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[LOGO OF EATON VANCE
MUTUAL FUNDS APPEARS HERE] [PHOTO APPEARS HERE]
Semiannual Report June 30, 1998
EATON VANCE
[PHOTO APPEARS HERE]
BALANCED
FUND
Global Management--Global Distribution
[PHOTO APPEARS HERE]
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Eaton Vance Balanced Fund as of June 30, 1998
INVESTMENT UPDATE
[PHOTO OF THOMAS E. FAUST JR.
APPEARS HERE]
Thomas E. Faust Jr.
Portfolio Manager
Investment Environment
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The Economy
. In the first half of 1998, the U.S. economy continued to benefit from a
confluence of favorable trends, including sound growth, historically low
unemployment, and tame inflation.
. Gross Domestic Product increased by a stronger-than-expected 5.4% in the first
quarter, but slowed to a 1.4% rate in the second quarter. Meanwhile, the
unemployment rate declined from 4.7% in December, 1997, to 4.5% in June, 1998.
The Consumer Price Index rose just 1.6% in the twelve months ended June, 1998.
. Investors continue to evaluate the potential effect of the Asian economic
crisis on the U.S. economy. Thus far in 1998, lower prices for Asian imports
have led to lower prices for imported manufactured goods overall, contributing
to already-low inflation.
The Stock Market
. The U.S. stock market surged to record levels in the first six months of the
year, with the S&P 500 Index registering a total return of 17.7%.* The Index's
strength reflected the favorable economic backdrop, a good earnings outlook,
and a continuing flight to quality by global investors.
. The market was characterized by increasing volatility during the period. In
the six weeks from early May through mid-June, the market underwent a 6%
correction as high valuations and fears of lackluster second-quarter earnings
sent the market lower. Investor confidence was restored by month-end, however,
with blue chips again providing market leadership.
. The low inflation outlook led to declining interest rates and positive returns
for the bond market. The yield on the 30-year Treasury bond fell from 5.92% at
December 31, 1997, to 5.63% at June 30, 1998. The Lehman Government/Corporate
Bond Index had a total return of 4.2% during the period.*
The Fund
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The Past Six Months
. During the six months ended June 30, 1998, the Fund's Class A shares had a
total return of 10.5%. This return resulted from an increase in net asset
value (NAV) to $9.51 per share on June 30, 1998 from $8.70 on December 31,
1997, and the reinvestment of $0.10 in dividends and $0.0035 in capital gain
distributions./1/
. The Fund's Class B shares had a total return of 10.1% during the period, the
result of an increase in NAV to $14.95 per share from $13.68 per share, and
the reinvestment of $0.10 in dividends and $0.0035 in capital gain
distributions./1/
. The Fund's Class C shares had a total return of 10.1% during the period, the
result of an increase in NAV to $14.47 per share from $13.24 per share, and
the reinvestment of $0.10 in dividends and $0.0035 in capital gain
distributions./1/
. By comparison, the average total return for mutual funds in the Lipper
Balanced Funds Category was 9.0% during this period./2/
Portfolio Strategy
. The Portfolio maintained a strong exposure to equities - 66% of the
Portfolio's net assets at June 30. Insurance and drug stocks represented the
Portfolio's largest weightings. Warner-Lambert Co., the Portfolio's largest
holding, rose 67.8% during the period. The company's Lipitor drug has recorded
rapid sales growth due to higher efficacy rates than its competitors in the
cholesterol-lowering field. In the insurance sector, General Re Corp. was up
19.6%. The leader in re-insurance agreed to be acquired by Berkshire Hathaway,
Inc.
. Another major holding, Home Depot, was up 41.1% in the first half as a
beneficiary of lower interest rates and a surge in home remodellings. CVS
Corp., up 21.6%, is a fast-growing pharmacy chain operating more than 4,000
stores in 25 states. The company has enjoyed rapid same store sales in the
past year, as well as the benefits of an aggressive acquisition strategy.
. Amid declining interest rates, the Portfolio's fixed-income segment performed
well. Corporate put bonds provided a wide exposure to the U.S. economy,
including financial, industrial and consumer goods companies.
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Fund Information
as of June 30, 1998
Performance/2/ Class A Class B Class C
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Average Annual Total Returns (at net asset value)
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One Year 19.2% 18.1% 17.7%
Five Years 15.6 N.A. N.A.
Ten Years 13.3 N.A. N.A.
Life of Fund+ 10.3 14.2 13.6
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
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One Year 12.4% 13.1% 16.7%
Five Years 14.2 N.A. N.A.
Ten Years 12.7 N.A. N.A.
Life of Fund+ 10.2 14.0 13.6
+Inception Dates - Class A: 4/1/32; Class B: 11/2/93; Class C:11/2/93
Ten Largest Equity Holdings/3/
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By total net assets
Warner-Lambert Co. 2.6%
Sofamor-Danek Group, Inc. 2.4
Home Depot, Inc. (The) 2.3
General Re Corp. 2.1
CVS Corp. 2.1
Unilever ADR 2.0
Mutual Risk Management Ltd. 1.9
Norwest Corp. 1.9
SunAmerica, Inc. 1.8
Allstate Corp., (The) 1.5
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Mutual fund shares are not insured 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.
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/1/This return does not include the maximum 5.75% sales charge for Class A
shares or the applicable contingent deferred sales charges (CDSC) for Class B
and C shares. /2/ Returns are historical and are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns for Class A reflect the maximum 5.75% sales charge. SEC returns for
Class B reflect applicable CDSC based on the following schedule: 5% - 1st and
2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
SEC 1 - Year return for Class C reflects 1% CDSC. /3/ As of 6/30/98; may not be
representative of the Portfolio's current or future investments. The ten largest
holdings accounted for 20.6% of the Portfolio's investments. *It is not possible
to invest directly in an Index or Lipper Category.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
2
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Eaton Vance Balanced Fund as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
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Investment in Balanced Portfolio, at value
(identified cost, $265,043,448) $359,292,977
Receivable for Fund shares sold 255,641
Deferred organization expenses 8,276
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Total assets $359,556,894
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Liabilities
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Payable for Fund shares redeemed $ 570,679
Payable to affiliate for Trustees' fees 1,900
Other accrued expenses 203,408
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Total liabilities $ 775,987
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Net Assets $358,780,907
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Sources of Net Assets
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Paid-in capital $233,980,909
Accumulated undistributed net realized gain from Portfolio
(computed on the basis of identified cost) 29,774,117
Accumulated undistributed net investment income 776,352
Net unrealized appreciation from Portfolio (computed on the
basis of identified cost) 94,249,529
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Total $358,780,907
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Class A Shares
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Net Assets $281,270,579
Shares Outstanding 29,564,427
Net Asset Value and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 9.51
Maximum Offering Price Per Share
(100 / 94.25 of $9.51) $ 10.09
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Class B Shares
- --------------------------------------------------------------------------------
Net Assets $ 69,025,929
Shares Outstanding 4,616,607
Net Asset Value, Offering Price and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 14.95
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Class C Shares
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Net Assets $ 8,484,399
Shares Outstanding 586,431
Net Asset Value, Offering Price and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 14.47
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On sales of $50,000 or more, the offering price of Class A shares is reduced.
Statement of Operations
For the Six Months Ended
June 30, 1998
Investment Income
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Dividends allocated from Portfolio (net of
foreign taxes, $39,230) $ 2,512,480
Interest allocated from Portfolio 3,557,199
Expenses allocated from Portfolio (1,191,316)
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Net investment income from Portfolio $ 4,878,363
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Expenses
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Trustees fees and expenses $ 2,368
Distribution and service fees
Class A 152,201
Class B 310,819
Class C 38,430
Transfer and dividend disbursing agent fees 239,476
Printing and postage 37,060
Registration fees 24,748
Custodian fee 18,887
Legal and accounting services 8,914
Amortization of organization expenses 7,964
Miscellaneous 10,545
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Total expenses $ 851,412
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Net investment income $ 4,026,951
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Realized and Unrealized
Gain (Loss) from Portfolio
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Net realized gain (loss) --
Investment transactions (identified cost basis) $ 29,860,207
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Net realized gain $ 29,860,207
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Change in unrealized appreciation (depreciation) --
Investments $ 316,121
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Net change in unrealized appreciation (depreciation) $ 316,121
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Net realized and unrealized gain $ 30,176,328
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Net increase in net assets from operations $ 34,203,279
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See notes to financial statements
3
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Eaton Vance Balanced Fund as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 1998 Year Ended
in Net Assets (Unaudited) December 31, 1997
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From operations --
Net investment income $ 4,026,951 $ 6,043,945
Net realized gain 29,860,207 20,676,352
Net change in unrealized
appreciation (depreciation) 316,121 23,123,556
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Net increase in net assets
from operations $ 34,203,279 $ 49,843,853
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Distributions to shareholders --
From net investment income
Class A $ (2,976,268) $ (5,802,058)
Class B (448,104) --
Class C (57,979) --
From net realized gain
Class A (108,126) (25,427,692)
Class B (16,47) --
Class C (1,924) --
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Total distributions to shareholders $ (3,608,448) $(31,229,750)
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Transactions in shares of
beneficial interest --
Proceeds from sale of shares
Class A $ 4,266,627 $ 8,832,967
Class B 8,825,210 --
Class C 2,013,230 --
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 1,727,391 22,842,764
Class B 403,526 --
Class C 57,603 --
Cost of shares redeemed
Class A (12,767,591) (26,777,414)
Class B (5,312,795) --
Class C (1,566,441) --
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Net increase (decrease) in net assets
from Fund share transactions $ (2,353,240) $ 4,898,317
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Contribution from EV Marathon and
Classic Investors Fund $ 66,809,498 $ --
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Net increase in net assets $ 95,051,089 $ 23,512,420
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Six Months Ended
June 30, 1998 Year Ended
Net Assets (Unaudited) December 31, 1997
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At beginning of period $263,729,818 $240,217,398
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At end of period $358,780,907 $263,729,818
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Accumulated undistributed net
investment income included in net
assets
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At end of period $ 776,352 $ 205,985
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See notes to financial statements
4
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Eaton Vance Balanced Fund as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31, Year Ended January 31,
June 30, 1998 ----------------------------- -----------------------------
(Unaudited) 1997 1996 1995* 1995 1994 1993
----------------------------- ----------------------------- -----------------------------
Class A Class B Class C Class A Class A Class A Class A Class A Class A
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of
period $ 8.700 $ 13.680 $ 13.240 $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390 $ 7.500
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Income (loss) from operations
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Net investment income $ 0.115 $ 0.118 $ 0.112 $ 0.208 $ 0.254 $ 0.254 $ 0.283 $ 0.217 $ 0.342
Net realized and unrealized gain
(loss) 0.799 1.256 1.222 1.492 0.821 1.641 (0.623) 0.833 0.318
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Total income (loss) from operations $ 0.914 $ 1.374 $ 1.334 $ 1.700 $ 1.075 $ 1.895 $ (0.340) $ 1.050 $ 0.660
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Less distributions
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From net investment income $ (0.100) $ (0.100) $ (0.100) $ (0.200) $ (0.254) $ (0.248) $ (0.275) $ (0.307) $ (0.360)
In excess of net investment income -- -- -- -- (0.001) -- -- (0.008) --
From net realized gain (0.004) (0.004) (0.004) (0.890) (0.880) (0.337) (0.145) (0.525) (0.410)
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Total distributions $ (0.104) $ (0.104) $ (0.104) $ (1.090) $ (1.135) $ (0.585) $ (0.420) $ (0.840) $ (0.770)
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Net asset value -- End of period $ 9.510 $ 14.950 $ 14.470 $ 8.700 $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390
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Total Return/(1)/ 10.53% 10.05% 10.09% 21.60% 13.61% 28.36% (4.45)% 15.13% 9.30%
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Ratios/Supplemental Data
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Net assets, end of period (000's
omitted) $281,271 $ 69,026 $ 8,484 $263,730 $240,217 $236,870 $200,419 $227,402 $212,545
Ratios (As a percentage of average
daily net assets):
Expenses/(2)/ 1.00%+ 1.85%+ 1.85%+ 0.97% 0.93% 0.95%+ 0.91% 0.90% 0.89%
Net investment income 2.49%+ 1.64%+ 1.64%+ 2.35% 3.03% 3.60%+ 4.05% 4.07% 4.62%
Portfolio turnover/(3)/ -- -- -- -- -- -- -- 44% 32%
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</TABLE>
+ Annualized.
* For the eleven month period ended December 31, 1995.
/(1)/ 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
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
/(2)/ Includes the Fund's share of its Portfolio's allocated expenses.
/(3)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred all of
its investable assets to the Portfolio is shown in the Portfolio's
financial statements which are included elsewhere in this report.
See notes to financial statements
5
<PAGE>
Eaton Vance Balanced Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
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Eaton Vance Balanced Fund (the Fund) (formerly the Eaton Vance Investors
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 offers three
classes of shares. Class A shares are sold subject to a sales charge imposed
at the time of purchase. Class B and Class C shares are sold at net asset
value and are subject to a contingent deferred sales charge (See Note 6). All
classes of shares have equal rights to assets and voting privileges. Realized
and unrealized gains and losses and net investment income, other than class
specific expenses, are allocated daily to each class of shares based on the
relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its distribution plan and certain other class
specific expenses. The Fund invests all of its investable assets in interests
in the Balanced 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 (100% at June 30, 1998). 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. Prior to the Fund's investment in the Portfolio, the
Fund held its investments directly. For investments held directly, interest
income was determined on the basis of interest accrued, adjusted for
amortization of premium or discount when required for federal income tax
purposes and dividend income was recorded on the ex-dividend date.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal
income or excise tax is necessary.
D Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on a
straight-line basis over five years.
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average daily cash balances the Fund or Portfolio maintains with IBT.
All significant credit balances used to reduce the Fund's custodian fees are
reflected as a reduction of operating expenses on the Statement of
Operations.
F Other -- Investment transactions are accounted for on a trade-date 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 revenue and expense during the reporting period. Actual results
could differ from those estimates.
H Interim Financial Statements -- The interim financial statements relating
to June 30, 1998 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
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The Fund's present policy is to pay quarterly dividends from net investment
income allocated to the Fund by the Portfolio (less the Fund's direct
expenses) and to distribute
6
<PAGE>
Eaton Vance Balanced Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
at least annually all or substantially all of the net realized capital gains
(reduced by any available capital loss carryforwards from prior years) so
allocated. Shareholders may reinvest all distributions in shares of the Fund
at the per share net asset value as of the close of business on the ex-
dividend date. The Fund distinguishes between distributions on a tax basis
and a financial reporting basis. Generally accepted accounting principles
require that only distributions in excess of tax basis earnings and profits
be reported in the financial statements as a return of capital. 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.
3 Shares of Beneficial Interest
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The Fund's 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:
Six Months Ended
June 30, 1998 Year Ended
Class A (Unaudited) December 31, 1997
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Sales 456,599 1,006,180
Issued to shareholders electing to
receive payments of distributions
in Fund shares 185,329 2,664,443
Redemptions (1,384,520) (3,051,117)
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Net increase (decrease) (742,592) 619,506
-----------------------------------------------------------------------------
Six Months Ended
June 30, 1998
Class B (Unaudited)
-----------------------------------------------------------------------------
Sales 600,807
Issued to shareholders electing to
receive payment of distributions
in Fund shares 27,470
Redemptions (361,543)
Issued to EV Marathon Investors Fund shareholders 4,349,873
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Net increase 4,616,607
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Six Months Ended
June 30, 1998
Class C (Unaudited)
-----------------------------------------------------------------------------
Sales 140,723
Issued to shareholders electing to
receive payment of distributions
in Fund shares 4,057
Redemptions (110,355)
Issued to EV Classic Investors Fund shareholders 552,006
-----------------------------------------------------------------------------
Net increase 586,431
-----------------------------------------------------------------------------
4 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 2 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. Eaton Vance Distributors, Inc. (EVD), a subsidiary of
EVM and the Fund's principal underwriter, received $11,396 from the Eaton
Vance Balanced Fund as its portion of the sales charge on sales of Class A
shares for the six months ended June 30, 1998.
Certain of the officers and Trustees of the Fund and Portfolio are officers
and directors/trustees of the above organizations.
5 Distribution Plan
-----------------------------------------------------------------------------
The Fund has adopted distribution plans (Class B Plan and Class C Plan)
pursuant to Rule 12b-1 under the Investment Company Act of 1940 and a service
plan (Class A Plan, the Plans). The Plans require the Fund to pay the
Principal Underwriter, Eaton Vance Distributors, Inc. (EVD) amounts equal to
1/365 of 0.75% of the Fund's average daily net assets attributable to both
Class B and Class C shares 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) 5% and 6.25% of
the aggregate amount received by the Fund for the Class B and Class C shares
sold, respectively plus, (ii) distribution fees
7
<PAGE>
Eaton Vance Balanced Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
calculated by applying the rate of 1% over the prevailing prime rate to the
outstanding balance of Uncovered Distribution Charges of EVD of each
respective class reduced by the aggregate amount of contingent deferred sales
charges (see Note 6) and daily amounts theretofore paid to EVD by each
respective class. The Fund paid or accrued $243,465 and $30,017 for Class B
and Class C shares, respectively, to EVD for the six months ended June 30,
1998, representing 0.75% (annualized) of the average daily net assets for
Class B and Class C shares. At June 30, 1998, the amount of Uncovered
Distribution Charges EVD calculated under the Plan was approximately
$1,580,000 and $1,082,000 for Class B and Class C shares, respectively.
In addition, the Plans also authorize each class to make payments of service
fees to EVD, Authorized Firms and other persons in amounts not exceeding
0.25% of the Fund's average daily net assets attributable to Class A, Class B
and Class C shares for each fiscal year. The Trustees have initially
implemented the Plans by authorizing each class to make quarterly payments of
service fees to EVD and Authorized Firms in amounts not expected to exceed
0.25% per annum of the Fund's average daily net assets attributable to Class
A and Class B shares based on the value of Fund shares sold by such persons
and remaining outstanding for at least one year. The Class C plan requires
the Fund to make monthly payments of service fees in amounts not expected to
exceed 0.25% of the Fund's average daily net assets attributable to Class C
shares for any fiscal year. Service fee payments will be made for personal
services and/or the maintenance of shareholder accounts. Service fees are
separate and distinct from the sales commissions and distribution fees
payable by the Fund to EVD, and, as such are not subject to automatic
discontinuance when there are no outstanding Uncovered Distribution Charges
of EVD. Service fee payments for the six months ended June 30, 1998 amounted
to $152,201, $67,354, and $8,413 for Class A, Class B, and Class C shares,
respectively.
6 Contingent Deferred Sales Charge
-----------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Class B shares made within six years of purchase. A CDSC of 1% is imposed on
any redemption of Class C shares made within one year of purchase. Generally,
the CDSC is based upon the lower of the net asset value at date of redemption
or date of purchase. No charge is levied on shares acquired by reinvestment
of dividends or capital gains distributions. Class B CDSC is imposed at
declining rates that begin at 5% in the case of redemptions in the first and
second year after purchase, declining one percentage point each subsequent
year. No CDSC is levied on shares which have been sold to EVM or its
affiliates or to their respective employees or clients. CDSC charges are paid
to EVD to reduce the amount of Uncovered Distribution Charges calculated
under each Fund's Distribution Plan (See Note 5). CDSC charges received when
no Uncovered Distribution Charges exist will be retained by the Fund. EVD
received approximately $56,000 and $1,000 of CDSC paid by shareholders for
Class B and Class C shares, respectively, for the six months ended June 30,
1998.
7 Investment Transactions
-----------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the six
months ended June 30, 1998, aggregated $16,165,337 and $21,634,273
respectively.
8 Transfer of Net Assets
-----------------------------------------------------------------------------
On January 1, 1998, EV Traditional Investors Fund received the net assets of
the EV Marathon Investors Fund and EV Classic Investors Fund pursuant to an
Agreement and Plan of Reorganization dated June 23, 1997. In accordance with
the agreement, EV Traditional Investors Fund, at the closing, issued
4,349,873 Class B shares and 552,006 Class C shares of the Fund having an
aggregate value of $59,501,704 and $7,307,794, respectively. As a result the
Fund issued one Class B share and one Class C share for each share of EV
Marathon Investors Fund and EV Classic Investors Fund, respectively. The
transaction was structured for tax purposes to qualify as a tax free
reorganization under the Internal Revenue Code. The EV Marathon Investors
Fund's and EV Classic Investors Fund's net assets at the date of the
transaction were $59,501,704 and $7,307,794, respectively, including
$11,654,296 and $1,851,259 of unrealized appreciation. Directly after the
merger, the combined net assets of the Eaton Vance Investors Fund (formerly
"EV Traditional Investors Fund") were $330,539,316 with a net asset value of
$8.70, $13.68 and $13.24 for Class A, Class B and Class C, respectively.
8
<PAGE>
Eaton Vance Balanced Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
9 Name Change
-----------------------------------------------------------------------------
Effective January 1, 1998, EV Traditional Investors Fund changed its name to
Eaton Vance Investors Fund. Effective May 1, 1998, Eaton Vance Investors Fund
changed its name to Eaton Vance Balanced Fund.
9
<PAGE>
Balanced Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks -- 66.0%
Security Shares Value
- -------------------------------------------------------------------------
Aerospace and Defense -- 0.9%
- -------------------------------------------------------------------------
General Motors Corp., Class H* 60,000 $ 2,827,500
Raytheon Co., Class A 3,826 220,473
- -------------------------------------------------------------------------
$ 3,047,973
- -------------------------------------------------------------------------
Auto and Parts -- 2.5%
- -------------------------------------------------------------------------
General Motors Corp. 60,000 $ 4,008,750
Magna International, Inc., Class A 75,000 5,146,875
- -------------------------------------------------------------------------
$ 9,155,625
- -------------------------------------------------------------------------
Banks - Regional -- 1.9%
- -------------------------------------------------------------------------
Norwest Corp. 180,000 $ 6,727,500
- -------------------------------------------------------------------------
$ 6,727,500
- -------------------------------------------------------------------------
Banks and Money Services -- 0.6%
- -------------------------------------------------------------------------
Banco Latinoamericano de
Exportaciones 75,000 $ 2,306,250
- -------------------------------------------------------------------------
$ 2,306,250
- -------------------------------------------------------------------------
Beverages -- 0.9%
- -------------------------------------------------------------------------
PepsiCo, Inc. 80,000 $ 3,295,000
- -------------------------------------------------------------------------
$ 3,295,000
- -------------------------------------------------------------------------
Chemicals -- 2.1%
- -------------------------------------------------------------------------
Monsanto Co. 65,000 $ 3,631,875
Praxair, Inc. 80,000 3,745,000
- -------------------------------------------------------------------------
$ 7,376,875
- -------------------------------------------------------------------------
Computers and Business Equipment -- 1.0%
- -------------------------------------------------------------------------
Hewlett-Packard Co. 60,000 $ 3,592,500
- -------------------------------------------------------------------------
$ 3,592,500
- -------------------------------------------------------------------------
Drugs -- 8.5%
- -------------------------------------------------------------------------
Elan Corp., PLC ADR* 75,000 $ 4,823,438
Lilly (Eli) & Co. 70,000 4,624,375
Pfizer, Inc. 37,800 4,108,388
Sepracor, Inc.* 80,000 3,320,000
SmithKline Beecham PLC ADR 70,000 4,235,000
- -------------------------------------------------------------------------
Warner-Lambert Co. 135,000 9,365,624
- -------------------------------------------------------------------------
$ 30,476,825
- -------------------------------------------------------------------------
Electric Utilities -- 1.1%
- -------------------------------------------------------------------------
The Southern Co. 140,000 $ 3,876,250
- -------------------------------------------------------------------------
$ 3,876,250
- -------------------------------------------------------------------------
Electronics - Semiconductors -- 2.2%
- -------------------------------------------------------------------------
Intel Corp. 70,000 $ 5,188,750
LSI Logic, Inc.* 120,000 2,767,500
- -------------------------------------------------------------------------
$ 7,956,250
- -------------------------------------------------------------------------
Environmental Services -- 1.2%
- -------------------------------------------------------------------------
U.S.A. Waste Services, Inc.* 90,000 $ 4,443,750
- -------------------------------------------------------------------------
$ 4,443,750
- -------------------------------------------------------------------------
Financial - Miscellaneous -- 3.4%
- -------------------------------------------------------------------------
Federal National Mortgage
Association 75,000 $ 4,556,250
MBNA Corp. 120,000 3,960,000
MGIC Investment Corp. 65,000 3,709,063
- -------------------------------------------------------------------------
$ 12,225,313
- -------------------------------------------------------------------------
Foods -- 3.0%
- -------------------------------------------------------------------------
Tyson Foods, Inc. 164,700 $ 3,571,931
Unilever ADR 92,000 7,262,250
- -------------------------------------------------------------------------
$ 10,834,181
- -------------------------------------------------------------------------
Insurance -- 7.3%
- -------------------------------------------------------------------------
Allstate Corp. (The) 60,000 $ 5,493,750
General RE Corp. 30,000 7,605,000
Mutual Risk Management Ltd. 186,600 6,799,238
SunAmerica, Inc. 110,000 6,318,125
- -------------------------------------------------------------------------
$ 26,216,113
- -------------------------------------------------------------------------
Machinery -- 1.1%
- -------------------------------------------------------------------------
Deere and Co. 75,000 $ 3,965,625
- -------------------------------------------------------------------------
$ 3,965,625
- -------------------------------------------------------------------------
See notes to financial statements
10
<PAGE>
Balanced Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- -------------------------------------------------------------------------
Medical Products -- 4.7%
- -------------------------------------------------------------------------
Baxter International, Inc. 55,000 $ 2,959,688
Boston Scientific Corp.* 75,000 5,371,875
Sofamor Danek Group, Inc.* 100,300 8,682,218
- -------------------------------------------------------------------------
$ 17,013,781
- -------------------------------------------------------------------------
Metals and Minerals -- 2.1%
- -------------------------------------------------------------------------
J & L Specialty Steel, Inc. 200,000 $ 1,187,500
Potash Corp. of Saskatchewan** 55,000 4,155,938
Steel Dynamics Corp.* 150,000 2,081,250
- -------------------------------------------------------------------------
$ 7,424,688
- -------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.8%
- -------------------------------------------------------------------------
Rowan Companies, Inc.* 140,000 $ 2,721,250
- -------------------------------------------------------------------------
$ 2,721,250
- -------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 2.0%
- -------------------------------------------------------------------------
Anadarko Petroleum Corp. 60,000 $ 4,031,250
Triton Energy Ltd.* 90,000 3,211,875
- -------------------------------------------------------------------------
$ 7,243,125
- -------------------------------------------------------------------------
Oil and Gas - Integrated -- 2.2%
- -------------------------------------------------------------------------
Exxon Corp. 67,280 $ 4,797,905
Mobil Corp. 40,000 3,065,000
- -------------------------------------------------------------------------
$ 7,862,905
- -------------------------------------------------------------------------
Paper and Forest Products -- 0.8%
- -------------------------------------------------------------------------
Plum Creek Timber Co., L.P. 90,000 $ 2,705,625
- -------------------------------------------------------------------------
$ 2,705,625
- -------------------------------------------------------------------------
Publishing -- 2.6%
- -------------------------------------------------------------------------
Central Newspapers, Inc., Class A 70,000 $ 4,882,500
McGraw-Hill Companies, Inc. (The) 56,500 4,608,281
- -------------------------------------------------------------------------
$ 9,490,781
- -------------------------------------------------------------------------
REITS -- 3.3%
- -------------------------------------------------------------------------
Equity Office Properties Trust 110,000 $ 3,121,250
Equity Residential Properties Trust 101,400 4,810,163
Security Capital Group 6,982 2,400
Security Capital Industrial Trust 150,000 3,750,000
- -------------------------------------------------------------------------
$ 11,683,813
- -------------------------------------------------------------------------
Retail - Food and Drug -- 3.4%
- -------------------------------------------------------------------------
CVS Corp. 190,000 $ 7,398,125
Safeway, Inc.* 120,000 4,882,500
- -------------------------------------------------------------------------
$ 12,280,625
- -------------------------------------------------------------------------
Retail - Specialty and Apparel -- 4.0%
- -------------------------------------------------------------------------
Fastenal Co. 52,500 $ 2,437,969
Home Depot, Inc. (The) 100,000 8,306,249
Republic Industries, Inc.* 150,000 3,750,000
- -------------------------------------------------------------------------
$ 14,494,218
- -------------------------------------------------------------------------
Specialty Chemicals and Materials -- 1.4%
- -------------------------------------------------------------------------
Corning, Inc. 80,000 $ 2,780,000
Millipore Corp. 80,000 2,180,000
- -------------------------------------------------------------------------
$ 4,960,000
- -------------------------------------------------------------------------
Telephone Utilities -- 1.0%
- -------------------------------------------------------------------------
Ameritech Corp. 80,896 $ 3,630,208
- -------------------------------------------------------------------------
$ 3,630,208
- -------------------------------------------------------------------------
Total Common Stocks
(identified cost $146,306,236) $237,007,049
- -------------------------------------------------------------------------
Convertible Preferred Stock -- 0.7%
Security Shares Value
- -------------------------------------------------------------------------
Metals - Gold -- 0.7%
- -------------------------------------------------------------------------
Freeport McMoRan Copper & Gold,
5% Series CV 125,000 $ 2,437,500
- -------------------------------------------------------------------------
$ 2,437,500
- -------------------------------------------------------------------------
Total Convertible Preferred Stock
(identified cost $2,872,500) $ 2,437,500
- -------------------------------------------------------------------------
See notes to financial statements
11
<PAGE>
Balanced Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Corporate Bonds -- 18.7%
Principal
Amount
Security (000's Omitted) Value
- -------------------------------------------------------------------------
Air Products and Chemicals, Inc.,
7.34%, 6/15/26 $ 720 $ 796,010
Associates Corp., N.A., 5.96%,
5/15/37 4,000 4,162,400
Bell Telephone Co., 8.35%, 12/15/30 3,000 3,795,030
Chesapeake Potomac Telephone Co.,
8.375%, 10/1/29 2,850 3,582,650
Commercial Credit Corp., 7.875%,
2/1/25 2,000 2,345,640
Commercial Credit Corp., 6.625%,
6/1/15 1,350 1,416,731
Connecticut Light and Power Co.,
7.875%, 10/1/24 3,775 4,523,469
General Motors Corp., 9.45%, 11/1/11 3,000 3,801,720
Grand Metropolitan Investments
Corp., 7.45%, 4/15/35 3,090 3,501,372
Intermediate American Development
Bank, 8.40%, 9/1/09 3,690 4,426,967
Intermediate American Development
Bank, 6.95%, 8/1/26 220 248,919
J.C. Penney, Inc., 7.40%, 4/1/37 2,075 2,322,195
Johnson Controls, Inc., 7.70%, 1,360 1,562,150
3/1/15
Lowe's Cos., Inc., 7.11%, 5/15/37 5,000 5,405,700
Mead Corp. (The), 6.84%, 3/1/37 2,000 2,106,500
Proctor and Gamble Co., 8.00%,
9/1/24 3,000 3,678,840
Seagram (Joseph) & Sons, Inc.,
9.65%, 8/15/18 1,030 1,362,875
State Street Bank, 7.35%, 6/15/26 2,450 2,720,799
Tennessee Valley Power Authority,
6.235%, 7/15/45 700 727,090
Tennessee Valley Power Authority,
5.88%, 4/1/36 3,350 3,496,429
Times Mirror Co., 6.61%, 9/15/27 3,250 3,415,328
Tribune Co., 6.25%, 11/10/26 1,000 1,027,690
TRW, Inc., MTN, 9.35%, 6/4/20 900 1,197,135
Willamette Industries, 7.35%, 7/1/26 1,200 1,325,664
Xerox Corp., 5.90%, 5/5/37 3,000 3,105,630
Xerox Corp., 5.875%, 6/15/37 1,000 1,037,830
- -------------------------------------------------------------------------
Total Corporate Bonds
(identified cost $62,917,215) $ 67,092,763
- -------------------------------------------------------------------------
U.S. Treasury Obligations -- 14.0%
Principal
Amount
Security (000's Omitted) Value
- -------------------------------------------------------------------------
FHLMC, PAC, CMO, Series 1206-GA,
7.00%, 3/15/18 $ 1,740 $ 1,736,918
FHLMC, PAC, CMO, Series 1258-D,
8.00%, 9/15/05 2,131 2,134,999
FHLMC, PAC, CMO, Series 34-C,
9.00%, 11/15/19 203 206,194
FHLMC, PAC, CMO, Series 41-F,
10.00%, 5/15/20 1,470 1,596,716
FNMA, PAC, CMO, Series 1990 24-E,
9.00%, 3/25/20 1,279 1,332,672
U.S. Treasury Note, 5.75%, 11/30/02 10,000 10,084,299
U.S. Treasury Note, 7.125%, 9/30/99 10,000 10,192,099
U.S. Treasury Note, 6.125%, 9/30/00 4,000 4,049,960
U.S. Treasury Note, 8.50%, 2/15/00 15,000 15,684,299
U.S. Treasury Note, 6.125%, 8/31/98 3,500 3,505,180
- -------------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost $50,715,018) $ 50,523,336
- -------------------------------------------------------------------------
Commercial Paper -- 1.6%
Principal
Amount
Security (000's Omitted) Value
- -------------------------------------------------------------------------
General Electric Capital Corp., $5,712 $ 5,712,000
6.10%, 7/1/98
- -------------------------------------------------------------------------
Total Commercial Paper
(amortized cost $5,712,000) $ 5,712,000
- -------------------------------------------------------------------------
Total Investments -- 101.0%
(identified cost $268,522,969) $362,772,648
- -------------------------------------------------------------------------
Other Assets, Less Liabilities -- (1.0)% $ (3,479,649)
- -------------------------------------------------------------------------
Net Assets -- 100% $359,292,999
- -------------------------------------------------------------------------
ADR - American Depositary Receipt
PAC - Planned Authorization Class
CMO - Collateralized Mortgage Obligations
REIT- Real Estate Investment Trust * Non-income producing security.
** Foreign security.
See notes to financial statements
12
<PAGE>
Balanced Portfolio as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost, $268,522,969) $362,772,648
Cash 1,648
Receivable for investments sold 89,394
Interest and dividends receivable 2,243,532
Tax reclaim receivable 3,377
Deferred organization expenses 520
- --------------------------------------------------------------------------------
Total assets $365,111,119
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 5,778,740
Payable to affiliate for Trustees' fees 9,950
Other accrued expenses 29,430
- --------------------------------------------------------------------------------
Total liabilities $ 5,818,120
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $359,292,999
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $265,043,320
Net unrealized appreciation (computed on the basis
of identified cost) 94,249,679
- --------------------------------------------------------------------------------
Total $359,292,999
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
June 30, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $39,230) $ 2,512,480
Interest 3,557,199
- --------------------------------------------------------------------------------
Total investment income $ 6,069,679
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 1,070,461
Trustees fees and expenses 14,977
Custodian fee 84,426
Legal and accounting services 17,100
Amortization of organization expenses 1,593
Miscellaneous 2,759
- --------------------------------------------------------------------------------
Total expenses $ 1,191,316
- --------------------------------------------------------------------------------
Net investment income $ 4,878,363
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 29,860,210
- --------------------------------------------------------------------------------
Net realized gain $ 29,860,210
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 316,120
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 316,120
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 30,176,330
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 35,054,693
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Balanced Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 1998 Year Ended
in Net Assets (Unaudited) December 31, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 4,878,363 $ 8,365,076
Net realized gain 29,860,210 24,802,364
Net change in unrealized
appreciation (depreciation) 316,120 29,330,948
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 35,054,693 $ 62,498,388
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 16,165,337 $ 27,019,040
Withdrawals (21,634,273) (61,370,968)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $ (5,468,936) $ (34,351,928)
- --------------------------------------------------------------------------------
Net increase in net assets $ 29,585,757 $ 28,146,460
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $329,707,242 $ 301,560,782
- --------------------------------------------------------------------------------
At end of period $359,292,999 $ 329,707,242
- --------------------------------------------------------------------------------
See notes to financial statements
14
<PAGE>
Balanced Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31, Year Ended January 31,
June 30, 1998 -------------------------------------- ------------------------
(Unaudited) 1997 1996 1995* 1995 1994**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------
Expenses 0.68%+ 0.69% 0.70% 0.71%+ 0.70% 0.69%+
Net investment income 2.80%+ 2.62% 3.23% 3.83%+ 4.25% 3.69%+
Portfolio Turnover 25% 37% 64% 47% 28% 15%
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $359,293 $329,707 $301,561 $276,375 $217,157 $230,334
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven month period ended December 31, 1995.
** For the period from the start of business, October 28, 1993, to January 31,
1994.
See notes to financial statements
15
<PAGE>
Balanced Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Balanced Portfolio (the "Portfolio") (formerly Investors 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 -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Listed or unlisted securities for which
closing sale prices are not available are valued at the mean between latest
bid and asked prices. Debt securities (other than mortgage-backed "pass
through" securities and short-term obligations maturing in sixty days or
less), including listed securities and securities for which price quotations
are available and forward contracts, will normally be valued on the basis of
market valuations furnished by pricing services. Mortgage-backed "pass
through" securities are valued using a matrix pricing system which takes into
account yield differentials, anticipated prepayments and interest rates.
Short-term obligations and money market securities maturing in 60 days or
less are valued at amortized cost which approximates value. Non-U.S. dollar
denominated short-term obligations are valued at amortized cost as calculated
in the base currency and translated to U.S. dollars at the current exchange
rate. Investments for which valuations or market quotations are unavailable
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 when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date for
dividends received in cash and/or securities. However, if the ex-dividend
date has passed, certain dividends from foreign securities are recorded as
the Portfolio is informed of the ex-dividend date. Dividend income may
include dividends that represent returns of capital for federal income tax
purposes.
C Income Taxes -- The Portfolio has elected to be treated as a partnership
for United States Federal tax purposes. No provision is made by the Portfolio
for federal or state taxes on any taxable income of the Portfolio because
each investor in the Portfolio is ultimately responsible for the payment of
any taxes. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements (under the Internal Revenue Code) in
order for its investors to satisfy them. The Portfolio will allocate at least
annually among its investors each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. Withholding taxes on
foreign dividends and capital gains have been provided for in accordance with
the Portfolio's understanding of the applicable countries' tax rules and
rates.
D Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to foreign currency rates are recorded
for financial statement purposes as net realized gains and losses on
investments. That portion of unrealized gains and losses on investments that
result from fluctuations in foreign currency exchange rates are not
separately disclosed.
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
expenses on the Statement of Operations.
F Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on a straight-line basis
over five years.
G Other -- Investment transactions are accounted for on a trade date basis.
16
<PAGE>
Balanced Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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 income and expense during the reporting period. Actual results
could differ from those estimates.
I Interim Financial Statements -- The interim financial statements relating
to June 30, 1998 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 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 six months ended
June 30, 1998 the fee was equivalent to 0.61% (annualized) of the Portfolio's
average net assets for such period and amounted to $1,070,461. 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.
Trustees of the Portfolio that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a portion of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan. For the
six months ended June 30, 1998, no significant amounts have been deferred.
3 Investments Transaction
-----------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $55,963,740 and $59,807,945, respectively.
Purchases and sales of U.S. Government/agency securities aggregated
$30,685,430 and $26,012,777, respectively.
4 Federal Income Tax Basis of Investments
-----------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in the value of
investments owned at June 30, 1998, as computed on a federal income tax
basis, are as follows:
Aggregate cost $268,522,969
-----------------------------------------------------------------------------
Gross unrealized appreciation $104,138,145
Gross unrealized depreciation (9,888,466)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 94,249,679
-----------------------------------------------------------------------------
5 Line of Credit
-----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $100 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 Eurodollar rate or federal funds rate. In addition, a fee
computed at an annual rate of 0.10% 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 period.
6 Risk Associated with Foreign Investments
-----------------------------------------------------------------------------
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the
Portfolio, political or financial instability or diplomatic and other
developments which could affect such investments. Foreign stock markets,
while growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers
17
<PAGE>
Balanced Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
(particularly those located in developing countries) may be less liquid and
more volatile than securities of comparable U.S. companies. In general, there
is less overall governmental supervision and regulation of foreign securities
markets, broker-dealers and issuers than in the United States.
7 Name Change
-----------------------------------------------------------------------------
Effective May 1, 1998, the Investors Portfolio changed its name to the
Balanced Portfolio.
18
<PAGE>
Eaton Vance Balanced Fund as of June 30, 1998
INVESTMENT MANAGEMENT
Eaton Vance Balanced Fund
Officers
James B. Hawkes
President and Trustee
Edward E. Smiley, Jr
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
M. Dozier Gardner
Vice Chairman, Eaton Vance Management
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Balanced Portfolio
Officers
M. Dozier Gardner
President and Trustee
James B. Hawkes
Vice President and Trustee
Thomas E. Faust, Jr.
Vice President and
Portfolio Manager
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
19
<PAGE>
Investment Adviser of
Balanced Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of
Eaton Vance Balanced Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer and Dividend
Disbursing Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Eaton Vance Balanced Fund
24 Federal Street
Boston, MA 02110
- -------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- -------------------------------------------------------------------------------
BALSRC 8/98
