INVESTMENT ADVISER OF
TOTAL RETURN PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV CLASSIC
TOTAL RETURN 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 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 TOTAL RETURN FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-TMSRC-2/96
[LOGO]
EV Classic
Total Return
Fund
Annual Shareholder Report
December 31, 1995
<PAGE>
To Shareholders
EV Classic Total Return Fund had a total return of 25.3% for the year ended
December 31, 1995. That return includes an increase in net asset value per share
from $8.38 to $10.14 on December 31, 1995 and the reinvestment of $0.319 per
share in income dividends.
By comparison, the Lipper Utility Fund Index, an index of 30 mutual funds
primarily invested in utility stocks, gained 26.9% for the year.
DECLINING INTEREST RATES HELPED UTILITIES STOCKS...
The U.S. economy remained remarkably steady during 1995, providing investors a
favorable period of slow growth and low inflation. The nation's annualized rate
of economic growth was 2.7% in the first quarter and 1.3% in the second quarter
of the year, rising to 4.2% in the third quarter. It was expected to be between
2% and 3% for the fourth quarter.
Concerned about the economy slowing too much, the Fed in July lowered the
federal funds rate by a quarter of a percentage point, and announced another
quarter-point decrease in December. These changes helped the economy continue to
advance at a slow but steady pace.
The yields of long-term U.S. Treasury bonds fell to nearly 6% after rising to
nearly 8% on December 31, 1994. Generally, utility stock prices increase as
interest rates decline because their behavior parallels that of long-term
fixed-income securities, and, indeed, utility stocks performed well during the
year.
Early in 1995, there were fears that electric utilities would face increased
competition and that the market would punish those companies with higher-cost
power generating plants and those serving large industrial customers with
powerful bargaining positions. As the year progressed, it became clear that
regulatory, legislative and competitive developments were moving more slowly
than first feared, giving these utilities time to put their houses in order.
MERGERS HERALD A CHANGING ELECTRIC UTILITY SECTOR...
A number of electric utility companies announced mergers during the year. While
the merger of Northern States Power and Wisconsin Energy combined two large,
healthy companies, other mergers later in the year often involved a large,
higher-cost company acquiring a smaller, lower-cost company to average down
costs of production. Generally, it appears that the remaining utilities will be
larger and more efficient.
The telephone sector, quiet during the first half of the year, came alive in the
second half. Gains in telephone company stocks contributed to the Fund's
positive year. Portfolio Manager Timothy P. O'Brien will discuss the details of
these investments later in this report.
Sincerely,
[Photo of M. Dozier Gardner] /s/ M. Dozier Gardner
President
February 21, 1996
A PROFILE OF EV CLASSIC TOTAL RETURN FUND
CHANGES IN COMMON STOCK HOLDINGS* SHOW
FUND'S RESPONSE TO CHANGING INVESTMENT CONDITIONS
AS OF DECEMBER 31, 1994
Oil/Gas 5.8%
Telephone Utilities 7.4%
REITS 19.8%
Electric Utilities 66.5%
Other 0.5%
<PAGE>
AS OF DECEMBER 31, 1995
REITS 4.4%
Telephone Utilities 23.5%
Financial 9.0%
Oil/Gas 4.6%
Electric Utilities 55.3%
Other 3.2%
*By market value as of date shown
AS INTEREST RATES DROPPED, UTILITY STOCK PRICES ROSE
Label A B
Label Date 30-Yr Treas.+ Dow Jones*
1 6/94 7.58 177.17
2 7/94 7.53 186.4
3 8/94 7.46 189.16
4 9/94 7.78 181.45
5 10/94 7.92 181.39
6 11/94 8.1 179.54
7 12/94 7.85 181.52
8 1/95 7.82 193.12
9 2/95 7.6 193.91
10 3/95 7.37 187.65
11 4/95 7.37 194.5
12 5/95 6.9 206.43
13 6/95 6.61 202.08
14 7/95 6.82 203.99
15 8/95 6.92 202.35
16 9/95 6.53 214.28
17 10/95 6.32 214.54
18 11/95 6.26 215.79
19 12/95 6.12 225.4
* Dow Jones Utility Average (blue line, left axis) is an unmanaged index of 15
utility common stocks.
+ U.S. Treasury yields (black line, right axis) refer to yields on 30-year
Treasury bonds.
Sources: Towers Data Systems, Wall Street Journal.
EV CLASSIC TOTAL RETURN FUND
THE PORTFOLIO'S 10 LARGEST
EQUITY HOLDINGS**
Frontier Corp.
CINergy Corp
FPL Group, Inc.
First Interstate Bancorp
DQE, Inc.
DPL Inc.
NIPSCO Industries, Inc.
SCE Corp.
Southern Co.
SBC Communications, Inc.
**By market value as of 12/31/95.
<PAGE>
MANAGEMENT DISCUSSION
An interview with Timothy P. O'Brien, Vice President and Manager of the Total
Return Portfolio.
Q. TIM, HOW DID THE UTILITY SECTOR PERFORM IN 1995?
A. During 1995, there was an overall decline in interest rates, led by the
Federal Reserve's cutting of its federal funds rate twice during the year. As
a result, this has been a very good year for investments in general, although
some investors found it frustrating because the large gains were seen in a
relatively narrow band of stocks. Generally, utility stocks do well in an
environment of declining interest rates, and 1995 was no exception.
Q. IN TERMS OF MANAGING INVESTMENTS, HOW HAVE YOU RESPONDED TO THIS ENVIRONMENT?
A. If you look at all of 1995, the major concerns were not with responding to
some preconceived notion of where the economy was headed. Instead, the
strategy was to look at the distribution of stocks and begin to make some
fundamental changes in our holdings. For example, at the start of 1995, we
were nearly 20% invested in real estate investment trusts, or REITs. At the
end of the year, REITs comprised a weighting of about 5%.
Q. WHAT WAS THE PROBLEM WITH REITS?
A. While REITs do have relatively high yields, they simply have not performed
well. In general, they performed poorly in 1995, just as they did in 1994.
That adversely impacted the Fund's performance during the year.
Q. HOW ELSE DID YOU CHANGE THE SECTORS REPRESENTED AMONG INVESTMENTS?
A. We started the year very heavily weighted in electric utilities. That amount
was reduced somewhat, increasing representation in telephone stocks and
foreign utilities.
[Photo of Timothy P. O'Brien]
TIMOTHY P. O'BRIEN
Q. WHAT FOREIGN UTILITIES WERE GOOD INVESTMENTS IN 1995?
A. British electric utility stocks saw a merger mania that, at times, bordered
on a feeding frenzy. When these companies were privatized in 1990, the
British government, in essence, held onto the power to prevent their merging
or being acquired. That power expired in 1995 and within a very short period,
the acquisitions and mergers had begun. Out of 12 utilities, seven or eight
have been acquired since March. The Portfolio owned several of these, three
of which rose on merger news.
Norweb was the largest of these positions. Our total return on this stock,
including dividends, was well over 50%. Midlands Electricity and Manweb also
performed well. Naturally, investing in foreign stocks involves additional
risks, including currency fluctuations, shifting political climates and
uneven economic growth rates.
Q. WHAT WAS THE SITUATION AMONG U.S. ELECTRIC UTILITIES?
A. There also were several mergers here. Unfortunately, the Portfolio tended to
own the acquiring companies instead of the acquired, so we didn't reap many
of the benefits of these deals.
We're seeing some interesting trends among these companies. The survivors are
larger, more efficient and better able to compete.
Many electric utilities also are accelerating the amortization of their
high-cost assets. This means that these companies are not showing great
increases in earnings, but they are developing significant cash flow. If
their managements are wise, they'll use that money to pay off debt and buy
back stock. Those are pluses for investors.
Q. HOW DID THE TELEPHONE SECTOR PERFORM?
A. It did almost nothing during the first half of the year, largely because of
uncertainties surrounding the possible passage of a Telecommunications Act.
In the process, people lost sight of the fact that interest rates were
falling and that, statistically, these stocks were becoming cheap. All this
added up to a much better second half of the year for these stocks. It's
still not clear what form a Telecommunications Act will take, assuming one is
approved.
Q. WHAT'S THE LARGEST HOLDING IN THIS SECTOR?
A. Frontier Corp. is a diversified telecommunications firm that started out as
a local telephone company in Rochester, NY. It expanded into long distance
service and wireless, and, now, long distance amounts to 70% of the company's
revenues and is driving its growth. Its local telephone business is very well
managed.
Frontier acquired ALC Communications, a company of approximately the same
size, early in 1995. That acquisition caused the price of Frontier's stock to
fall below $20. It was acquired at that point because we felt it was a strong
company with a solid future. The stock closed the year at $30.
Q. WHAT OTHER TELEPHONE STOCKS WERE AMONG THE HOLDINGS?
A. Domestically, we've acquired positions in U.S. West, GT&E and NYNEX, all of
which have done well. GT&E and NYNEX had lagged the group of regional Bell
companies. We picked these underperformers because we felt the time was right
for them to show some of the same gains as the other regional Bells.
In terms of foreign stocks, we held positions in New Zealand Telephone and
TeleDanmark during the year. Neither of these stocks has been a stellar
performer, but both did fairly well. Both stocks tend to serve as
representatives of their countries' economies. So investors who think the
Danish economy might be declining will sell their TeleDanmark shares, and
when they think the Danish economy is rallying, might buy more. What we did
in both cases was to buy the stocks when their prices were low, stay with
them as they rose a few points, and sell at the higher prices. The Portfolio
had the opportunity to do that more than once during the year, and made money
each time.
Q. WHAT WERE SOME OF THE INVESTMENT SUCCESS STORIES?
A. DQE, an electric utility in Pittsburgh, PA, is one. This is a high-cost
utility that's been working very hard to reduce its costs. It changed
management teams in the mid 1980s, and the new team has done a very good job
there. DQE has posted solid earnings, and they had a stock split in 1995. The
reality is that when it comes to electric utilities, just about everyone does
the same thing. DQE just did it better than many of the others.
Another is SCE Corp., what used to be called Southern California Edison. The
situation in California was dicey for a while during 1995 because it was
known that state regulators were going to issue new rules for utilities. The
stock was trading as though the regulators were going to pass the most
anti-utility plan, which, in our opinion, just wasn't likely to happen. After
discounting the worst-case scenario, we bought a large amount of this stock
and realized a significant gain in a relatively short period of time.
Q. WHAT'S THE OUTLOOK FOR UTILITIES?
A. For 1996, it's reasonably good. Electrics are still relatively inexpensive
and provide a significant yield advantage over the average common stock. I
still look for opportunities among foreign companies, although the foreign
weighting was reduced somewhat at the end of 1995. This is because of
concerns about the British pound.
In a more general sense, electric utility companies are going to continue to
face tremendous competitive pressure. But it seems that the pressures -- the
need to become more efficient -- will not arrive as quickly as first thought.
Utility companies that already are strong will not be affected, but the
others -- those that need to become more efficient and to cut costs -- are
gaining some time to accomplish their goals.
There's also the issue of interest rates, which have a strong influence on
utility stock prices. While past trends don't guarantee future results, a
continuation of the current stable interest rate environment could mean a
continued favorable climate for utility stocks. This is a sector where change
can create opportunities for wise investors. As a result, we will continue
our practice of closely monitoring all kinds of utility stocks to find stocks
that demonstrate they have prospects for earnings and dividend growth, and
that may provide opportunities for attractive long-term total returns.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EV CLASSIC TOTAL RETURN FUND AND THE S&P 500 STOCK INDEX
FROM NOVEMBER 30, 1993, THROUGH DECEMBER 31, 1995
AVG. ANNUAL 1 Life of
RETURNS Year Fund*
With CDSC 24.3% 4.5%
Without CDSC 25.3% 4.5%
Label A B
Label Date C. Total Rtn S&P 11/93
1 11/93+ 10,000 10,000
2 12/93 10,124 10,168
3 1/94 9,986 10,498
4 2/94 9,574 10,183
5 3/94 9,373 9,785
6 4/94 9,507 9,898
7 5/94 9,120 10,021
8 6/94 8,863 9,827
9 7/94 8,978 10,137
10 8/94 8,896 10,518
11 9/94 8,739 10,308
12 10/94 8,736 10,523
13 11/94 8,713 10,107
14 12/94 8,809 10,306
15 1/95 9,043 10,556
16 2/95 8,961 10,937
17 3/95 8,942 11,306
18 4/95 9,071 11,622
19 5/95 9,510 12,044
20 6/95 9,544 12,382
21 7/95 9,781 12,775
22 8/95 9,859 12,771
23 9/95 10,322 13,363
24 10/95 10,411 13,296
25 11/95 10,629 13,842
26 12/95 11,038 14,165
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 11/1/93.
+ Index information is available only at month-end; therefore, the line
comparison begins at he next month-end following the commencement of the
Fund's investment operations.
FUND PERFORMANCE
In accordance with guidelines issued by the Securities and Exchange Commission,
we are including the above performance chart that compares your Fund's total
return with that of a broad-based investment index. The lines on the chart
represent the total returns of a $10,000 investment in the Fund and the S&P 500
Stock Index, an unmanaged index of common stocks.
TOTAL RETURN FIGURES
The solid line on the chart represents the Fund's performance at net asset
value. The Fund's total return figure reflects Fund expenses and 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 have been incurred if an
investor individually purchased or sold the securities represented in the Index.
<PAGE>
EV CLASSIC TOTAL RETURN FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investment in Total Return Portfolio (Portfolio), at
value (Note 1A) $5,680,221
Receivable from administrator (Note 6) 45,005
Deferred organization expenses (Note 1D) 27,565
----------
Total assets $5,752,791
LIABILITIES:
Payable for Fund shares redeemed $31,525
Payable to Affiliate --
Trustees' fees 43
Accrued expenses 16,055
-------
Total liabilities 47,623
----------
NET ASSETS for 562,741 shares of beneficial interest
outstanding $5,705,168
==========
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 $5,125,319
Undistributed net investment income (2,145)
Accumulated net realized loss on investments and
financial futures transactions (computed on
the basis of identified cost) (333,507)
Unrealized appreciation of investments (computed
on the basis of identified cost) 911,211
----------
Total net assets $5,705,168
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($5,705,168 / 562,741 shares of beneficial interest) $10.14
======
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 $3,201) $ 280,316
Interest income allocated from Portfolio 39,200
Expenses allocated from Portfolio (47,647)
----------
Total investment income $ 271,869
Expenses --
Compensation of Trustees not members of the
Investment Adviser's organization (Note 6) $ 165
Custodian fees (Note 6) 3,252
Distribution fees (Note 4) 56,748
Transfer and dividend disbursing agent fees 4,532
Printing and postage 34,220
Legal and accounting services 17,355
Registration fees 18,166
Amortization of organization expenses (Note 1D) 8,030
Miscellaneous 7,059
----------
Total expenses 149,527
Deduct --
Allocation of expenses to the administrator
(Note 6) 45,005
----------
Net expenses 104,522
----------
Net investment income $ 167,347
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (loss) (identified cost basis) --
Investment transactions $ 111,480
Financial futures contracts (89,371)
----------
Net realized gain on investment transactions
and financial futures (identified cost
basis) $ 22,109
Change in unrealized appreciation of investments 1,088,357
----------
Net realized and unrealized gain on
investments 1,110,466
----------
Net increase in net assets resulting from operations $1,277,813
==========
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 $ 167,347 $ 166,438
Net realized gain (loss) from
Portfolio 22,109 (603,258)
Change in unrealized appreciation
from Portfolio 1,088,357 (214,075)
---------- ----------
Net increase (decrease) in net
assets resulting from operations $1,277,813 $ (650,895)
---------- ----------
Distributions to shareholders --
From net investment income $ (160,366) $ (160,568)
In excess of net investment income (33,443) --
From tax return of capital -- (38,551)
---------- ----------
Total distributions to
shareholders $ (193,809) $ (199,119)
---------- ----------
Net increase (decrease) in net assets
from Fund share transactions (Note 2) $ (967,350) $2,977,233
---------- ----------
Net increase in net assets $ 116,654 $2,127,219
NET ASSETS:
At beginning of year 5,588,514 3,461,295
---------- ----------
At end of year (including undistributed
net investment income of $2,145 and
$781, respectively) $5,705,168 $5,588,514
========== ==========
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993*
-------- -------- --------
NET ASSET VALUE -- Beginning
of year $ 8.3800 $10.0300 $10.0000
-------- -------- --------
Income from operations:
Net investment income $ 0.2722 $ 0.3167 $ 0.0253
Net realized and
unrealized gain (loss)
on investments 1.8068 (1.6077) 0.0577
-------- -------- --------
Total income (loss)
from investment
operations $ 2.0790 $(1.2910) $ 0.0830
-------- -------- --------
Less distributions:
From net investment
income $(0.2640) $(0.3013) $(0.0253)
In excess of net
investment income (0.0550) -- --
From tax return of
capital -- (0.0577) (0.0277)
-------- -------- --------
Total distributions $(0.3190) $(0.3590) $(0.0530)
-------- -------- --------
NET ASSET VALUE -- End of
year $10.1400 $ 8.3800 $10.0300
======== ======== ========
TOTAL RETURN(2) 25.30% (12.26%) 0.83%
RATIOS)SUPPLEMENTAL DATA:
(to average daily net
assets)**
Expenses(1) 2.68% 2.66% 0.83% +
Net investment income 2.95% 3.32% 2.56% +
NET ASSETS, END OF YEAR
(000'S OMITTED) $5,705 $ 5,589 $ 3,461
+ Computed on an annualized basis.
(1) Includes the Fund's share of Total Return Portfolio's allocated expenses.
(2) 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.
* For the period from the start of business, November 1, 1993, to December 31,
1993.
** The expenses related to the operation of the Fund reflect an an allocation of
expenses to the administrator. Had such action not been taken, the ratios
would have been as follows:
Ratios (to average
daily net assets)
Expenses 3.47% 3.70% 2.22%+
Net investment income 2.16% 2.29% 1.17%+
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 Total Return Fund (the Fund) is a non-diversified entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an 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 Total Return
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. At
December 31, 1995, the Fund, for federal income tax purposes, had capital loss
carryovers of $327,840, which will reduce the Fund's taxable income arising from
future net realized gain on investment transactions, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve the
Fund of any liability for federal income or excise tax. Such capital loss
carryovers will expire on December 31, 2002.
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. Dividend income may include dividends that represent
returns of capital for federal tax purposes.
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.
<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:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ---------- -----------
Sales 245,267 $ 2,160,839 418,427 $ 3,812,962
Issued to Shareholders
electing to receive
payment of distribution
in Fund shares 18,974 172,005 20,529 179,725
Redemptions (368,704) (3,300,194) (116,708) (1,015,454)
-------- ----------- -------- -----------
Net increase (decrease) (104,463) $ (967,350) 322,248 $ 2,977,233
======== =========== ======= ===========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregrated
$2,243,110 and $3,458,868, 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 the 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 $42,561 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 $576,364.
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 $14,187.
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 $309 of
CDSC paid by shareholders for the year ended December 31, 1995.
<PAGE>
- ------------------------------------------------------------------------------
(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. The administrator was allocated $45,005 of the Funds
expenses for the year ended December 31, 1995. 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 Portfolio who are not members of EVM's of BMR's
organization, officers and Trustees receive remuneration for their services to
the Fund out of such investment adviser fee. The custodian fee was paid to
Investors Bank & Trust Company (IBT) for its services as custodian of the
Fund. 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 Portfolio maintains with
IBT. 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 BOARD OF TRUSTEES OF
EV CLASSIC TOTAL RETURN FUND, A SERIES OF EATON VANCE SPECIAL
INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities of EV
Classic Total Return Fund, a series of Eaton Vance Special Investment Trust,
as of December 31, 1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
then ended and the financial highlights for each of the two years then ended
and for the period from November 1, 1993 (start of business) to December 31,
1993. 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 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 financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Classic Total Return Fund, a series of Eaton Vance Special Investment Trust,
as of December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years then ended, and
the financial highlights for each of the two years then ended and for the
period from November 1, 1993 (start of business) to December 31, 1993, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 2, 1996
<PAGE>
--------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- -------------------------------------------------------------------------------
COMMON STOCKS - 81.2%
- -------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
BUSINESS SERVICES - 0.8%
U.S. Filter Corp.* 160,000 $ 4,260,000
------------
ELECTRIC UTILITIES - 44.9%
Baltimore Gas & Electric Co. 125,000 $ 3,562,500
Carolina Power & Light Co. 300,000 10,350,000
Central Louisiana Electric Co. 200,000 5,375,000
Cilcorp Inc. 58,900 2,495,887
Cinergy Corp. 850,000 26,031,250
DPL Inc. 675,000 16,706,250
DQE, Inc. 590,000 18,142,500
FPL Group, Inc. 550,000 25,506,250
General Public Utilities Corp. 250,000 8,500,000
Houston Industries, Inc. 150,000 3,637,500
LG & E Energy Corp. 87,200 3,684,200
London Electricity 200,000 1,782,380
National Grid Holdings* 706,155 2,187,245
National Power PLC 200,000 479,740
National Power PLC ADR 267,500 2,474,375
NIPSCO Industries, Inc. 400,000 15,300,000
Northern States Power Co. Minn. 50,000 2,456,250
Ohio Edison Co. 300,000 7,050,000
PECO Energy Co. 200,000 6,025,000
Pinnacle West Capital Corp. 300,000 8,625,000
Portland General Electric Corp. 290,000 8,446,250
PowerGen PLC 6,024 49,803
SCE Corp 750,000 13,312,500
Southern Co. 575,000 14,159,375
Teco Energy, Inc. 310,000 7,943,750
Templeton Global Utilities, Inc. 26,000 338,000
Texas Utilities Co. 156,500 6,436,062
Union Electric Co. 80,000 3,340,000
Wisconsin Energy Corp. 150,400 4,606,000
WPS Resources Corp. 125,000 4,250,000
Yorkshire Electric Group* 100,000 1,036,360
------------
$234,289,427
------------
ENERGY - 1.7%
ENI SPA* 250,000 $ 8,562,500
------------
FINANCIAL SERVICES - 7.3%
Fidelity Federal Bank Class A* 1,624,741 $ 3,757,214
First Defiance Financial 300,000 3,037,500
First Interstate Bancorp 141,000 19,246,500
GCR Holdings Ltd.* 205,000 4,612,500
FINANCIAL SERVICES (Continued)
Imperial Thrift & Loan Association* 45,000 551,250
Klamath First Bancorp, Inc.* 10,000 137,500
PMI Group, Inc.* 50,000 2,262,500
PNC Bank Corp. 90,000 2,902,500
St. Paul Bancorp, Inc. 68,000 1,734,000
------------
$ 38,241,464
------------
HEALTHCARE SERVICES - 0.4%
Emeritus Corp.* 180,000 $ 2,092,500
------------
NATURAL GAS UTILITIES - 2.1%
K N Energy 200,000 $ 5,825,000
MCN Corp. 87,000 2,022,750
Wicor Inc. 94,200 3,037,950
------------
$ 10,885,700
------------
REITS - 3.6%
Apartment Investment
& Management Co. Class A 100,000 $ 1,950,000
Cali Realty Corp. 150,000 3,281,250
Health Care Property Investors, Inc. 126,000 4,425,750
Healthcare Realty Trust 92,200 2,120,600
LTC Properties, Inc. 150,000 2,250,000
Redwood Trust, Inc. 100,000 1,825,000
Sun Communities Inc. 110,000 2,901,250
------------
$ 18,753,850
------------
RETAIL - 0.1%
Ingles Markets Class A 50,000 $ 556,250
------------
TELECOMMUNICATIONS - 1.2%
Alcatel Alsthon Sponsored ADR 50,000 $ 874,999
Home Shopping Network, Inc.* 400,000 3,600,000
Nokia Corp. 50,000 1,943,750
------------
$ 6,418,749
------------
TELEPHONE UTILITIES - 19.1%
Ameritech Corp. 150,000 $ 8,850,000
ACC Corp. 50,000 1,153,125
AT&T Corp. 50,000 3,237,500
CAI Wireless Systems, Inc.* 80,000 770,000
Cellular Communications, Inc.* 91,700 2,544,675
DST Systems Inc.* 60,000 1,710,000
Frontier Corp. 1,205,000 36,150,000
Globolstar Telecommunications* 5,000 188,750
GTE Corp. 75,000 3,300,000
Mannesmann A.G. Ord 5,000 1,594,730
TELEPHONE UTILITIES (Continued)
Midcom Communications, Inc.* 89,700 1,637,025
NYNEX Corp. 150,000 8,100,000
SBC Communications, Inc. 225,000 12,937,500
Sprint Corp. 10,000 398,750
Tele Danmark A/S* 50,000 1,381,250
Telephone & Data Systems, Inc. 100,000 3,950,000
U.S. West Inc. 230,000 8,222,500
U.S. West Media Group* 185,000 3,515,000
------------
$ 99,640,805
------------
TOTAL COMMON STOCKS
(Identified cost, $329,651,929) $423,701,245
------------
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 7.8%
- -------------------------------------------------------------------------------
Alco Standard Corp., 6.5s 10,000 $ 855,000
Allstate Corp., 6.76s 110,000 4,510,000
Enron Corp., 6.25s 30,000 720,000
Fidelity Federal Bank, 12s 250,000 6,406,250
First Washington Realty Trust, 9.75s 45,000 1,023,750
Freeport McMoRan Copper & Gold, 5s 90,000 2,452,500
Philippines Long Distance
Telephone, 7s 194,000 10,100,125
Prime Retail Inc. Series B, 8.5s 255,000 4,526,250
St. Paul Capital, 6s 75,000 4,218,750
Sovereign Bancorp, 6.25s 105,000 5,985,000
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(identified cost, $38,727,055) $ 40,797,625
------------
<PAGE>
- -------------------------------------------------------------------------------
CONVERTIBLE BONDS - 6.5%
- -------------------------------------------------------------------------------
Face Amount
Name of Company (000's Omitted) Value
- -------------------------------------------------------------------------------
Assisted Living, 7s, 8/15/05 $ 2,000 $ 2,080,000
Cooper Industries, Inc., 6s,
"WYMN " DECS 115 1,581,250
Danka Business, 6.75s, 4/1/02 2,000 2,805,000
Fort Bend Holdings Corp.,
8s, 12/1/05 2,000 2,027,500
National Health Investment,
7.75s, 1/1/01 2,000 2,000,000
Novacare Inc., 5.5s, 1/15/00 10,000 8,162,500
Softkey International, Inc.,
5.5s, 11/1/00 3,000 2,205,000
Theratx Inc., 8s, 2/1/02 6,000 5,475,000
Thermo Electron Corp., 4.25s, 1/1/03** 1,000 1,000,000
VLSI Technology, 8.25%, 10/1/05 7,000 6,457,500
------------
TOTAL CONVERTIBLE BONDS
(identified cost, $33,339,744) $ 33,793,750
------------
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATION - 1.5%
- -------------------------------------------------------------------------------
FACE AMOUNT
NAME OF COMPANY (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Melville Corp., 5.9s, 1/2/96 $ 7,744 $ 7,742,730
------------
TOTAL SHORT-TERM OBLIGATION,
AT AMORTIZED COST $ 7,742,730
------------
TOTAL INVESTMENTS - 97.0%
(IDENTIFIED COST, $409,461,458) $506,035,350
OTHER ASSETS, LESS LIABILITIES - 3.0% 15,634,975
------------
NET ASSETS - 100% $521,670,325
============
*Non-income producing security
**Security purchased on a delayed basis (Note 1E)
ADR - American Depository Receipt
REIT - Real Estate Investment Trust
The accompanying notes are an integral part
of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
December 31, 1995
- -------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$409,461,458) $506,035,350
Cash 1,749,910
Receivable for investments sold 15,561,601
Dividends receivable 1,656,271
Interest receivable 763,215
Deferred organization expenses (Note 1F) 11,830
Foreign tax reclaim receivable 59,781
------------
Total assets $525,837,958
LIABILITIES:
Payable for investments purchased $4,101,362
Payable to affiliate --
Trustees' fees 4,640
Accrued expenses 61,631
----------
Total liabilities 4,167,633
------------
NET ASSETS applicable to investors' interest in Portfolio $521,670,325
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $425,079,473
Unrealized appreciation of investments
(computed on the basis of identified cost) 96,590,852
------------
Total net assets $521,670,325
============
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the Year Ended December 31, 1995
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income (net of withholding taxes, $288,697) $ 25,020,308
Interest income 3,493,504
------------
Total income $ 28,513,812
Expenses --
Investment adviser fee (Note 3) $ 3,772,142
Compensation of Trustees not members
of the Investment Adviser's
organization (Note 3) 19,014
Custodian fee (Note 3) 196,160
Commitment fee 151,668
Printing and postage 272
Legal and accounting services 61,284
Amortization of deferred organization
expenses (Note 1F) 4,197
Miscellaneous 12,136
-----------
Total expenses 4,216,873
------------
Net investment income $ 24,296,939
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
(identified cost basis) --
Investment transactions $25,034,154
Financial futures contracts (8,405,750)
-----------
Net realized gain on investments
and financial futures contracts $16,628,404
Change in unrealized appreciation --
Investment transactions $80,813,152
Financial futures contracts 2,152,500
-----------
Net change in unrealized appreciation 82,965,652
------------
Net realized and unrealized
gain on investments 99,594,056
------------
Net increase in net assets
resulting from operations $123,890,995
============
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 $ 24,296,939 $ 28,785,986
Net realized gain (loss) on investment
transactions and financial
futures contracts 16,628,404 (15,151,998)
Change in unrealized appreciation of
investments 82,965,652 (89,492,365)
------------- -------------
Net increase (decrease) in net assets
resulting from operations $ 123,890,995 $ (75,858,377)
------------- -------------
Capital transactions --
Contributions $ 29,142,153 $ 97,021,559
Withdrawals (136,929,715) (152,162,876)
------------- -------------
Decrease in net assets resulting from
capital transactions $(107,787,562) $ (55,141,317)
------------- -------------
Total increase (decrease) in net
assets $ 16,103,433 $(130,999,694)
NET ASSETS:
At beginning of year 505,566,892 636,566,586
------------- -------------
At end of year $ 521,670,325 $ 505,566,892
============= =============
- ------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993*
---- ---- -----
RATIOS (As a percentage of average
daily assets):
Expenses 0.84% 0.85% 0.91%+
Net investment income 4.83% 5.22% 4.57%+
PORTFOLIO TURNOVER 103% 107% 16%
LEVERAGE ANALYSIS:
Average daily balance of debt outstanding
during period (000's omitted) $232 $3,137 $15,452
+Computed on an annualized basis.
*For the period from the start of business,
October 28, 1993, to December 31, 1993.
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES Total Return 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. INVESTMENT VALUATIONS -- Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sales prices or, if there has been
no sale, at the mean between the closing bid and asked prices. Unlisted
securities are valued at the mean between the latest available bid and asked
prices. Options and financial futures contracts are valued at the last sale
price, as quoted on the principal exchange or board of trade on which such
options or contracts are traded or, in the absence of a sale, the mean between
the last bid and asked prices. Short-term obligations, maturing in 60 days or
less, are valued at amortized cost, which approximates value. Securities for
which market quotations are unavailable are appraised at their fair value as
determined in good faith by or at the direction of 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. OPTION ACCOUNTING PRINCIPLES -- Upon the writing of a covered call option, an
amount equal to the premium received by the Portfolio is included in the
Statement of Assets and Liabilities as a liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written in accordance with the Portfolio's policies on investment
valuations discussed above. Premiums received from writing call options which
expire are treated as realized gains. Premiums received from writing call
options which are exercised or are closed are added to or offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. The Portfolio, as writer of a call option, may have no control over
whether the underlying securities may be sold and, as a result, bears the market
risk or an unfavorable change in the price of the securities underlying the
written option.
D. FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on the
daily fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. When the Portfolio
enters into a closing transaction, the Portfolio will realize for book purposes
a gain or loss equal to the difference between the value of the financial
futures contract to sell and the financial futures contract to buy. The
Portfolio's investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest rates, security prices, commodity
prices or currency exchange rates. Should interest rates, security prices,
commodity prices or currency exchange rates move unexpectedly, the Portfolio may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss.
E. DELAYED DELIVERY TRANSACTIONS -- The Fund may purchase or sell securities on
a when-issued or forward committment basis. Payment and delivery may take place
at a period in time after the date of the transaction. At the time the
transaction is negotiated, the price of the security will be delivered and paid
for are fixed. Losses may arise due to changes in the market value of the
underlying securities if the counterparty does not perform under the contract.
F. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
G. 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.
- -------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregrated $492,715,872 and $590,882,397, 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 based upon a percentage of average daily net asets. For the year ended
December 31, 1995, the fee was equivalent to 0.75% of the Portfolio's average
net assets for such period and amounted to $3,772,142. Except as to Trustees of
the Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Portfolio out of such
investment adviser fee. Investors Bank & Trust Company (IBT), serves as
custodian of the Portfolio. Prior to November 10, 1995, IBT was an affiliate of
EVM. Pursuant to the custodian agreement, IBT receives a fee reduced by credits
which are determined based on the average daily cash balances the Portfolio
maintains with IBT. All significant credit balances 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 Portfolio are officers
and directors/trustees of the above organizations. Trustees of the Portfolio
that are not affiliated with the Investment Adviser may elect to defer receipt
of all or a percentage of their annual fees in accordance with the terms of the
Trustees Deferred Compensation Plan. For the year ended December 31, 1995, no
significant amounts have been deferred.
- -------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds
managed by BMR and EVM and its affiliates in a $120 million unsecured line of
credit agreement with a bank. The line of credit consists of a $20 million
committed facility and a $100 million discretionary facility. The Portfolio
expects to use the proceeds of the advances primarily for leveraging purposes.
Borrowings by the Portfolio under the Credit Agreement will not exceed the
lesser of 1/3 of the market value of the net assets of the Portfolio or
$60,000,000. Interest is charged to each portfolio based on its borrrowings 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. At December 31, 1995 there were no outstanding loans
under 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 $410,032,499
============
Gross unrealized appreciation $ 99,292,413
Gross unrealized depreciation 3,272,602
------------
Net unrealized appreciation $ 96,019,811
============
- -------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Portfolio may trade in financial instruments with off-balance sheet risk in
the normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and financial futures contracts and
may involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. The notional or contractual amounts
of these instruments represent the investment the Portfolio has in particular
classes of financial instruments and does 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. At December 31, 1995 there were no outstanding obligations under
these financial instruments.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND INVESTORS OF
TOTAL RETURN PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of Total
Return Portfolio, including the portfolio of investments, as of December 31,
1995, the related statement of operations for the year then ended and the
statement of changes in net assets for each of the two years then ended and
supplementary data for each of the two years then ended and for the period
from October 28, 1993 (start of business) to December 31, 1993. These
financial statements and supplementary data are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of
Total Return Portfolio as of December 31, 1995, the results of its operations
for the year then ended and the changes in its net assets for each of the two
years then ended and the supplementary data for each of the two years then
ended, and for the period from October 28, 1993 (start of business), to
December 31, 1993, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 2, 1996
<PAGE>
---------------------------
INVESTMENT MANAGEMENT
EV CLASSIC OFFICERS TRUSTEES
TOTAL RETURN FUND JAMES B. HAWKES M. DOZIER GARDNER
24 Federal Street President, Trustee President, Eaton Vance Management
Boston, MA 02110
CLIFFORD H. KRAUSS DONALD R. DWIGHT
Vice President 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
- -------------------------------------------------------------------------------
TOTAL RETURN OFFICERS TRUSTEES
PORTFOLIO M. DOZIER GARDNER DONALD R. DWIGHT
24 Federal Street President, Trustee President, Dwight Partners, Inc.
Boston, MA 02110 Chairman, Newspapers of
JAMES B. HAWKES New England, Inc.
Vice President,
Trustee SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
TIMOTHY O'BRIEN Investment Banking, Harvard
Vice President and University Graduate School of
Portfolio Manager Business Administration
JAMES L. O'CONNOR NORTON H. REAMER
Treasurer President and Director,
United Asset Management
THOMAS OTIS Corporation
Secretary
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
