<PAGE>
-----------------------
TO SHAREHOLDERS
VANCE, SANDERS EXCHANGE FUND HAD A TOTAL RETURN OF 9.2% FOR THE FISCAL PERIOD
BEGINNING DECEMBER 31, 1995 AND ENDING AUGUST 31, 1996.
AT A SPECIAL MEETING OF THE PARTNERS HELD ON AUGUST 28, 1996, SHAREHOLDERS OF
VANCE, SANDERS EXCHANGE FUND VOTED TO ADOPT SEVERAL IMPORTANT CHANGES IN THE
FUND'S ORGANIZATION AND OPERATIONS THAT HAD BEEN RECOMMENDED BY THE FUND'S
MANAGING GENERAL PARTNERS. As a result, the Fund is now a series of a
Massachusetts business trust, and the investment objective and several of the
investment restrictions of the Fund have been revised. The Fund has also adopted
the Hub-and-Spoke(R) mutual fund structure, and is pursuing its investment
objective by investing in the Tax-Managed Growth Portfolio (the "Portfolio"), a
separate open-end management investment company with substantially the same
investment objective, policies and restrictions as the Fund. Adopting the
Hub-and-Spoke(R) structure and investing through the Portfolio enables the Fund
to consolidate its assets on a tax-free basis with other similar funds, and to
participate in a larger, more diversified and potentially more attractive
investment portfolio. As of September 3, 1996, net assets of the Portfolio
totalled $827.2 million.
AS A RESULT OF THE REORGANIZATION, THE FISCAL YEAR OF THE FUND HAS BEEN CHANGED
TO COINCIDE WITH THE OCTOBER 31 FISCAL YEAR OF THE PORTFOLIO. On October 31,
1996, the Portfolio's and the Fund's independent auditors will conduct an audit
of the Portfolio and the Fund and shareholders of the Fund will receive an
annual report containing financial statements for the Portfolio for the fiscal
year then ended and for the Fund covering the period from September 3, 1996 to
October 31, 1996.
THIS REPORT PROVIDES INFORMATION WITH RESPECT TO THE FUND'S FISCAL PERIOD THAT
BEGAN ON DECEMBER 31, 1995 AND CONCLUDED ON AUGUST 31, 1996, THE DATE THE FUND
WAS REORGANIZED. Over this period, the Fund had a total return of 9.2%,
including an increase in the net asset value to $376.86 per share from $347.57
per share, and the reinvestment of $2.70 in dividend income. The Fund's
performance compares favorably to the 7.5% total return of the Standard & Poor's
500, an unmanaged index of large capitalization stocks traded in the U.S.,
during this eight-month period.*
"THROUGHOUT ITS 20-YEAR HISTORY, VANCE, SANDERS EXCHANGE FUND HAS BEEN MANAGED
FOR THE LONG TERM AND WITH CONSIDERATION TO SHAREHOLDER TAXES AND AFTER-TAX
RETURNS."
- -------------- THE TYPES OF BLUE-CHIP GROWTH COMPANIES IN WHICH THE PORTFOLIO
TYPICALLY INVESTS HAVE BEEN STRONG PERFORMERS AND CONTINUE TO
LOOK ATTRACTIVE FOR THE MONTHS AND THE YEARS AHEAD. The
[Photo of largest holdings of the Portfolio as of September 3, 1996
Landon T. Clay include such well-regarded companies as Intel Corp., PepsiCo,
Inc., Coca-Cola Company, Johnson & Johnson, Reuters, PLC, and
Hewlett-Packard Co. Each of these companies is well
- -------------- established as an industry leader, and has attractive
financial characteristics and excellent growth prospects. The
Portfolio holds investments in a diverse group of over 150
companies.
THROUGHOUT ITS 20-YEAR HISTORY, VANCE, SANDERS EXCHANGE FUND HAS BEEN MANAGED
FOR THE LONG TERM AND WITH CONSIDERATION TO SHAREHOLDER TAXES AND AFTER-TAX
RETURNS. Investing in the Portfolio through the Hub-and-Spoke(R) structure will
not alter this focus, but will enable the Fund to benefit from the Portfolio's
greater size and broader diversification. Looking ahead, I am confident
shareholders will benefit from the changes made in the Fund's organization and
operations, as well as from the long-term growth of the economy and holdings in
the Portfolio positioned to take advantage of that growth.
Sincerely,
/s/ Landon T. Clay
LANDON T. CLAY
Managing General Partner
September 26, 1996
*It is not possible to invest directly in this index.
<PAGE>
-----------------
VANCE, SANDERS
EXCHANGE FUND
AUGUST 31, 1996
(UNAUDITED)
INVESTMENT CHANGES
PERIOD ENDED AUGUST 31, 1996
- --------------------------------------------------------------------------------
Shares Owned
6/30/96 8/31/96
- --------------------------------------------------------------------------------
INCREASES
- --------------------------------------------------------------------------------
Sofamor Danek Group, Inc. -- 68,000
- --------------------------------------------------------------------------------
DECREASES*
- --------------------------------------------------------------------------------
Coca-Cola Company 255,936 245,886
- --------------------------------------------------------------------------------
Dun & Bradstreet Corp. 81,030 75,670
- --------------------------------------------------------------------------------
Intel Corp. 196,400 176,010
- --------------------------------------------------------------------------------
Loctite Corp. 138,612 135,252
- --------------------------------------------------------------------------------
*Includes investments paid in kind on redemptions.
OTHER CHANGES
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
103,584 Hewlett-Packard Co. in a 2 for 1 stock split.
- --------------------------------------------------------------------------------
2,629 Imation Corp. in a 1 for 10 spinoff from Minnesota
Mining & Manufacturing Co.
- --------------------------------------------------------------------------------
<PAGE>
-------------------------
VANCE, SANDERS
EXCHANGE FUND
AUGUST 31, 1996
Value
TEN LARGEST HOLDINGS (in millions)
- ------------------------------------------------------------------------------
Intel Corp. $14.0
- ------------------------------------------------------------------------------
American International Group Inc. 12.9
- ------------------------------------------------------------------------------
Coca-Cola Company 12.3
- ------------------------------------------------------------------------------
ASTRA AB -- Series A 10.6
- ------------------------------------------------------------------------------
Monsanto Co. 9.6
- ------------------------------------------------------------------------------
Reuters Holding PLC 9.2
- ------------------------------------------------------------------------------
Hewlett-Packard Co. 9.1
- ------------------------------------------------------------------------------
Pfizer Inc. 9.0
- ------------------------------------------------------------------------------
PepsiCo., Inc. 8.6
- ------------------------------------------------------------------------------
Johnson & Johnson 8.2
- ------------------------------------------------------------------------------
Percentage of
FIVE LARGEST INDUSTRY HOLDINGS Net Assets
- ------------------------------------------------------------------------------
Drugs 11.6%
- ------------------------------------------------------------------------------
Medical Products 10.1
- ------------------------------------------------------------------------------
Insurance 9.1
- ------------------------------------------------------------------------------
Beverages 8.3
- ------------------------------------------------------------------------------
Information Services 6.3
- ------------------------------------------------------------------------------
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996
- ----------------------------------------------------------------------
COMMON STOCKS - 98.1%
- ----------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- ----------------------------------------------------------------------
AEROSPACE AND DEFENSE - 1.8%
Raytheon Co. 84,744 $ 4,364,316
------------
BEVERAGES - 8.3%
Coca-Cola Company 245,886 $ 12,294,300
PepsiCo, Inc. 300,000 8,625,000
------------
$ 20,919,300
------------
BUILDING MATERIALS - 0.7%
Masco Corp. 55,540 $ 1,617,603
------------
BUSINESS PRODUCTS & SERVICES - 0.0%
Imation Corp.* 2,629 $ 62,105
------------
CHEMICALS - 4.3%
Dow Chemical Company 13,917 $ 1,109,881
Monsanto Co. 300,000 9,637,500
------------
$ 10,747,381
------------
COMPUTERS & BUSINESS EQUIPMENT - 4.1%
Hewlett-Packard Co. 207,168 $ 9,063,600
International Business Machines Corp. 11,094 1,268,876
------------
$ 10,332,476
------------
DISTRIBUTION - 1.4%
Sysco Corp. 107,760 $ 3,461,790
------------
DRUGS - 11.6%
ASTRA AB - Series A ADR 250,000 $ 10,581,525
Merck & Co., Inc. 33,746 2,214,581
Pfizer Inc. 127,184 9,030,064
Schering-Plough Corp. 128,120 7,158,705
------------
$ 28,984,875
------------
ELECTRICAL EQUIPMENT - 4.0%
AMP Inc. 60,360 $ 2,308,770
Emerson Electric Co. 22,398 1,875,832
General Electric Co. 24,864 2,066,820
Lincoln Electric Co. 19,700 605,775
Lincoln Electric Co. Class A 19,700 536,825
General Signal Corp. 68,600 2,752,575
------------
$ 10,146,597
------------
ELECTRONICS - SEMICONDUCTORS - 5.6%
Intel Corp. 176,010 $ 14,047,798
------------
FINANCIAL SERVICES - MISCELLANEOUS - 2.4%
Federal National Mortgage Association 191,200 $ 5,927,200
------------
FOOD - 3.4%
McCormick & Co. Inc., Nonvoting 181,328 $ 3,717,224
Pioneer Hi-Bred International Inc. 87,000 4,795,875
------------
$ 8,513,099
------------
HOUSEHOLD PRODUCTS - 3.5%
Colgate-Palmolive Co. 21,826 $ 1,773,363
Procter & Gamble Co. 80,000 7,110,000
------------
$ 8,883,363
------------
INDUSTRIAL EQUIPMENT - 0.8%
Parker-Hannifin Corp. 53,730 $ 2,095,470
------------
INFORMATION SERVICES - 6.3%
Automatic Data Processing Inc. 51,040 $ 2,124,540
Dun & Bradstreet Corp. 75,670 4,360,484
Reuters Holdings PLC 132,000 9,223,500
------------
$ 15,708,524
------------
INSURANCE - 9.1%
American International Group Inc. 138,008 $ 12,920,760
General Re Corp. 26,816 3,884,968
Highlands Insurance Co.* 5,070 96,330
Marsh & McLennan Companies, Inc. 28,172 2,619,996
Providian Corp. 46,794 1,936,102
Seafield Capital Corp. 35,960 1,267,590
------------
$ 22,725,746
------------
MEDICAL PRODUCTS - 10.1%
Abbott Laboratories 80,000 $ 3,610,000
Baxter International Inc. 49,728 2,219,112
Boston Scientific Corp.* 125,000 5,734,375
Johnson & Johnson 165,672 8,159,346
Medtronic, Inc. 72,000 3,744,000
Sofamor Danek Group, Inc.* 68,000 1,955,000
------------
$ 25,421,833
------------
METALS - INDUSTRIAL - 1.6%
Inco Ltd. 124,000 $ 3,999,000
------------
OIL AND GAS - EQUIPMENT & SERVICES - 2.7%
Halliburton Co. 50,700 $ 2,668,088
Schlumberger Ltd. 49,246 4,155,131
------------
$ 6,823,219
------------
OIL AND GAS - EXPLORATION & PRODUCTION - 1.2%
Apache Corp. 56,440 $ 1,657,930
Louisiana Land & Exploration Co. 25,000 1,421,875
------------
$ 3,079,805
------------
OIL AND GAS - INTEGRATED - 1.8%
Amoco Corp. 47,928 $ 3,307,032
Murphy Oil Corp. 29,700 1,299,375
------------
$ 4,606,407
------------
PRINTING AND BUSINESS FORMS - 1.2%
American Business Products Inc. - GA 146,497 $ 2,984,876
------------
PUBLISHING - 2.5%
Gannett Co., Inc. 93,400 $ 6,257,800
------------
RETAIL - SPECIALTY AND APPAREL - 3.6%
Home Depot, Inc. (The) 80,000 $ 4,250,000
Toys "R" Us, Inc.* 161,775 4,772,363
------------
$ 9,022,363
------------
SPECIALTY CHEMICALS AND MATERIALS - 6.1%
International Flavors & Fragrances 60,000 $ 2,580,000
Loctite Corp. 135,252 5,934,181
Millipore Corp. 31,440 1,202,580
Minnesota Mining & Manufacturing Co. 26,288 1,807,300
Nalco Chemical Co. 116,020 3,727,142
------------
$ 15,251,203
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $36,890,114) $245,984,149
------------
- ----------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.8%
- ----------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED) VALUE
- ----------------------------------------------------------------------
American Express Credit Corp.,
5.28% 9/3/96 $ 4,300 $ 4,298,739
Associates Corp. of North America,
5.30% 9/3/96 298 297,912
------------
TOTAL SHORT-TERM OBLIGATIONS,
AT AMORTIZED COST $ 4,596,651
------------
TOTAL INVESTMENTS - 99.9%
(IDENTIFIED COST, $41,486,765) $250,580,800
OTHER ASSETS, LESS LIABILITIES - 0.1% 237,220
------------
NET ASSETS - 100% $250,818,020
============
*Non-income producing security.
See notes to financial statements
<PAGE>
-------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
August 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$41,486,765) $250,580,800
Cash 693
Receivable for investments sold 11,031
Dividends receivable 367,696
Miscellaneous receivable 33,102
------------
Total assets $250,993,322
LIABILITIES:
Payable for shares of partnership interest
redeemed $ 11,504
Payable to affiliates --
Investment adviser fee 127,024
Managing General Partners 2,191
Accrued expenses and other liabilities 34,583
----------
Total liabilities 175,302
------------
NET ASSETS for 665,546 shares of partnership interest
outstanding $250,818,020
============
NET ASSETS APPLICABLE TO SHARES OF PARTNERSHIP
INTEREST OWNED BY:
Limited Partners (655,695 shares) $247,105,567
General Partners --
Managing Partners (547 shares) $ 206,143
Non-Managing Partner (9,304 shares) 3,506,310 3,712,453
---------- ------------
NET ASSETS (665,546 shares) $250,818,020
============
SOURCES OF NET ASSETS:
Accumulated net realized gain on investment and
foreign currency transactions (computed on the
basis of identified cost), less the excess of
cost of partnership interest redeemed over
proceeds from sales of partnership interest
(including shares issued to partners electing
to receive payment of distributions in shares) $ 55,528,889
Accumulated distributions of net realized gain
on investments as computed for federal income
tax purposes (16,700,504)
Unrealized appreciation of investments and
foreign currency transactions (computed on the
basis of identified cost) 209,095,673
Undistributed net investment income 2,893,962
------------
Total $250,818,020
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF
PARTNERSHIP INTEREST
($250,818,020 / 665,546 shares of partnership
interest outstanding) $376.86
=======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
-------------------------
STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED
AUGUST 31, DECEMBER 31,
1996* 1995
------------ ------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding tax of
$45,349) $ 2,665,765 $ 3,766,073
Interest 232,510 228,361
----------- -----------
Total income $ 2,898,275 $ 3,994,434
----------- -----------
Expenses --
Investment adviser fee (Note 4) $ 997,647 $ 1,266,428
Compensation of Managing General Partners not
members of the Non-Managing
General Partner's organization 8,839 8,538
Custodian fee 85,632 111,037
Legal and accounting services 33,511 33,601
Printing and postage 32,720 31,062
Transfer and dividend disbursing agent fees 10,000 10,179
Miscellaneous 14,059 25,396
----------- -----------
Total expenses $ 1,182,408 $ 1,486,241
----------- -----------
Net investment income $ 1,715,867 $ 2,508,193
----------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments and foreign
currency transactions, computed on
the basis of identified cost ($1,165,951 net
gain and $188,025 net loss, respectively, as
computed for federal income tax purposes) $ 7,213,979 $ 9,325,132
Increase in unrealized appreciation of
investments and foreign currency 12,790,346 51,653,643
----------- -----------
Net realized and unrealized gain on
investments and foreign currency
transactions $20,004,325 $60,978,775
----------- -----------
Net increase in net assets from
operations $21,720,192 $63,486,968
=========== ===========
*For the eight month period ended August 31, 1996.
See notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
AUGUST 31, ---------------------------
1996* 1995 1994
------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,715,867 $ 2,508,193 $ 2,384,023
Net realized gain on
investments and foreign
currency transactions 7,213,979 9,325,132 8,358,479
Increase (decrease) in
unrealized appreciation of
investments and foreign
currency 12,790,346 51,653,643 (2,991,174)
------------ ------------ ------------
Increase in net assets from
operations $ 21,720,192 $ 63,486,968 $ 7,751,328
------------ ------------ ------------
Distributions to partners --
From net investment income $ (1,825,608) $ (2,400,734) $ (2,256,662)
Net decrease from transactions
in shares of partnership
interest (Note 2) (6,108,867) (9,472,006) (8,614,936)
------------ ------------ ------------
Net increase (decrease)
in net assets $ 13,785,717 $ 51,614,228 $ (3,120,270)
NET ASSETS:
At beginning of period 237,032,303 185,418,075 188,538,345
------------ ------------ ------------
At end of period (including
undistributed net investment
income of $2,893,962,
$3,003,703 and $2,896,244,
respectively) $250,818,020 $237,032,303 $185,418,075
============ ============ ============
*For the eight month period ended August 31, 1996.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED YEAR ENDED DECEMBER 31,
AUGUST 31, --------------------------------------------------------------------
1996* 1995 1994 1993 1992 1991
------------ ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period $347.570 $259.490 $251.710 $246.130 $241.030 $181.960
-------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 2.644 $ 3.800 $ 3.406 $ 3.141 $ 3.198 $ 3.743
Net realized and unrealized gain on
investments 29.346 87.730 7.424 5.599 5.012 58.777
-------- -------- -------- -------- -------- --------
Total income from operations $ 31.990 $ 91.530 $ 10.830 $ 8.740 $ 8.210 $ 62.520
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (2.700) $ (3.450) $ (3.050) $ (3.000) $ (3.050) $ (3.450)
From net realized gain on investments -- -- -- (0.160) (0.060) --
-------- -------- -------- -------- -------- --------
Total distributions $ (2.700) $ (3.450) $ (3.050) $ (3.160) $ (3.110) $ (3.450)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of period $376.860 $347.570 $259.490 $251.710 $246.130 $241.030
======== ======== ======== ======== ======== ========
TOTAL RETURN (1) 9.22% 35.50% 4.39% 3.63% 3.50% 34.76%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) $250,818 $237,032 $185,418 $188,538 $195,679 $201,607
Ratio of expenses to average net assets 0.71%+ 0.70% 0.71% 0.71% 0.71% 0.71%
Ratio of net investment income to average
net assets 1.03%+ 1.19% 1.31% 1.22% 1.31% 1.70%
PORTFOLIO TURNOVER 3% 0% 3% 3% 5% 7%
AVERAGE COMMISSION RATE PAID(2) $ 0.0589 -- -- -- -- --
(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. Total return
is not computed on an annualized basis.
(2) Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the fiscal year by the total number of
shares purchased and sold during the fiscal year for which commissions
were charged. For fiscal years beginning on or after September 1, 1995, a
Fund is required to disclose its average commission rate per share for
security trades on which commissions are charged.
* For the eight month period ended August 31, 1996.
+ Annualized.
See notes to financial statements
</TABLE>
<PAGE>
---------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Fund is a limited partnership formed under The Uniform Limited Partnership
Act of California, and is registered under the Investment Company Act of 1940
as amended, as a diversified, open-end management investment company. Under
the Partnership Agreement, all partnership interests, whether of a limited
partner or a general partner, are represented by shares of the same class. 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 listed on security exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at
closing bid prices. Short-term obligations, maturing in 60 days or less, are
valued at amortized cost, which approximates value.
B. INCOME TAXES AND DISTRIBUTIONS TO PARTNERS -- No provision is made by the
Fund for federal or state taxes on the taxable income of the partnership
because each partner is individually responsible for the payment of any taxes
on his share of such taxable income. The Managing General Partners will make
quarterly distributions to the partners from the Fund's net investment income
and it is their present intention to distribute each year approximately 30% of
any taxable net realized gain from investment transactions.
C. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT), serves as
custodian of the Fund. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average cash balances the
Fund maintains with IBT. All significant credit balances used to reduce the
Fund's custodian fees are reflected as a reduction of operating expenses in
the Statement of Operations.
D. OTHER -- Investment transactions are accounted for on a trade date basis.
Dividend income and distributions to partners are recorded on the ex-dividend
date.
E. 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.
- --------------------------------------------------------------------------------
(2) SHARES OF PARTNERSHIP INTEREST
Transactions in shares of partnership interest were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED AUGUST 31, 1996 YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994
----------------------------------- ----------------------------------- ----------------------------------
SHARES SHARES SHARES
-------------------- -------------------- --------------------
GENERAL LIMITED GENERAL LIMITED GENERAL LIMITED
PARTNERS PARTNERS AMOUNT PARTNERS PARTNERS AMOUNT PARTNERS PARTNERS AMOUNT
--------- --------- ------------- --------- --------- ------------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redemptions -- (16,961) $(6,309,352) -- (33,511) $(9,741,812) -- (35,476) $(8,859,649)
Issued to partners
electing to
receive payment of
distributions in
shares 67 478 200,485 109 815 269,806 114 894 244,713
-- ------- ----------- --- ------- ----------- --- ------- -----------
Net increase
(decrease) 67 (16,483) $(6,108,867) 109 (32,696) $(9,472,006) 114 (34,582) $(8,614,936)
== ======= =========== === ======= =========== === ======= ===========
</TABLE>
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $6,975,182 and $6,115,551, respectively. In addition, investments
having an aggregate market value of $6,075,983 at dates of redemption were
distributed in payment for shares of partnership interest redeemed, resulting in
realized capital gains of $6,047,572, for book purposes.
- ------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at the monthly rate of 0.05 of 1% ( 1/12 of
an annual rate of 0.6 of 1%) of the Fund's average monthly net assets, was paid
to Eaton Vance Management (EVM) as compensation for management and investment
advisory services rendered to the Fund. The Fund pays the compensation of its
Managing General Partners who are not members of EVM's organization. One of the
Managing Gen eral Partners of the Fund is an officer and trustee of EVM and that
organization is the Non-Managing General Partner of the Fund. Managing General
Partners 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 Managing Partners Deferred Compensation Plan. For the
period ended August 31, 1996, no significant amounts have been deferred.
- ------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Fund participates with other funds managed by EVM and 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 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 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 the unused
portion of the $100 million discretionary facility is allocated among the
participating funds at the end of each quarter. The Fund did not have any
significant borrowings or allocated fees during the period.
- ------------------------------------------------------------------------------
(6) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at August 31, 1996, as computed on a federal income tax basis, are as
follows:
Aggregate cost $ 41,486,765
============
Gross unrealized appreciation $209,094,035
Gross unrealized depreciation --
------------
Net unrealized appreciation $209,094,035
============
- ------------------------------------------------------------------------------
(7) SUBSEQUENT EVENT
On September 1, 1996, the Fund transferred substantially all of its investable
assets to the Tax-Managed Growth Portfolio (the Portfolio) for an interest in
the Portfolio. The Portfolio has substantially the same investment objective,
policies, and restrictions as the Fund. In addition, the Fund was reorganized as
a Massachusetts Business Trust and changed its fiscal year end to October 31.
- ------------------------------------------------------------------------------
(8) SPECIAL MEETING OF PARTNERS (UNAUDITED)
Vance, Sanders Exchange Fund (a California Limited Partnership) (the "Fund")
held a special meeting of partners on August 28, 1996. On July 2, 1996, the
record date of the meeting, the Fund had 672,279.904 shares outstanding of which
510,551.147 shares were represented at the meeting. The votes at the meeting
were as follows:
Item 1. To approve the Agreement and Plan of Reorganization set forth as
Exhibit A to the Proxy Statement for the meeting.
NUMBER OF SHARES
----------------
Affirmative 500,776.257
Against 2,674.181
Abstain 7,100.709
Item 2. To approve the revision of the Fund's investment objective and
certain fundamental investment restrictions as follows:
A. Reclassification and amendment of the Fund's investment objective.
NUMBER OF SHARES
----------------
Affirmative 497,825.442
Against 6,327.213
Abstain 6,398.492
B. Amend the restriction concerning investing in any one issuer.
NUMBER OF SHARES
----------------
Affirmative 497,657.943
Against 8,789.213
Abstain 4,103.991
C. Amend the restriction concerning investing in voting securities of
any one issuer.
NUMBER OF SHARES
----------------
Affirmative 495,471.598
Against 10,975.558
Abstain 4,103.991
D. Eliminate the restriction concerning investment in other investment
companies.
NUMBER OF SHARES
----------------
Affirmative 493,770.012
Against 13,119.144
Abstain 3,661.991
E. Reclassify the restriction concerning investment in unseasoned
issuers.
NUMBER OF SHARES
----------------
Affirmative 490,857.057
Against 14,142.358
Abstain 5,551.732
F. Amend the restriction concerning investment in affiliated issuers.
NUMBER OF SHARES
----------------
Affirmative 497,630.202
Against 6,927.213
Abstain 5,993.732
G. Amend the restriction concerning borrowing.
NUMBER OF SHARES
----------------
Affirmative 493,581.857
Against 14,177.143
Abstain 2,792.147
H. Amend the restriction concerning margin, short sales and options.
NUMBER OF SHARES
----------------
Affirmative 490,857.057
Against 17,343.943
Abstain 2,350.147
I. Reclassify the restriction concerning investing for control.
NUMBER OF SHARES
----------------
Affirmative 490,884.798
Against 13,700.358
Abstain 5,965.991
J. Amend the restriction concerning lending.
NUMBER OF SHARES
----------------
Affirmative 490,695.057
Against 17,478.202
Abstain 2,377.888
K. Amend the restriction concerning investing in real estate.
NUMBER OF SHARES
----------------
Affirmative 490,253.057
Against 16,194.099
Abstain 4,103.991
L. Amend the restriction concerning underwriting.
NUMBER OF SHARES
----------------
Affirmative 492,615.057
Against 13,832.099
Abstain 4,103.991
M. Amend the restriction concerning concentration.
NUMBER OF SHARES
----------------
Affirmative 492,457.057
Against 15,116.202
Abstain 2,977.888
N. Reclassify the restriction concerning restricted securities.
NUMBER OF SHARES
----------------
Affirmative 493,161.057
Against 13,728.099
Abstain 3,661.991
O. Reclassify the restriction concerning investing in exploration
companies.
NUMBER OF SHARES
----------------
Affirmative 492,804.578
Against 12,869.299
Abstain 4,877.270
Item 3. To adopt a new policy and supplement investment restrictions to
permit a new investment structure for the Successor Fund as described
in the Proxy Statement for the meeting.
NUMBER OF SHARES
----------------
Affirmative 500,718.409
Against 6,927.213
Abstain 2,905.525
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------
To the Partners of
Vance, Sanders Exchange Fund
(A California Limited Partnership):
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Vance, Sanders Exchange Fund (A
California Limited Partnership) as of August 31, 1996, and the related
statements of operations for the eight months then ended and the year ended
December 31, 1995, the statement of changes in net assets for the eight months
ended August 31, 1996 and the years ended December 31, 1995 and 1994, and the
financial highlights for the eight months ended August 31, 1996 and for each
of the years in the five-year period ended December 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned as of August 31, 1996, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Vance, Sanders
Exchange Fund (A California Limited Partnership) as of August 31, 1996, the
results of its operations, the changes in its net assets, and its financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 1996
<PAGE>
-----------------------------
INVESTMENT MANAGEMENT
VANCE, SANDERS OFFICERS MANAGING GENERAL PARTNERS
EXCHANGE FUND
(A California LANDON T. CLAY DONALD R. DWIGHT
Limited Chairman and Managing President, Dwight Partners, Inc.
Partnership) General Partner Chairman, Newspapers of
24 Federal Street New England, Inc.
Boston, MA 02110 THOMAS E. FAUST, JR.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff Professor of
Investment Banking, Harvard
JAMES L. O'CONNOR University Graduate School of
Treasurer Business Administration
THOMAS OTIS NORTON H. REAMER
Secretary President and Director, United
Asset Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
------------------------------------------------------------
VANCE, SANDERS TRANSFER AND DIVIDEND
EXCHANGE FUND DISBURSING AGENT
24 Federal Street First Data Investor
Boston, MA 02110 Services Group, Inc.
BOS725
P.O. Box 1559
INVESTMENT ADVISER Boston, MA 02104
Eaton Vance Management 800-262-1122
24 Federal Street
Boston, MA 02110
INDEPENDENT AUDITORS
Deloitte & Touche LLP
CUSTODIAN 125 Summer Street
Investors Bank & Trust Boston, MA 02110
Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
<PAGE>
VANCE, SANDERS
EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
PERFORMANCE RESULTS+
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(STANDARDIZED SEC PERFORMANCE DATA
FOR THE PERIODS ENDED AUGUST 31, 1996)
-------------------------------------------------------------------------------
One year 20.9%
-------------------------------------------------------------------------------
Five years 12.6%
-------------------------------------------------------------------------------
Ten years 13.1%
-------------------------------------------------------------------------------
Life of Fund (6/1/76) 13.5%
-------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
LIFE OF FUND
(6/1/76 TO 8/31/96)
-------------------------------------------------------------------------------
Vance, Sanders Exchange Fund 1,200.0%
-------------------------------------------------------------------------------
Dow Jones Industrial Average 1,272.2%
-------------------------------------------------------------------------------
Standard & Poor's 500 1,350.7%
-------------------------------------------------------------------------------
+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.
[Logo]
EATON VANCE
The Boston Tradition
Funds offered through
Eaton Vance Distributors, Inc.
24 Federal Street, Boston, Massachusetts 02110
9/96
VANCE, SANDERS
EXCHANGE FUND
An Eaton Vance
Exchange Fund
Annual Report
August 31, 1996
[Logo]
