<PAGE>
INVESTMENT ADVISER OF
SPECIAL INVESTMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV CLASSIC
SPECIAL EQUITIES FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AND DIVIDEND
DISBURSING AGENT
First Data Investor Services Group, Inc.
P.O. Box 5123
Westborough, MA 01581-5123
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV CLASSIC SPECIAL EQUITIES FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-SESRC-2/97
EV Classic
Special Equities
Fund
Annual
Shareholder Report
December 31, 1996
-----
-----
<PAGE>
To Shareholders
During the year ended December 31, 1996, EV Classic Special Equities Fund had a
total return of 19.9%. That return, which did not include the 1% maximum
contingent deferred sales charge, resulted from an increase in net asset value
to $13.35 per share from $11.63 per share and the reinvestment of $0.575 in
capital gain distributions. The Fund's return compared favorably to the S&P
500,* an unmanaged index of common stocks, which had a total return of 22.9%
during the year. The average total return for mutual funds in the Lipper Growth
Funds Category,* which consists of 672 mutual funds investing in growth stocks,
was 19.2% during the year.
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. 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.
The stock market continued into June, 1996 the bullish advance it began in 1995,
but then corrected sharply in July. Technology stocks were hit particularly
hard. The market recovered in August, but advanced on a more selective basis
through the remainder of the year. With the market reaching record highs,
investors sought comfort in high-quality, blue chip stocks. 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.
While past trends cannot guarantee future performance, we believe that an
investment in growth stocks will continue to produce solid returns.
- -------------------------- Sincerely,
/s/ James B. Hawkes
[Photo of James B. Hawkes] James B. Hawkes
President
February 7, 1997
- --------------------------
- --------------------------------------------------------------------------------
EV CLASSIC SPECIAL EQUITIES FUND
10 LARGEST COMMON STOCK HOLDINGS*
FIserv, Inc. ........................................ Data processing services
Providence Journal Co. ............................................ Publishing
T. Rowe Price Assoc., Inc. .......................................... Financial
Boston Scientific Corp. ...................................... Medical devices
Mutual Risk Management Ltd. ........................................ Insurance
Anadarko Petroleum Corp. ................................. Oil/gas exploration
USA Waste Svcs., Inc. ................................. Environmental services
Sofamor/Danek Group, Inc. ........................................ Health care
Elan Corp. PLC ................................................... Health care
Ceridian Corp. ............................................. Computer services
*By market value as of 12/31/96. Holdings may change *due to active management.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
*It is not possible to invest directly in an index or a *Lipper Category.
<PAGE>
-----
-----
Management Report
An interview with Jack Smiley, Vice President and Manager of Special Investment
Portfolio.
Q. JACK, BECAUSE YOU ARE NEW TO EATON VANCE, COULD YOU DESCRIBE YOUR STYLE OF
EQUITY MANAGEMENT FOR SHAREHOLDERS?
A. I would be happy to. A company that I select should meet several criteria: it
should be reasonably valued, with annual revenues under $1.5 billion; it
should be a leader in its industry; and, finally, it should have the
potential to grow earnings at a rate of 15% over a three- to five-year
period. Our goal is to keep companies in the Portfolio for this three- to
five-year time frame to capitalize on their growth. My selling discipline
dictates that if a company's fundamentals change or its value declines by a
certain percentage, I will eliminate it. This combination of good earnings
growth with reasonable valuation has been my style of management since 1983,
and has worked very well for me. Fortunately, it is very similar to Eaton
Vances investment philosophy, and this helped to make my joining the company
a natural fit.
Q. WHAT CHARACTERISTICS DO YOU LOOK FOR IN A COMPANY OR STOCK?
A. I look at companies that have conservative balance sheets and are growing
internally, rather than by using leverage. Such companies typically have a
unique product or service with strong pricing power, which translates to
above-average operating margins and return on equity. An example would be a
specialty chemical company that sells value-added products at premium prices
and has premium margins with fast unit growth, versus a bulk chemical company
that sells a mundane commodity product.
- ----------------------
[Photo of Jack Smiley]
- ----------------------
Q. HAVE YOU MADE ANY CHANGES TO THE PORTFOLIO SINCE YOU TOOK OVER IN NOVEMBER?
A. Yes. There were several stocks in the portfolio with annual sales that
exceeded my target revenue base. I have sold positions in Fannie Mae and
American International Group, for example. Due to the markets current high
level of valuation, I believe in having a diversified portfolio with 60 to 80
names; if it were not so highly valued, I might have fewer names in the
portfolio.
Q. HOW WILL THIS PORTFOLIO DIFFER FROM EATON VANCE'S OTHER EQUITY PORTFOLIOS
STOCK AND GROWTH - UNDER YOUR MANAGEMENT?
A. The growth rates of companies that I choose should be higher than those in
the Stock or Growth Portfolios, and their revenues will be smaller. The Stock
and Growth Portfolios invest primarily in larger companies which typically
have somewhat lower rates of growth.
Q. AFTER SEVERAL YEARS OF UNDERPERFORMING, THIS PORTFOLIO HAS HAD A RESPECTABLE
YEAR. TO WHAT DO YOU ATTRIBUTE THIS TURNAROUND?
A. I have to give Clifford Krauss, my predecessor, credit for all of 1996's
performance. Many of his large holdings did very well. Providence Journal,
Inc., for example, was acquired at a cost of around $15 per share at the
beginning of the year and doubled by year-end. Mutual Risk Management,
MiniMed, and several energy companies, which Mr. Krauss had chosen, also
performed well.
- --------------------------------------------------------------------------------
A DIVERSIFIED PORTFOLIO, POSITIONED TO TAKE ADVANTAGE OF 1997'S OPPORTUNITIES
SECTOR BREAKDOWN AS OF 12/31/96*
DRUGS & HEALTH CARE .......... 20.9%
BUSINESS PRODUCTS AND SERVICES 18.9%
CASH/COMMERCIAL PAPER ........ 17.4%
CONSUMER SERVICES ............ 15.8%
FINANCIAL .................... 13.4%
ENERGY ....................... 7.9%
TELECOMMUNICATIONS ........... 3.0%
SEMICONDUCTORS ............... 1.5%
AIRLINES ..................... 1.2%
*By market value. Sectors subject to change due to active management.
- --------------------------------------------------------------------------------
Q. WHAT EXPERIENCE OR SKILLS DO YOU BRING TO HELP THIS PORTFOLIO'S LONG-TERM
PERFORMANCE?
A. First, I am a very disciplined investor, and I believe in getting to know the
managements of companies as well as possible through extensive company
visits. That includes both current holdings as well as prospective ones.
Second, I use a proprietary valuation model that measures price/earnings
growth to company growth, which I find very helpful. Finally, the previous
fund that I managed outperformed most emerging growth funds on a one- and
three-year basis, so my methods have worked, and I plan to employ the same
style here. Of course, past performance is no guarantee of future results.
Q. CAN YOU GIVE SOME EXAMPLES OF COMPANIES THAT YOU THINK HAVE POTENTIAL TO
PERFORM WELL OVER THE NEXT FEW YEARS?
A. Absolutely. Health Management Associates is an excellent manager of hospitals
located in the smaller population centers of the country. This company - the
only hospital chain currently in the Portfolio - has above-average profit
margins and is doing very well in a difficult industry. The Portfolio has
several investments in companies that provide medical information systems,
which expedite patient and billing information. These stocks include Medic
Computer, HBO, and IDX Systems, and they should benefit from any growth in
the health care technology sector. Other health care companies include
Pediatrix and PhyCorp, which manage physician practices and help doctors to
focus on their specialties without being diverted by office administration.
In return, for a share of the profits, these companies improve accounts
receivable, office operations, and especially billing and patient information
records. In the energy sector, the Portfolio owns BJ Services, Anadarko
Petroleum, and Triton Oil & Gas all - of which we think have excellent growth
prospects. In telecommunications, several stocks stand out, including Ascend
Communications, Cascade Communications, and Aspect Telecommunications. These
represent three of the best growth companies in the corporate voice and data
networking business. Networking is growing very rapidly because it allows a
company to increase its productivity to the extent that a system will pay for
itself within one to two years.
Q. WHICH ECONOMIC SECTORS DO YOU THINK WILL BE FAVORED IN THE NEXT FEW YEARS?
A. Some media, cellular, and personal communications systems (PCS) stocks look
interesting, but we are holding off on buying them because some have become
overvalued and the industries are in a state of transition. We will continue
to monitor the companies that look attractive and invest if and when we feel
it makes sense. Software will continue to be a favorable area. We have
several software stocks in the portfolio, including Veritas Software and
Parametric Technologies. In addition, some of the health care companies have
proprietary software. We are certainly looking to increase holdings in this
sector.
Q. ONE READS A GREAT DEAL ABOUT "SMALL CAP" AND "LARGE CAP" FUNDS. WHAT
ADVANTAGES ARE THERE IN A "MID-CAP" FUND LIKE THIS ONE?
A. There are several. Some of the best growth companies in the U.S. are in the
mid-cap area. Small cap companies are no longer as exciting as they once were
because valuations in the stock market are at such high levels. There are
many companies with revenues of $100 million that have market capitalizations
of $1 billion. It used to be that "small cap" companies would consist of
capitalizations of less than $500 million, but many such companies today are
not considered true growth stocks because the market is valuing smaller
revenue companies at a higher level. As a result, many companies with market
capitalizations of $1, $2 and $3 billion - like those in which this Portfolio
invests still have a great deal of room for growth. Put another way, many of
today's mid-cap companies are yesterday's small-cap companies, and, while
there are no guarantees in this business, these stocks have excellent
long-term growth potential.
<PAGE>
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EV CLASSIC SPECIAL EQUITIES FUND AND THE STANDARD & POOR'S 500
From November 30, 1994, through December 31, 1996
- ----------------------------------------------------
AVERAGE ANNUAL 1 Life Value
RETURNS Year of Fund* 12/31/96
- ----------------------------------------------------
With CDSC 18.9% 17.4% $14,489
- ----------------------------------------------------
Without CDSC 19.9% 17.4% $14,489
- ----------------------------------------------------
- --------------------------------------------------------------------------------
EV CLASSIC
SPECIAL EQUITIES
DATE FUND S&P 500
- --------------------------------------------------------------------------------
11/30/94+ $10,000 $10,000
12/31/94 $10,186 $10,148
1/31/95 $10,082 $10,417
2/28/95 $10,402 $10,816
3/31/95 $10,629 $11,135
4/30/95 $10,619 $11,473
5/31/95 $10,691 $11,916
6/30/95 $10,918 $12,197
7/31/95 $11,485 $12,610
8/31/95 $11,773 $12,632
9/30/95 $11,732 $13,165
10/31/95 $11,278 $13,126
11/30/95 $11,711 $13,692
12/31/95 $12,085 $13,957
1/31/96 $12,023 $14,439
2/28/96 $12,449 $14,565
3/31/96 $12,459 $14,706
4/30/96 $12,979 $14,933
5/31/96 $13,498 $15,302
6/30/96 $13,342 $15,366
7/31/96 $12,314 $14,692
8/31/96 $12,875 $14,999
9/30/96 $13,820 $15,841
10/31/96 $13,997 $16,284
11/30/96 $14,569 $17,508
12/31/96 $14,489 $17,161
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. *Investment operations commenced on 11/17/94. +Index information
is available only at month-end; therefore, the line comparison begins at the
next month-end following the commencement of the Fund's investment operations.
- --------------------------------------------------------------------------------
THE FUND'S PERFORMANCE
In accordance with guidelines issued by the Securities and Exchange Commission,
the above chart compares the Fund's total return with that of a broad-based
securities market index. The lines on the chart represent the total returns of
$10,000 hypothetical investments in the Fund and the S&P 500 Stock Index.
THE TOTAL RETURN FIGURES
The solid line on the chart represents the Fund's performance. The Fund's total
return figure reflects Fund expenses, fees and Portfolio transaction costs, and
assumes the reinvestment of income dividends and capital gain distributions. The
Fund also has a 1% contingent deferred sales charge (CDSC) that is deducted for
redemptions made within the first 12 months of purchase.
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. It is not possible to invest directly in an index.
<PAGE>
EV CLASSIC SPECIAL EQUITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investment in Special Investment Portfolio (Portfolio),
at value (Note 1A) $2,069,798
Receivable for Fund shares sold 168
Receivable from Administrator (Note 6) 20,276
Deferred organization expenses (Note 1E) 25,184
----------
Total assets $2,115,426
LIABILITIES:
Dividends payable $8,831
Payable to affiliate --
Trustees' fees 23
Accrued expenses 3,835
------
Total liabilities 12,689
----------
NET ASSETS for 157,510 shares of beneficial interest outstanding $2,102,737
==========
SOURCES OF NET ASSETS:
Paid-in capital $1,430,221
Unrealized appreciation of investments from Portfolio 420,019
Undistributed net realized gain on investment
transactions 252,497
----------
Total net assets $2,102,737
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($2,102,737 / 157,510 shares of beneficial interest
outstanding) $13.35
======
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended December 31, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of
foreign taxes, $7) $ 8,703
Interest income allocated from Portfolio 12,309
Expenses allocated from Portfolio (16,930)
--------
Total investment income $ 4,082
Expenses --
Custodian fees $ 2,998
Distribution fees (Note 4) 22,877
Transfer and dividend disbursing agent fees 2,229
Printing and postage 14,105
Legal and accounting services 11,178
Registration fees 21,350
Amortization of organization expenses (Note 1E) 8,517
Miscellaneous 37
-------
Total expenses $ 83,291
Deduct --
Allocation of expenses by the Administrator (Note 6) 20,276
--------
Net expenses 63,015
--------
Net investment loss $(58,933)
REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain on investments (identified cost
basis) $388,691
Change in unrealized appreciation of investments 117,756
--------
Net realized and unrealized gain on investments 506,447
--------
Net increase in net assets resulting from operations $447,514
========
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (58,933) $ (33,422)
Net investment gain (loss) on 388,691 (13,011)
investments
Change in unrealized appreciation of 117,756 295,342
investments
-------------- --------------
Net increase in net assets
resulting from operations $ 447,514 248,909
-------------- --------------
Distributions to shareholders --
From net realized gain on
investments $ (86,680) $ --
In excess of realized loss on
investments -- $ (16,544)
-------------- --------------
Total distributions to
shareholders $ (86,680) $ (16,544)
-------------- --------------
Net increase (decrease) in net assets (396,597) 1,784,199
from Fund share transactions (Note 2) -------------- --------------
Net increase (decrease) in net
assets $ (35,763) $2,016,564
NET ASSETS:
At beginning of year 2,138,500 121,936
-------------- --------------
At end of year $ 2,102,737 $ 2,138,500
============== ==============
*For the period from the start of business, November 17, 1994 to December 31,
1994.
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994*
---- ---- -----
<S> <C> <C> <C>
NET ASSET VALUE -- Beginning of year $11.630 $ 9.880 $10.000
------- ------- -------
INCOME FROM OPERATIONS:
Net investment loss $(0.374) $(0.182) $(0.003)
Net realized and unrealized gain (loss) on investments 2.669 2.022 (0.117)
------- ------- -------
Total income (loss) from investment operations $ 2.295 $ 1.840 $(0.120)
------- ------- -------
LESS DISTRIBUTIONS:
From net realized gain on investment transactions $(0.575) $ -- $ --
In excess of net realized loss on investment transactions -- $(0.090) $ --
------- ------- -------
Total distributions $(0.575) $(0.090) $ --
------- ------- -------
NET ASSET VALUE -- End of year $13.350 $11.630 $ 9.880
======= ======= =======
TOTAL RETURN(2) 19.90% 18.65% (1.20)%(3)
RATIOS/SUPPLEMENTAL DATA: (to average daily net assets)**
Expenses(1) 3.50% 3.44% 1.60%+
Net investment loss (2.58)% (2.54)% 0.59%+
NET ASSETS AT END OF YEAR (000'S OMITTED) $ 2,103 $ 2,139 $ 122
**The expenses related to the operation of the Fund reflect an assumption of
expenses by the administrator. Had such action not been taken, net investment
loss per share and the ratios would have been as follows:
Net investment loss per share $(0.503) $(0.453) $(0.236)
Ratios (to average daily net assets)
Expenses(1) 4.38% 7.23% 45.05%+
Net investment (loss) (1.70)% (6.34)% (44.04)%
</TABLE>
*For the period from the start of business, November 17, 1994 to December 31,
1994.
+Computed on an annualized basis.
(1)Includes the Fund's share of Special Investment Portfolio's allocated
expenses.
(2)Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each year reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date.
(3)Total return is not computed on an annualized basis.
The accompanying notes are an integral part of the financial statements
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Classic Special Equities Fund (the Fund) a Massachusetts business trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company. The Fund is a series in the
Eaton Vance Special Investment Trust. The Fund invests all of its investable
assets in interests in the Special Investment Portfolio (the Portfolio), a New
York Trust, having the same investment objective as the Fund. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio (2.5% 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 is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund.
C. EXPENSE REDUCTION -- The Fund has entered into an arrangement with its
custodian agent whereby interest earned on uninvested cash balances are used to
offset custody fees. All significant reductions are reported as a reduction of
expenses in the Statement of Operations.
D. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments, option and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$86,680 as capital gain dividends for its taxable year ended December 31, 1996.
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
F. OTHER -- Investment transactions are accounted for on a trade date basis.
G. DISTRIBUTIONS -- Generally accepted accounting principals 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.
H. USE OF ESTIMATES. -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
- ------------------------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Sales 86,531 $ 1,066,218 198,284 $2,076,166
Issued to shareholders
electing to receive
payment of distribution
in Fund shares 6,021 77,849 1,363 15,433
Redemptions (118,969) (1,540,664) (28,060) (307,400)
-------- ----------- -------- -----------
Net increase (decrease) (26,417) $ (396,597) 171,587 $1,784,199
======= =========== ======= ==========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$1,116,023 and $1,671,800, respectively.
- ------------------------------------------------------------------------------
(4) DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay the
principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to
1/365th of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no outstanding
Uncovered Distribution Charges, which are equivalent to the sum of (i) 6.25% of
the aggregate amount received by the Fund for shares sold plus, (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD,
reduced by amounts theretofore paid to EVD.
The amount payable to EVD with respect to each day is accrued on such day as a
liability of the Fund and, accordingly, reduces the Fund's net assets. Such
payments would cease upon termination of the distribution agreement (unless made
in accordance with another distribution agreement). As a result, the Fund does
not accrue amounts which may become payable to EVD in the future because the
conditions for recording any contingent liability under generally accepted
accounting principles have not been satisfied. EVD earned $17,158 for the year
ended December 31, 1996 representing 0.75% (annualized) of average daily net
assets. At December 31, 1996, the amount of Uncovered Distribution Charges of
EVD calculated under the Plan was approximately $186,094.
In addition, the Plan provides that the Fund may make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for each fiscal year. The
Trustees of the Fund have initially implemented this provision of the Plan by
authorizing the Fund to make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons in each fiscal year of the Fund
in amounts not exceeding 0.25% (per annum) of the Fund's average daily net
assets. Provision for service fee payments for the year ended December 31, 1996
amounted to $5,719.
Certain of the officers and Trustees of the Fund are officers or directors of
EVD.
- ------------------------------------------------------------------------------
(5) CONTINGENT DEFERRED SALES CHARGE (CDSC)
Shares purchased on or after January 30, 1995 and redeemed during the first
year after purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
at a rate of one percent of redemption proceeds, exclusive of
all reinvestments and capital appreciation in the account. No contingent
deferred sales charge is imposed on exchanges for shares of other funds in the
Eaton Vance Classic Group of Funds or Eaton Vance Money Market which are
distributed with a contingent deferred sales charge. EVD received
approximately $97 of CDSC paid by shareholders for the year ended December 31,
1996.
- ------------------------------------------------------------------------------
(6) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 3 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. To enhance the net income of the Fund, the
administrator was allocated $20,276 of the Fund's expenses, on a preliminary
basis for the year ended December 31, 1996. Investment Adviser fee and other
transactions with affiliates is discussed in Note 3 of the Portfolio's Notes to
Financial Statements which are included in this report. Except as to Trustees of
the Fund and the 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 directors/trustees of the above organization.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND TRUSTEES OF
EV CLASSIC SPECIAL EQUITIES FUND:
We have audited the accompanying statement of assets and liabilities of EV
Classic Special Equities Fund, a series of Eaton Vance Special Investment Trust,
as of December 31, 1996, the related statement of operations for the year then
ended, changes in net assets for each of the two years then ended and financial
highlights for each of the two years then ended and for the period from November
17, 1994 (start of business) to December 31, 1994. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 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
Classic Special Equities Fund, a series of Eaton Vance Special Investment Trust,
as of December 31, 1996, the results of its operations for the year then ended,
changes in its net assets for each of the two years then ended and financial
highlights for each of the two years then ended and for the period from November
17, 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>
-----------------------------------
SPECIAL INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
COMMON STOCKS - 82.6%
- ------------------------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
AIRLINES - 1.2%
Comair Holdings, Inc. 40,000 $ 960,000
Regional airline holding company. -----------
BROADCASTING & CABLE - 1.9%
Lin Television Corp. 25,000 $ 1,056,250
Commercial television broadcast company.
Young Broadcasting, Inc. Class A* 17,500 511,875
Owns and operates network affiliated TV stations.
-----------
$ 1,568,125
-----------
BUSINESS PRODUCTS & SERVICES - 9.5%
BISYS Group, Inc.* 22,000 $ 815,375
Services financial institutions with computer, administrative and
marketing support data processing services.
Ceridian Corp.* 40,000 1,620,000
Provides payroll processing and other employer services, media and
market research.
FIserv Incorporated* 75,000 2,756,250
Provider of data processing services to banks and savings
institutions, benefiting from outsourcing trend.
G&K Services, Inc. 40,000 1,510,000
Rents and launders uniforms and other textile products.
Personnel Group America, Inc.* 50,000 1,206,250
Temporary employment company.
-----------
$ 7,907,875
-----------
COMPUTER SERVICES - 4.2%
Affiliated Computer Services, Inc. Class A* 15,000 $ 446,250
Nationwide provider of information processing services.
Cambridge Technology Partners, Inc.* 31,000 1,040,437
Software consulting company.
Cognos Inc.* 20,000 562,500
Computer tool developer and supporter.
SunGard Data Systems, Inc.* 30,000 1,185,000
Computer services company.
Veritas Software Co.* 5,000 248,750
Develops, markets and supports storage management products and
software systems.
-----------
$ 3,482,937
-----------
COMPUTER SOFTWARE - 0.7%
3Com Corp.* 8,000 $ 587,000
Designs, manufactures and distributes intelligent hubs and other -----------
computer networking products.
ELECTRONICS & INSTRUMENTATION - 2.9%
Cisco Systems, Inc.* 20,000 $ 1,272,500
Manufacturer of routers that connect computer networks.
Linear Technology Corp. 20,000 877,500
Manufacturer of high performance linear integrated circuits.
MEMC Electronic Materials, Inc.* 12,000 270,000
Leading producer of silicon wafers used to create integrated
circuits.
-----------
$ 2,420,000
-----------
ENERGY - 7.9%
Anadarko Petroleum Corp. 30,000 $ 1,942,500
A leading independent company in oil and gas exploration,
development and production.
BJ Services Co.* 23,000 1,173,000
Provides oilfield services for the petroleum industry.
Enron Oil & Gas Co. 30,000 757,500
Independent oil & gas company.
Noble Drilling Corp.* 48,000 954,000
Oil and gas well drilling.
Triton Energy Ltd.* 30,000 1,455,000
International oil and gas exploration and development.
USX Delhi Group 14,300 227,013
Purchases, gather, processes, transports and markets
natural gas.
-----------
$ 6,509,013
-----------
ENTERTAINMENT & LEISURE - 3.6%
Gaylord Entertainment 46,000 $ 1,052,250
Producer of The Nashville Network and Country Music Television
Network and operator of the Opryland amusement park.
MGM Grand, Inc.* 25,000 871,875
Operator of MGM Grand Hotel in Las Vegas.
Mirage Resorts, Inc.* 50,000 1,081,250
Nevada based gaming resort operator.
-----------
$ 3,005,375
-----------
ENVIRONMENTAL SERVICES - 2.3%
USA Waste Services, Inc.* 59,200 $ 1,887,000
Operator of solid-waste land fills and collection services, -----------
integrating several large recent acquisitions.
FINANCE - 8.7%
Federal National Mortgage Association 25,000 $ 931,250
Leading factor in the secondary mortgage market.
First USA Inc. 30,000 1,038,750
Credit card issuer and processor.
First USA Paymentech, Inc.* 22,000 745,250
Payment processor of merchant credit card transactions.
Franklin Resources, Inc. 20,000 $ 1,367,500
One of the largest mutual fund organizations in the U.S.
Nova Corp. Georgia* 24,000 531,000
Nation largest bankcard processor.
T. Rowe Price Associates, Inc. 60,000 2,610,000
Investment adviser to mutual funds, institutions and individuals.
-----------
$ 7,223,750
-----------
HEALTHCARE - 20.9%
Astra AB ADR Series B 15,000 $ 722,756
Swedish based, multinational pharmaceutical company.
Boston Scientific Corp.* 35,000 2,100,000
Medical device manufacturer focusing primarily on disposable
products in less invasive surgery procedures.
Clintrials Research, Inc.* 20,000 455,000
Pharmaceutical research company.
CRA Managed Care, Inc.* 3,000 135,000
Workers compensation company.
Elan Corp. PLC ADR* 50,000 1,662,500
Drug delivery company.
Galileo Corp.* 15,500 389,437
Develops and manufactures fiber optic equipment.
Genesis Health Ventures, Inc.* 40,000 1,245,000
Nursing home chain.
Genzyme Corp.* 22,000 478,500
Leading researcher in gene therapy.
HBO & Co. 18,000 1,068,750
Health information service provider.
Health Management Associates, Inc. Class A* 50,000 1,125,000
Hospital chain.
IDX System Corp.* 37,000 1,059,125
Healthcare information systems.
Medic Computer System, Inc.* 32,000 1,290,000
Physicans information company.
MiniMed Inc.* 35,000 1,128,750
Developer and manufacturer of medical devices focusing on
diabetics.
Pfizer Inc. 10,000 828,750
International health care and pharmaceutical products.
PhyCor Inc.* 40,000 1,135,000
Physicans practice management.
Sofamor Danek Group, Inc.* 55,000 1,677,500
Leading developer/manufacturer of spinal implant devices. Company
markets products internationally.
Transition System, Inc.* 60,000 847,500
Healthcare information systems.
-----------
$17,348,568
-----------
HOTELS & RESTAURANTS - 4.4%
LaQuinta Inns, Inc. 45,000 $ 860,625
Owner/operator of modestly priced lodging chain.
Outback Steakhouse, Inc.* 45,000 1,203,750
Restaurant theme chain.
Promus Hotel Corp.* 15,000 444,375
Owner and operator of Embassy Suite and Hampton Inn hotels.
Red Roof Inns, Inc.* 55,000 852,500
Owns and operates economy hotels in U.S.
Sonic Corp.* 10,000 255,000
Large chain of quick service drive ins.
-----------
$ 3,616,250
-----------
INSURANCE - 4.7%
Mutual Risk Management Ltd. 53,332 $ 1,973,333
Specialty insurer focusing on workmen's compensation.
PMI Group, Inc. 23,000 1,273,625
Private mortgage insurer.
Progressive Corp. 10,000 673,750
Insurer focusing on high risk and standard auto coverage.
-----------
$ 3,920,708
-----------
PUBLISHING - 4.0%
Providence Journal Co. Class A* 86,100 $ 2,636,812
Operates television stations and publishes newspapers.
Scholastic Corp.* 10,000 672,500
Publisher/distributor of children's books.
-----------
$ 3,309,312
-----------
RETAILING - 1.2%
Consolidated Stores Corp.* 31,250 $ 1,003,906
Chain of close-out merchandise stores operating primarily under -----------
the Odd/Big Lots name
SEMICONDUCTORS - 1.5%
Analog Devices, Inc.* 22,000 $ 745,250
Leading manufacturer of semiconductors.
Level One Communications, Inc.* 13,000 464,750
Designs and sells integrated circuits.
-----------
$ 1,210,000
-----------
TELECOMMUNICATIONS - 3.0%
Adtran Inc.* 21,000 $ 871,500
Company helps modern telephone equipment work with older
equipment.
Ascend Communications, Inc.* 12,000 745,500
Leading developer of products that connect computer networks.
Cascade Communications Corp.* 8,000 441,000
Designs equipment which links computers and networks.
Jacor Communications, Inc.* 16,500 451,688
Operator of radio and TV stations.
-----------
$ 2,509,688
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $49,564,465) $68,469,507
-----------
<CAPTION>
- ------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 17.4%
- ------------------------------------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Associates Corp. of North America, $3,746 $ 3,745,324
6.5s, 1/2/97
Delaware Funding Corp., 6s, 1/6/97 3,740 3,736,883
Ford Motor Credit Corp., 5.65s, 1/8/97 4,000 3,995,606
General Electric Capital Co., 5.9s, 1/2/97 2,993 2,992,509
-----------
TOTAL SHORT-TERM OBLIGATIONS
AT AMORTIZED COST $14,470,322
-----------
TOTAL INVESTMENTS - 100.0%
(IDENTIFIED COST, $64,034,787) $82,939,829
OTHER ASSETS, LESS LIABILITIES - 0.0% 7,445
-----------
TOTAL NET ASSETS - 100% $82,947,274
===========
*Non-income producing security.
</TABLE>
The accompanying notes are an
integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost, $64,034,787) $82,939,829
Cash 1,553
Dividends receivable 13,010
Deferred organization expenses (Note 1E) 8,153
-----------
Total assets $82,962,545
LIABILITIES:
Payable to affiliate --
Trustees' fees $ 2,540
Accrued expenses 12,731
-------
Total liabilities 15,271
-----------
NET ASSETS applicable to investors' interest in Portfolio $82,947,274
===========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $64,042,232
Unrealized appreciation of investments (computed on the basis of
identified cost) 18,905,042
-----------
Total net assets $82,947,274
===========
</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:
Dividend income (net of foreign taxes, $247) $ 288,670
Interest income 424,785
-----------
Total income $ 713,455
Expenses --
Investment adviser fee (Note 3) $477,560
Compensation of Directors not members of the Investment Adviser's
organization (Note 3) 7,615
Custodian fees 61,252
Legal and accounting services 21,618
Amortization of organization expenses (Note 1E) 3,166
Miscellaneous 6,520
--------
Total expenses 577,731
-----------
Net investment income $ 135,724
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments (identified cost basis) $18,226,741
Change in unrealized appreciation on investments (1,762,538)
-----------
Net realized and unrealized gain on investments 16,464,203
-----------
Net increase in net assets resulting from operations $16,599,927
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<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 $ 135,724 $ 134,736
Net realized gain on investment transactions 18,226,741 4,131,300
Change in unrealized appreciation (depreciation) of investments (1,762,538) 10,473,926
----------- -----------
Net increase in net assets from operations $16,599,927 $14,739,962
----------- -----------
Capital transactions --
Contributions $10,738,468 $14,400,870
Withdrawals (18,331,396) (19,642,929)
----------- -----------
Decrease in net assets resulting from capital transactions $(7,592,928) $(5,242,059)
----------- -----------
Total increase in net assets $ 9,006,999 $ 9,497,903
NET ASSETS:
At beginning of year 73,940,275 64,442,372
----------- -----------
At end of year $82,947,274 $73,940,275
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTARY DATA
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994*
---------------- ---------------- ---------------
<S> <C> <C> <C>
RATIOS (As a percentage of average net assets):
Expenses 0.76% 0.77% 0.74%+
Net investment income 0.18% 0.19% 0.20%+
PORTFOLIO TURNOVER 91% 81% 19%
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 years beginning on or after September 1, 1995, a fund is required to disclose its
average commission rate per share for security trades on which commissions are charged. Average
commission rate paid is computed by dividing the total dollar amount of commissions paid during
the fiscal year by the total number of shares purchased and sold during the fiscal year for
which commissions were charged.
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
-----------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Special Investment Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end investment company
which was organized as a trust under the laws of the State of New York on May
1, 1992. The Declaration of Trust permits the Trustees to issue beneficial
interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or in the NASDAQ National Market are valued on the basis
of the last reported sales prices on the last business day of the period. If
no sale is reported on that date, a security is valued, if quoted on such a
day, at not lower than the old bid price nor higher than the asked prices.
Prices on such exchanges will not be used for valuing debt securities if in
the Trustees judgment, some other valuation method more accurately reflects
the fair market value of such a security. Securities for which over-the-
counter market quotations are readily available are valued on the basis of the
mean between the last bid and asked prices. Short-term securities are valued
at cost, which approximates market value. All other securities and assets are
appraised to reflect their fair value as determined in good faith by the
Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Code) in order for its investors to satisfy them. The Portfolio
will allocate at least annually among its investors each investors'
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or credit.
C. EXPENSE REDUCTION -- The 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 Additional Information.
D. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
F. USE OF ESTIMATES. -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
- --------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregrated $62,868,221 and $79,119,712, 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 $477,560. Except as to Trustees
of the Portfolio who are not members of EVM's or BMR's organization, officers
and Trustees receive remuneration for their services to the Portfolio out of
such investment adviser fee. Certain of the officers and Trustees of the
Portfolio are officers and directors/trustees of the above organizations.
Trustees of the Portfolio that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan. For the
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, are as
follows:
Aggregate cost $64,034,787
===========
Gross unrealized appreciation $19,905,582
Gross unrealized depreciation 1,000,540
-----------
Net unrealized appreciation $18,905,042
===========
<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, 1996, the related statement of operations for the year then
ended, changes in net assets for each of the two years then ended and
supplementary data for each of the two years then ended and for the period
from 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, 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
Special Investment Portfolio as of December 31, 1996, the results of its
operations for the year then ended, changes in its net assets for each of the
two years then ended and supplementary data for each of the two years then
ended and for the period from 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 CLASSIC OFFICERS TRUSTEES
SPECIAL EQUITIES JAMES B. HAWKES M. DOZIER GARDNER
FUND President, Trustee Vice Chairman, EVM
24 Federal Street
Boston, MA 02110 EDWARD E. SMILEY, JR. 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 OFFICERS TRUSTEES
INVESTMENT JAMES B. HAWKES DONALD R. DWIGHT
PORTFOLIO President, Trustee Vice Chairman, Eaton Vance
24 Federal Street Management
Boston, MA 02110 EDWARD E. SMILEY, JR.
Vice President and DONALD R. DWIGHT
Portfolio Manager President, Dwight Partners, Inc.
Chairman, Newspapers of
JAMES L. O'CONNOR New England, Inc.
Treasurer
SAMUEL L. HAYES, III
THOMAS OTIS Jacob H. Schiff Professor of
Secretary Investment Banking,
Harvard University
Graduate School of
Business Administration
NORTON H. REAMER
President and Director, United Asset
Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
