The Eaton Vance Mutual Funds Trust
For the Strategic Income Fund
[LOGO GOES HERE]
Annual Shareholder Report
October 31, 1995
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
24 Federal Street
Boston, MA 02110
Transfer Agent
First Data 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
October 31, 1995
Principal U.S. $ Value
- ------------------------------------------------------------------------------------------------------------------------------------
Bonds & Notes -- 93.9%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA, 7.3% Argentine Pesos
Argentina Pensioner Pre-1 BOCON, 4.5132%, 4/1/01 2,000,000 $ 1,242,500
U.S. Dollars
Argentina Pre-2 BOCON, 5.8005%, 4/1/07 1,000,000 605,000
Argentina Discount, 6.875%, 3/31/23 16,400,000 9,255,750
---------------
Total Argentina (identified cost $11,405,592) $ 11,103,250
---------------
AUSTRALIA, 4.3% Australian Dollars
Commonwealth Bank of Australia, 11%, 10/16/01 2,000,000 $ 1,664,416
State Bank of New South Wales, 10.75%, 3/12/02 5,000,000 4,128,696
State Electricity -- Victoria, 9.25%, 9/18/03 1,000,000 759,147
---------------
Total Australia (identified cost, $6,403,503) $ 6,552,259
---------------
BRAZIL, 11.4% U.S. Dollars
Brazil Eligible Interest Bond (Brady), 6.8125%, 4/15/06 2,694,000 $ 1,789,826
Brazil Discount Bond, (Brady), 6.8125%, 4/15/24 26,200,000 15,621,750
---------------
Total Brazil (identified cost $16,442,740) $ 17,411,576
---------------
COSTA RICA, 1.9% U.S. Dollars
Costa Rica Interest Series B, (Brady), 6.7656%, 5/21/05 1,504,480 $ 1,168,480
Costa Rica Principal Series A, (Brady), 6.25%, 5/21/10 3,000,000 1,775,001
---------------
Total Costa Rica (identified cost $3,326,339) $ 2,943,481
---------------
CZECH REPUBLIC, 4.3% Czech Korunas
CEZ, 14.375%, 1/27/01 159,710,000 $ 6,523,130
---------------
(identified cost $6,022,084)
DENMARK, 4.8% Danish Krone
Denmark Government, 8%, 5/15/03 20,000,000 $ 3,731,683
Denmark Government, 8%, 3/15/06 20,000,000 3,668,855
---------------
Total Denmark (identified cost $6,820,519) $ 7,400,538
---------------
ECUADOR 0.7% U.S. Dollars
Ecuador-Par, 3%, 2/28/2025 3,000,000 $ 997,500
---------------
(identified cost $990,000)
FINLAND, 4.2% Finnish Markka
Republic of Finland, 9.5%, 3/15/04 25,000,000 $ 6,453,263
---------------
(identified cost, $5,081,593)
IRELAND, 8.9% Irish Pound
Irish Government, 9.25%, 10/18/03 4,000,000 $ 6,962,927
Irish Government, 8%, 10/18/00 4,000,000 6,594,758
---------------
Total Ireland (identified cost, $13,016,494) $ 13,557,685
---------------
MEXICO, 1.2% Mexican Peso
Mexican Cetes, 0%, 2/15/96 1,454,000 $ 1,824,361
---------------
(identified cost, $2,149,873)
NEW ZEALAND, 9.6% New Zealand Dollars
New Zealand Government, 8%, 11/15/06 14,550,000 $ 10,101,798
New Zealand Government, 10%, 3/15/02 6,000,000 4,502,111
---------------
Total New Zealand (identified cost, $13,131,282) $ 14,603,909
---------------
POLAND, 4.5% Polish Zloty
Polish Government T-Bill, 0%, 12/20/95 3,000,000 $ 1,180,044
Polish Government T-Bill, 0%, 11/29/95 3,000,000 1,198,911
Polish Government T-Bill, 0%, 01/26/96 3,370,000 1,306,209
U.S. Dollars
Poland-PDI (Brady), 3.25%, 10/27/14 5,000,000 3,221,875
---------------
Total Poland (identified cost $5,776,452) $ 6,907,039
---------------
THAILAND, 3.8% Thai Baht
ABN-Amro Bank Hong Kong -- Certificate of Deposit, 9.1%, 8/5/97 150,000,000 $ 5,861,550
---------------
(identified cost, $6,004,205)
UNITED STATES, 27.0%
Corporate Bonds & Notes, 12.1%
Agricultural Minerals & Chemicals, Sr. Notes, 10.75%, 9/30/03 1,000,000 $ 1,060,000
American General Finance, 8.125%, 8/15/09 1,000,000 1,106,770
Applied Extrusion, Sr. Notes, 11.5%, 4/1/02 1,000,000 1,075,000
Corporate Express Inc., Sr. Sub. Notes, 9.125%, 3/15/04 500,000 497,500
Dade International Inc., 13%, 2/01/05 500,000 550,000
Dayton Hudson Medium Term Note, 9.5%, 6/10/15 665,000 814,951
Dayton Hudson Medium Term Note, 9.52%, 6/10/15 350,000 429,461
Dayton Hudson Medium Term Note, 9.35%, 6/16/20 600,000 739,440
General Electric Capital Corp., 8.625%, 6/15/08 250,000 291,468
General Electric Capital Corp., 8.30%, 9/20/09 2,000,000 2,284,160
General Motors Acceptance Corp., 8.75%, 7/15/05 250,000 282,470
Moran Transportation, 1st Mortgage Bonds, 11.75%, 7/15/04 1,000,000 935,000
Overhead Door Corp., Sr. Notes, 12.25%, 2/1/00 500,000 477,500
Purina Mills, Sr. Sub. Notes, 10.25%, 9/1/03 1,000,000 1,032,500
Roadmaster Industries Inc Sr. Sub. Notes, 11.75%, 7/15/02 1,000,000 720,000
SD Warren Co., 12%, 12/15/04 1,000,000 1,100,000
Stone Container Corp., Sr. Sub. Debs., 10.75%, 10/1/02 500,000 522,500
TRW Inc., Medium Term Note, 9.35%, 6/4/20 1,900,000 2,419,061
Waters Corporation, Sr. Sub. Notes, 12.75%, 9/30/04 1,000,000 1,100,000
Westpoint Stevens, Sr. Sub. Notes, 9.375%, 12/15/05 1,000,000 1,000,000
---------------
Total United States Corporate Bonds & Notes
(identified cost, $17,345,757) $ 18,437,781
---------------
Mortgage Pass-Throughs, 12.4%
Federal Home Loan Mortgage Corp. Participation Certificates:
4.75%, with various maturities to 2003 97,350 $ 95,015
5.5%, with maturity at 2019 82,239 81,714
12.5%, with maturity at 2011 195,811 223,154
12.75%, with maturity at 2013 206,657 238,223
13.25%, with various maturities to 2013 277,052 323,290
13.5%, with maturity at 2019 743,597 865,668
---------------
$ 1,827,064
---------------
Federal National Mortgage Association
Mortgage-Backed Securities:
4.75%, with maturity at 1999 145,956 $ 142,966
5%, with maturity at 2003 231,191 224,320
5.5%, with various maturities to 2012 258,762 254,199
7.5%, with maturity at 2002 1,260,998 1,287,205
8%, with maturity at 2013 1,880,553 1,955,188
12.75%, with maturity at 2014 278,471 326,509
13%, with various maturities to 2015 1,801,958 2,100,373
13.25%, with maturity at 2014 307,421 364,692
13.5%, with various maturities to 2015 1,499,033 1,734,023
14.75%, with various maturities at 2012 3,625,776 4,349,433
---------------
$ 12,738,908
---------------
Government National Mortgage Association:
6.5%, with various maturities to 2007 1,767,604 $ 1,762,794
9%, with maturity at 2016 1,535,810 1,702,829
13.5%, with various maturities at 2014 690,109 830,434
---------------
$ 4,296,057
---------------
Total Mortgage Pass-Throughs $ 18,862,029
---------------
U.S. Treasury Bond, 11.75%, 2/15/01+
(identified cost, $3,862,188) 3,000,000 $ 3,797,820
---------------
Total United States (identified cost, $39,643,911) $ 41,097,630
---------------
Total Bonds & Notes (identified cost, $136,214,587) $ 143,237,171
---------------
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Options Purchased by Fund -- 0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Option to Deliver/Receive, Strike Price, Expiration Month:
Canadian Dollars
Canadian December 1995 10 year Bond Futures/CAD, 103, November 19 4,000,000 $ 892
Canadian December 1995 10 year Bond Futures/CAD, 104, November 19 1,000,000 446
Canadian December 1995 10 year Bond Futures/CAD, 105, November 19 2,000,000 2,082
Canadian December 1995 10 year Bond Futures/CAD, 106, November 19 1,000,000 1,933
---------------
Total Options Purchased (premium paid, $74,469) $ 5,353
---------------
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Short-Term Obligation -- 2.6%
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Banque National De Paris, Euro Time-Deposit
Cayman Islands, 5.8125%, 11/1/95 4,000,000 $ 4,000,000
---------------
Total Investments (identified cost, $140,289,056) $ 147,242,524
Other Assets, less Liabilities, 3.5% 5,340,765
---------------
Net Assets, 100% $ 152,583,289
===============
+Security pledged as collateral on financial futures contracts.
CAD -- Canadian Dollars
The accompanying notes are an integral part of the financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Statements
Statement of Assets and Liabilities
October 31, 1995
<S> <C> <C>
Assets:
Investments, at value (Note 1A) (identified cost, $140,289,056) $ 147,242,524
Cash 18,631
Foreign currency, at value (cost, $1,841,352) 1,882,211
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 27,589
Receivable for investments sold 2,155,437
Interest receivable 3,782,499
Deferred organization expenses (Note 1J) 15,684
--------------
Total assets $ 155,124,575
Liabilities:
Payable for forward foreign currency exchange contracts $ 2,527,247
Payable to affiliates --
Trustees' fees 855
Custodian fee 6,732
Accrued expenses 6,452
--------------
Total liabilities 2,541,286
--------------
Net Assets applicable to investors' interest in Portfolio $ 152,583,289
==============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $ 148,485,554
Unrealized appreciation of investments
(computed on the basis of identified cost) 4,097,735
--------------
Total $ 152,583,289
==============
The accompanying notes are an integral part of the financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended October 31, 1995
<S> <C> <C>
Investment Income:
Interest Income -- $ 18,061,570
Expenses --
Investment adviser fee (Note 2) $ 992,620
Administration fee (Note 2) 273,545
Compensation of Directors not members of the
Investment Adviser's organization (Note 2) 11,281
Custodian fees (Note 2) 134,894
Legal and accounting services 86,580
Amortization of organization expenses (Note 1J) 4,708
Miscellaneous 24,893
--------------
Total expenses 1,528,521
--------------
Net investment income $ 16,533,049
--------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized loss (identified cost basis) (including net gain due to
foreign currency rate fluctuations of $560,380) --
Investment transactions $ (4,786,213)
Financial futures contracts (1,240,447)
Foreign currency and forward foreign
currency exchange contracts (5,860,177)
--------------
Net realized loss on investments $ (11,886,837)
Change in unrealized appreciation (depreciation) --
Investment transactions $ 12,752,524
Financial futures contracts (1,061,449)
Foreign currency and forward foreign
currency exchange contracts 3,945,995
--------------
Net change in unrealized appreciation of investments $ 15,637,070
--------------
Net realized and unrealized gain on investments 3,750,233
--------------
Net increase in net assets resulting from operations $ 20,283,282
==============
The accompanying notes are an integral part of the financial statements
</TABLE>
Financial Statements (continued)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended October 31,
---------------------------------------
1995 1994*
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<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 16,533,049 $ 15,949,560
Net realized loss on investments (11,886,837) (23,646,259)
Change in unrealized appreciation (depreciation)
of investments 15,637,070 (7,159,575)
-------------- --------------
Net increase (decrease) in net assets resulting from operations $ 20,283,282 $ (14,856,274)
-------------- --------------
Capital transactions --
Contributions $ 7,892,611 $ 353,394,561
Withdrawals (112,061,370) (102,169,541)
-------------- --------------
Increase (decrease) in net assets resulting from capital transactions $ (104,168,759) $ 251,225,020
-------------- --------------
Total increase (decrease) in net assets $ (83,885,477) $ 236,368,746
Net Assets:
At beginning of year 236,468,766 100,020
-------------- --------------
At end of year $ 152,583,289 $ 236,468,766
============== ==============
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Supplementary Data
Year Ended October 31,
---------------------------------------
1995 1994*
-------------- --------------
Ratios (as a percentage of average net assets):
Expenses 0.84% 0.82%+
Net investment income 9.08% 8.41%+
Portfolio Turnover 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 which was organized as a trust under the laws of the State of
New York in 1992. The Declaration of Trust permits the Trustees to issue
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 closing bond valuations, 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 - 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, 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 the entering of 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 only 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 or offset.
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 redemptions, 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 Fund. The securities underlying
such agreements continue to be treated as owned by the Fund 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. Other - Investment transactions are accounted for on the date the
investments are purchased or sold.
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(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 year ended
October 31, 1995, the fee was equivalent to 0.55% (annualized) of the
Portfolio's average net assets for such period and amounted to $992,620.
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 $273,545 for the
year ended October 31, 1995.
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 and BMR. 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. Certain officers of the Portfolio and Directors of
the Corporation are officers and directors/trustees of the above
organizations. Trustees of the Portfolio that are not affiliated with
the Investment Adviser may elect to defer receipt of all or a percentage
of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the year ended October 31, 1995, no
significant amounts have been deferred.
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(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 year ended
October 31, 1995.
- ----------------------------------------------------------------------
(4) Investments
The Portfolio invests primarily in foreign debt securities and U.S.
Government securities, the aggregate of which have a dollar weighted
average maturity of not more than three years. 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
year ended October 31, 1995 were as follows:
Purchases -
Investments (non-U.S. Government) $132,446,244
U.S. Government Securities 5,147,873
------------
$137,594,117
============
Sales -
Investments (non-U.S. Government) $221,485,148
U.S. Government Securities 9,228,918
------------
$230,714,066
============
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(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 October
31, 1995 is as follows:
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Sales
- ------
In Exchange For Net Unrealized
Settlement (in United States Appreciation
Date Deliver Dollars) (Depreciation)
- ------------------ ------------------------------------ ----------- ------------
<S> <C> <C> <C> <C>
11/14/95-11/22/95 Belgian Franc 1,114,190,005 $36,186,832 $(2,269,363)
4/19/96 Canadian Dollar 5,000,000 3,645,909 (66,746)
12/11/95-3/21/96 Swiss Franc 6,038,904 5,039,247 (321,221)
11/1/95-11/2/95 Deutsche Mark 4,362,224 3,101,221 7,430
1/18/96-1/22/96 Finnish Markka 12,352,483 2,892,814 (15,522)
11/1/95 Icelandic Krona 114,973,810 1,782,540 1,105
12/8/95 Irish Pound 2,125,174 3,353,525 (79,742)
11/10/95-12/18/95 Japanese Yen 626,000,000 6,362,431 204,781
11/01/95 Mexican Neuvo Peso 13,297,820 1,863,745 (18,465)
12/8/95 New Zealand Dollar 3,343,841 2,158,616 (41,943)
11/1/95-11/10/95 Singapore Dollar 19,600,000 13,822,868 (35,092)
----------- ------------
$80,209,748 $ (2,634,778)
=========== ============
</TABLE>
(5) Financial Instruments (continued)
<TABLE>
<CAPTION>
Purchases
- ----------
Deliver Net Unrealized
Settlement (in United Appreciation
Date In Exchange for States Dollars) (Depreciation)
- ------------------ ------------------------------------ ----------- ------------
<S> <C> <C> <C> <C>
11/14/95-11/15/95 Belgian Franc 155,241,536 $ 5,341,496 $ 15,816
4/19/96 Canadian Dollar 5,000,000 3,725,782 (13,128)
12/11/95 Swiss Franc 2,702,631 2,353,183 34,971
1/18/96 Czech Rep Koruna 169,905,000 6,393,212 (4,086)
11/1/95-11/9/95 Deutsche Mark 6,543,335 4,655,857 (14,586)
11/7/95-1/16/96 Indonesian Rupiah 33,500,000,000 14,458,334 79,426
12/8/95 New Zealand Dollar 2,533,920 1,662,505 5,051
11/1/95-3/6/96 Singapore Dollar 19,600,000 13,880,916 58,270
11/16/95-1/11/96 Thai Baht 232,000,000 9,225,670 (54,203)
----------- --------
$61,695,955 $107,531
=========== ========
</TABLE>
<TABLE>
<CAPTION>
Futures Contracts
Net Unrealized
Appreciation
Expiration Date Contracts Position (Depreciation)
- ------------------ ---------- ---------- --------------
<S> <C> <C> <C>
12/95 97 U.S. 30 year Bond Futures Short $ (438,929)
12/95 240 U.S. 5 year Bond Futures Short (295,008)
12/95 90 Australian 10 year Bond Futures Long (40,605)
12/95 145 Canadian 10 year Bond Futures Short 359,268
12/95 25 German 10 year Bond Futures Short (79,787)
--------------
$ (495,061)
==============
</TABLE>
At October 31, 1995, the Portfolio had sufficient cash and/or securities
to cover 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, 1995, as computed on a federal income
tax basis, were as follows:
Aggregate cost $ 142,570,086
=============
Gross unrealized appreciation $ 6,145,077
Gross unrealized depreciation 1,471,993
-------------
Net unrealized appreciation $ 4,673,084
=============
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, including the portfolio of investments, as
of October 31, 1995, the related statement of operations for the year
then ended and the statements of changes in net assets and supplementary
data for 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 audit.
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, 1995 by
correspondence with the custodians 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 October 31, 1995, the
results of its operations for the year then ended and the changes in net
assets and the supplementary data for the 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
December 1, 1995
Investment Management For Strategic Income Portfolio
- ------------------
Officers
James B. Hawkes
President, Director
Mark S. Venezia
Vice President
Mark P. Doman
Assistant 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
