<PAGE>
Filed with the Securities and Exchange Commission on April 24, 1995
1933 Act File Nos. 33-28516, 33-30268, 33-34922
1940 Act File No. 811-05808
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
EATON VANCE PRIME RATE RESERVES
(Name of Issuer)
EATON VANCE PRIME RATE RESERVES
(Name of Person(s) Filing Statement)
Shares of Beneficial Interest, Without Par Value
(Title of Class of Securities)
277913 10 9
(CUSIP Number of Class of Securities)
H. Day Brigham, Jr.
Eaton Vance Management
24 Federal Street, Boston, Massachusetts 02110
(617) 482-8260
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
April 24, 1995
(Date Tender Offer First Published,
Sent or Given to Security Holders)
Calculation of Filing Fee
-------------------------
Transaction Valuation Amount of Filing Fee
--------------------------------------- --------------------
No. of Shares Price/Share Total Value
------------- ----------- -----------
6,500,000 $10.03 $65,195,000 $13,039
__
/_/ Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee
was previously paid. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing.
<PAGE>
Background
----------
Eaton Vance Prime Rate Reserves (the "Trust"), is a closed-end,
non-diversified management investment company (File Nos. 33-34922, 811-
05808) registered under the Investment Company Act of 1940 (the "1940
Act"). As a closed-end investment company, the Trust does not redeem its
shares, but the Trust continuously offers its shares at net asset value.
However, the Trust makes quarterly tender offers (at the discretion of the
Board of Trustees)to provide some measure of liquidity to the Trust's
shareholders because the Trust's shares are not listed on an exchange or
traded in the over-the-counter market.
On February 21, 1995, the Trust converted to a "master-feeder"
structure and now invests all of its assets in the Senior Debt Portfolio
(the "Portfolio"), a separate closed-end non-diversified management
investment company registered under the 1940 Act (File No. 811-8876). The
Portfolio also continuously offers its interests, but the interests
are offered privately (i.e., without conducting a public offering under
the Securities Act of 1933), and are held by an extremely small number of
feeder funds. In order to continue to provide liquidity to Trust
shareholders (and to the shareholders of any other feeder fund), the
Portfolio also intends to conduct periodic tender offers.
EV Classic Senior Floating-Rate Fund is a "sister" feeder
fund of the Trust, is registered under the 1940 Act as a closed-
end, non-diversified management investment company, and also offers its
shares to the public (File Nos. 811-07946 and 33-67118). The Fund also
invests its assets in the Portfolio. In order to provide liquidity to
Fund shareholders, the Fund also expects to conduct periodic tender
offers.
Introduction
------------
The following is a cross-reference sheet pursuant to General Instruction B
of Schedule 13E-4 showing the location in the Offer To Purchase dated
April 24, 1995 of Eaton Vance Prime Rate Reserves (the "Offer To
Purchase"), submitted herewith as an exhibit, of the information required
by Schedule 13E-4. All of the information contained under the below-
referenced captions of the Offer To Purchase is hereby incorporated by
reference.
Schedule 13E-4 Item and Caption Caption in Offer To Purchase
------------------------------- ----------------------------
Item 1 Security and Issuer
-------------------
(a) . . . . . . . . . . . . . . Heading.
(b) and (c) . . . . . . . . . . Heading. Letter. Price; Number
of Shares. Selected Financial
Information.
- 2 -
<PAGE>
(d) . . . . . . . . . . . . . . Inapplicable.
Item 2 Source and Amount of Funds
or Other Consideration
---------------------------
(a) . . . . . . . . . . . . . . Heading. Source and Amount of
Funds.
(b) . . . . . . . . . . . . . . Inapplicable.
Item 3 Purpose of the Tender Offer
and Plans or Proposals of
the Issuer or Affiliate
---------------------------
(a) through (f) . . . . . . . . Purpose of the Offer. Certain
Effects of the Offer.
The Trust has no present plans
or proposals which relate to or
would result in any
extraordinary corporate
transaction, such as a merger,
reorganization, or liquidation,
involving the Trust; a sale or
transfer of a material amount of
assets of the Trust; any
material changes in the Trust's
present capitalization (except
as resulting from the Offer or
otherwise set forth in the Offer
to Purchase); or any other
material change in the Trust's
corporate structure or business
as a non-diversified closed-end
management investment company.
(g) through (j) . . . . . . . . Inapplicable.
Item 4 Interest in Securities of Selected Financial
the Issuer Information.
-------------------------
Item 5 Contracts, Arrangements, No such contracts, arrangements,
Understandings or Relationships understandings or relationships
with Respect to the Issuer's exist between the Trust and any
Securities person with respect to the
------------------------------- tender offer.
Item 6 Persons Retained, Employed Letter. No person has been
or to Be Compensated authorized to make solicitations
--------------------------- or recommendations with respect
to the Offer to Purchase.
- 3 -
<PAGE>
Item 7 Financial Information
---------------------
(a)(1) (2) (3) and (4). . . . . Reference is hereby made to the
Selected Financial Information
in the Offer to Purchase and to
the financial statements
included as Exhibit (g)(1)
hereto, which is incorporated
herein by reference.
(b)(1) (2) and (3). . . . . . . Inapplicable.
Item 8 Additional Information
----------------------
(a) . . . . . . . . . . . . . . Contracts and Relationships with
Affiliates.
Eaton Vance Distributors, Inc.
("EVD") is a wholly-owned
subsidiary of Eaton Vance
Management, which is a wholly-
owned subsidiary of Eaton Vance
Corp. EVD serves as the Trust's
principal underwriter.
(b) through (d) . . . . . . . . Inapplicable.
(e) . . . . . . . . . . . . . . Withdrawal Rights. Early
Withdrawal Charge. Extension of
Tender Period; Termination;
Amendments. Tax Consequences.
Item 9 Material to be Filed as Exhibits
--------------------------------
(a)(1). . . . . . . . . . . . . Advertisement printed in The
Wall Street Journal.
(2). . . . . . . . . . . . . Offer to Purchase (including
Selected Financial Information).
(3). . . . . . . . . . . . . Letter of Transmittal.
(b) . . . . . . . . . . . . . . Inapplicable.
(c) . . . . . . . . . . . . . . Inapplicable.
(d) through (f) . . . . . . . . Inapplicable.
(g)(1). . . . . . . . . . . . . Audited Financial Statements of
the Trust for the fiscal year
ended December 31, 1994.
- 4 -
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
April 21, 1995 /s/ James B. Hawkes
-------------- ---------------------------------
(Date) James B. Hawkes, President of
Eaton Vance Prime Rate Reserves
- 5 -
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Issuer Tender
Offer Statement.
Exhibit
No. Description
------- -----------
(a)(1) Advertisement printed in The Wall Street Journal
(a)(2) Offer to Purchase (including Selected Financial
Information)
(a)(3) Letter of Transmittal
(g)(1) Audited Financial Statements of the Trust for the fiscal
year ended December 31, 1994.
- 6 -
<PAGE>
This announcement is not an offer to purchase or a solicitation of an offer to
sell Shares. The Offers are made only by the Offer to Purchase dated April
24, 1995, and the related Letter of Transmittal.
NOTICE OF OFFERS TO PURCHASE FOR CASH
6,500,000 OF THE ISSUED AND OUTSTANDING SHARES OF
EATON VANCE PRIME RATE RESERVES AND
1,000,000 OF THE ISSUED AND OUTSTANDING SHARES OF
EV CLASSIC SENIOR FLOATING-RATE FUND
AT NET ASSET VALUE PER SHARE
Eaton Vance Prime Rate Reserves and EV Classic Senior Floating-Rate Fund (the
"Funds") are offering to purchase 6,500,000 and 1,000,000, respectively, of
their issued and outstanding shares ("Shares") at a price equal to their net
asset values ("NAV") as of the close of the New York Stock Exchange on the
Expiration Date, May 19, 1995. The Offers will expire at 12:00 midnight,
Eastern time, on that date unless extended upon the terms and conditions set
forth in the Offers to Purchase dated April 24, 1995, and the related Letter of
Transmittal, which together constitute the "Offers." The NAV on April 17, 1995,
of Eaton Vance Prime Rate Reserves, was $10.03 per Share, and of EV Classic
Senior Floating-Rate Fund was $9.99 per Share. The applicable early withdrawal
charges will be deducted from the proceeds of Shares tendered. The purpose of
the Offers is to provide liquidity to shareholders since the Funds are
unaware of any secondary market which exists for the Shares. The Offers are not
conditioned upon the tender of any minimum number of Shares.
If more than a Fund's Shares offered are duly tendered prior to the expiration
of the Offers, the Fund will, assuming no changes in the factors originally
considered when it was determined to make its Offer, extend its Offer period,
if necessary, and increase the number of Shares that the Fund is offering to
purchase to an amount which it believes will be sufficient to accommodate the
excess Shares tendered as well as any Shares tendered during the extended Offer
period or purchase the original number of Shares offered (or such larger number
of Shares sought) of the Shares tendered on a pro rata basis.
Shares tendered pursuant to the Offers may be withdrawn at any time prior to
12:00 midnight, Eastern time, on May 19, 1995, and, if not yet accepted for
payment. Shares may also be withdrawn after June 19, 1995.
The information required to be disclosed by paragraph (d)(1) of Rule 13e-4
under the Securities Exchange Act of 1934, as amended, is contained in the
Offers to Purchase and is incorporated herein by reference.
Requests for free copies of the Offers to Purchase, Letter of Transmittal and
any other tender offer documents may be directed to Eaton Vance, at the
address and telephone number below. Shareholders who do not own Shares directly
may effect a tender through their broker, dealer or nominee.
[LOGO] EATON VANCE PRIME RATE RESERVES AND
EATON VANCE EV CLASSIC SENIOR FLOATING-RATE FUND
=========== 24 FEDERAL STREET
MUTUAL FUNDS BOSTON, MA 02110
1-800-225-6265, EXTENSION 5
April 24, 1995
- --------------------------------------------------------------------------------
OFFERS TO PURCHASE FOR CASH AT NET ASSET VALUE
6,500,000 OF THE ISSUED AND OUTSTANDING SHARES OF
EATON VANCE PRIME RATE RESERVES AND
1,000,000 OF THE ISSUED AND OUTSTANDING SHARES OF
EV CLASSIC SENIOR FLOATING-RATE FUND
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT
EASTERN TIME, ON friday, MAY 19, 1995 UNLESS EXTENDED.
To the Holders of Shares of
EATON VANCE PRIME RATE RESERVES AND EV CLASSIC SENIOR FLOATING-RATE FUND:
As of April 24, 1995, (the "Commencement Date") Eaton Vance Prime Rate
Reserves and EV Classic Senior Floating-Rate Fund (the "Funds") are offering
to purchase up to 6,500,000 and 1,000,000, respectively, (the "Designated
Number") of their shares of beneficial interest without par value ("Shares")
for cash at a price equal to their net asset value ("NAV") as of the close of
the New York Stock Exchange on May 19, 1995 (the "Initial Expiration Date"),
unless extended, upon the terms and conditions set forth in these Offers to
Purchase and the related Letter of Transmittal which together constitute the
"Offers." The later of the Initial Expiration Date or the latest time and date
to which an Offer is extended is hereinafter called the "Expiration Date." The
Funds' NAVs were $10.03 and $9.99, respectively, per Share on April 17, 1995.
The total cost to the Funds of purchasing the Designated Number of Shares
pursuant to the Offer will be approximately $65,195,000 and $9,990,000,
respectively. Any early withdrawal charge applicable to Shares tendered for
purchase will be deducted from the proceeds sent to shareholders.
If more than the Designated Number of Shares of a Fund are duly
tendered prior to the Expiration Date and not withdrawn, subject to the
condition that there have been no changes in the factors originally considered
by the Board of Trustees when it determined to make the Offer, the relevant
Fund will either (1) extend the Offer period, if necessary, and increase the
number of Shares that the Fund is offering to purchase to an amount which it
believes will be sufficient to accommodate the excess Shares tendered as well
as any Shares tendered during the extended Offer period or (2) purchase the
Designated Number (or such larger number of Shares sought) of the Shares
tendered on a pro rata basis.
NEITHER THE FUND NOR THEIR BOARDS OF TRUSTEES MAKES ANY
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING SHARES. EACH SHAREHOLDER MUST MAKE AN INDEPENDENT DECISION WHETHER
TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF
OF EITHER FUND AS TO WHETHER SHAREHOLDERS SHOULD TENDER SHARES PURSUANT TO
THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED
HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION
AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE A FUND.
Questions, requests for assistance and requests for additional copies
of these Offers to Purchase and, if necessary, the Letter of Transmittal
should be directed to Eaton Vance Prime Rate Reserves or EV Classic Senior
Floating-Rate Fund, 24 Federal Street, Boston, Massachusetts 02110, telephone
number 1-800-225-6265, Ext. 5.
OFFERS TO PURCHASE
APRIL 24, 1995 EATON VANCE PRIME RATE RESERVES
EV CLASSIC SENIOR FLOATING-RATE FUND
24 FEDERAL STREET, BOSTON, MA 02110
<PAGE>
1. PRICE; NUMBER OF SHARES. Each Fund will, upon the terms and subject
to the conditions herein purchase up to the Designated Number of its issued and
outstanding Shares which are tendered and not withdrawn prior to the Expiration
Date, unless it determines to accept none of them. The purchase price of the
Shares will be their NAV as of the close of regular trading on the New York
Stock Exchange on the Expiration Date. Each Fund reserves the right to extend
or terminate its Offer (See Section 8).
The Offers are being made to all shareholders of the Funds and are not
conditioned upon any minimum number of Shares being tendered.
If the number of Shares properly tendered prior to the Expiration Date
and not withdrawn is less than or equal to the Designated Number (or such
greater number of Shares as a Fund may elect to purchase pursuant to its
Offer), the Fund will, upon the terms and subject to the conditions of its
Offer, purchase at NAV all Shares so tendered. If more than the Designated
Number are duly tendered prior to the Expiration Date and not withdrawn,
subject to the condition that there have been no changes in the factors
originally considered by the Board of Trustees when it determined to make the
Offer, the relevant Fund will either (1) extend the Offer period, if necessary,
and increase the number of Shares that the Fund is offering to purchase to an
amount which it believes will be sufficient to accommodate the excess Shares
tendered as well as any Shares tendered during the extended Offer period or
(2) purchase the Designated Number (or such larger number of Shares sought) of
the Shares tendered on a pro rata basis.
Each Fund reserves the right, in its sole discretion, at any time or
from time to time, to extend the period of time during which its Offer is open
by giving oral or written notice of such extension to the Depository and making
a public announcement thereof. There can be no assurance, however, that a Fund
will exercise its right to extend. If either Fund decides, in its sole
discretion, to increase (except for any increase not in excess of 2% of the
outstanding Shares) or decrease the number of Shares being sought and, at the
time that notice of such increase or decrease is first published, sent or given
to holders of Shares in the manner specified below, its Offer is scheduled to
expire at any time earlier than the tenth business day from the date that such
notice is first so published, sent or given, the Offer will be extended at
least until the end of such ten business day period.
If the Shares to be tendered are registered in the shareholder's name
and the necessary documents will be completed and transmitted to the Funds'
Transfer Agent by the shareholder, the procedure for tendering Shares for
purchase pursuant to each Offer is set forth in the Letter of Transmittal, the
provisions of which are incorporated herein by reference. A Letter of
Transmittal is not required if a broker, dealer or other selling group member
will be used to effect the transaction for the shareholder.
Each Fund has been advised that none of its Trustees, officers or
affiliates intends to tender any Shares pursuant to its Offer except that Eaton
Vance Distributors, Inc. ("EVD") may tender any Shares that it has acquired
pursuant to its distribution activities prior to the Expiration Date. The
Shares are not currently traded on any established trading market. The current
NAV of each Fund's Shares may be obtained by calling the Fund at the telephone
number provided above.
2. WITHDRAWAL RIGHTS. Tenders made pursuant to the Offer will be
irrevocable. However, shareholders may withdraw Shares tendered at any time up
to the Expiration Date and, if the Shares have not yet been accepted for
payment by the Fund, at any time after the expiration of 40 Business Days
following, and including, the Commencement Date. Business Day means any day,
other than Saturday, Sunday, or a Federal holiday. A shareholder whose Shares
have been purchased pursuant to this Offer may reinvest any portion or all of
his tender proceeds in Shares of the same Fund on the terms and conditions set
forth in the prospectus under "Eaton Vance Shareholder Services."
3. PURPOSE OF THE OFFER. The Funds do not currently believe that
there is or is likely to be an active
2
<PAGE>
secondary market for their Shares. The Trustees of each Fund have determined
that it would be in the best interest of Fund shareholders to take action to
provide liquidity to shareholders and, accordingly, that the Fund should make
this Offer.
4. SOURCE AND AMOUNT OF FUNDS. Each Fund invests its assets in the
Senior Debt Portfolio (the"Portfolio") and is expected to have cash to pay
for Shares acquired pursuant to the Offers because the Portfolio has made a
tender offer to each Fund in the same amounts and on the same terms as the
Fund's tender offers. Accordingly, each Fund will tender a portion of its
interest in the Portfolio equal in value to shares tendered pursuant to its
Offer hereunder. The Portfolio does not anticipate borrowing to meet its
tender offer obligations to the Funds. If, in the judgment of the Trustees of
the Portfolio, sufficient assets of the Portfolio cannot readily be
liquidated to pay for tendered Shares, the Portfolio may terminate its offer.
If the Portfolio did so, the Funds would terminate their Offers.
5. CERTAIN EFFECTS OF THE OFFER. Although the Trustees of each Fund
believe that the Offer would be beneficial their Fund's shareholders, the
acquisition of Shares by a Fund will decrease its total assets and therefore
have the likely effect of increasing the Fund's expense ratio. All Shares
purchased pursuant to the Offer will be retired by the relevant Fund.
6. EARLY WITHDRAWAL CHARGE. An Early Withdrawal Charge to recover
distribution expenses will be imposed on those Shares accepted for tender the
amount of which exceeds the aggregate value at the time the tender is accepted
of (a) all Shares in the account purchased more than the requisite time set
forth in the relevant Fund's prospectus (the "Aging Period") prior to such
acceptance, (b) all Shares in the account acquired through reinvestment of
distributions, and (c) the increase, if any, of value of all other Shares in
the account (namely those purchased within the Aging Period) over the purchase
price of such Shares. The Early Withdrawal Charge will be paid to the Funds'
principal underwriter, EVD. In determining whether an Early Withdrawal Charge
is payable, it is assumed that the acceptance of a repurchase offer would be
made from the earliest purchase of Shares. Any Early Withdrawal Charge which is
required to be imposed will be made in accordance with the terms and schedule
set forth in the relevant Fund's prospectus.
Tendering shareholders may elect to receive, in lieu of cash, the
proceeds from the tender of their Shares in shares of certain other open-end
management investment companies in the Eaton Vance Group of Funds. Consult the
relevant Fund's prospectus for eligible Eaton Vance funds. The Early Withdrawal
Charge will be waived for the Shares tendered in exchange for shares in such
funds.
The prospectus for each fund describes its investment objectives and
policies as well as the contingent deferred sales charge imposed on the
redemption of shares. Shareholders should obtain a prospectus and consider a
fund's objectives and policies carefully before requesting an exchange. Each
exchange must involve Shares which have a net asset value of at least $1,000. A
shareholder may effect an exchange by completing the appropriate section of the
Letter of Transmittal or by giving proper instructions to the shareholder's
broker or dealer. For purposes of calculating the contingent deferred sales
charge upon a subsequent redemption of shares of a fund acquired in an
exchange, the purchase of such shares is deemed to have occurred at the time of
the original purchase of the exchanged Fund Shares. An exchange may result in a
taxable gain or loss. Although the exchange privilege has been made available
as a convenience to each Fund's shareholders, neither the Fund nor the Boards
of Trustees makes any recommendation as to whether shareholders should exchange
Shares for shares of another Eaton Vance fund.
7. TAX CONSEQUENCES. The following discussion is a general summary of
the Federal income tax
3
<PAGE>
consequences of a tender of Shares pursuant to the Offers. You should consult
your own tax adviser regarding the specific tax consequences, including state
and local tax consequences, of such a tender to you.
A tender of Shares pursuant to an Offer (including an exchange for
shares of another Eaton Vance fund) will be a taxable transaction for Federal
income tax purposes. In general, the transaction should be treated as a sale or
exchange of the Shares under Section 302 of the Internal Revenue Code of 1986,
as amended (the "Code"), if the tender (i) completely terminates the
shareholder's interest in a Fund, (ii) is treated as a distribution that is
"substantially disproportionate" or (iii) is treated as a distribution that is
"not essentially equivalent to a dividend." A complete termination of the
shareholder's interest generally requires that the shareholder dispose of all
Shares directly owned or attributed to him under Section 318 of the Code. A
"substantially disproportionate" distribution generally requires a reduction of
at least 20% in the shareholder's proportionate interest in a Fund after all
Shares are tendered. A distribution "not essentially equivalent to a dividend"
requires that there be a "meaningful reduction" in the shareholder's interest,
which should be the case if the shareholder has a minimal interest in the Fund,
exercises no control over Fund affairs and suffers a reduction in his or her
proportionate interest.
Each Fund intends to take the position that tendering shareholders will
qualify for sale or exchange treatment. If the transaction is treated as a sale
or exchange for tax purposes, any gain or loss recognized will be treated as a
capital gain or loss by shareholders who hold their Shares as a capital asset
and as a long-term capital gain or loss if such Shares have been held for more
than one year. The current maximum tax rates on ordinary income and long-term
capital gains are the same.
If the transaction is not treated as a sale or exchange, the amount
received upon a sale of Shares may consist in whole or in part of ordinary
dividend income, a return of capital or capital gain, depending on the Fund's
earnings and profits for its taxable year and the shareholder's tax basis in
the Shares. In addition, if any amounts received are treated as a dividend to
tendering shareholders, a constructive dividend under Section 305 of the Code
may be received by non-tendering shareholders whose proportionate interest in
the Fund has been increased as a result of the tender.
Each Fund or its agent could be required to withhold 31% of gross
proceeds paid to a shareholder or other payee pursuant to its Offer if (a) it
has not been provided with the shareholder's taxpayer identification number
(which, for an individual, is usually the social security number) and
certification under penalties of perjury (i) that such number is correct and
(ii) that the shareholder is not subject to withholding as a result of failure
to report all interest and dividend income or (b) the Internal Revenue Service
(IRS) or a broker notifies the Fund that the number provided is incorrect or
withholding is applicable for other reasons. Backup withholding does not apply
to certain payments that are exempt from information reporting or are made to
exempt payees, such as corporations. Foreign shareholders are required to
provide the relevant Fund with a completed IRS Form W-8 to avoid 31%
withholding on payments received on a sale or exchange. Foreign shareholders
may be subject to withholding of 30% (or a lower treaty rate) on any portion of
payments received that is deemed to constitute a dividend.
8. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. Each Fund
reserves the right, at any time and from time to time, to extend the period of
time during which its Offer is pending by making a public announcement thereof.
In the event that a Fund so elects to extend the tender period, the NAV for
the Shares tendered will be determined as of the close of regular trading on
the New York Stock Exchange on the Expiration Date, as extended. During any
such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer. Each Fund also reserves the right, at any time and from
time to time up to and including the Expiration Date, to (a) terminate its
Offer and not to purchase or pay for any Shares, and (b) amend the Offer in any
respect by making a public announcement. Such public announcement will be
issued no later than 9:00 a.m. New York City
4
<PAGE>
Time, on the next Business day after the previously scheduled Expiration Date
and will disclose the approximate number of Shares tendered as of that date.
Without limiting the manner in which a Fund may choose to make a public
announcement of extension, termination or amendment, except as provided by
applicable law, the Fund shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
release to the Dow Jones News Service.
Each Fund reserves the right to terminate its Offer for any of the
following reasons:
(i) the Fund would not able to liquidate the requisite portion of its interest
in the Portfolio and/or such liquidation would have an adverse effect on the
net asset value of the Fund to the detriment of the nontendering Fund
shareholders; (ii) the Fund's income would be taxed at the Fund level in
addition to the taxation of shareholders who receive dividends and
distributions from the Fund as a result of the Fund being deemed a taxable
entity occasioned by the impairment of the Fund's status as a regulate d
investment company under the Code; or (iii) there exists (a) a limitation
imposed by Federal or state authorities on the extension of credit by lenders
which affects the Fund, the Borrowers of Loans in which the Portfolio holds
Loan Interests or the Intermediate Participants, (b) a banking moratorium
declared by Federal or state authorities or any suspension of payments by banks
in the United States, (c) a legal action or proceeding instituted or threatened
which materially adversely affects the Fund, (d) a legal action or proceeding
instituted or threatened which challenges such purchase, (e) an international
or national calamity, such as commencement of war or armed hostilities,
which directly or indirectly involves the United States, or (f) an event or
condition not listed herein which would materially adversely affect the Fund if
the tendered shares are purchased.
9. CONTRACTS AND RELATIONSHIPS WITH AFFILIATES. The Portfolio
currently is a party to an Investment Advisory Contract with Boston Management
and Research ("BMR"), its investment adviser. The Portfolio pays to BMR an
advisory fee on an annual basis (payable monthly) of (a) .95% of average daily
gross assets of the Portfolio up to and including $1 billion; (b) .90% of
average daily gross assets in excess of $1 billion up to and including $2
billion; and (c) .85% of average daily gross assets in excess of $2 billion. An
administration fee is paid to Eaton Vance Management ("EVM") by each Fund and
is equal to .25% annually of daily gross assets of the Portfolio attributable
to a Fund. The Funds and the Portfolio also have an agreement with Investors
Bank & Trust Company ("IBT"), which acts as the custodian of each entity's
assets. IBT (majority-owned) and EVM (wholly-owned)are both subsidiaries of
Eaton Vance Corp. and hence affiliates. BMR is a wholly-owned subsidiary of
EVM.
5
<PAGE>
<TABLE>
EATON VANCE PRIME RATE RESERVES
SELECTED FINANCIAL INFORMATION *
RESULTS OF OPERATIONS
For the periods:
<CAPTION>
January 1, 1994 to January 1, 1993 to
December 31, 1994 ** December 31, 1993 **
-------------------- --------------------
<S> <C> <C>
INVESTMENT INCOME $ 49,297,808 $ 59,085,695
EXPENSES $ 11,601,914 $ 15,487,154
-------------------- --------------------
Net Investment Income $ 37,695,894 $ 43,598,541
==================== ====================
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1994 December 31, 1993
-------------------- --------------------
Assets $639,320,838 $707,908,138
Liabilities $ 27,733,320 $ 24,514,457
-------------------- --------------------
Net Assets $611,587,518 $683,393,681
==================== ====================
Net Assets Consist of
Paid-in Capital $614,489,902 $685,789,141
Undistributed Net
Investment Income $ 21,700 $ 303,643
Accumulated Net Realized
Gain / (Loss) on Investments $ (3,626,938) $(10,517,164)
Accumulated Distributions from
Net Realized Gain on Investments $ (2,266,346) $ (2,266,346)
Unrealized Gain / (Loss) on
Investments $ 2,969,200 $ 10,084,407
-------------------- --------------------
Net Assets $611,587,518 $683,393,681
==================== ====================
PER SHARE DATA
Investment Income $ 0.7802 $ 0.6735
Net Investment Income $ 0.5966 $ 0.4970
Net Asset Value $ 10.02 $ 10.03
Sales in last 40 Business
Days of Period (all at
Net Asset Value next
determined after receipt) to:
Trustees, Officers, Affiliates $ 0 $ 0
Public $ 20,875,840 $ 4,002,820
Total $ 20,875,840 $ 4,002,820
SHARES ISSUED AND OUTSTANDING $ 61,040,057 $ 68,165,570
<FN>
* The selected financial information reflects the ongoing process of investing the Fund's assets. For more complete financial
information, a copy of the Fund's most recently published Annual Report can be obtained free of charge from Eaton Vance
Distributors, Inc., telephone number 1-800-225-6265, Ext.1 (copies of which have been filed as exhibits to the
Schedule 13E-4 filed with the Securities Exchange Commission).
** Based on audited figures for the fiscal years ended December 31, 1994 and December 31, 1993.
Note: Shares of the EV Classic Senior Floating-Rate Fund were first offered to the public on February 22, 1995.
</TABLE>
[LOGO]
EATON VANCE
===========
MUTUAL FUNDS
LETTER OF TRANSMITTAL
To Be Used* To Tender Shares of
EATON VANCE PRIME RATE RESERVES OR
EV CLASSIC SENIOR FLOATING-RATE FUND
Pursuant to the Offers to Purchase
Dated April 24, 1995
THE EXPIRATION DATE AND THE WITHDRAWAL
DEADLINE IS 12:00 MIDNIGHT, EASTERN TIME, ON
May 19, 1995, UNLESS EXTENDED
- Please complete and mail Pages 3 and 4 of this form to the Funds'
Transfer Agent:
The Shareholder Services Group, Inc.
Eaton Vance Section - BOS725
P.O. Box 1559
Boston, MA 02104
- If the letter is to be delivered by messenger or overnight
courier, use the following street address:
The Shareholder Services Group, Inc.
Eaton Vance Section - BOS725
Seventh Floor
53 State Street
Boston, MA 02109
- Delivery to an address other than that shown above does not constitute
valid delivery.
- --------------------------------------------------------------------------------
* THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE SHARES TO BE
TENDERED ARE REGISTERED IN THE SHAREHOLDER'S NAME AND THE NECESSARY
DOCUMENTS WILL BE TRANSMITTED TO THE TRANSFER AGENT (ABOVE). DO NOT
USE THIS FORM IF A BROKER, DEALER OR OTHER SELLING GROUP MEMBER IS
EFFECTING THE TRANSACTION FOR THE SHAREHOLDER.
- --------------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
QUESTIONS AND REQUESTS FOR FURTHER ASSISTANCE MAY BE DIRECTED TO
EATON VANCE MANAGEMENT, AT 1-800-225-6265, EXT. 5.
- --------------------------------------------------------------------------------
<PAGE>
GENERAL INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES
A properly completed and duly executed Letter of Transmittal, together with
certificates for any tendered shares held in certificate form, should be
mailed or delivered to the Transfer Agent at the appropriate address shown
on the front of this Letter. All documents must be received by the Transfer
Agent on or prior to the Expiration Date (as defined in the Offer to
Purchase). Delivery to an address other than that shown does not constitute
valid delivery. The method of delivery of all documents, including
certificates for shares, is at the election and risk of the shareholder
making the tender.
2. TRANSFER TAXES
The Funds will pay all taxes, if any, payable on the transfer of shares
purchased pursuant to the Offers. If, however, payment of the purchase price
is to be made to or (in the circumstances permitted by the Offers) if
unpurchased shares are to be registered in the name of a person other than
the registered holder, or if any tendered shares are registered in any name
other than that of the person(s) signing this Letter of Transmittal, the
amount of transfer taxes (whether imposed on the registered holder or such
other person) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment
of such taxes, or exemption therefrom, is submitted.
3. IRREGULARITIES
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of any tender of shares will be determined by the
relevant Fund, whose determination shall be final and binding. Each Fund
reserves the absolute right to reject any or all tenders determined by it
not to be in appropriate form or the acceptance of, or payment for which
would, in the opinion of the Fund's counsel, be unlawful. Each Fund also
reserves the absolute right to waive any of the conditions of its Offer or
any defect in any tender with respect to any particular shares or any
particular shareholder. Each Fund's interpre-tations of the terms and
conditions of the Offers (including these instructions) will be final and
binding. Unless waived, any defects or irregularities in connection with
tenders must be cured within such time as the relevant Fund shall determine.
Tenders will not be deemed to have been made until all defects and
irregularities have been cured or waived. Neither the Funds, the Transfer
Agent, or any other person shall be obligated to give notice of defects or
irregularities in tenders, nor shall any of them incur any liability for
failure to give such notice.
4. SEPARATE ACCOUNTS
If the shares tendered are registered in more than one account, please
complete, sign and submit a separate Letter of Transmittal for each account.
5. ADDITIONAL COPIES
Additional copies of the Offers to Purchase and this Letter of Transmittal
may be obtained by contacting Eaton Vance Management at the telephone number
shown below.
ADDITIONAL TERMS AND CONDITIONS
The Tendering Shareholder hereby sells to the relevant Fund all shares tendered
hereby that are purchased pursuant to the relevant Offer and hereby irrevocably
constitutes and appoints the Transfer Agent as attorney in fact of the
Tendering Shareholder, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to present
such shares and any share certificates for any cancellation of such shares on
the Fund's books and to deduct from the sale proceeds the applicable early
withdrawal charge of the Fund and to remit such charge to Eaton Vance
Distributors, Inc.
The Tendering Shareholder hereby warrants that the Tendering Shareholder has
full authority to sell the shares tendered hereby and that the Fund will
acquire good title thereto, free and clear of all liens, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale thereof,
and not subject to any adverse claim, when and to the extent the same are
purchased by it. Upon request, the Tendering Shareholder will execute and
deliver any additional documents necessary to complete the sale in accordance
with the terms of the Offer.
The Tendering Shareholder recognizes that, under certain circumstances set
forth in the Offers to Purchase, a Fund may not be required to purchase any of
the shares tendered hereby. In that event, the Tendering Shareholder
understands that certificate(s) for any shares not purchased will be deposited
and held in unissued form in the Tendering Shareholder's account at the Fund
unless specifically requested otherwise. The Tendering Shareholder recognizes
that neither Fund has an obligation, pursuant to the Special Payment and
Delivery Instructions, to transfer any shares from the name of the registered
holder thereof if the relevant Fund purchases none of the shares originally
tendered.
The check for the purchase price of the tendered shares purchased, minus the
applicable early withdrawal charge, will be issued to the order of the
Tendering Shareholder and mailed to the address of record, unless otherwise
indicated under Special Payment and Delivery Instructions.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the Tendering Shareholder and all obligations of the
Tendering Shareholder hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the Tendering Shareholder. Except as
stated in the Offers, this tender is irrevocable.
- --------------------------------------------------------------------------------
QUESTIONS AND REQUESTS FOR FURTHER ASSISTANCE MAY BE DIRECTED TO
EATON VANCE MANAGEMENT, AT 1-800-225-6265, EXT. 5.
2
<PAGE>
EATON VANCE PRIME RATE RESERVES/EV CLASSIC SENIOR FLOATING-RATE FUND
THE UNDERSIGNED SHAREHOLDER ("TENDERING SHAREHOLDER") HEREBY TENDERS THE SHARES
DESIGNATED BELOW AT A PRICE EQUAL TO THEIR NET ASSET VALUE PER SHARE ("NAV") ON
THE EXPIRATION DATE (AS DEFINED IN THE OFFERS TO PURCHASE) IN CASH UPON THE
TERMS AND CONDITIONS SET FORTH IN THE OFFERS TO PURCHASE DATED APRIL 24, 1995,
RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, AND IN THIS LETTER OF TRANSMITTAL
(WHICH TOGETHER CONSTITUTE THE "OFFERS").
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
CHECK ONE:
- ----------
/ / EATON VANCE PRIME RATE RESERVES (EVPRX)
/ / EV CLASSIC SENIOR FLOATING-RATE FUND (ECFRX)
NAME(S) OF REGISTERED HOLDER(S)
Instructions:
- -------------
* Please fill in exactly as shares are registered
_________________________________________
_________________________________________
_________________________________________
Please Print
Account number______________________________
Please provide your daytime telephone number: _________________________________
Please include area code
SHARES TENDERED
Check one:
- ----------
/ / PARTIAL TENDER - only the number of shares entered are to be tendered.
_____________________shares.
/ / COMPLETE TENDER - all shares (issued and unissued) are to be tendered.
Note: Any shares represented by certificates which are not delivered will
be excluded from shares tendered. If not specified above as either a
partial or complete tender, only shares represented by certificates
delivered are deemed to have been tendered.
CERTIFICATES - The following certificates are enclosed herewith: (If forwarded
separately, check here / /.)
Certificate no.(s) Issue date No. of shares No. of shares tendered
- ------------------ ---------- ------------- ----------------------
__________________ __________ _____________ ______________________
__________________ __________ _____________ ______________________
__________________ __________ _____________ ______________________
Note: Certificates wll be deposited to your account when delivered. Any
balance of shares remaining after the Expiration Date will be held in
your account in unissued form unless you specifically request
otherwise.
/ / EXCHANGE - check this box to request that the shares tendered above be
exchanged for shares of
_______________________________ Fund. (By checking the box, you certify
(Name of Fund) receipt of a current prospectus for such
fund.) See a current Fund prospectus for
the names of the funds available for
exchange.
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER (TIN) CERTIFICATION
-------------------------- Enter your TIN (Social Security number of
individuals or Employer I.D. number of
entries, including corporations,
-------------------------- partnerships, estates and trusts.)
(1) The number shown on this form or currently shown on my account is my correct
taxpayer identification number, AND
(2) I am not subject to backup withholding because (A) I am exempt from backup
withholding, or (B) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (C) the IRS has notified me that I am
no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS - You must cross out item (2) if you have been
notified by the IRS that you are currently subject to backup withholding becuase
of underreporting interest or dividends on your tax return.
IN SIGNING THIS LETTER, I CERTIFY UNDER PENALTIES OF PERJURY THAT THE
INFORMATION PROVIDED IN THIS SECTION IS TRUE, CORRECT AND COMPLETE.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS
- - The check and any certificates requested for remaining shares will be issued
in the name of the registered shareholder and mailed to the address of record
unless alternative instructions are authorized in this section.
ALTERNATIVE INSTRUCTIONS: (If special payment or delivery is requested,
signatures must be quaranteed.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EARLY WITHDRAWAL CHARGE WAIVER
/ / Check this box if shares are tendered within one year following the date of
death of the shareholder in whose name the tendered shares are registered. A
certified copy of the shareholder's death certificate must be enclosed
herewith. Refer to entitlement details in a current Fund prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) AND SIGNATURE(S) GUARANTEE
Instructions:
- -------------
- - If this Letter of Transmittal is signed by the registered holder(s) of the
shares tendered, the signature(s) below must correspond exactly with the
name(s) in which the shares are registered.
- - If the shares are held of record by two or more joint holders, all such
holders must sign below.
- - If shares are held of record by an IRA account, this Letter of Transmittal
must be signed by an authorized official of the Custodian of the IRA.
- - If this Letter of Transmittal or any certificates or authorizations are signed
by trustees, executors, administrators, guardians, attorneys in fact, officers
of corporations or others acting in fiduciary or representative capacity, such
persons should so indicate when signing, and must submit proper evidence
satisfactory to the Funds of their authority to so act.
- - All signatures must be guaranteed unless ALL of the following conditions
apply:
- This Letter of Transmittal is signed by the registered holder(s) of the
shares, AND
- There is no change of registration of any remaining shares, AND
- The payment of the tender offer proceeds and certificates for any
remaining shares are to be sent to the registered owner of the shares at
the address shown in the share registration, AND
- The tender offer proceeds will be less than $25,000.
In all other cases, all signatures on this Letter of Transmittal must be
guaranteed by a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.; a commercial bank or trust
company having an office, branch or agency in the United States; or other
Eligible Guarantor Institution as defined in Rule 17 Ad - 15(a)(2) under the
Securities and Exchange Act of 1934.
_________________________________________________________
_________________________________________________________
Signature(s) of owner(s) - EXACTLY as registered
Date __________________
SIGNATURE(S) GUARANTEED BY:
- --------------------------------------------------------------------------------
4
<TABLE>
------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
---------------------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS -- 99.9%
---------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE/DEFENSE -- 3.5%
TRACOR, INC.
$10,000,000 Term loan, maturing February 28, 2001 $ 10,000,000
Technical services to defense companies
VSI INDUSTRIES, INC.
11,095,867 Term loan, maturing March 31, 1997 11,095,867
Aerospace and specialty fasteners, and plastics ------------
industry tooling systems
$ 21,095,867
------------
AUTO PARTS -- 0.4%
STANADYNE AUTOMOTIVE CORP.
$ 2,281,759 Term loan, maturing December 31, 1995 $ 2,281,759
Auto and light truck fuel injection equipment ------------
BROADCAST MEDIA -- 1.1%
COAXIAL COMMUNICATIONS, INC.
$ 7,000,000 Term loan, maturing December 31, 1999 $ 7,000,000
Cable television franchise ------------
BUILDING MATERIALS -- 6.3%
AMERICAN STANDARD, INC.
$14,816,556 Term loan, maturing February 28, 2000 $ 14,816,556
10,000,000 Term loan, maturing February 28, 2001 10,000,000
Bathroom and kitchen fixtures, air conditioning
systems and air brake controls
FORMICA CORP.
14,000,000 Term loan, maturing October 21, 2001 14,000,000
Household and commercial surfacing materials -----------
$ 38,816,556
------------
CHEMICALS -- 4.3%
FREEDOM CHEMICAL COMPANY
$ 9,000,000 Term loan, maturing June 30, 2002 $ 9,000,000
Organic dyes, pigments, textile chemicals, and other
specialty chemicals
HARRIS SPECIALTY CHEMICALS, INC.
5,739,695 Term loan, maturing December 31, 2001 $ 5,739,695
1,594,959 Term loan, maturing December 31, 1999 1,594,959
Construction chemicals
INDSPEC CHEMICAL CORP.
10,000,000 Term loan, maturing December 2, 2000 10,000,000
Resorcinol and other specialty chemical products ------------
$ 26,334,654
------------
<PAGE>
---------------------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS (Continued)
---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.9%
DONNELLEY MARKETING, INC.
$ 5,743,054 Term loan, maturing December 31, 1996 $ 5,743,054
Direct mail consumer promotions ------------
CONGLOMERATES -- 2.0%
SPALDING & EVENFLO COMPANIES, INC.
$12,465,278 Term loan, maturing October 13, 2002 $ 12,465,278
Sporting goods and infant products
------------
CONTAINERS-METAL & GLASS -- 1.2%
SILGAN CORP.
$ 7,637,022 Term loan, maturing September 15, 1996 $ 7,637,022
Metal and plastic packaging products ------------
CONTAINERS-PAPER -- 12.2%
IVEX PACKAGING CORP.
$ 9,631,266 Term loan, maturing December 31, 1999 $ 9,631,266
3,737,173 Term loan, maturing December 17, 1998 3,737,173
Plastic and paper packaging products
JEFFERSON SMURFIT CORP.
29,000,000 Term loan, maturing April 30, 2002 29,000,000
Liner board and other paper board products
STONE CONTAINER CORP.
32,000,000 Term loan, maturing April 1, 2000 32,000,000
Commodity pulp, paper and packaging products ------------
$ 74,368,439
------------
ELECTRONICS-INSTRUMENTATION -- 5.2%
BERG ELECTRONICS, INC.
$11,950,000 Term loan, maturing March 31, 2001 $ 11,950,000
Electronic connectors
ELSAG BAILEY, INC.
12,945,833 Term loan, June 25, 2002 12,945,833
Electronic process control systems
SPERRY MARINE, INC.
6,741,463 Term loan, maturing December 31, 2000 6,741,463
Marine navigational equipment
------------
$ 31,637,296
------------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
---------------------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS (Continued)
---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
FOOD WHOLESALERS -- 3.7%
CATERAIR HOLDINGS CORP.
$12,496,766 Term loan, maturing December 31, 1996 $ 12,496,766
Food service to airlines
U.S. FOODSERVICE, INC.
9,866,667 Term loan, maturing June 30, 2000 9,866,667
Food distributor to businesses ------------
$ 22,363,433
------------
FOODS -- 4.0%
ENVIRODYNE INDUSTRIES, INC.
$13,335,000 Term loan, maturing December 31, 1999 $ 13,335,000
Cellulosic and plastic based products for the food
industry
SPECIALTY FOODS CORP.
11,326,275 Term loan, maturing August 31, 1999 11,326,275
Bread and cheese products ------------
$ 24,661,275
------------
MANUFACTURING-DIVERSIFIED -- 8.1%
INTERLAKE CORP.
$13,657,633 Term loan, maturing September 27, 1996 $ 13,657,633
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
MOSLER, INC.
1,944,879 Term loan, maturing June 1, 1998 1,944,879
Safes, vaults, electronic security systems
THERMADYNE HOLDINGS CORP.
14,495,438 Term loan, maturing February 1, 2001 14,495,438
Cutting and welding products and floor cleaning
equipment
WATERS CORP.
6,250,000 Term loan, maturing November 30, 2001 6,250,000
4,375,000 Term loan, maturing November 30, 2002 4,375,000
Manufacturer of high performance liquid
chromatography instruments ------------
$ 49,405,933
------------
<PAGE>
---------------------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS (Continued)
---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 11.9%
FORT HOWARD CORP.
$ 9,782,847 Term loan, maturing December 31, 1996 $ 9,782,847
9,000,000 Senior Secured Notes, maturing September 11, 1998 19,000,000
19,000,000 Senior Secured Notes, maturing September 11, 1999 19,000,000
Sanitary tissue paper products
SDW ACQUISITION CORP.
25,000,000 Term loan, maturing December 30, 2002 25,000,000
Largest U.S. producer of coated free paper ------------
$ 72,782,847
------------
PUBLISHING -- 6.6%
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
12,867,647 Term loan, maturing December 31, 2001 12,867,647
12,132,353 Term loan, maturing December 31, 2002 12,132,353
Computer magazine and newspaper publications
------------
$ 40,149,355
------------
PUBLISHING-NEWSPAPERS -- 0.7%
AMERICAN MEDIA OPERATIONS, INC.
$ 4,500,000 Term loan, maturing September 30, 2002 $ 4,500,000
Weekly periodical publisher ------------
RESTAURANTS -- 6.5%
AMERICA'S FAVORITE CHICKEN COMPANY
$22,122,093 Term loan, maturing November 5, 1998 $ 22,122,093
Church's Fried Chicken and Popeye's restaurants
LONG JOHN SILVER'S RESTAURANTS, INC.
17,545,637 Term loan, maturing December 31, 1996 17,545,637
Fish restaurants
------------
$ 39,667,730
------------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
---------------------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS (Continued)
---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
RETAIL-SPECIALTY -- 3.9%
CAMELOT MUSIC, INC.
$12,918,750 Term loan, maturing February 28, 2001 $ 12,918,750
Music stores
GRIFFITH CONSUMERS COMPANY
1,000,000 Term loan, maturing December 31, 2002 11,000,000
Retail petroleum distributor
SPIRIT HOLDING CO., INC.*
80,039 Term loan, maturing June 13, 1997 52,826
Do-it-yourself hardware stores
------------
$ 23,971,576
------------
RETAIL STORES-DRUG STORES -- 1.2%
DUANE READE, INC.
$ 7,516,667 Term loan, maturing December 31, 1997 $ 7,516,667
Retail drug stores ------------
RETAIL STORES-FOOD CHAINS -- 11.8%
CIRCLE K CORP.
$ 4,983,333 Term loan, maturing July 31, 2001 $ 4,983,333
Convenience stores and gasoline retailer
PATHMARK STORES, INC.
35,000,000 Term loan, maturing October 31, 1999 35,000,000
Supermarket chain in mid-Atlantic states
RALPHS GROCERY COMPANY
21,700,000 Term loan, maturing June 30, 1998 21,700,000
Third largest supermarket chain in Southern
California
STAR MARKET COMPANY, INC.
5,894,738 Term loan, maturing December 31, 2001 5,894,738
4,421,053 Term loan, maturing December 31, 2002 4,421,053
Supermarket chain in Massachusetts
------------
$ 71,999,124
------------
TEXTILES -- 4.4%
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
<PAGE>
---------------------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS (Continued)
---------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
---------------------------------------------------------------------------------------------
LONDON FOG INDUSTRIES, INC.
$12,000,000 Term loan, maturing June 30, 2001 $ 11,760,000
5,000,000 Term loan, maturing June 30, 2002 4,900,000
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
------------
$ 26,660,000
------------
TOTAL LOAN INTERESTS (IDENTIFIED COST, $612,159,991) $611,057,865
------------
--------------------------------------------------------------------------------------------
STOCKS & WARRANTS -- 1.4%
--------------------------------------------------------------------------------------------
SHARES/
WARRANTS SECURITY VALUE
--------------------------------------------------------------------------------------------
54,895 America's Favorite Chicken Company, 8%, Preferred Stock $ 4,035,899
11,504 DM Holdings, Inc., Series A Warrants<F2><F1> 3,555,311
3,498 DM Holdings, Inc., Series B Warrants<F2><F1> 648,634
------------
TOTAL STOCKS & WARRANTS (IDENTIFIED COST, $4,168,518) $ 8,239,844
------------
TOTAL INVESTMENTS (IDENTIFIED COST,
$616,328,509) -- 101.3% $619,297,709
OTHER ASSETS, LESS LIABILITIES -- (1.3%) (7,710,191)
------------
TOTAL NET ASSETS -- 100% $611,587,518
============
<FN>
<F1> Non-income producing security.
<F2> Restricted Security -- At December 31, 1994, the Trust owned such
securities (constituting 0.7% of net assets) which were not readily
marketable at such date. The Trust has various registration rights
(exercisable under a variety of circumstances) with respect to these
securities. The fair values of these securities are determined in good
faith under methods or procedures authorized by the Trustees.
Note: The description of the principal business for each security set forth
above is unaudited.
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1994
----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost, $616,328,509) $619,297,709
Cash 9,397,820
Receivable for investments sold 2,937,034
Receivable for Trust shares sold 2,430,988
Interest receivable 4,598,880
Prepaid expenses 658,407
------------
Total assets $639,320,838
LIABILITIES:
Notes Payable $20,403,169
Distributions payable 2,833,076
Deferred facility fee income (Note 1B) 4,243,777
Accrued interest expense on notes payable 123,649
Trustees' fees payable 5,059
Custodian fee payable 10,000
Accrued expenses 114,590
-----------
Total liabilities 27,733,320
------------
NET ASSETS for 61,040,057 shares of beneficial interest outstanding $611,587,518
============
SOURCES OF NET ASSETS:
Paid-in capital $614,489,902
Accumulated undistributed net realized gain (loss) on investment
transactions (computed on the basis of identified cost) (5,893,284)
Unrealized appreciation of investments (computed on the basis of
identified cost) 2,969,200
Undistributed net investment income 21,700
------------
Total $611,587,518
============
NET ASSET VALUE PER SHARE (NOTE 6)
($611,587,518 / 61,040,057 shares of beneficial interest) $10.02
=====
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
-----------------------------------------------------------------
<CAPTION>
For the year ended December 31, 1994
----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income $46,031,176
Facility fees earned 3,266,632
-----------
Total income $49,297,808
EXPENSES:
Investment advisory fee (Note 4) $ 6,116,870
Administration fee (Note 4) 1,609,703
Compensation of Trustees not members of the Investment
Adviser's organization 20,587
Custodian fee (Note 4) 278,996
Interest expense 1,299,638
Legal and accounting services 548,473
Transfer and dividend disbursing agent fees 497,078
Printing and postage 282,964
Registration costs 242,252
Amortization of organization expenses 125,138
Miscellaneous 580,215
-----------
Total expenses 11,601,914
-----------
Net investment income $37,695,894
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions $ 6,890,227
Decrease in unrealized appreciation of investments (7,115,207)
-----------
Net realized and unrealized loss on investments (224,980)
-----------
Net increase in net assets from operations $37,470,914
===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
STATEMENT OF CASH FLOWS
------------------------------------------------------------------------------------------
<CAPTION>
For the year ended December 31, 1994
------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES --
Purchase of Loan Interests $(375,884,709)
Proceeds from sales and principal repayments 438,605,296
Interest received 44,425,826
Facility fees received 3,202,537
Interest paid (1,175,989)
Operating expenses paid (10,176,219)
--------------
Net cash provided by operating activities $ 98,996,742
--------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES --
Proceeds from shares sold $ 57,625,779
Payments for shares reacquired in tender offers (149,902,946)
Cash distributions paid (excluding reinvestments of distributions
of $18,665,751) (18,120,929)
Payments made upon maturity of commercial paper (246,048,739)
Proceeds from issuance of commercial paper 248,470,683
-------------
Net cash used for financing activities $(107,976,152)
-------------
Net decrease in cash $ (8,979,410)
CASH AT BEGINNING OF YEAR 18,377,230
-------------
CASH AT END OF YEAR $ 9,397,820
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH FROM OPERATING ACTIVITIES:
Net increase in net assets from operations $ 37,470,914
Increase in receivable for investments sold (2,512,664)
Increase in interest receivable (1,520,750)
Decrease in commitment fees receivable 14,814
Decrease in prepaid expenses 203,267
Decrease in deferred organization expenses 125,138
Decrease in deferred facility fee income (247,182)
Decrease in payable to affiliates (38,126)
Decrease in accrued expenses and other liabilities (40,573)
Net decrease in investments 65,541,904
-------------
Net cash provided by operating activities $ 98,996,742
=============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993
------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 37,695,894 $ 43,598,541
Net realized gain (loss) on investment transactions 6,890,227 (12,203,678)
Change in unrealized appreciation (depreciation) of
investments (7,115,207) 13,261,884
------------ --------------
Net increase in net assets from operations $ 37,470,914 $ 44,656,747
------------ --------------
Distributions to shareholders (Note 2) --
From net investment income $(37,695,894) $ (44,592,169)
In excess of net investment income (281,944) --
In excess of net realized gain on investment
transactions -- (165,896)
------------ --------------
Total distributions to shareholders $(37,977,838) $ (44,758,065)
------------ --------------
Transactions in shares of beneficial interest (Note 3) --
Proceeds from sales of shares $ 59,869,598 $ 20,789,439
Net asset value of shares issued to shareholders in
payment of distributions declared 18,665,751 21,943,704
Cost of shares reacquired in tender offers (149,834,588) (370,244,501)
------------ --------------
Decrease in net assets from Trust share
transactions $(71,299,239) $ (327,511,358)
------------ --------------
Net decrease in net assets $(71,806,163) $ (327,612,676)
NET ASSETS:
At beginning of year 683,393,681 1,011,006,357
------------ --------------
At end of year (including undistributed net
investment income of $21,700
and $303,643, respectively) $611,587,518 $ 683,393,681
============ ==============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value and market
value --
Beginning of year $ 10.03 $ 10.02 $ 9.96 $ 9.97 $ 10.00
------------ ----------- ----------- ----------- -----------
Income from Investment
Operations:
Net investment income $ 0.5966 $ 0.4970 $ 0.5415 $ 0.7500 $ 0.9505
Net realized and unrealized
gain (loss) on investments (0.0059) 0.0258 0.0575 (0.0035)(a) (0.0305)
------------ ----------- ----------- ----------- -----------
Total income from
investment operations $ 0.5907 $ 0.5228 $ 0.5990 $ 0.7465 $ 0.9200
------------ ----------- ----------- ----------- -----------
Less Distributions:
From net investment income $ (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 $ (0.6007) $ (0.5128) $ (0.5390) $ (0.7565) $ (0.9500)
------------ ----------- ----------- ----------- -----------
Net asset value and market value --
End of year $ 10.02 $ 10.03 $ 10.02 $ 9.96 $ 9.97
============ =========== =========== =========== ===========
TOTAL INVESTMENT RETURN(b) 6.1% 5.3% 6.2% 7.8% 9.6%
============ =========== =========== =========== ===========
RATIOS (as a percentage of average daily net
assets)(c):
Operating expenses 1.63% 1.55% 1.44% 1.37% 1.43%
Interest expense 0.21% 0.22% 0.18% 0.16% --
Net investment income 5.95% 4.98% 5.33% 7.42% 9.48%
SUPPLEMENTAL DATA:
Net Assets, End of Year (000
omitted) $611,588 $683,393 $1,011,006 $1,694,332 $2,095,692
Portfolio Turnover 60% 37% 26% 16% 43%
Number of Shares Outstanding
at End of Year (000 omitted) 61,040 68,165 100,877 170,032 210,285
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LEVERAGE ANALYSIS:
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
---------
</TABLE>
(a) 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.
(b) 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.
(c) 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%
See notes to financial statements
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
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, as
a non-diversified closed-end management investment company. 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 - The Trust's investments in interests in loans (Loan
Interests) are valued at fair value by the Trust's administrator, Eaton Vance
Management, 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 Trust'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 Interests and interests
in similar loans and the market environment and investor attitudes towards Loan
Interests 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 Trust 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 Trust 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.
<PAGE>
- ------------------------------------------------------------------------------
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. 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 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
carryover will expire on December 31, 2001.
- ------------------------------------------------------------------------------
(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, 1995 and will be based on tax accounting methods which may differ
from amounts determined for financial statement purposes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
- ------------------------------------------------------------------------------
(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 14, 1994 to February 11, 1994, from
April 18, 1994 to May 16, 1994, from July 18, 1994 to August 12, 1994, from
October 21, 1994 to November 18, 1994 and from January 23, 1995 to February 17,
1995. Transactions in Trust shares were as follows:
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993
--------- ---------
Sales 5,996,851 2,074,916
Issued to shareholders electing
to receive payments of
distributions in Trust shares 1,868,329 2,190,350
Reacquired in tender offers (14,990,693) (36,976,837)
------------ ------------
Net decrease (7,125,513) (32,711,571)
========== ==========
- ------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY AND ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
The investment advisory fee was earned by Eaton Vance Management (EVM) as
compensation for investment advisory services rendered to the Trust. The fee is
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 year ended December 31, 1994,
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 Trust's average daily gross assets, was also paid to
EVM for managing and administering business affairs of the Trust. Except as to
Trustees of the Trust who are not members of EVM's organization, officers and
Trustees receive remuneration for their services to the Trust out of such
investment advisory fee. Investors Bank & Trust Company (IBT), an affiliate of
EVM, serves as custodian of the Trust. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on average daily
cash balances the Trust maintains with IBT. Certain of the officers and Trustees
of the Trust are officers and directors/trustees of the above organizations.
- ------------------------------------------------------------------------------
(5) INVESTMENTS
The Trust 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 year ended December 31,
1994 aggregated $375,595,829 and $439,402,249, respectively.
<PAGE>
- ------------------------------------------------------------------------------
(6) 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 2 1/2% of the purchase price of shares purchased through such
dealers. EVD also pays additional compensation to each dealer equal to .25% per
annum of the value of Trust shares sold by such dealer that are outstanding for
more than one year. 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 year ended
December 31, 1994 amounted to $423,222.
- ------------------------------------------------------------------------------
(7) SHORT-TERM DEBT AND CREDIT AGREEMENTS
The Trust participates with other funds managed by 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 Trust solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each fund 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 at the end of each quarter. The Trust did not have any
significant borrowings or allocated fees under this agreement during the period.
The Trust has also entered into a revolving credit agreement, that will allow
the Trust to borrow an additional $245 million to support the issuance of
commercial paper and to permit the Trust 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 $612,500 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 December 31, 1994, the
Trust had $20,403,169 in commercial paper outstanding with an annual weighted
interest rate of 6.0%. The maximum amount of commercial paper outstanding at any
month end and average borrowings for the year ended December 31, 1994 were
$46,288,000 and $10,236,000, respectively, and the average interest rate was
5.11%.
- ------------------------------------------------------------------------------
(8) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES
The cost and unrealized appreciation/depreciation in the value of investments
owned at December 31, 1994, as computed on a federal income tax basis, were as
follows:
Aggregate cost $616,328,509
============
Gross unrealized appreciation $ 4,203,945
Gross unrealized depreciation 1,234,745
------------
Net unrealized appreciation $ 2,969,200
============
<PAGE>
INDEPENDENT AUDITORS' REPORT
-----------------------------------------------------------------
To the Trustees and Shareholders of
Eaton Vance Prime Rate Reserves:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Eaton Vance Prime Rate Reserves as of December
31, 1994, and the related statements of operations and cash flows for the year
then ended, the statement of changes in net assets for the years ended December
31, 1994 and 1993, and the financial highlights for each of the years in the
five-year period ended December 31, 1994. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights 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 December 31, 1994, 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 audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Eaton Vance Prime
Rate Reserves at December 31, 1994, the results of its operations and its cash
flows, the changes in its net assets and its financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
As discussed in Note 1A, the financial statements include Loan Interests and
certain other securities held by Eaton Vance Prime Rate Reserves valued at
$619,297,709 (101.3% of net assets of the Trust), which values are fair values
determined by the Trust's administrator 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 Trust's administrator 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 LLP
Boston, Massachusetts
February 8, 1995
