcy or liquidation, statutory preferences, or the legality and enforceability
of the obligation.
Sovereign credit ratings are forms of issuer credit ratings.
Issuer credit ratings can be either long-term or short-term.
LONG-TERM ISSUER CREDIT RATINGS
AAA:
An obligor rated ‘AAA’ has extremely strong capacity to meet its financial commitments. ‘AAA’ is the highest
issuer credit rating assigned by S&P.
AA:
An obligor rated ‘AA’ has very strong capacity to meet its financial commitments. It differs from the highest-rated
obligors only to a small degree.
A:
An obligor rated ‘A’ has strong capacity to meet its financial commitments but is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
BBB:
An obligor rated ‘BBB’ has adequate capacity to meet its financial commitments. However, adverse economic conditions
or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments.
BB, B, CCC and CC
Obligors rated ‘BB’, ‘B’, ‘CCC’,
and ‘CC’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree
of speculation and ‘CC’ the highest. While such obligors will likely have some quality and protective characteristics,
these may be outweighed by large uncertainties or major exposure to adverse conditions.
BB:
An obligor ‘BB’ is less vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing
uncertainties and exposure to adverse business, financial, or economic conditions that could lead to the obligor’s inadequate
capacity to meet its financial commitments.
B:
An obligor rated ‘B’ is more vulnerable than the obligors rated ‘BB’, but the obligor currently has the
capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor’s
capacity or willingness to meets its financial commitments.
CCC:
An obligor rated ‘CCC’ is currently vulnerable, and is dependent upon favorable business, financial, and economic conditions
to meet its financial commitments.
CC:
An obligor rated ‘CC’ is currently highly vulnerable. The 'CC' rating is used when a default has not yet
occurred, but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.
SD
and D: An obligor is rated 'SD' (selective default) or 'D' if S&P considers
there to be a default on one or more of its financial obligations, whether long -or short-term, including rated and unrated financial
obligations but excluding hybrid instruments classified as regulatory capital or in non-payment according to terms. A 'D' rating
is assigned when S&P believes that the default will be a general default and that the obligor will fail to pay all or substantially
all of its obligations as they come due. An 'SD' rating is assigned when S&P believes that the obligor has selectively defaulted
on a specific issue or class of obligations but it will continue to meet its payment obligations on other issues or classes of
obligations in a timely manner. A rating on an obligor is lowered to 'D' or 'SD' if it is conducting a distressed exchange offer.
NR:
Indicates that a rating has not been assigned or is no longer assigned.
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.
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SHORT-TERM ISSUER CREDIT RATINGS
A-1:
An obligor rated ‘A-1’ has strong capacity to meet its financial commitments. It is rated in the highest category by
S&P. Within this category, certain obligors are designated with a plus sign (+). This indicates that the obligor’s capacity
to meet its financial commitments is extremely strong.
A-2:
An obligor rated ‘A-2’ has satisfactory capacity to meet its financial commitments. However, it is somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than obligors in the highest rating category.
A-3:
An obligor rated ‘A-3’ has adequate capacity to meet its financial obligations. However, adverse economic conditions
or changing circumstances are more likely to weaken the obligor’s capacity to meet its financial commitments.
B:
An obligor rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor currently
has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor’s
inadequate capacity to meet its financial commitments.
C:
An obligor rated 'C' is currently vulnerable to nonpayment that would result in a 'SD' or 'D' issuer rating, and is
dependent upon favorable business, financial, and economic conditions for it to meet its financial commitments.
SD
and D: An obligor is rated 'SD' (selective default) or 'D' if S&P considers there to be a default on one or more
of its financial obligations, whether long- or short-term, including rated and unrated obligations but excluding hybrid instruments
classified as regulatory capital or in nonpayment according to term. An obligor is considered in default unless S&P believes
that such payments will be made within any stated grace period. However, any stated grace period longer than five business days
will be treated as five business days. A 'D' rating is assigned when S&P believes that the default will be a general default
and that the obligor will fail to pay all or substantially all of its obligations as they come due. An 'SD' rating is assigned
when S&P believes that the obligor has selectively defaulted on a specific issue or class of obligations, excluding hybrid
instruments classified as regulatory capital, but it will continue to meet its payment obligations on other issues or classes of
obligations in a timely manner. An obligor's rating is lowered to 'D' or 'SD' if it is conducting a distressed exchange offer.
NR:
Indicates that a rating has not been assigned or is no longer assigned.
MUNICIPAL SHORT-TERM NOTE RATINGS
SHORT-TERM
NOTES: An S&P U.S. municipal note rating reflects S&P opinions about the liquidity factors and market access
risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more
than three years will most likely receive a long-term debt rating. In determining which type of rating, if any, to assign, S&P’s
analysis will review the following considerations: Amortization schedule--the larger the final maturity relative to other maturities,
the more likely it will be treated as a note; and Source of payment--the more dependent the issue is on the market for its refinancing,
the more likely it will be treated as a note.
Municipal Short-Term Note rating symbols are as follows:
SP-1:
Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt will be given
a plus (+) designation.
SP-2:
Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the
term of the notes.
SP-3:
Speculative capacity to pay principal and interest.
D: ‘D’
is assigned upon failure to pay the note when due, completion of a distressed exchange offer, or the filing of a bankruptcy petition
or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions.
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FITCH RATINGS
LONG-TERM CREDIT RATINGS
Issuer Default Ratings
AAA:
Highest credit quality. ‘AAA’ ratings denote the lowest expectation of default risk. They are assigned only
in case of exceptionally strong capacity for payment of financial commitments. The capacity is highly unlikely to be adversely
affected by foreseeable events.
AA:
Very high credit quality. ‘AA’ ratings denote expectations of very low default risk. They indicate very
strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A:
High credit quality. ‘A’ ratings denote expectations of low default risk. The capacity for payment of financial
commitments is considered strong. The capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.
BBB:
Good credit quality. 'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment
of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB:
Speculative. 'BB' ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes
in business or economic conditions over time; however, business or financial flexibility exist that supports the servicing of financial
commitments.
B:
Highly speculative. B' ratings indicate that material default risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business
and economic environment.
CCC:
Substantial credit risk. Default is a real possibility.
CC:
Very high levels of credit risk. Default of some kind appears probable.
C:
Near default. A default or default-like process has begun, or the issuer is in standstill, or for a closed funding vehicle,
payment capacity is irrevocably impaired. Conditions that are indicative of a ‘C’ category rating for an issuer include:
• The issuer has entered into a grace or cure period following
non-payment of a material financial obligation;
• The issuer had entered into a temporary negotiated waiver
or standstill agreement following a payment default on a material financial obligation;
• The formal announcement by the issuer or their agent
of distressed debt exchange;
• A closed financing vehicle where payment capacity is
irrevocably impaired such that it is not expected to pay interest and/or principal in full during the life of the transaction,
but where no payment default is imminent.
RD:
Restricted Default. ‘RD’ ratings indicate an issuer that in Fitch’s opinion has experienced:
• An unsecured payment default or distressed debt exchange
on a bond, loan or other material financial obligation, but
• Has not entered into bankruptcy filings, administration,
receivership, liquidation, or other formal winding-up procedure, and
• Has not otherwise ceased operating.
This would include:
• The selective payment default on specific class or currency
of debt;
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• The uncured expiry of any applicable grace period, cure
period or default forbearance period following a payment default on a bank loan, capital markets security or other material financial
obligation;
• The extension of multiple waivers of forbearance periods
upon a payment default on one or more material financial obligations, either in series or in parallel; ordinary execution of a
distressed debt exchange on one or more material financial obligations.
D:
Default. ‘D’ ratings indicate an issuer that in Fitch’s opinion has entered into bankruptcy filings,
administration, receivership, liquidation or other formal winding-up procedure or that has otherwise ceased business.
• Default ratings are not assigned prospectively to entities
or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally
not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by
bankruptcy or other similar circumstance, or by a distressed debt exchange.
• In all cases, the assignment of default rating reflects
the agency’s opinion as to the most appropriate rating category consistent with the rest of its universe of ratings and may
differ from the definition of default under the terms of an issuer’s financial obligations or local commercial practice.
Notes to Long-Term ratings:
The modifiers “+” or “-” may be appended
to a rating to denote relative status within major rating categories. Such suffixes are not added to the ‘AAA’ Long-Term
IDR category, or to Long-Term IDR categories below ‘B’.
Short-Term Credit Ratings Assigned to Issuers and Obligations
A short-term issuer or obligation rating is based in all cases
on the short-term vulnerability to default of the rated entity and relates to the capacity to meet financial obligations in accordance
with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity
is viewed as “short term” based on market convention. Typically, this means up to 13 months for corporate, sovereign,
and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
F1:
Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial
commitments; may have an added “+” to denote any exceptionally strong credit feature.
F2:
Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.
F3:
Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.
B:
Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened
vulnerability to near term adverse changes in financial and economic conditions.
C:
High short-term default risk. Default is a real possibility.
RD:
Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it
continues to meet other financial obligations. Typically applicable to entity ratings only.
D:
Indicates a broad-based default event for an entity, or the default of a short-term obligation.
DESCRIPTION OF INSURANCE FINANCIAL STRENGTH RATINGS
Moody’s Investors Service, Inc. Insurance Financial
Strength Ratings
Moody’s Insurance Financial Strength Ratings are opinions
of the ability of insurance companies to repay punctually senior policyholder claims and obligations and also reflect the expected
financial loss suffered in the event of default.
S&P Insurer Financial Strength Ratings
An S&P insurer financial strength rating is a forward-looking
opinion about the financial security characteristics of an insurance organization with respect to its ability to pay under its
insurance policies and contracts in accordance with their terms. Insurer financial strength ratings are also assigned to health
maintenance organizations and similar health plans with respect to their ability to pay under their policies and contracts in accordance
with their terms.
This opinion is not specific to any particular policy or contract,
nor does it address the suitability of a particular policy or contract for a specific purpose or purchaser. Furthermore, the opinion
does not take into account deductibles, surrender or cancellation penalties, timeliness of payment, nor the likelihood of the use
of a defense such as fraud to deny claims.
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Insurer financial strength ratings do not refer to an organization's
ability to meet nonpolicy (i.e., debt) obligations. Assignment of ratings to debt issued by insurers or to debt issues that are
fully or partially supported by insurance policies, contracts, or guarantees is a separate process from the determination of insurer
financial strength ratings, and it follows procedures consistent with those used to assign an issue credit rating. An insurer financial
strength rating is not a recommendation to purchase or discontinue any policy or contract issued by an insurer.
Long-Term Insurer Financial Strength Ratings
Category Definition
AAA
An insurer rated 'AAA' has extremely strong financial security
characteristics. 'AAA' is the highest insurer financial strength rating assigned by S&P.
AA
An insurer rated 'AA' has very strong financial security characteristics,
differing only slightly from those rated higher.
A
An insurer rated 'A' has strong financial security characteristics,
but is somewhat more likely to be affected by adverse business conditions than are insurers with higher ratings.
BBB
An insurer rated 'BBB' has good financial security characteristics,
but is more likely to be affected by adverse business conditions than are higher-rated insurers.
BB, B, CCC and CC
An insurer rated 'BB' or lower is regarded as having vulnerable
characteristics that may outweigh its strengths. 'BB' indicates the least degree of vulnerability within the range and 'CC' the
highest.
BB
An insurer rated 'BB' has marginal financial security characteristics.
Positive attributes exist, but adverse business conditions could lead to insufficient ability to meet financial commitments.
B
An insurer rated 'B' has weak financial security characteristics.
Adverse business conditions will likely impair its ability to meet financial commitments.
CCC
An insurer rated 'CCC' has very weak financial security characteristics,
and is dependent on favorable business conditions to meet financial commitments.
CC
An insurer rated 'CC' has extremely weak financial security
characteristics and is likely not to meet some of its financial commitments.
SD or D
An insurer rated 'SD' (selective default) or 'D' is in default
on one or more of its insurance policy obligations. The 'D' rating also will be used upon the filing of a bankruptcy petition
or the taking of similar action if payments on a policy obligation are at risk. A 'D' rating is assigned when S&P believes
that the default will be a general default and that the obligor will fail to pay substantially all of its obligations in full
in accordance with the policy terms. An 'SD' rating is assigned when S&P believes that the insurer has selectively defaulted
on a specific class of policies but it will continue to meet its payment obligations on other classes of obligations. A selective
default includes the completion of a distressed exchange offer. Claim denials due to lack of coverage or other legally permitted
defenses are not considered defaults.
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NR: Indicates that
a rating has not been assigned or is no longer assigned.
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.
Fitch Insurer Financial Strength Rating
The Insurer Financial Strength (IFS) Rating provides an assessment
of the financial strength of an insurance organization. The IFS Rating is assigned to the insurance company's policyholder obligations,
including assumed reinsurance obligations and contract holder obligations, such as guaranteed investment contracts. The IFS Rating
reflects both the ability of the insurer to meet these obligations on a timely basis, and expected recoveries received by claimants
in the event the insurer stops making payments or payments are interrupted, due to either the failure of the insurer or some form
of regulatory intervention. In the context of the IFS Rating, the timeliness of payments is considered relative to both contract
and/or policy terms but also recognizes the possibility of reasonable delays caused by circumstances common to the insurance industry,
including claims reviews, fraud investigations and coverage disputes.
The IFS Rating does not encompass policyholder obligations residing
in separate accounts, unit-linked products or segregated funds, for which the policyholder bears investment or other risks. However,
any guarantees provided to the policyholder with respect to such obligations are included in the IFS Rating.
Expected recoveries are based on the agency's assessments of
the sufficiency of an insurance company's assets to fund policyholder obligations, in a scenario in which payments have ceased
or been interrupted. Accordingly, expected recoveries exclude the impact of recoveries obtained from any government sponsored guaranty
or policyholder protection funds. Expected recoveries also exclude the impact of collateralization or security, such as letters
of credit or trusteed assets, supporting select reinsurance obligations.
IFS Ratings can be assigned to insurance and reinsurance companies
in any insurance sector, including the life & annuity, non-life, property/casualty, health, mortgage, financial guaranty,
residual value and title insurance sectors, as well as to managed care companies such as health maintenance organizations.
The IFS Rating uses the same symbols used by the agency for its
International and National credit ratings of long-term or short-term debt issues. However, the definitions associated with the
ratings reflect the unique aspects of the IFS Rating within an insurance industry context.
Obligations for which a payment interruption has occurred due
to either the insolvency or failure of the insurer or some form of regulatory intervention will generally be rated between 'B'
and 'C' on the Long-Term IFS Rating scales (both International and National). International Short-Term IFS Ratings assigned under
the same circumstances will align with the insurer's International Long-Term IFS Ratings.
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APPENDIX B
Eaton Vance Funds
Proxy Voting Policy and Procedures
I. Overview
The Boards of Trustees (the “Board”) of the Eaton
Vance Funds1 have determined that
it is in the interests of the Funds’ shareholders to adopt these written proxy voting policy and procedures (the “Policy”).
For purposes of this Policy:
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“Fund” means each registered investment company sponsored by the Eaton Vance organization; and
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“Adviser” means the adviser or sub-adviser responsible for the day-to-day management of all or a portion of the
Fund’s assets.
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II. Delegation of Proxy Voting Responsibilities
The Board hereby delegates to the Adviser responsibility for
voting the Fund’s proxies as described in this Policy. In this connection, the Adviser is required to provide the Board with
a copy of its proxy voting policies and procedures (“Adviser Procedures”) and all Fund proxies will be voted in accordance
with the Adviser Procedures, provided that in the event a material conflict of interest arises with respect to a proxy to be voted
for the Fund (as described in Section IV below) the Adviser shall follow the process for voting such proxy as described in Section
IV below.
The Adviser is required to report any material change to the
Adviser Procedures to the Board in the manner set forth in Section V below. In addition, the Board will review the Adviser Procedures
annually.
III. Delegation of Proxy Voting Disclosure
Responsibilities
Pursuant to Rule 30b1-4 promulgated under the Investment Company
Act of 1940, as amended (the “1940 Act”), the Fund is required to file Form N-PX no later than August 31st of each
year. On Form N-PX, the Fund is required to disclose, among other things, information concerning proxies relating to the Fund’s
portfolio investments, whether or not the Fund (or its Adviser) voted the proxies relating to securities held by the Fund and how
it voted on the matter and whether it voted for or against management.
To facilitate the filing of Form N-PX for the Fund:
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The Adviser is required to record, compile and transmit in a timely manner all data required to be filed on Form N-PX for the
Fund that it manages. Such data shall be transmitted to Eaton Vance Management, which acts as administrator to the Fund (the “Administrator”)
or the third party service provider designated by the Administrator; and
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the Administrator is required to file Form N-PX on behalf of the Fund with the Securities and Exchange Commission (“Commission”)
as required by the 1940 Act. The Administrator may delegate the filing to a third party service party provided each such filing
is reviewed and approved by the Administrator.
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IV. Conflicts of Interest
The Board expects the Adviser, as a fiduciary to the Fund it
manages, to put the interests of the Fund and its shareholders above those of the Adviser. When required to vote a proxy for the
Fund, the Adviser may have material business relationships with the issuer soliciting the proxy that could give rise to a potential
material conflict of interest for the Adviser.2
In the event such a material conflict of interest arises, the Adviser, to the extent it is aware or reasonably should have been
aware of the material conflict, will refrain from voting any proxies related to companies giving rise to such material conflict
until it notifies and consults with the appropriate Board, or any committee, sub-committee or group of Independent Trustees identified
by the Board (as long as such committee, sub-committee or group contains at least two or more Independent Trustees) (the “Board
Members”), concerning the material conflict.3
For ease of communicating with the Board Members, the Adviser is required to provide the foregoing notice to the Fund’s Chief
Legal Officer who will then notify and facilitate a consultation with the Board Members.
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Once the Board Members have been notified of the material conflict:
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They shall convene a meeting to review and consider all relevant materials related to the proxies involved. This meeting shall
be convened within 3 business days, provided that it an effort will be made to convene the meeting sooner if the proxy must be
voted in less than 3 business days;
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In considering such proxies, the Adviser shall make available all materials requested by the Board Members and make reasonably
available appropriate personnel to discuss the matter upon request.
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The Board Members will then instruct the Adviser on the appropriate course of action with respect to the proxy at issue.
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If the Board Members are unable to meet and the failure to vote
a proxy would have a material adverse impact on the Fund(s) involved, the Adviser will have the right to vote such proxy, provided
that it discloses the existence of the material conflict to the Chairperson of the Board as soon as practicable and to the Board
at its next meeting. Any determination regarding the voting of proxies of the Fund that is made by the Board Members shall be deemed
to be a good faith determination regarding the voting of proxies by the full Board.
V. Reports and Review
The Administrator shall make copies of each Form N-PX filed on
behalf of the Fund available for the Boards’ review upon the Boards’ request. The Administrator (with input from the
Adviser for the Fund) shall also provide any reports reasonably requested by the Board regarding the proxy voting records of the
Fund.
The Adviser shall report any material changes to the Adviser
Procedures to the Board as soon as practicable and the Boards will review the Adviser Procedures annually.
The Adviser also shall report any material changes to the
Adviser Procedures to the Fund Chief Legal Officer prior to implementing such changes in order to enable the Administrator to effectively
coordinate the Fund’s disclosure relating to the Adviser Procedures.
To the extent requested by the Commission, the Policy and the
Adviser Procedures shall be appended to the Fund’s statement of additional information included in its registration statement.
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1
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The Eaton Vance Funds may be organized as trusts or corporations. For ease of reference, the Funds may be referred to herein
as Trusts and the Funds’ Board of Trustees or Board of Directors may be referred to collectively herein as the Board.
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2
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An Adviser is expected to maintain a process for identifying a potential material conflict of interest. As an example only,
such potential conflicts may arise when the issuer is a client of the Adviser and generates a significant amount of fees to the
Adviser or the issuer is a distributor of the Adviser’s products.
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If a material conflict of interest exists with respect to a particular proxy and the proxy voting procedures of the relevant
Adviser require that proxies are to be voted in accordance with the recommendation of a third party proxy voting vendor, the requirements
of this Section IV shall only apply if the Adviser intends to vote such proxy in a manner inconsistent with such third party recommendation.
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EATON VANCE MANAGEMENT
BOSTON MANAGEMENT AND RESEARCH
EATON VANCE INVESTMENT COUNSEL
EATON VANCE TRUST COMPANY
EATON VANCE MANAGEMENT (INTERNATIONAL)
LIMITED
EATON VANCE ADVISERS INTERNATIONAL LTD.
PROXY VOTING POLICIES AND PROCEDURES
I. Introduction
Eaton Vance Management, Boston Management and Research, Eaton
Vance Investment Counsel, Eaton Vance Management (International) Limited, Eaton Vance Advisers International Ltd. and Eaton Vance
Trust Company (each an “Adviser” and collectively the “Advisers”) have each adopted and implemented policies
and procedures that each Adviser believes are reasonably designed to ensure that proxies are voted in the best interest of clients,
in accordance with its fiduciary duties and, to the extent applicable, Rule 206(4)-6 under the Investment Advisers Act of 1940,
as amended. The Advisers’ authority to vote the proxies of their clients is established by their advisory contracts or similar
documentation. These proxy policies and procedures are intended to reflect current requirements applicable to investment advisers
registered with the U.S. Securities and Exchange Commission (“SEC”) . These procedures may change from time to time.
II. Overview
Each Adviser manages its clients’ assets with the overriding
goal of seeking to provide the greatest possible return to such clients consistent with governing laws and the investment policies
of each client. In pursuing that goal, each Adviser seeks to exercise its clients’ rights as shareholders of voting securities
to support sound corporate governance of the companies issuing those securities with the principle aim of maintaining or enhancing
the companies’ economic value.
The exercise of shareholder rights is generally done by casting
votes by proxy at shareholder meetings on matters submitted to shareholders for approval (for example, the election of directors
or the approval of a company’s stock option plans for directors, officers or employees). Each Adviser has established guidelines
(“Guidelines”) as described below and generally will utilize such Guidelines in voting proxies on behalf of its clients.
The Guidelines are largely based on those developed by the Agent (defined below) but also reflect input from the Global Proxy Group
(defined below) and other Adviser investment professionals and are believed to be consistent with the views of the Adviser on the
various types of proxy proposals. These Guidelines are designed to promote accountability of a company’s management and board
of directors to its shareholders and to align the interests of management with those of shareholders. The Guidelines provide a
framework for analysis and decision making but do not address all potential issues.
Except as noted below, each Adviser will vote any proxies received
by a client for which it has sole investment discretion through a third-party proxy voting service (“Agent”) in accordance
with the Guidelines in a manner that is reasonably designed to eliminate any potential conflicts of interest, as described more
fully below. The Agent is currently Institutional Shareholder Services Inc. Where applicable, proxies will be voted in accordance
with client-specific guidelines or, in the case of an Eaton Vance Fund that is sub-advised, pursuant to the sub-adviser’s
proxy voting policies and procedures. Although an Adviser retains the services of the Agent for research and voting recommendations,
the Adviser remains responsible for proxy voting decisions.
III. Roles and Responsibilities
A. Proxy Administrator
The Proxy Administrator and/or her designee coordinate
the consideration of proxies referred back to the Adviser by the Agent, and otherwise administers these Procedures. In the Proxy
Administrator’s absence, another employee of the Adviser may perform the Proxy Administrator’s responsibilities as
deemed appropriate by the Global Proxy Group. The Proxy Administrator also may designate another employee to perform certain of
the Proxy Administrator’s duties hereunder, subject to the oversight of the Proxy Administrator.
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B. Agent
The Agent is responsible for coordinating with the
clients’ custodians and the Advisers to ensure that all proxy materials received by the custodians relating to the portfolio
securities are processed in a timely fashion. Each Adviser shall instruct the custodian for its clients to deliver proxy ballots
and related materials to the Agent. The Agent shall vote and/or refer all proxies in accordance with the Guidelines. The Agent
shall retain a record of all proxy votes handled by the Agent. With respect to each Eaton Vance Fund memorialized therein, such
record must reflect all of the information required to be disclosed in the Fund’s Form N-PX pursuant to Rule 30b1-4 under
the Investment Company Act of 1940, to the extent applicable. In addition, the Agent is responsible for maintaining copies of all
proxy statements received by issuers and to promptly provide such materials to an Adviser upon request.
Subject to the oversight of the Advisers, the Agent
shall establish and maintain adequate internal controls and policies in connection with the provision of proxy voting services
to the Advisers, including methods to reasonably ensure that its analysis and recommendations are not influenced by a conflict
of interest, and shall disclose such controls and policies to the Advisers when and as provided for herein. Unless otherwise specified,
references herein to recommendations of the Agent shall refer to those in which no conflict of interest has been identified. The
Advisers are responsible for the ongoing oversight of the Agent as contemplated by SEC Staff Legal Bulletin No. 20 (June 30, 2014)
and interpretive guidance issued by the SEC in August 2019 regarding proxy voting responsibilities of investment advisers (Release
Nos. IA-5325 and IC-33605). Such oversight currently may include one or more of the following and may change from time to time:
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periodic review of Agent’s proxy voting platform and reporting capabilities (including recordkeeping);
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periodic review of a sample of ballots for accuracy and correct application of the Guidelines;
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periodic meetings with Agent’s client services team;
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periodic in-person and/or web-based due diligence meetings;
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receipt and review of annual certifications received from the Agent;
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annual review of due diligence materials provided by the Agent, including review of procedures and practices regarding potential
conflicts of interests;
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periodic review of relevant changes to Agent’s business; and/or
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periodic review of the following to the extent not included in due diligence materials provided by the Agent: (i) Agent’s
staffing, personnel and/or technology; (ii) Agent’s process for seeking timely input from issuers (e.g., with respect
to proxy voting policies, methodologies and peer group construction); (iii) Agent’s process for use of third-party information;
and (iv) the Agent’s policies and procedures for obtaining current and accurate information relevant to matters in its research
and on which it makes voting recommendations.
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C. Global Proxy Group
The Adviser shall establish a Global Proxy Group which
is responsible for establishing the Guidelines (described below) and reviewing such Guidelines at least annually. The Global Proxy
Group shall also review recommendations to vote proxies in a manner that is contrary to the Guidelines and when the proxy relates
to a conflicted company of the Adviser or the Agent as described below.
The members of the Global Proxy Group shall include
the Chief Equity Investment Officer of Eaton Vance Management (“EVM”) and selected members of the Equity Departments
of EVM and Eaton Vance Advisers International Ltd. (“EVAIL”) and EVM’s Global Income Department. The Proxy Administrator
is not a voting member of the Global Proxy Group. Members of the Global Proxy Group may be changed from time to time at the Advisers’
discretion. Matters that require the approval of the Global Proxy Group may be acted upon by its member(s) available to consider
the matter.
IV. Proxy Voting
A. The Guidelines
The Global Proxy Group shall establish recommendations
for the manner in which proxy proposals shall be voted (the “Guidelines”). The Guidelines shall identify when ballots
for specific types of proxy proposals shall be voted(1)
or referred to the Adviser. The Guidelines shall address a wide variety of individual topics, including, among other
matters, shareholder voting rights, anti-takeover defenses, board structures, the election of directors, executive and director
compensation, reorganizations, mergers, issues of corporate social responsibility and other proposals affecting shareholder rights.
In determining the Guidelines, the Global Proxy Group considers the recommendations of the Agent as well as input from the Advisers’
portfolio managers and analysts and/or other internally developed or third party research.
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The Global Proxy Group shall review the Guidelines
at least annually and, in connection with proxies to be voted on behalf of the Eaton Vance Funds, the Adviser will submit amendments
to the Guidelines to the Fund Boards each year for approval.
With respect to the types of proxy proposals listed
below, the Guidelines will generally provide as follows:
1. Proposals Regarding Mergers and Corporate
Restructurings/Disposition of Assets/Termination/Liquidation and Mergers
The Agent shall be directed to refer proxy proposals
accompanied by its written analysis and voting recommendation to the Proxy Administrator and/or her designee for all proposals
relating to Mergers and Corporate Restructurings.
2. Corporate Structure Matters/Anti-Takeover
Defenses
As a general matter, the Advisers will normally vote
against anti-takeover measures and other proposals designed to limit the ability of shareholders to act on possible transactions
(except in the case of closed-end management investment companies).
3. Proposals Regarding Proxy Contests
The Agent shall be directed to refer contested proxy
proposals accompanied by its written analysis and voting recommendation to the Proxy Administrator and/or her designee.
4. Social and Environmental Issues
The Advisers will vote social and environmental proposals
on a “case-by-case” basis taking into consideration industry best practices and existing management policies and practices.
Interpretation and application of the Guidelines is
not intended to supersede any law, regulation, binding agreement or other legal requirement to which an issuer or the Adviser may
be or become subject. The Guidelines generally relate to the types of proposals that are most frequently presented in proxy statements
to shareholders. In certain circumstances, an Adviser may determine to vote contrary to the Guidelines subject to the voting procedures
set forth below.
B. Voting Procedures
Except as noted in Section V below, the Proxy Administrator
and/or her designee shall instruct the Agent to vote proxies as follows:
1. Vote in Accordance with Guidelines
If the Guidelines prescribe the manner in which the
proxy is to be voted, the Agent shall vote in accordance with the Guidelines, which for certain types of proposals, are recommendations
of the Agent made on a case-by-case basis.
2. Seek Guidance for a Referred Item or a Proposal
for which there is No Guideline
If (i) the Guidelines state that the proxy shall be
referred to the Adviser to determine the manner in which it should be voted or (ii) a proxy is received for a proposal for which
there is no Guideline, the Proxy Administrator and/or her designee shall consult with the analyst(s) covering the company subject
to the proxy proposal and shall instruct the Agent to vote in accordance with the determination of the analyst. The Proxy Administrator
and/or her designee will maintain a record of all proxy proposals that are referred by the Agent, as well as all applicable recommendations,
analysis and research received and the resolution of the matter. Where more than one analyst covers a particular company and the
recommendations of such analysts for voting a proposal subject to this Section IV.B.2 conflict, the Global Proxy Group shall review
such recommendations and any other available information related to the proposal and determine the manner in which it should be
voted, which may result in different recommendations for clients (including Funds).
3. Votes Contrary to the Guidelines or Where
Agent is Conflicted
In the event an analyst with respect to
companies within his or her coverage area may recommend a vote contrary to the Guidelines, the Proxy Administrator and/or her
designee will provide the Global Proxy Group with the Agent’s recommendation for the Proposal along with any other
relevant materials, including a description of the basis for the analyst’s recommendation via email and the Proxy
Administrator and/or designee will then instruct the Agent to vote the proxy in the manner determined by the Global Proxy
Group. Should the vote by the Global Proxy
Group concerning one or more recommendations result in a tie,
EVM’s Chief Equity Investment Officer will determine
the manner in which the proxy will
be voted. The Adviser will provide a report to the Boards of Trustees of the
Eaton Vance Funds reflecting any votes cast on behalf of
the Eaton Vance Funds contrary to the Guidelines, and shall do so quarterly. A similar process will be followed if the Agent has
a conflict of interest with respect to a proxy as described in Section VI.B.
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4. Do Not Cast a Vote
It shall generally be the policy of the Advisers to
take no action on a proxy for which no client holds a position or otherwise maintains an economic interest in the relevant security
at the time the vote is to be cast. In addition, the Advisers may determine not to vote (i) if the economic effect on shareholders'
interests or the value of the portfolio holding is indeterminable or insignificant (e.g., proxies in connection with securities
no longer held in the portfolio of a client or proxies being considered on behalf of a client that is no longer in existence);
(ii) if the cost of voting a proxy outweighs the benefits (e.g., certain international proxies, particularly in cases in
which share blocking practices may impose trading restrictions on the relevant portfolio security); (iii) in markets in which shareholders'
rights are limited; or (iv) the Adviser is unable to access or access timely ballots or other proxy information. Non-Votes may
also result in certain cases in which the Agent's recommendation has been deemed to be conflicted, as provided for herein.
C. Securities on Loan
When a fund client participates in the lending of
its securities and the securities are on loan at the record date for a shareholder meeting, proxies related to such securities
generally will not be forwarded to the relevant Adviser by the fund’s custodian and therefore will not be voted. In the event
that the Adviser determines that the matters involved would have a material effect on the applicable fund’s investment in
the loaned securities, the Adviser will make reasonable efforts to terminate the loan in time to be able to cast such vote or exercise
such consent. The Adviser shall instruct the fund’s security lending agent to refrain from lending the full position of any
security held by a fund to ensure that the Adviser receives notice of proxy proposals impacting the loaned security.
V. Recordkeeping
The Advisers will maintain records relating to the proxies they
vote on behalf of their clients in accordance with Section 204-2 of the Investment Advisers Act of 1940, as amended. Those records
will include:
|
·
|
A copy of the Advisers’ proxy voting policies and procedures;
|
|
·
|
Proxy statements received regarding client securities. Such proxy statements received from issuers are either in the SEC’s
EDGAR database or are kept by the Agent and are available upon request;
|
|
·
|
A record of each vote cast;
|
|
·
|
A copy of any document created by the Advisers that was material to making a decision on how to vote a proxy for a client or
that memorializes the basis for such a decision; and
|
|
·
|
Each written client request for proxy voting records and the Advisers’ written response to any client request (whether
written or oral) for such records.
|
All records described above will be maintained in an easily accessible
place for five years and will be maintained in the offices of the Advisers or their Agent for two years after they are created.
Notwithstanding anything contained in this Section V, Eaton Vance
Trust Company shall maintain records relating to the proxies it votes on behalf of its clients in accordance with laws and regulations
applicable to it and its activities. In addition, EVAIL shall maintain records relating to the proxies it votes on behalf of its
clients in accordance with UK law.
VI. Assessment of Agent and Identification and Resolution
of Conflicts with Clients
A. Assessment
of Agent
The Advisers shall establish that the Agent (i) is
independent from the Advisers, (ii) has resources that indicate it can competently provide analysis of proxy issues, and (iii)
can make recommendations in an impartial manner and in the best interests of the clients and, where applicable, their beneficial
owners. The Advisers shall utilize, and the Agent shall comply with, such methods for establishing the foregoing as the Advisers
may deem reasonably appropriate and shall do so not less than annually as well as prior to engaging the services of any new proxy
voting service. The Agent shall also notify the Advisers in writing within fifteen (15) calendar days of any material change to
information previously provided to an Adviser in connection with establishing the Agent’s independence, competence or impartiality.
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B. Conflicts of Interest
As fiduciaries to their clients, each Adviser puts
the interests of its clients ahead of its own. In order to ensure that relevant personnel of the Advisers are able to identify
potential material conflicts of interest, each Adviser will take the following steps:
|
·
|
Quarterly, the Eaton Vance Legal and Compliance Department will seek information from the department heads of each department
of the Advisers and of Eaton Vance Distributors, Inc. (“EVD”) (an affiliate of the Advisers and principal underwriter
of certain Eaton Vance Funds). Each department head will be asked to provide a list of significant clients or prospective clients
of the Advisers or EVD.
|
|
·
|
A representative of the Legal and Compliance Department will compile a list of the companies identified (the “Conflicted
Companies”) and provide that list to the Proxy Administrator.
|
|
·
|
The Proxy Administrator will compare the list of Conflicted Companies with the names of companies for which he or she has been
referred a proxy statement (the “Proxy Companies”). If a Conflicted Company is also a Proxy Company, the Proxy Administrator
will report that fact to the Global Proxy Group.
|
|
·
|
If the Proxy Administrator expects to instruct the Agent to vote the proxy of the Conflicted Company strictly according to
the Guidelines contained in these Proxy Voting Policies and Procedures (the “Policies”) or the recommendation of the
Agent, as applicable, he or she will (i) inform the Global Proxy Group of that fact, (ii) instruct the Agent to vote the proxies
and (iii) record the existence of the material conflict and the resolution of the matter.
|
|
·
|
If the Proxy Administrator intends to instruct the Agent to vote in a manner inconsistent with the Guidelines, the Global Proxy
Group will then determine if a material conflict of interest exists between the relevant Adviser and its clients (in consultation
with the Legal and Compliance Department if needed). If the Global Proxy Group determines that a material conflict exists, prior
to instructing the Agent to vote any proxies relating to these Conflicted Companies the Adviser will seek instruction on how the
proxy should be voted from:
|
|
·
|
The client, in the case of an individual, corporate, institutional or benefit plan client;
|
|
·
|
In the case of a Fund, its board of directors, any committee, sub-committee or group of Independent Trustees (as long as such
committee, sub-committee or group contains at least two or more Independent Trustees); or
|
|
·
|
The adviser, in situations where the Adviser acts as a sub-adviser to such adviser.
|
The Adviser will provide all reasonable assistance to each party
to enable such party to make an informed decision.
If the client, Fund board or adviser, as the case may be, fails
to instruct the Adviser on how to vote the proxy, the Adviser will generally instruct the Agent, through the Proxy Administrator,
to abstain from voting in order to avoid the appearance of impropriety. If however, the failure of the Adviser to vote its clients’
proxies would have a material adverse economic impact on the Advisers’ clients’ securities holdings in the Conflicted
Company, the Adviser may instruct the Agent, through the Proxy Administrator, to vote such proxies in order to protect its clients’
interests. In either case, the Proxy Administrator will record the existence of the material conflict and the resolution of the
matter.
The Advisers shall also identify and address conflicts that may
arise from time to time concerning the Agent. Upon the Advisers’ request, which shall be not less than annually, and within
fifteen (15) calendar days of any material change to such information previously provided to an Adviser, the Agent shall provide
the Advisers with such information as the Advisers deem reasonable and appropriate for use in determining material relationships
of the Agent that may pose a conflict of interest with respect to the Agent’s proxy analysis or recommendations. Such information
shall include, but is not limited to, a monthly report from the Agent detailing the Agent’s Corporate Securities Division
clients and related revenue data. The Advisers shall review such information on a monthly basis. The Proxy Administrator shall
instruct the Agent to refer any proxies for which a material conflict of the Agent is deemed to be present to the Proxy Administrator.
Any such proxy referred by the Agent shall be referred to the Global Proxy Group for consideration accompanied by the Agent’s
written analysis and voting recommendation. The Proxy Administrator will instruct the Agent to vote the proxy as recommended by
the Global Proxy Group.
|
(1)
|
The Guidelines will prescribe how a proposal shall be voted or provide factors to be considered on a case-by-case basis by
the Agent in recommending a vote pursuant to the Guidelines.
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Eaton Vance Senior Income Trust
Statement of Additional Information
October 27, 2020
_______________
Investment Adviser and Administrator
Eaton Vance Management
Two International Place
Boston, MA 02110
Custodian
State Street Bank and Trust Company
State Street Financial Center, One Lincoln
Street
Boston, MA 02111
Transfer Agent
American Stock Transfer & Trust Company,
LLC
6201 15th Avenue
Brooklyn, NY 11219
Independent Registered Public Accounting
Firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PART C
OTHER INFORMATION
|
ITEM 25.
|
FINANCIAL STATEMENTS AND EXHIBITS
|
(1) FINANCIAL STATEMENTS:
Included in Part A:
Financial Highlights.
Included in Part B:
Registrant’s Certified Shareholder
Report on Form N-CSR filed August 26, 2020 (Accession No. 0001193125-20-230900) and incorporated herein by reference.
_______________________________
(2) EXHIBITS:
|
|
(4)
|
|
Form of Underwriting Agreement for Auction Preferred Shares filed as Exhibit (h) to Pre-Effective Amendment No. 2 to the Registration Statement under the Securities Act of 1933 (1933 Act File No. 333-58758) and Amendment No. 5 to the Registration Statement under the Investment Company Act of 1940 (1940 Act File No. 811-09013) filed with the Commission on June 19, 2001 (Accession No. 0000940394-01-500302) ("Amendment No. 5") and incorporated herein by reference.
|
|
|
(5)
|
|
Form of Distribution Agreement with respect to the Rule 415 shelf offering is incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant’s Shelf Registration Statement filed with the Commission on February 21, 2019 (Accession No. 000940394-19-000355) (“Form of Distribution Agreement”).
|
|
|
(6)
|
|
Form of Sub-Placement Agent Agreement between Eaton Vance Distributors, Inc. and UBS Securities LLC is incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant’s Shelf Registration Statement filed with the Commission on February 21, 2019 (Accession No. 000940394-19-000355) (“Form of Sub-Placement Agent Agreement”).
|
|
(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)
|
(1)
|
|
Amended and Restated Master Custodian Agreement between Eaton Vance Funds and State Street Bank & Trust Company dated September 1, 2013 filed as Exhibit (g)(1) to Post-Effective Amendment No. 211 of Eaton Vance Mutual Funds Trust (File Nos. 002-90946, 811-04015) filed September 24, 2013 (Accession No. 0000940394-13-001073) and incorporated herein by reference.
|
|
|
(2)
|
|
Amended and Restated Services Agreement with State Street Bank & Trust Company dated September 1, 2010 filed as exhibit (g)(2) to Post-Effective Amendment No. 108 of Eaton Vance Special Investment Trust (File Nos. 02-27962, 811-1545) filed September 27, 2010 (Accession No. 0000940394-10-001000) and incorporated herein by reference.
|
|
|
(3)
|
|
Amendment Number 1 dated May 16, 2012 to Amended and Restated Services Agreement with State Street Bank & Trust Company dated September 1, 2010 filed as Exhibit (g)(3) to Post-Effective Amendment No. 39 of Eaton Vance Municipals Trust II (File Nos. 033-71320, 811-08134) filed May 29, 2012 (Accession No. 0000940394-12-000641) and incorporated herein by reference.
|
|
|
(4)
|
|
Amendment dated September 1, 2013 to Amended and Restated Services Agreement with State Street Bank & Trust Company filed as Exhibit (g)(4) to Post-Effective Amendment No. 211 of Eaton Vance Mutual Funds Trust (File Nos. 002-90946, 811-04015) filed September 24, 2013 (Accession No. 0000940394-13-001073) and incorporated herein by reference.
|
|
|
(5)
|
|
Amendment dated July 18, 2018 and effective June 29, 2018 to Amended and Restated Services Agreement with State Street Bank & Trust Company dated September 1, 2010 filed as Exhibit (g)(5) to Post-Effective Amendment No. 212 filed July 31, 2018 (Accession No. 0000940394-18-001408) and incorporated herein by reference.
|
|
(k)
|
(1)
|
|
Transfer Agency and Services Agreement dated February 5, 2007 between American Stock Transfer & Trust Company and each Registered Investment Company listed on Exhibit 1 filed as Exhibit (k)(1) is incorporated herein by reference to Pre-Effective Amendment No. 3 to the initial Registration Statement on Form N-2 of Eaton Vance Tax-Managed Global Diversified Equity Income Fund (File Nos. 333-138318, 811-21973) filed February 21, 2007 (Accession No. 0000950135- 07- 000974).
|
|
|
(2)
|
|
Amendment dated April 21, 2008 to Transfer Agency and Services Agreement dated February 5, 2007 between American Stock Transfer & Trust Company and each Registered Investment Company listed on Exhibit 1 filed as Exhibit (k)(1) is incorporated herein by reference to Pre-Effective Amendment No. 1 to the initial Registration Statement on Form N-2 of Eaton Vance National Municipal Opportunities Trust (File Nos. 333-156948, 811-22269) filed April 21, 2009 (Accession No. 0000950135- 09- 083055).
|
|
|
(3)
|
|
Amendment dated June 13, 2012 to Transfer Agency and Services Agreement dated February 5, 2007 between American Stock Transfer & Trust Company and each Registered Investment Company listed on Exhibit 1 filed as Exhibit (k)(1) is incorporated herein by reference to Pre-Effective Amendment No. 2 to the initial Registration Statement on Form N-2 of Eaton Vance High Income 2021 Target Term Trust (File Nos. 333-209436, 811-23136) filed April 25, 2016 (Accession No. 0000950135-16-552383).
|
|
|
(4)
|
|
Amended and Restated Administrative Services Agreement dated August 6, 2012 filed as Exhibit (k)(2) to Post-Effective Amendment No. 3 filed October 27, 2014 (Accession No. 0000940394-14-001403) and incorporated herein by reference.
|
|
|
(5)
|
|
Shareholder Servicing Agreement dated as of October 19, 1998 filed as Exhibit (k)(3) to Amendment No. 1 and incorporated herein by reference.
|
|
|
(6)
|
|
Form of Auction Agency Agreement to the Auction Preferred Shares filed as Exhibit (k)(1) to Amendment No. 5 and incorporated herein by reference.
|
|
|
(7)
|
|
Form of Broker-Dealer Agreement as to the Registrant's Auction Preferred Shares filed as Exhibit (k)(2) to Amendment No. 5 and incorporated herein by reference.
|
|
|
(8)
|
|
Form of DTC Representations Letter as to the Registrant's Auction Preferred Shares filed as Exhibit (k)(3) to Amendment No. 5 and incorporated herein by reference.
|
|
(l)
|
|
|
Opinion of Internal Counsel filed herewith.
|
|
(m)
|
|
|
Not applicable.
|
|
(n)
|
|
|
Consent of Independent Registered Public Accounting Firm filed herewith.
|
|
(o)
|
|
|
Not applicable.
|
|
(p)
|
|
|
Letter Agreement with Eaton Vance Management dated October 23, 1998 filed as Exhibit (p) to Amendment No. 1 and incorporated herein by reference.
|
|
(q)
|
|
|
Not applicable.
|
|
(r)
|
(1)
|
|
Code of Ethics adopted by the Eaton Vance Funds effective April 8, 2020 filed as Exhibit (p)(1)(a) to Post-Effective Amendment No. 198 of Eaton Vance Special Investment Trust (File Nos. 002-27962, 811-01545) filed April 27, 2020 (Accession No. 0000940394-20-000815) and incorporated herein by reference.
|
|
|
(2)
|
|
Code of Ethics adopted by the Eaton Vance Entities effective January 1, 2020 filed as Exhibit (p)(1)(b) to Post-Effective Amendment No. 192 of Eaton Vance Special Investment Trust (File Nos. 002-27962, 811-01545) filed January 9, 2020 (Accession No. 0000940394-20-000020) and incorporated herein by reference.
|
|
(s)
|
|
|
Power of Attorney dated October 10, 2018 filed as Exhibit (s) to the Registrant’s Post-Effective Amendment No. 3 on Form N-2 filed October 24, 2018 (Accession No. 0000940394-18-001709) and incorporated herein by reference.
|
|
ITEM 26.
|
MARKETING ARRANGEMENTS
|
See Form of Distribution Agreement with respect to the
Rule 415 shelf offering.
See Form of Sub-Placement Agent Agreement between Eaton Vance
Distributors, Inc. and UBS Securities LLC.
|
ITEM 27.
|
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
|
The approximate expenses in connection with the offering are
as follows:
Registration and Filing Fees
|
$ 3,365
|
FINRA Fees
|
500
|
New York Stock Exchange Fees
|
15,930
|
Costs of Printing and Engraving
|
0
|
Accounting Fees and Expenses
|
2,050
|
Legal Fees and Expenses
|
5,000
|
Total
|
$ 26,845
|
* The Adviser will pay expenses of the offering (other than the applicable commissions).
|
|
ITEM 28.
|
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
|
None.
|
ITEM 29.
|
NUMBER OF HOLDERS OF SECURITIES
|
Set forth below is the number of record holders as of September
30, 2020, of each class of securities of the Registrant:
Title of Class
|
|
Number of Record Holders
|
Common Shares of Beneficial interest, par value $0.01 per share
|
|
8,162
|
Auction Preferred Shares - Series A, par value $0.01 per share
|
|
18
|
Auction Preferred Shares - Series B, par value $0.01 per share
|
|
11
|
The Registrant's Amended and Restated By-Laws and the Form of
Distribution Agreement contain provisions limiting the liability, and providing for indemnification, of the Trustees and officers
under certain circumstances.
The 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 official capacities as such. Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the “Securities Act”), may be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions described in this Item 30, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
|
ITEM 31.
|
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
|
Reference is made to: (i) the information set forth under the
caption “Investment advisory and other services” in the Statement of Additional Information; (ii) the Eaton Vance Corp.
10-K filed under the Securities Exchange Act of 1934, as amended (File No. 001-8100); and (iii) the Form ADV of Eaton Vance Management
(File No. 801-15930) filed with the Securities and Exchange Commission, all of which are incorporated herein by reference.
|
ITEM 32.
|
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, as amended, and the Rules promulgated thereunder
are in the possession and custody of the Registrant's custodian, State Street Bank and Trust Company, State Street Financial Center,
One Lincoln Street, Boston, MA 02111, and its transfer agent, American Stock Transfer & Trust Company, LLC, 6201 15th
Avenue, Brooklyn, NY 11219, with the exception of certain corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, Two International Place, Boston, MA 02110. Registrant is informed that all applicable
accounts, books and documents required to be maintained by registered investment advisers are in the custody and possession of
Eaton Vance Management.
|
ITEM 33.
|
MANAGEMENT SERVICES
|
Not applicable.
1. The
Registrant undertakes to suspend the offering of Common Shares until the prospectus is amended if (1) subsequent to the effective
date of this Registration Statement, the net asset value declines more than 10 percent from its net asset value as of the effective
date of this Registration Statement or (2) the net asset value increases to an amount greater than its net proceeds as stated
in the prospectus.
2. Not
applicable.
3. The
Registrant undertakes to
(a) file,
during any period in which offers or sales are being made, a post-effective amendment to the registration statement:
(1) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(2) to
reflect in the prospectus any facts or events 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. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(3) 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.
(b) that,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the offering of those securities at that time shall
be deemed to be the initial bona fide offering thereof;
(c) 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 offering;
(d) that,
for the purpose of determining liability under the Securities Act to any purchaser:
(1) if the Registrant is relying
on Rule 430B [17 CFR 230.430B]:
(A) Each prospectus filed by
the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus
was deemed part of and included in the registration statement; and
(B) Each prospectus required
to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating
to an offering made pursuant to Rule 415(a)(1)(i), (x), or (xi) for the purpose of providing the information required by Section
10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the
date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities
in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part
of the registration statement or made in any such document immediately prior to such effective date; or
(2) if the Registrant is subject
to Rule 430C [17 CFR 230.430C]: each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a registration
statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede
or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first use.
(e) that
for the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution
of securities: The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to the purchaser:
(1) any
preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule
424 under the Securities Act;
(2) free
writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the
undersigned Registrants;
(3) the
portion of any other free writing prospectus or advertisement pursuant to Rule 482 under the Securities Act relating to the offering
containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned
Registrant; and
(4) any
other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.
4. The
Registrant undertakes that:
(a) for
the purpose of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant
under the Securities Act shall be deemed to be part of the Registration Statement as of the time it was declared effective; and
(b) for
the purpose of determining any liability under the Securities Act, each post- effective amendment that contains a form of prospectus
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.
5. Not applicable.
6. Not applicable.
7. The Registrant undertakes to send
by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of an oral
or written request, its Statement of Additional Information.
NOTICE
A copy of the Agreement and Declaration of Trust
of Eaton Vance Senior Income Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby
given that this instrument is executed on behalf of the Registrant by an officer of the Registrant as an officer and not individually
and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders
individually, but are binding only upon the assets and property of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended and the Investment Company Act of 1940, as amended, the Registrant 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 the 27th day of October 2020.
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EATON VANCE SENIOR INCOME TRUST
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|
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By:
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Payson F. Swaffield*
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Payson F. Swaffield, President
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Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
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Title
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|
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Payson F. Swaffield*
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President (Chief Executive Officer)
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Payson F. Swaffield
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James F. Kirchner*
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Treasurer (Principal Financial and Accounting Officer)
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James F. Kirchner
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Signature
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Title
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Signature
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Title
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Thomas E. Faust Jr.*
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Trustee
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Helen Frame Peters*
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Trustee
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Thomas E. Faust Jr.
|
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Helen Frame Peters
|
|
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Mark R. Fetting*
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Trustee
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Keith Quinton*
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Trustee
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Mark R. Fetting
|
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Keith Quinton
|
|
|
|
|
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Cynthia E. Frost*
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Trustee
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Marcus L. Smith*
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Trustee
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Cynthia E. Frost
|
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Marcus L. Smith
|
|
|
|
|
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George J. Gorman*
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Trustee
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Susan J. Sutherland*
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Trustee
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George J. Gorman
|
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Susan J. Sutherland
|
|
|
|
|
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Valerie A. Mosley*
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Trustee
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Scott E. Wennerholm*
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Trustee
|
Valerie A. Mosley
|
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Scott E. Wennerholm
|
|
|
|
|
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William H. Park*
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Trustee
|
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William H. Park
|
|
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*By:
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/s/ Maureen A. Gemma
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Maureen A. Gemma (As attorney-in-fact)
|
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INDEX TO EXHIBITS
Exhibit No.
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Description
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(l)
|
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Opinion of Internal Counsel
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(n)
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Consent of Independent Registered Public Accounting Firm
|
|
|
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