UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-10389
Tax-Managed International Equity Portfolio
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Maureen A. Gemma
Two International Place, Boston, Massachusetts 02110
(Name and Address of Agent for Services)
(617) 482-8260
(Registrant’s Telephone Number)
October 31
Date of Fiscal Year End
October 31, 2019
Date of Reporting Period
Item 1. Reports to Stockholders
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments
| 18 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 19 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 20 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 21 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 22 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 23 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 24 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 25 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 26 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 27 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Portfolio of Investments — continued
| 28 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Statement of Assets and Liabilities
| Assets | October 31, 2019 | |||
| Unaffiliated investments, at value including $1,933,519 of securities on loan (identified cost, $68,166,026) |
$ | 71,717,193 | ||
| Affiliated investment, at value (identified cost, $343,801) |
343,801 | |||
| Foreign currency, at value (identified cost, $54,701) |
54,782 | |||
| Dividends receivable |
123,968 | |||
| Dividends receivable from affiliated investment |
358 | |||
| Receivable for investments sold |
6,890,318 | |||
| Securities lending income receivable |
1,509 | |||
| Tax reclaims receivable |
279,755 | |||
| Total assets |
$ | 79,411,684 | ||
| Liabilities | ||||
| Collateral for securities loaned |
$ | 1,355,834 | ||
| Payable for investments purchased |
6,899,893 | |||
| Payable to affiliates: |
||||
| Investment adviser fee |
29,561 | |||
| Trustees’ fees |
327 | |||
| Accrued expenses |
72,500 | |||
| Total liabilities |
$ | 8,358,115 | ||
| Net Assets applicable to investors’ interest in Portfolio |
$ | 71,053,569 | ||
| 29 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Statement of Operations
| Investment Income | Year Ended October 31, 2019 |
|||
| Dividends (net of foreign taxes, $318,887) |
$ | 2,224,252 | ||
| Dividends from affiliated investment |
4,175 | |||
| Securities lending income, net |
2,577 | |||
| Total investment income |
$ | 2,231,004 | ||
| Expenses | ||||
| Investment adviser fee |
$ | 341,403 | ||
| Trustees’ fees and expenses |
4,033 | |||
| Custodian fee |
68,967 | |||
| Legal and accounting services |
54,323 | |||
| Miscellaneous |
33,961 | |||
| Total expenses |
$ | 502,687 | ||
| Net investment income |
$ | 1,728,317 | ||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) — |
||||
| Investment transactions (net of foreign capital gains taxes of $2,128) |
$ | 3,994,374 | ||
| Investment transactions — affiliated investment |
(27 | ) | ||
| Foreign currency transactions |
(10,941 | ) | ||
| Net realized gain |
$ | 3,983,406 | ||
| Change in unrealized appreciation (depreciation) — |
||||
| Investments |
$ | 1,665,670 | ||
| Investments — affiliated investment |
24 | |||
| Foreign currency |
12,559 | |||
| Net change in unrealized appreciation (depreciation) |
$ | 1,678,253 | ||
| Net realized and unrealized gain |
$ | 5,661,659 | ||
| Net increase in net assets from operations |
$ | 7,389,976 | ||
| 30 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Statements of Changes in Net Assets
| Year Ended October 31, | ||||||||
| Increase (Decrease) in Net Assets | 2019 | 2018 | ||||||
| From operations — |
||||||||
| Net investment income |
$ | 1,728,317 | $ | 1,416,578 | ||||
| Net realized gain (loss) |
3,983,406 | (211,552 | ) | |||||
| Net change in unrealized appreciation (depreciation) |
1,678,253 | (5,289,631 | ) | |||||
| Net increase (decrease) in net assets from operations |
$ | 7,389,976 | $ | (4,084,605 | ) | |||
| Capital transactions — |
||||||||
| Contributions |
$ | 4,518,129 | $ | 5,441,279 | ||||
| Withdrawals |
(8,896,244 | ) | (8,995,378 | ) | ||||
| Net decrease in net assets from capital transactions |
$ | (4,378,115 | ) | $ | (3,554,099 | ) | ||
| Net increase (decrease) in net assets |
$ | 3,011,861 | $ | (7,638,704 | ) | |||
| Net Assets | ||||||||
| At beginning of year |
$ | 68,041,708 | $ | 75,680,412 | ||||
| At end of year |
$ | 71,053,569 | $ | 68,041,708 | ||||
| 31 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Financial Highlights
| Year Ended October 31, | ||||||||||||||||||||
| Ratios/Supplemental Data | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
| Ratios (as a percentage of average daily net assets): |
||||||||||||||||||||
| Expenses(1) |
0.74 | % | 0.71 | % | 0.68 | % | 0.97 | % | 0.92 | % | ||||||||||
| Net investment income |
2.53 | % | 1.90 | % | 2.30 | % | 2.19 | % | 2.06 | % | ||||||||||
| Portfolio Turnover |
37 | % | 30 | % | 26 | % | 14 | % | 11 | % | ||||||||||
| Total Return |
11.59 | % | (5.77 | )% | 22.05 | % | 0.74 | % | 0.31 | % | ||||||||||
| Net assets, end of year (000’s omitted) |
$ | 71,054 | $ | 68,042 | $ | 75,680 | $ | 65,395 | $ | 71,918 | ||||||||||
| (1) | Excludes the effect of custody fee credits, if any, of less than 0.005%. Effective September 1, 2015, custody fee credits, which were earned on cash deposit balances, were discontinued by the custodian. |
| 32 | See Notes to Financial Statements. |
Tax-Managed International Equity Portfolio
October 31, 2019
Notes to Financial Statements
1 Significant Accounting Policies
Tax-Managed International Equity Portfolio (the Portfolio) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Portfolio’s investment objective is to achieve long-term, after-tax returns by investing in a diversified portfolio of foreign equity securities. The Declaration of Trust permits the Trustees to issue interests in the Portfolio. At October 31, 2019, Parametric Tax-Managed International Equity Fund and Eaton Vance Tax-Managed Equity Asset Allocation Fund held an interest of 52.0% and 48.0%, respectively, 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 (U.S. GAAP). The Portfolio is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946.
A Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.
Equity Securities. Equity securities listed on a U.S. securities exchange generally are valued at the last sale or closing price on the day of valuation or, if no sales took place on such date, at the mean between the closing bid and ask prices on the exchange where such securities are principally traded. Equity securities listed on the NASDAQ Global or Global Select Market generally are valued at the NASDAQ official closing price. Unlisted or listed securities for which closing sales prices or closing quotations are not available are valued at the mean between the latest available bid and ask prices.
Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads. The daily valuation of exchange-traded foreign securities generally is determined as of the close of trading on the principal exchange on which such securities trade. Events occurring after the close of trading on foreign exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. When valuing foreign equity securities that meet certain criteria, the Portfolio’s Trustees have approved the use of a fair value service that values such securities to reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or other instruments that have a strong correlation to the fair-valued securities.
Affiliated Fund. The Portfolio may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). While Cash Reserves Fund is not a registered money market mutual fund, it conducts all of its investment activities in accordance with the requirements of Rule 2a-7 under the 1940 Act. Investments in Cash Reserves Fund are valued at the closing net asset value per unit on the valuation day. Cash Reserves Fund generally values its investment securities based on available market quotations provided by a third party pricing service.
Other. Investments in registered investment companies (including money market funds) that do not trade on an exchange are valued at the net asset value per share on the valuation day.
Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Portfolio in a manner that most fairly reflects the security’s “fair value”, which is the amount that the Portfolio might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial statements, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
B Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.
C Income — 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. 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. In consideration of recent decisions rendered by European courts, the Portfolio has filed additional tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Due to the uncertainty as to the ultimate resolution of these proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment, no amounts are reflected in the financial statements for such outstanding reclaims.
D Federal and Other Taxes — The Portfolio has elected to be 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 on its share of taxable income. 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 losses and any other items of income, gain, loss, deduction or credit.
| 33 |
Tax-Managed International Equity Portfolio
October 31, 2019
Notes to Financial Statements — continued
In addition to the requirements of the Internal Revenue Code, the Portfolio may also be subject to local taxes on the recognition of capital gains in certain countries. Capital gains taxes on securities sold are included in net realized gain (loss) on investments.
As of October 31, 2019, the Portfolio had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Portfolio files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.
E Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect 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.
F Use of Estimates — The preparation of the financial statements in conformity with U.S. GAAP 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.
G Indemnifications — Under the Portfolio’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Portfolio. Under Massachusetts law, if certain conditions prevail, interestholders in the Portfolio could be deemed to have personal liability for the obligations of the Portfolio. However, the Portfolio’s Declaration of Trust contains an express disclaimer of liability on the part of Portfolio interestholders. Additionally, in the normal course of business, the Portfolio enters into agreements with service providers that may contain indemnification clauses. The Portfolio’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Portfolio that have not yet occurred.
2 Investment Adviser Fee and Other Transactions with Affiliates
The investment adviser fee is earned by Boston Management and Research (BMR), a subsidiary of EVM, as compensation for investment advisory services rendered to the Portfolio. Pursuant to the investment advisory agreement and subsequent fee reduction agreements between the Portfolio and BMR, the fee is computed at an annual rate of 0.50% of the Portfolio’s average daily net assets up to $1 billion and is payable monthly. On net assets of $1 billion or over, the annual fee is reduced. The fee reductions cannot be terminated or reduced without the approval of a majority vote of the Trustees of the Portfolio who are not interested persons of BMR or the Portfolio and by vote of a majority of the holders of interest in the Portfolio. For the year ended October 31, 2019, the Portfolio’s investment adviser fee amounted to $341,403 or 0.50% of the Portfolio’s average daily net assets. Pursuant to a sub-advisory agreement, BMR pays Parametric Portfolio Associates LLC (Parametric), a wholly-owned indirect subsidiary of Eaton Vance Corp., a portion of its investment adviser fee for sub-advisory services provided to the Portfolio. The Portfolio invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund.
Trustees and officers of the Portfolio who are members of EVM’s or BMR’s organizations receive remuneration for their services to the Portfolio out of the investment adviser fee. Trustees of the Portfolio who are not affiliated with the investment adviser may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the year ended October 31, 2019, no significant amounts have been deferred. Certain officers and Trustees of the Portfolio are officers of the above organizations.
3 Purchases and Sales of Investments
Purchases and sales of investments, other than short-term obligations, aggregated $24,887,814 and $27,310,924, respectively, for the year ended October 31, 2019.
4 Federal Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) of investments of the Portfolio at October 31, 2019, as determined on a federal income tax basis, were as follows:
| Aggregate cost |
$ | 68,855,743 | ||
| Gross unrealized appreciation |
$ | 8,801,041 | ||
| Gross unrealized depreciation |
(5,595,790 | ) | ||
| Net unrealized appreciation |
$ | 3,205,251 | ||
| 34 |
Tax-Managed International Equity Portfolio
October 31, 2019
Notes to Financial Statements — continued
5 Securities Lending Agreement
The Portfolio has established a securities lending agreement with State Street Bank and Trust Company (SSBT) as securities lending agent in which the Portfolio lends portfolio securities to qualified borrowers in exchange for collateral consisting of either cash or securities issued or guaranteed by the U.S. government or its agencies or instrumentalities in an amount at least equal to the market value of the securities on loan. The market value of securities loaned is determined daily and any additional required collateral is delivered to the Portfolio on the next business day. Cash collateral is invested in the State Street Navigator Securities Lending Government Money Market Portfolio, a money market fund registered under the 1940 Act. The Portfolio earns interest on the amount invested but it must pay (and at times receive from) the broker a loan rebate fee computed as a varying percentage of the collateral received. For security loans secured by non-cash collateral, the Portfolio earns a negotiated lending fee from the borrower. A portion of the income earned by the Portfolio from its investment of cash collateral, net of rebate fees, and lending fees received is allocated to SSBT for its services as lending agent and the portion allocated to the Portfolio is presented as securities lending income, net on the Statement of Operations. Non-cash collateral is held by the lending agent on behalf of the Portfolio and cannot be sold or re-pledged by the Portfolio; accordingly, such collateral is not reflected in the Statement of Assets and Liabilities.
The Portfolio is subject to possible delay in the recovery of loaned securities. Pursuant to the securities lending agreement, SSBT has provided indemnification to the Portfolio in the event of default by a borrower with respect to a loan. The Portfolio bears the risk of loss with respect to the investment of cash collateral.
At October 31, 2019, the value of the securities loaned (all common stock) and the value of the collateral received, which exceeded the value of the securities loaned, amounted to $1,933,519 and $2,029,920, respectively. Collateral received was comprised of cash of $1,355,834 and U.S. government and/or agencies securities of $674,086. The securities lending transactions have no contractual maturity date and each of the Portfolio and borrower has the option to terminate a loan at any time. The carrying amount of the liability for collateral for securities loaned at October 31, 2019 approximated its fair value. If measured at fair value, such liability would have been considered as Level 2 in the fair value hierarchy (see Note 9) at October 31, 2019.
6 Line of Credit
The Portfolio participates with other portfolios and funds managed by EVM and its affiliates in a $800 million unsecured line of credit agreement with a group of banks, which is in effect through October 27, 2020. In connection with the renewal of the agreement on October 29, 2019, funds managed by Calvert Research and Management, an affiliate of EVM, were added as participating funds to the agreement and the borrowing limit was increased from $625 million. Borrowings are made by the Portfolio solely to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Interest is charged to the Portfolio based on its borrowings at an amount above either the Eurodollar rate or Federal Funds rate. In addition, a fee computed at an annual rate of 0.15% on the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. Because the line of credit is not available exclusively to the Portfolio, it may be unable to borrow some or all of its requested amounts at any particular time. The Portfolio did not have any significant borrowings or allocated fees during the year ended October 31, 2019.
7 Risks Associated with Foreign Investments
Investing in securities issued by companies whose principal business activities are outside the United States may involve significant risks not present in domestic investments. For example, there is generally less publicly available information about foreign companies, particularly those not subject to the disclosure and reporting requirements of the U.S. securities laws. Certain foreign issuers are generally not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic issuers. Investments in foreign securities also involve the risk of possible adverse changes in investment or exchange control regulations, expropriation or confiscatory taxation, limitation on the removal of funds or other assets of the Portfolio, political or financial instability or diplomatic and other developments which could affect such investments. Foreign securities markets, while growing in volume and sophistication, are generally not as developed as those in the United States, and securities of some foreign issuers (particularly those located in developing countries) may be less liquid and more volatile than securities of comparable U.S. companies. In general, there is less overall governmental supervision and regulation of foreign securities markets, broker/dealers and issuers than in the United States.
| 35 |
Tax-Managed International Equity Portfolio
October 31, 2019
Notes to Financial Statements — continued
8 Investments in Affiliated Funds
At October 31, 2019, the value of the Portfolio’s investment in affiliated funds was $343,801, which represents 0.5% of the Portfolio’s net assets. Transactions in affiliated funds by the Portfolio for the year ended October 31, 2019 were as follows:
| Name of affiliated fund | Value, beginning of period |
Purchases | Sales proceeds |
Net realized gain (loss) |
Change in unrealized appreciation (depreciation) |
Value, end of period |
Dividend income |
Units, period |
||||||||||||||||||||||||
| Short-Term Investments |
| |||||||||||||||||||||||||||||||
| Eaton Vance Cash Reserves Fund, LLC, 1.97% |
$ | 349,200 | $ | 6,463,709 | $ | (6,469,105 | ) | $ | (27 | ) | $ | 24 | $ | 343,801 | $ | 4,175 | 343,801 | |||||||||||||||
9 Fair Value Measurements
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
| • | Level 1 – quoted prices in active markets for identical investments |
| • | Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments) |
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
At October 31, 2019, the hierarchy of inputs used in valuing the Portfolio’s investments, which are carried at value, were as follows:
| Asset Description | Level 1 | Level 2 | Level 3* | Total | ||||||||||||
| Common Stocks |
||||||||||||||||
| Asia/Pacific |
$ | 542,790 | $ | 20,811,703 | $ | 0 | $ | 21,354,493 | ||||||||
| Developed Europe |
964,972 | 46,446,138 | 16,560 | 47,427,670 | ||||||||||||
| Developed Middle East |
252,928 | 1,326,268 | — | 1,579,196 | ||||||||||||
| Total Common Stocks |
$ | 1,760,690 | $ | 68,584,109 | ** | $ | 16,560 | $ | 70,361,359 | |||||||
| Rights |
$ | — | $ | — | $ | 0 | $ | 0 | ||||||||
| Warrants |
— | — | 0 | 0 | ||||||||||||
| Short-Term Investments |
1,355,834 | 343,801 | — | 1,699,635 | ||||||||||||
| Total Investments |
$ | 3,116,524 | $ | 68,927,910 | $ | 16,560 | $ | 72,060,994 | ||||||||
| * | None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Portfolio. |
| ** | Includes foreign equity securities whose values were adjusted to reflect market trading of comparable securities or other correlated instruments that occurred after the close of trading in their applicable foreign markets. |
Level 3 investments at the beginning and/or end of the period in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for the year ended October 31, 2019 is not presented.
| 36 |
Tax-Managed International Equity Portfolio
October 31, 2019
Report of Independent Registered Public Accounting Firm
To the Trustees and Investors of Tax-Managed International Equity Portfolio:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of Tax-Managed International Equity Portfolio (the “Portfolio”), including the portfolio of investments, as of October 31, 2019, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Portfolio as of October 31, 2019, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Portfolio in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Portfolio is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Portfolio’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2019, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
December 18, 2019
We have served as the auditor of one or more Eaton Vance investment companies since 1959.
| 37 |
Parametric
Tax-Managed International Equity Fund
October 31, 2019
Management and Organization
Fund Management. The Trustees of Eaton Vance Mutual Funds Trust (the Trust) and Tax-Managed International Equity Portfolio (the Portfolio) are responsible for the overall management and supervision of the Trust’s and Portfolio’s affairs. The Trustees and officers of the Trust and the Portfolio are listed below. Except as indicated, each individual has held the office shown or other offices in the same company for the last five years. Trustees and officers of the Trust and the Portfolio hold indefinite terms of office. The “Noninterested Trustees” consist of those Trustees who are not “interested persons” of the Trust and the Portfolio, as that term is defined under the 1940 Act. The business address of each Trustee and officer is Two International Place, Boston, Massachusetts 02110. As used below, “EVC” refers to Eaton Vance Corp., “EV” refers to Eaton Vance, Inc., “EVM” refers to Eaton Vance Management, “BMR” refers to Boston Management and Research and “EVD” refers to Eaton Vance Distributors, Inc. EVC and EV are the corporate parent and trustee, respectively, of EVM and BMR. EVD is the Fund’s principal underwriter, the Portfolio’s placement agent and a wholly-owned subsidiary of EVC. Each officer affiliated with Eaton Vance may hold a position with other Eaton Vance affiliates that is comparable to his or her position with EVM listed below. Each Trustee oversees 159 portfolios in the Eaton Vance Complex (including all master and feeder funds in a master feeder structure). Each officer serves as an officer of certain other Eaton Vance funds. Each Trustee and officer serve until his or her successor is elected.
| Name and Year of Birth | Trust/Portfolio Position(s) |
Trustee Since(1) |
Principal Occupation(s) and Other Directorships During Past Five Years and Other Relevant Experience | |||
| Interested Trustee | ||||||
| Thomas E. Faust Jr. 1958 |
Trustee | 2007 | Chairman, Chief Executive Officer and President of EVC, Director and President of EV, Chief Executive Officer and President of EVM and BMR, and Director of EVD. Trustee and/or officer of 159 registered investment companies. Mr. Faust is an interested person because of his positions with EVM, BMR, EVD, EVC and EV, which are affiliates of the Trust and Portfolio. Other Directorships in the Last Five Years. Director of EVC and Hexavest Inc. (investment management firm). | |||
| Noninterested Trustees | ||||||
| Mark R. Fetting 1954 |
Trustee | 2016 | Private investor. Formerly held various positions at Legg Mason, Inc. (investment management firm) (2000-2012), including President, Chief Executive Officer, Director and Chairman (2008-2012), Senior Executive Vice President (2004-2008) and Executive Vice President (2001-2004). Formerly, President of Legg Mason family of funds (2001-2008). Formerly, Division President and Senior Officer of Prudential Financial Group, Inc. and related companies (investment management firm) (1991-2000). Other Directorships in the Last Five Years. None. | |||
| Cynthia E. Frost 1961 |
Trustee | 2014 | Private investor. Formerly, Chief Investment Officer of Brown University (university endowment) (2000-2012). Formerly, Portfolio Strategist for Duke Management Company (university endowment manager) (1995-2000). Formerly, Managing Director, Cambridge Associates (investment consulting company) (1989-1995). Formerly, Consultant, Bain and Company (management consulting firm) (1987-1989). Formerly, Senior Equity Analyst, BA Investment Management Company (1983-1985). Other Directorships in the Last Five Years. None. | |||
| George J. Gorman 1952 |
Trustee | 2014 | Principal at George J. Gorman LLC (consulting firm). Formerly, Senior Partner at Ernst & Young LLP (a registered public accounting firm) (1974-2009). Other Directorships in the Last Five Years. Formerly, Trustee of the BofA Funds Series Trust (11 funds) (2011-2014) and of the Ashmore Funds (9 funds) (2010-2014). | |||
| Valerie A. Mosley 1960 |
Trustee | 2014 | Chairwoman and Chief Executive Officer of Valmo Ventures (a consulting and investment firm). Former Partner and Senior Vice President, Portfolio Manager and Investment Strategist at Wellington Management Company, LLP (investment management firm) (1992-2012). Former Chief Investment Officer, PG Corbin Asset Management (1990-1992). Formerly worked in institutional corporate bond sales at Kidder Peabody (1986-1990). Other Directorships in the Last Five Years. Director of Envestnet, Inc. (provider of intelligent systems for wealth management and financial wellness) (since 2018). Director of Dynex Capital, Inc. (mortgage REIT) (since 2013). | |||
| 38 |
Parametric
Tax-Managed International Equity Fund
October 31, 2019
Management and Organization — continued
| Name and Year of Birth | Trust/Portfolio Position(s) |
Trustee Since(1) |
Principal Occupation(s) and Other Directorships During Past Five Years and Other Relevant Experience | |||
| Noninterested Trustees (continued) | ||||||
| William H. Park 1947 |
Chairperson of the Board and Trustee | 2016 (Chairperson) and 2003 (Trustee) |
Private investor. Formerly, Consultant (management and transactional) (2012-2014). Formerly, Chief Financial Officer, Aveon Group L.P. (investment management firm) (2010-2011). Formerly, Vice Chairman, Commercial Industrial Finance Corp. (specialty finance company) (2006-2010). Formerly, President and Chief Executive Officer, Prizm Capital Management, LLC (investment management firm) (2002-2005). Formerly, Executive Vice President and Chief Financial Officer, United Asset Management Corporation (investment management firm) (1982-2001). Formerly, Senior Manager, Price Waterhouse (now PricewaterhouseCoopers) (a registered public accounting firm) (1972-1981). Other Directorships in the Last Five Years. None. | |||
| Helen Frame Peters 1948 |
Trustee | 2008 | Professor of Finance, Carroll School of Management, Boston College. Formerly, Dean, Carroll School of Management, Boston College (2000-2002). Formerly, Chief Investment Officer, Fixed Income, Scudder Kemper Investments (investment management firm) (1998-1999). Formerly, Chief Investment Officer, Equity and Fixed Income, Colonial Management Associates (investment management firm) (1991-1998). Other Directorships in the Last Five Years. None. | |||
| Keith Quinton 1958 |
Trustee | 2018 | Independent Investment Committee Member at New Hampshire Retirement System (since 2017). Advisory Committee member at Northfield Information Services, Inc. (risk management analytics provider) (since 2016). Formerly, Portfolio Manager and Senior Quantitative Analyst at Fidelity Investments (investment management firm) (2001-2014). Other Directorships in the Last Five Years. Director of New Hampshire Municipal Bond Bank (since 2016). | |||
| Marcus L. Smith 1966 |
Trustee | 2018 | Member of Posse Boston Advisory Board (foundation) (since 2015). Trustee at University of Mount Union (since 2008). Formerly, Portfolio Manager at MFS Investment Management (investment management firm) (1994-2017). Other Directorships in the Last Five Years. Director of MSCI Inc. (global provider of investment decision support tools) (since 2017). Formerly, Director of DCT Industrial Trust Inc. (logistics real estate company) (2017-2018). | |||
| Susan J. Sutherland 1957 |
Trustee | 2015 | Private investor. Formerly, Associate, Counsel and Partner at Skadden, Arps, Slate, Meagher & Flom LLP (law firm) (1982-2013). Other Directorships in the Last Five Years. Formerly, Director of Montpelier Re Holdings Ltd. (global provider of customized insurance and reinsurance products) (2013-2015). | |||
| Scott E. Wennerholm 1959 |
Trustee | 2016 | Formerly, Trustee at Wheelock College (postsecondary institution) (2012-2018). Formerly, Consultant at GF Parish Group (executive recruiting firm) (2016-2017). Formerly, Chief Operating Officer and Executive Vice President at BNY Mellon Asset Management (investment management firm) (2005-2011). Formerly, Chief Operating Officer and Chief Financial Officer at Natixis Global Asset Management (investment management firm) (1997-2004). Formerly, Vice President at Fidelity Investments Institutional Services (investment management firm) (1994-1997). Other Directorships in the Last Five Years. None. | |||
| Name and Year of Birth | Trust/Portfolio Position(s) |
Officer Since(2) |
Principal Occupation(s) During Past Five Years | |||
| Principal Officers who are not Trustees | ||||||
| Payson F. Swaffield 1956 |
President of the Trust | 2003 | Vice President and Chief Income Investment Officer of EVM and BMR. Also Vice President of Calvert Research and Management (“CRM”) since 2016. | |||
| Edward J. Perkin 1972 |
President of the Portfolio | 2014 | Chief Equity Investment Officer and Vice President of EVM and BMR since 2014. Formerly, Chief Investment Officer, International and Emerging Markets Equity, and Managing Director, Portfolio Manager, Europe, EAFE and Global at Goldman Sachs Asset Management (2002-2014). Also Vice President of CRM since 2016. | |||
| Maureen A. Gemma 1960 |
Vice President, Secretary and Chief Legal Officer | 2005 | Vice President of EVM and BMR. Also Vice President of CRM since 2016. | |||
| 39 |
Parametric
Tax-Managed International Equity Fund
October 31, 2019
Management and Organization — continued
| Name and Year of Birth | Trust/Portfolio Position(s) |
Officer Since(2) |
Principal Occupation(s) During Past Five Years | |||
| Principal Officers who are not Trustees (continued) | ||||||
| James F. Kirchner 1967 |
Treasurer | 2007 | Vice President of EVM and BMR. Also Vice President of CRM since 2016. | |||
| Richard F. Froio 1968 |
Chief Compliance Officer | 2017 | Vice President of EVM and BMR since 2017. Formerly, Deputy Chief Compliance Officer (Adviser/Funds) and Chief Compliance Officer (Distribution) at PIMCO (2012-2017) and Managing Director at BlackRock/Barclays Global Investors (2009-2012). | |||
| (1) | Year first appointed to serve as Trustee for a fund in the Eaton Vance family of funds. Each Trustee has served continuously since appointment unless indicated otherwise. |
| (2) | Year first elected to serve as officer of a fund in the Eaton Vance family of funds when the officer has served continuously. Otherwise, year of most recent election as an officer of a fund in the Eaton Vance family of funds. Titles may have changed since initial election. |
The SAI for the Fund includes additional information about the Trustees and officers of the Fund and the Portfolio and can be obtained without charge on Eaton Vance’s website at www.eatonvance.com or by calling 1-800-260-0761.
| 40 |
Eaton Vance Funds
IMPORTANT NOTICES
Privacy. The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy 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. This may include information such as name, address, social security number, tax status, account balances and transactions. |
| • | 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). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers. |
| • | Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information. |
| • | We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com. |
Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management (International) Limited, Eaton Vance Advisers International Ltd., Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.
Delivery of Shareholder Documents. The Securities and Exchange Commission (SEC) permits 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 intermediary, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial intermediary, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-260-0761, or contact your financial intermediary. Your instructions that householding not apply to delivery of your Eaton Vance documents will typically be effective within 30 days of receipt by Eaton Vance or your financial intermediary.
Portfolio Holdings. Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) files a schedule of portfolio holdings on Part F to Form N-PORT with the SEC for the first and third quarters of each fiscal year. The Form N-PORT will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-260-0761 or in the EDGAR database on the SEC’s website at www.sec.gov.
Proxy Voting. From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-260-0761 and by accessing the SEC’s website at www.sec.gov.
| 41 |
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| * | FINRA BrokerCheck. Investors may check the background of their Investment Professional by contacting the Financial Industry Regulatory Authority (FINRA). FINRA BrokerCheck is a free tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers. FINRA BrokerCheck is available by calling 1-800-289-9999 and at www.FINRA.org. The FINRA BrokerCheck brochure describing this program is available to investors at www.FINRA.org. |
38 10.31.19
Item 2. Code of Ethics
The registrant has adopted a code of ethics applicable to its Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-262-1122. The registrant has not amended the code of ethics as described in Form N-CSR during the period covered by this report. The registrant has not granted any waiver, including an implicit waiver, from a provision of the code of ethics as described in Form N-CSR during the period covered by this report.
Item 3. Audit Committee Financial Expert
The registrant’s Board has designated George J. Gorman and William H. Park, each an independent trustee, as audit committee financial experts. Mr. Gorman is a certified public accountant who is the Principal at George J. Gorman LLC (a consulting firm). Previously, Mr. Gorman served in various capacities at Ernst & Young LLP (a registered public accounting firm), including as Senior Partner. Mr. Gorman also has experience serving as an independent trustee and audit committee financial expert of other mutual fund complexes. Mr. Park is a certified public accountant who is a private investor. Previously, he served as a consultant, as the Chief Financial Officer of Aveon Group, L.P. (an investment management firm), as the Vice Chairman of Commercial Industrial Finance Corp. (specialty finance company), as President and Chief Executive Officer of Prizm Capital Management, LLC (investment management firm), as Executive Vice President and Chief Financial Officer of United Asset Management Corporation (an institutional investment management firm) and as a Senior Manager at Price Waterhouse (now PricewaterhouseCoopers) (a registered public accounting firm).
Item 4. Principal Accountant Fees and Services
(a)-(d)
The following table presents the aggregate fees billed to the registrant for the registrant’s fiscal years ended October 31, 2018 and October 31, 2019 by the registrant’s principal accountant, Deloitte & Touche LLP (“D&T”), for professional services rendered for the audit of the registrant’s annual financial statements and fees billed for other services rendered by D&T during such periods.
| Fiscal Years Ended |
10/31/18 | 10/31/19 | ||||||
| Audit Fees |
$ | 35,590 | $ | 36,100 | ||||
| Audit-Related Fees(1) |
$ | 0 | $ | 0 | ||||
| Tax Fees(2) |
$ | 16,438 | $ | 16,685 | ||||
| All Other Fees(3) |
$ | 0 | $ | 0 | ||||
|
|
|
|
|
|||||
| Total |
$ | 52,028 | $ | 52,785 | ||||
|
|
|
|
|
|||||
| (1) | Audit-related fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under the category of audit fees. |
| (2) | Tax fees consist of the aggregate fees billed for professional services rendered by the principal accountant relating to tax compliance, tax advice, and tax planning and specifically include fees for tax return preparation and other related tax compliance/planning matters. |
| (3) | All other fees consist of the aggregate fees billed for products and services provided by the principal accountant other than audit, audit-related, and tax services. |
(e)(1) The registrant’s audit committee has adopted policies and procedures relating to the pre-approval of services provided by the registrant’s principal accountant (the “Pre-Approval Policies”). The Pre-Approval Policies establish a framework intended to assist the audit committee in the proper discharge of its pre-approval responsibilities. As a general matter, the Pre-Approval Policies (i) specify certain types of audit, audit-related, tax, and other services determined to be pre-approved by the audit committee; and (ii) delineate specific procedures governing the mechanics of the pre-approval process, including the approval and monitoring of audit and non-audit service fees. Unless a service is specifically pre-approved under the Pre-Approval Policies, it must be separately pre-approved by the Audit Committee.
The Pre-Approval Policies and the types of audit and non-audit services pre-approved therein must be reviewed and ratified by the registrant’s audit committee at least annually. The registrant’s audit committee maintains full responsibility for the appointment, compensation, and oversight of the work of the registrant’s principal accountant.
(e)(2) No services described in paragraphs (b)-(d) above were approved by the registrant’s audit committee pursuant to the “de minimis exception” set forth in Rule 2-01 (c)(7)(i)(C) of Regulation S-X.
(f) Not applicable.
(g) The following table presents (i) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed to the registrant by D&T for the registrant’s fiscal years ended October 31, 2018 and October 31, 2019; and (ii) the aggregate non-audit fees (i.e., fees for audit-related, tax, and other services) billed to the Eaton Vance organization by D&T for the same time periods.
| Fiscal Years Ended |
10/31/18 | 10/31/19 | ||||||
| Registrant |
$ | 16,438 | $ | 16,685 | ||||
| Eaton Vance(1) |
$ | 126,485 | $ | 59,903 | ||||
| (1) | Certain entities that provide ongoing services to the registrant are subsidiaries of Eaton Vance Corp. |
(h) The registrant’s audit committee has considered whether the provision by the registrant’s principal accountant of non-audit services to the registrant’s investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant that were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
No material changes.
Item 11. 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 changes in the registrant’s internal controls over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable.
Item 13. Exhibits
| (a)(1) | Registrant’s Code of Ethics – Not applicable (please see Item 2). | |
| (a)(2)(i) | Treasurer’s Section 302 certification. | |
| (a)(2)(ii) | President’s Section 302 certification. | |
| (b) | Combined Section 906 certification. | |
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.
Tax-Managed International Equity Portfolio
| By: |
/s/ Edward J. Perkin | |
| Edward J. Perkin | ||
| President | ||
| Date: |
December 23, 2019 | |
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 F. Kirchner | |
| James F. Kirchner | ||
| Treasurer | ||
| Date: | December 23, 2019 | |
| By: | /s/ Edward J. Perkin | |
| Edward J. Perkin | ||
| President | ||
| Date: | December 23, 2019 | |