<PAGE>
INVESTMENT ADVISER OF
SPECIAL INVESTMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV TRADITIONAL
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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA02109
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 TRADITIONAL SPECIAL EQUITIES FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-SESRC-2/96
[logo]
EV TRADITIONAL
SPECIAL EQUITIES
FUND
ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1995
<PAGE>
To Shareholders
During the year ending December 31, 1995, EV Traditional Special Equities Fund
had a total return of 23.3%. That return was the result of an increase in net
asset value to $7.98 per share from $6.88 per share and the reinvestment of
$0.49 in capital gain distributions. By comparison, the S&P 500, an unmanaged
index of common stocks, had a total return of 37.4% for the same period.
The United States economy remained remarkably steady during 1995, bringing
investors into a favorable period of slow growth and low inflation. The nation's
annualized rate of economic growth was 2.7% in the first quarter and 1.3% in the
second quarter of the year, rising to 4.2% in the third quarter. It was expected
to decline below 3% during the fourth quarter.
The crucial issue during the first half of the year was whether the
FederalReserve's previous tightening of its target federal funds rate would
cause a recession or would merely slow the economy's growth. As the year
progressed, it became clear that the Fed successfully engineered a "soft
landing."
In July the Fed lowered the federal funds rate by a quarter of a percentage
point, the first downward change since September, 1992. Another quarter-point
decrease was announced in December. These changes helped the economy continue to
advance at a slow but steady pace and provided impetus for the stock market.
The Fund's underperformance can be attributed in part to the fact that mid-cap
stocks, which the Portfolio targets, somewhat underperformed the market. The
underperformance also was caused by the selection of several stocks, some in the
technology sector, that posted earnings results lower than were generally
anticipated. Portfolio Manager Clifford H. Krauss will discuss these results in
greater detail on the pages that follow this letter.
While past trends cannot guarantee future performance, we believe that an
investment in growth stocks will provide a satisfactory long term total return.
[Photo of James B. Hawkes]
Sincerely,
/s/ James B. Hawkes
James B. Hawkes,
President
February 21, 1996
EV TRADITIONAL SPECIAL
EQUITIES FUND
10 LARGEST COMMON STOCK HOLDINGS*
Federal National Mortgage Assn..................................Housing finance
FIserv Inc.............................................Data processing services
Boston Scientific Corp..........................................Medical devices
Anadarko Petroleum Corp.....................................Oil/gas exploration
Triton Energy Corp..........................................Oil/gas exploration
Cisco Systems Inc.....................................Computer network products
Mutual Risk Mgmnt. Ltd. ........................................Risk management
Ceridian Corp.........................................Computer/finance services
Frontier Corp....................................Diversified telecommunications
Scholastic Corp...........................................Educational publisher
*By market value as of 12/31/95
<PAGE>
Management Report
An interview with Clifford H. Krauss, Vice President and Manager of
SpecialEquities Portfolio.
Q. CLIFF, HOW WOULD YOU DESCRIBE THE INVESTMENT CLIMATE OF THE PAST YEAR?
A. This was a remarkable market for stock investors. The S&P 500, an unmanaged
index of large-capitalization common stocks, rose 37.4%, the index's best
year since 1958. During the first half of the year, technology stocks were
the top performers. During the second half of the year, the market became
more selective, punishing companies for earnings disappointments. Late in
the year, technology stocks declined, while biotechnology and oils posted
large gains.
Q. HOW DID THE FUND PERFORM IN THIS ENVIRONMENT?
A. In absolute terms and in most markets, the Fund's performance during 1995
would be considered good. However, when compared with the high returns
posted by the S&P 500, the Fund did poorly. There were two principal reasons
for this. First, we were somewhat late in adding technology issues. And
second, some companies, including some technology issues, reported earnings
shortfalls that neither we nor Wall Street in general anticipated. Those
shortfalls caused the prices of those stocks to decline.
Q. WHAT KIND OF PROBLEMS DID THOSE STOCKS ENCOUNTER?
A. The example of Wabash National demonstrates what can go wrong. Long-term
investors know that in the past, we've been enthusiastic about this company,
which manufactures truck trailers that can be carried on railroad cars.
However, the economic slowdown hit the company more than it anticipated. We
had been trimming our holdings in any case, but still held some stock when
the company announced lower-than-expected earnings. The stock's price fell
on that bad news.
Q. DID YOU HAVE ANY SUCCESSES WITH TECHNOLOGY STOCKS DURING THE YEAR?
A. We were happy with the performance of FIserv, a company that provides data
processing for banks, and Cisco Systems, a company that is a leader in
developing switching systems for computer networks.
Q. WHAT OTHER SUCCESSFUL STOCKS WERE AMONG THE HOLDINGS THIS YEAR?
A. We've held one, Boston Scientific, for a number of years.In fact, we bought
a position in this company when it first went public. We went through a
period when the stock underperformed, and increased our position because we
believed that it eventually would do well. That long-term outlook was
rewarded during 1995, when the price of Boston Scientific increased more
than 183%.
Q. Did the interest rate decline have a direct effect on any of the holdings?
A. While the market in general gained when the Federal Reserve lowered its
rates, there is a whole category of interest rate sensitive stocks -- the
financial sector -- that benefits even more when interest rates drop.
Federal National Mortgage Association performed very well, especially when
interest rates dropped more than expected.
Q. DID YOU MOVE THE PORTFOLIO INTO ANY NEW SECTORS DURING 1995?
A. Yes. We built up a position in the energy sector for the first time in
several years. We've invested in companies focused on exploration, companies
that are creative in their efforts. Triton EnergyCorp. has performed
especially well. Triton has conducted successful explorations for oil in
Colombia and for natural gas in Thailand. It should generate significant
cash flow in the future and the stock's value is rising accordingly.
Q. ARE THERE OTHER ENERGY STOCKS THAT LOOK PROMISING?
A. Yes. Anadarko Petroleum Corp. has done well because its exploration for oil
in Algeria has been a real success. It's possible that full development of
what Anadarko has found inAlgeria may actually exceed the company's current
earnings and cash flow.
Q. HOW ABOUT OTHER SECTORS?
A. We believe there may be some opportunities in the entertainment and
communications sectors, so we'll be considering the possibility of
selectively picking stocks in those sectors.We already held stock in
Comcast, a cable television company, and during 1995 we added a position in
Gaylord Entertainment, which owns The Nashville Network, among other
properties.
Another promising sector is environmental services, and here we've acquired
stocks in three companies,Sanifill, USA Waste and United Waste Systems. All
are strong companies within their geographic areas, have strong operational
teams and are continuing to acquire smaller companies in their areas.
Q. HOW DO YOU VIEW 1996 IN TERMS OF THE FUND'S INVESTMENTS?
A. Overall economic conditions remain favorable for stock investors. Inflation
continues to be low and the economy is growing slowly. However, there
appears to be a considerable amount of volatility in the market because
prices are at all-time highs. I expect that at times, you'll see
profit-taking, which will cause price fluctuations.
While it seems unlikely that the market could experience as positive a year
as it did in 1995, we believe that those who invest in stocks that
demonstrate the potential for growth will be rewarded in the long term.
[Photo of Clifford H. Krauss]
CLIFFORD H. KRAUSS
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EV TRADITIONAL SPECIAL EQUITIES FUND AND THE S&P 500 STOCK INDEX
From December 31, 1985, through December 31, 1995
-------------------------------------------------
AVERAGE ANNUAL 1 5 10
RETURNS Year Year Year
-------------------------------------------------
Incl. Max. Sales Charge 17.5% 11.6% 9.4%
-------------------------------------------------
Excl. Max. Sales Charge 23.3% 12.7% 9.9%
-------------------------------------------------
Label A B
Label DATE T.S. Equities S&P 500
- -----------------------------------------------
1 12/85 9528 10000
2 1/86 9822 10024
3 2/86 10522 10740
4 3/86 10704 11404
5 4/86 11070 11243
6 5/86 11508 11808
7 6/86 11341 12074
8 7/86 10318 11365
9 8/86 10496 12174
10 9/86 9300 11235
11 10/86 9708 11849
12 11/86 9483 12104
13 12/86 9369 11862
14 1/87 10633 13425
15 2/87 11283 13920
16 3/87 11161 14391
17 4/87 10697 14226
18 5/87 11011 14312
19 6/87 11040 15109
20 7/87 11412 15838
21 8/87 11919 16392
22 9/87 11768 16106
23 10/87 8989 12601
24 11/87 8424 11526
25 12/87 9560 12476
26 1/88 9641 12980
27 2/88 10340 13523
28 3/88 10247 13186
29 4/88 10294 13310
30 5/88 10107 13352
31 6/88 10748 14059
32 7/88 10445 13983
33 8/88 10067 13444
34 9/88 10544 14104
35 10/88 10410 14470
36 11/88 10212 14197
37 12/88 10632 14534
38 1/89 11034 15568
39 2/89 10894 15117
40 3/89 11109 15562
41 4/89 11704 16342
42 5/89 12362 16916
43 6/89 11977 16933
44 7/89 12706 18430
45 8/89 13020 18715
46 9/89 13247 18744
47 10/89 12991 18272
48 11/89 13119 18574
49 12/89 13137 19125
50 1/90 12118 17809
51 2/90 12659 17961
52 3/90 13230 18547
53 4/90 12901 18048
54 5/90 14680 19708
55 6/90 15053 19708
56 7/90 14530 19605
57 8/90 12951 17756
58 9/90 12347 17013
59 10/90 11613 16899
60 11/90 12677 17912
61 12/90 13466 18530
62 1/91 14831 19299
63 2/91 16130 20597
64 3/91 17086 21211
65 4/91 16710 21219
66 5/91 17845 22037
67 6/91 16684 21165
68 7/91 18009 22114
69 8/91 18484 22549
70 9/91 18240 22296
71 10/91 19012 22560
72 11/91 18418 21569
73 12/91 21185 24151
74 1/92 21007 23670
75 2/92 21252 23897
76 3/92 20028 23543
77 4/92 19160 24200
78 5/92 19071 24223
79 6/92 18315 23992
80 7/92 19316 24937
81 8/92 18960 24338
82 9/92 19338 24748
83 10/92 19850 24800
84 11/92 21408 25550
85 12/92 21760 25988
86 1/93 22220 26171
87 2/93 20622 26446
88 3/93 21034 27120
89 4/93 19339 26430
90 5/93 20671 27031
91 6/93 20598 27248
92 7/93 20259 27103
93 8/93 21300 28036
94 9/93 21929 27950
95 10/93 22147 28492
96 11/93 21663 28124
97 12/93 22008 28596
98 1/94 22295 29525
99 2/94 22165 28638
100 3/94 20233 27521
101 4/94 20233 27838
102 5/94 19684 28183
103 6/94 18640 27639
104 7/94 18901 28509
105 8/94 20624 29581
106 9/94 19998 28989
107 10/94 20389 29594
108 11/94 19554 28425
109 12/94 19895 28984
110 1/95 19693 29688
111 2/95 20532 30759
112 3/95 21023 31798
113 4/95 21023 32687
114 5/95 21254 33874
115 6/95 21746 34823
116 7/95 23047 35929
117 8/95 23684 35918
118 9/95 23626 37582
119 10/95 22758 37395
120 11/95 23712 38930
121 12/95 24533 39837
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.
THE FUND'S PERFORMANCE
In accordance with guidelines issued by the Securities and Exchange Commission,
the above performance chart compares the Fund's total return with that of a
broad-based securities market index. The lines on the chart represent the total
returns of $10,000 hypothetical investments in the Fund and the S&P 500 Stock
Index.
THE TOTAL RETURN FIGURES
The solid line on the chart represents the Fund's performance, and includes the
Fund's maximum current sales charge of 4.75%. The Fund's total return figure
reflects Fund expenses and Portfolio transaction costs, and assumes the
reinvestment of income dividends and capital gain distributions.
The dotted line represents the performance of the S&P 500 Stock Index, a
broad-based, widely recognized unmanaged index of 500 common stocks.The Index's
total return does not reflect any commissions or expenses that would be incurred
if an investor individually purchased or sold the securities represented in the
Index.
<PAGE>
EV TRADITIONAL SPECIAL EQUITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investment in Special Investment Portfolio
(Portfolio), at value (Note 1A) $70,485,484
Receivable for Fund shares sold and dividend
reinvestments 138,224
-----------
Total assets 70,623,708
LIABILITIES:
Payable for Fund shares redeemed $136,682
Payable to affiliate --
Trustees' fees 427
Accrued organization expense 2,942
Accrued expenses 27,253
--------
Total liabilities 167,304
-----------
NET ASSETS for 8,827,299 shares of beneficial
interest outstanding $70,456,404
===========
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 $50,261,299
Unrealized appreciation of investments 20,186,475
Accumulated undistributed net realized gain on
investments 8,630
-----------
Total net assets $70,456,404
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($70,456,404 / 8,827,299 shares of beneficial
interest) $ 7.98
======
COMPUTATION OF OFFERING PRICE:
Offering price per share (100/95.25 of $7.98) $ 8.38
======
On sales of $100,000 or more, the offering price
is reduced.
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended December 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio
(net of foreign taxes, $235) $ 349,722
Interest income allocated from Portfolio 299,727
Expenses allocated from Portfolio (518,018)
-----------
Total investment income $ 131,431
Expenses --
Compensation of Directors not members of the
Investment Adviser's organization $ 550
Custodian fees 8,002
Service fees (Note 4) 50,623
Transfer and dividend disbursing agent fees 53,234
Printing and postage 38,878
Legal and accounting services 14,108
Registration fees 25,869
Amortization of organization expenses
(Note 1D) 12,248
Miscellaneous 9,342
-----------
Total expenses 212,854
-----------
Net investment loss $ (81,423)
REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain on investments (identified
cost basis) -- $ 4,156,583
Change in unrealized appreciation of investments 10,008,882
-----------
Net realized and unrealized gain
on investments 14,165,465
-----------
Net increase in net assets resulting
from operations $14,084,042
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994
----------- ------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (81,423) $ (120,323)
Net realized gain on investments 4,156,583 6,224,249
Unrealized appreciation (depreciation) of
investments 10,008,882 (13,248,458)
----------- ------------
Net increase (decrease) in net assets
resulting from operations $14,084,042 (7,144,532)
----------- ------------
Distributions to shareholders --
From net realized gain on investments $(4,111,614) $ (6,183,757)
From tax return of capital -- (30,146)
----------- ------------
Total distributions to shareholders $(4,111,614) $ (6,213,903)
----------- ------------
Net decrease from Fund share transactions
(Note 2) (3,368,326) $ (921,158)
----------- ------------
Total increase (decrease) in net assets $ 6,604,102 $(14,279,593)
NET ASSETS:
At beginning of year 63,852,302 78,131,895
----------- ------------
At end of year $70,456,404 $ 63,852,302
=========== ============
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991***
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- Beginning of
year $ 6.880 $ 8.430 $ 8.990 $ 9.520 $ 6.810
------- ------- ------- ------- -------
Income from operations:
Net investment income (loss) $(0.009) $(0.013) $(0.018) $ 0.006 $ 0.004
Net realized and unrealized
gain (loss) on investments 1.599 (0.807) 0.108 0.239 3.776
------- ------- ------- ------- -------
Total income (loss) from
operations $ 1.590 $(0.820) $ 0.090 $ 0.245 $ 3.780
------- ------- ------- ------- -------
Less distributions:
From net realized gain $(0.490) $(0.727) $(0.650) $(0.775) $(1.070)
From tax return of capital -- (0.003) -- -- --
------- ------- ------- ------- -------
Total distributions $(0.490) $(0.730) $ 0.650) $(0.775) $(1.070)
------- ------- ------- ------- -------
NET ASSET VALUE -- End of year $ 7.980 $ 6.880 $ 8.430 $ 8.990 $ 9.520
======= ======= ======= ======= =======
TOTAL RETURN(1) 23.31% (9.60)% 1.14% 2.71% 57.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's omitted) $70,456 $ 63,852 $78,132 $76,544 $77,324
Ratio of net expenses to average
net assets* 1.08% 1.02% 1.01% 0.96% 0.94%
Ratio of net investment income
to average net assets (0.12)% (0.17)% (0.30)% 0.07% 0.05%
PORTFOLIO TURNOVER** -- 37% 73% 48% 41%
*Includes the Fund's share of Special Investment Portfolio's allocated expenses for the periods subsequent to
August 1, 1994.
**Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making
investments directly in securities. The portfolio turnover for the period since the Fund transferred
substantially all of its investable assets to the Portfolio is shown in the Portfolio's financial statements
which are included elsewhere in this report.
***Audited by previous auditors.
(1)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.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional 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. On August 2, 1994, the Fund
transferred substantially all of its investable assets to the Special
Investment Portfolio (the Portfolio). Prior to this date the Fund's name was
Eaton Vance Special Equities Fund. The Fund invests all of its investable
assets in interests in 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 (95.3% 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. Prior to the Fund's investment in the Portfolio,
the Fund held its investments directly.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applic-
able to regulated investment companies and to distribute to shareholders each
year all of its taxable income, including any net realized gain on
investments, options and financial futures transactions. Accordingly, no
provision for federal income or excise tax is necessary. Pursuant to Section
852 of the Internal Revenue Code, the Fund designates $4,111,614 as capital
gain dividends for its taxable year ended December 31, 1995.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization, are being amortized on the straight-line basis over
five years.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income and dividends to
shareholders are recorded on the ex-dividend date. Dividend income may include
dividends that represent returns of capital for federal tax purposes. Gains or
loss on the sale of investments is determined on the identified cost basis.
F. DISTRIBUTIONS -- Generally accepted accounting principles require that
differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
<PAGE>
- ------------------------------------------------------------------------------
(2) FUND SHARES
The Fund under its indenture of trust is authorized to issue unlimited shares
of $0.50 par value. Transactions in Fund shares were as follows:
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995 1994
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- ---------- -----------
Sales 1,277,190 $ 9,721,796 23,121,866 $181,853,726
Shares issued in
reinvestment of
distributions 452,980 3,517,230 785,094 5,336,802
Shares redeemed (2,180,286) (16,607,352) (23,895,612) (188,111,686)
--------- ----------- ---------- ------------
Net increase
(decrease) (450,116) $(3,368,326) 11,348 $ (921,158)
========= =========== ========== ============
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$9,827,442 and $17,402,267, respectively.
- ------------------------------------------------------------------------------
(4) SERVICE PLAN
The Trustees of the Fund adopted a Service Plan on July 7, 1993 designed to
meet the requirements of Rule 12b-1 under the Investment Company Act of 1940
and the service fee requirements of the revised sales charge rule of The
National Association of Securities Dealers Inc. The Service Plan replaced the
Fund's distribution plan which became effective on June 12, 1989. The Service
Plan provides that the Fund may make service fee payments to the Principal
Underwriter, Eaton Vance Distributors, Inc., a subsidiary of Eaton Vance
Management, Authorized Firms or other persons in amounts not exceeding 0.25%
of the Fund's average daily net assets for any fiscal year. The Trustees have
implemented the Service Plan by authorizing the Fund to make quarterly service
fee payments to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed 0.25% of that portion of the Fund's average daily net
assets for any fiscal year which is attributable to shares of the Fund sold on
or after June 12, 1989 by such persons and remaining outstanding for at least
twelve months. Such payments are made for personal services and/or the
maintenance of shareholder accounts. During the year ended December 31, 1995
the Fund made payments of $50,623 under the Plan to the Principal Underwriter
and Authorized Firms.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
EV TRADITIONAL SPECIAL EQUITIES FUND, A SERIES OF EATON VANCE SPECIAL
INVESTMENT TRUST:
We have audited the accompanying statement of assets and liabilities of EV
Traditional Special Equities Fund (formerly Eaton Vance Special Equities
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 in the period
then ended and the financial highlights for each of the four years in the
period then ended. 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. The financial highlights for the year ended December 31, 1991,
presented herein, was audited by other auditors whose report dated January 21,
1992, expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Traditional Special Equities 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 in the
period then ended and the financial highlights for each of the four years in
the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON MASSACHUSETTS
FEBRUARY 2, 1996
<PAGE>
- -------------------------------------------------------------------
SPECIAL INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- -------------------------------------------------------------------
COMMON STOCKS - 92.4%
- -------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------------
BUSINESS SERVICES - 9.9%
BISYS Group, Inc.* 22,000 $ 676,500
Services financial institutions with
computer, administrative and
marketing support data processing
services.
Ceridian Corp.* 40,000 1,650,000
Provides payroll processing and other
employer services, media and market
research.
Corestaff Inc.* 10,000 365,000
Temporary employment services agency.
Danka Business Systems PLC, ADR 20,000 740,000
An independent provider of
maintenance and service for office
copying machines.
FIserv Incorporated* 93,500 2,805,000
Provider of data processing services
to banks and savings institutions,
benefiting from outsourcing trend.
G&K Services, Inc. 42,200 1,076,100
Rents and launders uniforms and other
textile products.
-----------
$ 7,312,600
-----------
COMMUNICATIONS - 9.4%
Cellular Communications of Puerto
Rico* 15,000 $ 416,250
Provider of wireless cellular
telephone services.
Comcast Corp. 70,000 1,273,125
Cable TV and Cellular telephone
operator.
Evergreen Media Corp. Class A* 35,000 1,120,000
Operator of major market AM and FM
radio stations.
Frontier Corp. 55,000 1,650,000
Formerly Rochester Telephone Corp.,
provides local telephone and
communications services.
Intelcom Group, Inc.* 50,000 618,750
Provider of alternative access
telecommunication services and
international satellite uplink
teleports.
MFS Communications Co., Inc.* 20,000 1,065,000
Provider of fiber-optic based
telecommunications services
primarily to businesses.
Nokia Corp. 20,000 777,500
International wireless handset and
infrastructure equipment
manufacturer.
-----------
$ 6,920,625
-----------
<PAGE>
COMPUTER EQUIPMENT - 1.1%
Motorola Inc. 15,000 $ 855,000
Leading worldwide producer of -----------
wireless communication systems and
equipment, major manufacturer of
semiconductors.
COMPUTER SOFTWARE - 8.7%
Banyan Inc.* 75,000 $ 768,750
Provider of networking software
products for large, complex
computer networks.
Checkfree Corp.* 2,000 43,000
Provider of electronic banking
software products and services.
3Com Corp.* 21,200 988,450
Designs, manufactures and distributes
intelligent hubs and other computer
networking products.
Davidson & Associates, Inc.* 25,000 550,000
Developer and distributor of
educational software products.
DST Systems, Inc.* 8,500 242,250
Provider of software and back office
computer services to the mutual
fund industry.
Inso Corp.* 20,000 850,000
Developer of software tools used for
proofing, reference and information
management.
Interleaf Inc.* 35,000 354,375
Provider of software used to compare,
edit and print complex documents.
Intersolv Inc.* 55,000 708,125
Provider of software development
tools.
Novell, Inc.* 40,000 570,000
Leading provider of network software
systems.
Objective Systems Integrator* 10,000 547,500
Provider of object-oriented, client
server software for network
operations, support and management.
Silicon Graphics, Inc.* 30,000 825,000
Produces computer systems used for
the design, analysis, and
simulation of three dimensional
objects.
-----------
$ 6,447,450
-----------
CONSUMER PRODUCTS - 0.3%
Boston Beer Co. Class A* 4,600 $ 109,250
Leading micro-brewery primarily under
the Samuel Adams brand-name.
Estee Lauder Companies* 3,800 132,525
International cosmetics company.
-----------
$ 241,775
-----------
ELECTRONICS & INSTRUMENTATION - 10.0%
Cisco Systems, Inc.* 25,000 $ 1,865,625
Manufacturer of routers that connect
computer networks.
Intel Corp. 25,000 1,418,750
World's leading semiconductor
manufacturer, also produces
microcomputer components, modules
and systems.
Linear Technology Corp. 20,000 785,000
Manufacturer of high performance
linear integrated circuits.
MEMC Electronic Materials, Inc.* 25,000 815,625
Leading producer of silicon wafers
used to create integrated circuits.
Mentor Graphics Corp.* 80,000 1,460,000
Developer of electronic design
automation systems used in complex
electronic products.
Microchip Technology, Inc.* 20,000 730,000
Leading producer of field
programmable micro-controllers.
Zoran Corp.* 15,000 311,250
Developer and marketer of integrated
circuits for digital video and
audio compression applications.
-----------
$ 7,386,250
-----------
ENERGY - 7.5%
Anadarko Petroleum Corp. 40,000 $ 2,165,000
A leading independent company in oil
and gas exploration, development
and production.
Pogo Producing Co. 50,000 1,412,500
Independent oil and gas exploration
and production company active in
the U.S. and Thailand
Triton Energy Corp. 35,000 2,008,125
Independent oil and gas exploration
and production company focusing on
international prospects especially
a major Colombian oil discovery.
-----------
$ 5,585,625
-----------
ENTERTAINMENT - 5.7%
Circus Circus Enterprises, Inc.* 47,000 $ 1,310,125
Major casino facilities in Las Vegas.
Also operates hotels.
Gaylord Entertainment 30,000 832,500
Producer of The Nashville Network and
Country Music Television Network
and operator of the Opryland
amusement park.
Mirage Resorts, Inc.* 25,000 862,500
Nevada based gaming resort operator.
Players International, Inc.* 42,500 454,219
Operates riverboat casinos in
Louisiana and Illinois and a
racetrack in Kentucky. Plans new
casino in Mesquite, Nevada.
Station Casinos, Inc.* 50,000 731,250
Owner and operator of gaming
enterprises.
-----------
$ 4,190,594
-----------
ENVIROMENTAL SERVICES - 2.6%
Sanfill Inc.* 26,000 $ 867,750
Operator of primarily solid-waste
facilities in 16 states.
United Waste Systems, Inc.* 10,000 372,500
Provider of collection and solid-
waste disposal services primarily
in secondary markets.
U.S.A. Waste Services, Inc.* 35,000 660,625
Operator of solid-waste land fills
and collection services,
integrating several large recent
acquisitions.
-----------
$ 1,900,875
-----------
<PAGE>
FINANCE - 9.9%
Federal National Mortgage Association 30,000 $ 3,723,750
Leading factor in the secondary
mortgage market.
Franklin Resources, Inc. 20,000 1,007,500
One of the largest mutual fund
organizations in the U.S.
MBNA Corp. 30,000 1,106,250
Bank holding company and world's
leading issuer of Gold MasterCards.
T. Rowe Price Associates, Inc. 30,000 1,477,500
Investment adviser to mutual funds,
institutions and individuals.
-----------
$ 7,315,000
-----------
HEALTHCARE - 8.0%
Astra AB ADR Series B* 25,000 $ 992,118
Swedish based, multinational
pharmaceutical company.
Boston Scientific Corp.* 50,000 2,450,000
Medical device manufacturer focusing
primarily on disposable products
used in less invasive surgery
procedures.
MiniMed Inc.* 60,000 750,000
Developer and manufacturer of medical
devices focusing on diabetics.
Sofamor Danek Group, Inc.* 50,000 1,418,750
Leading developer/manufacturer of
spinal implant devices. Company
markets products internationally.
Vitalink Pharmacy Services, Inc.* 12,500 290,625
Provider of pharmacy services to
nursing homes and sub-acute care
medical facilities.
-----------
$ 5,901,493
-----------
HOMEBUILDING - 1.3%
Southern Energy Homes, Inc.* 55,625 $ 973,437
Produces customized manufactured -----------
homes in facilities located in
Alabama and Texas. Homes are sold
in 24 states.
HOTELS & RESTAURANTS - 0.5%
LaQuinta Inns, Inc. 15,000 $ 410,625
Owner/operator of modestly priced -----------
lodging chain.
INDUSTRIAL PRODUCTS - 2.6%
Greenfield Industries, Inc. 30,000 $ 937,500
A leading manufacturer of expendable
cutting tools and related products
used in industrial applications.
Loctite Corp. 20,600 978,500
International manufacturer of
adhesives, sealants and related
products.
-----------
$ 1,916,000
-----------
INSURANCE - 5.0%
American International Group 15,000 $ 1,387,500
One of the world's leading insurance
companies, operating in 130
countries.
<PAGE>
Mutual Risk Management Ltd. 40,000 1,830,000
Specialty insurer focusing on
workmen's compensation.
Renaissance Re Holdings Ltd. 15,500 470,812
Provider of catastrophy reinsurance
services.
-----------
$ 3,688,312
-----------
PUBLISHING - 2.1%
Scholastic Corp.* 20,000 $ 1,555,000
Publisher/distributor of children's -----------
books.
RETAILING - 3.4%
Consolidated Stores Corp.* 70,000 $ 1,522,500
Chain of close-out merchandise stores
operating primarily under the Odd/
Big Lots name.
Home Depot Inc. 20,000 957,500
Operator of a chain of retail
warehouse-type stores selling
building supply and home
improvement products.
-----------
$ 2,480,000
-----------
SPECIALTY CHEMICALS - 3.6%
Great Lakes Chemical Corp. 20,000 $ 1,440,000
Leading producer of flame retardant
and specialty intermediate
chemicals.
Millipore Corp. 30,000 1,233,750
Manufacturer of membrane technology
products used for chemical analysis
and purification.
-----------
$ 2,673,750
-----------
TRANSPORTATION - 0.8%
Midwest Express Holdings* 20,100 $ 557,775
-----------
Business oriented airline with primary hub in Milwaukee.
TOTAL COMMON STOCKS
(IDENTIFIED COST, $47,644,606) $68,312,186
-----------
- -------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 7.6%
- -------------------------------------------------------------------
PRINCIPAL AMOUNT
(000'S OMITTED) VALUE
- -------------------------------------------------------------------
Ford Motor Credit Co., 58s, 1/3/96 $2,641 $ 2,640,142
Melville Corp., 5.9s, 1/2/96 2,955 2,954,522
-----------
TOTAL SHORT-TERM OBLIGATIONS, AT
AMORTIZED COST $ 5,594,664
-----------
TOTAL INVESTMENTS (IDENTIFIED COST,
$53,239,270) $73,906,850
OTHER ASSETS, LESS LIABILITIES - 0.0% $ 33,425
-----------
TOTAL NET ASSETS - 100% $73,940,275
===========
*Non-income producing security.
ADR -- American Depositary Receipt.
The accompanying notes are an
integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1995
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$53,239,270) $73,906,850
Cash 2,862
Dividends receivable 32,795
Deferred organization expenses (Note 1D) 11,318
-----------
Total assets $73,953,825
LIABILITIES:
Payable to affiliate --
Trustees' fees $ 1,400
Accrued expenses 12,150
-------
Total liabilities 13,550
-----------
NET ASSETS applicable to investors' interest in Portfolio $73,940,275
===========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $53,272,695
Unrealized appreciation of investments (computed on
the basis of identified cost) 20,667,580
-----------
Total net assets $73,940,275
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------
For the Year Ended December 31, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income (net of foreign taxes, $244) $ 360,263
Interest income 308,573
-----------
Total income $ 668,836
Expenses --
Investment adviser fee (Note 3) $ 435,400
Compensation of Directors not members of the Investment
Adviser's organization (Note 3) 7,486
Custodian fee (Note 3) 58,731
Printing and postage 620
Legal and accounting services 23,951
Amortization of organization expenses (Note 1D) 3,158
Miscellaneous 4,754
-----------
Total expenses 534,100
-----------
Net investment income 134,736
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (identified cost basis) $ 4,131,300
Change in unrealized appreciation on investments 10,473,926
-----------
Net realized and unrealized gain on investments 14,605,226
-----------
Net increase in net assets resulting from operations $14,739,962
===========
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1994*
------------ -------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 134,736 $ 55,637
Net realized gain (loss) on
investment transactions 4,131,300 (986,284)
Change in unrealized appreciation
of investments 10,473,926 4,288,639
----------- ------------
Net increase in net assets from
operations $14,739,962 $ 3,357,992
----------- ------------
Capital transactions --
Contributions $14,400,870 $104,495,403
Withdrawals (19,642,929) (43,411,023)
----------- ------------
Increase (decrease) in net
assets resulting from capital
transactions $(5,242,059) $ 61,084,380
----------- ------------
Total increase in net assets $ 9,497,903 $ 64,442,372
NET ASSETS:
At beginning of year 64,442,372 --
----------- ------------
At end of year $73,940,275 $ 64,442,372
=========== ============
- ----------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
RATIOS (As a percentage of average net assets):
Expenses 0.77% 0.74%+
Net investment income 0.19% 0.20%+
PORTFOLIO TURNOVER 81% 19%
+Computed on an annualized basis.
*For the period from the start of business, August 1, 1994 to December 31,
1994.
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SIGNIFICANT ACCOUNTING POLICIES
Special Investment Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end investment company
which was organized as a trust under the laws of the State of New York on May
1, 1992. The Declaration of Trust permits the Trustees to issue beneficial
interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or in the NASDAQ National Market are valued on the basis
of the last reported sales prices on the last business day of the period. If
no sale is reported on that date, a security is valued, if quoted on such a
day, at not lower than the old bid price nor higher than the asked prices.
Prices on such exchanges will not be used for valuing debt securities if in
the Trustees judgment, some other valuation method more accurately reflects
the fair market value of such a security. Securities for which over-the-
counter market quotations are readily available are valued on the basis of the
mean between the last bid and asked prices. Short-term securities are valued
at cost, which approximates market value. All other securities and assets are
appraised to reflect their fair value as determined in good faith by the
Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Code) in order for its investors to satisfy them. The Portfolio
will allocate at least annually among its investors each investors'
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
C. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
- ------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $52,362,032 and $58,838,098, respectively.
- ------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is at the annual rate of 5/8 of 1% of average daily net assets. For the year
ended December 31, 1995, the fee amounted to $435,400. Except as to Trustees
of the Portfolio who are not members of EVM's or BMR's organization, officers
and Trustees receive remuneration for their services to the Portfolio out of
such investment adviser fee. Investors Bank & Trust Company (IBT), serves as
custodian of the Portfolio. Prior to November 10, 1995, IBT was an affiliate
of EVM. Pursuant to the custodian agreement, IBT receives a fee reduced by
credits which are determined based on the average daily cash balances the
Portfolio maintains with IBT. All significant credit balances are reported as
a reduction of expenses in the statement of operations. Certain of the
officers and Trustees of the Portfolio are officers and directors/trustees of
the above organizations. Trustees of the Portfolio that are not affiliated
with the Investment Adviser may elect to defer receipt of all or a percentage
of their annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the year ended December 31, 1995, no significant
amounts have been deferred.
- ------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement
with a bank. The line of credit consists of a $20 million committed facility
and a $100 million discretionary facility. Borrowings will be made by the
Portfolio solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each portfolio based on
its borrowings at an amount above either the bank's adjusted certificate of
deposit rate, a variable adjusted certificate of deposit rate, or a federal
funds effective rate. In addition, a fee computed at an annual rate of 1/4 of
1% on the $20 million committed facility and on the daily unused portion of
the $100 million discretionary facility is allocated among the participating
funds and portfolios at the end of each quarter. The Portfolio did not have
any significant borrowings or allocated fees during the year. At December 31,
1995, the Fund did not have an outstanding balance pursuant to the line of
credit.
- ------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1995, as computed on a federal income tax basis, are as
follows:
Aggregate cost $53,239,270
===========
Gross unrealized appreciation $22,100,411
Gross unrealized depreciation 1,432,881
-----------
Net unrealized appreciation $20,667,580
===========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE TRUSTEES AND INVESTORS OF
SPECIAL INVESTMENT PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of
Special Investment Portfolio, including the portfolio of investments, as of
December 31, 1995, the related statement of operations, changes in net assets
and supplementary data for the year then ended and for the period from August
1, 1994 (start of business) to December 31, 1994. These financial statements
and supplementary data are the responsibility of the Portfolio's management.
Our responsibility is to express an opinion on these financial statements and
supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of
Special Investment Portfolio as of December 31, 1995, the results of its
operations, changes in its net assets and supplementary data for the year then
ended and for the period from August 1, 1994 (start of business) to December
31, 1994, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
FEBRUARY 2, 1996
<PAGE>
---------------------------
INVESTMENT MANAGEMENT
EV TRADITIONAL OFFICERS TRUSTEES
SPECIAL EQUITIES JAMES B. HAWKES M. DOZIER GARDNER
FUND President, Trustee President, Eaton Vance Management
24 Federal Street
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
- -------------------------------------------------------------------------------
SPECIAL INVESTMENT OFFICERS TRUSTEES
PORTFOLIO 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 and President, Dwight Partners, Inc.
Portfolio Manager 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
