UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETT S

DONALD CHESNER and ELIZABETHCHESNER, on behalf of themselves and allothers similarly situated ,

vs .Plaintiffs,

RECWr0 1A

AMOUNT $SUMMONS YSS.LOCAL RULE 4,1WAIVER OE SE>

4-MCF ISAO 120 O1 :421 _BY DPTYC K

Civil Action No .

EATON VANCE CORPORATION, EATONVANCE MANAGEMENT, JAMES B . HAWKES,JAMES L . O'CONNOR, JESSICA M .BIBLIOWICZ, DONALD R . DWIGHT, SAMUEL L .HAYES, NORTON H . REAMER, JACK L .TREYNOR, M . DOZIER GARDNER, JOHN L .THORNDIKE, SCOTT H . PAGE, PAYSON F .SWAFFIELD, EV CLASSIC SENIOR FLOATING-RATE FUND, and BOSTON MANAGEMENTAND RESEARCH,

Defendants .

COMPLAINT

U Y TRIAL D IDD F H

Plaintiffs, by their attorneys, as and for their complaint, allege the following upo n

personal knowledge as to themselves and their acts and as to all other matters upon

information and belief based upon, inter alia, the investigation made by and through their

attorneys, including a review of the public filings of EV Classic Senior Floating-Rate Fund

(the "Fund") with the United States Securities and Exchange Commission ("SEC"), as well

as published annual reports and news articles .

NATURE OF THE ACTIO N

1 . This is a class action on behalf of a class (the "Class") of all persons wh o

purchased or otherwise acquired shares ("common stock " or "shares ") of EV Classic

Senior Floating - Rate Fund between March 30, 1998 and March 2 , 2000 (the "Class

Period"), seeking to pursue remedies under the Securities Act of 1933 (the "1933 Act") and

the Securities Exchange Act of 1934 (the "1934 Act") .

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2 . During the Class Period, defendants disseminated a series o f

Prospectuses/Registration Statements dated March 30,1998, October 19,1998, February

22, 1999, and March 13, 2000 (the "Prospectuses") to the Class in connection with their

purchase of Fund shares at a materially inflated net asset value ("NAV"), which rendered

such Prospectuses materially false and misleading as stated herein .

3 . Shares in the Fund are not publicly traded . The Fund, however, conduct s

quarterly repurchases of shares from shareholders and allows for daily purchases of

shares. As such, the Fund is required under SEC Rules 22c-1(a) and c-3 under the

Investment Company Act of 1940 ("1940 Act") to conduct share repurchases and sales at

NAV . Pursuant to Section 2 of the 1940 Act and Rule 2a-4 thereunder, the Fund is

obligated to compute its NAV based on market quotations for its securities where such

quotations are "readily available" and value its securities based on their "fair value" where

market quotations are not "readily available ." Where "fair value" is used, however,

determinations as to the value of the Fund's securities must reflect what the Fund would

receive on their current sale .

4. Despite the fact that the Trustees of the Fund were closely following the rapi d

development of the secondary market for senior loans and had actual knowledge thereof,

they continued to direct the Fund's loan interests to be valued at a "fair value" method

during the Class Period. Defendants failed to adopt and employ market pricing procedures

for the Fund's senior loan interests, despite their knowledge of the existence of "readily

available" market quotations, or, in the alternative, failed to determine in good faith the "fair

value" of the Fund's senior loan interests, considering all indications of value in respect of

a "current sale . "

5 . The Fund also disseminated annual reports to the Class for the years ended

1999 and 2000 (the "Annual Reports") that contained materially false and misleadin g

statements regarding the nature and development of the secondary market for its senio r

loan interests, the risks associated with investing in the Fund, and the Fund's performanc e

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information . For example, in its 1999 annual report, the Fund stated that the development

of a secondary market for senior loan interests and the Fund's corresponding adoption of

"mark to market" pricing for its loan interests would yield "absolutely" "positive" results when

it knew or was reckless in not knowing that the values the Fund ascribed to many of its

loan interests were well in excess of their then market prices and that a shift to market

pricing would deliver a swift and stinging blow to the Fund's NAV . Indeed, the Fund's NAV,

which had never fallen more than a few pennies below $10 since its inception in 1995,

dropped from approximately $10 in late 1999 to $9 .44 on March 30, 2001, following its

gradual implementation of market pricing for up to 90% of its loan interests .

JURISDICTION AND VENU E

6 . Plaintiffs bring this action pursuant to the 1933 Act and the 1934 Act as

amended (15 U .S.C. §§ 78j(b) and 78t (a)) and Rule 10b-5 promulgated thereunder (17

C .F.R. § 240. 10b-5) .

7 . This Court has jurisdiction over the subject matter of this action pursuant to

the 1933 Act, § 27 of the 1934 Act (15 U .S .C . § 78aa ) and 28 U .S.C . § 1331 .

8 . Venue is proper in this District pursuant to the provisions of the 1933 Act, §

27 of the 1934 Act, 15 U .S .C. § 78aa and 28 U .S.C . § 1391(b) . Many of the acts and

transactions giving rise to the violations of law complained of herein, including the

preparation and dissemination to the investing public of false and misleading information,

occurred in this District .

9 . In connection with the acts, conduct and otherwrongs complained of herein,

the defendants used the means and instrumentalities of interstate commerce .

THE PARTIE S

10. Plaintiffs purchased shares in the Fund during the Class Period, as set forth

in the certification attached hereto and incorporated herein by reference, and have suffered

substantial damages as a result of the wrongful acts of defendants as alleged herein .

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11 . Defendant Eaton Vance Corporation ("Eaton Vance Corp.") is an investment

management company based in Boston, Massachusetts that operates a number of mutua l

funds, including the EV Classic Senior Floating-Rate Fund .

12. Defendant EV Classic Senior Floating -Rate Fund (the "Fund") maintains its

principal executive offices at The Eaton Vance Building, 255 State Street, Boston,

Massachusetts, 02109 . The Fund is a Massachusetts business trust and is registered

under the Investment Company Act of 1940 as a non-diversified, closed-end management

investment company. The Fund commenced operations on February 24, 1995 . Its stated

investment objective is to "provide as high a level of current income as is consistent with

the preservation of capital," by investing all of its investable assets in senior secured

floating rate loans through an ownership interest in a Senior Debt Portfolio (the "Portfolio"),

an affiliated, closed-end, non-diversified investment company with the same investment

objective as the Fund . The Portfolio's loans are made to corporations, partnerships and

other business entities, which operate in various industries and geographical regions and

pay interest at rates which are recalculated periodically on the basis of a floating lending

rate .

13. Boston Management and Research ("BMR") is the Portfolio's investmen t

adviser and is a wholly-owned subsidiary of Eaton Vance Management . Under the general

supervision of the Portfolio's Board of Trustees, BMR carries out the investment and

reinvestment of the assets of the Portfolio, including but not limited to making all purchase

and sale decisions . An investment advisory fee is paid to BMR as compensation for its

investment advisory services rendered to the Portfolio . The fee is computed at .95% of the

Portfolio's average daily gross assets up to and including $1 billion and at a reduced rate

for assets in excess of $1 billion . For the year ended December 31, 2000, the effective

annual rate, based on average daily gross assets, was 0 .41 % and amounted to payment

to them of $38,551,367 .

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14 . Eaton Vance Management ("Eaton Vance") is a business trust organized

under Massachusetts law and is the administrator of the Fund . For the fiscal years ended

December 31, 1998 and 1997, the Fund paid Eaton Vance administration fees of

$6,375,216 and $4,213,131, respectively, which was equal to 0 .25% of the average daily

gross assets of the Portfolio attributable to the Fund for each fiscal year . Effective May

1999, Eaton Vance agreed to waive continued payment of administration fees as long as

the Fund pays it distribution fees of 0 .70% of average daily net assets annually .

15. The following defendants, at times relevant to this action, served as (i )

Trustees and/or executive officers of the Fund and signed Prospectuses/Registration

Statements which were false and misleading as stated herein and received compensation,

or (ii) served as portfolio managers of the Fund and made false and misleading statements

as alleged herein :

Name

JAMES B. HAWKESJAMES L . O'CONNOR

JESSICA M . BIBLIOWICZDONALD R. DWIGHTSAMUEL L . HAYESNORTON H . REAMERJACK L . TREYNORM . DOZIER GARDNERJOHN L. THORNDIKESCOTT H . PAGEPAYSON F. SWAFFIELD

Position

Trustee, President and Principal Executive OfficerTreasurer and Principal Financial and Accounting

OfficerTrusteeTrusteeTrusteeTrusteeTrusteeTrusteeTrusteePortfolio Manager of the Portfolio and Officer of BMRPortfolio Manager of the Portfolio and Officer of BMR

The Trustees and O'Connor are sometimes referred to herein as the "Individua l

Defendants " . Page and Swaffield are sometimes referred to herein as the "Portfolio

Managers" .

16 . By reason of their management and officer positions, and membership on th e

Fund's Board of Trustees, and their ability to make public statements in the name of th e

Fund, the Individual Defendants and the Portfolio Managers were and are controllin g

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persons, and had the power and influence to cause (and did cause) the Fund to engage

in the unlawful conduct complained of herein .

MOTIVE OPPORTUNITY AND KNOWLEDG E

17. The Individual Defendants were charged with selecting the methods to be

used in determining the value of the securities held by the Fund and its daily NAV. The

Prospectuses state that the Trustees were following closely the development of the

seconda ry market for senior loans while continuing to direct that the Fund ' s loan interests

be valued using a "fair value " method . Tthe Individual Defendants and the Po rtfolio

Managers knew that ce rtain of the loans held by the Portfolio were being traded in the

seconda ry, over-the-counter market at a fraction of the value the Fund ascribed to such

loans in calculating NAV, and that upon conversion to "mark to market " pricing, the Fund's

NAV would be significantly reduced . In monitoring closely the development of the

seconda ry market , the Individual Defendants and the Po rtfolio Managers had knowledge

of the nature , quality , volume, and prices at which the loan interests held by the Po rtfolio

were trading in the seconda ry market . In addition , because of their membership on the

Board of Trustees and/or executive and managerial positions with the Fund , the Individual

Defendants and the Po rtfolio Managers had access to the adverse non-public information

about the business , finances, markets and present and future business prospects of the

Fund particularized herein via access to internal corporate documents , conversations or

connections with corporate officers or employees, membership in the Loan Syndication

and Trading Association ("LSTA"), attendance at management, Board of Trustees'

meetings and commi ttees thereof and /orvia repo rts and other information provided to them

in connection therewith .

18. The Individual Defendants had a duty to determine the Fund 's NAV in

accordance with applicable SEC Rules and its own stated valuation policies and promptly

disseminate accurate and truthful information with respect to the Fund 's operations and

financial condition or to cause and direct that such information be disseminated and to

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promptly correct any previously disseminated information that was misleading to the

market . As a result of their failure to do so, the price of the Fund's shares was artificially

inflated during the Class Period, damaging plaintiffs and the Class .

19 . The Individual Defendants, because of their positions with the Fund ,

controlled the contents of annual reports, prospectuses and registration statements . Each

Individual Defendant was provided with copies of the filings and reports alleged herein to

be misleading prior to or shortly after their issuance and had the ability and opportunity to

prevent their issuance or cause them to be corrected . Because of their positions and

access to material non-public information available to them but not the public, each of

these defendants knew that the adverse facts specified herein had not been disclosed to

and were being concealed from the public and that the positive representations which were

being made were then false and misleading . As a result, each of the Individual Defendants

is responsible forthe accuracy of the Fund's statements contained in its annual reports and

prospectuses/registrations statements executed by them and are therefore responsible and

liable for the representations contained therein .

20 . The Individual Defendants and the Portfolio Managers were motivated by

various reasons to make material misrepresentations to plaintiffs and the Class during the

Class Period particularly concerning the development of the secondary market for senior

loan interests and the purported effect on the Fund from conversion to mark to market

pricing, which the Individual Defendants and the Portfolio Managers knew orwere reckless

in not knowing would cause a sharp drop in the Fund's NAV . First, the Individual

Defendants and the Portfolio Managers knew that the Fund's success depended on its

ability to provide shareholders with a reasonable return (by maintaining a stable NAV and

making quarterly dividend payments) . The Fund knew that if it truthfully disclosed that

conversion to market pricing was going to result in a significant drop in the Fund's NAV,

few new investors or existing shareholders would purchase shares at an inflated NAV, prior

to the Fund's contemplated conversion to market pricing. Indeed, during the Class Period ,

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defendants successfully sold to the public 250 million shares at an inflated NAV and

reaped just under$2 .5 billion in proceeds . In addition, the Fund knewthat if investors knew

the true impact of conversion to market pricing, many would have submitted their shares

to the Fund for repurchase, which would have reduced the overall assets in the Fund

(which figure is used to determine management fees received by BMR, certain of the

Individual Defendants and Eaton Vance). Finally, Defendants were motivated by the fact

that their yearly compensation of millions of dollars in management and other fees was tied

to the reported NAV of the Fund . For example, as compensation for investment advisory

services BMR is paid a fee of .95% of the Portfolio's average daily gross assets up to $1

billion and at a reduced rate for assets in excess of $1 billion . For the year ended

December 31, 2000 these fees exceeded $38 million .

21 . Each of the defendants is liable as a primary violator in making false an d

misleading statements, and for participating in a fraudulent scheme and course of business

that operated as a fraud or deceit on purchasers and sellers of shares in the Fund during

the Class Period . For the reasons stated above, all of the defendants had motives to

pursue a fraudulent scheme in furtherance of their common goal, i .e ., to gradually convert

to mark to market pricing, which they knew they had to do based on the content of

communications by the SEC to the Investment Company Institute and the undeniable

development of a secondary market, without suffering significant share redemptions, which

would have had a direct negative impact on the fees it earned from managing the Fund,

and its ability to further attract interest in the Fund's shares which were being continually

offered to the public pursuant to periodic registration statements/prospectuses . The

fraudulent scheme and course of business was designed to and did : (i) deceive the

investing public, including plaintiffs and other Class members ; (ii) artificially inflate the price

of shares in the Fund during the Class Period ; (iii) cause plaintiffs and other members of

the Class to purchase shares in the Fund at inflated prices ; and (iv) conceal and cover-u p

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the true value of the Fund's investments and the effect of conversion to mark to market

pricing .

CLASS ACTION ALLEGATION S

22. Plaintiffs bring this action as a class action pursuant to Rule 23(a) and (b)(3)

of the Federal Rules of Civil Procedure on behalf of a class (the "Class") consisting of all

persons who purchased shares in the Fund between March 30, 1998 and March 2, 2001,

inclusive (the "Class Period"). Excluded from the Class are the defendants herein,

members of each Individual Defendant's immediate family, any entity in which any

defendant has a controlling interest, and the legal affiliates, representatives, heirs,

controlling persons, successors, and predecessors in interest or assigns of any such

excluded party .

23. As of December 31, 2000, over 351 million shares in the Fund wer e

outstanding . While the exact number of Class members can only be determined by

appropriate discovery, plaintiffs believe that Class members number at least in the

thousands and that they are geographically dispersed . Accordingly, members of the Class

are so numerous that joinder of all members is impracticable .

24 . Plaintiffs' claims are typical of the claims of the members of the Class,

because plaintiffs and all of the Class members sustained damages arising out of the same

wrongful conduct complained of herein .

25 . Plaintiffs will fairly and adequately protect the interests of the Class members

and have retained counsel who is experienced and competent in class and securities

litigation. Plaintiffs have no interests that are contrary to or in conflict with the members of

the Class plaintiffs seeks to represent .

26 . A class action is superior to all other available methods for the fair and

efficient adjudication of this controversy, since joinder of all members is impracticable .

Furthermore, as the damages suffered by individual members of the Class may be

relatively small, the expense and burden of individual litigation make it impossible for th e

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members of the Class individually to redress the wrongs done to them . There will be no

difficulty in the management of this action as a class action .

27. Questions of law and fact common to the members of the Class predominat e

over any questions that may affect only individual members, in that defendants have acte d

on grounds generally applicable to the entire Class . Among the questions of law and fact

common to the Class are :

a . whether the federal securities laws were violated by defendants' act s

as alleged herein ;

b. whether the Fund's publicly disseminated Prospectuses and othe r

public filings issued during the Class Period omitted and/or misrepresented material fact s

and whether defendants breached any duty to convey material facts or to correct materia l

facts previously disseminated ;

c. whether defendants participated in and pursued the fraudulent schem e

or course of business complained of;

d . whether the defendants acted willfully, with knowledge or recklessly ,

in omitting and/or misrepresenting material facts ;

e . whether the Fund's NAV and, by extension, its shares were artificiall y

inflated during the Class Period due to the Fund's failure to value the its investments o n

a mark to market basis despite the existence of "readily available" quotes for its loa n

interests :

f. whether the Fund's NAV and, by extension, its shares were artificiall y

inflated during the Class Period due to the Fund's failure to use good faith in valuing it s

loan interests considering all indications of value and based on a current sale ;

g. whether, on account of the inflated NAV as alleged herein, the Fun d

paid excessive management and/or administrator fees ; and

h. whether the members of the Class have sustained damages and, i f

so, what is the appropriate measure of damages .

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SUBSTANTIVE ALLEGATION S

28 . The Fund is registered under the 1940 Act as a non-diversified, closed-en d

management investment company . The Fund's shares are not publicly traded . The Fund

currently has one class of shares of beneficial interest, which may be issued in an unlimited

number by the Trustees . Each share represents an equal proportionate beneficial interest

in the Fund .

29 . The Fund' s stated investment objective is to "provide as high a level of

current income as is consistent with the preservation of capital, by investing all of its

investable assets in senior secured floating rate loans" through an ownership interest in a

Senior Debt Portfolio (the "Portfolio") having the same investment objective as the Fund .

30. The value of the Fund's investment in the Portfolio reflects the Fund' s

proportionate interest in the net assets of the Portfolio (41 .6% at December 31, 2000) . The

Fund reported in its 2000 Annual Report that the Portfolio held assets of $8 .01 billion at

December 31, 2000, which it then used to calculate the value of its interest therein at $3 .33

billion .

31 . Under normal market conditions, at least 80% of the Portfolio's total asset s

are to be invested in interests in senior loans . The Fund describes the Portfolio's senior

loans (the "Loans") as secured loans made to corporations, partnerships and other

business entities, which operate in various industries and geographical regions and pay

interest at rates, which bear a "floating" rate of interest, i .e ., the Loan's interest rate is

recalculated periodically to reflect current interest rates . The "senior" feature of the Loans

refers to the Loans' primary standing among other debt held by a given borrower, which

must usually be repaid before other debt obligations .

32 . Although the Portfolio, within which the Fund invests exclusively, reserves th e

right to make, or originate Loans, the majority of its Loan interests are acquired b y

purchasing an assignment from another lender or as a participating member of a loa n

syndicate along with other financial institutions .

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33. Although the Loans are generally considered below " investment grade," th e

Prospectuses states that, "[b]ecause of the protective features of Senior Loans (being

senior in a borrower's capital structure and secured by specific collateral), the investment

adviser believes, based on its experience, that Senior Loans tend to have more favorable

loss recovery rates compared to most other types of below investment grade debt

obligations . "

34. The Fund is managed by the Trustees of the Fund, who are responsible fo r

the overall management and supervision of its affairs including selection of the method b y

which the Fund will determine NAV .

35 . The Fund's NAV is computed by dividing the value of the Fund' s total assets ,

less its liabilities by the number of shares outstanding . Because the Fund invests its assets

exclusively in an interest in the Portfolio, the Fund states that NAV reflects the value of its

interest in the Portfolio (which, in turn, reflects the underlying value of the Portfolio's assets

and liabilities) . The Portfolio's NAV is, in turn, computed by "determining the value of the

Portfolio's total assets (the senior loans and securities it holds plus any cash), and

subtracting all of the Portfolio's liabilities (including the outstanding principal amount of any

indebtedness issued and any unpaid interest thereon) . "

Determination of NAV

36. Shares in the Fund are not publicly traded . Moreover, unlike open-end mutua l

funds, which typically redeem shares daily, the Fund is closed-end, and thus does not

conduct daily redemptions . To create liquidity for its shares, the Fund operates as an

interval fund (in accordance with SEC Rule 22c-3 under the 1940 Act) which means that

it continuously sells shares to the public, but conducts only periodic share repurchases (of

at least 5% and up to 25% or more of its shares) at "net asset value ." The Fund conducts

share repurchases once per quarter .

37 . Given that the Fund serves as the exclusive source of liquidity for selling

shareholders, its determination of NAV (the purchase and sale price of its shares) is of

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critical importance . In recognition of this, the SEC promulgated Rules 22c-1(a) and c-3

underthe 1940 Act, which require that registered investment companies, such as the Fund ,

conduct all share repurchases and sales at the current NAV .

38 . To calculate the current NAV required by Rule 22c-1 and c-3, funds mus t

follow SEC Rule 2a-4 under the 1940 Act . Rule 2a-4 sets forth the definition of "current net

asset value " and provides that :

The current net asset value of any redeemable security issuedby a registered investment company used in computingperiodically the current price for the purpose of distribution,redemption, and repurchase means :

Portfolio securities with respect to which quotations are readilyavailable shall be valued at current market value, and othersecurities and assets shall be valued at fair value asdetermined in good faith by the board of directors of theregistered company . . . (emphasis supplied )

39 . In accordance with Rule 2a-4, a fund must determine its current NAV using

market prices, or "mark to market," where such quotations are "readily available ." As a last

resort, where such quotations are not "readily available," a fund may make a good fait h

determination of current NAV based upon the "fair value" of the security .

40 . With respect to "fair value" pricing, the SEC has issued Accounting Serie s

Release ("ASR") 118, which advises that fair value "would appear to be the amount whic h

the owner might reasonably expect to receive for [the securities] upon their current sale . "

41 . At the time shares in the Fund were first sold to the public in February 1995 ,

trading in the seconda ry, over-the-counter market (the "Senior Loan Market") in senior loan

interests exceeded $35 billion . Although other senior loan funds found the Senior Loan

Market active and reliable enough to calculate its respective NAV on a "mark to market"

basis, market quotations for some senior loans were not "readily available ." As a result, the

Fund initially calculated its daily NAV on the basis of the "fair value" of all of its Loan

interests , even those that did trade in the Senior Loan Market .

42. Over time, however, the Senior Loan Market experienced significan t

development so that by the end of 1997, market quotations for the Fund's Loan interest s

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were "readily available ." Turning a blind eye to the development of the Senior Loan Market

and the existence of "readily available" quotes for many, if not all, of its Loan interests, the

Fund continued to value all of its interests in the Loans on the basis of fair value throughout

1997 and 1998 .

43. As shown by the cha rt below , seconda ry loan trading increased exponentiall y

in the 1990's . Between 1991 and 1998, volume grew over 1200%, with total traded loan

value in excess of $110 billion . The impropriety of the Fund's failure to convert to mark to

market pricing in, at the latest, 1998 is evidenced by (as discussed below) the Fund's

determination to partially convert to mark to market pricing in the last quarter of 1999 . As

the chart indicates, however, the total volume of loans was actually greater in 1998 than

in 1999.

140

120Par

C 100

80c_

60

40

20

Q~ CQV~ {p'7~ . 47 ~D N aP a 0

CJI 41 41 41 41 41 41 41 41 CUr r r r r ,- r r r CV

44. Indeed, while the Fund continued to value certain of its Loan interests at pa r

using a "fair value" valuation method, such Loan interests were trading in the secondar y

market at significant discounts to par. The Fund was reluctant to convert to "mark t o

14

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market" pricing because such a conversion would have caused its NAV to be reduced, as

it should have, to reflect the significantly lower prices at which certain of its Loan interests

were trading in the Senior Loan Market . For example, defendants had valued an $18

million Loan to Tokheim Corp ., the largest maker of automatic gas pumps, at par, or full

value, on June 30, 2000, while this loan was simultaneously selling for 72 cents on the

dollar in the Senior Loan Market. Tokheim Corp. later filed for bankruptcy protection in

August 2000 . In another instance, as of June 30, 2000, the Fund valued a $12 million loan

to Globe Manufacturing, a maker of spandex, at par when such loan was selling on the

Senior Loan Market at 67 .5 cents on the dollar . The Fund similarly valued a $7 million loan

to U .S . Office Products at par on June 30, 2000 when Loan Pricing Corp . ("LPC") quoted

it at 70 cents on the dollar and valued an almost $15 million loan to Mariner Post-Acute

Network at par when it was selling for 77 cents on the dollar .

45. The Fund's failure to calculate its NAV during the Class Period on a mark t o

market basis for its Loan interests for which market quotations were "readily available"

resulted in plaintiffs and members of the Class purchasing shares in the Fund pursuant to

materially misleading Prospectuses, which reflected a materially inflated NAV . In addition,

the Fund's quarterly repurchase of shares at a similarly materially inflated NAV diluted the

other shareholders' interests in the Fund .

Dissemination Of Materially Misleading Statements

46 . In addition to failing to adopt market pricing for its Loan interests for which

market prices were "readily available ," the Fund misled plaintiffs and the Class during the

Class Period by characterizing , in its Annual Repo rts and Prospectuses , its senior Loan

interests as "illiquid ," for which quotes on the seconda ry market were not "reliable ."

Defendants disseminated this falsity in fu rtherance of its effo rt to justify its continued use

of "fair value" to determine the Fund 's NAV in 1998, 1999 and the better pa rt of 2000 and

mislead plaintiffs and the Class .

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47 . In late 1999, the SEC drafted a letter to the Investment Company Institut e

and its members, including Eaton Vance (the "SEC Letter"). In the SEC letter, which the

author was later quoted as saying was "written with [loan funds] in mind," the SEC

expressed its concern that funds, such as the Fund, were not using proper valuation

procedures to calculate NAV . Reports in the financial press soon circulated, mentioning

the SEC letter, and raising strong concerns that certain senior loan funds were improperly

delaying conversion to mark to market pricing because they knew that their respective

fund NAVs would be drop significantly, resulting in increased redemption, little future

investor interest, and a reduction in fees tied to NAV .

48. Following the not so subtle prodding of the SEC, negative reports in th e

financial press and criticism from certain large institutional investors, who expressed strong

skepticism regarding the reluctance of certain funds to convert to mark to market pricing,

the Fund decided to begin the process (albeit two years late) of converting to mark to

market pricing in the last quarter of 1999 .

49 . The Fund's decision to finally adopt mark to market pricing to determine NA V

was not easy. The Fund's failure to adopt market pricing, as the Senior Loan Market

developed in 1996, 1997, 1998 and 1999, for those of its Loan interests for which "readily

available" quotes existed (which would have allowed for a more gradual reduction in its

NAV), meant that it now faced the arduous task of having to adopt market pricing for all of

its Loan interests at once because a very deep and liquid Senior Loan Market existed in

the last quarter of 1999 .

50. Given its purported close monitoring of the Senior Loan Market, however ,

defendants knew that an "all at once" conversion to market pricing would cause the Fund's

NAV to drop precipitously, causing its shareholders and the market to further question,

inter alia, its valuation practices and overall fund management . Defendants' solution to this

problem, which would prevent a precipitous drop in NAV and avoid unwanted attention t o

16

t •its own malfeasance, was to gradually adopt mark to market pricing, or mechanically

ratchet down the Fund's NAV.

51 . The "Management Discussion" section of the Fund's Annual Reports typically

comprised "question and answer" of the Portfolio's managers . The Fund's 1999 annual

report, issued just after the Fund adopted mark to market pricing for 10% of its Loan

interests, contained the following "question and answer" :

Q : Were There Any Notable Developments In The Portfolio In The PastYear?

A : Mr. Page: Yes . We've made a change with respect to loan valuation . ThePortfolio has adopted valuation procedures under which a portion of the

Portfolio's loans will be priced at market value, based on information aboutactual loan market transactions . Because a real market exists for certainloans, they are deemed liquid and can therefore be "marked-to-market ."Initially, this new valuation procedure will affect around 10% of the Portfolio .That percentage may rise over time as we identify additional loans that canbe priced at market value . The remainder of the Portfolio will continue to bepriced at fair value, using a methodology we've utilized since 1989 . Webelieve that this dual-pricing approach reflects the current reality in the loanmarket .

52 . This statement was materially false and misleading for multiple reasons . First,

this statement implies that a "real market" existed at that time only for 10% of its Loan

interests, which percentage would increase as "we identify additional loans that can be

priced at market value ." By the last quarter of 1999, however, the Senior Loan Market had

already developed into a liquid market, and thus market prices existed at the time this

statement was made for significantly more than 10% of the Fund's Loan interests .

53. This statement was also materially false and misleading because it create d

the impression that further development in the Senior Loan Market and the Fund's further

use of market prices for its Loan interests was uncertain . At this time, however, not only

were "readily available" quotes available for the all or most of its Loan interests, but

defendants knew that the Fund was embarking upon a gradual, broad based conversion

to market pricing for the entire Fund . This information was of particular importance

because, following adoption of market pricing for 10% of its Loans, the NAV dropped fro m

17

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just a few pennies shy of $10 (an NAV that had persisted relatively unchanged since the

Fund's inception in February 1995) to $9 .87, by far the lowest NAV the Fund ever

experienced .

54. On pages 3-4 of its annual repo rt for 2000 (filed on March 2, 2001), a year

in which the Fund converted to market pricing for over 90% of the Fund, the followin g

question and answer appeared :

Q : Payson, could you elaborate on market pricing in calculating the Fund'snet asset value ?

A : Mr. Swaffield : In the fall of 1999 , a pricing service for the seconda rymarket trading of bank loans emerged under the auspices of the LoanSyndication and Trading Association (LSTA) . In a joint venture with LoanPricing Corporation (LPC), a subsidiary of Reuters, LSTA/LPC began thesystematic collection and repo rting of indicative seconda ry market prices forbank loans . Prior to this service , few standards existed for soliciting anddistributing price information , and those that were available were notsufficiently reliable to serve as the basis of pricing and transacting bankloans on a daily basis .

After an intensive evaluation of the new LSTA/LPC service, the Portfolio'sTrustees adopted the use of this independent pricing service for a portion ofthe Portfolio . Throughout 2000, we continued to evaluate the reliability of theservice, comparing its prices with actual transactions in loan interests that weand other institutional investors conducted . As we grew more comfortablewith its reliability, based on the evaluation of data, we increased our relianceon the pricing service. Today, over 90% of the Portfolio is priced using thisservice and we expect that percentage to increase .

55. The creation of this joint venture and the Fund 's use thereof, should have

been disclosed in the Fund's 1999 annual report because it would have indicated to

plaintiffs and the Class that not only was the percentage of the Fund's Loans being marked

to market likely to rise, but also that market prices existed for more than 10% of its Loans

and that it chose to limit use of the pricing service to 10% of its Loan interests . Proper

disclosure would have allowed plaintiffs and the Class to consider whether they wanted to

purchase shares in the Fund during its conversion to market pricing . Indeed, plaintiffs and

the Class had already witnessed a significant drop in NAV after 10% of the Fund was

converted and would have certainly deemed it important to know that another 80% of the

Fund's Loan interests were going to be marked to market in the near future .

18

56. The Fund 's statement in ¶ 53 above was also false and misleading in that i t

falsely implies that prior to the joint venture between LPC and the LSTA, market prices for

senior loan interests were unreliable and unavailable, when in fact, trading in senior loan

interests in 1998 was just as "active," "liquid" and "reliable" as the Senior Loan Market in

the latter portion of 1999 . Moreover, the Fund misled plaintiffs and the Class by making

it appear that its obligation to use Market Prices to determine NAV was contingent on the

development of the LSTA/LPC joint venture or other similar pricing service, as opposed to

the simple existence of "readily available" quotations . This statement was also misleading

because for many years prior to the LSTA/LPC joint venture, LPC had been collecting and

disseminating market prices to senior loan funds (including the Fund) .

57 . The Fund's 1999 annual repo rt was also false and misleading in its overly

positive statements concerning the impact on the Fund upon conversion to mark to market

pricing. Prominently appearing on page 4 of the 1999 annual report is the following

question and answer .

Q: Do You View This Change [Mark to Market ] As Positive For The Fund ?

A: Mr. Page : Absolutely. This is a very Dositive development for the marketand the Fund . We've long been advocates of improved liquidity and view thismove as another step in that direction . It also reflects the impressive growthof the loan market . In 1999, issuance again reached record levels, whiletrading volumes also grew . In addition, the market continued to attract anincreasing number of institutional investors, which should further improveliquidity . That trend is good for issuers and investors alike . (emphasis added)

58 . At the time this statement was made , the Fund had only converted to market

pricing for 10% of its Loan interests but had already seen the resulting record low NAV .

The Fund also knew at this time that many of the Fund's Loan interests were trading at

significant discounts in the Senior Loan Market and that upon adoption of such market

prices, the Fund's NAV was certain to drop much further. This certain risk, which

defendants failed to disclose, renders defendants' unqualified positive statement regarding

the benefits of conversion to mark to market pricing materially false and misleading .

19

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The Fund's "Fair Value" Determinations During the Class Period were not in Good Fait h

59. Beginning at the Fund's inception in February 1995 and continuing throug h

the last quarter of 1999, defendants determined NAV for all of the Fund's Loan interest s

based upon what it claimed was "fair value . "

60. ASR 118 sets forth the following factors be considered in making fair valu e

determinations :

(a) fundamental analytical data, (b) the nature and duration of anyrestrictions on disposition ; (c) and evaluation of the forces that influence themarket in which the securities are purchased and sold ; and (d) specificfactors, including (among others) the type of security, financial statements,cost, size of holding, analysts' reports, transactional information or offers,and public trading in similar securities of the issuer or comparablecompanies .

61 . The Fund's Trustees, who are responsible for formulating the Fund' s

valuation guidelines and procedures, required the following valuation guidelines be use d

in calculating "fair value" of its Loan interests :

(i) the characteristics of and fundamental analytical data relating to theSenior Loan, including the cost, size, current interest rate, period until nextinterest rate reset, maturity and base lending rate of the Senior Loan, theterms and conditions of the Senior Loan and any related agreements, andthe position of the Senior Loan in the Borrower's debt structure ; (ii) thenature, adequacy and value of the collateral, including the Portfolio's rights,remedies and interests with respect to the collateral ; (iii) the creditworthinessof the Borrower, based on an evaluation of its financial condition, financialstatements and information about the Borrower's business, cash flows,capital structure and future prospects ; (iv) information relating to the marketfor the Senior Loan including price quotations for and trading in the SeniorLoan, and interests in similar Senior Loans and the market environment andinvestor attitudes towards the Senior Loan and interests in similar SeniorLoans; (v) the reputation and financial condition of the agent and anyintermediate participant in the Senior Loan ; and (vi) general economic andmarket conditions affecting the fair value of the Senior Loan .

62 . Although a "fair value" valuation is designed to produce accurate curren t

security valuations, defendants ascribed values to its Loan interests in an effort to maintain

a "stable ," albeit inflated , NAV and, in so doing , completely ignored all of the valuatio n

considerations set forth in ASR 118 and its own stated valuation considerations .

20

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63. During the years 1995,1996,1997 and 1998, defendants reported the Fund' s

NAV as remaining remarkably stable, falling at most 3 or 4 cents under $10, the price at

which shares in the Fund were initially sold to the public . The stability in the Fund's

reported NAV was a direct result of defendants' determinations to value all its Loan

interests at full value, except in the most extreme and limited circumstances where the

Fund had clear proof that a Loan was not going to be repaid . Indeed, the Fund often

valued Loan interests at full value even where the borrower had sought bankruptcy

protection . The problem with this valuation method (in addition to it being contrary to ASR

118 and the Fund's stated valuation methodology) is that it confuses the intrinsic value of

a Loan with the Loan's market value . Indeed, it is common for a loan that is considered

performing (all payments are being made and full repayment is expected) to have an

intrinsic value of par but, because of substantial risks to continued payment, a market

value of significantly less . In determining the "fair value" of its Loan interests, defendants

failed to consider at what price its Loans could currently be sold, in consideration of all

risks, which the market would not overlook and chose instead to consider only whether the

Loan was still technically performing .

64. Indeed, the Commission made clear in the SEC Letter that, as a genera l

principle, the fair value of a portfolio security is the price, which the fund might reasonabl y

expect to receive upon its current sale .

Ascertaining fair value requires a determination of the amount that an arm's-length buyer, under the circumstances, would currently pay for the security .Fair value cannot be based on what a buyer might pay at some later time,such as when the market ultimately recognizes the security's true value ascurrently perceived by the portfolio manager . Funds also may not fair valueprice portfolio securities at prices, which are not achievable on a currentbasis on the belief that the fund would not currently need to sell thosesecurities. Thus, bond or similar funds generally may not fair value priceportfolio securities at par based on the expectation that the funds will holdthose securities until maturity, if the funds could not receive par value uponthe current sale of those securities .

65. In valuing its Loan interests at par (barring the most extraordinary

circumstances) defendants accorded little or no weight to ASR 118 or the Fund's ow n

21

.1 00

valuation procedures including, but not limited to, consideration of general economic

conditions affecting the loan market, the financial condition of its borrowers, the market

prices at which identical and similar loan interests were being sold on the Senior Loan

Market and the market prices of similar senior loan funds .

66. As such , defendants ' calculation of NAV, which was based on inflated Values

for the Fund's Loan interest, resulted in a materially inflated NAV during the Class Period .

This inflated NAV was reported in the Prospectuses disseminated during the Class Period

rendering them materially false and misleading . Further, the materially inflated NAVs were

used to determine the price at which plaintiffs and other members of the Class purchased

shares thereby causing them to be damaged .

67 . For example, throughout 1998, the Fund's NAV remained remarkably stable ,

within a few pennies of $10 . 1998, however, saw significant market gyrations, not the least

of which involved an eroding debt market, the Asian Financial Crisis, the Long Term

Capital debacle, high loan defaults, and a reportedly depressed market for publicly traded

loan funds. In fact, in 1998, the Nuveen senior loan fund, which had intended to raise

between $1 and $2 billion in an initial equity offering, was heavily under subscribed, selling

only $250 million to the market, representing the market's distaste for senior loan funds at

that time . Yet, despite all of these factors, which would have negatively affected the market

value of the Fund's Loan interests, the Fund's NAV never wavered, serving as strong

evidence that the Fund was not making "fair value" determination in accordance with the

"current sale" rule underASR 118 and its own stated valuation considerations . The Fund's

valuation determinations were thus not in good faith, which in addition to leading to a

materially inflated NAV also constituted a breach of the Individual Defendants' fiduciary

duties to plaintiffs and the Class .

68 . In sum, defendants' failed to adopt and employ "mark to market" pricin g

procedures for the Fund's interest in the senior loan interests of the Portfolio, despite th e

existence of "readily available" market quotations, or, in the alternative, failed to determin e

22

in good faith the "fair value" of the Fund's senior loan interests, considering all indications

of value in respect of a "current sale ." As a result, trading of the Fund's shares during the

Class Period was based on an artificially inflated NAV . The artificial inflation continued

until the time the Fund completed conversion to market pricing for all Loan interests for

which "readily available" market quotations existed . Plaintiffs and other members of the

Class purchased the Fund's common stock relying upon the integrity of the Fund's NAV

and have been damaged thereby .

69 . During the Class Period, defendants materially misled the investing public ,

thereby inducing the purchase of shares in the Fund at inflated prices of the Fund's

common stock, by publicly issuing false and misleading statements and omitting to disclose

material facts necessary to make defendants' statements, as set forth herein, not false and

misleading. Said statements and omissions were materially false and misleading in that

they failed to disclose material adverse information and misrepresented the truth about the

Company, its business and operations .

70 . At all relevant times, the material misrepresentations and omissions

particularized in this Complaint directly or proximately caused or were a substantial

contributing cause of the damages sustained by plaintiffs and other members of the Class .

As described herein, during the Class Period, defendants made or caused to be made a

series of materially false or misleading statements about The Fund's business, prospects

and operations . These material misstatements and omissions had the cause and effect of

creating in the market an unrealistically positive assessment of the Fund and its business,

prospects and operations, thus causing the Company's common stock to be overvalued

and artificially inflated at all relevant times . Defendants' materially false and misleading

statements during the Class Period resulted in plaintiffs and other members of the Class

purchasing the Fund's common stock at artificially inflated prices, thus causing the

damages complained of herein .

23

SCIENTER ALLEGATION S

71 . As alleged herein , defendants acted with scienter in that defendants kne w

that the public documents and statements, issued or disseminated by or in the name of the

Fund were materially false and misleading ; knew or recklessly disregarded that such

statements or documents would be issued or disseminated to the investing public ; and

knowingly and substantially participated or acquiesced in the issuance or dissemination of

such statements or documents as primary violators of the federal securities laws . As set

forth elsewhere herein in detail, defendants, by virtue of their receipt of information

reflecting the true facts regarding the Fund and its business practices, their control over

and/or receipt of the Fund's allegedly materially misleading misstatements and/or their

associations with the Fund, which made them privy to confidential proprietary information

concerning the Fund, were active and culpable participants in the fraudulent scheme

alleged herein. Defendants knew and/or recklessly disregarded the falsity and misleading

nature of the information which they caused to be disseminated to the investing public . The

ongoing fraudulent scheme described in this complaint could not have been perpetrated

over a substantial period of time, as has occurred, without the knowledge and complicity

of the personnel at the highest level of the Company, including the Individual Defendants

and the Portfolio Managers .

72. The defendants engaged in such a scheme to maintain an artificially inflate d

price of Fund shares in order to : (i) collect unreasonable and excessive fees and other

compensation, the amount of which was tied to the Fund's reported NAV ; (ii) protect and

enhance their executive positions and the substantial compensation and prestige they

obtained thereby ; and (iii) complete the sale of 250 million shares in the Fund to the public

for total proceeds of approximately $2 .5 billion, which had the effect of increasing the

management and administrative fees earned by defendants .

24

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STATUTORY SAFE HARBOR

73 . The federal statutory safe harbor provided for forward-looking statement s

under certain circumstances does not apply to any of the allegedly false statements

pleaded in this Complaint . Further, none of the statements pleaded herein which were

forward-looking statements were identified as "forward-looking statements" when made .

Nor were the forward-looking statements pleaded accompanied by cautionary statements

identifying important factors that could cause actual results to differ materially from the

statements made therein . Defendants are liable for the forward-looking statements pleaded

because, at the time each of those forward-looking statements was made, the speaker

knew the forward-looking statement was false and the forward-looking statement was

authorized and/or approved by an executive officer of the Fund who knew that those

statements were false when made .

APPLICABILITY OF PRESUMPTION OF RELIANC E

74 . The presumption of reliance on the materially misleading statements o f

defendants in, inter alia, the Annual Reports and Prospectuses is applicable for the

following reasons, among others:

a . As a regulated issuer, the Fund filed periodic public reports with th e

SEC, including Prospectuses, quarterly and annual reports ; and

b . The Fund' s public filings including, among others , the Prospectuse s

and Annual Reports were disseminated to plaintiffs and the Class each containing identica l

statements which were materially false and misleading and upon which plaintiffs and th e

Class relied ;

75. As a result, the proofs necessary to establish liability under Section 1 Ob o f

the Exchange Act and SEC Rule 1 Ob-5 thereunder will be the same for plaintiffs and the

Class. Under the circumstances, all purchasers of shares in the Fund during the Class

Period suffered similar injury through their purchase of stock at artificially inflated prices

and a presumption of reliance applies .

25

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COUNT I

For Violations of Section 10(b) of the1934 Act and Rule 10b-5 Promulgated

Thereunder Against the Fund, the Individual Defendants and the PortfolioManagers

76 . Plaintiffs repeat and reallege the allegations set forth above as though full y

set forth herein . This claim is asserted against all defendants .

77 . During the Class Period, the Fund and the Individual Defendants and th e

Portfolio Managers, and each of them, carried out a plan, scheme and course of conduct

which was intended to and, throughout the Class Period, did : (i) deceive the investing

public, including plaintiffs and other Class members, as alleged herein ; (ii) artificially inflate

and maintain the market price of shares in the Fund ; and (iii) cause plaintiffs and other

members of the Class to purchase shares at artificially inflated prices . In furtherance of this

unlawful scheme, plan and course of conduct, the Fund, the Individual Defendants and the

Portfolio Managers, and each of them, took the actions set forth herein .

78. These defendants : (a) employed devices, schemes, and artifices to defraud ;

(b) made untrue statements of material fact and/or omitted to state material facts

necessary to make the statements not misleading ; and (c) engaged in acts, practices and

a course of business which operated as a fraud and deceit upon the purchasers of the

Company's common stock in an effort to maintain artificially high market prices for shares

in the Fund in violation of Section 10(b) of the Exchange Act and Rule 10b-5 . These

defendants are sued as primary participants in the wrongful and illegal conduct charged

herein . The Individual Defendants and the Portfolio Managers are also sued herein as

controlling persons of the Fund, as alleged below .

79. In addition to the duties of full disclosure imposed on defendants as a resul t

of their making of affirmative statements and reports, or participation in the making o f

affirmative statements and reports to the investing public, they each had a duty to promptl y

disseminate truthful information that would be material to investors in compliance with th e

26

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integrated disclosure provisions of the SEC as embodied in SEC Regulation S-X (17

C.F.R. § 210 .01 et sec . ) and S -K (17 C .F.R. § 229 . 10 et seg.) and other SEC regulations,

including accurate and truthful information with respect to the Fund ' s, financial condition

and performance so that the market prices of shares in the Fund would be based on

truthful , complete and accurate information .

80 . The Fund , the Individual Defendants and the Portfolio Managers , individuall y

and in concert, directly and indirectly, by the use of means or instrumentalities of interstate

commerce and/or of the mails, engaged and participated in a continuous course of conduct

to conceal adverse material information about the business, business practices,

performance, operations, future prospects and NAV of the Fund as specified herein . These

defendants employed devices, schemes and artifices to defraud, while in possession of

material adverse non-public information and engaged in acts, practices, and a course of

conduct as alleged herein in an effort to assure investors in the Fund continued stability

in the NAV and dividends, which included the making of, or the participation in the making

of, untrue statements of material facts and omitting to state material facts necessary in

orderto make the statements made about the Fund and its business, operations and future

prospects in the light of the circumstances under which they were made, not misleading,

as set forth more particularly herein, and engaged in transactions, practices and a course

of business which operated as a fraud and deceit upon the purchasers of shares in the

Fund during the Class Period .

81 . Each of the Individual Defendants' and the Portfolio Managers' primar y

liability, and controlling person liability, arises from the following facts : (i) each of them was

a high-level executive and/or Fund Trustee during the Class Period ; (ii) each of them, by

virtue of his or her responsibilities and activities as a senior executive officer and/orTrustee

of the Fund, was privy to and participated in the creation, development and reporting of the

Fund's performance, future prospects and/or reports ; (iii) they enjoyed significant personal

contact and familiarity with each other and were advised of and had access to othe r

27

members of the Fund's management team, internal reports, and other data and information

about the Fund's performance and development of the Senior Loan Market and available

market prices at all relevant times ; and (iv) they were aware of the Fund's dissemination

of information to the investing public which they knew or recklessly disregarded was

materially false and misleading .

82 . These defendants had actual knowledge of the misrepresentations an d

omissions of material facts set forth herein, or acted with reckless disregard for the truth

in that they failed to ascertain and to disclose such facts, even though such facts were

readily available to them . Such defendants' material misrepresentations and/or omissions

were done knowingly or recklessly and for the purpose and effect of concealing the Fund's

operating condition, business practices and future business prospects from the investing

public and supporting the artificially inflated price of its shares . As demonstrated by their

overstatements and misstatements of the Fund's financial condition and performance

throughout the Class Period, the Individual Defendants and the Portfolio Managers, if they

did not have actual knowledge of the misrepresentations and omissions alleged, were

reckless in failing to obtain such knowledge by deliberately refraining from taking those

steps necessary to discover whether those statements were false or misleading .

83 . As a result of the dissemination of the materially false and misleadin g

information and failure to disclose material facts, as set forth above, the price of the Fund's

shares, as reflected in its NAV, was artificially inflated during the Class Period . In ignorance

of the fact that the price of the Fund's shares was artificially inflated, and relying directly

or indirectly on the false and misleading statements made by defendants, and/or on the

absence of material adverse information that was known to or recklessly disregarded by

defendants but not disclosed in public statements by defendants during the Class Period,

plaintiffs and the other members of the Class acquired shares in the Fund during the Class

Period at artificially inflated prices and were damaged thereby .

28

84. At the time of said misrepresentations and omissions, plaintiffs and othe r

members of the Class were ignorant of their falsity and believed them to be true . Had

plaintiffs and the other members of the Class known of the true performance, business

practices and future prospects of the Fund, plaintiffs and other members of the Class

would not have purchased or otherwise acquired their shares in the Fund during the Class

Period, or, if they had acquired such shares during the Class Period would not have

purchased them at the prices they did .

85. By virtue of the foregoing, defendants each violated Section 10(b) of th e

Exchange Act and Rule 1 Ob-5 promulgated thereunder .

86 . As a direct and proximate result of defendants' wrongful conduct, plaintiff s

and the other members of the Class suffered damages in connection with their purchase s

of Fund shares during the Class Period .

COUNT 1 1For Violations of Section 20(a) of th e

1934 Act Against the Individual Defendants, the Portfolio Managers,BMR Eaton Vance and Eaton Vance Corp.

87 . Plaintiffs repeat and reallege the allegations set forth above as if set fort h

fully herein . This claim is asse rted against the Individual Defendants, the Portfoli o

Managers, BMR, Eaton Vance and Eaton Vance Corp . .

88. These defendants were and acted as controlling persons of the Fund withi n

the meaning of Section 20(a) of the Exchange Act as alleged herein . By virtue of their high-

level positions with the Fund, participation in and/or awareness of the Fund's operations

and/or intimate knowledge of the Fund's actual performance, the Individual Defendants

and the Portfolio Managers had the power to influence and control and did influence and

control, directly or indirectly, the decision-making of the Fund, including the content and

dissemination of the various statements which plaintiffs contend are false and misleading .

Each of the Individual Defendants and the Portfolio Managers was provided with or had

unlimited access to copies of the Fund's reports, public filings and other statements allege d

29

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by plaintiffs to be misleading prior to and/or shortly after these statements were issued an d

had the ability to prevent the issuance of the statements or cause the statements to b e

corrected .

89 . In addition, each of the Individual Defendants and the Portfolio Managers ha d

direct involvement in the day-to-day operations of the Fund and, therefore, is presume d

to have had the power to control or influence the particular transactions giving rise to th e

securities violations as alleged herein, and exercised the same .

90 . The Portfolio Managers were officers of BMR . As such , BMR is a contro l

person of the Portfolio Managers .

91 . As administrator of the Fund, Eaton Vance was a control person of the Fund .

92. As owner of the Fund , and as the employer of Hawkes and O'Connor, Eato n

Vance Corp . was a control person of the Fund and of Hawkes and O'Connor .

93. As set forth above, the Fund and the Individual Defendants and the Portfoli o

Managers each violated Section 10(b) and Rule 10b-5 by their acts and omissions as

alleged in this Complaint . By virtue of their controlling positions, the Individual Defendants,

the Portfolio Managers, BMR, Eaton Vance and Eaton Vance Corp . are liable pursuant to

Section 20(a) of the Exchange Act . As a direct and proximate result of defendants'

wrongful conduct, plaintiffs and other members of the Class suffered damages in

connection with their purchases of Fund shares during the Class Period .

COUNT II I

For Violations of Sections 11 of the Securities ActAgainst the Fund and the Individual Defendant s

94 . Plaintiffs repeat and reallege the allegations set forth above as if fully set

forth herein . For the purposes of this Count, plaintiffs expressly do not allege that an y

defendant acted with scienter or fraudulent intent, which is not an element of a

Section11 claim.

30

95. This claim is brought by plaintiffs pursuant to Section 11 of the Securitie s

Act, 15 U .S.C. § 77k, on behalf of the Class, against all defendants .

96 . The Prospectuses disseminated during the Class Period, pursuant t o

which plaintiffs and the Class purchased shares in the Fund, were inaccurate and

misleading, contained untrue statements of material facts, omitted to state other facts

necessary to make the statements made not misleading, and concealed and failed

adequately to disclose material facts as described above .

97 . The Fund is the registrant in the Prospectuses . As Trustees of the Fund ,

the Individual Defendants signed the Registration Statements and were responsible fo r

the contents and dissemination of the Prospectuses .

98. As issuer of the shares and signers of the Registration Statements, th e

Fund and the Individual Defendants are strictly liable to plaintiffs and the othe r

members of the Class for the material misstatements in and omissions from th e

Prospectuses.

99. None of the defendants named herein made a reasonable investigation o r

possessed reasonable grounds for the belief that the statements contained in the

Prospectuses were true, without omissions of any material facts and not misleading .

Defendants issued, caused to be issued and participated in the issuance of materially

false and misleading written statements to the investing public which were contained in

the Prospectuses, which misrepresented or failed to disclose, inter alia, the adverse

facts set forth above . By reason of the conduct herein alleged, each defendant violated,

and/or controlled a person who violated, Section 11 of the Securities Act .

100. Plaintiffs and the other members of the Class acquired Fund shares on o r

traceable to one of the Prospectuses .

101 . Plaintiffs and other members of the Class have sustained damages . The

value of Fund shares have declined substantially subsequent to, and due to ,

defendants' violations .

31

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102 . At the time they purchased Fund shares, plaintiffs and the other member s

of the Class were without knowledge of the facts concerning the wrongful conduct

alleged herein and could not have reasonably discovered those facts prior to the end of

the Class Period . Less than one year has elapsed from the time that plaintiffs

discovered or reasonably could have discovered the facts upon which this complaint is

based to the time that plaintiffs filed this Complaint. Less than three years have elapsed

from the time that the shares upon which this claim is brought were bona fide offered to

the public to the time plaintiffs filed this Complaint .

COUNT IV

Violations of Section 12(a)(2) of the Securities ActAgainst the Fun d

103. Plaintiffs incorporate each of the foregoing allegations set forth above as i f

fully set forth herein, except to the extent that such allegations charge the defendants

with intentional or reckless misconduct . For the purposes of this Count, plaintiffs

expressly do not allege that any defendant acted with scienter or fraudulent intent,

which is not an element of a Section 12(2) claim .

104 . This count is asse rted against the Fund for violation of Section 12(a)(2) o f

the Securities Act, 15 U .S .C. §771 .

105 . The Fund was a seller, offeror, and/or solicitor of sales of Fund shares fo r

its financial benefit pursuant to the Prospectuses .

106 . The Prospectuses contained materially false and misleading statement s

and omitted to state material facts necessary in order to make the statements, in light o f

the circumstances under which they were made, not misleading.

107 . The Fund did not make a reasonable investigation or possess reasonabl e

grounds for the belief that the statements contained in the Registration

Statement/Prospectus were true, without omissions of any material facts and were no t

misleading .

32

108 . Plaintiffs, individually and representatively, hereby elect to rescind an d

tender to the Fund those securities that members of the Class continue to own, i n

return for the consideration paid for those securities together with interest thereon .

109 . Plaintiffs and members of the Class who have sold their Fund shares ar e

entitled to rescissory damages .

110 . The action was brought within one year after the discovery of the untru e

statements and omissions and within three years after the Fund common stock wa s

offered to the public .

COUNT V

For Violations of Section 15 of the Securities ActAgainst Eaton Vance Corp .

111 . Plaintiffs repeat and reallege each and every allegation contained abov e

as if fully set forth herei n

112 . This claim is brought by plaintiffs pursuant to Section 15 of the Securities

Act against Eaton Vance Corp.

113 . Eaton Vance Corp . was a control person of the Fund and of Hawkes an d

O'Connor by virtue of its ownership of the affiliated Eaton Vance entities and it s

employment of the senior executive officers of the Fund, including Hawkes an d

O'Connor.

114 . As a control person , Eaton Vance Corp . is liable jointly and severally wit h

the Fund, Hawkes and O'Connor for violations of sections 11 and 12 .

115 . Asa result of the foregoing, plaintiffs and the other members of the Clas s

suffered damages .

33

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COUNT VI

Breach of Fiduciary DutyAgainst the Individual Defendants BMR, Eaton Vance and Eaton Vance Corp.

116. Defendants stand in a fiduciary relationship with shareholders in the Fund .

As such, they had, and continue to have, the obligations of candor, due care and

diligence to further the interests of the plaintiffs and the Class and of undivided loyalty

to the Fund and its shareholders . By reason of their positions, defendants were

prohibited from using their positions of trust and authority for gain at the expense of the

Fund and its shareholders, to improperly diminish the assets of the Fund, or to benefit

at the expense of Fund shareholders .

117 . In intentionally or recklessly assigning artificially inflated values to th e

Loan interests during the Class Period, from which defendants received compensation

on a percentage basis, these defendants garnered substantial benefits to the detriment,

harm, monetary damage, and expense of plaintiffs and the Class, who purchase d

shares in the Fund at inflated levels . In so doing, these defendants breached their

fiduciary duties to plaintiffs and the Class and should be surcharged for all damages

suffered by plaintiffs and the Class by reason of their breaches of fiduciary duties .

BASIS OF ALLEGATION S

118 . This complaint is pleaded in conformance with Federal Rules of Civi l

Procedure and the PSLRA . Plaintiffs have alleged the foregoing based upon th e

investigation of plaintiffs' counsel, which included a review of the Fund's SEC filings an d

media reports about the Fund .

PRAYER FOR RELIE F

WHEREFORE, plaintiffs, on their own behalf and on behalf of the Class, pray for

judgment as follows :

A. Declaring this action to be a class action pursuant to Rule 23(a) and (b)(3 )

of the Federal Rules of Civil Procedure on behalf of the Class defined herein ;

34

C •B . Awarding plaintiffs and the other members of the Class damages in a n

amount which may be proven at trial, together with interest thereon ;

C . Awarding plaintiffs and the members of the Class pre-judgment and post-

judgment interest, as well as their reasonable attorneys' and experts' witness fees an d

other costs; an d

D . Such other relief as this Court deems appropriate .

JURY DEMAN D

Plaintiffs demand a trial by jury .

DATED : May 25, 2001 By their attorneys ,

;2x4y,.,z .Thomas G. Shapiro BBO #454680SHAPIRO HABER & URMY LLP75 State St .Boston, MA 02109617-439-3939

Joel H . Bernstein, Esq .Christopher J. Keller, Esq .GOODKIND LABATON RUDOFF &

SUCHAROW LLP100 Park AvenueNew York, NY 10017(212) 907-070 0

John Lawlor, Esq .129 3rd StreetMineola , NY 11501(516) 248-770 0

Attorneys for Plaintiffs

35

t 0 01s

PLAINTIFF'S CERTIFICATIO N

Donald Chesner and Elizabeth Chesner hereby certify that :

1 . We are fully familiar with the matters referred to herein .

2 . We have reviewed the class action complaint filed in this case .

3 . We did not purchase any shares of EV Classic Senior Floating-

Rate Fund (the "Fund") at the direction of counsel or in order to participate in any private actio n

arising under the Securities Exchange Act of 1934 .

3. We are willing to serve as Lead Plaintiffs in the above-captione d

action, including providing testimony at deposition and trial, if necessary .

4. We purchased 16,409 .96 shares of the Fund on July 9, 1998 at

$9.98 per share. We purchased 51 .524 shares of the Fund on August 3, 1998 at $9 .98 per share .

We purchased 94 .781 shares on September 2, 1998 at $9 .98 per share . We purchased 8,959 .048

shares of the Fund on March 11, 1999 at $9.95 per share . We sold all of these shares on

December 22, 2000 at $9 .49 per share .

5 . During the three years immediately preceding the date of thi s

Certification, we have not sought to serve or served as representative parties on behalf of a clas s

in an action brought under the federal securities laws .

6. We will not accept any payment for serving as a representativ e

plaintiffs on behalf of the class beyond our pro-rata share of any recovery, except as ordered or

approved by the Court .

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0 0

7. Nothing herein shall be construed to be or constitute a waiver of

the attorney -client privilege .

/. NC - Donald Ches erSworn to and subscribe dbefore me_ this 26E"dayof May, 2001 .

Notary P li cMy Commission Expires October 29, 200 1

Sworn to and subscribedbefore me this 36 dayof May, 2001 .

Notary Pu i c

My Commission Expires October 29, 2001

lizabet Chesner

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