<Page>
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-04015
EATON VANCE MUTUAL FUNDS TRUST
(Exact Name of Registrant as Specified in Charter)
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
(Address of principal Executive Offices)
Alan R. Dynner
THE EATON VANCE BUILDING, 255 STATE STREET, BOSTON, MASSACHUSETTS 02109
(Name and Address of Agent for Services)
(617) 482-8260
(Registrant's Telephone Number)
OCTOBER 31, 2003
Date of Fiscal Year End
APRIL 30, 2003
Date of Reporting Period
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS
<Page>
[EATON VANCE LOGO]
[PHOTO OF PLANET EARTH]
SEMIANNUAL REPORT APRIL 30, 2003
[PHOTO OF CURRENCY]
EATON VANCE STRATEGIC INCOME FUND
[PHOTO OF BUILDINGS]
<Page>
IMPORTANT NOTICE REGARDING DELIVERY
OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission (SEC) permits mutual funds to deliver
only one copy of shareholder documents, including prospectuses, proxy statements
and shareholder reports, to fund investors with multiple accounts at the same
residential or post office box address. This practice is often called
"householding" and it helps eliminate duplicate mailings to shareholders.
EATON VANCE, OR YOUR FINANCIAL ADVISER, MAY HOUSEHOLD THE MAILING OF YOUR
DOCUMENTS INDEFINITELY UNLESS YOU INSTRUCT EATON VANCE, OR YOUR FINANCIAL
ADVISER, OTHERWISE.
If you would prefer that your Eaton Vance documents not be householded, please
contact Eaton Vance at 1-800-262-1122, or contact your financial adviser.
Your instructions that householding not apply to delivery of your Eaton Vance
documents will be effective within 30 days of receipt by Eaton Vance or your
financial adviser.
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
INVESTMENT UPDATE
[PHOTO OF MARK S. VENEZIA]
Mark S. Venezia
Portfolio Manager
INVESTMENT ENVIRONMENT
- - The six months ended April 30, 2003 were marked by continued economic weakness
and very low inflation. Reflecting investor concerns about the sluggish
economy, the Federal Reserve further lowered its Federal Funds rate - a key
short-term interest rate barometer. Meanwhile, 10-year Treasury yields fell to
45-year lows.
- - Emerging bond markets continued to post strong returns. Brazil has been
especially impressive, as newly-elected President Luiz Ignacio da Silva's
economic program, which has targeted wasteful entitlements, has proved more
reform-minded than earlier anticipated.
- - The U.S. high-yield bond market improved in the past six months, helped by
more stable corporate earnings, improved technical conditions and widespread
bond-buybacks. High-yield default rates fell significantly and, by April 30,
2002 credit spreads had narrowed by approximately 400 basis points (4.0%)from
their October peak.
THE FUND
PERFORMANCE FOR THE PAST SIX MONTHS
- - The Fund's Class A shares had a total return of 11.78% during the six months
ended April 30, 2003.(1) This return resulted from an increase in net asset
value per share (NAV) to $8.09 on April 30, 2003 from $7.55 on October 31,
2002, and the reinvestment of $0.332 in dividend income.
- - The Fund's Class B shares had a total return of 11.19% during the six months
ended April 30, 2003.(1) This return resulted from an increase in NAV to $7.65
on April 30, 2003 from $7.15 on October 31, 2002 and the reinvestment of
$0.286 in dividend income.
- - The Fund's Class C shares had a total return of 11.32% during the six months
ended April 30, 2003.(1) This return resulted from an increase in NAV to $9.68
on April 30, 2003 from $9.04 on October 31, 2002 and the reinvestment of
$0.361 in dividend income.
RECENT PORTFOLIO DEVELOPMENTS
- - Management reduced the Fund's duration to the lower end of its range. Average
duration - a measure of the volatility risk associated with the Portfolio's
bonds - declined from 2.93 years at October 31, 2002 to 2.43 years at April
30, 2003.
- - Management made relatively few strategic changes during the six-month period
ended April 30, 2003. U.S. investment-grade bonds constituted 62.3% of the
Fund at April 30, 2003. Domestic high-yield bonds represented another 21.0%,
while emerging market debt accounted for 14.4%. The Fund maintained a sector
allocation we believe should be well-positioned in a variety of economic
scenarios.
- - The Fund benefited from its emerging market investments, with the government
bonds of Brazil, Ecuador and Colombia all performing well. Brazil's bond's
fared especially well, rising more than 60%. The da Silva government has taken
a resolute stand against inflation, while proposing legislation to cap pension
benefits for civil servants.
- - The Fund's high-yield bond holdings fared well during the period. Bond
buybacks enabled many companies to significantly improve their balance sheets.
Utilities were among the strongest sectors, as many companies benefited from a
debt-restructuring, thus improving their access to the capital markets.
- - Mortgage-backed securities (MBS) performed poorly during the period. Amid the
sharp decline in interest rates, mortgage refinancings reached record levels.
With prepayment rates surging, MBS yield spreads widened dramatically.
Management is more optimistic about the outlook for MBS, however, as an
eventual economic recovery and rising interest rates would likely result in a
narrowing of spreads, accompanied by a slowdown in prepayment rates.
THE VIEWS EXPRESSED IN THIS REPORT ARE THOSE OF THE PORTFOLIO MANAGER AND ARE
CURRENT ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER.
THESE VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER
CONDITIONS, AND EATON VANCE DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS.
THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT
DECISIONS FOR AN EATON VANCE FUND ARE BASED ON MANY FACTORS, MAY NOT BE RELIED
ON AS AN INDICATION OF TRADING INTENT ON BEHALF OF ANY EATON VANCE FUND.
<Table>
<Caption>
FUND INFORMATION
as of April 30, 2003
PERFORMANCE(2) CLASS A CLASS B CLASS C
- -----------------------------------------------------------------
Average Annual Total Returns (at net asset value)
One Year 9.05% 8.06% 8.22%
Five Years 5.01 4.14 4.13
Ten Years N.A. 6.34 N.A.
Life of Fund+ 5.25 6.01 7.14
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
One Year 3.91% 3.07% 7.22%
Five Years 4.00 3.86 4.13
Ten Years N.A. 6.34 N.A.
Life of Fund+ 4.28 6.01 7.14
</Table>
+Inception Dates - Class A: 1/23/98; Class B: 11/26/90; Class C:5/25/94
REGIONAL WEIGHTINGS(3)
- ----------------------
<Table>
Asia 0.7%
Europe 0.6%
U.S. Investment Grade 62.3%
U.S. High Yield 21.0%
Latin America 13.1%
Foreign Investment Grade 2.3%
</Table>
1 These returns do not include the 4.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC) for
the Fund's Class B and Class C shares. 2 Returns are calculated by determining
the percentage change in net asset value with all distributions reinvested.
SEC average annual returns for Class A reflect a 4.75% sales charge; for Class
B, returns reflect applicable CDSC based on the following schedule: 5%-1st and
2nd years; 4%-3rd year; 3%-4th year; 2%-5th year; 1%-6th year. One-year SEC
return for Class C reflects a 1% CDSC. 3 By total investments - Weightings
reflect the Fund's investment in Strategic Income Portfolio (holdings
described beginning on page 12) and a 20.7% investment in High Income
Portfolio. Because the Portfolio is actively managed, Regional Weightings are
subject to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
MUTUAL FUND SHARES ARE NOT INSURED 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. YIELD WILL
VARY.
2
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<Table>
<Caption>
AS OF APRIL 30, 2003
Assets
- ------------------------------------------------------
Investment in Strategic Income
Portfolio, at value
(identified cost, $216,346,549) $218,533,883
Investment in High Income Portfolio, at
value
(identified cost, $56,263,610) 56,788,575
Receivable for Fund shares sold 1,713,254
- ------------------------------------------------------
TOTAL ASSETS $277,035,712
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Dividends payable $ 1,020,817
Payable for Fund shares redeemed 980,968
Payable to affiliate for distribution
and service fees 52,729
Payable to affiliate for Trustees' fees 411
Accrued expenses 78,922
- ------------------------------------------------------
TOTAL LIABILITIES $ 2,133,847
- ------------------------------------------------------
NET ASSETS $274,901,865
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Paid-in capital $311,956,995
Accumulated net realized loss from
Portfolios (computed on the basis
of identified cost) (34,948,389)
Overdistributed net investment income (4,819,040)
Net unrealized appreciation from
Portfolios (computed on the basis
of identified cost) 2,712,299
- ------------------------------------------------------
TOTAL $274,901,865
- ------------------------------------------------------
Class A Shares
- ------------------------------------------------------
NET ASSETS $ 24,766,402
SHARES OUTSTANDING 3,063,198
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 8.09
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 95.25 of $8.09) $ 8.49
- ------------------------------------------------------
Class B Shares
- ------------------------------------------------------
NET ASSETS $195,487,760
SHARES OUTSTANDING 25,541,126
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (NOTE 6)
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 7.65
- ------------------------------------------------------
Class C Shares
- ------------------------------------------------------
NET ASSETS $ 54,647,703
SHARES OUTSTANDING 5,648,003
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (NOTE 6)
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.68
- ------------------------------------------------------
</Table>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
STATEMENT OF OPERATIONS
<Table>
<Caption>
FOR THE SIX MONTHS ENDED APRIL 30, 2003
Investment Income
- -----------------------------------------------------
Interest allocated from Portfolios $ 8,085,286
Dividends allocated from Portfolios 50,609
Expenses allocated from Portfolios (904,629)
- -----------------------------------------------------
NET INVESTMENT INCOME FROM PORTFOLIOS $ 7,231,266
- -----------------------------------------------------
Expenses
- -----------------------------------------------------
Trustees' fees and expenses $ 1,495
Distribution and service fees
Class A 24,908
Class B 899,675
Class C 233,685
Transfer and dividend disbursing agent
fees 107,311
Registration fees 20,321
Legal and accounting services 16,972
Printing and postage 16,534
Custodian fee 15,584
Miscellaneous 6,314
- -----------------------------------------------------
TOTAL EXPENSES $ 1,342,799
- -----------------------------------------------------
NET INVESTMENT INCOME $ 5,888,467
- -----------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolios
- -----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 3,192,884
Financial futures contracts (3,040,024)
Written options 251,688
Swap contracts 1,477,774
Foreign currency and forward foreign
currency exchange
contract transactions (103,131)
- -----------------------------------------------------
NET REALIZED GAIN $ 1,779,191
- -----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $15,490,137
Financial futures contracts 1,328,710
Written options 85,812
Swap contracts 1,465,136
Foreign currency and forward foreign
currency exchange contracts 1,283
- -----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $18,371,078
- -----------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $20,150,269
- -----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $26,038,736
- -----------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
3
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS ENDED
INCREASE (DECREASE) APRIL 30, 2003 YEAR ENDED
IN NET ASSETS (UNAUDITED) OCTOBER 31, 2002
- ----------------------------------------------------------------------------
From operations --
Net investment income $ 5,888,467 $ 13,406,462
Net realized gain (loss) 1,779,191 (6,603,858)
Net change in unrealized
appreciation (depreciation) 18,371,078 (2,696,121)
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 26,038,736 $ 4,106,483
- ----------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (854,126) $ (1,293,307)
Class B (7,050,484) (13,320,246)
Class C (1,830,484) (3,501,766)
Tax return of capital
Class A -- (55,179)
Class B -- (657,737)
Class C -- (135,287)
- ----------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (9,735,094) $ (18,963,522)
- ----------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 8,664,655 $ 14,540,453
Class B 27,003,034 49,549,673
Class C 11,719,624 16,182,754
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 387,827 563,339
Class B 1,997,539 3,819,622
Class C 911,975 1,734,618
Cost of shares redeemed
Class A (3,061,470) (9,037,822)
Class B (19,103,593) (31,787,954)
Class C (6,534,002) (14,311,374)
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM FUND
SHARE TRANSACTIONS $ 21,985,589 $ 31,253,309
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 38,289,231 $ 16,396,270
- ----------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------
At beginning of period $ 236,612,634 $ 220,216,364
- ----------------------------------------------------------------------------
AT END OF PERIOD $ 274,901,865 $ 236,612,634
- ----------------------------------------------------------------------------
Overdistributed net investment
income included in net assets
- ----------------------------------------------------------------------------
AT END OF PERIOD $ (4,819,040) $ (972,413)
- ----------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
4
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
CLASS A
-----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2003 ---------------------------------------------------------------------------
(UNAUDITED) 2002(1)(2) 2001(1) 2000 1999(1) 1998(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning
of period $ 7.550 $ 8.030 $ 8.360 $ 9.110 $ 9.220 $10.000
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.235 $ 0.504 $ 0.705 $ 0.795 $ 0.852 $ 0.668
Net realized and unrealized
gain (loss) 0.637 (0.286) (0.250) (0.698) (0.095) (0.767)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ 0.872 $ 0.218 $ 0.455 $ 0.097 $ 0.757 $(0.099)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.332) $(0.670) $(0.723) $(0.847) $(0.819) $(0.681)
Tax return of capital -- (0.028) (0.062) -- (0.048) --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(0.332) $(0.698) $(0.785) $(0.847) $(0.867) $(0.681)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF
PERIOD $ 8.090 $ 7.550 $ 8.030 $ 8.360 $ 9.110 $ 9.220
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) 11.78% 2.68% 5.69% 0.88% 8.40% (1.29)%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $24,766 $17,418 $12,352 $10,350 $ 6,050 $ 2,009
Ratios (As a percentage of
average daily net assets):
Expenses(5) 1.13%(6) 1.17% 1.21% 1.19% 1.08% 1.03%(6)
Net investment income 5.43%(6) 6.39% 8.63% 8.83% 9.20% 8.44%(6)
Portfolio Turnover of the
Strategic Income Portfolio 32% 63% 54% 49% 47% 71%
Portfolio Turnover of the High
Income Portfolio 50% 88% -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Net investment income per share was computed using average shares
outstanding.
(2) The Fund, through its investment in the Portfolios, has adopted the
provisions of the revised AICPA Audit and Accounting Guide for
Investment Companies and began amortizing market premiums on
fixed-income securities, excluding mortgage-backed securities, and
accreting certain discounts using a different methodology. Additionally,
the Portfolios reclassified net losses realized on prepayments received
on mortgage-backed securities that were previously included in realized
gains/losses to interest income. The effect of these changes for the
year ended October 31, 2002 were to decrease net investment income per
share by $0.095, decrease net realized and unrealized loss per share by
$0.095 and decrease the ratio of net investment income to average net
assets from 7.58% to 6.39%. Per share data and ratios for the periods
prior to November 1, 2001 have not been restated to reflect this change
in presentation.
(3) For the period from the commencement of offering of Class A shares,
January 23, 1998, to October 31, 1998.
(4) Returns are historical and are calculated by determining the percentage
change in net asset value with all distributions reinvested. Total
return is not computed on an annualized basis.
(5) Includes the Fund's share of the Portfolios' allocated expenses.
(6) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
5
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
CLASS B
----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2003 --------------------------------------------------------------------------
(UNAUDITED) 2002(1)(2) 2001(1) 2000 1999(1) 1998
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning
of period $ 7.150 $ 7.600 $ 7.910 $ 8.610 $ 8.720 $ 9.470
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.177 $ 0.425 $ 0.607 $ 0.674 $ 0.731 $ 0.684
Net realized and unrealized
gain (loss) 0.609 (0.272) (0.241) (0.651) (0.105) (0.686)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ 0.786 $ 0.153 $ 0.366 $ 0.023 $ 0.626 $ (0.002)
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.286) $ (0.575) $ (0.614) $ (0.723) $ (0.688) $ (0.748)
Tax return of capital -- (0.028) (0.062) -- (0.048) --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.286) $ (0.603) $ (0.676) $ (0.723) $ (0.736) $ (0.748)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF
PERIOD $ 7.650 $ 7.150 $ 7.600 $ 7.910 $ 8.610 $ 8.720
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3) 11.19% 1.96% 4.82% 0.07% 7.32% (0.20)%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $195,488 $173,780 $163,261 $152,535 $155,768 $138,495
Ratios (As a percentage of
average daily net assets):
Expenses(4) 1.88%(5) 1.93% 1.96% 1.98% 1.96% 1.96%
Net investment income 4.72%(5) 5.68% 7.83% 7.99% 8.31% 7.40%
Portfolio Turnover of the
Strategic Income Portfolio 32% 63% 54% 49% 47% 71%
Portfolio Turnover of the High
Income Portfolio 50% 88% -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Net investment income per share was computed using average shares
outstanding.
(2) The Fund, through its investment in the Portfolios, has adopted the
provisions of the revised AICPA Audit and Accounting Guide for
Investment Companies and began amortizing market premiums on
fixed-income securities, excluding mortgage-backed securities, and
accreting certain discounts using a different methodology. Additionally,
the Portfolios reclassified net losses realized on prepayments received
on mortgage-backed securities that were previously included in realized
gains/losses to interest income. The effect of these changes for the
year ended October 31, 2002 were to decrease net investment income per
share by $0.090, decrease net realized and unrealized loss per share by
$0.090 and decrease the ratio of net investment income to average net
assets from 6.86% to 5.68%. Per share data and ratios for the periods
prior to November 1, 2001 have not been restated to reflect this change
in presentation.
(3) Returns are historical and are calculated by determining the percentage
change in net asset value with all distributions reinvested. Total
return is not computed on an annualized basis.
(4) Includes the Fund's share of the Portfolios' allocated expenses.
(5) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
6
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
CLASS C
--------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2003 ------------------------------------------------------------------------
(UNAUDITED) 2002(1)(2) 2001(1) 2000 1999(1) 1998
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning
of period $ 9.040 $ 9.610 $ 9.990 $10.870 $11.010 $11.950
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.236 $ 0.538 $ 0.773 $ 0.850 $ 0.912 $ 0.869
Net realized and unrealized
gain (loss) 0.765 (0.346) (0.304) (0.826) (0.132) (0.872)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ 1.001 $ 0.192 $ 0.469 $ 0.024 $ 0.780 $(0.003)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.361) $(0.734) $(0.787) $(0.904) $(0.872) $(0.937)
Tax return of capital -- (0.028) (0.062) -- (0.048) --
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(0.361) $(0.762) $(0.849) $(0.904) $(0.920) $(0.937)
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF
PERIOD $ 9.680 $ 9.040 $ 9.610 $ 9.990 $10.870 $11.010
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3) 11.32% 1.95% 4.90% 0.02% 7.23% (0.15)%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $54,648 $45,414 $44,603 $40,023 $30,882 $19,518
Ratios (As a percentage of
average daily net assets):
Expenses(4) 1.88%(5) 1.93% 1.96% 2.00% 2.03% 2.03%
Net investment income 4.71%(5) 5.69% 7.89% 7.94% 8.22% 7.37%
Portfolio Turnover of the
Strategic Income Portfolio 32% 63% 54% 49% 47% 71%
Portfolio Turnover of the High
Income Portfolio 50% 88% -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Net investment income per share was computed using average shares
outstanding.
(2) The Fund, through its investment in the Portfolios, has adopted the
provisions of the revised AICPA Audit and Accounting Guide for
Investment Companies and began amortizing market premiums on
fixed-income securities, excluding mortgage-backed securities, and
accreting certain discounts using a different methodology. Additionally,
the Portfolios reclassified net losses realized on prepayments received
on mortgage-backed securities that were previously included in realized
gains/losses to interest income. The effect of these changes for the
year ended October 31, 2002 were to decrease net investment income per
share by $0.113, decrease net realized and unrealized loss per share by
$0.113 and decrease the ratio of net investment income to average net
assets from 6.88% to 5.69%. Per share data and ratios for the periods
prior to November 1, 2001 have not been restated to reflect this change
in presentation.
(3) Returns are historical and are calculated by determining the percentage
change in net asset value with all distributions reinvested. Total
return is not computed on an annualized basis.
(4) Includes the Fund's share of the Portfolios' allocated expenses.
(5) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
7
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
- -------------------------------------------
Eaton Vance Strategic Income Fund (the Fund) is a non-diversified series of
Eaton Vance Mutual Funds Trust (the Trust). The Fund is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund offers three classes of shares. Class A shares
are generally sold subject to a sales charge imposed at the time of purchase.
Class B and Class C shares are sold at net asset value and are generally
subject to a contingent deferred sales charge (see Note 6). Each class
represents a pro rata interest in the Fund, but votes separately on
class-specific matters and (as noted below) is subject to different expenses.
Realized and unrealized gains and losses are allocated daily to each class of
shares based on the relative net assets of each class to the total net assets
of the Fund. Net investment income, other than class specific expenses, is
allocated daily to each class of shares based upon the ratio of the value of
each class' paid shares to the total value of all paid shares. Each class of
shares differs in its distribution plan and certain other class specific
expenses. The Fund currently invests all of its investable assets in
interests in two Portfolios, Strategic Income Portfolio and High Income
Portfolio (the Portfolios), New York trusts which have investment objectives
consistent with that of the Fund. The value of the Fund's investment in the
Portfolios reflects the Fund's proportionate interest in the net assets of
the Strategic Income Portfolio and the High Income Portfolio (99.9% and 5.4%
at April 30, 2003, respectively). The performance of the Fund is directly
affected by the performance of the Portfolios. The financial statements of
the Strategic Income Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. See Note 8 for further information on the
results of operations of High Income Portfolio. A copy of the financial
statements of High Income Portfolio is available upon request from Eaton
Vance Distributors.
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 accounting principles generally accepted in
the United States of America.
A Investment Valuation -- Valuation of securities by the Strategic Income
Portfolio is discussed in Note 1A of the Portfolio's Notes to Financial
Statements, which are included elsewhere in this report. High Income
Portfolio's valuation policies are as follows: Fixed income investments
(other than short-term obligations), including listed investments and
investments for which price quotations are available, will normally be valued
on the basis of market valuations furnished by a pricing service. Marketable
securities that are listed on foreign or U.S. securities exchanges are valued
at closing sale prices on the exchange where such securities are principally
traded. Marketable securities listed in the NASDAQ National Market System are
valued at the NASDAQ official closing price. Listed or unlisted investments
for which closing sale prices are not available are valued at the mean
between the latest bid and asked prices. Financial futures contracts listed
on commodity exchanges are valued at closing settlement prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates value. Investments for which there are no quotations or
valuations are valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
B Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolios, less all actual and
accrued expenses of the Fund determined in accordance with accounting
principles generally accepted in the United States of America.
C 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. Accordingly, no provision for Federal
income or excise tax is necessary. At October 31, 2002, the Fund, for Federal
income tax purposes, had a capital loss carryover of $38,593,038 which will
reduce the Fund's taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code,
and thus will reduce the amount of the distributions to shareholders which
would otherwise be necessary to relieve the Fund of any liability for federal
income or excise tax. Such capital loss carryover will expire on October 31,
2003 ($4,613,119), October 31, 2006 ($1,984,147), October 31, 2007
($7,933,008), October 31, 2009 ($9,854,300) and October 31, 2010
($14,208,464). The amount of the tax basis capital loss carryforward differed
from the accumulated net realized loss due primarily to the timing of
recording gain/loss on certain futures contracts.
D Use of Estimates -- The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and
8
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. Actual results could
differ from those estimates.
E Expenses -- The majority of expenses of the Trust are directly identifiable
to an individual fund. Expenses which are not readily identifiable to a
specific fund are allocated taking into consideration, among other things,
the nature and type of expense and the relative size of the funds.
F Interim Financial Statements -- The interim financial statements relating to
April 30, 2003 and for the six months 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 Distributions to Shareholders
- -------------------------------------------
The net income of the Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions of
allocated realized capital gains, if any, are made at least annually.
Shareholders may reinvest income and capital gain distributions in additional
shares of the Fund at the net asset value as of the ex-dividend date.
Distributions are paid in the form of additional shares or, at the election
of the shareholder, in cash. The Fund distinguishes between distributions on
a tax basis and a financial reporting basis. Accounting principles generally
accepted in the United States of America require that only distributions in
excess of tax basis earnings and profits be reported in the financial
statements as a return of capital. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital and
primarily relate to expired capital loss carryforwards and realized losses
on in-kind withdrawals allocated from the High Income Portfolio.
3 Shares of Beneficial Interest
- -------------------------------------------
The Fund's 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:
<Table>
<Caption>
SIX MONTHS ENDED
APRIL 30, 2003 YEAR ENDED
CLASS A (UNAUDITED) OCTOBER 31, 2002
----------------------------------------------------------------------------
Sales 1,112,114 1,831,820
Issued to shareholders electing to
receive payments of distributions in
Fund shares 49,588 71,825
Redemptions (404,075) (1,135,544)
----------------------------------------------------------------------------
NET INCREASE 757,627 768,101
----------------------------------------------------------------------------
<Caption>
SIX MONTHS ENDED
APRIL 30, 2003 YEAR ENDED
CLASS B (UNAUDITED) OCTOBER 31, 2002
----------------------------------------------------------------------------
Sales 3,660,294 6,568,813
Issued to shareholders electing to
receive payments of distributions in
Fund shares 270,043 522,773
Redemptions (2,692,508) (4,259,717)
----------------------------------------------------------------------------
NET INCREASE 1,237,829 2,831,869
----------------------------------------------------------------------------
<Caption>
SIX MONTHS ENDED
APRIL 30, 2003 YEAR ENDED
CLASS C (UNAUDITED) OCTOBER 31, 2002
----------------------------------------------------------------------------
Sales 1,251,788 1,722,079
Issued to shareholders electing to
receive payments of distributions in
Fund shares 97,842 183,562
Redemptions (725,925) (1,521,743)
----------------------------------------------------------------------------
NET INCREASE 623,705 383,898
----------------------------------------------------------------------------
</Table>
4 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolios have engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of each of the Portfolio's Notes to financial statements. Except
as to Trustees of the Fund and the Portfolios who are not members of EVM's
organization, officers and Trustees receive remuneration for their services
to the Fund out of
9
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
such investment adviser fee. Certain officers and Trustees of the Fund and of
the Portfolios are officers of the above organizations (see Note 5).
Effective August 1, 2002, EVM serves as the sub-transfer agent of the Fund
and receives an aggregate fee based upon the actual expenses incurred by EVM
in the performance of those services. During the six months ended April 30,
2003 no significant amounts have been earned. The Fund was informed that
Eaton Vance Distributors, Inc. (EVD), a subsidiary of EVM and the Fund's
principal underwriter, received $12,043 as its portion of the sales charge on
sales of Class A shares for the six months ended April 30, 2003.
5 Distribution and Service Plans
- -------------------------------------------
The Fund has in effect distribution plans for Class B shares (Class B Plan)
and Class C shares (Class C Plan) pursuant to Rule 12b-1 under the Investment
Company Act of 1940 and a service plan for Class A shares (Class A Plan)
(collectively, the Plans). The Class B and Class C Plans require the Fund to
pay EVD, amounts equal to 1/365 of 0.75% of the Fund's average daily net
assets attributable to Class B and Class C shares, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no
outstanding Uncovered Distribution Charges, which are equivalent to the sum
of (i) 5% and 6.25% of the aggregate amount received by the Fund for Class B
and Class C shares sold, respectively, plus (ii) interest calculated by
applying the rate of 1% over the prevailing prime rate to the outstanding
balance of Uncovered Distribution Charges due EVD, of each respective class
reduced by the aggregate amount of contingent deferred sales charges (see
Note 6) and daily amounts theretofore paid to EVD by each respective class.
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. For
the six months ended April 30, 2003, the Fund paid or accrued $674,756 and
$175,264, respectively, to or payable to EVD representing 0.75% (annualized)
of average daily net assets of Class B and Class C shares, respectively. At
April 30, 2003, the amount of Uncovered Distribution Charges of EVD
calculated under the Plans was approximately $30,890,000 and $5,246,000 for
Class B and Class C shares, respectively.
The Plans authorize the Fund to make payments of service fees to EVD,
investment dealers and other persons in amounts not exceeding 0.25% of the
Fund's average daily net assets attributable to Class A, Class B, and
Class C shares for the fiscal year. Service fee payments will be made for
personal services and/or the maintenance of shareholder accounts. Service
fees are separate and distinct from the sales and commissions and
distribution fees payable by the Fund to EVD, and, as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of EVD. Service fee payments for the six months ended April 30, 2003
amounted to $24,908, $224,919, and $58,421 for Class A, Class B, and Class C
shares, respectively.
6 Contingent Deferred Sales Charge
- -------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase and on redemptions of
Class C shares made within one year of purchase. Generally, the CDSC is based
on the lower of the net asset value at the date of redemption or date of
purchase. No charge is levied on shares acquired by reinvestment of dividends
or capital gains distributions. The Class B CDSC is imposed at declining
rates that begin at 5% in the case of redemptions in the first and second
years of redemption after purchase, declining one percentage point each
subsequent year. Class C shares will be subject to a 1% CDSC if redeemed
within one year of purchase. No CDSC is levied on shares which have been sold
to EVM or its affiliates or to their respective employees or clients and may
be waived under certain other limited conditions. CDSC charges are paid to
EVD to reduce the amount of Uncovered Distribution Charges calculated under
the Fund's Distribution Plans. CDSC charges received when no Uncovered
Distribution Charges exist will be credited to the Fund. The Fund has been
informed that EVD received approximately $291,000 and $4,000 of CDSC paid by
shareholders of Class B and Class C shares, respectively, during the six
months ended April 30, 2003.
7 Investment Transactions
- -------------------------------------------
Increases and decreases in the Fund's investment in the Strategic Income
Portfolio for the six months ended April 30, 2003, aggregated $46,260,938 and
$37,119,719, respectively. There were no increases or decreases in the Fund's
investment in the High Income Portfolio for the six months ended April 30,
2003.
10
<Page>
EATON VANCE STRATEGIC INCOME FUND AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
8 Investment in Portfolios
- -------------------------------------------
For the six months ended April 30, 2003, the Fund was allocated net
investment income and realized and unrealized gain (loss) from the Portfolios
as follows:
<Table>
<Caption>
STRATEGIC HIGH
INCOME INCOME
PORTFOLIO PORTFOLIO TOTAL
------------------------------------------------------------------------------
Interest income $ 5,258,134 $2,827,152 $ 8,085,286
Dividend income -- 50,609 50,609
Expenses (730,558) (174,071) (904,629)
------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 4,527,576 $2,703,690 $ 7,231,266
------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions $ 3,423,948 $ (231,064) $ 3,192,884
Financial futures contracts (3,040,024) -- (3,040,024)
Written options 251,688 -- 251,688
Swap contracts 1,477,774 1,477,774
Foreign currency and forward foreign
currency exchange contract
transactions (66,369) (36,762) (103,131)
------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) $ 2,047,017 $ (267,826) $ 1,779,191
------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $ 9,479,532 $6,010,605 $15,490,137
Financial futures contracts 1,328,710 -- 1,328,710
Written options 85,812 -- 85,812
Swap contracts 1,465,136 -- 1,465,136
Foreign currency and forward foreign
currency exchange contracts 6,251 (4,968) 1,283
------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) $12,365,441 $6,005,637 $18,371,078
------------------------------------------------------------------------------
</Table>
11
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
PORTFOLIO OF INVESTMENTS
BONDS & NOTES -- 93.1%
<Table>
<Caption>
SECURITY PRINCIPAL U.S. $ VALUE
- ----------------------------------------------------------------------------------------
Argentina -- 0.5%
- ----------------------------------------------------------------------------------------
Cablevision SA, 13.75%, 4/30/07(1) $ 4,000,000 $ 1,100,000
- ----------------------------------------------------------------------------------------
Total Argentina (identified cost $3,928,229) $ 1,100,000
- ----------------------------------------------------------------------------------------
Brazil -- 9.0%
- ----------------------------------------------------------------------------------------
Republic of Brazil, 8.875%, 4/15/24 $ 4,000,000 $ 2,991,000
Republic of Brazil, 10.125%, 5/15/27 6,000,000 4,972,500
Republic of Brazil, 11.00%, 8/17/40 13,500,000 11,805,750
- ----------------------------------------------------------------------------------------
Total Brazil (identified cost $15,366,269) $ 19,769,250
- ----------------------------------------------------------------------------------------
Bulgaria -- 0.4%
- ----------------------------------------------------------------------------------------
Bulgaria Discount Bond (Brady), Series A,
2.188%, 7/28/24(2) $ 1,000,000 $ 964,375
- ----------------------------------------------------------------------------------------
Total Bulgaria (identified cost $797,540) $ 964,375
- ----------------------------------------------------------------------------------------
Colombia -- 5.3%
- ----------------------------------------------------------------------------------------
Republic of Colombia, 10.75%, 1/15/13 $10,000,000 $ 11,522,500
- ----------------------------------------------------------------------------------------
Total Colombia (identified cost $10,275,524) $ 11,522,500
- ----------------------------------------------------------------------------------------
Indonesia -- 0.7%
- ----------------------------------------------------------------------------------------
APP China Group Ltd., 14.00%, 3/15/10(1) $ 2,000,000 $ 687,500
APP Finance VI, 0.00%, 11/18/12(1)(3) 4,000,000 110,000
APP Finance VII, 3.50%, 4/30/03(1)(3) 2,000,000 110,000
DGS International Finance, 10.00%, 6/1/07(1) 2,000,000 55,000
Indah Kiat Finance Mauritius, Sr. Unsec. Notes,
10.00%, 7/1/07(1) 1,000,000 307,500
Indah Kiat International Finance,
12.50%, 6/15/06(1) 1,000,000 337,500
- ----------------------------------------------------------------------------------------
Total Indonesia (identified cost $7,468,002) $ 1,607,500
- ----------------------------------------------------------------------------------------
Morocco -- 0.3%
- ----------------------------------------------------------------------------------------
Snap Ltd., 11.50%, 1/29/09 DEM 1,075,000 $ 568,671
- ----------------------------------------------------------------------------------------
Total Morocco (identified cost $538,611) $ 568,671
- ----------------------------------------------------------------------------------------
New Zealand -- 2.9%
- ----------------------------------------------------------------------------------------
New Zealand Government, 6.50%, 4/15/13 NZD 10,700,000 $ 6,238,050
- ----------------------------------------------------------------------------------------
Total New Zealand (identified cost $4,520,121) $ 6,238,050
- ----------------------------------------------------------------------------------------
Philippines -- 0.2%
- ----------------------------------------------------------------------------------------
Bayan Telecommunications, 13.50%, 7/15/06(1)(4) $ 2,000,000 $ 410,000
- ----------------------------------------------------------------------------------------
Total Philippines (identified cost $1,917,238) $ 410,000
- ----------------------------------------------------------------------------------------
<Caption>
SECURITY PRINCIPAL U.S. $ VALUE
- ----------------------------------------------------------------------------------------
United States -- 72.8%
- ----------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES -- 3.5%
Baltimore Gas and Electric, 6.73%, 6/12/12 $ 400,000 $ 445,620
BellSouth Capital Funding, 6.04%, 11/15/26 300,000 332,560
Coca-Cola Enterprise, 7.00%, 10/1/26 375,000 436,794
Eaton Corp., 8.875%, 6/15/19 500,000 656,198
Ford Holdings, 9.30%, 3/1/30 1,000,000 1,021,245
General Motors Acceptance Corp., 8.875%, 6/1/10 1,000,000 1,146,348
Ingersoll-Rand Co., 6.48%, 6/1/25 1,050,000 1,126,942
NBD Bank N.A., 8.25%, 11/1/24 610,000 796,041
US Bancorp, 7.50%, 6/1/26 840,000 1,008,427
Williamette Industries, 7.35%, 7/1/26 50,000 54,740
Worldcom, Inc., 6.95%, 8/15/28(1) 1,000,000 285,000
Worldcom, Inc., 7.75%, 4/1/27(1) 1,000,000 285,000
- ----------------------------------------------------------------------------------------
Total Corporate Bonds & Notes (identified cost, $7,900,940)
$ 7,594,915
- ----------------------------------------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 68.4%
Federal Home Loan Mortgage Corp.:
6.50% with various maturities to 2024 $17,317,831 $ 18,408,012
7.00% with various maturities to 2024 6,134,310 6,584,232
7.50% with maturity at 2023 1,197,673 1,295,851
7.95% with maturity at 2022 2,758,601 3,022,858
8.00% with various maturities to 2021 1,578,119 1,712,648
8.15% with maturity at 2021 2,152,320 2,341,580
8.30% with maturity at 2021 1,994,915 2,185,411
8.47% with maturity at 2018 1,911,775 2,150,065
8.50% with various maturities to 2019 433,141 482,929
9.00% with various maturities to 2019 1,347,745 1,526,537
9.25% with various maturities to 2016 1,356,243 1,489,021
9.50% with various maturities to 2027 2,516,739 2,815,772
9.75% with various maturities to 2020 297,288 336,746
10.00% with maturity at 2021 741,896 873,885
10.25% with maturity at 2013 725,932 819,931
10.50% with various maturities to 2021 3,093,873 3,703,099
11.00% with various maturities to 2019 5,262,560 6,314,227
11.25% with maturity at 2010 44,403 51,435
12.50% with various maturities to 2019 732,463 894,716
12.75% with maturity at 2013 60,866 73,444
13.25% with maturity at 2013 18,548 22,741
13.50% with maturity at 2019 84,768 103,495
- ----------------------------------------------------------------------------------------
$ 57,208,635
- ----------------------------------------------------------------------------------------
Federal National Mortgage Association:
6.50% with various maturities to 2025 $27,047,069 $ 28,654,050
7.00% with various maturities to 2024 6,694,715 7,192,249
7.50% with various maturities to 2023 2,229,726 2,408,854
8.00% with various maturities to 2020 1,005,529 1,100,465
8.50% with various maturities to 2026 1,788,994 1,971,504
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
PORTFOLIO OF INVESTMENTS CONT'D
<Table>
<Caption>
SECURITY PRINCIPAL U.S. $ VALUE
- ----------------------------------------------------------------------------------------
United States (continued)
- ----------------------------------------------------------------------------------------
8.881% with maturity at 2010 $ 840,513 $ 931,768
9.00% with various maturities to 2024 2,452,595 2,740,783
9.50% with various maturities to 2021 1,003,256 1,124,667
10.50% with maturity at 2020 657,098 787,149
11.00% with maturity at 2025 173,300 208,332
11.50% with maturity at 2019 538,367 648,974
12.00% with maturity at 2015 263,023 319,189
12.50% with maturity at 2015 1,522,305 1,859,943
12.75% with maturity at 2014 69,810 88,122
13.00% with various maturities to 2015 630,072 784,111
13.25% with maturity at 2014 81,158 103,820
13.50% with various maturities to 2015 356,388 434,051
14.75% with maturity at 2012 902,612 1,157,023
- ----------------------------------------------------------------------------------------
$ 52,515,054
- ----------------------------------------------------------------------------------------
Government National Mortgage Association:
7.00% with various maturities to 2023 $11,350,219 $ 12,205,324
7.50% with various maturities to 2028 15,081,733 16,394,538
7.75% with maturity at 2019 277,687 308,452
8.00% with various maturities to 2023 3,151,428 3,497,688
8.30% with various maturities to 2020 1,753,278 1,970,338
8.50% with various maturities to 2021 1,458,517 1,617,359
9.00% with various maturities to 2016 518,645 578,035
9.50% with maturity at 2021 1,849,448 2,077,442
12.50% with maturity at 2019 815,366 1,002,972
13.50% with maturity at 2014 56,253 72,072
- ----------------------------------------------------------------------------------------
$ 39,724,220
- ----------------------------------------------------------------------------------------
Total Mortgage Pass-Throughs (identified cost, $145,232,925)
$149,447,909
- ----------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 0.9%
United States Treasury Bond,
7.875%, 2/15/21(5) --
(identified cost, $1,859,656) $ 1,500,000 $ 2,074,337
- ----------------------------------------------------------------------------------------
Total United States (identified cost $154,993,521)
$159,117,161
- ----------------------------------------------------------------------------------------
Venezuela -- 1.0%
- ----------------------------------------------------------------------------------------
Republic of Venezuela, 10.50%, 6/30/03 EUR 2,000,000 $ 2,172,300
- ----------------------------------------------------------------------------------------
Total Venezuela (identified cost $2,100,299) $ 2,172,300
- ----------------------------------------------------------------------------------------
Total Bonds & Notes (identified cost, $201,905,354)
$203,469,807
- ----------------------------------------------------------------------------------------
</Table>
WARRANTS -- 0.0%
<Table>
<Caption>
SECURITY SHARES VALUE
- ----------------------------------------------------------------------------------------
Indonesia -- 0.0%
- ----------------------------------------------------------------------------------------
Asia Pulp and Paper(1)(6) 2,000 $ 0
- ----------------------------------------------------------------------------------------
Total Indonesia (identified cost $0) $ 0
- ----------------------------------------------------------------------------------------
Total Warrants (identified cost $0) $ 0
- ----------------------------------------------------------------------------------------
</Table>
SHORT-TERM INVESTMENTS -- 5.5%
<Table>
<Caption>
SECURITY PRINCIPAL VALUE
- ----------------------------------------------------------------------------------------
Banque National De Paris Euro Time-Deposit Cayman
Islands, 1.30%, 5/1/03 $12,006,000 $ 12,006,000
- ----------------------------------------------------------------------------------------
Total Short-Term Investments (at amortized cost, $12,006,000)
$ 12,006,000
- ----------------------------------------------------------------------------------------
Total Investments -- 98.6%
(identified cost $213,911,354) $215,475,807
- ----------------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 1.4% $ 3,058,089
- ----------------------------------------------------------------------------------------
Net Assets -- 100.0% $218,533,896
- ----------------------------------------------------------------------------------------
</Table>
DEM - Deutsche Mark
NZD - New Zealand Dollar
EUR - Euro Dollar
(1) Defaulted security.
(2) Variable rate or step coupon security
(3) Convertible bond
(4) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(5) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(6) Security valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<Table>
<Caption>
AS OF APRIL 30, 2003
Assets
- ------------------------------------------------------
Investments, at value (identified cost,
$213,911,354) $215,475,807
Cash 438
Receivable for investments sold 98,598
Receivable for open swap contracts 1,155,218
Interest receivable 2,376,969
Receivable for open forward foreign
currency contracts 1,030
Prepaid expenses 410
- ------------------------------------------------------
TOTAL ASSETS $219,108,470
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable for open forward foreign
currency contracts $ 215,404
Payable for daily variation margin on
open financial futures contracts 304,315
Payable to affiliate for Trustees' fees 2,224
Accrued expenses 52,631
- ------------------------------------------------------
TOTAL LIABILITIES $ 574,574
- ------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $218,533,896
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $216,346,562
Net unrealized appreciation (computed on
the basis of identified cost) 2,187,334
- ------------------------------------------------------
TOTAL $218,533,896
- ------------------------------------------------------
</Table>
STATEMENT OF OPERATIONS
<Table>
<Caption>
FOR THE SIX MONTHS ENDED
APRIL 30, 2003
Investment Income
- -----------------------------------------------------
Interest $ 5,258,134
- -----------------------------------------------------
TOTAL INVESTMENT INCOME $ 5,258,134
- -----------------------------------------------------
Expenses
- -----------------------------------------------------
Investment adviser fee $ 479,887
Administration fee 147,270
Trustees' fees and expenses 6,582
Custodian fee 43,833
Legal and accounting services 43,719
Miscellaneous 9,267
- -----------------------------------------------------
TOTAL EXPENSES $ 730,558
- -----------------------------------------------------
NET INVESTMENT INCOME $ 4,527,576
- -----------------------------------------------------
Realized and Unrealized Gain (Loss)
- -----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 3,423,949
Financial futures contracts (3,040,024)
Written options 251,688
Swap contracts 1,477,774
Foreign currency and forward foreign
currency exchange
contract transactions (66,369)
- -----------------------------------------------------
NET REALIZED GAIN $ 2,047,018
- -----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 9,479,532
Financial futures contracts 1,328,710
Written options 85,812
Swap contracts 1,465,136
Foreign currency and forward foreign
currency exchange contracts 6,251
- -----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $12,365,441
- -----------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $14,412,459
- -----------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $18,940,035
- -----------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
INCREASE (DECREASE) SIX MONTHS ENDED YEAR ENDED
IN NET ASSETS APRIL 30, 2003 OCTOBER 31, 2002
- ----------------------------------------------------------------------------
From operations --
Net investment income $ 4,527,576 $ 10,912,356
Net realized gain 2,047,018 1,956,204
Net change in unrealized
appreciation (depreciation) 12,365,441 (3,749,032)
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 18,940,035 $ 9,119,528
- ----------------------------------------------------------------------------
Capital transactions --
Contributions $ 46,260,938 $ 80,054,746
Withdrawals (37,119,719) (78,213,706)
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 9,141,219 $ 1,841,040
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 28,081,254 $ 10,960,568
- ----------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------
At beginning of period $ 190,452,642 $ 179,492,074
- ----------------------------------------------------------------------------
AT END OF PERIOD $ 218,533,896 $ 190,452,642
- ----------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
15
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED ---------------------------------------------------------------
APRIL 30, 2003 2002(1) 2001 2000 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.74%(2) 0.77% 0.79% 0.83% 0.86% 0.83%
Net investment income 4.61%(2) 5.88% 8.10% 8.36% 9.14% 8.31%
Portfolio Turnover 32% 63% 54% 49% 47% 71%
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3) 9.90% 5.25% -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $218,534 $190,453 $179,492 $154,712 $150,282 $138,446
- ---------------------------------------------------------------------------------------------------------------------
</Table>
(1) The Portfolio adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began amortizing market premiums on
fixed-income securities, excluding mortgage-backed securities, and
accreting certain discounts using a different methodology. Additionally,
the Portfolio reclassified net losses realized on prepayments received
on mortgage-backed securities that were previously included in realized
gains/losses to interest income. The effect of these changes for the
year ended October 31, 2002 was a decrease in the ratio of net
investment income to average net assets from 7.32% to 5.88%. Ratios for
the periods prior to October 31, 2001 have not been restated to reflect
this change in presentation.
(2) Annualized.
(3) Total return is required to be disclosed for fiscal years beginning
after December 15, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
16
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Strategic Income Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a non-diversified open-end investment company. The
Portfolio, which was organized as a trust under the laws of the State of New
York in 1992, seeks to achieve a high level of income by investing in a
global portfolio consisting primarily of high grade debt securities. The
Declaration of Trust permits the Trustees to issue beneficial interests in
the Portfolio. At April 30, 2003, Eaton Vance Strategic Income Fund held an
approximate 99.9% interest in the Portfolio. The following is a summary of
significant accounting policies of the Portfolio. The policies are in
conformity with accounting principles generally accepted in the United States
of America.
A Investment Valuation -- Debt securities (other than mortgage-backed,
pass-through securities and short-term obligations maturing in sixty days or
less), including listed securities and securities for which price quotations
are available and forward contracts, will normally be valued on the basis of
market valuations furnished by pricing services. Mortgage backed,
pass-through securities are valued using an independent matrix pricing system
applied by the advisor which takes into account closing bond valuations,
yield differentials, anticipated prepayments and interest rates provided by
dealers. Marketable securities that are listed on foreign or U.S. securities
exchanges are valued at closing sale prices on the exchange where such
securities are principally traded. Marketable securities listed in the NASDAQ
National Market System are valued at the NASDAQ official closing price.
Unlisted or listed securities for which closing sale prices are not available
are valued at the mean between the latest available bid and asked prices. For
foreign investments, if trading or events occurring in other markets after
the close of the principal exchange in which the securities are traded are
expected to materially affect the value of the investments, then those
investments are valued, taking into consideration these events, at their fair
value following procedures approved by the Trustees. Financial futures
contracts listed on commodity exchanges and exchange-traded options are
valued at closing settlement prices. Short-term obligations and money-market
securities maturing in sixty days or less are valued at amortized cost which
approximates value. Non-U.S. dollar denominated short-term obligations are
valued at amortized cost as calculated in the base currency and translated to
U.S. dollars at the current exchange rate. Investments for which market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued and
discount earned, adjusted for amortization of premium or accretion of
discount. Dividend income is recorded on the ex-dividend date for dividends
received in cash and/or securities. However, if the ex-dividend date has
passed, certain dividends from foreign securities are recorded as the
Portfolio is informed of the ex-dividend date. Dividend income may include
dividends that represent returns of capital for federal income tax purposes.
C Gains and Losses From Investment Transactions -- Realized gains and losses
from investment transactions are recorded on the basis of identified cost.
For book purposes, gains and losses are not recognized until disposition. For
federal tax purposes, the Portfolio is subject to special tax rules that may
affect the amount, timing and character of gains recognized on certain of the
Portfolio's investments.
D Income Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests all
or substantially all of its assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors each
investor's distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit. Withholding taxes on foreign dividends and capital gains have been
provided for in accordance with the Portfolio's understanding of the
applicable countries' tax rules and rates.
E Financial Futures Contracts -- Upon entering into a financial futures
contract, the Portfolio is required to deposit an amount (initial margin),
either in cash or securities, equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio (variation margin) each day, dependent on
the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
The Portfolio's investment in financial futures contracts is designed for
both hedging against anticipated future changes in interest or currency
exchange rates and investment purposes. Should interest or currency exchange
rates move unexpectedly, the
17
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS CONT'D
Portfolio may not achieve the anticipated benefits of the financial futures
contracts and may realize a loss. If the Portfolio enters into a closing
transaction, the Portfolio will realize, for book purposes, a gain or loss
equal to the difference between the value of the financial futures contract
to sell and financial futures contract to buy.
F When-Issued and Delayed Delivery Transactions -- The Portfolio may engage in
when-issued and delayed delivery transactions. The Portfolio records
when-issued securities on trade date and maintains security positions such
that sufficient liquid assets will be available to make payments for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked-to-market daily and begin earning interest on
settlement date.
G Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to changes in foreign currency exchange
rates are recorded for financial statement purposes as net realized gains and
losses on investments. That portion of unrealized gains and losses on
investments that results from fluctuations in foreign currency exchange rates
is not separately disclosed.
H Written Options -- The Portfolio may write call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received from
writing options which expire are treated as realized gains. Premiums received
from writing options which are exercised or closed are offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by the Portfolio. The Portfolio as 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.
I Forward Foreign Currency Exchange Contracts -- The Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties
to meet the terms of their contracts and from movements in the value of a
foreign currency relative to the U.S. dollar. The Portfolio will enter into
forward contracts for hedging purposes as well as non-hedging purposes. The
forward foreign currency exchange contracts are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until such time as the
contracts have been closed.
J Reverse Repurchase Agreements -- The Portfolio may enter into reverse
repurchase agreements. Under such an agreement, the Portfolio temporarily
transfers possession, but not ownership, of a security to a counterparty, in
return for cash. At the same time, the Portfolio agrees to repurchase the
security at an agreed-upon price and time in the future. The Portfolio may
enter into reverse repurchase agreements for temporary purposes, such as to
fund withdrawals, or for use as hedging instruments where the underlying
security is denominated in a foreign currency. As a form of leverage, reverse
repurchase agreements may increase the risk of fluctuation in the market
value of the Portfolio's assets or in its yield. Liabilities to
counterparties under reverse repurchase agreements are recognized in the
Statement of Assets and Liabilities at the same time at which cash is
received by the Portfolio. The securities underlying such agreements continue
to be treated as owned by the Portfolio and remain in the Portfolio of
Investments. Interest charged on amounts borrowed by the Portfolio under
reverse repurchase agreements is accrued daily.
K Total Return Swaps -- The Portfolio may enter into swap agreements to enhance
return, to hedge against fluctuations in securities prices or interest rates
or as substitution for the purchase or sale of securities. Pursuant to these
agreements, the Portfolio makes monthly payments at a rate equal to a
predetermined spread to the one-month LIBOR. In exchange, the Portfolio
receives payments based on the rate of return of a benchmark industry index.
During the term of the outstanding swap agreement, changes in the underlying
value of the swap are recorded as unrealized gains and losses. Payments
received or made at the end of the measurement period are recorded as
realized gains and losses. The value of the swap is determined by changes in
the relationship between the rate of interest and the benchmark industry
index. The Portfolio is exposed to credit loss in the event of non-
performance by the swap counterparty. However, the Portfolio does not
anticipate non-performance by the counterparty. Risk may also arise from the
unanticipated movements in value of interest rates or the index.
18
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS CONT'D
L Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
of the Portfolio. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average daily cash
balance the Portfolio maintains with IBT. All significant credits used to
reduce the Portfolio's custodian fees are reported separately as a reduction
of total expenses in the Statement of Operations. For the six months ended
April 30, 2003, $63 in credits were used to reduce the Portfolio's custodian
fee.
M Use of Estimates -- The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
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 income and expense during the
reporting period. Actual results could differ from those estimates.
N Other -- Investment transactions are accounted for on a trade date basis.
2 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
The fee is based upon a percentage of average daily net assets plus a
percentage of gross income (i.e., income other than gains from the sale of
investments and paydown gains/losses). Such percentages are reduced as
average daily net assets exceed certain levels. For the six months ended
April 30, 2003, the fee was equivalent to 0.49% (annualized) of the
Portfolio's average net assets for such period and amounted to $479,887. An
administration fee, computed at an effective annual rate of 0.15% of average
daily net assets was also paid to BMR for administrative services and office
facilities. Such fee amounted to $147,270 for the six months ended April 30,
2003.
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. Trustees of the
Portfolio that are not affiliated with the Investment Adviser may elect to
defer receipt of all or a portion of their annual fees in accordance with the
terms of the Trustees Deferred Compensation Plan. For the six months ended
April 30, 2003, no significant amounts have been deferred. Certain officers
and Trustees of the Portfolio are officers of the above organizations.
3 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR or
EVM and its affiliates in a $150 million unsecured line of credit agreement
with a group of banks. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio or fund based on its
borrowings at an amount above the Eurodollar rate or federal funds rate. In
addition, a fee computed at an annual rate of 0.10% on the daily unused
portion of the line of credit is allocated among the participating portfolios
and funds at the end of each quarter. The Portfolio did not have any
significant borrowings or allocated fees during the six months ended
April 30, 2003.
4 Investment Transactions
- -------------------------------------------
The Portfolio invests primarily in foreign government and U.S. Government
debt securities. The ability of the issuers of the debt securities to meet
their obligations may be affected by economic developments in a specific
industry or country. The Portfolio regularly invests in lower rated and
comparable quality unrated high yield securities. These investments have
different risks than investments in debt securities rated investment grade
and held by the Portfolio. Risk of loss upon default by the borrower is
significantly greater with respect to such debt securities than with other
debt securities because these securities are generally unsecured and are more
sensitive to adverse economic conditions, such as recession or increasing
interest rates, than are investment grade issuers. At April 30, 2003, the
Portfolio had invested approximately 18% of its net assets or approximately
$39,000,000 in high yield securities. Purchases and sales of investments,
other than short-term obligations, and including paydowns on mortgage pass-
throughs, for the six months ended April 30, 2003 were as follows:
<Table>
<Caption>
PURCHASES
-----------------------------------------------------
Investments (non-U.S. Government) $14,362,113
U.S. Government Securities 47,667,933
-----------------------------------------------------
$62,030,046
-----------------------------------------------------
</Table>
19
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
NOTES TO FINANCIAL STATEMENTS CONT'D
<Table>
<Caption>
SALES
-----------------------------------------------------
Investments (non-U.S. Government) $24,162,802
U.S. Government Securities 35,724,538
-----------------------------------------------------
$59,887,340
-----------------------------------------------------
</Table>
5 Financial Instruments
- -------------------------------------------
The Portfolio 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 various market risks. These financial instruments
include written options, forward foreign currency contracts, financial
futures contracts and swaps and may involve, to a varying degree, elements of
risk in excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered. A summary
of obligations under these financial instruments at April 30, 2003 is as
follows:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
SALES
-----------------------------------------------------------------------
SETTLEMENT IN EXCHANGE FOR NET UNREALIZED
DATE(S) DELIVER (IN U.S. DOLLARS) DEPRECIATION
-----------------------------------------------------------------------
6/30/03 Euro Dollar
2,210,000 $ 2,360,280 $ (96,488)
5/19/03 Japanese Yen
1,943,179,110 16,152,777 (118,916)
-----------------------------------------------------------------------
$ 18,513,057 $ (215,404)
-----------------------------------------------------------------------
</Table>
<Table>
<Caption>
PURCHASES
-----------------------------------------------------------------------
SETTLEMENT DELIVER NET UNREALIZED
DATE(S) IN EXCHANGE FOR (IN U.S. DOLLARS) APPRECIATION
-----------------------------------------------------------------------
7/28/03 Indonesian Rupiah
45,000,000,000 $ 5,069,280 $ 1,030
-----------------------------------------------------------------------
$ 5,069,280 $ 1,030
-----------------------------------------------------------------------
</Table>
<Table>
<Caption>
WRITTEN CALL OPTIONS NUMBER OF CONTRACTS PREMIUMS
------------------------------------------------------------------------
Outstanding, beginning of period 250 $ 251,688
------------------------------------------------------------------------
Options expired (250) (251,688)
------------------------------------------------------------------------
Outstanding, end of period -- $ --
------------------------------------------------------------------------
</Table>
<Table>
<Caption>
FUTURES CONTRACTS
----------------------------------------------------------------
EXPIRATION NET UNREALIZED
DATE(S) CONTRACTS POSITION DEPRECIATION
----------------------------------------------------------------
5/03 10 Japan Bond 10
year Short $(266,764)
5/03 660 U.S. Treasury 5
year Note Short (66,482)
----------------------------------------------------------------
$(333,246)
----------------------------------------------------------------
</Table>
At April 30, 2003, the Portfolio had sufficient cash and/or securities to
cover potential obligations arising from open futures and forward contracts,
as well as margin requirements on open futures contracts.
The Portfolio has entered into two total return swap agreements with Credit
Suisse First Boston International whereby the Portfolio makes monthly
payments at a rate equal to the one-month LIBOR plus 0.20% and the one-month
LIBOR plus 0.70% on the notional amount of $5,000,000 and $15,000,000,
respectively. In exchange, the Portfolio receives payments equal to the total
returns on the Lehman Brothers High Yield Bond Index on the same notional
amounts. The value of the contracts, which terminate on June 1, 2003 and
August 1, 2003, are recorded as a receivable for open swap contracts of
$290,367 and $864,851, respectively, at April 30, 2003.
6 Federal Income Tax Basis of Unrealized Appreciation (Depreciation)
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments at April 30, 2003, as computed on a federal income tax basis,
were as follows:
<Table>
AGGREGATE COST $214,874,600
------------------------------------------------------
Gross unrealized appreciation $ 12,409,131
Gross unrealized depreciation (11,807,924)
------------------------------------------------------
NET UNREALIZED APPRECIATION $ 601,207
------------------------------------------------------
</Table>
The net unrealized depreciation on foreign currency, swaps, forwards and
futures contracts at April 30, 2003 on a federal income tax basis was
$318,732.
20
<Page>
STRATEGIC INCOME PORTFOLIO AS OF APRIL 30, 2003
INDEPENDENT ACCOUNTANTS' REPORT
TO THE TRUSTEES AND INVESTORS
OF STRATEGIC INCOME PORTFOLIO:
- ---------------------------------------------
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of Strategic Income Portfolio (the "Portfolio")
at April 30, 2003, and the results of its operations, the changes in its net
assets, and the supplementary data for the periods presented, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at April 30, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 6, 2003
21
<Page>
INVESTMENT MANAGEMENT
EATON VANCE STRATEGIC INCOME FUND
Officers
Thomas E. Faust Jr.
President
William H. Ahern, Jr.
Vice President
Thomas J. Fetter
Vice President
Michael R. Mach
Vice President
Robert B. MacIntosh
Vice President
Duncan W. Richardson
Vice President
Walter A. Row, III
Vice President
Judith A. Saryan
Vice President
Susan Schiff
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
Donald R. Dwight
James B. Hawkes
Samuel L. Hayes, III
William H. Park
Norton H. Reamer
Lynn A. Stout
STRATEGIC INCOME PORTFOLIO
Officers
Mark S. Venezia
President and Portfolio Manager
Susan Schiff
Vice President
Barbara E. Campbell
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
Donald R. Dwight
James B. Hawkes
Samuel L. Hayes, III
William H. Park
Norton H. Reamer
Lynn A. Stout
22
<Page>
INVESTMENT ADVISER OF STRATEGIC INCOME PORTFOLIO
BOSTON MANAGEMENT AND RESEARCH
The Eaton Vance Building
255 State Street
Boston, MA 02109
ADMINISTRATOR OF EATON VANCE STRATEGIC INCOME FUND
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
Boston, MA 02116
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC INC.
Attn: Eaton Vance Funds
P.O. Box 9653
Providence, RI 02940-9653
(800) 262-1122
EATON VANCE FUNDS
EATON VANCE MANAGEMENT
BOSTONMANAGEMENT AND RESEARCH
EATON VANCE DISTRIBUTORS, INC.
PRIVACY NOTICE
The Eaton Vance organization is committed to ensuring your financial privacy.
This notice is being sent to comply with privacy regulations of the Securities
and Exchange Commission. Each of the above financial institutions has in effect
the following policy with respect to nonpublic personal information about its
customers:
- - Only such information received from you, through application forms or
otherwise, and information about your Eaton Vance fund transactions will be
collected.
- - None of such information about you (or former customers) will be disclosed to
anyone, except as permitted by law (which includes disclosure to employees
necessary to service your account).
- - Policies and procedures (including physical, electronic and procedural
safeguards) are in place that are designed to protect the confidentiality of
such information.
For more information about Eaton Vance's privacy policies, call: 1-800-262-1122
EATON VANCE STRATEGIC INCOME FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
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.
028-6/03 SISRC
<Page>
ITEM 2. CODE OF ETHICS
Not Required in Filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not Required in Filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Required in Filing.
ITEMS 5-6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not Required in Filing.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) It is the conclusion of the registrant's principal executive officer and
principal financial officer that the effectiveness of the registrant's current
disclosure controls and procedures (such disclosure controls and procedures
having been evaluated within 90 days of the date of this filing) provide
reasonable assurance that the information required to be disclosed by the
registrant has been recorded, processed, summarized and reported within the time
period specified in the Commission's rules and forms and that the information
required to be disclosed by the registrant has been accumulated and communicated
to the registrant's principal executive officer and principal financial officer
in order to allow timely decisions regarding required disclosure.
(b) There have been no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a) and (b) Exhibit is attached to Filing.
(c) Exhibit is attached to Filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
STRATEGIC INCOME PORTFOLIO
By: /s/ Thomas E. Faust Jr.
-----------------------
Thomas E. Faust Jr.
President
Date: June 18, 2003
<Page>
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ James L. O'Connor
-----------------------
James L. O'Connor
Treasurer
Date: June 18, 2003
By: /s/ Thomas E. Faust Jr.
-----------------------
Thomas E. Faust Jr.
President
Date: June 18, 2003