INVESTMENT ADVISER OF
SPECIAL INVESTMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV MARATHON SPECIAL EQUITIES FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AND DIVIDEND DISBURSING AGENT
First Data Investor Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV MARATHON
SPECIAL EQUITIES FUND
24 FEDERAL STREET
BOSTON, MA 02110
M-SESRC-2/96
[Logo]
EV MARATHON
SPECIAL EQUITIES
FUND
ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1995
<PAGE>
TO SHAREHOLDERS
During the year ended December 31, 1995, EV Marathon Special Equities Fund had a
total return of 19.6%. That return was the result of an increase in net asset
value to $11.66 per share from $9.81 per share and the reinvestment of $0.075 in
capital gain distributions. By comparison, the S&P 500, an unmanaged index of
common stocks, had a total return of 37.4% for the same period.
The United States economy remained remarkably steady during 1995, bringing
investors into a favorable period of slow growth and low inflation. The nation's
annualized rate of economic growth was 2.7% in the first quarter and 1.3% in the
second quarter of the year, rising to 4.2% in the third quarter. It was expected
to decline below 3% during the fourth quarter.
The crucial issue during the first half of the year was whether the
FederalReserve's previous tightening of its target federal funds rate would
cause a recession or would merely slow the economy's growth. As the year
progressed, it became clear that the Fed successfully engineered a "soft
landing."
In July the Fed lowered the federal funds rate by a quarter of a percentage
point, the first downward change since September, 1992. Another quarter-point
decrease was announced in December. These changes helped the economy continue to
advance at a slow but steady pace and provided impetus for the stock market.
The Fund's underperformance can be attributed in part to the fact that mid-cap
stocks, which the Portfolio targets, somewhat underperformed the market. The
underperformance also was caused by the selection of several stocks, some in the
technology sector, that posted earnings results lower than were generally
anticipated. Portfolio Manager Clifford H. Krauss will discuss these results in
greater detail on the pages that follow this letter.
While past trends cannot guarantee future performance, we believe that an
investment in growth stocks will provide a satisfactory long term total return.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes,
President
February 21, 1996
EV MARATHON SPECIAL EQUITIES FUND
10 LARGEST COMMON STOCK HOLDINGS*
Federal National Mortgage Assn..................................Housing finance
FIserv Inc.............................................Data processing services
Boston Scientific Corp..........................................Medical devices
Anadarko Petroleum Corp.....................................Oil/gas exploration
Triton Energy Corp..........................................Oil/gas exploration
Cisco Systems Inc.....................................Computer network products
Mutual Risk Mgmnt. Ltd. ........................................Risk management
Ceridian Corp.........................................Computer/finance services
Frontier Corp....................................Diversified telecommunications
Scholastic Corp...........................................Educational publisher
*By market value as of 12/31/95
<PAGE>
MANAGEMENT REPORT
An interview with Clifford H. Krauss, Vice President and Manager of
Special Equities Potfolio.
Q. CLIFF, HOW WOULD YOU DESCRIBE THE INVESTMENT CLIMATE OF THE PAST YEAR?
A. This was a remarkable market for stock investors. The S&P 500, an unmanaged
index of large-capitalizatiom common stocks, rose 37.4%. During the first
half of the year, technology stocks were the top performers. During the
second half of the year, the market became more selective, punishing
companies for earnings disappointments. Late in the year, technology stocks
declined, while biotechnology and oils posted large gains.
Q. HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
A. In absolute terms and in most markets, the Fund's performance during 1995
would be considered good. However, when compared with the high returns
posted by the S&P 500, the Fund did poorly. There were two principal reasons
for this. First, we were somewhat late in adding technology issues. And
second, some companies, including some technology issues, reported earnings
shortfalls that neither we nor Wall Street in general anticipated. Those
shortfalls caused the prices of those stocks to decline.
Q. WHAT KIND OF PROBLEMS DID THOSE STOCKS ENCOUNTER?
A. The example of Wabash National demonstrates what can go wrong. Long-term
investors know that in the past, we've been enthusiastic about this company,
which manufactures truck trailers that can be carried on railroad cars.
However, the economic slowdown hit the company more than it anticipated. We
had been trimming our holdings in any case, but still held some stock when
the company announced lower-than-expected earnings. The stock's price fell
on that bad news.
Q. DID YOU HAVE ANY SUCCESSES WITH TECHNOLOGY STOCKS DURING THE YEAR?
A. We were happy with the performance of FIserv, a company that provides data
processing for banks, and Cisco Systems, a company that is a leader in
developing switching systems for computer networks.
Q. WHAT OTHER SUCCESSFUL STOCKS WERE AMONG THE HOLDINGS THIS YEAR?
A. We've held one, Boston Scientific, for a number of years.In fact, we bought
a position in this company when it first went public. We went through a
period when the stock underperformed, and increased our position because we
believed that it eventually would do well. That long-term outlook was
rewarded during 1995, when the price of Boston Scientific increased more
than 183%.
Q. DID THE INTEREST RATE DECLINE HAVE A DIRECT EFFECT ON ANY HOLDINGS?
A. While the market in general gained when the Federal Reserve lowered its
rates, there is a whole category of interest rate sensitive stocks -- the
financial sector -- that benefits even more when interest rates drop.
Federal National Mortgage Association performed very well, especially when
interest rates dropped more than expected.
Q. DID YOU MOVE THE PORTFOLIO INTO ANY NEW SECTORS DURING 1995?
A. Yes. We built up a position in the energy sector for the first time in
several years. We've invested in companies focused on exploration, companies
that are creative in their efforts. Triton EnergyCorp. has performed
especially well. Triton has conducted successful explorations for oil in
Colombia and for natural gas in Thailand. It should generate significant
cash flow in the future and the stock's value is rising accordingly.
Q. ARE THERE OTHER ENERGY STOCKS THAT LOOK PROMISING?
A. Yes. Anadarko Petroleum Corp. has done well because its exploration for oil
in Algeria has been a real success. It's possible that full development of
what Anadarko has found inAlgeria may actually exceed the company's current
earnings and cash flow.
Q. HOW ABOUT OTHER SECTORS?
A. We believe there may be some opportunities in the entertainment and
communications sectors, so we'll be considering the possibility of
selectively picking stocks in those sectors.We already held stock in
Comcast, a cable television company, and during 1995 we added a position in
Gaylord Entertainment, which owns The Nashville Network, among other
properties.
Another promising sector is environmental services, and here we've acquired
stocks in three companies,Sanifill, USA Waste and United Waste Systems. All
are strong companies within their geographic areas, have strong operational
teams and are continuing to acquire smaller companies in their areas.
Q. HOW DO YOU VIEW 1996 IN TERMS OF THE FUND'S INVESTMENTS?
A. Overall economic conditions remain favorable for stock investors. Inflation
continues to be low and the economy is growing slowly. However, there
appears to be a considerable amount of volatility in the market because
prices are at all-time highs. I expect that at times, you'll see
profit-taking, which will cause price fluctuations.
While it seems unlikely that the market could experience as positive a year
as it did in 1995, we believe that those who invest in stocks that
demonstrate the potential for growth will be rewarded in the long term.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EV MARATHON SPECIAL EQUITIES FUND AND THE S&P 500 STOCK INDEX
From August 31, 1994, through December 31, 1995
-----------------------------------------------
AVG. ANNUAL 1 Life of
RETURNS Year Fund*
-----------------------------------------------
With CDSC 14.6% 9.0%
-----------------------------------------------
Without CDSC 19.6% 12.5%
-----------------------------------------------
[plot points]
Label A B
Label date M. Sp. Equities S&P 500
- --------------------------------------------------
1 8/94+ 10000 10000
2 9/94 9726 9800
3 10/94 9883 10005
4 11/94 9472 9609
5 12/94 9599 9798
6 1/95 9491 10036
7 2/95 9863 10398
8 3/95 10078 10749
9 4/95 10068 11050
10 5/95 10147 11451
11 6/95 10352 11772
12 7/95 10920 12146
13 8/95 11184 12142
14 9/95 11145 12705
15 10/95 10724 12642
16 11/95 11135 13161
17 12/95 11484 13467
Past performance is not indicative of future results. Investment returns and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
* Investment operations commenced on 8/22/94.
+ Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the
Fund's investment operations.
THE FUND'S PERFORMANCE
In accordance with guidelines issued by the Securities and Exchange Commission,
the above performance chart compares the Fund's total return with that of a
broad-based securities market index. The lines on the chart represent the total
returns of $10,000 hypothetical investments in the Fund and the S&P 500 Stock
Index.
THE TOTAL RETURN FIGURES
The solid line on the chart represents the Fund's performance. The Fund's total
return reflects Fund expenses, fees and Portfolio transaction costs, and assumes
the reinvestment of income dividends and capital gains distributions. The second
dollar figure listed for the Fund reflects the Fund's maximum applicable
contingent deferred sales charge (CDSC) deducted at redemption as follows: 5%
1st year; 5% 2nd year; 4% 3rd year; 3% 4th year; 2% 5th year; 1% 6th year.
The dotted line represents the performance of the S&P 500, a broad-based, widely
recognized unmanaged index of 500 common stocks. The Index's total return does
not reflect any commissions or expenses that would be incurred if an investor
purchased or sold the securities represented in the Index.
<PAGE>
EV MARATHON SPECIAL EQUITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investment in Special Investment Portfolio (Portfolio), at
value (Note 1A) $1,339,745
Receivable for Fund shares sold 946
Receivable from Administrator (Note 6) 53,746
Deferred organization expenses (Note 1D) 29,311
----------
Total assets $1,423,748
LIABILITIES:
Payable to affiliates --
Trustees' fees $ 23
Accrued organization expenses 31,095
Accrued expenses 6,257
-------
Total liabilities 37,375
----------
NET ASSETS for 118,920 shares of beneficial interest
outstanding $1,386,373
==========
SOURCES OF NET ASSETS:
Proceeds from sales of shares (including shares
issued to shareholders electing to receive payment
of distribution in shares), less cost of shares
redeemed $1,207,532
Unrealized appreciation of investments 178,841
----------
Total net assets $1,386,373
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($1,386,373 / 118,920 shares of beneficial interest) $11.66
======
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended December 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of
foreign taxes, $3) $ 4,172
Interest income allocated from Portfolio 3,397
Expenses allocated from Portfolio (6,244)
---------
Total investment income $ 1,325
Expenses --
Compensation of Directors not members of the
Investment Adviser's organization $ 23
Custodian fees 3,252
Distribution fees (Note 4) 6,345
Transfer and dividend disbursing agent fees 1,110
Printing and postage 19,744
Legal and accounting services 12,672
Registration fees 20,823
Amortization of organization expenses (Note 1D) 7,665
Miscellaneous 3,082
---------
Total expenses $ 74,716
Deduct --
Allocation of expenses by the Administrator
(Note 6) 53,746
---------
Net expenses 20,970
---------
Net investment loss $ (19,645)
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized loss on investments (identified cost
basis) $ (12,271)
Change in unrealized appreciation of investments 169,703
---------
Net realized and unrealized gain on
investments 157,432
---------
Net increase in net assets resulting from operations $ 137,787
=========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------
1995 1994*
-------- ------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (19,645) $ (1,495)
Net realized loss from Portfolio (12,271) (949)
Unrealized appreciation from Portfolio 169,703 9,138
----------- ---------
Net increase in net assets resulting from
operations $ 137,787 $ 6,694
----------- ---------
Distributions to shareholders --
In excess of realized loss $ (7,783) $ --
----------- ---------
Total distributions to shareholders $ (7,783) $ --
----------- ---------
Net increase in net assets from Fund share
transactions (Note 2) $ 633,799 $ 615,876
----------- ---------
Net increase in net assets $ 763,803 $ 622,570
NET ASSETS:
At beginning of year 622,570 --
----------- ---------
At end of year $ 1,386,373 $ 622,570
=========== =========
* For the period from the start of business, August 22, 1994 to December 31,
1994.
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994*
--------- --------
NET ASSET VALUE -- Beginning of year $ 9.810 $10.000
-------- -------
Income from operations:
Net investment loss $ (0.165) $(0.021)
Net realized and unrealized gain (loss) on
investments 2.090 (0.169)
-------- -------
Total income (loss) from investment operations $ 1.925 $(0.190)
-------- -------
Less distributions:
In excess of net realized loss $ (0.075) $ --
-------- -------
Total distributions $ (0.075) $ --
-------- -------
NET ASSET VALUE -- End of year $ 11.660 $ 9.810
======== =======
TOTAL RETURN(2) 19.64% (1.90)%
RATIOS/SUPPLEMENTAL DATA: (to average daily net assets)**
Expenses(1) 3.21% 3.05%+
Net investment income (2.31)% (2.00)%+
NET ASSETS, END OF YEAR (000 OMITTED) $ 1,386 $ 623
+ Computed on an annualized basis.
* For the period from the start of business, August 22, 1994 to December 31,
1994.
** The expenses related to the operation of the Fund reflect assumption of
expenses by the administrator. Had such action not been taken, net
investment loss per share and the ratios would have been as follows:
Net investment loss per share $ (0.617) $ (0.092)
Ratios (to average daily net assets)
Expenses 9.54% 9.55%+
Net investment (loss) (8.65)% (8.50)%+
(1) Includes the Fund's share of Special Investment Portfolio's allocated
expenses.
(2) Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Special Equities Fund (the Fund) a Massachusetts business trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company. The Fund is a series in
the Eaton Vance Special Investment Trust. The Fund invests all of its
investable assets in interests in the Special Investment Portfolio (the
Portfolio), a New York Trust, having the same investment objective as the
Fund. The value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (1.8% at December
31, 1995). The performance of the Fund is directly affected by the performance
of the Portfolio. The financial statements of the Portfolio, including the
portfolio of investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. 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 -- Valuations of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments, option and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$2,159 as capital gain dividends for its taxable year ended December 31 1995.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Distributions to shareholders are recorded
on the ex-dividend date.
- ------------------------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1994*
------------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------ ----------- ------ ---------
Sales 223,862 $ 2,433,937 64,218 $623,694
Issued to shareholders
electing to receive payment
of distribution in Fund
shares 494 5,375 -- --
Redemptions (168,879) (1,805,513) (775) (7,818)
-------- ------------ ------- ---------
Net increase (decrease) 55,477 $ 633,799 63,443 $615,876
======== ============ ======= =========
*From the start of business, August 22, 1994 to December 31, 1994.
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$2,494,453 and $1,871,583, respectively.
- ------------------------------------------------------------------------------
(4) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to accrue
amounts daily to the principal underwriter, Eaton Vance Distributors, Inc.
(EVD), equal to 1/365th of 0.75% of the Fund's average daily net assets, for
providing ongoing distribution services and facilities to the Fund. The Fund
will automatically discontinue accruals to EVD during any period in which
there are no outstanding Uncovered Distribution Charges, which are
approximately equivalent to the sum of (i) 5% of the aggregate amount received
by the Fund for shares sold plus (ii) distribution fees calculated by applying
the rate of 1% over the prevailing prime rate to the outstanding balance of
Uncovered Distribution Charges of EVD, reduced by the aggregate amount of
contingent deferred sales charges (see Note 5) and amounts theretofore paid
to EVD.
The amount payable to EVD with respect to each day is accrued on such day as
a liability of the Fund and, accordingly, reduces the Fund's net assets. Such
payments would cease upon termination of the distribution agreement (unless
made in accordance with another distribution agreement). As a result, the Fund
does not accrue amounts which may become payable to EVD in the future because
the conditions for recording any contingent liability under generally accepted
accounting principles have not been satisfied. EVD earned $6,345 for the year
ended December 31, 1995, representing 0.75% (annualized) of average daily net
assets. At December 31, 1995, the amount of Uncovered Distribution Charges of
EVD calculated under the Plan was approximately $41,748.
In addition, the Plan authorizes the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets for each fiscal
year. The Trustees have implemented the Plan by authorizing the Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.25% of the Fund's average daily net
assets for each fiscal year based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months, and that
payments of these service fees shall commence with the quarter ending March
31, 1996, for the quarter ending December 31, 1995. Service fees are separate
and distinct from the sales commissions and distribution fees payable by the
Fund to EVD, and, as such, are not subject to automatic discontinuance where
there are no outstanding Uncovered Distribution Charges of EVD.
Certain of the officers of the Fund and Directors of the Corporation are
officers and directors of EVD.
- ------------------------------------------------------------------------------
(5) CONTINGENT DEFERRED SALES CHARGES
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon
the lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gain distributions. The CDSC is imposed at declining rates that begin at 5% in
the first and second year or redemption after purchase, declining
one percentage point each year. No CDSC is levied on shares which have been
sold to EVM or its affiliates or to their respective employees or clients.
CDSC charges are paid to EVD to reduce the amount of Uncovered Distribution
Charges calculated under the Fund's Distribution Plan. CDSC charges received
when no Uncovered Distribution Charges exist will be retained by the Fund. EVD
received approximately $6,899 of CDSC paid by shareholders for the year ended
December 31, 1995.
- ------------------------------------------------------------------------------
(6) ADMINISTRATOR
The administrator assumed $53,746 of the Funds expenses in the year ended
December 31, 1995.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND TRUSTEES OF
EV MARATHON SPECIAL EQUITIES FUND, A SERIES OF EATON VANCE SPECIAL INVESTMENT
TRUST:
We have audited the accompanying statement of assets and liabilities of EV
Marathon Special Equities Fund, a series of Eaton Vance Special Investment
Trust, as of December 31, 1995, the related statements of operations, changes
in net assets and financial highlights for the year then ended and for the
period from August 22, 1994 (start of business) to December 31, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 by correspondence with the custodian. 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 financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Marathon Special Equities Fund, a series of Eaton Vance Special Investment
Trust, as of December 31, 1995, the results of its operations, changes in its
net assets and financial highlights for the year then ended and for the period
from August 22, 1994 (start of business) to December 31, 1994, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 2, 1996
<PAGE>
- -------------------------------------------------------------
SPECIAL INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- -------------------------------------------------------------
COMMON STOCKS - 92.4%
- -------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------
BUSINESS SERVICES - 9.9%
BISYS Group, Inc.* 22,000 $ 676,500
Services financial institutions with
computer, administrative and
marketing support data processing
services.
Ceridian Corp.* 40,000 1,650,000
Provides payroll processing and other
employer services, media and market
research.
Corestaff Inc.* 10,000 365,000
Temporary employment services agency.
Danka Business Systems PLC, ADR 20,000 740,000
An independent provider of
maintenance and service for office
copying machines.
FIserv Incorporated* 93,500 2,805,000
Provider of data processing services
to banks and savings institutions,
benefiting from outsourcing trend.
G&K Services, Inc. 42,200 1,076,100
Rents and launders uniforms and other
textile products.
-----------
$ 7,312,600
-----------
COMMUNICATIONS - 9.4%
Cellular Communications of Puerto 15,000 $ 416,250
Rico*
Provider of wireless cellular
telephone services.
Comcast Corp. 70,000 1,273,125
Cable TV and Cellular telephone
operator.
Evergreen Media Corp. Class A* 35,000 1,120,000
Operator of major market AM and FM
radio stations.
Frontier Corp. 55,000 1,650,000
Formerly Rochester Telephone Corp.,
provides local telephone and
communications services.
Intelcom Group, Inc.* 50,000 618,750
Provider of alternative access
telecommunication services and
international satellite uplink
teleports.
MFS Communications Co., Inc.* 20,000 1,065,000
Provider of fiber-optic based
telecommunications services
primarily to businesses.
Nokia Corp. 20,000 777,500
International wireless handset and
infrastructure equipment
manufacturer.
-----------
$ 6,920,625
-----------
COMPUTER EQUIPMENT - 1.1%
Motorola Inc. 15,000 $ 855,000
Leading worldwide producer of -----------
wireless communication systems and
equipment, major manufacturer of
semiconductors.
COMPUTER SOFTWARE - 8.7%
Banyan Inc.* 75,000 $ 768,750
Provider of networking software
products for large, complex
computer networks.
Checkfree Corp.* 2,000 43,000
Provider of electronic banking
software products and services.
3Com Corp.* 21,200 988,450
Designs, manufactures and distributes
intelligent hubs and other computer
networking products.
Davidson & Associates, Inc.* 25,000 550,000
Developer and distributor of
educational software products.
DST Systems, Inc.* 8,500 242,250
Provider of software and back office
computer services to the mutual
fund industry.
Inso Corp.* 20,000 850,000
Developer of software tools used for
proofing, reference and information
management.
Interleaf Inc.* 35,000 354,375
Provider of software used to compare,
edit and print complex documents.
Intersolv Inc.* 55,000 708,125
Provider of software development
tools.
Novell, Inc.* 40,000 570,000
Leading provider of network software
systems.
Objective Systems Integrator* 10,000 547,500
Provider of object-oriented, client
server software for network
operations, support and management.
Silicon Graphics, Inc.* 30,000 825,000
Produces computer systems used for
the design, analysis, and
simulation of three dimensional
objects.
-----------
$ 6,447,450
-----------
CONSUMER PRODUCTS - 0.3%
Boston Beer Co. Class A* 4,600 $ 109,250
Leading micro-brewery primarily under
the Samuel Adams brand-name.
Estee Lauder Companies* 3,800 132,525
International cosmetics company.
-----------
$ 241,775
-----------
ELECTRONICS & INSTRUMENTATION - 10.0%
Cisco Systems, Inc.* 25,000 $ 1,865,625
Manufacturer of routers that connect
computer networks.
Intel Corp. 25,000 1,418,750
World's leading semiconductor
manufacturer, also produces
microcomputer components, modules
and systems.
Linear Technology Corp. 20,000 785,000
Manufacturer of high performance
linear integrated circuits.
MEMC Electronic Materials, Inc.* 25,000 815,625
Leading producer of silicon wafers
used to create integrated circuits.
Mentor Graphics Corp.* 80,000 1,460,000
Developer of electronic design
automation systems used in complex
electronic products.
Microchip Technology, Inc.* 20,000 730,000
Leading producer of field
programmable micro-controllers.
Zoran Corp.* 15,000 311,250
Developer and marketer of integrated
circuits for digital video and
audio compression applications.
-----------
$ 7,386,250
-----------
ENERGY - 7.5%
Anadarko Petroleum Corp. 40,000 $ 2,165,000
A leading independent company in oil
and gas exploration, development
and production.
Pogo Producing Co. 50,000 1,412,500
Independent oil and gas exploration
and production company active in
the U.S. and Thailand
Triton Energy Corp. 35,000 2,008,125
Independent oil and gas exploration
and production company focusing on
international prospects especially
a major Colombian oil discovery.
-----------
$ 5,585,625
-----------
ENTERTAINMENT - 5.7%
Circus Circus Enterprises, Inc.* 47,000 $ 1,310,125
Major casino facilities in Las Vegas.
Also operates hotels.
Gaylord Entertainment 30,000 832,500
Producer of The Nashville Network and
Country Music Television Network
and operator of the Opryland
amusement park.
Mirage Resorts, Inc.* 25,000 862,500
Nevada based gaming resort operator.
Players International, Inc.* 42,500 454,219
Operates riverboat casinos in
Louisiana and Illinois and a
racetrack in Kentucky. Plans new
casino in Mesquite, Nevada.
Station Casinos, Inc.* 50,000 731,250
Owner and operator of gaming
enterprises.
-----------
$ 4,190,594
-----------
ENVIROMENTAL SERVICES - 2.6%
Sanfill Inc.* 26,000 $ 867,750
Operator of primarily solid-waste
facilities in 16 states.
United Waste Systems, Inc.* 10,000 372,500
Provider of collection and solid-
waste disposal services primarily
in secondary markets.
U.S.A. Waste Services, Inc.* 35,000 660,625
Operator of solid-waste land fills
and collection services,
integrating several large recent
acquisitions.
-----------
$ 1,900,875
-----------
FINANCE - 9.9%
Federal National Mortgage Association 30,000 $ 3,723,750
Leading factor in the secondary
mortgage market.
Franklin Resources, Inc. 20,000 1,007,500
One of the largest mutual fund
organizations in the U.S.
MBNA Corp. 30,000 1,106,250
Bank holding company and world's
leading issuer of Gold MasterCards.
T. Rowe Price Associates, Inc. 30,000 1,477,500
Investment adviser to mutual funds,
institutions and individuals.
-----------
$ 7,315,000
-----------
HEALTHCARE - 8.0%
Astra AB ADR Series B* 25,000 $ 992,118
Swedish based, multinational
pharmaceutical company.
Boston Scientific Corp.* 50,000 2,450,000
Medical device manufacturer focusing
primarily on disposable products
used in less invasive surgery
procedures.
MiniMed Inc.* 60,000 750,000
Developer and manufacturer of medical
devices focusing on diabetics.
Sofamor Danek Group, Inc.* 50,000 1,418,750
Leading developer/manufacturer of
spinal implant devices. Company
markets products internationally.
Vitalink Pharmacy Services, Inc.* 12,500 290,625
Provider of pharmacy services to
nursing homes and sub-acute care
medical facilities.
-----------
$ 5,901,493
-----------
HOMEBUILDING - 1.3%
Southern Energy Homes, Inc.* 55,625 $ 973,437
Produces customized manufactured -----------
homes in facilities located in
Alabama and Texas. Homes are sold
in 24 states.
HOTELS & RESTAURANTS - 0.5%
LaQuinta Inns, Inc. 15,000 $ 410,625
Owner/operator of modestly priced -----------
lodging chain.
INDUSTRIAL PRODUCTS - 2.6%
Greenfield Industries, Inc. 30,000 $ 937,500
A leading manufacturer of expendable
cutting tools and related products
used in industrial applications.
Loctite Corp. 20,600 978,500
International manufacturer of
adhesives, sealants and related
products.
-----------
$ 1,916,000
-----------
INSURANCE - 5.0%
American International Group 15,000 $ 1,387,500
One of the world's leading insurance
companies, operating in 130
countries.
Mutual Risk Management Ltd. 40,000 1,830,000
Specialty insurer focusing on
workmen's compensation.
Renaissance Re Holdings Ltd. 15,500 470,812
Provider of catastrophy reinsurance
services.
-----------
$ 3,688,312
-----------
PUBLISHING - 2.1%
Scholastic Corp.* 20,000 $ 1,555,000
Publisher/distributor of children's -----------
books.
RETAILING - 3.4%
Consolidated Stores Corp.* 70,000 $ 1,522,500
Chain of close-out merchandise stores
operating primarily under the Odd/
Big Lots name.
Home Depot Inc. 20,000 957,500
Operator of a chain of retail
warehouse-type stores selling
building supply and home
improvement products.
-----------
$ 2,480,000
-----------
SPECIALTY CHEMICALS - 3.6%
Great Lakes Chemical Corp. 20,000 $ 1,440,000
Leading producer of flame retardant
and specialty intermediate
chemicals.
Millipore Corp. 30,000 1,233,750
Manufacturer of membrane technology
products used for chemical analysis
and purification.
-----------
$ 2,673,750
-----------
TRANSPORTATION - 0.8%
Midwest Express Holdings* 20,100 $ 557,775
-----------
Business oriented airline with primary hub in Milwaukee.
TOTAL COMMON STOCKS
(IDENTIFIED COST, $47,644,606) $68,312,186
-----------
- -------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 7.6%
- -------------------------------------------------------------
PRINCIPAL AMOUNT
(000'S OMITTED) VALUE
- -------------------------------------------------------------
Ford Motor Credit Co., 58s, 1/3/96 $2,641 $ 2,640,142
Melville Corp., 5.9s, 1/2/96 2,955 2,954,522
-----------
TOTAL SHORT-TERM OBLIGATIONS, AT
AMORTIZED COST $ 5,594,664
-----------
TOTAL INVESTMENTS (IDENTIFIED COST,
$53,239,270) $73,906,850
OTHER ASSETS, LESS LIABILITIES - 0.0% $ 33,425
-----------
TOTAL NET ASSETS - 100% $73,940,275
===========
*Non-income producing security.
ADR -- American Depositary Receipt.
The accompanying notes are an
integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$53,239,270) $73,906,850
Cash 2,862
Dividends receivable 32,795
Deferred organization expenses (Note 1D) 11,318
-----------
Total assets $73,953,825
LIABILITIES:
Payable to affiliate --
Trustees' fees $ 1,400
Accrued expenses 12,150
-------
Total liabilities 13,550
-----------
NET ASSETS applicable to investors' interest in Portfolio $73,940,275
===========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $53,272,695
Unrealized appreciation of investments (computed on
the basis of identified cost) 20,667,580
-----------
Total net assets $73,940,275
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------
For the Year Ended December 31, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income (net of foreign taxes, $244) $ 360,263
Interest income 308,573
-----------
Total income $ 668,836
Expenses --
Investment adviser fee (Note 3) $ 435,400
Compensation of Directors not members of the Investment
Adviser's organization
(Note 3) 7,486
Custodian fee (Note 3) 58,731
Printing and postage 620
Legal and accounting services 23,951
Amortization of organization expenses (Note 1D) 3,158
Miscellaneous 4,754
-----------
Total expenses 534,100
-----------
Net investment income 134,736
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (identified cost basis) $ 4,131,300
Change in unrealized appreciation on investments 10,473,926
-----------
Net realized and unrealized gain on investments 14,605,226
-----------
Net increase in net assets resulting from operations $14,739,962
===========
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994*
------------ -------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 134,736 $ 55,637
Net realized gain (loss) on
investment transactions 4,131,300 (986,284)
Change in unrealized appreciation
of investments 10,473,926 4,288,639
----------- ------------
Net increase in net assets from
operations $14,739,962 $ 3,357,992
----------- ------------
Capital transactions --
Contributions $14,400,870 $104,495,403
Withdrawals (19,642,929) (43,411,023)
----------- ------------
Increase (decrease) in net
assets resulting from capital
transactions $(5,242,059) $ 61,084,380
----------- ------------
Total increase in net assets $ 9,497,903 $ 64,442,372
NET ASSETS:
At beginning of year 64,442,372 --
----------- ------------
At end of year $73,940,275 $ 64,442,372
=========== ============
The accompanying notes are an integral part of the financial statements
- ----------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
RATIOS (As a percentage of average
net assets):
Expenses 0.77% 0.74%+
Net investment income 0.19% 0.20%+
PORTFOLIO TURNOVER 81% 19%
+Computed on an annualized basis.
*For the period from the start of business, August 1, 1994 to December 31,
1994.
The accompanying notes are an integral part of the financial statements
<PAGE>
(1) SIGNIFICANT ACCOUNTING POLICIES
Special Investment Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-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 beneficial
interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or in the NASDAQ National Market are valued on the basis
of the last reported sales prices on the last business day of the period. If
no sale is reported on that date, a security is valued, if quoted on such a
day, at not lower than the old bid price nor higher than the asked prices.
Prices on such exchanges will not be used for valuing debt securities if in
the Trustees judgment, some other valuation method more accurately reflects
the fair market value of such a security. Securities for which over-the-
counter market quotations are readily available are valued on the basis of the
mean between the last bid and asked prices. Short-term securities are valued
at cost, which approximates market value. All other securities and assets are
appraised to reflect their fair value as determined in good faith by the
Trustees.
B. 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 Code) in order for its investors to satisfy them. The Portfolio
will allocate at least annually among its investors each investors'
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
C. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
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.
- ------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $52,362,032 and $58,838,098, respectively.
- ------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is at the annual rate of 5/8 of 1% of average daily net assets. For the year
ended December 31, 1995, the fee amounted to $435,400. Except as to Trustees
of the Portfolio who are not members of EVM's or BMR's organization, officers
and Trustees receive remuneration for their services to the Portfolio out of
such investment adviser fee. Investors Bank & Trust Company (IBT), serves as
custodian of the Portfolio. Prior to November 10, 1995, IBT was an affiliate
of EVM. Pursuant to the custodian agreement, IBT receives a fee reduced by
credits which are determined based on the average daily cash balances the
Portfolio maintains with IBT. All significant credit balances are reported as
a reduction of expenses in the statement of operations. Certain of the
officers and Trustees of the Portfolio are officers and directors/trustees of
the above organizations. Trustees of the Portfolio that are not affiliated
with the Investment Adviser may elect to defer receipt of all or a percentage
of their annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the year ended December 31, 1995, no significant
amounts have been deferred.
- ------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement
with a bank. The line of credit consists of a $20 million committed facility
and a $100 million discretionary facility. Borrowings will be made by the
Portfolio solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each portfolio based on
its borrowings at an amount above either the bank's adjusted certificate of
deposit rate, a variable adjusted certificate of deposit rate, or a federal
funds effective rate. In addition, a fee computed at an annual rate of 1/4 of
1% on the $20 million committed facility and on the daily unused portion of
the $100 million discretionary facility is allocated among the participating
funds and portfolios at the end of each quarter. The Portfolio did not have
any significant borrowings or allocated fees during the year. At December 31,
1995, the Fund did not have an outstanding balance pursuant to the line of
credit.
- ------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1995, as computed on a federal income tax basis, are as
follows:
Aggregate cost $53,239,270
===========
Gross unrealized appreciation $22,100,411
Gross unrealized depreciation 1,432,881
-----------
Net unrealized appreciation $20,667,580
===========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND INVESTORS OF
SPECIAL INVESTMENT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of
Special Investment Portfolio, including the portfolio of investments, as of
December 31, 1995, the related statement of operations, changes in net assets
and supplementary data for the year then ended and for the period from August
1, 1994 (start of business) to December 31, 1994. 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 generally accepted auditing
standards. 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
owned as of December 31, 1995 by correspondence with the custodian and
brokers. 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 supplementary data referred to
above present fairly, in all material respects, the financial position of
Special Investment Portfolio as of December 31, 1995, the results of its
operations, changes in its net assets and supplementary data for the year then
ended and for the period from August 1, 1994 (start of business) to December
31, 1994, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 2, 1996
<PAGE>
INVESTMENT MANAGEMENT
EV MARATHON OFFICERS TRUSTEES
SPECIAL EQUITIES
FUND JAMES B. HAWKES M. DOZIER GARDNER
24 Federal Street President, Trustee President, Eaton
Boston, MA 02110 Vance Management
CLIFFORD H. KRAUSS
Vice President DONALD R. DWIGHT
President, Dwight
JAMES L. O'CONNOR Partners, Inc.
Treasurer Chairman, Newspapers
of New England, Inc.
THOMAS OTIS
Secretary 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
Director, Fiduciary
Trust Company
JACK L. TREYNOR
Investment Adviser
and Consultant
-------------------------------------------------
SPECIAL INVESTMENT OFFICERS TRUSTEES
PORTFOLIO
24 Federal Street JAMES B. HAWKES M. DOZIER GARDNER
Boston, MA 02110 President, Trustee President, Eaton
Vance Management
CLIFFORD H. KRAUSS
Vice President DONALD R. DWIGHT
President, Dwight
Partners, Inc.
JAMES L. O'CONNOR Chairman, Newspapers
Treasurer of New England, Inc.
THOMAS OTIS SAMUEL L. HAYES, III
Secretary 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
Director, Fiduciary
Trust Company
JACK L. TREYNOR
Investment Adviser
and Consultant
