<PAGE>
[EATON VANCE LOGO]
SEMIANNUAL REPORT JUNE 30, 2000
EATON VANCE
NYSE BALANCED
FLAG FUND
[75TH ANNIVERSARY LOGO]
[PEOPLE AT STOCK EXCHANGE]
<PAGE>
Eaton Vance Balanced Fund as of June 30, 2000
INVESTMENT UPDATE
Investment Environment
---------------------------------------------------------
The Economy
- In response to a strong economy and signs of rising
inflation, the Federal Reserve Board raised the Federal
Funds rate, a key barometer of short-term interest
rates, on six occasions in the past 13 months. The Fed
has been especially concerned that rising labor costs
and increased demand, despite improvements in pro-
ductivity, could lead to higher inflation.
- There is evidence that the Fed's series of rate hikes is
starting to have the desired effect. Interest-rate-sensi-
tive sectors of the economy -- especially housing and
construction -- have slowed significantly. Although still
healthy, consumer spending has cooled off.
- Recent inflation indicators have been favorable. Wage
gains, a source of concern in a tight labor market,
showed little movement in May. Both the Producer
Price Index and the Consumer Price Index have been
benign, and the number of manufacturers experienc-
ing price increases from suppliers dropped off sharply.
The Markets
- The first half of 2000 saw a return to earth for many
high-flying technology stocks that have led the market.
Tech-heavy NASDAQ reached a record high in March,
before increasingly valuation-sensitive investors -- wary
of interest rate hikes and second-quarter earnings --
took some air out of the balloon. A stronger perform-
ance in June pushed total return for 2000 to -2.5%.(1)
- The Dow Jones Index, primarily made up of so-called
"Old Economy" stocks, benefited from investors' desire
for solid earnings in the second quarter. Healthcare
and drug companies fared particularly well. After a
difficult first quarter, however, the Dow finished the
first half of 2000 down 9.1%. A broader equity index,
the S & P 500, was down 0.4% for the year to date.(1)
- The bond market rallied briefly in February and
March, as investors sought some refuge from the
increasingly volatile equity markets. However, the
downtrend resumed in April and May, when the Fed
punctuated its anti-inflation stance with a 50 basis
point (0.50%) rate hike.
The Fund
---------------------------------------------------------
The Past Six Months
- During the six months ended June 30, 2000, the
Fund's Class A shares had a total return of -0.44%.(2)
This return was the result of a decrease in net asset
value (NAV)to $7.74 on June 30, 2000 from $7.92
on December 31, 1999, and the reinvestment of
$0.090 per share in dividends and $0.055 per share
in capital gains.
- The Fund's Class B shares had a total return of
-0.93%(2) during the period, the result of a decrease in
NAV to $13.14 from $13.41, and the reinvestment of
$0.090 per share in dividends and $0.055 per share
in capital gains.
- The Fund's Class C shares had a total return of
-0.90%(2) during the period, the result of a decrease in
NAV to $12.64 from $12.90, and the reinvestment of
$0.090 per share in dividends and $0.055 per share
in capital gains.
- For comparison, during the six months ended June
30, 2000, the average return of funds in the Lipper
Balanced Fund Classification was 1.61%.(2)
Management Discussion
- Arieh Coll and Michael Terry became co-managers of
Balanced Fund's investment portfolios in January.
The Fund now invests 65% of assets in Capital
Growth Portfolio, managed by Mr. Coll, and 35% in
Investment Grade Income Portfolio, managed by Mr.
Terry. The Fund's objective of providing current
income and long-term capital growth remains intact.
- In the first half of 2000, devalued technology stocks
and corporate bonds had a negative impact on the
Fund's performance. To offset the volatility of the
equity markets, the fixed-income portion of the Fund
sought to provide current income and total return.
--------------------------------------------------------------------------------
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, 2000
Performance(3) Class A Class B Class C
------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
------------------------------------------------------------------------------
One Year -2.68% -3.52% -3.56%
Five Years 12.06 11.06 10.53
Ten Years 11.18 N.A. N.A.
Life of Fund+ 10.05 10.09 9.64
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
------------------------------------------------------------------------------
One Year -8.26% -8.24% -4.50%
Five Years 10.74 10.80 10.53
Ten Years 10.53 N.A. N.A.
Life of Fund+ 9.96 10.09 9.64
+Inception Dates -- Class A: 4/1/32; Class B: 11/2/93; Class C: 11/2/93
Ten Largest Equity Holdings(4)
------------------------------------------
Tech Data Corp. 4.5%
Precision Drilling Corp. 4.2
Nabisco Holdings Corp. 4.1
Precision Castparts Corp. 3.3
Cardinal Health, Inc. 3.2
Concord EFS, Inc. 3.0
Metris Companies, Inc. 2.3
Philip Morris Co., Inc. 2.2
Hollywood Entertainment Corp. 2.2
Alpharma, Inc. 2.0
(1) It is not possible to invest directly in an Index or a Lipper
Classification. The S&P 500 Index is an unmanaged
index commonly used as a measure of U.S. stock market
performance. (2) These returns do not include the 5.75%
maximum sales charge for the Fund's 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 the 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) Holdings and asset allocation are subject to
change. Ten largest equity holdings accounted for 31.0%
of Capital Growth 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 BALANCED FUND AS OF JUNE 30, 2000
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
<S> <C>
Assets
------------------------------------------------------
Investment in Capital Growth Portfolio,
at value
(identified cost, $163,927,377) $182,495,443
Investment in Investment Grade Income
Portfolio, at value
(identified cost, $105,700,194) 102,814,356
Receivable for Fund shares sold 62,166
------------------------------------------------------
TOTAL ASSETS $285,371,965
------------------------------------------------------
Liabilities
------------------------------------------------------
Payable for Fund shares redeemed $ 394,806
Payable to affiliate for service fees 35,018
Payable to affiliate for Trustees' fees 1,127
Dividends payable 594
Accrued expenses 197,706
------------------------------------------------------
TOTAL LIABILITIES $ 629,251
------------------------------------------------------
NET ASSETS $284,742,714
------------------------------------------------------
Sources of Net Assets
------------------------------------------------------
Paid-in capital $222,522,462
Accumulated undistributed net realized
gain from Portfolio (computed on the
basis of identified cost) 46,487,955
Accumulated undistributed net
investment income 50,069
Net unrealized appreciation from
Portfolio (computed on the basis of
identified cost) 15,682,228
------------------------------------------------------
TOTAL $284,742,714
------------------------------------------------------
Class A Shares
------------------------------------------------------
NET ASSETS $221,085,803
SHARES OUTSTANDING 28,582,308
NET ASSET VALUE, AND REDEMPTION PRICE
PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 7.74
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 94.25 of $7.74) $ 8.21
------------------------------------------------------
Class B Shares
------------------------------------------------------
NET ASSETS $ 55,849,587
SHARES OUTSTANDING 4,250,916
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (NOTE 6)
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 13.14
------------------------------------------------------
Class C Shares
------------------------------------------------------
NET ASSETS $ 7,807,324
SHARES OUTSTANDING 617,602
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (NOTE 6)
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 12.64
------------------------------------------------------
</TABLE>
On sales of $50,000 or more, the offering price of Class A shares is reduced.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 2000
<S> <C>
Investment Income
------------------------------------------------------
Interest allocated from Portfolios $ 3,970,462
Dividends allocated from Portfolio
(net of foreign taxes, $1,013) 807,013
Miscellaneous income 22,463
Expenses allocated from Portfolios (829,668)
------------------------------------------------------
NET INVESTMENT INCOME $ 3,970,270
------------------------------------------------------
Expenses
------------------------------------------------------
Trustees fees and expenses $ 2,158
Distribution and service fees
Class A 232,947
Class B 291,483
Class C 43,643
Transfer and dividend disbursing
agent fees 448,135
Custodian fee 19,612
Registration fees 17,918
Printing and postage 11,690
Legal and accounting services 8,666
Miscellaneous 18,355
------------------------------------------------------
TOTAL EXPENSES $ 1,094,607
------------------------------------------------------
NET INVESTMENT INCOME $ 2,875,663
------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolios
------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 46,516,242
------------------------------------------------------
NET REALIZED GAIN $ 46,516,242
------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(51,458,863)
------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(51,458,863)
------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (4,942,621)
------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (2,066,958)
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
INCREASE (DECREASE) JUNE 30, 2000 YEAR ENDED
IN NET ASSETS (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
From operations --
Net investment income $ 2,875,663 $ 7,681,130
Net realized gain 46,516,242 2,306,741
Net change in unrealized
appreciation (depreciation) (51,458,863) (5,818,018)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (2,066,958) $ 4,169,853
-----------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (2,648,341) $ (6,528,540)
Class B (411,207) (1,244,137)
Class C (60,347) (182,168)
In excess of net investment income
Class A (10,274) --
Class B -- (4,166)
From net realized gain
Class A (1,645,050) (4,538,312)
Class B (257,828) (720,243)
Class C (38,647) (115,910)
-----------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (5,071,694) $ (13,333,476)
-----------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 3,683,065 $ 13,887,731
Class B 2,228,820 13,804,115
Class C 500,525 3,542,983
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 2,727,287 7,228,182
Class B 525,448 1,759,599
Class C 87,178 280,791
Cost of shares redeemed
Class A (24,188,696) (39,550,883)
Class B (12,815,902) (19,645,700)
Class C (3,164,069) (3,700,084)
-----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS $ (30,416,344) $ (22,393,266)
-----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS $ (37,554,996) $ (31,556,889)
-----------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
NET ASSETS (UNAUDITED) DECEMBER 31, 1999
-----------------------------------------------------------------------------
<S> <C> <C>
At beginning of period $ 322,297,710 $ 353,854,599
-----------------------------------------------------------------------------
AT END OF PERIOD $ 284,742,714 $ 322,297,710
-----------------------------------------------------------------------------
Accumulated undistributed
net investment income
included in net assets
-----------------------------------------------------------------------------
AT END OF PERIOD $ 50,069 $ 304,575
-----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------------------
(UNAUDITED) 1999(1) 1998 1997 1996 1995(2)
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of
period $ 7.920 $ 8.140 $ 8.700 $ 8.090 $ 8.150 $ 6.840
--------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
--------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.082 $ 0.195 $ 0.226 $ 0.208 $ 0.254 $ 0.254
Net realized and unrealized gain
(loss) (0.117) (0.080) 0.901 1.492 0.821 1.641
--------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.035) $ 0.115 $ 1.127 $ 1.700 $ 1.075 $ 1.895
--------------------------------------------------------------------------------------------------------------------
Less distributions
--------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.090) $(0.200) $(0.220) $(0.200) $(0.254) $(0.248)
In excess of net investment income --(3) -- -- -- (0.001) --
From net realized gain (0.055) (0.135) (1.467) (0.890) (0.880) (0.337)
--------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.145) $(0.335) $(1.687) $(1.090) $(1.135) $(0.585)
--------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 7.740 $ 7.920 $ 8.140 $ 8.700 $ 8.090 $ 8.150
--------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) (0.44)% 1.45% 13.43% 21.60% 13.61% 28.36%
--------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's
omitted) $221,086 $244,507 $270,277 $263,730 $240,217 $236,870
Ratios (As a percentage of average
daily net assets):
Expenses(5) 1.12%(6) 0.97% 0.98% 0.97% 0.93% 0.95%(6)
Net investment income 2.12%(6) 2.45% 2.45% 2.35% 3.03% 3.60%(6)
Portfolio Turnover of the Balanced
Portfolio -- 33% 49% 37% 64% 47%
Portfolio Turnover of the Capital
Growth Portfolio 122%
Portfolio Turnover of the Investment
Grade Income Portfolio 26%
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A
----------------------
YEAR ENDED JANUARY 31,
----------------------
1995
<S> <C>
------------------------------------
Net asset value -- Beginning of
period $ 7.600
------------------------------------
Income (loss) from operations
------------------------------------
Net investment income $ 0.283
Net realized and unrealized gain
(loss) (0.623)
------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.340)
------------------------------------
Less distributions
------------------------------------
From net investment income $ (0.275)
In excess of net investment income --
From net realized gain (0.145)
------------------------------------
TOTAL DISTRIBUTIONS $ (0.420)
------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 6.840
------------------------------------
TOTAL RETURN(4) (4.45)%
------------------------------------
Ratios/Supplemental Data
------------------------------------
Net assets, end of period (000's
omitted) $200,419
Ratios (As a percentage of average
daily net assets):
Expenses(5) 0.91%
Net investment income 4.05%
Portfolio Turnover of the Balanced
Portfolio 28%
Portfolio Turnover of the Capital
Growth Portfolio
Portfolio Turnover of the Investment
Grade Income Portfolio
------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) For the eleven-month period ended December 31, 1995.
(3) Represents less than .001.
(4) 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 reinvestment date. Total return
is not computed on an annualized basis.
(5) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ------------------------
(UNAUDITED) 1999(1) 1998
<S> <C> <C> <C>
------------------------------------------------------------------------------------
Net asset value -- Beginning of
period $13.410 $13.680 $13.680
------------------------------------------------------------------------------------
Income (loss) from operations
------------------------------------------------------------------------------------
Net investment income $ 0.090 $ 0.221 $ 0.231
Net realized and unrealized gain
(loss) (0.215) (0.121) 1.451
------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $(0.125) $ 0.100 $ 1.682
------------------------------------------------------------------------------------
Less distributions
------------------------------------------------------------------------------------
From net investment income $(0.090) $(0.234) $(0.215)
In excess of net investment income -- (0.001) --
From net realized gain (0.055) (0.135) (1.467)
------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(0.145) $(0.370) $(1.682)
------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $13.140 $13.410 $13.680
------------------------------------------------------------------------------------
TOTAL RETURN(2) (0.93)% 74.00% 12.59%
------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period (000's
omitted) $55,850 $67,207 $72,836
Ratios (As a percentage of average
daily net assets):
Expenses(3) 1.89%(4) 1.78% 1.81%
Net investment income 1.34%(4) 1.64% 1.62%
Portfolio Turnover of the Balanced
Portfolio -- 33% 49%
Portfolio Turnover of the Capital
Growth Portfolio 122%
Portfolio Turnover of the Investment
Grade Income Portfolio 26%
------------------------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
(3) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(4) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ------------------------
(UNAUDITED) 1999(1) 1998
<S> <C> <C> <C>
------------------------------------------------------------------------------------
Net asset value -- Beginning of
period $12.900 $13.170 $13.240
------------------------------------------------------------------------------------
Income (loss) from operations
------------------------------------------------------------------------------------
Net investment income $ 0.088 $ 0.205 $ 0.216
Net realized and unrealized gain
(loss) (0.203) (0.130) 1.401
------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $(0.115) $ 0.075 $ 1.617
------------------------------------------------------------------------------------
Less distributions
------------------------------------------------------------------------------------
From net investment income $(0.090) $(0.210) $(0.220)
From net realized gain (0.055) (0.135) (1.467)
------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(0.145) $(0.345) $(1.687)
------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $12.640 $12.900 $13.170
------------------------------------------------------------------------------------
TOTAL RETURN(2) (0.90)% 58.00% 12.51%
------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period (000's
omitted) $ 7,807 $10,584 $10,742
Ratios (As a percentage of average
daily net assets):
Expenses(3) 1.92%(4) 1.84% 1.85%
Net investment income 1.31%(4) 1.58% 1.58%
Portfolio Turnover of the Balanced
Portfolio -- 33% 49%
Portfolio Turnover of the Capital
Growth Portfolio 122%
Portfolio Turnover of the Investment
Grade Income Portfolio 26%
------------------------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
(3) Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
(4) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
-------------------------------------------
Eaton Vance Balanced 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 offers three classes of shares: Class A,
Class B and Class C. Class A shares are generally sold subject to a sales
charge imposed at 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). Each class represents a pro rata interest in the Fund, but votes
separately on class-specific matters and (as noted below) is subject to
different expenses. 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 two Portfolios, Capital Growth
Portfolio and Investment Grade Income Portfolio (the Portfolios), which are
New York Trusts. The investment objectives and policies of the two Portfolios
together are the same as those of the Fund. The value of the Fund's
investment in the Portfolios reflects the Fund's proportionate interest in
the net assets of the Capital Growth Portfolio and the Investment Grade
Income Portfolio (99.9% and 99.8% at June 30, 2000). The performance of the
Fund is directly affected by the performance of the Portfolios. The financial
statements of the Portfolios, including the portfolios of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuations -- Valuations of securities by the Portfolios are
discussed in Note 1A of each 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 Portfolios, 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 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 $5,939,199 as a long-term capital gain
distribution for its taxable year ended December 31, 1999.
D 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.
E Other -- Investment transactions are accounted for on a trade-date basis.
F Interim Financial Statements -- The interim financial statements relating to
June 30, 2000 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
-------------------------------------------
The Fund's present policy is to pay quarterly dividends from net investment
income allocated to the Fund by the Portfolios (less the Fund's direct
expenses) and to distribute at least annually all or substantially all of the
net realized capital gains (reduced by any available capital loss
carryforwards from prior years) so allocated. Shareholders may reinvest all
distributions in shares of the same class 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 Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of
8
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
beneficial interest (without par value). Such shares may be issued in a
number of different series (such as the Fund) and classes. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
CLASS A (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
Sales 474,248 1,738,700
Issued to shareholders electing to
receive payments of distributions in
Fund shares 351,110 909,455
Redemptions (3,111,283) (4,979,333)
-----------------------------------------------------------------------------
NET DECREASE (2,285,925) (2,331,178)
-----------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
CLASS B (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
Sales 169,863 1,018,888
Issued to shareholders electing to
receive payments of distributions in
Fund shares 40,131 130,316
Redemptions (972,283) (1,459,657)
-----------------------------------------------------------------------------
NET DECREASE (762,289) (310,453)
-----------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 YEAR ENDED
CLASS C (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
Sales 39,513 271,995
Issued to shareholders electing to
receive payments of distributions in
Fund shares 6,863 21,655
Redemptions (248,952) (289,417)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) (202,576) 4,233
-----------------------------------------------------------------------------
</TABLE>
4 Transactions with Affiliates
-------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolios' Notes to Financial Statements which are
included elsewhere in this report. Certain officers and Trustees of the Fund
and of the Portfolios are officers of the above organizations. Except as to
Trustees of the Fund and the Portfolios who are not members of EVM's or BMR's
organizations, officers and Trustees receive remuneration for their services
to the Fund out of such investment adviser fee. The Fund was informed that
Eaton Vance Distributors, Inc. (EVD), a subsidiary of EVM and the Fund's
principal underwriter, received $5,021 from the Fund as its portion of the
sales charge on sales of Class A shares for the six months ended June 30,
2000.
5 Distribution and Service Plans
-------------------------------------------
The Fund has in effect distribution plans for Class B (Class B Plan) and
Class C (Class C Plan) pursuant to Rule 12b-1 under the Investment Company
Act of 1940 and a service plan for Class A shares (Class A Plan)
(collectively, the Plans). The Class B and Class C Plans require the Fund to
pay EVD amounts equal to 1/365 of 0.75% (annualized) of the Fund's average
daily net assets attributable to 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) interest
calculated by applying the rate of 1% over the prevailing prime rate to the
outstanding balance of Uncovered Distribution Charges of EVD of each
respective class reduced by the aggregate amount of contingent deferred sales
charges (see Note 6) and daily amounts theretofore paid to EVD by each
respective class. The Fund paid or accrued $224,699 and $33,770 for Class B
and Class C shares, respectively, to or payable to EVD for the six months
ended June 30, 2000, representing 0.75% (annualized) of the average daily net
assets for Class B and Class C shares. At June 30, 2000, the amount of
Uncovered Distribution Charges EVD calculated under the Plans was
approximately $1,352,000 and $1,123,000 for Class B and Class C shares,
respectively.
The Plans authorize the Fund to make payments of service fees to EVD,
investments dealers and other persons in amounts not exceeding 0.25% of the
Fund's average daily net assets attributable to Class A, Class B and Class C
shares for each fiscal year. The Trustees initially implemented the Plans by
authorizing the Fund to make quarterly payments of service fees to EVD and
investment dealers equal to 0.25% per annum of the Fund's average daily net
assets attributable to Class A and Class B shares based on the value of Fund
shares sold by such persons and remaining outstanding for at least one year.
On October 4, 1999, the Trustees approved service fee payments equal to 0.25%
per annum of the Fund's average daily net assets attributable to Class A and
Class B shares for any fiscal year on shares of the Fund sold on or after
October 12, 1999. The Class C Plan permits the Fund to make monthly payments
of service fees in amounts not expected to exceed 0.25% of the Fund's average
daily net assets attributable to Class C shares for any fiscal year. Service
fee payments will be made for personal services and/or the maintenance of
shareholder accounts. Service
9
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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, 2000 amounted
to $232,947, $66,784, and $10,873 for Class A, Class B, and Class C
shares, respectively.
Certain officers and Trustees of the Fund are officers of EVD.
6 Contingent Deferred Sales Charge
-------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase and on redemptions of
Class C shares made within one year of purchase. A CDSC of 1% is imposed on
any redemption of Class A shares made within 12 months of purchase that were
acquired at net asset value if the purchase amount was $1 million or more.
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 and may
be waived under certain other limited circumstances. CDSC charges are paid to
EVD to reduce the amount of Uncovered Distribution Charges calculated under
the Fund's Distribution Plans (see Note 5). CDSC charges received when no
Uncovered Distribution Charges exist will be retained by the Fund. The Fund
was informed that EVD received approximately $102,000 and $1,000 of CDSC paid
by shareholders for Class B and Class C shares, respectively, for the six
months ended June 30, 2000.
7 Investment Transactions
-------------------------------------------
Increases and decreases in the Fund's investment in the Capital Growth
Portfolio for the six months ended June 30, 2000, aggregated $6,079,172 and
$13,430,273, respectively. Increases and decreases in the Fund's investment
in the Investment Grade Income Portfolio for the six months ended June 30,
2000, aggregated $311,712 and $12,731,685, respectively. Increases and
decreases in the Fund's investment in the Balanced Portfolio for the six
months ended June 30, 2000, aggregated $3,523,488 and $20,562,025,
respectively.
8 Investment in Portfolios
-------------------------------------------
For the six months ended June 30, 2000, the Fund was allocated net investment
income and realized and unrealized gain (loss) from the Portfolios as
follows:
<TABLE>
<CAPTION>
INVESTMENT
CAPITAL GRADE
GROWTH INCOME BALANCED
PORTFOLIO(1) PORTFOLIO(1) PORTFOLIO(2) TOTAL
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
Dividend income $ 550,915 $ -- $ 256,098 $ 807,013
Interest income 152,393 2,320,558 1,497,511 3,970,462
Miscellaneous Income 22,463
Expenses (415,970) (236,811) (176,887) (829,668)
------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 287,338 $ 2,083,747 $ 1,576,722 $ 3,970,270
------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) --
INVESTMENT TRANSACTIONS
(IDENTIFIED COST BASIS) $ 4,115,011 $(1,519,870) $ 43,921,101 $ 46,516,242
------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) --
INVESTMENTS $(11,266,026) $ 2,155,756 $(42,348,593) $(51,458,863)
------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, March 7, 2000, to June 30,
2000.
(2) For the period from January 1, 2000 to March 6, 2000.
9 Transfer of Net Assets
-------------------------------------------
At the close of business on March 6, 2000, the Fund withdrew net assets of
$309,221,573 from Balanced Portfolio, including net unrealized appreciation
of $24,791,298. Subsequently, the Fund contributed net assets of $196,706,145
and $112,515,428 into Capital Growth Portfolio and Investment Grade Income
Portfolio, including unrealized appreciation and depreciation of $29,830,011
and $5,038,713, respectively.
10
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED)
COMMON STOCKS -- 92.8%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Advertising and Marketing Services -- 1.1%
-----------------------------------------------------------------------
Interact Commerce Corp.(1) 175,500 $ 2,073,094
-----------------------------------------------------------------------
$ 2,073,094
-----------------------------------------------------------------------
Aerospace and Defense -- 1.8%
-----------------------------------------------------------------------
BE Aerospace, Inc.(1) 40,000 $ 275,000
Boeing Company (The) 66,000 2,759,625
Hexcel Corp.(1) 20,000 190,000
-----------------------------------------------------------------------
$ 3,224,625
-----------------------------------------------------------------------
Apparel -- 1.0%
-----------------------------------------------------------------------
Reebok International Ltd.(1) 117,000 $ 1,864,687
-----------------------------------------------------------------------
$ 1,864,687
-----------------------------------------------------------------------
Banks and Money Services -- 3.6%
-----------------------------------------------------------------------
Citigroup 40,000 $ 2,410,000
Metris Companies, Inc. 167,501 4,208,450
-----------------------------------------------------------------------
$ 6,618,450
-----------------------------------------------------------------------
Batteries -- 1.0%
-----------------------------------------------------------------------
Energizer Holdings, Inc.(1) 100,000 $ 1,825,000
-----------------------------------------------------------------------
$ 1,825,000
-----------------------------------------------------------------------
Beverages -- 0.6%
-----------------------------------------------------------------------
Seagrams Co. Ltd. 17,500 $ 1,015,000
-----------------------------------------------------------------------
$ 1,015,000
-----------------------------------------------------------------------
Broadcasting and Cable -- 0.6%
-----------------------------------------------------------------------
Radio One, Inc.(1) 15,000 $ 443,437
Radio One, Inc., Class D(1) 30,000 661,875
-----------------------------------------------------------------------
$ 1,105,312
-----------------------------------------------------------------------
Business Products and Services -- 0.3%
-----------------------------------------------------------------------
Ceridian Corp.(1) 25,000 $ 601,562
-----------------------------------------------------------------------
$ 601,562
-----------------------------------------------------------------------
Business Services - Miscellaneous -- 3.9%
-----------------------------------------------------------------------
Complete Business Solutions, Inc.(1) 132,000 $ 2,318,250
Critical Path, Inc.(1) 15,000 874,687
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Business Services - Miscellaneous (continued)
-----------------------------------------------------------------------
Forrester Research, Inc.(1) 2,200 $ 160,187
Heidrick and Struggles International,
Inc.(1) 27,500 1,735,937
Manpower, Inc. 1,000 32,000
Thermo Cardiosystems, Inc.(1) 200,000 2,000,000
-----------------------------------------------------------------------
$ 7,121,061
-----------------------------------------------------------------------
Communications Equipment -- 0.3%
-----------------------------------------------------------------------
ECI Telecom, Ltd. 14,800 $ 529,100
-----------------------------------------------------------------------
$ 529,100
-----------------------------------------------------------------------
Communications Services -- 1.5%
-----------------------------------------------------------------------
ALLTEL Corp. 15,000 $ 929,062
BellSouth Corp. 30,000 1,278,750
Winstar Communications, Inc.(1) 15,000 508,125
-----------------------------------------------------------------------
$ 2,715,937
-----------------------------------------------------------------------
Computer Equipment -- 3.5%
-----------------------------------------------------------------------
Brocade Communications Systems, Inc.(1) 20,000 $ 3,669,688
Clarent Corp.(1) 10,000 715,000
Emulex Corp.(1) 30,000 1,970,625
-----------------------------------------------------------------------
$ 6,355,313
-----------------------------------------------------------------------
Computer Services -- 5.3%
-----------------------------------------------------------------------
Concord EFS, Inc.(1) 212,500 $ 5,525,000
ePresence, Inc.(1) 5,000 36,250
iGATE Capital Corp.(1) 20,000 275,000
Profit Recovery Group International,
Inc.(1) 121,500 2,019,938
SunGard Data Systems, Inc.(1) 60,000 1,860,000
-----------------------------------------------------------------------
$ 9,716,188
-----------------------------------------------------------------------
Computer Software -- 2.3%
-----------------------------------------------------------------------
BindView Development Corp.(1) 50,000 $ 600,000
Intuit, Inc.(1) 1,000 41,375
Mercury Interactive Corp.(1) 10,000 967,500
Microsoft Corp.(1) 10,000 800,000
Pinnacle Systems, Inc.(1) 25,000 562,110
Project Software and Development,
Inc.(1) 60,000 1,080,000
Software.com, Inc.(1) 500 64,938
-----------------------------------------------------------------------
$ 4,115,923
-----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Computers and Business Equipment -- 1.2%
-----------------------------------------------------------------------
Dell Computer Corp.(1) 8,000 $ 394,500
Insight Enterprises, Inc.(1) 30,000 1,779,375
-----------------------------------------------------------------------
$ 2,173,875
-----------------------------------------------------------------------
Distribution -- 8.5%
-----------------------------------------------------------------------
AmeriSource Health Corp., Class A(1) 48,049 $ 1,489,519
Cardinal Health, Inc. 78,426 5,803,524
Tech Data Corp.(1) 190,000 8,276,875
-----------------------------------------------------------------------
$ 15,569,918
-----------------------------------------------------------------------
Drugs -- 5.4%
-----------------------------------------------------------------------
Alpharma, Inc. 59,556 $ 3,707,361
Elan Corp., PLC ADR(1) 32,000 1,550,000
Lilly (Eli) & Co. 15,000 1,498,125
Teva Pharmaceutical Industries Ltd. 55,834 3,095,297
-----------------------------------------------------------------------
$ 9,850,783
-----------------------------------------------------------------------
Electrical Equipment -- 1.2%
-----------------------------------------------------------------------
C&D Technology, Inc. 40,000 $ 2,260,000
-----------------------------------------------------------------------
$ 2,260,000
-----------------------------------------------------------------------
Electronic Components - Instruments -- 1.0%
-----------------------------------------------------------------------
C-MAC Industries, Inc. 20,000 $ 944,880
Keithley Instruments, Inc. 10,000 871,250
-----------------------------------------------------------------------
$ 1,816,130
-----------------------------------------------------------------------
Electronics - Instruments -- 1.1%
-----------------------------------------------------------------------
Credence Systems Corp.(1) 30,000 $ 1,655,625
Mechanical Technology, Inc.(1) 21,000 315,000
-----------------------------------------------------------------------
$ 1,970,625
-----------------------------------------------------------------------
Electronics - Semiconductors -- 7.1%
-----------------------------------------------------------------------
Advanced Micro Devices, Inc.(1) 40,000 $ 3,090,000
Analog Devices, Inc.(1) 20,000 1,520,000
Cirrus Logic, Inc.(1) 50,000 800,000
Conexant Systems(1) 40,000 1,945,000
Micron Technology, Inc.(1) 37,000 3,258,313
National Semiconductor Corp.(1) 10,000 567,500
SanDisk Corp.(1) 30,000 1,835,625
-----------------------------------------------------------------------
$ 13,016,438
-----------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Financial - Miscellaneous -- 0.6%
-----------------------------------------------------------------------
MGIC Investment Corp. 25,000 $ 1,137,500
-----------------------------------------------------------------------
$ 1,137,500
-----------------------------------------------------------------------
Financial Services - Miscellaneous -- 2.2%
-----------------------------------------------------------------------
Finova Group, Inc. 100,000 $ 1,300,000
Providian Financial Corp. 30,000 2,700,000
-----------------------------------------------------------------------
$ 4,000,000
-----------------------------------------------------------------------
Foods -- 4.1%
-----------------------------------------------------------------------
Nabisco Holdings Corp. 286,000 $ 7,418,125
-----------------------------------------------------------------------
$ 7,418,125
-----------------------------------------------------------------------
Gaming -- 0.2%
-----------------------------------------------------------------------
Penn National Gaming Inc.(1) 22,700 $ 309,288
-----------------------------------------------------------------------
$ 309,288
-----------------------------------------------------------------------
Health Services -- 2.3%
-----------------------------------------------------------------------
Caremark Rx, Inc.(1) 150,000 $ 1,021,875
Express Scripts, Inc.(1) 22,000 1,366,750
MedQuist, Inc.(1) 55,000 1,870,000
-----------------------------------------------------------------------
$ 4,258,625
-----------------------------------------------------------------------
Information Services -- 0.5%
-----------------------------------------------------------------------
Cambridge Technology Partners, Inc.(1) 101,250 $ 882,779
Lante Corp.(1) 50 1,022
-----------------------------------------------------------------------
$ 883,801
-----------------------------------------------------------------------
Insurance -- 0.8%
-----------------------------------------------------------------------
Aetna, Inc. 5,000 $ 320,938
Oxford Health Plans, Inc.(1) 20,000 476,250
Progressive Corp. 10,000 740,000
-----------------------------------------------------------------------
$ 1,537,188
-----------------------------------------------------------------------
Investment Services -- 0.0%
-----------------------------------------------------------------------
Savvis Communications Corp.(1) 50 $ 653
-----------------------------------------------------------------------
$ 653
-----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Medical Products -- 0.7%
-----------------------------------------------------------------------
Novoste Corp.(1) 20,000 $ 1,220,000
-----------------------------------------------------------------------
$ 1,220,000
-----------------------------------------------------------------------
Metals - Industrial -- 3.5%
-----------------------------------------------------------------------
Precision Castparts Corp. 132,000 $ 5,973,000
RTI International Metals, Inc.(1) 40,000 455,000
-----------------------------------------------------------------------
$ 6,428,000
-----------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 7.0%
-----------------------------------------------------------------------
Baker Hughes, Inc. 85,000 $ 2,720,000
Halliburton Co. 48,000 2,265,000
Precision Drilling Corp. 200,000 7,725,000
-----------------------------------------------------------------------
$ 12,710,000
-----------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 1.1%
-----------------------------------------------------------------------
Enron Corp. 30,000 $ 1,935,000
-----------------------------------------------------------------------
$ 1,935,000
-----------------------------------------------------------------------
Optical Components -- 0.6%
-----------------------------------------------------------------------
Avanex Corp.(1) 100 $ 9,550
Corning, Inc. 3,000 809,625
MRV Communications, Inc.(1) 5,000 336,250
-----------------------------------------------------------------------
$ 1,155,425
-----------------------------------------------------------------------
Pharmaceuticals - Generic -- 1.8%
-----------------------------------------------------------------------
Alza Corp.(1) 54,324 $ 3,211,907
-----------------------------------------------------------------------
$ 3,211,907
-----------------------------------------------------------------------
Printing and Business Products -- 0.5%
-----------------------------------------------------------------------
Electronics for Imaging(1) 34,000 $ 860,625
-----------------------------------------------------------------------
$ 860,625
-----------------------------------------------------------------------
Publishing -- 1.0%
-----------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 10,000 $ 540,000
Playboy Enterprises, Inc.(1) 100,000 1,287,500
-----------------------------------------------------------------------
$ 1,827,500
-----------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Retail -- 2.2%
-----------------------------------------------------------------------
Hollywood Entertainment Corp.(1) 520,000 $ 4,095,000
-----------------------------------------------------------------------
$ 4,095,000
-----------------------------------------------------------------------
Semiconductor Equipment -- 1.4%
-----------------------------------------------------------------------
Electro Scientific Industries, Inc.(1) 2,500 $ 110,078
Varian Semiconductor Equipment
Associates, Inc.(1) 38,500 2,418,281
-----------------------------------------------------------------------
$ 2,528,359
-----------------------------------------------------------------------
Semiconductors -- 3.5%
-----------------------------------------------------------------------
Actel Corp.(1) 57,500 $ 2,623,438
AudioCodes Ltd.(1) 20,500 2,460,000
Galileo Technology Ltd.(1) 60,000 1,290,000
-----------------------------------------------------------------------
$ 6,373,438
-----------------------------------------------------------------------
Telecommunication Equipment -- 0.8%
-----------------------------------------------------------------------
Accelerated Networks, Inc.(1) 3,350 $ 141,328
Alcatel ADR 7,000 465,500
Paradyne Networks, Inc.(1) 25,000 814,063
-----------------------------------------------------------------------
$ 1,420,891
-----------------------------------------------------------------------
Telecommunications Services -- 1.3%
-----------------------------------------------------------------------
Nextel Communications, Inc., Class A(1) 40,000 $ 2,447,500
-----------------------------------------------------------------------
$ 2,447,500
-----------------------------------------------------------------------
Tobacco -- 2.2%
-----------------------------------------------------------------------
Philip Morris Co., Inc. 154,500 $ 4,103,906
-----------------------------------------------------------------------
$ 4,103,906
-----------------------------------------------------------------------
Transportation -- 0.7%
-----------------------------------------------------------------------
Kansas City Southern Industries, Inc. 15,000 $ 1,330,313
-----------------------------------------------------------------------
$ 1,330,313
-----------------------------------------------------------------------
Wireless Communication Services -- 1.5%
-----------------------------------------------------------------------
VoiceStream Wireless Corp.(1) 23,500 $ 2,732,977
-----------------------------------------------------------------------
$ 2,732,977
-----------------------------------------------------------------------
Total Common Stocks
(identified cost $149,692,619) $169,465,042
-----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
CONVERTIBLE PREFERRED STOCKS -- 0.9%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Metals - Gold -- 0.9%
-----------------------------------------------------------------------
Freeport McMoRan Copper & Gold, 5%
Series CV 125,000 $ 1,664,062
-----------------------------------------------------------------------
$ 1,664,062
-----------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $2,872,500) $ 1,664,062
-----------------------------------------------------------------------
</TABLE>
COMMERCIAL PAPER -- 3.4%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Associates Corp. of North America,
6.89%, 7/3/00 $ 6,142 $ 6,139,649
-----------------------------------------------------------------------
Total Commercial Paper
(at amortized cost $6,139,649) $ 6,139,649
-----------------------------------------------------------------------
Total Investments -- 97.1%
(identified cost $158,704,768) $177,268,753
-----------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.9% $ 5,378,076
-----------------------------------------------------------------------
Net Assets -- 100.0% $182,646,829
-----------------------------------------------------------------------
</TABLE>
ADR - American Depositary Receipt
(1) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
<S> <C>
Assets
------------------------------------------------------
Investments, at value
(identified cost, $158,704,768) $177,268,753
Cash 3,557
Receivable for investments sold 7,921,482
Dividends receivable 247,165
------------------------------------------------------
TOTAL ASSETS $185,440,957
------------------------------------------------------
Liabilities
------------------------------------------------------
Payable for investments purchased $ 2,766,456
Payable to affiliate for Trustees' fees 3,796
Accrued expenses 23,876
------------------------------------------------------
TOTAL LIABILITIES $ 2,794,128
------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $182,646,829
------------------------------------------------------
Sources of Net Assets
------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $164,082,844
Net unrealized appreciation (computed on
the basis of identified cost) 18,563,985
------------------------------------------------------
TOTAL $182,646,829
------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
JUNE 30, 2000
<S> <C>
Investment Income
------------------------------------------------------
Interest $ 152,496
Dividends (net of foreign taxes, $1,640) 551,315
------------------------------------------------------
TOTAL INVESTMENT INCOME $ 703,811
------------------------------------------------------
Expenses
------------------------------------------------------
Investment adviser fee $ 362,971
Trustees fees and expenses 4,878
Custodian fee 30,732
Legal and accounting services 13,695
Miscellaneous 3,982
------------------------------------------------------
TOTAL EXPENSES $ 416,258
------------------------------------------------------
NET INVESTMENT INCOME $ 287,553
------------------------------------------------------
Realized and Unrealized Gain (Loss)
------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 4,116,731
------------------------------------------------------
NET REALIZED GAIN $ 4,116,731
------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(11,266,026)
------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) $(11,266,026)
------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (7,149,295)
------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (6,861,742)
------------------------------------------------------
</TABLE>
(1) For the period from the start of business, March 7, 2000, to June 30,
2000.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
INCREASE (DECREASE) JUNE 30, 2000
IN NET ASSETS (UNAUDITED)(1)
<S> <C>
--------------------------------------------------------
From operations --
Net investment income $ 287,553
Net realized gain 4,116,731
Net change in unrealized
appreciation (depreciation) (11,266,026)
--------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (6,861,742)
--------------------------------------------------------
Capital transactions --
Net assets contributed by Eaton Vance
Balanced Fund $ 196,706,145
Contributions 6,143,054
Withdrawals (13,440,638)
--------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 189,408,561
--------------------------------------------------------
NET INCREASE IN NET ASSETS $ 182,546,819
--------------------------------------------------------
Net Assets
--------------------------------------------------------
At beginning of period $ 100,010
--------------------------------------------------------
AT END OF PERIOD $ 182,646,829
--------------------------------------------------------
</TABLE>
(1) For the period from the start of business, March 7, 2000, to June 30,
2000.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 2000
(UNAUDITED)(1)
<S> <C>
------------------------------------------------
Ratios/Supplemental Data
------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.71%(2)
Net investment income 0.49%(2)
Portfolio Turnover 122%
------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $182,647
------------------------------------------------
</TABLE>
(1) For the period from the start of business, March 7, 2000, to June 30,
2000.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
-------------------------------------------
Capital Growth Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. The Portfolio, which was organized as a trust under the
laws of the State of New York on February 28, 2000, seeks to achieve
long-term growth of capital by investing in a portfolio consisting of common
stocks. The Declaration of Trust permits the Trustees to issue interests in
the Portfolio. The following is a summary of significant accounting policies
of the Portfolio. The policies are in conformity with generally accepted
accounting principles.
A Investment Valuations -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Listed or unlisted securities for which
closing sale prices are not available are valued at the mean between latest
bid and asked prices. 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 one of the Portfolio's investors is a regulated investment
company that invests all or substantially all of its 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 changes in foreign currency exchange
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 results from fluctuations in foreign currency exchange rates
is not separately disclosed.
E 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.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to 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 Portfolio maintains with IBT. All significant credit
balances used to reduce the Portfolios custodian fees are reported as a
reduction of expenses on the Statement of Operations.
G Other -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed based on the specific identification
of the security sold.
H Interim Financial Statements -- The interim financial statements relating to
June 30, 2000 and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the
18
<PAGE>
CAPITAL GROWTH PORTFOLIO AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
Portfolio's management reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
2 Investment Adviser Fee and Other Transactions with Affiliates
-------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
The fee is computed at the monthly rate of 5/96 of 1% (0.625% annualized) of
the Portfolio's average daily net assets up to $300 million and 1/24 of 1%
(0.50% annualized) of average daily net assets of $300 million and more. For
the period ended June 30, 2000 the fee was equivalent to 0.63% (annualized)
of the Portfolio's average net assets for such period and amounted to
$362,971. 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 officers
and Trustees of the Portfolio are officers 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
period ended June 30, 2000, no significant amounts have been deferred.
3 Investment Transactions
-------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $332,106,690 and $209,498,528, respectively.
4 Federal Income Tax Basis of Investments
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 2000, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $158,704,768
------------------------------------------------------
Gross unrealized appreciation $ 28,463,927
Gross unrealized depreciation (9,899,942)
------------------------------------------------------
NET UNREALIZED APPRECIATION $ 18,563,985
------------------------------------------------------
</TABLE>
5 Line of Credit
-------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 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 ended June 30, 2000.
6 Transfer of Net Assets
-------------------------------------------
Prior to the opening of business on March, 7, 2000, Eaton Vance Balanced
Fund, pursuant to an Agreement and Plan of Reorganization dated February 29,
2000, contributed net assets to the Portfolio of $196,706,145, in exchange
for an interest therein, including $29,830,011 of net unrealized
appreciation. The transaction was structured for tax purposes to qualify as a
tax free exchange under the Internal Revenue Code.
19
<PAGE>
INVESTMENT GRADE INCOME PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED)
CORPORATE BONDS -- 58.2%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Air Products and Chemicals, Inc., MTN,
7.34%, 6/15/26 $ 720 $ 709,985
Associates Corp., N.A., 5.96%, 5/15/37 30 29,654
Bellsouth Telecommunications, Inc.,
5.85%, 11/15/45 1,510 1,504,715
BHP Finance, 6.42%, 3/1/26 80 77,366
Commercial Credit Corp., 6.625%, 6/1/15 1,000 989,820
Commercial Credit Corp., 7.875%, 2/1/25 2,000 2,064,700
Dayton Hudson, MTN, 5.865%, 8/15/27 2,490 2,486,987
Eaton Corp., 6.50%, 6/1/25 400 385,968
Eaton Corp., 8.875%, 6/15/19 200 223,528
First Union National Bank of Florida,
6.18%, 2/15/36 125 115,164
Grand Metropolitan Investment Corp.,
7.45%, 4/15/35 3,090 3,094,635
Harris Corp., 6.65%, 8/1/06 3,000 2,972,490
Hertz Corp., 6.30%, 11/15/06 25 24,289
IBM Corp., 6.22%, 8/1/27 65 63,042
Ingersoll-Rand MTN, 6.015%, 2/15/28 25 24,851
Inter-American Development Bank, 6.95%,
8/1/26 220 218,269
Inter-American Development Bank, 8.40%,
9/1/09 3,690 4,014,314
ITT Corp., 8.55%, 6/15/09 450 462,451
Johnson Controls, 7.70%, 3/1/15 3,000 3,056,370
Lowe's Cos., Inc., MTN, 7.11%, 5/15/37 5,000 4,946,450
Mead Corp., 6.84%, 3/1/37 2,000 1,879,360
Motorola, Inc., 6.50%, 9/1/25 3,000 2,916,810
NBD Bank N.A., 8.25%, 11/1/24 135 141,522
Penney (JC) Co., Inc., 7.40%, 4/1/37 2,000 1,808,440
Procter and Gamble Co., 8.00%, 9/1/24 3,000 3,200,010
Seagram (Joseph) & Sons, Inc., 9.65%,
8/15/18 1,030 1,143,207
State Street Bank, 7.35%, 6/15/26 2,450 2,405,900
Tennessee Valley Authority, 5.88%,
4/1/36 3,350 3,194,661
Tennessee Valley Authority, 6.235%,
7/15/45 1,700 1,691,398
Times Mirror Co., 6.61%, 9/15/27 3,250 3,157,408
Transcontinental Gas Pipeline Corp.,
7.08%, 7/15/26 2,600 2,579,382
Tribune Co., MTN, 6.25%, 11/10/26 1,000 985,080
TRW, Inc., MTN, 9.35%, 6/4/20 1,395 1,508,441
Washington Gas Light Co., MTN, 7.50%,
4/1/30 2,000 1,997,020
Willamette Industries, 7.35%, 7/1/26 4,000 3,901,760
-----------------------------------------------------------------------
Total Corporate Bonds
(identified cost $62,623,864) $ 59,975,447
-----------------------------------------------------------------------
</TABLE>
MORTGAGE PASS-THROUGHS -- 4.2%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
FHLMC, PAC CMO, Series 1627-PZ, 5.60%,
8/15/17 $ 1,711 $ 1,701,185
FHLMC, PAC CMO, Series 1630-PE, 5.50%,
5/15/18 285 283,535
FHLMC, PAC CMO, Series 41-F, 10.00%,
5/15/20 727 760,555
FNMA, PAC CMO, Series 1990 24-E,
9.00%, 3/25/20 324 328,329
FNMA, PAC CMO, Series 1992 64-H,
7.50%, 9/25/06 1,227 1,229,721
-----------------------------------------------------------------------
Total Mortgage Pass-Throughs
(identified cost $4,268,136) $ 4,303,325
-----------------------------------------------------------------------
</TABLE>
U.S. TREASURY OBLIGATIONS -- 35.0%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
U.S. Treasury Bond, 7.25%, 8/15/22 $ 3,000 $ 3,375,210
U.S. Treasury Bond, 7.50%, 11/15/16 7,500 8,471,400
U.S. Treasury Bond, 10.75%, 8/15/05 10,000 11,924,200
U.S. Treasury Note, 5.75%, 11/30/02 9,500 9,363,390
U.S. Treasury Note, 6.50%, 5/31/02 3,000 3,004,440
-----------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost, $36,408,369) $ 36,138,640
-----------------------------------------------------------------------
</TABLE>
COMMERCIAL PAPER -- 0.9%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Associates Corp. of North America,
6.89%, 7/3/00 $ 893 $ 892,658
-----------------------------------------------------------------------
Total Commercial Paper
(at amortized cost $892,658) $ 892,658
-----------------------------------------------------------------------
Total Investments -- 98.3%
(identified cost $104,193,027) $101,310,070
-----------------------------------------------------------------------
Other Assets, Less Liabilities -- 1.7% $ 1,759,140
-----------------------------------------------------------------------
Net Assets -- 100.0% $103,069,210
-----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
INVESTMENT GRADE INCOME PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
<S> <C>
Assets
------------------------------------------------------
Investments, at value
(identified cost, $104,193,027) $101,310,070
Cash 685
Interest receivable 1,990,518
------------------------------------------------------
TOTAL ASSETS $103,301,273
------------------------------------------------------
Liabilities
------------------------------------------------------
Payable for investments purchased $ 218,567
Payable to affiliate for Trustees' fees 2,047
Accrued expenses 11,449
------------------------------------------------------
TOTAL LIABILITIES $ 232,063
------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $103,069,210
------------------------------------------------------
Sources of Net Assets
------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $105,952,167
Net unrealized depreciation (computed on
the basis of identified cost) (2,882,957)
------------------------------------------------------
TOTAL $103,069,210
------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
JUNE 30, 2000
<S> <C>
Investment Income
-----------------------------------------------------
Interest $ 2,323,691
-----------------------------------------------------
TOTAL INVESTMENT INCOME $ 2,323,691
-----------------------------------------------------
Expenses
-----------------------------------------------------
Investment adviser fee $ 207,551
Trustees fees and expenses 2,630
Custodian fee 19,000
Legal and accounting services 7,836
Miscellaneous 113
-----------------------------------------------------
TOTAL EXPENSES $ 237,130
-----------------------------------------------------
NET INVESTMENT INCOME $ 2,086,561
-----------------------------------------------------
Realized and Unrealized Gain (Loss)
-----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $(1,519,708)
-----------------------------------------------------
NET REALIZED LOSS $(1,519,708)
-----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 2,155,756
-----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 2,155,756
-----------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 636,048
-----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 2,722,609
-----------------------------------------------------
</TABLE>
(1) For the period from the start of business, March 7, 2000, to June 30,
2000.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
INVESTMENT GRADE INCOME PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
INCREASE (DECREASE) JUNE 30, 2000
IN NET ASSETS (UNAUDITED)(1)
<S> <C>
--------------------------------------------------------
From operations --
Net investment income $ 2,086,561
Net realized loss (1,519,708)
Net change in unrealized appreciation
(depreciation) 2,155,756
--------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 2,722,609
--------------------------------------------------------
Capital transactions --
Net assets contributed by Eaton Vance
Balanced Fund $ 112,515,428
Contributions 462,914
Withdrawals (12,731,751)
--------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 100,246,591
--------------------------------------------------------
NET INCREASE IN NET ASSETS $ 102,969,200
--------------------------------------------------------
Net Assets
--------------------------------------------------------
At beginning of period $ 100,010
--------------------------------------------------------
AT END OF PERIOD $ 103,069,210
--------------------------------------------------------
</TABLE>
(1) For the period from the start of business, March 7, 2000, to June 30,
2000.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
INVESTMENT GRADE INCOME PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 2000
(UNAUDITED)(1)
<S> <C>
------------------------------------------------------
Ratios/Supplemental Data
------------------------------------------------------
Ratios (As a percentage of average
daily net assets):
Expenses 0.72%(2)
Net investment income 6.30%(2)
Portfolio Turnover 26%
------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S
OMITTED) $103,069
------------------------------------------------------
</TABLE>
(1) For the period from the start of business, March 7, 2000 to June 30,
2000.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
INVESTMENT GRADE INCOME PORTFOLIO AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
-------------------------------------------
Investment Grade Income Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end,
management investment company. The Portfolio, which was organized as a trust
under the laws of the State of New York on February 28, 2000, seeks to
achieve current income and total return by investing in a portfolio
consisting primarily of fixed-income securities. 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 -- 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. 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.
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 one of the Portfolio's investors is a regulated investment
company that invests all or substantially all of its 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 changes in foreign currency exchange
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 results from fluctuations in foreign currency exchange rates
is not separately disclosed.
E 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.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to 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 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.
G Other -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed based on the specific identification
of the security sold.
H Interim Financial Statements -- The interim financial statements relating to
June 30, 2000 and for the 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.
24
<PAGE>
INVESTMENT GRADE INCOME PORTFOLIO AS OF JUNE 30, 2000
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 computed at the monthly rate of 5/96 of 1% (0.625% annualized) of
the Portfolio's average daily net assets up to $300 million and 1/24 of 1%
(0.50% annualized) of average daily net assets of $300 million and more. For
the period ended June 30, 2000 the fee was equivalent to 0.61% of the
Portfolio's average net assets for such period and amounted to $207,551.
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 officers and
Trustees of the Portfolio are officers 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 period
ended June 30, 2000, no significant amounts have been deferred.
3 Investment Transactions
-------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $4,304,388 and $13,969,936, respectively.
Purchases and sales of U.S. Government agency securities aggregated
$21,028,344 and $20,089,919, respectively.
4 Federal Income Tax Basis of Investments
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 2000, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $104,193,027
------------------------------------------------------
Gross unrealized appreciation $ 313,546
Gross unrealized depreciation (3,196,503)
------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (2,882,957)
------------------------------------------------------
</TABLE>
5 Line of Credit
-------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 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 ended June 30, 2000.
6 Transfer of Net Assets
-------------------------------------------
Prior to the opening of business on March 7, 2000, Eaton Vance Balanced Fund,
pursuant to an Agreement and Plan of Reorganization dated February 29, 2000,
contributed to the Portfolio net assets of $112,515,428, in exchange for an
interest therein, including $5,038,713 of net unrealized depreciation. The
transaction was structured for tax purposes to qualify as a tax free exchange
under the Internal Revenue Code.
25
<PAGE>
EATON VANCE BALANCED FUND AS OF JUNE 30, 2000
INVESTMENT MANAGEMENT
EATON VANCE BALANCED FUND
Officers
James B. Hawkes
President and Trustee
Edward E. Smiley, Jr.
Vice President
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman of the Board,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
CAPITAL GROWTH PORTFOLIO
Officers
James B. Hawkes
President and Trustee
Arieh Coll
Vice President and
Portfolio Manager
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman of the Board,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
INVESTMENT GRADE INCOME PORTFOLIO
Officers
James B. Hawkes
President and Trustee
Arieh Coll
Vice President
Michael B. Terry
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman of the Board,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
26
<PAGE>
This page intentionally left blank.
<PAGE>
INVESTMENT ADVISER OF CAPITAL GROWTH PORTFOLIO
AND INVESTMENT GRADE INCOME PORTFOLIO
BOSTON MANAGEMENT AND RESEARCH
The Eaton Vance Building
255 State Street
Boston, MA 02109
ADMINISTRATOR OF
EATON VANCE BALANCED FUND
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC, Inc.
Attn: Eaton Vance Funds
P.O. Box 9653
Providence, RI 02904-9653
(800) 262-1122
EATON VANCE BALANCED FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
-------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------
162-8/00 BALSRC
