<PAGE>
INVESTMENT ADVISER OF
SENIOR DEBT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC
SENIOR FLOATING-RATE FUND
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
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
BANKING COUNSEL
Mayer, Brown &Platt
787 Seventh Avenue
New York, NY 10019
AUDITORS
Deloitte & Touche LLP
125 Summer 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 distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV CLASSIC
SENIOR FLOATING-RATE FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-SFRSRC-2/96
EV CLASSIC
SENIOR FLOATING-RATE
FUND
ANNUAL SHAREHOLDER REPORT
DECEMBER 31, 1995
<PAGE>
Performance Highlights
A CONSISTENT YIELD ADVANTAGE
In 1995, the Fund has maintained an attractive yield advantage over 3-month
bank CDs.
EFFECTIVE YIELD SPREAD OVER 3-MONTH CD RATES
[PLOT POINTS]
Effective Yield PRR CDs Spread
- -----------------------------------------------
mar 95 8.38 4.38 4
apr 95 7.85 4.34 3.51
may 95 7.85 4.36 3.49
jun 95 7.85 4.27 3.58
jul 95 7.7 4.21 3.49
aug 95 7.45 4.22 3.23
sep 95 7.45 4.27 3.18
oct 95 7.68 4.25 3.43
nov 95 7.38 4.2 3.18
dec 95 7.38 4.14 3.24
All figures are as of 12/31/95. EV Classic Senior Floating-Rate Fund figure
represents effective yield (distribution for the latest 30-day period,
annualized, divided by the net asset value per share at the end of the period,
and then compounded over a 12-month period). The Fund is not insured, nor does
it offer a fixed rate of return like bank certificates of deposit or bank money
market funds, and does not attempt to maintain a constant net asset value per
share, as do money market funds. Past performance is no guarantee of future
results. Principal value and investment return will fluctuate with changes in
market conditions. Sources: Eaton Vance Management, The Wall Street Journal
- -------------------------------------------------------------------------------
o RELATIVE STABILITY OF NET ASSET VALUE
In its initial year of operation, EV Classic Senior Floating-Rate Fund has
maintained a relatively stable net asset value.
MONTH-END NET ASSET VALUE PER SHARE
[PLOT POINTS}
monthy end EV Classic
- ----------------------------
feb 95 10
mar 95 10
apr 95 9.99
may 95 9.99
jun 95 9.99
jul 95 9.99
aug 95 9.99
sep 95 9.99
oct 95 9.99
nov 95 9.99
dec 95 9.99
Source: Eaton Vance Management
<PAGE>
---------------
To Shareholders
EV Classic Senior Floating-Rate Fund paid shareholders distributions from net
investment income totaling $0.633 during the period from its inception on
February 24, 1995 through December 31, 1995. Based on the Fund's closing net
asset value of $9.99, the Fund had an effective yield of 7.38% at December 31.
The Fund's investments in a portfolio of senior, secured, floating rate loans
met the Fund's objective of maintaining a high level of current income with a
relatively stable share price. The Fund's net asset value per share ended the
year only $0.01 changed from its $10.00 level at inception.
SENIOR FLOATING-RATE FUND ENJOYED A YIELD ADVANTAGE OVER OTHER SHORT-TERM FIXED
INCOME INVESTMENTS...
Senior Floating-Rate Fund shareholders enjoyed a handsome yield advantage over
other short-term investments. As the chart on page 4 illustrates, the Fund's
effective yield represented a significant advantage over money market mutual
funds, 3-month certificates of deposit, and bank money market accounts, which
offered rates of 5.30%, 4.14%, and 3.23%, respectively. Of course, unlike bank
certificates of deposit, the Fund is not insured and does not offer a fixed rate
of return; and unlike money market accounts, the Fund's principal value and
return can fluctuate with market conditions.
HAVING WON THE BATTLE AGAINST INFLATION, THE FEDERAL RESERVE BEGAN TO LOWER
RATES IN 1995...
Having raised interest rates throughout 1994, the Federal Reserve made
significant progress in the fight against inflation. With the economy
registering slow growth, and inflation well under control, the Fed apparently
achieved its long-sought "soft landing." In July, the Fed effectively declared
victory in the inflation war and lowered the federal funds rate, a key
short-term interest rate barometer. With inflation rising a modest 2.5% for all
of 1995, the Fed lowered rates again in December.
SENIOR FLOATING-RATE FUND'S CONTINUED GOAL OF A RELATIVELY STABLE SHARE PRICE...
The Fund's relatively stable net asset value is especially impressive in light
of recent market gyrations. Bond prices, for example, have fluctuated wildly in
recent years, sharply lower in 1994 and significantly higher in 1995. However,
during the period since its inception in February, EV Classic Senior
Floating-Rate Fund's share price has remained within a very narrow price range.
While past performance is, of course, no guarantee of future results, that
relative stability will remain one of the Fund's major goals in 1996. In the
pages that follow, portfolio manager Jeffrey Garner will share his insights on
the developments in the loan market, shed light on the recent changes in the
Portfolio, and give his thoughts on what may lie ahead in the coming year.
[ ] Sincerely,
[ ]
[ ] /s/ James B. Hawkes
[ Photo of ]
[ James B. Hawkes ] James B. Hawkes
[ ] President
[ ] February 20, 1996
<PAGE>
-----------------
Management Report
Questions and answers with Jeffrey S. Garner, Vice President and Portfolio
Manager, Senior Debt Portfolio.
Q: JEFF, THE FUND'S 6.4% TOTAL RETURN FOR THE YEAR OUTPACED MOST OTHER
SHORT-TERM INVESTMENT VEHICLES. TO WHAT DO YOU ATTRIBUTE THE FUND'S
PERFORMANCE?
A: In addition to a favorable interest rate climate, the Fund's performance was
aided by the healthy economy. Corporate borrowers in the manufacturing and
industrial sectors, which are well represented in the Portfolio, have
enjoyed improving margins in 1995 amid a relatively upbeat economy. That has
limited the number of credit weakenings among corporate borrowers and
contributed to the Fund's relatively stable net asset value.
The Fund's return also reflected the relative stability of the London
Interbank Offering Rate (LIBOR), the benchmark to which most floating rate
loan interest rates are tied. LIBOR declined only modestly in 1995, which
allowed the Fund to maintain a yield advantage over other short-term
instruments. The fact that the loans that constitute the Portfolio's
investment universe typically re-set every 30, 60, or 90 days in step with
prevailing interest rate levels, continues to give the Fund the opportunity
to adjust in a timely fashion.
Q: HOW WOULD YOU ASSESS THE LOAN MARKET ENVIRONMENT IN 1995?
A: The floating rate loan universe continued to expand in 1995, as an
increasing number of corporate borrowers turned to the loan market as a
financing alternative. Syndicated lending reached a record level of $101
billion in 1995, up from $81 billion in 1994, according to Loan Pricing
Corp. The surge in market growth was nicely complemented by a corresponding
rise in investor demand. Consistent with that growing demand, the Senior
Debt Portfolio attracted $1 billion in additional investment in 1995.
[Photo of Jeffrey S. Garner]
JEFFREY S. GARNER
- ------------------
Q: TO WHAT DO YOU ATTRIBUTE THE GROWTH OF THE LOAN MARKET?
A: The growth in the market was the result of several factors. First, merger
and acquisition activity has picked up significantly in the past year,
requiring a sharp increase in corporate financing; second, as profitability
has improved in recent years, banks have become increasingly aggressive in
lending to the corporate sector; finally, investment banks, which have
traditionally focused on stock and bond underwriting, have targeted the loan
syndication business, as bond issuance has decreased.
Q: HOW HAVE YOU POSITIONED THE PORTFOLIO IN RECENT MONTHS?
A: We've redoubled our efforts to diversify the Portfolio in recent months. As
a result of those efforts, the Portfolio currently has exposure among a
widened range of borrowers and industries. The mix includes: cyclical
indus-tries, such as paper and building materials, that tend to benefit from
a growing economy; consumer areas, such as drug retailers and grocery
chains, which are typically less dependent on the economy; and growth
segments of the economy, such as cable, broadcast, and communications
equipment, which have enjoyed rapid growth due to evolving generations of
communications and technology. At December 31, the Portfolio had investments
in 30 industries and 85 borrowers.
It's worthwhile noting that even amid the rapid growth of the Portfolio, we
have maintained our strict credit standards and rigorous analytical
procedures. As a result, the Portfolio had a higher-than-usual cash balance
at year-end as we sought to prudently invest the Portfolio's assets.
EV CLASSIC SENIOR FLOATING-RATE FUND:
THE FUND MAINTAINED A SIZABLE YIELD ADVANTAGE OVER OTHER POPULAR SHORT-TERM
INVESTMENT VEHICLES.
EV Classic Senior Floating-Rate Fund 7.38%
Money markets* 5.30%
3-month CDs 4.14%
Bank money market accounts 3.23%
All figures are as of 12/31/95. EV Classic Senior Floating-Rate Fund figure
represents effective yield (distribution for the latest 30-day period,
annualized, divided by the net asset value per share at the end of the period,
and then compounded over a 12-month period). The Fund is not insured by the FDIC
nor does it offer a fixed rate of return like bank certificates of deposit or
bank money market funds, and does not attempt to maintain a constant net asset
value per share, as do money market funds. Past performance is no guarantee of
future results. Principal value and investment return will fluctuate with
changes in market conditions.
Sources: Eaton Vance Management, The Wall Street Journal
* IBC Money Report Average
Q: WHAT WERE SOME OF THE PORTFOLIO'S LARGEST INVESTMENTS?
A: Interestingly, some of the largest investments in the Portfolio represent
loans to widely recognized household names. For example, Westinghouse
Electric is involved in many businesses, including consumer electronics,
power generation, and broadcasting. With their recent purchase of television
giant, CBS, Inc., the company has established a major presence in network
television. The company has sold some assets and should be able to realize
some efficiencies from an overlap in some broadcasting markets. Those
developments should result in a stronger balance sheet for the company.
Another large investment is a loan to Viacom Inc., which has extensive cable
and entertainment interests, including Paramount Communications and
Blockbuster. The company is a prime beneficiary of the increasing
consolidation within the entertainment industry and continues to post strong
cash-flow growth.
Q: THE SENIOR DEBT PORTFOLIO HAS NOW ESTABLISHED A SOLID TRACK RECORD. WHY IS
THAT IMPORTANT FOR SHAREHOLDERS?
A: I think our track record is important for two major reasons: first, the Fund
has consistently posted returns above those of other popular short-term
investment vehicles. Of course, past trends cannot guarantee future
performance. But there is a growing universe of investors who demand yields
above those of money markets or CDs, but who may be uncom-fortable with the
longer durations of bonds. The Fund has afforded access to this unique
market niche. Second, the Fund has contributed to the growth and maturation
of the loan market by improving its liquidity. That, in turn, increases the
level of investor confidence.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET IN 1996?
A: There are clearly areas of concern within the economy, which has shown
anecdotal signs of weakness. However, while interest rates have declined in
the past year, the Federal Reserve remains vigilant in the fight against
inflation. The result has been what many are calling a "Goldilocks" economy:
not too hot and not too cold. I believe the Fed will continue its inflation
watch. In a relatively stable interest rate climate, the loan market should
continue to present attractive income possibilities for investors. EVClassic
Senior Floating-Rate Fund will continue seeking those opportunities in this
growing market.
- ------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
December 31, 1995
GENERAL PORTFOLIO INFORMATION
Total net assets.................................................$1.62 billion
Assets invested in loan interests................................$1.42 billion
Number of borrowers.........................................................85
Industries represented......................................................30
FUNDAMENTAL CHARACTERISTICS OF PORTFOLIO LOANS
Senior....................................................................100%
Secured....................................................................97%
Floating rate.............................................................100%
Commercial & industrial...................................................100%
AVERAGE PORTFOLIO STATISTICS
(DOLLAR-WEIGHTED)
Collateral coverage ratio...........................................1.5 to 1*
Days to interest-rate reset................................................52
Maturity............................................................5.6 years
Size per borrower...............................................$16.7 million
Average size as percent of total net assets.............................1.03%
* At time of purchase
Source: Eaton Vance Management
- ------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN EV CLASSIC SR.
FLOATING-RATE FUND AND THE FEDERAL RESERVE 90-DAY COMMERCIAL PAPER INDEX
From February 28, 1995, through December 31, 1995
- -------------------------------------
CUMULATIVE Life
TOTAL RETURN of Fund*
- -------------------------------------
With Early Withdrawal Charge 5.4%
- -------------------------------------
Without Early Withdrawal Charge 6.4%
- -------------------------------------
[PLOT POINTS]
date C. Sr. Floating 90- Commercial
- -------------------------------------------------
2/95+ 10000 10000
3/95 10079 10050
4/95 10132 10100
5/95 10197 10149
6/95 10261 10198
7/95 10326 10246
8/95 10389 10295
9/95 10450 10343
10/95 10516 10392
11/95 10578 10440
12/95 10642 10488
Past performance is not indicative of future results. Investment returns and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
* Investment operations commenced on 2/24/95.
+ Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the
Fund's investment operations.
FUND PERFORMANCE
In accordance with guidelines issued by the Securities and Exchange Commission,
we are including a performance chart that compares your Fund's total return with
that of a broad-based market index. The lines on the chart represent the total
returns of $10,000 hypothetical investments in the Fund, and the Federal
Reserve's 90-Day Commercial Paper Index.
THE TOTAL RETURN FIGURES
The bold solid line on the chart represents the Fund's performance. The Fund's
total return figure reflects fund expenses and portfolio transaction costs, and
assumes the reinvestment of income dividends and capital gain distributions.
The dotted line represents the performance of the Federal Reserve 90-Day
Commercial Paper Index. The unmanaged Index is composed of corporate commercial
paper rated A1 and P1 by Moody's and Standard & Poor's, respectively, two major
independent ratings agencies. Commercial paper represents short-term obligations
of corporate borrowers, which are usually backed by bank lines of credit.
<PAGE>
EV CLASSIC SENIOR FLOATING-RATE FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investment in Senior Debt Portfolio (Portfolio),
at value (Note 1A)
(identified cost, $494,509,958) $494,459,354
Receivable for Trust shares sold 6,966,389
Deferred organization expenses (Note 1D) 248,583
Prepaid expenses 367,614
------------
Total assets $502,041,940
LIABILITIES:
Dividends payable $799,691
Payable for Trust shares redeemed 32,010
Payable to affiliate --
Trustees' fees 40
Administrator fee 100
Accrued expenses 179,479
--------
Total liabilities 1,011,320
------------
NET ASSETS for 50,152,318 shares of beneficial
interest outstanding $501,030,620
============
SOURCES OF NET ASSETS:
Paid-in capital $501,051,020
Unrealized depreciation of investments from
Portfolio (computed on the basis of identified cost) (50,604)
Undistributed net investment income 30,204
------------
Total $501,030,620
============
NET ASSET VALUE PER SHARE (NOTE 6)
($501,030,620 / 50,152,318 shares of beneficial
interest) $9.99
=====
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the period from the start of business, February 24, 1995, to December 31,
1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Income allocated from Portfolio $15,694,122
Expenses allocated from Portfolio (1,972,213)
-----------
Total investment income $13,721,909
Expenses --
Administration fee (Note 4) $433,285
Compensation of Trustees not members of the
Administrator's organization (Note 4) 3,525
Custodian fees (Note 4) 48,368
Service fee (Note 5) 267,727
Transfer and dividend disbursing agent fees 76,879
Printing and postage 37,038
Legal and accounting services 14,019
Registration fees 80,659
Amortization of organization expense (Note 1D) 50,470
Miscellaneous 5,978
---------
Total expenses 1,017,948
-----------
Net investment income $12,703,961
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain from Portfolio on investment
transactions (identified cost) $ 66,856
Unrealized depreciation on investments (50,604)
--------
Net realized and unrealized gain 16,252
-----------
Net increase in net assets from operations $12,720,213
===========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------
For the period from the start of business, February 24, 1995, to December 31,
1995
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 12,703,961
Net realized gain on investments 66,856
Unrealized depreciation of investments (50,604)
------------
Net increase in net assets from operations $ 12,720,213
------------
Distributions to shareholders (Note 2) --
From net investment income $(12,673,757)
From net realized gain on investment
transactions (66,856)
------------
Total distributions to shareholders $(12,740,613)
------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sales of shares $501,932,098
Net asset value of shares issued to
shareholders in payment of distributions
declared 9,236,474
Cost of shares reacquired in tender offer (10,217,552)
------------
Net increase in net assets from Trust share
transactions $500,951,020
------------
Net increase in net assets $500,930,620
NET ASSETS:
At beginning of period 100,000
------------
At end of period (including undistributed net
investment income of $30,204) $501,030,620
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF CASH FLOWS
- ------------------------------------------------------------------------------
For the period from the start of business, February 24, 1995, to December 31,
1995
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES --
Purchase of Interests in Senior Debt
Portfolio $(495,717,650)
Withdrawal of interests in Senior Debt
Portfolio 14,996,457
Operating expenses paid (1,454,526)
-------------
Net cash used for operating activities $(482,175,719)
-------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES --
Proceeds from shares sold $ 494,965,709
Payments for shares reacquired in tender offers (10,185,542)
Cash distributions paid (excluding
reinvestments of distributions of $9,236,474) (2,704,448)
-------------
Net cash provided from financing activities $ 482,075,719
-------------
Net decrease in cash $ (100,000)
CASH AT BEGINNING OF PERIOD 100,000
-------------
CASH AT END OF PERIOD $ --
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH USED FOR OPERATING
ACTIVITIES:
Net increase in net assets from operations $ 12,720,213
Increase in other assets (367,614)
Increase in deferred organization expenses (149,320)
Increase in payable to affiliates 140
Increase in accrued expenses and other liabilities 80,216
Net increase in investments (494,459,354)
-------------
Net cash used for operating activities $(482,175,719)
=============
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
For the period from the start of business, February 24, 1995, to December 31,
1995
- ------------------------------------------------------------------------------
NET ASSET VALUE, beginning of period $ 10.000
------------
INCOME FROM OPERATIONS:
Net investment income(1) $ 0.634
Net realized and unrealized gain (loss) on
investments (0.008)++
------------
Total income from operations $ 0.626
------------
LESS DISTRIBUTIONS:
From net investment income $ (0.633)
From net realized gain on investment
transactions (0.003)
------------
Total distributions $ (0.636)
------------
NET ASSET VALUE, end of period $ 9.990
============
TOTAL RETURN(2) 6.42%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $501,031
Ratio of net expenses to average daily net
assets(1) 1.66%+
Ratio of net investment income to average
daily net assets 7.04%+
(1) Includes the Fund's share of Senior Debt Portfolio's allocated expenses.
(2) 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 the
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date.
+ Annualized.
++ The per share amount is not in accord with the net realized and unrealized
gain for the period because of the timing of sales of Trust shares and the
amount of the per share realized and unrealized gains and losses at
such time.
See notes to financial statements
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Classic Senior Floating-Rate Fund (the Trust) was formed under a
Declaration of Trust dated August 5, 1993, amended and restated December 7,
1994. The Trust is an entity of the type commonly known as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a non-diversified closed-end management investment company. The
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
(30.5% at December 31, 1995). The performance of the Trust is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the portfolio of investments, are included elsewhere in
this report and should be read in conjunction with the Trust's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATION -- Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Trust's net investment income consists of the 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 principals.
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.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Trust in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
- ------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net investment income of the Trust is determined daily, and substantially
all of the net investment income so determined is declared daily as a dividend
to shareholders of record at the time of declaration. Such daily dividends
will be paid monthly. Distributions of realized capital gains, if any, are
made at least annually. Shareholders may reinvest capital gain distributions
in additional shares of the Trust at the net asset value as of the ex-dividend
date. Distributions are paid in the form of additional shares of the Trust or,
at the election of the shareholder, in cash. The Trust distinguishes between
distributions on a tax basis and a financial reporting basis. Generally
accepted accounting principles require that only distributions in excess of
tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
over-distributions for financial statement purposes only are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital.
At December 31, 1995, $66,856 ($0.003 per share) of dividends from net
investment income were recharacterized for financial statement purposes as
distributions from net realized long-term gains on investment transactions.
- ------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). The
Trust may from time to time, at its discretion, make tender offers at net
asset value for the purchase of all or a portion of its shares. The price will
be established at the close of business on the last day the tender offer is
open. (An early withdrawal charge will be imposed on most shares accepted for
tender which have been held less than one year.) (See Note 6). The Trustees
approved a tender offer for the period from April 24, 1995 to May 19, 1995,
July 24, 1995 to August 18, 1995, October 13, 1995 to November 17, 1995 and
January 22, 1996 to February 16, 1996. Transactions in Trust shares for the
period from the start of business, February 24, 1995, to December 31, 1995
were as follows:
Sales 50,240,529
Issued to shareholders electing to receive payments
of distributions in Trust shares 924,567
Reacquired in tender offer (1,022,778)
----------
Net increase 50,142,318
==========
- ------------------------------------------------------------------------------
(4) TRANSACTIONS WITH AFFILIATES
The administration fee was earned by Eaton Vance Management (EVM) as
compensation for administrative services necessary to conduct the Trust's
business. The fee is computed monthly in the amount of 1/48 of 1% (equivalent
to 0.25% annually) of the average daily gross assets of the Portfolio
attributable to the Trust. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
Except as to Trustees of the Trust and the Portfolio who are not members of
EVM's or BMR's organization, officers and Trustees receive remuneration for
their services to the Trust out of such investment adviser fee. Investors Bank
& Trust Company (IBT) serves as custodian of the Trust and the Portfolio.
Prior to November 10, 1995, IBT was an affiliate of EVM. Pursuant to the
respective custodian agreements, IBT receives a fee reduced by credits which
are determined based on the average cash balances the Trust or the Portfolio
maintains with IBT. All significant credit balances are reported as a
reduction of expenses in the Statement of Operations. Certain of the officers
and Trustees of the Trust and Portfolio are
officers and/or directors/trustees of the above organizations (Note 5).
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Trust has adopted a service plan (the Plan) designed to meet the
requirements of the sales charge rule of the National Association of
Securities Dealers, Inc. as if such rule were applicable.
The Service Plan provides that the Trust may make service fee payments to
the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD), a subsidiary
of Eaton Vance Management, Authorized Firms or other persons in amounts not
exceeding 0.25% of the Trust's average daily net assets for any fiscal year.
The Trustees have initially implemented the Plan by authorizing the Trust to
make quarterly service fee payments to the Principal Underwriter and
Authorized Firms in amounts not exceeding 0.15% of the Trust's average daily
net assets for each fiscal year. The Trust paid or accrued service fees to or
payable to EVD for the period from the start of business, February 24, 1995,
to December 31, 1995, in the amount of $267,727. Service fee payments are made
for personal services and/or the maintenance of shareholder accounts.
Certain of the officers and Trustees of the Trust are officers or directors
of EVD.
- ------------------------------------------------------------------------------
(6) EARLY WITHDRAWAL CHARGE
Eaton Vance Distributors, Inc. (EVD), a subsidiary of Eaton Vance Management,
serves as the Trust's principal underwriter. EVD compensates authorized firms
at a rate of 1% of the purchase price of shares purchased through such firms
consisting of 0.85% of sales commissions and 0.15% service fee (for the first
year's service). EVD also pays additional compensation to each firm equal to
0.60% per annum of the value of Trust shares sold by such firm that are
outstanding for more than one year. A 1% early withdrawal charge to recover
distribution expenses will be charged to tendering shareholders and paid to
EVD in connection with most shares held for less than one year which are
accepted by the Trust for repurchase pursuant to tender offers. The early
withdrawal charge will be imposed on those shares accepted for tender, the
value of which exceeds the aggregate value at the time the tender is accepted
of: (a) all shares in the account purchased more than one year prior to such
acceptance, (b) all shares in the account acquired through reinvestment of
distributions, and (c) the increase, if any, in value of all other shares in
the account (namely those purchased within the one year preceding the
acceptance) over the purchase price of such shares. In determining whether an
early withdrawal charge is payable, it is assumed that the acceptance of a
repurchase offer would be made from the earliest purchase of shares. The total
early withdrawal charges received by EVD for the period from the start of
business, February 24, 1995 to December 31, 1995 amounted to $93,300.
- ------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
Increases and decreases in the Trust's investment in the Portfolio for the
period from February 24, 1995 to December 31, 1995 aggregated $495,717,650 and
$14,996,457, respectively.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF
EV CLASSIC SENIOR FLOATING-RATE FUND:
We have audited the accompanying statement of assets and liabilities of EV
Classic Senior Floating-Rate Fund as of December 31, 1995, and the related
statements of operations, cash flows, changes in net assets, and the financial
highlights for the period from the start of business, February 24, 1995, to
December 31, 1995. 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
audit.
We conducted our audit 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
audit provides 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 EV Classic Senior
Floating-Rate Fund at December 31, 1995, the results of its operations and
cash flows, the changes in its net assets, and its financial highlights for
the period from the start of business, February 24, 1995, to December 31, 1995
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
FEBRUARY 20, 1996
<PAGE>
<TABLE>
<CAPTION>
SENIOR DEBT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
(EXPRESSED IN UNITED STATES DOLLARS)
- ------------------------------------------------------------------------------------------------------------
SENIOR, SECURED, FLOATING-RATE INTERESTS - 87.6%
- ------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE/DEFENSE - 3.4%
FIBERITE, INC.
$ 9,500,000 Term loan, maturing December 31, 2001 $ 9,500,000
Manufactures composite materials for the aerospace industry
HOWMET CORPORATION
7,741,935 Term loan, maturing November 20, 2002 7,741,935
4,258,065 Term loan, maturing May 20, 2003 4,258,065
Manufactures and refurbishes airfoils for turbine engines
TRACOR, INC.
1,368,522 Term loan, maturing October 31, 1998 1,368,522
14,850,000 Term loan, maturing February 28, 2001 14,850,000
Technical services to defense companies
TRANSTECHNOLOGY CORPORATION
7,500,000 Term loan, maturing June 30, 2002 7,500,000
Aerospace and specialty fasteners, rescue winches, and hoists
VSI INDUSTRIES, INC.
9,858,914 Term loan, maturing March 31, 1997 9,858,914
Aerospace and specialty fasteners, and plastics industry tooling
systems
--------------
$ 55,077,436
--------------
AUTO PARTS - 0.5%
STANADYNE AUTOMOTIVE CORP.
$ 7,453,125 Term loan, maturing December 31, 2001 $ 7,453,125
Auto and light truck fuel injection equipment --------------
BEVERAGES/ALCOHOL - 1.2%
LABATT BREWING COMPANY LIMITED
$ 19,800,000 Term loan, maturing October 1, 2003 $ 19,800,000
Manufactures and distributes beer --------------
BROADCAST MEDIA - 6.0%
CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P.
$ 10,000,000 Term loan, maturing September 30, 2004 $ 10,000,000
Cable television provider
CLASSIC CABLE, INC.
11,470,588 Term loan, maturing June 30, 2004 11,470,588
3,529,412 Term loan, maturing June 30, 2005 3,529,412
Cable television provider
COAXIAL COMMUNICATIONS, INC.
16,921,628 Term loan, maturing December 31, 1999 16,921,628
Midwest cable television provider
ELLIS COMMUNICATIONS, INC.
10,296,000 Term loan, maturing March 31, 2003 10,296,000
Broadcast television operator
MARCUS CABLE OPERATING COMPANY, L.P.
35,000,000 Term loan, maturing April 30, 2004 35,000,000
Cable television provider
NORTHLAND CABLE TELEVISION, INC.
7,235,725 Term loan, maturing March 31, 2002 7,235,725
3,500,000 Term loan, maturing September 30, 2003 3,500,000
Cable television provider
--------------
$ 97,953,353
--------------
BUILDING MATERIALS - 2.5%
NATIONAL GYPSUM COMPANY
$ 40,000,000 Term loan, maturing September 21, 2003 $ 40,000,000
Produces and supplies gypsum wallboard --------------
CHEMICALS - 2.1%
FREEDOM CHEMICAL COMPANY
$ 13,200,000 Term loan, maturing June 30, 2002 $ 13,200,000
Organic dyes, pigments, textile chemicals, and other
specialty chemicals
HARRIS SPECIALTY CHEMICALS, INC.
1,507,581 Term loan, maturing December 31, 1999 1,507,581
5,653,637 Term loan, maturing December 31, 2001 5,653,637
5,288,195 Term loan, maturing December 31, 2002 5,288,195
Construction chemicals
INDSPEC CHEMICAL CORP.
7,724,407 Term loan, maturing December 2, 2000 7,724,407
Resorcinol and other specialty chemical products
--------------
$ 33,373,820
--------------
COMMERCIAL SERVICES - 6.7%
AVIALL, INC.
$ 14,662,021 Term loan, maturing November 30, 2000 $ 14,662,021
Turbine engine repair and parts distribution
DECISION SERVCOM, INC.
13,391,304 Term loan, maturing September 30, 2000 13,391,304
Provides multivendor computer maintenance and support services
EH & F, INC.
10,000,000 Term loan, maturing June 30, 2002 10,000,000
24,653,409 Term loan, maturing December 21, 2003 24,653,409
Outdoor advertising
HOSIERY CORP. OF AMERICA
3,333,861 Term loan, maturing October 17, 1999 3,333,861
4,887,500 Term loan, maturing July 31, 2001 4,887,500
Women's hosiery
IRON MOUNTAIN INFORMATION SERVICES, INC.
4,466,250 Term loan, maturing October 31, 2002 4,466,250
Document archive services
NBC MERGER SUB, INC.
7,500,000 Term loan, maturing August 31, 2003 7,500,000
Used college textbook wholesaler
PSI ACQUISITION CORPORATION
2,834,260 Term loan, maturing December 31, 1998 2,834,260
12,750,000 Term loan, maturing December 31, 2000 12,750,000
Diversified consulting services
SELECT BEVERAGES, INC.
4,000,000 Term loan, maturing June 30, 2001 4,000,000
6,000,000 Term loan, maturing June 30, 2002 6,000,000
Soft drink bottler
--------------
$ 108,478,605
--------------
COMMUNICATION EQUIPMENT - 1.8%
COMMUNICATIONS & POWER INDUSTRIES, INC.
$ 2,083,333 Term loan, maturing August 11, 2000 $ 2,083,333
5,666,667 Term loan, maturing August 12, 2002 5,666,667
Microwave, electronic, and radio frequency components
DICTAPHONE ACQUISITION INC.
14,000,000 Term loan, maturing June 30, 2002 14,000,000
Manufactures, markets, and services communication systems
K-TEC HOLDINGS, INC.
3,500,000 Term loan, maturing January 31, 2003 3,500,000
4,000,000 Term loan, maturing January 31, 2004 4,000,000
Manufactures and services telephone, television, and wireless
communications equipment
--------------
$ 29,250,000
--------------
CONGLOMERATES - 4.8%
FENWAY HOLDINGS, L.L.C.
$ 15,000,000 Term loan, maturing September 15, 2002 $ 15,000,000
Manufactures and distributes billiard tables, dart machines, wood
mouldings, windows, doors, artificial flowers, archery bows, and
plastics.
SPALDING & EVENFLO COMPANIES, INC.
12,326,389 Term loan, maturing October 13, 2002 12,326,389
Sporting goods and infant products
WESTINGHOUSE ELECTRIC CORPORATION
50,833,333 Term loan, maturing August 1, 1997 50,833,333
Television and radio broadcasting, defense, electronics and other
manufacturing
--------------
$ 78,159,722
--------------
CONTAINERS - METAL & GLASS - 2.0%
CALMAR, INC.
$ 5,985,000 Term loan, maturing September 15, 2003 $ 5,985,000
4,488,750 Term loan, maturing June 15, 2004 4,488,750
Plastic sprayers and dispensers
SILGAN CORP.
21,978,000 Term loan, maturing March 15, 2002 21,978,000
Metal and plastic packaging products
--------------
$ 32,451,750
--------------
CONTAINERS - PAPER - 6.7%
IPC, INC.
$ 9,000,000 Term loan, maturing September 30, 2001 $ 9,000,000
Plastic and paper packaging products
JEFFERSON SMURFIT CORP.
25,103,275 Term loan, maturing April 30, 2001 25,103,275
18,761,831 Term loan, maturing April 30, 2002 18,761,831
Liner board and other paper board products
STONE CONTAINER CORP.
39,676,179 Term loan, maturing April 1, 2000 39,676,179
16,000,000 Term loan, maturing October 1, 2003 16,000,000
Commodity pulp, paper and packaging products
--------------
$ 108,541,285
--------------
COSMETICS - 0.4%
MARY KAY COSMETICS, INC.
$ 6,923,077 Term loan, maturing June 6, 2001 $ 6,923,077
Cosmetics, skin and hair care, and perfume products --------------
ELECTRONICS - INSTRUMENTATION - 1.1%
BERG ELECTRONICS, INC.
$ 11,800,000 Term loan, maturing March 31, 2001 $ 11,800,000
Electronic connectors
SPERRY MARINE, INC.
6,341,463 Term loan, maturing December 31, 2000 6,341,463
Marine navigational equipment
--------------
$ 18,141,463
--------------
FOOD WHOLESALERS - 3.7%
CATERAIR INTERNATIONAL CORPORATION
$ 9,116,363 Term loan, maturing September 15, 2001 $ 9,116,363
Food service to airlines
FAVORITE BRANDS INTERNATIONAL, INC.
12,193,548 Term loan, maturing September 30, 2002 12,193,548
Manufactures and markets marshmallows and caramels
SC INTERNATIONAL SERVICES, INC.
11,361,058 Term loan, maturing September 15, 2002 11,361,058
2,506,116 Term loan, maturing September 15, 2003 2,506,116
Food service to airlines
U.S. FOODSERVICE, INC.
2,658,824 Term loan, maturing December 31, 1998 2,658,824
14,629,856 Term loan, maturing June 30, 2000 14,629,856
Food distributor to business
VOLUME SERVICES, INC.
5,000,000 Term loan, maturing October 31, 2002 5,000,000
2,500,000 Term loan, maturing October 31, 2003 2,500,000
Provides food services for civic centers and sports facilities
--------------
$ 59,965,765
--------------
FOODS - 2.2%
SPECIALTY FOODS CORPORATION
$ 34,950,000 Term loan, maturing April 30, 2001 $ 34,950,000
Bread and cheese products --------------
LEISURE - 5.8%
AMFAC PARKS, INC.
$ 8,333,333 Term loan, maturing September 30, 2002 $ 8,333,333
Provides lodging, food and beverage services to national and state
parks
METRO-GOLDWYN-MAYER, INC.
15,000,000 Term loan, maturing April 15, 1997 15,000,000
Film and television production and distribution
ORION PICTURES CORPORATION
8,281,502 Term loan, maturing December 31, 2000 8,281,502
Film and television production and distribution
SIX FLAGS THEME PARKS, INC.
11,730,000 Term loan, maturing June 23, 2003 11,730,000
Amusement parks
VIACOM, INC.
50,000,000 Term loan, maturing December 31, 1996 50,000,000
Television and motion picture entertainment
--------------
$ 93,344,835
--------------
MACHINERY - 0.6%
MERKLE KORFF INDUSTRIES, INC.
$ 9,953,704 Term loan, maturing March 31, 2003 $ 9,953,704
Manufactures fractional horsepower motors --------------
MANUFACTURING - DIVERSIFIED - 3.7%
INTERLAKE CORP.
$ 8,197,467 Term loan, maturing September 27, 1996 $ 8,197,467
Engineered materials
INTERMETRO INDUSTRIES CORP.
3,343,090 Term loan, maturing June 30, 2001 3,343,090
4,790,179 Term loan, maturing December 31, 2002 4,790,179
Shelving
INTERNATIONAL WIRE GROUP, INC.
9,992,424 Term loan, maturing September 30, 2002 9,992,424
Manufactures and markets copper wire and harnesses
INTESYS TECHNOLOGIES, INC.
5,000,000 Term loan, maturing December 31, 2001 5,000,000
Plastic injection molding and fabricated battery packs
JACKSON PRODUCTS, INC.
7,480,434 Term loan, maturing September 1, 2002 7,480,434
7,481,250 Term loan, maturing September 1, 2003 7,481,250
Manufactures and distributes safety equipment and reflective beads
THERMADYNE HOLDINGS CORP.
14,200,997 Term loan, maturing February 1, 2001 14,200,997
Cutting and welding products and floor cleaning equipment
--------------
$ 60,485,841
--------------
MEDICAL PRODUCTS - 0.3%
GRAPHIC CONTROLS CORPORATION
$ 5,000,000 Term loan, maturing September 28, 2003 $ 5,000,000
Recording and monitoring devices --------------
OFFICE EQUIPMENT - 1.2%
WILLIAMHOUSE-REGENCY OF DELAWARE, INC.
$ 8,666,667 Term loan, maturing October 31, 2002 $ 8,666,667
6,000,000 Term loan, maturing October 31, 2003 6,000,000
5,333,333 Term loan, maturing February 28, 2004 5,333,333
Paper-based office products
--------------
$ 20,000,000
--------------
PAPER AND FOREST PRODUCTS - 6.2%
CROWN PAPER CO.
$ 24,937,500 Term loan maturing August 22, 2003 $ 24,937,500
Manufactures coated groundwood and uncoated free paper
FORT HOWARD CORP.
25,000,000 Term loan maturing March 8, 2002 25,000,000
15,000,000 Term loan maturing December 31, 2002 15,000,000
Sanitary tissue paper products
SDW ACQUISITION CORP.
35,280,473 Term loan, maturing December 20, 2002 35,280,473
Major U.S. producer of coated free paper
--------------
$ 100,217,973
--------------
PUBLISHING - 2.6%
KRUEGER RINGIER, INC.
$ 6,376,956 Term loan, maturing December 31, 1997 $ 6,376,956
6,096,786 Term loan, maturing December 31, 1998 6,096,786
Printers and binders of mass market and hardcover books
ZIFF-DAVIS PUBLISHING COMPANY
14,909,034 Term loan, maturing December 31, 2001 14,909,034
14,181,617 Term loan, maturing December 31, 2002 14,181,617
Computer publications publisher
--------------
$ 41,564,393
--------------
PUBLISHING - NEWSPAPERS - 1.5%
AMERICAN MEDIA OPERATIONS, INC.
$ 4,455,000 Term loan, maturing September 30, 2002 $ 4,455,000
Weekly periodical publisher
JOURNAL NEWS, INC.
20,000,000 Term loan, maturing December 31, 2001 20,000,000
Suburban newspaper
--------------
$ 24,455,000
--------------
RESTAURANTS - 2.3%
AMERICA'S FAVORITE CHICKEN COMPANY
$ 21,657,426 Term loan, maturing November 5, 1998 $ 21,657,426
Church's Fried Chicken and Popeye's restaurants
LONG JOHN SILVER'S RESTAURANTS, INC.
14,924,095 Term loan, maturing December 31, 1996 14,924,095
Seafood restaurants
--------------
$ 36,581,521
--------------
RETAIL - SPECIALTY - 2.2%
CAMELOT MUSIC, INC.
$ 4,924,057 Term loan, maturing February 28, 2001 $ 4,924,057
Music stores
GRIFFITH CONSUMERS COMPANY
10,694,444 Term loan, maturing December 31, 2002 10,694,444
Retail petroleum distributor
QVC, INC.
20,000,000 Term loan, maturing January 31, 2004 20,000,000
Home shopping retailer
--------------
$ 35,618,501
--------------
RETAIL STORES - DRUG STORES - 2.5%
DUANE READE, INC.
$ 5,016,667 Term loan, maturing December 31, 1997 $ 5,016,667
Retail drug stores
THRIFTY PAYLESS, INC.
6,562,509 Term loan, maturing March 31, 2000 6,562,509
28,333,333 Term loan, maturing June 30, 2002 28,333,333
Retail drug stores
--------------
$ 39,912,509
--------------
RETAIL STORES - FOOD CHAINS - 8.1%
DOMINICK'S FINER FOODS, INC.
$ 3,317,031 Term loan, maturing March 31, 2002 $ 3,317,031
8,223,043 Term loan, maturing March 31, 2003 8,223,043
9,217,980 Term loan, maturing September 30, 2003 9,217,980
Supermarket chain in Chicago
GRAND UNION COMPANY
26,628,890 Term loan, maturing June 15, 2002 26,628,890
Supermarket chain in the Northeast
PATHMARK STORES, INC.
32,030,952 Term loan, maturing October 31, 1999 32,030,952
Supermarket chain in mid-Atlantic states
RALPHS GROCERY COMPANY
3,221,257 Revolving loan, maturing June 15, 2001 3,221,257
6,672,703 Term loan, maturing June 15, 2001 6,672,703
9,277,215 Term loan, maturing June 15, 2002 9,277,215
9,277,216 Term loan, maturing June 15, 2003 9,277,216
9,277,216 Term loan, maturing June 15, 2004 9,277,216
Third largest supermarket chain in Southern California
STAR MARKET COMPANY, INC.
10,315,790 Term loan, maturing December 31, 2001 10,315,790
4,210,526 Term loan, maturing December 31, 2002 4,210,526
Supermarket chain in Massachusetts
--------------
$ 131,669,819
--------------
STEEL - 0.3%
UCAR INTERNATIONAL, INC.
$ 4,937,553 Term loan, maturing December 31, 2002 $ 4,937,553
Processing materials for steel industry --------------
TELECOMMUNICATIONS - 3.9%
MOBILEMEDIA COMMUNICATIONS, INC.
$ 6,666,667 Term loan, maturing June 30, 2002 $ 6,666,667
Paging service provider
PAGING NETWORK, INC.
18,750,000 Term loan, maturing March 31, 2002 18,750,000
Paging service provider
WORLDCOM, INC.
38,328,446 Term loan, maturing December 31, 1996 38,328,446
Long distance telecommunications provider
--------------
$ 63,745,113
--------------
TEXTILES - 1.3%
BLACKSTONE CAPITAL COMPANY II, L.L.C.
$ 5,000,000 Term loan, maturing January 13, 1997 $ 5,000,000
Automotive products, residential upholstery fabrics, and
wallcoverings
LONDON FOG INDUSTRIES, INC.
9,582,314 Term loan, maturing May 31, 2002 8,911,552
1,971,219 Term loan, maturing May 31, 2002* 1,655,824
Outerwear
WASSERSTEIN/C & A HOLDINGS, L.L.C.
5,000,000 Term loan, maturing January 13, 1997 5,000,000
Automotive products, residential upholstery fabrics, and
wallcoverings
--------------
$ 20,567,376
--------------
TOTAL LOAN INTERESTS (IDENTIFIED COST, $1,420,258,523) $1,418,573,539
--------------
- ------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 0.4%
- ------------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------
54,895 America's Favorite Chicken Company, 8% Preferred Stock $ 4,035,880
5,845,956 London Fog Industries, Inc., 17.5% Preferred Stock* 3,178,220
--------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $10,014,473) $ 7,214,100
--------------
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 11.3%
- ------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT DESCRIPTION
- ------------------------------------------------------------------------------------------------------------
$ 70,000,000 CXC,Inc., 5.90%, 1/2/96 $ 69,965,583
8,000,000 Coca-Cola Co., 5.72%, 1/2/96 7,994,915
64,155,000 General Electric Capital Co., 5.75%, 1/2/96 64,124,259
11,400,000 Lincoln National Corp., 5.85%, 1/2/96 11,394,442
26,990,000 A1 Credit Corp., 5.85%, 1/2/96 26,976,843
3,311,000 Melville Corp., 5.90%, 1/2/96 3,309,372
--------------
TOTAL SHORT-TERM INVESTMENTS, AT AMORTIZED COST $ 183,765,414
--------------
TOTAL INVESTMENTS (IDENTIFIED COST, $1,614,038,410) - 99.3% $1,609,553,053
OTHER ASSETS, LESS LIABILITIES - 0.7% 11,785,799
--------------
TOTAL NET ASSETS - 100% $1,621,338,852
==============
* Non-income producing security.
Note: The description of the principal business for each security set forth above is unaudited.
See notes to financial statements
</TABLE>
<PAGE>
----------------------
SENIOR DEBT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
(Expressed in United States Dollars)
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$1,614,038,410) $1,609,553,053
Cash 7,058,508
Receivable for investments sold 346,347
Interest receivable 11,043,182
Deferred organization expenses (Note 1D) 44,040
Prepaid expenses 655,818
--------------
Total assets $1,628,700,948
LIABILITIES:
Deferred facility fee income (Note 1B) $7,236,000
Trustees' fees payable 4,975
Accrued expenses 121,121
----------
Total liabilities 7,362,096
--------------
NET ASSETS applicable to investors' interest
in Portfolio $1,621,338,852
==============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $1,625,824,209
Unrealized depreciation of investments
(computed on the basis of identified cost) (4,485,357)
--------------
Total $1,621,338,852
==============
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------------------------
For the period from the start of business, February 22, 1995, to December 31, 1995
(Expressed in United States Dollars)
- ----------------------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
<S> <C> <C>
Interest income $79,409,986
Facility fees earned 3,166,902
-----------
Total income $82,576,888
Expenses --
Investment advisory fee (Note 2) $8,544,646
Compensation of Trustees not members of the Investment
Adviser's organization (Note 2) 15,442
Custodian fee (Note 2) 391,775
Interest expense 578,113
Legal and accounting services 404,377
Amortization of organization expenses (Note 1D) 5,504
Miscellaneous 517,339
----------
Total expenses 10,457,196
-----------
Net investment income $72,119,692
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions $1,214,316
Change in unrealized depreciation of investments (1,760,430)
-----------
Net realized and unrealized loss on investments (546,114)
-----------
Net increase in net assets from operations $71,573,578
===========
</TABLE>
See notes to financial statements
<PAGE>
STATEMENT OF CASH FLOWS
- ------------------------------------------------------------------------------
For the period from the start of business, February 22, 1995,
to December 31, 1995
(Expressed in United States Dollars)
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES --
Purchase of loan interests $(1,194,325,622)
Proceeds from sales and principal repayments 351,061,697
Interest received 75,242,985
Facility fees received 6,697,569
Interest paid (801,440)
Operating expenses paid (9,691,998)
Net increase in short-term investments (136,857,076)
---------------
Net cash used for operating activities $ (908,673,885)
---------------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES --
Proceeds from capital contributions $ 1,050,247,987
Payments for capital withdrawals (134,615,604)
---------------
Net cash provided from financing activities $ 915,632,383
---------------
Net increase in cash $ 6,958,498
CASH AT BEGINNING OF PERIOD 100,010
---------------
CASH AT END OF PERIOD $ 7,058,508
===============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net increase in net assets from operations $ 71,573,578
Increase in receivable for investments sold (193,389)
Increase in interest receivable (4,167,001)
Increase in prepaid expenses (76,202)
Increase in deferred organization expenses (17,833)
Increase in deferred facility fee income 3,530,667
Increase in accrued expenses and other liabilities 80,489
Net increase in investments (979,404,194)
---------------
Net cash used for operating activities $ (908,673,885)
===============
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
For the period from the start of business, February 22, 1995,
to December 31, 1995
(Expressed in United States Dollars)
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 72,119,692
Net realized gain on investments 1,214,316
Change in unrealized appreciation of
investments (1,760,430)
---------------
Net increase in net assets from
operations $ 71,573,578
---------------
Capital transactions --
Contributions $ 1,684,280,868
Withdrawals (134,615,604)
---------------
Increase in net assets from capital
transactions $ 1,549,665,264
---------------
Total increase in net assets $ 1,621,238,842
NET ASSETS:
At beginning of period 100,010
---------------
At end of period $ 1,621,338,852
===============
- ------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
For the period from the start of business, February 22, 1995
to December 31, 1995
- ------------------------------------------------------------------------------
RATIOS (to average daily net assets):
Operating expenses 1.01%+
Interest expense 0.13%+
Net investment income 7.95%+
PORTFOLIO TURNOVER 39%
+Annualized
See notes to financial statements
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Senior Debt Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a non-diversified closed-end investment company which
was organized as a trust under the laws of the State of New York on May 1,
1992. The Declaration of Trust permits the Trustees to issue interests in the
Portfolio. Investment operations began on February 22, 1995, with the
acquisition of securities with a value of $583,240,521, including unrealized
depreciation of $2,724,927, in exchange for an interest in the Portfolio by
one of the Portfolio's investors. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
accounting principles generally accepted in the United States of America.
A. INVESTMENT VALUATION -- The Portfolio's investments in interests in loans
(Loan Interests) are valued at fair value by the Portfolio's investment
adviser, Boston Management and Research, under procedures established by the
Trustees as permitted by Section 2(a)(41) of the Investment Company Act of
1940. Such procedures include the consideration of relevant factors, data and
information relating to fair value, including (i) the characteristics of and
fundamental analytical data relating to the Loan Interest, including the cost,
size, current interest rate, period until next interest rate reset, maturity
and base lending rate of the Loan Interest, the terms and conditions of the
loan and any related agreements and the position of the loan in the borrower's
debt structure; (ii) the nature, adequacy and value of the collateral,
including the Portfolio's rights, remedies and interests with respect to the
collateral; (iii) the creditworthiness of the borrower, based on evaluations
of its financial condition, financial statements and information about the
borrower's business, cash flows, capital structure and future prospects; (iv)
information relating to the market for the Loan Interest including price
quotations for and trading in the Loan Interest and interests in similar loans
and the market environment and investor attitudes towards the Loan Interest
and interests in similar loans; (v) the reputation and financial condition of
the agent bank and any intermediate participant in the loan; and (vi) general
economic and market conditions affecting the fair value of the Loan Interest.
Other portfolio securities (other than short-term obligations, but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-sized
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. In certain circumstances,
portfolio securities will be valued at the last sales price on the exchange
that is the primary market for such securities, or the last quoted bid price
for those securities for which the over-the-counter market is the primary
market or for listed securities in which there were no sales during the day.
The value of interest rate swaps will be determined in accordance with a
discounted present value formula and then confirmed by obtaining a bank
quotation. Short-term obligations which mature in sixty days or less are
valued at amortized cost, if their original term to maturity when acquired by
the Portfolio was 60 days or less, or are valued at amortized cost using their
value on the 61st day prior to maturity, if their original term to maturity
when acquired by the Portfolio was more than 60 days, unless in each case this
is determined not to represent fair value. Repurchase agreements are valued at
cost plus accrued interest. Other portfolio securities for which there are no
quotations or valuations are valued at fair value as determined in good faith
by or on behalf of the Trustees.
B. INCOME -- Interest income from Loan Interests is recorded on the accrual
basis at the then-current interest rate, while all other interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or discount when required for federal income tax purposes. Facility
fees received are recognized as income over the expected term of the loan.
C. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors each
investor's distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deductions
or credit.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
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(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment advisory fee is earned by Boston Management and Research (BMR)
as compensation for investment advisory services rendered to the Portfolio.
The fee is computed at the monthly rate of 19/240 of 1% (0.95% per annum) of
the Portfolio's average daily gross assets up to and including $1 billion and
at reduced rates as daily gross assets exceed that level. For the period from
the start of business, February 22, 1995, to December 31, 1995, the effective
annual rate, based on average daily gross assets, was 0.94% (annualized) and
amounted to $8,544,646. Except as to Trustees of the Portfolio who are not
members of BMR's organization, officers and Trustees receive remuneration for
their services to the Portfolio out of such investment advisory fee. Investors
Bank & Trust Company (IBT) serves as custodian of the Portfolio. Prior to
November 10, 1995, IBT was an affiliate of EVM. Pursuant to the custodian
agreement, IBT receives a fee reduced by credits which are determined based on
average daily cash balances the Portfolio maintains with IBT. All significant
credit balances are reported as a reduction of expenses in the statement of
operations. Certain of the officers and Trustees of the Portfolio are officers
and directors/trustees of the above organizations. Trustees of the Portfolio
that are not affiliated with the Investment Advisor may elect to defer receipt
of all or a percentage of their annual fees in accordance with the terms of
the Trustees Deferred Compensation Plan. For the period from the start of
business, February 22, 1995, to December 31, 1995, no significant amounts have
been deferred.
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(3) INVESTMENTS
The Portfolio invests primarily in Loan Interests. The ability of the issuers
of the Loan Interests to meet their obligations may be affected by economic
developments in a specific industry. The cost of purchases and the proceeds
from principal repayments and sales of Loan Interests for the period from the
start of business, February 22, 1995, to December 31, 1995, aggregated
$1,194,325,622 and $351,255,086, respectively.
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(4) SHORT-TERM DEBT AND CREDIT AGREEMENTS
The Portfolio participates with other funds and portfolios managed by BMR and
Eaton Vance Management (EVM) in a $120 million unsecured line of credit
agreement with a bank. The line of credit consists of a $20 million committed
facility and a $100 million discretionary facility. Borrowings will be made by
the Portfolio solely to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. Interest is charged to each
portfolio based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of
deposit rate, or a federal funds effective rate. In addition, a fee computed
at an annual rate of 1/4 of 1% on the $20 million committed facility and on
the daily unused portion of the $100 million discretionary facility is
allocated among the participating funds and portfolios at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees under this agreement during the period.
The Portfolio has also entered into a revolving credit agreement, that will
allow the Portfolio to borrow an additional $245 million to support the
issuance of commercial paper and to permit the Portfolio to invest in
accordance with its investment practices. Interest is charged under the
revolving credit agreement at the bank's base rate or at an amount above
either the bank's adjusted Libor rate or adjusted certificate of deposit rate.
Interest expense includes a commitment fee of approximately $534,665 which is
computed at the annual rate of 1/4 of 1% on the unused portion of the
revolving credit agreement. There were no borrowings under this agreement
during the period from the start of business, February 22, 1995, to December
31, 1995. As of December 31, 1995, the Portfolio had no commercial paper
outstanding.
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(5) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES
The cost and unrealized appreciation/depreciation in the value of investments
owned at December 31, 1995, as computed on a federal income tax basis, were as
follows:
Aggregate cost $1,614,038,410
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Gross unrealized depreciation $ 4,485,357
Gross unrealized appreciation --
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Net unrealized depreciation $ 4,485,357
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<PAGE>
INDEPENDENT AUDITORS' REPORT
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TO THE TRUSTEES AND INVESTORS OF
SENIOR DEBT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Senior Debt Portfolio as of
December 31, 1995, and the related statements of operations, cash flows,
changes in net assets and the supplementary data 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and supplementary data are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities and Loan Interests owned at December 31, 1995 by
correspondence with the custodian and selling or agent banks; where replies
were not received from selling or agent banks, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present
fairly, in all material respects, the financial position of Senior Debt
Portfolio as of December 31, 1995, the results of its operations and its cash
flows, the changes in its net assets, and its supplementary data for the
period from the start of business, February 22, 1995, to December 31, 1995, in
conformity with accounting principles generally accepted in the United States
of America.
As discussed in Note 1A, the financial statements include Loan Interests and
certain other securities held by Senior Debt Portfolio valued at $1,425,787,639
(88% of net assets of the Portfolio), which values are fair values determined by
the Portfolio's investment adviser in the absence of actual market values.
Determination of fair value involves subjective judgment, as the actual market
value of a particular Loan Interest or security can be established only by
negotiation between the parties in a sales transaction. We have reviewed the
procedures established by the Trustees and used by the Portfolio's investment
adviser in determining the fair values of such Loan Interests and securities and
have inspected underlying documentation, and in the circumstances, we believe
that the procedures are reasonable and the documentation appropriate.
DELOITTE & TOUCHE
GRAND CAYMAN, CAYMAN ISLANDS
BRITISH WEST INDIES
FEBRUARY 20, 1996
<PAGE>
INVESTMENT MANAGEMENT
EV CLASSIC OFFICERS INDEPENDENT TRUSTEES
SENIOR FLOATING- JAMES B. HAWKES DONALD R. DWIGHT
RATE FUND President and Trustee President, Dwight
24 Federal Street M. DOZIER GARDNER Partners, Inc.
Boston, MA 02110 Vice President and Chairman, Newspapers
Trustee of New England, Inc.
JEFFREY S. GARNER SAMUEL L. HAYES, III
Vice President Jacob H. Schiff
JAMES L. O'CONNOR Professor of
Treasurer Investment Banking,
THOMAS OTIS Harvard
Secretary University Graduate
School of
Business Administration
NORTON H. REAMER
President and Director,
United Asset
Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
--------------------------------------------------
SENIOR DEBT OFFICERS INDEPENDENT TRUSTEES
PORTFOLIO JAMES B. HAWKES DONALD R. DWIGHT
24 Federal Street President and Trustee President, Dwight
Boston, MA 02110 M. DOZIER GARDNER Partners, Inc.
Vice President and Chairman, Newspapers
Trustee of
JEFFREY S. GARNER New England, Inc.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff
WILLIAM CHISHOLM Professor of
Vice President Investment Banking,
RAYMOND O'NEILL Harvard University
Vice President Graduate School of
MICHEL NORMANDEAU Business Administration
Vice President NORTON H. REAMER
JAMES L. O'CONNOR President and Director,
Treasurer United Asset
THOMAS OTIS Management Corporation
Secretary JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
