<PAGE>
To Shareholders
I am pleased to report that EV Classic Special Equities Fund had a total return
of 10.4% for the six months ended June 30, 1996. That return reflected a change
in net asset value per share from $11.63 on December 31, 1995 to $12.84 on June
30, 1996. By comparison, the performance of the Lipper Growth Fund Index was
8.0% during this same period. The S&P 500 Index, an unmanaged index of large
capitalization stocks which serves as a measure of stock market performance, was
up 10.1% during the first half of the year.*
The last two quarters represent the sixth and seventh consecutive periods of
positive performance in the equity markets, and the economy is in its sixth
consecutive year of positive growth. However, the stock market, which has not
seen a significant correction since 1990, has shown unusually high volatility in
the last six months. On several occasions, the market declined sharply in
response to reports of a strong economy because investors were nervous that
continuing, unabated economic strength would eventually lead to inflation.
Inflation is a nemesis of both the stock and bond markets because it causes
concern that the Federal Reserve will raise interest rates to slow the economy
and avert the inflationary threat. Higher interest rates cause bond prices to
decline and can divert funds away from the stock market into fixed-income
securities.
Smaller capitalization stocks have experienced somewhat of a "shakeout" in
recent weeks. The NASDAQ Composite Index, an unmanaged index of small company
stocks, was up 18.2% for the first five months of this year, but declined 4.7%
in June. Many investors consider this a natural and healthy reaction to some of
the market's excesses, which include unrealistically high valuations of Internet
stocks, heavy volume of initial public offerings (IPO's), and a large flow of
public money into aggressive stock mutual funds.
- ----------------------------------------------------------------------
EV CLASSIC SPECIAL EQUITIES FUND
Ten largest stock holdings, by market value, as of 6/30/96
COMPANY INDUSTRY
Federal Nat'l Mortgage..............Finance
Anadarko Petroleum..................Energy
FIserve, Inc........................Bus. Products & Services
Cisco Systems, Inc..................Electronics/Instruments
Boston Scientific Corp..............Health Care
Consolidated Stores.................Retailing
Ceridian Corp.......................Bus. Products & Services
Circus Circus.......................Entertainment/Leisure
T. Rowe Price Assoc.................Finance
MiniMed, Inc........................Health Care
- ----------------------------------------------------------------------
Despite the recent turmoil in the stock market, EV Classic Special Equities Fund
has outperformed many of its peers. However, it is important to note that past
performance is no guarantee of future results. In the interview that follows,
manager Clifford Krauss highlights some of the successes of the past six months,
and provides insight into what recent events may portend.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
August 5, 1996
*It is not possible to invest directly in these indexes.
<PAGE>
Management Report
An interview with Clifford H. Krauss, Vice President and Manager of
Special Equities Portfolio.
Q. CLIFF, HOW HAS THE EQUITY MARKET AS A WHOLE PERFORMED IN THE LAST SIX
MONTHS?
A. Despite its recent volatility, the stock market has been fairly strong in
the last six months. This strength has been somewhat surprising because many
analysts had predicted a correction by now. The market's volatility is the
result of a rise in long-term interest rates, a prolonged economic
expansion, and the lack of a major correction in six years. Over-the-counter
stocks and IPO's - among the best performers so far this year - have also
been among the most erratic.
The Fund's performance has improved dramatically in recent months. We have
outperformed both the S&P 500 and the Growth Fund averages for two major
reasons. First, our patience in some stocks has finally paid off, and we've
been able to reap the rewards of being long-term investors. And second,
other stock sectors that had done poorly in the second half of last year
have rebounded nicely.
Q. WHAT SECTORS OF THE MARKET HAVE DONE WELL IN THIS SIX-MONTH PERIOD?
A. The gaming and hotel industries have been among the strongest performing
sectors this year. Other areas of strength include retailing, technology,
and the specialized device manufacturing business. Energy companies -
especially those involved in exploration - performed very well.
Q. TO WHAT EXTENT HAS THE SPECIAL EQUITIES PORTFOLIO CAPITALIZED ON THE GROWTH
OF THE MARKET?
A. I think the portfolio has captured much of the growth of the market, but
many of our stocks can be "idiosyncratic" - they are niche companies that
are very growth-oriented, with distinctive businesses and products, and such
stocks tend to create their own markets. Because we focus primarily on this
high-growth part of the market, we do not participate in other segments such
as insurance. In the energy area, we look at smaller exploration companies
rather than the large oil conglomerates like Exxon. We have participated
somewhat in the IPO market and have taken advantage of the good performance
that has taken place there this year.
Q. WHAT IS THE CORE FOCUS OF THE SPECIAL EQUITIES PORTFOLIO?
A. This is a growth-oriented portfolio with a strong bias towards quality. We
look for companies whose earnings-per-share are growing at 15% per year,
which leads us to mid-sized companies. Most large companies are too big to
grow at this rate, and many of the smaller companies are less proven and
more volatile. We will look at some rapidly growing large-capitalization
companies and some small-capitalization firms that have staying power and
distinctive businesses, but we focus mainly on mid-size companies whose
businesses make sense for the long-term.
Q. CISCO SYSTEMS SEEMS TO BE A GREAT SUCCESS STORY - CAN YOU ELABORATE ON IT?
A. We have owned this stock for several years, and were initially attracted by
its rapid growth. Cisco designs and manufactures "routers," which are
computer network switches that facilitate telecommunications and networking.
These products can work in inter-office and intra-office (within an office)
networks, and also on the Internet. Cisco's earnings have accelerated from a
fairly large base, and it dominates the market for networking components.
The company has stayed at the leading edge of technology through research
and development and by acquiring companies that are breaking new ground, and
its products are vital to its customers' businesses. Finally, investing in
Cisco represents a sound way to capitalize on the growth of the Internet
without buying a highly speculative stock.
Q. WHAT OTHER SECTORS INTEREST YOU?
A. Environmental services, or waste disposal, is a very interesting area that
did well in the first half of this year and looks good going forward. While
some of the large companies like Waste Management and Browning Ferris have
had a tough time lately, there is a whole group of smaller companies - such
as USA Waste, United Waste, and Sani-Fill - that are benefiting from a
consolidation trend in the industry. When USA Waste acquired Sani-Fill, the
stocks, both of which we owned, appreciated nicely.
Broadcasting is another attractive area. The broadcasting industry is
undergoing two major changes: first, recent legislation has led to an
increase in mergers and acquisitions activity; and second, companies are
improving their advertising cost-effectiveness by segmenting their markets
into smaller demographic groups. We have invested in companies like Jacor, a
radio company, and Gaylord Entertainment, which owns the Grand Old Opry and
The Nashville Network. We also own shares in The Providence Journal a
publishing firm that gets 80% of its revenue from television stations.
Q. WHAT CAN SHAREHOLDERS OF THE FUND LOOK FORWARD TO IN THE SECOND HALF OF THIS
YEAR?
A. Many of the sectors that we have talked about should continue to do well,
and some financial companies may perform better with the recent rise in
interest rates. But because we are at the top of a long bull market, we may
likely avoid such areas as the IPO sector that are now too speculative.
Given the opportunity, we may also take profits in companies where we have
had significant appreciation.
- --------------------------------------------------------------------------------
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
<PAGE>
------------------------------------
EV CLASSIC SPECIAL EQUITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investment in Special Investment Portfolio (Portfolio), at
value (Note 1A) $2,056,127
Receivable for Fund shares sold 31,260
Receivable from Administrator (Note 6) 15,750
Deferred organization expenses (Note 1E) 29,600
----------
Total assets $2,132,737
LIABILITIES:
$44,114
Payable for Fund shares redeemed
Payable to affiliate --
Trustees' fees 23
Accrued expenses 3,495
-------
Total liabilities 47,632
----------
NET ASSETS for 162,370 shares of beneficial interest outstanding $2,085,105
==========
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 $1,589,084
Unrealized appreciation of investments from Portfolio 462,739
Accumulated undistributed net realized gain on
investment transactions 114,526
Accumulated net investment loss (81,244)
----------
Total $2,085,105
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($2,085,105 / 162,370 shares of beneficial interest) $12.84
======
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of
foreign taxes, $7) $ 5,427
Interest income allocated from Portfolio 5,308
Expenses allocated from Portfolio (8,962)
--------
Total investment income $ 1,773
Expenses --
Custodian fees (Note 1C) $ 1,748
Distribution fees (Note 4) 12,187
Transfer and dividend disbursing agent fees 1,351
Printing and postage 10,760
Legal and accounting services 4,366
Registration fees 14,249
Amortization of organization expenses (Note 1E) 4,101
--------
Total expenses $ 48,762
Deduct --
Preliminary allocation of expenses by the
Administrator (Note 6) 15,750
--------
Net expenses 33,012
--------
Net investment loss $(31,239)
REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain on investments (identified cost
basis) $127,535
Change in unrealized appreciation of investments 160,476
--------
Net realized and unrealized gain on investments 288,011
--------
Net increase in net assets resulting from operations $256,772
========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (31,239) $ (33,422)
Net investment gain (loss) from Portfolio 127,535 (13,011)
Unrealized appreciation from Portfolio 160,476 295,342
---------- ----------
Net increase in net assets resulting
from operations $ 256,772 $ 248,909
---------- ----------
Distributions to shareholders --
In excess of realized loss $ -- $ (16,544)
---------- ----------
Total distributions to shareholders $ -- $ (16,544)
---------- ----------
Net increase (decrease) in net
assets from Fund share transactions
(Note 2) $ (310,167) $1,784,199
---------- ----------
Net increase (decrease) in net assets $ (53,395) $2,016,564
NET ASSETS:
At beginning of period 2,138,500 121,936
---------- ----------
At end of period $2,085,105 $2,138,500
========== ==========
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 ----------------------
(UNAUDITED) 1995 1994*
----------------- ------- -------
NET ASSET VALUE --
Beginning of period $11.630 $ 9.880 $10.000
------- ------- -------
INCOME FROM OPERATIONS:
Net investment loss $(0.192) $(0.182) $(0.003)
Net realized and unrealized gain
(loss) on investments 1.402 2.022 (0.117)
------- ------- -------
Total income (loss) from
operations $ 1.210 $ 1.840 $(0.120)
------- ------- -------
LESS DISTRIBUTIONS:
In excess of net realized loss $ -- $(0.090) $ --
------- ------- -------
Total distributions $ -- $(0.090) $ --
------- ------- -------
NET ASSET VALUE -- End of period $12.840 $11.630 $ 9.880
======= ======= =======
TOTAL RETURN (2) 10.40% 18.65% (1.20)%
RATIOS/SUPPLEMENTAL DATA: (to
average daily net assets)**
Expenses (1) 3.45%+ 3.44% 1.60%+
Net investment loss (2.57)%+ (2.54)% (0.59)%+
NET ASSETS AT END OF YEAR
(000'S OMITTED) $ 2,085 $ 2,139 $ 122
** The operating expenses 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 $(0.289) $(0.453) $(0.236)
------- ------- -------
Ratios (to average daily net
assets)
Expenses (1) 4.74%+ 7.23% 45.05%+
Net investment loss (3.86)%+ (6.34)% (44.04)%+
* For the period from the start of business, November 17, 1994 to December 31,
1994.
+ Computed on an annualized basis.
(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
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Classic 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 (2.73% at June 30,
1996). 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. EXPENSE REDUCTION -- The Fund has entered into an arrangement with its
custodian agent whereby interest earned on uninvested cash balances are used to
offset custody fees. All significant reductions are reported as a reduction of
expenses in the Statement of Operations.
D. 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.
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
F. 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.
G. USE OF ESTIMATES. -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
H. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating
to June 30, 1996 and for the six month period then ended have not been audited
by independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
<PAGE>
- ------------------------------------------------------------------------------
(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:
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Sales 58,405 $ 707,396 198,284 $2,076,166
Issued to shareholders
electing to receive
payment of distribution
in Fund shares -- -- 1,363 15,433
Redemptions (79,962) (1,017,563) (28,060) (307,400)
------- ----------- ------- ----------
Net increase (21,557) $ (310,167) 171,587 $1,784,199
======= =========== ======= ==========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$726,108 and $1,074,810, 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 $9,140 for the six
months ended June 30, 1996 representing 0.75% (annualized) of average daily net
assets. At June 30, 1996, the amount of Uncovered Distribution Charges of EVD
calculated under the Plan was approximately $170,695.
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
six months ended June 30, 1996 amounted to $3,047.
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 which are distributed with a contingent
deferred sales charge. EVD received approximately $495 of CDSC paid by
shareholders for the six months ended June 30, 1996.
- ------------------------------------------------------------------------------
(6) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 3 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. To enhance the net income of the Fund, the
administrator was allocated $15,750 of the Fund's expenses, on a preliminary
basis for the six months ended June 30, 1996. Investment Adviser fee and other
transactions with affiliates is discussed in Note 3 of the Portfolio's Notes to
Financial Statements which are included in this report. Except as to Trustees of
the Fund and the Port- folio 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. Certain of the officers and Trustees of the Fund
and Portfolio are officers and directors/trustees of the above organization.
<PAGE>
--------------------------------------------
SPECIAL INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- --------------------------------------------------------------------------
COMMON STOCKS - 102.2%
- --------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------
BEVERAGES - 0.9%
PepsiCo Inc. 20,000 $ 707,500
International snack food, restaurant and -----------
beverages.
BUSINESS PRODUCTS & SERVICES - 11.4%
BISYS Group, Inc.* 22,000 $ 830,500
Services financial institutions with
computer, administrative and marketing
support data processing services.
Ceridan Corp. 40,000 2,020,000
Provides payroll processing and other
employer services, media and market
research.
Danka Business Systems PLC, ADR 20,000 585,000
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 1,202,700
Rents and launders uniforms and other
textile products.
Intuit Inc. 5,000 236,250
Developer of financial software products.
Metromail Corp. 39,000 872,625
Sells consumer info, proprietary software
and reference services.
-----------
$ 8,552,075
-----------
COMMUNICATIONS - 9.7%
Comcast Corp. 80,000 $ 1,470,000
Cable TV and Cellular telephone operator.
Intelcom Group, Inc. 50,000 1,250,000
Provider of alternative access
telecommunication services and
international satellite uplink teleports.
Jacor Communications, Inc. 35,000 1,080,625
Operator of radio and TV satations.
MFS Communications Co., Inc.* 40,000 1,505,000
Provider of fiber-optic based
telecommunications services primarily to
businesses.
Nokia Corp. 35,000 1,295,000
International wireless handset and
infrastructure equipment manufacturer.
Tele-Communications International, Inc. 40,000 705,000
Operates international cable TV systems.
-----------
$ 7,305,625
-----------
COMPUTER SOFTWARE - 3.5%
Banyan Inc.* 60,000 $ 435,000
Provider of networking software products for
large, complex computer networks.
3Com Corp. 15,000 686,250
Designs, manufactures and distributes
intelligent hubs and other computer
networking products.
Davidson & Associates, Inc. 25,000 750,000
Developer and distributor of educational
software products.
Inso Corp. 15,000 785,625
Developer of software tools used for
proofing, reference and information
management.
-----------
$ 2,656,875
-----------
ELECTRONICS & INSTRUMENTATION - 8.6%
Cisco Systems, Inc.* 40,000 $ 2,265,000
Manufacturer of routers that connect
computer networks.
Intel Corp. 20,000 1,468,750
World's leading semiconductor manufacturer,
also produces microcomputer components,
modules and systems.
Linear Technology Corp. 20,000 600,000
Manufacturer of high performance linear
integrated circuits.
MEMC Electronic Materials, Inc. 25,000 968,750
Leading producer of silicon wafers used to
create integrated circuits.
Mentor Graphics Corp. 50,000 812,500
Developer of electronic design automation
systems used in complex electronic
products.
Xilinx Inc. 10,000 317,500
Supplier of programmable semiconductors.
-----------
$ 6,432,500
-----------
ENERGY - 7.3%
Anadarko Petroleum Corp. 50,000 $ 2,900,000
A leading independent company in oil and gas
exploration, development and production.
Belco Oil & Gas Corp. 12,500 443,750
Oil and gas exploration, development and
production.
Noble Drilling Corp. 48,000 666,000
Oil and gas well drilling.
Triton Energy Ltd. 30,000 1,458,750
International oil and gas exploration and
development.
-----------
$ 5,468,500
-----------
ENTERTAINMENT & LEISURE - 8.9%
Circus Circus Enterprises, Inc. 47,000 $ 1,927,000
Major casino facilities in Las Vegas. Also
operates hotels.
Gaylord Entertainment 36,750 1,038,188
Producer of The Nashville Network and
Country Music Television Network and
operator of the Opryland amusement park.
Harvey's Casino Resorts 10,000 212,500
Owner and operator of hotel casinos.
ITT Corp. 20,000 1,325,000
Operator of Sheraton hotels, Caesar's
Palace, resort casinos and Madison Square
Garden.
MGM Grand, Inc. 20,000 797,500
Operator of MGM Grand Hotel in Las Vegas.
Mirage Resorts, Inc. 25,000 1,350,000
Nevada based gaming resort operator.
-----------
$ 6,650,188
-----------
ENVIROMENTAL SERVICES - 3.9%
Sanfill Inc. 26,000 $ 1,280,500
Operator of primarily solid-waste facilities
in 16 states.
United Waste Systems, Inc. 20,000 645,000
Provider of collection and solid-waste
disposal services primarily in secondary
markets.
U.S.A. Waste Services, Inc. 35,000 1,036,875
Operator of solid-waste lands fills and
collection services, integrating several
large recent acquisitions.
-----------
$ 2,962,375
-----------
FINANCE - 10.6%
Federal National Mortgage Association 120,000 $ 4,020,000
Leading factor in the secondary mortgage
market.
Franklin Resources, Inc. 20,000 1,220,000
One of the largest mutual fund organizations
in the U.S.
MBNA Corp. 30,000 855,000
Bank holding company and world's leading
issuer of Gold MasterCards.
T. Rowe Price Associates, Inc. 60,000 1,845,000
Investment adviser to mutual funds,
institutions and individuals.
-----------
$ 7,940,000
-----------
HEALTHCARE - 10.4%
Arterial Vascular Engineering, Inc. 2,100 $ 76,125
Manufacturers coronary related medical
devices.
Astra AB ADR Series B 25,000 1,088,840
Swedish based, multinational pharmaceutical
company.
Boston Scientific Corp.* 50,000 2,250,000
Medical device manufacturer focusing
primarily on disposable products in less
invasive surgery procedures.
General Surgical Innovations, Inc. 5,000 76,250
Developer of surgical devices.
MiniMed Inc. 60,000 1,785,000
Developer and manufacturer of medical
devices focusing on diabetics.
Pfizer Inc. 10,000 713,750
International health care and pharmaceutical
products.
Sofamor Danek Group, Inc. 55,000 1,526,250
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.
-----------
$ 7,806,840
-----------
HOTELS & RESTAURANTS - 4.6%
Applebee's International, Inc. 25,000 $ 803,125
Franchisor and operator of casual themed
restaurants.
Extended Stay America, Inc. 19,000 598,500
Owner and operator of longer stay lodging
facilities.
LaQuinta Inns, Inc. 15,000 502,500
Owner/operator of modestly priced lodging
chain.
Promus Hotel Corp. 10,000 296,250
Owner and operator of Embassy Suite and
Hampton Inn hotels.
Red Roof Inns, Inc. 55,000 776,875
Owns and operates economy hotels in U.S.
Sun International Hotels Ltd. 10,000 485,000
International operator of resort and casino
hotels.
-----------
$ 3,462,250
-----------
INDUSTRIAL PRODUCTS - 1.3%
Greenfield Industries, Inc. 30,000 $ 990,000
A leading manufacturer of expendable cutting -----------
tools and related products used in
industrial applications.
INSURANCE - 8.5%
American International Group 15,000 $ 1,479,375
One of the world's leading insurance
companies, operating in 130 countries.
Mutual Risk Management Ltd. 53,332 1,666,666
Specialty insurer focusing on workmen's
compensation.
PMI Group, Inc. 23,000 977,500
Private mortgage insurer.
Progressive Corp. 30,000 1,387,500
Insurer focusing on high risk and standard
auto coverage.
Renaissance Re Holdings Ltd. 15,500 476,625
Provider of catastrophy reinsurance
services.
Terra Nova Holdings 25,000 400,000
Provides property, casualty, marine and life
insurance.
-----------
$ 6,387,666
-----------
PUBLISHING - 3.4%
Providence Journal Co. Class A 86,100 $ 1,323,787
Operates television stations and publishes
newspapers.
Scholastic Corp.* 20,000 1,240,000
Publisher/distributor of children's books.
-----------
$ 2,563,787
-----------
RETAILING - 4.9%
Consolidated Stores Corp.* 60,000 $ 2,205,000
Chain of close-out merchandise stores
operating primarily under the Odd/Big Lots
name.
Home Depot Inc. 20,000 1,080,000
Operator of a chain of retail warehouse-type
stores selling building supply and home
improvement products.
Lowes Companies 10,000 361,250
Retailer of building materials and supplies.
-----------
$ 3,646,250
-----------
SPECIALTY CHEMICALS - 2.8%
Great Lakes Chemical Corp. 14,200 $ 883,950
Leading producer of flame retardant and
specialty intermediate chemicals.
Millipore Corp. 30,000 1,256,250
Manufacturer of membrane technology products
used for chemical analysis and purification.
-----------
$ 2,140,200
-----------
TRANSPORTATION - 1.5%
Southwest Airlines Co. 40,000 $ 1,165,000
Discount airline expanding throughout the U.S. -----------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $51,277,639) $76,837,631
OTHER ASSETS, LESS LIABILITIES - (2.2%) (1,618,717)
-----------
TOTAL NET ASSETS - 100% $75,218,914
===========
*Non-income producing security.
The accompanying notes are an integral part of the financial statements
<PAGE>
--------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$51,277,639) $76,837,631
Cash 886
Receivable for investments sold 140,081
Dividends receivable 25,385
Deferred organization expenses (Note 1E) 9,744
-----------
Total assets $77,013,727
LIABILITIES:
Payable for investments purchased $1,414,000
Demand note payable 365,000
Payable to affiliate --
Trustees' fees 1,700
Accrued expenses 14,113
----------
Total liabilities 1,794,813
-----------
NET ASSETS applicable to investors' interest in Portfolio $75,218,914
===========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $49,658,922
Unrealized appreciation of investments (computed
on the basis of identified cost) 25,559,992
-----------
Total net assets $75,218,914
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income (net of foreign taxes, $242) $ 168,281
Interest income 163,945
----------
Total income $ 332,226
Expenses --
Investment adviser fee (Note 3) $ 235,242
Compensation of Trustees not members of the
Investment Adviser's organization (Note 3) 3,550
Custodian fees (Note 1C) 28,220
Legal and accounting services 10,547
Amortization of organization expenses (Note 1E) 1,574
Miscellaneous 2,925
----------
Total expenses 282,058
----------
Net investment income $ 50,168
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (identified cost
basis) $3,746,545
Change in unrealized appreciation on investments 4,892,412
----------
Net realized and unrealized gain on
investments 8,638,957
----------
Net increase in net assets resulting from operations $8,689,125
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 50,168 $ 134,736
Net realized gain on investment
transactions 3,746,545 4,131,300
Change in unrealized appreciation of
investments 4,892,412 10,473,926
------------ -------------
Net increase in net assets from
operations $ 8,689,125 $ 14,739,962
------------ -------------
Capital transactions--
Contributions $ 4,992,539 $ 14,400,870
Withdrawals (12,403,025) (19,642,929)
------------ -------------
Decrease in net assets resulting from
capital transactions $ (7,410,486) $ (5,242,059)
------------ -------------
Total increase in net assets $ 1,278,639 $ 9,497,903
NET ASSETS:
At beginning of year 73,940,275 64,442,372
------------ -------------
At end of year $ 75,218,914 $ 73,940,275
============ =============
- ------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 ------------------------------
(UNAUDITED) 1995 1994*
------------- ---- -----
RATIOS (As a percentage
of average net assets):
Expenses 0.75%+ 0.77% 0.74%+
Net investment income 0.13%+ 0.19% 0.20%+
PORTFOLIO TURNOVER 38% 81% 19%
AVERAGE COMMISSION RATE
PAID (1) $0.058 -- --
+ Computed on an annualized basis.
* For the period from the start of business, August 1, 1994 to December 31,
1994.
(1) Average commission rate paid is computed by dividing the total dollar amount
of commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were
charged. For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged.
The accompanying notes are an integral part of the financial statements
<PAGE>
--------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
(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. EXPENSE REDUCTION -- The Fund has entered into an arrangement with its
custodian agent whereby interest earned on uninvested cash balances are used
to offset custody fees. All significant reductions are reported as a reduction
of expenses in the Statement of Additional Information.
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. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
F. USE OF ESTIMATES. -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
G. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating
to June 30, 1996 and for the six month period then ended have not been audited
by independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
- ------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregrated $26,898,510 and $26,973,399, 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 six
months ended June 30, 1996, the fee amounted to $235,242. 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. 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
six months ended June 30, 1996, 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 $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 June 30,
1996, the Fund had an outstanding balance pursuant to the line of credit of
$365,000.
- ------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at June 30, 1996, as computed on a federal income tax basis, are as
follows:
Aggregate cost $51,277,639
===========
Gross unrealized appreciation $26,648,301
Gross unrealized depreciation 1,088,309
-----------
Net unrealized appreciation $25,559,992
===========
<PAGE>
INVESTMENT MANAGEMENT
EV CLASSIC OFFICERS TRUSTEES
SPECIAL EQUITIES JAMES B. HAWKES M. DOZIER GARDNER
FUND President, Trustee President, Eaton Vance
24 Federal Street Management
Boston, MA 02110 CLIFFORD H. KRAUSS
Vice President DONALD R. DWIGHT
President, Dwight Partners, Inc.
JAMES L. O'CONNOR Chairman, Newspapers of
Treasurer 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 Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
-----------------------------------------------------
SPECIAL INVESTMENT OFFICERS TRUSTEES
PORTFOLIO JAMES B. HAWKES M. DOZIER GARDNER
24 Federal Street President, Trustee President, Eaton Vance
Boston, MA 02110 Management
CLIFFORD H. KRAUSS
Vice President DONALD R. DWIGHT
Portfolio Manager President, Dwight Partners, Inc.
Chairman, Newspapers of
JAMES L. O'CONNOR New England, Inc.
Treasurer
SAMUEL L. HAYES, III
THOMAS OTIS Jacob H. Schiff Professor of
Secretary 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
<PAGE>
INVESTMENT ADVISER OF
SPECIAL INVESTMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV CLASSIC
Special Equities 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
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 SPECIAL EQUITIES FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-SESRC-8/96
[LOGO]
EV Classic
Special Equities
Fund
Semi-Annual
Shareholder Report
June 30, 1996
