The Senior Debt Portfolio
[Logo]
Annual Shareholder Report
December 31, 1995
Investment Adviser of Senior Debt Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Fund Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
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
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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
--------------
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PREFERRED STOCKS - 0.4%
- ------------------------------------------------------------------------------------------------------------
SHARES SECURITY VALUE
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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
--------------
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SHORT-TERM INVESTMENTS - 11.3%
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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
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SENIOR DEBT PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
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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
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STATEMENT OF OPERATIONS
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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
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STATEMENT OF CASH FLOWS
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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
===============
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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
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(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
==============
Gross unrealized depreciation $ 4,485,357
Gross unrealized appreciation --
--------------
Net unrealized depreciation $ 4,485,357
==============
<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 FOR SENIOR DEBT PORTFOLIO
OFFICERS INDEPENDENT TRUSTEES
JAMES B. HAWKES DONALD R. DWIGHT
President, Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of New England,
M. DOZIER GARDNER Inc.
Vice President, Trustee
SAMUEL L. HAYES, III
WILLIAM CHISHOLM Jacob H. Schiff Professor of
Vice President Investment Banking,
Harvard University Graduate School
JEFFREY S. GARNER . of Business Administration
Vice President and
Portfolio Manager NORTON H. REAMER
President and Director, United Asset
RAYMOND O'NEILL Management Corporation
Vice President
JOHN L. THORNDIKE
MICHEL NORMANDEAU Vice President and Director,
Vice President Fiduciary Company Incorporated
JAMES L. O'CONNOR JACK L. TREYNOR
Treasurer Investment Adviser and Consultant
THOMAS OTIS
Secretary
