The Eaton Vance Mutual Funds Trust
For the Strategic Income Portfolio
[LOGO]
Semi-Annual Shareholder Report
April 30, 1996
Investment Adviser of Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
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 Agent
First Data Investor Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
<TABLE>
<CAPTION>
Strategic Income Portfolio
Portfolio of Investments
April 30, 1996
Principal U.S. $ Value
- ------------------------------------------------------------------------------------------------------------
Bonds & Notes -- 89.4%
- ------------------------------------------------------------------------------------------------------------
<S> <S> <S>
ARGENTINA, 4.0% U.S. Dollars
Argentina Discount Bond (Brady), 6.5625%, 3/31/23
(identified cost $4,718,125) 8,000,000 $ 5,515,000
---------------
AUSTRALIA, 0.6% Australian Dollars
State Electricity - Victoria, 9.25%, 9/18/03
(identified cost $733,564) 1,000,000 $ 787,350
---------------
BRAZIL, 7.6% U.S. Dollars
Brazil Discount Bond, (Brady), 6.5%, 4/15/24
(identified cost $8,530,563) 15,500,000 $ 10,491,563
---------------
CZECH REPUBLIC, 4.4% Czech Korunas
CEZ (Czech Electric Company), 14.375%, 1/27/01
(identified cost $6,022,084) 159,710,000 $ 6,090,514
---------------
DENMARK, 5.2% Danish Krone
Denmark Government, 8%, 3/15/06
(identified cost $7,156,882) 40,000,000 $ 7,129,242
---------------
ECUADOR, 2.0% U.S. Dollars
Ecuador Discount Bond (Brady), 6.0625%, 2/28/25
(identified cost $2,711,875) 5,000,000 $ 2,815,625
----------------
IRELAND, 8.6% Irish Pound
Irish Government, 8%, 8/18/06 3,000,000 $ 4,828,537
Irish Government, 9.25%, 7/11/03 4,000,000 6,975,849
---------------
Total Ireland (identified cost, $11,599,951) $ 11,804,386
---------------
NEW ZEALAND, 7.3% New Zealand Dollars
New Zealand Government, 6.5%, 2/15/00 4,000,000 $ 2,534,743
New Zealand Government, 8%, 11/15/06 4,800,000 3,170,213
New Zealand Government, 10%, 3/15/02 6,000,000 4,337,623
---------------
Total New Zealand (identified cost, $9,762,499) $ 10,042,579
---------------
POLAND, 9.4% Polish Zloty
Polish Government T-Bill, 0%, 5/8/96 4,210,000 $ 1,577,289
Polish Government T-Bill, 0%, 6/12/96 5,600,000 2,056,018
Polish Government T-Bill, 0%, 6/19/96 3,340,000 1,220,723
Polish Government T-Bill, 0%, 7/31/96 9,500,000 3,393,888
U.S. Dollars
Poland Discount Bond, (Brady), 6.4375%, 10/27/24 5,000,000 4,646,875
---------------
Total Poland (identified cost, $12,215,438) $ 12,894,793
---------------
SPAIN, 2.4% Spanish Pesetas
Spanish Government, 10.1%, 2/28/01
(identified cost, $3,382,193) 400,000,000 $ 3,337,317
---------------
UNITED STATES, 37.8% U.S. Dollars
Corporate Bonds & Notes, 8.8%
Agricultural Minerals & Chemicals, Sr. Notes, 10.75%, 9/30/03 1,000,000 $ 1,060,000
Applied Extrusion, Sr. Notes, 11.5%, 4/1/02 1,000,000 1,030,000
Dade International, Inc., 13%, 2/01/05 500,000 590,000
Dayton Hudson, Medium Term Note, 9.52%, 6/10/15 350,000 403,536
Dayton Hudson, Medium Term Note, 9.5%, 6/10/15 665,000 765,421
Dayton Hudson, Medium Term Note, 9.35%, 6/16/20 600,000 666,330
Overhead Door Corp., Sr. Notes, 12.25%, 2/1/00 500,000 505,000
Purina Mills, Sr. Sub. Notes, 10.25%, 9/1/03 1,000,000 995,000
Roadmaster Industries, Inc., Sr. Sub. Notes, 11.75%, 7/15/02 475,000 384,750
SD Warren Co., 12%, 12/15/04 1,000,000 1,042,500
Selmer Company, Inc., Sr. Sub. Notes, 11%, 5/15/05 500,000 515,000
Stone Container Corp., Sr. Sub. Debs., 10.75%, 10/1/02 500,000 500,000
TRW, Inc., Medium Term Note, 9.35%, 6/4/20 1,900,000 2,255,547
United International Holdings, Inc., Sr. Sec. Disc.
Notes, 0%, 11/15/99 1,500,000 952,500
Westpoint Stevens, Sr. Sub. Notes, 9.375%, 12/15/05 500,000 490,000
---------------
Total United States Corporate Bonds & Notes
(identified cost, $11,791,128) $ 12,155,584
---------------
Mortgage Pass-Throughs, 27.3% U.S. Dollars
Federal Home Loan Mortgage Corp. Participation Certificates:
4.75%, with various maturities to 2003 60,898 $ 59,211
5.5%, with maturity at 2019 48,614 48,180
8%, with various maturities to 2021 4,997,613 5,098,086
8.5%, with various maturities to 2024 6,147,705 6,390,704
9%, with maturity at 2019 1,145,114 1,206,184
12.5%, with maturity at 2011 190,782 215,452
12.75%, with maturity at 2013 204,099 232,985
13.25%, with maturity at 2013 244,781 283,349
13.5%, with maturity at 2019 612,744 710,114
---------------
$ 14,244,265
---------------
Federal National Mortgage Association
Mortgage-Backed Securities:
4.75%, with maturity at 1999 108,836 $ 106,307
5%, with maturity at 2003 197,794 190,818
5.5%, with various maturities to 2012 201,571 197,219
7.5%, with maturity at 2002 1,083,188 1,094,206
8%, with various maturities to 2013 4,494,788 4,597,984
8.5%, with maturity at 2018 587,012 609,336
9%, with various maturities to 2017 4,505,385 4,728,146
12.75%, with maturity at 2014 237,949 276,267
13%, with various maturities to 2015 1,561,943 1,808,078
13.25%, with maturity at 2014 305,672 359,912
13.5%, with various maturities to 2015 1,410,546 1,623,180
14.75%, with various maturities at 2012 3,346,760 4,040,410
---------------
$ 19,631,863
---------------
Government National Mortgage Association:
6.5%, with various maturities at 2007 1,442,604 $ 1,432,476
9%, with maturity at 2016 1,375,859 1,451,635
13.5%, with various maturities at 2014 623,539 742,291
---------------
$ 3,626,402
---------------
Total Mortgage Pass-Throughs (identified cost, $37,583,363) $ 37,502,530
---------------
U.S. Government Securities -- U.S. Dollars
U.S. Treasury Bond, 11.75%, 2/15/01+
(identified cost, $2,603,438) 2,000,000 $ 2,436,560
---------------
Total United States (identified cost, $51,977,929) $ 52,094,674
---------------
Total Bonds & Notes (identified cost, $118,811,103) $ 123,003,043
---------------
- ------------------------------------------------------------------------------------------------------------
Short-Term Obligations -- 9.5%
- ------------------------------------------------------------------------------------------------------------
Banque National De Paris, Euro Time-Deposit, U.S. Dollars
Cayman Islands, 5.375%, 5/1/96 4,400,000 $ 4,400,657
Dai-Ichi Kangyo Bank-N.Y., Cayman Time-Deposit, 5.3125%, 5/1/96 5,105,164 5,105,917
Postipanki-N.Y., Cayman Time-Deposit, 5.375%, 5/1/96 3,603,113 3,603,651
---------------
Total Short-Term Obligations $ 13,110,225
---------------
Total Investments (identified cost, $131,921,328) $ 136,113,268
Options Written by Fund -- 0.0%
Option to Deliver/Receive, Strike Price, Expiration Month:
New Zealand Dollars
USD/NZD, $0.6720, May 1996
(premium received, $23,385) 3,000,000 (39,340)
Other Assets, less Liabilities, 1.1% 1,611,830
---------------
Net Assets, 100% $ 137,685,758
===============
+Security pledged as collateral on financial futures contracts.
USD -- United States Dollars
NZD -- New Zealand Dollars
The accompanying notes are an integral part of the financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
Assets:
<S> <C> <C>
Investments, at value (Note 1A) (identified cost, $131,921,328) $ 136,113,268
Cash 19,516
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 16,217
Receivable for investments sold 98,736
Net receivable for forward foreign
currency exchange contracts (Note 1H) 2,709,514
Interest receivable 2,162,294
Deferred organization expenses (Note 1J) 13,336
-------------
Total assets $ 141,132,881
Liabilities:
Payable for investments purchased $ 3,393,888
Options written, at value (premium received $23,385) (Note 1G) 39,340
Payable to affiliate --
Trustees' fees (Note 2) 722
Accrued expenses 13,173
-------------
Total liabilities 3,447,123
-------------
Net Assets applicable to investors' interest in Portfolio $ 137,685,758
=============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $ 130,521,856
Unrealized appreciation of investments, futures, options and foreign currency
(computed on the basis of identified cost) 7,163,902
-------------
Total $ 137,685,758
=============
The accompanying notes are an integral part of the financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Six Months Ended April 30, 1996
<S> <C> <C>
Investment Income:
Interest Income $ 6,774,671
Expenses --
Investment adviser fee (Note 2) $ 385,046
Administration fee (Note 2) 108,103
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 4,683
Custodian fee (Note 2) 71,046
Legal and accounting services 22,203
Amortization of organization expenses (Note 1J) 2,348
Miscellaneous 1,902
-------------
Total expenses 595,331
-------------
Net investment income $ 6,179,340
-------------
Realized and Unrealized Gain (Loss) on Investments,
Futures, Options and Foreign Currency:
Net realized gain (loss) (identified cost basis)
(including net loss due to foreign currency rate
fluctuations of $214,422) on --
Investment transactions $ 5,424,499
Financial futures contracts (824,055)
Foreign currency and forward foreign
currency exchange contracts (650,406)
-------------
Net realized gain on investments, futures and
foreign currency $ 3,950,038
Change in unrealized appreciation (depreciation) on --
Investments $ (2,762,175)
Financial futures contracts 736,507
Written options (15,955)
Foreign currency and forward foreign
currency exchange contracts 5,107,790
-------------
Net change in unrealized appreciation of
investments, futures, options and foreign currency 3,066,167
-------------
Net realized and unrealized gain on investments,
futures, options and foreign currency $ 7,016,205
-------------
Net increase in net assets resulting from operations $ 13,195,545
=============
The accompanying notes are an integral part of the financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Six Months Ended Year Ended
April 30, 1996 October 31, 1995
-------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 6,179,340 $ 16,533,049
Net realized gain (loss) on investments, futures and foreign currency transactions 3,950,038 (11,886,837)
Change in unrealized appreciation
of investments, futures, options, and foreign currency 3,066,167 15,637,070
------------- -------------
Net increase in net assets resulting from operations $ 13,195,545 $ 20,283,282
------------- -------------
Capital transactions --
Contributions $ 5,546,210 $ 7,892,611
Withdrawals (33,639,286) (112,061,370)
------------- -------------
Net decrease in net assets resulting from capital transactions $ (28,093,076) $(104,168,759)
------------- -------------
Total decrease in net assets $ (14,897,531) $ (83,885,477)
Net Assets:
At beginning of period 152,583,289 236,468,766
------------- -------------
At end of period $ 137,685,758 $ 152,583,289
============= =============
<CAPTION>
Supplementary Data
Year Ended October 31,
Six Months Ended -----------------------
April 30, 1996 1995 1994*
-------------- ---------- -----------
Ratios (as a percentage of average net assets):
<S> <C> <C> <C>
Expenses 0.83%+ 0.84% 0.82%+
Net investment income 8.59%+ 9.08% 8.41%+
Portfolio Turnover 53% 78% 71%
+Computed on an annualized basis.
*For the period from the start of business, March 1, 1994, to October 31, 1994.
The accompanying notes are an integral part of the financial statements
</TABLE>
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. Investment operations began on
March 1, 1994, with the acquisition of net assets of $348,433,258 in
exchange for an interest in the Portfolio by one of the Portfolio's
investors. 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. 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 price. 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 into 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 Security
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
Fund 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 ("margin maintenance") 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 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 and losses on investment transactions attributable to foreign
currency rates are recorded for financial statement purposes as net
realized gains and losses on investments. That portion of unrealized gains
and losses on investments that result from fluctuations in foreign
currency exchange rates are not separately disclosed.
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 a 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 foreign denominated. 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 Expense - Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
K. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
L. 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 investment 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 six months ended
April 30, 1996, the fee was equivalent to 0.53% (annualized) of the
Portfolio's average net assets for such period and amounted to $385,046.
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 $108,103 for the six months
ended April 30, 1996.
Except for 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. Investors
Bank & Trust Company (IBT) serves as custodian of the Portfolio. Prior to
November 10, 1995, IBT was an affiliate of EVM. Pursuant to the custodian
agreement, IBT receives a fee reduced by credits which are determined
based on the average daily cash balances the Portfolio maintains with IBT.
All significant credit balances used to reduce the Porfolio's custody fees
are reported as a reduction of expenses in the statement of operations.
Certain officers of the Portfolio and Directors of the Corporation are
officers and directors/trustees of the above organizations. Trustees of
the Portfolio 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 six months ended April 30, 1996, no significant
amounts have been deferred.
(3) Line of Credit
The Portfolio participates with other portfolios and funds managed by BMR
or EVM in a $120 million unsecured line of credit agreement with a bank.
The line of credit consists of a $20 million committed facility and a $100
million discretionary facility. Borrowings will be made by the Portfolio
solely to facilitate the handling of unusual and/or unanticipated short-
term cash requirements. Interest is charged to each portfolio or fund
based on its borrowings at an amount above either the bank's adjusted
certificate of deposit rate, a variable adjusted certificate of deposit
rate, or a federal funds effective rate. In addition, a fee computed at an
annual rate of 1/4 of 1% on the $20 million committed facility and on the
daily unused portion of the $100 million discretionary facility 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) Investments
The Portfolio invests primarily in foreign government debt securities and
U.S. Government 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. Purchases and sales of
investments, other than short-term obligations, for the six months ended
April 30, 1996 were as follows:
Purchases -
Investments (non-U.S. Government) $48,293,260
U.S. Government Securities 21,853,727
-----------
$70,146,987
===========
Sales -
Investments (non-U.S. Government) $89,762,194
U.S. Government Securities 1,284,688
-----------
$91,046,882
===========
(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, forward foreign currency exchange contracts 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.
A summary of obligations under these financial instruments at April 30,
1996 is as follows:
<TABLE>
<CAPTION>
Forward Foreign Currency Exchange Contracts
Sales
- ------
In Exchange For Net Unrealized
Settlement (in United States Appreciation
Date Deliver Dollars) (Depreciation)
- ----------------- --------------------------------- ----------------- --------------
<S> <C> <C> <C>
11/15/96-11/29/96 Belgian Franc 930,959,031 $ 32,198,318 $ 2,238,105
5/13/96 Canadian Dollar 4,000,000 2,925,688 (14,129)
5/2/96-6/21/96 Swiss Franc 13,611,273 11,474,220 541,364
6/10/96 Irish Pound 1,057,919 1,665,481 20,325
5/13/96-6/21/96 Japanese Yen 966,000,000 9,399,082 121,626
6/10/96 New Zealand Dollars 809,921 518,349 (35,008)
6/12/96 Swedish Krona 30,000,000 4,267,000 (148,411)
----------------- --------------
$ 62,448,138 $ 2,723,872
================= ==============
Purchases
- ---------
Deliver Net Unrealized
Settlement (in United Appreciation
Date In Exchange For States Dollars) (Depreciation)
- ----------------- --------------------------------- ----------------- --------------
5/9/96 Australian Dollar 1,000,000 $ 748,300 $ 38,611
5/13/96-7/26/96 Canadian Dollar 7,750,000 5,671,678 27,490
5/2/96-8/2/96 Swiss Franc 7,200,000 5,813,017 --
5/28/96 Czech Republic Krona 169,905,000 6,230,473 (145,196)
8/28/96 Greek Drachma 1,000,000,000 3,998,957 (4,257)
5/7/96-10/16/96 Indonesian Rupiah 30,250,000,000 12,680,461 48,154
6/18/96 Indian Rupee 98,395,000 2,750,000 33,819
7/15/96 Philippine Peso 106,264,000 4,000,000 12,324
5/2/96 Polish Zloty 9,020,105 3,402,144 --
6/12/96 Swedish Krona 30,000,000 4,459,044 (43,632)
6/21/96 New Taiwan Dollar 109,180,000 4,000,000 18,329
----------------- --------------
$ 53,754,074 $ (14,358)
================= ==============
Futures Contracts
Net Unrealized
Appreciation
Expiration Date Contracts Position (Depreciation)
- --------------- --------- -------- --------------
6/96 75 U.S. 30 year Bond Futures Short $ 322,756
6/96 107 U.S. 5 year Bond Futures Short 173,767
6/96 106 Australian 10 year Bond Futures Long 140,723
6/96 106 Canadian 10 year Bond Futures Long (168,514)
6/96 62 German 10 year Bond Futures Long 12,264
6/96 140 French 10 year Bond Futures Short (232,771)
6/96 2 Japanese 10 year Bond Futures Short (6,779)
--------------
$ 241,446
==============
</TABLE>
At April 30, 1996, the Portfolio had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
Written Option Transactions
Transactions in written options for the period ended April 30, 1996 were
as follows:
Number
of Contracts Premiums
---------------- ------------
Outstanding, beginning of period -- --
Options written 3,000 $23,385
Options exercised -- --
Options expired -- --
------------ --------
Outstanding, end of period 3,000 $23,385
============ ========
(6) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the
investments owned at April 30, 1996, as computed on a federal income tax
basis, were as follows:
Aggregate cost $ 132,036,123
=============
Gross unrealized appreciation $ 4,591,562
Gross unrealized depreciation 516,365
-------------
Net unrealized appreciation $ 4,075,197
=============
Report of Independent Accountants
To the Trustees and Investors 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 April 30, 1996, the related statement of operations for
the six months then ended, the statements of changes in net assets for the
six months ended April 30, 1996 and the year ended October 31, 1995 and
the supplementary data for the six months ended April 30, 1996, the year
ended October 31, 1995, 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 April 30, 1996 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 Strategic Income Portfolio as of April 30, 1996, the results of its
operations, changes in net assets and the supplementary data for the six
months ended April 30, 1996, the year ended October 31, 1995, 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
May 24, 1996
INVESTMENT MANAGEMENT FOR STRATEGIC INCOME PORTFOLIO
OFFICERS
JAMES B. HAWKES
President, Director
MARK S. VENEZIA
Vice President
JAMES L. O'CONNOR
Treasurer
THOMAS OTIS
Secretary
DIRECTORS
LANDON T. CLAY
Chairman, Eaton Vance Corp.
DONALD R. DWIGHT
President, Dwight Partners, Inc.
Chairman, Newspapers of
New England, Inc.
SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
Investment Banking,
Harvard University Graduate School of
Business Administration
NORTON H. REAMER
President and Director, United Asset
Management Corporation
JOHN L. THORNDIKE
Director,
Fiduciary Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
