<PAGE>
To Shareholders
During the six months ended June 30, 1996, EV Traditional Stock Fund had a total
return of 8.2%. This return reflected an increase in net asset value to $13.68
per share from $12.76 per share, and the reinvestment of $0.115 in dividend
income and $0.005 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 it 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 TRADITIONAL STOCK FUND
TOP 10 COMMON STOCK HOLDINGS, BY MARKET VALUE, AS OF 6/30/96
COMPANY INDUSTRY
Eastman Kodak Co...................................Consumer Goods & Svcs.
Xerox Corporation..................................Computer Bus. Equip.
ConAgra, Inc.......................................Consumer Goods & Svcs.
PepsiCo, Inc. .....................................Consumer Goods & Svcs.
Nokia Corp.........................................Telecommunications
American Int'l. Corp...............................Insurance/Financial
Anadarko Petroleum Corp............................Energy
Allstate Corporation...............................Insurance/Financial
Rayonier, Inc. ....................................Forest Products
MGIC Investment....................................Insurance/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 Traditional Stock Fund.
[Photo of James B. Hawkes]
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.
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 (IPOs) 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 I thought 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.
[Photo of Duncan W. Richardson]
DUNCAN W. RICHARDSON
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.
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 TRADITIONAL STOCK FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
June 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investment in Stock Portfolio (Portfolio) at value (Note 1A) $102,059,418
Receivable for Fund shares sold and dividend reinvestments 143
------------
Total assets $102,059,561
LIABILITIES:
Payable for Fund shares redeemed $ 244
Payable to affiliate -
Trustees' fees 415
Accrued expenses 61,196
-------
Total liabilities 61,855
------------
NET ASSETS for 7,457,338 shares of beneficial interest
outstanding $101,997,706
============
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 $ 74,556,817
Unrealized appreciation of investments 19,142,834
Accumulated net realized gain on investments 8,153,874
Undistributed net investment income 144,181
------------
Total net assets $101,997,706
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($101,997,706 / 7,457,338 shares of beneficial interest) $13.68
======
COMPUTATION OF OFFERING PRICE:
Offering price per share (100/95.25 of $13.68) $14.36
======
On sales of $100,000 or more, the offering price is reduced.
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 $6,713) $1,314,599
Interest income allocated from Portfolio 157,101
Expenses allocated from Portfolio (362,827)
----------
Total investment income $1,108,873
Expenses -
Compensation of Trustees not members of the
Investment Adviser's organization (Note 4) $ 784
Custodian fees (Note 1C) 5,691
Service fees (Note 5) 69,987
Transfer and dividend disbursing agent fees 39,441
Printing and postage 25,591
Legal and accounting services 3,104
Registration fees 9,799
Miscellaneous 3,172
----------
Total expenses 157,569
----------
Net investment income $ 951,304
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (identified cost basis)
Investment transactions $8,057,133
Written option transactions 110,466
----------
Net realized gain on investments $8,167,599
Change in unrealized appreciation of investments (1,222,207)
----------
Net realized and unrealized gain on
investments 6,945,392
----------
Net increase in net assets resulting from
operations $7,896,696
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT 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 $ 951,304 $ 1,864,291
Net realized gain from Portfolio 8,167,599 10,049,325
Change in unrealized appreciation
from Portfolio (1,222,207) 14,029,502
------------ ------------
Net increase in net assets
resulting from operations $ 7,896,696 $ 25,943,118
Distributions to shareholders -
From net investment income $ (880,304) $ (1,811,949)
From net realized gain on
investment transactions (38,150) (10,044,124)
------------ ------------
Total distributions to
shareholders $ (918,454) $(11,856,073)
------------ ------------
Net increase (decrease) in net
assets from Fund share
transactions (Note 2) $ (4,355,246) $ 988,920
------------ ------------
Total increase in net assets $ 2,622,996 $ 15,075,965
NET ASSETS:
At beginning of period 99,374,710 84,298,745
------------ ------------
At end of period (including
undistributed net investment
income of $144,181
and $73,181, respectively) $101,997,706 $ 99,374,710
============ ============
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 ---------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991*
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, Beginning of
period $12.760 $10.900 $12.490 $13.480 $14.030 $13.070
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income $ 0.125 $ 0.250 $ 0.250 $ 0.270+ $ 0.312 $ 0.449
Net realized and unrealized gain
(loss) on investments 0.915 3.255 (0.765) 0.270+ 0.658 2.191
------- ------- ------- ------- ------- -------
Total income (loss) from
investment operations $ 1.040 $ 3.505 $(0.515) $ 0.540 $ 0.970 $ 2.640
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.115) $(0.251) $(0.250) $(0.270) $(0.320) $(0.460)
From net realized gain on
investments (0.005) (1.394) (0.765) (1.260) (1.200) (1.220)
In excess of net realized gain on
investments -- -- (0.060) -- -- --
------- ------- ------- ------- ------- -------
Total distributions $(0.120) $(1.645) $(1.075) $(1.530) $(1.520) $(1.680)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, End of period $13.680 $12.760 $10.900 $12.490 $13.480 $14.030
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 8.22% 32.77% (4.12%) 4.19% 6.93% 21.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted) $101,998 $99,375 $84,299 $97,513 $91,299 $91,844
Ratios of net expenses to average
net assets(1) 1.05%++ 1.04%+ 0.98% 0.96% 0.92% 0.94%
Ratio of net investment income to
average net assets 1.92%++ 2.02%+ 2.09% 2.01% 2.29% 3.23%
PORTFOLIO TURNOVER(2) -- -- 66% 105% 59% 42%
- ------------------
<FN>
+ Computed on an average share basis.
++ Computed on an annualized basis.
* Audited by previous auditors.
(1) Includes the Fund's share of Stock Portfolio's allocated expenses for the six months ended June 30, 1996, the year
ended December 31, 1995 and the period from August 1, 1994 to December 31, 1994.
(2) Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making investments
directly in securities. The Portfolio turnover for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial statements which are included elsewhere in
this report.
(3) 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 accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional 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. On August 1, 1994, the Fund
transferred substantially all of its investable assets to the Stock Portfolio
(the Portfolio). Prior to this date the Fund's name was Eaton Vance Stock
Fund. The Fund invests all of its investable assets in interests in 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 (89.7% 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. Prior to
the Fund's investment in the Portfolio, the Fund held its investments
directly.
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. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income and dividends to
shareholders are recorded on the ex-dividend date. Dividend income may include
dividends that represent returns of capital for federal tax purposes. Gains or
loss on the sale of investments is determined on the identified cost basis.
F. 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 statements
purposes.
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 revenue and expense during the reporting period. Actual results
could differ from those estimates.
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 the fair presentation of the financial statements.
- ------------------------------------------------------------------------------
(2) FUND SHARES
The Fund under its indenture of trust is authorized to issue unlimited shares
of $0.50 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 91,424 $ 1,197,589 336,944 $ 4,180,153
Issued to shareholders
electing to receive
payment of distributions
in Fund shares 44,509 564,555 713,057 8,917,234
Shares redeemed (468,324) (6,117,390) (991,413) (12,108,467)
-------- ----------- -------- -----------
Net increase (decrease) (332,391) $(4,355,246) 58,588 $ 988,920
======== =========== ======== ===========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$1,446,884 and $6,704,963, respectively.
- ------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Eaton Vance serves only as the administrator of the Fund, but receives no
compensation. 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.
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Trustees of the Fund adopted a Service Plan designed to meet the service
fee requirements of the revised sales charge rule of The National Association
of Securities Dealers Inc. The Service Plan replaced the Fund's distribution
plan which became effective on December 27, 1990. The Service Plan provides
that the Fund may make service fee payments to the Principal Underwriter,
Eaton Vance Distributors, Inc., a subsidiary of Eaton Vance Management,
Authorized Firms or other persons in amounts not exceeding 0.25% of the Fund's
average daily net assets for any fiscal year. The Trustees have implemented
the Service Plan by authorizing the Fund to make quarterly service fee
payments to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed 0.25% of that portion of the Fund's average daily net
assets for any fiscal year which is attributable to shares of the Fund sold on
or after June 12, 1991 by such persons and remaining outstanding for a least
twelve months. Such payments are made for personal services and/or the
maintenance of shareholder accounts. During the six months ended June 30, 1996
the Fund made payments of $69,987 under the Plan to the Principal Underwriter
and Authorized Firms.
<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 TRADITIONAL OFFICERS TRUSTEES
STOCK FUND
24 Federal JAMES B. HAWKES M. DOZIER GARDNER
Street President, Trustee President, Eaton Vance
Boston, MA 02110 Management
JAMES L. O'CONNOR
Treasurer DONALD R. DWIGHT
President, Dwight Partners,
THOMAS OTIS 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, 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 of
Vice President and Portfolio New England, Inc.
Manager
SAMUEL L. HAYES, III
JAMES L. O'CONNOR Jacob H. Schiff Professor of
Treasurer Investment Banking, Harvard
University Graduate School of
THOMAS OTIS Business Administration
Secretary
NORTON H. REAMER
President, 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 TRADITIONAL STOCK FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER 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 TRADITIONAL STOCK FUND
24 FEDERAL STREET
BOSTON, MA 02110 T-STSRC 7/96
EV TRADITIONAL
STOCK
FUND
SEMI-ANNUAL
SHAREHOLDER REPORT
JUNE 30, 1996
