As filed with the Securities and Exchange Commission on April 28, 1995
File No. 811-8594
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 1 [x]
SPECIAL INVESTMENT PORTFOLIO
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(Exact Name of Registrant as Specified in Charter)
24 Federal Street
Boston, Massachusetts 02110
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (617) 482-8260
H. Day Brigham, Jr.
24 Federal Street, Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
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EXPLANATORY NOTE
This Registration Statement, as amended, has been filed by the
Registrant pursuant to Section 8(b) of the Investment Company Act of 1940,
as amended. However, interests in the Registrant have not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), because
such interests will be issued solely in private placement transactions
that do not involve any "public offering" within the meaning of Section
4(2) of the 1933 Act. Investments in the Registrant may be made only by
investment companies, common or commingled trust funds, organizations or
trusts described in Sections 401(a) or 501(a) of the Internal Revenue Code
of 1986, as amended, or similar organizations or entities that are
"accredited investors" within the meaning of Regulation D under the 1933
Act. This Registration Statement, as amended, does not constitute an offer
to sell, or the solicitation of an offer to buy, any interests in the
Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant
to Paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant
Special Investment Portfolio (the "Portfolio") is a diversified,
open-end management investment company which was organized as a trust
under the laws of the State of New York on May 1, 1992. Interests in the
Portfolio are issued solely in private placement transactions that do not
involve any "public offering" within the meaning of Section 4(2) of the
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may be made only by U.S. and foreign investment companies,
common or commingled trust funds, organizations or trusts described in
Sections 401(a) or 501(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or similar organizations or entities that are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement, as amended, does not constitute an offer to sell,
or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
The Portfolio's investment objective is to provide growth of
capital. The Portfolio's investment objective is nonfundamental and may be
changed when authorized by a vote of the Trustees without obtaining the
approval of the investors in the Portfolio.
Additional information about the investment policies of the
Portfolio appears in Part B. The Portfolio is not intended to be a
complete investment program, and a prospective investor should take into
account its objectives and other investments when considering the purchase
of interests in the Portfolio. The Portfolio cannot assure achievement of
its investment objective.
How the Portfolio Invests its Assets; Investment Risks
The Portfolio seeks to achieve its investment objective by
investing primarily in quality growth securities. Although there is no
formula as to the percentage of assets that will be invested in any one
type of security, the policy of the Portfolio is to invest principally
(i.e., at least 65% of its total assets during normal market conditions)
in equity securities, including common stocks and securities convertible
into common stocks, of publicly held companies combining characteristics
of both growth and quality sought by the Portfolio. Any income received
will be incidental to the Portfolio's objective of capital growth. The
criteria for investments in convertible debt are the same as those used
for the common stock of the issuer. The Portfolio does not currently
intend to invest more than 5% of its net assets in convertible debt. The
Portfolio may invest in companies that have market capitalizations of $250
million or less. Investment in the securities of such companies may be
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characterized as involving greater relative risk due to their smaller
size. From time to time, the Portfolio may also invest in bonds, notes
and certificates of indebtedness if in the Investment Adviser's judgment
such investments are consistent with the Portfolio's objective; however,
the Portfolio does not currently intend to invest more than 5% of its net
assets in each of such investments and currently intends to limit its
investments in non-convertible debt to non-convertible debt rated
investment grade (i.e., rated Baa or higher by Moody's Investors Service,
Inc. or BBB or higher by Standard & Poor's Ratings Group) or, if unrated,
determined to be of comparable quality by the Portfolio's Investment
Adviser. Realization of the Portfolio's objective will depend to a large
extent on the accuracy of earnings projections, which are not subject to
exact prediction. If, in the opinion of the Investment Adviser, market
conditions are such that a more conservative approach to investments is
deemed desirable, then the Portfolio may temporarily make substantial
investments in investment grade fixed-income obligations of all types and
U.S. Government obligations, or in bonds, notes or other certificates of
indebtedness.
In the view of the Investment Adviser, a growth security is an
equity security of a company which has shown relative gains in earning
power over a period of years substantially above that achieved by the
economy as a whole and which, the Investment Adviser expects, will
continue to show such gains. It is the intention of the Portfolio that its
portfolio will be concentrated in securities of companies which, in the
Investment Adviser's judgment, seem likely to double their earning power
within a five-year period. To achieve this objective, a company would
require minimum average annual compound rates of growth over such period
of at least 15%. There is, of course, no assurance that the Investment
Adviser will be successful in selecting securities of companies which meet
these standards. In recommending portfolio investments on behalf of the
Portfolio, the Investment Adviser will consider that the quality of a
security depends upon the ability, motivation, depth and integrity of the
issuer's management, the importance of the enterprise in its industry and
the relative importance of the industry within the broad economic
framework, the current financial strength of the enterprise in terms of
ability to cushion adversity and to fund the expansion of activities, and
the reliability of final demand characteristics for products or services.
The Portfolio would generally expect to hold such securities until BMR's
judgment of the issuing company's prospects is altered and/or the price of
the company's securities appears to over-discount prospective earnings
progress as compared with other issues with similar characteristics.
The Portfolio may invest in securities issued by foreign
companies (including American Depository Receipts and Global Depository
Receipts). Such investments may be subject to various risks such as
fluctuations in currency and exchange rates, foreign taxes, social,
political and economic conditions in the countries in which such companies
operate, and changes in governmental, economic or monetary policies both
here and abroad. There may be less publicly available information about a
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foreign company than about a comparable domestic company. Because the
securities markets in many foreign countries are not as developed as those
in the United States, the securities of many foreign companies are less
liquid and their prices are more volatile than securities of comparable
domestic companies. In order to hedge against possible variations in
foreign exchange rates pending the settlement of foreign securities
transactions, the Portfolio may buy or sell foreign currencies.
An investment in the Portfolio entails the risk that the
principal value of the Portfolio's interests may not increase or may
decline. The Portfolio's investments in equity securities are subject to
the risk of adverse developments affecting particular companies or
industries and the stock market generally. Investments in bonds are
subject to the risk that the issuer may default on its obligations to pay
principal and interest. The value of bonds tends to increase during
periods of falling interest rates and to decline during periods of rising
interest rates.
Investment Restrictions
The Portfolio has adopted certain fundamental investment
restrictions which are enumerated in detail in Part B and which may not be
changed unless authorized by an investor vote. Except for such enumerated
restrictions and as otherwise indicated in this Part A, the investment
objective and policies of the Portfolio are not fundamental policies and
accordingly may be changed by the Trustees without obtaining the approval
of the investors in the Portfolio. The Portfolio's investors will receive
written notice thirty days prior to any change in the investment objective
of the Portfolio. If any changes were made, the Portfolio might have an
investment objective different from the objective which an investor
considered appropriate at the time of its initial investment.
Item 5. Management of the Portfolio
The Portfolio is organized as a trust under the laws of the State
of New York. The Portfolio intends to comply with all applicable Federal
and state securities laws.
Investment Adviser. The Portfolio engages BMR, a wholly-owned subsidiary
of Eaton Vance Management ("Eaton Vance"), as its investment adviser.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931.
Acting under the general supervision of the Board of Trustees,
BMR manages the Portfolio's investments and affairs. Under its investment
advisory agreement with the Portfolio, BMR receives a monthly advisory fee
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of 5/96 of 1% (equivalent to 0.625% annually) of average daily net assets
of the Portfolio. For the period from the start of business, August 1,
1994, to December 31, 1994, the Portfolio paid BMR advisory fees
equivalent to 0.625% (annualized) of the Portfolio's average daily net
assets for such period.
BMR also furnishes for the use of the Portfolio office space and
all necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. The Portfolio is responsible for the payment
of all expenses other than those expressly stated to be payable by BMR
under the investment advisory agreement.
BMR places the portfolio security transactions of the Portfolio
for execution with many broker-dealer firms and uses its best efforts to
obtain execution of such transactions at prices which are advantageous to
the Portfolio and at reasonably competitive commission rates. Subject to
the foregoing, BMR may consider sales of shares of other investment
companies sponsored by BMR or Eaton Vance as a factor in the selection of
broker-dealer firms to execute portfolio transactions.
Clifford H. Krauss has acted as the portfolio manager of the
Portfolio since it commenced operations. Mr. Krauss has been a Vice
President of Eaton Vance since 1987 and of BMR since 1992.
BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with assets
under management of approximately $15 billion. Eaton Vance is a
wholly-owned subsidiary of Eaton Vance Corp., a publicly held holding
company. Eaton Vance Corp., through its subsidiaries and affiliates,
engages in investment management and marketing activities, fiduciary and
banking services, oil and gas operations, real estate investment,
consulting and management, and development of precious metals properties.
Item 6. Capital Stock and Other Securities
The Portfolio is organized as a trust under the laws of the State
of New York and intends to be treated as a partnership for Federal tax
purposes. Under the Declaration of Trust, the Trustees are authorized to
issue interests in the Portfolio. Each investor is entitled to a vote in
proportion to the amount of its investment in the Portfolio. Investments
in the Portfolio may not be transferred, but an investor may withdraw all
or any portion of its investment at any time at net asset value. Investors
in the Portfolio will each be liable for all obligations of the Portfolio.
However, the risk of an investor in the Portfolio incurring financial loss
on account of such liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of any investor in the
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Portfolio unless either the remaining investors, by unanimous vote at a
meeting of such investors, or a majority of the Trustees of the Portfolio,
by written instrument consented to by all investors, agree to continue the
business of the Portfolio. This provision is consistent with the treatment
of the Portfolio as a partnership for Federal income tax purposes.
Investments in the Portfolio have no preemptive or conversion
rights and are fully paid and nonassessable, except as set forth above.
The Portfolio is not required and has no current intention to hold annual
meetings of investors, but the Portfolio may hold special meetings of
investors when in the judgment of the Trustees it is necessary or
desirable to submit matters for an investor vote. Changes in fundamental
policies or restrictions will be submitted to investors for approval. The
investment objective and all nonfundamental investment policies of the
Portfolio may be changed by the Trustees of the Portfolio without
obtaining the approval of the investors in the Portfolio. Investors have
under certain circumstances (e.g., upon application and submission of
certain specified documents to the Trustees by a specified number of
investors) the right to communicate with other investors in connection
with requesting a meeting of investors for the purpose of removing one or
more Trustees. Any Trustee may be removed by the affirmative vote of
holders of two-thirds of the interests in the Portfolio.
Information regarding pooled investment entities or funds which
invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc., 24 Federal Street, Boston, MA 02110 (617) 482-8260.
Smaller investors in the Portfolio may be adversely affected by the
actions of larger investors in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may
experience higher pro rata operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk, and experience decreasing economies of scale.
However, this possibility exists as well for historically structured funds
which have large or institutional investors.
As of March 31, 1995, EV Traditional Special Equities Fund
controlled the Portfolio by virtue of owning approximately 97.8% of the
outstanding voting securities of the Portfolio.
The net asset value of the Portfolio is determined each day on
which the New York Stock Exchange (the "Exchange") is open for trading
("Portfolio Business Day"). This determination is made each Portfolio
Business Day as of the close of regular trading on the Exchange (currently
4:00 p.m., New York time) (the "Portfolio Valuation Time").
Each investor in the Portfolio may add to or reduce its
investment in the Portfolio on each Portfolio Business Day as of the
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Portfolio Valuation Time. The value of each investor's interest in the
Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage, determined on the prior Portfolio Business
Day, which represented that investor's share of the aggregate interest in
the Portfolio on such prior day. Any additions or withdrawals for the
current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be
recomputed as a percentage equal to a fraction (i) the numerator of which
is the value of such investor's investment in the Portfolio as of the
Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of any additions to or withdrawals
from the investor's investment in the Portfolio on the current Portfolio
Business Day and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the Portfolio Valuation Time on the prior
Portfolio Business Day plus or minus, as the case may be, the amount of
the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine
the value of the investor's interest in the Portfolio for the current
Portfolio Business Day.
The Portfolio will allocate at least annually among its investors
its net investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. The Portfolio's net investment
income consists of all income accrued on the Portfolio's assets, less all
actual and accrued expenses of the Portfolio, determined in accordance
with generally accepted accounting principles.
Under the anticipated method of operation of the Portfolio, the
Portfolio will not be subject to any Federal income tax (see Part B, Item
20). However, each investor in the Portfolio will take into account its
allocable share of the Portfolio's ordinary income and capital gain in
determining its Federal income tax liability. The determination of such
share will be made in accordance with the governing instruments of the
Portfolio, which are intended to comply with the requirements of the Code,
and regulations promulgated thereunder.
It is intended that the Portfolio's assets and income will be
managed in such a way that an investor in the Portfolio which seeks to
qualify as a regulated investment company ("RIC") under the Code will be
able to satisfy the requirements for such qualification.
Item 7. Purchase of Interests in the Portfolio
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the 1933 Act. See "General Description of Registrant"
above.
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An investment in the Portfolio will be made without a sales load.
All investments received by the Portfolio will be effected as of the next
Portfolio Valuation Time. The net asset value of the Portfolio is
determined at the Portfolio Valuation Time on each Portfolio Business Day.
The Portfolio will be closed for business and will not determine its net
asset value on the following business holidays: New Year's Day,
Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
Portfolio's net asset value is computed in accordance with procedures
established by the Portfolio's Trustees.
The Portfolio's net asset value is determined by Investors Bank &
Trust Company (as custodian and agent for the Portfolio) in the manner
authorized by the Trustees of the Portfolio. The net asset value is
computed by subtracting the liabilities of the Portfolio from the value of
its total assets. Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sale prices. For further
information regarding the valuation of the Portfolio's assets, see Part B,
Item 19.
There is no minimum initial or subsequent investment in the
Portfolio. The Portfolio reserves the right to cease accepting investments
at any time or to reject any investment order.
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc. ("EVD"). The principal business address of EVD is 24
Federal Street, Boston, Massachusetts 02110. EVD receives no compensation
for serving as the placement agent for the Portfolio.
Item 8. Redemption or Decrease of Interest
An investor in the Portfolio may withdraw all (redeem) or any
portion (decrease) of its interest in the Portfolio if a withdrawal
request in proper form is furnished by the investor to the Portfolio. All
withdrawals will be effected as of the next Portfolio Valuation Time. The
proceeds of a withdrawal will be paid by the Portfolio normally on the
Portfolio Business Day the withdrawal is effected, but in any event within
seven days. The Portfolio reserves the right to pay the proceeds of a
withdrawal (whether a redemption or decrease) by a distribution in kind of
portfolio securities (instead of cash). The securities so distributed
would be valued at the same amount as that assigned to them in calculating
the net asset value for the interest (whether complete or partial) being
withdrawn. If an investor received a distribution in kind upon such
withdrawal, the investor could incur brokerage and other charges in
converting the securities to cash. The Portfolio has filed with the
Securities and Exchange Commission (the "Commission") a notification of
election on Form N-18F-1 committing to pay in cash all requests for
withdrawals by any investor, limited in amount with respect to such
investor during any 90 day period to the lesser of (a) $250,000 or (b) 1%
of the net asset value of the Portfolio at the beginning of such period.
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Investments in the Portfolio may not be transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds
postponed during any period in which the Exchange is closed (other than
weekends or holidays) or trading on the Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists, or
during any other period permitted by order of the Commission for the
protection of investors.
Item 9. Pending Legal Proceedings
Not applicable.
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PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
Page
General Information and History B-1
Investment Objective and Policies B-1
Management of the Portfolio B-5
Control Persons and Principal Holder of Securities B-9
Investment Advisory and Other Services B-9
Brokerage Allocation and Other Practices B-12
Capital Stock and Other Securities B-14
Purchase, Redemption and Pricing of Securities B-16
Tax Status B-16
Underwriters B-18
Calculation of Performance Data B-18
Financial Statements B-19
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objective and Policies.
Part A contains additional information about the investment
objective and policies of the Portfolio (the "Portfolio"). This Part B
should be read in conjunction with Part A. Capitalized terms used in this
Part B and not otherwise defined have the meanings given them in Part A.
The Portfolio's investment objective is to provide growth of
capital. The Portfolio seeks to achieve its investment objective by
investing primarily in quality growth securities.
Lending of Portfolio Securities
The Portfolio may seek to increase its income by lending
portfolio securities. Under present regulatory policies, including those
of the Board of Governors of the Federal Reserve System and the Securities
and Exchange Commission, such loans may be made to member firms of the New
York Stock Exchange, and would be required to be secured continuously by
collateral in cash or cash equivalents maintained on a current basis at an
amount at least equal to the market value of the securities loaned. The
Portfolio would have the right to call a loan and obtain the securities
loaned at any time on five days' notice. During the existence of a loan,
the Portfolio would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also
receive the interest on investment of the collateral. The Portfolio would
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not, however, have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation
of an important vote to be taken among holders of the securities or of the
giving or withholding of their consent on a material matter affecting the
investment. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of
the securities fail financially. However, the loans would be made only to
firms deemed by the Portfolio's management to be of good standing, and
when, in the judgment of the Portfolio's management, the consideration
which can be earned currently from securities loans of this type justifies
the attendant risk.
If the Investment Adviser determines to make securities loans, it
is not intended that the value of the securities loaned would exceed 30%
of the Portfolio's total assets. As of the present time, the Trustees have
not made a determination to engage in this activity, and have no present
intention of making such a determination during the current fiscal year.
Writing Covered Call Options
The Portfolio may engage in the writing of call option contracts
on securities which are owned by the Portfolio ("covered call options")
when, in the opinion of the Trustees, such activity is advisable and
appropriate.
A call option written by the Portfolio obligates the Portfolio to
sell specified securities to the holder of the option at a specified price
at any time before the expiration date. The Portfolio will write a covered
call option on a security for the purpose of increasing its return on such
security and/or to partially hedge against a decline in the value of the
security. In particular, when the Portfolio writes an option which expires
unexercised or is closed out by the Portfolio at a profit, it will retain
the premium paid for the option, which will increase its gross income and
will offset in part the reduced value of the portfolio security underlying
the option, or the increased cost of acquiring the security for its
portfolio. However, if the price of the underlying security moves
adversely to the Portfolio's position, the option may be exercised and the
Portfolio will be required to sell the underlying security at a
disadvantageous price, which may only be partially offset by the amount of
the premium, if at all. The Portfolio does not intend to write a covered
option on any security if after such transaction more than 25% of its net
assets, as measured by the aggregate value of the securities underlying
all covered calls written by the Portfolio, would be subject to such
options.
The Portfolio may terminate its obligations under a call option
by purchasing an option identical to the one it has written. Such
purchases are referred to as "closing purchase transactions."
An options position may be closed out only on an options exchange
which provides a secondary market for an option of the same series.
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Although the Portfolio will generally purchase or write only those options
for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time. For some options no
secondary market on an exchange may exist. In such event, it might not be
possible to effect closing transactions in particular options, with the
result that the Portfolio would have to exercise its options in order to
realize any profit and would incur transaction costs upon the sale of
underlying securities pursuant to the exercise of put options. If the
Portfolio as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires or it delivers the
underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading
interest in certain options; (ii) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying
securities; (iv) unusual or unforeseen circumstances may interrupt normal
operations on an exchange; (v) the facilities of an exchange or the
Options Clearing Corporation may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding
options on that exchange that had been issued by the Options Clearing
Corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
The Portfolio will pay brokerage commissions in connection with
writing options and effecting closing purchase transactions, as well as
for sales of underlying securities. The writing of options could result in
significant increases in the Portfolio's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render certain of
the facilities of the Options Clearing Corporation inadequate, and thereby
result in the institution by an exchange of special procedures which may
interfere with the timely execution of customers' orders.
The amount of the premiums which the Portfolio may pay or receive
may be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option purchasing and
writing activities.
Portfolio Turnover
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The Portfolio's investment policies may involve a portfolio
turnover (and corresponding brokerage expenses) somewhat greater than that
of other investment companies. Such turnover can result from portfolio
transactions reflecting BMR's view of a change or prospective changes in
the earnings growth rate of a company, what it considers a more favorable
investment opportunity, and other circumstances bearing on the
desirability of continuing a given investment.
Investment Restrictions
Whenever an investment policy or investment restriction set forth
in Part A or this Part B states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall
be determined immediately after and as a result of the Portfolio's
acquisition of such security or other asset. Accordingly, any later
increase or decrease resulting from a change in values, assets or other
circumstances will not compel the Portfolio to dispose of such security
or other asset.
The Portfolio has adopted the following investment restrictions
which may not be changed without the approval of the holders of a
"majority of the outstanding voting securities" of the Portfolio which as
used in this Part B means the lesser of (a) 67% or more of the outstanding
voting securities of the Portfolio present or represented by proxy at a
meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or
(b) more than 50% of the outstanding voting securities of the Portfolio.
The term "voting securities" as used in this paragraph has the same
meaning as in the Investment Company Act of 1940 (the "1940 Act"). The
Portfolio may not:
(1) With respect to 75% of its total assets, invest more than 5%
of its total assets (taken at current value) in the securities of
any one issuer or in more than 10% of the outstanding voting
securities of any one issuer, except obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment
companies;
(2) Borrow money or issue senior securities except as permitted
by the Investment Company Act of 1940;
(3) Purchase any securities on margin (but the Portfolio may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities);
(4) Underwrite securities of other issuers;
(5) Concentrate its investments in any particular industry, but,
if deemed appropriate for the Portfolio's objective, up to 25% of
the value of its assets may be invested in securities of
companies in any one industry (although more than 25% may be
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invested in securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities);
(6) Invest in real estate (although it may purchase and sell
securities which are secured by real estate and securities of
companies which invest or deal in real estate); invest in
commodities or commodity contracts for the purchase or sale of
physical commodities; or
(7) Make loans to any person except by (a) the acquisition of
debt securities and making portfolio investments, (b) entering
into repurchase agreements and (c) lending portfolio securities.
The Portfolio has adopted the following nonfundamental investment
policies which may be changed by the Trustees of the Portfolio with or
without the approval of the Portfolio's other investors. As a matter of
nonfundamental policy, the Portfolio may not: (a) invest more than 15% of
net assets in investments which are not readily marketable, including
restricted securities and repurchase agreements maturing in more than
seven days. Restricted securities for the purposes of this limitation do
not include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 that the Board of Trustees, or its delegate,
determines to be liquid, based upon the trading markets for the specific
security; (b) invest in put or call options, except that the Portfolio is
authorized to engage in the writing and sale of call option contracts and
the purchase of call options as described above under "Writing Covered
Call Options" and the Portfolio may invest in warrants where the grantor
thereof is the issuer of the underlying securities; (c) invest in the
securities of an issuer when any officer or Trustee of the Portfolio or
any investor in the Portfolio, any investment adviser of the Portfolio, or
any officer or trustee of such investment adviser, owns in excess of 1/2
of 1% of the issuer's securities if such owners together own more than 5%
of such securities; (d) purchase securities of companies which, including
predecessors, have not been in continuous operation for at least three
years, except that 5% of total assets (taken at market value) may be
invested in certain issuers not in such continuous operation but
substantially all of whose assets are (i) securities of one or more
issuers which have had a record of three years' continuous operation or
(ii) assets of an independent division of an issuer which division has had
a record of three years' continuous operation; provided, however, that
exempted from this restriction are U.S. Government securities, securities
of issuers which are rated by at least one nationally recognized
statistical rating organization, municipal obligations and obligations
issued or guaranteed by any foreign government or its agencies or
instrumentalities; (e) sell or contract to sell a security which it does
not own unless by virtue of its ownership of other securities it has at
the time of sale a right to obtain securities equivalent in kind and
amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions; (f) invest in
interests in oil, gas or other mineral exploration or development programs
(this restriction does not, however, prevent investment in securities of
companies engaged in such activities); or (g) purchase warrants in excess
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of 2% of net assets, except that if such warrants are listed on the New
York or American Stock Exchanges, the percentage restriction is 5% of net
assets. Any such warrants shall be valued at the lower of cost or market
except that warrants acquired by the Portfolio attached to portfolio
securities shall be deemed to be without value for the purpose of this
restriction.
In order to permit the sale in certain states of shares of
certain open- end investment companies which are investors in the
Portfolio, the Portfolio may adopt policies more restrictive than the
fundamental policies described above. Should the Portfolio determine that
any such policy is no longer in the best interests of the Portfolio and
its investors, it will revoke such policy.
Item 14. Management of the Portfolio
The Trustees and officers of the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise
noted, the business address of each Trustee and officer is 24 Federal
Street, Boston, Massachusetts 02110, which is also the address of the
Portfolio's investment adviser, Boston Management and Research ("BMR" or
the "Investment Adviser"), which is a wholly-owned subsidiary of Eaton
Vance Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC.
Those Trustees who are "interested persons" of the Portfolio, BMR, Eaton
Vance, EVC or EV, as defined in the 1940 Act, by virtue of their
affiliation with any one or more of the Portfolio, BMR, Eaton Vance, EVC
or EV, are indicated by an asterisk(*).
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TRUSTEES OF THE PORTFOLIO
JAMES B. HAWKES (53), President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director
of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
LANDON T. CLAY (69), Trustee*
Chairman of BMR, Eaton Vance, EVC and EV and a Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
DONALD R. DWIGHT (64), Trustee
President of Dwight Partners, Inc. (a corporate relations and
communications company) founded in 1988; Chairman of the Board of
Newspapers of New England, Inc. since 1983; Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University
Graduate School of Business Administration. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (59), Trustee
President and Director, United Asset Management Corporation, a holding
company owning institutional investment management firms. Chairman,
President and Director, The Regis Fund, Inc. (mutual fund). Director or
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), Trustee
Investment Adviser and Consultant. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
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OFFICERS OF THE PORTFOLIO
PETER F. KIELY (58), Vice President
Vice President of BMR, Eaton Vance, and EV. Director or Trustee and
officer of various investment companies managed by Eaton Vance or BMR.
CLIFFORD H. KRAUSS (40), Vice President
Vice President of Eaton Vance and EV.
JAMES L. O'CONNOR (49), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
WILLIAM J. AUSTIN, JR. (43), Assistant Treasurer
Assistant Vice President of BMR, Eaton Vance and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (32), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. State Regulations Supervisor,
The Boston Company (1991-1993) and Registration Specialist, Fidelity
Management & Research Co. (1986-1991). Mr. Murphy was elected Assistant
Secretary of the Portfolio on March 27, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the
Special Committee of the Board of Trustees. The Special Committee's
functions include a continuous review of the Portfolio's contractual
relationship with the Investment Adviser, making recommendations to the
Trustees regarding the compensation of those Trustees who are not members
of the Eaton Vance organization, and making recommendations to the
Trustees regarding candidates to fill vacancies, as and when they occur,
in the ranks of those Trustees who are not "interested persons" of the
Portfolio or the Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit
Committee of the Board of Trustees. The Audit Committee's functions
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include making recommendations to the Trustees regarding the selection of
the independent accountants, and reviewing with such accountants and the
Treasurer of the Portfolio matters relative to accounting and auditing
practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent
of the Portfolio.
The fees and expenses of those Trustees who are not members of
the Eaton Vance organization (the noninterested Trustees) are paid by the
Portfolio. (The Trustees who are members of the Eaton Vance organization
receive no compensation from the Portfolio.) During the fiscal year ended
December 31, 1994, the noninterested Trustees of the Portfolio earned the
following compensation in their capacities as Trustees from the Portfolio
and the other funds in the Eaton Vance fund complex:
<TABLE>
<CAPTION>
Aggregate Retirement Total Compensation
Compensation Benefit Accrued from Trust and
Name from Portfolio from Fund Complex Fund Complex(1)
<S> <C> <C> <C>
Donald R.
Dwight $297(2) $8,750 $135,000
Samuel L.
Hayes, III 302(3) 8,865 142,500
Norton H.
Reamer 318 -0- 135,000
John L.
Thorndike 338 -0- 140,000
Jack L.
Treynor 301 -0- 140,000
(1) The Eaton Vance fund complex consists of 201 registered investment companies or series thereof.
(2) Includes $98 of deferred compensation.
(3) Includes $101 of deferred compensation.
</TABLE>
Trustees of the Portfolio who are not affiliated with BMR may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his
deferred fees invested by the Portfolio in the shares of one or more funds
in the Eaton Vance Family of Funds, and the amount paid to the Trustees
under the Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Plan will
have a negligible effect on the Portfolio's assets, liabilities, and net
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income per share, and will not obligate the Portfolio to retain the
services of any Trustee or obligate the Portfolio to pay any particular
level of compensation to the Trustee.
The Portfolio's Declaration of Trust provides that it will
indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved
because of their offices with the Portfolio, unless, as to liability to
the Portfolio or its investors, it is finally adjudicated that they
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices, or unless with respect
to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Portfolio. In the case of settlement, such
indemnification will not be provided unless it has been determined by a
court or other body approving the settlement or other disposition, or by a
reasonable determination, based upon a review of readily available facts,
by vote of a majority of noninterested Trustees or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
wilful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
Item 15. Control Persons and Principal Holder of Securities
As of March 31, 1995, EV Traditional Special Equities Fund (the
"Fund") controlled the Portfolio by virtue of owning approximately 97.8%
of the value of the outstanding interests in the Portfolio. Because the
Fund controls the Portfolio, the Fund may take actions without the
approval of any other investor. The Fund has informed the Portfolio that
whenever it is requested to vote on matters pertaining to the fundamental
policies of the Portfolio, it will hold a meeting of shareholders and will
cast its vote as instructed by its shareholders. It is anticipated that
any other investor in the Portfolio which is an investment company
registered under the 1940 Act would follow the same or a similar practice.
EV Traditional Special Equities Fund is a series of Eaton Vance Special
Investment Trust, a Massachusetts business trust. Eaton Vance Special
Investment Trust is a mutual fund -- an open-end management investment
company.
Item 16. Investment Advisory and Other Services
Investment Adviser. The Portfolio engages BMR as its investment
adviser pursuant to an Investment Advisory Agreement dated August 1, 1994.
BMR or Eaton Vance acts as investment adviser to investment companies and
various individual and institutional clients with combined assets under
management of approximately $15 billion.
BMR manages the investments and affairs of the Portfolio subject
to the supervision of the Portfolio's Board of Trustees. BMR furnishes to
the Portfolio investment research, advice and supervision, furnishes an
investment program and will determine what securities will be purchased,
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held or sold by the Portfolio and what portion, if any, of the Portfolio's
assets will be held uninvested. The Investment Advisory Agreement requires
BMR to pay the salaries and fees of all officers and Trustees of the
Portfolio who are members of the BMR organization and all personnel of BMR
performing services relating to research and investment activities. The
Portfolio is responsible for all expenses not expressly stated to be
payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and
continuing its existence, (ii) registration of the Portfolio under the
1940 Act, (iii) commissions, fees and other expenses connected with the
acquisition, holding and disposition of securities and other investments,
(iv) auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale and redemption of
interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under Federal and state
securities laws and of preparing and printing registration statements or
other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering
and maintaining registrations of the Portfolio and of the Portfolio's
placement agent as broker-dealer or agent under state securities laws,
(ix) expenses of reports and notices to investors and of meetings of
investors and proxy solicitations therefor, (x) expenses of reports to
governmental officers and commissions, (xi) insurance expenses, (xii)
association membership dues, (xiii) fees, expenses and disbursements of
custodians and subcustodians for all services to the Portfolio (including
without limitation safekeeping for funds, securities and other
investments, keeping of books, accounts and records, and determination of
net asset values, book capital account balances and tax capital account
balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for
all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees
of the Portfolio, (xvii) compensation and expenses of Trustees of the
Portfolio who are not members of the BMR organization, and (xvii) such
non-recurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the obligation of
the Portfolio to indemnify its Trustees, officers and investors with
respect thereto.
Under the Investment Advisory Agreement, BMR receives a monthly
advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of the average
daily net assets of the Portfolio. As at December 31, 1994, the Portfolio
had net assets of $64,442,372. For the period from the start of business,
August 1, 1994, to December 31, 1994, BMR received advisory fees of
$175,012 (equivalent to 0.625% (annualized) of the Portfolio's average
daily net assets for such period).
The Investment Advisory Agreement with BMR remains in effect
until February 28, 1996. It may be continued indefinitely thereafter so
long as such continuance after February 28, 1996 is approved at least
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annually (i) by the vote of a majority of the Trustees who are not
interested persons of the Portfolio or of BMR cast in person at a meeting
specifically called for the purpose of voting on such approval and (ii) by
the Board of Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time
without penalty on sixty (60) days' written notice by the Board of
Trustees of either party, or by vote of the majority of the outstanding
voting securities of the Portfolio, and the Agreement will terminate
automatically in the event of its assignment. The Agreement provides that
BMR may render services to others and engage in other business activities
and may permit other fund clients and other corporations and organizations
to use the words "Eaton Vance" or "Boston Management and Research" in
their names. The Agreement also provides that BMR shall not be liable for
any loss incurred in connection with the performance of its duties, or
action taken or omitted under that Agreement, in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and
EV are both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the Trustee of BMR and Eaton
Vance. The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M.
Dozier Gardner, James B. Hawkes, and Benjamin A. Rowland, Jr. The
Directors of EVC consist of the same persons and John G.L. Cabot and Ralph
Z. Sorenson. Mr. Clay is chairman and Mr. Gardner is president and chief
executive officer of EVC, BMR, Eaton Vance and EV. All of the issued and
outstanding shares of Eaton Vance and EV are owned by EVC. All of the
issued and outstanding shares of BMR are owned by Eaton Vance. All shares
of the outstanding Voting Common Stock of EVC are deposited in a Voting
Trust, which expires on December 31, 1996, the Voting Trustees of which
are Messrs. Clay, Brigham, Gardner, Hawkes and Rowland. The Voting
Trustees have unrestricted voting rights for the election of Directors of
EVC. All of the outstanding voting trust receipts issued under said Voting
Trust are owned by certain of the officers of BMR and Eaton Vance who are
also officers and Directors of EVC and EV. As of March 31, 1995, Messrs.
Clay, Gardner and Hawkes each owned 24% of such voting trust receipts, and
Messrs. Rowland and Brigham owned 15% and 13%, respectively, of such
voting trust receipts. Messrs. Clay, Hawkes and Otis are officers or
Trustees of the Portfolio and are members of the EVC, BMR, Eaton Vance and
EV organizations. Messrs. Austin, Kiely, Krauss, Murphy and O'Connor and
Ms. Sanders are officers of the Portfolio and are also members of the BMR,
Eaton Vance and EV organizations. BMR will receive the fees paid under the
Investment Advisory Agreement.
Eaton Vance owns all of the stock of Energex Corporation, which
is engaged in oil and gas operations. EVC owns all of the stock of
Marblehead Energy Corp. (which is engaged in oil and gas operations) and
77.3% of the stock of Investors Bank & Trust Company, custodian of the
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<PAGE>
Portfolio, which provides custodial, trustee and other fiduciary services
to investors, including individuals, employee benefit plans, corporations,
investment companies, savings banks and other institutions. In addition,
Eaton Vance owns all of the stock of Northeast Properties, Inc., which is
engaged in real estate investment, consulting and management. EVC owns all
of the stock of Fulcrum Management, Inc. and MinVen Inc., which are
engaged in the development of precious metal properties. EVC, BMR, Eaton
Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time
to time have transactions with various banks, including the custodian of
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not
be influenced by existing or potential custodial or other relationships
between the Portfolio and such banks.
Custodian. Investors Bank & Trust Company ("IBT"), 24 Federal
Street, Boston, Massachusetts (a 77.3% owned subsidiary of EVC) acts as
custodian for the Portfolio. IBT has the custody of all the Portfolio's
assets, maintains the general ledger of the Portfolio, and computes the
daily net asset value of interests in the Portfolio. In such capacity it
attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with the Portfolio's investments, receives and
disburses all funds and performs various other ministerial duties upon
receipt of proper instructions from the Portfolio. IBT charges fees which
are competitive within the industry. A portion of the fee relates to
custody, bookkeeping and valuation services and is based upon a percentage
of Portfolio net assets, and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are
then reduced by a credit for cash balances of the particular investment
company at the custodian equal to 75% of the 91-day, U.S. Treasury Bill
auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT,
the Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under
the 1940 Act, and the Portfolio's investments held by IBT as custodian are
thus subject to additional examinations by the Portfolio's independent
accountants as called for by such Rule. For the period from the start of
business, August 1, 1994, to December 31, 1994, the Portfolio paid IBT
$20,710.
Independent Accountants. Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts, are the independent accountants of
the Portfolio, providing audit services, tax return preparation, and
assistance and consultation with respect to the preparation of filings
with the Securities and Exchange Commission.
Item 17. Brokerage Allocation and Other Practices
Decisions concerning the execution of portfolio security
transactions, including the selection of the market and the executing
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<PAGE>
firm, are made by BMR. BMR is also responsible for the execution of
transactions for all other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio
and of all other accounts managed by it for execution with many
broker-dealer firms. BMR uses its best efforts to obtain execution of
portfolio security transactions at prices which are advantageous to the
Portfolio (when a disclosed commission is being charged) at reasonably
competitive commission rates. In seeking such execution, BMR will use its
best judgment in evaluating the terms of a transaction, and will give
consideration to various relevant factors, including without limitation
the size and type of the transaction, the general execution and
operational capabilities of the executing broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the
reputation, reliability, experience and financial condition of the broker-
dealer, the value and quality of the services rendered by the
broker-dealer in other transactions, and the reasonableness of the
commission, if any. Transactions on United States stock exchanges and
other agency transactions involve the payment by the Portfolio of
negotiated brokerage commissions. Such commissions vary among different
broker-dealer firms, and a particular broker- dealer may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities
traded in the over-the-counter markets, but the price paid or received by
the Portfolio usually includes an undisclosed dealer markup or markdown.
In an underwritten offering the price paid by the Portfolio includes a
disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions on portfolio security transactions will, in
the judgment of BMR, be reasonable in relation to the value of the
services provided, commissions exceeding those which another firm might
charge may be paid to broker-dealers who were selected to execute
transactions on behalf of the Portfolio and BMR's other clients for
providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of
1934, a broker or dealer who executes a portfolio transaction on behalf of
the Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of overall responsibilities which
BMR and its affiliates have for accounts over which they exercise
investment discretion. In making any such determination, BMR will not
attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
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related to such services. Brokerage and research services may include
advice as to the value of securities, the advisability of investing in,
purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts; effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement); and the "Research Services" referred to in the
next paragraph.
It is a common practice of the investment advisory industry and
of the advisers of investment companies, institutions and other investors
to receive research, statistical and quotation services, data, information
and other services, products and materials which assist such advisers in
the performance of their investment responsibilities ("Research Services")
from broker-dealer firms which execute portfolio transactions for the
clients of such advisers and from third parties with which such
broker-dealers have arrangements. Consistent with this practice, BMR
receives Research Services from many broker-dealer firms with which BMR
places the Portfolio's transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include
such matters as general economic and market reviews, industry and company
reviews, evaluations of securities and portfolio strategies and
transactions and recommendations as to the purchase and sale of securities
and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation
equipment and services, and research oriented computer hardware, software,
data bases and services. Any particular Research Service obtained through
a broker-dealer may be used by BMR in connection with client accounts
other than those accounts which pay commissions to such broker-dealer. Any
such Research Service may be broadly useful and of value to BMR in
rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by
the Portfolio is not reduced because BMR receives such Research Services.
BMR evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research
Services which BMR believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to
seek and execute portfolio security transactions at advantageous prices
and at reasonably competitive spreads or commission rates, BMR is
authorized to consider as a factor in the selection of any firm with whom
portfolio orders may be placed the fact that such firm has sold or is
selling securities of other investment companies sponsored by BMR or Eaton
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<PAGE>
Vance. This policy is not inconsistent with a rule of the National
Association of Securities Dealers, Inc., which rule provides that no firm
which is a member of the Association shall favor or disfavor the
distribution of shares of any particular investment company or group of
investment companies on the basis of brokerage commissions received or
expected by such firm from any source.
Securities considered as investments for the Portfolio may also
be appropriate for other investment accounts managed by BMR or its
affiliates. BMR will attempt to allocate equitably portfolio security
transactions among the Portfolio and the portfolios of its other
investment accounts whenever decisions are made to purchase or sell
securities by the Portfolio and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and
such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the
Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such
accounts. While this procedure could have a detrimental effect on the
price or amount of the securities available to the Portfolio from time to
time, it is the opinion of the Trustees of the Portfolio that the benefits
available from the BMR organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions. For the period from the
start of business, August 1, 1994, to December 31, 1994, the Portfolio
paid brokerage commissions of $36,041 on portfolio securities
transactions. Of the total brokerage commissions paid, approximately
$31,811 was paid in respect of portfolio transactions aggregating
approximately $12,822,000 to firms which provided some Research Services
to BMR (although many of such firms may have been selected in any
particular transaction primarily because of their execution capabilities).
Item 18. Capital Stock and Other Securities
Under the Portfolio's Declaration of Trust, the Trustees are
authorized to issue interests in the Portfolio. Investors are entitled to
participate pro rata in distributions of taxable income, loss, gain and
credit of the Portfolio. Upon dissolution of the Portfolio, the Trustees
shall liquidate the assets of the Portfolio and apply and distribute the
proceeds thereof as follows: (a) first, to the payment of all debts and
obligations of the Portfolio to third parties including, without
limitation, the retirement of outstanding debt, including any debt owed to
holders of record of interests in the Portfolio ("Holders") or their
affiliates, and the expenses of liquidation, and to the setting up of any
reserves for contingencies which may be necessary; and (b) second, in
accordance with the Holders' positive Book Capital Account balances after
adjusting Book Capital Accounts for certain allocations provided in the
Declaration of Trust and in accordance with the requirements described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(b) (2). Notwithstanding the
foregoing, if the Trustees shall determine that an immediate sale of part
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or all of the assets of the Portfolio would cause undue loss to the
Holders, the Trustees, in order to avoid such loss, may, after having
given notification to all the Holders, to the extent not then prohibited
by the law of any jurisdiction in which the Portfolio is then formed or
qualified and applicable in the circumstances, either defer liquidation of
and withhold from distribution for a reasonable time any assets of the
Portfolio except those necessary to satisfy the Portfolio's debts and
obligations or distribute the Portfolio's assets to the Holders in
liquidation. Interests in the Portfolio have no preference, preemptive,
conversion or similar rights and are fully paid and nonassessable, except
as set forth below. Interests in the Portfolio may not be transferred.
Certificates representing an investor's interest in the Portfolio are
issued only upon the written request of a Holder.
Each Holder is entitled to vote in proportion to the amount of
its interest in the Portfolio. Holders do not have cumulative voting
rights. The Portfolio is not required and has no current intention to hold
annual meetings of Holders but the Portfolio will hold meetings of Holders
when in the judgment of the Portfolio's Trustees it is necessary or
desirable to submit matters to a vote of Holders at a meeting. Any action
which may be taken by Holders may be taken without a meeting if Holders
holding more than 50% of all interests entitled to vote (or such larger
proportion thereof as shall be required by any express provision of the
Declaration of Trust of the Portfolio) consent to the action in writing
and the consents are filed with the records of meetings of Holders.
The Portfolio's Declaration of Trust may be amended by vote of
Holders of more than 50% of all interests in the Portfolio at any meeting
of Holders or by an instrument in writing without a meeting, executed by a
majority of the Trustees and consented to by the Holders of more than 50%
of all interests. The Trustees may also amend the Declaration of Trust
(without the vote or consent of Holders) to change the Portfolio's name or
the state or other jurisdiction whose law shall be the governing law, to
supply any omission or cure, correct or supplement any ambiguous,
defective or inconsistent provision, to conform the Declaration of Trust
to applicable Federal law or regulations or the requirements of the
Internal Revenue Code, or to change, modify or rescind any provision,
provided that such change, modification or rescission is determined by the
Trustees to be necessary or appropriate and not to have a materially
adverse effect on the financial interests of the Holders. No amendment of
the Declaration of Trust which would change any rights with respect to any
Holder's interest in the Portfolio by reducing the amount payable thereon
upon liquidation of the Portfolio may be made, except with the vote or
consent of the Holders of two-thirds of all interests. References in the
Declaration of Trust and in Part A or this Part B to a specified
percentage of, or fraction of, interests in the Portfolio, means Holders
whose combined Book Capital Account balances represent such specified
percentage or fraction of the combined Book Capital Account balance of
all, or a specified group of, Holders.
The Portfolio may merge or consolidate with any other
corporation, association, trust or other organization or may sell or
B - 17
<PAGE>
exchange all or substantially all of its assets upon such terms and
conditions and for such consideration when and as authorized by the
Holders of (a) 67% or more of the interests in the Portfolio present or
represented at the meeting of Holders, if Holders of more than 50% of all
interests are present or represented by proxy, or (b) more than 50% of all
interests, whichever is less. The Portfolio may be terminated (i) by the
affirmative vote of Holders of not less than two- thirds of all interests
at any meeting of Holders or by an instrument in writing without a
meeting, executed by a majority of the Trustees and consented to by
Holders of not less than two-thirds of all interests, or (ii) by the
Trustees by written notice to the Holders.
The Portfolio is organized as a trust under the laws of the State
of New York. Investors in the Portfolio will be held personally liable for
its obligations and liabilities, subject, however, to indemnification by
the Portfolio in the event that there is imposed upon an investor a
greater portion of the liabilities and obligations of the Portfolio than
its proportionate interest in the Portfolio. The Portfolio intends to
maintain fidelity and errors and omissions insurance deemed adequate by
the Trustees. Therefore, the risk of an investor incurring financial loss
on account of investor liability is limited to circumstances in which both
inadequate insurance exists and the Portfolio itself is unable to meet its
obligations.
The Declaration of Trust further provides that obligations of the
Portfolio are not binding upon the Trustees individually but only upon the
property of the Portfolio and that the Trustees will not be liable for any
action or failure to act, but nothing in the Declaration of Trust protects
a Trustee against any liability to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Item 19. Purchase, Redemption and Pricing of Securities
Interests in the Portfolio are issued solely in private placement
transactions that do not involve any "public offering" within the meaning
of Section 4(2) of the Securities Act of 1933. See "Purchase of Interests
in the Portfolio" and "Redemption or Decrease of Interest" in Part A.
Securities listed on securities exchanges or in the NASDAQ
National Market are valued at closing sale prices. Unlisted or listed
securities for which closing sale prices are not available are valued at
the mean between the latest bid and asked prices. Securities for which
market quotations are unavailable, including any security the disposition
of which is restricted under the Securities Act of 1933, and other assets
will be appraised at their fair value as determined in good faith by or at
the direction of the Trustees of the Portfolio. Short-term obligations
maturing in sixty days or less are valued at original cost which, when
combined with amortized discount or accrued interest, approximates market.
Item 20. Tax Status
B - 18
<PAGE>
The Portfolio has been advised by tax counsel that, provided the
Portfolio is operated at all times during its existence in accordance with
certain organizational and operational documents, the Portfolio should be
classified as a partnership under the Internal Revenue Code of 1986, as
amended (the "Code"), and it should not be a "publicly traded partnership"
within the meaning of Section 7704 of the Code. Consequently, the
Portfolio does not expect that it will be required to pay any Federal
income tax.
Under Subchapter K of the Code, a partnership is considered to be
either an aggregate of its members or a separate entity depending upon the
factual and legal context in which the question arises. Under the
aggregate approach, each partner is treated as an owner of an undivided
interest in partnership assets and operations. Under the entity approach,
the partnership is treated as a separate entity in which partners have no
direct interest in partnership assets and operations. The Portfolio has
been advised by tax counsel that, in the case of a Holder that seeks to
qualify as a RIC, the aggregate approach should apply, and each such
Holder should accordingly be deemed to own a proportionate share of each
of the assets of the Portfolio and to be entitled to the gross income of
the Portfolio attributable to that share for purposes of all requirements
of Sections 851(b) and 852(b)(5) of the Code. Further, the Portfolio has
been advised by tax counsel that each Holder that seeks to qualify as a
RIC should be deemed to hold its proportionate share of the Portfolio's
assets for the period the Portfolio has held the assets or for the period
the Holder has been an investor in the Portfolio, whichever is shorter.
Investors should consult their tax advisers regarding whether the entity
or the aggregate approach applies to their investment in the Portfolio in
light of their particular tax status and any special tax rules applicable
to them.
In order to enable a Holder that is otherwise eligible to qualify
as a RIC, the Portfolio intends to satisfy the requirements of Subchapter
M of the Code relating to sources of income and diversification of assets
as if they were applicable to the Portfolio and to allocate and permit
withdrawals in a manner that will enable a Holder which is a RIC to comply
with those requirements. The Portfolio will allocate at least annually to
each Holder it'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 in a manner intended to comply with the Code and
applicable Treasury regulations. Tax counsel has advised the Portfolio
that the Portfolio's allocations of taxable income and loss should have
"economic effect" under applicable Treasury regulations.
To the extent the cash proceeds of any withdrawal (or, under
certain circumstances, such proceeds plus the value of any marketable
securities distributed to an investor) ("liquid proceeds") exceed a
Holder's adjusted basis of his interest in the Portfolio, the Holder will
generally realize a gain for Federal income tax purposes. If, upon a
B - 19
<PAGE>
complete withdrawal (redemption of the entire interest), the Holder's
adjusted basis of his interest exceeds the liquid proceeds of such
withdrawal, the Holder will generally realize a loss for Federal income
tax purposes. The tax consequences of a withdrawal of property (instead
of or in addition to liquid proceeds) will be different and will depend on
the specific factual circumstances. A Holder's adjusted basis of an
interest in the Portfolio will generally be the aggregate prices paid
therefor (including the adjusted basis of contributed property and any
gain recognized on such contribution), increased by the amounts of the
Holder's distributive share of items of income (including interest income
exempt from Federal income tax) and realized net gain of the Portfolio,
and reduced, but not below zero, by (i) the amounts of the Holder's
distributive share of items of Portfolio loss, and (ii) the amount of any
cash distributions (including distributions of interest income exempt from
Federal income tax and cash distributions on withdrawals from the
Portfolio) and the basis to the Holder of any property received by such
Holder other than in liquidation, and (iii) the Holder's distributive
share of the Portfolio's nondeductible expenditures not properly
chargeable to capital account. Increases or decreases in a Holder's share
of the Portfolio's liabilities may also result in corresponding increases
or decreases in such adjusted basis. Distributions of liquid proceeds in
excess of a Holder's adjusted basis in its interest in the Portfolio
immediately prior thereto generally will result in the recognition of gain
to the Holder in the amount of such excess.
The Portfolio's transactions in options will be subject to
special tax rules that may affect the amount, timing and character of
distributions. For example, certain positions held by the Portfolio that
substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject
to tax rules that may cause deferral of Portfolio losses, adjustments in
the holding period of Portfolio securities and conversion of short-term
into long-term capital losses.
Income from transactions in options derived by the Portfolio with
respect to its business of investing in securities will qualify as
permissible income for its Holders that are RICs under the requirement
that at least 90% of a RIC's gross income each taxable year consist of
specified types of income. However, income from the disposition by the
Portfolio of options held for less than three months will be subject to
the requirement applicable to those Holders that less than 30% of a RIC's
gross income each taxable year consist of certain short-term gains
("Short-Short Limitation").
If the Portfolio satisfies certain requirements, any increase in
value of a position that is part of a "designated hedge" will be offset by
any decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Holders that are RICs satisfy the Short-Short Limitation.
B - 20
<PAGE>
Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. The Portfolio
will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Portfolio does not so qualify, it
may be forced to defer the closing out of options beyond the time when it
otherwise would be advantageous to do so, in order for Holders that are
RICs to continue to qualify as such.
The Portfolio may be subject to foreign withholding taxes with
respect to income on certain foreign securities. These taxes may be
reduced or eliminated under the terms of an applicable U.S. income tax
treaty. The anticipated extent of the Portfolio's investment in foreign
securities is such that it is not expected that an investor that is a RIC
will be eligible to pass through to its shareholders foreign taxes paid by
the Portfolio and allocated to the investor, so that shareholders of such
a RIC will not be entitled to foreign tax credits or deductions for
foreign taxes paid by the Portfolio and allocated to the RIC. Certain
foreign exchange gains and losses realized by the Portfolio and allocated
to the RIC will be treated as ordinary income and losses. Certain uses of
foreign currency and investment by the Portfolio in certain "passive
foreign investment companies" may be limited or a tax election may be
made, if available, in order to enable an investor that is a RIC to
preserve its qualification as a RIC or to avoid imposition of a tax on
such an investor.
An entity that is treated as a partnership under the Code, such
as the Portfolio, is generally treated as a partnership under state and
local tax laws, but certain states may have different entity
classification criteria and may therefore reach a different conclusion.
Entities that are classified as partnerships are not treated as separate
taxable entities under most state and local tax laws, and the income of a
partnership is considered to be income of partners both in timing and in
character. The laws of the various states and local taxing authorities
vary with respect to the taxation of such interest income, as well as to
the status of a partnership interest under state and local tax laws, and
each holder of an interest in the Portfolio is advised to consult his own
tax adviser.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors, such as tax-exempt entities,
insurance companies and financial institutions. Investors should consult
their own tax advisers with respect to special tax rules that may apply in
their particular situations, as well as the state, local or foreign tax
consequences of investing in the Portfolio.
Item 21. Underwriters
The placement agent for the Portfolio is Eaton Vance
Distributors, Inc., which receives no compensation for serving in this
capacity. Investment companies, common and commingled trust funds and
similar organizations and entities may continuously invest in the
Portfolio.
B - 21
<PAGE>
Item 22. Calculation of Performance Data
Not applicable.
Item 23. Financial Statements
The following financial statements included herein have been
included in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing.
Portfolio of Investment as at December 31, 1994
Statement of Assets and Liabilities as at December 31, 1994
Statement of Operations for the period from the start of
business, August 1, 1994, to December 31, 1994
Statement of Changes in Net Assets for the period from the start
of business, August 1, 1994, to December 31, 1994
Supplementary Data for the period from the start of business,
August 1, 1994, to December 31, 1994
Notes to Financial Statements
Independent Auditors' Report
B - 22
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
COMMON STOCKS - 93.3%
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
BUSINESS SERVICES - 6.8%
Accustaff Inc.* 20,000 $ 277,500
Provider of specialized temporary staffing
services to major corporations.
BISYS Corp.* 40,000 885,000
Services financial institutions with
computer, administrative and marketing
support data processing services.
Danka Business Systems PLC, ADR 20,000 432,500
An independent provider of maintenance and
service for office copying machines.
FIserv Incorporated* 103,500 2,225,250
Provider of data processing services to
banks and savings institutions, benefiting
from outsourcing trend.
G&K Services, Inc. 35,000 581,875
Rents and launders uniforms and other
textile products.
-----------
$ 4,402,125
-----------
COMMUNICATIONS - 6.2%
Comcast Corp. 55,000 $ 862,812
Cable TV and cellular telephone operator.
Comcast UK Cable Partners 40,000 640,000
Operator of integrated cable television, residential telephone and business
telecommunications services in the United Kingdom.
Intelcom Group, Inc.* 17,300 229,030
Provider of alternative access
telecommunication services and
international satellite uplink teleports.
MFS Communications Co., Inc* 45,000 1,473,750
Provider of fiber-optic based
telecommunications services primarily to
businesses.
Paging Network, Inc.* 10,000 340,000
Provider of paging services in U.S.
Telephone & Data Systems, Inc. 10,000 461,250
A provider of local telephone service in
smaller communities, as well as
cellular and paging services.
-----------
$ 4,006,842
-----------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTER EQUIPMENT - 2.7%
EMC Corp. Mass. 55,000 $ 1,189,375
Manufacturer of data storage products for
midrange and mainframe computer systems.
Motorola Inc. 10,000 578,750
Leading worldwide producer of wireless
communication systems and equipment,major
manufacturer of semiconductors.
-----------
$ 1,768,125
-----------
CONSUMER SOFTWARE - 6.4%
Banyan Inc.* 70,000 $ 1,251,250
Provider of networking software products for
large, complex computer networks.
Lotus Development Corp.* 10,000 411,250
Provider of business application software
including (1-2-3), graphics (Freelance)
and communications (Notes) products.
Novell, Inc.* 70,000 1,198,750
Leading provider of network software
systems.
Silicon Graphics, Inc.* 40,000 1,235,000
Produces computer systems used for the
design analysis and simulation of three
dimensional objects.
-----------
$ 4,096,250
-----------
CONSUMER PRODUCTS - 2.2%
Sunbeam Oster, Inc. 55,000 $ 1,416,250
Manufacturer of outdoor, household, and -----------
specialty consumer products under Sunbeam
and Oster brand names.
ELECTRONICS & INSTRUMENTATION - 7.3%
Cisco Systems, Inc.* 35,000 $ 1,229,375
Manufacturer of routers that connect
computer networks.
Dallas Semiconductor Corp.* 110,000 1,828,750
Specialty semiconductor supplier focusing on
CMOS integrated circuits.
Linear Technology Corp. 15,000 742,500
Manufacturer of high performance linear
integrated circuits.
Xilinx Inc.* 15,000 888,750
Leading world-wide supplier of CMOS
programmable logic semiconductors.
-----------
$ 4,689,375
-----------
<PAGE>
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
ENTERTAINMENT - 2.5%
Carnival Corp. 60,000 $ 1,275,000
World's largest cruise ship company
operating primarily as Carnival and
Holland America cruise lines.
Gaylord Entertainment 16,000 364,000
Diversified cable entertainment/broadcasting
company focused in the country music
industry.
-----------
$ 1,639,000
-----------
ENVIRONMENTAL SERVICES - 0.4%
United Waste Systems, Inc.* 10,000 $ 250,000
Integrated provider of solid waste -----------
management services to residential,
commercial and industrial customers.
FINANCE - 7.5%
Federal National Mortgage Association 30,000 $ 2,186,250
Leading factor in the secondary mortgage
market.
Franklin Resources, Inc. 45,000 1,603,125
One of the largest mutual fund organizations
in the U.S.
T. Rowe Price Associates, Inc. 35,000 1,050,000
Investment adviser to mutual funds,
institutions and individuals.
-----------
$ 4,839,375
-----------
HEALTHCARE - 11.9%
Boston Scientific Corp.* 134,000 $ 2,328,250
Medical device manufacturer focusing
primarily on disposable products in less
invasive surgery procedures.
Genesis Health Ventures, Inc.* 35,000 1,106,875
Provider of geriatric health services.
Horizon Healthcare Corp.* 25,000 700,000
Manager of long-term care and specialty healthcare facilities focusing on
geriatric care.
Mylan Laboratories, Inc. 75,000 2,025,000
Leading manufacturer of generic drugs.
U.S. Healthcare, Inc. 15,000 618,750
Operates health management organization
serving over 1.5 million members.
Ventritex Inc.* 25,500 688,500
Developer of new generation implantable
heart defibrillator.
Vitalink Pharmacy Services, Inc.* 12,500 178,125
Provider of pharmacy services to nursing
homes and sub-acute care medical
facilities.
-----------
$ 7,645,500
-----------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS - 9.8%
J & L Specialty Steel, Inc. 40,000 $ 785,000
Manufacturer of stainless steel.
Loctite Corp. 34,400 1,599,600
International manufacturer of adhesives, sealants and related products.
Union Switch & Signal, Inc.* 45,000 613,125
Manufacturer of advanced signaling, control
and automatic systems for railroads and
transit authorities.
Wabash National Corp. 85,000 3,315,000
Manufacturer of specialy truck trailers
benefiting from innovative new products.
-----------
$ 6,312,725
-----------
INSURANCE - 7.1%
American International Group 10,000 $ 980,000
One of the world's leading insurance
companies, operating in 130 countries.
HCC Insurance Holdings, Inc.* 47,700 1,001,700
Specialty insurer focusing on complex
international markets.
Mutual Risk Management Ltd. 55,000 1,443,750
Specialty insurer focusing on workmen's
compensation.
UNUM Corp. 30,000 1,132,500
Leading provider of long-term disability
insurance.
-----------
$ 4,557,950
-----------
PUBLISHING -1.2%
Scholastic Corp.* 15,000 $ 765,000
Publisher/distributor of children's books, -----------
magazines and related educational
materials.
RESTAURANTS - 5.5%
Bertucci's Holding Corp.* 95,000 $ 1,045,000
Rapidly growing operator of Italian style
restaurants featuring wood burning brick
ovens.
Brinker International, Inc.* 70,000 1,268,750
Operator of Chili's, Grady's and other
dinnerhouse restaurants growing through
new unit expansion.
Buffets Inc.* 100,000 987,500
Chain of value-oriented Old Country Buffet
restaurants growing through new unit
expansion.
Quality Dining, Inc.* 16,900 209,138
Midwestern U.S. franchise operator of Burger
King and Chili's restaurants.
-----------
$ 3,510,388
-----------
<PAGE>
COMMON STOCKS - (Continued)
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
RETAILING - 9.3%
Ann Taylor Stores Corp.* 20,000 $ 687,500
Specialty retailer of better quality women's
apparel, shoes and accessories.
Consolidated Stores Corp.* 95,000 1,769,375
Chain of close-out merchandise stores
operating primarily under the Odd/Big Lots
name.
Gap (The) Inc. 25,000 762,500
Specialty apparel retailer offering high-
quality, modestly priced private-label
sportswear under six brand names.
Home Depot Inc. 35,000 1,610,000
Operator of a chain of retail warehouse-type
stores selling building supply and home
improvement products.
Michaels Stores Inc.* 30,000 1,042,500
Leading arts and crafts retailer in the U.S.
Sports Authority (The)* 6,600 138,600
Largest operator of large-format sporting
goods stores in the United States.
-----------
$ 6,010,475
-----------
SPECIALTY CHEMICALS - 2.9%
Great Lakes Chemical Corp. 20,000 $ 1,140,000
Leading producer of flame retardant and
specialty intermediate chemicals.
Millipore Corp. 15,000 725,625
Manufacturer of membrane technology products
used for chemical analysis and
purification.
-----------
$ 1,865,625
-----------
TRANSPORTATION - 3.6%
Greenbrier Companies,Inc. 45,500 $ 750,750
Leading manufacturer of intermodal railcars
used to transport container freight.
M.S. Carriers, Inc.* 40,000 870,000
Irregular route truckload carrier.
Werner Enterprises, Inc. 30,000 708,750
Nationwide truckload transportation carrier.
-----------
$ 2,329,500
-----------
TOTAL COMMON STOCKS
IDENTIFIED COST, $49,823,351) $60,104,505
-----------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
- --------------------------------------------------------------------------------
PREFERRED STOCK - 0.1%
- --------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
Concentric Data Systems, Inc.
1983 Class B Pfd.+
Software company providing data management
programs for microcomputers. 43,750 $ 87,500
------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST, $175,000) $ 87,500
------------
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 6.9%
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000
OMITTED)
- --------------------------------------------------------------------------------
CXC Inc., 5.95s, 1/3/95 $2,958 $ 2,956,842
General Electric Capital Corp., 5.82s, 1/9/95 1,485 1,483,080
-----------
TOTAL SHORT-TERM OBLIGATIONS, AT
AMORTIZED COST $ 4,439,922
-----------
TOTAL INVESTMENTS (IDENTIFIED COST,
$54,438,273) $64,631,927
OTHER ASSETS, LESS LIABILITIES - (0.3%) $ (189,555)
-----------
TOTAL NET ASSETS - 100% $64,442,372
===========
*Non-income producing security.
+Not readily marketable security.
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$54,438,273) $64,631,927
Cash 1,875
Dividends receivable 28,262
Deferred organization expenses (Note 1D) 14,476
-----------
Total assets $64,676,540
LIABILITIES:
Payable for investments purchased $229,889
Custodian fee payable 1,929
Accrued expenses 2,350
--------
Total liabilities 234,168
-----------
NET ASSETS applicable to investors' interest
in Portfolio $64,442,372
===========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $54,248,718
Unrealized appreciation of investments (identified
cost) 10,193,654
-----------
Total net assets $64,442,372
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period from the start of business,
August 1, 1994, to December 31, 1994
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income $ 130,332
Interest income 133,617
----------
Total income 263,949
Expenses --
Investment adviser fee (Note 3) $ 175,012
Custodian fee (Note 3) 20,710
Legal and accounting 8,231
Registration fees 2,642
Amortization of organization expenses (Note 1D) 1,196
Printing 173
Miscellaneous 348
----------
Total expenses 208,312
----------
Net investment income 55,637
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (identified cost
basis) $ (986,284)
Change in unrealized appreciation on investments 4,288,639
----------
Net realized and unrealized gain on
investments 3,302,355
----------
Net increase in net assets resulting from operations $3,357,992
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the period from the start of business,
August 1, 1994, to December 31, 1994
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 55,637
Net realized loss on investment transactions (986,284)
Increase in unrealized appreciation of investments 4,288,639
------------
Net increase in net assets from operations $ 3,357,992
------------
Capital transactions--
Contributions $104,495,403
Withdrawals (43,411,023)
------------
Increase in net assets resulting from capital transactions $ 61,084,380
------------
Total increase in net assets $ 64,442,372
NET ASSETS:
At beginning of period --
------------
At end of period $ 64,442,372
============
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
RATIOS (As a percentage of average net assets):
Expenses 0.74%+
Net investment income 0.20%+
PORTFOLIO TURNOVER 19%
+Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements
<PAGE>
(1) SIGNIFICANT ACCOUNTING POLICIES
Special Investment Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a diversified open-end investment company which was
organized as a trust under the laws of the State of New York on May 1, 1992. The
Declaration of Trust permits the Trustees to issue beneficial interests in the
Portfolio. Investment operations began on August 1, 1994, with the acquisition
of net assets of $69,001,817 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. SECURITY VALUATIONS -- Investments in securities traded on a national
securities exchange or in the NASDAQ National Market are valued on the basis of
the last reported sales prices on the last business day of the period. If no
sale is reported on that date, a security is valued, if quoted on such a day, at
not lower than the old bid price nor higher than the asked prices. Prices on
such exchanges will not be used for valuing debt securities if in the Trustees
judgment, some other valuation method more accurately reflects the fair market
value of such a security. Securities for which over-the-counter market
quotations are readily available are valued on the basis of the mean between the
last bid and asked prices. Short-term securities are valued at cost, which
approximates market value. All other securities and assets are appraised to
reflect their fair value as determined in good faith by the Trustees.
B. 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 investors' distributive
share of the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
C. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
- --------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregrated $11,947,002 and $14,500,376, respectively.
- --------------------------------------------------------------------------------
(3) 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 at the annual
rate of 5/8 of 1% of average daily net assets. For the period from the start of
business, August 1, 1994 to December 31, 1994, the fee amounted to $175,012.
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. Investors Bank & Trust Company
(IBT), an affiliate of EVM and BMR, serves as custodian of the Portfolio.
Pursuant to the custodian agreement, IBT receives a fee reduced by credits which
are determined based on the average daily cash balances the Portfolio maintains
with IBT. Certain of the officers and Trustees of the Portfolio are officers and
directors/trustees of the above organizations.
- --------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement with
a bank. The line of credit consists of $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 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 funds and portfolios
at the end of each quarter. The Portfolio did not have any significant
borrowings or allocated fees during the period. At December 31, 1994, the Fund
did not have an outstanding balance pursuant to the line of credit.
- --------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1994, as computed on a federal income tax basis, are as
follows:
Aggregate cost $54,436,173
===========
Gross unrealized appreciation $12,351,693
Gross unrealized depreciation 2,158,039
-----------
Net unrealized appreciation $10,193,654
===========
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Investors of
Special Investment Portfolio:
We have audited the accompanying statement of assets and liabilities of Special
Investment Portfolio, including the portfolio of investments, as of December 31,
1994, the related statement of operations, changes in net assets and
supplementary data for the period from August 1, 1994 (start of business) to
December 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 audit 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 December 31, 1994 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 audit provides 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
Special Investment Portfolio as of December 31, 1994, the results of its
operations, changes in its net assets and supplementary data for the period from
August 1, 1994 (start of business) to December 31, 1994, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The Financial statements called for by this Item are included in
Part B and listed in Item 23 hereof.
(b) Exhibits
1. Declaration of Trust dated May 1, 1992, filed as Exhibit No.
1 to the original Registration Statement and incorporated herein
by reference.
2. By-Laws of the Registrant dated May 1, 1992, filed as Exhibit
No. 2 to the original Registration Statement and incorporated
herein by reference.
5. Form of Investment Advisory Agreement between the Registrant
and Boston Management and Research, filed as Exhibit No. 5 to the
original Registration Statement and incorporated herein by
reference.
6. Form of Placement Agent Agreement with Eaton Vance
Distributors, Inc., filed as Exhibit No. 6 to the original
Registration Statement and incorporated herein by reference.
8. Form of Custodian Agreement with Investors Bank & Trust
Company, filed as Exhibit No. 8 to the original Registration
Statement and incorporated herein by reference.
13. Investment representation letter of Eaton Vance Special
Investment Trust, on behalf of Eaton Vance Special Equities Fund,
filed as Exhibit No. 13 to the original Registration Statement
and incorporated herein by reference.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
C - 1
<PAGE>
Item 26. Number of Holders of Securities
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
As of March 31, 1995
Interests 3
Item 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration of
Trust, filed as an Exhibit herewith.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser are insured under an errors and omissions
liability insurance policy. The Registrant and its officers are also
insured under the fidelity bond required by Rule 17g-1 under the
Investment Company Act of 1940.
Item 28. Business and Other Connections
To the knowledge of the Portfolio, none of the trustees or officers of the
Portfolio's investment adviser, except as set forth on its Form ADV as
filed with the Securities and Exchange Commission, is engaged in any other
business, profession, vocation or employment of a substantial nature,
except that certain trustees and officers also hold various positions
with and engage in business for affiliates of the investment adviser.
Item 29. Principal Underwriters
Not applicable.
Item 30. Location of Accounts and Records
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and
the Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 24 Federal Street,
Boston, MA 02110 and 89 South Street, Boston, MA 02111, and its transfer
agent, The Shareholder Services Group, Inc., 53 State Street, Boston, MA
02104, with the exception of certain corporate documents and portfolio
trading documents which are in the possession and custody of the
Registrant's investment adviser at 24 Federal Street, Boston, MA 02110.
The Registrant is informed that all applicable accounts, books and
documents required to be maintained by registered investment advisers are
in the custody and possession of the Registrant's investment adviser.
C - 2
<PAGE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
C - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
the Registrant has duly caused this Amendment to the Registration
Statement on Form N-1A to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston and Commonwealth of
Massachusetts on the 27th day of April, 1995.
SPECIAL INVESTMENT PORTFOLIO
By /s/ JAMES B. HAWKES
------------------------
James B. Hawkes
President
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
1. Declaration of Trust dated May 1, 1992, filed as Exhibit No. 1
to the original Registration Statement and incorporated herein by
reference.
2. By-Laws of the Registrant dated May 1, 1992, filed as Exhibit
No. 2 to the original Registration Statement and incorporated herein
by reference.
5. Form of Investment Advisory Agreement between the Registrant and
Boston Management and Research, filed as Exhibit No. 5 to the
original Registration Statement and incorporated herein by
reference.
6. Form of Placement Agent Agreement with Eaton Vance Distributors,
Inc., filed as Exhibit No. 6 to the original Registration Statement
and incorporated herein by reference.
8. Form of Custodian Agreement with Investors Bank & Trust Company,
filed as Exhibit No. 8 to the original Registration Statement and
incorporated herein by reference.
13. Investment representation letter of Eaton Vance Special
Investment Trust, on behalf of Eaton Vance Special Equities Fund,
filed as Exhibit No. 13 to the original Registration Statement and
incorporated herein by reference.
<PAGE>
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<NAME> SPECIAL INVESTMENT PORTFOLIO
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