UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-09013
Eaton Vance Senior Income Trust
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110
(Name and Address of Agent for Services)
(617) 482-8260
(Registrant’s Telephone Number)
June 30
Date of Fiscal Year End
December 31, 2015
Date of Reporting Period
Item 1. Reports to Stockholders
Eaton Vance
Senior Income Trust (EVF)
Semiannual Report
December 31, 2015
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 swap agreements) or markets itself as providing investment exposure to such instruments. The Fund has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act. Accordingly, neither the Fund nor the adviser with respect to the operation of the Fund is subject to CFTC regulation. Because of its management of other strategies, the Fund’s adviser is registered with the CFTC as a commodity pool operator and a commodity trading advisor.
Fund shares are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution. Shares are subject to investment risks, including possible loss of principal invested.
Semiannual Report December 31, 2015
Eaton Vance
Senior Income Trust
Table of Contents
| Performance |
2 | |||
| Fund Profile |
3 | |||
| Endnotes and Additional Disclosures |
4 | |||
| Financial Statements |
5 | |||
| Notice to Shareholders |
43 | |||
| Annual Meeting of Shareholders |
44 | |||
| Officers and Trustees |
45 | |||
| Important Notices |
46 | |||
Eaton Vance
Senior Income Trust
December 31, 2015
Performance1,2
Portfolio Managers Scott H. Page, CFA and John Redding
| % Average Annual Total Returns | Inception Date | Six Months | One Year | Five Years | Ten Years | |||||||||||||||
| Fund at NAV |
10/30/1998 | –5.33 | % | –2.48 | % | 4.29 | % | 4.03 | % | |||||||||||
| Fund at Market Price |
— | –3.21 | –0.63 | 2.07 | 4.19 | |||||||||||||||
| S&P/LSTA Leveraged Loan Index |
— | –3.42 | % | –0.69 | % | 3.41 | % | 4.31 | % | |||||||||||
| % Premium/Discount to NAV3 | ||||||||||||||||||||
| –9.56 | % | |||||||||||||||||||
| Distributions4 | ||||||||||||||||||||
| Total Distributions per share for the period |
$ | 0.244 | ||||||||||||||||||
| Distribution Rate at NAV |
6.58 | % | ||||||||||||||||||
| Distribution Rate at Market Price |
7.28 | % | ||||||||||||||||||
| % Total Leverage5 | ||||||||||||||||||||
| Auction Preferred Shares (APS) |
27.75 | % | ||||||||||||||||||
| Borrowings |
11.35 | |||||||||||||||||||
See Endnotes and Additional Disclosures in this report.
Past performance is no guarantee of future results. Returns are historical and are calculated by determining the percentage change in net asset value (NAV) or market price (as applicable) with all distributions reinvested and includes management fees and other expenses. Fund performance at market price will differ from its results at NAV due to factors such as changing perceptions about the Fund, market conditions, fluctuations in supply and demand for Fund shares, or changes in Fund distributions. Investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than their original cost. Performance less than one year is cumulative. Performance is for the stated time period only; due to market volatility, current Fund performance may be lower or higher than the quoted return. For performance as of the most recent month-end, please refer to eatonvance.com.
| 2 |
Eaton Vance
Senior Income Trust
December 31, 2015
Fund Profile
See Endnotes and Additional Disclosures in this report.
| 3 |
Eaton Vance
Senior Income Trust
December 31, 2015
Endnotes and Additional Disclosures
| 4 |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited)
| 5 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 6 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 7 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 8 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 9 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 10 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 11 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 12 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 13 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 14 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 15 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 16 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 17 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 18 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 19 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 20 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 21 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 22 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 23 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 24 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 25 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 26 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| 27 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Portfolio of Investments (Unaudited) — continued
| Forward Foreign Currency Exchange Contracts | ||||||||||||||||||||||||
| Currency Purchased | Currency Sold | Counterparty | Settlement Date |
Unrealized Appreciation |
Unrealized (Depreciation) |
|||||||||||||||||||
| EUR | 400,000 | USD | 437,135 | State Street Bank and Trust Company | 1/29/16 | $ | — | $ | (2,176 | ) | ||||||||||||||
| USD | 3,338,703 | EUR | 3,009,630 | Goldman Sachs International | 1/29/16 | 66,044 | — | |||||||||||||||||
| EUR | 1,800,000 | USD | 1,988,490 | HSBC Bank USA, N.A. | 2/29/16 | — | (29,676 | ) | ||||||||||||||||
| USD | 214,228 | CAD | 284,996 | State Street Bank and Trust Company | 2/29/16 | 8,230 | — | |||||||||||||||||
| USD | 3,964,007 | EUR | 3,711,131 | State Street Bank and Trust Company | 2/29/16 | — | (74,557 | ) | ||||||||||||||||
| USD | 3,652,223 | GBP | 2,420,089 | JPMorgan Chase Bank, N.A. | 2/29/16 | 84,175 | — | |||||||||||||||||
| USD | 4,219,079 | EUR | 3,850,793 | HSBC Bank USA, N.A. | 3/31/16 | 24,932 | — | |||||||||||||||||
| USD | 2,988,677 | GBP | 2,016,794 | Goldman Sachs International | 3/31/16 | 15,083 | — | |||||||||||||||||
| $ | 198,464 | $ | (106,409 | ) | ||||||||||||||||||||
Abbreviations:
| DIP | – | Debtor in Possession | ||
| PIK | – | Payment In Kind |
Currency Abbreviations:
| CAD | – | Canadian Dollar | ||
| EUR | – | Euro | ||
| GBP | – | British Pound Sterling | ||
| USD | – | United States Dollar |
| 28 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Statement of Assets and Liabilities (Unaudited)
| Assets | December 31, 2015 | |||
| Unaffiliated investments, at value (identified cost, $423,626,219) |
$ | 392,070,713 | ||
| Affiliated investment, at value (identified cost, $1,999,176) |
1,999,176 | |||
| Cash |
4,024,269 | |||
| Restricted cash* |
30,000 | |||
| Foreign currency, at value (identified cost, $134,179) |
134,234 | |||
| Interest and dividends receivable |
1,811,097 | |||
| Interest receivable from affiliated investment |
1,098 | |||
| Receivable for investments sold |
300,603 | |||
| Receivable for open forward foreign currency exchange contracts |
198,464 | |||
| Prepaid upfront fees on notes payable |
14,610 | |||
| Prepaid expenses |
14,111 | |||
| Total assets |
$ | 400,598,375 | ||
| Liabilities | ||||
| Notes payable |
$ | 45,000,000 | ||
| Payable for investments purchased |
2,143,371 | |||
| Payable for open forward foreign currency exchange contracts |
106,409 | |||
| Distributions payable |
1,325,331 | |||
| Payable to affiliates: |
||||
| Investment adviser fee |
273,445 | |||
| Administration fee |
86,533 | |||
| Trustees’ fees |
6,140 | |||
| Accrued expenses |
226,710 | |||
| Total liabilities |
$ | 49,167,939 | ||
| Auction preferred shares (4,400 shares outstanding) at liquidation value plus cumulative unpaid dividends |
$ | 110,003,526 | ||
| Net assets applicable to common shares |
$ | 241,426,910 | ||
| Sources of Net Assets | ||||
| Common shares, $0.01 par value, unlimited number of shares authorized, 37,866,607 shares issued and outstanding |
$ | 378,666 | ||
| Additional paid-in capital |
324,759,843 | |||
| Accumulated net realized loss |
(51,020,047 | ) | ||
| Accumulated distributions in excess of net investment income |
(1,189,416 | ) | ||
| Net unrealized depreciation |
(31,502,136 | ) | ||
| Net assets applicable to common shares |
$ | 241,426,910 | ||
| Net Asset Value Per Common Share | ||||
| ($241,426,910 ÷ 37,866,607 common shares issued and outstanding) |
$ | 6.38 | ||
| * | Represents restricted cash on deposit at the custodian for open forward foreign currency exchange contracts. |
| 29 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Statement of Operations (Unaudited)
| Investment Income | Six Months Ended December 31, 2015 |
|||
| Interest and other income |
$ | 10,871,360 | ||
| Dividends |
197,820 | |||
| Interest allocated from affiliated investment |
5,733 | |||
| Expenses allocated from affiliated investment |
(338 | ) | ||
| Total investment income |
$ | 11,074,575 | ||
| Expenses | ||||
| Investment adviser fee |
$ | 1,692,022 | ||
| Administration fee |
535,450 | |||
| Trustees’ fees and expenses |
12,970 | |||
| Custodian fee |
102,169 | |||
| Transfer and dividend disbursing agent fees |
9,493 | |||
| Legal and accounting services |
91,356 | |||
| Printing and postage |
34,098 | |||
| Interest expense and fees |
372,960 | |||
| Preferred shares service fee |
51,780 | |||
| Miscellaneous |
43,971 | |||
| Total expenses |
$ | 2,946,269 | ||
| Deduct — |
||||
| Reduction of custodian fee |
$ | 2 | ||
| Total expense reductions |
$ | 2 | ||
| Net expenses |
$ | 2,946,267 | ||
| Net investment income |
$ | 8,128,308 | ||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) — |
||||
| Investment transactions |
$ | (3,948,331 | ) | |
| Foreign currency and forward foreign currency exchange contract transactions |
506,418 | |||
| Net realized loss |
$ | (3,441,913 | ) | |
| Change in unrealized appreciation (depreciation) — |
||||
| Investments |
$ | (20,194,528 | ) | |
| Foreign currency and forward foreign currency exchange contracts |
243,835 | |||
| Net change in unrealized appreciation (depreciation) |
$ | (19,950,693 | ) | |
| Net realized and unrealized loss |
$ | (23,392,606 | ) | |
| Distributions to preferred shareholders |
||||
| From net investment income |
$ | (78,272 | ) | |
| Net decrease in net assets from operations |
$ | (15,342,570 | ) | |
| 30 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Statements of Changes in Net Assets
| Increase (Decrease) in Net Assets | Six Months Ended December 31, 2015 (Unaudited) |
Year Ended June 30, 2015 |
||||||
| From operations — |
||||||||
| Net investment income |
$ | 8,128,308 | $ | 15,172,786 | ||||
| Net realized gain (loss) from investment, foreign currency and forward foreign currency exchange contract transactions |
(3,441,913 | ) | 717,100 | |||||
| Net change in unrealized appreciation (depreciation) from investments, foreign currency and forward foreign currency exchange contracts |
(19,950,693 | ) | (12,590,560 | ) | ||||
| Distributions to preferred shareholders — |
| |||||||
| From net investment income |
(78,272 | ) | (112,997 | ) | ||||
| Net increase (decrease) in net assets from operations |
$ | (15,342,570 | ) | $ | 3,186,329 | |||
| Distributions to common shareholders — |
||||||||
| From net investment income |
$ | (9,239,452 | ) | $ | (15,222,376 | ) | ||
| Total distributions to common shareholders |
$ | (9,239,452 | ) | $ | (15,222,376 | ) | ||
| Net decrease in net assets |
$ | (24,582,022 | ) | $ | (12,036,047 | ) | ||
| Net Assets Applicable to Common Shares | ||||||||
| At beginning of period |
$ | 266,008,932 | $ | 278,044,979 | ||||
| At end of period |
$ | 241,426,910 | $ | 266,008,932 | ||||
| Accumulated distributions in excess of net investment income included in net assets applicable to common shares |
||||||||
| At end of period |
$ | (1,189,416 | ) | $ | — | |||
| 31 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Statement of Cash Flows (Unaudited)
| Cash Flows From Operating Activities | Six Months Ended December 31, 2015 |
|||
| Net decrease in net assets from operations |
$ | (15,342,570 | ) | |
| Distributions to preferred shareholders |
78,272 | |||
| Net decrease in net assets from operations excluding distributions to preferred shareholders |
$ | (15,264,298 | ) | |
| Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities: |
||||
| Investments purchased |
(62,583,632 | ) | ||
| Investments sold and principal repayments |
67,098,768 | |||
| Decrease in short-term investments, net |
8,872,017 | |||
| Net amortization/accretion of premium (discount) |
(247,699 | ) | ||
| Amortization of prepaid upfront fees on notes payable |
35,144 | |||
| Decrease in restricted cash |
260,000 | |||
| Increase in interest and dividends receivable |
(197,945 | ) | ||
| Decrease in interest receivable from affiliated investment |
109 | |||
| Increase in receivable for open forward foreign currency exchange contracts |
(180,139 | ) | ||
| Decrease in prepaid expenses |
1,476 | |||
| Decrease in payable for open forward foreign currency exchange contracts |
(71,812 | ) | ||
| Decrease in payable to affiliate for investment adviser fee |
(11,161 | ) | ||
| Decrease in payable to affiliate for administration fee |
(3,532 | ) | ||
| Increase in payable to affiliate for Trustees’ fees |
687 | |||
| Increase in accrued expenses |
10,159 | |||
| Increase in unfunded loan commitments |
23,936 | |||
| Net change in unrealized (appreciation) depreciation from investments |
20,194,528 | |||
| Net realized (gain) loss from investments |
3,948,331 | |||
| Net cash provided by operating activities |
$ | 21,884,937 | ||
| Cash Flows From Financing Activities | ||||
| Distributions paid to common shareholders, net of reinvestments |
$ | (7,914,121 | ) | |
| Cash distributions paid to preferred shareholders |
(76,583 | ) | ||
| Proceeds from notes payable |
14,000,000 | |||
| Repayments of notes payable |
(29,000,000 | ) | ||
| Net cash used in financing activities |
$ | (22,990,704 | ) | |
| Net decrease in cash* |
$ | (1,105,767 | ) | |
| Cash at beginning of period(1) |
$ | 5,264,270 | ||
| Cash at end of period(1) |
$ | 4,158,503 | ||
| Supplemental disclosure of cash flow information: | ||||
| Cash paid for interest and fees on borrowings |
$ | 335,780 | ||
| * | Includes net change in unrealized appreciation (depreciation) on foreign currency of $121. |
| (1) | Balance includes foreign currency, at value. |
| 32 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Financial Highlights
Selected data for a common share outstanding during the periods stated
| Six Months Ended December 31, 2015 (Unaudited) |
Year Ended June 30, | |||||||||||||||||||||||
| 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
| Net asset value — Beginning of period (Common shares) |
$ | 7.020 | $ | 7.340 | $ | 7.350 | $ | 7.160 | $ | 7.240 | $ | 6.710 | ||||||||||||
| Income (Loss) From Operations | ||||||||||||||||||||||||
| Net investment income(1) |
$ | 0.215 | $ | 0.401 | $ | 0.406 | $ | 0.468 | $ | 0.435 | $ | 0.420 | ||||||||||||
| Net realized and unrealized gain (loss) |
(0.609 | ) | (0.316 | ) | 0.029 | 0.194 | (0.071 | ) | 0.557 | |||||||||||||||
| Distributions to preferred shareholders — |
||||||||||||||||||||||||
| From net investment income(1) |
(0.002 | ) | (0.003 | ) | (0.002 | ) | (0.003 | ) | (0.003 | ) | (0.006 | ) | ||||||||||||
| Total income (loss) from operations |
$ | (0.396 | ) | $ | 0.082 | $ | 0.433 | $ | 0.659 | $ | 0.361 | $ | 0.971 | |||||||||||
| Less Distributions to Common Shareholders | ||||||||||||||||||||||||
| From net investment income |
$ | (0.244 | ) | $ | (0.402 | ) | $ | (0.443 | ) | $ | (0.476 | ) | $ | (0.441 | ) | $ | (0.441 | ) | ||||||
| Total distributions to common shareholders |
$ | (0.244 | ) | $ | (0.402 | ) | $ | (0.443 | ) | $ | (0.476 | ) | $ | (0.441 | ) | $ | (0.441 | ) | ||||||
| Premium from common shares sold through shelf offering (see Note 6)(1) |
$ | — | $ | — | $ | — | $ | 0.007 | $ | — | $ | — | ||||||||||||
| Net asset value — End of period (Common shares) |
$ | 6.380 | $ | 7.020 | $ | 7.340 | $ | 7.350 | $ | 7.160 | $ | 7.240 | ||||||||||||
| Market value — End of period (Common shares) |
$ | 5.770 | $ | 6.210 | $ | 6.810 | $ | 7.520 | $ | 7.020 | $ | 7.200 | ||||||||||||
| Total Investment Return on Net Asset Value(2) |
(5.33 | )%(3) | 1.71 | % | 6.34 | % | 9.49 | % | 5.58 | % | 14.80 | % | ||||||||||||
| Total Investment Return on Market Value(2) |
(3.21 | )%(3) | (3.02 | )% | (3.57 | )% | 14.26 | % | 4.09 | % | 15.55 | % | ||||||||||||
| 33 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Financial Highlights — continued
Selected data for a common share outstanding during the periods stated
| Six Months Ended December 31, 2015 (Unaudited) |
Year Ended June 30, | |||||||||||||||||||||||
| Ratios/Supplemental Data | 2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||||||
| Net assets applicable to common shares, end of period (000’s omitted) |
$ | 241,427 | $ | 266,009 | $ | 278,045 | $ | 278,364 | $ | 263,168 | $ | 265,927 | ||||||||||||
| Ratios (as a percentage of average daily net assets applicable to common shares):(4)† |
||||||||||||||||||||||||
| Expenses excluding interest and fees(5) |
2.00 | %(6) | 1.99 | % | 1.98 | % | 1.98 | % | 2.01 | % | 1.95 | % | ||||||||||||
| Interest and fee expense |
0.29 | %(6) | 0.28 | % | 0.27 | % | 0.23 | % | 0.23 | % | 0.23 | % | ||||||||||||
| Total expenses |
2.29 | %(6) | 2.27 | % | 2.25 | % | 2.21 | % | 2.24 | % | 2.18 | % | ||||||||||||
| Net investment income |
6.31 | %(6) | 5.61 | % | 5.51 | % | 6.35 | % | 6.17 | % | 5.90 | % | ||||||||||||
| Portfolio Turnover |
13 | %(3) | 33 | % | 33 | % | 52 | % | 38 | % | 53 | % | ||||||||||||
| Senior Securities: |
||||||||||||||||||||||||
| Total notes payable outstanding (in 000’s) |
$ | 45,000 | $ | 60,000 | $ | 65,000 | $ | 65,000 | $ | 46,000 | $ | 36,000 | ||||||||||||
| Asset coverage per $1,000 of notes payable(7) |
$ | 8,810 | $ | 7,267 | $ | 6,970 | $ | 6,975 | $ | 9,112 | $ | 11,442 | ||||||||||||
| Total preferred shares outstanding |
4,400 | 4,400 | 4,400 | 4,400 | 4,400 | 4,400 | ||||||||||||||||||
| Asset coverage per preferred share(8) |
$ | 63,940 | $ | 64,119 | $ | 64,721 | $ | 64,766 | $ | 67,174 | $ | 70,536 | ||||||||||||
| Involuntary liquidation preference per
preferred |
$ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | ||||||||||||
| Approximate market value per preferred share(9) |
$ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | $ | 25,000 | ||||||||||||
| (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) | Not annualized. |
| (4) | Ratios do not reflect the effect of dividend payments to preferred shareholders. |
| (5) | Excludes the effect of custody fee credits, if any, of less than 0.005%. |
| (6) | Annualized. |
| (7) | 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. |
| (8) | 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 256%, 256%, 259%, 259%, 269% and 282% at December 31, 2015 and June 30, 2015, 2014, 2013, 2012 and 2011, respectively. |
| (9) | 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. Ratios for periods less than one year are annualized. |
| Six Months Ended December 31, 2015 (Unaudited) |
Year Ended June 30, | |||||||||||||||||||||||
| 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||
| Expenses excluding interest and fees |
1.21 | % | 1.21 | % | 1.22 | % | 1.25 | % | 1.27 | % | 1.26 | % | ||||||||||||
| Interest and fee expense |
0.17 | % | 0.17 | % | 0.17 | % | 0.15 | % | 0.15 | % | 0.15 | % | ||||||||||||
| Total expenses |
1.38 | % | 1.38 | % | 1.39 | % | 1.40 | % | 1.42 | % | 1.41 | % | ||||||||||||
| Net investment income |
3.81 | % | 3.42 | % | 3.39 | % | 4.03 | % | 3.93 | % | 3.82 | % | ||||||||||||
| 34 | See Notes to Financial Statements. |
Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited)
1 Significant Accounting Policies
Eaton Vance Senior Income Trust (the Trust) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company. The Trust’s investment objective is to provide a high level of current income, consistent with the preservation of capital, by investing primarily in senior, secured floating-rate loans.
The following is a summary of significant accounting policies of the Trust. The policies are in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). The Trust is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946.
A Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.
Senior Floating-Rate Loans. Interests in senior floating-rate loans (Senior Loans) for which reliable market quotations are readily available are valued generally at the average mean of bid and ask quotations obtained from a third party pricing service. Other Senior Loans are valued at fair value by the investment adviser under procedures approved by the Trustees. In fair valuing a Senior Loan, the investment adviser utilizes one or more of the valuation techniques described in (i) through (iii) below to assess the likelihood that the borrower will make a full repayment of the loan underlying such Senior Loan relative to yields on other Senior Loans issued by companies of comparable credit quality. If the investment adviser believes that there is a reasonable likelihood of full repayment, the investment adviser will determine fair value using a matrix pricing approach that considers the yield on the Senior Loan. If the investment adviser believes there is not a reasonable likelihood of full repayment, the investment adviser will determine fair value using analyses that include, but are not limited to: (i) a comparison of the value of the borrower’s outstanding equity and debt to that of comparable public companies; (ii) a discounted cash flow analysis; or (iii) when the investment adviser believes it is likely that a borrower will be liquidated or sold, an analysis of the terms of such liquidation or sale. In certain cases, the investment adviser will use a combination of analytical methods to determine fair value, such as when only a portion of a borrower’s assets are likely to be sold. In conducting its assessment and analyses for purposes of determining fair value of a Senior Loan, the investment adviser will use its discretion and judgment in considering and appraising relevant factors. Fair value determinations are made by the portfolio managers of the Trust based on information available to such managers. The portfolio managers of other funds managed by the investment adviser that invest in Senior Loans may not possess the same information about a Senior Loan borrower as the portfolio managers of the Trust. At times, the fair value of a Senior Loan determined by the portfolio managers of other funds managed by the investment adviser that invest in Senior Loans may vary from the fair value of the same Senior Loan determined by the portfolio managers of the Trust. The fair value of each Senior Loan is periodically reviewed and approved by the investment adviser’s Valuation Committee and by the Trustees based upon procedures approved by the Trustees. Junior Loans (i.e., subordinated loans and second lien loans) are valued in the same manner as Senior Loans.
Debt Obligations. Debt obligations (including short-term obligations with a remaining maturity of more than sixty days) are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term obligations purchased with a remaining maturity of sixty days or less are generally valued at amortized cost, which approximates market value.
Equity Securities. Equity securities listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and asked prices therefore on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and asked prices or, in the case of preferred equity securities that are not listed or traded in the over-the-counter market, by a third party pricing service that uses various techniques that consider factors including, but not limited to, prices or yields of securities with similar characteristics, benchmark yields, broker/dealer quotes, quotes of underlying common stock, issuer spreads, as well as industry and economic events.
Derivatives. Forward foreign currency exchange contracts are generally valued at the mean of the average bid and average asked prices that are reported by currency dealers to a third party pricing service at the valuation time. Such third party pricing service valuations are supplied for specific settlement periods and the Trust’s forward foreign currency exchange contracts are valued at an interpolated rate between the closest preceding and subsequent settlement period reported by the third party pricing service.
Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads.
Affiliated Fund. The Trust may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). The value of the Trust’s investment in Cash Reserves Fund reflects the Trust’s proportionate interest in its net assets. 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.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Trust in a manner that fairly reflects the security’s value, or the amount that
| 35 |
Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited) — continued
the Trust might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount. Fees associated with loan amendments are recognized immediately. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Distributions from investment companies are recorded as dividend income, capital gains or return of capital based on the nature of the distribution.
D Federal Taxes — The Trust’s policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its net investment income, and all or substantially all of its net realized capital gains. Accordingly, no provision for federal income or excise tax is necessary.
As of December 31, 2015, the Trust had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Trust files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Trust. Pursuant to the custodian agreement, SSBT receives a fee reduced by credits, which are determined based on the average daily cash balance the Trust maintains with SSBT. All credit balances, if any, used to reduce the Trust’s custodian fees are reported as a reduction of expenses in the Statement of Operations.
F Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange rates are recorded for financial statement purposes as net realized gains and losses on investments. That portion of unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed.
G Unfunded Loan Commitments — The Trust may enter into certain loan agreements all or a portion of which may be unfunded. The Trust is obligated to fund these commitments at the borrower’s discretion. These commitments are disclosed in the accompanying Portfolio of Investments. At December 31, 2015, the Trust had sufficient cash and/or securities to cover these commitments.
H Use of Estimates — The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.
I Indemnifications — Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Trust. Under Massachusetts law, if certain conditions prevail, shareholders of a Massachusetts business trust (such as the Trust) could be deemed to have personal liability for the obligations of the Trust. However, the Trust’s Declaration of Trust contains an express disclaimer of liability on the part of Trust shareholders and the By-laws provide that the Trust shall assume the defense on behalf of any Trust shareholders. Moreover, the By-laws also provide for indemnification out of Trust property of any shareholder held personally liable solely by reason of being or having been a shareholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Trust enters into agreements with service providers that may contain indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred.
J Forward Foreign Currency Exchange Contracts — The Trust may enter into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded as unrealized until such time as the contracts have been closed. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from movements in the value of a foreign currency relative to the U.S. dollar.
K When-Issued Securities and Delayed Delivery Transactions — The Trust may purchase or sell securities on a delayed delivery or when-issued basis. Payment and delivery may take place after the customary settlement period for that security. At the time the transaction is negotiated, the price of the security that will be delivered is fixed. The Trust maintains security positions for these commitments such that sufficient liquid assets will be available to make payments upon settlement. Securities purchased on a delayed delivery or when-issued basis are marked-to-market daily and begin earning interest on settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
| 36 |
Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited) — continued
L Statement of Cash Flows — The cash amount shown in the Statement of Cash Flows of the Trust is the amount included in the Trust’s Statement of Assets and Liabilities and represents the unrestricted cash on hand at its custodian and does not include any short-term investments.
M Interim Financial Statements — The interim financial statements relating to December 31, 2015 and for the six months then ended have not been audited by an independent registered public accounting firm, but in the opinion of the Trust’s management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements.
2 Auction Preferred Shares
The Trust issued Auction Preferred Shares (APS) on June 27, 2001 in a public offering. Dividends on the APS, which accrue daily, are cumulative at rates which are reset every seven days by an auction, unless a special dividend period has been set. Series of APS are identical in all respects except for the reset dates of the dividend rates. If the APS auctions do not successfully clear, the dividend payment rate over the next period for the APS holders is set at a specified maximum applicable rate until such time as the APS auctions are successful. Auctions have not cleared since February 13, 2008 and the rate since that date has been the maximum applicable rate (see Note 3). The maximum applicable rate on the APS is 125% of the “AA” Financial Composite Commercial Paper Rate at the date of the auction. The stated spread over the reference benchmark rate is determined based on the credit rating of the APS.
The number of APS issued and outstanding as of December 31, 2015 is as follows:
| APS Issued and Outstanding |
||||
| Series A |
2,200 | |||
| Series B |
2,200 | |||
The APS are redeemable at the option of the Trust at a redemption price equal to $25,000 per share, plus accumulated and unpaid dividends, on any dividend payment date. The APS are also subject to mandatory redemption at a redemption price equal to $25,000 per share, plus accumulated and unpaid dividends, if the Trust is in default for an extended period on its asset maintenance requirements with respect to the APS. If the dividends on the APS remain unpaid in an amount equal to two full years’ dividends, the holders of the APS as a class have the right to elect a majority of the Board of Trustees. In general, the holders of the APS and the common shares have equal voting rights of one vote per share, except that the holders of the APS, as a separate class, have the right to elect at least two members of the Board of Trustees. The APS have a liquidation preference of $25,000 per share, plus accumulated and unpaid dividends. The Trust is required to maintain certain asset coverage with respect to the APS as defined in the Trust’s By-Laws and the 1940 Act. The Trust pays an annual fee up to 0.15% of the liquidation value of the APS to broker/dealers as a service fee if the auctions are unsuccessful; otherwise, the annual fee is 0.25%.
3 Distributions to Shareholders and Income Tax Information
The Trust intends to make monthly distributions of net investment income to common shareholders, after payment of any dividends on any outstanding APS. 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). 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. The dividend rates for the APS at December 31, 2015, and the amount of dividends accrued (including capital gains, if any) to APS shareholders, average APS dividend rates (annualized), and dividend rate ranges for the six months then ended were as follows:
| APS Dividend Rates at December 31, 2015 |
Dividends Accrued to APS Shareholders |
Average APS Dividend Rates |
Dividend Ranges (%) |
|||||||||||||
| Series A |
0.40 | % | $ | 37,482 | 0.14 | % | 0.10–0.40 | |||||||||
| Series B |
0.38 | 40,790 | 0.15 | 0.08–0.38 | ||||||||||||
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 table above reflects such maximum dividend rate for each series as of December 31, 2015.
Distributions to shareholders are determined in accordance with income tax regulations, which may differ from U.S. GAAP. As required by U.S. GAAP, only distributions in excess of tax basis earnings and profits are reported in the financial statements as a return of capital. Permanent differences between book
| 37 |
Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited) — continued
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.
At June 30, 2015, the Trust, for federal income tax purposes, had capital loss carryforwards of $45,629,752 which would reduce its taxable income arising from future net realized gains on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus would reduce the amount of distributions to shareholders, which would otherwise be necessary to relieve the Trust of any liability for federal income or excise tax. Such capital loss carryforwards will expire on June 30, 2017 ($16,051,408), June 30, 2018 ($22,498,410) and June 30, 2019 ($7,079,934) and their character is short-term. Under tax regulations, capital losses incurred in taxable years beginning after December 2010 are considered deferred capital losses and are treated as arising on the first day of the Trust’s next taxable year, retaining the same short-term or long-term character as when originally deferred. Deferred capital losses are required to be used prior to capital loss carryforwards, which carry an expiration date. As a result of this ordering rule, capital loss carryforwards may be more likely to expire unused.
Additionally, at June 30, 2015, the Trust had a net capital loss of $1,938,954 attributable to security transactions incurred after October 31, 2014 that it has elected to defer. This net capital loss is treated as arising on the first day of the Trust’s taxable year ending June 30, 2016.
The cost and unrealized appreciation (depreciation) of investments of the Trust at December 31, 2015, as determined on a federal income tax basis, were as follows:
| Aggregate cost |
$ | 425,634,824 | ||
| Gross unrealized appreciation |
$ | 2,145,184 | ||
| Gross unrealized depreciation |
(33,710,119 | ) | ||
| Net unrealized depreciation |
$ | (31,564,935 | ) | |
4 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by EVM as compensation for management and investment advisory services rendered to the Trust. The fee is computed at an annual rate of 0.79% of the Trust’s average weekly gross assets and is payable monthly. Gross assets as referred to herein represent net assets plus obligations attributable to investment leverage. 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. The fee reduction cannot be terminated without the consent of the Trustees and shareholders. For the six months ended December 31, 2015, the Trust’s investment adviser fee totaled $1,692,022. The Trust invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund. The administration fee is earned by EVM 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 six months ended December 31, 2015, the administration fee amounted to $535,450.
Trustees and officers of the Trust who are members of EVM’s organization receive remuneration for their services to the Trust out of the investment adviser fee. Trustees of the Trust who are not affiliated with EVM may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended December 31, 2015, no significant amounts have been deferred. Certain officers and Trustees of the Trust are officers of EVM.
5 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations and including maturities and principal repayments on Senior Loans, aggregated $53,397,437 and $66,636,989, respectively, for the six months ended December 31, 2015.
6 Common Shares of Beneficial Interest and Shelf Offering
The Trust may issue common shares pursuant to its dividend reinvestment plan. There were no common shares issued by the Trust for the six months ended December 31, 2015 and the year ended June 30, 2015.
On November 11, 2013, the Board of Trustees of the Trust authorized the repurchase by the Trust of up to 10% of its then currently outstanding common shares in open-market transactions at a discount to net asset value. The repurchase program does not obligate the Trust to purchase a specific amount of shares. There were no repurchases of common shares by the Trust for the six months ended December 31, 2015 and the year ended June 30, 2015.
Pursuant to a registration statement filed with the SEC and declared effective in 2012, the Trust is authorized to issue up to an additional 3,677,150 common shares through an equity shelf offering program (the “shelf offering”). Under the shelf offering, the Trust, subject to market conditions, may raise additional capital from time to time and in varying amounts and offering methods at a net price at or above the Trust’s net asset value per common
| 38 |
Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited) — continued
share. During the six months ended December 31, 2015 and the year ended June 30, 2015, there were no shares sold by the Trust pursuant to its shelf offering.
7 Restricted Securities
At December 31, 2015, the Trust owned the following securities (representing less than 0.1% of net assets applicable to common shares) which were restricted as to public resale and not registered under the Securities Act of 1933 (excluding Rule 144A securities). The Trust has various registration rights (exercisable under a variety of circumstances) with respect to these securities. The value of these securities is determined based on valuations provided by brokers when available, or if not available, they are valued at fair value using methods determined in good faith by or at the direction of the Trustees.
| Description | Date of Acquisition |
Shares | Cost | Value | ||||||||||||
| Common Stocks |
||||||||||||||||
| Panolam Holdings Co. |
12/30/09 | 131 | $ | 71,985 | $ | 113,974 | ||||||||||
| Total Restricted Securities |
$ | 71,985 | $ | 113,974 | ||||||||||||
8 Financial Instruments
The Trust may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities. These financial instruments may include forward foreign currency exchange contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. The notional or contractual amounts of these instruments represent the investment the Trust has in particular classes of financial instruments and do not necessarily represent the amounts potentially subject to risk. The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered. A summary of obligations under these financial instruments at December 31, 2015 is included in the Portfolio of Investments. At December 31, 2015, the Trust had sufficient cash and/or securities to cover commitments under these contracts.
The Trust is subject to foreign exchange risk in the normal course of pursuing its investment objective. Because the Trust holds foreign currency denominated investments, the value of these investments and related receivables and payables may change due to future changes in foreign currency exchange rates. To hedge against this risk, the Trust enters into forward foreign currency exchange contracts.
The Trust enters into forward foreign currency exchange contracts that may contain provisions whereby the counterparty may terminate the contract under certain conditions, including but not limited to a decline in the Trust’s net assets below a certain level over a certain period of time, which would trigger a payment by the Trust for those derivatives in a liability position. At December 31, 2015, the fair value of derivatives with credit-related contingent features in a net liability position was $106,409. The aggregate fair value of assets pledged as collateral by the Trust for such liability was $10,000 at December 31, 2015.
The over-the-counter (OTC) derivatives in which the Trust invests are subject to the risk that the counterparty to the contract fails to perform its obligations under the contract. To mitigate this risk, the Trust has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with substantially all its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Trust and a counterparty that governs certain OTC derivatives and typically contains, among other things, set-off provisions in the event of a default and/or termination event as defined under the relevant ISDA Master Agreement. Under an ISDA Master Agreement, the Trust may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy or insolvency. Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Trust’s net assets decline by a stated percentage or the Trust fails to meet the terms of its ISDA Master Agreements, which would cause the counterparty to accelerate payment by the Trust of any net liability owed to it.
The collateral requirements for derivatives traded under an ISDA Master Agreement are governed by a Credit Support Annex to the ISDA Master Agreement. Collateral requirements are determined at the close of business each day and are typically based on changes in market values for each transaction under an ISDA Master Agreement and netted into one amount for such agreement. Generally, the amount of collateral due from or to a counterparty is subject to a minimum transfer threshold amount before a transfer is required, which may vary by counterparty. Collateral pledged for the benefit of the Trust and/or counterparty is held in segregated accounts by the Trust’s custodian and cannot be sold, re-pledged, assigned or otherwise used while pledged. The portion of such collateral representing cash, if any, is reflected as restricted cash and, in the case of cash pledged by a counterparty for the benefit of the Trust, a corresponding liability on the Statement of Assets and Liabilities. Securities pledged by the Trust as collateral, if any, are identified as such in the Portfolio of Investments.
| 39 |
Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited) — continued
The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) and whose primary underlying risk exposure is foreign exchange risk at December 31, 2015 was as follows:
| Fair Value | ||||||||
| Derivative | Asset Derivative | Liability Derivative | ||||||
| Forward foreign currency exchange contracts |
$ | 198,464 | (1) | $ | (106,409 | )(2) | ||
| (1) | Statement of Assets and Liabilities location: Receivable for open forward foreign currency exchange contracts; Net unrealized depreciation. |
| (2) | Statement of Assets and Liabilities location: Payable for open forward foreign currency exchange contracts; Net unrealized depreciation. |
The Trust’s derivative assets and liabilities at fair value by type, which are reported gross in the Statement of Assets and Liabilities, are presented in the table above. The following tables present the Trust’s derivative assets and liabilities by counterparty, net of amounts available for offset under a master netting agreement and net of the related collateral received by the Trust for assets and pledged by the Trust for liabilities as of December 31, 2015.
| Counterparty | Derivative Assets Subject to Master Netting Agreement |
Derivatives Available for Offset |
Non-cash Collateral Received(a) |
Cash Collateral Received(a) |
Net Amount of Derivative Assets(b) |
|||||||||||||||
| Goldman Sachs International |
$ | 81,127 | $ | — | $ | — | $ | — | $ | 81,127 | ||||||||||
| HSBC Bank USA, N.A. |
24,932 | (24,932 | ) | — | — | — | ||||||||||||||
| JPMorgan Chase Bank, N.A. |
84,175 | — | — | — | 84,175 | |||||||||||||||
| State Street Bank and Trust Company |
8,230 | (8,230 | ) | — | — | — | ||||||||||||||
| $ | 198,464 | $ | (33,162 | ) | $ | — | $ | — | $ | 165,302 | ||||||||||
| Counterparty | Derivative Liabilities Subject to Master Netting Agreement |
Derivatives Available for Offset |
Non-cash Collateral Pledged(a) |
Cash Collateral Pledged(a) |
Net Amount of Derivative Liabilities(c) |
|||||||||||||||
| HSBC Bank USA, N.A. |
$ | (29,676 | ) | $ | 24,932 | $ | — | $ | — | $ | (4,744 | ) | ||||||||
| State Street Bank and Trust Company |
(76,733 | ) | 8,230 | — | 10,000 | (58,503 | ) | |||||||||||||
| $ | (106,409 | ) | $ | 33,162 | $ | — | $ | 10,000 | $ | (63,247 | ) | |||||||||
| (a) | In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization. |
| (b) | Net amount represents the net amount due from the counterparty in the event of default. |
| (c) | Net amount represents the net amount payable to the counterparty in the event of default. |
The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations and whose primary underlying risk exposure is foreign exchange risk for the six months ended December 31, 2015 was as follows:
| Derivative | Realized Gain (Loss) on Derivatives Recognized in Income |
Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income |
||||||
| Forward foreign currency exchange contracts |
$ | 649,207 | (1) | $ | 251,951 | (2) | ||
| (1) | Statement of Operations location: Net realized gain (loss) – Foreign currency and forward foreign currency exchange contract transactions. |
| (2) | Statement of Operations location: Change in unrealized appreciation (depreciation) – Foreign currency and forward foreign currency exchange contracts. |
The average notional amount of forward foreign currency exchange contracts outstanding during the six months ended December 31, 2015, which is indicative of the volume of this derivative type, was approximately $18,473,000.
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Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited) — continued
9 Revolving Credit and Security Agreement
The Trust has entered into a Revolving Credit and Security Agreement, as amended (the Agreement) with conduit lenders and a bank that allows it to borrow up to $70 million and to invest the borrowings in accordance with its investment practices. 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 15, 2016, the Trust also pays a program fee of 0.67% 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 50% of the total facility size) per annum on the borrowing limit under the Agreement. Program and liquidity fees for the six months ended December 31, 2015 totaled $251,466 and are included in interest expense and fees on the Statement of Operations. The Trust also paid a renewal fee of $70,000, which is being amortized to interest expense over a period of one year through March 2016. The unamortized balance at December 31, 2015 is approximately $15,000 and is included in prepaid upfront fees on notes payable on the Statement of Assets and Liabilities. The Trust is required to maintain certain net asset levels during the term of the Agreement. At December 31, 2015, the Trust had borrowings outstanding under the Agreement of $45,000,000 at an interest rate of 0.44%. Based on the short-term nature of the borrowings under the Agreement and the variable interest rate, the carrying amount of the borrowings at December 31, 2015 approximated its fair value. If measured at fair value, borrowings under the Agreement would have been considered as Level 2 in the fair value hierarchy (see Note 12) at December 31, 2015. For the six months ended December 31, 2015, the average borrowings under the Agreement and the average annual interest rate (excluding fees) were $57,760,870 and 0.29%, respectively.
10 Risks Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Certain foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Trust, political or financial instability or diplomatic and other developments which could affect such investments. 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. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker/dealers and issuers than in the United States.
11 Credit Risk
The Trust invests primarily in below investment grade floating-rate loans, which are considered speculative because of the credit risk of their issuers. Changes in economic conditions or other circumstances are more likely to reduce the capacity of issuers of these securities to make principal and interest payments. Such companies are more likely to default on their payments of interest and principal owed than issuers of investment grade bonds. An economic downturn generally leads to a higher non-payment rate, and a loan or other debt obligation may lose significant value before a default occurs. Lower rated investments also may be subject to greater price volatility than higher rated investments. Moreover, the specific collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan’s value.
12 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
| • | Level 1 – quoted prices in active markets for identical investments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments) |
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| 41 |
Eaton Vance
Senior Income Trust
December 31, 2015
Notes to Financial Statements (Unaudited) — continued
At December 31, 2015, the hierarchy of inputs used in valuing the Trust’s investments and open derivative instruments, which are carried at value, were as follows:
| Asset Description | Level 1 | Level 2 | Level 3* | Total | ||||||||||||
| Senior Floating-Rate Loans (Less Unfunded Loan Commitments) |
$ | — | $ | 342,296,483 | $ | 1,793,665 | $ | 344,090,148 | ||||||||
| Corporate Bonds & Notes |
— | 22,994,110 | 13,147 | 23,007,257 | ||||||||||||
| Asset-Backed Securities |
— | 16,969,994 | — | 16,969,994 | ||||||||||||
| Common Stocks |
438,667 | — | 2,278,204 | 2,716,871 | ||||||||||||
| Convertible Preferred Stocks |
— | — | 24,080 | 24,080 | ||||||||||||
| Closed-End Funds |
5,259,790 | — | — | 5,259,790 | ||||||||||||
| Warrants |
— | — | 0 | 0 | ||||||||||||
| Miscellaneous |
— | 2,573 | 0 | 2,573 | ||||||||||||
| Short-Term Investments |
— | 1,999,176 | — | 1,999,176 | ||||||||||||
| Total Investments |
$ | 5,698,457 | $ | 384,262,336 | $ | 4,109,096 | $ | 394,069,889 | ||||||||
| Forward Foreign Currency Exchange Contracts |
$ | — | $ | 198,464 | $ | — | $ | 198,464 | ||||||||
| Total |
$ | 5,698,457 | $ | 384,460,800 | $ | 4,109,096 | $ | 394,268,353 | ||||||||
| Liability Description |
||||||||||||||||
| Forward Foreign Currency Exchange Contracts |
$ | — | $ | (106,409 | ) | $ | — | $ | (106,409 | ) | ||||||
| Total |
$ | — | $ | (106,409 | ) | $ | — | $ | (106,409 | ) | ||||||
| * | None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Trust. |
Level 3 investments at the beginning and/or end of the period in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for the six months ended December 31, 2015 is not presented.
At December 31, 2015, there were no investments transferred between Level 1 and Level 2 during the six months then ended.
13 Legal Proceedings
In May 2015, the Trust was served with an amended complaint filed in an adversary proceeding in the United States Bankruptcy Court for the Southern District of New York. The adversary proceeding was filed by the Motors Liquidation Company Avoidance Action Trust (“AAT”) against the former holders of a $1.5 billion term loan issued by General Motors Corp. (“GM”) in 2006 (the “Term Loan Lenders”) who received a full repayment of the term loan pursuant to a court order in the GM bankruptcy proceeding. The court order was made with the understanding that the term loan was fully secured at the time of GM’s bankruptcy filing in June 2009. The AAT is seeking (1) a determination from the Bankruptcy Court that the security interest held by the Term Loan Lenders was not perfected at the time GM filed for Chapter 11 Bankruptcy protection and thus the Term Loan Lenders should have been treated in the same manner as GM’s unsecured creditors, (2) disgorgement of any interest payments made to the Term Loan Lenders within ninety days of GM’s filing for Chapter 11 Bankruptcy protection, and (3) disgorgement of the $1.5 billion term loan repayment that was made to the Term Loan Lenders. The value of the payment received under the term loan agreement by the Trust is approximately $1,787,000 (equal to 0.74% of net assets applicable to common shares at December 31, 2015). The Trust cannot predict the outcome of these proceedings or the effect, if any, on the Trust’s net asset value. The attorneys’ fees and costs related to these actions are expensed by the Trust as incurred.
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Eaton Vance
Senior Income Trust
December 31, 2015
Notice to Shareholders (Unaudited)
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. 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. Effective February 11, 2016, the Trust eliminated its policy limiting investment in fixed rate investments to not more than 10% of its total assets.
| 43 |
Eaton Vance
Senior Income Trust
December 31, 2015
Annual Meeting of Shareholders (Unaudited)
The Fund held its Annual Meeting of Shareholders on October 22, 2015. The following action was taken by the shareholders:
Item 1: The election of Scott E. Eston, Helen Frame Peters and Ralph F. Verni as Class II Trustees of the Fund for a three-year term expiring in 2018. Mr. Verni was elected solely by APS shareholders.
| Nominee for Trustee Elected by All Shareholders |
Number of Shares1 | |||||||
| For | Withheld | |||||||
| Scott E. Eston |
32,724,468 | 750,402 | ||||||
| Helen Frame Peters |
32,738,105 | 736,766 | ||||||
| Nominee for Trustee Elected by APS Shareholders |
Number of Shares | |||||||
| For | Withheld | |||||||
| Ralph F. Verni |
2,143 | 324 | ||||||
| 1 | Excludes fractional shares. |
| 44 |
Eaton Vance
Senior Income Trust
December 31, 2015
Officers and Trustees
Officers of Eaton Vance Senior Income Trust
Trustees of Eaton Vance Senior Income Trust
| * | Interested Trustee |
| ** | Ms. Sutherland began serving as a Trustee effective May 1, 2015. |
Number of Employees
The Trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a closed-end management investment company and has no employees.
Number of Shareholders
As of December 31, 2015, Trust records indicate that there are 103 registered shareholders and approximately 10,092 shareholders owning the Trust shares in street name, such as through brokers, banks, and financial intermediaries.
If you are a street name shareholder and wish to receive Trust reports directly, which contain important information about the Trust, please write or call:
Eaton Vance Distributors, Inc.
Two International Place
Boston, MA 02110
1-800-262-1122
New York Stock Exchange symbol
The New York Stock Exchange symbol is EVF.
| 45 |
Eaton Vance Funds
IMPORTANT NOTICES
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:
| • | Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions. |
| • | None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers. |
| • | Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information. |
| • | We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com. |
Our pledge of privacy 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 Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents. The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-262-1122, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-262-1122 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-262-1122 and by accessing the SEC’s website at www.sec.gov.
Share Repurchase Program. The Fund’s Board of Trustees has approved a share repurchase program authorizing the Fund to repurchase up to 10% of its outstanding common shares as of the approved date in open-market transactions at a discount to net asset value. The repurchase program does not obligate the Fund to purchase a specific amount of shares. The Fund’s repurchase activity, including the number of shares purchased, average price and average discount to net asset value, is disclosed in the Fund’s annual and semi-annual reports to shareholders.
Additional Notice to Shareholders. If applicable, a Fund may also redeem or purchase its outstanding preferred shares in order to maintain compliance with regulatory requirements, borrowing or rating agency requirements or for other purposes as it deems appropriate or necessary.
Closed-End Fund Information. Eaton Vance closed-end funds make fund performance data and certain information about portfolio characteristics available on the Eaton Vance website shortly after the end of each month. Other information about the funds is available on the website. The funds’ net asset value per share is readily accessible on the Eaton Vance website. Portfolio holdings for the most recent month-end are also posted to the website approximately 30 days following the end of the month. This information is available at www.eatonvance.com on the fund information pages under “Individual Investors — Closed-End Funds”.
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7700 12.31.15
Item 2. Code of Ethics
Not required in this filing.
Item 3. Audit Committee Financial Expert
Not required in this filing.
Item 4. Principal Accountant Fees and Services
Not required in this filing.
Item 5. Audit Committee of Listed Registrants
Not required in this filing.
Item 6. Schedule of Investments
Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not required in this filing.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not required in this filing.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
No such purchases this period.
Item 10. Submission of Matters to a Vote of Security Holders
No material changes.
Item 11. Controls and Procedures
(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.
(b) There have been no changes in the registrant’s internal controls over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
| (a)(1) |
Registrant’s Code of Ethics – Not applicable (please see Item 2). | |
| (a)(2)(i) |
Treasurer’s Section 302 certification. | |
| (a)(2)(ii) |
President’s Section 302 certification. | |
| (b) |
Combined Section 906 certification. | |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Eaton Vance Senior Income Trust
| By: | /s/ Scott H. Page | |
| Scott H. Page | ||
| President | ||
| Date: | February 12, 2016 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ James F. Kirchner | |
| James F. Kirchner | ||
| Treasurer | ||
| Date: | February 12, 2016 | |
| By: | /s/ Scott H. Page | |
| Scott H. Page | ||
| President | ||
| Date: | February 12, 2016 | |