<PAGE>
TO SHAREHOLDERS
During the six months ended June 30, 1996, EV Marathon Stock Fund had a total
return of 7.5%. This return reflected an increase in net asset value to $13.10
per share from $12.25 per share, and the reinvestment of $0.045 in dividend
income and $0.022 in capital gain distributions.
By comparison, the Standard & Poors 500 Index, an unmanaged index of common
stocks, had a total return of 10.1%, and the Lipper Growth and Income Fund
Index, an unmanaged index of 30 growth and income mutual funds, had a total
return of 8.7% during the same period.*
The most salient characteristic of the stock market during the first half of
1996 was an increase in volatility, which may have resulted from two major
investor concerns. First, the market has not seen a significant correction since
1990, and recently completed its seventh straight quarter of positive
performance. Second, the U.S. economy is currently in its sixth year of
expansion, and some believe that a continuing strong economy will lead to an
increase in inflation.
Higher inflation is a nemesis of the stock market because it causes concern that
the Federal Reserve will raise interest rates to slow the economy and avert the
inflationary threat. Higher interest rates, in turn, can divert funds away from
the stock market into fixed-income securities.
Although the stock market overall has been more volatile than normal, the large
capitalization, blue-chip stocks in which this fund typically invests have not
been as affected as the smaller, more-speculative stocks. Many consider this
"shake-out" among smaller company stocks a healthy reaction to some recent
market excesses, which include unrealistically high valuations of Internet
stocks, heavy volume of initial public offerings (IPOs), and a large flow of
public money into aggressive stock mutual funds.
- ---------------------------------------------------
EV MARATHON STOCK FUND
Ten largest common stock holdings, by market value,
as of 6/30/96
Company Industry
Eastman Kodak Co. ...........Photographic Products
Xerox Corporation............Imaging/Technology
Conagra, Inc. ...............Agriculture/Foods
PepsiCo, Inc. ...............Beverages
Nokia Corp. .................Telecommunications
American Int'l. Corp. .......Insurance/Financial
Anadarko Petroleum Corp. ....Oil & Gas Exploration
Allstate Corporation.........Insurance/Financial
Rayonier, Inc. ..............Forest Products
MGIC Investment..............Investments/Financial
- ---------------------------------------------------
The recent volatility in the stock market underscores the importance of
investing for the long-term. Although past performance is no guarantee of future
results, an investment over time in a diversified group of quality growth and
income-producing stocks has proven to yield sound returns. This remains the
strategy of EV Marathon Stock Fund.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
August 5, 1996
- ---------------------------------------------------------------------------
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are
subject to investment risks, including possible loss of principal invested.
- ---------------------------------------------------------------------------
*It is not possible to invest directly in these indexes.
<PAGE>
MANAGEMENT REPORT
An interview with Duncan W. Richardson, Vice President and Portfolio Manager of
the Stock Portfolio.
Q. DUNCAN, HOW WOULD YOU DESCRIBE THE STOCK MARKET IN THE PAST SIX MONTHS?
A. The market has extended the strong performance that it exhibited throughout
1995. The six-month return is above average historically, but is in line
with what we have seen for the recent decade. The final quarter of 1995 and
the first half of 1996 have been volatile for some sectors of the market,
such as technology and interest-sensitive stocks, and the major indexes have
not revealed this underlying volatility. There has also been an abnormally
high volume of initial public offerings (IPO's) and secondary offerings.
Finally, there has been a huge flow of money into equity mutual funds, which
has been a big factor in the positive performance of the market.
The IPO activity has been a little unnerving because many of these companies
are in a less mature state than companies that were raising money in the
stock market in the late '80s and early '90s. I hope some of these excesses
can work themselves out without affecting the overall market, which was the
case when technology stocks corrected last year.
Q. DID ANY INVESTMENT OPPORTUNITIES STAND OUT IN THIS PERIOD?
A. Yes. Intel is a good example. A year ago it was the largest position in the
Portfolio and Ithought it was overpriced. It was caught up in the
high-priced technology sector, and the price rose to $80 a share. We sold
some at that level, and then took advantage of the stock's subsequent
decline and bought more in the $50s. That is a good example of active
management of a core holding in the Portfolio, where we took profits when
the price was high, and then opportunistically bought it back when it
dropped.
As interest rates have increased, we have bought some financial stocks such
as American International Group, which over-corrected and I think will
continue to grow regardless of the U.S. interest rate environment. We have
also bought some additional bank stocks to add more income to the Portfolio.
Q. WHAT DO YOU FIND ATTRACTIVE ABOUT KODAK AND OMNICOM, TWO COMPANIES IN WHICH
YOU HAVE LARGE HOLDINGS?
A. Kodak is a great worldwide brand. George Fisher, the relatively new CEO from
Motorola, is shedding businesses that are not related to images and focusing
on growing the core business. Kodak also has great growth opportunities
internationally and should do well in China and other emerging markets. The
company is valued reasonably at its current price, and is not really tied to
the economic cycle. I am very excited about the new "Advantix" product,
which will roll out this Fall for the holiday season. It is projected to be
one of the most successful consumer product launches ever.
Omnicom has done well since we added shares, but now we are trimming it back
a bit and taking some profits. The last three years have been one of the
best periods ever for advertising agencies. I'm bullish on the long-term
case for advertising growth worldwide, but we are now reaching a cyclical
peak in the United States. The Olympics and the election this year represent
a quadrennial peak in advertising, so I suspect that in a year earnings will
be somewhat sluggish.
Q. YOU HAVE ALSO ADDED NOKIA - WHAT DO YOU LIKE ABOUT THIS COMPANY?
A. I like the telecommunications industry because there is tremendous growth
potential. Deregulation - in the U.S. and abroad - has created a massive
building of infrastructure for cellular and other wireless technologies,
such as personal communications systems (PCS). Nokia had an earnings
shortfall which caused the stock to fall from $78 to the low $30s. That
correction was more than what was justified by the fundamentals, so again we
were opportunistic buyers. Nokia is not as well-covered by analysts, but it
is a great growth company and represents our major pick in the wireless
area.
<PAGE>
Q. WHAT OTHER SECTORS DO YOU FIND ATTRACTIVE NOW?
A. Technology has been very weak, and I am always drawn to this industry
because it is one of the major growth industries of the future. I prefer the
service companies, such as Automatic Data, and am increasing holdings in
computer service and outsourcing firms. Another growing area is health care,
and Columbia Healthcare, a hospital management company, is a leader in that
sector. For long-term growth, I like airline manufacturing, which does not
follow the typical economic cycles. Instead, the industry follows product
replacement cycles that tend to be 20-to-30 years in length. Industry leader
Boeing saw its stock price fall recently to the $70s from the mid-$80s,
largely because of symbolic dispute with China. However, this dispute is
short-term in nature, which created a long-term investment opportunity.
Having passed the low point in its production cycle, the outlook for Boeing
is up and we are looking for a long period of rising production and
earnings.
Q. IS THE PORTFOLIO POSITIONED TO YOUR LIKING VIS-A-VIS THE CURRENT ECONOMIC
CLIMATE?
A. I tend to weight the sectors on the basis of individual stock valuations and
industry trends, rather than my current economic views. I am concerned that
some earnings estimates have been too high, which is why I reduced our
exposure to capital goods stocks during the first quarter of this year. I
have increased our weighting in financials because that industry represents
one of the few attractive sources of yield. As I have mentioned before, the
portfolio can be viewed as a barbell with growth on one end and income on
the other. For income, I generally buy convertible securities, utilities
(telephone and electric), some oil companies, real estate investment trusts
(REITs) and financial companies. I have seen more capital appreciation
opportunities recently than yield/total return opportunities, and I've
deemphasized the income component somewhat.
Q. WHAT ARE YOUR CURRENT FEELINGS ABOUT THE ECONOMY AND THE INFLATION THREAT?
A. I personally feel that the economy will slow in the latter part of the year.
A lot of the recent surge in the consumer economy resulted from abnormally
high and early tax refunds this year. That will go away during the summer.
Also, consumer debt is high, and it has been that way for awhile. Consumers
are very stretched financially, and this is starting to show up in the
delinquencies on debt payments. Consumer spending, which makes up two-thirds
of the economy, has to slow down at some point and when this happens,
economic growth should also slow down.
Q. WOULD YOU VIEW A MARKET CORRECTION AS A HEALTHY EVENT?
A. The overall valuation level in the market is certainly an issue. If economic
growth does slow, that will affect earnings which means that the market at
this level is too high. I'm not forecasting a recession, but there is
certainly potential for a slowdown. A market correction would not only work
out the excesses, but would also get valuations back into a more reasonable
alignment with earnings. Our management style, however, is not to time the
market, but to assess the best risk-reward trade-offs in any given market
condition.
Q. WHAT ARE THE BEST REASONS TO OWN SHARES IN THIS FUND?
A. This Fund allows shareholders to participate in the wealth-building effect
of the U.S. equity market. The combination of growth and income represents a
rational approach to taking on risk. A pure growth fund will have more
volatility because there is no income or yield support. This Fund is managed
with a discipline that seeks to benefit from some of the short-term
fluctuations in the market, and provide opportunities for any market
environment. It can be summarized as equity market exposure with a strong
management and valuation discipline.
<PAGE>
EV MARATHON STOCK FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investment in Stock Portfolio (Portfolio), at value (Note 1A) $10,290,238
Receivable for Fund shares sold 102,637
Receivable from administrator (Note 6) 14,182
Deferred organization expenses (Note 1E) 29,640
-----------
Total assets $10,436,697
LIABILITIES:
Payable for Fund shares redeemed $ 2,899
Payable to affiliate --
Trustees' fees 45
Accrued expense 12,438
-------
Total liabilities 15,382
-----------
NET ASSETS for 795,714 shares of beneficial interest
outstanding $10,421,315
===========
SOURCES OF NET ASSETS:
Proceeds from sales of shares (including shares issued
to shareholders electing to receive payment of
distributions in shares), less cost of
shares redeemed $ 9,041,206
Unrealized appreciation of investments 637,585
Accumulated net realized gain on investments 736,967
Undistributed net investment income 5,557
-----------
Total net assets $10,421,315
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($10,421,315 / 795,714 shares of beneficial interest) $13.10
======
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of
withholding taxes of $523) $116,376
Interest income allocated from Portfolio 13,884
Expenses allocated from Portfolio (32,319)
--------
Total investment income $ 97,941
Expenses --
Compensation of Trustees not members of the
Investment Adviser's organization (Note 6) $ 102
Custodian fees (Note 1C) 1,748
Distribution fees (Note 4) 35,218
Transfer and dividend disbursing agent fees 6,332
Printing and postage 12,209
Legal and accounting services 4,104
Registration fees 14,864
Amortization of organization expenses (Note 1E) 4,550
Miscellaneous 4,375
--------
Total expenses $ 83,502
Deduct --
Preliminary allocation of expenses to the
administrator (Note 6) 14,182
--------
Net expenses 69,320
--------
Net investment income $ 28,621
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (identified cost basis) --
Investment transactions $727,805
Written option transactions 10,426
--------
Net realized gain on investment transactions $738,231
Change in unrealized depreciation of investments (95,147)
--------
Net realized and unrealized gain on investments $643,084
--------
Net increase in net assets resulting from operations $671,705
========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------- -----------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 28,621 $ 26,235
Net realized gain from Portfolio 738,231 118,270
Change in unrealized appreciation from
Portfolio (95,147) 749,420
----------- ----------
Net increase in net assets resulting from
operations $ 671,705 $ 893,925
----------- ----------
Distributions to shareholders --
From net investment income $ (28,621) $ (19,603)
In excess of net investment income (851) --
From net realized gains on investments (15,737) (107,649)
----------- ----------
Total distributions to shareholders $ (45,209) $ (127,252)
----------- ----------
Net increase in net assets from Fund share
transactions (Note 2) $ 2,458,640 $5,503,696
----------- ----------
Net increase in net assets $ 3,085,136 $6,270,369
NET ASSETS:
At beginning of period 7,336,179 1,065,810
----------- ----------
At end of period (including undistributed net
investment income of $5,557 and $6,408,
respectively) $10,421,315 $7,336,179
=========== ==========
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 -----------------------
(UNAUDITED) 1995 1994*
------------- --------- ----------
NET ASSET VALUE -- beginning of period $12.250 $ 9.610 $10.000
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) $ 0.041 $ 0.060 $(0.010)
Net realized and unrealized gain
(loss) on investments 0.876 2.815 (0.380)
------- ------- -------
Total income (loss) from
investment operations $ 0.917 $ 2.875 $(0.390)
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.041) $(0.036) $ --
In excess of net investment income (0.004) -- --
From net realized gain on
investments (0.022) (0.199) --
------- ------- -------
Total distributions $(0.067) $(0.235) $ --
------- ------- -------
NET ASSET VALUE -- end of period $13.100 $12.250 $ 9.610
======= ======= =======
TOTAL RETURN(2) 7.52% 29.98% (3.90%)
RATIOS/SUPPLEMENTAL DATA:
(to average daily net assets)***
Expenses(1) 2.29%+ 2.32% 3.25%+
Net investment income 0.65%+ 0.71% (0.74%)+
NET ASSETS AT END OF PERIOD (000'S OMITTED) $10,421 $ 7,336 $ 1,066
Note: Certain per share amounts have been calculated using average shares
outstanding during the period.
+Computed on an annualized basis.
*For the period from the start of business, August 17, 1994, to December 31,
1994.
(1)Includes the Fund's share of Stock Portfolio's allocated expenses.
(2)Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the record date. Total return is not computed on
an annualized basis.
***The expenses related to the operation of the Fund reflect an allocation of
expenses to the administrator. Had such action not been taken, net
investment income (loss) per share and the ratios would have been as follows:
NET INVESTMENT INCOME (LOSS) PER SHARE $ 0.022 $(0.022) $(0.016)
RATIOS (to average daily net assets):
Expenses 2.61%+ 3.66% 3.81%+
Net investment income (loss) 0.33%+ (0.63%) (0.18%)+
The accompanying notes are an integral part of the financial statements
<PAGE>
---------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Stock Fund (the Fund), a Massachusetts business trust, is registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end, management investment company. The Fund is a series in the Eaton Vance
Special Investment Trust. The Fund invests all of its investable assets in
interests in the Stock Portfolio (the Portfolio), a New York Trust, having the
same investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio (9.0% at June 30, 1996). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the portfolio of investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATIONS -- Valuations of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund.
C. EXPENSE REDUCTION -- The Fund has entered into an arrangement with its
custodian agent whereby interest earned on uninvested cash balances are used to
offset custody fees. All significant reductions are reported as a reduction of
expenses in the Statement of Operations.
D. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments, option and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary.
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization, are being amortized on the straight-line basis over five
years.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Distributions to shareholders are recorded
on the ex-dividend date. Gains or loss on the sale of investments is
determined on the identified cost basis.
G. DISTRIBUTIONS -- Generally accepted accounting principles require that
differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. The tax treatment of distributions for the calendar year will be reported
to shareholders prior to February 1, 1997 and will be based on tax accounting
methods which may differ from amounts determined for financial statement
purposes.
H. USE OF ESTIMATES -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
I. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to
June 30, 1996 and for the six month period then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
- ------------------------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Sales 366,376 $4,579,646 681,373 $7,710,688
Issued to shareholders
electing to receive payment
of distribution in Fund
shares 3,171 39,068 9,235 111,558
Redemptions (172,808) (2,160,074) (202,565) (2,318,550)
------- ---------- ------- ----------
Net increase 196,739 $2,458,640 488,043 $5,503,696
======= ========== ======= ==========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$3,698,150 and $1,985,911, respectively.
- ------------------------------------------------------------------------------
(4) DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the Plan) pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The Plan requires the Fund to accrue amounts
daily to the principal underwriter, Eaton Vance Distributors, Inc. (EVD),
amounts equal to 1/365th of 0.75% of the Fund's daily net assets, for providing
ongoing distribution services and facilities to the Fund. The Fund will
automatically discontinue accruals to EVD during any period in which there are
no outstanding Uncovered Distribution Charges, which are equivalent to the sum
of (i) 5% of the aggregate amount received by the Fund for shares sold plus,
(ii) distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD,
reduced by the aggregate amount of contingent deferred sales charges (see Note
5) and amounts theretofore paid to EVD.
The amount payable to EVD with respect to each day is accrued on such day
as a liability of the Fund and, accordingly, reduces the Fund's net assets. Such
payments would cease upon termination of the distribution agreement (unless made
in accordance with another distribution agreement). As a result, the Fund does
not accrue amounts which may become payable to EVD in the future because the
conditions for recording any contingent liability under generally accepted
accounting principles have not been satisfied. EVD earned $33,181 for the six
months ended June 30, 1996 representing 0.75% of average daily net assets. At
June 30, 1996, the amount of Uncovered Distribution Charges of EVD calculated
under the Plan was approximately $290,620.
In addition, the Plan authorizes the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for each fiscal year. The
Trustees of the Fund have implemented the Plan by authorizing the Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.25% of the Fund's average daily net
assets for each fiscal year based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months. During the six
months ended June 30, 1996, the Fund provided for $2,037 under the Plan to the
Principal Underwriter and Authorized Firms. Service fees are separate and
distinct from the sales commissions and distribution fees payable by the Fund to
EVD, and, as such, are not subject to automatic discontinuance where there are
no outstanding Uncovered Distribution Charges of EVD.
Certain of the officers of the Fund and Directors of the Corporation are
officers and directors of EVD.
- ------------------------------------------------------------------------------
(5) CONTINGENT DEFERRED SALES CHARGE (CDSC)
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital gain
distributions. The CDSC is imposed at declining rates that begin at 5% in the
first and second year of redemption after purchase, declining one percentage
point each year. No CDSC is levied on shares which have been sold to EVM or its
affiliates or to their respective employees or clients. CDSC charges are paid to
EVD to reduce the amount of Uncovered Distribution Charges calculated under the
Fund's Distribution Plan. CDSC charges received when no Uncovered Distribution
charges exist will be retained by the Fund. EVD received approximately $20,265
of CDSC paid by shareholders for the six months ended June 30, 1996.
- ------------------------------------------------------------------------------
(6) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Eaton Vance serves only as the administrator of the Fund, but receives no
compensation. The administrator assumed $14,182 of the Funds' expenses on a
preliminary basis for the six months ended June 30, 1996. The Portfolio has
engaged Boston Management and Research (BMR), a subsidiary of Eaton Vance
Management (EVM), to render investment advisory services. See Note 3 of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report. Except as to Trustees of the Fund and the Portfolio who are not members
of EVM's or BMR's organization, officers and Trustees receive remuneration for
their services to the Fund out of such investment adviser fee.
Certain of the officers and Trustees of the Fund and Portfolio are officers
and directors/trustees of the above organizations.
<PAGE>
--------------------------------------
STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
COMMON STOCKS -- 89.4%
- ------------------------------------------------------------------------------
SHARES SECURITY VALUE
- ------------------------------------------------------------------------------
ADVERTISING - 1.6%
40,000 Omnicom Group $ 1,860,000
------------
AEROSPACE - 1.9%
25,000 Boeing Co. $ 2,178,125
------------
BANKS - 4.9%
40,000 Bank of Boston Corp. $ 1,980,000
29,332 Citicorp 2,423,557
26,766 Fleet Financial Group, Inc. 1,164,321
------------
$ 5,567,878
------------
BROADCASTING - 2.3%
140,000 Comcast Corp. Class A $ 2,590,000
------------
BUSINESS PRODUCTS & SERVICES - 1.4%
35,000 Crown Cork & Seal Inc. $ 1,575,000
------------
CHEMICALS - 0.3%
5,000 DuPont (E.I.) deNemours & Co., Inc. $ 395,625
------------
COMPUTER & BUSINESS EQUIPMENT - 3.8%
10,000 Bay Networks, Inc. $ 257,500
75,000 Xerox Corp. 4,012,500
------------
$ 4,270,000
------------
COMPUTER SERVICES - 1.2%
35,000 Automatic Data Processing, Inc. $ 1,351,875
------------
CONSUMER GOODS & SERVICES - 15.1%
86,063 Conagra Inc. $ 3,905,108
25,000 Duracell International, Inc. 1,078,125
62,500 Eastman Kodak Co. 4,859,375
50,000 Heinz, H. J. Co. 1,518,750
25,000 International Flavors & Fragrances 1,190,625
100,000 PepsiCo, Inc. 3,537,500
12,100 Procter & Gamble Co. 1,096,563
------------
$ 17,186,046
------------
ENERGY - 9.0%
50,000 Anadarko Petroleum Corp. $ 2,900,000
27,000 Exxon Corp. 2,345,625
52,000 J & L Specialty Steel, Inc. 773,500
45,000 Triton Energy Ltd. 2,188,125
90,000 YPF Sociedad Anonima Class D ADR 2,025,000
------------
$ 10,232,250
------------
ENTERTAINMENT & LEISURE - 2.9%
40,000 ITT Corp. $ 2,650,000
20,000 Promus Hotel Corp. 592,500
------------
$ 3,242,500
------------
FINANCE & INSURANCE - 13.5%
63,540 Allstate Corp. $ 2,899,012
30,000 American International Group 2,958,750
80,000 Federal National Mortgage Association 2,680,000
15,000 Marsh & McLennan Cos., Inc. 1,447,500
50,000 MGIC Investment Corp. Wisc. 2,806,250
55,000 Progressive Corp. 2,543,750
------------
$ 15,335,262
------------
FOREST PRODUCTS - 2.5%
75,000 Rayonier Inc. $ 2,850,000
------------
HEALTHCARE - 7.4%
20,000 Astra AB A Shares $ 875,000
30,000 Astra AB B Shares 1,306,608
50,000 Columbia/HCA Healthcare Corp. 2,668,750
20,000 Johnson & Johnson Co. 990,000
58,000 Pharmacia & Upjohn Inc. 2,573,750
------------
$ 8,414,108
------------
HOUSING - 1.3%
50,000 Newell Co. $ 1,531,250
------------
PUBLISHING - 3.5%
30,000 Dow Jones & Co., Inc. $ 1,252,500
60,000 McGraw-Hill, Inc. 2,745,000
------------
$ 3,997,500
------------
REITS - 4.5%
30,000 Beacon Properties Corp. $ 768,750
20,000 Equity Residential Properties Trust 657,500
20,000 Highwood Properties, Inc. 552,500
40,000 Nationwide Health Properties, Inc. 845,000
10,000 Post Properties, Inc. 353,750
18,000 Redwood Trust, Inc. 504,000
20,000 ROC Communities, Inc. 477,500
20,000 Sun Communities, Inc. 537,500
14,200 Trinet Corporate Realty Trust, Inc. 411,800
------------
$ 5,108,300
------------
RETAIL - 2.4%
45,000 Melville Corp. $ 1,822,500
20,000 Sears Roebuck & Co. 972,500
------------
$ 2,795,000
------------
SEMICONDUCTORS - 2.3%
35,000 Intel Corp. $ 2,570,313
------------
TELECOMMUNICATIONS - 4.5%
10,000 Ameritech Corp. $ 593,750
25,000 AT&T Corp. 1,550,000
80,000 Frontier Corp. 2,450,000
10,000 SBC Communications, Inc. 492,500
------------
$ 5,086,250
------------
TELECOMMUNICATIONS
EQUIPMENT - 3.1%
95,000 Nokia Corp. $ 3,515,000
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $83,298,651) $101,652,282
------------
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 5.2%
- -------------------------------------------------------------------------------
10,000 Ford Motor Co., 8.4s $ 1,060,000
140,000 Freeport McMoRan Copper & Gold, 5% 3,815,000
10,000 Tejas Gas Corp., 5.25s 500,000
10,000 Valero Energy Corp., 6.5s 525,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST, $4,782,860) $ 5,900,000
------------
- -------------------------------------------------------------------------------
CONVERTIBLE BONDS - 2.9%
- ------------------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED) SECURITY VALUE
- ------------------------------------------------------------------------------
$1,920 INCO Ltd., 5.75s, 7/1/04 $ 2,416,800
840 Scandinavian Broadcasting
System, 7.25s, 8/1/05 904,050
------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST, $2,840,000) $ 3,320,850
------------
- ------------------------------------------------------------------------------
CORPORATE BOND - 0.0%
- ------------------------------------------------------------------------------
$ 50 H.P. Hood & Son, 7.50s, 2/1/01 $ 39,400
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST, $50,000) $ 39,400
------------
- ------------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 1.0%
- ------------------------------------------------------------------------------
$1,122 Associates Corp. of North America,
5.51s, 7/1/96 $ 1,122,000
------------
TOTAL SHORT TERM INVESTMENTS
AT AMORTIZED COST $ 1,122,000
------------
TOTAL INVESTMENTS - 98.5%
(IDENTIFIED COST, $92,093,511) $112,034,532
OTHER ASSETS, LESS LIABILITIES - 1.5% 1,730,362
------------
NET ASSETS - 100% $113,764,894
============
The accompanying notes are an integral part
of the financial statements
<PAGE>
STOCK PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$92,093,511) $112,034,532
Cash 870,669
Receivable for investments sold 907,770
Interest receivable 82,309
Dividends receivable 206,025
Deferred organization expenses (Note 1D) 10,099
Tax reclaim receivable 21,656
------------
Total assets $114,133,060
LIABILITIES:
Payable for investments purchased $348,478
Payable to affiliate --
Trustees fees 2,187
Accrued expenses 17,501
--------
Total liabilities 368,166
------------
NET ASSETS applicable to investors' interest in Portfolio $113,764,894
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $ 93,823,873
Unrealized appreciation of investments
(computed on the basis of identified cost) 19,941,021
------------
Total net assets $113,764,894
============
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Six Months Ended June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 173,001
Dividends (net of withholding tax of, $7,315) 1,447,717
----------
Total income 1,620,718
Expenses --
Investment adviser fee (Note 3) $ 343,568
Compensation of Directors, not members of the
Investment Adviser's organization (Note 3) 4,996
Custodian fee (Note 1C) 36,329
Legal and accounting services 13,293
Amortization of organization expenses (Note 1D) 1,620
----------
Total expenses 399,806
----------
Net investment income 1,220,912
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (identified cost basis) --
Investment transactions $8,890,275
Written option transactions 122,298
----------
Net realized gain $9,012,573
Change in unrealized appreciation on investments (1,336,032)
----------
Net realized and unrealized gain on
investments $7,676,541
----------
Net increase in net assets resulting from operations $8,897,453
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,220,912 $ 2,228,398
Net realized gain on investment
transactions 9,012,573 10,222,803
Change in unrealized appreciation of
investments (1,336,032) 14,953,494
------------ ------------
Net increase in net assets resulting from
operations $ 8,897,453 $ 27,404,695
------------ ------------
Capital transactions --
Contributions $ 6,452,420 $ 13,753,042
Withdrawals (9,302,254) (18,959,497)
------------ ------------
Decrease in net assets resulting from
capital transactions $ (2,849,834) $ (5,206,455)
------------ ------------
Total increase in net assets $ 6,047,619 $ 22,198,240
NET ASSETS:
At beginning of period 107,717,275 85,519,035
------------ ------------
At end of period $113,764,894 $107,717,275
============ ============
The accompanying notes are an integral part of the financial statements
<PAGE>
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 ----------------------
(UNAUDITED) 1995 1994*
------------- ---------- ----------
RATIOS (to average daily net assets):
Expenses 0.73%+ 0.75% 0.73%+
Net investment income 2.23%+ 2.30% 2.45%+
PORTFOLIO TURNOVER 61% 108% 28%
AVERAGE COMMISSION RATE PAID(1) $0.060 -- --
+ Computed on an annualized basis.
* For the period from the start of business, August 1, 1994 to December 31,
1994.
(1) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the fiscal year by the total number of
shares purchased and sold during the fiscal year for which commissions were
charged. For fiscal years beginning on or after September 1, 1995, a Fund
is required to disclose its average commission rate per share for security
trades on which commissions are charged.
The accompanying notes are an integral part of the financial statements
<PAGE>
--------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Stock 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. 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. EXPENSE REDUCTION -- The Fund has entered into an arrangement with its
custodian agent whereby interest earned on uninvested cash balances are used to
offset custody fees. All significant reductions are reported as a reduction of
expenses in the Statement of Operations.
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.
E. 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.
F. WRITTEN OPTIONS -- The Fund may write call or put options for which premiums
are received and are recorded as liabilities, and are subsequently adjusted to
the current value of the options written. Premiums received from writing options
which expire are treated as realized gains. Premiums received from writing
options which are exercised or are closed are offset against the proceeds or
amount paid on the transaction to determine the realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the securities
purchased by the Fund. The Fund as a writer of an option may have no control
over whether the underlying securities may be sold (call) or purchased (put) and
as a result bears the market risk of an unfavorable change in the price of the
securities underlying the written option.
G. USE OF ESTIMATES -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expense during the reporting period. Actual results could differ
from those estimates.
<PAGE>
H. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to
June 30, 1996 and for the six month period then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial statements.
- ------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregrated $65,842,401 and $65,890,358, 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 six
months ended June 30, 1996, the fee amounted to $343,568. 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. Certain of the officers and Trustees of the
Portfolio are officers and directors/trustees of the above organizations.
Trustees of the Portfolio that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan. For the
six months ended June 30, 1996, no significant amounts have been deferred.
- ------------------------------------------------------------------------------
(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 a $20 million committed facility and a
$100 million discretionary facility. Borrowings will be made by the Portfolio
solely to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Interest is charged to each portfolio 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 June 30, 1996, 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 June 30, 1996, as computed on a federal income tax
basis, are as follows:
Aggregate cost $92,093,511
===========
Gross unrealized appreciation $20,762,003
Gross unrealized depreciation 820,982
-----------
Net unrealized appreciation $19,941,021
===========
- ------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Fund regularly trades in financial instruments with off-balance-sheet risk
in the normal course of its investing activities and to assist in managing
exposure to market risks such as interest rates and foreign currency exchange
rates. These financial instruments include written options. The notational or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these insruments is meaningful only when all related and
offsetting transactions are considered. A summary of obligations under these
financial instruments at June 30, 1996 is as follows:
Written Option Transactions
Transactions in written options for the six months ended June 30, 1996 were as
follows:
PRINCIPAL AMOUNTS
OF CONTRACTS
(000 OMITTED) PREMIUMS
--------- ------
Outstanding, beginning of period -- --
Options written (40) $(122,298)
Options exercised 30 89,872
Options expired 10 32,426
--- ---------
Outstanding, end of period 0 0
=== =========
<PAGE>
-----------------------------
INVESTMENT MANAGEMENT
EV MARATHON OFFICERS TRUSTEES
STOCK FUND JAMES B. HAWKES M. DOZIER GARDNER
24 Federal Street President, Trustee President, Eaton
Boston, MA 02110 Vance Management
JAMES L. O'CONNOR
Treasurer DONALD R. DWIGHT
President, Dwight
THOMAS OTIS Partners, Inc.
Secretary Chairman, Newspapers
of New England, Inc.
SAMUEL L. HAYES, III
Jacob H. Schiff Professor
of Investment Banking,
Harvard University Graduate
School of Business Administration
NORTON H. REAMER
President and Director,
United Asset Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
-------------------------------------------
STOCK PORTFOLIO OFFICERS TRUSTEES
24 Federal Street JAMES B. HAWKES DONALD R. DWIGHT
Boston, MA 02110 President, Trustee President, Dwight
Partners, Inc.
DUNCAN W. RICHARDSON Chairman, Newspapers
Vice President and of New England, Inc.
Portfolio Manager
SAMUEL L. HAYES, III
JAMES L. O'CONNOR Jacob H. Schiff Professor
Treasurer of Investment Banking,
Harvard University Graduate
THOMAS OTIS School of Business Administration
Secretary
NORTON H. REAMER
President and Director,
United Asset Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
<PAGE>
- ----------------------------------------
INVESTMENT ADVISER OF
STOCK PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV MARATHON STOCK FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV MARATHON STOCK FUND
24 FEDERAL STREET
BOSTON, MA 02110
M-STSRC 7/96
[LOGO]
EV MARATHON
STOCK
FUND
SEMI-ANNUAL
SHAREHOLDER REPORT
JUNE 30, 1996
