-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K7he/45UYhcMMOvgLk4041uGR9WBv7zflQnsdCPC9JvC0/S88211PMjL7ply6v7+ ST6UTnnF4tDwbC7ZUvdPWA== 0000950156-96-000545.txt : 19960625 0000950156-96-000545.hdr.sgml : 19960625 ACCESSION NUMBER: 0000950156-96-000545 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960624 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL EXCHANGE FUND INC CENTRAL INDEX KEY: 0000017147 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042385053 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01339 FILM NUMBER: 96584514 BUSINESS ADDRESS: STREET 1: 24 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174828260 MAIL ADDRESS: STREET 1: ONE BEACON ST CITY: BOSTON STATE: MA ZIP: 02108 N-30D 1 CAPITAL EXCHANGE FUND SA CAPITAL EXCHANGE FUND, INC. PERFORMANCE RESULTS+ - ------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (STANDARDIZED SEC PERFORMANCE DATA FOR THE PERIODS ENDED APRIL 30, 1996) - ------------------------------------------------------------------------------- One year 28.6% - ------------------------------------------------------------------------------- Five years 14.8% - ------------------------------------------------------------------------------- Ten years 13.8% - ------------------------------------------------------------------------------- Life of Fund (3/29/66) 10.4% - ------------------------------------------------------------------------------- CUMULATIVE TOTAL RETURN LIFE OF FUND (3/29/66 TO 4/30/96) - ------------------------------------------------------------------------------- Capital Exchange Fund 1,884.6% - ------------------------------------------------------------------------------- Dow Jones Industrial Average 2,018.0% - ------------------------------------------------------------------------------- Standard & Poor's 500 2,210.1% - ------------------------------------------------------------------------------- +Past performance is no guarantee of future results. Investment returns and principal will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The Dow Jones Industrial Average and the Standard & Poor's 500 are unmanaged lists of common stocks. This report must be preceded or accompanied by a prospectus which contains more complete information on the Fund including its distribution plan, sales charges and expenses. Please read the prospectus carefully before investing. CAPITAL EXCHANGE FUND An Eaton Vance Exchange Fund Semi-Annual Report April 30, 1996 [LOGO] EATON VANCE The Boston Tradition Funds offered through Eaton Vance Distributors, Inc. 24 Federal Street, Boston, Massachusetts 02110 6/96 TO SHAREHOLDERS CAPITAL EXCHANGE FUND HAD A TOTAL RETURN OF 12.0% DURING THE 6 MONTHS ENDED APRIL 30, 1996. That return represented a rise in net asset value per share to $257.36 from $230.96, and the reinvestment of $1.20 per share in income dividends. By comparison, the S&P 500 Index, an unmanaged index of common stocks, had a total return of 9.9% during the same period. - ------------------------------------------------------------------------------ THE FUND HAD A TOTAL RETURN OF 12.0% DURING THE 6 MONTHS ENDED APRIL 30, 1996. BY LATE 1995, THE FEDERAL RESERVE APPEARED TO HAVE REALIZED ITS GOAL OF A "SOFT LANDING." With economic growth advancing at a moderate pace and inflation remaining well in check, the Federal Reserve again lowered its Federal funds rate - a key interest rate benchmark - in December, 1995. Employment rose, with the service and trade areas providing the bulk of new jobs growth, while the manufacturing sector continued to suffer job losses. THE RELATIVELY LOW INTEREST RATE ENVIRONMENT, WHICH HAD DRIVEN STOCKS HIGHER THROUGH MUCH OF 1995, continued to provide a favorable backdrop for the equity markets early in 1996. With large-cap stocks pacing the market, major market indices extended their reach into record territory. HOWEVER, TOWARD THE END OF THE REPORTING PERIOD, THE MARKET ENCOUNTERED INCREASED VOLATILITY. The failure of budget deficit reduction talks and concerns over a possible reigniting of inflation pushed interest rates higher. While stocks registered further gains, the market was increasingly characterized by sector rotation, with market leadership shifting among industry groups. With momentum slowing somewhat, investors worried over the strength of corporate earnings. According to Standard & Poor's, corporate profits registered an average gain of 7.3% in the first quarter of 1996 versus a robust 23% gain in the same period a year earlier. HEALTH CARE STOCKS WERE AMONG THE MARKET LEADERS, PACED BY STRONG EARNINGS AND AN INCREASE IN MERGER ACTIVITY WITHIN THE DRUG INDUSTRY. Among the Portfolio's ten largest holdings, Pfizer, propelled by its fast-selling cardiovascular drug Norvasc, rose 20%. Elsewhere in the drug sector, Johnson & Johnson rose 13.5%. The company is the largest health care company in the world and continued to benefit from a growing dominance in the consumer sector. IN THE TECHNOLOGY SECTOR, HEWLETT-PACKARD CO., A LEADING MANUFACTURER OF COMPUTERS AND HIGH-SPEED PRINTERS, ROSE 14.3%. Elsewhere, Dover Corp., which has business interests in the construction and real estate industries, rose 30.4%. Finally, Raytheon, one of the world's leading defense contractors, rose 16.1%. UNEXPECTED STRENGTH IN THE EMPLOYMENT NUMBERS FOR THE FIRST FOUR MONTHS OF 1996 SUGGESTS THAT THE ECONOMY MAY BE GATHERING STEAM. The market could, therefore, undergo further short-term volatility if interest rates move higher. However, an ongoing, ample labor supply and increasing global competiveness should keep inflation in check. Meanwhile, history has demonstrated time and again that a long-term approach to investing provides the best results. By investing in a portfolio of stocks of companies that are financially sound and leaders in their industries, Capital Exchange Fund is well-positioned to continue delivering sound long-term performance for its shareholders. - ------------------------------------------------------------------------------ "BY INVESTING IN A PORTFOLIO OF STOCKS OF COMPANIES THAT ARE FINANCIALLY SOUND AND LEADERS IN THEIR INDUSTRIES, CAPITAL EXCHANGE FUND IS WELL-POSITIONED TO CONTINUE DELIVERING SOUND LONG-TERM PERFORMANCE FOR ITS SHAREHOLDERS." [Photo of Landon T. Clay] Sincerely, /s/ Landon T. Clay ------------------------------- Landon T. Clay President June 20, 1996 ------------------------------------ TAX-MANAGED GROWTH PORTFOLIO APRIL 30, 1996 (UNAUDITED) VALUE TEN LARGEST HOLDINGS (IN MILLIONS) - ------------------------------------------------------------------------------ Hewlett-Packard Co. $12.6 - ------------------------------------------------------------------------------ Pfizer Inc. 10.0 - ------------------------------------------------------------------------------ Intel Corp. 7.1 - ------------------------------------------------------------------------------ PepsiCo Inc. 6.8 - ------------------------------------------------------------------------------ Reuters Holdings PLC, ADR 6.8 - ------------------------------------------------------------------------------ Johnson & Johnson 6.4 - ------------------------------------------------------------------------------ Albertson's, Inc. 6.0 - ------------------------------------------------------------------------------ Coca-Cola Co. 5.5 - ------------------------------------------------------------------------------ Exxon Corp. 5.4 - ------------------------------------------------------------------------------ Dover Corp. 5.2 - ------------------------------------------------------------------------------ PERCENTAGE OF FIVE LARGEST INDUSTRY HOLDINGS NET ASSETS - ------------------------------------------------------------------------------ Health Care 14.1% - ------------------------------------------------------------------------------ Beverages 7.0 - ------------------------------------------------------------------------------ Computer & Business Equipment 7.0 - ------------------------------------------------------------------------------ Electronics 6.0 - ------------------------------------------------------------------------------ Business Products and Services 5.2 - ------------------------------------------------------------------------------ ------------------------------------ CAPITAL EXCHANGE FUND FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES - ------------------------------------------------------------------------------ April 30, 1996 (Unaudited) - ------------------------------------------------------------------------------ ASSETS: Investment in Tax-Managed Growth Portfolio (Portfolio), at value (Note 1A) $125,746,806 LIABILITIES: Payable to affiliates -- Trustees' fees $ 136 Accrued expenses 4,708 ------ Total liabilities 4,844 ------------ NET ASSETS for 488,586 shares of capital stock outstanding $125,741,962 ============ SOURCES OF NET ASSETS: Accumulated net realized gain on investment transactions (computed on the basis of identified cost), less the excess of cost of capital stock redeemed over proceeds from sales of capital stock (including shares issued to shareholders electing to receive payment of distributions in capital stock) $ 28,401,196 Unrealized appreciation of investments (computed on on the basis of identified cost) 106,634,687 Provision for federal tax on undistributed net realized long-term capital gain, paid on behalf of shareholders (Note 1C) (9,348,114) Undistributed net investment income 54,193 ------------ Total $125,741,962 ============ NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($125,741,962 / 488,586 shares of capital stock outstanding) $257.36 ======= See notes to financial statements STATEMENT OF OPERATIONS - ------------------------------------------------------------------------------ For the Six Months Ended April 30, 1996 (Unaudited) - ------------------------------------------------------------------------------ INVESTMENT INCOME (NOTE 1B): Dividend income allocated from Portfolio (net of foreign taxes of $7,535) $ 809,070 Dividend income 230,177 Interest income allocated from Portfolio 38,374 Interest income 10,562 Expenses allocated from Portfolio (343,639) ----------- Total investment income $ 744,544 Expenses -- Investment adviser fee (Note 4) $ 60,464 Compensation of Directors not members of the Investment Adviser's organization (Note 4) 2,342 Custodian fees 11,438 Transfer and dividend disbursing agent fees 7,728 Printing and postage 5,902 Legal and accounting services 28,471 Miscellaneous 8,683 ----------- Total expenses 125,028 ----------- Net investment income $ 619,516 REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain from Portfolio, computed on the basis of identified cost $ 1,837,791 Net realized gain, computed on the basis of identified cost 58,935 ----------- Net realized gain on investments $ 1,896,726 Increase in unrealized appreciation of investments 11,135,792 ----------- Net realized and unrealized gain on investments 13,032,518 ----------- Net increase in net assets from operations $13,652,034 =========== See notes to financial statements STATEMENTS OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------ SIX MONTHS ENDED APRIL 30, YEAR ENDED 1996 MARCH 31, (UNAUDITED) 1995 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: From operations -- Net investment income $ 619,516 $ 1,342,981 Net realized gain on investments 1,896,726 6,830,476 Increase in unrealized appreciation of investments 11,135,792 21,643,313 ----------- ----------- Net increase in net assets from operations $ 13,652,034 $ 29,816,770 ----------- ----------- Distributions to shareholders -- From net investment income $ (590,691) $ (1,366,266) From net realized gain on investments -- (12,852) ----------- ----------- Total distributions to shareholders $ (590,691) $ (1,379,118) ----------- ----------- Provision for federal tax on undistributed net realized long-term gain (Note 1C) $ -- $ (1,023,649) ----------- ----------- Net decrease from capital stock transactions (Note 2) $ (1,962,596) $ (4,059,852) ----------- ----------- Net increase in net assets $ 11,098,747 $ 23,354,151 NET ASSETS: At beginning of period 114,643,215 91,289,064 ----------- ----------- At end of period (including undistributed net investment income of $54,193 and $25,368, respectively) $125,741,962 $114,643,215 ============ ============ See notes to financial statements
FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 1996 ------------------------------------------------------------------------ (UNAUDITED) 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSET VALUE, beginning of period $230.960 $176.610 $164.860 $156.030 $142.810 $106.030 -------- -------- -------- -------- -------- -------- INCOME FROM OPERATIONS: Net investment income $ 1.260 $ 2.657 $ 2.521 $ 2.334 $ 2.178 $ 2.181 Net realized and unrealized gain on investments 26.340 56.480 11.869 9.533 13.332 36.949 -------- -------- -------- -------- -------- -------- Total income from operations $ 27.600 $ 59.137 $ 14.390 $ 11.867 $ 15.510 $ 39.130 -------- -------- -------- -------- -------- -------- LESS DISTRIBUTIONS: From net investment income $ (1.200) $ (2.700) $ (2.490) $ (2.550) $ (2.130) $ (2.350) From net realized gain on investments -- (0.025) (0.150) -- (0.160) -- -------- -------- -------- -------- -------- -------- Total distributions $ (1.200) $ (2.725) $ (2.640) $ (2.550) $ (2.290) $ (2.350) -------- -------- -------- -------- -------- -------- PROVISION FOR FEDERAL TAX ON UNDISTRIBUTED NET REALIZED LONG-TERM GAIN (NOTE 1B) $ -- $ (2.062) $ -- $ (0.487) $ -- $ -- -------- -------- -------- -------- -------- -------- NET ASSET VALUE, end of period $257.360 $230.960 $176.610 $164.860 $156.030 $142.810 ======== ======== ======== ======== ======== ======== TOTAL RETURN(1) 11.98% 32.56% 8.80% 7.33% 10.94% 37.13% RATIOS/SUPPLEMENTAL DATA: Ratio expenses to average 0.78%+ 0.76% 0.76% 0.78% 0.78% 0.79% net assets(2) Ratio of net investment income to average net assets 1.04%+ 1.32% 1.49% 1.46% 1.44% 1.64% Net assets, end of period (000's omitted) $125,742 $114,643 $ 91,289 $ 89,593 $ 88,632 $ 86,148 PORTFOLIO TURNOVER** 0% 2% 2% 2% 0% 3%
+Computed on an annualized basis. (1)Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale at the net asset value on the last day of each period reported. Dividends and distributions, if any, are assumed to be reinvested at the net asset value on the payable date. (2)Includes the Fund's share of Tax-Managed Growth Portfolio's allocated expenses for the period from December 1, 1995, to April 30, 1996. **Portfolio Turnover represents the rate of portfolio activity for the period while the fund was making investments directly in securities. The Portfolio turnover for the period since the Fund transferred substantially all of its investable assets to the Portfolio is shown in the Portfolio's financial statements which are included elsewhere in this report. See notes to financial statements ------------------------------------ NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES The Capital Exchange Fund, Inc. (the Fund) is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end, management investment company. The Fund invests all of its investable assets in interests in the Tax-Managed Growth Portfolio (the Portfolio), a New York Trust, having the same investment objective as the Fund. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the Portfolio (60.0% at April 30, 1996). The performance of the Fund is directly affected by the performance of the Portfolio. The financial statements of the Portfolio, including the portfolio of investments are included elsewhere in this report and should be read in conjunction with the Fund's financial statements. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. A. INVESTMENT VALUATION -- Valuation of the securities by the Portfolio is discussed in Note 1 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. B. INCOME -- The Fund's net investment income consists of the Fund's pro rata share of the net investment income of the Portfolio, less all actual and accrued expenses of the Fund determined in accordance with generally accepted accounting principles. Prior to the Fund's investment in the Portfolio, the Fund held its investments directly. For investments held directly, dividend income was recorded on the ex-dividend date. C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the Internal Revenue Code available to regulated investment companies and to distribute to shareholders each year all of its net investment income and net realized short-term capital gain. Accordingly, no provision for federal income or excise tax is necessary on such income. The Fund generally designates as undistributed any taxable net realized long-term gain (but reserves the right to distribute such gain in any year) and pays the federal tax thereon on behalf of shareholders. Provision for such tax is recorded on the Fund's records on the last business day of the Fund's fiscal year because the Internal Revenue Code provides that such tax is allocated among shareholders of record on that date. D. OTHER -- Investment transactions are accounted for on a trade date basis. Dividends to shareholders are recorded on the ex-dividend date. E. DISTRIBUTIONS -- Generally accepted accounting principles require that differences in the recognition or classification of income between the financial statements and tax earnings and profits which result in temporary over- distributions for financial statement purposes, are classified as distributions in excess of net investment income or accumulated net realized gains. F. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. G. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to April 30, 1996 and for the period then ended have not been audited by independent certified public accountants, but in the opinion of the Fund's management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements. - ------------------------------------------------------------------------------ (2) CAPITAL STOCK At April 30, 1996, there were 4,000,000 shares of $1.00 par value capital stock authorized. Transactions in capital stock were as follows: SIX MONTHS ENDED YEAR ENDED APRIL 30, 1996 OCTOBER 31, 1995 ----------------------- ---------------------- SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Redemptions (8,324) $ (2,091,312) (22,059) $(4,365,843) Issued to shareholders electing to receive payment of dividends in capital stock 526 128,716 1,533 305,991 ------ ------------ ------- ----------- Net decrease (7,798) $ (1,962,596) (20,526) $(4,059,852) ====== ============ ======= =========== - ------------------------------------------------------------------------------ (3) INVESTMENT TRANSACTIONS On December 1, 1995, the Fund transferred substantially all its assets to the Portfolio in exchange for an interest in the Portfolio. Increases and decreases in the Fund's investment in the Portfolio aggregated $18,997,644 and $2,526,794, respectively for the six months ended April 30, 1996. - ------------------------------------------------------------------------------ (4) TRANSACTIONS WITH AFFILIATES Prior to December 1, 1995 (when the Fund transferred substantially all of its assets to the Portfolio in exchange for an interest in the Portfolio), the Fund retained Eaton Vance Management (EVM) as its investment adviser. Since December 1, 1995, EVM has served only as the administrator of the Fund, but receives no compensation. The Portfolio has engaged Boston Management and Research (BMR), a subsidiary of EVM, to render investment advisory services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Except as to directors of the Fund who are not members of EVM's organization, officers and directors receive remuneration for their services to the Fund out of such investment adviser fee. The custodian fee was paid to Investors Bank & Trust Company (IBT) for its services as custodian of the Fund. One of the Directors of the Fund owns approximately 13% of the voting stock of Investors Financial Services Corp., the parent company of IBT. Pursuant to the custodian agreement, IBT receives a fee reduced by credits which are determined based on the average daily cash balances the Fund maintains with IBT. Certain of the officers and directors of the Fund are officers and directors/trustees of the above organizations. -------------------------------- TAX-MANAGED GROWTH PORTFOLIO PORTFOLIO OF INVESTMENTS APRIL 30, 1996 (UNAUDITED) - ------------------------------------------------------------------------------ COMMON STOCKS - 96.4% - ------------------------------------------------------------------------------ NAME OF COMPANY SHARES VALUE - ------------------------------------------------------------------------------ ADVERTISING 1.5% Interpublic Group Cos. 66,000 $ 3,085,500 ------------ AEROSPACE/DEFENSE - 4.3% Boeing Co. 60,370 $ 4,957,886 Raytheon 80,000 4,050,000 ------------ $ 9,007,886 ------------ BEVERAGES - 7.0% Anheuser-Busch Cos., Inc. 35,820 $ 2,404,418 Coca-Cola Co. 67,206 5,477,289 PepsiCo Inc. 106,985 6,793,547 ------------ $ 14,675,254 ------------ BUSINESS PRODUCTS AND SERVICES - 5.2% Manpower Inc. 110,000 $ 4,070,000 Reuters Holdings PLC, ADR 100,420 6,790,903 ------------ $ 10,860,903 ------------ CHEMICALS - 1.4% Monsanto Co. 19,336 $ 2,929,404 ------------ COMPUTER & BUSINESS EQUIPMENT - 7.0% Digital Equipment Corp.* 8,325 $ 497,419 International Business Machines 14,400 1,548,000 Hewlett-Packard Co. 118,570 12,553,599 ------------ $ 14,599,018 ------------ CONSTRUCTION AND REAL ESTATE - 2.5% Dover Corp. 101,580 $ 5,231,370 ------------ CONSUMER PRODUCTS - 1.9% Procter & Gamble Co. 48,000 $ 4,056,000 ------------ COSMETICS AND TOILETRIES - 2.0% International Flavors & Fragrances, Inc. 88,101 $ 4,327,962 ------------ HEALTH CARE - 14.1% Astra AB - Series A 80,000 $ 3,548,576 Bristol-Myers Squibb Co. 29,000 2,385,250 Genentech Inc.* (Redeemable Common) 16,500 872,438 Johnson & Johnson 69,575 6,435,688 Merck & Co., Inc. 72,045 4,358,722 Pfizer Inc. 144,952 9,983,569 SmithKline Beecham PLC 37,520 2,026,080 ------------ $ 29,610,323 ------------ ELECTRONICS - 6.0% AMP Inc. 61,530 $ 2,753,467 Intel Corp. 104,278 7,064,835 Texas Instruments Inc. 48,000 2,712,000 ------------ $ 12,530,302 ------------ FINANCIAL - MISC. - 0.9% Federal National Mortgage Association 62,620 $ 1,917,738 ------------ FINANCIAL SERVICES - 2.4% American Express Co. 56,798 $ 2,754,703 Marsh & McLennan Cos., Inc. 24,000 2,256,000 ------------ $ 5,010,703 ------------ FOOD PROCESSING - 1.5% Earthgrains Co. 1,433 $ 46,387 McCormick & Co., Inc., Non-voting 145,120 3,228,920 ------------ $ 3,275,307 ------------ FOREST PRODUCTS - 2.0% Kimberly-Clark Corp. 57,310 $ 4,162,139 ------------ INDUSTRIAL EQUIPMENT - 0.5% Parker Hannifin Corp. 22,369 $ 945,090 ------------ INSTRUMENTATION AND CONTROLS - 1.7% Dionex Corp.* 100,000 $ 3,662,500 ------------ INSURANCE - 5.1% American International Group Inc. 50,625 $ 4,625,859 General Re Corp. 31,920 4,560,570 St. Paul Cos., Inc. 27,620 1,467,313 ------------ $ 10,653,742 ------------ MACHINERY AND EQUIPMENT - 2.9% Dexter Corp. 47,829 $ 1,285,404 Gould Pumps, Inc. 78,830 1,832,797 Tecumseh Products Co. Class B 13,320 705,960 Tecumseh Products Co. Class A 39,960 2,257,740 ------------ $ 6,081,901 ------------ MEDICAL PRODUCTS - 1.3% Baxter International Inc. 23,950 $ 1,059,787 Sofamor/Danek Group, Inc.* 50,000 1,637,500 ------------ $ 2,697,287 ------------ METALS & MINING - 0.7% Nucor Corp. 25,000 $ 1,406,250 ------------ MISCELLANEOUS - 0.0% Schweitzer-Maudit International Inc. 5,731 $ 155,453 ------------ OIL - 3.8% Atlantic Richfield Co. 6,880 $ 810,120 Exxon Corp. 63,774 5,420,790 Andarko Petroleum Corp. 29,000 1,689,250 ------------ $ 7,920,160 ------------ OIL & GAS - EQUIPMENT & SERVICE - 3.6% Baker Hughes Inc. 39,234 $ 1,245,679 Dresser Industries, Inc. 79,800 2,543,625 Schlumberger Ltd. 42,819 3,778,777 ------------ $ 7,568,081 ------------ PAPER & FOREST PRODUCTS - 0.5% Champion International Corp. 1,438 $ 69,383 Weyerhaeuser Co. 19,380 959,310 ------------ $ 1,028,693 ------------ PHOTOGRAPHIC PRODUCTS - 1.4% Eastman Kodak Co. 37,181 $ 2,844,347 ------------ PRINTING & BUSINESS FORMS - 1.8% Bowne & Co., Inc. 91,770 $ 1,651,860 Donnelley (R.R.) & Sons Co. 47,896 1,724,256 Moore Corp., Ltd. 19,075 348,119 ------------ $ 3,724,235 ------------ PUBLISHING AND PRINTING - 3.1% Dun & Bradstreet Corp. 21,098 $ 1,284,341 Harcourt General, Inc. 50,000 2,200,000 Houghton Mifflin Co. 63,700 2,954,087 ------------ $ 6,438,428 ------------ RESTAURANTS - 1.6% McDonald's Corp. 72,000 $ 3,447,000 ------------ RETAIL - 4.6% Albertson's, Inc. 156,048 $ 6,007,848 Wal-Mart Stores, Inc. 148,700 3,550,213 ------------ $ 9,558,061 ------------ RETAIL - SPECIALTY & APPAREL - 1.9% Home Depot, Inc. (The) 40,000 $ 1,895,000 Toys "R" Us, Inc. 72,000 2,007,000 ------------ $ 3,902,000 ------------ TRANSPORTATION - 2.2% CSX Corp. 15,270 $ 782,587 Flightsafety International Ltd. 15,000 830,625 Union Pacific Corp. 44,530 3,033,606 ------------ $ 4,646,818 ------------ TOTAL COMMON STOCKS (IDENTIFIED COST, $28,531,980) $201,959,855 ------------ - -------------------------------------------------------------------------- SHORT-TERM OBLIGATION - 3.1% - -------------------------------------------------------------------------- FACE AMOUNT (000 OMITTED) VALUE - -------------------------------------------------------------------------- Ford Motor Credit Corp., 5.27% due 5/01/96, at amortized cost $ 6,400 $ 6,400,000 ------------ TOTAL INVESTMENTS (IDENTIFIED COST, $34,931,980) - 99.5% $208,359,855 OTHER ASSETS, LESS LIABILITIES - 0.5% 1,084,812 ------------ NET ASSETS - 100% $209,444,667 ============ *Non-income producing security. See notes to financial statements STATEMENT OF ASSETS AND LIABILITIES - ------------------------------------------------------------------------------ April 30, 1996 (Unaudited) - ------------------------------------------------------------------------------ ASSETS: Investments, at value (Note 1A) (identified cost, $34,931,980) $208,359,855 Cash 908,206 Dividends and interest receivable 170,736 Deferred organization expenses (Note 1C) 6,280 Other assets 8,360 ------------ Total assets $209,453,437 LIABILITIES: Payable to affiliate -- Trustees' fees $1,104 Accrued expenses 7,666 ------ Total liabilities 8,770 ------------ NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $209,444,667 ============ SOURCES OF NET ASSETS: Net proceeds from capital contributions and withdrawals $ 36,016,792 Unrealized appreciation of investments (computed on the basis of identified cost) 173,427,875 ------------ Total $209,444,667 ============ See notes to financial statements STATEMENT OF OPERATIONS - ------------------------------------------------------------------------------ For the period from the start of business, December 1, 1995, to April 30, 1996 (Unaudited) - ------------------------------------------------------------------------------ INVESTMENT INCOME: Income -- Dividends (net of foreign withholding tax of $7,541) $ 864,332 Interest 47,216 ----------- Total income $ 911,548 Expenses -- Investment adviser fee (Note 2) $ 356,359 Compensation of Directors not members of the Investment Adviser's organization (Note 2) 3,293 Custodian fees 24,502 Amortization of organization expenses (Note 1C) 570 Miscellaneous 712 ----------- Total expenses 385,436 ----------- Net investment income $ 526,112 REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments, computed on the basis of identified cost $ 1,907,186 Increase in unrealized appreciation of investments 12,138,526 ----------- Net realized and unrealized gain on investments 14,045,712 ----------- Net increase in net assets from operations $14,571,824 =========== See notes to financial statements STATEMENT OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------ For the period from the start of business, December 1, 1995, to April 30, 1996 (Unaudited) - ------------------------------------------------------------------------------ INCREASE IN NET ASSETS: From operations -- Net investment income $ 526,112 Net realized gain on investments 1,907,186 Increase in unrealized appreciation of investments 12,138,526 ----------- Net increase in net assets from operations $ 14,571,824 ----------- Capital transactions -- Contributions $197,452,649 Withdrawals (2,679,816) ----------- Increase in net assets from capital transactions $194,772,833 ----------- Total increase in net assets $209,344,657 NET ASSETS: At beginning of period 100,010 ----------- At end of period $209,444,667 ============ SUPPLEMENTARY DATA - ------------------------------------------------------------------------------ For the period from the start of business, December 1, 1995, to April 30, 1996 (Unaudited) - ------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: Expenses 0.68%+ Net investment income 1.35%+ PORTFOLIO TURNOVER 0% +Annualized. See notes to financial statements -------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------ (1) SIGNIFICANT ACCOUNTING POLICIES Tax-Managed Growth Portfolio (the "Portfolio") is registered under the Investment Company Act of 1940 as a diversified, open-end investment company. The Portfolio, which was organized as a trust under the laws of the State of New York on December 1, 1995, seeks to provide long-term after-tax returns by investing in a diversified portfolio of equity securities. The Declaration of Trust permits the Trustees to issue interests in the Portfolio. Investment operations began on December 1, 1995, with the acquisition of investments with a value of $115,586,248, including unrealized appreciation of $96,618,064, in exchange for an interest in the Portfolio by one of the Portfolio's investors. During the period, additional investors contributed securities with a value of $77,830,309, including unrealized appreciation of $64,671,645. The following is a summary of the significant accounting policies of the Portfolio. The policies are in conformity with generally accepted accounting principles. A. INVESTMENT VALUATIONS -- Marketable securities, including options, that are listed on foreign or U.S. securities exchanges or in the NASDAQ National Market System are valued at closing sale prices, on the exchange where such securities are principally traded. Futures positions on securities or currencies are generally valued at closing settlement prices. Unlisted or listed securities for which closing sale prices are not available are valued at the mean between the latest bid and asked prices. Short-term debt securities with a remaining maturity of 60 days or less are valued at amortized cost. Other fixed income and debt securities, including listed securities and securities for which price quotations are available, will normally be valued on the basis of valuations furnished by a pricing service. Investments for which valuations or market quotations are unavailable are valued at fair value using methods determined in good faith by or at the direction of the Trustees. B. FEDERAL 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 on its share of such income. Since some of the Portfolio's investors are regulated investment companies that invest all or substantially all of their assets in the Portfolio, the Portfolio normally must satisfy the applicable source of income and diversification requirements, (under the 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. C. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in connection with its organization, including registration costs, are being amortized on the straight-line basis over five years. D. FUTURES CONTRACTS -- Upon the entering of a financial futures contract, the Portfolio is required to deposit either in cash or securities an amount ("initial margin") equal to a certain percentage of the purchase price indicated in the financial futures contract. Subsequent payments are made or received by the Portfolio ("margin maintenance") each day, dependent on 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 to hedge against anticipated future changes in price of current or anticipated portfolio positions. Should prices move unexpectedly, the Portfolio may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. E. OTHER -- Investment transactions are accounted for on the date the investments are purchased or sold. Dividend income is recorded on the ex- dividend date. 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. Interest income is recorded on the accrual basis. F. USE OF ESTIMATES -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. G. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to April 30, 1996 and for the period then ended have not been audited by independent certified public accountants, but in the opinion of the Portfolio's management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial statements. - ------------------------------------------------------------------------------ (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. Under the advisory agreement, BMR receives a monthly advisory fee of 5/96 of 1% (0.625% annually) of the average daily net assets of the Portfolio up to $500,000,000, and at reduced rates as daily net assets exceed that level. For the period from the start of business, December 1, 1995, to April 30, 1996 the adviser fee was 0.625% of average net assets. Except as to Trustees of the Portfolio who are not members of EVM's organization, officers and Trustees receive remuneration for their services to the Portfolio out of such investment adviser and administrative fees. Certain of the officers and Trustees of the Portfolio are officers or directors/trustees of the above organizations. - ------------------------------------------------------------------------------ (3) INVESTMENT TRANSACTIONS Purchases and sales of investments, other than short-term obligations, aggregated $54,486 and $96,714, respectively. - ------------------------------------------------------------------------------ (4) FEDERAL INCOME TAX BASIS OF INVESTMENT The cost and unrealized appreciation (depreciation) in value of the investments owned at April 30, 1996, as computed on a federal income tax basis, are as follows: Aggregate cost $ 34,931,980 ============ Gross unrealized appreciation $173,427,875 Gross unrealized depreciation -- ----------- Net unrealized appreciation $173,427,875 ============ - ------------------------------------------------------------------------------ (5) FINANCIAL INSTRUMENTS The Portfolio may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and financial futures contracts 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. The Portfolio did not have any open obligations under these financial instruments at April 30, 1996. - ------------------------------------------------------------------------------ (6) LINE OF CREDIT The Portfolio participates with other portfolios and funds managed by BMR and EVM and its affiliates in a $120 million unsecured line of credit agreement with a bank. The line of credit consists of a $20 million committed facility and a $100 million discretionary facility. Borrowings will be made by the Portfolio solely to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Interest is charged to each portfolio based on its borrowings at an amount above either the bank's adjusted certificate of deposit rate, a variable adjusted certificate of deposit rate, or a federal funds effective rate. In addition, a fee computed at an annual rate of 1/4 of 1% on the $20 million committed facility and on the daily unused portion of the $100 million discretionary facility is allocated among the participating funds and portfolios at the end of each quarter. The Portfolio did not have any significant borrowings or allocated fees during the period.
INVESTMENT MANAGEMENT CAPITAL EXCHANGE OFFICERS AND STAFF INDEPENDENT DIRECTORS FUND, INC. LANDON T. CLAY DONALD R. DWIGHT 24 Federal Street President, Director President, Dwight Partners, Inc. Boston, MA 2110 JAMES B. HAWKES Chairman, Newspapers of Vice President New England, Inc. JAMES L. O'CONNOR SAMUEL L. HAYES, III Treasurer Jacob H. Schiff Professor of THOMAS OTIS Investment Banking, Harvard University Clerk Graduate School of Business Administration NORTON H. REAMER President and Director, United Asset Management Corporation JOHN L. THORNDIKE Director, Fiduciary Company Incorporated JACK L. TREYNOR Investment Adviser and Consultant - -------------------------------------------------------------------------------------- TAX-MANAGED OFFICERS INDEPENDENT TRUSTEES GROWTH PORTFOLIO LANDON T. CLAY DONALD R. DWIGHT 24 Federal Street President, Trustee President, Dwight Partners, Inc. Boston, MA 2110 JAMES B. HAWKES Chairman, Newspapers of Vice President New England, Inc. DUNCAN W. RICHARDSON SAMUEL L. HAYES, III Vice President and Jacob H. Schiff Professor of Portfolio Manager Investment Banking, Harvard University JAMES L. O'CONNOR Graduate School of Business Administration Treasurer NORTON H. REAMER THOMAS OTIS President and Director, United Asset Secretary Management Corporation JOHN L. THORNDIKE Director, Fiduciary Company Incorporated JACK L. TREYNOR Investment Adviser and Consultant
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO Boston Management and Research 24 Federal Street Boston, MA 02110 ADMINISTRATOR OF CAPITAL EXCHANGE FUND, INC. Eaton Vance Management 24 Federal Street Boston, MA 02110 CUSTODIAN Investors Bank & Trust Company 89 South Street P.O. Box 1537 Boston, MA 02205-1537 TRANSFER AND DIVIDEND DISBURSING AGENT First Data Investor Services Group, Inc. BOS725 P.O. Box 1559 Boston, MA 02104 -----END PRIVACY-ENHANCED MESSAGE-----