<PAGE>
[LOGO Investing [PHOTO OF
APPEARS for the CALCULATOR &
HERE] 21st FINANCIAL
Century NEWSPAPER]
Annual Report December 31, 1997
EV
TRADITIONAL
INVESTORS
FUND
[PHOTO OF NYSE FLAG
APPEARS HERE]
Eaton Vance
Global Management-Global Distribution
T r a d i t i o n a l
[PHOTO OF FLOOR OF NYSE
APPEARS HERE]
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
Letter to Shareholders
[PHOTO APPEARS HERE]
For the year ended December 31, 1997, EV Traditional Investors Fund had a total
return of 21.6%./1/ This return resulted from an increase in net asset value to
$8.70 per share on December 31, 1997 from $8.09 per share on December 31, 1996
and the reinvestment of $0.20 per share in income dividends and $0.89 per share
in capital gains distributions. This return compared favorably to the average
total return for mutual funds in the Lipper Balanced Funds Category* which was
19.0% for the period.
The U.S. economy continued to grow at a healthy rate in 1997. Gross domestic
product, the primary indicator of economic performance, increased 3.8%,
exceeding most predictions made at the beginning of the year. Unemployment
declined 0.6% to 4.7%, and 3.2 million new jobs were created. The inflation
rate, which historically has risen after periods of sustained growth and low
unemployment, declined from the previous year. The consumer price index
increased only 1.7% in 1997, compared to 3.3% in 1996, and wholesale prices
decreased 1.2% -- the largest drop since 1986. Many economists, including
Federal Reserve Chairman Alan Greenspan, attribute this continued low inflation
to the effects of increasing global competition, a strong dollar, and higher
productivity brought on by advances in technology.
The stock market's performance in 1997 exceeded 20% for a record third
consecutive year. The S&P 500 Index* rose 31% during the year, with a relatively
small group of large capitalization stocks providing the leadership. There was
considerable volatility during the year, marked by significant market declines
- -- the first in the spring, and a second, steeper decline in October caused by
economic turmoil in several important Asian countries. In both cases, stock
prices recovered.
In the bond market, long-term interest rates were on a rising trend through
April, as evidence emerged of stronger-than-expected economic growth. Rates then
reversed course and declined through the end of the year, reflecting declining
federal budget deficits and falling inflation.
The stock market's increased volatility illustrates the benefits of a balanced
approach to investing and of maintaining a long-term outlook. By staying with an
investment through the inevitable market cycles, investors can reduce the impact
of any one downturn. Moreover, a professionally managed mutual fund with
diversified asset classes can help to reduce risk further. In the pages that
follow, Portfolio Manager Thomas E. Faust Jr. discusses the economy, the stock
and bond markets, and the Fund's performance in 1997.
Sincerely,
/s/ M. Dozier Gardner,
M. Dozier Gardner,
President
February 9, 1998
- --------------------------------------------------------------------------------
Performance/2/
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 21.6%
Five Years 14.4
Ten Years 13.1
SEC Average Annual Total Returns (including maximum 5.75% sales charge)
- --------------------------------------------------------------------------------
One Year 14.7%
Five Years 13.0
Ten Years 12.4
Ten Largest Equity Holdings/3/
- --------------------------------------------------------------------------------
Sofamor Danek 3.4%
Allstate 2.5
Home Depot 2.1
Norwest 2.1
General RE 1.9
CVS 1.8
Unilever 1.7
Mutual Risk Management 1.7
Warner Lambert 1.7
Chase Manhattan Corp. 1.7
/1/ This return does not include the maximum 5.75% sales charge.
/2/ Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC Returns reflect maximum sales
charge as noted.
/3/ By total net assets. Ten largest holdings are as of 12/31/97 only and may
not be representative of the Portfolio's current or future investments.
Holdings accounted for 20.6% of the Portfolio's investments, determined by
dividing the total market value of the holdings by the total net assets of
the Portfolio.
* It is not possible to invest directly in a Lipper Category or an Index.
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
MANAGEMENT DISCUSSION
An interview with Thomas E. Faust Jr., Vice President and Portfolio Manager of
the Investors Portfolio
[PHOTO OF THOMAS E. FAUST JR. APPEARS HERE]
Thomas E. Faust Jr.,
Portfolio Manager
Q: Tom, how would you describe the stock market's 1997 performance?
A: 1997 was another strong year for the stock market, with returns exceeding 20%
for an unprecedented third consecutive year. The market benefited from a
variety of positive factors, including continued strong earnings and a
favorable interest rate environment. In addition, the stock market survived
two major corrections -- one in the spring, and a second, more severe one in
October. In each case, equity prices recovered, showing a level of resilience
that surprised many analysts. After the second correction, brought on in part
by economic turmoil in Asia, the companies that recovered the fastest were
those with little exposure to Asia or which benefited from weaker Asian
currencies. Companies suffering the biggest declines in the fourth quarter
were those most sensitive to Asia's economic problems, including basic
materials companies and technology firms. The U.S. financial markets -
especially the bond market -- benefitted from a flight to quality, as
investors sought a safe haven from the Asian crisis.
Q: That leads to the second major asset class of this Portfolio -- bonds. How
would you characterize the U.S. bond market during 1997?
A: Overall, 1997 was a good year for the bond market, with a general decline in
interest rates over the 12-month period. In the spring, rates rose sharply on
developing evidence that the economy was growing at a faster-than-expected
rate. After rates peaked in April, news of a balanced budget agreement, a
slowing economy, and continued low inflation contributed to a rally in the
bond market, and interest rates generally trended downward through the end of
the year. Recently, the problems in Asia and ensuing flight to quality among
global bond investors have driven U.S. bond prices still higher, leading to
interest rates on long-term government bonds that are lower than have been
seen in over a decade. Furthermore, the Asian situation has resulted in a
widening of quality spreads -- the difference between high quality and lower
quality corpo-
- --------------------------------------------------------------------------------
Portfolio Allocation+
- --------------------------------------------------------------------------------
As a percentage of total net assets
[PIE CHART APPEARS HERE]
Fixed Income 29.6%
Cash 1.1%
Equities 69.3%
Five Largest Equity Sectors+
- --------------------------------------------------------------------------------
As a percentage of total net assets
Financial 14.4%
Drugs 7.7%
Medical Products 5.6%
Retail 5.2%
Oil & Gas 4.4%
+ Portfolio allocation and five largest sectors are subject to change due to
active management.
3
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
MANAGEMENT DISCUSSION CONT'D
rate bond yields -- and has flattened the yield curve, which means that the
difference between short-term and long-term interest rates has narrowed.
Q: Finance is a large weighting in this Portfolio. How did stocks in this sector
perform during the year?
A: It was a very good year for this sector. Many of our financial sector stocks
are in the insurance and banking sectors, which are generally sensitive to
interest rate movements. Given that it was a good year for the bond market,
and that their core businesses were buoyed by a strong economy, insurance and
banking stocks performed very well in 1997. Within domestic banking, there
was significant consolidation during the year which tends to boost stock
valuations for the industry as a whole. Consolidation also helped lower
operating costs, thereby increasing profitability in the sector.
Q: How did health care stocks, also a large weighting, perform during the
12-month period?
A: The health care stocks in this Portfolio, which consist primarily of large
pharmaceutical companies with significant new products, performed very well
during the year. Generally speaking, large capitalization health care
stocks -- primarily big pharmaceutical companies -- had a very good year in
1997, whereas smaller biotechnology and health care services stocks performed
poorly. Drug stocks benefited from a streamlined FDA approval process and
increased use by managed care companies.
Q: What impact did the market's sharp decline in October have on the Portfolio?
A: Because the Portfolio is invested in equities, it experienced a decline
during the market's broad-based October correction. Fortunately, the
Portfolio outperformed the large equity indexes, primarily as a result of the
mix of asset classes in the Portfolio. The bond and cash investments acted as
a hedge against the decline in equity prices. This experience illustrates the
basic investment rule that diversification makes sense, particularly in an
environment of increased volatility. A balanced asset allocation among
stocks, bonds and cash provides a built-in hedge, and -- although past
experience does not guarantee future results -- it may explain why this Fund
has had only one year with a negative total return in the past 23 years.
Q: How would you characterize the economy right now?
A: The U.S. economy continues to be robust, and the consensus expectation for
1998 is that it should continue to expand. GDP is expected to rise in the 2-
3% range, with inflation remaining below 2%. Interest rates could continue
their downward trend as long as inflation remains low. Moreover, the capital
gains tax rate was cut in 1997, and we have seen a significant decline in
energy prices. In this late stage of the expansion, however, there are some
indications of weakness, including the impact on U.S. companies of weakened
economic growth in Asia, as well as an increase in the U.S. of consumer
bankruptcies and consumer debt levels.
Q: Of the Portfolio's corporate bond holdings, most have "put" option features.
What are the benefits of "put" bonds?
A: A bond with a "put" feature gives the holder -- in this case, the Portfolio
-- the right to sell (or "put") the bond back to the issuer at a specific
price and date in the future. As a result of this feature, put bonds perform
like a long bond in a market rally and like a short bond during a decline.
Hence, the feature acts a bit like an insurance policy for the holder when
prices drop. These bonds command a premium in the market, but we think the
put feature is worth the added cost.
4
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
MANAGEMENT DISCUSSION CONT'D
Q: What is your outlook for the stock and bond markets in 1998?
A: I continue to have a generally positive outlook for both the stock and bond
markets, but I tend to be more bullish about bonds for the coming year. If
inflation remains low, which it should, interest rates should continue to
decline. The keys to another good year for the stock market are low interest
rates, continued economic growth, strong corporate profitability, and
sustained cash flows into U.S. stocks from domestic and foreign investors.
The biggest concern with the stock market is that valuations are high, but
one can make an argument that low inflation and declining interest rates
support current valuations. As always, we remain long-term investors, and
will continue to make adjustments in the portfolio as economic and market
conditions warrant.
Comparison of Change in Value of a $10,000 Investment in
EV Traditional Investors Fund vs. the Standard & Poor's 500,
Lehman Bros. Govt./Corp Bond Index and 90-Day Treasury Bills*
December 31, 1987 through December 31, 1997
[LINE GRAPH APPEARS HERE]
Lehman Brothers 90-day US
EV Traditional Corporate/Gov't. Treasury
Date Investors Fund Fund/Off Pr S&P 500 Bond Index Bills*
---- -------------- ----------- ------- ---------------- -----
12/31/87 $10,000 $ 9,431 $10,000 $10,000 $10,000
1/31/88 $10,206 $ 9,626 $10,435 $10,343 $10,000
2/28/88 $10,564 $ 9,963 $10,901 $10,461 $10,000
3/31/88 $10,325 $ 9,738 $10,569 $10,358 $10,142
4/30/88 $10,400 $ 9,809 $10,703 $10,298 $10,142
5/31/88 $10,490 $ 9,894 $10,771 $10,229 $10,142
6/30/88 $10,792 $10,179 $11,272 $10,460 $10,307
7/31/88 $10,777 $10,164 $11,245 $10,400 $10,307
8/31/88 $10,639 $10,034 $10,845 $10,427 $10,307
9/30/88 $10,853 $10,236 $11,310 $10,655 $10,493
10/31/88 $11,022 $10,395 $11,638 $10,544 $10,493
11/30/88 $10,913 $10,292 $11,452 $10,722 $10,493
12/31/88 $11,068 $10,439 $11,655 $10,758 $10,706
1/31/89 $11,574 $10,915 $12,519 $10,901 $10,706
2/28/89 $11,398 $10,750 $12,192 $10,819 $10,706
3/31/89 $11,526 $10,871 $12,480 $10,877 $10,942
4/30/89 $11,942 $11,263 $13,146 $11,107 $10,942
5/31/89 $12,178 $11,485 $13,648 $11,380 $10,942
6/30/89 $12,261 $11,564 $13,581 $11,751 $11,167
7/31/89 $12,878 $12,146 $14,821 $11,995 $11,167
8/31/89 $12,979 $12,241 $15,091 $11,809 $11,167
9/30/89 $13,013 $12,273 $15,033 $11,861 $11,387
10/31/89 $12,929 $12,193 $14,696 $12,161 $11,387
11/30/89 $13,100 $12,355 $14,980 $12,271 $11,387
12/31/89 $13,366 $12,606 $15,342 $12,290 $11,609
1/31/90 $12,762 $12,036 $14,326 $12,121 $11,609
2/28/90 $12,960 $12,223 $14,489 $12,148 $11,609
3/31/90 $13,014 $12,274 $14,881 $12,149 $11,836
4/30/90 $12,744 $12,019 $14,527 $12,037 $11,836
5/31/90 $13,514 $12,745 $15,911 $12,386 $11,836
6/30/90 $13,532 $12,763 $15,817 $12,586 $12,067
7/31/90 $13,758 $12,976 $15,778 $12,742 $12,067
8/31/90 $12,994 $12,255 $14,334 $12,558 $12,067
9/30/90 $12,784 $12,057 $13,645 $12,662 $12,282
10/31/90 $12,708 $11,985 $13,600 $12,830 $12,282
11/30/90 $13,211 $12,459 $14,462 $13,109 $12,282
12/31/90 $13,502 $12,734 $14,867 $13,307 $12,480
1/31/91 $13,755 $12,973 $15,527 $13,457 $12,480
2/28/91 $14,169 $13,363 $16,613 $13,572 $12,480
3/31/91 $14,327 $13,512 $17,024 $13,666 $12,659
4/30/91 $14,386 $13,568 $17,079 $13,823 $12,659
5/31/91 $14,647 $13,814 $17,787 $13,888 $12,659
6/30/91 $14,344 $13,528 $16,984 $13,873 $12,834
7/31/91 $14,829 $13,986 $17,794 $14,047 $12,834
8/31/91 $15,158 $14,296 $18,192 $14,370 $12,834
9/30/91 $15,301 $14,431 $17,891 $14,670 $12,998
10/31/91 $15,588 $14,701 $18,150 $14,802 $12,998
11/30/91 $15,380 $14,506 $17,400 $14,949 $12,998
12/31/91 $16,375 $15,444 $19,388 $15,453 $13,123
1/31/92 $15,992 $15,082 $19,048 $15,224 $13,123
2/28/92 $16,100 $15,184 $19,275 $15,305 $13,123
3/31/92 $15,862 $14,960 $18,900 $15,221 $13,256
4/30/92 $16,035 $15,123 $19,477 $15,312 $13,256
5/31/92 $16,327 $15,398 $19,547 $15,609 $13,256
6/30/92 $16,461 $15,525 $19,258 $15,838 $13,375
7/31/92 $16,885 $15,925 $20,067 $16,243 $13,375
8/31/92 $16,952 $15,988 $19,636 $16,388 $13,375
9/30/92 $17,042 $16,073 $19,865 $16,612 $13,467
10/31/92 $16,861 $15,902 $19,955 $16,358 $13,467
11/30/92 $17,136 $16,161 $20,607 $16,343 $13,467
12/31/92 $17,431 $16,440 $20,864 $16,625 $13,575
1/31/92 $17,479 $16,485 $21,059 $16,987 $13,575
2/28/93 $17,813 $16,800 $21,328 $17,339 $13,575
3/31/93 $18,028 $17,003 $21,775 $17,398 $13,676
4/30/93 $17,909 $16,890 $21,274 $17,532 $13,676
5/31/93 $17,968 $16,947 $21,810 $17,522 $13,676
6/30/93 $18,265 $17,227 $21,879 $17,920 $13,780
7/31/93 $18,364 $17,320 $21,815 $18,035 $13,780
8/31/93 $19,111 $18,024 $22,618 $18,449 $13,780
9/30/93 $19,336 $18,236 $22,444 $18,513 $13,880
10/31/93 $19,436 $18,331 $22,929 $18,589 $13,880
11/30/93 $18,944 $17,867 $22,684 $18,379 $13,880
12/31/93 $19,382 $18,280 $22,963 $18,459 $13,986
1/31/94 $20,123 $18,979 $23,761 $18,737 $13,986
2/28/94 $19,616 $18,501 $23,099 $18,329 $13,986
3/31/94 $18,841 $17,770 $22,094 $17,881 $14,108
4/30/94 $18,948 $17,871 $22,405 $17,733 $14,108
5/31/94 $18,989 $17,909 $22,739 $17,100 $14,108
6/30/94 $18,576 $17,519 $22,187 $17,658 $14,256
7/31/94 $19,182 $18,091 $22,940 $18,011 $14,256
8/31/94 $19,545 $18,433 $23,858 $18,019 $14,256
9/30/94 $19,099 $18,013 $23,270 $17,746 $14,427
10/31/94 $19,266 $18,171 $23,812 $17,726 $14,427
11/30/94 $18,861 $17,789 $22,928 $17,695 $14,427
12/31/94 $19,030 $17,948 $23,266 $17,811 $14,628
1/31/95 $19,227 $18,133 $23,884 $18,153 $14,628
2/28/95 $19,974 $18,838 $24,799 $18,574 $14,628
3/31/95 $20,456 $19,293 $25,530 $18,699 $14,834
4/30/95 $20,938 $19,747 $26,305 $18,960 $14,834
5/31/95 $21,763 $20,525 $27,321 $19,754 $14,834
6/30/95 $22,107 $20,850 $27,964 $19,912 $15,032
7/31/95 $22,594 $21,309 $28,912 $19,835 $15,032
8/31/95 $22,999 $21,691 $28,963 $20,089 $15,032
9/30/95 $23,316 $21,990 $30,185 $20,293 $15,225
10/31/95 $23,345 $22,018 $30,095 $20,591 $15,225
11/30/95 $23,983 $22,619 $31,392 $20,930 $15,225
12/31/95 $24,680 $23,276 $32,001 $21,238 $15,412
1/31/96 $25,073 $23,647 $33,104 $21,371 $15,412
2/28/96 $25,161 $23,730 $33,394 $20,918 $15,412
3/31/96 $25,344 $23,903 $33,718 $20,742 $15,605
4/30/96 $25,527 $24,075 $34,237 $20,599 $15,605
5/31/96 $25,816 $24,348 $35,085 $20,565 $15,605
6/30/96 $26,032 $24,551 $35,230 $20,839 $15,804
7/31/96 $25,168 $23,737 $33,686 $20,888 $15,804
8/31/96 $25,707 $24,245 $34,388 $20,836 $15,804
9/30/96 $26,516 $25,008 $36,320 $21,207 $16,002
10/31/96 $27,045 $25,507 $37,335 $21,702 $16,002
11/30/96 $28,277 $26,669 $40,142 $22,101 $16,002
12/31/96 $28,039 $26,444 $39,345 $21,855 $16,205
1/31/97 $29,217 $27,556 $41,822 $21,881 $16,205
2/28/97 $29,284 $27,618 $42,134 $21,927 $16,205
3/31/97 $28,412 $26,796 $40,402 $21,667 $16,415
4/30/97 $29,388 $27,717 $42,831 $21,983 $16,415
5/31/97 $30,677 $28,932 $45,409 $22,189 $16,415
6/30/97 $31,605 $29,808 $47,451 $22,455 $16,625
7/31/97 $33,605 $31,694 $51,230 $23,142 $16,625
8/31/97 $32,210 $30,379 $48,360 $22,882 $16,625
9/30/97 $33,503 $31.598 $51,003 $23,242 $16,830
10/31/97 $33,216 $31,327 $49,316 $23,614 $16,830
11/30/97 $33,720 $31,802 $51,586 $23,738 $16,830
12/31/97 $34,097 $32,158** $52,468 $23,988 $17,052
Fund Performance +
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 21.6%
Five Years 14.4
Ten Years 13.1
SEC Average Annual Total Returns (including 5.75% sales charge)
- --------------------------------------------------------------------------------
One Year 14.7%
Five Years 13.0
Ten Years 12.4
* Source: Towers Data Systems, Bethesda, MD.
The chart compares the Fund's total return with those of the S&P 500 Index,
the Lehman Brothers Government/Corporate Bond Index, and 90-Day U.S.
Treasury Bills. The S&P 500 is a broad-based unmanaged index of 500 common
stocks. The Lehman Brothers Corporate/Government Index is a diversified,
unmanaged index of corporate and U.S. government bonds. The 90-Day Treasury
Bill returns are shown to indicate how the Fund performed relative to a
portfolio of cash equivalents. Returns are calculated by determining the
percentage change in net asset value with all distributions reinvested. The
lines on the chart represent the total returns of $10,000 hypothetical
investments in the Fund, the S&P 500 Index, the Lehman Brothers
Corporate/Government Bond Index, and 90-Day U.S. Treasury Bills. The
Indices' total returns do not reflect any commissions or expenses that would
have been incurred if an investor individually purchased or sold the
securities represented in them. It is not possible to invest directly in an
Index.
** This figure represents the Fund's performance including the Fund's maximum
5.75% initial sales charge.
+ Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC Returns reflect maximum sales
charge as noted.
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.
5
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1997
Assets
- --------------------------------------------------------------------------------
Investment in Investors Portfolio (Portfolio), at value (Note 1A)
(identified cost, $182,926,986) $263,354,839
Receivable for Fund shares sold 504,268
- --------------------------------------------------------------------------------
Total assets $263,859,107
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable to affiliate for Trustees' fees (Note 4) $ 840
Accrued expenses 128,449
- --------------------------------------------------------------------------------
Total liabilities $ 129,289
- --------------------------------------------------------------------------------
Net Assets for 30,307,019 shares of beneficial
interest outstanding $263,729,818
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $183,052,175
Accumulated net realized gain on investments (computed on
the basis of identified cost) 43,805
Accumulated undistributed net investment income 205,985
Net unrealized appreciation of investments (computed on the basis
of identified cost) 80,427,853
- --------------------------------------------------------------------------------
Total $263,729,818
- --------------------------------------------------------------------------------
Net Asset Value and Redemption
Price Per Share
- --------------------------------------------------------------------------------
($263,729,818 / 30,307,019 shares of
beneficial interest outstanding) $ 8.70
- --------------------------------------------------------------------------------
Computation of Offering Price
- --------------------------------------------------------------------------------
Offering price per share (100 / 94.25 of $8.70) $ 9.23
- --------------------------------------------------------------------------------
On sales of $25,000 or more, the offering price is reduced.
Statement of Operations
For the Year Ended
December 31, 1997
Investment Income (Note 1B)
- --------------------------------------------------------------------------------
Dividend income allocated from Portfolio (net of
foreign taxes, $25,735) $ 3,118,235
Interest income allocated from Portfolio 5,411,952
Expenses allocated from Portfolio (1,773,717)
- --------------------------------------------------------------------------------
Net investment income from Portfolio $ 6,756,470
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 3,310
Transfer and dividend disbursing agent fees 282,475
Service fees (Note 5) 281,858
Printing and postage 68,674
Custodian fee 23,878
Registration fees 20,671
Legal and accounting services 18,471
Miscellaneous 13,188
- --------------------------------------------------------------------------------
Total expenses $ 712,525
- --------------------------------------------------------------------------------
Net investment income $ 6,043,945
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 20,676,352
- --------------------------------------------------------------------------------
Net realized gain on investment transactions $ 20,676,352
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 23,123,556
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 23,123,556
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 43,799,908
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 49,843,853
- --------------------------------------------------------------------------------
See notes to financial statements
6
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 6,043,945 $ 7,176,453
Net realized gain on investments 20,676,352 28,326,826
Net change in unrealized
appreciation (depreciation)
of investments 23,123,556 (5,008,446)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 49,843,853 $ 30,494,833
- --------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (5,802,058) $ (7,176,453)
In excess of net investment income -- (20,625)
From net realized gain
on investments (25,427,692) (24,332,072)
- --------------------------------------------------------------------------------
Total distributions to shareholders $ (31,229,750) $ (31,529,150)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sale of shares $ 8,832,967 $ 8,562,690
Net asset value of shares issued to
shareholders in payment of
distributions declared 22,842,764 21,195,011
Cost of shares redeemed (26,777,414) (25,376,402)
- --------------------------------------------------------------------------------
Net increase in net assets from Fund
share transactions $ 4,898,317 $ 4,381,299
- --------------------------------------------------------------------------------
Net increase in net assets $ 23,512,420 $ 3,346,982
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 240,217,398 $ 236,870,416
- --------------------------------------------------------------------------------
At end of year $ 263,729,818 $ 240,217,398
- --------------------------------------------------------------------------------
Accumulated undistributed
net investment income
included in net assets
- --------------------------------------------------------------------------------
At end of year $ 205,985 $ 309,282
- --------------------------------------------------------------------------------
See notes to financial statements
7
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended January 31,
------------------------------------------------------------------------------
1997 1996 1995* 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390 $ 7.500
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.208 $ 0.254 $ 0.254 $ 0.283 $ 0.217 $ 0.342
Net realized and unrealized gain (loss) on investments 1.492 0.821 1.641 (0.623) 0.833 0.318
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.700 $ 1.075 $ 1.895 $ (0.340) $ 1.050 $ 0.660
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (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 on investments (0.890) (0.880) (0.337) (0.145) (0.525) (0.410)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (1.090) $ (1.135) $ (0.585) $ (0.420) $ (0.840) $ (0.770)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 8.700 $ 8.090 $ 8.150 $ 6.840 $ 7.600 $ 7.390
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 21.60% 13.61% 28.36% (4.45)% 15.13% 9.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $263,730 $240,217 $236,870 $200,419 $227,402 $212,545
Ratio of net expenses to average daily net assets/(2)/ 0.97% 0.93% 0.95%+ 0.91% 0.90% 0.89%
Ratio of net investment income to average daily net assets 2.35% 3.03% 3.60%+ 4.05% 4.07% 4.62%
Portfolio Turnover/(3)/ -- -- -- -- 44% 32%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 to be
reinvested at the net asset value on the ex-date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of the Portfolio's allocated expenses for the
period the Fund was investing in the Portfolio.
/(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
substantially 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
8
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS
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 (79.9% at December 31, 1997). 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.
On June 23, 1997, the Board of Trustees of the Trust adopted a multiple class
plan for the Fund which permits the Fund to issue more than one class of
shares. Initially, the Fund will offer three classes of shares and, effective
January 1, 1998, the existing shares of the Fund will be designated Class A
shares. On June 23, 1997, the Board of Trustees also approved a Plan of
Reorganization (the "Plan") for the Trust. Under the terms of the Plan, the
Fund would acquire substantially all of the assets and liabilities of the EV
Marathon Investors Fund and the EV Classic Investors Fund. The transaction
will be structured for tax purposes to qualify as a tax-free reorganization
under the Internal Revenue Code. As a result of the reorganization,
shareholders of the Marathon Fund will receive Class B shares and
shareholders of the Classic Fund will receive Class C shares of the Fund.
The reorganization will occur after the close of business, December 31, 1997.
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, 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. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $7,889,707 at 28% and $13,099,413 at 20% as
a long-term capital gain distribution for its taxable year ended December 31,
1997.
D 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 or Portfolio's
custodian fees are reflected as a reduction of operating expenses on the
Statement of Operations.
E Other -- Investment transactions are accounted for on a trade-date basis.
F Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
2 Distributions to Shareholders
-----------------------------------------------------------------------------
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 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
9
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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
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
-----------------------------------------------------------------------------
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:
Year Ended December 31,
-----------------------------
1997 1996
---------------------------------------------------------------------------
Sales 1,006,180 1,024,596
Issued to shareholders electing to
receive payments of distributions in
Fund shares 2,664,443 2,630,611
Redemptions (3,051,117) (3,029,893)
---------------------------------------------------------------------------
Net Increase 619,506 625,314
---------------------------------------------------------------------------
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 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. 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. (EVD), a subsidiary of Eaton
Vance Management, Authorized Firms or other persons in amounts not exceeding
0.25% of the Fund's average daily net assets for any fiscal year. The
Trustees have implemented the Service Plan by authorizing the Fund to make
quarterly service fee payments to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.25% of that portion of the Fund's
average daily net assets for any fiscal year which is attributable to shares
of the Fund sold 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, 1997
the Fund paid or accrued $281,858 under the Plan to the Principal Underwriter
and Authorized Firms.
6 Investment Transactions
-----------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the
year ended December 31, 1997, aggregated $9,838,854 and $44,202,927
respectively.
7 Subsequent Event
-----------------------------------------------------------------------------
Effective January 1, 1998, the EV Traditional Investors Fund changed its name
to Eaton Vance Investors Fund and shares of the Fund are designated Class A
shares. Additional classes of shares are also offered.
10
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Trustees and Shareholders
of EV Traditional Investors Fund:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of EV
Traditional Investors Fund (the Fund), a series of Eaton Vance Special
Investment Trust, as of December 31, 1997, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the two years then ended, the eleven month period ended December 31,
1995, and each of the three 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 audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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 the
Fund at December 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the two years then ended,
the eleven month period ended December 31, 1995 and for each of the three years
in the period ended January 31, 1995, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 06, 1998
11
<PAGE>
Investors Portfolio as of December 31, 1997
PORTFOLIO OF INVESTMENTS
Common Stocks -- 68.5%
Security Shares Value
- --------------------------------------------------------------------------------
Aerospace and Defense -- 1.2%
- --------------------------------------------------------------------------------
General Motors Corp., Class H 100,000 $ 3,693,750
Raytheon Co. Class A 3,826 188,679
- --------------------------------------------------------------------------------
$ 3,882,429
- --------------------------------------------------------------------------------
Auto and Parts -- 2.5%
- --------------------------------------------------------------------------------
General Motors Corp. 60,000 $ 3,637,500
Magna International, Inc. Class A 75,000 4,710,938
- --------------------------------------------------------------------------------
$ 8,348,438
- --------------------------------------------------------------------------------
Banks - Regional -- 2.1%
- --------------------------------------------------------------------------------
Norwest Corp. 180,000 $ 6,952,499
- --------------------------------------------------------------------------------
$ 6,952,499
- --------------------------------------------------------------------------------
Banks and Money Services -- 2.6%
- --------------------------------------------------------------------------------
Banco Latinoamericano de Exportaciones 75,000 $ 3,103,125
Chase Manhattan Corp. 50,200 5,496,900
- --------------------------------------------------------------------------------
$ 8,600,025
- --------------------------------------------------------------------------------
Beverages -- 1.4%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 130,000 $ 4,736,875
- --------------------------------------------------------------------------------
$ 4,736,875
- --------------------------------------------------------------------------------
Chemicals -- 2.1%
- --------------------------------------------------------------------------------
Monsanto Corp. 65,000 $ 2,730,000
Praxair, Inc. 80,000 3,600,000
Solutia, Inc. 25,000 667,188
- --------------------------------------------------------------------------------
$ 6,997,188
- --------------------------------------------------------------------------------
Computers and Business Equipment -- 2.3%
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 60,000 $ 3,750,000
Xerox Corp. 51,000 3,764,438
- --------------------------------------------------------------------------------
$ 7,514,438
- --------------------------------------------------------------------------------
Drugs -- 7.7%
- --------------------------------------------------------------------------------
Astra AB Class A 266,666 $ 4,621,215
Elan Corp., PLC, ADR* 75,000 3,839,063
Eli Lilly & Co. 70,000 4,873,750
Pfizer, Inc. 37,800 2,818,463
Smithkline Beecham PLC, ADR 70,000 3,600,625
Warner-Lambert Co. 45,000 5,580,000
- --------------------------------------------------------------------------------
$ 25,333,116
- --------------------------------------------------------------------------------
Electric Utilities -- 1.1%
- --------------------------------------------------------------------------------
The Southern Co. 140,000 $ 3,622,500
- --------------------------------------------------------------------------------
$ 3,622,500
- --------------------------------------------------------------------------------
Electronics - Semiconductors -- 2.2%
- --------------------------------------------------------------------------------
Intel Corp. 70,000 $ 4,917,500
LSI Logic, Inc.* 120,000 2,370,000
- --------------------------------------------------------------------------------
$ 7,287,500
- --------------------------------------------------------------------------------
Financial - Miscellaneous -- 3.6%
- --------------------------------------------------------------------------------
Federal National Mortgage Association 75,000 $ 4,279,688
MBNA Corp. 120,000 3,277,500
MGIC Investment Corp. 65,000 4,322,500
- --------------------------------------------------------------------------------
$ 11,879,688
- --------------------------------------------------------------------------------
Foods -- 1.8%
- --------------------------------------------------------------------------------
Unilever ADR 92,000 $ 5,744,250
- --------------------------------------------------------------------------------
$ 5,744,250
- --------------------------------------------------------------------------------
Household Products -- 0.9%
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 62,400 $ 3,077,100
- --------------------------------------------------------------------------------
$ 3,077,100
- --------------------------------------------------------------------------------
Information Services -- 1.3%
- --------------------------------------------------------------------------------
Reuters Holdings PLC, ADR 65,000 $ 4,306,250
- --------------------------------------------------------------------------------
$ 4,306,250
- --------------------------------------------------------------------------------
Insurance -- 6.1%
- --------------------------------------------------------------------------------
Allstate Corp. 90,000 $ 8,178,749
General RE Corp. 30,000 6,359,999
Mutual Risk Management Ltd. 186,600 5,586,338
- --------------------------------------------------------------------------------
$ 20,125,086
- --------------------------------------------------------------------------------
See notes to financial statements
12
<PAGE>
Investors Portfolio as of December 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Machinery -- 1.3%
- --------------------------------------------------------------------------------
Deere and Co. 75,000 $ 4,373,438
- --------------------------------------------------------------------------------
$ 4,373,438
- --------------------------------------------------------------------------------
Medical Products -- 5.6%
- --------------------------------------------------------------------------------
Baxter International, Inc. 80,000 $ 4,035,000
Boston Scientific Corp.* 75,000 3,440,625
Sofamor Danek Group, Inc.* 170,300 11,080,143
- --------------------------------------------------------------------------------
$ 18,555,768
- --------------------------------------------------------------------------------
Metals and Minerals -- 2.7%
- --------------------------------------------------------------------------------
J & L Specialty Steel, Inc. 200,000 $ 2,012,500
Potash Corp. of Saskatchewan 55,000 4,565,000
Steel Dynamics Corp.* 150,000 2,400,000
- --------------------------------------------------------------------------------
$ 8,977,500
- --------------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 1.9%
- --------------------------------------------------------------------------------
Anadarko Petroleum Corp. 60,000 $ 3,641,250
Triton Energy Ltd.* 90,000 2,626,875
- --------------------------------------------------------------------------------
$ 6,268,125
- --------------------------------------------------------------------------------
Oil and Gas - Integrated -- 2.5%
- --------------------------------------------------------------------------------
Exxon Corp. 87,280 $ 5,340,445
Mobil Corp. 40,000 2,887,500
- --------------------------------------------------------------------------------
$ 8,227,945
- --------------------------------------------------------------------------------
Paper and Forest Products -- 0.8%
- --------------------------------------------------------------------------------
Plum Creek Timber Co., L.P. 90,000 $ 2,716,875
- --------------------------------------------------------------------------------
$ 2,716,875
- --------------------------------------------------------------------------------
Publishing -- 1.3%
- --------------------------------------------------------------------------------
McGraw-Hill Companies, Inc. 56,500 $ 4,181,000
- --------------------------------------------------------------------------------
$ 4,181,000
- --------------------------------------------------------------------------------
REITS -- 3.5%
- --------------------------------------------------------------------------------
Colonial Properties Trust 80,000 $ 2,410,000
Equity Office Properties 10,000 315,625
Equity Residential Properties Trust 101,400 5,127,038
Security Capital Group 6,982 36,656
Security Capital Industrial Trust 150,000 3,731,250
- --------------------------------------------------------------------------------
$ 11,620,569
- --------------------------------------------------------------------------------
Retail - Food and Drug -- 3.0%
- --------------------------------------------------------------------------------
CVS Corp. 95,000 $ 6,085,938
Safeway, Inc.* 60,000 3,795,000
- --------------------------------------------------------------------------------
$ 9,880,938
- --------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 2.2%
- --------------------------------------------------------------------------------
The Home Depot, Inc. 120,000 $ 7,064,999
- --------------------------------------------------------------------------------
$ 7,064,999
- --------------------------------------------------------------------------------
Specialty Chemicals and Materials -- 1.9%
- --------------------------------------------------------------------------------
Corning, Inc. 80,000 $ 2,970,000
Sealed Air Corp.* 50,000 3,087,500
- --------------------------------------------------------------------------------
$ 6,057,500
- --------------------------------------------------------------------------------
Telephone Utilities -- 1.5%
- --------------------------------------------------------------------------------
Ameritech Corp. 60,448 $ 4,866,064
- --------------------------------------------------------------------------------
$ 4,866,064
- --------------------------------------------------------------------------------
Transportation -- 1.4%
- --------------------------------------------------------------------------------
Southwest Airlines, Inc. 187,500 $ 4,617,188
- --------------------------------------------------------------------------------
$ 4,617,188
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $134,632,910) $225,815,291
- --------------------------------------------------------------------------------
Convertible Preferred Stock -- 0.8%
Metals - Gold -- 0.8%
- --------------------------------------------------------------------------------
Freeport McMoRan Copper & Gold,
5% Series CV 125,000 $ 2,710,938
- --------------------------------------------------------------------------------
$ 2,710,938
- --------------------------------------------------------------------------------
Total Convertible Preferred Stock
(identified cost $2,872,500) $ 2,710,938
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Investors Portfolio as of December 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
Principal
Amount
Security (000 Omitted) Value
- --------------------------------------------------------------------------------
Associates Corp., N.A., 5.96%, 5/15/37 $ 2,000 $ 2,056,740
Bell Telephone Co., 8.35%, 12/15/30 3,000 3,737,130
Chesapeake Potomac Telephone Co., 2,850 3,529,127
8.375%, 10/1/29
Columbia/HCA Healthcare Corp.,
8.36%, 4/15/24 900 963,594
Commercial Credit Corp., 7.875%, 2/1/25 2,000 2,284,480
Connecticut Light and Power Co.,
7.875%, 10/1/24 3,775 4,345,667
General Motors Corp., 9.45%, 11/1/11 3,000 3,719,010
Grand Metropolitan Investments Corp.,
7.45%, 4/15/35 3,090 3,453,971
Intermediate American Development Bank,
8.40%, 9/1/09 3,690 4,382,023
Intermediate American Development Bank,
6.95%, 8/1/26 220 238,682
J.C. Penney, Inc., 7.40%, 4/1/37 2,050 2,245,878
Johnson Controls, Inc., 7.70%, 3/1/15 1,360 1,509,926
Lowes Cos., Inc., 7.11%, 5/15/37 3,000 3,269,430
Mead Corp., 6.84%, 3/1/37 2,000 2,108,820
Proctor and Gamble Co., 8.00%, 9/1/24 3,000 3,602,610
Seagram (Joseph) & Sons Inc.,
9.65%, 8/15/18 1,030 1,338,104
State Street Bank, 7.35%, 6/15/26 1,700 1,877,616
Tennessee Valley Power Authority,
5.88%, 4/1/36 3,350 3,466,580
TRW, Inc., MTN, 9.35%, 6/4/20 900 1,148,859
Xerox Corp., 5.90%, 5/5/37 3,000 3,071,430
Xerox Corp., 5.875%, 6/15/37 1,000 1,019,990
- --------------------------------------------------------------------------------
Total Corporate Bonds
(identified cost $50,178,347) $53,369,667
- --------------------------------------------------------------------------------
U.S. Treasury Obligations -- 13.4%
Principal
Amount
Security (000 Omitted) Value
- --------------------------------------------------------------------------------
FHLMC, 7.95%, 5/15/20 $ 772 $ 776,346
FHLMC, PAC, CMO, Series 34-C,
9.00%, 11/15/19 318 328,827
FHLMC, PAC, CMO, Series 41-F,
10.00%, 5/15/20 1,801 1,993,902
FHLMC, PAC, CMO, Series 59-D,
9.70%, 1/15/16 277 276,660
FNMA , PAC, CMO, Series 1990 101-C,
7.50%, 5/25/19 370 369,336
FNMA, PAC, CMO, Series 1990 24-E,
9.00%, 3/25/20 1,586 1,667,127
FNMA, PAC, CMO, Series 1990 82-K,
8.50%, 7/25/19 11 10,768
U.S. Treasury Note, 5.75%, 11/30/02 11,000 11,008,579
U.S. Treasury Note, 7.125%, 9/30/99 15,000 15,356,249
U.S. Treasury Note, 6.125%, 5/15/98 8,000 8,017,519
U.S. Treasury Note, 6.125%, 9/30/00 4,000 4,041,880
U.S. Treasury Note, 6.50%, 10/15/06 300 314,109
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost $44,439,882) $ 44,161,302
- --------------------------------------------------------------------------------
Commercial Paper -- 0.6%
Principal
Amount
Security (000 Omitted) Value
- --------------------------------------------------------------------------------
Associates Corp., N.A., 6.70%, 1/2/98 $ 2,102 $ 2,101,609
- --------------------------------------------------------------------------------
Total Commercial Paper
(amortized cost $2,101,609) $ 2,101,609
- --------------------------------------------------------------------------------
Total Investments -- 99.5%
(identified cost $234,225,248) $328,158,807
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.5% $ 1,548,435
- --------------------------------------------------------------------------------
Net Assets -- 100% $329,707,242
- --------------------------------------------------------------------------------
ADR - American Depositary Receipt
PAC - Planned Authorization Class
CMO - Collateralized Mortgage Obligations
REIT - Real Estate Investment Trust
* Non-income producing security.
See notes to financial statements
14
<PAGE>
Investors Portfolio as of December 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1997
Assets
- --------------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $234,225,248) $328,158,807
Cash 627
Interest and dividends receivable 1,589,744
Tax reclaim receivable 4,677
Deferred organization expenses (Note 1F) 2,113
- --------------------------------------------------------------------------------
Total assets $329,755,968
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable to affiliate for Trustees' fees (Note 2) $ 4,260
Accrued expenses 44,466
- --------------------------------------------------------------------------------
Total liabilities $ 48,726
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $329,707,242
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $235,773,683
Net unrealized appreciation of investments (computed on
the basis of identified cost) 93,933,559
- --------------------------------------------------------------------------------
Total $329,707,242
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 1997
Investment Income (Note 1B)
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $31,939) $ 3,858,950
Interest income 6,702,834
- --------------------------------------------------------------------------------
Total income $ 10,561,784
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 1,964,597
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 16,887
Custodian fee 159,280
Legal and accounting services 45,475
Amortization of organization expenses (Note 1F) 3,661
Miscellaneous 6,808
- --------------------------------------------------------------------------------
Total expenses $ 2,196,708
- --------------------------------------------------------------------------------
Net investment income $ 8,365,076
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 24,802,364
- --------------------------------------------------------------------------------
Net realized gain on investment transactions $ 24,802,364
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 29,330,948
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 29,330,948
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 54,133,312
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 62,498,388
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Investors Portfolio as of December 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 8,365,076 $ 9,268,008
Net realized gain on investments 24,802,364 30,748,316
Net change in unrealized
appreciation (depreciation)
of investments 29,330,948 (2,562,219)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 62,498,388 $ 37,454,105
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 27,019,040 $ 32,919,522
Withdrawals (61,370,968) (45,187,645)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (34,351,928) $ (12,268,123)
- --------------------------------------------------------------------------------
Net increase in net assets $ 28,146,460 $ 25,185,982
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 301,560,782 $ 276,374,800
- --------------------------------------------------------------------------------
At end of year $ 329,707,242 $ 301,560,782
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Investors Portfolio as of December 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended January 31,
-------------------------------------------- ----------------------------
1997 1996 1995* 1995 1994**
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses 0.69% 0.70% 0.71%+ 0.70% 0.69%+
Net investment income 2.62% 3.23% 3.83%+ 4.25% 3.69%+
Portfolio Turnover 37% 64% 47% 28% 15%
- ----------------------------------------------------------------------------------------------------------------------
Average commission rate (per share) /(1)/ $ 0.0584 $ 0.0591 $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $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.
/(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 were charged.
See notes to financial statements
17
<PAGE>
Investors Portfolio as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS
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 -- 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 investments 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.
18
<PAGE>
Investors Portfolio as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS 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.
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 year ended December 31,
1997, the fee was equivalent to 0.61% of the Portfolio's average net assets
for such period and amounted to $1,964,597. 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 year ended
December 31, 1997, 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 $81,128,338 and $104,085,909,
respectively. Purchases and sales of U.S. Government/agency securities
aggregated $34,911,297 and $30,400,441, respectively.
4 Federal Income Tax Basis of Investments
-----------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in the value of
investments owned at December 31, 1997, as computed on a federal income tax
basis, are as follows:
Aggregate cost $234,225,248
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 99,371,940
Gross unrealized depreciation 5,438,381
-----------------------------------------------------------------------------
Net unrealized appreciation $ 93,933,559
-----------------------------------------------------------------------------
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 year ended December 31, 1997.
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
19
<PAGE>
Investors Portfolio as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (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.
20
<PAGE>
Investors Portfolio as of December 31, 1997
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Trustees and Investors
of Investors Portfolio:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of
Investors Portfolio (the Portfolio), including the portfolio of investments, as
of December 31, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the supplementary data for each of the two years in the
period then ended, the eleven month period ended December 31, 1995, the year
ended January 31, 1995 and 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 audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities held as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of the
Investors Portfolio as of December 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
then ended and the supplementary data for each of the two years in the period
then ended, the eleven month period ended December 31, 1995, the year ended
January 31, 1995 and 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
February 6, 1998
21
<PAGE>
EV Traditional Investors Fund as of December 31, 1997
INVESTMENT MANAGEMENT
EV Traditional Investors 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
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Investors 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
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
22
<PAGE>
This Page Intentionally Left Blank
<PAGE>
Investment Advisor 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
(617) 482-8260
Custodian
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02205-1537
Transfer and Dividend
Disbursing Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV Traditional Investors 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.
- --------------------------------------------------------------------------------
T-IFSRC-2/98
