<PAGE>
Investing
[LOGO OF EATON
VANCE APPEARS HERE] for the
[PHOTO OF CALCULATOR APPEARS HERE]
21st
Century (R)
Semiannual Report June 30, 1998
[PHOTO OF NEW YORK STOCK EXCHANGE FLAG APPEARS HERE]
EATON VANCE
SPECIAL
EQUITIES FUND
Eaton Vance
Global Management-Global Distribution
[PHOTO OF NEW YORK STOCK EXCHANGE APPEARS HERE]
<PAGE>
Eaton Vance Special Equities Fund as of June 30, 1998
INVESTMENT UPDATE
[PHOTO OF EDWARD E. (JACK) SMILEY PORTFOLIO MANAGER APPEARS HERE]
Edward E. (Jack) Smiley
Portfolio Manager
Investment Environment
- --------------------------------------------------------------------------------
The Economy
. In the first half of 1998, the U.S. economy continued to benefit from a
confluence of favorable trends, including good growth, historically low
unemployment, and tame inflation.
. Gross Domestic Product increased by a modest 1.4% in the second quarter,
while the unemployment rate declined from 4.7% in December, 1997, to 4.5%
in June, 1998. On the inflation front, the Consumer Price Index rose just
1.6% in the year 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,
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&P500 Index registering a total return of 17.7%./1/ The
market's strength reflected the favorable economic backdrop, a good
earnings outlook, and a continuing flight to quality among 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.
. Small-cap stocks -- the Fund's investment universe -- continued to
underperform larger stocks, with the technology and energy sectors
displaying tremendous volatility. As a result, valuations of small-cap
stocks are now very reasonable compared to their larger cap counterparts.
That is very significant, especially given the continuing strong earnings
momentum among many smaller companies.
The Fund
- --------------------------------------------------------------------------------
The Past Six Months
. During the six months ended June 30, 1998, the Fund's Class A shares had a
total return of 12.5%. This return resulted from an increase in net asset
value (NAV) to $7.86 per share on June 30, 1998 from $6.99 on December 31,
1997 and the reinvestment of $0.003 in capital gain distributions./2/ By
comparison, the S&P SmallCap 600 Index rose just 6.1% during the six-month
period./1/
. The Fund's Class B shares had a total return of 12.0% during the period,
the result of an increase in NAV to $14.92 per share from $13.32 per share
and the reinvestment of $0.003 in capital gain distributions./2/
. The Fund's Class C shares had a total return of 11.8% during the period,
the result of an increase in NAV to $11.13 per share from $9.96 per share
and the reinvestment of $0.003 in capital gain distributions./2/
Management Discussion
. Software and information technology companies such as J.D. Edwards, Inc.
and Yahoo, Inc. were very strong performers. J.D. Edwards is a leader in
enterprise planning software. Yahoo is a leading Internet media company
offering a wide range of branded programs.
. The telecommunications industry remains a major source of growth, both
domestically and abroad. ECI Telecommunications, Ltd. rose 63% during the
period. The Israel-based company develops digital telecom and data
transmission systems.
. United Rentals, Inc., which rents equipment to the construction industry
and to homeowners, rose 135% in the six-month period. The company has
benefited from the national boom in construction and has pursued an
aggressive acquisition strategy. United recently announced a merger with
competitor U.S. Rentals.
. While much of the semiconductor industry suffered from slowing demand,
Vitesse Semiconductor Corp. enjoyed a 50% surge in second quarter earnings.
The company, which rose 65%, makes specialized integrated circuits for the
fast-growing telecom and data communication sectors.
- --------------------------------------------------------------------------------
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.
Fund Information
as of June 30, 1998
Performance/3/ Class A Class B Class C
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 21.9% 19.6% 19.1%
Five Years 13.6 N.A. N.A.
Ten Years 13.8 N.A. N.A.
Life of Fund+ 9.3 15.8 16.6
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year 14.8% 14.6% 18.2%
Five Years 12.3 N.A. N.A.
Ten Years 13.1 N.A. N.A.
Life of Fund+ 9.1 15.3 16.6
+Inception Dates -- Class A: 4/22/68; Class B: 8/22/94; Class C:11/17/94
Ten Largest Holdings/4/
- --------------------------------------------------------------------------------
SunGard Data Systems, Inc. 1.6%
Nova Corp. 1.6
Cross Timbers Oil Co. 1.6
Newfield Exploration Co. 1.5
Mutual Risk Management Ltd. 1.5
J.D. Edwards, Inc. 1.5
BISYS Group Inc., (The) 1.4
Emmis Broadcasting Corp., Class A 1.3
Genzyme Corp., Class A 1.3
Acxiom Corp. 1.3
/1/It is not possible to invest directly in an Index. /2/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 Class C shares.
/3/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. /4/As of 6/30/98; may not be representative of the
Portfolio's current or future investments. The ten largest holdings accounted
for 14.6% of the Portfolio's net assets.
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
<PAGE>
Eaton Vance Special Equities Fund as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
- --------------------------------------------------------------------------
Investment in Special Investment Portfolio, at value
(identified cost, $63,707,762) $82,278,870
Receivable for Fund shares sold 1,643
Deferred organization expenses 23,460
- --------------------------------------------------------------------------
Total assets $82,303,973
- --------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------
Payable for Fund shares redeemed $ 24,757
Payable to affiliate for Trustees' fees 516
Other accrued expenses 38,579
- --------------------------------------------------------------------------
Total liabilities $ 63,852
- --------------------------------------------------------------------------
Net Assets $82,240,121
- --------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------
Paid-in capital $57,822,945
Accumulated undistributed net realized gain from
Portfolio (computed on the basis of 6,176,519
identified cost)
Accumulated net investment loss (330,451)
Net unrealized appreciation from Portfolio (computed
on the basis of identified cost) 18,571,108
- --------------------------------------------------------------------------
Total $82,240,121
- --------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------
Net Assets $76,892,653
Shares Outstanding 9,785,470
Net Asset Value and Redemption Price Per Share
(net assets / shares of beneficial interest $ 7.86
outstanding)
Maximum Offering Price Per Share
(100 / 94.25 of $7.86) $ 8.34
- --------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------
Net Assets $ 3,810,583
Shares Outstanding 255,486
Net Asset Value, Offering Price and Redemption Price
Per Share
(net assets/shares of beneficial interest outstanding) $ 14.92
- --------------------------------------------------------------------------
Class C Shares
- --------------------------------------------------------------------------
Net Assets $ 1,536,886
Shares Outstanding 138,104
Net Asset Value, Offering Price and Redemption Price
Per Share
(net assets/shares of beneficial interest outstanding) $ 11.13
- --------------------------------------------------------------------------
On sales of 550,000 or more, the offering price of Class A shares is reduced.
Statement of Operations
For the Six Months Ended
June 30, 1998
Investment Income
- --------------------------------------------------------------------------
Dividends allocated from
Portfolio (net of foreign taxes $435) $ 82,123
Interest allocated from Portfolio 95,638
Expenses allocated from Portfolio (306,562)
- --------------------------------------------------------------------------
Net investment loss from Portfolio $ (128,801)
- --------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------
Trustees fees and expenses $ 1,400
Distribution and service fees
Class A 41,540
Class B 17,137
Class C 7,484
Transfer and dividend disbursing agent fees 67,783
Registration fees 27,150
Printing and postage 10,337
Amortization of organization expenses 9,548
Custodian fee 7,505
Legal and accounting services 6,335
Miscellaneous 5,431
- --------------------------------------------------------------------------
Total expenses $ 201,650
- --------------------------------------------------------------------------
Net investment loss $ (330,451)
- --------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 7,836,496
- --------------------------------------------------------------------------
Net realized gain $ 7,836,496
- --------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 1,911,529
- --------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 1,911,529
- --------------------------------------------------------------------------
Net realized and unrealized gain $ 9,748,025
- --------------------------------------------------------------------------
Net increase in net assets from operations $ 9,417,574
- --------------------------------------------------------------------------
See notes to financial statements
3
<PAGE>
Eaton Vance Special Equities 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
- --------------------------------------------------------------------------------
From operations --
Net investment loss $ (330,451) $ (338,399)
Net realized gain 7,836,496 12,638,422
Net change in unrealized
appreciation (depreciation) 1,911,529 (2,467,352)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 9,417,574 $ 9,832,671
- --------------------------------------------------------------------------------
Distributions to shareholders --
From net realized gain
Class A $ (30,440) $(22,988,175)
Class B (752) --
Class C (418) --
In excess of net realized gain
Class A -- (1,224,953)
- --------------------------------------------------------------------------------
Total distributions to shareholders $ (31,610) $(24,213,128)
- --------------------------------------------------------------------------------
Transactions in shares of
beneficial interest --
Proceeds from sale of shares
Class A $ 1,048,415 $ 35,975,118
Class B 948,969 --
Class C 463,493 --
Net asset value of shares
issued to shareholders
in payment of
distributions declared
Class A 27,662 21,098,427
Class B 685 --
Class C 412 --
Cost of shares redeemed
Class A (6,151,821) (46,548,090)
Class B (1,037,956) --
Class C (489,668) --
- --------------------------------------------------------------------------------
Net increase (decrease) in net
assets from Fund share
transactions $ (5,189,809) $ 10,525,455
- --------------------------------------------------------------------------------
Contribution from EV Marathon
and EV Classic Special
Equities Funds $ 4,900,379 $ --
- --------------------------------------------------------------------------------
Net increase (decrease) in net
assets $ 9,096,534 $ (3,855,002)
- --------------------------------------------------------------------------------
At beginning of period $ 73,143,587 $ 76,998,589
- --------------------------------------------------------------------------------
At end of period $ 82,240,121 $ 73,143,587
- --------------------------------------------------------------------------------
Accumulated
undistributed net
investment loss
included in net assets
- --------------------------------------------------------------------------------
At end of period $ (330,451) $ --
- --------------------------------------------------------------------------------
See notes to financial statements
4
<PAGE>
Eaton Vance Special Equities Fund as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1998 ---------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
------------------------------- ---------------------------------------------------
Class A Class B Class C Class A Class A Class A Class A Class A
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of period $ 6.990 $13.320 $ 9.960 $ 8.950 $ 7.980 $ 6.880 $ 8.430 $ 8.990
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss $(0.030) $(0.113) $(0.090) $(0.032) $(0.009) $(0.009) $(0.013) $(0.018)
Net realized and unrealized gain (loss) 0.903 1.716 1.263 0.922 1.874 1.599 (0.807) 0.108
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.873 $ 1.603 $ 1.173 $ 0.890 $ 1.865 $ 1.590 $(0.820) $ 0.090
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain $(0.003) $(0.003) $(0.003) $(2.706) $(0.895) $(0.490) $(0.727) $(0.650)
In excess of net realized gain -- -- -- (0.144) -- -- -- --
From tax return of capital -- -- -- -- -- -- (0.003) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.003) $(0.003) $(0.003) $(2.850) $(0.895) $(0.490) $(0.730) $(0.650)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $ 7.860 $14.920 $11.130 $ 6.990 $ 8.950 $ 7.980 $ 6.880 $ 8.430
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 12.49% 12.04% 11.78% 14.18% 23.76% 23.31% (9.60)% 1.14%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $76,893 $ 3,811 $ 1,537 $73,144 $76,999 $70,456 $63,852 $78,132
Ratios (As a percentage of average daily net
assets) 1.21%+ 2.06%+ 2.09%+ 1.12% 1.04% 1.08% 1.02% 1.01%
Expenses /(2)/
Net investment loss (0.77)%+ (1.62)%+ (1.66)%+ (0.46)% (0.10)% (0.12)% (0.17)% (0.30)%
Portfolio turnover /(3)/ -- -- -- -- -- -- 37% 73%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
/(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 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 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 Special Equities Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Eaton Vance Special Equities Fund (the Fund), is a diversified series of
Eaton Vance Special Investment 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 Special Investment
Portfolio (the Portfolio), a New York Trust, having the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio
(100.0% 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 -- Valuation of securities by the Portfolio is
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. Dividend income was recorded on the
ex-dividend date. However, if the ex-dividend date had passed, certain
dividends from securities were recorded as the Portfolio was informed of the
ex-dividend date. Interest income was recorded on the accrual basis.
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 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.
E Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
F Other -- Investment transactions are accounted for on a trade date basis.
G Use of Estimates -- The preparation of 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 Information -- The interim financial statements relating
to June 30, 1998 and for the six month period 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
-----------------------------------------------------------------------------
The Fund's present policy is to make a distribution at least annually of the
net investment income allocated to the Fund by the Portfolio (less the Fund's
direct and allocated
6
<PAGE>
Eaton Vance Special Equities Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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
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
-----------------------------------------------------------------------------
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). Such
shares may be issued in a number of different classes. Transactions in Fund
shares were as follows:
Six Months Ended
June 30, 1998 Year Ended
Class A (Unaudited) December 31, 1997
- --------------------------------------------------------------------------------
Sales 133,608 4,415,029
Issued to shareholders electing to
receive payments of distributions
in Fund shares 3,627 3,097,585
Redemptions (820,761) (5,649,305)
- --------------------------------------------------------------------------------
Net increase (decrease) (683,526) 1,863,309
- --------------------------------------------------------------------------------
Six Months Ended
June 30, 1998
Class B (Unaudited)
- --------------------------------------------------------------------------------
Sales 65,947
Issued to shareholders electing to
receive payments of distributions
in Fund shares 47
Redemptions (73,174)
Issued to EV Marathon Special
Equities Fund shareholders 262,666
- --------------------------------------------------------------------------------
Net increase 255,486
- --------------------------------------------------------------------------------
Six Months Ended
June 30, 1998
Class C (Unaudited)
- --------------------------------------------------------------------------------
Sales 42,276
Issued to shareholders electing to
receive payments of distributions
in Fund shares 38
Redemptions (44,893)
Issued to EV Classic Special
Equities Fund shareholders 140,683
- --------------------------------------------------------------------------------
Net increase 138,104
- --------------------------------------------------------------------------------
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 the
investment adviser fee. 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. The Plans
requires 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
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
7
<PAGE>
Eaton Vance Special Equities Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
sales charges (see Note 6) and daily amounts theretofore paid to EVD by each
respective class. The Fund paid or accrued $13,385 and $5,613 for Class B and
Class C shares, respectively to or payable to EVD for the six months ended
June 30, 1998, representing 0.75% and 0.75% (annualized) of the average daily
net assets for Class B and Class C shares, respectively. At June 30, 1998,
the amount of Uncovered Distribution Charges EVD calculated under the Plans
were approximately $67,000 and $240,000 for Class B and Class C shares,
respectively.
In addition, the Plans provide 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 attributable to Class
A, Class B and Class C shares for any fiscal year. The Trustees have
implemented the Plans 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 attributable to Class A, Class B and Class C shares 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 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 $41,540, $3,752 and $1,871 for Class A, Class B and Class C shares,
respectively.
Certain officers and Trustees of the Fund are officers or directors of EVD.
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 is imposed on
certain Class C shares redeemed 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. The 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. Class C shares will be subject to a 1% CDSC if redeemed within one year
of purchase. 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 the Fund's Class B and Class C Distribution Plans (See Note 5). CDSC
charges received when no Uncovered Distribution Charges exist will be
retained by the Fund. EVD received approximately $3,000 of CDSC paid by
shareholders for Class B shares for the six months ended June 30, 1998. There
was no CDSC paid by shareholders for Class C shares for the six months ended
June 30, 1998.
7 Investment Transactions
-----------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio aggregated
$2,744,300 and $8,053,723, respectively for the six months ended June 30,
1998.
8 Transfer of Net Assets
-----------------------------------------------------------------------------
On January 1, 1998, EV Traditional Special Equities Fund acquired the net
assets of the EV Marathon Special Equities Fund and the EV Classic Special
Equities Fund pursuant to an Agreement and Plan of Reorganization dated June
23, 1997. In accordance with the agreement, EV Traditional Special Equities
Fund, at the closing, issued 262,666 Class B shares and 140,683 Class C
shares of the Fund having an aggregate value of $3,498,869 and $1,401,510,
respectively. As a result, the Fund issued one Class B share and one Class C
share for each share of EV Marathon Special Equities Fund and EV Classic
Special Equities Fund, respectively. The transaction was structured for tax
purposes to qualify as a tax free reorganization under the Internal Revenue
Code. The EV Marathon Special Equities Fund's and EV Classic Special Equities
Fund's net assets at the date of the transaction were $3,498,869 and
$1,401,510, respectively, including $605,373 and $372,397 of unrealized
appreciation. Directly after the merger, the combined net assets of the Eaton
Vance Special Equities Fund (formerly EV Traditional Special Equities Fund)
were $78,043,966 with a net asset value of $6.99, $13.32 and $9.96 for Class
A, Class B and Class C shares, respectively.
9 Name Change
-----------------------------------------------------------------------------
Effective January 1, 1998, EV Traditional Special Equities Fund changed its
name to Eaton Vance Special Equities Fund.
8
<PAGE>
Special Investment Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks -- 97.6%
Security Shares Value
- --------------------------------------------------------------------------------
Advertising -- 2.6%
- --------------------------------------------------------------------------------
Catalina Marketing Corp.* 20,000 $1,038,750
Specialized market research.
Harte-Hanks Communications, Inc. 10,000 258,125
Owns and operates an international direct
marketing company.
Outdoor Systems, Inc.* 30,000 840,000
Dominant operator of outdoor advertising.
- --------------------------------------------------------------------------------
$2,136,875
- --------------------------------------------------------------------------------
Auto and Parts -- 0.3%
- --------------------------------------------------------------------------------
O'Reilly Automotive, Inc.* 7,000 $ 252,000
Supplies automotive equipment and
accessories to professional mechanics and
service technicians.
- --------------------------------------------------------------------------------
$ 252,000
- --------------------------------------------------------------------------------
Banks - Regional -- 1.4%
- --------------------------------------------------------------------------------
Colonial Bancgroup, Inc. (The) 21,000 $ 677,250
Emerging banking company in the
Southeastern U.S.
Northfork Bancorp 19,000 464,313
Provides commercial banking services to the
New York and Connecticut areas.
- --------------------------------------------------------------------------------
$1,141,563
- --------------------------------------------------------------------------------
Banks and Money Services -- 0.7%
- --------------------------------------------------------------------------------
Bank United Corp. 12,000 $ 574,500
Operates 70 branch bank system in Texas.
- --------------------------------------------------------------------------------
$ 574,500
- --------------------------------------------------------------------------------
Biotechnology -- 1.3%
- --------------------------------------------------------------------------------
Human Genome Sciences, Inc.* 12,000 $ 428,250
Researches and develops pharmaceutical and
diagnostic products.
Sepracor, Inc.* 15,000 622,500
Develops pharmaceutical drugs.
- --------------------------------------------------------------------------------
$1,050,750
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 3.4%
- --------------------------------------------------------------------------------
Emmis Broadcasting Corp., Class A* 23,000 $1,099,687
Diversified media company.
Jacor Communications, Inc.* 16,500 973,500
Rapidly growing operator of radio stations and
syndicated programming.
Sinclair Broadcast Group, Class A* 26,000 747,500
Well managed operator of diversified
broadcast properties.
- --------------------------------------------------------------------------------
$2,820,687
- --------------------------------------------------------------------------------
Building Materials -- 1.2%
- --------------------------------------------------------------------------------
Texas Industries, Inc. 18,000 $ 954,000
Regional producer of building products in
the Southwest.
- --------------------------------------------------------------------------------
$ 954,000
- --------------------------------------------------------------------------------
Business Products and Services -- 5.7%
- --------------------------------------------------------------------------------
Abacus Direct Corp.* 10,000 $ 519,375
Provider of specialized marketing programs.
Carreker-Antinori, Inc.* 25,000 262,500
Provides integrated consulting
software solutions.
CN Maximus, Inc.* 20,950 602,313
Management consulting group.
Gartner Group, Inc., Class A* 20,000 700,000
Leading consultant of high tech
equipment purchases.
Learning Tree International, Inc.* 13,000 261,625
Leading operator of computer software
training programs.
Personnel Group of America, Inc.* 14,000 280,000
Temporary employment company.
Saville Systems PLC ADR* 7,000 350,875
Provides billing software for the
telecommunications industry.
Sylvan Learning Systems, Inc.* 22,500 736,875
Operates specialized educational
tutoring and testing centers.
United Rentals, Inc.* 24,000 1,008,000
Unique operator of outlets renting
specialized construction equipment.
- --------------------------------------------------------------------------------
$4,721,563
- --------------------------------------------------------------------------------
See notes to financial statements
9
<PAGE>
Special Investment Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Business Services - Miscellaneous -- 2.4%
- --------------------------------------------------------------------------------
Boron, LePore & Associates, Inc.* 5,000 $ 190,000
Provides outsourced promotional, marketing,
educational, and field sales force logistics
services to the pharmaceutical industry.
Cognex Corp.* 23,000 425,500
Provides machine vision systems which are
used to automate the manufacturing process.
ISS Group, Inc.* 1,150 43,269
Provides network security
monitoring, detection, and
response software.
On Assignment, Inc.* 18,000 628,875
Provides temporary scientific and
environmental professionals to
laboratories.
United Road Services, Inc.* 35,000 669,375
Offers a range of towing and transport services.
- --------------------------------------------------------------------------------
$1,957,019
- --------------------------------------------------------------------------------
Communications Equipment -- 4.6%
- --------------------------------------------------------------------------------
Advanced Fibre Communication, Inc.* 10,000 $ 400,625
Develops the "Universal Modular
Carrier 1000" which enables
subscribers to access voice and
data communication over copper wire.
ANTEC Corp.* 9,950 230,716
Develops and supplies optical transmission,
construction, and maintenance equipment for
the cable television industry.
Aspect Telecommunication Corp.* 30,000 821,250
Provides voice and data integrated software.
Comverse Technology, Inc.* 15,000 778,125
Specialized communications products.
Davox Corp.* 20,000 437,500
Designs and manufactures specialized
telecom products.
ECI Telecommunications 20,000 757,500
A company that produces advanced
telecommunications equipment.
Glenayre Technologies, Inc.* 32,000 344,000
Leading supplier of wireless
communications equipment.
- --------------------------------------------------------------------------------
$3,769,716
- --------------------------------------------------------------------------------
Communications Services -- 0.2%
- --------------------------------------------------------------------------------
McLeodUSA, Inc.* 5,000 $ 194,375
Provides integrated telecommunications
services to business and residential customers.
- --------------------------------------------------------------------------------
$ 194,375
- --------------------------------------------------------------------------------
Computer Software -- 5.0%
- --------------------------------------------------------------------------------
Brio Technology, Inc.* 34,900 $ 466,788
Develops software that enables organizations
to implement business intelligent
solutions.
CBT Group PLC ADR* 10,000 535,000
Specialized provider of computer
based training systems.
Documentum, Inc.* 9,000 432,000
Provides niche software enabling
large corporations to integrate
their documents into
a central system.
HNC Software, Inc.* 15,000 612,188
Develops specialty software
products that enable credit
suppliers define risk/reward
scores for loans.
International Integration, Inc.* 4,500 77,625
Provides application migration and
custom software development
services.
J.D. Edwards, Inc.* 28,000 1,202,249
Leading vendor of enterprise
resource software - specialized in
mid range corporations.
PeopleSoft, Inc.* 16,800 789,600
Specialty software for human resources
and manufacturing.
- --------------------------------------------------------------------------------
$4,115,450
- --------------------------------------------------------------------------------
Consumer Products -- 0.5%
- --------------------------------------------------------------------------------
Twinlab Corp.* 10,000 $436,875
Manufactures nutritional products.
- --------------------------------------------------------------------------------
$436,875
- --------------------------------------------------------------------------------
Consumer Services -- 1.1%
- --------------------------------------------------------------------------------
Strayer Education, Inc. 25,865 $937,606
Specialized supplemental education services.
- --------------------------------------------------------------------------------
$937,606
- --------------------------------------------------------------------------------
See notes to financial statements
10
<PAGE>
Special Investment Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Drugs -- 2.3%
- --------------------------------------------------------------------------------
Genzyme Corp., Class A* 43,000 $1,099,187
Diversified biotechnology
pharmaceuticals.
Parexel International Corp.* 21,000 763,875
Contract research services for large
drug companies.
- --------------------------------------------------------------------------------
$1,863,062
- --------------------------------------------------------------------------------
Electrical Equipment -- 1.2%
- --------------------------------------------------------------------------------
Level One Communications, Inc.* 25,500 $ 599,250
Designs and sells integrated circuits.
Micrel, Inc.* 11,000 357,500
Designs and sells analog
integrated circuits used in the
communications, computer, and
industrial markets.
- --------------------------------------------------------------------------------
$ 956,750
- --------------------------------------------------------------------------------
Electronics - Equipment -- 0.4%
- --------------------------------------------------------------------------------
Etec Systems, Inc.* 10,000 $ 351,875
Manufactures high precision masks
used to print circuit patterns onto
semiconductor wafers.
- --------------------------------------------------------------------------------
$ 351,875
- --------------------------------------------------------------------------------
Electronics - Instruments -- 1.0%
- --------------------------------------------------------------------------------
Flextronics International Ltd.* 9,000 $ 391,500
Provides contract manufacturing services
to equipment manufacturers.
Photronics, Inc.* 9,100 200,769
Manufactures photomasks used to
transfer circuit patterns onto
semiconductor wafers.
Sanmina Corp.* 6,000 260,250
Operates contract manufacturing
facilities for high tech companies.
- --------------------------------------------------------------------------------
$ 852,519
- --------------------------------------------------------------------------------
Electronics - Semiconductors -- 2.6%
- --------------------------------------------------------------------------------
Dallas Semiconductor Corp. 20,000 $ 620,000
Designs, manufactures, and markets
electronic chips and chip-based
subsystems.
PMC-Sierra, Inc.* 15,000 703,125
Provides high speed internetworking
component solutions.
Qlogic Corp.* 5,950 212,341
Designs and distributes specialty chips
and systems for communications products.
Vitesse Semiconductor Corp.* 20,000 617,500
Provides digital circuits used
primarily for telecommunications,
data communications and automated
test equipment systems.
- --------------------------------------------------------------------------------
$2,152,966
- --------------------------------------------------------------------------------
Entertainment -- 0.5%
- --------------------------------------------------------------------------------
Speedway Motorsports, Inc.* 15,000 $ 383,438
Owns and operates "Atlanta Motor
Speedway", "Bristol Motor
Speedway", "Charlotte Motor
Speedway", "Texas Motor Speedway",
and "600 Racing".
- --------------------------------------------------------------------------------
$ 383,438
- --------------------------------------------------------------------------------
Financial - Miscellaneous -- 1.1%
- --------------------------------------------------------------------------------
Capital One Financial Corp. 3,000 $ 372,563
Leading credit card services specialists.
E*Trade Group, Inc.* 23,000 527,563
Innovative, high quality
electronic internet stock
brokerage firm.
- --------------------------------------------------------------------------------
$ 900,126
- --------------------------------------------------------------------------------
Health Care Services -- 0.7%
- --------------------------------------------------------------------------------
NCS Healthcare, Inc., Class A* 20,000 $ 570,000
An independent provider of pharmacy services.
- --------------------------------------------------------------------------------
$ 570,000
- --------------------------------------------------------------------------------
Health Services -- 10.7%
- --------------------------------------------------------------------------------
ABR Information Services, Inc.* 16,000 $ 380,000
Provides comprehensive benefits
administration, compliance and
information services.
American Retirement Corp.* 32,000 568,000
Assisted living services.
Biomatrix, Inc.* 10,000 410,000
Develops and manufactures products used for
orthopedics, ophthalmology, and other
medical applications.
See notes to financial statements
11
<PAGE>
Special Investment Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Health Services (continued)
- --------------------------------------------------------------------------------
Compdent Corp.* 52,000 $ 812,500
Offers a full line of dental care plan services.
Elan Corp., PLC ADR* 9,000 578,813
Specialty pharmaceutical.
Envoy Corp.* 10,000 473,750
Provides electronic data
interchange services to
participants in the health care market.
Express Scripts, Inc., Class A* 10,000 806,250
Rapidly growing pharmacy specialist.
Health Management Associates, 10,000 334,375
Inc., Class A*
Hospital chain.
MedQuist, Inc.* 5,000 144,375
Provides electronic transcription and
data management services to the healthcare industry.
MiniMed, Inc.* 15,000 785,625
Developer and manufacturer of
medical devices focusing on diabetics.
National Surgery Centers, Inc.* 18,000 523,125
Operator of independent surgery units.
Omnicare, Inc. 27,000 1,029,375
Provides pharmacy services to retirement
centers.
Pediatrix Medical Group, Inc.* 11,000 409,063
Operates pediatric care units.
Renal Care Group, Inc.* 14,000 616,875
One of the largest providers of renal
treatment centers.
Rexall Sundown, Inc.* 7,000 246,750
Develops, markets, and sells
vitamins, nutritional supplements
and consumer
health products
Sunrise Assisted Living, Inc.* 20,000 687,500
One of the leading operators of
assisted care facilities for senior citizens.
- --------------------------------------------------------------------------------
$8,806,376
- --------------------------------------------------------------------------------
Household Products -- 0.7%
- --------------------------------------------------------------------------------
Sola International, Inc.* 17,000 $ 555,688
Specialty eye care products.
- --------------------------------------------------------------------------------
$ 555,688
- --------------------------------------------------------------------------------
Information Services -- 20.2%
- --------------------------------------------------------------------------------
Acxiom Corp.* 43,000 $1,072,313
Database information services.
Affiliated Computer Services, 24,000 924,000
Inc., Class A*
Nationwide provider of information
processing services.
Aspect Development, Inc.* 7,000 529,375
Information processing services specialist.
Aspen Technologies, Inc.* 15,000 757,500
Specialty software for upgrading
manufacturing plants.
BISYS Group, Inc. (The)* 28,000 1,147,999
Services financial institutions
with computer, administrative and
marketing support data
processing services.
Cambridge Technology Partners, Inc.* 17,000 928,625
Software consulting company.
CCC Information Services Group* 30,000 495,000
Automotive repair information specialist.
Citrix Systems, Inc.* 8,600 588,025
Supplies client/server application products
that are compatible with "Windows"
operating systems.
Fiserv, Inc.* 20,950 889,719
Provider of data processing
services to banks and savings institutions.
Harbinger Corp.* 30,000 725,625
Electronic Data Interchange products
and services.
IDX Systems Corp.* 25,000 1,151,562
Healthcare information systems.
Legato Systems, Inc. 13,000 507,000
Develops, markets, and supports
network storage management software products.
Lycos, Inc.* 6,000 452,250
Develops and provides guides to Web
search and directory services.
Medical Manager Corp.* 27,000 745,875
Provides the Medical Manager
physician practice management system.
Mobius Management Systems, Inc.* 30,000 450,000
Provides software products designed
to optimize the storage and retrieval
of information.
Nova Corp.* 36,000 1,286,999
Nation's largest bankcard processor.
Paychex, Inc. 12,000 488,250
Payroll and corporate information services.
See notes to financial statements
12
<PAGE>
Special Investment Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Information Services (continued)
- --------------------------------------------------------------------------------
Sapient Corp.* 10,000 $ 527,500
Provides custom based software.
Siebel Systems, Inc.* 15,000 483,750
Supplies sales, marketing, and
customer service information
systems.
SunGard Data Systems, Inc.* 35,000 1,343,124
Data storage and emergency back up
products.
Veritas Software Co.* 23,250 961,969
Provides communications companies
with software.
measuring systems.
Yahoo!, Inc.* 1,200 189,000
Offers a network of branded
Web programming.
- --------------------------------------------------------------------------------
$16,645,460
- --------------------------------------------------------------------------------
Insurance -- 2.7%
- --------------------------------------------------------------------------------
Mercury General Corp. 5,000 $ 322,188
Large provider of specialized auto
insurance policies.
Mutual Risk Management Ltd. 33,006 1,202,655
Specialty insurer focusing on workmen's
compensation.
Reinsurance Group of America, Inc.* 13,000 667,063
Provides life reinsurance in
North America.
- --------------------------------------------------------------------------------
$ 2,191,906
- --------------------------------------------------------------------------------
Investment Services -- 3.0%
- --------------------------------------------------------------------------------
Centura Banks, Inc. 12,000 $ 750,000
Growing Southeastern bankers.
PMI Group, Inc. 10,000 733,750
Specialty financial products.
Sovereign Bancorp, Inc. 60,000 980,622
A thrift holding company.
- --------------------------------------------------------------------------------
$ 2,464,372
- --------------------------------------------------------------------------------
Lodging and Gaming -- 1.2%
- --------------------------------------------------------------------------------
ResortQuest International, Inc.* 35,000 $ 570,938
Provides vacation condominium and home
rentals in the United States.
Rio Hotel and Casino, Inc.* 20,000 377,500
Owns and operates the Rio Suite
Hotel & Casino in Las Vegas,
Nevada, consisting of
over 2500 suites.
- --------------------------------------------------------------------------------
$ 948,438
- --------------------------------------------------------------------------------
Machinery -- 2.1%
- --------------------------------------------------------------------------------
Camco International, Inc. 11,000 $ 856,625
Oilfield services.
Varco International, Inc.* 44,000 871,750
Designs and manufactures equipment
used for oil and gas drilling
worldwide.
- --------------------------------------------------------------------------------
$ 1,728,375
- --------------------------------------------------------------------------------
Medical Products -- 2.0%
- --------------------------------------------------------------------------------
Haemonetics Corp.* 28,000 $ 448,000
Designs and manufactures equipment
for the collection, processing and
surgical salvage of blood.
Ocular Sciences, Inc.* 10,000 325,000
Manufactures and markets a broad line of
disposable contact lenses.
Sofamor Danek Group, Inc.* 10,000 865,625
Leading developer/manufacturer of spinal
implant devices. Company markets
products internationally.
- --------------------------------------------------------------------------------
$ 1,638,625
- --------------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 7.4%
- --------------------------------------------------------------------------------
Cross Timbers Oil Co. 67,000 $ 1,277,187
Emerging growth energy company with
good exploration track record.
EEX Corp.* 85,000 796,875
Explores for and produces oil and
natural gas.
Encal Energy, Ltd.* 110,000 419,375
Specialized energy exploration
company.
Louis Dreyfus Natural Gas* 46,640 883,245
Niche developer and driller of gas
properties.
Meridian Resource Corp.* 80,000 565,000
An independent oil and natural gas
company that explores and develops
properties.
Newfield Exploration Co.* 50,000 1,243,749
Acquires and develops energy
properties in domestic U.S.
Triton Energy Ltd.* 25,000 892,188
International oil and gas
exploration and development.
- --------------------------------------------------------------------------------
$ 6,077,619
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Special Investment Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Publishing -- 1.2%
- --------------------------------------------------------------------------------
Belo (A.H.) Corp. $ 10
Publishes Dallas Morning News and
Providence Journal; also operates
T.V. and radio properties.
Central Newspapers, Inc., Class A 10,000 697,500
Publishes the Arizona Republic,
the Arizona Business Gazette, the
Indianapolis Star, the
Indianapolis News, and community
newspapers in Indiana and
Louisiana.
Master Graphics, Inc.* 30,000 277,500
Provides general commercial printing services
to customers throughout the United States.
- --------------------------------------------------------------------------------
$ 975,010
- --------------------------------------------------------------------------------
REITS -- 0.5%
- --------------------------------------------------------------------------------
Public Storage, Inc. 15,000 $ 420,000
Real Estate Investment Trust (REIT)
which invests in mini-warehouses and self-
service facilities.
- --------------------------------------------------------------------------------
$ 420,000
- --------------------------------------------------------------------------------
Retail - Food and Drug -- 1.4%
- --------------------------------------------------------------------------------
Papa John's International, Inc.* 29,000 $1,143,687
Rapidly growing restaurant chain.
- --------------------------------------------------------------------------------
$1,143,687
- --------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 1.7%
- --------------------------------------------------------------------------------
Bed Bath and Beyond, Inc.* 8,000 $ 414,500
Specialty retailer.
The Mens Wearhouse, Inc.* 31,000 1,023,000
Specialty apparel chain.
- --------------------------------------------------------------------------------
$1,437,500
- --------------------------------------------------------------------------------
Semiconductor Equipment -- 0.5%
- --------------------------------------------------------------------------------
PRI Automation, Inc.* 25,000 $ 426,563
Material handling equipment for high cost
semiconductor wafers.
- --------------------------------------------------------------------------------
$ 426,563
- --------------------------------------------------------------------------------
Software Services -- 0.6%
- --------------------------------------------------------------------------------
JDA Software Group, Inc.* 12,000 $ 525,000
Provides software products that
address business information
requirements of the
retail supply chain.
- --------------------------------------------------------------------------------
$ 525,000
- --------------------------------------------------------------------------------
Telephone Utilities -- 1.0%
- --------------------------------------------------------------------------------
Pacific Gateway Exchange, Inc.* 8,000 $ 320,500
Leading provider of foreign long
distance services.
Smartalk Teleservices, Inc.* 33,000 480,563
Provides prepaid
telecommunications products
and services.
- --------------------------------------------------------------------------------
$ 801,063
- --------------------------------------------------------------------------------
Transportation -- 0.5%
- --------------------------------------------------------------------------------
Comair Holdings, Inc. 13,000 $ 401,375
Regional airline holding company.
- --------------------------------------------------------------------------------
$ 401,375
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $61,709,662) $80,280,772
- --------------------------------------------------------------------------------
Commercial Paper -- 4.5%
Principal
Amount
Security (000's Omitted) Value
- --------------------------------------------------------------------------------
General Electric Capital Corp., 6.10%, 7/1/98 $3,721 $ 3,721,000
- --------------------------------------------------------------------------------
Total Commercial Paper
(identified cost $3,721,000) $ 3,721,000
- --------------------------------------------------------------------------------
Total Investments -- 102.1%
(identified cost $65,430,662) $ 84,001,772
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- (2.1)% $ (1,722,879)
- --------------------------------------------------------------------------------
Net Assets -- 100% $ 82,278,893
- --------------------------------------------------------------------------------
ADR -- American Depositary Receipt
* Non-income producing security.
See notes to financial statements
14
<PAGE>
Special Investment 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, $65,430,662) $ 84,001,772
Cash 90
Receivable for investments sold 1,588,962
Interest and dividends receivable 9,455
Deferred organization expenses 3,447
- --------------------------------------------------------------------------------
Total assets $ 85,603,726
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 3,305,660
Payable to affiliate for Trustees' fees 3,874
Other accrued expenses 15,299
- --------------------------------------------------------------------------------
Total liabilities $ 3,324,833
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 82,278,893
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 63,707,783
Net unrealized appreciation (computed on
the basis of identified cost) 18,571,110
- --------------------------------------------------------------------------------
Total $ 82,278,893
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
June 30, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $435) $ 82,123
Interest 95,638
- --------------------------------------------------------------------------------
Total investment income $ 177,761
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 251,939
Trustees fees and expenses 5,902
Custodian fee 30,405
Legal and accounting services 10,777
Amortization of organization expenses 1,574
Miscellaneous 5,965
- --------------------------------------------------------------------------------
Total expenses $ 306,562
- --------------------------------------------------------------------------------
Net investment loss $ (128,801)
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 7,836,498
- --------------------------------------------------------------------------------
Net realized gain $ 7,836,498
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 1,911,530
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 1,911,530
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 9,748,028
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 9,619,227
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Special Investment 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 loss $ (128,801) $ (76,118)
Net realized gain 7,836,498 13,086,809
Net change in unrealized
appreciation (depreciation) 1,911,530 (2,245,462)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 9,619,227 $ 10,765,229
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 2,744,300 $ 39,249,662
Withdrawals (8,053,723) (54,993,076)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (5,309,423) $(15,743,414)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 4,309,804 $ (4,978,185)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 77,969,089 $ 82,947,274
- --------------------------------------------------------------------------------
At end of period $ 82,278,893 $ 77,969,089
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Special Investment Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1998 ------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 *
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses 0.76%+ 0.75% 0.76% 0.77% 0.74%+
Net investment income (loss) (0.32)%+ (0.10)% 0.18% 0.19% 0.20%+
Portfolio Turnover 52% 156% 91% 81% 19%
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $82,279 $77,969 $82,947 $73,940 $64,442
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, August 1, 1994, to December 31,
1994.
See notes to financial statements
17
<PAGE>
Special Investment Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
----------------------------------------------------------------------------
Special Investment 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 on May 1, 1992. The Declaration of Trust permits the
Trustees to issue interests in the Portfolio. The following is a summary of
significant accounting policies of the Portfolio. The policies are in
conformity with generally accepted accounting principles.
A Investment Valuations -- Securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sales prices or, if there were no sales, at the mean between the
closing bid and asked prices on the exchange where such securities are
principally traded or on such National Market System. Unlisted or listed
securities for which closing sales prices are not available are valued at
the mean between the latest bid and asked prices. An option is valued at the
last sale price as quoted on the principal exchange or board of trade on
which such option or contract is traded or, in the absence of a sale, at the
mean between the last bid and asked prices. Futures positions on securities
or currencies are generally valued at closing settlement prices. Short-term
debt securities with a remaining maturity of 60 days or less are valued at
amortized cost. If securities were acquired with a remaining maturity of
more than 60 days, their amortized cost value will be based on their value
on the sixty-first day prior to maturity. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Securities for which market quotations are
unavailable, including any security the disposition of which is restricted
under the Securities Act of 1933, and other assets will be appraised at
their fair market value as determined in good faith by or at the direction
of the Trustees of the Portfolio.
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.
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 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 reflected as a
reduction of expenses on the Statement of Operations.
E Other -- Investment transactions are accounted for on a trade date basis.
F Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
G Use of Estimates -- The preparation of 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 Information -- The interim financial statements relating
to June 30, 1998 and for the six-month period then ended have not been
audited by independent certified public accountants, but in the opinion of
the Portfolio's management, reflect all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
financial statements.
18
<PAGE>
Special Investment Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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 at the annual rate of 5/8 of 1% of average daily net
assets. For the six months ended June 30, 1998, the fee was equivalent to
0.625% (annualized) of the Portfolio's average net assets for such period
and amounted to $251,939. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment
adviser fee. Certain of the officers and Trustees of the Portfolio are
officers and directors/trustees of the above organizations. Trustees of the
Portfolio that are not affiliated with the Investment Adviser may elect to
defer receipt of all or a percentage of their annual fees in accordance with
the terms of the Trustees Deferred Compensation Plan. For the six months
ended June 30, 1998, no significant amounts have been deferred.
3 Investment Transactions
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Purchases and sales of investments, other than short-term obligations,
aggregated $40,710,608 and $45,055,021, respectively.
4 Federal Income Tax Basis of Investments
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The cost and unrealized appreciation/depreciation in value of the
investments owned at June 30, 1998, is computed on a federal income tax
basis, were as follows:
Aggregate cost $ 65,639,132
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Gross unrealized appreciation $ 19,748,410
Gross unrealized depreciation (1,385,770)
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Net unrealized appreciation $ 18,362,640
5 Line of Credit
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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
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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
(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.
19
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Eaton Vance Special Equities Fund as of June 30, 1998
INVESTMENT MANAGEMENT
Eaton Vance Special Equities Fund
Officers Trustees
James B. Hawkes M. Dozier Gardner
President and Trustee Vice Chairman, Eaton Vance
Management
Edward E. Smiley, Jr.
Vice President Donald R. Dwight
President, Dwight Partners, Inc.
James L. O'Connor
Treasurer Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Alan R. Dynner Banking, Harvard University Graduate School of
Secretary 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
Special Investment Portfolio
Officers Trustees
James B. Hawkes M. Dozier Gardner
President and Trustee Vice Chairman, Eaton Vance
Management
Edward E. Smiley, Jr.
Vice President and Donald R. Dwight
Portfolio Manager President, Dwight Partners, Inc.
James L. O'Connor Samuel L. Hayes, III
Treasurer Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Alan R. Dynner Business Administration
Secretary
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
20
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Investment Adviser of
Special Investment Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of
Eaton Vance Special Equities Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
200 Claredon 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 Special Equities Fund
24 Federal Street
Boston, MA 02110
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This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
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SESRC-8/98
