<PAGE>
ADMINISTRATOR OF
EV MARATHON GOLD &
NATURAL RESOURCES FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV MARATHON
GOLD & NATURAL RESOURCES FUND
24 FEDERAL STREET
BOSTON, MA 02110
M-NRSRC-4/96
[LOGO]
EV MARATHON
GOLD & NATURAL
RESOURCES FUND
SEMI-ANNUAL
SHAREHOLDER REPORT
FEBRUARY 29, 1996
<PAGE>
TO SHAREHOLDERS
EV Marathon Gold & Natural Resources Fund had a total return of 10.6% for the
six months ended February 29, 1996, excluding the Fund's 5% maximum contingent
deferred sales charge.
That return reflected an increase in net asset value from $16.42 per share
on August 31, 1995, to $17.08 per share on February 29, 1996, and reflects the
reinvestment of a $0.95 per share capital gain distribution. Gold & Natural
Resources Fund's total return compared favorably to the 34 natural resources
funds monitored by Lipper Analytical Services, an independent mutual fund
ranking service, which had an average total return of 9.33% during the same
period.
The U.S. economy continued its pattern of slow, steady growth throughout this
six-month period, though there were some questions in early 1996 whether the
economy was moving into a mild recession. Those questions were fueled by the
nation's rate of economic growth, which was a strong 4.2% in the third quarter
of 1995 but which slipped to 0.9% in the fourth quarter.
The Federal Reserve cut the federal funds rate by a quarter of a percentage
point in December, the second such reduction during the year. These changes
helped the economy continue to advance slowly and provided impetus for the stock
market.
After years of relative stability, gold prices were higher during the latter
part of this six-month period. With investments in gold mining companies
constituting a significant portion of its Portfolio, the Fund is positioned to
take advantage of gold price increases and would benefit greatly if the positive
trend in the price of gold were to continue. Our Portfolio Managers will discuss
these developments in greater detail later in this report.
THE FUND'S 10 LARGEST HOLDINGS*
Potash Corp. of Saskatchewan ..........Fertilizer
Anadarko Petroleum Corp. .........Oil exploration
Dayton Mining Corp. ..................Gold mining
Firstmiss Gold Inc. ..................Gold mining
Freeport McMoRan
Copper & Gold .....................Gold, copper
Oregon Metallurgical ....................Titanium
RTZ Corp. ......................Industrial metals
TVX Gold Inc. ........................Gold mining
Greenstone Resources LTD .............Gold mining
Pogo Producing Co. ...............Oil exploration
* Holdings based on market value as of
February 29, 1996
It is not clear whether the economy, over the short run, will resume a pattern
of growth or slip into recession.
Clearly, the portfolio would benefit more if the economy accelerates once again.
But we believe that the Fund, which is not a complete investment program by
itself, can continue to be a valuable addition to a prudent investor's portfolio
because it may offer protection against the loss of purchasing power that
inflation can cause.
Sincerely,
[Photo of James B. Hawkes]
/s/ James B. Hawkes
James B. Hawkes
President
April 9, 1996
<PAGE>
MANAGEMENT REPORT
An interview with Barclay Tittmann and William D. Burt, Portfolio Managers of
EVMarathon Gold & Natural Resources Fund.
Q. BARCLAY, HOW WOULD YOU DESCRIBE THIS SIX-MONTH PERIOD IN TERMS OF THE
INVESTMENT CLIMATE?
BT: The biggest news for gold and natural resource investors was the rise in the
price of gold in February. Gold prices have been stable for a number of
years now, but the February price increases have the markets wondering
whether prices will rise significantly after being stable for so long.
However, most natural resource stocks were pretty spotty during this period,
with no significant positive trends. The exception was the fertilizer
sector, which was strong.
Q. BILL, HOW ABOUT PETROLEUM STOCKS?
WB: We have not changed the proportion of the portfolio that is invested in
petroleum stocks during this six-month period. In general, the production
growth oils have done well, while those tied to the commodity price have
been uninteresting.
EV MARATHON GOLD & NATURAL RESOURCES: NEW WEIGHTINGS IN
PORTFOLIO TAKE ADVANTAGE OF CHANGING INVESTMENT CONDITIONS
(Computed on the basis of the market value of common stock holdings at the
indicated dates.)
As of 8/31/95 As of 2/29/96
Gold & precious metals 27.2 29.1
Paper & forest products 5.5 0
Oil & gas 26.9 26.0
Industrial metals 23.7 21.9
Industrial minerals & fertilizer 10.5 17.0
Iron & steel 6.2 6.0
Q. HOW HAVE THESE TRENDS TRANSLATED INTO RESULTS FOR THE FUND?
BT: The rise in the price of gold translated directly into higher prices for our
gold stocks, in which we have a significant portion of the portfolio
invested. This more than offset the disappointing results in some of the
natural resource stocks.
[Photo of William D. Burt]
WILLIAM D. BURT
WB: In terms of the petroleum companies represented in the portfolio, we
increased the proportion of gas producers to oil producers. This is because
of a seasonal factor that is often important to take into account. The price
of natural gas stocks generally will rise as winter approaches and during
the heating season unless we have a very warm winter.So we took advantage of
that fact by buying before the winter heating season.
Q. WHAT'S THE STORY BEHIND THE PERFORMANCE OF FERTILIZER COMPANIES?
BT: Fertilizer continues to look like a very strong story. Of course, we can't
predict the near-term factors that could affect the price of fertilizer
stocks, such as the weather, but we do know that grain inventories worldwide
are at a record low and need to be built up, so there's a lot of incentive
for farmers to plant. The supply-demand ratio for phosphates and potash over
the next few years looks very favorable, with very little new capacity
planned and strong demand continuing from emerging markets. I think the
industry's positive trend could last for the next five years.
Q. DID YOU ADJUST THE PORTFOLIO TO TAKE ADVANTAGE OF THESE TRENDS?
BT: Absolutely. We added to our Potash Corp. of Saskatchewan holdings, now the
largest in the Portfolio, and we've added stocks in a number of other
fertilizer companies, including Agrium Inc., Arcadian Corp. and Mississippi
Chemical. We have a significant overweighting in the sector.
Q. WITH GOLD PERFORMING WELL, HAVE YOU MOVED INTO ANY NEW GOLD STOCKS?
BT: Investors who read our last report will recall that we were very
enthusiastic about Firstmiss Gold Inc. This is a company that was relatively
unknown -- what you'd call a junior company -- that found a major gold
deposit in Nevada.
[Photo of Barclay Tittman]
BARCLAY TITTMAN
WB: Firstmiss Gold was a major hit for the portfolio. We made a considerable
amount of money from it, and the prospects are still good. Of course, past
trends can not guarantee future performance.
BT: That's right, and while the major gold companies showed some increases
during this period, any major gains are more likely to come from smaller,
less well-known companies that might have a major find and, like Firstmiss,
really take off. That's why we've taken a collective stance on a number of
very junior Canadian mining companies.
Q. WHAT'S THE PURPOSE OF THIS STRATEGY?
BT: The large, blue chip gold companies have done well during this period, and
we certainly have invested in them. But we also want to expose the Fund to
larger potential gains, which are much more likely to come from smaller
companies that have the ability to turn good prospects into exciting and
profitable discoveries.
Q. WHAT ARE SOME OF THE SMALLER COMPANIES IN WHICH THE PORTFOLIO HAS INVESTED?
BT: One is Greenstone Resources, a gold exploration company working in Panama,
Nicaragua and Honduras. We've nearly doubled the value of our investment in
this company, with price increases caused by announcements of substantially
higher reserves. Another that we feel is promising is Corriente Resources,
which has a Bolivian mine that is one of the few producers in the world of
bismuth, which is used in the production of alloys and pharmaceuticals.
HAVING MOVED IN A FAIRLY NARROW RANGE FOR 5 YEARS,
IS THE PRICE OF GOLD POISED TO MOVE UP?
End-of-month
Date price per share
February 1991 355.65
March 1991 357.75
April 1991 360.40
May 1991 368.35
June 1991 362.85
July 1991 347.40
August 1991 354.90
September 1991 357.45
October 1991 366.30
November 1991 353.15
December 1991 354.10
January 1992 353.10
February 1992 341.70
March 1992 336.35
April 1992 337.50
May 1992 343.40
June 1992 357.85
July 1992 340.00
August 1992 349.00
September 1992 339.25
October 1992 334.20
November 1992 332.90
December 1992 330.45
January 1993 327.60
February 1993 337.80
March 1993 354.30
April 1993 377.45
May 1993 378.45
June 1993 401.75
July 1993 371.55
August 1993 355.50
September 1993 369.60
October 1993 370.90
November 1993 391.75
December 1993 377.90
January 1994 381.55
February 1994 389.20
March 1994 376.45
April 1994 387.60
May 1994 388.25
June 1994 384.00
July 1994 385.75
August 1994 394.85
September 1994 383.85
October 1994 383.10
November 1994 383.25
December 1994 374.90
January 1995 376.40
February 1995 392.00
March 1995 389.75
April 1995 384.30
May 1995 387.60
June 1995 383.35
July 1995 382.35
August 1995 384.00
September 1995 382.65
October 1995 387.80
November 1995 387.00
December 1995 405.55
January 1996 400.65
February 1996 397.70
Q. HAS THERE BEEN A CHANGE IN THE WAY THAT GOLD EXPLORATION IS VIEWED TODAY?
BT: The climate towards gold exploration has changed radically in the last five
years. This is mainly due to a complete change in the attitude of the
governments where exploration takes place. For example, Peru was until
recently totally underexplored because of a very hostile political
environment. Now, the government is doing all it can to encourage
exploration. That means that a whole new area of rich potential has become
available.
Q. BILL, HAVE THERE BEEN ANY EXCITING STOCKS IN THE PETROLEUM SECTOR?
A: Probably the best news during this period was our purchase of Pogo Producing
Co. in late 1995, during a period when domestic gas prices were weak. I was
convinced that the domestic business would rebound. I also liked the
company's explorations in offshore Thailand, where they've come in with a
series of interesting discoveries.
Q. IN THE LAST REPORT, YOU WERE ENTHUSIASTIC ABOUT DIAMOND FIELDS RESOURCES,
WHICH HAD A MAJOR FIND IN CANADA? DO YOU STILL HOLD THE STOCK?
BT: Yes. We more than doubled our money inDiamond Fields. The company now is
subject to an offer from Falconbridge Nickel, the second-largest nickel
producer in Canada. We sold half of our position and have held onto the
remainder because we think there may be a slightly better offer coming in
from another company.All in all, we're quite happy with what this company
did. Of course, past performance is no guarantee of future returns.
Q. WHAT'S THE OUTLOOK FOR THE GOLD AND NATURAL RESOURCES SECTORS OF THE MARKET?
BT: We believe that the demand for natural resources will remain strong --
stronger than in the past -- because of demand from emerging countries. Many
of these countries are getting their first taste of relative prosperity.
This has created increased demand for fertilizer, to satisfy improving
diets, as we mentioned earlier. But these countries also will need all the
basic materials that are used to build an infrastructure, better housing and
a whole range of consumer goods.
The outlook for the price of gold is less clear, because so much gold is
held by central banks and their sales are unpredictable. However, demand for
gold to make jewelry, which is by far the most important use for gold, is
growing, whereas mine output is flat.The primary reason for this growth is
demand from Asia and other emerging countries. In all, I think it's a fair
bet that the price of gold will improve in time.
WB: We've always said that investing in this Fund should be viewed as a part of
a prudent investor's complete investment program, and not a total investment
program by itself. That's still true, because an investment in this Fund may
be useful as a hedge against inflation. But this is also an exciting area
for investors because we believe it has just as much potential as many of
the more publicized sectors, such as technology.
<PAGE>
EV MARATHON GOLD & NATURAL
RESOURCES FUND
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 1996
(UNAUDITED)
- --------------------------------------------------------------------------
COMMON STOCKS - 104.0%
- --------------------------------------------------------------------------
Name of Company Shares Value
- --------------------------------------------------------------------------
GOLD & PRECIOUS METALS - 30.2%
Arequipa Resources Ltd. 20,000 $ 178,596
Cambior Inc. 24,000 321,000
Cambior Inc. (Reg. S) (Sec. 4.2) 17,000 225,250
Corriente Resources, Inc. 130,000 412,557
Dayton Mining Corp.+ 100,000 537,500
Eldorado Ltd. 144A Special Warrants 21,000 112,560
Euro-Nevada Mining Corp. 9,000 341,154
Firstmiss Gold, Inc.* 20,000 540,000
Golden Shamrock Mines Ltd. 200,000 122,340
Greenstone Resources Ltd. 100,000 425,000
Hecla Mining Co. 25,000 215,625
Pioneer Group, Inc. 10,000 290,000
TVX Gold, Inc.*+ 45,000 444,375
-----------
$ 4,165,957
-----------
INDUSTRIAL METALS - 22.8%
Aluminum Co. of America 8,000 $ 454,000
Commonwealth Aluminum Corp. 12,000 201,000
Diamond Fields Research, Inc. 10,000 271,539
Freeport McMoran Copper & Gold 16,300 521,600
Inco Limited+ 5,600 178,500
Oregon Metallurgical Corp. 30,000 521,250
RTZ Corp. PLC ADR 8,424 480,168
Schnitzer Steel Industries, Inc. 9,000 258,750
Western Mining Ltd. 39,000 250,793
-----------
$ 3,137,600
-----------
INDUSTRIAL MINERALS - 17.7%
Agrium Inc. 18,000 $ 278,436
Arcadian Corp. 12,000 258,000
Firstmiss Corp. 6,000 156,750
Minerals Technologies, Inc. 10,500 379,313
Mississippi Chemical Corp. 10,000 220,000
Potash Corp. of Saskatchewan+ 8,000 594,000
Tiomin Resources, Inc. Special Warrants 200,000 547,400
-----------
$ 2,433,899
-----------
IRON & STEEL - 6.3%
J & L Specialty Steel, Inc.* 16,000 $ 280,000
Nucor Corp. 5,000 269,375
Republic Engineered Steel, Inc. 60,000 315,000
-----------
$ 864,375
-----------
OIL & GAS - 27.0%
Alexander Energy Corp. 40,000 $ 155,000
Anadarko Petroleum Corp. 10,700 583,150
Apache Corp. 12,000 312,000
Beau Canada Exploration Ltd. Class A 170,000 223,057
Mobil Corp. 1,500 164,438
Noble Affiliates, Inc. 7,500 229,688
Plains Resources, Inc. 17,000 142,375
Pogo Producing Co. 13,000 440,375
Seagull Energy Corp. 10,000 188,750
Swift Energy Co. 25,000 290,625
Tesoro Petroluem Corp. 47,000 411,250
Transtexas Gas Corp. 17,000 182,750
Triton Energy Corp. 8,000 397,000
-----------
$ 3,720,458
-----------
TOTAL COMMON STOCKS
(Identified cost, $10,874,389) $14,322,289
-----------
- --------------------------------------------------------------------------
CONVERTIBLE BOND - 2.2%
- --------------------------------------------------------------------------
Face Amount
(000's Omitted) Value
- --------------------------------------------------------------------------
Ashanti Capital, 5.5s, 3/15/03 300 $ 300,750
-----------
TOTAL CONVERTIBLE BONDS
(Identified cost, $300,000) $ 300,750
-----------
TOTAL INVESTMENTS
(Identified cost, $11,174,389) $14,623,039
OTHER ASSETS, LESS LIABILITIES - (6.2%) (853,034)
-----------
NET ASSETS - 100% $13,770,005
===========
* Non-income producing security.
+ Foreign Security.
See notes to financial statements
<PAGE>
EV MARATHON GOLD & NATURAL RESOURCES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
February 29, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$11,174,389) $14,623,039
Cash 751
Receivable for Fund shares sold 106,435
Dividends receivable 16,222
-----------
Total assets $14,746,447
LIABILITIES:
Demand Note payable $363,000
Payable for investments purchased 539,365
Payable for Fund shares redeemed 54,219
Payable to affiliates --
Trustees' fees 50
Accrued expenses 19,808
--------
Total liabilities 976,442
-----------
NET ASSETS for 806,164 shares of beneficial interest
outstanding $13,770,005
===========
SOURCES OF NET ASSETS:
Paid-in capital $ 9,745,163
Accumulated net realized gain on investment
transactions (computed on the basis of identified
cost) 576,192
Unrealized appreciation of investments (computed on
the basis of identified cost) 3,448,650
-----------
Total $13,770,005
===========
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE (NOTE 6)
PER SHARE
($13,770,005 / 806,164 shares of beneficial interest) $17.08
======
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Six Months Ended February 29, 1996 (Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding taxes of
$3,007) $ 80,452
Interest 124
----------
Total income $ 80,576
Expenses --
Investment adviser fee (Note 4) $ 52,099
Compensation of Trustees not members of the
Investment Adviser's organization 68
Custodian fee (Note 4) 5,537
Distribution fees (Note 5) 62,827
Transfer and dividend disbursing agent fees 6,905
Printing and postage 27,276
Legal and accounting services 19,467
Registration fees 6,393
Interest expense (Note 7) 12,001
Miscellaneous 4,498
---------
Total expenses 197,071
----------
Net investment loss $ (116,495)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments, computed on the
basis of identified cost $ 582,677
Change in unrealized appreciation of investments 820,834
---------
Net realized and unrealized gain on
investments $1,403,511
----------
Net increase in net assets from operations $1,287,016
==========
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 29, YEAR ENDED SEPTEMBER
1996 AUGUST 31, 30,
(UNAUDITED) 1995* 1994
------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (116,495) $ (91,043) $ (89,807)
Net investment gain (loss) on
investments 582,677 875,917 (61,225)
Change in unrealized
appreciation of investments 820,834 634,567 1,765,546
----------- ----------- -----------
Net increase in net assets
from operations 1,287,016 $ 1,419,441 $ 1,614,514
----------- ----------- -----------
Distributions to shareholders --
In excess of net investment
income $ -- $ -- $ (10,924)
From net realized gain on
investments (582,677) -- --
In excess of net realized gain
on investments (238,500) -- (508,281)
----------- ----------- -----------
Total distributions $ (821,177) $ -- $ (519,205)
----------- ----------- -----------
Transactions in shares of
beneficial interest (Note 3) --
Proceeds from sales of shares $ 1,667,954 $ 5,076,779 $10,163,553
Net asset value of shares
issued to shareholders in
payment of distributions
declared 639,300 -- 378,380
Cost of shares redeemed (4,261,821) (4,292,802) (4,374,063)
----------- ----------- -----------
Increase (decrease) in net
assets from Fund share
transactions (1,954,567) $ 783,977 $ 6,167,870
----------- ----------- -----------
Net increase (decrease) in
net assets $(1,488,728) $ 2,203,418 $ 7,263,179
NET ASSETS:
At beginning of period 15,258,733 13,055,315 5,792,136
----------- ----------- -----------
At end of period $13,770,005 $15,258,733 $13,055,315
=========== =========== ===========
*For the eleven months ended August 31, 1995 (See Note 10).
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 29, YEAR ENDED SEPTEMBER 30,
1996 YEAR ENDED -------------------------------------------------------------------
(UNAUDITED) AUGUST 31, 1995<F3> 1994 1993 1992 1991 1990
--------------- --------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of year $16.420 $14.890 $13.240 $11.850 $11.140 $12.140 $13.460
------- ------- ------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income (loss) $(0.145) $(0.100)<F4> $(0.050) $(0.090) $(0.083) $ 0.020 $ 0.069
Net realized and
unrealized gain
(loss) on investments 1.755 1.630<F4> 2.650 1.480 1.103 (0.570) (0.009)
------- ------- ------- ------- ------- ------- -------
Total income (loss)
from operations $ 1.610 $ 1.530 $ 2.600 $ 1.390 $ 1.020 $(0.550) $ 0.060
------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $ -- $ -- $ -- $ -- $ -- $(0.020) $(0.069)
In excess of net investment
income -- -- (0.020) -- (0.250) (0.110) (1.091)
------- ------- ------- ------- ------- ------- -------
From net realized gain on
investments (0.674) -- -- -- (0.060) (0.320) (1.220)
In excess of net realized
gain on investments (0.276) -- (0.930) -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total distributions
$(0.950) $ -- $(0.950) $ -- $(0.310) $(0.450) $(1.380)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $17.080 $16.420 $14.890 $13.240 $11.850 $11.140 $12.140
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN 10.56% 10.28% 20.47% 11.73% 9.44% (4.36)% 0.01%
RATIOS/SUPPLEMENTAL DATA:<F1>
Net assets, end of year
(000's omitted) $13,770 $15,259 $13,055 $5,792 $3,775 $4,042 $4,391
Ratio of net expenses to
average net assets 2.86%<F2> 2.43%<F2> 2.64% 3.15% 3.26% 3.29% 2.50%
------- ------- ------- ------- ------- ------- -------
Ratio of net investment
income (loss) to average
daily net assets (1.69%)<F2> (0.74)%<F2> (0.96)% (0.92)% (0.67)% 0.17% 0.33%
PORTFOLIO TURNOVER 26% 49% 17% 57% 32% 27% 35%
AVERAGE COMMISSION RATE
PAID<F5> 0.32%
<FN>
<F1> For the four years ended September 30, 1993, the operating expenses of the Fund reflect a reduction of the investment
adviser fee, an allocation of expenses to the Investment Adviser, or both. Had such actions not been taken, net investment
loss per share and the ratios would have been as follows:
NET INVESTMENT LOSS PER SHARE $(0.210) $(0.240) $(0.110) $(0.300)
======= ======= ======= =======
RATIOS (As a percentage of average net assets):
Expenses 3.90% 4.65% 4.42% 5.23%
Net investment loss (1.67)% (2.06)% (0.96)% (2.40)%
<F2> Computed on an annualized basis.
<F3> For the eleven months ended August 31, 1995 (See Note 10).
<F4> Per share data is based on average shares outstanding.
<F5> Average commission rate paid is computed by dividing the total dollar amount of commissions paid during the fiscal year by
the total number of shares purchased and sold during the fiscal year for which commissions were charged. Amount is computed
on a non-annualized basis.
</FN>
</TABLE>
See notes to financial statements
<PAGE>
-----------------------------------
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Gold & Natural Resources Fund (the Fund) is a diversified series
of Eaton Vance Growth Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATIONS -- Investments, other than fixed income securities,
listed on securities exchanges or in the NASDAQ National Market System are
valued at closing sale prices. Unlisted securities or listed securities for
which closing sale prices are not available are valued at the mean between the
latest bid and asked prices. Options are valued at the last quoted sale price
on the exchange or board of trade on which they are primarily traded or, in
the absence of a sale, the mean between the last bid and asked price. Futures
positions on investments or currencies are generally valued at closing
settlement prices. Short-term obligations are valued at amortized cost, which
approximates value. 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.
All other securities are appraised at fair value as determined in
good faith by or pursuant to procedures established by
the Trustees.
B. 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 taxable income, including any
net realized gain on investments. Accordingly, no provision for federal income
or excise tax is necessary.
C. DISTRIBUTION COSTS -- For book purposes, commissions paid on the sale of
Fund shares and other distribution costs are charged to operations. As a
result of a recent Internal Revenue Service ruling, the Fund changed its tax
accounting for commissions paid from charging the expenses to paid-in capital
to charging the expenses to operations. The change had no effect on either the
Fund's current yield or total return (Notes 2 and 5).
D. OTHER -- Investment security transactions are accounted for on a trade date
basis. Dividend income, distributions to shareholders and shares issued to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
E. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating
to February 29, 1996 and for the six-month period then ended have not been
audited by independent certified public accountants, but in the opinion of the
Fund's management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
- -------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
It is the present policy of the Fund to make (A) at least one distribution
annually (normally in December) of substantially all of the investment income
earned by the Fund, less its expenses and (B) at least one distribution
annually of substantially all of the capital gains realized by the Fund, if
any. Distributions are paid in the form of additional shares of the Fund or,
at the election of the shareholder, in cash. The Fund distinguishes between
distributions on a tax basis and a financial reporting basis. Generally
accepted accounting principles require that only distributions in excess of
tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
overdistributions only for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital.
- -------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
FEBRUARY 29, 1996 AUGUST 31, SEPTEMBER 30,
(UNAUDITED) 1995* 1994
----------------- ------------- -------------
Sales 102,912 345,747 731,556
Issued to shareholders
electing to receive
payment of
distribution in Fund
shares 42,310 -- 28,365
Redemptions (268,377) (293,310) (320,555)
------- ------- -------
Net increase
(decrease) (123,155) 52,437 439,366
======== ====== =======
*For the eleven months ended August 31, 1995 (Note 10).
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(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee was paid to Eaton Vance Management (EVM) as
compensation for management and investment advisory services rendered to the
Fund. The fee is computed at the monthly rate of 0.0625% (0.75% per annum) of
the Fund's average daily net assets up to $500 million and at reduced rates as
daily net assets exceed that level. For the six months ended February 29,
1996, the effective annual rate, based on average daily net assets,
was 0.75%.
Except as to Trustees of the Fund who are not members of EVM's organization,
officers and Trustees receive remuneration for their services to the Fund out of
such investment adviser fee. Investors Bank & Trust Company (IBT), serves as
custodian of the Fund. Prior to November 10, 1995, IBT was an affiliate of EVM.
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 Trustees of the Fund are officers and
directors/trustees of the above organizations (See Note 5).
Trustees of the Fund that are not affiliated with the Investment Advisor may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of the Trustees Deferred Compensation Plan. For the six months
ended February 29, 1996, no significant amounts have been deferred.
- -------------------------------------------------------------------------------
(5) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay
the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD) amounts equal
to 1/365 of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no
outstanding Uncovered Distribution Charges, which are equivalent to the sum of
(i) 5% of the aggregate amount received by the Fund for shares sold plus (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of
EVD, reduced by the aggregate amount of contingent deferred sales charges (see
Note 6) and daily amounts theretofore paid to EVD. The amount payable to EVD
with respect to each day is accrued on such day as a liability of the Fund
and, accordingly, reduces the Fund's net assets. The Fund accrued $51,870 as
payable to EVD for the six months ended February 29, 1996, representing 0.75%
(annualized) of daily average net assets. At February 29, 1996, the amount of
Uncovered Distribution Charges of EVD calculated under the Plan was
approximately $342,802.
In addition, the Plan authorizes the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for each fiscal year. The
Trustees have initially implemented the Plan by authorizing the Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.25% per annum of the Fund's average
daily net assets based on the value of Fund shares sold by such persons and
remaining outstanding for at least one year. Service fee payments will be made
for personal services and/or the maintenance of shareholder accounts. Service
fees are separate and distinct from the sales commissions and distribution fees
payable by the Fund to EVD, and, as such, are not subject to automatic
discontinuance where there are no outstanding Uncovered Distribution Charges of
EVD. Provision for service fees payments amounted to $10,957 for the six months
ended February 29, 1996.
Certain officers and Trustees of the Fund are officers or directors of EVD.
- -------------------------------------------------------------------------------
(6) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon
the lower of net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gain distributions. The CDSC is imposed at declining rates that begin at 5% in
the case of redemptions in the first and second year after purchase (6% and
5%, respectively for shares acquired prior to August 1, 1994), declining one
percentage point each year. No CDSC is levied on shares which have been sold
to EVM or its affiliates or to their respective employees or clients. CDSC
charges are paid to EVD to reduce the amount of Uncovered Distribution Charges
calculated under the Fund's Distribution Plan. If no Uncovered Distribution
Charges exist, the CDSC will be credited to operations. EVD received
approximately $79,012 of CDSC paid by shareholders for the six months ended
February 29, 1996.
- -------------------------------------------------------------------------------
(7) LINE OF CREDIT
The Fund participates with other funds managed by EVM 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 Fund solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each fund 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 at the end of each quarter. The
average daily loan balance for the six months ended February 29, 1996 was
$267,940 and the average interest rate was 7.03%. The maximum borrowing
outstanding at any month end during the six months ended February 29, 1996 was
$1,177,000.
- -------------------------------------------------------------------------------
(8) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than U.S. Government Securities and
short-term obligations, aggregated $3,714,650 and $5,696,699, respectively.
- -------------------------------------------------------------------------------
(9) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investment
securities owned at February 29, 1996, as computed on a federal income tax
basis, are as follows:
Aggregate cost $11,174,389
===========
Gross unrealized appreciation $ 3,778,200
Gross unrealized depreciation 329,550
-----------
Net unrealized appreciation $ 3,448,650
===========
- -------------------------------------------------------------------------------
(10) SPECIAL SHAREHOLDER MEETING
The Fund changed its fiscal year end from September 30 to August 31, effective
August 31, 1995. EV Marathon Gold & Natural Resources Fund (the Fund) held a
special shareholder meeting on August 30, 1995. On July 5th, 1995, the record
date of the meeting, the Fund had 932,343 shares outstanding, of which 540,439
shares were represented at the meeting. The votes at the meeting were as
follows:
Item: The approval of an Agreement and Plan of Reorganization pursuant to
which the Fund will be reorganized to become a series fund of Eaton Vance
Growth Trust, a Massachusetts business trust.
NUMBER OF SHARES
(UNAUDITED)
--------------------
Affirmative 506,089
Against 4,640
Abstain 29,710
<PAGE>
------------------------
INVESTMENT MANAGEMENT
EV OFFICERS INDEPENDENT TRUSTEES
MARATHON JAMES B. HAWKES DONALD R. DWIGHT
GOLD & President, Trustee President, Dwight Partners, Inc.
NATURAL M. DOZIER GARDNER Chairman, Newspapers of
RESOURCES FUND Vice President New England, Inc.
24 Federal Street WILLIAM D. BURT SAMUEL L. HAYES, III
Boston, MA 02110 Vice President and Jacob H. Schiff Professor of
Co-Portfolio Manager Investment Banking,
BARCLAY TITTMANN Harvard University
Vice President and Graduate School of
Co-Portfolio Manager Business Administration
JAMES L. O'CONNOR NORTON H. REAMER
Treasurer President, United Asset
THOMAS OTIS Management Corporation
Secretary JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
