<PAGE>
[LOGO OF Investing
EATON VANCE
MUTUAL FUNDS for the
APPEARS HERE]
21st
[PHOTO OF EARTH
Century APPEARS HERE]
Annual Report October 31, 1997
EV
MARATHON
STRATEGIC
INCOME
FUND
[PHOTO OF STOCK CERTIFICATES
APPEARS HERE]
MARATHON
EATON VANCE
GLOBAL MANAGEMENT-GLOBAL DISTRIBUTION
[PHOTO OF SKYLINE APPEARS HERE]
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
LETTER TO SHAREHOLDERS
[PHOTO OF JAMES B. HAWKES APPEARS HERE]
James B. Hawkes,
President
EV Marathon Strategic Income Fund had a total return of 10.4% for the year ended
October 31, 1997./1/ That return was the result of a rise in net asset value per
share from $9.31 on October 31, 1996 to $9.47 on October 31, 1997, and the
reinvestment of $0.787 in dividends. By comparison, the average total return of
79 Multi-Sector Income Funds as compiled by Lipper Analytical Services, Inc. a
nationally recognized monitor of mutual fund performance was 9.8% for the same
period./2/
A volatile period for the world's fixed-income investors...
The past fiscal year was marked by unusually high volatility in the world's
fixed-income markets. Concerns over emerging nations' current account deficits,
a series of currency crises in Asia, and lingering questions over the fate of
European Monetary Union all contributed to rising volatility. Meanwhile,
conditions in the U.S. were relatively placid, as a sound economy was
accompanied by continued low inflation. In such a widely divergent investment
climate, it paid to be selective.
The Fund's performance again earned high marks from Morningstar...
In the face of high volatility, the Portfolio's flexibility to invest in a broad
range of markets provided a distinct advantage. Reflecting that advantage, the
Fund's risk-adjusted performance through October 31 earned it a Four-Star
Overall rating among taxable bond funds covered by Morningstar, Inc./3/-
a nationally recognized monitor of mutual fund performance.
1998 should bring more opportunities for high-yield investors...
As we've seen, the global bond markets proved very challenging in 1997. Yet, as
economic growth and development continue to alter the face of the world economy,
there remain ample opportunities for fixed-income investors, both here in the
U.S. and abroad. Strategic Income Portfolio will continue to monitor the markets
closely in search of those opportunities. In the pages that follow,
portfolio manager Mark Venezia reviews the past year in the global bond markets
and offers his outlook for the year ahead.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
December 9, 1997
- --------------------------------------------------------------------------------
Fund Information
as of October 31, 1997
Performance/4/
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- ----------------------------------------------------------------------
<S> <C>
One year 10.4%
Five years 8.8
Life of Fund (11/26/90) 7.2
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- -----------------------------------------------------------------------
<S> <C>
One year 5.4%
Five years 8.5
Life of Fund (11/26/90) 7.2
<CAPTION>
Five Largest Credit Exposures/5/
- -----------------------------------------------------------------------
By total net assets
[BAR GRAPH APPEARS HERE]
<S> <C>
United States 78.9%
Ireland 4.4%
Norway 3.3%
Argentina 2.7%
Ecuador 2.1%
</TABLE>
/1/ This return does not include the applicable contingent deferred salescharge
(CDSC).
/2/ It is not possible to invest directly in an Average or Index.
/3/ Morningstar ratings reflect historical risk-adjusted performance through
10/31/97 and are subject to change. Past performance is no guarantee of
future results. Funds are assigned ratings from 1 star (lowest) to 5 stars
(highest). Ratings are calculated from the funds' 3-, 5-, and 10-year
returns (with fee adjustment) in excess of 90-day Treasury bill returns. The
top 10% of the funds in a category receive 5 stars; the next 22.5% receive 4
stars. For the 3-year period, the Fund was rated 5 stars (1338 funds), and
for the 5-year period, 4 stars (732 funds).
/4/ Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC returns reflect applicable CDSC
based on the following schedule: 5%-1st year; 5%-2nd year; 4%-3rd year; 3%-
4th year; 2%-5th year; 1%-6th year.
/5/ Five largest credit weightings account for 91.4% of the Portfolio's
investments, determined by dividing the total market value of the holdings
by the total net assets of the Portfolio. Holdings are subject to change.
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>
EV Marathon Strategic Income Fund as of October 31, 1997
MANAGEMENT DISCUSSION
[PHOTO OF MARK S. VENEZIA APPEARS HERE]
Mark S. Venezia,
Portfolio Manager
An interview with Mark S. Venezia, portfolio manager of Strategic Income
Portfolio.
Q: Mark, the Fund turned in an excellent showing during the fiscal year. What
accounted for the strong performance?
A: This was a fairly good year for the global credit markets, as both emerging
markets and domestic high-yield markets saw spreads tighten through much of
the period. While that tightening slowed in the emerging markets in mid-
summer, it continued in the U.S. markets though September.
Then, in late October, the market changed dramatically, as currency crises
shook the Asian markets and rattled investors in other emerging markets.
Prior to the crisis, emerging market spreads - the yield difference between
emerging market bonds and U.S. Treasuries with similar maturities - had been
in the 300 basis point (3.0%) range. At the height of the currency crisis,
these spreads rose to as high as 900 basis points before rallying back to the
600 basis point level. Those volatile shifts all occurred within a period of
several days in the last week of October, creating a most difficult climate
as the period came to a close.
Q: How did you manage to avoid the downturn that rocked so many of the
fixed-income markets?
A: Primarily by emphasizing the U.S. while reducing our exposure to foreign
markets. Interestingly, we were able to avoid much of the volatility of the
global markets even while increasing the Portfolio's overall duration - a
measure of relative interest rate risk. On October 31, the Portfolio's
duration was 3.8 years, up from 2.9 a year ago. We increased the Portfolio's
exposure to high-grade bonds - to 53% on October 31 from 43% a year earlier -
with our strongest weighting in U.S. mortgage-backed securities.
The U.S. market has benefited from manageable growth and continued low
inflation. That combination has proven a very favorable backdrop for domestic
bonds. In addition, U.S.-backed securities represent an investment in the
very highest-quality issuer as well as providing excellent liquidity in an
increasingly volatile market.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Five Largest Currency Exposures/1/
- -----------------------------------------------
By total net assets
[BAR GRAPH APPEARS HERE]
<S> <C>
United States 85.4%
Norway 3.3%
Germany 2.7%
India 2.5%
Ireland 2.2%
<CAPTION>
U.S. Portion - Sector Allocation/1/
- -----------------------------------------------
By total net assets
[PIE GRAPH APPEARS HERE]
<S> <C>
Seasoned Mortgage-backed Securities 59.8%
High-Yield Corporates 21.3%
Commercial Paper 13.5%
Put Bonds 3.3%
U.S. Treasuries 2.1%
</TABLE>
/1/ Because the Portfolio is actively managed, currency exposures and sector
allocations are subject to change.
- --------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
3
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
MANAGEMENT DISCUSSION CONT'D
Q: Why did you focus predominantly on mortgage-backed securities?
A: In my view, mortgage-backed securities (MBS) were the sector of the market
with the least potential for spread widening. Accordingly, we raised this
segment of the Portfolio to 48% at October 31 from 35% a year ago. As
investors may know, MBS represent pools of homeowners' mortgages. MBS provide
a yield advantage over Treasuries and are especially attractive in a stable
interest rate environment. And because they are U.S. government-backed, they
are of the highest quality.
We focus on the seasoned segment of the MBS market. In aggregate, seasoned
MBS have highly predictable prepayment rates - the rates at which homeowners
prepay their mortgages. Their predictability makes seasoned securities
preferable to their unseasoned counterparts, which may provide uneven cash
flows and require investors to reinvest at unfavorable interest rates.
Q: Did you increase your commitments to U.S. high-yield bonds?
A: Yes. As part of our shift to the U.S., we increased our investments in U.S.
high-yield corporate bonds. The U.S. high-yield bond market performed very
well during the year. The economy remained in high gear and corporate
earnings continued to improve. Also, the strong performance of the stock
market increased the equity capitalization of these companies, thereby
improving debt-to-equity ratios. The high-yield market was further aided by a
surge in the number of mergers and industry consolidations. This trend was
witnessed across a broad array of industries, leading to larger, better
capitalized companies. While the high-yield market felt some volatility along
with the emerging markets in late October, the impact was much less
pronounced. Domestic high-yield spreads, meanwhile, which had been 300 basis
points, rose to 400 before settling back to 350.
Q: What were the difficulties in the Asian markets?
A: Several countries in southeast Asia -- including Indonesia, Thailand, and the
Philippines -- have been forced to sharply devalue their currencies in recent
months. In light of the countries' continuing current account deficits, their
currencies were grossly overvalued. While they tried gamely to defend their
currencies, their underlying economic fundamentals, as well as speculative
raids by currency traders, made devaluation inevitable. As the trend toward
devaluation rolled through Asia, financial markets were destabilized, with
some of that instability spreading to other emerging markets.
Q: How have you limited the Portfolio's foreign exposure?
A: We used a variety of measures during the year to reduce the Portfolio's
international credit exposure. The most significant move was the
aforementioned shift to the U.S. market, but we also sharply scaled back our
holdings in several vulnerable areas.
The most dramatic cuts in foreign positions were those in southeast Asia,
where high yields had attracted us from 1994 through 1996. Although we
suffered losses in our Philippine peso and Indonesian rupiah positions, they
were partially offset by our short position in the Japanese yen. The Japanese
economy remains so weak that the central bank will require a continued,
accommodative monetary policy.
Our Brady bond positions, 13.1% of the Portfolio a year ago, were gradually
reduced during the period, ending the fiscal year at 9.2%. The largest
reductions among the Brady nations were in Brazil and Argentina, the
countries in Latin America that suffered the brunt of the October crisis.
Brazil, for example, continues to champion economic reforms, but suffers from
a nagging current account deficit.
4
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
Management Discussion Cont'd
In Eastern Europe, where we had a 16% exposure a year ago, we now have only a
1% position in Bulgarian Brady bonds and no foreign currency exposure
whatsoever. In Western Europe, we've held modest positions in the German mark
and in Irish government bonds. Germany has maintained an artificially weak
mark in recent years in order to promote European monetary union (EMU). Now
that EMU appears certain, the Bundesbank is in good position to ultimately
raise interest rates. Meanwhile, Ireland's buoyant economy appears to have
assured its entry into the first wave of EMU.
Q: Mark, what is your outlook for the coming year?
A: Given current conditions, most risk/reward factors favor the U.S. market. The
U.S. continues to benefit from moderate growth, low inflation, and a
political stability that encourages a flight to high-quality, dollar-
denominated securities.
Elsewhere, it's apparent that the Japanese yen is likely to weaken further as
Japan's economic fundamentals deteriorate. The opposite is true of Germany,
which has kept interest rates artificially low. Thus, we should see the
German mark strengthen somewhat in coming months.
As I indicated earlier, we have exited most of the emerging markets, although
we may very well see some interesting opportunities appear once the markets
have settled from their recent instability. That flexibility is among the
most appealing aspects of Strategic Income Portfolio. It allowed us to move
nimbly earlier in the fiscal year and thus avoid the difficulties in some
foreign markets. Fortunately, our charter is broad enough to include a fairly
wide range of investments in terms of credit quality as well as country of
origin. I believe that same flexibility will allow us to take advantage of
future global opportunities as they occur.
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the J.P.
Morgan Hedged Short-Term Global Index*
From November 30, 1990, through October 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
J.P. Morgan
EV Marathon Hedged Consumer
Strategic Short-Term Price
Date Income Fund Global Index Index
<S> <C> <C> <C>
11/30/90 $10,000 $10,000 $10,000
12/31/91 $9,973 $10,098 $10,000
1/31/91 $10,091 $10,191 $10,060
2/28/91 $10,197 $10,279 $10,075
3/31/91 $10,340 $10,341 $10,090
4/30/91 $10,438 $10,431 $10,105
5/31/91 $10,580 $10,507 $10,135
6/30/91 $10,553 $10,529 $10,164
7/31/91 $10,550 $10,595 $10,179
8/31/91 $10,640 $10,732 $10,209
9/30/91 $10,739 $10,833 $10,254
10/31/91 $10,819 $10,931 $10,269
11/30/91 $10,732 $11,013 $10,299
12/31/91 $10,794 $11,151 $10,306
1/31/92 $10,840 $11,176 $10,321
2/28/92 $10,952 $11,206 $10,359
3/31/92 $10,958 $11,189 $10,411
4/30/92 $11,109 $11,274 $10,426
5/31/92 $11,185 $11,360 $10,441
6/30/92 $11,222 $11,439 $10,478
7/31/92 $11,239 $11,520 $10,501
8/31/92 $11,079 $11,573 $10,531
9/30/92 $10,719 $11,697 $10,561
10/31/92 $10,662 $11,713 $10,598
11/30/92 $10,626 $11,707 $10,613
12/31/92 $10,719 $11,806 $10,605
1/31/93 $10,762 $11,900 $10,658
2/28/93 $11,015 $12,003 $10,695
3/31/93 $11,102 $12,042 $10,732
4/30/93 $11,192 $12,108 $10,762
5/31/93 $11,261 $12,111 $10,777
6/30/93 $11,341 $12,222 $10,792
7/31/93 $11,545 $12,263 $10,792
8/31/93 $11,603 $12,351 $10,822
9/30/93 $11,487 $12,380 $10,845
10/31/93 $11,782 $12,444 $10,889
11/30/93 $11,740 $12,469 $10,897
12/31/93 $11,880 $12,543 $10,897
1/31/94 $12,073 $12,591 $10,927
2/28/94 $11,738 $12,493 $10,964
3/31/94 $11,097 $12,452 $11,001
4/30/94 $11,184 $12,418 $11,016
5/31/94 $11,352 $12,421 $11,024
6/30/94 $10,920 $12,424 $11,061
7/31/94 $10,973 $12,513 $11,091
8/31/94 $11,136 $12,516 $11,136
9/30/94 $11,130 $12,513 $11,166
10/31/94 $11,154 $12,562 $11,173
11/30/94 $11,284 $12,576 $11,188
12/31/94 $11,254 $12,590 $11,188
1/31/95 $11,047 $12,744 $11,233
2/28/95 $11,022 $12,896 $11,278
3/31/95 $10,992 $12,998 $11,315
4/30/95 $11,474 $13,122 $11,353
5/31/95 $11,920 $13,350 $11,375
6/30/95 $11,802 $13,399 $11,398
7/31/95 $11,898 $13,496 $11,398
8/31/95 $12,110 $13,604 $11,428
9/30/95 $12,350 $13,700 $11,450
10/31/95 $12,419 $13,817 $11,487
11/30/95 $12,662 $13,967 $11,480
12/31/95 $12,880 $14,086 $11,472
1/31/96 $13,394 $14,225 $11,540
2/28/96 $13,132 $14,181 $11,577
3/31/96 $13,219 $14,206 $11,637
4/30/96 $13,500 $14,296 $11,682
5/31/96 $13,572 $14,345 $11,704
6/30/96 $13,780 $14,429 $11,712
7/31/96 $13,812 $14,505 $11,734
8/31/96 $14,049 $14,602 $11,756
9/30/96 $14,487 $14,760 $11,794
10/31/96 $14,714 $14,915 $11,831
11/30/96 $15,164 $15,063 $11,854
12/31/96 $15,223 $15,109 $11,854
1/31/97 $15,539 $15,199 $11,891
2/28/97 $15,685 $15,233 $11,928
3/31/97 $15,534 $15,218 $11,958
4/30/97 $15,640 $15,351 $11,973
5/31/97 $15,767 $15,446 $11,966
6/30/97 $15,907 $15,569 $11,981
7/31/97 $16,219 $15,697 $11,996
8/31/97 $16,013 $15,725 $12,018
9/30/97 $16,275 $15,846 $12,048
10/31/97 $16,250 $15,929 $12,078
</TABLE>
Performance+
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One year 10.4%
Five years 8.8
Life of Fund (11/26/90) 7.2
<CAPTION>
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One year 5.4%
Five years 8.5
Life of Fund (11/26/90) 7.2
</TABLE>
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
11/26/90. Index information is only available at month-end; therefore, the
line comparison begins at the next month-end following the commencement of
the Fund's investment operations.
The chart compares the Fund's total return with that of the J.P. Morgan
Hedged Short-Term Global Index, a broad-based, unmanaged market index of
short-term, global bonds, and the Consumer Price Index, a widely recognized
measure of inflation. Returns are calculated by determining the percentage
change in net asset value (NAV) with all distributions reinvested. The lines
on the chart represent the total returns of $10,000 hypothetical investments
in the Fund and the Indices. The Indices' total return does not reflect
commissions or expenses that would have been incurred if an investor
individually purchased or sold the securities represented in the Index. It
is not possible to invest directly in an Index.
+ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC returns reflect
applicable CDSC based on the following schedule: 5%-1st year; 5%-2nd year;
4%-3rd year; 3%-4th year; 2%-5th year; 1%-6th year.
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 their original cost.
5
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of October 31, 1997
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investment in Strategic Income Portfolio, at value $113,713,046
(Note 1A) (identified cost, $108,145,773)
Investment in High Income Portfolio, at value
(Note 1A) (identified cost, $17,414,617) 17,353,707
Receivable for Fund shares sold 422,450
- --------------------------------------------------------------------------------
Total assets $131,489,203
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Dividends payable $ 588,938
Payable for Fund shares redeemed 205,556
Payable to affiliate for Trustees' fees (Note 4) 281
Accrued expenses 98,228
- --------------------------------------------------------------------------------
Total liabilities $ 893,003
- --------------------------------------------------------------------------------
Net Assets for 13,786,594 shares of
beneficial interest outstanding $130,596,200
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $133,924,682
Accumulated net realized loss on investments from Portfolios
(computed on the basis of identified cost) (9,828,796)
Accumulated undistributed net investment income 993,951
Net unrealized appreciation of investments from Portfolios
(computed on the basis of identified cost) 5,506,363
- --------------------------------------------------------------------------------
Total $130,596,200
- --------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption
Price Per Share (Note 6)
- --------------------------------------------------------------------------------
($130,596,200 / 13,786,594 shares of
beneficial interest outstanding) $ 9.47
- --------------------------------------------------------------------------------
<CAPTION>
Statement of Operations
For the Year Ended
October 31, 1997
Investment Income (Notes 1B and 8)
- --------------------------------------------------------------------------------
<S> <C>
Interest income allocated from Portfolios $ 11,733,025
Expenses allocated from Portfolios (1,125,925)
- --------------------------------------------------------------------------------
Net investment income from Portfolios $ 10,607,100
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Distribution and service fees (Note 5) $ 1,237,629
Compensation of Trustees not members of the
Administrator's organization (Note 4) 3,308
Transfer and dividend disbursing agent fees 151,199
Printing and postage 84,048
Legal and accounting services 24,417
Registration fees 20,351
Custodian fee 14,931
Miscellaneous 47,900
- --------------------------------------------------------------------------------
Total expenses $ 1,583,783
- --------------------------------------------------------------------------------
Net investment income $ 9,023,317
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolios (Note 8)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,354,742
Financial futures contracts (296,446)
Foreign currency transactions 5,335,937
- --------------------------------------------------------------------------------
Net realized gain on investments $ 6,394,233
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ (3,077,613)
Financial futures contracts 815,908
Foreign currency transactions (76,476)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ (2,338,181)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 4,056,052
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 13,079,369
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
6
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended Year Ended
in Net Assets October 31, 1997 October 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 9,023,317 $10,110,231
Net realized gain on investments 6,394,233 9,539,060
Net change in unrealized
appreciation (depreciation)
of investments (2,338,181) 3,747,829
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 13,079,369 $ 23,397,120
- --------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (9,023,317) $(10,110,231)
In excess of net investment income (1,758,107) (748,802)
- --------------------------------------------------------------------------------
Total distributions to shareholders $(10,781,424) $(10,859,033)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 3) --
Proceeds from sale of shares $ 21,726,736 $ 7,147,913
Net asset value of shares issued to
shareholders in payment of
distributions declared 5,147,130 5,396,728
Cost of shares redeemed (28,246,800) (46,178,157)
- --------------------------------------------------------------------------------
Net decrease in net assets from Fund
share transactions $ (1,372,934) $(33,633,516)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 925,011 $(21,095,429)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $129,671,189 $150,766,618
- --------------------------------------------------------------------------------
At end of year $130,596,200 $129,671,189
- --------------------------------------------------------------------------------
Accumulated undistributed net investment
income included in net assets
- --------------------------------------------------------------------------------
At end of year $ 993,951 $ 522,270
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
7
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------
1997 1996 1995 1994+ 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 9.310 $ 8.500 $ 8.290 $ 9.410 $ 9.120
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.657 $ 0.655 $ 0.726 $ 0.645 $ 0.239
Net realized and unrealized gain (loss) on investments 0.288 0.858 0.167 (1.135) 0.683
- ---------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 0.945 $ 1.513 $ 0.893 $ (0.490) $ 0.922
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.657) $ (0.655) $ (0.361) $ (0.343) $ (0.632)
In excess of net investment income (0.128) (0.048) -- -- --
From tax return of capital -- -- (0.322) (0.290) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.785) $ (0.703) $ (0.683) $ (0.633) $ (0.632)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 9.470 $ 9.310 $ 8.500 $ 8.290 $ 9.410
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 10.44% 18.48% 11.34% (5.33)% 10.51%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $130,596 $129,671 $150,767 $233,139 $381,227
Ratio of net expenses to average daily net assets/(2)/ 2.08% 2.17% 2.18% 2.00% 1.99%
Ratio of net investment income to average daily net assets 6.91% 7.38% 7.85% 7.24% 7.53%
Portfolio Turnover/(3)/ -- -- -- 55% 55%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Per share data has been computed based on average shares outstanding
during the period.
/(1)/ Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of the Portfolio's allocated expenses.
/(3)/ Portfolio Turnover represents the rate of portfolio activity for the
period while the Fund was making investments directly in securities. The
portfolio turnover for the period since the Fund transferred substantially
all of its investable assets to the Portfolios is shown in each Portfolios
financial statements.
See notes to financial statements
8
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
------------------------------------------------------------------------------
EV Marathon Strategic Income Fund (the Fund) is a non-diversified series of
Eaton Vance Mutual Funds Trust (the Trust). The Fund is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund currently invests all of its investable assets in
interests in two Portfolios, Strategic Income Portfolio and High Income
Portfolio (the Portfolios), New York Trusts which have investment objectives
consistent with that 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
Strategic Income Portfolio and the High Income Portfolio (93.8% and 2.1% at
October 31, 1997, respectively). The performance of the Fund is directly
affected by the performance of the Portfolios. The financial statements of the
Strategic Income Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Fund in preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles. See Note 8 for further information on the results of
operations of High Income Portfolio. A copy of the financial statements of
High Income Portfolio is available upon request from Eaton Vance Distributors.
On June 23, 1997, the Board of Trustees of the Trust adopted a multiple class
plan for the Fund which permits the Fund to issue more than one class of
shares. Initially, the Fund will offer two classes of shares and, effective
November 1, 1997 the existing shares of the Fund will be designated Class B
shares. On June 23, 1997, the Board of Trustees also approved a Plan of
Reorganization (the "Plan") for the Trust. Under the terms of the Plan, the
Fund will acquire substantially all of the assets and liabilities of EV
Classic Strategic Income Fund. The transaction will be structured for tax
purposes to qualify as a tax-free reorganization under the Internal Revenue
Code. As a result of the reorganization, shareholders of the Classic Fund will
receive Class C shares of the Fund. The reorganization will occur after the
close of business, October 31, 1997.
A Investment Valuation -- Valuation of securities by the Strategic Income
Portfolio is discussed in Note 1A of the Portfolios Notes to Financial
Statements, which are included elsewhere in this report. High Income
Portfolio's valuation policies are as follows: Investments listed on
securities exchanges or in the NASDAQ National Market are valued at closing
sale prices. Listed or unlisted investments for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices.
Fixed income investments (other than short-term obligations), including listed
investments and investments for which price quotations are available, will
normally be valued on the basis of market valuations furnished by a pricing
service. Financial futures contracts listed on commodity exchanges are valued
at closing settlement prices. Short-term obligations, maturing in sixty days
or less, are valued at amortized cost, which approximates value. Investments
for which there are no quotations or valuations are valued at fair value using
methods determined in good faith by or at the direction of the Trustees.
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. At October 31, 1997, the Fund, for Federal income
tax purposes, had a capital loss carryover of $9,088,297, which will reduce
the Fund's taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code, and
thus will reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal income
tax. Such capital loss carryovers will expire on, October 31, 2002
($4,475,178), and October 31, 2003 ($4,613,119).
D Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Actual results could
differ from those estimates.
9
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
NOTES TO FINANCIAL STATEMENTS Cont'd
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolios. Pursuant to the respective custodian
agreements, IBT receives fees reduced by credits which are determined based on
the average daily cash balances the Fund or the Portfolios maintain with IBT.
All significant credit balances used to reduce the Fund's custodian fees are
reflected as a reduction of expenses on the Statement of Operations.
2 Distributions to Shareholders
------------------------------------------------------------------------------
The net income of the Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions of
allocated realized capital gains, if any, are made at least annually.
Shareholders may reinvest income and capital gain distributions in additional
shares of the Fund at the net asset value as of the ex-dividend date.
Distributions are paid in the form of additional shares or, at the election of
the shareholder, in cash. The Fund distinguishes between distributions on a
tax basis and a financial reporting basis. Generally accepted accounting
principles require that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in over-
distributions for financial statement purposes only 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 Capital Stock
------------------------------------------------------------------------------
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares (without par value). Transactions in capital stock
were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31,1997 October 31, 1996
------------------------------------------------------------------------------
<S> <C> <C>
Sales 2,277,649 801,649
Issued to shareholders
electing to receive payments
of distributions in capital stock 539,780 608,806
Redemptions (2,963,088) (5,223,821)
------------------------------------------------------------------------------
Net decrease (145,659) (3,813,366)
------------------------------------------------------------------------------
</TABLE>
4 Investment Adviser Fee and Other 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 each of the Portfolios' Notes to financial statements. Certain
of the officers and Trustees of the Fund and Portfolios' are officers and
directors/trustees of the above organizations (Note 5). Except as to Trustees
of the Fund and the Portfolios who are not members of EVM's organization,
officers and Trustees receive remuneration for their services to the Fund out
of such investment adviser fee.
5 Distribution Plan
------------------------------------------------------------------------------
The Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan, which is approved
annually, requires the Fund to pay the Principal Underwriter, Eaton Vance
Distributors, Inc. (EVD), amounts equal to 1/365 of 0.75% of the Fund's daily
net assets, for providing ongoing distribution services and facilities to the
Fund. The Fund will automatically discontinue payments to EVD during any
period in which there are no outstanding Uncovered Distribution Charges, which
are equivalent to the sum of (i) 4.50% of the aggregate amount received by the
Fund for shares sold plus (ii) distribution fees calculated by applying the
rate of 1% over the prevailing prime rate to the outstanding balance of
Uncovered Distribution Charges of EVD, reduced by the aggregate amount of
contingent deferred sales charges (see Note 6) and daily amounts theretofore
paid to EVD. The amount payable to EVD with respect to each day is accrued on
such day as a liability of the Fund and, accordingly, reduces the Fund's net
assets. For the year ended October 31, 1997, the Fund paid or accrued
$979,078, payable to EVD representing 0.75% (annualized) of average daily net
assets. At October 31, 1997, the amount of Uncovered Distribution Charges of
EVD calculated under the Plan was approximately $19,584,000.
In addition, the Plan authorizes the Fund to make payments of service fees to
the Principal Underwriter, Authorized Firms, and other persons in amounts not
to exceed 0.25% of the Fund's average daily net assets for each fiscal year.
The Trustees of the Trust have implemented the Plan by authorizing the Fund to
make quarterly payments of service fees to the Principal
10
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
NOTES TO FINANCIAL STATEMENTS Cont'd
Underwriter and Authorized Firms in amounts not expected to exceed 0.25% of
the Fund's average daily net assets for each fiscal year based on the value of
Fund shares sold by such persons and remaining outstanding for at least twelve
months. The Fund paid or accrued service fees to or payable to EVD for the
year ended October 31, 1997 in the amount of $258,551. Service fee payments
are made for personal services and/or the maintenance of shareholder accounts.
Service fees are separate and distinct from the sales commissions and
distribution fees payable by the Fund to EVD, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of EVD.
Certain of the officers and Trustees of the Fund are officers or directors of
EVD.
6 Contingent Deferred Sales Charge
------------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within four years of purchase. Generally, the CDSC is based upon
the lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gain distributions. The CDSC is imposed at declining rates that begin at 3% in
the first year of redemption after purchase, declining one-half of one
percentage point in the second and third years and one percentage point in the
fourth and fifth years. No CDSC is levied on shares which have been sold to
EVM or its affiliates or to their respective employees or clients. CDSC
charges are paid to EVD to reduce the amount of Uncovered Distribution Charges
calculated under the Fund's Distribution Plan. CDSC charges received when no
Uncovered Distribution Charges exist will be credited to the Fund. EVD
received approximately $25,000 of CDSC paid by shareholders for the year ended
October 31, 1997.
7 Investment Transactions
------------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Strategic Income
Portfolio for the year ended October 31, 1997, aggregated $27,012,915 and
$58,408,167, respectively. Increases and decreases in the Fund's investment in
the High Income Portfolio aggregated $20,693,020 and $3,619,785, respectively.
8 Investment in Portfolios
------------------------------------------------------------------------------
For the year ended October 31, 1997, the Fund was allocated net investment
income and realized and unrealized gain (loss) from the Portfolios as follows:
<TABLE>
<CAPTION>
Strategic Income High Income
Portfolio Portfolio Total
------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 11,454,286 $278,739 $ 11,733,025
Expenses (1,108,239) (17,686) (1,125,925)
------------------------------------------------------------------------------
Net investment income $ 10,346,047 $261,053 $ 10,607,100
------------------------------------------------------------------------------
Net realized gain (loss)--
Investment transactions $ 1,274,413 $ 80,329 $ 1,354,742
Financial futures contracts (296,446) -- (296,446)
Foreign currency transactions 5,335,937 -- 5,335,937
------------------------------------------------------------------------------
Net realized gain on investments $ 6,313,904 $ 80,329 $ 6,394,233
------------------------------------------------------------------------------
Change in unrealized
appreciation (depreciation)--
Investment transactions $ (3,016,703) $(60,910) $ (3,077,613)
Financial futures contracts 815,908 -- 815,908
Foreign currency transactions (76,476) -- (76,476)
------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
of investments $ (2,277,271) $(60,910) $ (2,338,181)
------------------------------------------------------------------------------
</TABLE>
9 Subsequent Event
------------------------------------------------------------------------------
Effective November 1, 1997, the Fund changed its name to Eaton Vance Strategic
Income Fund and shares of the Fund are designated Class B shares. An
additional class of shares is also offered.
11
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Eaton Vance Mutual Funds Trust and Shareholders of
EV Marathon Strategic Income Fund:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of EV
Marathon Strategic Income Fund, a series of Eaton Vance Mutual Funds Trust, as
of October 31, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years then
ended and the financial highlights for each of the five years then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Marathon Strategic Income Fund, a series of Eaton Vance Mutual Funds Trust, as
of October 31, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years ended October 31, 1997, and
the financial highlights for each of the five years ended October 31, 1997, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 5, 1997
12
<PAGE>
Strategic Income Portfolio as of October 31, 1997
PORTFOLIO OF INVESTMENTS
Bonds & Notes -- 87.2%
<TABLE>
<CAPTION>
Principal U.S. $ Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Argentina -- 3.2% U.S. Dollar
- --------------------------------------------------------------------------------
Argentina Discount Bond (Brady),
6.875%, 3/31/23 4,750,000 $ 3,764,375
- --------------------------------------------------------------------------------
Total Argentina (identified cost, $3,438,378) $ 3,764,375
- --------------------------------------------------------------------------------
Brazil -- 2.2% U.S. Dollar
- --------------------------------------------------------------------------------
Brazil Discount Bond (Brady), 6.688%, 4/15/24 3,500,000 $ 2,651,250
- --------------------------------------------------------------------------------
Total Brazil (identified cost, $2,419,632) $ 2,651,250
- --------------------------------------------------------------------------------
Bulgaria -- 1.2% U.S. Dollar
- --------------------------------------------------------------------------------
Bulgaria Discount Bond (Brady), 6.688%, 7/28/24 2,000,000 $ 1,393,750
- --------------------------------------------------------------------------------
Total Bulgaria (identified cost, $1,397,500) $ 1,393,750
- --------------------------------------------------------------------------------
Ecuador -- 2.4% U.S. Dollar
- --------------------------------------------------------------------------------
Ecuador Discount Bond (Brady), 6.688%, 2/28/25 4,100,000 $ 2,885,375
- --------------------------------------------------------------------------------
Total Ecuador (identified cost, $2,513,100) $ 2,885,375
- --------------------------------------------------------------------------------
Indonesia -- 0.5% U.S. Dollar
- --------------------------------------------------------------------------------
APP Global Finance III, 10.094%, 4/17/02/(1)/ 600,000 $ 543,000
- --------------------------------------------------------------------------------
Total Indonesia (identified cost, $549,583) $ 543,000
- --------------------------------------------------------------------------------
Ireland -- 5.2% Irish Punt
- --------------------------------------------------------------------------------
Irish Government, 9.25%, 7/11/03 3,500,000 $ 6,159,556
- --------------------------------------------------------------------------------
Total Ireland (identified cost, $6,052,161) $ 6,159,556
- --------------------------------------------------------------------------------
Morocco -- 1.5% Deutsche Mark
- --------------------------------------------------------------------------------
Snap Limited, 11.50%, 1/29/09 3,000,000 $ 1,814,709
- --------------------------------------------------------------------------------
Total Morocco (identified cost, $1,853,583) $ 1,814,709
- --------------------------------------------------------------------------------
Norway -- 3.9% Norwegian Krone
- --------------------------------------------------------------------------------
Norway Government, 6.75%, 1/15/07 20,000,000 $ 3,041,533
- --------------------------------------------------------------------------------
Norway Government, 7.00%, 5/31/01 10,000,000 1,510,792
- --------------------------------------------------------------------------------
Total Norway (identified cost, $4,587,443) $ 4,552,325
- --------------------------------------------------------------------------------
The Philippines -- 0.8% U.S. Dollar
- --------------------------------------------------------------------------------
JG Summit Cayman, 3.50%, 12/23/03 1,500,000 $ 937,500
- --------------------------------------------------------------------------------
Total The Philippines (identified cost, $1,203,147) $ 937,500
- --------------------------------------------------------------------------------
United Kingdom -- 2.0% U.S. Dollar
- --------------------------------------------------------------------------------
Diamond Cable Communications Co., PLC, 144A, Sr.
Disc. Notes, 10.75% (0% until 2002), 2/15/07 2,000,000 $ 1,280,000
- --------------------------------------------------------------------------------
Newsquest Capital Corp., Sr. Sub. Note,
11.00%, 5/01/06 1,000,000 $ 1,110,000
- --------------------------------------------------------------------------------
Total United Kingdom (identified cost, $2,287,751) $ 2,390,000
- --------------------------------------------------------------------------------
United States -- 64.3% U.S. Dollar
- --------------------------------------------------------------------------------
Corporate Bonds & Notes -- 5.7%
Applied Extrusion Inc., Sr. Notes, 11.50%, 4/01/02 1,000,000 $ 1,070,000
Dayton Hudson MTN, 9.52%, 6/10/15 350,000 421,817
Overhead Door Corp., Sr. Notes, 12.25%, 2/01/00 1,500,000 1,558,125
TRW Inc., Medium Term Notes, 9.35%, 6/04/20 1,900,000 2,432,266
United International -Series B, 0.00%, 11/15/99 1,500,000 1,245,000
- --------------------------------------------------------------------------------
Total Corporate Bonds & Notes (identified cost, $6,165,695) $ 6,727,208
- --------------------------------------------------------------------------------
Mortgage Pass-Throughs -- 56.6%
Federal Home Loan Mortgage Corp.:
4.75%, with various maturities to 2003 24,292 $ 23,795
5.50%, with maturity at 2019 3,273 3,293
8.00%, with various maturities to 2021 9,418,342 9,861,664
8.50%, with various maturities to 2019 2,679,237 2,866,629
9.00%, with maturity at 2019 803,984 871,583
9.25%, with maturity at 2010 2,199,386 2,351,495
12.50%, with maturity at 2011 108,926 126,230
12.75%, with maturity at 2013 157,544 183,817
13.25%, with maturity at 2013 144,461 170,204
13.50%, with maturity at 2019 417,207 496,891
- --------------------------------------------------------------------------------
$ 16,955,601
- --------------------------------------------------------------------------------
Federal National Mortgage Association:
4.75%, with maturity at 1999 15,378 $ 15,383
5.00%, with maturity at 2003 106,659 104,889
5.50%, with various maturities to 2012 48,537 48,519
7.50%, with various maturities to 2018 4,268,264 4,422,837
8.00%, with various maturities to 2013 3,544,195 3,712,349
8.25%, with maturity at 2007 3,419,514 3,569,268
8.50%, with various maturities to 2026 5,953,380 6,383,078
9.00%, with maturity at 2010 1,835,874 1,970,099
12.00%, with maturity at 2015 1,367,404 1,584,668
12.50%, with various maturities to 2019 8,389,207 9,858,347
12.75%, with maturity at 2014 175,976 210,147
13.00%, with various maturities to 2015 3,453,864 4,109,676
13.25%, with maturity at 2014 232,442 280,774
13.50%, with various maturities to 2015 1,897,416 2,263,990
14.75%, with various maturities to 2012 2,380,057 2,943,082
- --------------------------------------------------------------------------------
$ 41,477,106
- --------------------------------------------------------------------------------
Government National Mortgage Association:
6.50%, with various maturities to 2007 942,604 $ 953,636
</TABLE>
See notes to financial statements
13
<PAGE>
Strategic Income Portfolio as of October 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Principal U.S. $ Value
- --------------------------------------------------------------------------------
United States (continued)
- --------------------------------------------------------------------------------
<S> <C> <C>
Government National Mortgage Association (continued):
7.50%, with various maturities to 2017 1,329,260 $ 1,398,413
9.00%, with maturity at 2016 1,069,231 1,158,067
12.50%, with maturity at 2019 3,766,600 4,443,232
13.50%, with various maturities to 2014 329,690 402,100
- --------------------------------------------------------------------------------
$ 8,355,448
- --------------------------------------------------------------------------------
Total Mortgage Pass-Throughs (identified cost, $66,035,145) $ 66,788,155
- --------------------------------------------------------------------------------
U.S. Treasury Bond -- 2.0%
United States Treasury Bond, 11.75%, 2/15/01/(2)/
(identified cost, $2,603,438) 2,000,000 $ 2,357,180
- --------------------------------------------------------------------------------
Total United States (identified cost, $74,804,278) $ 75,872,543
- --------------------------------------------------------------------------------
Total Bonds & Notes
(identified cost $101,106,556) $102,964,383
- --------------------------------------------------------------------------------
<CAPTION>
Short-Term
Investments -- 12.8% U.S. Dollar
<S> <C> <C>
Banque National De Paris, Euro Time-deposit Cayman
Islands, 5.625%, 11/03/97 4,100,000 $ 4,100,000
Postipanki, NY Cayman Time Deposit,
5.620%, 11/03/97 5,000,000 5,000,000
Skandinaviska Enskilada Banken Time Deposit,
5.625%, 11/03/97 6,002,730 6,002,730
- --------------------------------------------------------------------------------
Total Short-Term Investments
(at amortized cost $15,102,730) $ 15,102,730
- --------------------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost $116,209,286) $118,067,113
- --------------------------------------------------------------------------------
</TABLE>
/(1)/ Variable rate security.
/(2)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
14
<PAGE>
Strategic Income Portfolio as of October 31, 1997
FINANCIAL STATEMENTS
Statement of Assets & Liabilities
<TABLE>
<CAPTION>
As of October 31, 1997
Assets
- ------------------------------------------------------------------------------------------
<S> <C>
Investments, at value (Note 1A) (identified cost, $116,209,286) $ 118,067,113
Cash 70,312
Receivable for investments sold 23,925
Interest receivable 1,520,911
Receivable for daily variation margin on open financial
futures contracts (Note 5) 70,961
Receivable for open forward foreign currency contracts (Note 1H) 2,956,076
Deferred organization expenses (Note 1J) 6,254
- ------------------------------------------------------------------------------------------
Total assets $ 122,715,552
- ------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------
Payable for investments purchased $ 1,434,281
Payable to affiliate for Trustees' fees (Note 2) 689
Accrued expenses 24,583
- ------------------------------------------------------------------------------------------
Total liabilities $ 1,459,553
- ------------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 121,255,999
- ------------------------------------------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 115,644,338
Net unrealized appreciation of investments (computed on the
basis of identified cost) 5,611,661
- ------------------------------------------------------------------------------------------
Total $ 121,255,999
- ------------------------------------------------------------------------------------------
<CAPTION>
Statement of Operations
For the Year Ended
October 31, 1997
Investment Income (Note 1B)
- ------------------------------------------------------------------------------------------
<S> <C>
Interest income $ 11,644,406
- ------------------------------------------------------------------------------------------
Total income $ 11,644,406
- ------------------------------------------------------------------------------------------
Expenses
- ------------------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 679,210
Administration fee (Note 2) 195,786
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 8,729
Custodian fee 164,817
Legal and accounting services 67,135
Amortization of organization expenses (Note 1J) 4,709
Miscellaneous 7,032
- ------------------------------------------------------------------------------------------
Total expenses $ 1,127,418
- ------------------------------------------------------------------------------------------
Net investment income $ 10,516,988
- ------------------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- ------------------------------------------------------------------------------------------
Net realized gain (loss)--
Investment transactions $ 1,249,916
Financial futures contracts (308,110)
Foreign currency transactions 5,418,169
- ------------------------------------------------------------------------------------------
Net realized gain on investments $ 6,359,975
- ------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions (identified cost basis) $ (3,069,262)
Financial futures contracts 891,508
Foreign currency transactions (128,907)
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ (2,306,661)
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 4,053,314
- ------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 14,570,302
- ------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
Strategic Income Portfolio as of October 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended Year Ended
in Net Assets October 31, 1997 October 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 10,516,988 $ 11,982,292
Net realized gain on investments 6,359,975 9,573,199
Net change in unrealized
appreciation (depreciation)
of investments (2,306,661) 3,820,588
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 14,570,302 $ 25,376,079
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 36,154,026 $ 10,557,996
Withdrawals (61,875,128) (56,110,565)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $(25,721,102) $(45,552,569)
- --------------------------------------------------------------------------------
Net decrease in net assets $ (11,150,80) $(20,176,490)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $132,406,799 $152,583,289
- --------------------------------------------------------------------------------
At end of year $121,255,999 $132,406,799
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
16
<PAGE>
Strategic Income Portfolio as of October 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------
1997 1996 1995 1994*
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------------
Expenses 0.86% 0.86% 0.84% 0.82%+
Net investment income 8.06% 8.62% 9.08% 8.41%+
Portfolio Turnover 77% 71% 78% 71%
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $121,256 $132,407 $152,583 $236,469
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, March 1, 1994, to October 31,
1994.
See notes to financial statements
17
<PAGE>
Strategic Income Portfolio as of October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
------------------------------------------------------------------------------
Strategic Income Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a non-diversified open-end investment company. The
Portfolio, which was organized as a trust under the laws of the State of New
York in 1992, seeks to provide a high level of income by investing in a global
portfolio consisting primarily of high grade debt securities. The Declaration
of Trust permits the Trustees to issue beneficial 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 Valuation -- Debt securities (other than mortgage-backed, "pass-
through," securities and short-term obligations maturing in sixty days or
less), including listed securities and securities for which price quotations
are available and forward contracts, will normally be valued on the basis of
market valuations furnished by pricing services. Mortgage backed, "pass-
through," securities are valued using a matrix pricing system which takes into
account yield differentials, anticipated prepayments and interest rates.
Financial futures contracts listed on commodity exchanges and exchange-traded
options are valued at closing settlement prices. Short-term obligations and
money-market securities maturing in sixty 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 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
and discount earned, adjusted for amortization of discount when required for
federal income tax purposes.
C Gains and Losses From Investment Transactions -- Realized gains and losses
from investment transactions are recorded on the basis of identified cost. For
book purposes, gains and losses are not recognized until disposition. For
federal tax purposes, the Portfolio is subject to special tax rules that may
affect the amount, timing and character of gains recognized on certain of the
Portfolio's investments. The Portfolio has elected, under Section 1092 of the
Internal Revenue Code (the Code), to utilize mixed straddle accounting for
certain designated classes of activities involving domestic options and
domestic financial futures contracts in determining recognized gains and
losses. Under this method, Section 1256 positions (financial futures contracts
and options on investments or financial futures contracts) and non-Section
1256 positions (bonds, etc.) are marked-to-market on a daily basis resulting
in the recognition of taxable gains and losses on a daily basis. Such gains or
losses are categorized as short-term or long-term based on aggregation rules
provided in the Code.
D Income Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the 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.
E Financial Futures Contracts -- Upon entering into a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin"),
either in cash or securities, equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("variation margin") each day, dependent on
the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio. The
Portfolio's investment in financial futures contracts is designed to hedge
against anticipated future changes in interest or currency exchange rates.
Should interest or currency exchange rates move unexpectedly, the Portfolio
may not achieve the anticipated benefits of the financial futures contracts
and may realize a loss. If the Portfolio enters into a closing transaction,
the Portfolio will realize, for book purposes, a gain or loss equal to the
difference between the value of the financial futures contract to sell and
financial futures contract to buy.
F 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
18
<PAGE>
Strategic Income Portfolio as of October 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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 result from fluctuations in foreign currency exchange rates
are not separately disclosed.
G Written Options -- The Portfolio may write call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or are closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Portfolio. The Portfolio as writer of an option
may have no control over whether the underlying securities may be sold (call)
or purchased (put) and as a result bears the market risk of an unfavorable
change in the price of the securities underlying the written option.
H Forward Foreign Currency Exchange Contracts -- The Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties
to meet the terms of their contracts and from movements in the value of a
foreign currency relative to the U.S. dollar. The Portfolio will enter into
forward contracts for hedging purposes as well as non-hedging purposes. The
forward foreign currency exchange contracts are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded for
financial statement purposes as unrealized until such time as the contracts
have been closed.
I Reverse Repurchase Agreements -- The Portfolio may enter into reverse
repurchase agreements. Under such an agreement, the Portfolio temporarily
transfers possession, but not ownership, of a security to a counterparty, in
return for cash. At the same time, the Portfolio agrees to repurchase the
security at an agreed-upon price and time in the future. The Portfolio may
enter into reverse repurchase agreements for temporary purposes, such as to
fund withdrawals, or for use as hedging instruments where the underlying
security is denominated in a foreign currency. As a form of leverage, reverse
repurchase agreements may increase the risk of fluctuation in the market
value of the Portfolio's assets or in its yield. Liabilities to
counterparties under reverse repurchase agreements are recognized in the
Statement of Assets and Liabilities at the same time at which cash is
received by the Portfolio. The securities underlying such agreements continue
to be treated as owned by the Portfolio and remain in the Portfolio of
investments. Interest charged on amounts borrowed by the Portfolio under
reverse repurchase agreements is accrued daily and offset against interest
income for financial statement purposes.
J Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
K Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balance the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reflected as a reduction of
operating expenses on the Statement of Operations.
L 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 expenses during the reporting period. Actual results
could differ from those estimates.
M Other -- Investment transactions are accounted for on a trade date basis.
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 based upon a percentage of average daily net assets plus a percentage of
gross income (i.e., income other than gains from the sale of investments).
Such percentages are reduced as average daily net assets exceed certain
levels. For the year
19
<PAGE>
Strategic Income Portfolio as of October 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
ended October 31, 1997, the fee was equivalent to 0.52% of the Portfolio's
average net assets for such period and amounted to $679,210. An administration
fee, computed at an effective annual rate of 0.15% of average daily net assets
was also paid to BMR for administrative services and office facilities. Such
fee amounted to $195,786 for the year ended October 31, 1997.
Except as to Trustees of the Portfolio who are not members of EVM's or BMR's
organization, officers and Trustees receive remuneration for their services to
the Portfolio out of such investment adviser fee. Trustees of the Portfolio
that are not affiliated with the Investment Adviser may elect to defer receipt
of all or a portion of their annual fees in accordance with the terms of the
Trustees Deferred Compensation Plan. For the year ended October 31, 1997, no
significant amounts have been deferred. Certain of the officers and Trustees
of the Portfolios are officers and directors/trustees of the above
organizations.
3 Line of Credit
------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR or
EVM and its affiliates in a $100 million unsecured line of credit agreement
with a group of banks. The portfolio may temporarily borrow from the line of
credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at an
amount above the Eurodollar rate or federal funds rate. In addition, a fee
computed at an annual rate of 0.10% on the daily unused portion of the line of
credit is allocated among the participating portfolios and funds at the end of
each quarter. The Portfolio did not have any significant borrowings or
allocated fees during the period.
4 Investment Transactions
- --------------------------------------------------------------------------------
The Portfolio invests primarily in foreign government and U.S. Government debt
securities. The ability of the issuers of the debt securities to meet their
obligations may be affected by economic developments in a specific industry or
country. The Portfolio regularly invests in lower rated and comparable quality
unrated high yield securities. These investments have different risks than
investments in debt securities rated investment grade and held by the
Portfolio. Risk of loss upon default by the borrower is significantly greater
with respect to such debt securities than with other debt securities because
these securities are generally unsecured and are more sensitive to adverse
economic conditions, such as recession or increasing interest rates, than are
investment grade issuers. At October 31, 1997, the Portfolio had invested
approximately 16.7% of its net assets or approximately $20,253,000 in high
yield securities. Purchases and sales of investments, other than short-term
obligations, for the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
Purchases
------------------------------------------------------------------------------
<S> <C>
Investments (non-U.S. Government) $46,252,396
U.S. Government Securities 43,636,016
------------------------------------------------------------------------------
$89,888,412
------------------------------------------------------------------------------
Sales
------------------------------------------------------------------------------
Investments (non-U.S. Government) $84,545,598
U.S. Government Securities 12,274,628
------------------------------------------------------------------------------
$96,820,226
------------------------------------------------------------------------------
</TABLE>
5 Financial Instruments
------------------------------------------------------------------------------
The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options and financial futures contracts and may involve, to a varying degree,
elements of risk in excess of the amounts recognized for financial statement
purposes. The notional or contractual amounts of these instruments represent
the investment the Portfolio has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
20
<PAGE>
Strategic Income Portfolio as of October 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
A summary of obligations under these financial instruments at October 31,
1997 is as follows:
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
Sales
-------------------------------------------------------------------------------
Net Unrealized
Settlement In Exchange for Appreciation
Date Deliver (in U.S. dollars) (Depreciation)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
11/24/97 Australian Dollar
2,000,000 $ 1,461,960 $ 55,580
11/5/97- Belgian Franc
11/17/97 721,805,951 23,745,222 3,473,632
11/24/97 British Pound Sterling
1,184,016 1,932,314 (47,078)
12/17/97 Indonesian Rupiah
5,301,750,000 1,707,488 259,122
11/28/97 Irish Punt
2,070,000 3,034,620 (72,842)
11/14/97- Japanese Yen
1/28/98 652,000,000 5,508,447 50,977
12/2/97 Singapore Dollar
3,000,000 1,982,161 91,285
11/20/97 Thai Baht
12/26/97 103,200,000 3,038,041 527,882
-------------------------------------------------------------------------------
$42,410,253 $4,338,558
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Purchases
-------------------------------------------------------------------------------
Net Unrealized
Settlement Deliver Appreciation
Date In Exchange For (in U.S. dollars) (Depreciation)
-------------------------------------------------------------------------------
<S> <C> <C> <C>
11/24/97 Australian Dollar
2,000,000 $ 1,386,420 $ 19,960
11/5/97- Belgian Franc
11/28/97 607,265,306 16,849,206 208,547
11/17/97 Deutsche Mark
3,400,000 1,910,112 59,944
12/17/97- Indonesian Rupiah
12/26/97 14,301,750,000 5,470,246 (1,566,209)
11/14/97 Indian Rupee
127,750,000 3,500,000 6,403
12/02/97 Singapore Dollar
3,000,000 2,002,002 (111,127)
-------------------------------------------------------------------------------
$31,117,986 $(1,382,482)
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Futures Contracts
-------------------------------------------------------------------------------
Net
Unrealized
Expiration Appreciation
Date Contracts Position (Depreciation
------------------------------------------------------------------------------
<S> <C> <C> <C>
12/97 109 US 5 year Treasury
Note Futures Long $202,015
12/97 200 US 30 year
Bond Futures Long 894,256
12/97 10 German 10 year
Bond Futures Short (2,643)
12/97 62 French 10 year
Bond Futures Short (2,278)
12/97 8 Japanese 10 year
Bond Futures Short (262,239)
12/97 27 Italian 10 year
Bond Futures Short (73,998)
------------------------------------------------------------------------------
$755,113
------------------------------------------------------------------------------
</TABLE>
At October 31, 1997, the Portfolio had sufficient cash and/or securities to
cover potential obligations arising from open futures and forward contracts,
as well as margin requirements on open futures contracts.
6 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at October 31, 1997, as computed on a federal income tax
basis, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $117,099,817
----------------------------------------------------------------------------
Gross unrealized appreciation $1,392,633
Gross unrealized depreciation (425,337)
----------------------------------------------------------------------------
Net unrealized appreciation $967,296
----------------------------------------------------------------------------
</TABLE>
21
<PAGE>
Strategic Income Portfolio as of October 31, 1997
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders
of Strategic Income Portfolio
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of
Strategic Income Portfolio (the Portfolio), including the portfolio of
investments, as of October 31, 1997, the related statement of operations for the
year then ended, the statement of changes in net assets for the two years ended
October 31, 1997, and the supplementary data for each of the three years ended
October 31, 1997, and for the period from March 1, 1994 (start of business) to
October 31, 1994. These financial statements and supplementary data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and supplementary data based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of the
Portfolio, as of October 31, 1997, the results of its operations for the year
then ended, the changes in its net assets for each of the two years ended
October 31, 1997, and the supplementary data for each of the three years ended
October 31, 1997, and for the period from March 1, 1994 (start of business) to
October 31, 1994, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 5, 1997
22
<PAGE>
EV Marathon Strategic Income Fund as of October 31, 1997
INVESTMENT MANAGEMENT
<TABLE>
<CAPTION>
EV Marathon Strategic Income Fund
Officers Independent Trustees
<S> <C>
M. Dozier Gardner Donald R. Dwight
President and Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
James B. Hawkes
Vice President and Trustee Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
William H. Ahern, Jr. Banking, Harvard University Graduate School of
Vice President Business Administration
Thomas J. Fetter Norton H. Reamer
Vice President President and Director, United Asset
Management Corporation
Michael B. Terry
Vice President John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
James L. O'Connor
Treasurer Jack L. Treynor
Investment Adviser and Consultant
Alan R. Dynner
Secretary
<CAPTION>
Strategic Income Portfolio
Officers Independent Trustees
<S> <C>
James B. Hawkes Donald R. Dwight
President and Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Mark S. Venezia
Vice President Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
James L. O'Connor Banking, Harvard University Graduate School of
Treasurer Business Administration
Alan R. Dynner Norton H. Reamer
Secretary President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
</TABLE>
23
<PAGE>
Investment Adviser of
Strategic Income Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of EV Marathon
Strategic Income Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer and Dividend Disbursing Agent
First Data Investor Services Group, Inc.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV Marathon Strategic Income Fund
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
- --------------------------------------------------------------------------------
M-SGSRC-12/97
