TO SHAREHOLDERS
DIVERSIFICATION FUND HAD A TOTAL RETURN OF 0.9 PERCENT DURING THE SIX MONTHS
THAT ENDED NOVEMBER 30, 1994. That return represented a rise in net asset value
per share to $171.58 from $170.98, and the reinvestment of $1.00 in income
dividends. By comparison, the S&P 500 Index, an unmanaged index of common
stocks, also had a return of 0.9 percent during the same period.
SHAREHOLDERS RECEIVED INCOME DIVIDENDS TOTALING $1.00 PER SHARE DURING THE SIX
MONTHS ENDED NOVEMBER 30, 1994.
THE ECONOMY CONTINUED TO GROW SOLIDLY IN 1994. THIRD QUARTER GROSS DOMESTIC
PRODUCT ROSE 3.4 PERCENT, FOLLOWING A 4.1 PERCENT GAIN IN THE SECOND QUARTER.
The economy was fueled by increases in capital spending by business. Such
spending was up significantly in the past year, according to the U.S. Department
of Commerce. The nation's improved economic activity was reflected in brisk job
growth as well, with November unemployment down to 5.6 percent.
BY MOST MEASURES, INFLATION CONTINUES TO BE MODEST. However, the Federal
Reserve, having raised short-term rates on six occasions in 1994, is maintaining
a close watch on inflation indices, commodity prices, productivity and labor
costs, and has not excluded the possibility of further rate increases. Core
inflation - which excludes the volatile energy and food categories - remained in
the range of 3 percent.
ON THE COMMODITY FRONT, A STRONGER U.S. ECONOMY AND AN IMPROVING ECONOMY ABROAD
INCREASED PRICES FOR KEY BASE METALS, AS WELL AS PAPERS AND CHEMICALS. After
drifting for some time, crude oil prices jumped during the summer, leading to a
rise in oil stock prices. These inflation concerns, the Fed actions and a
consistently weak dollar pushed long-term Treasury yields to 8.1 percent on
November 30, their highest since early 1992.
CYCLICAL STOCKS WERE AMONG THE BETTER PERFORMERS DURING THE FIRST HALF OF 1994.
However, during the second six months, growth stocks rallied for the first time
in more than a year. This shift benefited the Fund's growth and cyclical stocks.
Growth companies with international operations should show better earnings if
there is an economic slowdown in the U.S. next year.
OVER THE LONG-TERM, INVESTMENTS THAT FOCUS ON A REPRESENTATIVE PORTFOLIO OF
HIGH-QUALITY COMMON STOCKS ARE LIKELY TO DELIVER SOUND PERFORMANCE.
DURING THE SIX MONTHS THAT ENDED NOVEMBER 30, 1994, THE STRONG FUNDAMENTALS AND
UNDERVALUATION OF TECHNOLOGY STOCKS CAUSED THIS SECTOR TO APPRECIATE. Within the
Fund, the greatest gains were registered in the business product and consumer
service sectors. Overall, health care stocks, long regarded as market laggards,
also gained significantly during the period. In particular, the stocks of drug
companies returned to favor once the debate over health care reform was set
aside for the year.
INTEREST-SENSITIVE STOCKS, INCLUDING THOSE OF INSURANCE AND FINANCE COMPANIES,
WERE AMONG THE MARKET'S WEAKER PERFORMERS DURING THE PERIOD. Bank and finance
company margins are likely to face increasing pressure because of softer loan
demand. Utility stocks also underperformed during the period.
IN THE SHORT TERM, THE MARKET REMAINS VULNERABLE TO FURTHER INCREASES IN
INTEREST RATES. However, over the long term, investments that focus on a
representative portfolio of high-quality common stocks are likely to deliver
sound performance. Because this remains the investment strategy of
Diversification Fund, we are confident the Fund will continue to participate in
the growth of the economy.
Sincerely,
Landon T. Clay
President
January 20, 1995
<PAGE>
DIVERSIFICATION FUND, INC.
NOVEMBER 30, 1994
(UNAUDITED)
VALUE
TEN LARGEST HOLDINGS (IN MILLIONS)
--------------------------------------------------------------------------
Intel Corp. $4.0
--------------------------------------------------------------------------
Emerson Electric Co. 3.5
--------------------------------------------------------------------------
Coca-Cola Co. 3.5
--------------------------------------------------------------------------
General Re Corp. 3.1
--------------------------------------------------------------------------
Citizens Utilities Co., Class A 3.1
--------------------------------------------------------------------------
PepsiCo, Inc. 2.8
--------------------------------------------------------------------------
Mobil Corp. 2.6
--------------------------------------------------------------------------
Anheuser-Busch Co., Inc. 2.2
--------------------------------------------------------------------------
Lotus Development Corp. 1.8
--------------------------------------------------------------------------
Champion International Corp. 1.7
--------------------------------------------------------------------------
PERCENTAGE OF
FIVE LARGEST INDUSTRY HOLDINGS NET ASSETS
--------------------------------------------------------------------------
Consumer Products 14.0%
--------------------------------------------------------------------------
Insurance 9.8
--------------------------------------------------------------------------
Business Products and Services 9.4
--------------------------------------------------------------------------
Special Products and Services 7.3
--------------------------------------------------------------------------
Chemicals-Specialty 7.0
--------------------------------------------------------------------------
<PAGE>
INVESTMENT CHANGES
SIX MONTHS ENDED NOVEMBER 30, 1994
--------------------------------------------------------------------------
Shares Owned
INCREASES 5/31/94 11/30/94
--------------------------------------------------------------------------
Great Lakes Chemical Corp. 15,000 25,000
--------------------------------------------------------------------------
Harcourt General Inc. -0- 20,000
--------------------------------------------------------------------------
Loctite Corp. 20,000 23,000
--------------------------------------------------------------------------
Lotus Development Corp. 13,750 41,250
--------------------------------------------------------------------------
Novell Inc. 68,500 78,500
--------------------------------------------------------------------------
Stride Rite Corp. -0- 40,000
--------------------------------------------------------------------------
Wheelabrator Technologies Inc. -0- 40,000
--------------------------------------------------------------------------
Telefonos de Mexico, S.A. de C.V. -0- 12,000
--------------------------------------------------------------------------
DECREASES*
--------------------------------------------------------------------------
Coca-Cola Co. 89,840 68,200
--------------------------------------------------------------------------
Emerson Electric Co. 64,886 59,546
--------------------------------------------------------------------------
Intel Corp. 83,490 63,410
--------------------------------------------------------------------------
International Specialty Products Inc. 87,500 50,000
--------------------------------------------------------------------------
Merck & Co., Inc. 58,380 35,000
--------------------------------------------------------------------------
Microsoft Corp. 16,000 12,000
--------------------------------------------------------------------------
Macdermid, Inc. 77,800 -0-
--------------------------------------------------------------------------
PepsiCo, Inc. 85,030 80,400
--------------------------------------------------------------------------
Tecumseh Products Co. Class B 10,050 8,050
--------------------------------------------------------------------------
Warner-Lambert Co. 26,090 16,380
--------------------------------------------------------------------------
*Includes investments paid in kind on redemptions.
--------------------------------------------------------------------------
OTHER CHANGES
Shares
--------------------------------------------------------------------------
(46,585) Citizens Utilities C0., Class A in stock
dividends of 1.3% and 1.4% less 52,800
shares paid in kind on redemptions.
--------------------------------------------------------------------------
18,400 St. Paul Cos., Inc. in a 2 for 1 stock split
less 4,600 shares paid in kind on
redemptions.
--------------------------------------------------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
(UNAUDITED)
NAME OF COMPANY SHARES VALUE
------------------------------------------------------------------------------
COMMON STOCKS - 97.6%
------------------------------------------------------------------------------
BUSINESS PRODUCTS AND SERVICES - 9.4%
Banyan Systems Inc.* 40,000 $ 780,000
General Motors Corp. Class E 30,000 1,102,500
Lotus Development Corp.* 41,250 1,845,938
Microsoft Corp.* 12,000 754,500
Novell Inc.* 78,500 1,560,188
-----------
$ 6,043,126
-----------
CHEMICALS - 3.1%
Dow Chemical Co. 11,331 $ 725,184
Nalco Chemical Co. 40,000 1,300,000
-----------
$ 2,025,184
-----------
CHEMICALS-SPECIALTY - 7.0%
Great Lakes Chemical Corp. 25,000 $ 1,325,000
International Specialty Products Inc. 50,000 337,500
Loctite Corp. 23,000 1,040,750
Sealed Air Corp.* 40,000 1,395,000
Wellman Inc. 15,000 380,625
-----------
$ 4,478,875
-----------
CONSUMER PRODUCTS - 14.0%
Anheuser-Busch Co., Inc. 45,000 $ 2,210,625
Coca-Cola Co. 68,200 3,486,725
PepsiCo, Inc. 80,400 2,844,150
Stride Rite Corp. 40,000 495,000
-----------
$ 9,036,500
-----------
DRUGS AND MEDICAL - 6.1%
Bausch & Lomb Inc. 40,000 $ 1,335,000
Merck & Co., Inc. 35,000 1,303,750
Warner-Lambert Co. 16,380 1,267,402
-----------
$ 3,906,152
-----------
ELECTRICAL EQUIPMENT - 5.5%
Emerson Electric Co. 59,546 $ 3,513,214
-----------
ELECTRONICS - 6.2%
Intel Corp. 63,410 $ 4,002,756
-----------
FOREST PRODUCTS - 5.2%
Champion International Corp. 50,314 $ 1,748,412
Weyerhaeuser Co. 42,250 1,621,344
-----------
$ 3,369,756
-----------
INSURANCE - 9.8%
General Re Corp. 26,500 $ 3,110,437
Kansas City Life Insurance Co. 35,400 1,495,650
St. Paul Cos., Inc. 41,400 1,707,750
-----------
$ 6,313,837
-----------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
NAME OF COMPANY SHARES VALUE
------------------------------------------------------------------------------
COMMON STOCKS (Continued)
------------------------------------------------------------------------------
MACHINERY AND EQUIPMENT - 3.0%
Tecumseh Products Co. Class A 35,850 $ 1,568,437
Tecumseh Products Co. Class B 8,050 356,213
-----------
$ 1,924,650
-----------
OFFICE EQUIPMENT - 2.4%
Digital Equipment Corp.* 20,000 $ 680,000
International Business Machines Corp. 12,570 889,328
-----------
$ 1,569,328
-----------
PETROLEUM - 6.3%
Atlantic Richfield Co. 14,003 $ 1,449,311
Mobil Corp. 30,850 2,629,962
-----------
$ 4,079,273
-----------
PETROLEUM SERVICES AND EQUIPMENT - 1.5%
Schlumberger Ltd. 18,086 $ 960,819
-----------
POWER AND LIGHT - 4.8%
Citizens Utilities Co., Class A 234,881 $ 3,053,452
-----------
PUBLISHING AND PRINTING - 3.3%
Harcourt General Inc. 20,000 $ 717,500
Times Mirror Co. 46,204 1,426,548
-----------
$ 2,144,048
-----------
SPECIAL PRODUCTS AND SERVICES - 7.3%
Corning Inc. 35,000 $ 1,050,000
Millipore Corp. 30,000 1,436,250
Telefonos de Mexico, S.A. de C.V. 12,000 636,000
Wheelabrator Technologies Inc. 40,000 575,000
WMX Technologies, Inc. 37,930 976,697
-----------
$ 4,673,947
-----------
TRANSPORTATION - 2.7%
Union Pacific Corp. 36,790 $ 1,710,735
-----------
TOTAL COMMON STOCKS (Identified cost, $18,801,048) $62,805,652
-----------
FACE AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 2.0%
- ------------------------------------------------------------------------------
American Express Credit Corp.,
5.50%, due 12/5/94 $ 1,300 $ 1,299,205
-----------
TOTAL INVESTMENTS
(Identified cost, $20,100,253) -- 99.6% $64,104,857
OTHER ASSETS, LESS LIABILITIES -- 0.4% 251,669
-----------
NET ASSETS -- 100% $64,356,526
-----------
-----------
* Non-income producing security.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------
<CAPTION>
November 30, 1994 (Unaudited)
----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost, $20,100,253) $64,104,857
Cash 90,595
Dividends receivable 165,475
-----------
Total assets $64,360,927
LIABILITIES:
Payable to affiliates --
Custodian fee $1,220
Directors' fees 1,013
Accrued expenses 2,168
------
Total liabilities 4,401
-----------
NET ASSETS for 375,089 shares of capital stock outstanding $64,356,526
-----------
-----------
SOURCES OF NET ASSETS:
Accumulated net realized gain on investment transactions (computed on the
basis of identified cost), less the excess of cost of capital stock
redeemed over proceeds from sales of capital stock (including shares
issued to shareholders electing to receive payment of distributions in
capital stock) $28,998,264
Unrealized appreciation of investments (computed on the basis of identified
cost) 44,004,604
Provision for federal tax on undistributed net realized long-term capital
gain (8,917,930)
Undistributed net investment income 271,588
-----------
Total $64,356,526
-----------
-----------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($64,356,526 / 375,089 shares of capital stock outstanding) $171.58
------
------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------------
<CAPTION>
For the Six Months Ended November 30, 1994 (Unaudited)
----------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
<S> <C> <C>
Dividends $668,403
Interest 57,453
--------
Total income $725,856
Expenses --
Investment adviser fee (Note 4) $ 203,868
Compensation of Directors not members of the Investment
Adviser's organization 3,047
Custodian fee (Note 4) 20,282
Legal and accounting services 24,347
Printing and postage 10,526
Transfer and dividend disbursing agent fees 7,500
Miscellaneous 1,123
-----------
Total expenses 270,693
--------
Net investment income $455,163
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments, computed on the basis of
identified cost ($423,603 net gain as computed for
federal income tax purposes) $ 5,221,455
Decrease in unrealized appreciation of investments (5,113,765)
-----------
Net realized and unrealized gain on investments 107,690
--------
Net increase in net assets from operations $562,853
--------
--------
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30, 1994 YEAR ENDED
(UNAUDITED) MAY 31, 1994
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
From operations --
Net investment income $ 455,163 $ 870,759
Net realized gain on investment transactions 5,221,455 9,054,172
Decrease in unrealized appreciation of investments (5,113,765) (10,198,249)
----------- ------------
Increase (decrease) in net assets from operations $ 562,853 $ (273,318)
Undistributed net investment income included in net
asset value of shares redeemed and issued -- (15,234)
Distributions to shareholders -
From net investment income (390,007) (852,858)
Provision for federal tax on undistributed net realized
long-term gain (Note 1B) -- (300,267)
Net decrease from capital stock transactions (exclusive
of amounts allocated to net investment income) (5,019,975) (8,597,266)
----------- ------------
Net decrease in net assets $(4,847,129) $(10,038,943)
NET ASSETS:
At beginning of period 69,203,655 79,242,598
----------- ------------
At end of period (including undistributed net
investment income of $271,588 and $206,432,
respectively) $64,356,526 $ 69,203,655
----------- ------------
----------- ------------
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
NOVEMBER 30, YEAR ENDED MAY 31,
1994 ---------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $170.980 $174.560 $159.820 $147.710 $135.280 $120.820
-------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 1.214 $ 2.011 $ 1.935 $ 1.876 $ 2.021 $ 1.889
Net realized and unrealized
gain (loss) on investments 0.386 (2.899) 17.155 12.485 13.325 14.981
-------- -------- -------- -------- -------- --------
Total income(loss) from
operations $ 1.600 $ (0.888) $ 19.090 $ 14.361 $ 15.346 $ 16.870
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (1.000) $ (1.950) $ (1.900) $ (1.900) $ (2.100) $ (2.410)
From net realized gain
on investments -- -- (2.450) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions $ (1.000) $ (1.950) $ (4.350) $ (1.900) $ (2.100) $ (2.410)
-------- -------- -------- -------- -------- --------
LESS PROVISION FOR FEDERAL
TAX ON UNDISTRIBUTED NET
REALIZED LONG-TERM GAIN
(NOTE 1B) $ -- $ (0.742) $ -- $ (0.351) $ (0.816) $ --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $171.580 $170.980 $174.560 $159.820 $147.710 $135.280
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
TOTAL RETURN 0.94% (0.93)% 12.10% 9.59% 11.00% 14.15%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $ 64,357 $ 69,204 $ 79,243 $ 76,697 $ 72,981 $ 68,768
Ratio of expenses to
average net assets 0.83%<F1> 0.78% 0.78% 0.82% 0.85% 0.85%
Ratio of net investment
income to average net
assets 1.39%<F1> 1.17% 1.19% 1.24% 1.57% 1.51%
PORTFOLIO TURNOVER 4% 8% 5% 5% 7% 6%
<FN>
<F1> Annualized.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end, management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS - Investments listed on security exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at
closing bid prices. Short-term obligations, maturing in 60 days or less, are
valued at amortized cost, which approximates value.
B. FEDERAL TAXES - The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders each year all of its taxable income from dividends,
interest and net realized short-term capital gain. Accord- ingly, no provision
for federal income or excise tax is necessary on such income. The Fund generally
designates as undistributed any taxable net realized long-term gain (but
reserves the right to distribute such gain in any year) and pays the federal tax
thereon on behalf of shareholders. Provision for such tax is recorded on the
Fund's records on the last business day of the Fund's fiscal year because the
Internal Revenue Code provides that such tax is allocated among shareholders of
record on that date.
C. EQUALIZATION - Prior to June 1, 1994, the Fund followed the accounting
practice known as equalization by which a portion of the proceeds from the sales
and costs of redemptions of Fund shares was allocated to undistributed net
investment income. As of June 1, 1994, the Fund discontinued the use of
equalization. This change had no effect on the Fund's net assets, net asset
value per share, or its net increase in net assets from operations.
Discontinuing the use of equalization will result in a simpler and more
meaningful financial statement presentation.
D. DISTRIBUTIONS - Generally accepted accounting principles require that
differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in over- distributions for
financial statement purposes are classified as distributions in excess of net
investment income or accumulated net realized gains.
E. OTHER - Investment transactions are accounted for on a trade date basis.
Dividend income and dividends to shareholders are recorded on the ex-dividend
date.
F. INTERIM FINANCIAL INFORMATION - The interim financial statements relating to
November 30, 1994 and for the six-month period then ended have not been audited
by independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
- -------------------------------------------------------------------------------
(2) Capital Stock At November 30, 1994, there were 4,395,355 shares of $1.00 par
value capital stock authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30, YEAR ENDED
1994 MAY 31,
(UNAUDITED) 1994
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Redemptions (30,160) $(5,104,259) (50,280) $(8,781,339)
Issued to shareholders electing to
receive payment of
dividends in capital stock 493 84,284 1,076 184,073
-------- ----------- ------- -----------
Net decrease (29,667) $(5,019,975) (49,204) $(8,597,266)
------- ----------- ------- -----------
------- ----------- ------- -----------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
- -------------------------------------------------------------------------------
(3) Investment Transactions Purchases and sales of investments, other than
short-term obligations, aggregated $4,426,602 and $2,788,315, respectively. In
addition, investments having an aggregate market value of $5,068,275 at dates of
redemption were distributed in payment for capital stock redeemed.
- -------------------------------------------------------------------------------
(4) Investment Adviser Fee and Other Transactions with Affiliates The investment
adviser fee, computed at the monthly rate of 5/96 of 1% ( 5/8 of 1% annually) of
the Fund's average monthly net assets, was paid to Eaton Vance Management (EVM)
as compensation for management and investment advisory services rendered to the
Fund. Except as to directors of the Fund who are not members of EVM's
organization, officers and directors receive remuneration for their services to
the Fund out of such investment adviser fee. The custodian fee was paid to
Investors Bank & Trust Company (IBT), an affiliate of EVM, for its services as
custodian of the Fund. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average daily cash balances
the Fund maintains with IBT. Certain of the officers and directors of the Fund
are officers and directors/trustees of the above organizations.
- -------------------------------------------------------------------------------
(5) Line of Credit The Fund participates with other funds managed by EVM in a
$120 million unsecured line of credit agreement with a bank. The line of credit
consists of a $20 million committed facility and a $100 million discretionary
facility. Borrowings will be made by the Fund solely to facilitate the handling
of unusual and/or unanticipated short-term cash requirements. Interest is
charged to each fund based on its borrowings at an amount above either the
bank's adjusted certificate of deposit rate, a variable adjusted certificate of
deposit rate, or a federal funds effective rate. In addition, a fee computed at
an annual rate of 1/4 of 1% on the $20 million committed facility and on the
daily unused portion of the $100 million discretionary facility is allocated
among the participating funds at the end of each quarter. The Fund did not have
any significant borrowings or allocated fees during the period.
- -------------------------------------------------------------------------------
(6) FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized
appreciation/depreciation in value of the investments owned at November 30,
1994, as computed on a federal income tax basis, are as follows:
Aggregate cost $20,100,253
-----------
-----------
Gross unrealized appreciation $44,425,520
Gross unrealized depreciation 420,916
-----------
Net unrealized appreciation $44,004,604
-----------
-----------
- ------------------------------------------------------------------------------
(7) DISTRIBUTIONS
On December 19, 1994, the Directors of the Fund declared a dividend from net
investment income of $0.67 per share and a distribution from net realized
long-term capital gains of $1.145 per share both payable December 30, 1994, to
shareholders of record on December 19, 1994.
<PAGE>
INVESTMENT MANAGEMENT
DIVERSIFICATION OFFICERS AND STAFF INDEPENDENT DIRECTORS
FUND, INC. LANDON T. CLAY DONALD R. DWIGHT
24 Federal Street President, President, Dwight
Boston, MA 02110 Director Partners, Inc.
PETER F. KIELY Chairman, Newspapers of
Vice President, New England, Inc.
Director SAMUEL L. HAYES, III
JAMES B. HAWKES Jacob H. Schiff
Vice President Professor of
ROBERT S. GOODOF Investment Banking,
Vice President Harvard University
and Portfolio Graduate School of
Manager Business
JAMES L. O'CONNOR Administration
Treasurer NORTON H. REAMER
THOMAS OTIS President and Director,
Clerk United Asset
JAMES F. ALBAN Management Corporation
Assistant JOHN L. THORNDIKE
Treasurer Director, Fiduciary
JANET E. SANDERS Trust Company
Assistant JACK L. TREYNOR
Treasurer Investment Adviser and
and Assistant Consultant
Clerk
-------------------------------------------
INVESTMENT ADVISER TRANSFER AND DIVIDEND
Eaton Vance DISBURSING AGENT
Management The Shareholder
24 Federal Street Services Group, Inc.
Boston, MA 02110 BOS725
P.O. Box 1559
CUSTODIAN Boston, MA 02104
Investors Bank &
Trust Company
24 Federal Street
Boston, MA 02110
<PAGE>
DIVERSIFICATION FUND, INC.
SUMMARY
NET ASSET VALUE PER SHARE
----------------------------------------------
PAST SIX MONTHS
----------------------------------------------
November 30, 1994 $171.58
----------------------------------------------
May 31, 1994 $170.98
----------------------------------------------
PAST YEAR
----------------------------------------------
November 30, 1994 $171.58
----------------------------------------------
November 30, 1993 $171.10
----------------------------------------------
LIFE OF FUND
----------------------------------------------
November 30, 1994 $171.58
----------------------------------------------
July 27, 1961 $ 22.49
----------------------------------------------
CHANGE (7/27/61 TO 11/30/94)
----------------------------------------------
Share value +662.9%
----------------------------------------------
Share value plus cumulative
Federal taxes paid by Fund* +697.2%
----------------------------------------------
Dow Jones Industrial Average +432.0%
----------------------------------------------
Standard & Poor's 500 +581.1%
----------------------------------------------
*Realized capital gains are retained by the
Fund and the federal tax thereon is paid on
behalf of shareholders. Such taxes aggregated
$7.711 per share over the life of the Fund.
The Dow Jones Industrial Average and the
Standard & Poor's 500 are unmanaged lists oF
common stocks.
[EATON VANCE LOGO]
DIVERSIFICATION FUND
An Eaton Vance
Exchange Fund
Semi-Annual Report
November 30, 1994
