<PAGE>
INVESTMENT ADVISER OF
INVESTORS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL
INVESTORS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 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 TRADITIONAL INVESORS FUND
24 FEDERAL STREET
BOSTON, MA 02110 T-IFSRC-1/97
[Logo]
[Graphic Omitted]
EV Traditional
Investors
Fund
Annual
Shareholder Report
December 31, 1996
<PAGE>
To Shareholders
During the year ended December 31, 1996, EV Traditional Investors Fund had a
total return of 13.6%. This return, which did not include the 4.75% initial
sales charge, resulted from a decrease in net asset value to $8.09 per share
from $8.15 per share and the reinvestment of income dividends of $0.255 per
share and capital gain distributions of $0.88 per share. By comparison, the
Lipper Balanced Fund Category,* a composite of 277 balanced mutual funds, had an
average total return of 13.6%.
The U.S. economy in 1996 experienced a year of growth, low inflation, and rising
employment -- advantageous mix of economic circumstances which helped produce
another good year for stock market investors. For the year, economic growth, as
measured by the Commerce Department's report of Gross Domestic Product (GDP),
was 3.4%, while inflation, as measured by the Consumer Price Index (CPI), was
3.3% (not seasonally adjusted). The U.S. civilian unemployment rate stood at a
low level of 5.3% in December.
The stock market continued into May, 1996, the bullish advance which began in
1995, but then corrected sharply in July. Technology stocks were hit
particularly hard. The market recovered in August, but advanced thereafter on a
more selective basis. With the market reaching record highs, investors sought
comfort in high-quality, blue chip stocks. The S&P 500,* a broadly based blue
chip stock barometer, dropped by roughly 10% in July, but rallied to record
highs through the second half of the year and finished the year with a total
return of 22.9%.
In contrast to the stock market, the bond market did not fare as well in 1996.
The yield on the 30-year Treasury bond, a bellwether of bond market activity,
rose to 6.64% by December 31, 1996 from 6.02% at the beginning of the year. The
Lehman Brothers Government/Corporate Bond Index* -- an unmanaged index of
government and corporate bonds -- had a total return of only 2.9% for the year.
Although a weak bond market damped the 1996 performance of balanced funds --
which generally invest in both stocks and bonds -- history has demonstrated that
diversification among asset classes can reduce volatility while producing
rewarding long-term returns. Of course, past performance is no guarantee of
future results.
Sincerely
[Photo of M. Dozier Gardner]
/s/ M. Dozier Gardner
--------------------------------
M. Dozier Gardner
President
February 7, 1997
- -------------------------------------------------------------------------------
EV TRADITIONAL INVESTORS FUND
Investors Portfolio's 10 largest stock holdings*
Chase Manhattan ....................... Banking
Sofomor/Danek ......................... Healthcare
Boston Scientific ..................... Healthcare
Progressive ........................... Insurance
Boeing ................................ Aerospace/Defense
Intel ................................. Semiconductors
Eastman Kodak ......................... Photography
Allstate .............................. Insurance
Federal Nat'l Mortgage Assn. .......... Financial
Astra AB .............................. Healthcare
*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 Thomas E. Faust Jr., Vice President and Portfolio Manager of
Investors Portfolio.
Q. HOW WOULD YOU SUMMARIZE THE 1996 STOCK AND BOND MARKETS?
A. In the first five months of the year, almost all types of stocks rose in
value, including small, unseasoned issues and initial public offerings
(IPOs). This was a classic bull market in which a "rising tide lifts all
boats." The overall market corrected in July, and the less established
companies and IPOs were hit particularly hard. When stock prices recovered
through the late summer and fall, there was a dramatic shift in leadership
from smaller capitalization companies to large capitalization, blue chip
firms. This two-tiered market, in which a relatively small number of large
capitalization stocks accounted for most of the positive performance of the
S&P 500, characterized the second half of 1996. In this environment, actively
managed funds generally had difficulty beating the major indexes, which are
dominated by the largest capitalization stocks. To illustrate, the 19.2%
average total return of mutual funds in the Lipper Growth Funds category
significantly underperformed the 22.9% return of the S&P 500 Index and the
28.8% return of the Dow Jones Industrial Average in 1996.
Unlike the stock market, the bond market did not perform very well in 1996.
Many analysts expected that the economy would continue the slow pace set in
1995. As it turned out, the economy's growth exceeded most forecasts. This
disappointed bond investors because significant increases in economic growth
tend to build concerns about inflation.
[Photo of Thomas E. Faust Jr.]
Q. THERE HAS BEEN MUCH TALK ABOUT HIGH LEVELS OF CONSUMER DEBT HAVING A NEGATIVE
EFFECT ON THE ECONOMY. DO YOU AGREE?
A. In fact, we have seen some new interpretations of consumer debt. The argument
has been that consumers are "tapped out" and will have to slow spending
because their credit card balances are too high. This argument was made
repeatedly during the first half of the year, but consumer spending -- which
accounts for roughly two-thirds of economic growth -- did not slow to the
extent analysts had predicted. One explanation is that the increased
availability and convenience of credit cards may have increased their usage
for routine purchases, including groceries and gasoline. This gives the
statistical appearance of a higher personal debt burden than is actually the
case because many people pay off these routine purchases at the end of each
month.
Q. HAS THE EQUITY PORTION OF THE PORTFOLIO CHANGED IN ANY SIGNIFICANT WAY DURING
THE YEAR?
A. The most significant change was an increase in the equity weighting within
the Portfolio -- from 62% to 69% -- which enabled us to capitalize on the
momentum of the bull market. I have been somewhat concerned about a slowing
in the economy, however, and have increased positions in less cyclical
industries, such as health care. I have also reduced utility holdings due to
the unattractive interest rate environment and the turmoil the industry is
experiencing as deregulation transforms it.
Q. ARE THERE ANY NEW HOLDINGS IN THE PORTFOLIO THAT YOU WOULD LIKE TO HIGHLIGHT
FOR SHAREHOLDERS?
A. Boeing is new to the Portfolio and a top holding. Boeing is the world's
largest aircraft manufacturer and recently announced a merger with McDonnell
Douglas. This is timely because Boeing has a tremendous backlog of orders,
and the acquisition gives it the extra capacity it needs. McDonnell Douglas
is in the opposite situation of having excess capacity in its commercial
aircraft facilities. It is also a good fit because Boeing's business is
almost entirely commercial, whereas McDonnell Douglas's is primarily
defense-oriented. Hence, the combined company will be less affected by market
cycles within each sector. These factors should produce a healthy rate of
growth for many years.
Another recent addition is Eli Lilly, a large pharmaceutical company. Its
largest and most successful product is Prozac, a proven anti-depression drug.
Lilly now has a new drug for schizophrenia, Zyprexa, which looks to be a
major advance in treating this devastating condition. Current drugs for this
disease are often not effective or have very strong side effects that inhibit
patients from functioning effectively in society. Eli Lilly's product shows
good efficacy with much more manageable side effects.
Q. HOW DID THE BONDS IN THE PORTFOLIO PERFORM THIS YEAR?
A. We own mainly "put bonds," which can be redeemed at a predetermined price,
usually equal to par value, on a specific date. Because of this feature,
these securities tend to perform better in a rising market and are impacted
less in a declining market than otherwise similar bonds.
Q. WITH THE MARKET AT AN ALL-TIME HIGH, WHAT IS YOUR APPROACH TO INVESTING IN
EQUITIES?
A. Our approach has been to maintain equity exposure. We have become somewhat
more defensive in the types of stocks that we buy, emphasizing those stocks
whose underlying fundamentals we are confident justify their valuations.
Q. WHAT ADVANTAGES CAN BE GAINED BY INVESTING IN A BALANCED FUND SUCH AS THIS?
A. A balanced fund can be advantageous in any market, but is especially so in a
market like this one. The reason lies simply in the diversification of asset
classes. By holding both stocks and bonds, our overall volatility is lower
than if we were completely invested in either sector, and, over the long
term, our returns have generally been much better than if we had invested
100% in bonds. For investors seeking some income, and growth with reasonable
principal stability, a balanced fund can make a great deal of sense.
- --------------------------------------------------------------------------------
CHANGING ASSET ALLOCATION WITH CHANGING MARKET CONDITIONS...
PORTFOLIO ALLOCATION, WITH EQUITY SECTORS,
AS OF 12/31/95*
CASH FIXED
& OTHER EQUITIES INCOME OTHER
5.6% 61.5% 32.9% 0.9%
BASIC CONSUMER
FINANCIAL UTILITIES ENERGY MATERIALS NON-DURABLES
15.6% 11.7% 11.6% 11.4% 10.3%
PORTFOLIO ALLOCATION, WITH EQUITY SECTORS,
AS OF 12/31/96*
CASH FIXED
& OTHER EQUITIES INCOME OTHER
1.8% 69.3% 28.9% 5.4%
HEALTH BASIC BUSINESS
FINANCIAL CARE TECHNOLOGY MATERIALS PRODUCTS/SERVICES
19.9% 16.0% 9.7% 11.0% 7.3%
*By market value as % of net assets on dates shown. Asset allocation and sector
breakdown are subject to change due to active management.
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000
INVESTMENT IN EV TRADITIONAL INVESTORS FUND, THE
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX, THE STANDARD & POOR'S 500 AND 90-DAY
US TREASURY BILLS
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 8.2% 10.3% 10.9% $28,220
- --------------------------------------------------------------------
Without Max. Sls. Chg. 13.6% 11.4% 11.5% $29,624
- --------------------------------------------------------------------
EVIFX vs. Lehman Govt./Corp.Bond Index, S&P 500, and 90-day Treasury
<TABLE>
<CAPTION>
Fund
including Lehman Bros.
EV Traditional Maximum Govt./Corp. 90-day US
Date Investors Fund Sales Charge Bond Index S&P 500 Treasury Bills
<C> <C> <C> <C> <C> <C>
12/31/86 $10,000 $ 9,526 $10,000 $10,000 $10,000
1/31/87 $10,825 $10,312 $10,137 $11,347 $10,000
2/28/87 $11,106 $10,580 $10,203 $11,795 $10,000
3/31/87 $11,254 $10,721 $10,148 $12,135 $10,139
4/30/87 $10,985 $10,465 $ 9,877 $12,028 $10,139
5/31/87 $11,054 $10,530 $ 9,834 $12,132 $10,139
6/30/87 $11,448 $10,906 $ 9,956 $12,744 $10,283
7/31/87 $11,788 $11,229 $ 9,934 $13,390 $10,283
8/31/87 $12,242 $11,662 $ 9,878 $13,889 $10,283
9/30/87 $12,049 $11,479 $ 9,665 $13,585 $10,446
10/31/87 $10,593 $10,091 $10,028 $10,660 $10,446
11/30/87 $10,147 $ 9,667 $10,091 $ 9,781 $10,446
12/31/87 $10,565 $10,065 $10,229 $10,525 $10,597
1/31/88 $10,783 $10,272 $10,580 $10,983 $10,597
2/28/88 $11,161 $10,632 $10,701 $11,474 $10,597
3/31/88 $10,909 $10,392 $10,595 $11,123 $10,748
4/30/88 $10,988 $10,467 $10,534 $11,265 $10,748
5/31/88 $11,083 $10,558 $10,464 $11,337 $10,748
6/30/88 $11,402 $10,862 $10,700 $11,864 $10,923
7/31/88 $11,386 $10,847 $10,639 $11,835 $10,923
8/31/88 $11,241 $10,708 $10,666 $11,414 $10,923
9/30/88 $11,467 $10,924 $10,900 $11,903 $11,120
10/31/88 $11,645 $11,093 $11,093 $12,249 $11,120
11/30/88 $11,530 $10,984 $10,968 $12,054 $11,120
12/31/88 $11,694 $11,140 $11,005 $12,267 $11,345
1/31/89 $12,228 $11,648 $11,152 $13,176 $11,345
2/28/89 $12,042 $11,472 $11,067 $12,832 $11,345
3/31/89 $12,178 $11,601 $11,126 $13,136 $11,595
4/30/89 $12,617 $12,019 $11,362 $13,836 $11,595
5/31/89 $12,866 $12,257 $11,641 $14,365 $11,595
6/30/89 $12,954 $12,340 $12,021 $14,294 $11,834
7/31/89 $13,606 $12,962 $12,270 $15,599 $11,834
8/31/89 $13,713 $13,063 $12,080 $15,884 $11,834
9/30/89 $13,749 $13,097 $12,133 $15,823 $12,067
10/31/89 $13,660 $13,012 $12,440 $15,467 $12,067
11/30/89 $13,840 $13,184 $12,553 $15,767 $12,067
12/31/89 $14,122 $13,453 $12,572 $16,148 $12,302
1/31/90 $13,483 $12,844 $12,399 $15,079 $12,302
2/28/90 $13,693 $13,044 $12,427 $15,250 $12,302
3/31/90 $13,750 $13,098 $12,427 $15,662 $12,543
4/30/90 $13,464 $12,826 $12,313 $15,290 $12,543
5/31/90 $14,278 $13,601 $12,670 $16,746 $12,543
6/30/90 $14,297 $13,620 $12,875 $16,647 $12,787
7/31/90 $14,536 $13,847 $13,035 $16,607 $12,787
8/31/90 $13,729 $13,078 $12,846 $15,087 $12,787
9/30/90 $13,507 $12,867 $12,953 $14,362 $13,015
10/31/90 $13,426 $12,790 $13,125 $14,314 $13,015
11/30/90 $13,957 $13,296 $13,410 $15,221 $13,015
12/31/90 $14,265 $13,589 $13,613 $15,648 $13,225
1/31/91 $14,533 $13,844 $13,766 $16,342 $13,225
2/28/91 $14,970 $14,261 $13,884 $17,485 $13,255
3/31/91 $15,137 $14,420 $13,980 $17,918 $13,415
4/30/91 $15,200 $14,479 $14,140 $17,976 $13,415
5/31/91 $15,475 $14,742 $14,206 $18,721 $13,415
6/30/91 $15,155 $14,437 $14,191 $17,876 $13,601
7/31/91 $15,668 $14,925 $14,369 $18,728 $13,601
8/31/91 $16,014 $15,256 $14,700 $19,147 $13,601
9/30/91 $16,166 $15,400 $15,007 $18,831 $13,775
10/31/91 $16,469 $15,689 $15,141 $19,103 $13,775
11/30/91 $16,250 $15,480 $15,292 $18,313 $13,775
12/31/91 $17,301 $16,481 $15,808 $20,406 $13,907
1/31/92 $16,896 $16,095 $15,573 $20,048 $13,907
2/28/92 $17,010 $16,204 $15,656 $20,287 $13,907
3/31/92 $16,759 $15,965 $15,571 $19,892 $14,048
4/30/92 $16,941 $16,139 $15,663 $20,500 $14,048
5/31/92 $17,250 $16,432 $15,967 $20,573 $14,048
6/30/92 $17,391 $16,567 $16,201 $20,269 $14,174
7/31/92 $17,840 $16,994 $16,616 $21,121 $14,174
8/31/92 $17,910 $17,061 $16,764 $20,667 $14,174
9/30/92 $18,006 $17,152 $16,993 $20,908 $14,271
10/31/92 $17,815 $16,970 $16,734 $21,003 $14,271
11/30/92 $18,104 $17,246 $16,718 $21,689 $14,271
12/31/92 $18,417 $17,544 $17,006 $21,959 $14,386
1/31/93 $18,467 $17,592 $17,376 $22,164 $14,386
2/28/93 $18,820 $17,928 $17,737 $22,447 $14,386
3/31/93 $19,047 $18,145 $17,797 $22,918 $14,492
4/30/93 $18,921 $18,024 $17,934 $22,391 $14,492
5/31/93 $18,984 $18,085 $17,924 $22,955 $14,492
6/30/93 $19,398 $18,384 $18,331 $23,028 $14,603
7/31/93 $19,403 $18,483 $18,448 $22,960 $14,603
8/31/93 $20,191 $19,234 $18,872 $23,805 $14,603
9/30/93 $20,429 $19,461 $18,938 $23,622 $14,709
10/31/93 $20,535 $19,562 $19,015 $24,133 $14,709
11/30/93 $20,015 $19,066 $18,800 $23,875 $14,709
12/31/93 $20,477 $19,507 $18,882 $24,169 $14,821
1/31/94 $21,261 $20,253 $19,166 $25,009 $14,821
2/28/94 $20,725 $19,743 $18,750 $24,312 $14,821
3/31/94 $19,906 $18,963 $18,291 $23,254 $14,951
4/30/94 $20,019 $19,071 $18,140 $23,582 $14,951
5/31/94 $20,063 $19,112 $18,106 $23,933 $14,951
6/30/94 $19,626 $18,696 $18,064 $23,352 $15,108
7/31/94 $20,267 $19,306 $18,425 $24,145 $15,108
8/31/94 $20,650 $19,671 $18,432 $25,110 $15,108
9/30/94 $20,179 $19,223 $18,153 $24,492 $15,289
10/31/94 $20,356 $19,391 $18,133 $25,063 $15,289
11/30/94 $19,928 $18,983 $18,100 $24,132 $15,289
12/31/94 $20,106 $19,153 $18,220 $24,488 $15,501
1/31/95 $20,314 $19,351 $18,570 $25,138 $15,501
2/28/95 $21,103 $20,103 $19,000 $26,101 $15,501
3/31/95 $21,612 $20,588 $19,128 $26,870 $15,720
4/30/95 $22,122 $21,074 $19,394 $27,686 $15,720
5/31/95 $22,993 $21,904 $20,207 $28,756 $15,720
6/30/95 $23,356 $22,250 $20,369 $29,432 $15,930
7/31/95 $23,871 $22,740 $20,290 $30,430 $15,930
8/31/95 $24,299 $23,147 $20,550 $30,484 $15,930
9/30/95 $24,634 $23,467 $20,759 $31,769 $16,135
10/31/95 $24,665 $23,496 $21,063 $31,676 $16,135
11/30/95 $25,339 $24,138 $21,410 $33,040 $16,135
12/31/95 $26,075 $24,839 $21,726 $33,681 $16,333
1/31/96 $26,491 $25,235 $21,861 $34,843 $16,333
2/28/96 $26,583 $25,323 $21,397 $35,147 $16,333
3/31/96 $26,777 $25,508 $21,217 $35,489 $16,537
4/30/96 $26,970 $25,692 $21,072 $36,034 $16,537
5/31/96 $27,276 $25,983 $21,036 $36,927 $16,537
6/30/96 $27,503 $26,200 $21,317 $37,080 $16,747
7/31/96 $26,591 $25,331 $21,367 $35,455 $16,747
8/31/96 $27,160 $25,873 $21,314 $36,194 $16,747
9/30/96 $28,015 $26,687 $21,693 $38,228 $16,957
10/31/96 $28,574 $27,220 $22,200 $39,296 $16,957
11/30/96 $29,876 $28,460 $22,608 $42,249 $16,957
12/31/96 $29,624 $28,220 $22,356 $41,411 $17,173
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.
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FUND PERFORMANCE
The chart above compares the Fund's return with broad-based market indexes. The
lines on the chart represent the total returns of $10,000 hypothetical
investments in the Fund, the S&P 500 and the Lehman Brothers Government/
Corporate Bond Index.
TOTAL RETURN FIGURES
The solid red line represents the Fund's performance and includes the Fund's
maximum current sales charge of 4.75%. The Fund's total return figure reflects
Fund expenses, fees and portfolio transaction costs, and assumes the
reinvestment of income dividends and capital gain distributions.
The dotted black line represents the performance of the S&P 500, a broad-based,
widely recognized unmanaged index of 500 common stocks.
The solid black line represents the performance of the Lehman Brothers
Government/Corporate Bond Index, a diversified, unmanaged index of corporate and
U.S. government bonds. The Indices' total return figures do not reflect any
commissions or expenses that would be incurred if an investor individually
purchased or sold the securities in the Indices.
The dashed line represents the performance of 90-Day U.S. Treasury Bills. It is
included to indicate how the Fund has performed relative to a portfolio of cash
equivalents. Principal and interest payments of Treasury Bills are guaranteed by
the U.S. Government.
NOTE: It is not possible to invest directly in an index.
<PAGE>
EV TRADITIONAL INVESTORS FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investment in Investors Portfolio (Portfolio), at
value (Note 1A) $247,162,534
Receivable for Fund shares sold 17,261
------------
Total assets $247,179,795
LIABILITIES:
Dividends payable $6,686,324
Payable for Fund shares redeemed 189,770
Payable for Trustees' fees 834
Accrued expenses 85,469
----------
Total liabilities 6,962,397
------------
NET ASSETS for 29,687,513 shares of beneficial
interest outstanding $240,217,398
============
SOURCES OF NET ASSETS:
Paid-in capital $178,158,222
Undistributed net investment income 309,282
Accumulated net realized gain on investment
transactions 4,445,597
Unrealized appreciation of investments 57,304,297
------------
Total net assets $240,217,398
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($240,217,398 / 29,687,513 shares of beneficial
interest outstanding) $8.09
=====
COMPUTATION OF OFFERING PRICE:
Offering price per share (100/95.25 of $8.09) $8.49
=====
On sales of $100,000 or more, the offering price is reduced.
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended December 31, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $ 5,869,912
Dividend income allocated from Portfolio (net of
withholding tax expense of $34,128) 3,504,553
Expenses allocated from Portfolio (1,672,039)
-----------
Total investment income $ 7,702,426
Expenses -
Compensation of Trustees not members of the
Investment Adviser's organization
(Note 4) $ 2,578
Custodian fee 10,428
Service fee (Note 5) 201,529
Transfer agent fees 185,903
Printing and postage 85,158
Legal and accounting services 10,789
Registration fees 18,811
Miscellaneous 10,777
-----------
Total expenses 525,973
-----------
Net investment income $ 7,176,453
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain on investment transactions
(identified cost basis) $28,326,826
Change in unrealized appreciation of investments (5,008,446)
-----------
Net realized and unrealized gain on
investments 23,318,380
-----------
Net increase in net assets resulting
from operations $30,494,833
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------- YEAR ENDED
1996 1995* JANUARY 31, 1995
------------- ------------ ----------------
INCREASE (DECREASE) IN NET ASSETS:
From operations -
<S> <C> <C> <C>
Net investment income $ 7,176,453 $ 7,243,551 $ 8,470,498
Net realized gain on investment transactions 28,326,826 8,706,988 1,556,290
Change in unrealized appreciation of investments (5,008,446) 38,309,383 (20,258,131)
------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations $ 30,494,833 $ 54,259,922 $(10,231,343)
------------- ------------ ------------
Distributions to shareholders -
From net investment income $ (7,176,453) $ (7,060,919) $ (8,249,107)
In excess of net investment income (20,625) -- --
From net realized gain on investment transactions (24,332,072) (9,517,875) (4,372,413)
------------- ------------ ------------
Total distributions to shareholders $ (31,529,150) $(16,578,794) $(12,621,520)
------------- ------------ ------------
Net increase (decrease) in net assets from
Fund share transactions (Note 2) $ 4,381,299 $ (1,229,666) $ (4,130,436)
------------- ------------ ------------
Net increase (decrease) in net assets $ 3,346,982 $ 36,451,462 $ 26,983,299)
NET ASSETS:
At beginning of year 236,870,416 200,418,954 227,402,253
----------- ----------- -----------
At end of year (including undistributed net
investment income of $309,282, $373,801 and
$263,835, respectively) $240,217,398 $236,870,416 $200,418,954
============ ============ ============
*For the eleven month period ended December 31, 1995 (Note 6).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED JANUARY 31,
----------------------- ----------------------------------------
1996 1995* 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
NET ASSET VALUE -
<S> <C> <C> <C> <C> <C> <C>
Beginning of year $ 8.150 $ 6.840 $ 7.600 $ 7.390 $ 7.500 $ 7.060
Income (loss) from operations:
Net investment income $ 0.254 $ 0.254 $ 0.283 $ 0.217 $ 0.342 $ 0.364
Net realized and unrealized gain (loss) on investments 0.821 1.641 (0.623) 0.833 0.318 0.736
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 1.075 $ 1.895 $ (0.340) $ 1.050 $ 0.660 $ 1.100
-------- -------- -------- -------- -------- --------
Less distributions:
From net investment income $ (0.254) $ (0.248) $ (0.275) $ (0.307) $ (0.360) $ (0.360)
In excess of net investment income (0.001) -- -- (0.008) -- --
From net realized gain on investments (0.880) (0.337) (0.145) (0.525) (0.410) (0.300)
-------- -------- -------- -------- -------- --------
Total distributions $ (1.135) $ (0.585) $ (0.420) $ (0.840) $ (0.770) $ (0.660)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE - End of year $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390 $ 7.500
======== ======== ======== ======== ======== ========
TOTAL RETURN(2) 13.61% 28.36%(4) (4.45%) 15.13% 9.30% 16.26%
RATIOS/SUPPLEMENTAL DATA (to average daily net assets):
Expenses(1) 0.93% 0.95%+ 0.91% 0.90% 0.89% 0.86%
Net investment income 3.03% 3.60%+ 4.05% 4.07% 4.62% 4.96%
PORTFOLIO TURNOVER(3) -- -- -- 44% 32% 51%
NET ASSETS, END OF YEAR (000'S OMITTED) $240,217 $236,870(4) $200,419 $227,402 $212,545 $210,197
+Computed on an annualized basis.
(1)Includes the Fund's share of Investors Portfolio's allocated expenses for the year ended December 31, 1996, the eleven month
period ended December 31, 1995, the year ended January 31, 1995 and the period from start of business, October 28, 1993, to
January 31, 1994.
(2)Total return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on
the last day of each period reported. Dividends and distributions, if any, are assumed to be reinvested at the net asset value
on the record date.
(3)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.
(4)Total return is not calculated on an annualized basis.
*For the eleven month period ended December 31, 1995 (See Note 6).
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional Investors Fund (the Fund) is a diversified series of Eaton
Vance Special Investment Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund invests all of its investable assets in interests
in the Investors 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 (82.0% 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 determined in accordance with generally accepted
accounting principles.
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, options and financial futures transactions.
accordingly, no provision for federal income or excise tax is necessary.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$22,328,254 as capital gain dividends for its taxable year ended December 31,
1996.
E. DISTRIBUTIONS -- Generally accepted accounting principles require that
differences in the recognition of classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial 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.
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 income 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:
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995* JANUARY 31, 1995
---------------------------------- ------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales 1,024,596 $ 8,562,690 1,091,531 $ 8,545,882 1,384,961 $ 9,717,293
Issued to shareholders
electing to receive
payment of distributions
in Fund shares 2,630,611 21,195,011 1,346,249 10,484,714 1,050,557 7,289,379
Redemptions (3,029,893) (25,376,402) (2,666,931) (20,260,262) (3,061,441) (21,137,108)
---------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) 625,314 $ 4,381,299 (229,151) $ (1,229,666) (625,923) $ (4,130,436)
========== =========== ========== ============ ========== ============
</TABLE>
*For the eleven month period ended December 31, 1995 (Note 6).
- -------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio for the year
ended December 31, 1996 aggregated $9,205,614 and $29,738,167, respectively.
- ------------------------------------------------------------------------------
(4) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves only 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. Except as to Trustees of the Fund and the Portfolio
who are not members of EVM's or BMR's organizations, 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 organizations.
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Fund adopted a Service Plan on July 7, 1993 designed to meet the
requirements of Rule 12b-1 under the Investment Company Act of 1940 and the
service fee requirements of the revised sales charge rule of The National
Association of Securities Dealers, Inc. The Service Plan replaced the Fund's
distribution plan which became effective on July 1, 1989. The Service Plan
provides that the Fund may make service fee payments to the Principal
Underwriter, Eaton Vance Distributors, Inc., a subsidiary of Eaton Vance
Management, Authorized Firms or other persons in amounts not exceeding .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 .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 by such
persons and remaining outstanding for at least twelve months. Such payments are
made for personal services and/or maintenance of shareholder accounts. During
the year ended December 31, 1996 the Fund paid or accrued $201,529 under the
Plan to the Principal Underwriter and Authorized Firms.
- ------------------------------------------------------------------------------
(6) CHANGE IN YEAR END
The Fund changed its fiscal year end from January 31 to December 31, effective
December 31, 1995.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
EV TRADITIONAL INVESTORS FUND:
We have audited the accompanying statement of assets and liabilities of EV
Traditional Investors Fund, a series of Eaton Vance Special Investment Trust, as
of December 31, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended, the
eleven month period ended December 31, 1995 and for the year ended January 31,
1995, and the financial highlights for the year then ended, the eleven month
period ended December 31, 1995 and each of the four years in the period ended
January 31, 1995. 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 Investors 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 the year then ended, the eleven month period ended
December 31, 1995 and for the year ended January 31, 1995 and the financial
highlights for the year then ended, the eleven month period ended December 31,
1995 and for each of the four years in the period ended January 31, 1995, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 31, 1997
<PAGE>
- --------------------------------------------------------------------------------
INVESTORS PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
COMMON STOCKS - 67.1%
- -------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
AEROSPACE & DEFENSE - 1.8%
Boeing Co. 50,000 $ 5,318,750
------------
AUTOMOTIVE - 1.1%
General Motors Corp. 60,000 $ 3,345,000
------------
BANKS - 3.3%
Banco Latinoamericano de Exportaciones* 75,000 $ 3,806,250
Chase Manhattan Corp. 70,200 6,265,350
------------
$ 10,071,600
------------
BEVERAGES - 1.3%
PepsiCo, Inc. 130,000 $ 3,802,500
------------
CHEMICALS - 2.8%
Monsanto Corp. 125,000 $ 4,859,375
Praxair, Inc. 80,000 3,690,000
------------
$ 8,549,375
------------
COMPUTER & BUSINESS EQUIPMENT - 2.9%
Hewlett Packard Co. 90,000 $ 4,522,500
Xerox Corp. 81,000 4,262,625
------------
$ 8,785,125
------------
DRUGS - 5.3%
Astra AB, A Free Shares* 100,000 $ 4,935,540
Elan Corp. PLC, ADR 75,000 2,493,750
Lilly (Eli) & Co. 65,000 4,745,000
Pfizer, Inc. 18,900 1,566,338
Smithkline Beecham PLC, ADR 35,000 2,380,000
------------
$ 16,120,628
------------
ELECTRIC UTILITIES - 1.0%
The Southern Co. 140,000 $ 3,167,500
------------
ELECTRONICS - SEMICONDUCTORS - 2.6%
Intel Corp. 40,000 $ 5,237,500
MEMC Electronic Materials, Inc.* 109,000 2,452,500
------------
$ 7,690,000
------------
FINANCIAL - MISCELLANEOUS - 4.6%
Federal National Mortgage Association 135,000 $ 5,028,750
MBNA Corp. 100,000 4,150,000
MGIC Investment Corp. 60,000 4,560,000
------------
$ 13,738,750
------------
FOOD - 0.5%
Hershey Foods Corp. 34,400 $ 1,505,000
------------
FERTILIZER - 1.6%
Potash Corp. of Saskatchewan 55,000 $ 4,675,000
------------
HEALTHCARE SERVICES - 0.6%
Vencor, Inc. 60,000 $ 1,897,500
------------
HOUSEHOLD PRODUCTS - 1.0%
Kimberly Clark Corp. 31,200 $ 2,971,800
------------
INFORMATION SERVICES - 2.3%
Electronic Data Systems Corp. 80,000 $ 3,460,000
Reuters Holdings PLC, ADR 45,000 3,442,500
------------
$ 6,902,500
------------
INSURANCE - 5.7%
Allstate Corp. 90,000 $ 5,208,750
General Re Corp. 20,000 3,155,000
Mutual Risk Management Ltd. 93,300 3,452,100
Progressive Corp. 80,000 5,390,000
------------
$ 17,205,850
------------
LODGING & GAMING - 1.1%
ITT Corp.* 75,000 3,253,125
-------------
MACHINERY - 1.4%
Deere & Co. 105,000 $ 4,265,625
------------
MEDICAL PRODUCTS - 5.0%
Baxter International, Inc. 100,000 $ 4,100,000
Boston Scientific Corp.* 90,000 5,400,000
Sofamor Danek Group, Inc.* 180,300 5,499,150
------------
$ 14,999,150
------------
METALS & MINING - 0.8%
J & L Specialty Steel, Inc. 200,000 $ 2,275,000
------------
OIL & GAS - EXPLORATION & PRODUCTION - 2.7%
Anadarko Petroleum Corp. 60,000 $ 3,885,000
Triton Energy Ltd.* 90,000 4,365,000
------------
$ 8,250,000
------------
OIL & GAS - INTEGRATED - 2.2%
Exxon Corp. 43,640 $ 4,276,720
Mobil Corp. 20,000 2,445,000
------------
$ 6,721,720
------------
PAPER & FOREST PRODUCTS - 0.8%
Plum Creek Timber Co., L.P. 90,000 $ 2,340,000
------------
PHOTOGRAPHY - 1.7%
Eastman Kodak Co. 65,000 $ 5,216,250
------------
PUBLISHING - 0.9%
McGraw-Hill, Inc. 56,500 $ 2,606,063
------------
REITS - 3.5%
Colonial Properties Trust 80,000 $ 2,430,000
Equity Residential Properties Trust 101,400 4,182,750
ROC Communities, Inc. 116,250 3,225,937
Security Capital Industrial Trust 37,000 790,875
------------
$ 10,629,562
------------
RETAIL - FOOD & DRUG - 1.3%
CVS Corp. 95,000 $ 3,930,625
------------
RETAIL - SPECIALTY - 2.3%
Circuit City Stores, Inc. 100,000 $ 3,012,500
The Home Depot, Inc. 80,000 4,010,000
------------
$ 7,022,500
------------
SPECIALTY CHEMICALS & MATERIALS - 2.9%
Corning, Inc. 100,000 $ 4,625,000
Sealed Air Corp.* 100,000 4,162,500
------------
$ 8,787,500
------------
TELEPHONE UTILITIES - 1.2%
Ameritech Corp. 60,448 $ 3,664,660
------------
TRANSPORTATION - 0.9%
Southwest Airlines, Inc. 125,000 $ 2,765,625
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $140,868,078) $202,474,283
------------
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK - 1.2%
- -------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
Freeport McMoRan Copper & Gold, 5% 125,000 $ 3,468,750
------------
TOTAL CONVERTIBLE PREFERRED STOCK
(IDENTIFIED COST, $2,872,500) $ 3,468,750
------------
- -------------------------------------------------------------------------------
PREFERRED STOCK - 1.0%
- -------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
Bank of Boston, Series C Adjustable rate 37,600 $ 3,064,400
------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST, $1,815,525) $ 3,064,400
------------
- -------------------------------------------------------------------------------
U.S. TREASURY/AGENCY OBLIGATIONS - 14.3%
- -------------------------------------------------------------------------------
PRINCIPAL AMOUNT
NAME OF COMPANY (000's Omitted) VALUE
- -------------------------------------------------------------------------------
Federal Home Loan Morgage Corp., PAC,
CMO, Series 1033E,
8.10s, 12/15/04 $ 238 $ 238,746
Federal Home Loan Mortgage Corp., PAC,
CMO, Series 59-D,
9.70s, 1/15/16 1,501 1,522,765
Federal Home Loan Mortgage Corp.,
PAC, CMO, Series 34-C, 9s,
11/15/19 472 486,809
Federal Home Loan Mortgage Corp.,
7.95s, 5/15/20 1,738 1,756,236
Federal Home Loan Mortgage Corp.,
PAC, CMO, Series 41-F, 10s, 5/15/20 2,338 2,507,792
Federal National Mortgage Association,
7.50s, 5/25/19 1,264 1,268,807
Federal National Mortgage Association,
PAC, CMO, Series 1990 82-K,
8.50s, 7/25/19 1,262 1,268,779
Federal National Mortgage Association,
PAC, CMO, Series 1990 24E,
9s, 3/25/20 2,000 2,071,860
U.S. Treasury Notes, 7.375s, 11/15/97 1,800 1,825,867
U.S. Treasury Notes, 8.125s, 2/15/98 6,500 6,668,610
U.S. Treasury Notes, 7.125s, 9/30/99 17,000 17,470,220
U.S. Treasury Notes, 5.625s, 11/30/00 6,000 5,891,220
------------
TOTAL U.S. TREASURY/AGENCY OBLIGATIONS
(IDENTIFIED COST, $43,168,541) $ 42,977,711
------------
- -------------------------------------------------------------------------------
CORPORATE BONDS - 14.6%
- -------------------------------------------------------------------------------
FACE AMOUNT
NAME OF COMPANY (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Bell Telephone Co., 8.35s, 12/15/30 $ 3,000 $ 3,525,420
Chesapeake Potomac Telephone,
8.375s, 10/1/29 1,500 1,728,540
Columbia/HCA Health, 8.36s, 5/15/24 900 1,007,028
Columbia/HCA Health, 6.73s, 7/15/45 1,000 1,003,790
Commercial Credit Corp.,
7.875s, 2/1/25 2,000 2,168,860
Connecticut Light & Power,
7.875s, 10/1/24 3,775 4,140,080
Dayton Hudson, Medium Term Notes,
9.50s, 6/10/15 650 748,059
Deere & Co., 8.95s, 6/15/19 250 282,733
General Motors Corp., 8.80s, 3/1/21 3,130 3,567,605
General Motors Corp., Medium Term
Notes, 9.45s, 11/1/11 3,000 3,558,630
Grand Metropolitan Investments,
7.45s, 4/15/35 3,090 3,286,926
Hertz Corp., 9s, 11/1/09 2,600 2,970,032
Inter American Development Bank,
8.875s, 6/1/09 2,000 2,330,520
Inter American Development Bank,
8.40s, 9/1/09 2,500 2,853,325
Johnson Controls,
7.70s, 3/1/15 1,360 1,446,646
Pitney Bowes Credit Corp.,
9.25s, 6/15/08 1,650 1,942,858
Procter & Gamble Co.,
8s, 9/1/24 3,000 3,397,530
Seagram (Joseph) & Sons, 9.65s, 8/15/18 1,030 1,272,276
State Street Bank,
7.35s, 6/15/26 1,700 1,767,609
TRW, Inc., Medium Term Notes,
9.35s, 6/4/20 900 1,080,315
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST, $42,736,671) $ 44,078,782
------------
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.2%
- -------------------------------------------------------------------------------
FACE AMOUNT
NAME OF COMPANY (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Associates Corp. of North America,
6.5s, 1/02/97 $ 3,624 $ 3,623,346
------------
TOTAL SHORT-TERM OBLIGATIONS,
AT VALUE $ 3,623,346
------------
TOTAL INVESTMENTS AT VALUE - 99.4%
(IDENTIFIED COST, $235,084,661) $299,687,272
OTHER ASSETS, LESS LIABILITIES - 0.6% 1,873,510
------------
NET ASSETS - 100% $301,560,782
============
*Non-income producing security.
ADR - American Depository Receipt
REIT - Real Estate Investment Trust
PAC - Planned Amortization Class
CMO - Collateralized Mortgage Obligations
The accompanying notes are an integral part of the financial statements
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$235,084,661) $299,687,272
Cash 2,239
Receivable for investments sold 156,885
Interest receivable 1,386,807
Dividends receivable 333,187
Tax reclaim receivable 15,160
Deferred organization expenses (Note 1E) 5,774
------------
Total assets $301,587,324
LIABILITIES:
Payable for Trustees' fees $ 3,712
Accrued expenses 22,830
-------
Total liabilities 26,542
------------
NET ASSETS applicable to investors' interest in Portfolio $301,560,782
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $236,958,175
Unrealized appreciation of investments (computed on
the basis of identified cost) 64,602,611
------------
Total net assets $301,560,782
============
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):
Interest income $ 7,063,471
Dividend income (net of withholding tax of
$40,973) 4,218,017
-----------
Total income $11,281,488
-----------
Expenses --
Investment adviser fee (Note 3) $ 1,794,096
Compensation of Trustees not members of the
Investment Adviser's organization (Note 3) 13,630
Custodian fee 151,240
Legal and accounting services 40,594
Amortization of organization expenses (Note 1E) 3,203
Miscellaneous 10,717
-----------
Total expenses 2,013,480
-----------
Net investment income $ 9,268,008
-----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on investment transactions
(identified cost basis) $30,748,316
Change in unrealized appreciation of investments (2,562,219)
-----------
Net realized and unrealized gain on investments 28,186,097
-----------
Net increase in net assets resulting from
operations $37,454,105
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------- YEAR ENDED
1996 1995** JANUARY 31, 1995
------------- ------------ ---------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
<S> <C> <C> <C>
Net investment income $ 9,268,008 $ 8,692,310 $ 9,351,946
Net realized gain on investment transactions 30,748,316 9,116,976 1,467,119
Change in unrealized appreciation of investments (2,562,219) 43,494,132 (20,681,070)
------------ ------------ ------------
Net increase (decrease) in net assets from
operations $ 37,454,105 $ 61,303,418 $ (9,862,005)
------------ ------------ ------------
Capital transactions --
Contributions $ 32,919,522 $ 32,319,917 $ 29,380,822
Withdrawals (45,187,645) (34,406,030) (32,695,351)
------------ ------------ ------------
Net decrease in net assets resulting from
capital transactions $(12,268,123) $ (2,086,113) $ (3,314,529)
------------ ------------ ------------
Net increase (decrease) in net assets $ 25,185,982 $ 59,217,305 $(13,176,534)
NET ASSETS:
At beginning of year 276,374,800 217,157,495 230,334,029
------------ ------------ ------------
At end of year $301,560,782 $276,374,800 $217,157,495
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED JANUARY 31,
---------------------- ---------------------
1996 1995** 1995 1994*
-------- -------- -------- --------
RATIOS (to average daily net assets):
<S> <C> <C> <C> <C>
Expenses 0.70% 0.70% 0.71%+ 0.69%+
Net investment income 3.23% 4.25% 3.83%+ 3.69%+
PORTFOLIO TURNOVER 64% 28% 47% 15%
AVERAGE COMMISSION RATE PAID(1) $0.0591 -- -- --
</TABLE>
+Computed on an annualized basis.
*For the period from the start of business, October 28, 1993, to
January 31, 1994. **For the eleven month period ended December 31, 1995
(Note 6).
(1)Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the fiscal year by the total number
of shares purchased and sold during the fiscal year for which
commissions were charged. For fiscal years beginning on or after
September 1, 1995, a fund is required to disclose its average
commission rate per share for security trades on which commissions are
charged.
The accompanying notes are an integral part of the financial statements
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) SIGNIFICANT ACCOUNTING POLICIES
Investors Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940, as a diversified, open-end, management investment
company, which was organized as a trust under the laws of the State of New
York in 1992. The Declaration of Trust permits the Trustees to issue interests
in the Portfolio. The following is a summary of significant accounting
policies of the Portfolio. The policies are in conformity with generally
accepted accounting principles.
A. INVESTMENT VALUATIONS -- Securities listed on securities exchanges or on
the NASDAQ National Market System are valued at closing sales prices. Listed
or unlisted investments for which closing sale prices are not available are
valued at the mean between latest bid and asked prices. Debt investments
(other than mortgage-backed "pass-through" securities) are valued at prices
furnished by a pricing service. Mortgage-backed "pass through" securities are
valued using a matrix pricing system which takes into account closing bond
valuations, yield differentials, anticipated prepayments and interest rates.
Short-term obligations maturing in 60 days or less, are valued at amortized
cost, which approximates value. All other investments are valued at fair value
using methods determined in good faith by or at the direction of the Trustees.
B. INCOME -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount on debt investments when
required for federal income tax purposes. Dividend income is recorded on the
ex-dividend date. Dividend income may include dividends that represent returns
of capital for federal income
tax purposes.
C. FEDERAL 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 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 taxable income, net realized capital
gains, and any other items of income, gain, loss, deduction or credit.
D. 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.
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. SECURITY TRANSACTIONS -- Investment transactions are accounted for on
the date the investments are purchased or sold. Realized gains and losses on
the sale of investments are determined on the identified cost basis.
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.
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(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $126,423,298 and $122,238,451, respectively.
Purchases and sales of U.S. Government/agency securities aggregated $57,614,455
and $37,447,328, respectively.
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(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 computed at the monthly rate of 5/96 of 1% (0.625% annually) of the
Portfolio's average daily net assets up to $300 million and at reduced rates as
daily net assets exceed that level. For the year ended December 31, 1996, the
fee was equivalent to 0.625% of the Portfolio's average net assets for such
period and amounted to $1,794,096. 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 service 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.
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(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement
with a 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.
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(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in the value of investments owned at December 31, 1996, as
computed on a federal income tax basis, are as follows:
Aggregate cost $234,809,581
============
Gross unrealized appreciation $ 69,150,437
Gross unrealized depreciation 4,272,746
------------
Net unrealized appreciation $ 64,877,691
============
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(6) CHANGE IN FISCAL YEAR END
The Portfolio changed its fiscal year end from January 31, to December 31,
effective December 31, 1995.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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TO THE BOARD OF TRUSTEES AND INVESTORS OF
INVESTORS PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of
Investors Portfolio, including the portfolio of investments, as of December 31,
1996, the related statement of operations for the year then ended and the
statement of changes in net assets and the supplementary data for the year then
ended, the eleven month period ended December 31, 1995, and for the year ended
January 31, 1995, and the supplementary data for the period from October 28,
1993 (start of business) to January 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. 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
Investors Portfolio, as of December 31, 1996, the results of its operations for
the year then ended, the changes in its net assets and the supplementary data
for the year then ended, the eleven month period ended December 31, 1995, and
for the year ended January 31, 1995 and the supplementary data for the period
from October 28, 1993 (start of business) to January 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
INVESTORS JAMES B. HAWKES M. DOZIER GARDNER
FUND President, Trustee Vice Chairman, Eaton Vance Management
24 Federal Street EDWARD E. SMILEY, JR. DONALD R. DWIGHT
Boston, MA 02110 Vice President President, Dwight Partners, Inc.
JAMES L. O'CONNOR Chairman, Newspapers of
Treasurer New England, Inc.
THOMAS OTIS SAMUEL L. HAYES, III
Secretary Jacob H. Schiff Professor of
Investment Banking, Harvard
University Graduate School of
Business Administration
NORTON H. REAMER
President, United Asset Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
--------------------------------------------------------------
INVESTORS OFFICERS TRUSTEES
PORTFOLIO M. DOZIER GARDNER DONALD R. DWIGHT
24 Federal Street President, Trustee President,
Boston, MA 02110 JAMES B. HAWKES Dwight Partners, Inc.
Vice President, Trustee Chairman, Newspapers of
THOMAS E. FAUST, JR. New England, Inc.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff Professor of
MICHAEL B. TERRY Investment Banking,
Vice President Harvard University
JAMES L. O'CONNOR Graduate School of
Treasurer Business Administration
THOMAS OTIS NORTON H. REAMER
Secretary President, United Asset
Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
