INVESTMENT ADVISER OF
STOCK PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV CLASSIC
STOCK FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER 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 CLASSIC STOCK FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-STSRC-2/96
[LOGO]
EV Classic
Stock
Fund
Annual Shareholder Report
December 31, 1995
<PAGE>
To Shareholders
We are pleased to report that during the year ended December 31, 1995, EV
Classic Stock Fund had a total return of 28.7%. That return was the result of an
increase in net asset value to $12.04 per share from $9.87 per share and the
reinvestment of distributions of $0.65 per share.
By comparison, the Lipper Growth & Income Fund Index, an index of 30 growth and
income funds, had a total return of 30.5%. The S&P500, an unmanaged index of
common stocks, had a total return of 37.4% for the same period.
The U.S. economy remained remarkably steady during 1995, creating a favorable
period of slow growth and low inflation for investors. 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."
The Fed lowered the federal funds rate by a quarter of a percentage point in
July, 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 market reached record levels during the year. This runup in prices was led
during the first half of the year by technology stocks while, later in 1995,
other segments of the market, particularly biotechnology and oils, came into
favor as technology stocks faltered.
Of course, past performance is no guarantee of future returns, but we believe
that investing in a combination of income-producing and growth stocks will
provide a satisfactory total return over the long term.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes,
President
February 21, 1996
EV CLASSIC STOCK FUND
10 LARGEST COMMON
STOCK HOLDINGS*
Praxair, Inc.............................Chemicals
Eastman Kodak Co............Photographic equipment
Omnicom Group..........................Advertising
Frontier Corp...................Telecommunications
PepsiCo Inc....................Beverages, consumer
Anadarko Petroleum Corp. .....Oil, gas exploration
McGraw-Hill Inc.........................Publishing
Bank of Boston.............................Banking
ConAgra, Inc.................................Foods
Rayonier, Inc......................Forest products
*as of 12/31/95
<PAGE>
MANAGEMENT REPORT
An interview with Duncan W. Richardson,
Vice President and manager of the Stock Portfolio.
Q. DUNCAN, HOW WOULD YOU CHARACTERIZE THE PAST YEAR FOR EQUITY INVESTORS?
A. It was a remarkable year in the financial markets. Both the bond and stock
markets were up dramatically for the year. On the stock side, the S&P 500,
an unmanaged index of common stocks, was up 37.4%, the largest increase
since 1958. For stock investors, everything fell into place -- lower
interest rates, moderate economic growth and relatively low inflation. I'm
sure that some investors thought it couldn't get any better than this,
because conditions were very positive.
Q. WHAT IS THE INVESTMENT STRATEGY THAT YOU USE IN MANAGING INVESTMENTS?
A. There are several components to our strategy.First, we choose stocks using a
bottom-up method. That is, we do extensive research on stocks that we're
considering before we buy. We also employ a strong selling discipline to
lower risk.
Another component that is fundamental to our investment strategy is the use
of convertible securities to increase yield. And, finally, we set aside a
portion of the Portfolio to be used to opportunistically purchase
underpriced, out-of-favor securities that we believe have strong prospects.
Q. WHAT DO YOU MEAN BY A STRONG SELLING DISCIPLINE?
A. When a stock's price declines, we look closely to determine whether we want
to continue to hold it. Capital preservation is important to achieving
long-term performance. We like to catch any mistakes early. In some cases,
if we decide that the stock is still fundamentally sound, we recommit to the
investment.
Q. WHAT SECTORS OF THE MARKET WERE FAVORED DURING THE YEAR?
A. What we saw during 1995 was a rotation of the sectors that the market
favored. Early in the year, technology stocks led the price increases, as
they had in late 1994. Later on, technology fell out of favor and other
sectors, especially telephone utilities, drugs and oils, performed well.
Q. HOW DID THESE FACTORS AFFECT THE INVESTMENT PORTFOLIO?
A. Compared to other growth and income funds, over the course of the year we
were significantly underweighted in technology stocks.We achieved our high
returns with less reliance on this volatile sector. We started overweighting
oil stocks last summer, so we've been able to take advantage of the market's
favorable attitude toward that sector.
Another factor was the Federal Reserve's lowering of interest rates twice
during the year. In addition to boosting overall investor confidence, the
lower interest rates were especially helpful to stocks in the financial
sector. The gains experienced by these stocks formed the foundation for the
Fund's solid year.
Q. WHAT WERE SOME OF THE STRONGEST PERFORMERS DURING 1995?
A. As I mentioned, financial stocks were a significant part of the success.
Three stocks that contributed strong performance in an environment of
declining interest rates were Bank of Boston Corp., Citicorp and Mortgage
Guaranty Investment Corporation, or MGIC. Bank of Boston's stock price also
rose because the market recognized the growth prospects for its
international banking operations. In all, the stock's price was up nearly
79% for the year. MGIC's price was helped by the fact that its earnings had
been previously underappreciated.
Sometimes there are special situations that can work to an investor's
advantage. For example, numerous industries are consolidating in this
country, and we were able to take advantage of this trend. In the financial
sector, our holdings in Shawmut National Corp. appreciated because of the
announcement of its acquisition by Fleet National.The price of CBS stock,
which we also held, increased when it was announced that the network would
be acquired by Westinghouse.The price of Upjohn Co. stock also rose on news
that the company was merging to become Pharmacia & Upjohn.
Triton Energy Corp. was another strong performer. This is a company that
explores for oil and natural gas and has had remarkable success in Colombia
and Thailand. From the time we acquired the stock until the end of 1995, its
price was up 82%.
Q. DID TECHNOLOGY STOCKS PLAY ANY ROLE IN THE PORTFOLIO'S SUCCESS?
A. Yes. While we were underweighted in technology, some of our holdings in this
sector, particularly Intel Corp. and Texas Instruments, both contributed to
the strong showing during the year. Intel, by the way, was the largest
position at the beginning of the year. Fortunately, we lightened our
position before the stock's price declined late in the year.
Q. WHAT OTHER SECTORS PERFORMED WELL?
A. In general, health care stocks performed well in 1995. Johnson & Johnson has
done particularly well this year. We've also had strong performance from
some of our consumer products stocks, particularly Procter & Gamble Co. and
Eastman Kodak Co.
In the case of both Procter & Gamble and Johnson & Johnson, we increased our
holdings when we recognized that in a slow or no-growth economy, the market
would more highly value companies that demonstrate the ability to grow
internationally. Both of these companies have a strong international
presence that could offset any disappointing U.S. earnings.
Q. IN ADDITION TO USING CONVERTIBLE SECURITIES, HOW DO YOU SEEK YIELD?
A. One way to find a good source of total return is by investing in telephone
utilities. These stocks were good performers during the second half of the
year and should continue to be a good source of total return. Many of these
companies have strong prospects for earnings gains based on the tremendous
opportunities that they have to cut costs.
Frontier Corp. is an example. This is a diversified telecommunications
company that is based inRochester, NY. It began with local telephone service
and expanded into long-distance and wireless operations. Now, long-distance
services account for 70% of the company's revenues and, at the same time,
its local telephone services are very well-managed. The good news is that
Frontier was up more than 51% during the period of 1995 that we owned the
stock.
Q. GIVEN THE GOOD YEAR THAT INVESTORS HAD IN 1995, WHAT SHOULD THEY EXPECT IN
1996?
A. While the outlook for the stock market remains basically positive, its just
not realistic to expect two blockbuster years in a row. Investors should
keep the historical returns of the stock market in mind as they look to the
future. Having said that, economic conditions going into 1996 continue to be
positive, with low inflation and slow, steady economic growth.
The objective of the Fund is to achieve growth and income for its investors.
To achieve that objective, we continue to balance the need to add attractive
growth stocks with the need to search out total return opportunities. In
all, we believe that choosing a combination of income-producing and growth
stocks is the way for the long-term investor to achieve a satisfactory total
return.
<PAGE>
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EV CLASSIC STOCK FUND AND THE S&P 500 STOCK INDEX
From November 30, 1994, through December 31, 1995
- ---------------------------------------
AVG. ANNUAL 1 Life of
RETURNS Year Fund*
- ---------------------------------------
With CDSC 27.7% 22.9%
- ---------------------------------------
Without CDSC 28.7% 22.9%
- ---------------------------------------
Label A B
- ----------------------------------------
Label Date C. Stock S&P 500
- ----------------------------------------
1 11/94+ 10000 10000
2 12/94 10154 10197
3 1/95 10123 10444
4 2/95 10494 10821
5 3/95 10844 11186
6 4/95 11080 11499
7 5/95 11502 11917
8 6/95 11698 12251
9 7/95 12125 12640
10 8/95 12320 12636
11 9/95 12475 13221
12 10/95 12418 13155
13 11/95 12841 13695
14 12/95 13065 14015
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 11/4/94.
+ 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 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.
TOTAL RETURN FIGURES
The solid line on the chart represents the Fund's performance. The Fund's total
return figure reflects Fund expenses, fees and Portfolio transaction costs, and
assumes the reinvestment of income dividends and capital gain distributions. The
Fund also has a 1% contingent deferred sales charge (CDSC) that is deducted for
redemptions made within the first 12 months.
The dotted line represents the performance of the S&P 500 Stock Index, 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 individually purchased or sold the securities represented in the
Index.
<PAGE>
EV CLASSIC STOCK FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investment in Stock Portfolio (Portfolio), at value
(Note 1A) $1,209,378
Receivable for Fund shares sold 4,417
Receivable from administrator (Note 6) 62,963
Deferred organization expenses (Note 1D) 29,112
----------
Total assets $1,305,870
LIABILITIES:
Payable to affiliates --
Trustees $ 23
Accrued organization expense 36,278
Accrued expenses 6,948
-------
Total liabilities 43,249
----------
NET ASSETS for 104,900 shares of beneficial interest
outstanding $1,262,621
==========
SOURCES OF NET ASSETS:
Proceeds from sales of shares (including shares
issued to shareholders electing to receive payment
of distributions in shares), less cost of shares
redeemed $1,082,892
Unrealized appreciation of investments 179,280
Undistributed net investment income 449
----------
Total net assets $1,262,621
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($1,262,621 / 104,900 shares of beneficial interest) $12.04
======
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
withholding tax of $217) $ 22,089
Interest income allocated from Portfolio 3,945
Expenses allocated from Portfolio (6,382)
--------
Total investment income $ 19,652
Expenses --
Compensation of Trustees not members of the
Investment Adviser's organization (Note 6) $ 23
Custodian fees (Note 6) 3,252
Distribution fees (Note 4) 8,753
Transfer and dividend disbursing agent fees 649
Printing and postage 20,505
Legal and accounting services 17,255
Registration fees 19,827
Amortization of organization expenses (Note 1D) 7,665
Miscellaneous 3,578
--------
Total expenses $ 81,507
Deduct --
Allocation of expenses to the administrator (Note 6) 62,963
--------
Net expenses 18,544
--------
Net investment income $ 1,108
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (loss) (identified cost basis) --
Investment transactions $ 57,002
Written option transactions (1,794)
--------
Net realized gain on investment transactions $ 55,208
Change in unrealized appreciation of investments 174,572
--------
Net realized and unrealized gain on investments 229,780
--------
Net increase in net assets resulting from operations $230,888
========
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 income $ 1,108 $ 84
Net realized gain from Portfolio 55,208 15
Change in unrealized appreciation from Portfolio 174,572 4,708
---------- --------
Net increase in net assets from operations $ 230,888 $ 4,807
---------- --------
Distributions to shareholders --
From net investment income $ (2,429) $ --
Tax return of capital (7,754) --
From net realized gain on investments (54,686) --
---------- --------
Total distributions to shareholders $ (64,869) $ --
---------- --------
Net increase in net assets from Fund share
transactions (Note 2) $ 950,965 $140,820
---------- --------
Net increase in net assets $1,116,984 $145,627
NET ASSETS:
At beginning of year 145,637 10
---------- --------
At end of year (including undistributed net
investment income of $449 and $84, respectively) $1,262,621 $145,637
========== ========
* For the period from the start of business, November 4, 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 $ 9.870 $10.000
------- -------
Income from investment operations:
Net investment income $ 0.013 $ --
Net realized and unrealized gain (loss) on
investments 2.807 (0.130)
------- -------
Total income (loss) from investment
operations $ 2.820 $(0.130)
------- -------
Less distributions:
From net investment income $(0.024) $ --
Tax return of capital (0.074) --
From net realized gain on investments (0.552) --
------- -------
Total distributions $(0.650) $ --
------- -------
NET ASSET VALUE -- end of year $12.040 $ 9.870
======= =======
TOTAL RETURN** 28.66% (1.30)%
RATIOS/SUPPLEMENTAL DATA: (to average daily net
assets)***
Expenses(1) 2.84% 1.59%+
Net investment income 0.13% 1.01%+
NET ASSETS AT END OF PERIOD (000'S OMITTED) $ 1,263 $ 146
* For the period from the start of business, November 4, 1994, to
December 31, 1994.
(1) Includes the Fund's share of Stock Portfolio's allocated expenses.
+ Computed on an annualized basis.
** Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the record date. Total return is not
computed on an annualized basis.
*** The expenses related to the operation of the Fund reflect an allocation of
expenses to 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 $(0.588) $(0.210)
Ratios (to average daily net assets)
Expenses 10.01 % 39.84 %+
Net investment income (7.04)% (37.23)%+
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
- -----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Classic Stock 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 Stock 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 (1.1% 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
$27,156 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. Gain or loss on the sale of investments is determined on
the identified cost basis.
F. 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 temporary over-
distributions for financial statement purposes are classified as distributions
in excess of net investment income or accumulated net realized gains.
- ------------------------------------------------------------------------------
(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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1995 1994*
----------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales 153,557 $1,668,761 14,749 $140,820
Issued to shareholders electing to receive payment of
distribution in Fund shares 4,349 51,758 -- --
Redemptions (67,755) (769,554) -- --
------ --------- ----- -------
Net increase 90,151 $ 950,965 14,749 $140,820
====== ========== ====== ========
<FN>
*From the start of business, November 4, 1994 to December 31, 1994.
</TABLE>
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$1,670,745 and $855,343, 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 pay
the principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal
to 1/365th of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no
outstanding Uncovered Distribution Charges, which are equivalent to the sum of
(i) 6.25% 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 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 $6,565 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 $108,913.
In addition, the Plan provides that the Fund may 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 of the Fund have initially implemented this
provision of the Plan by authorizing the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in each
fiscal year of the Fund in amounts not exceeding 0.25% (per annum) of the
Fund's average daily net assets. Provision for service fee payments for the
year ended December 31, 1995 amounted to $2,188.
Certain of the officers and Trustees of the Fund are officers or directors
of EVD.
- ------------------------------------------------------------------------------
(5) CONTINGENT DEFERRED SALES CHARGE (CDSC)
Shares purchased on or after January 30, 1995 and redeemed during the first year
after purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
at a rate of one percent of redemption proceeds, exclusive of all reinvestments
and capital appreciation in the account. No contingent deferred sales charge is
imposed on exchanges for shares of other funds in the Eaton Vance Classic Group
of Funds or Eaton Vance Money Market Fund which are distributed with a
contingent deferred sales charge. EVD received approximately $38 of CDSC paid by
shareholders for the year ended December 31, 1995.
- ------------------------------------------------------------------------------
(6) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Eaton Vance serves only as the administrator of the Fund, but receives no
compensation. The administrator assumed $62,963 of the Fund's expenses for the
year ended December 31, 1995. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of Eaton Vance Management (EVM), to render
investment advisory services. See Note 3 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report. Except as to Trustees of
the Fund and the Portfolio who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to the Fund out of
such investment adviser fee.
Investors Bank & Trust Company (IBT), serves as custodian of the Fund and
the Portfolio. Prior to November 10, 1995 IBT was an affiliate of EVM.
Pursuant to the respective custodian agreements, IBT receives a fee reduced by
credits which are determined based on the average cash balances the Fund or
the Portfolio maintains with IBT. All significant credit balances used to
reduce the Fund's custody fees are reported as a reduction of expenses in the
Statement of Operations.
Certain of the officers and Trustees of the Fund and Portfolio are officers
and directors/trustees of the above organizations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND TRUSTEES OF
EV CLASSIC STOCK FUND, A SERIES OF EATON VANCE SPECIAL INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities of EV
Classic Stock Fund, a series of Eaton Vance Special Investment Trust, as of
December 31, 1995, the related statements of operations for the year then
ended, changes in net assets and financial highlights for the year ended
December 31, 1995 and for the period from November 4, 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
Classic Stock Fund, a series of Eaton Vance Special Investment Trust, as of
December 31, 1995, the results of its operations for the year then ended, and
the changes in its net assets and financial highlights for the year ended
December 31, 1995 and for the period from November 4, 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>
- -----------------------------------------------------------------------------
STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- -----------------------------------------------------------------------------
COMMON STOCKS -- 86.5%
- -----------------------------------------------------------------------------
SHARES SECURITY VALUE
- -----------------------------------------------------------------------------
ADVERTISING - 3.1%
90,000 Omnicom Group $ 3,352,500
------------
AEROSPACE & DEFENSE - 1.8%
40,000 General Motors Corp. Class H $ 1,965,000
------------
AGRICULTURE EQUIPMENT - 2.0%
60,000 Deere & Co. $ 2,115,000
------------
AUTOMOTIVE - 0.4%
15,000 Ford Motor Co. $ 435,000
------------
BANKS - 4.3%
55,000 Bank of Boston Corp. $ 2,543,750
14,331 Citicorp 963,792
26,766 Fleet Financial Group, Inc. 1,090,714
------------
$ 4,598,256
------------
BROADCASTING - 2.0%
120,000 Comcast Corp. Class A $ 2,182,500
------------
CHEMICALS - 4.7%
20,000 DuPont (E.I.) deNemours & Co., Inc. $ 1,397,500
110,000 Praxair, Inc. 3,698,750
------------
$ 5,096,250
------------
CONSUMER GOODS & SERVICES - 11.7%
50,000 American Brands, Inc. $ 2,231,250
55,000 Eastman Kodak Co. 3,685,000
50,000 PepsiCo, Inc. 2,793,750
17,100 Procter & Gamble Co. 1,419,300
70,000 Seagram Co. Ltd. 2,423,750
------------
$ 12,553,050
------------
DRUGS & MEDICAL - 4.1%
25,000 Johnson & Johnson Co. $ 2,140,625
58,000 Pharmacia & Upjohn, Inc. 2,247,500
------------
$ 4,388,125
------------
FINANCE & INSURANCE - 9.5%
48,540 Allstate Corp. $ 1,996,208
50,000 American General Corp. 1,743,750
60,000 Block (H. & R.), Inc. 2,430,000
35,000 MGIC Investment Corp. Wisc. 1,898,750
45,000 Progressive Corp. 2,199,375
------------
$ 10,268,083
------------
FOOD - 2.3%
61,063 Conagra, Inc. $ 2,518,849
------------
FOREST PRODUCTS - 2.3%
75,000 Rayonier, Inc. $ 2,503,125
------------
INTEGRATED OIL - 4.1%
27,000 Exxon Corp. $ 2,163,375
65,000 Phillips Petroleum Co. 2,218,125
------------
$ 4,381,500
------------
INTERNATIONAL NEWS AGENCY - 0.8%
15,000 Reuters Holdings PLC ADR $ 826,875
------------
MANUFACTURING - DIVERSIFIED - 1.4%
25,000 Illinois Tool Works, Inc. $ 1,475,000
------------
METALS & MINING - 1.8%
100,000 J & L Specialty Steel, Inc. $ 1,875,000
------------
OIL & GAS EXPLORATION - 6.8%
50,000 Anadarko Petroleum Corp. $ 2,706,250
30,000 Texaco, Inc. 2,355,000
40,000 Triton Energy Corp. 2,295,000
------------
$ 7,356,250
------------
PUBLISHING - 4.2%
15,000 Dow Jones & Co., Inc. $ 598,125
30,000 Houghton Mifflin Co. 1,290,000
30,000 McGraw-Hill, Inc. 2,613,750
------------
$ 4,501,875
------------
REAL ESTATE INVESTMENT TRUSTS - 3.6%
20,000 Beacon Properties Corp. $ 460,000
16,000 Chelsea GCA Realty, Inc. 480,000
20,000 Equity Residential Properties Trust 612,500
20,000 Nationwide Health Properties, Inc. 840,000
10,000 Post Properties, Inc. 318,750
18,000 Redwood Trust, Inc. 328,500
20,000 ROC Communities, Inc. 480,000
14,200 Trinet Corporate Realty Trust, Inc. 386,950
------------
$ 3,906,700
------------
RETAIL - 2.0%
100,000 Toys "R" Us* $ 2,175,000
------------
SAVINGS & LOAN - 1.3%
55,000 Great Western Financial Corp. $ 1,402,500
------------
SEMICONDUCTORS - 3.6%
25,000 Intel Corp. $ 1,418,750
30,000 Motorola, Inc. 1,710,000
15,000 Texas Instruments, Inc. 776,250
------------
$ 3,905,000
------------
SPECIALTY CHEMICALS - 1.6%
35,000 Loctite Corp. $ 1,662,500
------------
TELECOMMUNICATIONS - 6.3%
35,000 Ameritech Corp. $ 2,065,000
100,000 Frontier Corp. 3,000,000
30,000 SBC Communications, Inc. 1,725,000
------------
$ 6,790,000
------------
UTILITIES - NATURAL GAS - 0.8%
50,000 Western Gas Resources $ 806,250
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $73,217,574) $ 93,040,188
------------
- -----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 5.3%
- -----------------------------------------------------------------------------
10,000 Ford Motor Co., 8.4% $ 947,500
140,000 Freeport McMoRan Copper & Gold, 5% 3,815,000
10,000 Tejas Gas Corp., 5.25% 475,000
10,000 Valero Energy Corp., 6.25% 515,000
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST, $4,782,861) $ 5,752,500
------------
- -----------------------------------------------------------------------------
CONVERTIBLE BONDS - 4.2%
- -----------------------------------------------------------------------------
FACE AMOUNT
(000'S OMITTED)
- -----------------------------------------------------------------------------
$ 500 Beverly Enterprises, 7.625%, 3/15/03 $ 477,500
750 Beverly Enterprises, 5.5%, 8/1/18 708,750
1,920 INCO Ltd., 5.75%, 7/1/04 2,524,800
840 Scandinavian Broadcasting System,
7.25%, 8/1/05 863,100
------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST, $4,078,750) $ 4,574,150
------------
- -----------------------------------------------------------------------------
CORPORATE BOND - 0.0%
- -----------------------------------------------------------------------------
FACE AMOUNT
(000'S OMITTED) VALUE
- -----------------------------------------------------------------------------
$ 50 H.P. Hood & Son, 7.50%, 2/1/01 $ 39,400
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST, $50,000) $ 39,400
------------
- -----------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 3.7%
- -----------------------------------------------------------------------------
$3,056 General Electric Capital Corp.,
5.8%, 1/3/96 $ 3,055,014
933 Melville Corp., 5.9%, 1/2/96 932,849
------------
TOTAL SHORT TERM INVESTMENTS
AT AMORTIZED COST $ 3,987,863
------------
TOTAL INVESTMENTS - 99.7%
(IDENTIFIED COST, $86,117,048) $107,394,101
OTHER ASSETS, LESS LIABILITIES - 0.3% 323,174
------------
NET ASSETS - 100% $107,717,275
============
ADR -- American Depository Receipt
Note: Percentages shown are based on net assets
The accompanying notes are an integral part of the financial statements
<PAGE>
STOCK PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$86,117,048) $107,394,101
Cash 970
Interest receivable 100,068
Dividends receivable 207,809
Deferred organization expenses (Note 1C) 11,719
Other receivables 21,656
------------
Total assets $107,736,323
LIABILITIES:
Payable to affiliates --
Trustees fees $ 1,396
Accrued expenses 17,652
-------
Total liabilities 19,048
------------
NET ASSETS applicable to investors' interest in Portfolio $107,717,275
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $ 86,440,222
Unrealized appreciation of investments (computed on
the basis of identified cost) 21,277,053
------------
Total net assets $107,717,275
============
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended December 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 462,813
Dividends (net of withholding tax of, $21,440) 2,496,020
-----------
Total income 2,958,833
Expenses --
Investment adviser fee (Note 3) $ 606,215
Compensation of directors, not members of the
Investment Adviser's organization (Note 3) 7,482
Custodian fee (Note 3) 73,496
Printing and postage 332
Legal and accounting services 28,943
Amortization of organizational expenses
(Note 1C) 3,248
Miscellaneous 10,719
----------
Total expenses 730,435
-----------
Net investment income 2,228,398
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (identified cost basis) --
Investment transactions $9,926,132
Written option transactions 296,671
----------
Net realized gain $10,222,803
Change in unrealized appreciation on investments 14,953,494
-----------
Net realized and unrealized gain on investments $25,176,297
-----------
Net increase in net assets resulting from operations $27,404,695
===========
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 income $ 2,228,398 $ 908,166
Net realized gain (loss) on investment
transactions 10,222,803 (2,035,741)
Change in unrealized appreciation of
investments 14,953,494 (1,601,217)
------------ -----------
Net increase (decrease) in net assets
resulting from operations $ 27,404,695 $(2,728,792)
------------ -----------
Capital transactions --
Contributions $ 13,753,042 $ 2,390,694
Withdrawals (18,959,497) (5,494,445)
------------ -----------
Decrease in net assets resulting from
capital transactions $ (5,206,455) $(3,103,751)
------------ -----------
Total increase (decrease) in net assets $ 22,198,240 $(5,832,543)
NET ASSETS:
At beginning of year 85,519,035 91,351,578
------------ -----------
At end of year $107,717,275 $85,519,035
============ ===========
- ------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------
1995 1994*
------------- ------------
RATIOS (to average daily net assets):
Expenses 0.75% 0.73%+
Net investment income 2.30% 2.45%+
PORTFOLIO TURNOVER 108% 28%
+ 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>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Stock 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 invest- ment 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. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
D. 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.
E. WRITTEN OPTIONS -- The Fund may write call or put options for which premiums
are received and are recorded as liabilities, and are subsequently adjusted to
the current value of the options written. Premiums received from writing options
which expire are treated as realized gains. Premiums received from writing
options which are exercised or are closed are offset against the proceeds or
amount paid on the transaction to determine the realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund as a writer of an option may have no control
over whether the underlying securities may be sold (call) or purchased (put) and
as a result bears the market risk of an unfavorable change in the price of the
securities underlying the written option.
- ------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregrated $99,400,340 and $102,585,387, 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 $606,215. 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. Certain of the officers and Trustees of the Portfolio are
officers and directors/trustees of the above organizations. All significant
credit balances used to reduce the Funds custody fees are reported as a
reduction of expenses in the statement of operations. 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 period. 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 $86,041,047
===========
Gross unrealized appreciation $22,128,189
Gross unrealized depreciation 775,135
-----------
Net unrealized appreciation $21,353,054
===========
- ------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Fund regularly trades in financial instruments with off-balance-sheet risk
in the normal course of its investing activities and to assist in managing
exposure to market risks such as interest rates and foreign currency exchange
rates. These financial instruments include written options. The notional or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and do not necessarily represent
the amounts potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and offsetting
transactions are considered. A summary of obligations under these financial
instruments at December 31, 1995 is as follows:
Written Option Transactions
Transactions in written options for the year ended December 31, 1995 were as
follows:
PRINCIPAL AMOUNTS
OF CONTRACTS
(000'S OMITTED) PREMIUMS
--------------- --------
Outstanding, beginning of period -- --
Options written (990) ($296,671)
Options exercised 990 296,671
Options expired -- --
---- ---------
Outstanding, end of period 0 $ 0
==== =========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND INVESTORS OF STOCK PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of Stock
Portfolio, including the portfolio of investments, as of December 31, 1995,
the related statement of operations for the year then ended, and the changes
in net assets and supplementary data for the year ended December 31, 1995 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 audits 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
Stock Portfolio as of December 31, 1995, the results of its operations for the
year then ended, and the changes in its net assets and supplementary data for
the year ended December 31, 1995 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 CLASSIC OFFICERS TRUSTEES
STOCK FUND JAMES B. HAWKES M. DOZIER GARDNER
24 Federal Street President, Trustee President, Eaton Vance
Boston, MA 02110 CLIFFORD H. KRAUSS Management
Vice President DONALD R. DWIGHT
JAMES L. O'CONNOR President, Dwight Partners, Inc.
Treasurer Chairman, Newspapers of
THOMAS OTIS New England, Inc.
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 Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
-----------------------------------------------------------
STOCK PORTFOLIO OFFICERS TRUSTEES
24 Federal Street JAMES B. HAWKES DONALD R. DWIGHT
Boston, MA 02110 President, Trustee President, Dwight Partners, Inc.
DUNCAN W. RICHARDSON Chairman, Newspapers of
Vice President and New England, Inc.
Portfolio Manager SAMUEL L. HAYES, III
JAMES L. O'CONNOR Jacob H. Schiff Professor of
Treasurer Investment Banking, Harvard
THOMAS OTIS University Graduate School of
Secretary Business Administration
NORTON H. REAMER
President and Director,
United Asset Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
