<PAGE>
PERFORMANCE HIGHLIGHTS
o A CONSISTENT YIELD ADVANTAGE
MONTH AFTER MONTH, THE FUND HAS PRODUCED A YIELD ADVANTAGE OVER 3-MONTH
BANK CDS.
AVERAGE YIELD
EFFECTIVE YIELD ADVANTAGE
SPREAD OVER DURING PAST
3-MONTH 12 MONTHS
CD RATES OF 3.57%
Prime
Effective Rate
Yield Reserves CDs Spread
--------- -------- ---- ------
Jun 94 5.9 3.15 2.75
Jul 94 6 3.24 2.76
Aug 94 6.4 3.31 3.09
Sep 94 6.66 3.44 3.22
Oct 94 7.24 3.66 3.58
Nov 94 7.5 3.94 3.56
Dec 94 8 4.12 3.88
Jan 95 8.31 4.19 4.12
Feb 95 8.53 4.33 4.2
Mar 95 8 4.38 3.62
Apr 95 8 4.34 3.66
May 95 7.85 4.36 3.49
Jun 95 8 4.27 3.73
This bar chart shows the spread between the effective month-end yields of
Prime rate Reserves and CD yields from 6/30/94 through 6/30/95.
Sources: Eaton Vance, Wall Street Journal.
--------------------------------------------------------------------------------
o RELATIVE STABILITY OF NET ASSET VALUE
DESPITE LINGERING QUESTIONS ABOUT THE ECONOMY AND A ROLLER-COASTER BOND
MARKET, THE FUND CONTINUED TO MAINTAIN A RELATIVELY STABLE SHARE PRICE.
MONTH-END NET ASSET
VALUE PER SHARE
Prime
Rate
Reserves
Jun 94 10.00
Jul 94 10.00
Aug 94 9.96
Sep 94 9.96
Oct 94 9.97
Nov 94 9.97
Dec 94 10.02
Jan 95 10.02
Feb 95 10.04
Mar 95 10.04
Apr 95 10.03
May 95 10.03
Jun 95 10.03
This line chart shows the relative stability of the share price of EV Prime Rate
Reserves during the past twelve months.
Source: Eaton Vance Management. Uses month-end NAVs.
<PAGE>
TO SHAREHOLDERS
During the six months ended June 30, 1995 Eaton Vance Prime Rate Reserves
shareholders once again realized a significant yield advantage over other
short-term investments as the Fund's investments in a portfolio of senior,
secured, floating rate loans met the Fund's objective of maintaining a high
level of current income with a relatively stable net asset value.
THE ECONOMY CONTINUED TO GROW IN THE FIRST HALF, ALBEIT AT A SLOWER PACE...
The Federal Reserve's inflation-fighting efforts extended into February of this
year, with a final increase in the Federal funds rate, a key short-term interest
rate barometer. However, with few current signs of inflation to date, the
pressure on interest rates has since mitigated. Rising business inventories
contributed to a significant slowdown in the second quarter, with GDP rising a
modest 0.5 percent. Convinced that inflation posed no immediate threat to the
economy, the Fed lowered short-term rates at its July open market meeting.
PRIME RATE RESERVES MAINTAINED ITS YIELD ADVANTAGE OVER OTHER SHORT-TERM
FIXED INCOME INVESTMENTS...
The Fund paid shareholders distributions from net investment income totaling
$0.393 during the first six months of the year. As the chart on page 4
illustrates, the Fund had an effective yield of 8.0 percent at June 30. The
Fund's yield continued to represent a significant advantage over money market
mutual funds, 3-month certificates of deposit, and bank money market
accounts, which offered rates of 5.61 percent, 4.27 percent, and 3.43
percent, respectively. Of course, unlike bank certificates of deposit, the
Fund is not insured and does not offer a fixed rate of return; and unlike
money market accounts, the Fund's principal value and return can fluctuate
with market conditions.
RELATIVE STABILITY SERVED OUR SHAREHOLDERS WELL IN AN OTHERWISE VOLATILE
FIXED INCOME MARKET...
While the fixed income markets have been volatile over the past 18 months,
Prime Rate Reserves has continued to maintain a relatively stable share
price, a major consideration for investors in short-term instruments. Of
course, past performance is no guarantee of future returns. But Prime Rate
Reserves will continue its pursuit of attractive yields and relative price
stability in senior floating rate loans as well as its efforts to maintain
purchasing power for its shareholders.
On November 18, 1994 a proxy statement and ballot were circulated to
shareholders of the Trust. Results of that ballot appear on page 6, following
a management discussion with portfolio manager Jeffrey Garner.
--------------------------
[Photo of James B. Hawkes]
--------------------------
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
August 21, 1995
<PAGE>
MANAGEMENT DISCUSSION
Questions and answers with Jeffrey S. Garner, Vice President and Portfolio
Manager, Senior Debt Portfolio.
Q: JEFF, THE FUND'S RETURN FOR THE SIX MONTH PERIOD SURPASSED MOST OTHER
SHORT-TERM VEHICLES. TO WHAT DO YOU ATTRIBUTE THE FUND'S PERFORMANCE?
A: The Fund has benefited from the relative stability of interest rates.
Interest rates on the floating rate loans in which the Portfolio invests are
generally pegged to LIBOR - the London Interbank Offered Rate. While U.S.
interest rates have moved lower during the past six months, LIBOR has
remained quite stable. That has resulted in a relatively stable rate
structure for the Portfolio.
Complementing the yield performance has been a relatively stable net asset
value. The healthy economy has resulted in no significant credit weakenings,
which has further buttressed the market.
Q: HOW WOULD YOU CHARACTERIZE THE LOAN MARKET TO DATE IN 1995?
A: Loan demand has been brisk so far in 1995, for several major reasons. First,
with a fundamentally sound economy, the need for financing of new plant and
equipment has continued to grow. Second, corporate acqusition activity has
also picked up. Finally, there is growing enthusiasm and activity among the
major investment banks within the loan market, including such participants
as Merrill Lynch and Goldman Sachs.
Q: HAS THE GROWTH IN LOAN VOLUME LED TO MORE OPPORTUNITIES FOR THE PORTFOLIO?
A: Yes. Rising volume of loan transactions has improved our opportunities for
selectivity as well as diversification. We have been able to increase the
diversification of the Fund's portfolio during the period from 45 borrowers
to 61 borrowers and from 21 industries to 25 industries. That is consistent
with our belief in a broad but prudent diversification.
---------------------------
[Photo of Jeffrey S. Garner
---------------------------
Jeffrey S. Garner
---------------------------
At Eaton Vance, we believe that diversification should span a relatively
wide range of industries while maintaining consistent credit standards among
our borrowers. We ensure that each analyst is responsible for a limited
number of borrowers. We will not compromise the analysts' ability to monitor
the Portfolio's investments for the sake of further marginal
diversification.
Q: CAN YOU GIVE SOME EXAMPLES OF YOUR INVESTMENT FOCUS IN RECENT MONTHS?
A: The Portfolio maintained relatively large weightings in the paper, retail,
and manufacturing sectors. Each of those segments has benefited from the
expanding economy and each has witnessed a growing participation in the loan
market. An area where the Portfolio widened its commitment was the broadcast
media sector, as represented by additional loans involving broadcasters and
cable television operators.
-------------------------------------------------------------------------------
PRIME RATE RESERVES: THE FUND MAINTAINED A SIZABLE YIELD ADVANTAGE OVER OTHER
POPULAR SHORT-TERM INVESTMENT VEHICLES.
All figures are as of 6/30/95. Prime Rate Reserves figure represents effective
yield (distribution for the latest 30-day period, annualized, divided by the
net asset value per share at athe end of the period, and then compounded over
a 12-month period). The Fund is not insured by the FDIC nor does it offer a
fixed rate of return like bank certificates of deposit or bank money market
funds, and does not attempt to maintain a constant net asset value per share,
as do money market funds. Past performance is no guarantee of future results.
Principal value and investment return will fluctuate with changes in market
conditions.
Sources: Eaton Vance Management, The Wall Street Journal
Bank money market accounts 3.43%
3-month CDs 4.27%
Money markets 5.61%
Prime Rate reserves 8.00%
This bar chart shows the difference in yields between Prime Rate Reserves and
Money market mutual funds, 3-month CDs, and Bank money market accounts. The data
is from June 30, 1995. Source: Eaton Vance, Wall Street Journal
--------------------------------------------------------------------------------
Q: IN PAST REPORTS, YOU'VE INDICATED THAT THE FUND IS MOST SUITABLE FOR
INVESTORS WHO ARE "YIELD-HUNGRY, BUT RISK-AVERSE." IS THAT STILL TRUE TODAY?
A: Yes, I think it's especially true in today's investment climate. We've seen
a bond market rally of large proportions in 1995, and many investors fear
that a correction may be due. Their uneasiness is amplified by the
historically high levels of the stock market. That's especially unnerving
for investors for whom capital preservation is an important goal.
The Fund may represent a good complement to bonds and bond funds in the
current environment. First, the Fund's distribution rate represents an
attractive yield when compared to bonds. Second, - and this is especially
important for the conservative investor - the relative stability of the
Fund's share price is a welcome change from the recent volatility of the
bond market. Just consider the harrowing rollercoaster ride of the past 18
months.
Q: THERE HAS BEEN A LOT OF TALK ABOUT A "SOFT LANDING" FOR THE ECONOMY. COULD
THE DECLINE IN INTEREST RATES BE NEAR AN END?
A: If the Fed has indeed been successful in engineering a soft landing, there
is not likely to be much more near-term pressure to lower interest rates.
Chairman Greenspan has indicated that he is not likely to push for another
rate cut in the immediate future. Much anecdotal evidence suggests that the
economy is firming a bit. Absent a recession, the Fed will be careful not to
add too much fuel to the economy. Especially, given the Fed's oft-stated
goal of discouraging inflation.
--------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
June 30, 1995
GENERAL PORTFOLIO INFORMATION
Total net assets . . . . . . . . . . . . . . . . . . . $955 million
Assets invested in loan interests . . . . . . . . . . $842 million
Number of borrowers . . . . . . . . . . . . . . . . . . . . . . . . 61
Industries represented . . . . . . . . . . . . . . . . . . . . . . . 25
FUNDAMENTAL CHARACTERISTICS OF PORTFOLIO LOANS
Senior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Floating rate . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Commercial & industrial . . . . . . . . . . . . . . . . . . . . . 100%
AVERAGE PORTFOLIO STATISTICS (DOLLAR-WEIGHTED)
Collateral coverage ratio . . . . . . . . . . . . . . . . . . 1.5 to 1*
Days to interest-rate reset . . . . . . . . . . . . . . . . . . . 49
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 years
Size per borrower . . . . . . . . . . . . . . . . . . . $13.8 million
Average size as percent of total net assets . . . . . . . . . . . 1.45%
* At time of purchase
Source: Eaton Vance Management
--------------------------------------------------------------------------------
Q: HOW MIGHT THAT IMPACT THE FUND?
A: If the interest rate environment remains stable, the Fund should continue to
enjoy a yield advantage over short-term rates. However, a stronger economy
would bring still higher rates which should be reflected over time in the
Fund's returns. The floating rate loan agreements in which the Portfolio has
invested have interest rate reset provisions. The interest rates paid by
borrowers are typically reset every 30, 60 or 90 days, thus quickly
reflecting changes in the prevailing interest rate environment. If interest
rates rise in general, the rates paid by the borrowers will also rise.
Because the average interest rate reset period is a short 49 days at (June
30), the Portfolio typically responds promptly to a change in interest
rates. That represents a major advantage over traditional fixed income
investments such as bonds, whose interest rates remain fixed and whose
prices decline as rates rise.
Q: WHAT IS YOUR OUTLOOK FOR THE LOAN MARKET?
A: In my view, we should see growth in the loan market as the economy expands
and the underwriting activity continues to increase. Naturally, past trends
will not necessarily be repeated in the future. But if the soft landing is
followed by another leg upward in the economy, floating rate loan investors
are very likely to be beneficiaries of rising interest rate resets. That
unique feature sets this investment apart from other short-term vehicles,
and makes it a compelling choice for investors.
<PAGE>
Eaton Vance Prime Rate Reserves (the "Trust") held a special shareholder
meeting on January 11, 1995 (which was an adjourned meeting from December 21,
1994) at which the following action was taken:
Proposal 1: The approval of a new investment policy and supplemental
provision to the investment restrictions of the Trust to permit a new
investment structure.
NUMBER OF SHARES
----------------
For ................................................... 28,356,206.204
Against ............................................... 1,513,076.146
Abstain ............................................... 1,463,268.572
Broker Non-Vote ....................................... 4,785,909.000
Proposal 2(A): The authorization of the Fund to elect as Trustees of the
Portfolio created by the aforementioned new investment structure the
following: James B. Hawkes, M. Dozier Gardner, Donald R. Dwight, Samuel L.
Hayes, III, Norton H. Reamer, John L. Thorndike, Jack L. Treynor.
NUMBER OF SHARES
----------------
For ................................................... 35,055,240.024
Against ............................................... 1,063,219.898
Proposal 2(B): The ratification of the selection of Deloitte & Touche LLP as
independent certified public accountants of the Portfolio.
NUMBER OF SHARES
----------------
For ................................................... 34,253,450.358
Against ............................................... 642,183.505
Abstain ............................................... 1,198,769.059
Broker Non-Vote ....................................... 24,057.000
Proposal 2(C): The approval of an Investment Advisory Agreement establishing
Boston Management and Research as an investment advisor to the Portfolio.
NUMBER OF SHARES
----------------
For ................................................... 33,456,596.509
Against ............................................... 1,155,286.735
Abstain ............................................... 1,488,605.678
Broker Non-Vote ....................................... 17,971.000
Proposal 3(A): The approval of the elimination of the restriction concerning
investment in other investment companies.
NUMBER OF SHARES
----------------
For ................................................... 27,455,611.359
Against ............................................... 2,072,067.750
Abstain ............................................... 1,804,117.813
Broker Non-Vote ....................................... 4,786,633.000
Proposal 3(B): The approval of the elimination of the restriction concerning
diversification of assets.
NUMBER OF SHARES
----------------
For ................................................... 27,703,449.027
Against ............................................... 1,914,175.705
Abstain ............................................... 1,714,172.190
Broker Non-Vote ....................................... 4,786,633.000
Proposal 3(C): The approval of the elimination of the restriction concerning
investing for control or management of other companies.
NUMBER OF SHARES
----------------
For ................................................... 27,332,805.741
Against ............................................... 2,121,300.565
Abstain ............................................... 1,877,690.616
Broker Non-Vote ....................................... 4,786,633.000
Proposal 3(D): The approval of the elimination of the restriction concerning
transactions with affiliates.
NUMBER OF SHARES
----------------
For ................................................... 27,230,063.999
Against ............................................... 2,215,543.725
Abstain ............................................... 1,886,189.198
Broker Non-Vote ....................................... 4,786,633.000
Proposal 3(E): The approval of the reclassification of the restriction
concerning short sales.
NUMBER OF SHARES
----------------
For ................................................... 27,377,691.805
Against ............................................... 2,068,195.797
Abstain ............................................... 1,885,909.320
Broker Non-Vote ....................................... 4,786,633.000
Proposal 3(F): The approval of the reclassification of the restriction
concerning investment in exploration companies.
NUMBER OF SHARES
----------------
For ................................................... 27,213,283.944
Against ............................................... 2,268,615.079
Abstain ............................................... 1,849,897.899
Broker Non-Vote ....................................... 4,786,633.000
Proposal 3(G): The approval of the reclassification and amendment of the
restriction concerning unseasoned issuers.
NUMBER OF SHARES
----------------
For ................................................... 27,087,476.140
Against ............................................... 2,336,310.089
Abstain ............................................... 1,915,801.693
Broker Non-Vote ....................................... 4,778,872.000
Proposal 3(H): The approval of the amendment of the restriction on borrowing.
NUMBER OF SHARES
----------------
For ................................................... 27,118,910.520
Against ............................................... 2,350,006.136
Abstain ............................................... 1,862,872.266
Broker Non-Vote ....................................... 4,786,671.000
Proposal 3(I): The approval of the amendment of the restriction concerning
issuing senior securities.
NUMBER OF SHARES
----------------
For ................................................... 27,303,495.371
Against ............................................... 2,151,505.048
Abstain ............................................... 1,876,776.503
Broker Non-Vote ....................................... 4,786,633.000
Proposal 4: The ratification of the selection of Deloitte & Touche LLP as
independent certified public accountants of the Fund.
NUMBER OF SHARES
----------------
For ................................................... 33,867,476.232
Against ............................................... 807,176.974
Abstain ............................................... 1,430,167.716
Broker Non-Vote ....................................... 13,639.000
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
------------------------------------------------------------------------------
ASSETS:
Investment in Senior Debt Portfolio, at value
(Note 1A) (identified cost, $806,396,256) $801,958,921
Receivable for Trust shares sold 10,246,004
------------
Total assets $812,204,925
LIABILITIES:
Distributions payable $3,283,792
Payable for Trust shares reacquired 10,031
Payable to affiliates --
Trustees' fees 5,193
Custodian fee 1,000
Accrued expenses 126,084
----------
Total liabilities 3,426,100
------------
NET ASSETS for 80,629,830 shares of beneficial
interest outstanding $808,778,825
============
SOURCES OF NET ASSETS:
Paid-in capital $811,020,583
Accumulated undistributed net realized gain
(loss) on investment transactions
(computed on the basis of identified cost) 2,155,850
Unrealized depreciation of investments (computed
on the basis of identified cost) (4,437,335)
Undistributed net investment income 39,727
------------
Total $808,778,825
============
NET ASSET VALUE PER SHARE (NOTE 6)
($808,778,825 / 80,629,830 shares of beneficial
interest) $10.03
======
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the six months ended June 30, 1995 (Unaudited)
------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Interest income $ 8,328,788
Facility fees earned 455,096
Income allocated from Portfolio 23,555,684
Expenses allocated from Portfolio (2,969,671)
-----------
Total income $29,369,897
Expenses --
Investment advisory fee (Note 4) $ 877,603
Administration fee (Note 4) 846,202
Compensation of Trustees not members of the
Investment Adviser's/Administrator's
organization 10,384
Custodian fee (Note 4) 74,119
Interest expense 273,901
Legal and accounting services 256,626
Transfer and dividend disbursing agent fees 132,170
Printing and postage 56,029
Registration costs 41,688
Miscellaneous 389,374
-----------
Total expenses 2,958,096
-----------
Net investment income $26,411,801
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) --
From investment transactions, computed on the
basis of identified cost $ 6,993,137
From investment transactions allocated from
Portfolio, computed on the basis of
identified cost 1,055,997
-----------
Net realized gain $ 8,049,134
Change in unrealized appreciation of investments (7,406,535)
-----------
Net realized and unrealized gain on
investments 642,599
-----------
Net increase in net assets from
operations $27,054,400
===========
See notes to financial statements
<PAGE>
STATEMENT OF CASH FLOWS
------------------------------------------------------------------------------
For the six months ended June 30, 1995 (Unaudited)
------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES --
Purchase of Loan Interests $ (30,002,538)
Proceeds from sales and principal repayments 70,114,416
Net purchases of short-term investments (46,908,338)
Purchases of interests in Senior Debt Portfolio (201,017,951)
Withdrawal of interests in Senior Debt Portfolio 53,021,511
Interest received 6,204,445
Interest paid (373,470)
Operating expenses paid (2,815,364)
--------------
Net cash used for operating activities $(151,777,289)
--------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES --
Proceeds from shares sold $ 218,599,826
Payments for shares reacquired in tender offers (44,106,043)
Cash distributions paid (excluding reinvestments of
distributions of $14,231,913) (11,711,145)
Payments made upon maturity of commercial paper (37,458,370)
Proceeds from issuance of commercial paper 17,055,201
--------------
Net cash provided from financing activities $ 142,379,469
--------------
Net decrease in cash $ (9,397,820)
CASH AT BEGINNING OF PERIOD 9,397,820
--------------
CASH AT END OF PERIOD $ --
==============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH FROM OPERATING ACTIVITIES:
Net increase in net assets from operations $ 27,054,400
Decrease in receivable for investments sold 2,937,034
Decrease in interest receivable 4,598,880
Decrease in prepaid expenses 658,407
Decrease in deferred facility fee income (4,243,777)
Decrease in accrued interest expense (123,649)
Decrease in payable to affiliates (8,866)
Increase in accrued expenses and other liabilities 11,494
Net increase in investments (182,661,212)
--------------
Net cash used for operating activities $(151,777,289)
==============
See notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 26,411,801 $ 37,695,894
Net realized gain on investment
transactions and amounts
allocated from Portfolio 8,049,134 6,890,227
Change in unrealized appreciation
(depreciation) of investments (7,406,535) (7,115,207)
------------ ------------
Net increase in net assets
from operations $ 27,054,400 $ 37,470,914
------------ ------------
Distributions to shareholders
(Note 2) --
From net investment income $(26,393,774) $(37,695,894)
In excess of net investment income -- (281,944)
------------ ------------
Total distributions to shareholders $(26,393,774) $(37,977,838)
------------ ------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sales of shares $226,414,842 $ 59,869,598
Net asset value of shares issued
to shareholders in payment of
distributions declared 14,231,913 18,665,751
Cost of shares reacquired in
tender offers (44,116,074) (149,834,588)
------------ ------------
Increase (decrease) in net
assets from Trust share
transactions $196,530,681 $(71,299,239)
------------ ------------
Net increase (decrease) in
net assets $197,191,307 $(71,806,163)
NET ASSETS:
At beginning of period 611,587,518 683,393,681
------------ ------------
At end of period (including
undistributed net investment income
of $39,727 and $21,700, respectively) $808,778,825 $611,587,518
============ ============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 -----------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value and market value -- $ 10.02 $ 10.03 $ 10.02 $ 9.96 $ 9.97 $ 10.00
Beginning of year -------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income <F3> $ 0.3935 $ 0.5966 $ 0.4970 $ 0.5415 $ 0.7500 $ 0.9505
Net realized and unrealized gain (loss) on investments 0.0099 (0.0059) 0.0258 0.0575 (0.0035)<F1> (0.0305)
-------- -------- -------- -------- -------- --------
Total income from investment operations $ 0.4034 $ 0.5907 $ 0.5228 $ 0.5990 $ 0.7465 $ 0.9200
-------- -------- -------- -------- -------- --------
Less Distributions:
From net investment income $(0.3934) $(0.5966) $(0.5110) $(0.5296) $(0.7522) $(0.9500)
In excess of net investment income -- (0.0041) -- -- -- --
From net realized gain on investments -- -- -- (0.0094) (0.0043) --
In excess of net realized gain on investment
transactions -- -- (0.0018) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions $(0.3934) $(0.6007) $(0.5128) $(0.5390) $(0.7565) $(0.9500)
-------- -------- -------- -------- -------- --------
Net asset value and market value --
End of year $ 10.03 $ 10.02 $ 10.03 $ 10.02 $ 9.96 $ 9.97
======== ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN<F2> 4.1% 6.1% 5.3% 6.2% 7.8% 9.6%
======== ======== ======== ======== ======== ========
RATIOS(as a percentage of average daily net assets)<F4>:
Operating expenses<F3> 1.68%<F8> 1.63% 1.55% 1.44% 1.37% 1.43%
Interest expense<F3> 0.08%<F8><F7> 0.21% 0.22% 0.18% 0.16% --
Net investment income 7.84%<F8> 5.95% 4.98% 5.33% 7.42% 9.48%
SUPPLEMENTAL DATA:
Net Assets, End of Year (000 omitted) $808,779 $611,588 $683,393 $1,011,006 $1,694,332 $2,095,692
Portfolio Turnover <F5> 5% 60% 37% 26% 16% 43%
Number of Shares Outstanding at End of Year
(000 omitted) 80,630 61,040 68,165 100,877 170,032 210,285
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
-----------------------------------------------------------------------------------------------------------------------------------
LEVERAGE ANALYSIS:
<CAPTION>
Borrowings from issuance AMOUNT OF DEBT AVERAGE DAILY BALANCE AVERAGE WEEKLY BALANCE AVERAGE AMOUNT OF
of commercial paper: OUTSTANDING AT OF DEBT OUTSTANDING OF SHARES OUTSTANDING DEBT PER SHARE
YEAR ENDED END OF YEAR DURING YEAR DURING YEAR DURING YEAR
---------- -------------- --------------------- ---------------------- -----------------
<S> <C> <C> <C> <C>
December 31, 1991 $ -- $34,893,000 189,758,055 $0.1839
December 31, 1992 $39,764,710 $37,304,000 132,343,142 $0.2819
December 31, 1993 $17,981,224 $24,585,000 85,859,000 $0.2863
December 31, 1994 $20,403,169 $10,236,000 63,465,000 $0.1613
June 30, 1995<F6> $ -- $ 9,688,000 62,118,000 $0.1560
</TABLE>
[FN]
------------
<F1> The per share amount is not in accordance with the net realized and
unrealized gain for the period because of the timing of sales of Trust
shares and the amount of per share realized and unrealized gains and
losses at such time.
<F2> Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day
of each period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the payable date.
<F3> Includes the Trust's share of Senior Debt Portfolio's allocated expenses
for the period from February 22, 1995 to June 30, 1995.
<F4> For the year ended December 31, 1991, the expenses related to the
operation of the Trust were reduced by a reduction of the investment
advisory fee. Had such action not been taken, the ratios would have been
as follows:
YEAR ENDED
DECEMBER 31,
1991
------------
RATIOS (as a percentage of average daily net assets):
Operating expenses 1.40%
Interest expense 0.16%
Net investment income 7.39%
<F5> Portfolio Turnover represents the rate of portfolio activity for the period
while the Trust was making investments directly in securities. The
portfolio turnover for the period since the Trust transferred substantially
all of its investable assets to the Portfolio is shown in the Portfolio's
financial statements which are included elsewhere in this report.
<F6> The Leverage Analysis is for the period January 1, 1995 to February 21,
1995 when the Trust transferred the Commercial Paper program to the
Portfolio.
<F7> Interest expense is for the period from January 1, 1995 to February 21,
1995.
<F8> Computed on an annualized basis.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Prime Rate Reserves (the Trust) is a non-diversified closed-end
management investment company. The Trust is an entity of the type commonly
known as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended. On February 22, 1995, the Trust transferred
substantially all of its investable assets to the Senior Debt Portfolio (the
Portfolio) in exchange for an interest in the Portfolio. The Trust invests all
of its investable assets in interests in the Portfolio, a New York Trust,
having the same investment objective as the Trust. The value of the Trust's
investment in the Portfolio reflects the Trust's proportionate interest in the
net assets of the Portfolio (84.0% at June 30, 1995). The performance of the
Trust is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Trust's financial statements. The following is a summary of significant
accounting policies consistently followed by the Trust in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
A. INVESTMENT VALUATION -- Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Trust's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Trust determined in accordance with generally accepted
accounting principles. Prior to the Trust's investment in the Portfolio, the
Trust held its investments directly. For investments held directly, interest
income from Loan Interests was recorded on the accrual basis at the then-
current interest rate while all other interest income was determined on the
basis of interest accrued, adjusted for amortization of premium or discount
when required for federal income tax purposes. Facility fees received were
recognized as income over the expected term of the loan.
C. 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 all of its taxable income, including any net
realized gain on investments. Accordingly, no provision for federal income or
excise tax is necessary. At December 31, 1994, the Trust, for federal income
tax purposes, had a capital loss carryover of $5,893,284 which will reduce the
Trust's taxable income arising from future net realized gain on investments,
if any, to the extent permitted by the Internal Revenue Code, and thus will
reduce the amount of the distributions to shareholders which would otherwise
be necessary to relieve the Trust of any liability for federal income or
excise tax. Such capital loss carryovers will expire on December 31, 2001.
D. OTHER -- Investment transactions are accounted for
on a trade date basis.
E. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating
to June 30, 1995 and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the Trust's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necesssary for the fair presentation of the financial statements.
------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net investment income of the Trust is determined daily, and substantially
all of the net investment income so determined is declared daily as a dividend
to shareholders of record at the time of declaration. Such daily dividends
will be paid monthly. Distributions of realized capital gains, if any, are
made at least annually. Shareholders may reinvest capital gain distributions
in additional shares of the Trust at the net asset value as of the ex-dividend
date. Distributions are paid in the form of additional shares of the Trust or,
at the election of the shareholder, in cash. The Trust distinguishes between
distributions on a tax basis and a financial reporting basis. Generally
accepted accounting principles require that only distributions in excess of
tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
over-distributions for financial statement purposes only are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital. The tax treatment of
distributions for the calendar year will be reported to shareholders prior to
February 1, 1996 and will be based on tax accounting methods which may differ
from amounts determined for financial statement purposes.
------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). The
Trust may from time to time, at its discretion, make tender offers at net
asset value for the purchase of all or a portion of its shares. The price will
be established at the close of business on the last day the tender offer is
open. (An early withdrawal charge will be imposed on most shares accepted for
tender which have been held less than four years.) (See Note 6.) The Trustees
approved tender offers for the periods from January 23, 1995 to February 17,
1995; from April 24, 1995 to May 19, 1995, and from July 24, 1995 to August
18, 1995. Transactions in Trust shares were as follows:
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
------------- ------------
Sales 22,567,021 5,996,851
Issued to shareholders
electing to receive
payments of distributions
in Trust shares 1,418,638 1,868,329
Reacquired in tender offers (4,395,886) (14,990,693)
-------- ---------
Net increase (decrease) 19,589,773 (7,125,513)
========== ==========
--------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Prior to February 22, 1995 (when the Trust transferred substantially all of
its investable assets to the Portfolio in exchange for an interest in the
Portfolio), the Trust retained Eaton Vance Management (EVM) as its investment
adviser. The investment adviser fee was earned by EVM as compensation for
management and investment advisory services rendered to the Trust. The fee was
computed at the monthly rate of 19/240 of 1% (0.95% per annum) of the Trust's
average daily gross assets up to and including $1 billion and at reduced rates
as daily gross assets exceed that level. For the period from January 1, 1995
to February 21, 1995, the effective annual rate, based on average daily gross
assets, was 0.95% (annualized). An administration fee, computed at the monthly
rate of 1/48 of 1% (0.25% per annum) of the average daily gross assets of the
Portfolio attributable to the Trust, is also paid to EVM for managing and
administering business affairs of the Trust. The Portfolio has engaged Boston
Management and Research (BMR), a subsidiary of EVM, to render investment
advisory services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. Except as to Trustees of the
Trust and the Portfolio who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to the Trust out
of such investment adviser fee. Investors Bank & Trust Company (IBT), an
affiliate of EVM, serves as custodian of the Trust and the Portfolio. Pursuant
to the respective custodian agreements, IBT receives a fee reduced by credits
which are determined based on the average cash balances the Trust or the
Portfolio maintains with IBT. Certain of the officers and Trustees of the
Trust and Portfolio are officers and directors/trustees of the above
organizations (Note 5).
------------------------------------------------------------------------------
(5) EARLY WITHDRAWAL CHARGE
Eaton Vance Distributors, Inc. (EVD), a subsidiary of EVM, serves as the
Trust's principal underwriter. EVD compensates authorized dealers for sales
commissions at a rate of 3% of the purchase price of shares purchased through
such dealers. EVD also pays additional compensation to each dealer ranging
from 0.10% to 0.30% per annum of the value of Trust shares sold by such dealer
that are outstanding for specified periods of time. An early withdrawal charge
to recover distribution expenses will be charged to redeeming shareholders and
paid to EVD in connection with most shares held for less than four years which
are accepted by the Trust for repurchase pursuant to tender offers. The early
withdrawal charge is imposed at declining rates that begin at 3% in the case
of redemptions in the first year after purchase, declining to 2.5%, 2%, 1% and
0% in the second, third and fourth year and thereafter, respectively. The
early withdrawal charge will be imposed on those shares accepted for tender,
the value of which exceeds the aggregate value at the time the tender is
accepted of: (a) all shares in the account purchased more than four years
prior to such acceptance, (b) all shares in the account acquired through
reinvestment of distributions, and (c) the increase, if any, in value of all
other shares in the account (namely those purchased within the four years
preceding the acceptance) over the purchase price of such shares. In
determining whether an early withdrawal charge is payable, it is assumed that
the acceptance of a repurchase offer is made from the earliest purchase of
shares. The total early withdrawal charges received by EVD for the six months
ended June 30, 1995 amounted to $104,934.
------------------------------------------------------------------------------
(6) INVESTMENT TRANSACTIONS
On February 22, 1995, the Trust transferred substantially all of its assets to
the Portfolio in exchange for an interest in the Portfolio. Increases and
decreases in the Trust's investment in the Portfolio for the period from
February 22, 1995 to June 30, 1995 aggregated $201,017,951 and $53,021,511,
respectively. The cost of purchases and the proceeds from principal repayments
and sales of Loan Interests, during the period from January 1, 1995 to February
21, 1995, aggregated $30,002,538 and $67,177,382, respectively.
<PAGE>
SENIOR DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995
(EXPRESSED IN UNITED STATES DOLLARS)
--------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS - 88.2%
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
--------------------------------------------------------------------------------
AEROSPACE/DEFENSE - 2.3%
TRACOR, INC.
$ 1,596,609 Term loan, maturing October 31, 1998 $ 1,596,609
9,950,000 Term loan, maturing February 28, 2001 9,950,000
Technical services to defense companies
VSI INDUSTRIES, INC.
10,502,130 Term loan, maturing March 31, 1997 10,502,130
Aerospace and specialty fasteners, and
plastics industry tooling systems
------------
$ 22,048,739
------------
AIRLINES - 3.3%
NORTHWEST AIRLINES CORPORATION
$12,443,942 Term loan, maturing December 15, 1998 $ 12,443,942
13,949,160 Term loan, maturing December 15, 1999 13,949,160
5,303,423 Term loan, maturing December 15, 2000 5,303,423
Passenger airline carrier
------------
$ 31,696,525
------------
AUTO PARTS - 1.3%
EXIDE CORPORATION
$ 4,987,437 Term loan, maturing September 30, 2001 $ 4,987,437
Automobile batteries
STANADYNE AUTOMOTIVE CORP.
7,500,000 Term loan, maturing December 31, 2001 7,500,000
Auto and light truck fuel injection
equipment
------------
$ 12,487,437
------------
BROADCAST MEDIA - 4.4%
CLASSIC CABLE, INC.
$ 4,000,000 Term loan, maturing March 31, 2003 $ 4,000,000
7,000,000 Term loan, maturing March 31, 2004 7,000,000
Cable television provider
COAXIAL COMMUNICATIONS, INC.
9,966,667 Term loan, maturing December 31, 1999 9,966,667
Midwest cable television provider
ELLIS COMMUNICATIONS, INC.
10,365,333 Term loan, maturing March 31, 2003 10,365,333
Broadcast television operator
NORTHLAND CABLE TELEVISION, INC.
7,500,000 Term loan, maturing March 31, 2002 7,500,000
3,500,000 Term loan, maturing September 30, 2003 3,500,000
Cable television provider
------------
$ 42,332,000
------------
CHEMICALS - 3.0%
FREEDOM CHEMICAL COMPANY
$13,200,000 Term loan, maturing June 30, 2002 $ 13,200,000
Organic dyes, pigments, textile chemicals,
and other specialty chemicals
HARRIS SPECIALTY CHEMICALS, INC.
1,531,067 Term loan, maturing December 31, 1999 1,531,067
5,702,847 Term loan, maturing December 31, 2001 5,702,847
Construction chemicals
INDSPEC CHEMICAL CORP.
8,622,653 Term loan, maturing December 2, 2000 8,622,653
Resorcinol and other specialty chemical
products
------------
$ 29,056,567
------------
COMMERCIAL SERVICES - 3.8%
AVIALL, INC.
$ 5,000,000 Term loan, maturing November 30, 2000 $ 5,000,000
Turbine engine repair and parts
distribution
HOSIERY CORP. OF AMERICA
3,433,544 Term loan, maturing October 17, 1999 3,433,544
4,937,500 Term loan, maturing July 31, 2001 4,937,500
Women's hosiery
IRON MOUNTAIN INFORMATION SERVICES
4,488,750 Term loan, maturing October 31, 2002 4,488,750
Document archive services
PSI ACQUISITION CORPORATION
3,149,177 Term loan, maturing December 31, 1998 3,149,177
5,000,000 Term loan, maturing December 31, 2000 5,000,000
Diversified consulting services
SELECT BEVERAGES, INC.
4,000,000 Term loan, maturing June 30, 2001 4,000,000
6,000,000 Term loan, maturing June 30, 2002 6,000,000
Soft drink bottler
------------
$ 36,008,971
------------
CONGLOMERATES - 1.3%
SPALDING & EVENFLO COMPANIES, INC.
$12,395,833 Term loan, maturing October 13, 2002 $ 12,395,833
Sporting goods and infant products ------------
CONTAINERS - METAL & GLASS - 0.8%
SILGAN CORP.
$ 7,480,213 Term loan, maturing September 15, 1996 $ 7,480,213
Metal and plastic packaging products ------------
CONTAINERS - PAPER - 9.5%
IVEX PACKAGING CORP.
$ 9,631,266 Term loan, maturing December 31, 1999 $ 9,631,266
Plastic and paper packaging products
JEFFERSON SMURFIT CORP.
19,107,296 Term loan, maturing April 30, 2001 19,107,296
22,120,676 Term loan, maturing April 30, 2002 22,120,676
Liner board and other paper board product
STONE CONTAINER CORP.
39,885,000 Term loan, maturing April 1, 2000 39,885,000
Commodity pulp, paper and packaging
products
------------
$ 90,744,238
------------
COSMETICS - 0.8%
MARY KAY COSMETICS, INC.
$ 7,500,000 Term loan, maturing June 6, 2001 $ 7,500,000
Cosmetics, skin and hair care, and perfume
products
ELECTRONICS - INSTRUMENTATION - 3.3%
BERG ELECTRONICS, INC.
$11,850,000 Term loan, maturing March 31, 2001 $ 11,850,000
Electronic connectors
ELSAG BAILEY, INC
12,891,667 Term loan, maturing June 25, 2002 12,891,667
Electronic process control systems
SPERRY MARINE, INC.
6,541,487 Term loan, maturing December 31, 2000 6,541,487
Marine navigational equipment
------------
$ 31,283,154
------------
FOOD WHOLESALERS - 3.4%
CATERAIR HOLDINGS CORP.
$12,496,766 Term loan, maturing December 31, 1996 $ 12,496,766
Food service to airlines
KRAFT FOODSERVICE, INC.
5,000,000 Term loan, maturing March 31, 2002 5,000,000
Food producer and distributor
U.S. FOODSERVICE, INC.
14,679,787 Term loan, maturing June 30, 2000 14,679,787
Food distributor to business
------------
$ 32,176,553
------------
FOODS - 2.3%
SPECIALTY FOODS CORP.
$21,774,760 Term loan, maturing August 31, 1999 $ 21,774,760
Bread and cheese products ------------
LEISURE - 1.4%
SIX FLAGS THEME PARKS, INC.
$12,950,000 Term loan, maturing June 23, 2003 $ 12,950,000
Amusement parks ------------
MANUFACTURING - DIVERSIFIED - 6.2%
INTERLAKE CORP.
$ 8,235,788 Term loan, maturing September 27, 1996 $ 8,235,788
Engineered materials
INTERMETRO INDUSTRIES CORP.
3,569,044 Term loan, maturing June 30, 2001 3,569,044
5,113,939 Term loan, maturing December 31, 2002 5,113,939
Shelving
INTERNATIONAL WIRE GROUP, INC.
10,000,000 Term loan, maturing September 30, 2002 10,000,000
Manufactures and markets copper wire and
harnesses
INTESYS TECHNOLOGIES, INC.
5,000,000 Term loan, maturing December 31, 2001 5,000,000
Plastic injection molding and fabricated
battery packs
MOSLER, INC.
1,817,964 Term loan, maturing June 1, 1998 1,817,964
Safes, vaults, electronic security systems
THERMADYNE HOLDINGS CORP.
14,459,063 Term loan, maturing February 1, 2001 14,459,063
Cutting and welding products and floor
cleaning equipment
WATERS CORP.
6,218,750 Term loan, maturing November 30, 2001 6,218,750
4,353,125 Term loan, maturing November 30, 2002 4,353,125
Manufacturer of high performance liquid
chromatography instruments
------------
$ 58,767,673
------------
PAPER AND FOREST PRODUCTS - 7.3%
FORT HOWARD CORP.
$15,000,000 Term loan, maturing March 8, 2002 $ 15,000,000
15,000,000 Term loan, maturing December 31, 2002 15,000,000
Sanitary tissue paper products
SDW ACQUISITION CORP.
40,000,000 Term loan, maturing December 20, 2002 40,000,000
Major U.S. producer of coated free paper
------------
$ 70,000,000
------------
PUBLISHING - 4.7%
KRUEGER RINGIER, INC.
$ 9,052,569 Term loan, maturing December 31, 1997 $ 9,052,569
6,096,786 Term loan, maturing December 31, 1998 6,096,786
Printers and binders of mass market and
hardcover books
ZIFF-DAVIS PUBLISHING COMPANY
15,367,647 Term loan, maturing December 31, 2001 15,367,647
14,632,353 Term loan, maturing December 31, 2002 14,632,353
Computer publications publisher
------------
$ 45,149,355
------------
PUBLISHING - NEWSPAPERS - 2.6%
AMERICAN MEDIA OPERATIONS, INC.
$ 4,477,500 Term loan, maturing September 30, 2002 $ 4,477,500
Weekly periodical publisher
JOURNAL NEWS, INC.
20,000,000 Term loan, maturing December 31, 2001 20,000,000
Suburban newspaper
------------
$ 24,477,500
------------
RESTAURANTS - 4.0%
AMERICA'S FAVORITE CHICKEN COMPANY
$21,906,050 Term loan, maturing November 5, 1998 $ 21,906,050
Church's Fried Chicken and Popeye's
restaurants
LONG JOHN SILVER'S RESTAURANTS, INC.
16,718,464 Term loan, maturing December 31, 1996 16,718,464
Fish restaurants
------------
$ 38,624,514
------------
RETAIL - SPECIALTY - 3.2%
CAMELOT MUSIC, INC.
$ 4,987,186 Term loan, maturing February 28, 2001 $ 4,987,186
Music stores
GRIFFITH CONSUMERS COMPANY
10,847,222 Term loan, maturing December 31, 2002 10,847,222
Retail petroleum distributor
QVC, INC.
15,000,000 Term loan, maturing January 31, 2004 15,000,000
Home shopping retailer
------------
$ 30,834,408
------------
RETAIL STORES - DRUG STORES - 1.7%
DUANE READE, INC.
$ 5,016,667 Term loan, maturing December 31, 1997 $ 5,016,667
Retail drug stores
THRIFTY PAYLESS, INC.
11,562,509 Term loan, maturing March 31, 2000 11,562,509
Retail drug stores
------------
$ 16,579,176
------------
RETAIL STORES - FOOD CHAINS - 12.5%
DOMINICK'S FINER FOODS, INC.
$ 3,325,574 Term loan, maturing March 31, 2002 $ 3,325,574
8,255,854 Term loan, maturing March 31, 2003 8,255,854
9,255,854 Term loan, maturing September 30, 2003 9,255,854
Supermarket chain in Chicago
GRAND UNION COMPANY
26,628,890 Term loan, maturing June 15, 2002 26,628,890
Supermarket chain in the Northeast
PATHMARK STORES, INC.
34,650,000 Term loan, maturing October 31, 1999 34,650,000
Supermarket chain in mid-Atlantic states
RALPHS GROCERY COMPANY
7,666,667 Term loan, maturing June 15, 2002 7,666,667
7,666,667 Term loan, maturing June 15, 2003 7,666,667
7,666,667 Term loan, maturing June 15, 2004 7,666,667
Third largest supermarket chain in Southern
California
STAR MARKET COMPANY, INC.
10,105,263 Term loan, maturing December 31, 2001 10,105,263
4,421,053 Term loan, maturing December 31, 2002 4,421,053
Supermarket chain in Massachusetts
------------
$119,642,489
------------
STEEL - 1.3%
UCAR INTERNATIONAL, INC.
$ 6,090,848 Term loan, maturing January 31, 2003 $ 6,090,848
3,201,600 Term loan, maturing July 31, 2003 3,201,600
3,201,600 Term loan, maturing January 31, 2004 3,201,600
Processing materials for steel industry
------------
$ 12,494,048
------------
TELECOMMUNICATIONS - 1.6%
PAGING NETWORK, INC.
$15,000,000 Term loan, maturing March 31, 2002 $ 15,000,000
Paging service provider ------------
TEXTILES - 2.2%
BLACKSTONE CAPITAL COMPANY II, L.L.C.
$ 5,000,000 Term loan, maturing January 13, 1997 $ 5,000,000
Automotive products, residential upholstery
fabrics, and wallcoverings
LONDON FOG INDUSTRIES, INC.
9,582,314 Term loan, maturing May 31, 2002 8,911,552
1,971,219 Term loan, maturing May 31, 2002 * 1,655,824
Outerwear
WASSERSTEIN/C & A HOLDINGS, L.L.C.
5,000,000 Term loan, maturing January 13, 1997 5,000,000
Automotive products, residential upholstery
fabrics, and wallcoverings
------------
$ 20,567,376
------------
TOTAL LOAN INTERESTS (IDENTIFIED COST,
$843,764,660) $842,071,529
------------
--------------------------------------------------------------------------------
PREFERRED STOCKS - 0.8%
--------------------------------------------------------------------------------
SHARES SECURITY VALUE
--------------------------------------------------------------------------------
54,895 America's Favorite Chicken Company, 8% $ 4,035,880
Preferred Stock
5,845,956 London Fog Industries, Inc., 17.5% Preferred
Stock* 3,178,220
------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST,
$10,014,473) $ 7,214,100
------------
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 10.5%
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION
--------------------------------------------------------------------------------
$23,000,000 CXC,Inc., 6.25%, 7/3/95 $ 22,992,014
39,347,000 Corporate Receivables Corp., 6.20%, 7/3/95 39,333,447
2,824,000 Melville Corp., 6.23%, 7/3/95 2,823,023
35,373,000 Prudential Funding Corp., 5.97%, 7/6/95 35,343,670
------------
TOTAL SHORT-TERM INVESTMENTS, AT AMORTIZED
COST $100,492,154
------------
TOTAL INVESTMENTS (IDENTIFIED COST,
$954,271,287) - 99.5% $949,777,783
OTHER ASSETS, LESS LIABILITIES - 0.5% 4,809,543
------------
TOTAL NET ASSETS - 100% $954,587,326
============
*Non-income producing security.
Note: The description of the principal business for each security set forth
above is unaudited.
See notes to financial statements
<PAGE>
SENIOR DEBT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
June 30, 1995
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$954,271,287) $949,777,783
Cash 3,184,749
Receivable for investments sold 398,047
Interest receivable 5,371,248
Deferred organization expenses (Note 1D) 38,948
Prepaid expenses 798,758
------------
Total assets $959,569,533
LIABILITIES:
Deferred facility fee income (Note 1B) $4,869,498
Payable to affiliate -- Custodian fee 8,907
Accrued expenses 103,802
----------
Total liabilities 4,982,207
------------
NET ASSETS applicable to investors' interest in Portfolio $954,587,326
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $959,080,830
Unrealized depreciation of investments (computed
on the basis of identified cost) (4,493,504)
------------
Total $954,587,326
============
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the period from the start of business, February 22, 1995, to June 30, 1995
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Interest income $24,104,032
Facility fees earned 1,323,580
-----------
Total income $25,427,612
Expenses --
Investment adviser fee (Note 2) $2,523,771
Custodian fee (Note 2) 105,144
Interest expense 373,538
Legal and accounting services 14,716
Amortization of organization expenses (Note 1D) 2,282
Miscellaneous 182,242
----------
Total expenses 3,201,693
-----------
Net investment income $22,225,919
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions $1,095,155
Change in unrealized depreciation of investments (1,768,577)
----------
Net realized and unrealized loss on
investments (673,422)
-----------
Net increase in net assets from operations $21,552,497
===========
See notes to financial statements
<PAGE>
STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------
For the period from the start of business, February 22, 1995, to June 30, 1995
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES --
Purchase of Loan Interests and investments $(401,348,374)
Proceeds from sales and principal repayments 134,261,432
Interest received 25,307,620
Facility fees received 2,569,699
Interest paid (284,791)
Operating expenses paid (2,738,970)
Net increase in short-term investments (53,583,815)
-------------
Net cash used for operating activities $(295,817,199)
-------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES --
Proceeds from capital contributions $ 353,435,714
Payments for capital withdrawals (54,633,766)
-------------
Net cash provided by financing activities $ 298,801,948
-------------
Net increase in cash $ 2,984,749
CASH AT BEGINNING OF PERIOD 200,000
-------------
CASH AT END OF PERIOD $ 3,184,749
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net increase in net assets from operations $ 21,552,497
Increase in receivable for investments sold (245,089)
Decrease in interest receivable 1,504,933
Increase in prepaid expenses (219,142)
Increase in deferred organization expenses (38,948)
Increase in deferred facility fee income 1,164,165
Increase in payable to affiliate -- custodian fee 8,907
Increase in accrued expenses 84,403
Net increase in investments (319,628,925)
-------------
Net cash used for operating activities $(295,817,199)
=============
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the period from the start of business, February 22, 1995, to June 30, 1995
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 22,225,919
Net realized gain on investment transactions 1,095,155
Change in unrealized depreciation of investments (1,768,577)
-------------
Net increase in net assets from operations $ 21,552,497
-------------
Capital transactions --
Contributions $987,468,595
Withdrawals (54,633,766)
-------------
Increase in net assets resulting from capital
transactions $932,834,829
-------------
Total increase in net assets $954,387,326
NET ASSETS:
At beginning of period 200,000
-------------
At end of period $954,587,326
============
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
For the period from the start of business,
February 22, 1995, to June 30, 1995
--------------------------------------------------------------------------------
RATIOS (As a percentage of average daily net assets):
Operating expenses 1.06%+
Interest expense 0.14%+
Net investment income 8.35%+
PORTFOLIO TURNOVER 21%
+Annualized.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
Senior Debt Portfolio (the Portfolio) is registered under the Investment Company
Act of 1940 as a non-diversified closed-end investment company which was
organized as a trust under the laws of the State of New York on May 1, 1992. The
Declaration of Trust permits the Trustees to issue interests in the Portfolio.
Investment operations began on February 22, 1995, with the acquisition of
securities with a value of $583,240,521, including unrealized depreciation of
$2,724,927, in exchange for an interest in the Portfolio by one of the
Portfolio's investors. The following is a summary of significant accounting
policies of the Portfolio. The policies are in conformity with accounting
principles generally accepted in the United States of America.
A. INVESTMENT VALUATION -- The Portfolio's investments in interests in loans
(Loan Interests) are valued at fair value by the Portfolio's investment adviser,
Boston Management and Research, under procedures established by the Trustees as
permitted by Section 2(a)(41) of the Investment Company Act of 1940. Such
procedures include the consideration of relevant factors, data and information
relating to fair value, including (i) the characteristics of and fundamental
analytical data relating to the Loan Interest, including the cost, size, current
interest rate, period until next interest rate reset, maturity and base lending
rate of the Loan Interest, the terms and conditions of the loan and any related
agreements and the position of the loan in the borrower's debt structure; (ii)
the nature, adequacy and value of the collateral, including the Portfolio's
rights, remedies and interests with respect to the collateral; (iii) the
creditworthiness of the borrower, based on evaluations of its financial
condition, financial statements and information about the borrower's business,
cash flows, capital structure and future prospects; (iv) information relating to
the market for the Loan Interest including price quotations for and trading in
the Loan Interest and interests in similar loans and the market environment and
investor attitudes towards the Loan Interest and interests in similar loans; (v)
the reputation and financial condition of the agent bank and any intermediate
participant in the loan; and (vi) general economic and market conditions
affecting the fair value of the Loan Interest. Other portfolio securities (other
than short-term obligations, but including listed issues) may be valued on the
basis of prices furnished by one or more pricing services which determine prices
for normal, institutional-sized trading units of such securities using market
information, transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders. In
certain circumstances, portfolio securities will be valued at the last sales
price on the exchange that is the primary market for such securities, or the
last quoted bid price for those securities for which the over-the-counter market
is the primary market or for listed securities in which there were no sales
during the day. The value of interest rate swaps will be determined in
accordance with a discounted present value formula and then confirmed by
obtaining a bank quotation. Short-term obligations which mature in sixty days or
less are valued at amortized cost, if their original term to maturity when
acquired by the Portfolio was 60 days or less, or are valued at amortized cost
using their value on the 61st day prior to maturity, if their original term to
maturity when acquired by the Portfolio was more than 60 days, unless in each
case this is determined not to represent fair value. Repurchase agreements are
valued at cost plus accrued interest. Other portfolio securities for which there
are no quotations or valuations are valued at fair value as determined in good
faith by or on behalf of the Trustees.
B. INCOME -- Interest income from Loan Interests is recorded on the accrual
basis at the then-current interest rate, while all other interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or discount when required for federal income tax purposes. Facility fees
received are recognized as income over the expected term of the loan.
C. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements (under
the Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio will allocate at least annually among its investors each investor's
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deductions or credit.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
--------------------------------------------------------------------------------
(2) INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment advisory fee is earned by Boston Management and Research (BMR) as
compensation for investment advisory services rendered to the Portfolio. The fee
is computed at the monthly rate of 19/240 of 1% (0.95% per annum) of the
Portfolio's average daily gross assets up to and including $1 billion and at
reduced rates as daily gross assets exceed that level. For the period from the
start of business, February 22, 1995, to June 30, 1995, the effective annual
rate, based on average daily gross assets, was 0.95% (annualized) and amounted
to $2,523,771. Except as to Trustees of the Portfolio who are not members of
BMR's organization, officers and Trustees receive remuneration for their
services to the Portfolio out of such investment advisory fee. Investors Bank &
Trust Company (IBT), an affiliate of BMR, serves as custodian of the Portfolio.
Pursuant to the custodian agreement, IBT receives a fee reduced by credits which
are determined based on average daily cash balances the Portfolio maintains with
IBT. Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organizations. Trustees of the Portfolio that
are not affiliated with the Investment Advisor 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 period from the start of business,
February 22, 1995, to June 30, 1995, no significant amounts have been deferred.
--------------------------------------------------------------------------------
(3) INVESTMENTS
The Portfolio invests primarily in Loan Interests. The ability of the issuers of
the Loan Interests to meet their obligations may be affected by economic
developments in a specific industry. The cost of purchases and the proceeds from
principal repayments and sales of Loan Interests for the period from the start
of business, February 22, 1995, to June 30, 1995, aggregated $401,348,374 and
$134,506,521, respectively.
--------------------------------------------------------------------------------
(4) SHORT-TERM DEBT AND CREDIT AGREEMENTS
The Portfolio participates with other funds and portfolios managed by BMR and
Eaton Vance Management (EVM) in a $120 million unsecured line of credit
agreement with a bank. The line of credit consists of a $20 million committed
facility and a $100 million discretionary facility. Borrowings will be made by
the Portfolio solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each portfolio based on its
borrowings at an amount above either the bank's adjusted certificate of deposit
rate, a variable adjusted certificate of deposit rate, or a federal funds
effective rate. In addition, a fee computed at an annual rate of 1/4 of 1% on
the $20 million committed facility and on the daily unused portion of the $100
million discretionary facility is allocated among the participating funds and
portfolios at the end of each quarter. The Portfolio did not have any
significant borrowings or allocated fees under this agreement during the period.
The Portfolio has also entered into a revolving credit agreement, that will
allow the Portfolio to borrow an additional $245 million to support the issuance
of commercial paper and to permit the Portfolio to invest in accordance with its
investment practices. Interest is charged under the revolving credit agreement
at the bank's base rate or at an amount above either the bank's adjusted Libor
rate or adjusted certificate of deposit rate. Interest expense includes a
commitment fee of approximately $210,512 which is computed at the annual rate of
1/4 of 1% on the unused portion of the revolving credit agreement. There were no
borrowings under this agreement during the period. As of June 30, 1995, the
Portfolio had no commercial paper outstanding.
------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES
The cost and unrealized appreciation/depreciation in the value of investments
owned at June 30, 1995, as computed on a federal income tax basis, were as
follows:
Aggregate cost $954,271,287
============
Gross unrealized depreciation $ 4,493,504
Gross unrealized appreciation --
-----------
Net unrealized depreciation $ 4,493,504
============
<PAGE>
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
To the Trustees and Investors of
Senior Debt Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Senior Debt Portfolio as of June 30, 1995, and
the related statement of operations, the statement of cash flows, the statement
of changes in net assets and the supplementary data for the period from the
start of business, February 22, 1995, to June 30, 1995 (all expressed in United
States dollars). These financial statements and supplementary data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and supplementary data based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and supplementary data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities and Loan Interests owned at June 30, 1995 by correspondence with the
custodian and selling or agent banks; where replies were not received from
selling or agent banks, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of Senior Debt Portfolio as of
June 30, 1995, the results of its operations and its cash flows, the changes in
its net assets, and its supplementary data for the period from the start of
business, February 22, 1995, to June 30, 1995, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1A, the financial statements include Loan Interests and
certain other securities held by Senior Debt Portfolio valued at $849,285,629
(89% of net assets of the Portfolio), which values are fair values determined by
the Portfolio's investment adviser in the absence of actual market values.
Determination of fair value involves subjective judgment, as the actual market
value of a particular Loan Interest or security can be established only by
negotiation between the parties in a sales transaction. We have reviewed the
procedures established by the Trustees and used by the Portfolio's investment
adviser in determining the fair values of such Loan Interests and securities and
have inspected underlying documentation, and in the circumstances, we believe
that the procedures are reasonable and the documentation appropriate.
DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
British West Indies
August 11, 1995
<PAGE>
INVESTMENT MANAGEMENT
EATON VANCE OFFICERS INDEPENDENT TRUSTEES
PRIME RATE JAMES B. HAWKES DONALD R. DWIGHT
RESERVES President and Trustee President, Dwight
24 Federal Street M. DOZIER GARDNER Partners, Inc.
Boston, MA 02110 Vice President and Chairman,
Trustee Newspapers of
JEFFREY S. GARNER New England, Inc.
Vice President SAMUEL L. HAYES, III
JAMES L. O'CONNOR Jacob H. Schiff
Treasurer Professor of
THOMAS OTIS Investment Banking,
Secretary Harvard
University Graduate
School of
Business
Administration
NORTON H. REAMER
President and
Director, United
Asset
Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser
and Consultant
-------------------------------------------------
SENIOR DEBT OFFICERS INDEPENDENT TRUSTEES
PORTFOLIO JAMES B. HAWKES DONALD R. DWIGHT
24 Federal Street President and Trustee President, Dwight
Boston, MA 02110 M. DOZIER GARDNER Partners, Inc.
Vice President and Chairman,
Trustee Newspapers of
JEFFREY S. GARNER New England, Inc.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff
WILLIAM CHISHOLM Professor of
Vice President Investment Banking,
RAYMOND O'NEILL Harvard University
Vice President Graduate School of
MICHEL NORMANDEAU Business
Vice President Administration
THOMAS OTIS NORTON H. REAMER
Secretary President and
JAMES L. O'CONNOR Director, United
Treasurer Asset
Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser
and Consultant
<PAGE>
INVESTMENT ADVISER OF
SENIOR DEBT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EATON VANCE
PRIME RATE RESERVES
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
BANKING COUNSEL
Mayer, Brown & Platt
787 Seventh Avenue
New York, NY 10019
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EATON VANCE PRIME RATE RESERVES
24 Federal Street
Boston, MA 02110
M-PRSRC
[LOGO]
EATON VANCE PRIME RATE RESERVES
SEMI-ANNUAL SHAREHOLDER REPORT
JUNE 30, 1995
