<PAGE>
Senior Debt Portfolio
Semiannual Shareholder Report
June 30, 1997
Investment Adviser Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
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
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group, Inc.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Banking Counsel
Mayer, Brown & Platt
787 Seventh Avenue
New York, NY 10019
Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
<PAGE>
Senior Debt Portfolio as of June 30, 1997
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PORTFOLIO OF INVESTMENTS
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(EXPRESSED IN UNITED STATES DOLLARS)
SENIOR, SECURED, FLOATING-RATE INTERESTS -- 87.2%
PRINCIPAL
AMOUNT BORROWER/BUSINESS DESCRIPTION VALUE
- --------------------------------------------------------------------------------
Aerospace/Defense -- 1.4%
- --------------------------------------------------------------------------------
AEROSTRUCTURES CORPORATION
$ 7,111,111 Term loan, maturing March 29, 2002 $ 7,111,111
8,674,286 Term loan, maturing September 30, 2003 8,674,286
3,154,285 Term loan, maturing September 30, 2004 3,154,285
Designs, manufactures, and assembles structural
aircraft components
FIBERITE, INC.
9,296,429 Term loan, maturing December 31, 2001 9,296,429
Manufactures composite materials for the aerospace
industry
MAG AEROSPACE INDUSTRIES, INC.
4,975,000 Term loan, maturing December 6, 2003 4,975,000
Manfactures toilet systems for the aerospace industry
SHARED TECHNOLOGIES FAIRCHILD COMMUNICATIONS, INC.
4,000,000 Term loan, maturing March 30, 2001 4,000,000
Aerospace and specialty fasteners, and plastics
industry tooling systems
TRANSTECHNOLOGY CORPORATION
796,251 Revolving loan, maturing December 31, 2000 796,251
1,796,667 Term loan, maturing December 31, 2000 1,796,667
7,200,000 Term loan, maturing June 30, 2002 7,200,000
Aerospace and specialty fasteners, rescue winches,
and hoists
TRI-STAR INC.
5,000,000 Term loan, maturing September 30, 2003 5,000,000
Distributor of aerospace fasteners
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$ 52,004,029
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Automotive -- 2.4%
- --------------------------------------------------------------------------------
CAMBRIDGE INDUSTRIES, INC.
$ 7,507,629 Term loan, maturing May 17, 2002 $ 7,507,629
8,445,561 Term loan, maturing May 17, 2003 8,445,561
3,753,695 Term loan, maturing May 17, 2004 3,753,695
Original equipment manufacturer of plastic
auto parts
CSK AUTO, INC.
13,000,000 Term loan, maturing October 31, 2003 13,000,000
Retailer of automotive parts and accessories
EXIDE CORPORATION
7,980,000 Term loan, maturing June 15, 2001 7,980,000
Manufactures electrical components for automobiles
HAYES WHEELS INTERNATIONAL, INC.
7,131,758 Term loan, maturing July 31, 2004 7,131,758
5,790,464 Term loan, maturing July 31, 2005 5,790,464
Producer of automotive brakes and wheels
SAFELITE GLASS CORPORATION
0 Revolving loan, maturing December 20, 2002 0
10,000,000 Term loan, maturing December 20, 2002 10,000,000
8,500,000 Term loan, maturing December 20, 2004 8,500,000
Auto glass replacement and repair service provider
SCHRADER, INC.
3,067,176 Term loan, maturing February 28, 2001 3,067,176
3,937,974 Term loan, maturing February 28, 2001 3,937,974
Produces tire valves and accessories, and pneumatic
connectors
STANADYNE AUTOMOTIVE CORP.
6,976,021 Term loan, maturing December 31, 2001 6,976,021
Auto and light truck fuel injection equipment
- --------------------------------------------------------------------------------
$ 86,090,278
- --------------------------------------------------------------------------------
Broadcast Media -- 11.8%
- --------------------------------------------------------------------------------
AMERICAN RADIO SYSTEMS CORPORATION
$ 8,095,000 Revolving loan, maturing December 31, 2004 $ 8,095,000
295,000 Term loan, maturing December 31, 2004 295,000
Radio broadcasting
BENEDEK BROADCASTING CORPORATION
11,375,080 Term loan, maturing May 1, 2001 11,375,080
11,760,090 Term loan, maturing November 1, 2002 11,760,090
Broadcast television operator
CABLEVISION OF CLEVELAND, G.P., INC.
12,000,000 Term loan, maturing December 31, 2005 12,000,000
Cable television provider
CHANCELLOR RADIO BROADCASTING COMPANY
595,108 Revolving loan, maturing January 31, 2003 595,108
2,608,695 Term loan, maturing January 31, 2003 2,608,695
Radio broadcasting
CHARTER COMMUNICATIONS ENTERTAINMENT I, L.P.
5,000,000 Term loan, maturing December 31, 2003 5,000,000
Cable television provider
CHARTER COMMUNICATIONS ENTERTAINMENT II, L.P.
14,000,000 Term loan, maturing March 31, 2005 14,000,000
Cable television provider
CHELSEA COMMUNICATIONS, INC.
8,870,370 Revolving loan, maturing December 31, 2004 8,870,370
10,000,000 Term loan, maturing December 31, 2004 10,000,000
Cable television provider
CLASSIC CABLE, INC.
3,014,223 Term loan, maturing June 30, 2004 3,014,223
9,796,224 Term loan, maturing June 30, 2005 9,796,224
Cable television provider
EVERGREEN MEDIA CORPORATION OF LOS ANGELES
428,571 Revolving loan, maturing June 30, 2005 428,571
53,571,429 Term loan, maturing June 30, 2005 53,571,429
Radio broadcasting
FALCON CABLE MEDIA
7,338,461 Revolving loan, maturing March 31, 2003 7,338,461
22,000,000 Term loan, maturing July 12, 2005 22,000,000
Cable television provider
INTERMEDIA PARTNERS IV, L.P.
15,500,000 Term loan, maturing January 1, 2005 15,500,000
Cable television provider
JACOR COMMUNICATIONS COMPANY
9,226,700 Term loan, maturing June 12, 2004 9,226,700
Radio broadcasting
KATZ MEDIA CORPORATION
6,666,667 Term loan, maturing December 31, 2004 6,666,667
Full service media representation firm
MARCUS CABLE OPERATING COMPANY, L.P.
49,645,796 Term loan, maturing December 31, 2002 49,645,796
35,000,000 Term loan, maturing April 30, 2004 35,000,000
Cable television provider
SINCLAIR BROADCASTING GROUP, INC.
42,400,000 Term loan, maturing December 31, 2004 42,400,000
Broadcast television operator
SULLIVAN BROADCASTING COMPANY, INC.
16,405,358 Term loan, maturing December 31, 2003 16,405,358
Broadcast television operator
TCI PACIFIC, INC.
11,714,286 Revolving loan, maturing September 30, 2004 11,714,286
47,500,000 Term loan, maturing December 31, 2004 47,500,000
Cable television provider
YOUNG BROADCASTING, INC.
677,340 Revolving loan, maturing September 30, 2003 677,340
4,636,440 Term loan, maturing September 30, 2003 4,636,440
Owner and operator of network affiliated television
stations
- --------------------------------------------------------------------------------
$ 420,120,838
- --------------------------------------------------------------------------------
Building Materials -- 1.7%
- --------------------------------------------------------------------------------
FALCON BUILDING PRODUCTS, INC.
$10,750,000 Term loan, maturing June 30, 2005 $ 10,750,000
Manufactures and distributes air distribution
equipment, plumbing fixtures and air compressors
NATIONAL GYPSUM COMPANY
49,791,319 Term loan, maturing September 20, 2003 49,791,319
Produces gypsum wallboard
- --------------------------------------------------------------------------------
60,541,319
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Chemicals -- 4.3%
- --------------------------------------------------------------------------------
GEO SPECIALTY CHEMICALS, INC.
$ 5,000,000 Term loan, maturing March 25, 2004 $ 5,000,000
Diversified chemical producer
HARRIS SPECIALTY CHEMICALS, INC.
258,296 Term loan, maturing December 31, 1999 258,296
1,987,266 Term loan, maturing December 31, 2001 1,987,266
3,617,242 Term loan, maturing December 31, 2002 3,617,242
Construction chemicals
HUNTSMAN CORPORATION
9,900,000 Term loan, maturing September 30, 2003 9,900,000
21,037,500 Term loan, maturing December 31, 2004 21,037,500
Diversified chemical producer
HUNTSMAN SPECIALTY CHEMICALS CORPORATION
8,571,429 Term loan, maturing March 15, 2002 8,571,429
10,000,000 Term loan, maturing March 15, 2004 10,000,000
10,000,000 Term loan, maturing March 15, 2005 10,000,000
Diversified chemical producer
LILLY INDUSTRIES, INC.
19,634,989 Term loan, maturing November 30, 2003 19,634,989
Housing paints and industrial and specialty coatings
POLYMER GROUP, INC.
19,025,000 Term loan, maturing March 31, 2002 19,025,000
Produces nonwoven fabrics
RHEOX, INC.
19,666,667 Term loan, maturing January 30, 2004 19,666,667
Diversified chemical producer
STX CHEMICALS CORP.
21,913,333 Term loan, maturing September 30, 2004 21,913,333
Petrochemicals and pulp chemicals
- --------------------------------------------------------------------------------
$ 150,611,722
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Coal -- 0.3%
- --------------------------------------------------------------------------------
ALLIANCE COAL CORPORATION
$ 4,475,938 Term loan, maturing December 31, 2001 $ 4,475,938
6,673,442 Term loan, maturing December 31, 2002 6,673,442
Diversified producer and supplier of steam and
metallurgical coal
- --------------------------------------------------------------------------------
$ 11,149,380
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Commercial Services -- 4.3%
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ADVANSTAR COMMUNICATIONS, INC.
$ 9,712,644 Term loan, maturing March 31, 2002 $ 9,712,644
Trade publication and exposition management company
ADVO, INC.
13,026,827 Term loan, maturing March 31, 2004 13,026,827
Shared advertising distributor
AMERICAN FLORAL SERVICES, INC.
5,000,000 Term loan, maturing June 30, 2004 5,000,000
Flowers-by-wire service
AVIALL, INC.
11,400,000 Term loan, maturing September 30, 2001 11,400,000
Turbine engine repair and parts distribution
BRAND SCAFFOLD SERVICES, INC.
2,980,000 Term loan, September 30, 2003 2,980,000
1,982,500 Term loan, September 30, 2004 1,982,500
Industrial scaffolding rental, erection and
dismantlement services
ERICKSON AIR-CRANE CO.
8,977,500 Term loan, maturing December 31, 2004 8,977,500
Provider of heavy-lift helicopter services
HOSIERY CORPORATION OF AMERICA, INC.
2,547,468 Term loan, maturing October 17, 1999 2,547,468
22,050,000 Term loan, maturing July 31, 2001 22,050,000
Women's hosiery
NBC MERGER SUB, INC.
7,430,000 Term loan, maturing August 31, 2003 7,430,000
Used college textbook wholesaler
OSI HOLDINGS CORPORATION
14,894,366 Term loan, maturing October 15, 2003 14,894,366
Accounts receivable management services
OMNI SERVICES, INC.
18,000,000 Term loan, maturing October 30, 2005 18,000,000
Workwear rental and laundry and washroom servicing
PSI ACQUISITION CORPORATION
1,574,589 Term loan, maturing December 31, 1998 1,574,589
17,750,000 Term loan, maturing December 31, 2000 17,750,000
Diversified consulting services
SELECT BEVERAGES, INC.
3,920,234 Term loan, maturing June 30, 2001 3,920,234
5,820,351 Term loan, maturing June 30, 2002 5,820,351
Soft drink bottler
UNICCO SERVICE COMPANY
4,493,892 Term loan, maturing June 30, 2001 4,493,892
Provider of janitorial services
- --------------------------------------------------------------------------------
$ 151,560,371
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Communication Equipment -- 0.6%
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COMMUNICATIONS & POWER INDUSTRIES, INC.
$ 1,583,333 Term loan, maturing August 11, 2000 $ 1,583,333
5,550,000 Term loan, maturing August 12, 2002 5,550,000
Microwave, electronic, and
radio frequency components
TELEX COMMUNICATIONS, INC.
7,000,000 Term loan, maturing November 6, 2004 7,000,000
Supplier of brand name communications products
VIASYSTEMS, INC.
4,000,000 Term loan, maturing April 30, 2003 4,000,000
2,400,000 Term loan, maturing April 30, 2003 2,400,000
Supplier of interconnection products
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$ 20,533,333
- --------------------------------------------------------------------------------
Computer Systems -- 0.7%
- --------------------------------------------------------------------------------
ANACOMP, INC.
$10,000,000 Term loan, maturing February 28, 2001 $ 10,000,000
Produces micrographics systems
CELESTICA INTERNATIONAL, INC.
8,471,667 Term loan, maturing June 30, 2003 8,471,667
Produces memory and power systems
GENICOM CORPORATION
8,753,746 Term loan, maturing December 31, 2002 8,753,746
Produces computer printers and supplies, and provides
multivendor servicing
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$ 27,225,413
- --------------------------------------------------------------------------------
Conglomerates -- 3.6%
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AMERICAN MARKETING INDUSTRIES, INC.
$ 1,305,000 Term loan, maturing August 31, 2001 $ 1,305,000
3,430,000 Term loan, maturing November 30, 2002 3,430,000
6,583,500 Term loan, maturing November 30, 2003 6,583,500
Manufacturer and distributor of corporate promotional
and incentive products
E & S HOLDINGS
4,277,778 Term loan, maturing September 30, 2004 4,277,778
4,277,778 Term loan, maturing September 30, 2005 4,277,778
2,444,444 Term loan, maturing March 30, 2006 2,444,444
Sporting goods and infant products
FENWAY HOLDINGS, L.L.C.
8,406,285 Term loan, maturing September 15, 2002 8,406,285
Manufactures and distributes billiard tables, dart
machines, wood mouldings, windows, doors, artificial
flowers, archery bows, and plastics
PHASE METRICS, INC.
4,987,500 Term loan, maturing December 4, 2001 4,987,500
Designs and manufacturers production test equipment
for the computer data storage industry
SMARTE CARTE CORPORATION
500,000 Term loan, maturing December 31, 2001 500,000
3,000,000 Term loan, maturing June 30, 2003 3,000,000
4,500,000 Term loan, maturing June 30, 2004 4,500,000
Airport baggage cart management and self
storage locker service
WALTER INDUSTRIES, INC.
28,796,525 Term loan, maturing January 22, 2002 28,796,525
9,791,667 Term loan, maturing January 22, 2003 9,791,667
Homebuilding and financing, pipe manufacturing and
coal mining
YOUNG & RUBICAM L.P.
48,500,000 Term loan, maturing March 31, 2003 48,500,000
Advertising, public relations, direct marketing,
sales development and design and health care
communications
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$ 130,800,477
- --------------------------------------------------------------------------------
Containers -- Metal & Glass -- 2.2%
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CALMAR, INC.
$ 5,898,750 Term loan, maturing September 15, 2003 $ 5,898,750
4,417,500 Term loan, maturing June 15, 2004 4,417,500
Plastic sprayers and dispensers
REID PLASTICS, INC.
9,944,000 Term loan, maturing November 12, 2003 9,944,000
Bottle manufacturer
SILGAN CORPORATION
9,672,871 Term loan, maturing December 31, 2000 9,672,871
47,431,308 Term loan, maturing March 15, 2002 47,431,308
Metal and plastic packaging products
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$ 77,364,429
- --------------------------------------------------------------------------------
Containers -- Paper -- 6.6%
- --------------------------------------------------------------------------------
CFS HOLDING N.V.
$ 9,704,879 Term loan, maturing June 30, 2005 $ 9,704,879
Supplier of integrated production lines for food
processing and packaging
IPC, INC.
7,875,000 Term loan, maturing September 30, 2001 7,875,000
Plastic and paper packaging products
JEFFERSON SMURFIT CORPORATION
33,366,827 Term loan, maturing April 30, 2001 33,366,827
26,190,481 Term loan, maturing April 30, 2002 26,190,481
10,741,040 Term loan, maturing October 31, 2002 10,741,040
Liner board and other paper board products
RIC HOLDING, INC.
4,326,030 Revolving loan, maturing February 28, 2003 4,326,030
21,483,447 Term loan, maturing February 28, 2003 21,483,447
14,074,535 Term loan, maturing February 28, 2004 14,074,535
5,599,378 Term loan, maturing August 28, 2004 5,599,378
Liner board, lumber and paper packaging products
ST. LAURENT PAPER PRODUCTS
3,876,289 Term loan, maturing May 31, 2003 3,876,289
4,123,711 Term loan, maturing May 31, 2004 4,123,711
Major U.S. producer of pulp and paper
STONE CONTAINER CORPORATION
34,077,778 Term loan, maturing April 1, 2000 34,077,778
47,352,425 Term loan, maturing October 1, 2003 47,352,425
Commodity pulp, paper and
packaging products
STRONGHAVEN, INC.
9,450,862 Term loan, maturing May 31, 2004 9,450,862
Manufacturer of corrugated boxes
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$ 232,242,682
- --------------------------------------------------------------------------------
Cosmetics -- 1.2%
- --------------------------------------------------------------------------------
MARY KAY COSMETICS, INC.
$15,310,680 Term loan, maturing March 6, 2004 $ 15,310,680
Cosmetics, skin and hair care, and perfume products
REVLON CONSUMER PRODUCTS CORPORATION
27,025,000 Term loan, maturing May 29, 2002 27,025,000
Cosmetics, skin and hair care, and perfume products
- --------------------------------------------------------------------------------
$ 42,335,680
- --------------------------------------------------------------------------------
Electronics -- Defense -- 0.2%
- --------------------------------------------------------------------------------
L-3 COMMUNICATIONS CORPORATION
$ 1,364,000 Term loan, maturing March 31, 2003 $ 1,364,000
2,494,444 Term loan, maturing March 31, 2005 2,494,444
1,644,500 Term loan, maturing March 31, 2006 1,644,500
Designs and manufactures secure communication systems
and instrumentation products
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$ 5,502,944
- --------------------------------------------------------------------------------
Electronics -- Instrumentation -- 1.5%
- --------------------------------------------------------------------------------
AMPHENOL CORPORATION
$16,875,000 Term loan, maturing May 19, 2005 $ 16,875,000
16,875,000 Term loan, maturing May 19, 2006 16,875,000
Designs, manufactures and markets of interconnect
systems and coaxial cable
DETAILS, INC.
15,062,327 Term loan, maturing January 31, 2001 15,062,327
Manufactures prototype printed circuit boards
PACKARD BIOSCIENCE COMPANY
5,000,000 Term loan, maturing March 31, 2003 5,000,000
Manufacturer and distributor of bioanalytical
equipment
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$ 53,812,327
- --------------------------------------------------------------------------------
Electronics -- Semiconductors -- 0.2%
- --------------------------------------------------------------------------------
FAIRCHILD SEMICONDUCTOR CORPORATION
$ 7,458,333 Term loan, maturing March 11, 2003 $ 7,458,333
Designs, manufactures and markets logic, discrete
and memory semiconductors
- --------------------------------------------------------------------------------
$ 7,458,333
- --------------------------------------------------------------------------------
Foods -- 3.5%
- --------------------------------------------------------------------------------
DEL MONTE CORPORATION
$ 2,349,091 Revolving loan, maturing March 31, 2003 $ 2,349,091
6,181,818 Term loan, maturing March 31, 2003 6,181,818
10,200,000 Term loan, maturing March 31, 2005 10,200,000
Manufactures and markets canned vegetables and
canned fruit
FAVORITE BRANDS INTERNATIONAL, INC.
2,095,694 Term loan, maturing August 30, 2001 2,095,694
11,303,828 Term loan, maturing August 30, 2003 11,303,828
18,257,619 Term loan, maturing August 30, 2004 18,257,619
4,989,583 Term loan, maturing February 28, 2005 4,989,583
Manufactures and markets marshmallows and caramels
INTERNATIONAL HOME FOODS, INC.
5,222,917 Term loan, maturing March 31, 2003 5,222,917
12,956,757 Term loan, maturing September 30, 2004 12,956,757
11,010,811 Term loan, maturing September 30, 2005 11,010,811
Manufactures and markets food products with popular
brand names
SPECIALTY FOODS CORPORATION
27,310,760 Term loan, maturing April 30, 2001 27,310,760
Bread and cheese products
VAN DE KAMP'S, INC.
7,074,464 Term loan, maturing April 30, 2003 7,074,464
4,432,990 Term loan, maturing September 30, 2003 4,432,990
Distributor of frozen convenience foods
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$ 123,386,332
- --------------------------------------------------------------------------------
Food Wholesalers -- 1.9%
- --------------------------------------------------------------------------------
CATERAIR INTERNATIONAL CORPORATION
$ 8,737,629 Term loan, maturing September 15, 2001 $ 8,737,629
Food service to airlines
FLEMING COMPANIES, INC.
1,977,033 Revolving loan, maturing July 19, 2000 1,977,033
10,285,210 Letter of Credit, maturing June 30, 2000 10,285,210
9,554,915 Term loan, maturing July 19, 2000 9,554,915
Wholesale food distributor
RYKOFF-SEXTON, INC.
10,054,054 Term loan, maturing October 31, 2002 10,054,054
4,824,324 Term loan, maturing April 30, 2003 4,824,324
Manufactures and distributes food products
SC INTERNATIONAL SERVICES, INC.
11,156,391 Term loan, maturing September 15, 2002 11,156,391
2,447,640 Term loan, maturing September 15, 2003 2,447,640
Food service to airlines
VOLUME SERVICES, INC.
800,000 Revolving loan, maturing December 31, 2000 800,000
4,973,250 Term loan, maturing December 31, 2002 4,973,250
2,486,563 Term loan, maturing December 31, 2003 2,486,563
Provides food services for civic centers and sports
facilities
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$ 67,297,009
- --------------------------------------------------------------------------------
Health Care -- Diversified -- 1.0%
- --------------------------------------------------------------------------------
COMMUNITY HEALTH SYSTEMS, INC.
$12,609,589 Term loan, maturing December 31, 2003 $ 12,609,589
12,609,589 Term loan, maturing December 31, 2004 12,609,589
9,493,151 Term loan, maturing December 31, 2005 9,493,151
Hospital and healthcare management
- --------------------------------------------------------------------------------
$ 34,712,329
- --------------------------------------------------------------------------------
Health Care -- Miscellaneous -- 3.0%
- --------------------------------------------------------------------------------
AMERIPATH, INC.
$10,000,000 Term loan, maturing June 27, 2004 $ 10,000,000
Anatomical pathology services
IMED CORPORATION
2,700,000 Revolving loan, maturing November 30, 2002 2,700,000
9,000,000 Term loan, maturing November 30, 2002 9,000,000
4,567,050 Term loan, maturing November 30, 2003 4,567,050
4,567,050 Term loan, maturing November 30, 2004 4,567,050
4,298,400 Term loan, maturing May 31, 2005 4,298,400
Provider of infusion systems and related technologies
MEDIQ / PRN LIFE SUPPORT SERVICE
9,904,525 Term loan, maturing September 30, 2004 9,904,525
Medical equipment and rental services
NATIONAL MEDICAL CARE, INC.
60,000,000 Term loan, maturing September 30, 2003 60,000,000
Kidney dialysis service provider
- --------------------------------------------------------------------------------
$ 105,037,025
- --------------------------------------------------------------------------------
Hotels -- 2.4%
- --------------------------------------------------------------------------------
DOUBLETREE CORPORATION
$27,027,818 Term loan, maturing May 15, 2004 $ 27,027,818
Hotel management
INTERSTATE HOTELS CORPORATION
4,871,795 Term loan, maturing June 25, 2004 4,871,795
4,990,741 Term loan, maturing June 25, 2004 4,990,741
Hotel management
WESTIN HOTEL COMPANY
9,242,424 Revolving loan, maturing June 30, 2000 9,242,424
38,181,818 Term loan, maturing February 8, 2002 38,181,818
Hotel management
- --------------------------------------------------------------------------------
$ 84,314,596
- --------------------------------------------------------------------------------
Household Furnishings -- 0.4%
- --------------------------------------------------------------------------------
SIMMONS COMPANY
$ 6,956,774 Term loan, maturing March 31, 2003 $ 6,956,774
Manufactures bedding
LIFESTYLES FURNISHINGS INTERNATIONAL
6,667,443 Term loan, maturing August 8, 2004 6,667,443
Manufacturer of home improvement and building
products
- --------------------------------------------------------------------------------
$ 13,624,217
- --------------------------------------------------------------------------------
Household Products -- 0.2%
- --------------------------------------------------------------------------------
RAYOVAC CORPORATION
$ 2,756,945 Term loan, maturing September 30, 2003 $ 2,756,945
2,756,944 Term loan, maturing September 30, 2004 2,756,944
Manufacturer of general and specialty batteries,
flashlights and other battery-powered lighting
devices
- --------------------------------------------------------------------------------
$ 5,513,889
- --------------------------------------------------------------------------------
Leisure -- 3.0%
- --------------------------------------------------------------------------------
AMF GROUP, INC.
$14,151,667 Term loan, maturing March 31, 2001 $ 14,151,667
23,298,163 Term loan, maturing March 31, 2003 23,298,163
13,114,822 Term loan, maturing March 31, 2004 13,114,822
Manufactures and operates bowling equipment and
supplies
TW RECREATION SERVICES, INC.
8,250,000 Term loan, maturing September 30, 2002 8,250,000
Provides lodging, food and beverage services to
national and state parks
KSL RECREATION GROUP, INC.
3,070,879 Revolving loan, maturing April 30, 2005 3,070,879
7,028,846 Term loan, maturing April 30, 2005 7,028,846
7,028,846 Term loan, maturing April 30, 2006 7,028,846
Operates properties in the leisure, recreation,
resort and travel fields
METRO-GOLDWYN-MAYER, INC.
4,607,143 Revolving loan, maturing September 30, 2001 4,607,143
5,357,143 Term loan, maturing September 30, 2002 5,357,143
Film and television production and distribution
SIX FLAGS THEME PARKS, INC.
8,333,290 Term loan, maturing June 23, 2001 8,333,290
10,816,800 Term loan, maturing June 23, 2003 10,816,800
Amusement parks
- --------------------------------------------------------------------------------
$ 105,057,599
- --------------------------------------------------------------------------------
Machinery -- 0.3%
- --------------------------------------------------------------------------------
NUMATICS, INCORPORATED
$ 4,507,883 Term loan, maturing January 3, 2002 $ 4,507,883
7,853,155 Term loan, maturing January 3, 2004 7,853,155
Manufactures air valves, cylinders, and air
filtration and drying devices
- --------------------------------------------------------------------------------
$ 12,361,038
- --------------------------------------------------------------------------------
Manufacturing -- Diversified -- 3.4%
- --------------------------------------------------------------------------------
COLUMBUS MCKINNON CORPORATION
$12,913,333 Term loan, maturing September 30, 2003 $ 12,913,333
Manufacturer of hoists and lifting equipment
DESA INTERNATIONAL, INC.
8,205,607 Term loan, maturing August 31, 2001 8,205,607
Manufactures indoor and outdoor heaters and specialty
tools
FOAMEX L.P.
1,814,815 Revolving loan, maturing June 30, 2003 1,814,815
3,259,259 Term loan, maturing June 30, 2003 3,259,259
3,666,667 Term loan, maturing June 30, 2005 3,666,667
3,333,333 Term loan, maturing June 30, 2006 3,333,333
Manufactures flexible polyurethane and polymer foam
products
IMO INDUSTRIES, INC.
9,888,889 Term loan, maturing April 30, 2003 9,888,889
Manufactures pumps, gears and speed reducers, and
elecronic control products and instrumentation
INTERLAKE CORP.
5,368,255 Term loan, maturing June 30, 1999 5,368,255
Engineered materials
INTERMETRO INDUSTRIES CORPORATION
5,219,022 Term loan, maturing June 30, 2001 5,219,022
4,059,239 Term loan, maturing December 31, 2002 4,059,239
Manufactures shelving
INTERNATIONAL WIRE GROUP, INC.
24,000,000 Term loan, maturing September 30, 2002 24,000,000
Manufactures and markets copper wire and harnesses
INTESYS TECHNOLOGIES, INC.
4,390,244 Term loan, maturing December 31, 2001 4,390,244
Designs and manufactures plastic components for
original equipment manufacturers
JACKSON PRODUCTS, INC.
1,985,000 Term loan, maturing September 1, 2001 1,985,000
7,363,042 Term loan, maturing September 1, 2002 7,363,042
7,368,750 Term loan, maturing September 1, 2003 7,368,750
Manufactures and distributes safety equipment and
reflective beads
MATTHEW WARREN, INC.
7,000,000 Term loan, maturing February 28, 2004 7,000,000
Manufactures and distributes industrial spring
products
METTLER-TOLEDO HOLDINGS, INC.
5,700,000 Term loan, maturing December 31, 2003 5,700,000
Manufactures and markets weighing instruments for use
in laboratory, industrial and food retailing
applications
PANAVISION INTERNATIONAL, L.P.
1,906,667 Revolving loan, maturing December 31, 2004 1,906,667
4,400,000 Term loan, maturing December 31, 2004 4,400,000
Manufactures lens and camera equipment
- --------------------------------------------------------------------------------
$ 121,842,122
- --------------------------------------------------------------------------------
Medical Products -- 0.6%
- --------------------------------------------------------------------------------
GRAPHIC CONTROLS CORPORATION
$10,840,194 Term loan, maturing August 28, 2003 $ 10,840,194
4,915,042 Term loan, maturing September 28, 2003 4,915,042
Recording and monitoring devices
NUTRAMAX PRODUCTS, INC.
3,936,944 Term loan, maturing December 31, 2003 3,936,944
Manufactures and markets private label health and
personal care products
- --------------------------------------------------------------------------------
$ 19,692,180
- --------------------------------------------------------------------------------
Metals -- 0.2%
- --------------------------------------------------------------------------------
U.S. SILICA COMPANY
$ 4,663,504 Term loan, maturing December 31, 2001 $ 4,663,504
3,893,333 Term loan, maturing December 31, 2003 3,893,333
Producer of industrial silica
- --------------------------------------------------------------------------------
$ 8,556,837
- --------------------------------------------------------------------------------
Miscellaneous -- 2.0%
- --------------------------------------------------------------------------------
ALLIED WASTE NORTH AMERICA
$13,000,000 Term loan, maturing December 31, 2003 $ 13,000,000
Non-hazardous solid waste management
COINMACH LAUNDRY CORPORATION
10,965,625 Term loan, maturing June 30, 2004 10,965,625
Supplies coin-operated laundry equipment services for
multi-family properties
LAIDLAW CHEM-WASTE, INC.
7,500,000 Term loan, maturing May 15, 2004 7,500,000
7,500,000 Term loan, maturing May 15, 2005 7,500,000
Hazardous solid waste management
PRIME SUCCESSION, INC.
15,911,111 Term loan, maturing August 1, 2003 15,911,111
Operator of funeral homes and cemeteries
ROSE HILLS COMPANY
9,933,333 Term loan, maturing December 1, 2003 9,933,333
Operator of funeral homes and cemeteries
WALCO INTERNATIONAL, INC.
5,000,000 Term loan, maturing March 31, 2004 5,000,000
Distributes food animal health products
- --------------------------------------------------------------------------------
$ 69,810,069
- --------------------------------------------------------------------------------
Office Equipment and Supplies -- 0.3%
- --------------------------------------------------------------------------------
IDENTITY GROUP, INC.
$10,000,000 Term loan, maturing November 22, 2003 $ 10,000,000
Manufactures and distributes ink delivery products
- --------------------------------------------------------------------------------
$ 10,000,000
- --------------------------------------------------------------------------------
Paper and Forest Products -- 2.7%
- --------------------------------------------------------------------------------
FORT HOWARD CORPORATION
$54,891,912 Term loan, maturing March 8, 2002 $ 54,891,912
2,900,883 Term loan, maturing December 31, 2002 2,900,883
Sanitary tissue paper products
S.D. WARREN COMPANY
39,125,610 Term loan, maturing December 20, 2002 39,125,610
Major U.S. producer of coated free paper
- --------------------------------------------------------------------------------
$ 96,918,405
- --------------------------------------------------------------------------------
Publishing -- 1.5%
- --------------------------------------------------------------------------------
CYGNUS PUBLISHING, INC.
$13,500,000 Term loan, maturing June 5, 2005 $ 13,500,000
Trade magazine publisher
K-III COMMUNICATIONS
5,220,000 Revolving loan, maturing June 30, 2004 5,220,000
30,500,000 Term loan, maturing June 30, 2004 30,500,000
Leader in the education, media and information
businesses
VON HOFFMAN PRESS, INC.
2,571,429 Term loan, maturing May 30, 2004 2,571,429
2,571,428 Term loan, maturing May 30, 2005 2,571,428
Manufactures textbooks for educational purposes
- --------------------------------------------------------------------------------
$ 54,362,857
- --------------------------------------------------------------------------------
Publishing -- Newspapers -- 3.5%
- --------------------------------------------------------------------------------
AMERICAN MEDIA OPERATIONS, INC.
$ 1,266,622 Revolving loan, maturing September 30, 2002 $ 1,266,622
17,142,560 Term loan, maturing September 30, 2002 17,142,560
Weekly periodical publisher
GARDEN STATE NEWSPAPERS, INC.
10,058,947 Revolving loan, maturing June 30, 2003 10,058,947
46,315 Revolving loan, maturing March 31, 2004 46,315
13,729,825 Term loan, maturing March 31, 2004 13,729,825
Suburban newspaper
JOURNAL REGISTRY COMPANY
16,820,589 Term loan, maturing December 31, 2001 16,820,589
32,762,902 Term loan, maturing December 31, 2002 32,762,902
12,908,732 Term loan, maturing May 1, 2003 12,908,732
Suburban newspapers
MORRIS COMMUNICATIONS CORPORATION
20,000,000 Term loan, maturing June 30, 2005 20,000,000
Daily and non-daily publisher
- --------------------------------------------------------------------------------
$ 124,736,492
- --------------------------------------------------------------------------------
Railroads -- 0.3%
- --------------------------------------------------------------------------------
I & M RAIL LINK, LLC
$ 2,560,000 Revolving loan, maturing March 31, 2004 $ 2,560,000
7,200,000 Term loan, maturing March 31, 2004 7,200,000
Railway operating firm
- --------------------------------------------------------------------------------
$ 9,760,000
- --------------------------------------------------------------------------------
Restaurants -- 0.4%
- --------------------------------------------------------------------------------
HOULIHAN'S RESTAURANTS, INC.
$ 5,000,000 Term loan, maturing April 15, 2004 $ 5,000,000
Operates full service casual dining restaurants
LONG JOHN SILVER'S RESTAURANTS, INC.
7,582,752 Term loan, maturing December 31, 1996 7,582,752
Seafood restaurants
- --------------------------------------------------------------------------------
$ 12,582,752
- --------------------------------------------------------------------------------
Retail Stores -- Department Stores -- 0.8%
- --------------------------------------------------------------------------------
FEDERATED DEPARTMENT STORES, INC.
$27,240,237 Term loan, maturing January 31, 2000 $ 27,240,237
Retail department store
- --------------------------------------------------------------------------------
$ 27,240,237
- --------------------------------------------------------------------------------
Retail Stores -- Drug Stores -- 0.2%
- --------------------------------------------------------------------------------
DUANE READE, INC.
$ 3,079,167 Term loan, maturing September 30, 1997 $ 3,079,167
5,000,000 Term loan, maturing September 30, 1999 5,000,000
Retail drug stores
- --------------------------------------------------------------------------------
$ 8,079,167
- --------------------------------------------------------------------------------
Retail Stores -- Food Chains -- 5.9%
- --------------------------------------------------------------------------------
DOMINICK'S FINER FOODS, INC.
$ 7,144,615 Revolving loans, maturing April 30, 2003 $ 7,144,615
5,538,462 Term loan, maturing April 30, 2003 5,538,462
Supermarket chain in Chicago
GRAND UNION COMPANY
30,836,712 Term loan, maturing June 15, 2002 30,836,712
Supermarket chain in the Northeast
PATHMARK STORES, INC.
67,500 Revolving loan, maturing July 31, 1998 67,500
49,027,765 Term loan, maturing October 31, 1999 49,027,765
Supermarket chain in mid-Atlantic states
RALPHS GROCERY COMPANY
7,428,571 Revolving Loan, maturing February 15, 2003 7,428,571
21,333,333 Term loan, maturing February 15, 2003 21,333,334
34,912,500 Term loan, maturing February 15, 2004 34,912,500
Third largest supermarket chain in
Southern California
SMITH'S FOOD & DRUG CENTERS, INC.
63,636 Revolving loan, maturing November 1, 2003 63,636
20,318,182 Term loan, maturing November 1, 2003 20,318,182
14,000,000 Term loan, maturing May 1, 2005 14,000,000
Supermarket and drug store chain
STAR MARKET COMPANY, INC.
10,042,105 Term loan, maturing December 31, 2001 10,042,105
7,884,211 Term loan, maturing December 31, 2002 7,884,211
Supermarket chain in Massachusetts
- --------------------------------------------------------------------------------
$ 208,597,593
- --------------------------------------------------------------------------------
Retail -- Specialty -- 1.3%
- --------------------------------------------------------------------------------
BRYLANE, L.P.
$12,000,000 Term loan, maturing February 28, 2003 $ 12,000,000
Retail catalog distributor
GRIFFITH CONSUMERS COMPANY
10,271,368 Term loan, maturing December 31, 2002 10,271,368
9,833,333 Term loan, maturing December 31, 2003 9,833,333
Retail petroleum distributor
PETRO STOPPING CENTERS
6,666,667 Term loan, maturing December 31, 2003 6,666,667
Operator of full-service truck stops
TRAVELCENTERS OF AMERICA, INC.
7,987,500 Term loan, maturing March 27, 2005 7,987,500
Operator of full service truck stops
- --------------------------------------------------------------------------------
$ 46,758,868
- --------------------------------------------------------------------------------
Steel -- 0.2%
- --------------------------------------------------------------------------------
UCAR INTERNATIONAL, INC.
$ 8,000,000 Term loan, maturing December 31, 2002 $ 8,000,000
Processing materials for steel industry
- --------------------------------------------------------------------------------
$ 8,000,000
- --------------------------------------------------------------------------------
Telecommunications -- 0.3%
- --------------------------------------------------------------------------------
ARCH COMMUNICATIONS ENTERPRISES, INC.
$10,500,000 Term loan, maturing December 31, 2003 $ 10,500,000
Paging service provider
- --------------------------------------------------------------------------------
$ 10,500,000
- --------------------------------------------------------------------------------
Textiles -- 2.1%
- --------------------------------------------------------------------------------
CAF HOLDINGS, INC.
$ 6,035,294 Term loan, maturing June 30, 2002 $ 6,035,294
Manufactures and markets commercial floorcovering
COLLINS & AIKMAN PRODUCTS COMPANY
23,730,964 Term loan, maturing December 31, 2002 23,730,964
Automotive products, residential upholstery fabrics,
and wallcoverings
GFSI, INC.
14,000,000 Term loan, maturing March 31, 2004 14,000,000
Designs, manufactures and markets custom design
sportswear and activewear
LONDON FOG INDUSTRIES, INC.
9,582,314 Term loan, maturing May 31, 2002* 6,205,268
1,971,219 Term loan, maturing May 31, 2002* 1,276,512
Outerwear
RENFRO CORPORATION
5,000,000 Term loan, maturing November 15, 2003 5,000,000
Manufactures socks
THE WILLIAM CARTER COMPANY
6,237,000 Term loan, maturing October 31, 2003 6,237,000
Manufacturer and distributor of children's apparel
WALLS INDUSTRIES, INC.
5,106,382 Term loan, maturing February 28, 2005 5,106,382
6,893,618 Term loan, maturing February 28, 2006 6,893,618
Manufactures and markets workwear, hunting and
outdoor apparel and outerwear
- --------------------------------------------------------------------------------
$ 74,485,038
- --------------------------------------------------------------------------------
Toys -- 0.2%
- --------------------------------------------------------------------------------
HEDSTROM CORPORATION
$ 7,250,000 Term loan, maturing June 30, 2005 $ 7,250,000
Manufacturer of swing sets and toys
- --------------------------------------------------------------------------------
$ 7,250,000
- --------------------------------------------------------------------------------
Transportation -- 1.9%
- --------------------------------------------------------------------------------
ATLAS AIR, INC.
$ 8,799,474 Revolving loan, maturing June 30, 1998 $ 8,799,474
International cargo and transport services
ATLAS FREIGHTER LEASING, INC.
10,500,000 Term loan, maturing May 29, 2004 10,500,000
Aircraft leasing
CONTINENTAL AIRLINES, INC.
11,701,218 Term loan, maturing December 31, 2006 11,701,218
Air carrier
EVERGREEN INTERNATIONAL AVIATION, INC.
20,000,000 Term loan, maturing April 30, 2002 20,000,000
Air carrier
RCTR HOLDINGS, INC.
15,254,286 Term loan, maturing December 31, 2001 15,254,286
Consumer truck rental and moving supplies provider
- --------------------------------------------------------------------------------
$ 66,254,978
- --------------------------------------------------------------------------------
Utilities -- 0.7%
- --------------------------------------------------------------------------------
AES CEMIG FUNDING CORPORATION
$15,833,333 Term loan, maturing May 27, 1998 $ 15,833,333
Global power company
AESEBA FUNDING CORPORATION
10,166,667 Term loan, maturing May 29, 1998 10,166,667
Global power company
- --------------------------------------------------------------------------------
$ 26,000,000
- --------------------------------------------------------------------------------
Total Loan Interests
(identified cost, 3,096,146,041) $3,092,085,184
- --------------------------------------------------------------------------------
Common Stocks -- 0.1%
SHARES/RIGHTS SECURITY VALUE
- --------------------------------------------------------------------------------
806,708 America's Favorite Chicken Company,
Common Stock* $ 2,675,850
4,380,486 London Fog Industries, Inc., Common Stock* 0
608 Classic Cable Common Stock Warrants* 0
34,364 PSI Acquisition Corporation, Warrants* 0
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost, 0) $ 2,675,850
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.0%
SHARES/RIGHTS SECURITY VALUE
- --------------------------------------------------------------------------------
5,845,956 London Fog Industries, Inc. 17.5% Preferred Stock* $ 0
- --------------------------------------------------------------------------------
Total Preferred Stocks
(identified cost, $5,845,956) $ 0
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 10.0%
PRINCIPAL
AMOUNT BORROWER/MATURITY DATE VALUE
- --------------------------------------------------------------------------------
COMMERCIAL PAPER
$23,099,000 CIT Group Holdings, Inc., 07/14/97 $ 23,094,990
- --------------------------------------------------------------------------------
$ 23,094,990
- --------------------------------------------------------------------------------
SHORT-TERM LOAN PARTICIPATIONS
$34,000,000 Allegheny Teledyne, 07/14/97 $ 34,000,000
25,000,000 American Stores Company, 07/07/97 25,000,000
14,000,000 American Stores Company, 08/04/97 14,000,000
12,883,000 CSX, 07/15/97 12,883,000
9,350,000 Cabot Corporation, 08/29/97 9,350,000
5,000,000 Crown Cork & Seal, 07/21/97 5,000,000
17,325,000 Crown Cork & Seal, 07/21/97 17,325,000
10,000,000 Dial Corporation, 07/07/97 10,000,000
10,000,000 Foster Wheeler, 07/03/97 10,000,000
27,000,000 Georgia-Pacific Corporation, 07/03/97 27,000,000
5,000,000 Georgia-Pacific Corporation, 07/17/97 5,000,000
10,000,000 Kroger Company, 07/17/97 10,000,000
15,000,000 Kroger Company, 07/17/97 15,000,000
5,000,000 LL Bean, 09/22/97 5,000,000
8,260,000 MIT, 07/18/97 8,260,000
10,000,000 Mead Corporation, 07/18/97 10,000,000
5,000,000 Northrop Grumman, 07/16/97 5,000,000
35,000,000 Northrop Grumman, 07/16/97 35,000,000
7,000,000 Ralston Purina Co., 07/09/97 7,000,000
7,000,000 Ralston Purina Co., 07/25/97 7,000,000
7,000,000 Staples, Inc., 07/18/97 7,000,000
17,700,000 Tenneco Inc., 07/25/97 17,700,000
10,000,000 Union Pacific, 07/17/97 10,000,000
20,000,000 York International, 07/03/97 20,000,000
5,000,000 York International, 07/03/97 5,000,000
- --------------------------------------------------------------------------------
$ 331,518,000
- --------------------------------------------------------------------------------
Total Short-Term Investments,
at amortized cost $ 354,612,990
- --------------------------------------------------------------------------------
Total Investments -- 97.3%
(identified cost, $3,456,604,987) $3,449,374,024
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.7% $ 93,919,636
- --------------------------------------------------------------------------------
Total Net Assets -- 100% $3,543,293,660
- --------------------------------------------------------------------------------
*Non-income producing security.
Note: The description of the principal business for each security set forth
above is unaudited.
See notes to financial statements
<PAGE>
Senior Debt Portfolio as of June 30, 1997
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
AS OF JUNE 30, 1997
(EXPRESSED IN UNITED STATES DOLLARS)
Assets
- -------------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $3,456,604,987) $3,449,374,024
Cash 38,450,722
Receivable for investments sold 35,183,447
Interest receivable 25,574,939
Miscellaneous receivable 101,715
Prepaid expenses 857,028
Deferred organization expenses (Note 1D) 34,741
- -------------------------------------------------------------------------------
Total assets $3,549,576,616
- -------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------
Deferred facility fee income (Note 1B) $ 6,114,850
Payable to affiliate --
Trustees' fees 7,565
Accrued expenses 160,541
- -------------------------------------------------------------------------------
Total liabilities $ 6,282,956
- -------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $3,543,293,660
- -------------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $3,550,524,623
Net unrealized depreciation of investments
(computed on the basis of identified cost) (7,230,963)
- -------------------------------------------------------------------------------
Total $3,543,293,660
- -------------------------------------------------------------------------------
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JUNE 30, 1997
(EXPRESSED IN UNITED STATES DOLLARS)
Investment Income (Note 1B)
- -------------------------------------------------------------------------------
Interest income $128,711,657
Facility fees earned 2,307,429
- -------------------------------------------------------------------------------
Total income $131,019,086
- -------------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------------
Investment advisory fee (Note 2) $ 14,626,344
Compensation of Trustees not members of the Investment Adviser's
organization (Note 2) 14,564
Custodian fee 484,092
Legal and accounting services 331,167
Amortization of organization expenses (Note 1D) 3,077
Interest expense 339,784
Miscellaneous 43,309
- -------------------------------------------------------------------------------
Total expenses $ 15,842,337
- -------------------------------------------------------------------------------
Net investment income $115,176,749
- -------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- -------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (128,023)
- -------------------------------------------------------------------------------
Net realized loss on investments $ (128,023)
- -------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (1,357,746)
- -------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ (1,357,746)
- -------------------------------------------------------------------------------
Net realized and unrealized loss on investments $ (1,485,769)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $113,690,980
- -------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
SENIOR DEBT PORTFOLIO AS OF JUNE 30, 1997
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(EXPRESSED IN UNITED STATES DOLLARS)
Increase (Decrease) SIX MONTHS ENDED YEAR ENDED
in Net Assets JUNE 30, 1997 DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 115,176,749 $ 171,247,196
Net realized loss on investments (128,023) (2,509,974)
Net change in unrealized appreciation
(depreciation) (1,357,746) (1,387,860)
- ------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 113,690,980 $ 167,349,362
- ------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 782,233,870 $1,604,853,413
Withdrawals (362,705,646) (383,467,171)
- ------------------------------------------------------------------------------------------------
Net increase in net assets from capital
transactions $ 419,528,224 $1,221,386,242
- ------------------------------------------------------------------------------------------------
Net increase in net assets $ 533,219,204 $1,388,735,604
- ------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------
At beginning of period $3,010,074,456 $1,621,338,852
- ------------------------------------------------------------------------------------------------
At end of period $3,543,293,660 $3,010,074,456
- ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STATEMENT OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
SIX MONTHS ENDED
Increase (Decrease) in Cash JUNE 30, 1997
- --------------------------------------------------------------------------------
Cash Flows From (For) Operating Activities --
Purchases of loan interests $(1,583,312,681)
Proceeds from sales and principal repayments 913,861,365
Interest received 120,569,750
Facility fees received 233,716
Interest paid (339,676)
Operating expenses paid (15,570,008)
Net increase in short-term investments 74,713,723
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (489,843,811)
- --------------------------------------------------------------------------------
Cash Flows From (For) Financing Activities --
Proceeds from capital contributions $ 782,233,870
Payments for capital withdrawals (362,705,646)
- --------------------------------------------------------------------------------
Net cash provided from financing activities $ 419,528,224
- --------------------------------------------------------------------------------
Net decrease in cash $ (70,315,587)
- --------------------------------------------------------------------------------
Cash at Beginning of Period $ 108,766,309
- --------------------------------------------------------------------------------
Cash at End of Period $ 38,450,722
- --------------------------------------------------------------------------------
Reconciliation of Net Increase in Net Assets
From Operations to Net Cash Used For
Operating Activities
- --------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 113,690,980
(Increase) decrease in receivable for investments (34,347,248)
(Increase) decrease in dividends and interest receivable (8,141,907)
(Increase) decrease in prepaid expenses 67,121
(Increase) decrease in deferred organizational expense 3,077
Increase (decrease) in deferred facility income fees (3,024,707)
Increase (decrease) in payable to affiliate (318)
Increase (decrease) in accrued expenses (137,227)
Net increase (decrease) in investments (557,953,582)
- --------------------------------------------------------------------------------
Net cash used for operating activities $ (489,843,811)
- --------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
SENIOR DEBT PORTFOLIO AS OF JUNE 30, 1997
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA (EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------
JUNE 30, 1997 1996 1995*
- -------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating expenses 0.94%+ 0.98% 1.01%+
Interest expense 0.02%+ 0.04% 0.13%+
Net investment income 7.02%+ 7.17% 7.95%+
Portfolio Turnover 34% 75% 39%
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $3,543,294 $3,010,074 $1,621,339
- -------------------------------------------------------------------------------------------------------------
+ Annualized.
* For the period from the start of business, February 22,1995 to December 31, 1995.
</TABLE>
<PAGE>
Senior Debt Portfolio as of June 30, 1997
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(Expressed in United States Dollars)
1 Significant Accounting Policies
- --------------------------------------------------------------------------------
Senior Debt Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a non-diversified closed-end investment company which
was organized as a trust under the laws of the State of New York on May 1,
1992. The Declaration of Trust permits the Trustees to issue interests in the
Portfolio. The following is a summary of significant accounting policies of
the Portfolio. The Policies are in conformity with accounting principles
generally accepted in the United States of America.
A Investment Valuation -- The Portfolio's investments in interests in loans
(Loan Interests) are valued at fair value by the Portfolio's investment
adviser, Boston Management and Research, under procedures established by the
Trustees as permitted by Section 2(a)(41) of the Investment Company Act of
1940. Such procedures include the consideration of relevant factors, data and
information relating to fair value, including (i) the characteristics of and
fundamental analytical data relating to the Loan Interest, including the cost,
size, current interest rate, period until next interest rate reset, maturity
and base lending rate of the Loan Interest, the terms and conditions of the
loan and any related agreements and the position of the loan in the borrower's
debt structure; (ii) the nature, adequacy and value of the collateral,
including the Portfolio's rights, remedies and interests with respect to the
collateral; (iii) the creditworthiness of the borrower, based on evaluations
of its financial condition, financial statements and information about the
borrower's business, cash flows, capital structure and future prospects; (iv)
information relating to the market for the Loan Interest including price
quotations for and trading in the Loan Interest and interests in similar loans
and the market environment and investor attitudes towards the Loan Interest
and interests in similar loans; (v) the reputation and financial condition of
the agent bank and any intermediate participant in the loan; and (vi) general
economic and market conditions affecting the fair value of the Loan Interest.
Other portfolio securities (other than short-term obligations, but including
listed issues) may be valued on the basis of prices furnished by one or more
pricing services which determine prices for normal, institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. In certain circumstances, portfolio
securities will be valued at the last sales price on the exchange that is the
primary market for such securities, or the last quoted bid price for those
securities for which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day. The value of
interest rate swaps will be determined in accordance with a discounted present
value formula and then confirmed by obtaining a bank quotation. Short-term
obligations which mature in sixty days or less are valued at amortized cost,
if their original term to maturity when acquired by the Portfolio was 60 days
or less or are valued at amortized cost using their value on the 61st day
prior to maturity, if their original term to maturity when acquired by the
Portfolio was more 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, deduction
or credit.
D Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E Other -- Investment transactions are accounted for on a trade date basis.
F Use of Estimates -- The preparation of the financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
G Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by the credits which are determined based on the average daily
cash balances the Portfolio maintains with IBT. All significant credit
balances used to reduce the Portfolio's custodian fees are reported as a
reduction of expenses on the Statement of Operations.
2 Investment Adviser 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 a 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 six months
ended June 30, 1997, the effective annual rate, based on average daily gross
assets, was 0.89% and amounted to $14,626,344. Except as to Trustees of the
Portfolio who are not members of BMR's organization, officers and Trustees
receive remuneration for their services to the Portfolio out of such
investment adviser fee.
Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of BMR. Trustees of the Portfolio that are not affiliated
with the Investment Adviser may elect to defer receipt of all or a percentage
of their annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the six months ended June 30, 1997, no significant
amounts have been deferred.
3 Investments
- --------------------------------------------------------------------------------
The Portfolio invests primarily in Loan Interests. The ability of the issuers
of the Loan Interests to meet their obligations may be affected by economic
developments in a specific industry. The cost of purchases and the proceeds
from principal repayments and sales of Loan Interests and other securities for
the six months ended June 30, 1997 aggregated $1,583,312,681 and $948,208,613,
respectively.
4 Short - Term Debt and Credit Agreements
- --------------------------------------------------------------------------------
The Portfolio has entered into a revolving credit agreement that will allow
the Portfolio to borrow $250 million to support the issuance of commercial
paper and to permit the Portfolio to invest in accordance with its investment
practices. Interest is charged under the revolving credit agreement at the
bank's base rate or at an amount above either the bank's adjusted certificate
of deposit rate or a federal funds effective rate. Interest expense includes a
commitment fee of approximately $104,606 which is computed at the annual rate
of 0.20% of the revolving credit agreement. There were no borrowings under
this agreement during the six months ended June 30, 1997. As of June 30, 1997,
the Portfolio had no commercial paper outstanding.
5 Federal Income Tax Basis of Investments Securities
- --------------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in the value of the
investments owned at June 30, 1997, as computed on a federal income tax basis,
were as follows:
Aggregate cost $3,456,604,987
----------------------------------------------------------------------
Gross unrealized appreciation $ 2,675,850
Gross unrealized depreciation (9,906,813)
----------------------------------------------------------------------
Net unrealized appreciation $ (7,230,963)
----------------------------------------------------------------------
<PAGE>
Senior Debt Portfolio as of June 30, 1997
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders
of Senior Debt Portfolio
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Senior Debt Portfolio (the Portfolio) as of
June 30, 1997, the related statements of operations and of cash flows for the
six month period then ended, and the statement of changes in net assets for the
six months ended June 30, 1997 and the year ended December 31,1996 and the
supplementary data for the six months ended June 30, 1997, the year ended
December 31, 1996 and the period from the start of business, February 22, 1995,
to December 31, 1995 (all expressed in United States dollars). These financial
statements and supplementary data are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and supplementary data based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and supplementary data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities and Loan Interests owned at June 30, 1997, by correspondence with the
custodian and selling or agent banks; where replies were not received from
selling or agent banks, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and supplemental data present fairly,
in all material respects, the financial position of the Portfolio as of June 30,
1997, and the results of its operations and its cash flows, the changes in its
net assets and its supplemental data for the respective stated periods, in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 1A, the financial statements include Loan Interests and
certain other securities held by the Portfolio valued at $3,092,085,184 (87.2%
of net assets of the Portfolio), which values are fair values determined by the
Portfolio's investment adviser in the absence of actual market values.
Determination of fair value involves subjective judgment, as the actual market
value of a particular Loan Interest or security can be established only by
negotiations between the parties in a sale transaction. We have reviewed the
procedures established by the Trustees and used by the Portfolio's investment
adviser in determining the fair value of such Loans Interest and securities and
have inspected underlying documentation, and in the circumstances, we believe
that the procedures are reasonable and the documentation appropriate.
DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
British West Indies
August 15, 1997
<PAGE>
Investment Management for Senior Debt Portfolio
Officers
JAMES B. HAWKES
President and Trustee
M. DOZIER GARDNER
Vice President and
Trustee
WILLIAM CHISHOLM
Vice President
RAYMOND O'NEILL
Vice President
MICHEL NORMANDEAU
Vice President
SCOTT H. PAGE
Vice President and
Co-Portfolio Manager
PAYSON F. SWAFFIELD
Vice President and
Co-Portfolio Manager
JAMES L. O'CONNOR
Treasurer
ALAN R. DYNNER
Secretary
Independent Trustees
DONALD R. DWIGHT
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
SAMUEL L. HAYES, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate
School of Business Administration
NORTON H. REAMER
President and Director, United Asset
Management Corporation
JOHN L. THORNDIKE
Formerly Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
