<PAGE>
[LOGO Investing [PHOTO OF
APPEARS for the CALCULATOR &
HERE] 21st FINANCIAL NEWSPAPER
Century APPEARS HERE]
Annual Report December 31, 1997
EV
MARATHON
INVESTORS
FUND
[PHOTO OF NYSE FLAG
APPEARS HERE]
Eaton Vance
Global Management-Global Distribution
M a r a t h o n
[PHOTO OF FLOOR OF NYSE
APPEARS HERE]
<PAGE>
EV Marathon Investors Fund as of December 31, 1997
LETTER TO SHAREHOLDERS
[PHOTO APPEARS HERE]
For the year ended December 31, 1997, EV Marathon Investors Fund had a total
return of 20.4%./1/ This return resulted from an increase in net asset value to
$13.68 per share on December 31, 1997 from $12.34 per share on December 31, 1996
and the reinvestment of $0.195 per share in income dividends and $0.947 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 20.4%
Life of Fund (11/2/93) 13.4
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
One Year 15.4%
Life of Fund (11/2/93) 13.1
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 applicable contingent deferred sales charge
(CDSC).
/2/ Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC Returns reflect the Fund's
applicable CDSC based on the following schedule: 5% - 1st year; 5% - 2nd
year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
/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 Marathon 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
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. Further-more, the Asian situation has resulted in a
widening of quality spreads -- the difference between high quality and lower
quality corpo-
[PHOTO APPEARS HERE]
Thomas E. Faust Jr.,
Portfolio Manager
Portfolio Allocation +
- --------------------------------------------------------------------------------
As a percentage of total net assets
[PIE CHART APPEARS HERE]
Cash 1.1%
Fixed Income 29.6%
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 Marathon 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 stock
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 Marathon 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 Marathon Investors Fund vs. the Standard & Poor's 500,
Lehman Bros. Govt./Corp Bond Index and 90-Day Treasury Bills*
November 30, 1993, through December 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
EV Marathon Lehman Brothers
Investor's Govt./Corp. 90-day US
Date Fund Fund W/ CDSC** S&P 500 Bond Index Treasury Bills*
---- ---- ------------ ------- ---------- --------------
<S> <C> <C> <C> <C> <C>
11/30/93 $10,000 $16,919 $10,000 $10,000 $10,000
12/31/93 $10,183 $16,919 $10,123 $10,044 $10,077
1/31/94 $10,538 $16,919 $10,475 $10,195 $10,077
2/28/94 $10,284 $16,919 $10,183 $ 9,973 $10,077
3/31/94 $ 9,875 $16,919 $ 9,740 $ 9,729 $10,165
4/30/94 $ 9,926 $16,919 $ 9,877 $ 9,649 $10,165
5/31/94 $ 9,938 $16,919 $10,024 $ 9,631 $10,165
6/30/94 $ 9,722 $16,919 $ 9,781 $ 9,608 $10,271
7/31/94 $10,000 $16,919 $10,113 $ 9,800 $10,271
8/31/94 $10,187 $16,919 $10,517 $ 9,804 $10,271
9/30/94 $ 9,948 $16,919 $10,259 $ 9,656 $10,394
10/31/94 $10,000 $16,919 $10,497 $ 9,645 $10,394
11/30/94 $ 9,787 $16,919 $10,107 $ 9,628 $10,394
12/31/94 $ 9,870 $16,919 $10,257 $ 9,691 $10,539
1/31/95 $ 9,954 $16,919 $10,529 $ 9,877 $10,539
2/28/95 $10,336 $16,919 $10,932 $10,106 $10,539
3/31/95 $10,557 $16,919 $11,254 $10,174 $10,688
4/30/95 $10,788 $16,919 $11,596 $10,316 $10,688
5/31/95 $11,204 $16,919 $12,044 $10,748 $10,688
6/30/95 $11,383 $16,919 $12,328 $10,834 $10,830
7/31/95 $11,615 $16,919 $12,746 $10,793 $10,830
8/31/95 $11,801 $16,919 $12,768 $10,931 $10,830
9/30/95 $11,960 $16,919 $13,307 $11,042 $10,970
10/31/95 $11,960 $16,919 $13,267 $11,204 $10,970
11/30/95 $12,279 $16,919 $13,839 $11,388 $10,970
12/31/95 $12,630 $16,919 $14,107 $11,556 $11,104
1/31/96 $12,813 $16,919 $14,594 $11,628 $11,104
2/28/96 $12,850 $16,919 $14,721 $11,381 $11,104
3/31/96 $12,937 $16,919 $14,864 $11,286 $11,243
4/30/96 $13,024 $16,919 $15,093 $11,208 $11,243
5/31/96 $13,161 $16,919 $15,467 $11,189 $11,243
6/30/96 $13,259 $16,919 $15,531 $11,339 $11,386
7/31/96 $12,812 $16,919 $14,850 $11,365 $11,386
8/31/96 $13,073 $16,919 $15,160 $11,337 $11,386
9/30/96 $13,468 $16,919 $16,011 $11,539 $11,529
10/31/96 $13,732 $16,919 $16,459 $11,808 $11,529
11/30/96 $14,348 $16,919 $17,696 $12,026 $11,529
12/31/96 $14,215 $16,919 $17,345 $11,892 $11,675
1/31/97 $14,791 $16,919 $18,437 $11,906 $11,675
2/28/97 $14,820 $16,919 $18,574 $11,931 $11,675
3/31/97 $14,369 $16,919 $17,811 $11,789 $11,826
4/30/97 $14,843 $16,919 $18,882 $11,961 $11,826
5/31/97 $15,500 $16,919 $20,018 $12,073 $11,826
6/30/97 $15,956 $16,919 $20,918 $12,218 $11,978
7/31/97 $16,949 $16,919 $22,584 $12,592 $11,978
8/31/97 $16,241 $16,919 $21,319 $12,450 $11,978
9/30/97 $16,862 $16,919 $22,484 $12,646 $12,125
10/31/97 $16,698 $16,919 $21,740 $12,849 $12,125
11/30/97 $16,944 $16,919 $22,741 $12,916 $12,125
12/31/97 $17,119 $16,919 $23,130 $13,052 $12,285
</TABLE>
Fund Performance+
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year 20.4%
Life of Fund (11/2/93) 13.4
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
One Year 15.4%
Life of Fund (11/2/93) 13.1
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
11/2/93. Index information is available only at month-end; therefore, the
line comparison begins at the next month-end following the commencement of
the Fund's investment operations.
The 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 applicable
contingent deferred sales charge (CDSC) based on the following schedule:
5%-1st year; 5%-2nd year; 4%-3rd year; 3%-4th year; 2%-5th year; 1%-6th
year.
+ Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC Returns reflect the Fund's
applicable CDSC.
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 Marathon 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) $59,063,760
(identified cost, $47,409,464)
Receivable for Fund shares sold 595,252
Deferred organization expenses (Note 1E) 7,787
- --------------------------------------------------------------------------------
Total assets $59,666,799
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 108,039
Payable to affiliate for Trustees' fees (Note 4) 420
Accrued expenses 56,636
- --------------------------------------------------------------------------------
Total liabilities $ 165,095
- --------------------------------------------------------------------------------
Net Assets for 4,349,873 shares of
beneficial interest outstanding $59,501,704
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $47,829,018
Accumulated net realized loss on investments from
Portfolio (computed on the basis of identified
cost) (3,293)
Accumulated undistributed net
investment income 21,683
Net unrealized appreciation of investments from
Portfolio (computed on the basis of identified cost) 11,654,296
- --------------------------------------------------------------------------------
Total $59,501,704
- --------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share (Note 6)
- --------------------------------------------------------------------------------
($59,501,704 / 4,349,873 shares of beneficial
interest outstanding) $ 13.68
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 1997
Investment Income (Note 1B)
- --------------------------------------------------------------------------------
Dividend income allocated from Portfolio
(net of foreign taxes, $5,448) $ 648,735
Interest income allocated from Portfolio 1,131,805
Expenses allocated from Portfolio (370,858)
- --------------------------------------------------------------------------------
Net investment income from Portfolio $ 1,409,682
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Compensation of Trustees not members of the
Administrator's organization (Note 4) $ 923
Distribution and service fees (Note 5) 521,771
Transfer and dividend disbursing agent fees 57,936
Printing and postage 24,259
Registration fees 18,273
Legal and accounting services 17,304
Amortization of organization expenses (Note 1E) 10,170
Custodian fee 8,485
Miscellaneous 1,896
- --------------------------------------------------------------------------------
Total expenses $ 661,017
- --------------------------------------------------------------------------------
Net investment income $ 748,665
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 3,566,171
- --------------------------------------------------------------------------------
Net realized gain on investment transactions $ 3,566,171
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 5,469,761
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 5,469,761
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 9,035,932
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 9,784,597
- --------------------------------------------------------------------------------
See notes to financial statements
6
<PAGE>
EV Marathon 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 $ 748,665 $ 864,625
Net realized gain on investments 3,566,171 1,993,369
Net change in unrealized
appreciation (depreciation)
of investments 5,469,761 2,187,283
- --------------------------------------------------------------------------------
Net increase in net assets from
operations $ 9,784,597 $ 5,045,277
- --------------------------------------------------------------------------------
Distributions to
shareholders (Note 2) --
From net investment income $ (761,276) $ (864,625)
In excess of net investment
income -- (23,094)
From net realized gain
on investments (3,870,882) (1,975,424)
From paid-in capital (5,449) --
- --------------------------------------------------------------------------------
Total distributions to shareholders $ (4,637,607) $ (2,863,143)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sale of shares $ 14,474,237 $ 20,480,961
Net asset value of shares issued
to shareholders in payment
of distributions declared 4,343,242 2,274,104
Cost of shares redeemed (11,287,573) (11,627,072)
- --------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions $ 7,529,906 $ 11,127,993
- --------------------------------------------------------------------------------
Net increase in net assets $ 12,676,896 $ 13,310,127
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 46,824,808 $ 33,514,681
- --------------------------------------------------------------------------------
At end of year $ 59,501,704 $ 46,824,808
- --------------------------------------------------------------------------------
Accumulated undistributed
net investment income
included in net assets
- --------------------------------------------------------------------------------
At end of year $ 21,683 $ 22,025
- --------------------------------------------------------------------------------
See notes to financial statements
7
<PAGE>
EV Marathon 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**
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $12.340 $11.700 $ 9.540 $10.390 $10.000
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.190 $ 0.250 $ 0.231 $ 0.286 $ 0.025
Net realized and unrealized gain (loss)
on investments 2.292 1.190 2.299 (0.861) 0.365
- ----------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 2.482 $ 1.440 $ 2.530 $(0.575) $ 0.390
- ----------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------
From net investment income $(0.194) $(0.250) $(0.245) $(0.274) $ --
In excess of net investment income -- (0.010) -- -- --
From net realized gain on investments (0.947) (0.540) (0.125) (0.001) --
From paid-in capital (0.001) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions $(1.142) $(0.800) $(0.370) $(0.275) $ --
- ----------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $13.680 $12.340 $11.700 $ 9.540 $10.390
- ----------------------------------------------------------------------------------------------------------------------
Total Return /(1)/ 20.43% 12.55% 26.88% (5.44)% 3.90%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data++
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $59,502 $46,825 $33,515 $14,508 $ 2,487
Ratio of net expenses to average daily
net assets /(2)/ 1.92% 1.84% 2.03%+ 2.41% 1.04%+
Ratio of net investment income to
average daily net assets 1.39% 2.08% 2.48%+ 2.47% 2.49%+
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
++ The operating expenses of the Fund and the Portfolio may reflect an
allocation of expenses to the Administrator. Had such action not been taken,
the ratios would have been as follows:
<TABLE>
<CAPTION>
Ratios (As a percentage of average daily net assets):
<S> <C> <C> <C> <C> <C>
Expenses /(2)/ -- -- -- -- 2.29%+
Net investment income -- -- -- -- 1.24%+
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven month period ended December 31, 1995.
** For the period from the start of business, November 2, 1993, to January 31,
1994.
(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 its Portfolio's allocated expenses.
See notes to financial statements
8
<PAGE>
EV Marathon Investors Fund as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
-----------------------------------------------------------------------------
EV Marathon 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 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 (17.9% 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 approved a Plan of Reorganization
(the "Plan") for the Trust. Under the terms of the Plan, the EV Traditional
Investors Fund (the Successor Fund), a separate series of the Trust, would
acquire substantially all of the assets and liabilities of the Fund (the
Acquired Fund). The transaction will be structured for tax purposes to
qualify as a tax-free reorganization under the Internal Revenue Code. The
Trust will issue and deliver to the Acquired Fund a number of full and
fractional shares of beneficial interest of a separate class of the Successor
Fund (Class B shares), which will be equal in value to the net asset value
per share of the Acquired Fund multiplied by the number of full and
fractional shares of the Acquired Fund then outstanding. Such transaction
will occur after the close of business, on December 31, 1997.
Effective January 1, 1998, the EV Traditional Investors Fund changed its name
to Eaton Vance Investors Fund.
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.
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 and tax-exempt
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 $819,897 at 28% and
$2,247,983 at 20% as a long-term capital gain distribution for its taxable
year ended December 31, 1997.
D Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization are being amortized on a straight-line basis over five
years.
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average daily cash balances the Fund or Portfolio maintains with IBT.
All significant credit balances used to reduce the Fund's or Portfolio's
custodian fees are reflected as a reduction of operating expenses on the
Statement of Operations.
F Other -- Investment transactions are accounted for on a trade day 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.
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
carry-forwards from prior years) so allocated.
Shareholders may reinvest all distributions in shares of the Fund at the per
9
<PAGE>
EV Marathon Investors Fund as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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 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 1,068,784 1,703,686
Issued to shareholders
electing to
receive payments of
distributions in Fund
shares 325,080 187,664
Redemptions (838,891) (960,723)
---------------------------------------------------------
Net increase 554,973 930,627
---------------------------------------------------------
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 organization, 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
the Portfolio are officers and directors/trustees of the above organizations.
5 Distribution Plan
-----------------------------------------------------------------------------
The Fund has adopted a Distribution plan (the Plan) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay
the principal underwriter, Eaton Vance Distributors, Inc. (EVD) amounts equal
to 1/365 of 0.75% (0.75% annualized) of the Fund's daily net assets, for
providing ongoing distribution services and facilities to the Fund. The Fund
will automatically discontinue payments to EVD during any period in which
there are no outstanding Uncovered Distribution Charges, which are equivalent
to the sum of (i) 5% of the aggregate amount received by the Fund for shares
sold plus, (ii) distribution fees calculated by applying the rate of 1% over
the prevailing prime rate to the outstanding balance of Uncovered
Distribution Charges of EVD, reduced by the aggregate amount of contingent
deferred sales charges (see Note 6) and amounts theretofore paid to EVD. The
amount payable to EVD with respect to each day is accrued on such day as a
liability of the Fund and, accordingly, reduces Fund's net assets. The Fund
paid $403,730 to EVD for the year ended December 31, 1997, representing 0.75%
of average daily net assets. At December 31, 1997, the amount of Uncovered
Distribution Charges of EVD calculated under the Plan was approximately
$1,458,000.
In addition, the Plan authorizes the Fund to make quarterly payments of
service fees to the Principal Underwriter, Authorized Firms and other persons
in amounts not exceeding 0.25% of the Fund's average daily net assets for any
fiscal year. The Trustees have implemented the Plan by authorizing the Fund
to make quarterly payments of service fees to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed 0.25%, of the Fund's
average daily net assets for each fiscal year based on the value of Fund
shares sold by such persons and remaining outstanding for at least twelve
months. 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. During the year ended December 31, 1997, the Fund paid or
accrued $118,041 under the Plan to the Principal Underwriter and Authorized
Firms.
6 Contingent Deferred Sales Charge
-----------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Fund shares made within six years of purchase. Generally, the CDSC is based
upon the lower of the net asset value at date of redemption or date of
10
<PAGE>
EV Marathon Investors Fund as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
purchase. No charge is levied on shares acquired by reinvestment of dividends
or capital gain distributions. The CDSC is imposed at declining rates that
begin at 5% in the first and second year of redemption after purchase,
declining one percentage point each year thereafter. No CDSC is levied on
shares which have been sold to EVD 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 Distribution Plan.
CDSC charges received when no Uncovered Distribution Charges exist will be
retained by the Fund. EVD received approximately $172,000 of CDSC paid by
shareholders for the year ended December 31, 1997.
7 Investment Transactions
-----------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the
year ended December 31, 1997 aggregated $14,764,629 and $13,480,012,
respectively.
11
<PAGE>
EV Marathon Investors Fund as of December 31, 1997
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Trustees and Shareholders
of EV Marathon Investors Fund:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of EV
Marathon 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 in the period then ended, the eleven month period ended December 31, 1995,
the year ended January 31, 1995 and the period from November 2, 1993 (start of
business) to January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. 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, the year ended January 31,
1995, and the period from November 2, 1993 (start of business) to January 31,
1994, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 06, 1998
12
<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
13
<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
14
<PAGE>
Investors Portfolio as of December 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
Corporate Bonds -- 16.2%
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.,
8.375%, 10/1/29 2,850 3,529,127
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
15
<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' $329,707,242
interest in Portfolio
- ---------------------------------------------------------
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
16
<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
17
<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**
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------------
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
18
<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.
19
<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 sophistication, are generally not as developed as
those in
20
<PAGE>
Investors Portfolio as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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.
21
<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 06, 1998
22
<PAGE>
EV Marathon Investors Fund as of December 31, 1997
INVESTMENT MANAGEMENT
EV Marathon 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
23
<PAGE>
Investment Advisor of
Investors Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of
EV Marathon 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 02116
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 Marathon 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.
- --------------------------------------------------------------------------------
M-IFSRC-2/98
