<PAGE>
[LOGO] Investing
EATON VANCE for the
- ------------ 21st
Mutual Funds Century
ANNUAL REPORT DECEMBER 31, 1997
[graphic omitted]
EATON VANCE
PRIME RATE
RESERVES
EATON VANCE
GLOBAL MANAGEMENT-GLOBAL DISTRIBUTION
<PAGE>
Eaton Vance Prime Rate Reserves as of December 31, 1997
LETTER TO SHAREHOLDERS
[photo of James B. Hawkes]
Eaton Vance Prime Rate Reserves had a total return of 7.0% for the year ended
December 31, 1997.(1) That return was the result of shareholder distributions of
$0.676 per share from net investment income and no change in net asset value per
share from $9.99 on December 31, 1996 to December 31, 1997. Based on the Fund's
closing net asset value per share of $9.99 on December 31, 1997, the Fund had a
distribution rate of 6.93%.(2) The Fund's SEC 30-day yield at December 31 was
6.98%.(3)
The Fund again met its investment objective of providing a high level of current
income while maintaining a relatively stable net asset value.
The Fund's returns again outpaced other short-term investments...
The Fund's return was especially impressive in the context of recent inflation
trends. With a vigilant Federal Reserve at the helm and increased global
competition, most inflationary forces within the economy have receded. As a
measure of weaker inflation, the Consumer Price Index, a measure of inflation at
the consumer level, posted a rise of just 1.7% in 1997. Not surprisingly,
investors' returns from short-term instruments have declined correspondingly.
Yet, Eaton Vance Prime Rate Reserves maintained its yield advantage over other
short-term vehicles. The Fund's distribution rate was significantly higher than
the returns from money market mutual funds,
3-month certificates of deposit, and bank money market accounts, which offered
rates of 5.25%, 4.11%, and 3.45%, 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 changing market conditions.
Eaton Vance Prime Rate Reserves continues its mandate for conservative
investors...
1997 was a year in which the equity and bond markets produced very strong
performances. Yet, at year-end, economic events in Asia raised concerns over the
direction of the markets in the coming year. With a rising degree of economic
uncertainty, risk-conscious investors would do well to remember the tendency of
the markets to revert to their historical trends. As we enter the new year, the
Fund continues its conservative mandate of seeking high current income from a
portfolio of senior floating-rate loans. In the pages that follow, co-portfolio
managers Scott Page and Payson Swaffield review the events of the past year and
offer their insights on the period ahead.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
February 9, 1998
- ------------------------------------------------------------------------------
FUND INFORMATION
AS OF DECEMBER 31, 1997
Performance(4)
Average Annual Total Returns (at net asset value)
- ------------------------------------------------------------------------------
One year 7.0%
Five years 6.7
Life of Fund (8/4/89) 7.2
SEC Average Annual Total Returns (including applicable EWC)
- ------------------------------------------------------------------------------
One year 4.0%
Five years 6.7
Life of Fund (8/4/89) 7.2
Ten Largest Holdings(5) By total net assets
- ------------------------------------------------------------------------------
Stone Container Corp. 1.8%
Jefferson Smurfit Corp. 1.7
Chancellor Radio Broadcasting, Inc. 1.7
Ralph's Grocery Company 1.6
Tricon Global Restaurants, Inc. 1.6
Revlon Consumer Products Company 1.5
National Medical Care, Inc. 1.5
TCI Pacific, Inc. 1.5
Decisionone Corp. 1.3
Breed Technologies, Inc. 1.3
(1) This return does not include the applicable early withdrawal charge (EWC).
(2) The Fund's distribution rate represents actual distributions paid to
shareholders and is calculated daily by dividing the last distribution per
share (annualized) by the offering price.
(3) The Fund's SEC yield is calculated by dividing the net investment income per
share for the 30-day period by the offering price at the end of the period
and annualizing the result.
(4) Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC returns reflect applicable EWC
based on the following schedule: 3%-1st year; 2.5%-2nd year; 2%-3rd year;
1%-4th year.
(5) Ten largest holdings account for 15.5% of the Portfolio's investments,
determined by dividing the total market value of the holdings by the total
net assets of the Portfolio. Holdings are subject to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
<PAGE>
Eaton Vance Prime Rate Reserves as of December 31, 1997
Management Discussion
An interview with Scott H. Page and Payson F. Swaffield, co-portfolio managers
of Senior Debt Portfolio.
[photo of Scott H. Page]
[Photo of Payson F. Swaffield]
Q: Payson, were there any major developments in the loan market during the past
year?
A: MR. SWAFFIELD: There were several noteworthy trends. First, the market
continued its rapid growth, with new supply rising to $194 billion. That
marked a significant increase over the previous year. Much of the increased
supply came in the second half of the year, allowing us to redeploy the
sizable cash position we had built in late 1996 and early 1997. A second
development was the rise in the number of non-bank, institutional market
participants. That is significant because it creates a wider distribution
network for loans.
Finally, the secondary loan market grew to around $50 billion during the
year. That is a significant benchmark because it demonstrates a growing
liquidity within the market. Thus, while the market continued its impressive
growth in 1997, it also added liquidity and depth, which are important
market characteristics for conservative investors.
Q: Scott, how have you structured the Portfolio in recent months?
A: MR. PAGE: We've adopted a somewhat more defensive approach in recent months.
While the economy continues to register good growth, there have been some
anecdotal signs of a slowdown, with some sectors reporting rising
inventories. Further concerns have arisen in the wake of the Asian financial
turmoil of recent months. A slower Asian regional economy could have an
impact on demand within some U.S. export sectors. Accordingly, we've
increased our exposure to some defensive sectors, while lowering our
exposure to some of the more economically-sensitive, cyclical sectors.
Q: What were some of the defensive areas you favored?
A: MR. SWAFFIELD: Health care has been our largest addition to the Portfolio.
The health care industry has been characterized by a growing consolidation
in recent years. Providers seek economies of scale to operate more
effectively in an increasingly competitive environment. One such provider,
National Medical Care, Inc., is among the Portfolio's largest holdings. The
company, which provides kidney dialysis services, was merged with the
dialysis systems division of Fresenius AG, a German health care products
company. The combined company, Fresenius Medical Care AG, is a
fully-integrated products and services company and now ranks as the world's
largest renal care provider. In a changing health care mix, the dialysis
field provides a highly predictable source of revenues. The company's
integration affords it opportunities to realize major cost efficiencies.
Five Largest Sector Weightings1
- -------------------------------------------------------------------------------
BY TOTAL NET ASSETS
BROADCAST MEDIA 10.7%
HEALTH CARE 7.8%
CONTAINERS/PAPER 5.9%
COMMERCIAL SERVICES 5.7%
MANUFACTURING 4.7%
Portfolio Overview(1)
- -------------------------------------------------------------------------------
Total net assets $4.035 billion
Number of borrowers 213
Industries represented 53
Collateral coverage ratio 1.5 to 1
Days-to-interest rate reset 21.9 days
Average maturity 5.5 Yrs.
Average size per borrowing $20.9 million
(1) Five largest sector weightings account for 34.8% of the Portfolio's
investments, determined by dividing the total market value of the holdings
by the total net assets of the Portfolio. Sector weightings and Portfolio
Overview are as of 12/31/97 and are subject to change.
- -------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- -------------------------------------------------------------------------------
MR. PAGE: Another area we favored in the health care sector was continuing
care facilities, as represented by companies like Paragon Health Network,
Extendicare Health Services, and The Multicare Companies. These facilities
provide a wide range of housing, medical, and social services while still
affording senior citizens a measure of independence. Continuing care
facilities have become an increasingly important niche as the nation
struggles to find health care solutions for its fast-growing elderly
population.
Q: What are some other examples of the Portfolio's holdings?
A: MR. SWAFFIELD: Cable television has been an attractive area for the
Portfolio. Companies like Marcus Cable, Intermedia Partners, L.P., and TCI
Pacific, Inc. have enjoyed improving cash flow in the past year. The
companies have added modestly to their subscriber bases, even as competition
has intensified from other technologies, like direct satellite broadcasting.
TCI Pacific is an especially interesting company, as it is seeking to
provide internet access through the coaxial cables used to deliver
television services.
Q: Were there any sectors in which you reduced your exposure?
A: MR. PAGE: Yes. We've lightened our position in the telecom industry.
Reflecting the enthusiasm over the industry's rapid growth in recent years,
telecom-related deals represented an unusually high percentage of new loan
issuance in 1997. Because many of the companies were start-ups with limited
track records, the risk profile of many deals failed to meet our strict
standards. We will, nonetheless, monitor these companies closely. As they
begin to generate cash flow, their loan characteristics could improve and
merit a second look.
Q: The disruptions within the Asian economy have worried many investors in the
U.S. Did the Portfolio have any loan exposure to Asian companies?
A: MR. SWAFFIELD: The Portfolio had no exposure to Asian companies. We have
several loans to foreign companies, all of which are operating in G-7
countries. Because the loans are dollar-denominated, there is no currency
risk.
Q: The bond market had a very strong year in 1997. In your view, is the Fund
still a reasonable alternative for bond investors?
A: MR. PAGE: It certainly is. The bond market did indeed turn in an impressive
performance in 1997. However, with bond yields at their recent lows, it's
fair to ask whether the market hasn't already discounted a continuance of
near-zero inflation for the foreseeable future. Some economists have even
suggested a deflationary environment is in our future. That would suggest
that there is very little margin for error in the bond market for investors
or policy makers. In short, the bond market has reached a level where there
is an increasing amount of interest rate risk. If rates were to rise - even
slightly - the resulting price decline could negate a significant portion of
coupon income.
The opposite is true of a floating-rate loan portfolio. As interest rates
rise, the returns to loan investors also rise. That is a significant
distinction and one that merits the attention of bond investors following
last year's strong rally.
Q: What is your outlook for the loan market in the coming year?
A: MR. SWAFFIELD: The outlook for the economy appears to be one of modest
growth, which should result in improving loan quality. However, if the Asian
downturn results in a slowdown in the U.S., the Portfolio is well-positioned
through its defensive holdings. If, on the other hand, the economy delivers
slightly stronger growth than expected, the Portfolio's low days-to-reset
ratio should allow us to respond quickly to changing market conditions.
MR. PAGE: Investors should keep in mind that the bond market has reached its
lowest yield levels in more than twenty years, while the stock market has
registered an unprecedented three consecutive years of 20%-plus returns.
Therefore, a return to historical norms would not be unusual.
For conservative investors, the Portfolio has historically provided an
investment that has outpaced inflation and preserved purchasing power. While
past performance cannot indicate future trends, we will pursue a similar
goal in the year ahead.
EATON VANCE PRIME RATE RESERVES The Fund had a significant yield advantage over
other short-term invesetment vehicles.*
6.93% PRIME RATE RESERVES
6.98(+)
5.25% MONEY MARKETS
4.11% 3-MONTH CDS
3.45% BANK MONEY MARKET ACCOUNTS
* All figures are as of 12/31/97. Eaton Vance Prime Pate Reserves figure
represents distribution rate: actual distributions paid to shareholders and
calculated daily by dividing the last distribution per share (annualized) by the
offering price. The Fund's SEC yield is calculated by dividing the net
investment income per share for the 30-day period by the offering price at the
end of the period and annualizing the result. 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. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. Sources: Eaton Vance Management; The Wall
Street Journal.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN EATON VANCE PRIME RATE
RESERVES VS. THE FEDERAL RESERVE 90-DAY COMMERCIAL PAPER INDEX
EATON VANCE 90-DAY
PRIME RATE COMMERCIAL
RESERVES PAPER INDEX
- ---------------------------------------
8/31/89 $10,000 $10,000
9/30/89 $10,000 $10,070
10/31/89 $10,142 $10,139
11/30/89 $10,216 $10,207
12/31/89 $10,295 $10,275
1/31/90 $10,377 $10,342
2/28/90 $10,452 $10,409
3/31/90 $10,535 $10,478
4/30/90 $10,617 $10,548
5/31/90 $10,703 $10,618
6/30/90 $10,788 $10,688
7/31/90 $10,876 $10,756
8/31/90 $10,964 $10,825
9/30/90 $11,051 $10,894
10/31/90 $11,140 $10,964
11/30/90 $11,217 $11,034
12/31/90 $11,284 $11,103
1/31/91 $11,359 $11,166
2/28/91 $11,433 $11,225
3/31/91 $11,514 $11,283
4/30/91 $11,592 $11,339
5/31/91 $11,668 $11,393
6/30/91 $11,739 $11,450
7/31/91 $11,813 $11,506
8/31/91 $11,886 $11,560
9/30/91 $11,956 $11,612
10/31/91 $12,026 $11,662
11/30/91 $12,092 $11,710
12/31/91 $12,159 $11,754
1/31/92 $12,207 $11,793
2/28/92 $12,263 $11,833
3/31/92 $12,322 $11,874
4/30/92 $12,379 $11,913
5/31/92 $12,437 $11,951
6/30/92 $12,499 $11,990
7/31/92 $12,555 $12,023
8/31/92 $12,623 $12,057
9/30/92 $12,712 $12,089
10/31/92 $12,752 $12,122
11/30/92 $12,829 $12,158
12/31/92 $12,910 $12,195
1/31/93 $12,967 $12,227
2/28/93 $12,976 $12,259
3/31/93 $13,004 $12,291
4/30/93 $13,096 $12,323
5/31/93 $13,176 $12,355
6/30/93 $13,245 $12,388
7/31/93 $13,288 $12,420
8/31/93 $13,371 $12,453
9/30/93 $13,441 $12,485
10/31/93 $13,475 $12,518
11/30/93 $13,535 $12,553
12/31/93 $13,600 $12,588
1/31/94 $13,657 $12,621
2/28/94 $13,710 $12,657
3/31/94 $13,728 $12,697
4/30/94 $13,772 $12,739
5/31/94 $13,838 $12,787
6/30/94 $13,917 $12,834
7/31/94 $13,986 $12,884
8/31/94 $14,004 $12,935
9/30/94 $14,078 $12,988
10/31/94 $14,176 $13,046
11/30/94 $14,261 $13,108
12/31/94 $14,426 $13,174
1/31/95 $14,524 $13,244
2/28/95 $14,645 $13,312
3/31/95 $14,745 $13,382
4/30/95 $14,824 $13,451
5/31/95 $15,921 $13,520
6/30/95 $15,016 $13,588
7/31/95 $15,113 $13,655
8/31/95 $15,207 $13,721
9/30/95 $15,300 $13,789
10/31/95 $15,399 $13,857
11/30/95 $15,492 $13,924
12/31/95 $15,590 $13,989
1/31/96 $15,686 $14,052
2/28/96 $15,771 $14,115
3/31/96 $15,847 $14,182
4/30/96 $15,921 $14,250
5/31/96 $16,014 $14,318
6/30/96 $16,102 $14,386
7/31/96 $16,195 $14,452
8/31/96 $16,287 $14,250
9/30/96 $16,375 $14,588
10/31/96 $16,470 $14,657
11/30/96 $16,561 $14,728
12/31/96 $16,656 $14,797
1/31/97 $16,750 $14,864
2/28/97 $16,834 $14,930
3/31/97 $16,928 $15,001
4/30/97 $17,019 $15,073
5/31/97 $17,117 $15,144
6/30/97 $17,214 $15,216
7/31/97 $17,315 $15,287
8/31/97 $17,415 $15,358
9/30/97 $17,512 $15,431
10/31/97 $17,614 $15,503
11/30/97 $17,713 $15,579
12/31/97 $17,818 $15,652
Performance(+)
- -------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- -------------------------------------------------------------------------------
One year 7.0%
Five years 6.7
Life of Fund (8/4/89) 7.2
SEC Average Annual Total Returns (including applicable EWC)
- -------------------------------------------------------------------------------
One year 4.0%
Five years 6.7
Life of Fund (8/4/89) 7.2
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
8/4/89. Index information is only available at month-end; therefore, the
line comparison begins at the next month-end following the commencement of
the Fund's investment operations.
The chart compares the Fund's total return with that of the Federal Reserve
90-Day Commercial Paper Index, an unmanaged index of corporate commercial
paper rated A1 and P1 by Moody's and Standard & Poor's, respectively, two
major ratings agencies. Commercial paper represents short-term obligations
of corporate borrowers, which are usually backed by bank lines of credit.
Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. The lines on the chart
represent the total returns of $10,000 hypothetical investments in the Fund
and the Index. The Index's total return does not reflect commissions or
expenses that would have been incurred if an investor individually purchased
or sold the securities represented in the Index. It is not possible to
invest directly in an Index.
(+) Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC returns reflect
applicable EWC based on following schedule: 3%-1st year; 2.5%-2nd year;
2%-3rd year; 1%-4th year.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less their original cost.
<PAGE>
EATON VANCE PRIME RATE RESERVES as of December 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1997
Assets
- --------------------------------------------------------------------------------
Investment in Senior Debt Portfolio, at value (Note 1A)
(identified cost, $1,910,678,313) $1,911,784,605
Receivable for Trust shares sold 4,112,389
Prepaid expenses 261,567
- --------------------------------------------------------------------------------
Total assets $1,916,158,561
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Dividends payable $ 6,682,156
Payable for Trust shares redeemed 19,276
Payable to affiliate for Trustees' fees (Note 4) 843
Accrued expenses 190,184
- --------------------------------------------------------------------------------
Total liabilities $ 6,892,459
- --------------------------------------------------------------------------------
Net Assets for 191,100,960 shares of
beneficial interest outstanding $1,909,266,102
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $1,916,130,236
Accumulated net realized loss on investments from Portfolio
(computed on the basis of identified cost) (8,209,162)
Accumulated undistributed net investment income 238,736
Net unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 1,106,292
- --------------------------------------------------------------------------------
Total $1,909,266,102
- --------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share (Note 5)
- --------------------------------------------------------------------------------
($1,909,266,102 / 191,100,960 shares of
beneficial interest outstanding) $ 9.99
- --------------------------------------------------------------------------------
<PAGE>
Statement of Operations
For the Year Ended
December 31, 1997
Investment Income (Note 1B)
- --------------------------------------------------------------------------------
Interest income allocated from Portfolio $ 139,654,820
Facility fee allocated from Portfolio 2,366,690
Expenses allocated from Portfolio (16,873,963)
- --------------------------------------------------------------------------------
Net investment income from Portfolio $125,147,547
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Administration fee (Note 4) $ 4,386,074
Compensation of Trustees not members of the
Administrator's organization (Note 4) 3,445
Transfer and dividend disbursing agent fees 1,246,656
Registration fees 476,843
Printing and postage 178,617
Legal and accounting services 38,032
Custodian fee 28,851
Miscellaneous 44,303
- --------------------------------------------------------------------------------
Total expenses $ 6,402,821
- --------------------------------------------------------------------------------
Net investment income $ 118,744,726
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (6,324,158)
- --------------------------------------------------------------------------------
Net realized loss on investments $ (6,324,158)
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 6,040,288
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 6,040,288
- --------------------------------------------------------------------------------
Net realized and unrealized loss on investments $ (283,870)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 118,460,856
- --------------------------------------------------------------------------------
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------------------------
From operations --
<S> <C> <C>
Net investment income $ 118,744,726 $ 94,413,969
Net realized loss on investments (6,324,158) (1,881,889)
Net change in unrealized appreciation
(depreciation)
of investments 6,040,288 (498,767)
- --------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 118,460,856 $ 92,033,313
- --------------------------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (118,670,204) $ (94,275,229)
- --------------------------------------------------------------------------------------------------
Total distributions to
shareholders $ (118,670,204) $ (94,275,229)
- --------------------------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sales of shares $ 480,125,038 $ 608,114,256
Net asset value of shares issued to
shareholders in payment of distributions
declared 63,396,014 50,604,649
Cost of shares redeemed (245,780,846) (136,928,083)
- --------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share
transactions $ 297,740,206 $ 521,790,822
- --------------------------------------------------------------------------------------------------
Net increase in net assets $ 297,530,858 $ 519,548,906
- --------------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------
At beginning of year $ 1,611,735,244 $1,092,186,338
- --------------------------------------------------------------------------------------------------
At end of year $ 1,909,266,102 $1,611,735,244
- --------------------------------------------------------------------------------------------------
Accumulated undistributed
net investment income
included in net assets
- --------------------------------------------------------------------------------------------------
At end of year $ 238,736 $ 164,214
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statement of Cash Flows
For the Year Ended
December 31, 1997
Increase (Decrease) in Cash
- --------------------------------------------------------------------------------
Cash Flows From (Used For) Operating Activities --
Purchase of interests in Senior Debt Portfolio $ (496,604,034)
Withdrawal of interests in Senior Debt Portfolio 324,115,330
Operating expenses paid (6,366,297)
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (178,855,001)
- --------------------------------------------------------------------------------
Cash Flows From (Used For) Financing Activities --
Proceeds from shares sold $ 478,968,538
Payments for shares redeemed (245,888,023)
Cash distributions paid (excluding reinvestments of
distributions of $63,396,014) (54,225,514)
- --------------------------------------------------------------------------------
Net cash from financing activities $ 178,855,001
- --------------------------------------------------------------------------------
Net increase in cash $ --
- --------------------------------------------------------------------------------
Cash at Beginning of Year $ --
- --------------------------------------------------------------------------------
Cash at End of Year $ --
- --------------------------------------------------------------------------------
Reconciliation of Net Increase in Net Assets
From Operations to Net Cash Used For
Operating Activities
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 118,460,856
Decrease in prepaid expenses 911
Increase in payable to affiliate 9
Increase in accrued expenses 35,604
Net increase in investments (297,352,381)
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (178,855,001)
- --------------------------------------------------------------------------------
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value --
<S> <C> <C> <C> <C> <C>
beginning of year $ 9.9900 $ 10.0100 $ 10.0200 $ 10.0300 $ 10.0200
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.6756 $ 0.6837 $ 0.7694 $ 0.5966 $ 0.4970
Net realized and
unrealized gain (loss)
on investments -- + (0.0208) 0.0112 (0.0059) 0.0258
- --------------------------------------------------------------------------------------------------------------------------------
Total income from
operations $ 0.6756 $ 0.6629 $ 0.7806 $ 0.5907 $ 0.5228
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions
- --------------------------------------------------------------------------------------------------------------------------------
From net investment
income $ (0.6756) $ (0.6829) $ (0.7695) $ (0.5966) $ (0.5110)
In excess of net
investment income -- -- -- (0.0041) --
From net realized gain
on investments -- -- (0.0211) -- --
In excess of net
realized gain on
investments -- -- -- -- (0.0018)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.6756) $ (0.6829) $ (0.7906) $ (0.6007) $ (0.5128)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value -- end
of year $ 9.9900 $ 9.9900 $ 10.0100 $ 10.0200 $ 10.0300
- --------------------------------------------------------------------------------------------------------------------------------
Total Return(1) 6.98% 6.84% 8.10% 6.10% 5.30%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000 omitted) $1,909,266 $1,611,735 $1,092,186 $611,588 $ 683,393
Ratio of operating
expenses to average
daily net assets(2) 1.31% 1.35% 1.45% 1.63% 1.55%
Ratio of interest
expense to average daily
net assets(2) 0.01% 0.04% 0.16% 0.21% 0.22%
Ratio of net investment
income to average daily
net assets 6.76% 6.81% 7.57% 5.95% 4.98%
Portfolio Turnover(3) -- -- 5% 60% 37%
- --------------------------------------------------------------------------------------------------------------------------------
Leverage Analysis
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Borrowings from issuance Amount of Debt Average Daily Balance Average Daily 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, 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
December 31, 1995(4) -- 9,688,000 62,118,000 0.1560
- --------------------------------------------------------------------------------------------------------------------------------
+ Represents less then $0.0001 per share.
(1)Total 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. Income dividends are assumed to be reinvested at the net asset value on the payable
date. Total return is not computed on an annualized basis.
(2)Includes the Trust's share of its corresponding Portfolio's allocated expenses for the period the Trust was investing in the
Portfolio.
(3)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.
(4)The Leverage Analysis is for the period from January 1, 1995 to February 21, 1995, when the Trust transferred the Commercial
Paper program to the Portfolio.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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. The Trust invests all of its investable assets in
interests in the Senior Debt Portfolio (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 (47% at December 31, 1997). 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 1A 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 Trust'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.
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 each year 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, 1997, the Trust, for federal income
tax purposes, had a capital loss carryover of $8,206,047. Such capital loss
carryover will expire on December 31, 2004 ($1,415,460) and December 31, 2005
($6,790,587). These amounts will reduce 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.
D Other -- Investment transactions are accounted for on a trade date basis.
E Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expense during the reporting period. Actual results could differ from those
estimates.
F Expense Reduction -- Investors Bank & Trust Company (IBT) 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
daily cash balances the Trust or the Portfolio maintain with IBT. All
significant credit balances used to reduce the Trust's custodian fee are
reflected as a reduction of operating expenses on the statement of operations.
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 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.
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
operates as an interval fund, meaning that it continuously accepts new
shareholder investments but permits share repurchases at net asset value only
once a quarter. The price will be established at the close of business on the
last day the repurchase offer is open. An early withdrawal charge will be
imposed on most shares accepted for repurchase which have been held less than
four years (see Note 5). The Trustees approved repurchase offers for the periods
from January 20, 1997 to February 14, 1997, from April 21, 1997 to May 16, 1997,
from July 21, 1997 to August 15, 1997, from November 3, 1997 to November 24,
1997 and from February 2, 1998 to February 23, 1998. Transactions in Trust
shares were as follows:
Year Ended December 31,
-----------------------------------
1997 1996
- --------------------------------------------------------------------------------
Sales 48,046,520 60,826,261
Issued to shareholders electing to receive
payments of distributions in Trust shares 6,345,720 5,063,416
Redemptions (24,587,904) (13,701,065)
- --------------------------------------------------------------------------------
Net increase 29,804,336 52,188,612
- --------------------------------------------------------------------------------
4 Transactions with Affiliates
- --------------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Trust. 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
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 advisor fee. Certain of the officers and
Trustees of the Trust and the Portfolio are officers and directors/trustees of
the above organizations.
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 costs 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. 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 redeemed, 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 distribution 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 redemption
is made from the earliest purchase of shares. The total early withdrawal charges
received by EVD for the year ended December 31, 1997 amounted to approximately
$2,929,000.
6 Investment Transactions
- --------------------------------------------------------------------------------
Increases and decreases in the Trust's investment in the Portfolio for the year
ended December 31, 1997 aggregated $496,604,035 and $324,115,330, respectively.
<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 of Eaton
Vance Prime Rate Reserves (the Trust) as of December 31, 1997, the related
statements of operations and cash flows for the year then ended, the
statements of changes in net assets for the years ended December 31, 1997 and
1996 and the financial highlights for each of the years in the five-year
period ended December 31, 1997. 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. 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 the Trust at
December 31, 1997, the results of its operations, its cash flows, the changes
in net assets and its financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 13, 1998
<PAGE>
<TABLE>
Senior Debt Portfolio as of December 31, 1997
PORTFOLIO OF INVESTMENTS
(Expressed in United States Dollars)
Senior, Secured, Floating-Rate
Interests -- 90.6%
<CAPTION>
Principal
Amount Borrower/Business Description Value
- --------------------------------------------------------------------------------------
Aerospace/Defense -- 2.1%
- --------------------------------------------------------------------------------------
<S> <C> <C>
Aerostructures Corporation
$ 888,889 Revolving loan, maturing March 29, 2002 $ 888,889
6,944,444 Term loan, maturing March 29, 2002 6,944,444
8,652,381 Term loan, maturing September 30, 2003 8,652,381
3,146,320 Term loan, maturing September 30, 2004 3,146,320
Designs, manufactures, and assembles structural
aircraft components
Fairchild Holdings Corporation
0 Revolving loan, maturing July 28, 2000 0
Manufactures fasteners for the aerospace industry
K & F Industries, Inc.
15,860,409 Term loan, maturing October 15, 2005 15,860,409
Manufacturers aircraft braking systems
Mag Aerospace Industries, Inc.
4,743,234 Term loan, maturing December 6, 2003 4,743,234
Manufactures toilet systems for the aerospace
industry
Shared Technologies Fairchild Communications Corp.
3,400,000 Term loan, maturing March 30, 2001 3,400,000
Aerospace and specialty fasteners, and plastics
industry tooling systems
SWM Holdings, Inc.
5,000,000 Term loan, maturing May 27, 2005 5,000,000
Operator of ship yards
TransTechnology Corporation
0 Revolving loan, maturing December 31, 2000 0
1,163,105 Term loan, maturing December 31, 2000 1,163,105
7,200,000 Term loan, maturing June 30, 2002 7,200,000
Aerospace and specialty fasteners, rescue winches,
and hoists
Tri-Star Inc.
9,900,000 Term loan, maturing September 30, 2003 9,900,000
Distributor of aerospace fasteners
United Defense Industries, Inc.
9,197,101 Term loan, maturing October 6, 2005 9,197,101
8,924,493 Term loan, maturing October 6, 2005 8,924,493
Supplier of armored combat vehicles and weapons
systems
- --------------------------------------------------------------------------------------
$ 85,020,376
- --------------------------------------------------------------------------------------
Airlines -- 0.5%
- --------------------------------------------------------------------------------------
Continental Airlines, Inc.
$20,219,786 Term loan, maturing December 31, 2006 $ 20,219,786
Air carrier
- --------------------------------------------------------------------------------------
$ 20,219,786
- --------------------------------------------------------------------------------------
Automotive -- 3.2%
- --------------------------------------------------------------------------------------
American Axle & Manufacturing, Inc.
$29,000,000 Term loan, maturing April 30, 2006 $ 29,000,000
Develops and manufactures automotive parts
Breed Technologies, Inc.
53,000,000 Term loan, maturing October 30, 1998 53,000,000
Develops, assembles and markets motor vehicle safety
restraint components
Cambridge Industries, Inc.
26,000,000 Term loan, maturing June 30, 2005 26,000,000
Original equipment manufacturer of plastic auto parts
Hayes Wheels International, Inc.
3,650,937 Term loan, maturing July 31, 2004 3,650,937
2,957,389 Term loan, maturing July 31, 2005 2,957,389
Producer of automotive brakes and wheels
Plas-Tech (Engineered) Products, Inc.
6,058,824 Term loan, maturing April 1, 2002 6,058,824
3,941,176 Term loan, maturing April 1, 2004 3,941,176
Manufactures thermoplastic parts for automobiles
Stanadyne Automotive Corp.
5,000,000 Term loan, maturing December 10, 2004 5,000,000
Auto and light truck fuel injection equipment
- --------------------------------------------------------------------------------------
$ 129,608,326
- --------------------------------------------------------------------------------------
Auto Parts -- 0.9%
- --------------------------------------------------------------------------------------
AAS Holdings, LLC
$ 4,061,535 Term loan, maturing October 30, 2004 $ 4,061,535
Designs and manufactures automotive rack systems &
accessories
Exide Corporation
8,400,000 Term loan, maturing March 18, 2005 8,400,000
Manufactures batteries for automobiles
Safelite Glass Corporation
9,250,000 Term loan, maturing December 17, 2004 9,250,000
9,250,000 Term loan, maturing December 17, 2005 9,250,000
Auto glass replacement and repair service provider
Schrader, Inc.
6,734,271 Term loan, maturing February 28, 2001 6,734,271
Produces tire valves, accessories, and pneumatic
connectors
- --------------------------------------------------------------------------------------
$ 37,695,806
- --------------------------------------------------------------------------------------
Beverages -- Soft Drink -- 0.6%
- --------------------------------------------------------------------------------------
Dr. Pepper Bottling Holdings, Inc.
$15,000,000 Term loan, maturing December 31, 2005 $ 15,000,000
Soft drink bottler
Select Beverages, Inc.
3,880,234 Term loan, maturing June 30, 2001 3,880,234
5,820,351 Term loan, maturing June 30, 2002 5,820,351
Soft drink bottler
- --------------------------------------------------------------------------------------
$ 24,700,585
- --------------------------------------------------------------------------------------
Broadcast Media -- 10.7%
- --------------------------------------------------------------------------------------
Benedek Broadcasting Corporation
$15,057,209 Term loan, maturing May 1, 2001 $ 15,057,209
7,051,479 Term loan, maturing November 1, 2002 7,051,479
1,702,635 Term loan, maturing December 31, 2004 1,702,635
797,365 Term loan, maturing December 31, 2004 797,365
Broadcast television operator
Chancellor Radio Broadcasting Company
144,420 Revolving loan, maturing June 26, 2004 144,420
4,000,000 Term loan, maturing June 26, 2004 4,000,000
10,341,160 Revolving loan, maturing June 30, 2005 10,341,160
53,571,429 Term loan, maturing June 30, 2005 53,571,429
Radio broadcasting
Charter Communications Enterprises I, L.P.
1,669,391 Revolving loan, maturing December 31, 2003 1,669,391
15,032,855 Term loan, maturing December 31, 2003 15,032,855
Cable television provider
Charter Communications Enterprises II, L.P.
14,000,000 Term loan, maturing March 31, 2005 14,000,000
4,000,000 Term loan, maturing March 31, 2006 4,000,000
Cable television provider
Chelsea Communications, Inc.
10,000,000 Term loan, maturing December 31, 2004 10,000,000
Cable television provider
Classic Cable, Inc.
4,258,519 Revolving loan, June 30, 2004 4,258,519
3,706,501 Term loan, maturing June 30, 2004 3,706,501
9,796,225 Term loan, maturing June 30, 2005 9,796,225
Cable television provider
Comcorp Broadcasting, Inc.
6,097,561 Term loan, maturing September 30, 2005 6,097,561
Radio broadcasting
Falcon Cable Media
21,824,000 Term loan, maturing July 12, 2005 21,824,000
Cable television provider
Frontiervision Operating Partners, L.P.
15,000,000 Term loan, maturing March 31, 2006 15,000,000
Cable television provider
Intermedia Partners IV, L.P.
26,000,000 Term loan, maturing January 1, 2005 26,000,000
Cable television provider
Jacor Communications Company
17,000,000 Term loan, maturing December 31, 2004 17,000,000
Radio broadcasting
Marcus Cable Operating Company, L.P.
12,005,561 Term loan, maturing December 31, 2002 12,005,561
34,562,500 Term loan, maturing April 30, 2004 34,562,500
Cable television provider
Optel, Inc.
5,000,000 Term loan, maturing May 31, 2004 5,000,000
Cable television provider
Sinclair Broadcasting Group, Inc.
40,068,000 Term loan, maturing December 31, 2004 40,068,000
Broadcast television operator
Sullivan Broadcasting Company, Inc.
8,362,456 Term loan, maturing December 31, 2000 8,362,456
2,000,000 Acquisition revolving loan, maturing December 31, 2003 2,000,000
643,617 Revolving loan, maturing December 31, 2003 643,617
23,910,167 Term loan, maturing December 31, 2003 23,910,167
Broadcast television operator
TCI Pacific, Inc.
11,428,571 Revolving loan, maturing September 30, 2004 11,428,571
47,500,000 Term loan, maturing December 31, 2004 47,500,000
Cable television provider
White Knight Broadcasting, Inc.
3,902,439 Term loan, maturing September 30, 2005 3,902,439
Radio broadcasting
- --------------------------------------------------------------------------------------
$ 430,434,060
- --------------------------------------------------------------------------------------
Building Materials -- 1.7%
- --------------------------------------------------------------------------------------
Dayton Superior Corporation
$10,000,000 Term loan, maturing September 29, 2005 $ 10,000,000
Manufacturer of concrete, masonry and paving
accessories
Falcon Building Products, Inc.
10,719,286 Term loan, maturing June 30, 2005 10,719,286
Manufactures and distributes air distribution
equipment, plumbing fixtures and air compressors.
National Gypsum Company
49,707,847 Term loan, maturing September 20, 2003 49,707,847
Produces gypsum wallboard
- --------------------------------------------------------------------------------------
$ 70,427,133
- --------------------------------------------------------------------------------------
Chemicals -- 3.1%
- --------------------------------------------------------------------------------------
DT Acquisition Inc.
$ 8,814,842 Term loan, maturing December 16, 1998 $ 8,814,842
Diversified chemical producer
GEO Specialty Chemicals, Inc.
4,975,000 Term loan, maturing March 25, 2004 4,975,000
Diversified chemical producer
Huntsman Corporation
9,900,000 Term loan, maturing September 30, 2003 9,900,000
21,037,500 Term loan, maturing December 31, 2004 21,037,500
7,500,000 Term loan, maturing December 31, 2005 7,500,000
Diversified chemical producer
Huntsman Specialty Chemicals Corporation
0 Revolving loan, maturing March 15, 2002 0
7,240,491 Term loan, maturing March 15, 2002 7,240,491
9,900,000 Term loan, maturing March 15, 2004 9,900,000
9,900,000 Term loan, maturing March 15, 2005 9,900,000
Diversified chemical producer
Rheox, Inc.
0 Revolver loan, maturing January 30, 2004 0
18,016,667 Term loan, maturing January 30, 2004 18,016,667
Diversified chemical producer
Sterling Pulp Chemicals (Sask) Ltd.
7,230,323 Term loan, maturing June 30, 2005 7,230,323
Diversified chemical producer
STX Chemicals Corp.
21,839,993 Term loan, maturing September 30, 2004 21,839,993
Petrochemicals and pulp chemicals
- --------------------------------------------------------------------------------------
$ 126,354,816
- --------------------------------------------------------------------------------------
Chemicals Specialty -- 0.3%
- --------------------------------------------------------------------------------------
Harris Specialty Chemicals, Inc.
$ 253,792 Term loan, maturing December 31, 1999 $ 253,792
1,952,719 Term loan, maturing December 31, 2001 1,952,719
3,554,093 Term loan, maturing December 31, 2002 3,554,093
Construction chemicals
NEN Life Sciences Products, Inc.
5,265,306 Term loan, maturing December 31, 2004 5,265,306
Manufactures and distributes biochemical and related
products
- --------------------------------------------------------------------------------------
$ 11,025,910
- --------------------------------------------------------------------------------------
Coal -- 0.3%
- --------------------------------------------------------------------------------------
Alliance Coal Corporation
$ 4,143,663 Term loan, maturing December 31, 2001 $ 4,143,663
6,588,538 Term loan, maturing December 31, 2002 6,588,538
Diversified producer and supplier of steam and
metallurgical coal
- --------------------------------------------------------------------------------------
$ 10,732,201
- --------------------------------------------------------------------------------------
Commercial Services -- 5.7%
- --------------------------------------------------------------------------------------
Advanstar Communications, Inc.
$ 88,456 Revolving loan, maturing June 30, 2001 $ 88,456
3,188,855 Term loan, maturing December 21, 2003 3,188,855
9,712,644 Term loan, maturing December 31, 2002 9,712,644
Trade publication and exposition management company
American Floral Services, Inc.
5,000,000 Term loan, maturing June 30, 2004 5,000,000
Flowers-by-wire service
Brand Scaffold Services, Inc.
2,962,500 Term loan, September 30, 2003 2,962,500
1,975,000 Term loan, September 30, 2004 1,975,000
Industrial scaffolding rental, erection and
dismantlement services
Caterair International Corporation
37,027,200 Term loan, maturing March 1, 2007 37,027,200
Food service to airlines
Erickson Air-Crane Co.
8,932,500 Term loan, maturing December 31, 2004 8,932,500
Provider of heavy-lift helicopter services
NBC Merger Sub, Inc.
7,400,000 Term loan, maturing August 31, 2003 7,400,000
Used college textbook wholesaler
Outsourcing Solutions, Corp.
24,275,209 Term loan, maturing October 15, 2003 24,275,209
Accounts receivable management services
Outdoor Systems, Inc.
15,000,000 Term loan, maturing June 30, 2004 15,000,000
Outdoor advertising company
Omni Services, Inc.
22,910,000 Term loan, maturing October 30, 2005 22,910,000
Workwear rental, laundry and washroom servicing
PSI Acquisition Corporation
17,000,000 Term loan, maturing September 30, 2003 17,000,000
Diversified consulting services
SC International Services, Inc.
20,827,800 Term loan, maturing March 1, 2007 20,827,800
Food service to airlines
Volume Services, Inc.
960,000 Revolving loan, maturing December 31, 2000 960,000
4,957,200 Term loan, maturing December 31, 2002 4,957,200
2,478,500 Term loan, maturing December 31, 2003 2,478,500
Provides food services for civic centers and sports
facilities
Young & Rubicam L.P.
43,728,750 Term loan, maturing March 31, 2003 43,728,750
Advertising, public relations, direct marketing,
sales development and design and health care
communications
- --------------------------------------------------------------------------------------
$ 228,424,614
- --------------------------------------------------------------------------------------
Communication Equipment -- 0.3%
- --------------------------------------------------------------------------------------
Communications & Power Industries, Inc.
$ 1,500,000 Term loan, maturing August 11, 2000 $ 1,500,000
5,533,333 Term loan, maturing August 12, 2002 5,533,333
Microwave, electronic, and radio frequency components
Telex Communications, Inc.
5,000,000 Term loan, maturing November 6, 2004 5,000,000
Supplier of brand name communications products
- --------------------------------------------------------------------------------------
$ 12,033,333
- --------------------------------------------------------------------------------------
Computer Software -- 1.3%
- --------------------------------------------------------------------------------------
Decisionone Corporation
$ 2,175,332 Revolving loan, maturing August 7, 2003 $ 2,175,332
16,900,000 Term loan, maturing August 7, 2003 16,900,000
35,411,250 Term loan, maturing August 7, 2005 35,411,250
Provider of multi-vendor computer maintenance and
technology support
- --------------------------------------------------------------------------------------
$ 54,486,582
- --------------------------------------------------------------------------------------
Computer Systems -- 0.6%
- --------------------------------------------------------------------------------------
Anacomp, Inc.
$ 9,305,682 Term loan, maturing February 28, 2001 $ 9,305,682
Produces micrographics systems
Genicom Corporation
13,415,625 Term loan, maturing December 5, 2004 13,415,625
Produces computer printers and supplies and provides
multi-vendor servicing
- --------------------------------------------------------------------------------------
$ 22,721,307
- --------------------------------------------------------------------------------------
Conglomerates -- 1.0%
- --------------------------------------------------------------------------------------
American Marketing Industries, Inc.
$ 1,305,000 Term loan, maturing August 31, 2001 $ 1,305,000
3,430,000 Term loan, maturing November 30, 2002 3,430,000
6,550,500 Term loan, maturing November 30, 2003 6,550,500
2,250,000 Term loan, maturing November 30, 2004 2,250,000
Manufacturer and distributor of corporate promotional
and incentive products
E & S Holdings
4,277,778 Term loan, maturing September 30, 2004 4,277,778
4,277,778 Term loan, maturing September 30, 2005 4,277,778
2,444,444 Term loan, maturing March 30, 2006 2,444,444
Sporting goods and infant products
Fenway Holdings, L.L.C.
4,742,465 Term loan, maturing September 15, 2002 4,742,465
Manufactures and distributes billiard tables, dart
machines, wood moldings, windows, doors, artificial
flowers, archery bows, and plastics.
Phase Metrics, Inc.
4,950,000 Term loan, maturing December 4, 2001 4,950,000
Designs and manufactures production test equipment
for the computer data storage industry
Smarte Carte Corporation
483,871 Term loan, maturing December 31, 2001 483,871
2,914,286 Term loan, maturing June 30, 2003 2,914,286
4,410,000 Term loan, maturing June 30, 2004 4,410,000
Airport baggage cart management and self storage
locker service
- --------------------------------------------------------------------------------------
$ 42,036,122
- --------------------------------------------------------------------------------------
Containers -- Metal & Glass -- 1.9%
- --------------------------------------------------------------------------------------
Calmar, Inc.
$ 5,868,750 Term loan, maturing September 15, 2003 $ 5,868,750
4,395,000 Term loan, maturing June 15, 2004 4,395,000
Plastic sprayers and dispensers
Reid Plastics, Inc.
9,971,683 Term loan, maturing November 12, 2003 9,971,683
7,500,000 Term loan, maturing November 12, 2004 7,500,000
Bottle manufacturer
Russell-Stanley Holdings, Inc.
14,000,000 Term loan, maturing September 30, 2005 14,000,000
Manufactures and markets steel and plastic drums
Silgan Corporation
27,362,500 Term loan, maturing June 30, 2005 27,362,500
Metal and plastic packaging products
Truseal Technologies, Inc.
7,477,500 Term loan, maturing July 1, 2004 7,477,500
Manufactures and distributes patented sealant
products
- --------------------------------------------------------------------------------------
$ 76,575,433
- --------------------------------------------------------------------------------------
Containers -- Paper -- 5.9%
- --------------------------------------------------------------------------------------
IPC, Inc.
$40,386,250 Term loan, maturing September 30, 2004 $ 40,386,250
Plastic and paper packaging products
Jefferson Smurfit Corporation
37,366,827 Term loan, maturing April 30, 2001 37,366,827
22,190,481 Term loan, maturing April 30, 2002 22,190,481
10,741,040 Term loan, maturing October 31, 2002 10,741,040
Liner board and other paper board products
RIC Holding, Inc.
7,092,309 Revolving loan, maturing February 28, 2003 7,092,309
15,038,657 Term loan, maturing February 28, 2003 15,038,657
10,483,390 Term loan, maturing February 28, 2004 10,483,390
4,154,270 Term loan, maturing August 28, 2004 4,154,270
Liner board, lumber and paper packaging products
St. Laurent Paper Products
3,876,289 Term loan, maturing May 31, 2003 3,876,289
4,123,711 Term loan, maturing May 31, 2004 4,123,711
Major U.S. producer of pulp and paper
Stone Container Corporation
32,645,498 Term loan, maturing April 1, 2000 32,645,498
38,414,645 Term loan, maturing October 1, 2003 38,414,645
Commodity pulp, paper and packaging products
Stronghaven, Inc.
9,401,724 Term loan, maturing May 31, 2004 9,401,724
1,830,657 Term loan, maturing May 15, 2004 1,830,657
Manufacturer of corrugated boxes
- --------------------------------------------------------------------------------------
$ 237,745,748
- --------------------------------------------------------------------------------------
Cosmetics -- 2.3%
- --------------------------------------------------------------------------------------
AM Cosmetics, Inc.
$ 974,359 Term loan, maturing June 30, 2003 $ 974,359
12,937,494 Term loan, maturing December 31, 2004 12,937,494
Cosmetics, skin and hair care, and perfume products
Mary Kay Cosmetics, Inc.
15,310,680 Term loan, maturing March 6, 2004 15,310,680
Cosmetics, skin and hair care, and perfume products
Revlon Consumer Products Corporation
62,000,000 Term loan, maturing May 29, 2002 62,000,000
Cosmetics, skin and hair care, and perfume products
- --------------------------------------------------------------------------------------
$ 91,222,533
- --------------------------------------------------------------------------------------
Electrical Equipment -- 0.5%
- --------------------------------------------------------------------------------------
Celestica International, Inc.
$ 8,415,000 Term loan, maturing June 30, 2003 $ 8,415,000
Produces memory and power systems
Chatham Enterprises Inc.
1,865,000 Term loan, maturing August 18, 2003 1,865,000
3,497,308 Term loan, maturing August 18, 2005 3,497,308
Producer of electronic enclosures
Viasystems, Inc.
3,963,636 Term loan, maturing April 30, 2003 3,963,636
2,400,000 Term loan, maturing April 30, 2003 2,400,000
Supplier of interconnection products
- --------------------------------------------------------------------------------------
$ 20,140,944
- --------------------------------------------------------------------------------------
Electronics -- Defense -- 0.4%
- --------------------------------------------------------------------------------------
L-3 Communications Corporation
$ 1,342,000 Term loan, maturing March 31, 2003 $ 1,342,000
2,483,333 Term loan, maturing March 31, 2005 2,483,333
1,633,500 Term loan, maturing March 31, 2006 1,633,500
Designs and manufactures secure communication systems
and instrumentation products
SPD Holdings, Inc.
911,650 Revolving loan, maturing June 30, 2002 911,650
1,095,209 Term loan, maturing June 30, 2002 1,095,209
7,487,972 Term loan, maturing June 30, 2004 7,487,972
Manufactures circuit breakers, switchgear and control
panels for warships
- --------------------------------------------------------------------------------------
$ 14,953,664
- --------------------------------------------------------------------------------------
Electronics -Instrumentation -- 1.1%
- --------------------------------------------------------------------------------------
Amphenol Corporation
$15,967,500 Term loan, maturing May 19, 2005 $ 15,967,500
15,673,125 Term loan, maturing May 19, 2006 15,673,125
Designs, manufactures and markets interconnect
systems and coaxial cable
Details, Inc.
5,000,000 Term loan, maturing October 27, 2003 5,000,000
1,000,000 Term loan, maturing October 27, 2004 1,000,000
Manufactures prototype printed circuit boards
Packard Bioscience Company
4,975,000 Term loan, maturing March 31, 2003 4,975,000
Manufacturer and distributor of bioanalytical
equipment
- --------------------------------------------------------------------------------------
$ 42,615,625
- --------------------------------------------------------------------------------------
Foods -- 2.7%
- --------------------------------------------------------------------------------------
Del Monte Corporation
$ 6,181,818 Term loan, maturing March 31, 2003 $ 6,181,818
12,750,000 Term loan, maturing March 31, 2005 12,750,000
Manufactures and markets canned vegetables and canned
fruit
Favorite Brands International, Inc.
2,587,780 Revolving loan, maturing August 30, 2001 2,587,780
7,359,389 Term loan, maturing August 30, 2003 7,359,389
12,418,131 Term loan, maturing August 30, 2004 12,418,131
3,396,664 Term loan, maturing February 28, 2005 3,396,664
Manufactures and markets marshmallows and caramels
International Home Foods, Inc.
146,667 Revolving loan, maturing March 31, 2003 146,667
2,016,542 Term loan, maturing March 31, 2003 2,016,542
18,000,000 Term loan, maturing September 30, 2005 18,000,000
Manufactures and markets food products with popular
brand names
Southern Foods Group, L.P.
3,922,240 Term loan, maturing February 28, 2006 3,922,240
Processes and sells dairy products
Specialty Foods Corporation
27,271,521 Term loan, maturing April 30, 2001 27,271,521
Bread and cheese products
Van De Kamp's, Inc.
7,029,687 Term loan, maturing April 30, 2003 7,029,687
4,410,601 Term loan, maturing September 30, 2003 4,410,601
Distributor of frozen convenience foods
- --------------------------------------------------------------------------------------
$ 107,491,040
- --------------------------------------------------------------------------------------
Food Wholesalers -- 0.7%
- --------------------------------------------------------------------------------------
Fleming Companies, Inc.
$28,980,042 Term loan, maturing July 25, 2004 $ 28,980,042
Wholesale food distributor
- --------------------------------------------------------------------------------------
$ 28,980,042
- --------------------------------------------------------------------------------------
Hardware & Tools -- 0.2%
- --------------------------------------------------------------------------------------
Werner Holding Company, Inc.
$ 4,050,000 Term loan, maturing November 30, 2004 $ 4,050,000
4,950,000 Term loan, maturing November 30, 2005 4,950,000
Manufactures and markets ladders and other climbing
products
- --------------------------------------------------------------------------------------
$ 9,000,000
- --------------------------------------------------------------------------------------
Health Care -- Miscellaneous -- 6.9%
- --------------------------------------------------------------------------------------
Ameripath, Inc.
$10,000,000 Term loan, maturing June 27, 2004 $ 10,000,000
Anatomical pathology services
Extendicare Health Services, Inc.
25,500,000 Term loan, maturing December 31, 2004 25,500,000
Operator of long-term care facilities
Genesis Health Ventures, Inc.
10,640,012 Term loan, maturing September 30, 2004 10,640,012
10,620,000 Term loan, maturing June 1, 2005 10,620,000
Operator of long-term care facilities, outpatient
clinics and home health care services
Imed Corporation
9,000,000 Term loan, maturing November 30, 2002 9,000,000
4,544,100 Term loan, maturing November 30, 2003 4,544,100
4,544,100 Term loan, maturing November 30, 2004 4,544,100
4,276,800 Term loan, maturing May 31, 2005 4,276,800
Provider of infusion systems and related technologies
Integrated Health Services, Inc.
33,000,000 Term loan, maturing September 15, 2003 33,000,000
Provider of post-acute health care services
Kinetic Concepts, Inc.
5,250,000 Term loan, maturing December 31, 2004 5,250,000
5,250,000 Term loan, maturing December 31, 2005 5,250,000
Designs, manufactures and markets therapeutic systems
Leiner Health Products Inc.
5,970,000 Term loan, maturing December 30, 2004 5,970,000
4,477,500 Term loan, maturing December 31, 2005 4,477,500
Manufactures and markets vitamins, minerals and
nutritional supplements
Mediq / Prn Life Support Service
9,854,628 Term loan, maturing September 30, 2004 9,854,628
Medical equipment and rental services
Merit Behavioral Care Corporation
11,669,746 Term loan, maturing March 31, 2007 11,669,746
Mental health care provider
National Medical Care, Inc.
60,000,000 Term loan, maturing September 30, 2003 60,000,000
Kidney dialysis service provider
Paragon Health Network, Inc.
12,500,000 Term loan, maturing March 31, 2005 12,500,000
12,500,000 Term loan, maturing March 31, 2006 12,500,000
Operator of long-term care facilities
SMT Health Services
9,975,000 Term loan, maturing August 31, 2003 9,975,000
Provider of mobile magnetic resonance imaging
services
Sun Healthcare Group, Inc.
8,250,000 Term loan, maturing October 9, 2004 8,250,000
8,250,000 Term loan, maturing October 9, 2005 8,250,000
Operator of long-term care facilities, rehabilitation
facilities and home health care services
The Multicare Companies Inc. (Genesis Eldercare)
7,980,009 Term loan, maturing September 30, 2004 7,980,009
2,655,000 Term loan, maturing June 1, 2005 2,655,000
Operator of long-term care facilities, outpatient
clinics and home health care services
Total Renal Care Holdings, Inc.
0 Term loan, maturing September 30, 2007 0
Kidney dialysis service provider
WGL Acquisition Corp.
3,940,000 Term loan, maturing July 10, 2004 3,940,000
Manufactures medical devices and batteries for
medical and commercial applications
- --------------------------------------------------------------------------------------
$ 280,646,895
- --------------------------------------------------------------------------------------
Hospital Management -- 0.9%
- --------------------------------------------------------------------------------------
Community Health Systems, Inc.
$12,561,644 Term loan, maturing December 31, 2003 $ 12,561,644
12,561,644 Term loan, maturing December 31, 2004 12,561,644
9,445,205 Term loan, maturing December 31, 2005 9,445,205
Hospital and healthcare management
- --------------------------------------------------------------------------------------
$ 34,568,493
- --------------------------------------------------------------------------------------
Hotels -- 1.1%
- --------------------------------------------------------------------------------------
Capstar Hotel Company
$11,250,000 Term loan, maturing June 30, 2004 $ 11,250,000
Hotel management
Hard Rock Hotel, Inc.
2,000,000 Term loan, maturing October 24, 2003 2,000,000
3,000,000 Term loan, maturing October 24, 2004 3,000,000
3,000,000 Term loan, maturing October 24, 2005 3,000,000
Hotel management
HMC Capital Resources Corp.
532,800 Term loan, maturing June 17, 2004 532,800
Hotel management
Interstate Hotels Corporation
4,743,590 Term loan, maturing June 25, 2003 4,743,590
19,688,034 Term loan, maturing June 25, 2004 19,688,034
Hotel management
- --------------------------------------------------------------------------------------
$ 44,214,424
- --------------------------------------------------------------------------------------
Household Furnishings -- 2.7%
- --------------------------------------------------------------------------------------
Furniture Brands International, Inc.
$ 9,000,000 Term loan, maturing June 27, 2004 $ 9,000,000
31,000,000 Term loan, maturing June 27, 2007 31,000,000
Manufacturer of residential furniture
Goodman Manufacturing Company, L.P.
9,095,541 Term loan, maturing September 30, 2003 9,095,541
17,750,000 Term loan, maturing September 30, 2004 17,750,000
17,750,000 Term loan, maturing September 30, 2005 17,750,000
Manufacturer of heating/air conditioning equipment
Sealy Mattress Company
6,060,606 Term loan, maturing December 15, 2004 6,060,606
4,363,636 Term loan, maturing December 15, 2005 4,363,636
5,575,758 Term loan, maturing December 15, 2006 5,575,758
Manufactures bedding
Simmons Company
6,940,000 Term loan, maturing March 31, 2003 6,940,000
Manufactures bedding
- --------------------------------------------------------------------------------------
$ 107,535,541
- --------------------------------------------------------------------------------------
Household Products -- 0.5%
- --------------------------------------------------------------------------------------
Playtex Products, Inc.
$21,890,000 Term loan, maturing June 15, 2003 $ 21,890,000
Manufactures and markets a diversified line of
consumer products
- --------------------------------------------------------------------------------------
$ 21,890,000
- --------------------------------------------------------------------------------------
Housewares -- 0.2%
- --------------------------------------------------------------------------------------
Pillowtex Corporation
$ 6,500,000 Term loan, maturing December 31, 2004 $ 6,500,000
Producer of textile products
- --------------------------------------------------------------------------------------
$ 6,500,000
- --------------------------------------------------------------------------------------
Insurance Brokers -- 0.5%
- --------------------------------------------------------------------------------------
Acordia, Inc.
$ 5,900,000 Term loan, maturing December 31, 2004 $ 5,900,000
Provider of retail based brokerage services
TRG Holding Corporation
15,000,000 Term loan, maturing January 7, 2003 15,000,000
Provider of insurance services
- --------------------------------------------------------------------------------------
$ 20,900,000
- --------------------------------------------------------------------------------------
Leisure -- 3.9%
- --------------------------------------------------------------------------------------
24 Hour Fitness, Inc.
$10,000,000 Term loan, maturing December 31, 2004 $ 10,000,000
Fitness center chain
AMF Bowling Worldwide, Inc.
219,595 Revolving loan, maturing March 31, 2002 219,595
13,336,620 Term loan, maturing March 31, 2002 13,336,620
Manufactures and operates bowling equipment and
supplies
AMF Group, Inc.
14,799,106 Term loan, maturing March 31, 2003 14,799,106
13,007,981 Term loan, maturing March 31, 2004 13,007,981
Manufactures and operates bowling equipment and
supplies
ASC East, Inc.
3,857,143 Term loan, maturing May 31, 2006 3,857,143
Operator of alpine resorts
ASC West, Inc.
9,642,857 Term loan, maturing May 31, 2006 9,642,857
Operator of alpine resorts
Alliance Gaming Corporation
7,129,464 Term loan, maturing January 31, 2005 7,129,464
2,850,000 Term loan, maturing July 31, 2005 2,850,000
Designs and manufacturing gaming machines
Interval International Corporation
6,625,000 Term loan, maturing December 16, 2005 6,625,000
6,625,000 Term loan, maturing December 15, 2006 6,625,000
Timeshare exchange operator
KSL Recreation Group, Inc.
6,653,572 Revolving loan, maturing April 30, 2005 6,653,572
7,028,846 Term loan, maturing April 30, 2005 7,028,846
7,028,846 Term loan, maturing April 30, 2006 7,028,846
Operates properties in the leisure, recreation,
resort and travel fields
Metro-Goldwyn-Mayer, Inc.
25,000,000 Term loan, maturing December 31, 2006 25,000,000
Film and television production and distribution
Mikohn Gaming Corporation
5,000,000 Term loan, maturing April 1, 2004 5,000,000
Developer, manufacturer and distributor of gaming
equipment
Six Flags Theme Parks, Inc.
6,649,355 Term loan, maturing June 23, 2001 6,649,355
10,137,000 Term loan, maturing June 23, 2003 10,137,000
Amusement parks
- --------------------------------------------------------------------------------------
$ 155,590,385
- --------------------------------------------------------------------------------------
Machinery -- 0.3%
- --------------------------------------------------------------------------------------
Numatics, Incorporated
$ 4,222,732 Term loan, maturing January 3, 2002 $ 4,222,732
7,626,312 Term loan, maturing January 3, 2004 7,626,312
Manufactures air valves, cylinders, and air
filtration and drying devices
- --------------------------------------------------------------------------------------
$ 11,849,044
- --------------------------------------------------------------------------------------
Manufacturing -- Diversified -- 4.7%
- --------------------------------------------------------------------------------------
AMSCAN Holdings, Inc.
$ 8,454,545 Term loan, maturing December 31, 2004 $ 8,454,545
Designs, manufactures and distributes decorative
party goods
CFS Holding N.V.
9,398,729 Term loan, maturing June 30, 2005 9,398,729
Supplier of integrated production lines for food
processing and packaging
Columbus McKinnon Corporation
5,644,000 Revolving loan, maturing September 30, 2001 5,644,000
6,878,036 Term loan, maturing September 30, 2001 6,878,036
12,469,349 Term loan, maturing September 30, 2003 12,469,349
Manufacturer of hoists and lifting equipment
Desa International, Inc.
7,500,000 Term loan, maturing November 30, 2004 7,500,000
Manufactures indoor and outdoor heaters and specialty
tools
Foamex L.P.
3,879,630 Revolving loan, maturing June 30, 2003 3,879,630
5,559,174 Term loan, maturing June 30, 2003 5,559,174
8,339,048 Term loan, maturing June 30, 2005 8,339,048
7,580,952 Term loan, maturing June 30, 2006 7,580,952
7,000,000 Term loan, maturing December 31, 2006 7,000,000
Manufactures flexible polyurethane and polymer foam
products
International Wire Group, Inc.
23,962,617 Term loan, maturing September 30, 2002 23,962,617
Manufactures and markets copper wire and harnesses
InteSys Technologies, Inc.
4,390,244 Term loan, maturing December 31, 2001 4,390,244
Designs and manufactures plastic components for
original equipment manufacturers
Jackson Products, Inc.
1,975,000 Term loan, maturing September 1, 2001 1,975,000
7,323,912 Term loan, maturing September 1, 2002 7,323,912
7,331,250 Term loan, maturing September 1, 2003 7,331,250
Manufactures and distributes safety equipment and
reflective beads
Joan Fabrics Corporation
$ 5,622,678 Revolving loan, maturing June 30, 2003 $ 5,622,678
10,882,604 Term loan, maturing June 30, 2003 10,882,604
14,473,684 Term loan, maturing June 30, 2005 14,473,684
7,526,316 Term loan, maturing June 30, 2006 7,526,316
Manufacturer of velour fabrics for automotive and
furniture systems
Matthew Warren, Inc.
6,922,328 Term loan, maturing February 28, 2004 6,922,328
Manufactures and distributes industrial spring
products
Panavision International, L.P.
2,163,333 Revolving loan, maturing June 30, 2004 2,163,333
4,400,000 Term loan, maturing June 30, 2004 4,400,000
Manufactures lens and camera equipment
Panolam Industries, Inc.
828,000 Term loan, maturing November 1, 2002 828,000
4,564,000 Term loan, maturing November 1, 2004 4,564,000
2,608,000 Term loan, maturing November 1, 2005 2,608,000
2,000,000 Term loan, maturing May 1, 2006 2,000,000
Designs, manufactures and markets decorative
thermally- fused melamine panels
- --------------------------------------------------------------------------------------
$ 189,677,429
- --------------------------------------------------------------------------------------
Medical Products -- 1.0%
- --------------------------------------------------------------------------------------
Graphic Controls Corporation
$10,786,925 Term loan, maturing August 28, 2003 $ 10,786,925
4,890,890 Term loan, maturing September 28, 2003 4,890,890
Recording and monitoring devices
Nutramax Products, Inc.
3,936,944 Term loan, maturing December 31, 2003 3,936,944
6,000,000 Term loan, maturing September 30, 2004 6,000,000
Manufactures and markets private label health and
personal care products
Sterling Diagnostic Imaging, Inc.
15,000,000 Term loan, maturing December 30, 2005 15,000,000
Manufacturer and marketer of medical x-ray imaging
films and related products
- --------------------------------------------------------------------------------------
$ 40,614,759
- --------------------------------------------------------------------------------------
Metals -- 0.2%
- --------------------------------------------------------------------------------------
U.S. Silica Company
$ 4,145,337 Term loan, maturing December 31, 2001 $ 4,145,337
3,893,333 Term loan, maturing December 31, 2003 3,893,333
Producer of industrial silica
- --------------------------------------------------------------------------------------
$ 8,038,670
- --------------------------------------------------------------------------------------
Miscellaneous -- 1.5%
- --------------------------------------------------------------------------------
Allied Waste North America
$ 7,200,000 Term loan, maturing October 17, 2003 $ 7,200,000
7,644,000 Term loan, maturing December 31, 2003 7,644,000
Non-hazardous solid waste management
LESI, Inc.
7,462,500 Term loan, maturing May 15, 2004 7,462,500
7,462,500 Term loan, maturing May 15, 2005 7,462,500
Hazardous solid waste management
Prime Succession, Inc.
15,822,222 Term loan, maturing August 1, 2003 15,822,222
Operator of funeral homes and cemeteries
Rose Hills Company
9,800,447 Term loan, maturing December 1, 2003 9,800,447
Operator of funeral homes and cemeteries
Walco International, Inc.
4,966,667 Term loan, maturing March 31, 2004 4,966,667
Distributes food animal health products
- --------------------------------------------------------------------------------------
$ 60,358,336
- --------------------------------------------------------------------------------------
Office Equipment and Supplies -- 0.6%
- --------------------------------------------------------------------------------------
F.M.E. Corporation (Neopost, S.A.)
$12,314,749 Term loan, maturing June 24, 2006 $ 12,314,749
Producer of mailroom products
Identity Group, Inc.
9,949,749 Term loan, maturing November 22, 2003 9,949,749
Manufactures and distributes ink delivery products
- --------------------------------------------------------------------------------------
$ 22,264,498
- --------------------------------------------------------------------------------------
Paper and Forest Products -- 0.7%
- --------------------------------------------------------------------------------------
Bear Island Paper Company, LLC
$ 9,000,000 Term loan, maturing December 31, 2005 $ 9,000,000
Producer of news print
S.D. Warren Company
19,578,400 Term loan, maturing December 20, 2002 19,578,400
Major U.S. producer of coated free paper
- --------------------------------------------------------------------------------------
$ 28,578,400
- --------------------------------------------------------------------------------------
Publishing -- 2.4%
- --------------------------------------------------------------------------------------
Cullman Ventures, Inc.
$15,000,000 Term loan, maturing January 31, 2004 $ 15,000,000
Producer of calendars, organizers, diaries and
related products
Cygnus Publishing, Inc.
13,500,000 Term loan, maturing June 5, 2005 13,500,000
Leader in the education, media and information
businesses
Primedia, Inc.
8,770,000 Revolving loan, maturing June 30, 2004 8,770,000
31,500,000 Term loan, maturing June 30, 2004 31,500,000
Leader in the education, media and information
businesses
Rand McNally & Company
1,000,000 Term loan, maturing April 30, 2005 1,000,000
4,500,000 Term loan, maturing April 30, 2006 4,500,000
Provider of geographic information
Von Hoffman Press, Inc.
5,768,143 Term loan, maturing May 30, 2004 5,768,143
5,768,143 Term loan, maturing May 30, 2005 5,768,143
Manufactures textbooks for educational purposes
Yellow Book USA, L.P.
5,000,000 Term loan, maturing September 30, 2005 5,000,000
3,692,308 Term loan, maturing December 31, 2005 3,692,308
2,307,692 Term loan, maturing December 31, 2006 2,307,692
Publisher of yellow pages directories
- --------------------------------------------------------------------------------------
$ 96,806,286
- --------------------------------------------------------------------------------------
Publishing -- Newspapers -- 2.0%
- --------------------------------------------------------------------------------------
21st Century Newspapers, Inc.
$ 9,500,000 Term loan, maturing February 15, 2005 $ 9,500,000
Community newspaper
American Media Operations, Inc.
774,471 Revolving loan, maturing September 30, 2002 774,471
15,939,857 Term loan, maturing September 30, 2002 15,939,857
Weekly periodical publisher
Garden State Newspapers, Inc.
505,263 Revolving loan, maturing June 30, 2003 505,263
0 Revolving loan, maturing March 31, 2004 0
1,473,684 Term loan, maturing March 31, 2004 1,473,684
Suburban newspaper
Journal Register Company
8,168,237 Term loan, maturing June 30, 2000 8,168,237
22,462,955 Term loan, maturing December 31, 2002 22,462,955
4,084,118 Term loan, maturing May 5, 2003 4,084,118
Suburban newspaper
Morris Communications Corporation
20,000,000 Term loan, maturing June 30, 2005 20,000,000
Daily and non-daily publisher
- --------------------------------------------------------------------------------------
$ 82,908,585
- --------------------------------------------------------------------------------------
Railroads -- 0.2%
- --------------------------------------------------------------------------------------
I & M Rail Link, LLC
$ 2,800,000 Revolving loan, maturing March 31, 2004 $ 2,800,000
6,880,000 Term loan, maturing March 31, 2004 6,880,000
Railway operating firm
- --------------------------------------------------------------------------------------
$ 9,680,000
- --------------------------------------------------------------------------------------
Restaurants -- 2.4%
- --------------------------------------------------------------------------------------
Friendly Ice Cream Corporation
$ 1,285,714 Term loan, maturing November 15, 2004 $ 1,285,714
6,428,572 Term loan, maturing November 15, 2005 6,428,572
Operates full service casual dining restaurants
Houlihan's Restaurants, Inc.
4,975,000 Term loan, maturing April 15, 2004 4,975,000
Operates full service casual dining restaurants
Long John Silver's Restaurants, Inc.
7,031,065 Term loan, maturing September 30, 2002 7,031,065
Seafood restaurants
Shoney's Inc.
4,750,000 Term loan, maturing April 30, 2002 4,750,000
9,975,000 Term loan, maturing April 30, 2002 9,975,000
Operates full service casual dining restaurants
Tricon Global Restaurants, Inc.
63,960,000 Term loan, maturing October 2, 2002 63,960,000
Quick service restaurant provider
- --------------------------------------------------------------------------------------
$ 98,405,351
- --------------------------------------------------------------------------------------
Retail Stores -- Drug Stores -- 0.3%
- --------------------------------------------------------------------------------------
Duane Reade, Inc.
$12,468,499 Term loan, maturing June 15, 2002 $ 12,468,499
Retail drug stores
- --------------------------------------------------------------------------------------
$ 12,468,499
- --------------------------------------------------------------------------------------
Retail Stores -- Food Chains -- 2.9%
- --------------------------------------------------------------------------------------
Pathmark Stores, Inc.
$32,963,333 Term loan, maturing December 15, 2001 $ 32,963,333
Supermarket chain in New York Metro Area
Ralphs Grocery Company
26,601,905 Term loan, maturing February 15, 2003 26,601,905
37,715,000 Term loan, maturing February 15, 2004 37,715,000
Third largest supermarket chain in Southern
California
Star Market Company, Inc.
10,042,105 Term loan, maturing December 31, 2001 10,042,105
7,884,211 Term loan, maturing December 31, 2002 7,884,211
Supermarket chain in Massachusetts
- --------------------------------------------------------------------------------------
$ 115,206,554
- --------------------------------------------------------------------------------------
Retail -- Specialty -- 1.3%
- --------------------------------------------------------------------------------------
CSK Auto, Inc.
$15,000,000 Term loan, maturing October 31, 2003 $ 15,000,000
Retailer of automotive parts and accessories
Griffith Consumers Company
5,559,874 Term loan, maturing December 31, 2000 5,559,874
10,001,068 Term loan, maturing December 31, 2002 10,001,068
7,717,437 Term loan, maturing December 31, 2003 7,717,437
Retail petroleum distributor
Petro Stopping Centers
6,555,556 Term loan, maturing December 31, 2003 6,555,556
Operator of full-service truck stops
Travelcenters of America, Inc.
7,975,000 Term loan, maturing March 27, 2005 7,975,000
Operator of truck stops
- --------------------------------------------------------------------------------------
$ 52,808,935
- --------------------------------------------------------------------------------------
Steel -- 0.2%
- --------------------------------------------------------------------------------------
UCAR Global Enterprises, Inc.
$ 8,000,000 Term loan, maturing December 31, 2002 $ 8,000,000
Processing materials for steel industry
- --------------------------------------------------------------------------------------
$ 8,000,000
- --------------------------------------------------------------------------------------
Telecommunications -- 1.0%
- --------------------------------------------------------------------------------------
Access Communications, Inc.
$10,000,000 Term loan, maturing December 31, 2004 $ 10,000,000
Provider of long distance and other
telecommunications services
Arch Communications Enterprises, Inc.
10,500,000 Term loan, maturing December 31, 2003 10,500,000
Paging service provider
Price Communications Wireless, Inc.
1,883,333 Revolving loan, maturing September 30, 2005 1,883,333
1,666,667 Term loan, maturing September 30, 2005 1,666,667
18,000,000 Term loan, maturing September 30, 2006 18,000,000
Cellular systems provider
- --------------------------------------------------------------------------------------
$ 42,050,000
- --------------------------------------------------------------------------------------
Telephone -- 0.2%
- --------------------------------------------------------------------------------------
NSC Communications Corporation
$ 4,563,045 Revolving loan, maturing April 1, 2003 $ 4,563,045
4,378,846 Term loan, maturing October 1, 2003 4,378,846
Independent payphone provider
- --------------------------------------------------------------------------------------
$ 8,941,891
- --------------------------------------------------------------------------------------
Textiles -- 1.8%
- --------------------------------------------------------------------------------------
CAF Holdings, Inc.
$ 4,694,118 Term loan, maturing June 30, 2002 $ 4,694,118
Manufactures and markets commercial floorcovering
Collins & Aikman Products Company
31,685,196 Term loan, maturing December 31, 2002 31,685,196
Automotive products, residential upholstery fabrics,
and wallcoverings
GFSI, Inc. (Gear for Sports)
13,930,000 Term loan, maturing March 31, 2004 13,930,000
Designs, manufactures and markets custom design
sportswear and activewear
Renfro Corporation
5,000,000 Term loan, maturing November 15, 2003 5,000,000
Manufactures socks
The William Carter Company
6,174,000 Term loan, maturing October 31, 2003 6,174,000
Manufacturer and distributor of children's apparel
Walls Industries, Inc.
5,042,552 Term loan, maturing February 28, 2005 5,042,552
6,861,703 Term loan, maturing February 28, 2006 6,861,703
Manufactures and markets workwear, hunting and
outdoor apparel and outerwear
- --------------------------------------------------------------------------------------
$ 73,387,569
- --------------------------------------------------------------------------------------
Toys -- 0.2%
- --------------------------------------------------------------------------------------
Hedstrom Corporation
$ 1,973,333 Term loan, maturing June 30, 2003 $ 1,973,333
7,224,107 Term loan, maturing June 30, 2005 7,224,107
Manufactures swingsets and other children's toys
- --------------------------------------------------------------------------------------
$ 9,197,440
- --------------------------------------------------------------------------------------
Transportation -- 0.8%
- --------------------------------------------------------------------------------------
Atlas Freighter Leasing, Inc.
$ 5,500,000 Term loan, maturing May 29, 2004 $ 5,500,000
Aircraft leasing
Evergreen International Aviation, Inc.
19,836,002 Term loan, maturing April 30, 2002 19,836,002
Air cargo carrier
Gemini Leasing, Inc.
7,500,000 Term loan, maturing December 31, 2002 7,500,000
Air cargo carrier
- --------------------------------------------------------------------------------------
$ 32,836,002
- --------------------------------------------------------------------------------------
Utilities -- 1.2%
- --------------------------------------------------------------------------------------
AES CEMIG Funding Corporation
$25,575,000 Term loan, maturing August 28, 1998 $ 25,575,000
Global power company
AESEBA Funding Corporation
20,925,000 Term loan, maturing August 28, 1998 20,925,000
Global power company
- --------------------------------------------------------------------------------------
$ 46,500,000
- --------------------------------------------------------------------------------------
Total Senior, Secured, Floating-Rate Interests
(identified cost, $3,657,069,972) $3,657,069,972
- --------------------------------------------------------------------------------------
Common Stocks -- 0.1%
Shares/Rights Security Value
- --------------------------------------------------------------------------------------
806,708 America's Favorite Chicken Company,
Common Stock* $ 2,675,850
608 Classic Cable Common Stock Warrants * 0
34,364 PSI Acquisition Corporation, Warrants * 0
- --------------------------------------------------------------------------------------
Total Common Stocks
(identified cost, $0) $ 2,675,850
- --------------------------------------------------------------------------------------
Short-Term Investments -- 6.4%
Principal Maturity
Amount Date Borrower Rate Amount
- --------------------------------------------------------------------------------------
$35,193,644 01/02/98 American General Finance Company 6.50% $ 35,193,644
46,891,532 01/02/98 American General Company 6.50% 46,891,532
41,244,016 01/09/98 American Express Credit Corporation 6.10% 41,244,016
85,876,014 01/02/98 Associate Corporation of N.A. 6.70% 85,876,014
49,990,764 01/02/98 CXC Incorporated 6.65% 49,990,764
- --------------------------------------------------------------------------------------
Total Short-Term Investments,
at amortized cost $ 259,195,970
- --------------------------------------------------------------------------------------
Total Investments -- 97.1%
(identified cost, $3,916,265,942) $3,918,941,792
- --------------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.9% $ 116,130,133
- --------------------------------------------------------------------------------------
Total Net Assets -- 100% $4,035,071,925
- --------------------------------------------------------------------------------------
*Non-income producing security.
Note: The description of the principal business for each security set forth
above is unaudited.
</TABLE>
<PAGE>
Senior Debt Portfolio as of December 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
(Expressed in United States Dollars)
As of December 31, 1997
Assets
- -------------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $3,916,265,942) $3,918,941,792
Cash 93,405,242
Receivable for investments sold 448,058
Interest receivable 25,786,574
Miscellaneous receivable 101,715
Prepaid expenses 979,673
Deferred organization expenses (Note 1D) 31,613
- -------------------------------------------------------------------------------
Total assets $4,039,694,667
- -------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------
Deferred facility fee income (Note 1B) $ 4,370,655
Payable to affiliate for Trustees' fees (Note 2) 7,463
Accrued expenses 244,624
- -------------------------------------------------------------------------------
Total liabilities $ 4,622,742
- -------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $4,035,071,925
- -------------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $4,032,396,075
Net unrealized appreciation of investments
(computed on the basis of identified cost) 2,675,850
- -------------------------------------------------------------------------------
Total $4,035,071,925
- -------------------------------------------------------------------------------
Statement of Operations
(Expressed in United States Dollars)
For the Year Ended
December 31, 1997
Investment Income (Note 1B)
- -------------------------------------------------------------------------------
Interest income $ 283,456,988
Facility fees earned 4,774,292
- -------------------------------------------------------------------------------
Total income $ 288,231,280
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 31,751,900
Compensation of Trustees not members of the Investment Adviser's
organization (Note 2) 29,283
Custodian fee 1,008,778
Legal and accounting services 608,361
Amortization of organization expenses (Note 1D) 6,205
Interest expense (Note 4) 610,023
Miscellaneous 202,512
- -------------------------------------------------------------------------------
Total expenses $ 34,217,062
- -------------------------------------------------------------------------------
Net investment income $ 254,014,218
- -------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- -------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (9,000,530)
- -------------------------------------------------------------------------------
Net realized loss on investments $ (9,000,530)
- -------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 8,549,067
- -------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 8,549,067
- -------------------------------------------------------------------------------
Net realized and unrealized loss on investments $ (451,463)
- -------------------------------------------------------------------------------
Net increase in net assets from operations $ 253,562,755
- -------------------------------------------------------------------------------
<PAGE>
Senior Debt Portfolio as of December 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
(Expressed in United States Dollars)
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 254,014,218 $ 171,247,196
Net realized loss on investments (9,000,530) (2,509,974)
Net change in unrealized appreciation
(depreciation) of investments 8,549,067 (1,387,860)
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 253,562,755 $ 167,349,362
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $1,646,867,281 $1,604,853,413
Withdrawals (875,432,567) (383,467,171)
- --------------------------------------------------------------------------------
Net increase in net assets from capital
transactions $ 771,434,714 $1,221,386,242
- --------------------------------------------------------------------------------
Net increase in net assets $1,024,997,469 $1,388,735,604
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $3,010,074,456 $1,621,338,852
- --------------------------------------------------------------------------------
At end of year $4,035,071,925 $3,010,074,456
- --------------------------------------------------------------------------------
<PAGE>
Statement of Cash Flows
(Expressed in United States Dollars)
Year Ended
Increase (Decrease) in Cash December 31, 1997
- --------------------------------------------------------------------------------
Cash Flows From (Used For) Operating Activities --
Purchases of loan interests $(3,700,509,536)
Proceeds from sales and principal repayments 2,500,784,081
Interest received 275,103,446
Facility fees received 2,015,430
Interest paid (612,171)
Operating expenses paid (33,707,774)
Net decrease in short-term investments 170,130,743
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (786,795,781)
- --------------------------------------------------------------------------------
Cash Flows From (For) Financing Activities --
Proceeds from capital contributions $ 1,646,867,281
Payments for capital withdrawals (875,432,567)
- --------------------------------------------------------------------------------
Net cash provided from financing activities $ 771,434,714
- --------------------------------------------------------------------------------
Net decrease in cash $ (15,361,067)
- --------------------------------------------------------------------------------
Cash at Beginning of Year $ 108,766,309
- --------------------------------------------------------------------------------
Cash at End of Year $ 93,405,242
- -------------------------------------------------------------------------------
Reconciliation of Net Increase in Net Assets
From Operations to Net Cash Used For
Operating Activities
- -------------------------------------------------------------------------------
Net increase in net assets from operations $ 253,562,755
Decrease in receivable for investments sold 388,141
Increase in interest receivable (8,354,627)
Decrease in miscellaneous receivable 1,085
Increase in prepaid expenses (55,524)
Decrease in deferred organization expense 6,205
Decrease in deferred facility fee income (4,768,902)
Decrease in payable to affiliate (420)
Decrease in accrued expenses (53,144)
Net increase in investments (1,027,521,350)
- -------------------------------------------------------------------------------
Net cash used for operating activities $ (786,795,781)
- -------------------------------------------------------------------------------
<PAGE>
Supplementary Data (Expressed in United States Dollars)
Year Ended December 31,
------------------------------------------
1997 1996 1995*
- --------------------------------------------------------------------------------
Ratios to average daily net assets
- --------------------------------------------------------------------------------
Operating expenses 0.94% 0.98% 1.01%+
Interest expense 0.02% 0.04% 0.13%+
Net investment income 7.12% 7.17% 7.95%+
Portfolio Turnover 81% 75% 39%
- ------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $4,035,072 $3,010,074 $1,621,339
- ------------------------------------------------------------------------------
+Annualized.
*For the period from the start of business, February 22, 1995 to
December 31, 1995.
<PAGE>
Senior Debt Portfolio as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS
(Expressed in United States Dollars)
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. 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-size 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 then 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, deduction 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.
E Other -- Investment transactions are accounted for on a trade date basis.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT
receives a fee reduced by the credits which are determined based on the
average daily cash balances the Portfolio maintains with IBT. All
significant credit balances used to reduce the Portfolio's custodian fees
are reported as a reduction of expenses on the statement of operations.
G Use of Estimates -- The preparation of the financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense during
the reporting period. Actual results could differ from those estimates.
2 Investment Adviser Fee and Other Transactions with Affiliates
- --------------------------------------------------------------------------------
An investment advisory fee is paid to Boston Management and Research (BMR)
as compensation for investment advisory services rendered to the Portfolio.
The fee is computed at a monthly rate of 19/240 of 1% (0.95% annually) 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 year
ended December 31, 1997, the effective annual rate, based on average daily
gross assets, was 0.89% and amounted to $31,751,900. 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 adviser fee.
Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of BMR. Trustees of the Portfolio that are not affiliated
with the Investment Adviser 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 year ended December 31, 1997, 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 and other
securities for the year ended December 31, 1997 aggregated $3,700,509,536
and $2,502,405,980, respectively.
4 Short-Term Debt and Credit Agreements
- --------------------------------------------------------------------------------
The Portfolio has entered into a revolving credit agreement that will allow
the Portfolio to borrow an additional $250 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 certificate of deposit rate or federal funds effective rate.
Interest expense includes a commitment fee of approximately $452,100 which
is computed at the annual rate of 0.20% of the revolving credit agreement.
There were no significant borrowings under this agreement during the year
ended December 31, 1997. As of December 31, 1997, 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 the
investments owned at December 31, 1997, as computed on a federal income tax
basis, were as follows:
Aggregate cost $3,916,265,942
--------------------------------------------------------------------
Gross unrealized appreciation $ 2,675,850
Gross unrealized depreciation --
--------------------------------------------------------------------
Net unrealized appreciation $ 2,675,850
--------------------------------------------------------------------
<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 (the
Portfolio) as of December 31, 1997, the related statements of operations and
cash flows for the year then ended, the statements of changes in net assets
for the two years then ended and the supplementary data for each of the two
years then ended and for the period from the start of business, February 22,
1995, to December 31, 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 audits.
We conducted our audits 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 December 31, 1997 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 supplementary data present
fairly, in all material respects, the financial position of Senior Debt
Portfolio as of December 31, 1997, the results of its operations and its cash
flows, the changes in net assets and its supplemental data for the respective
stated periods, 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 the Portfolio valued at $3,657,069,972 (90.6%
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
negotiations between the parties in a sale transaction. We have reviewed the
procedures established by the Trustees and used by the Portfolio's investment
adviser in determining the fair value 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
February 13, 1998
<PAGE>
EATON VANCE PRIME RATE RESERVES as of December 31, 1997
INVESTMENT MANAGEMENT
EATON VANCE PRIME RATE RESERVES
Officers Independent Trustees
JAMES B. HAWKES DONALD R. DWIGHT
President and Trustee President, Dwight Partners, Inc.
M. DOZIER GARDNER SAMUEL L. HAYES, III
Vice President and Trustee Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate
JAMES L. O'CONNOR School of Business Administration
Treasurer
NORTON H. REAMER
ALAN R. DYNNER President and Director, United Asset
Secretary Management Corporation
JOHN L. THORNDIKE
Investment Adviser and Consultant
SENIOR DEBT PORTFOLIO
Officers Independent Trustees
JAMES B. HAWKES DONALD R. DWIGHT
President and Trustee President, Dwight Partners, Inc.
M. DOZIER GARDNER SAMUEL L. HAYES, III
Vice President and Jacob H. Schiff Professor of Investment
Trustee Banking, Harvard University Graduate
School of Business Administration
RAYMOND O'NEILL
Vice President NORTON H. REAMER
President and Director, United Asset
MICHEL NORMANDEAU Management Corporation
Vice President
JOHN L. THORNDIKE
JAMES L. O'CONNOR Formerly Director, Fiduciary Company
Treasurer Incorporated
ALAN R. DYNNER JACK L. TREYNOR
Secretary Investment Adviser and Consultant
SCOTT H. PAGE
Vice President and
Co-Portfolio Manager
PAYSON F. SWAFFIELD
Vice President and
Co-Portfolio Manager
<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
(800)225-6265
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
BANKING COUNSEL
Mayer, Brown & Platt
787 Seventh Avenue
New York, NY 10019
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
EATON VANCE
PRIME RATE RESERVES
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- -------------------------------------------------------------------------------
M-PRSRC-2/98
