<PAGE>
INVESTMENT ADVISER OF
STOCK PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV TRADITIONAL STOCK FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AND DIVIDEND
DISBURSING AGENT
First Data Investor Services Group
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
INDEPENDENT AUDITORS
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 TRADITIONAL STOCK FUND
24 FEDERAL STREET
BOSTON, MA 02110 T-STSRC 2/97
[Logo Omitted]
EV TRADITIONAL
STOCK
FUND
[graphic omitted]
ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1996
<PAGE>
To Shareholders
We are pleased to report that during the year ended December 31, 1996, EV
Traditional Stock Fund had a total return of 20.2%. This return, which did not
include the 4.75% sales charge, resulted from an increase in net asset value to
$13.56 per share from $12.76 per share, and the reinvestment of $0.220 in income
dividends and $1.48 per share in capital gain distributions.
By comparison, the average total return for mutual funds in the Lipper Growth &
Income Funds Category,* a group of 523 mutual funds investing in growth and
income stocks, was 20.8% during the year. The S&P 500,* an unmanaged index of
common stocks, recorded a total return of 22.9% for the same period.
According to the U.S. Commerce Department's quarterly Gross Domestic Product
(GDP) report, which totals the value of all goods and services produced in the
U.S., the economy experienced a year of respectable growth, low inflation, and
rising employment in 1996. This advantageous mix of economic factors helped
produce another good year for stock market investors.
The annualized GDP was 2.0%, 4.7%, 2.1%, and 4.7% for the four quarters of 1996.
Inflation, as measured by the Consumer Price Index (CPI), was 3.3% for the year
(not seasonally adjusted). Unemployment remained a low 5.3% in December.
Led by large capitalization, blue chip stocks, the stock market performed very
well for a second straight year. The Dow Jones Industrial Average,* a key blue
chip stock barometer, dropped by roughly 10% in July, but rallied to record
highs through the second half of the year to gain 28.8% by December 31. In the
pages that follow, Portfolio Manager Duncan W. Richardson provides a more
detailed commentary on the stock market and the Fund's performance during the
year.
Although past performance is no guarantee of future returns, Eaton Vance
believes that investing in a combination of income-producing and growth stocks
will provide solid returns over the long term.
- -------------------------- Sincerely,
/s/ James B. Hawkes
James B. Hawkes
[Photo of James B. Hawkes] President
February 7, 1997
- --------------------------
*It is not possible to invest directly in an index or a Lipper Category.
- --------------------------------------------------------------------------------
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution, Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------
EV TRADITIONAL STOCK FUND
THE 10 LARGEST COMMON STOCK HOLDINGS*
Eastman Kodak Co. ............... Photography
Intel Corp. ..................... Semiconductors
Conagra, Inc. ................... Agriculture
Boeing Co. ...................... Aerospace-Defense
Allstate Corp. .................. Insurance
Triton Energy Ltd. .............. Energy
Crown Cork & Seal, Inc. ......... Containers
Nokia Corp. ADR ................. Electronics-Instruments
Citicorp ........................ Banking
Home Depot ...................... Retail-Consumer services
*By market value as of 12/31/96. Holdings may change due to
active management.
- -------------------------------------------------------------
<PAGE>
Management Report
An interview with Duncan W. Richardson, Vice President and Portfolio Manager of
Stock Portfolio.
Q. CONGRATULATIONS ON ANOTHER GOOD YEAR. WHAT WERE THE MAIN CHARACTERISTICS OF
1996 FROM AN INVESTMENT STANDPOINT?
A. 1996 was another strong year for the equity markets, on top of a very good
year in 1995. Together, 1995 and 1996 rank as two of the best consecutive
years in the Stock Portfolio's history. As the market continued its
expansion, certain sectors experienced an increase in volatility. Technology
stocks, for example, rallied into May, corrected more than other sectors in
the July downturn, and then, on a selective basis, came back very strongly
toward the end of the year. Fortunately, the stocks with the best
performance in 1996 were the high-quality, large capitalization companies in
which this Portfolio invests.
Q. THIS FUND'S RETURN EXCEEDED THAT OF THE AVERAGE EQUITY FUND. TO WHAT DO YOU
ATTRIBUTE THIS SUCCESS?
A. It was probably a combination of our selling discipline, which protects us
on the downside and helps preserve capital, and our opportunism in adding
to existing positions or acquiring new ones. Some funds were hurt by holding
certain volatile sectors, such as technology, at the wrong time. This Fund
establishes long-term core positions but actively manages them, taking some
profits and reinvesting when the opportunities arise. Hence, rather than
riding the ups and downs of the market, the Fund seeks to take advantage of
buying and selling opportunities in an effort to produce better performance
from its holdings.
- -------------------------------
[Photo of Duncan W. Richardson]
- -------------------------------
Q. ARE THERE ANY COMPANIES THAT YOU WOULD LIKE TO HIGHLIGHT FOR SHAREHOLDERS
READING THIS REPORT?
A. Duracell is an excellent example. We initiated our position in this company
on the basis of the underlying growth potential and then continued to add to
our position. Our positive viewpoint was shared by Gillette, who recently
acquired the company at a premium for stock. As a non-taxable transaction,
this became a double win for shareholders.
Other examples of long-term opportunities include Potash, Triton Energy, and
Crown Cork and Seal. Potash, a recent addition to the Portfolio, makes
fertilizer and, over the next several years, should capitalize on the demand
from developing countries for this product. Potash's share price has
appreciated 29% in the past six months, but more importantly, the company
appears to have very good growth prospects. Triton Energy is an
international oil exploration and production company, while Crown Cork and
Seal, after a recent merger, is the largest container manufacturer in the
world. All four of these companies fit our model of growth companies that
are well-positioned in their industries, with worldwide market
opportunities.
Q. HOW MUCH OF A GLOBAL PRESENCE DO THE HOLDINGS IN THIS FUND HAVE?
A. For the Fund in general, we like companies which have opportunities to grow
their businesses overseas, particularly if those opportunities are not fully
reflected in the stock price. Most of our current top holdings fall into
this category, including Intel, Citicorp, Nokia, Bank of Boston, Eli Lilly,
Boeing, Duracell, Procter & Gamble, and Xerox - just to name a few.
Q. DOES THIS PORTFOLIO HAVE A GREAT DEAL OF TURNOVER?
A. The turnover rate has been somewhat higher than normal in recent years
simply because the market has been more volatile. Some stocks have performed
far better than we expected in a short period of time. As our targets were
met, I have taken gains and reinvested in other opportunities.
Our selling discipline for investments that are underperforming also
increases turnover, but has two offsetting benefits. First, and most
important, recognizing mistakes early on helps to preserve capital. Second,
by taking losses when necessary, we can reduce the negative tax consequences
of high distributions to taxable shareholders.
Q. WITH THE CURRENT DIVIDEND YIELD IN THE MARKET AT A LOW, WHAT STRATEGIES DO
YOU USE TO MAINTAIN OR INCREASE THE DIVIDEND YIELD OF THE STOCK PORTFOLIO?
A. With the current dividend yield on the market around 2%, yield is hard to
produce. We have used financial stocks, such as Fleet Financial, with a
yield of 3.4%, and Bank of Boston, with a yield of 2.5%. We also use real
estate investment trusts (REITs) to boost the Portfolio's yield, and this
has worked well. REITs had some trouble in 1995, but did very well in 1996
and can provide good total returns over the longer term. Finally, we invest
in some telecommunications stocks and convertible preferred stocks, which
typically provide better-than-average dividend yields.
Q. MANY ANALYSTS EXPECT THE FAVORABLE ECONOMIC CONDITIONS OF 1996 TO CONTINUE
INTO 1997. DO YOU AGREE?
A. Yes, but with a caveat. Investors who are new to the stock market should
keep in mind that, although we have been in a positive economic environment
for quite some time, the business cycle has not gone away. Eventually, we
will see a downturn - and in all likelihood a recession - and the stock
market could exhibit a considerable reaction. Many new investors in the
stock market have never experienced a 15% or 20% correction, and they should
be aware that it is indeed a very real possibility.
In the short term, I am cautiously optimistic. We have a delicate balance of
low inflation, low interest rates, and improving corporate earnings. Absent
any external shocks, the conditions could be in place for a third straight
year of excess returns in 1997. More likely, however, would be a year of
returns closer to, or below, the 11% historic annual average for the U.S.
stock market. I would also expect more volatility in the market in 1997
because of some extended valuations and the tremendous inflow of new money.
In my opinion, stock performance next year will be related much more
directly to earnings results than it was this year. In this environment, a
vehicle like the Stock Portfolio, in which the EV Traditional Stock Fund
invests, makes sense because it balances risks and rewards by continuing to
seek the most attractive areas and companies in the market.
THE PORTFOLIO'S HOLDINGS REAPED
BENEFITS OF BLUE CHIP RALLY IN 1996 . . .
HYPOTHETICAL INVESTMENTS OF $10,000 IN DOW JONES
INDUSTRIAL AVERAGE AND THE RUSSELL 2000 STOCK INDEX+
Dow Jones Industrial Average Russell 2000 Index
---------------------------- ------------------
12/31/95 $10,000 $10,000
1/31/96 $10,564 $10,062
2/29/96 $10,761 $10,301
3/31/96 $10,980 $10,514
4/30/96 $10,966 $11,072
5/31/96 $11,133 $11,509
6/30/96 $11,177 $11,063
7/31/96 $10,950 $10,072
8/31/96 $11,145 $10,657
9/30/96 $11,695 $11,073
10/31/96 $12,011 $10,903
11/30/96 $13,014 $11,352
12/31/96 $12,891 $11,649
+The Dow Jones Industrial Average is an unmanaged index of 30 large
capitalization industrial stocks traded in the U.S. The Russell 2000 Stock
Index is an index of 2,000 small capitalization stocks, many of which are in
the technology sector. It is not possible to invest directly in an index.
WHILE INVESTING IN A DIVERSIFIED
ARRAY OF ECONOMIC SECTORS . . .
SECTOR BREAKDOWN AS OF 12/31/96*
Finance & Insurance ................... 12.5%
Consumer Non-Durables ................. 12.0%
Health Care ........................... 10.4%
Business Products & Services .......... 9.2%
REITs ................................. 6.8%
Banks ................................. 5.2%
Retail ................................ 4.6%
Energy ................................ 4.3%
Semiconductors ........................ 3.7%
Aerospace ............................. 3.0%
Telecom. Equipment .................... 2.6%
Publishing ............................ 2.3%
Computer & Bus. Equip ................. 2.1%
Other Common Stock .................... 6.0%
Conv. Pref. Stock ..................... 5.6%
Convertible Bonds ..................... 3.5%
Cash/Short-Term Investments ........... 6.2%
*By market value as % of net assets on date shown.
Sectors subject to change due to active portfolio management.
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EV TRADITIONAL STOCK FUND AND THE STANDARD & POOR'S 500
From December 31, 1986 through December 31, 1996
- ---------------------------------------------------------------------
AVERAGE ANNUAL 1 5 10 Value at
RETURNS Year Years Years 12/31/96
- ---------------------------------------------------------------------
With Max Sales Charge 14.5% 10.2% 11.6% $30,003
- ---------------------------------------------------------------------
Without Max. Sls. Chg. 20.2% 11.3% 12.2% $31,493
- ---------------------------------------------------------------------
Fund
EV Including
Traditional Maximum
Stock Fund sales charge S&P 500
---------- ------------ -------
12/31/86 $10,000 $ 9,527 $10,000
1/31/87 $11,042 $10,520 $11,347
2/28/87 $11,310 $10,775 $11,795
3/31/87 $11,356 $10,818 $12,135
4/30/87 $11,040 $10,518 $12,028
5/31/87 $11,140 $10,613 $12,132
6/30/87 $11,556 $11,010 $12,744
7/31/87 $11,961 $11,395 $13,390
8/31/87 $12,543 $11,950 $13,889
9/30/87 $12,333 $11,750 $13,585
10/31/87 $10,243 $ 9,758 $10,660
11/30/87 $ 9,609 $ 9,154 $ 9,781
12/31/87 $10,199 $ 9,717 $10,525
1/31/88 $10,735 $10,227 $10,983
2/28/88 $11,021 $10,499 $11,474
3/31/88 $10,609 $10,107 $11,123
4/30/88 $10,635 $10,132 $11,265
5/31/88 $10,873 $10,358 $11,337
6/30/88 $11,263 $10,730 $11,864
7/31/88 $11,238 $10,706 $11,835
8/31/88 $11,007 $10,486 $11,414
9/30/88 $11,460 $10,918 $11,903
10/31/88 $11,736 $11,181 $12,249
11/30/88 $11,546 $11,000 $12,054
12/31/88 $11,730 $11,175 $12,267
1/31/89 $12,459 $11,870 $13,176
2/28/89 $12,160 $11,585 $12,832
3/31/89 $12,310 $11,727 $13,136
4/30/89 $12,931 $12,319 $13,836
5/31/89 $13,345 $12,714 $14,365
6/30/89 $13,185 $12,561 $14,294
7/31/89 $14,277 $13,602 $15,599
8/31/89 $14,629 $13,936 $15,884
9/30/89 $14,629 $13,936 $15,823
10/31/89 $14,446 $13,762 $15,467
11/30/89 $14,618 $13,927 $15,767
12/31/89 $15,123 $14,407 $16,148
1/31/90 $14,187 $13,516 $15,079
2/28/90 $14,426 $13,743 $15,250
3/31/90 $14,747 $14,050 $15,662
4/30/90 $14,528 $13,840 $15,290
5/31/90 $15,732 $14,988 $16,746
6/30/90 $15,649 $14,908 $16,647
7/31/90 $15,754 $15,008 $16,607
8/31/90 $14,496 $13,811 $15,087
9/30/90 $14,032 $13,368 $14,362
10/31/90 $14,196 $13,524 $14,314
11/30/90 $14,959 $14,251 $15,221
12/31/90 $15,212 $14,492 $15,648
1/31/91 $15,401 $14,672 $16,342
2/28/91 $16,142 $15,378 $17,485
3/31/91 $16,412 $15,636 $17,918
4/30/91 $16,342 $15,569 $17,976
5/31/91 $16,864 $16,066 $18,721
6/30/91 $16,271 $15,501 $17,876
7/31/91 $16,938 $16,136 $18,728
8/31/91 $17,260 $16,444 $19,147
9/30/91 $17,021 $16,216 $18,831
10/31/91 $17,322 $16,502 $19,103
11/30/91 $16,696 $15,906 $18,313
12/31/91 $18,475 $17,601 $20,406
1/31/92 $17,826 $16,982 $20,048
2/28/92 $18,078 $17,222 $20,287
3/31/92 $17,905 $17,058 $19,892
4/30/92 $18,385 $17,515 $20,500
5/31/92 $18,732 $17,846 $20,573
6/30/92 $18,225 $17,363 $20,269
7/31/92 $19,096 $18,192 $21,121
8/31/92 $18,828 $17,937 $20,667
9/30/92 $18,935 $18,039 $20,908
10/31/92 $19,245 $18,335 $21,003
11/30/92 $19,730 $18,797 $21,689
12/31/92 $19,755 $18,820 $21,959
1/31/93 $19,504 $18,581 $22,164
2/28/93 $19,534 $18,610 $22,447
3/31/93 $20,020 $19,073 $22,918
4/30/93 $19,354 $18,438 $22,391
5/31/93 $19,561 $18,635 $22,955
6/30/93 $19,620 $18,692 $23,028
7/31/93 $19,695 $18,763 $22,960
8/31/93 $20,231 $19,273 $23,805
9/30/93 $20,260 $19,302 $23,622
10/31/93 $20,619 $19,643 $24,133
11/30/93 $20,155 $19,202 $23,875
12/31/93 $20,583 $19,609 $24,169
1/31/94 $21,329 $20,320 $25,009
2/28/94 $20,832 $19,847 $24,312
3/31/94 $19,872 $18,932 $23,254
4/30/94 $20,189 $19,234 $23,582
5/31/94 $20,356 $19,393 $23,933
6/30/94 $19,873 $18,933 $23,352
7/31/94 $20,300 $19,339 $24,145
8/31/94 $20,735 $19,754 $25,110
9/30/94 $20,199 $19,244 $24,492
10/31/94 $20,292 $19,332 $25,063
11/30/94 $19,384 $18,467 $24,132
12/31/94 $19,735 $18,801 $24,488
1/31/95 $19,708 $18,776 $25,138
2/28/95 $20,473 $19,504 $26,101
3/31/95 $21,311 $20,303 $26,870
4/30/95 $21,805 $20,774 $27,686
5/31/95 $22,702 $21,628 $28,756
6/30/95 $23,142 $22,047 $29,432
7/31/95 $24,061 $22,923 $30,430
8/31/95 $24,521 $23,361 $30,484
9/30/95 $24,926 $23,746 $31,769
10/31/95 $24,723 $23,553 $31,676
11/30/95 $25,665 $24,451 $33,040
12/31/95 $26,201 $24,961 $33,681
1/31/96 $26,719 $25,455 $34,843
2/28/96 $26,678 $25,416 $35,147
3/31/96 $26,884 $25,612 $35,489
4/30/96 $27,320 $26,028 $36,034
5/31/96 $28,129 $26,798 $36,927
6/30/96 $28,357 $27,015 $37,080
7/31/96 $27,084 $25,802 $35,455
8/31/96 $28,083 $26,754 $36,194
9/30/96 $29,270 $27,885 $38,228
10/31/96 $29,895 $28,480 $39,296
11/30/96 $31,608 $30,112 $42,249
12/31/96 $31,493 $30,003 $41,411
Past performance is not indicative of future results. Investment returns and
principal value 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 chart above 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 Standard & Poor's 500
Index.
TOTAL RETURN FIGURES
The solid red line on the chart represents the Fund's performance at net asset
value. The total return figure reflects Fund expenses and transaction costs. The
dotted red line represents the Fund's performance including the Fund's 4.75%
maximum initial sales charge.
The solid black line represents the performance of the Standard & Poor's 500
Index, a broad-based, widely recognized unmanaged index of 500 large
capitalization common stocks traded in the U.S. 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. It is
not possible to invest directly in the Index.
<PAGE>
-----------------------------------
EV TRADITIONAL STOCK FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investment in Stock Portfolio (Portfolio), at value (Note 1A) $109,491,968
Receivable for Fund shares sold 1,155
------------
Total assets $109,493,123
LIABILITIES:
Dividends payable $2,597,955
Payable for Fund shares redeemed 78,496
Payable for Trustees' fees 835
Accrued expenses 40,594
----------
Total liabilities 2,717,880
------------
NET ASSETS for 7,875,724 shares of beneficial interest outstanding $106,775,243
============
SOURCES OF NET ASSETS:
Paid-in capital $ 79,959,746
Unrealized appreciation of investments 23,543,834
Accumulated net realized gain on investment transactions 3,145,037
Undistributed net investment income 126,626
------------
Total net assets $106,775,243
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($106,775,243 / 7,875,724 shares of beneficial interest outstanding) $13.56
======
COMPUTATION OF OFFERING PRICE:
Offering price per share (100/95.25 of $13.56) $14.24
======
On sales of $100,000 or more, the offering price is reduced.
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of withholding tax of
<S> <C> <C>
$7,612) $ 2,427,528
Interest income allocated from Portfolio 311,975
Expenses allocated from Portfolio (744,221)
-----------
Total investment income $ 1,995,282
Expenses --
Compensation of Trustees not members of the Investment Adviser's
organization (Note 4) $ 2,763
Custodian fee 11,071
Service fee (Note 5) 101,100
Transfer and dividend disbursing agent fees 79,860
Printing and postage 43,097
Legal and accounting services 9,903
Registration fees 18,773
Miscellaneous 5,365
-----------
Total expenses 271,932
-----------
Net investment income $ 1,723,350
REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain (identified cost basis) --
Investment transactions $13,834,662
Written option transactions 109,732
-----------
Net realized gain on investment transactions $13,944,394
Change in unrealized appreciation of investments 3,178,793
-----------
Net realized and unrealized gain on investments 17,123,187
-----------
Net increase in net assets resulting from operations $18,846,537
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,723,350 $ 1,864,291
Net realized gain on investment transactions 13,944,394 10,049,325
Change in unrealized appreciation of investments 3,178,793 14,029,502
------------- ------------
Net increase in net assets resulting from operations $ 18,846,537 $ 25,943,118
Distributions to shareholders --
From net investment income $ (1,656,709) $ (1,811,949)
From net realized gain on investment transactions (10,784,514) (10,044,124)
------------- ------------
Total distributions to shareholders $(12,441,223) $(11,856,073)
------------- ------------
Net increase in net assets from Fund share transactions (Note 2) 995,219 988,920
------------- ------------
Total increase in net assets $ 7,400,533 $ 15,075,965
NET ASSETS:
At beginning of year 99,374,710 84,298,745
------------- ------------
At end of year (including undistributed net investment income of
$126,626 and $73,181, respectively) $106,775,243 $ 99,374,710
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- beginning of year $12.760 $10.900 $12.490 $13.480 $14.030
------- ------- ------- ------- -------
Income from investment operations:
Net investment income $ 0.228 $ 0.250 $ 0.250 $ 0.270+ $ 0.312
Net realized and unrealized gain (loss) on investments 2.272 3.255 (0.765) 0.270+ 0.658
------- ------- ------- ------- -------
Total income (loss) from investment operations $ 2.500 $ 3.505 $(0.515) $ 0.540 $ 0.970
------- ------- ------- ------- -------
Less distributions:
From net investment income $(0.220) $(0.251) $(0.250) $(0.270) $(0.320)
From net realized gain on investments (1.480) (1.394) (0.765) (1.260) (1.200)
In excess of net realized gain on investments -- -- (0.060) -- --
------- ------- ------- ------- -------
Total distributions $(1.700) $(1.645) $(1.075) $(1.530) $(1.520)
------- ------- ------- ------- -------
NET ASSET VALUE -- end of year $13.560 $12.760 $10.900 $12.490 $13.480
======= ======= ======= ======= =======
TOTAL RETURN(3) 20.20% 32.77% (4.12%) 4.19% 6.93%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) $106,775 $99,375 $84,299 $97,513 $91,299
Ratio of expenses to average net assets(1) 1.00% 1.04% 0.98% 0.96% 0.92%
Ratio of net investment income to average net assets 1.70% 2.02% 2.09% 2.01% 2.29%
PORTFOLIO TURNOVER(2) -- -- 66% 105% 59%
+ Computed on an average share basis.
(1) Includes the Fund's share of Stock Portfolio's allocated expenses for the years ended December 31, 1996 and 1995, and for
the period from August 1, 1994 to December 31, 1994.
(2) 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.
(3) 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.
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
-----------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional Stock Fund (the Fund) a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund is a series in the
Eaton Vance Special Investment Trust. On August 1, 1994, the Fund transferred
substantially all of its investable assets to the Stock Portfolio (the
Portfolio). Prior to this date the Fund's name was Eaton Vance Stock 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 (89.1% at December 31, 1996). The performance of
the Fund is directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A. INVESTMENT VALUATIONS -- Valuations of securities by the Portfolio are
discussed in Note 1A 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. EXPENSE REDUCTION -- The Fund has entered into an arrangement with its
custodian whereby interest earned on uninvested cash balances are used to offset
custody fees. All significant reductions are reported as a reduction of expenses
in the Statement of Operations.
D. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments, option and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$9,579,490 as capital gain dividends for its taxable year ended December 31,
1996.
E. OTHER -- Investment transactions are accounted for on a trade date 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. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital, with no impact to the net
asset value of the Fund.
G. USE OF ESTIMATES -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expense during the reporting period. Actual results could differ from
those estimates.
- ------------------------------------------------------------------------------
(2) FUND SHARES
The Fund under its indenture of trust is authorized to issue unlimited shares of
beneficial interest (with no par value). Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sales 153,277 $ 2,060,267 336,944 $ 4,180,153
Issued to shareholders electing to receive
payment of distributions in Fund shares 696,901 9,184,094 713,057 8,917,234
Shares redeemed (764,183) (10,249,142) (991,413) (12,108,467)
------- ------------ ------- ------------
Net increase 85,995 $ 995,219 58,588 $ 988,920
======= ============ ======= ============
</TABLE>
- -------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$2,327,965 and $11,217,697, respectively.
- -------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Eaton Vance serves only as the administrator of the Fund, but receives no
compensation. The Portfolio has engaged Boston Management and Research (BMR), a
subsidiary of Eaton Vance Management (EVM), to render investment advisory
services. See Note 3 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. Except as to Trustees of the Fund and the
Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
investment adviser fee.
Certain of the officers and Trustees of the Fund and Portfolio are officers
and trustees of the above organizations.
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Trustees of the Fund adopted a Service Plan designed to meet 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 December 27, 1990. 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, 1991 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, 1996, the Fund made payments of $101,100
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 STOCK FUND:
We have audited the accompanying statement of assets and liabilities of EV
Traditional Stock Fund, a series of Eaton Vance Special Investment Trust, as of
December 31, 1996, 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 five years 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.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and 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, 1996 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 Stock Fund, a series of Eaton Vance Special Investment Trust, as of
December 31, 1996, 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 five years then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 31, 1997
<PAGE>
-----------------------------------
STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- ----------------------------------------------------------------------------
COMMON STOCKS -- 84.7%
- ----------------------------------------------------------------------------
SHARES SECURITY VALUE
- ----------------------------------------------------------------------------
AEROSPACE - 3.0%
35,000 Boeing Co. $ 3,723,125
------------
BANKS - 5.2%
30,000 Bank of Boston Corp. $ 1,927,500
30,332 Citicorp 3,124,196
26,766 Fleet Financial Group, Inc. 1,334,954
------------
$ 6,386,650
------------
BASIC MATERIALS - 0.8%
80,000 J & L Specialty Steel, Inc. $ 910,000
------------
BROADCASTING - 0.4%
25,000 Comcast Corp., Class A $ 445,313
------------
BUSINESS PRODUCTS & SERVICES - 9.2%
65,000 Automatic Data Procesing, Inc. $ 2,786,875
40,000 Corning, Inc. 1,850,000
60,000 Crown Cork & Seal, Inc. 3,262,500
20,000 Electronic Data Systems Corp. 865,000
30,000 Potash Corp. 2,550,000
------------
$ 11,314,375
------------
COMPUTER & BUSINESS EQUIPMENT - 2.1%
50,000 Xerox Corp. $ 2,631,250
------------
CONSUMER NON-DURABLES - 12.0%
76,063 Conagra, Inc. $ 3,784,134
35,000 Duracell International, Inc. 2,445,625
65,000 Eastman Kodak Co. 5,216,250
70,000 Pepsico, Inc. 2,047,500
12,100 Procter & Gamble Co. 1,300,750
------------
$ 14,794,259
------------
ENERGY - 4.3%
10,000 Exxon Corp. $ 980,000
40,000 Occidental Petroleum Corp. 935,000
70,000 Triton Energy Ltd.* 3,395,000
------------
$ 5,310,000
------------
FINANCE & INSURANCE - 12.5%
60,540 Allstate Corp. $ 3,503,753
25,000 American International Group 2,706,250
75,000 Federal National Mortgage Association 2,793,750
20,000 Marsh & McLennan Cos., Inc. 2,080,000
30,000 MGIC Investment Corp. 2,280,000
30,000 Progressive Corp. 2,021,250
------------
$ 15,385,003
------------
HEALTHCARE - 10.4%
25,000 Astra AB, A Shares, ADR $ 1,225,000
30,000 Astra AB, B Shares, ADR 1,445,511
55,000 Baxter International, Inc. 2,255,000
30,000 Johnson & Johnson Co. 1,492,500
20,000 Lilly (Eli) & Co. 1,460,000
10,000 Pfizer, Inc. 828,750
30,000 Pharmacia & Upjohn, Inc. 1,188,750
90,000 Vencor, Inc.* 2,846,250
------------
$ 12,741,761
------------
HOUSING - 1.5%
60,000 Newell Co. $ 1,890,000
------------
LODGING & GAMING - 1.7%
70,000 Promus Hotel Corp.* $ 2,073,750
------------
PAPER & FOREST PRODUCTS - 1.6%
50,000 Rayonier, Inc. $ 1,918,750
------------
PUBLISHING - 2.3%
60,000 McGraw-Hill, Inc. $ 2,767,500
------------
REITS - 6.8%
30,000 Beacon Properties Corp. $ 1,098,750
11,000 Cali Realty Corp. 339,625
20,000 Equity Residential Properties Trust 825,000
25,000 Highwood Properties, Inc. 843,750
40,000 Nationwide Health Properties, Inc. 970,000
20,000 Post Properties, Inc. 805,000
18,000 Redwood Trust, Inc. 670,500
25,000 ROC Communities, Inc. 693,750
20,000 Storage USA, Inc. 752,500
25,000 Sun Communities, Inc. 862,500
14,200 Trinet Corporate Realty Trust, Inc. 504,100
------------
$ 8,365,475
------------
RETAIL - 4.6%
65,000 CVS Corp. $ 2,689,375
60,000 The Home Depot, Inc. 3,007,500
------------
$ 5,696,875
------------
SEMICONDUCTORS - 3.7%
35,000 Intel Corp. $ 4,582,812
------------
TELECOMMUNICATIONS EQUIPMENT - 2.6%
55,000 Nokia Corp., ADR $ 3,169,375
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $79,726,807) $104,106,273
------------
- ----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 5.6%
- ----------------------------------------------------------------------------
140,000 Freeport McMoRan Copper & Gold, 5s $ 3,885,000
15,000 Frontier Financing Trust, 6.25s* 768,750
10,000 Tejas Gas Corp., 5.25s 597,500
10,000 Valero Energy Corp., 6.25s 577,500
25,000 Sun America, Inc., 3.188s 1,056,250
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST, $5,716,186) $ 6,885,000
------------
- ----------------------------------------------------------------------------
CONVERTIBLE BONDS - 3.5%
- ----------------------------------------------------------------------------
FACE AMOUNT
(000'S OMITTED)
- ----------------------------------------------------------------------------
$2,920 INCO Ltd., 5.75s, 7/1/04 $ 3,533,200
840 Scandinavian Broadcasting System,
7.25s, 8/1/05 789,600
------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST, $4,055,000) $ 4,322,800
------------
- ----------------------------------------------------------------------------
CORPORATE BOND - 0.0%
- ----------------------------------------------------------------------------
$ 50 H. P. Hood & Son, 7.50s, 2/1/01 $ 39,400
------------
TOTAL CORPORATE BOND
(IDENTIFIED COST, $50,000) $ 39,400
------------
- ----------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 5.7%
- ----------------------------------------------------------------------------
FACE AMOUNT
(000'S OMITTED) SECURITY VALUE
- ----------------------------------------------------------------------------
$3,951 Associates Corp. of North America,
6.5s, 1/2/97 $ 3,950,287
3,023 General Electric Capital Co., 6s, 1/2/97 3,022,496
------------
TOTAL SHORT TERM INVESTMENTS
AT AMORTIZED COST $ 6,972,783
------------
TOTAL INVESTMENTS - 99.5%
(IDENTIFIED COST, $96,520,776) $122,326,256
OTHER ASSETS, LESS LIABILITIES - 0.5% 636,892
------------
NET ASSETS - 100% $122,963,148
============
*Non-income producing security.
REIT -- Real Estate Investment Trust
ADR -- American Depository Receipt
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------
STOCK PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------
December 31, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost, $96,520,776) $122,326,256
Cash 1,519
Receivable for investments sold 641,278
Interest receivable 110,888
Dividends receivable 231,896
Deferred organization expenses (Note 1D) 8,461
Tax reclaim receivable 21,656
------------
Total assets $123,341,954
LIABILITIES:
Payable for investments purchased $120,500
Written options, at value (premium received $61,335) 243,125
Payable to affiliate --
Trustees fees 2,065
Accrued expenses 13,116
--------
Total liabilities 378,806
------------
NET ASSETS applicable to investors' interest in Portfolio $122,963,148
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $ 97,339,457
Unrealized appreciation of investments and written options
(computed on the basis of identified cost) 25,623,691
------------
Total net assets $122,963,148
============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------
For the Year Ended December 31, 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 346,215
Dividends (net of withholding tax of $8,319) 2,692,262
-----------
Total income 3,038,477
Expenses --
Investment adviser fee (Note 3) $ 706,803
Compensation of Trustees, not members of the Investment Adviser's
organization (Note 3) 9,090
Custodian fee 79,008
Legal and accounting services 28,096
Amortization of organizational expenses (Note 1D) 3,258
-----------
Total expenses $ 826,255
-----------
Net investment income 2,212,222
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain (identified cost basis) --
Investment transactions $14,593,864
Written option transactions 122,298
-----------
Net realized gain on investment transactions $14,716,162
Change in unrealized appreciation of investments and written options 4,346,638
-----------
Net realized and unrealized gain on investments $19,062,800
-----------
Net increase in net assets resulting from operations $21,275,022
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 2,212,222 $ 2,228,398
Net realized gain on investment transactions 14,716,162 10,222,803
Change in unrealized appreciation of investments 4,346,638 14,953,494
------------ ------------
Net increase in net assets resulting from operations $ 21,275,022 $ 27,404,695
------------ ------------
Capital transactions --
Contributions $ 9,663,514 $ 13,753,042
Withdrawals (15,692,663) (18,959,497)
------------ ------------
Net decrease in net assets resulting from capital transactions $ (6,029,149) $ (5,206,455)
------------ ------------
Net increase in net assets $ 15,245,873 $ 22,198,240
NET ASSETS:
At beginning of year 107,717,275 85,519,035
------------ ------------
At end of year $122,963,148 $107,717,275
============ ============
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
RATIOS (to average daily net assets):
Expenses 0.73% 0.75% 0.73%+
Net investment income 1.96% 2.30% 2.45%+
PORTFOLIO TURNOVER 114% 108% 28%
AVERAGE COMMISSION RATE PAID(1) $0.0579 -- --
+Computed on an annualized basis.
*For the period from the start of business, August 1, 1994, to December 31, 1994.
(1)For fiscal year beginning on or after September 1, 1995, a fund is required to disclose its average commission
rate per share for security trades on which commissions are charged. Average commissions rate paid is computed
by dividing the total dollar amount of commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
-----------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Stock Portfolio (the Portfolio) is registered under the Investment Company Act
of 1940 as a diversified open-end investment company which was organized as a
trust under the laws of the State of New York on May 1, 1992. The Declaration of
Trust permits the Trustees to issue beneficial interests in the Portfolio. The
following is a summary of significant accounting policies of the Portfolio. The
policies are in conformity with generally accepted accounting principles.
A. SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or in the NASDAQ National Market are valued on the basis of
the last reported sales prices on the last business day of the period. If no
sale is reported on that date, a security is valued, if quoted on such a day, at
not lower than the old bid price nor higher than the asked prices. Prices on
such exchanges will not be used for valuing debt securities if in the Trustees
judgment, some other valuation method more accurately reflects the fair market
value of such a security. Securities for which over-the-counter market
quotations are readily available are valued on the basis of the mean between the
last bid and asked prices. Short-term securities are valued at amortized 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 Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio will allocate at least annually among its investors each investors'
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
C. EXPENSE REDUCTION -- The Portfolio has entered into an arrangement with its
custodian agent whereby interest earned on uninvested cash balances are used to
offset custody fees. All significant reductions are reported as a reduction of
expenses in the Statement of Operations.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
E. OTHER -- Investment transactions are accounted for on a trade date basis.
F. WRITTEN OPTIONS -- The Portfolio may write call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Portfolio. The Portfolio as a writer of an option
may have no control over whether the underlying securities may be sold (call) or
purchased (put) and as a result bears the market risk of an unfavorable change
in the price of the securities underlying the written option.
G. USE OF ESTIMATES -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
- --------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $124,512,639 and $131,656,035, 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, 1996, the fee amounted to $706,803. Except as to Trustees of
the Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Portfolio out of such
investment adviser fee. Certain of the officers and Trustees of the Portfolio
are officers and 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, 1996, no
significant amounts have been deferred.
- --------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a committed $120 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from the
line of credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at an
amount above the banks, adjusted certificate of deposit rate, eurodollar rate or
federal funds rate. In addition, a fee computed at an annual rate of 0.15% on
the daily unused portion of the line of credit is allocated among the
participating portfolios and funds at the end of each quarter. The Portfolio did
not have any significant borrowings or allocated fees during the year ended
December 31, 1996.
- --------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1996, as computed on a federal income tax basis, were as
follows:
Aggregate cost $96,450,080
===========
Gross unrealized appreciation $26,380,933
Gross unrealized depreciation 504,757
-----------
Net unrealized appreciation $25,876,176
===========
- --------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Portfolio regularly trades in financial instruments with off-balance-sheet
risk in the normal course of its investing activities and to assist in managing
exposure to market risks such as interest rates and foreign currency exchange
rates. These financial instruments include written options. The notional or
contractual amounts of these instruments represent the investment the Portfolio
has in particular classes of financial instruments and do not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. A summary of obligations under these
financial instruments at December 31, 1996 is as follows:
Written Option Transactions
Transactions in written options for the year ended December 31, 1996 were as
follows:
NUMBER
OF CONTRACTS
(000'S OMITTED) PREMIUMS
--------------- --------
Outstanding, beginning of year -- --
Options written 500 $184,960
Options exercised (300) (32,750)
Options expired (100) (90,875)
--- --------
Outstanding, end of year 100 $ 61,335
=== ========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND INVESTORS OF
STOCK PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of Stock
Portfolio, including the portfolio of investments, as of December 31, 1996, 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 supplementary
data for each of the two years 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 audits to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of Stock
Portfolio, as of December 31, 1996, 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 supplementary data for each of the two years 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
JANUARY 31, 1997
<PAGE>
-----------------------------------
INVESTMENT MANAGEMENT
EV TRADITIONAL OFFICERS TRUSTEES
STOCK FUND
24 Federal Street JAMES B. HAWKES M. DOZIER GARDNER
Boston, MA 02110 President, Trustee Vice Chairman, Eaton Vance
Management
CLIFFORD H. KRAUSS
Vice President DONALD R. DWIGHT
President, Dwight Partners, Inc.
EDWARD E. SMILEY, JR. Chairman, Newspapers of
Vice President New England, Inc.
JAMES L. O'CONNOR SAMUEL L. HAYES, III
Treasurer Jacob H. Schiff Professor of
Investment Banking, Harvard
THOMAS OTIS University Graduate School of
Secretary Business Administration
NORTON H. REAMER
President, United Asset
Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
------------------------------------------------------
STOCK PORTFOLIO OFFICERS TRUSTEES
24 Federal Street
Boston, MA 02110 JAMES B. HAWKES DONALD R. DWIGHT
President, Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of
DUNCAN W. RICHARDSON New England, Inc.
Vice President and
Portfolio Manager SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
JAMES L. O'CONNOR Investment Banking, Harvard
Treasurer University Graduate School of
Business Administration
THOMAS OTIS
Secretary NORTON H. REAMER
President, United Asset
Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
