<PAGE>
[LOGO OF EATON VANCE MUTUAL FUNDS APPEARS HERE]
[PHOTO OF STATUE OF LIBERTY APPEARS HERE]
Annual Report December 31, 1998
CAPITAL
EXCHANGE
FUND
Eaton Vance
Global Management-Global Distribution
[PHOTO OF WALL ST SIGN POST APPEARS HERE]
[PHOTO OF CALCULATOR & 1120 INCOME TAX FORM APPEARS HERE]
<PAGE>
Capital Exchange Fund as of December 31, 1998
Letter to Shareholders
[PHOTO OF JAMES B. HAWKES
APPEARS HERE]
James B. Hawkes
President
The fiscal year-end for Eaton Vance Capital Exchange Fund has changed from
October 31 to December 31. In the two month period from October 31, 1998 to
December 31, 1998, Eaton Vance Capital Exchange Fund had a total return of
13.4%1. This return resulted from an increase in net asset value (NAV) to
$482.62 per share on December 31, 1998 from $426.61 per share on October 31,
1998, and the reinvestment of $1.242 per share in dividends. This return
compared favorably to the average total return for mutual funds in the Lipper
Growth Funds Category, which was 14.6% during the same period.*
The Dow Jones Industrial Average had its 4th consecutive year of 20%-plus
returns, but the investment environment was almost unprecedented in its
volatility. The market saw a tremendous rally in the first four months of 1998,
followed by a decline in September that erased the year's gains, a near-full
recovery in October, and a strong rally in the fourth quarter. Investor
confidence, bolstered by the Federal Reserve Board's interest rate cuts, modest
economic growth, and low inflation, kept stock valuations relatively high at
year end. However, the dangers that precipitated the market's mid-year plunge
still lurk on the horizon: Asian economies, while stabilized, are still not
strong; corporate earnings have been lackluster; and ongoing currency crises in
Japan and Brazil continue to worry credit markets.
In such a turbulent environment, most actively managed mutual funds not focused
specifically on tax-efficiency typically have a high rate of turnover and,
subsequently, higher taxable distributions to shareholders. However, Eaton Vance
Tax-Managed Growth Portfolio, in which Capital Exchange Fund invests, aims to
provide high after-tax returns, and its management employs a style that is
consistent with this objective.
Volatility in the stock market can be troubling, but Eaton Vance believes that,
as a normal and even healthy part of the investment process, it can also present
good opportunities for long-term investors. Beginning on the following page,
Portfolio Manager Duncan W. Richardson discusses the past 12 months and offers
his outlook for the year ahead.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
February 1, 1999
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Fund Information
as of December 31, 1998
Performance1
- ----------------------------------------------------
Average Annual Total Returns
- ----------------------------------------------------
One Year 25.8%
Five Years 24.9
Ten Years 19.1
Life of Fund (3/29/66) 11.8
Ten Largest Equity Holdings2
- -----------------------------------------------------
By total net assets
Lexmark International Group, Inc. 2.1%
Xerox Corp. 1.8
Home Depot, Inc. (The) 1.8
Albertson's, Inc. 1.7
Automatic Data Processing, Inc. 1.7
SunAmerica, Inc. 1.7
Unilever ADR 1.6
Omnicom Group, Inc. 1.5
Johnson & Johnson Co. 1.5
Gillette Co. 1.5
1 Returns are calculated by determining the percentage change in net asset value
with all distributions reinvested.
2 Ten largest holdings are as of 12/31/98 only and may not be representative of
the Portfolio's current or future investments. Holdings accounted for 16.9% of
the Portfolio's investments, determined by dividing the total market value of
the holdings by the total net assets of the Portfolio.
* It is not possible to invest directly in a Lipper Category or an Index.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
2
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Capital Exchange Fund as of December 31, 1998
Management Discussion
An interview with Duncan W. Richardson, Vice President and Portfolio Manager of
Tax-Managed Growth and Capital Exchange Portfolios
[PHOTO OF DUNCAN W. RICHARDSON
APPEARS HERE]
Duncan W. Richardson
Portfolio Manager
Q: Duncan, what can you tell us about the extreme highs and lows of the stock
market over the past year?
A: The market volatility that began in 1997 was amplified in 1998. At this time
last year, we were talking about the concern that the Asian economies would
be collapsing. That fear turned out to be well-founded, but the U.S. market
rallied dramatically between January and April. An already high valuation
range for stocks was stretched to historic levels. With higher valuation
levels comes higher risk. In this environment, any external shock can have an
amplified effect on the market. We have seen overreactions to political
developments, the economic slowdowns overseas, the risk of currency
devaluations, and the deflationary threat. All have swung the market wildly
in the last several months.
Q: How did the Portfolio perform in this context?
A: Overall, we have continued to do quite well despite increasing volatility in
the marketplace. Year in and year out, our goal is to be in the top quintile
of pre-tax performance for all growth funds, and the top decile for after-tax
performance.
Our Fund "corrected" in line with the rest of the market. While it slightly
lagged the S&P 500 Index for the year, we've actually done better than some
of our more aggressive competitors whose portfolios are more concentrated,
that is, less diversified, than ours. Our style tends to benefit from some
volatility.
Q: Is there one factor that drives the performance of this Portfolio?
A: The performance of the Portfolio can't be attributed to one particular stock
or one particular sector. How the Portfolio performs depends more on our
ability to correctly evaluate the earnings potential of scores of quality
growth companies. We have an extremely well-seasoned team of analysts,
averaging 16 years of experience in their areas of research. Strong research
is central to Eaton Vance's fundamental approach to growth stock investing.
As a growth fund, we look for companies with a history of strong earnings and
future growth potential. We are disciplined and don't want to overpay for
earnings that might not be delivered. The turbulent economic environment
around the world puts corporate earnings at risk. Companies have been
lowering their guidance for earnings, and as a result there have been some
dramatic devaluations of individual stocks and sectors. We have used this
near-term fear and uncertainty to our advantage, taking the opportunity to
invest when our favored stocks were "on sale."
We are patient in accumulating positions in companies that can grow their
earnings over a 5-year investment horizon. An "ideal" entry point is one
where we have the expectation of the stock doubling over a 5-year period. A
good example of this is Gillette Corporation, in which we have built a
position over the past several months. We've been able to buy it recently at
prices where we think it makes a good deal of long-term investment sense.
Q: How do you decide when to sell a stock?
A: Our "selling discipline" is a key factor in the success of our management
style. As a rule, we seek to avoid selling highly appreciated securities that
would result in capital gains. Generally, if the market price of a purchased
stock in the Portfolio has underperformed by 10% or more from our tax cost,
we will consider selling the stock and taking a loss. This is a good
investment practice to preserve capital and it also makes sense with regard
to taxes.
3
<PAGE>
Capital Exchange Fund as of December 31, 1998
Management Discussion
Taking a limited loss by selling stock allows us to offset gains taken
elsewhere, thereby limiting or eliminating any yearly capital gains
distributions.
Selling an underperforming stock gives us a better perspective from which to
reevaluate both our original investment case and the company's current
fundamentals. Often, with emotion-driven volatility, we've had opportunities
to buy back a stock at a lower price than when we sold it. We generally want
to own stocks for a minimum of five years, so we can easily sit out of an
investment for 30 days. Our selling discipline helps keep the Fund in the
right investments at the right prices and add to the tax efficiency of our
results.
Q: What about a selling discipline for your "winners?"
A: As a rule, we try not to sell highly appreciated securities that would result
in capital gains. That said, if an individual stock grows to constitute too
large a portion of the Portfolio, or if there has been a deterioration in the
company's fundamentals, I will generally try to lower the Portfolio's
exposure to that stock. We make every effort to ensure that any gains are
taken from the most favorable tax lots. This is to minimize any annual
distributions to our shareholders.
Q: Earlier you referred to the Portfolio as more diversified than some of its
competitors. Would you elaborate?
A: Certainly. There are other funds that focus more on specific sectors and have
higher concentrations in individual stocks. However, we don't radically
overweight or underweight any particular sector, and our top holdings tend to
be less concentrated versus other funds. We view diversification as a partial
shock absorber. Equity investors must take some market risk in order to
participate in the higher returns equities can offer, but my mantra for this
Fund is "No unnecessary risks." We attempt to minimize our stock-specific and
sector-specific risks.
Our active management style is another factor that distinguishes this
Portfolio from passively managed index funds and other "momentum"-style
funds. A passive fund "automatically" buys securities based on market
capitalizations, without regard to fundamentals or prices. Active management
allows us to try to take advantage of market volatility, rather than become a
victim of it.
Q: What can you tell us about one of the Portfolio's top holdings, Automatic
Data Processing, Inc.?
A: This is a great example of a growth stock. We believe that over the long
haul, stock prices follow earnings. ADP has one of the best track records for
double-digit earnings growth, and we believe that the earnings stream will
continue to grow. As a long-term investor, that's exactly what we're looking
for. In addition, as a tax-conscious investor, we love this company because
we can use a buy-and-hold forever strategy. As long as the company's growth
continues, we will remain as investors. While the stock has done well, at
less than 2% of the Portfolio, I'm not yet worried about too much
stock-specific risk in Automatic Data, especially since its fundamentals have
remained on track.
Q: It seems there has been an increased awareness of tax-managed investing
lately. Why is that so?
A: Thinking about taxes is something people should do more than once or twice a
year. In many mutual funds, high equity returns over the past few years,
combined with an increase in momentum-driven, high-turnover portfolio
management, have produced enormous taxable distributions. Taxable investors
have seen huge tax bills drag down their actual mutual fund returns over the
past three or four years. This year could be even more interesting and
painful. It may be a lower-return year, but market volatility has led to a
lot more turnover in many funds, which may kick out high distributions
despite modest returns.
4
<PAGE>
Capital Exchange Fund as of December 31, 1998
Management Discussion
New mutual fund rating organizations have realized that the tax efficiency of
funds is very important to investors with assets outside of qualified plans.
The after-tax performance difference between a fund that is tax-efficient and
one that is not can be more than 2% per year. This may not sound like much,
but, compounded over a long period of time, the difference between losing 2%
in taxes every year versus deferring those taxes and allowing those returns
to compound tax-free, can be substantial.
Q: What is Eaton Vance's background in tax-managed investing?
A: Eaton Vance has incorporated the principles of tax-managed investing for
private clients for decades. We have been managing mutual funds that focus on
after-tax returns for over 30 years. There are several other tax-managed
funds starting up, but none have Eaton Vance's depth of experience in using
an active management, research-driven approach. Tax-Managed Growth Portfolio
is the largest pool of actively managed, tax-efficient mutual fund assets in
the industry. The principles of tax-efficient investing guide our general
investment approach for building wealth for our clients over a long period of
time: 1) having exposure to the equity market, which historically has
provided the highest inflation-adjusted returns; 2) holding on to companies
whose business and earnings can continue to grow; and 3) taking losses early
to preserve capital.
Q: What do you see happening in the year ahead?
A: Well, I can essentially repeat my comments from last year, when I predicted
somewhat lower equity returns in 1998 and more volatility in the stock
market. Historically high valuations and the dominance of many passive and
short-term investors in the market should ensure continued volatility. We
continue to anticipate a levelling off of equity market returns to the
historic average of 10% per year. It's important to remember that stock
prices will reflect the earnings power of individual companies, and
evaluating these earnings, not predicting markets, is our main focus.
We expect that downside earnings surprises will continue to play a role
through 1999, especially in certain industries as companies spend an
increasing amount to fix the Year 2000 computer problem. There are a number
of other potentially negative influences on corporate earnings that will
require constant monitoring by our research staff. Overall, we will aim to
keep the Portfolio's volatility low through its diversified structure and our
buy and sell disciplines.
Our entire research staff and I remain grateful to our fellow shareholders,
new and old, for their continued participation in Tax-Managed Growth
Portfolio. Those who purchased shares recently have had a bumpy few quarters.
As always, our goal is to make the best risk/reward investment decisions in
any market environment that we encounter. Long-term investing success takes
patience and persistence, and we are pleased that our shareholders have
placed their confidence in us to help them meet their objectives.
5
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Capital Exchange Fund as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1998
Assets
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Investment in Tax-Managed Growth Portfolio, at
value (identified cost, $108,590,857) $1,232,864,594
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Total assets $1,232,864,594
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Liabilities
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Payable for Fund shares redeemed $ 26,225
Payable to affiliate for Trustees' fees 4,162
Other accrued expenses 114,541
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Total liabilities $ 144,928
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Net Assets for 2,554,242 shares of beneficial
interest outstanding $1,232,719,666
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Sources of Net Assets
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Accumulated undistributed net realized gain from Portfolio
(computed on the basis of identified cost), less the
excess of cost of Fund shares redeemed over proceeds
from sales of Fund shares (including shares issued to
shareholders electing to receive payment of
distributions in Fund shares) $ 117,898,419
Federal tax on undistributed net realized
long-term capital gain, paid on behalf of
shareholders (9,452,490)
Net unrealized appreciation from Portfolio
(computed on the basis of identified cost) 1,124,273,737
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Total $1,232,719,666
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Net Asset Value and Redemption Price Per Share
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($1,232,719,666 / 2,554,242 shares of
beneficial interest outstanding) $ 482.62
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Statement of Operations
Period Ended Year Ended
Investment Income December 31, 1998/1/ October 31, 1998
- --------------------------------------------------------------------------------
Dividends allocated from Portfolio
(net of foreign taxes, $8,531
and $18,850, respectively) $ 529,565 $ 1,803,513
Interest allocated from Portfolio 171,839 366,423
Expenses allocated from Portfolio (318,981) (839,125)
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Net investment income from Portfolio $ 382,423 $ 1,330,811
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Expenses
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Trustees fees and expenses $ 1,188 $ 3,419
Custodian fee 44,784 18,452
Legal and accounting services 13,050 23,410
Transfer and dividend disbursing
agent fees 12,798 23,830
Printing and postage 8,667 15,602
Miscellaneous 1,899 521
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Total expenses $ 82,386 $ 85,234
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Net investment income $ 300,037 $ 1,245,577
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Realized and Unrealized Gain
(Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 1,462,965 $ 4,174,699
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Net realized gain $ 1,462,965 $ 4,174,699
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Change in unrealized
appreciation (depreciation)--
Investments $ 70,490,863 $19,737,202
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Net change in unrealized
appreciation (depreciation) $ 70,490,863 $19,737,202
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Net realized and unrealized gain $ 71,953,828 $23,911,901
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Net increase in net assets
from operations $ 72,253,865 $25,157,478
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/1/ For the two-month period ended December 31, 1998.
See notes to financial statements
6
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Capital Exchange Fund as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
Increase (Decrease) in Net Assets December 31, 1998(1) October 31, 1998 October 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations--
Net investment income $ 300,037 $ 1,245,577 $ 1,148,991
Net realized gain 1,462,965 4,174,699 13,334,601
Net change in unrealized appreciation (depreciation) 70,490,863 19,737,202 24,257,475
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 72,253,865 $ 25,157,478 $ 38,741,067
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Distributions to shareholders --
From net investment income $ (600,890) $ (1,128,567) $ (1,008,197)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders $ (600,890) $ (1,128,567) $ (1,008,197)
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Provision for federal tax on undistributed net realized
long-term gain $ -- $ -- $ (104,376)
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Transactions in shares of beneficial interest --
Issued in reorganization of Depositors, Diversification,
The Exchange Fund of Boston, Fiduciary Exchange, Second
Fiduciary Exchange and Vance Sanders Exchange Funds $ 993,844,081 $ -- $ --
Net asset value of shares issued to shareholders in payment
of distributions declared 532,597 286,965 250,139
Cost of shares redeemed (665,148) (7,318,503) (23,395,187)
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Net increase (decrease) in net assets from Fund share transactions $ 993,711,530 $ (7,031,538) $ (23,145,048)
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Net increase in net assets $ 1,065,364,505 $ 16,997,373 $ 14,483,446
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Net Assets
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At beginning of period $ 167,355,161 $ 150,357,788 $ 135,874,342
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At end of period $ 1,232,719,666 $ 167,355,161 $ 150,357,788
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Accumulated undistributed net
investment income
included in net assets
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At end of period $ -- $ 312,700 $ 195,690
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</TABLE>
(1) For the two-month period ended December 31, 1998.
See notes to financial statements
7
<PAGE>
Capital Exchange Fund as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
Period Ended ------------------------------------------------------------
December 31, 1998 (1) 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of period $ 426.610 $ 366.870 $ 280.570 $ 230.960 $ 176.610 $ 164.860
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Income (loss) from operations
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Net investment income $ 0.450 $ 3.120 $ 2.704 $ 2.562 $ 2.657 $ 2.521
Net realized and unrealized gain 56.802 59.420 86.191 49.548 56.480 11.869
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Total income from operations $ 57.252 $ 62.540 $ 88.895 $ 52.110 $ 59.137 $ 14.390
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Less distributions
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From net investment income $ (1.242) $ (2.800) $ (2.340) $ (2.500) $ (2.700) $ (2.490)
From net realized gain -- -- -- -- (0.025) (0.150)
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Total distributions $ (1.242) $ (2.800) $ (2.340) $ (2.500) $ (2.725) $ (2.640)
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Provision for federal tax on undistributed net
realized long-term gain $ -- $ -- $ (0.255) $ -- $ (2.062) $ --
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Net asset value -- End of period $ 482.620 $ 426.610 $ 366.870 $ 280.570 $ 230.960 $ 176.610
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(2) 13.43% 17.07% 31.79% 22.67% 32.56% 8.80%
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Ratios/Supplemental Data
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Net assets, end of period (000's omitted) $1,232,720 $ 167,355 $ 150,358 $ 135,874 $ 114,643 $ 91,289
Ratios (As a percentage of average daily net assets)
Expenses(3) 0.61%(4) 0.55% 0.64% 0.76% 0.76% 0.76%
Net investment income 0.45%(4) 0.75% 0.81% 1.01% 1.32% 1.49%
Portfolio Turnover(5) -- -- -- -- 2% 2%
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</TABLE>
(1) For the two-month period ended December 31, 1998.
(2) Total 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 reinvested at the
net asset value on the reinvestment date. Total return is not computed on an
annualized basis.
(3) Includes the Fund's share of its Portfolio's allocated expenses.
(4) Annualized.
(5) Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred 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
8
<PAGE>
Capital Exchange Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
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The Capital Exchange Fund (the Fund), formerly the Capital Exchange Fund,
Inc., is a diversified series of Eaton Vance Series 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 a diversified open-end management investment company. The Fund invests all
of its investable assets in interests of 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 net assets of the Portfolio (14.2% at December
31, 1998). 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 securities by the Portfolio is
discussed in Note 1A 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.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income and net
realized short-term capital gain. Accordingly, no provision for federal income
or excise tax is necessary. At December 31, 1998, the Fund, for federal income
tax purposes, had a capital loss carryover of $20,311,853 which will reduce
the taxable income arising from future net realized gain on investments, if
any, to the extent permitted by the Internal Revenue Code, and thus will
reduce the amount of distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for Federal income or excise
tax. Such capital loss carryover will expire on December 31, 2006
($18,669,165) and December 31, 2005 ($1,642,688). 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 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 Distributions to Shareholders
------------------------------------------------------------------------------
The Fund's policy is to distribute all or substantially all of the net
investment income allocated to the Fund by the Portfolio (less the Fund's
direct expenses). Distributions are paid in the form of additional shares of
the Fund or, at the election of the shareholder, in cash. 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
temporary over distributions 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. During the period ended
December 31, 1998, the Fund has reclassified amounts to reflect a decrease to
undistributed net investment income of $11,847, a decrease in accumulated net
realized gain of $1,462,965 and an increase in paid-in capital of $1,474,812
due to permanent differences between book and tax accounting for distributions
to shareholders.
9
<PAGE>
Capital Exchange Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
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:
Year Ended October 31,
Period Ended ----------------------
December 31, 1998(1) 1998 1997
------------------------------------------------------------------------------
Issued in reorganization of
Depositors, Diversification,
The Exchange Fund of Boston,
Fiduciary Exchange, Second
Fiduciary Exchange and Vance
Sanders Exchange Funds 2,162,273 -- --
Issued to shareholders electing
to receive payment of
distributions in Fund shares 1,156 691 762
Redemptions (1,474) (18,239) (75,204)
------------------------------------------------------------------------------
Net increase (decrease) 2,161,955 (17,548) (74,442)
------------------------------------------------------------------------------
(1) For the two-month period ended December 31, 1998.
4 Investment Transactions
------------------------------------------------------------------------------
Decreases in the Fund's investment in the Portfolio aggregated $3,611,536 and
$8,357,479, respectively, for the period from November 1, 1998 to December 31,
1998 and the year ended October 31, 1998, respectively. In addition,
investments were distributed in payment for Fund shares redeemed resulting in
capital gains, for book purposes, of $105,361 and $7,284,980, respectively,
for the period from November 1, 1998 to December 31, 1998 and the year ended
October 31, 1998, respectively.
5 Transactions with Affiliates
------------------------------------------------------------------------------
Eaton Vance Management (EVM) serves 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 for 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. Certain of the
officers and trustees of the Fund are officers and directors/trustees of the
above organizations.
6 Fund Reorganization
------------------------------------------------------------------------------
Effective November 1, 1998, the Fund changed its fiscal year-end to December
31. Effective on December 18, 1998, the Fund acquired the net assets of
Depositors Fund, Diversification Fund, The Exchange Fund of Boston, Fiduciary
Exchange Fund, Second Fiduciary Exchange Fund and Vance Sanders Exchange Fund,
pursuant to an Agreement and Plan of Reorganization dated October 19, 1998. In
accordance with the agreement, the Fund, at closing, issued shares as follows:
<TABLE>
<CAPTION>
Net asset
Aggregate value
Shares value of shares per
Fund issued issued share
----------------------------------------------------------------------------
<S> <C> <C> <C>
Depositors Fund 238,033 $109,407,203 $459.63
Diversification Fund 281,027 $129,168,519 $459.63
The Exchange Fund
of Boston 280,926 $129,121,906 $459.63
Fiduciary Exchange Fund 192,407 $ 88,434,566 $459.63
Second Fiduciary
Exchange Fund 275,340 $126,554,447 $459.63
Vance Sanders
Exchange Fund 894,540 $411,157,440 $459.63
</TABLE>
The transaction was structured for tax purposes to qualify as a tax free
reorganization under the Internal Revenue Code. The net assets acquired,
including unrealized appreciation at the date of the transaction, were as
follows:
Acquired Unrealized
Fund net assets appreciation
--------------------------------------------------------------------------
Depositors Fund $109,407,203 $105,065,477
Diversification Fund $129,168,519 $113,551,006
The Exchange Fund of Boston $129,121,906 $116,460,407
Fiduciary Exchange Fund $ 88,434,566 $ 79,600,603
Second Fiduciary Exchange Fund $126,554,447 $107,900,682
Vance Sanders Exchange Fund $411,157,440 $370,240,803
Directly after the merger, the combined net assets of the Fund was
$1,173,720,711 and the net asset value was $459.63.
10
<PAGE>
Capital Exchange Fund as of December 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of Capital Exchange Fund:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of Capital
Exchange Fund as of December 31, 1998, the related statements of operations for
the two-month period then ended and the year ended October 31, 1998, the
statements of changes in net assets for the two-month period ended December 31,
1998 and each of the two years ended October 31, 1998, and the financial
highlights for the two-month period ended December 31, 1998 and each of the
years in the five-year period ended October 31, 1998. 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. 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 Capital Exchange
Fund as of December 31, 1998, 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
February 12, 1999
11
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS
Common Stocks-- 94.7%
Security Shares Value
- --------------------------------------------------------------------------
Advertising and Marketing Services -- 2.6%
- --------------------------------------------------------------------------
ACNielsen Corp.(1) 45,668 $ 1,290,121
Advo, Inc.(1) 170,000 4,483,750
Harte-Hanks Communications, Inc. 144,604 4,121,214
Interpublic Group of Companies, Inc. 582,138 46,425,506
Omnicom Group, Inc. 2,298,418 133,308,243
R.H. Donelley Corp. 8,153 118,728
Snyder Communications, Inc.(1)(2) 442,500 14,929,397
Snyder Communications, Inc.(1)(2) 40,000 1,348,875
TMP Worldwide, Inc.(1) 43,000 1,806,000
True North Communications, Inc. 93,000 2,499,375
True North Communications, Inc.(2) 200,000 5,358,248
WPP Group PLC 488,000 2,969,626
Young and Rubicam, Inc.(1) 186,000 6,021,750
- --------------------------------------------------------------------------
$ 224,680,833
- --------------------------------------------------------------------------
Aerospace and Defense -- 0.2%
- --------------------------------------------------------------------------
Allied Signal, Inc. 25,000 $ 1,107,813
Boeing Company (The) 228,127 7,442,643
Raytheon Co., Class B 213,564 11,372,283
- --------------------------------------------------------------------------
$ 19,922,739
- --------------------------------------------------------------------------
Apparel & Textiles -- 0.0%
- --------------------------------------------------------------------------
Unifi, Inc. 50,000 $ 978,125
- --------------------------------------------------------------------------
$ 978,125
- --------------------------------------------------------------------------
Auto and Parts -- 0.9%
- --------------------------------------------------------------------------
Aftermarket Technology Corp.(1)(2) 46,000 $ 361,767
Borg-Warner Automotive, Inc. 225,000 12,557,813
DaimlerChrysler(1) 19,952 1,916,639
Ford Motor Co. 32,000 1,878,000
General Motors Corp. 3,969 284,032
Genuine Parts Co. 147,059 4,917,285
Harley-Davidson, Inc. 1,000 47,375
Magna International, Inc., Class A 875,000 54,250,000
Meritor Automotive, Inc. 61,133 1,295,255
SPX Corp.(1) 47,862 3,206,754
TRW, Inc. 2,000 112,375
- --------------------------------------------------------------------------
$ 80,827,295
- --------------------------------------------------------------------------
Banks - Money Center-- 0.1%
- --------------------------------------------------------------------------
Bank of Montreal 36,650 $ 1,470,581
Chase Manhattan Corp. 78,566 5,347,398
Morgan (J.P.) & Co., Inc. 1,000 105,063
National Westminster Bank PLC 8,753 1,037,231
- --------------------------------------------------------------------------
$ 7,960,273
- --------------------------------------------------------------------------
Banks - Regional -- 5.4%
- --------------------------------------------------------------------------
AmSouth Bancorporation 27,492 $ 1,254,323
Bank of Granite Corp. 22,500 621,563
Bank of New York Co., Inc. (The) 245,144 9,867,046
Bank One Corp. 839,254 42,854,407
Bank United Corp. 65,000 2,551,250
BankAmerica Corp. 611,569 36,770,586
BankBoston Corp. 1,502,000 58,484,125
BB&T Corp. 66,470 2,679,572
City National Corp. 100,000 4,162,500
Colonial Bancgroup, Inc. (The) 310,822 3,729,864
Comerica, Inc. 100,779 6,871,868
Community First Bancshares, Inc. 296,000 6,234,500
Community First Bancshares, Inc.(2) 72,000 1,514,604
Compass Bancshares, Inc. 171,112 6,512,951
Crestar Financial Corp. 83,348 6,001,056
Fifth Third Bancorp 126,710 9,036,007
First Citizens BancShares, Inc. 47,900 4,311,000
First Tennessee National Corp. 33,488 1,274,637
First Union Corp. 1,054,655 64,136,206
Fleet Financial Group, Inc. 114,972 5,137,811
Golden West Financial Corp. 7,000 641,813
Keycorp 422,594 13,523,008
Marshall and Ilsley Corp. 20,000 1,168,750
Mellon Bank Corp. 16,000 1,100,000
Mercantile Bancorporation, Inc. 168,462 7,770,310
National City Corp. 90,150 6,535,875
National Commerce Bancorporation(2) 159,632 3,002,076
Northern Trust Corp. 181,898 15,881,969
Old Kent Financial Corp. 33,000 1,534,500
PNC Bank Corp. 62,502 3,382,921
Regions Financial Corp. 49,300 1,987,406
Southwest Bancorporation of
Texas, Inc.(1) 7,688 137,423
Sovereign Bancorp., Inc. 366,000 5,215,500
Summit Bancorp. 21,000 917,438
SunTrust Banks, Inc. 480 36,720
See notes to financial statements
12
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Banks - Regional (continued)
- --------------------------------------------------------------------------
Synovus Financial 41,776 $ 1,018,290
U.S. Bancorp. 155,474 5,519,327
Union Planters Corp. 56,875 2,577,148
Valley National Bancorp. 230,863 6,507,451
Wachovia Corp. 37,199 3,252,588
Washington Mutual, Inc. 143,506 5,480,135
Wells Fargo & Co. 2,714,048 108,392,291
Westamerica Bancorporation 82,596 3,035,403
Zions Bancorporation 20,000 1,247,500
- --------------------------------------------------------------------------
$ 473,871,718
- --------------------------------------------------------------------------
Beverages -- 1.5%
- --------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 546,465 $ 35,861,766
Coca-Cola Company (The) 612,666 40,972,039
PepsiCo, Inc. 1,343,931 55,017,175
- --------------------------------------------------------------------------
$ 131,850,980
- --------------------------------------------------------------------------
Broadcasting and Cable -- 1.5%
- --------------------------------------------------------------------------
Clear Channel Communications, Inc.(1) 108,600 $ 5,918,700
Comcast Corp., Class A 62,500 3,667,969
Cox Communications, Inc., Class A(1) 193,319 13,363,176
Infinity Broadcasting Corp.(1) 34,500 944,438
Liberty Media Group, Class A(1) 91,828 4,229,827
MediaOne Group, Inc.(1) 1,259,024 59,174,128
Tele-Communications, Inc., Series
A(1) 546,073 30,204,663
Univision Communications, Inc.(1) 200,649 7,260,986
Univision Communications,
Inc.(1)(2) 183,556 6,634,130
- --------------------------------------------------------------------------
$ 131,398,017
- --------------------------------------------------------------------------
Building Materials and Tools -- 0.5%
- --------------------------------------------------------------------------
American Standard Companies, Inc.(1) 172,899 $ 6,224,364
CRH PLC 258,294 4,443,380
Interface, Inc. 484,412 4,495,973
Masco Corp. 228,662 6,574,033
Sherwin-Williams Co. (The) 44,670 1,312,181
Snap-On, Inc. 44,444 1,547,207
Valspar Corp. 620,000 23,133,750
Walter Industries, Inc.(1) 1,000 15,313
- --------------------------------------------------------------------------
$ 47,746,201
- --------------------------------------------------------------------------
Business Services - Miscellaneous -- 1.0%
- --------------------------------------------------------------------------
Cintas Corp. 131,244 $ 9,244,499
Corrections Corporation of
America(1) 97,310 1,715,089
Fair, Issac and Co., Inc. 88,828 4,102,743
Fair, Issac and Co., Inc.(2) 150,000 6,922,352
Half (Robert) International,
Inc.(1) 1,800 80,438
Manpower, Inc. 110,000 2,770,625
Metzler Group, Inc. (The)(1) 314,880 15,330,720
Metzler Group, Inc. (The)(1)(2) 273,312 13,291,353
Navigant International, Inc.(1) 59,631 458,413
Romac International, Inc.(1)(2) 45,546 1,013,061
ServiceMaster Co. 515,201 11,366,622
Staff Leasing, Inc.(1) 78,125 908,203
Staff Leasing, Inc.(1)(2) 78,125 906,992
Sylvan Learning Systems, Inc.(1) 509,469 15,538,805
Viad Corp. 40,314 1,224,538
- --------------------------------------------------------------------------
$ 84,874,453
- --------------------------------------------------------------------------
Chemicals -- 0.8%
- --------------------------------------------------------------------------
Bayer AG ADR 40,000 $ 1,670,348
Dow Chemical Co. (The) 21,318 1,938,606
DuPont (E.I.) de Nemours & Co. 223,800 11,875,388
Eastman Chemical Co. 123 5,504
Monsanto Co. 1,142,240 54,256,400
Octel Corp.(1) 8,322 115,468
Solutia, Inc. 200,336 4,482,518
- --------------------------------------------------------------------------
$ 74,344,232
- --------------------------------------------------------------------------
Communications Equipment -- 2.0%
- --------------------------------------------------------------------------
3Com Corp.(1) 902,883 $ 40,460,444
Ascend Communications, Inc.(1) 11,000 723,250
Comverse Technology, Inc.(1) 100,000 7,100,000
Dialogic Corp.(1) 80,000 1,572,504
General Cable Corp. 3,000 61,500
General Motors Corp., Class H(1) 300,000 11,906,250
L.M. Ericsson Telephone Co., ADR 452,000 10,819,750
Lucent Technologies, Inc. 19,369 2,130,590
Nokia Corp., Class A ADR 644,720 77,648,464
Northern Telecom Ltd. ADR 138,263 6,930,433
PairGain Technologies, Inc.(1) 350,581 2,695,091
Salient 3 Communications, Inc.,
Class A 78,125 712,891
Tellabs, Inc.(1) 151,623 10,395,652
- --------------------------------------------------------------------------
$ 173,156,819
- --------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Communications Services-- 1.9%
- --------------------------------------------------------------------------
Airtouch Communications, Inc.(1) 1,420 $ 102,418
Aliant Communications, Inc. 86,322 3,528,412
Alltel Corp. 54,746 3,274,520
American Tower Corp., Class A(1) 149,451 4,418,145
Ameritech Corp. 28,968 1,835,847
AT&T Corp. 71,617 5,389,179
Bell Atlantic Corp. 8,448 447,744
BellSouth Corp. 43,912 2,190,111
Citizens Utilities Corp., Class B(1) 45,311 368,154
Frontier Corp. 32,129 1,092,386
GTE Corp. 12,176 791,440
GTE Corp.(2) 17,500 1,128,021
Intermedia Communications, Inc.(1) 113,637 1,960,238
ITC Deltacom, Inc.(1)(2) 628,773 9,536,050
IXC Communications, Inc.(1) 135,000 4,539,375
MCI Worldcom, Inc.(1) 1,422,741 102,081,666
McLeodUSA, Inc.(1) 57,143 1,785,719
McLeodUSA, Inc.(1)(2) 36,000 1,124,625
Nextel Communications, Inc.,
Class A(1) 75,830 1,791,484
Premiere Technologies, Inc.(1) 28,000 206,500
SBC Communications, Inc. 10,437 559,684
Sprint Corp. 1,885 158,576
Sprint Corp. (PCS Group)(1) 942 21,784
Tel-Save Holdings, Inc.(1) 247,376 4,143,548
Telecom Corp. of New Zealand Ltd. ADR 8,000 285,500
Teleglobe, Inc. 88,500 3,186,000
Telephone & Data Systems, Inc. 131,756 5,920,785
US West, Inc. 26,551 1,715,858
Winstar Communications, Inc.(1) 11,424 445,536
- --------------------------------------------------------------------------
$ 164,029,305
- --------------------------------------------------------------------------
Computer Software -- 2.9%
- --------------------------------------------------------------------------
Aspect Development, Inc.(1)(2) 100,000 $ 4,417,439
Baan Co., NV ADR(1) 223,926 2,351,223
BMC Software, Inc.(1) 8,000 356,500
Boole and Babbage, Inc.(1) 40,000 1,177,500
Cadence Design Systems, Inc.(1) 506,000 15,053,500
Computer Associates
International, Inc. 854,500 36,423,063
Compuware Corp.(1) 1,400 109,375
CSG Systems International, Inc.(1) 20,558 1,624,082
HNC Software, Inc.(1) 329,814 13,336,854
HNC Software, Inc.(1)(2) 147,980 5,981,448
Intuit, Inc.(1) 285,917 20,728,983
Microsoft Corp.(1) 281,755 39,075,897
Oracle Corp.(1) 1,262,500 54,445,313
Parametric Technology Corp.(1) 94,600 1,537,250
PeopleSoft, Inc.(1) 354,174 6,707,170
Platinum Technology, Inc.(1) 155,000 2,964,375
Sapient Corp.(1) 323,876 18,137,056
Security Dynamics Technologies,
Inc.(1) 40,000 920,000
Siebel Systems, Inc.(1) 118,000 4,004,625
Siebel Systems, Inc.(1)(2) 300,000 10,149,518
Sterling Commerce, Inc.(1) 2,388 107,460
Structural Dynamics Research
Corp.(1) 675,000 13,415,625
Wind River Systems, Inc.(1) 21,622 1,016,234
Wind River Systems, Inc.(1)(2) 13,000 610,796
- --------------------------------------------------------------------------
$ 254,651,286
- --------------------------------------------------------------------------
Computers and Business Equipment -- 7.6%
- --------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 33,715 $ 282,363
Cisco Systems, Inc.(1) 1,026,251 95,248,920
Compaq Computer Corp. 38,490 1,614,174
Dell Computer Corp.(1) 3,800 278,113
Dell Computer Corp.(1)(2) 1,500,000 109,744,655
Dell Computer Corp.(1)(2) 150,512 10,999,533
EMC Corp.(1) 22,162 1,883,770
Fore Systems, Inc.(1) 222,250 4,069,953
Fore Systems, Inc.(1)(2) 38,466 703,528
Gateway 2000, Inc.(1)(2) 200,000 10,224,703
Gateway 2000, Inc.(1)(2) 200,000 10,190,578
Hewlett-Packard Co. 588,680 40,214,203
International Business Machines
Corp. 154,198 28,488,081
Lexmark International Group,
Inc.(1) 1,841,746 185,095,472
Seagate Technology, Inc.(1) 40,000 1,210,000
Sun Microsystems, Inc.(1) 3,500 299,688
Xerox Corp. 1,334,000 157,411,999
- --------------------------------------------------------------------------
$ 657,959,733
- --------------------------------------------------------------------------
Conglomerates -- 1.4%
- --------------------------------------------------------------------------
General Electric Co. 1,066,342 $ 108,833,529
General Electric Co.(2) 21,155 2,157,675
United Technologies Corp. 86,242 9,378,818
- --------------------------------------------------------------------------
$ 120,370,022
- --------------------------------------------------------------------------
See notes to financial statements
14
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- -------------------------------------------------------------------------
Consumer Services -- 0.3%
- -------------------------------------------------------------------------
Block (H&R), Inc. 366,177 $ 16,477,965
Cendant Corp.(1) 187,999 3,583,731
Service Corp. International 130,389 4,962,931
Stewart Enterprises, Inc. 153,992 3,426,322
- --------------------------------------------------------------------------
$ 28,450,949
- --------------------------------------------------------------------------
Containers and Packaging -- 0.2%
- --------------------------------------------------------------------------
Sealed Air Corp.(1) 325,000 $ 16,595,313
Sonoco Products Co. 78,571 2,327,666
- --------------------------------------------------------------------------
$ 18,922,979
- --------------------------------------------------------------------------
Distribution Services -- 1.6%
- --------------------------------------------------------------------------
Airgas, Inc.(1) 536,219 $ 4,792,457
Cardinal Health, Inc. 747,356 56,705,637
School Specialty, Inc.(1) 66,257 1,416,234
Sysco Corp. 1,766,922 48,479,922
U.S. Foodservice, Inc.(1) 505,489 24,768,961
U.S. Foodservice, Inc.(1)(2) 66,438 3,252,749
US Office Products Co.(1) 149,077 577,674
Wilmar Industries, Inc.(1) 50,000 1,015,625
- --------------------------------------------------------------------------
$ 141,009,259
- --------------------------------------------------------------------------
Drugs -- 9.3%
- --------------------------------------------------------------------------
Abbott Laboratories 1,208,935 $ 59,237,814
Agouron Pharmaceuticals, Inc.(1) 355,077 20,860,774
Allergan, Inc. 50,000 3,237,500
American Home Products Corp. 4,600 259,038
Amgen, Inc.(1) 405,532 42,403,440
Astra AB, Class A 1,074,400 21,937,207
Astra AB, Class B ADR 160,000 3,310,000
Bristol-Myers Squibb Co. 383,255 51,284,310
Covance, Inc.(1) 81,250 2,366,406
Elan Corp., PLC ADR(1) 339,630 23,625,512
Genentech, Inc.(1) 80,000 6,375,000
Genzyme Corp., Class A(1) 970,000 48,257,500
Incyte Pharmaceuticals, Inc.(1)(2) 577,571 21,582,639
Incyte Pharmaceuticals, Inc.(1) 150,856 5,638,243
Incyte Pharmaceuticals, Inc.(1)(2) 328,053 12,257,303
Lilly (Eli) & Co. 825,448 73,361,690
Merck & Co., Inc. 597,415 88,230,727
Parexel International Corp.(1) 35,000 875,000
Pfizer, Inc. 881,021 110,513,071
Quintiles Transnational Corp.(1) 195,420 10,430,543
Schering-Plough Corp. 643,784 35,569,066
Sepracor, Inc.(1) 440,000 38,775,000
SmithKline Beecham PLC ADR 301,940 20,984,830
Teva Pharmaceutical Industries
Ltd. ADR(2) 100,000 4,065,834
Vertex Pharmaceuticals, Inc.(1) 35,000 1,041,250
Warner-Lambert Co. 716,032 53,836,656
Watson Pharmaceuticals, Inc.(1) 599,550 37,696,706
Watson Pharmaceuticals, Inc.(1)(2) 122,888 7,720,144
- --------------------------------------------------------------------------
$ 805,733,203
- --------------------------------------------------------------------------
Electric Utilities -- 0.2%
- --------------------------------------------------------------------------
Central and South West Corp. 1,600 $ 43,900
Dominion Resources, Inc. 28,938 1,352,852
Duke Energy Corp. 1,800 115,313
New England Electric System 2,700 129,938
Teco Energy, Inc. 40,000 1,127,500
Texas Utilities Co. 250,196 11,681,026
- --------------------------------------------------------------------------
$ 14,450,529
- --------------------------------------------------------------------------
Electrical Equipment -- 0.5%
- --------------------------------------------------------------------------
American Power Conversion Corp.(1) 200,000 $ 9,687,500
AMP, Inc. 112,340 5,848,701
Emerson Electric Co. 159,148 9,628,454
Molex, Inc., Class A 90,066 2,870,854
Rockwell International Corp. 183,400 8,906,363
Sanmina Corp.(1)(2) 150,000 9,363,281
Thomas and Betts Corp. 22,963 994,585
- --------------------------------------------------------------------------
$ 47,299,738
- --------------------------------------------------------------------------
Electronics - Instruments -- 0.2%
- --------------------------------------------------------------------------
Dionex Corp.(1) 362,140 $ 13,263,378
Dionex Corp.(1)(2) 40,000 1,460,434
Waters Corp.(1) 29,580 2,580,855
X-Rite, Inc. 310,000 2,402,500
X-Rite, Inc.(2) 118,000 914,195
- --------------------------------------------------------------------------
$ 20,621,362
- --------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Electronics - Semiconductors -- 2.6%
- --------------------------------------------------------------------------
Altera Corp.(1) 3,600 $ 219,150
Analog Devices, Inc.(1) 1,630,000 51,141,250
Burr-Brown Corp.(1) 600,000 14,062,500
Intel Corp. 857,173 101,628,573
KLA-Tencor Corp.(1) 36,000 1,561,500
Lam Research Corp.(1) 106,000 1,888,125
Level One Communications, Inc.(1) 31,129 1,105,080
Linear Technologies Corp. 66,000 5,911,125
Maxim Integrated Products
Co.(1)(2) 20,664 895,311
Maxim Intergrated Products Co.(1) 40,000 1,747,500
Motorola, Inc. 137,188 8,377,042
National Semiconductor Corp.(1) 79,368 1,071,468
Smart Modular Technologies,
Inc.(1) 60,000 1,665,000
Speedfam International, Inc.(1) 221,000 3,784,625
Texas Instruments, Inc. 337,948 28,915,676
Ultratech Stepper, Inc.(1) 245,129 3,922,064
Uniphase Corp.(1)(2) 25,932 1,798,433
- --------------------------------------------------------------------------
$ 229,694,422
- --------------------------------------------------------------------------
Engineering and Construction -- 0.1%
- --------------------------------------------------------------------------
Jacobs Engineering Group, Inc.(1) 162,455 $ 6,620,041
- --------------------------------------------------------------------------
$ 6,620,041
- --------------------------------------------------------------------------
Entertainment -- 0.6%
- --------------------------------------------------------------------------
Callaway Golf Co.(2) 35,715 $ 365,932
Disney (Walt) Co. 79,800 2,394,000
Fox Entertainment Group, Inc.(1) 275,500 6,939,156
Mattel, Inc. 20,995 478,948
Time Warner Inc.(2) 62,418 3,866,069
Time Warner Inc. 501,368 31,116,152
Viacom, Inc., Class A(1) 10,727 789,105
Viacom, Inc., Class B(1) 80,105 5,927,770
Westwood One(1)(2) 61,200 1,860,782
- --------------------------------------------------------------------------
$ 53,737,914
- --------------------------------------------------------------------------
Environmental Services -- 0.7%
- --------------------------------------------------------------------------
Allied Waste Industries, Inc.(1) 375,000 $ 8,859,375
Browning-Ferris Industries, Inc. 423,906 12,054,827
Eastern Environmental Services(1) 83,552 2,475,228
U.S. Filter Corp.(1) 160,412 3,669,425
Waste Management, Inc. 741,981 34,594,864
- --------------------------------------------------------------------------
$ 61,653,719
- --------------------------------------------------------------------------
Financial Services - Miscellaneous -- 3.4%
- --------------------------------------------------------------------------
American Express Co. 616,648 $ 63,052,257
Associates First Capital Corp. 600,000 25,425,000
Capital One Financial Corp. 73,411 8,442,265
Citigroup 1,395,960 69,100,019
Fannie Mae 940,805 69,619,569
FirstPlus Financial Group, Inc.(1) 120,000 330,000
Freddie Mac 352,900 22,739,994
Household International, Inc. 339,293 13,444,485
Providian Financial Corp. 266,261 19,969,538
- --------------------------------------------------------------------------
$ 292,123,127
- --------------------------------------------------------------------------
Foods -- 3.4%
- --------------------------------------------------------------------------
Archer-Daniels-Midland Co. 143,775 $ 2,471,133
Bestfoods 22,400 1,192,800
Conagra, Inc. 326,199 10,275,269
Dean Foods Co. 150,944 6,160,402
Flowers Industries, Inc. 435,781 10,431,508
General Mills, Inc. 24,850 1,932,088
Keebler Food Products Co.(1) 40,000 1,505,000
Keebler Food Products Co.(1)(2) 31,480 1,180,744
Kellogg Co. 69,714 2,378,990
McCormick & Co., Inc. 623,058 21,067,149
Nabisco Holdings Corp., Class A 100,000 4,150,000
Pioneer Hi-Bred International, Inc. 952,171 25,708,617
Quaker Oats Co. (The) 39,942 2,376,549
Ralston Purina Group 74,659 2,417,085
Riviana Foods, Inc. 150,000 3,703,125
Riviana Foods, Inc.(2) 100,000 2,465,664
Sara Lee Corp. 1,155,944 32,583,172
Tyson Food, Inc. 870,276 18,493,365
Unilever ADR 1,652,000 137,012,749
Wrigley (Wm.) Jr. Co. 113,180 10,136,684
- --------------------------------------------------------------------------
$ 297,642,093
- --------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Furniture and Appliances -- 0.5%
- --------------------------------------------------------------------------
HON Industries, Inc. 1,135,488 $ 27,180,744
HON Industries, Inc.(2) 134,930 3,228,810
Leggett & Platt, Inc. 298,328 6,563,216
Miller (Herman), Inc. 120,000 3,225,000
- --------------------------------------------------------------------------
$ 40,197,770
- --------------------------------------------------------------------------
Health Services -- 0.7%
- --------------------------------------------------------------------------
Aetna, Inc. 59,821 $ 4,703,426
Beverly Enterprises, Inc.(1) 357,143 2,410,715
Concentra Managed Care, Inc.(1) 410,257 4,384,622
FPA Medical Management, Inc.(1)(3) 315,000 3,150
Genesis Health Ventures, Inc.(1) 4,000 35,000
Health Management Associates,
Inc., Class A(1) 361,170 7,810,301
HealthSouth Corp.(1) 146,000 2,253,875
Integrated Health Services, Inc. 50,000 706,250
Magellan Health Services, Inc.(1) 50,000 418,750
MedPartners, Inc.(1) 17,696 92,904
Omnicare, Inc. 25,650 891,338
Orthodontic Centers of America,
Inc.(1) 100,000 1,943,750
Pacificare Health Systems, Inc.,
Class B(1) 19,500 1,550,250
PhyCor, Inc.(1) 312,500 2,128,906
Quest Diagnostics, Inc.(1) 15,625 278,320
Quorum Health Group, Inc.(1) 55,733 721,046
Renal Care Group, Inc.(1) 175,282 5,050,313
Renal Care Group, Inc.(1)(2) 196,225 5,646,195
Response Oncology, Inc.(1) 44,761 181,842
Sunrise Assisted Living, Inc.(1) 210,000 10,893,750
Sunrise Assisted Living,
Inc.(1)(2) 140,000 7,259,232
United HealthCare Corp. 20,000 861,250
Vencor, Inc.(1) 25,600 115,200
- --------------------------------------------------------------------------
$ 60,340,385
- --------------------------------------------------------------------------
Household Products -- 2.7%
- --------------------------------------------------------------------------
Avon Products, Inc. 8,700 $ 384,975
Blyth Industries, Inc.(1) 522,000 16,312,500
Blyth Industries, Inc.(1)(2) 40,000 1,249,583
Blyth Industries, Inc.(1)(2) 20,000 624,167
Colgate-Palmolive Co. 54,337 5,046,549
Fortune Brands, Inc. 67,500 2,134,688
Gillette Co. 2,632,556 127,185,361
Helen of Troy Ltd.(1) 65,000 954,688
Kimberly-Clark Corp. 551,168 30,038,656
Procter & Gamble Co. 410,462 37,480,311
Rubbermaid, Inc. 463,920 14,584,485
- --------------------------------------------------------------------------
$ 235,995,963
- --------------------------------------------------------------------------
Industrial Equipment -- 0.7%
- --------------------------------------------------------------------------
Dover Corp. 355,445 $ 13,018,173
DT Industries, Inc. 37,728 594,216
Federal Signal Corp. 283,471 7,760,019
Illinois Tool Works, Inc. 169,010 9,802,580
Parker-Hannifin Corp. 150,898 4,941,910
Regal Beloit Corp. 265,000 6,095,000
Tecumseh Products Co., Class A 156,420 7,293,083
Tyco International Ltd. 98,730 7,447,944
- --------------------------------------------------------------------------
$ 56,952,925
- --------------------------------------------------------------------------
Information Services -- 4.7%
- --------------------------------------------------------------------------
Acxiom Corp.(1) 407,088 $ 12,619,728
America Online, Inc.(1) 21,600 3,456,000
At Home Corp., Series A(1)(2) 20,291 1,478,584
At Home Corp., Series A(1)(2) 100,000 7,373,953
Automatic Data Processing, Inc. 1,856,243 148,847,485
Aztec Technology Partners(1) 119,262 432,324
Bell and Howell Co.(1) 115,000 4,348,438
BISYS Group, Inc. (The)(1) 53,873 2,781,194
Ceridian Corp.(1) 90,500 6,318,031
Computer Sciences Corp. 650,202 41,897,391
DST Systems, Inc.(1)(2) 93,000 5,302,390
Dun and Bradstreet Corp. (The) 40,768 1,286,740
Electronic Data Systems Corp. 155,000 7,788,750
Equifax, Inc. 40,000 1,367,500
First Data Corp. 282,761 8,959,989
HBO and Co. 27,599 791,746
IDX Systems Corp.(1)(2) 35,000 1,538,717
IDX Systems Corp.(1)(2) 25,000 1,096,572
IMS Health, Inc. 249,006 18,784,390
Lason, Inc.(1)(2) 165,000 9,597,737
Lason, Inc.(1)(2) 190,000 11,040,884
National Data Corp. 81,333 3,959,900
Nielsen Media Research 83,002 1,494,036
Nova Corp.(1) 75,758 2,627,856
Paychex, Inc. 87,976 4,525,266
See notes to financial statements
17
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Information Services (continued)
- --------------------------------------------------------------------------
Reuters Holdings PLC ADR 273,945 $ 17,361,264
Reynolds & Reynolds, Inc., Class A 235,989 5,412,998
Saville Systems PLC ADR(1) 320,000 6,080,000
Saville Systems PLC ADR(1)(2) 99,197 1,882,387
Saville Systems PLC ADR(1)(2) 297 5,635
SunGard Data Systems, Inc.(1) 1,732,319 68,751,409
- --------------------------------------------------------------------------
$ 409,209,294
- --------------------------------------------------------------------------
Insurance -- 6.6%
- --------------------------------------------------------------------------
20th Century Industries 70,700 $ 1,639,356
Aegon, N.V. ADR 96,504 11,797,614
Allmerica Financial Corp. 1,500 86,813
Allstate Corp. (The) 170,416 6,582,318
American General Corp. 91,153 7,109,934
American International Group, Inc. 427,911 41,346,901
AON Corp. 78,949 4,371,801
Berkshire Hathaway, Inc., Class A(1) 80 5,600,000
Berkshire Hathaway, Inc., Class
B(1) 38,078 89,482,900
Chubb Corp. 101,050 6,555,619
Conseco, Inc.(2) 100,000 3,052,175
Delphi Financial Group, Inc.(1) 40,800 2,139,450
Gallagher (A.J.) and Co. 35,000 1,544,375
HSB Group, Inc. 75,000 3,079,688
Jefferson-Pilot Corp. 38,267 2,870,025
Kansas City Life Insurance Co. 35,400 2,893,950
Lab Holdings, Inc. 35,960 629,300
Marsh & McLennan Cos., Inc. 2,138,866 124,989,981
Mercury General Corp. 2,000 87,625
Mutual Risk Management Ltd. 1,043,500 40,826,938
Progressive Corp. 190,000 32,181,250
Protective Life Corp. 64,346 2,561,775
Safeco Corp. 12,122 520,488
St. Paul Cos., Inc. (The) 275,532 9,574,737
SunAmerica, Inc. 1,810,644 146,888,494
Torchmark Corp. 222,850 7,869,391
Transamerica Corp. 52,304 6,041,112
UICI(1) 57,257 1,402,797
UICI(1) 180,000 4,410,000
UNUM Corp. 152,200 8,884,675
- --------------------------------------------------------------------------
$ 577,021,482
- --------------------------------------------------------------------------
Investment Services -- 0.7%
- --------------------------------------------------------------------------
E*Trade Group, Inc.(1)(2) 100,000 $ 4,634,268
Merrill Lynch & Co., Inc. 349,756 23,346,213
Morgan Stanley Dean Witter & Co. 300,431 21,330,601
Morgan Stanley Dean Witter &
Co.(2) 52,000 3,687,385
Price (T. Rowe) Associates, Inc. 86,716 2,970,023
Schwab (Charles) and Co., Inc. 66,750 3,750,516
Waddell & Reed Financial, Inc.,
Class A 12,680 300,358
Waddell & Reed Financial, Inc.,
Class B 54,575 1,268,869
- --------------------------------------------------------------------------
$ 61,288,233
- --------------------------------------------------------------------------
Lodging and Gaming -- 0.2%
- --------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.(2) 500,000 $ 18,433,400
Sunterra Corp.(1)(2) 50,000 749,188
- --------------------------------------------------------------------------
$ 19,182,588
- --------------------------------------------------------------------------
Medical Products -- 5.8%
- --------------------------------------------------------------------------
Allegiance Corp. 45,322 $ 2,113,138
Ballard Medical Products 519,966 12,641,673
Bausch & Lomb, Inc. 115,804 6,948,240
Baxter International, Inc. 1,266,028 81,421,425
Becton, Dickinson and Co. 7,265 310,125
Becton, Dickinson and Co.(2) 28,980 1,236,589
Boston Scientific Corp.(1) 1,979,700 53,080,706
Dentsply International, Inc. 42,000 1,081,500
ESC Medical Systems Ltd.(1) 30,000 315,000
ESC Medical Systems Ltd.(1)(2) 150,000 1,571,063
Guidant Corp. 100,000 11,025,000
Heartport, Inc.(1) 41,026 241,028
Hillenbrand Industries, Inc. 647,898 36,849,199
Johnson & Johnson Co. 1,575,542 132,148,584
Medtronics, Inc. 1,086,048 80,639,063
Schein (Henry) Corp.(1)(2) 271,494 12,100,759
Schein (Henry), Corp.(1) 555,700 24,867,575
Schein (Henry), Corp.(1)(2) 17,000 759,799
Schein (Henry), Corp.(1)(2) 281,000 12,557,984
Sofamor Danek Group, Inc.(1) 223,000 27,150,250
St. Jude Medical, Inc.(1) 42,144 1,166,862
Steris Corp.(1) 78,394 2,229,329
- --------------------------------------------------------------------------
$ 502,454,891
- --------------------------------------------------------------------------
See notes to financial statements
18
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Metals - Gold -- 0.0%
- --------------------------------------------------------------------------
Freeport-McMoran Copper & Gold, Inc. 6,000 $ 62,625
- --------------------------------------------------------------------------
$ 62,625
- --------------------------------------------------------------------------
Metals - Industrial -- 0.0%
- --------------------------------------------------------------------------
Cyprus Amax Minerals Co. 20,950 $ 209,500
Nucor Corp.(2) 22,648 979,199
- --------------------------------------------------------------------------
$ 1,188,699
- --------------------------------------------------------------------------
Minerals and Fertilizer -- 0.0%
- --------------------------------------------------------------------------
Mississippi Chemical Corp. 272,180 $ 3,810,520
- --------------------------------------------------------------------------
$ 3,810,520
- --------------------------------------------------------------------------
Natural Gas Distribution -- 0.1%
- --------------------------------------------------------------------------
Columbia Energy Group 1 $ 29
Dynegy, Inc. 290,000 3,171,875
KN Energy, Inc. 20,000 727,500
National Fuel Gas Co. 2,000 90,375
Sonat, Inc. 107,200 2,901,100
- --------------------------------------------------------------------------
$ 6,890,879
- --------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 1.1%
- --------------------------------------------------------------------------
Baker Hughes, Inc. 739,234 $ 13,075,201
Core Laboratories(1)(2) 560,000 10,668,767
Halliburton Co. 1,501,550 44,483,419
National-Oilwell, Inc.(1) 50,000 559,375
National-Oilwell, Inc.(1)(2) 416,400 4,652,264
Newpark Resources, Inc.(1) 110,000 749,375
Noble Drilling, Inc.(1) 170,000 2,199,375
Patterson Energy, Inc.(1) 200,000 812,500
Schlumberger Ltd. 367,470 16,949,554
Syntroleum Corp.(1) 2,735 16,923
Weatherford International(1) 56,750 1,099,531
- --------------------------------------------------------------------------
$ 95,266,284
- --------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 1.0%
- --------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,204,000 $ 68,048,499
Apache Corp. 127,003 3,214,763
Burlington Resources, Inc. 119,335 4,273,685
El Paso Energy Corp. 45,000 1,566,563
Oryx Energy Co.(1) 369,103 4,959,822
Triton Energy, Ltd.(1) 700 5,556
Union Pacific Resources Group, Inc. 79,795 723,142
USX-Marathon Group 50,005 1,506,401
- --------------------------------------------------------------------------
$ 84,298,431
- --------------------------------------------------------------------------
Oil and Gas - Integrated -- 1.2%
- --------------------------------------------------------------------------
Amoco Corp. 299,345 $ 17,661,355
Atlantic Richfield Co. 41,766 2,725,232
British Petroleum Co. PLC ADR 512 48,640
Chevron Corp. 55,600 4,611,325
Exxon Corp. 222,963 16,304,169
Mobil Corp. 450,645 39,262,446
Murphy Oil Corp. 29,700 1,225,125
Pennzoil-Quaker State Co. 74,458 1,102,907
Royal Dutch Petroleum Co. 33,417 1,599,839
Texaco, Inc. 700 37,013
Tosco Corp.(2) 314,619 8,138,053
Tosco Corp.(2) 300,000 7,738,307
- --------------------------------------------------------------------------
$ 100,454,411
- --------------------------------------------------------------------------
Paper and Forest Products -- 0.6%
- --------------------------------------------------------------------------
Caraustar Industries, Inc. 224,961 $ 6,425,449
Champion International Corp. 20,203 818,222
Fort James Corp. 56,401 2,256,040
Georgia-Pacific Corp. - G-P Group 305,098 17,867,302
Georgia-Pacific Corp. - G-P
Group(2) 14,133 826,974
Georgia-Pacific Corp. - Timber Group 305,098 7,265,146
Louisiana Pacific Corp. 55,364 1,013,853
Mead Corporation (The) 38,768 1,136,387
Union Camp Corp. 80,309 5,420,858
Weyerhaeuser Co. 101,205 5,142,479
Willamette Industries, Inc. 53,000 1,775,500
- --------------------------------------------------------------------------
$ 49,948,210
- --------------------------------------------------------------------------
Photography -- 0.1%
- --------------------------------------------------------------------------
Eastman Kodak Co. 64,225 $ 4,624,200
- --------------------------------------------------------------------------
$ 4,624,200
- --------------------------------------------------------------------------
See notes to financial statements
19
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Printing and Business Products -- 0.7%
- --------------------------------------------------------------------------
American Business Products, Inc. 261,355 $ 6,141,843
Avery Dennison Corp. 803,004 36,185,368
Bowne & Co., Inc. 172,640 3,085,940
Consolidated Graphics, Inc.(1) 35,064 2,369,012
Consolidated Graphics, Inc.(1)(2) 35,151 2,367,488
Consolidated Graphics, Inc.(1)(2) 35,977 2,424,571
Corporate Express, Inc.(1) 92,486 479,771
Danka Business Systems, PLC ADR 1,000 4,188
Deluxe Corp. 80,675 2,949,680
Donnelley (R.R.) & Sons Co. 32,896 1,441,256
Harland (John H.) Co. 51,540 814,976
Ikon Office Solutions, Inc. 115,500 988,969
Workflow Management, Inc.(1) 79,508 526,740
- --------------------------------------------------------------------------
$ 59,779,802
- --------------------------------------------------------------------------
Publishing -- 1.2%
- --------------------------------------------------------------------------
Belo (A.H.) Corp. 110,220 $ 2,197,511
Dow Jones & Co., Inc. 376,300 18,109,438
Gannett Co., Inc. 280,900 18,118,050
Houghton Mifflin Co. 97,400 4,602,150
McGraw-Hill Companies, Inc. (The) 455,608 46,415,065
Meredith Corp. 190,000 7,196,250
The MacClatchy Co., Class A 48,066 1,700,335
Times Mirror Co., Class A 151,670 8,493,520
- --------------------------------------------------------------------------
$ 106,832,319
- --------------------------------------------------------------------------
Real Estate -- 0.5%
- --------------------------------------------------------------------------
Avalonbay Communities, Inc. 55,000 $ 1,883,750
Catellus Development Corp.(1) 290,000 4,150,625
Equity Office Properties Trust 2,812 67,488
Grubb and Ellis Co.(1)(2) 100,000 805,242
LaSalle Partners, Inc.(1)(2) 213,193 6,273,777
Patriot America Hospitality, Inc. 132,212 793,272
Redwood Trust, Inc. 71,710 1,003,940
Rouse Co. (The) 127,700 3,511,750
Trammell Crow Co.(1)(2) 876,098 24,500,081
Ventas, Inc.(1) 25,600 312,000
- --------------------------------------------------------------------------
$ 43,301,925
- --------------------------------------------------------------------------
Restaurants -- 1.1%
- --------------------------------------------------------------------------
Bob Evans Farms, Inc. 48,193 $ 1,256,030
Boston Chicken, Inc.(1)(3) 38,500 385
Brinker International, Inc.(1) 435,034 12,561,607
CKE Restaurants, Inc.(2) 110,000 3,237,046
CKE Restaurants, Inc.(2) 11,000 323,381
Lone Star Steakhouse and Saloon,
Inc.(1) 145,981 1,341,200
Lone Star Steakhouse and Saloon,
Inc.(1)(2) 200,000 1,835,203
McDonald's Corp. 270,607 20,735,261
Outback Steakhouse, Inc.(1) 77,101 3,074,402
Outback Steakhouse, Inc.(1)(2) 130,181 5,184,479
Outback Steakhouse, Inc.(1)(2) 250,000 9,955,458
Papa John's International, Inc.(1) 25,807 1,138,734
Papa John's International,
Inc.(1)(2) 51,744 2,280,350
Sonic Corp.(1)(2) 47,338 1,176,061
Starbucks Corp.(1) 342,000 19,194,750
Tricon Global Restaurants, Inc.(1) 175,767 8,810,321
- --------------------------------------------------------------------------
$ 92,104,668
- --------------------------------------------------------------------------
Retail - Food and Drug -- 4.6%
- --------------------------------------------------------------------------
Albertson's, Inc. 2,340,219 $ 149,042,697
Albertson's, Inc.(2) 10,000 634,890
CVS Corp. 2,176,571 119,711,404
General Nutrition Companies, Inc.(1) 44,460 722,475
Hannaford Brothers Co. 30,849 1,634,997
Kroger Co. (The)(1) 22,800 1,379,400
Rite Aid Corp. 6,000 297,375
Safeway, Inc.(1) 1,777,501 108,316,466
Walgreen Co. 13,750 805,234
Whole Foods Market, Inc.(1) 90,000 4,353,750
Winn-Dixie Stores, Inc. 320,221 14,369,917
- --------------------------------------------------------------------------
$ 401,268,605
- --------------------------------------------------------------------------
Retail - General -- 1.8%
- --------------------------------------------------------------------------
99 Cents Only Stores(1)(2) 428,337 $ 21,033,989
Casey's General Stores, Inc.(2) 75,000 976,529
Department 56, Inc.(1) 190,000 7,136,875
Department 56, Inc.(1)(2) 29,404 1,101,045
Dollar General Corp. 25,625 605,391
Dollar Tree Stores, Inc.(1) 292,500 12,778,594
Dollar Tree Stores, Inc.(1)(2) 247,792 10,821,805
Harcourt General, Inc. 216,416 11,510,626
May Department Stores Co. (The) 104,258 6,294,577
Nordstrom, Inc. 27,610 957,722
Penney (J.C.) Company, Inc. 1,117,673 52,390,922
See notes to financial statements
20
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------
Retail - General (continued)
- --------------------------------------------------------------------------
Wal-Mart Stores, Inc. 428,060 $ 34,860,136
- --------------------------------------------------------------------------
$ 160,468,211
- --------------------------------------------------------------------------
Retail - Specialty and Apparel -- 2.8%
- --------------------------------------------------------------------------
Abercrombie and Fitch Co., Class A(1) 2,802 $ 198,242
Burlington Coat Factory Warehouse
Corp. 543,600 8,867,475
Home Depot, Inc. (The) 2,517,746 154,054,582
Limited, Inc. (The) 205,000 5,970,625
Lowe's Companies 60,000 3,071,250
Office Depot, Inc.(1) 140,000 5,171,250
OfficeMax, Inc.(1) 672,867 8,242,621
Pep Boys - Manny, Moe & Jack (The) 35,476 556,530
Pep Boys - Manny, Moe & Jack
(The)(2) 62,500 980,142
Pier 1 Imports, Inc.(2) 150,000 1,451,914
Pier 1 Imports, Inc.(2) 75,000 725,654
Pier 1 Imports, Inc.(2) 125,000 1,207,163
Republic Industries, Inc.(1) 2,719,023 40,105,589
Staples, Inc.(1) 150,000 6,553,125
Tandy Corp. 60,000 2,471,250
Tiffany and Co. 22,000 1,141,250
TJX Companies, Inc. (The) 50,000 1,450,000
Toys "R" Us, Inc.(1) 73,255 1,236,178
- --------------------------------------------------------------------------
$ 243,454,840
- --------------------------------------------------------------------------
Specialty Chemicals and Materials -- 1.3%
- --------------------------------------------------------------------------
Corning, Inc. 130,000 $ 5,850,000
Dexter Corp. (The) 36,139 1,136,120
Ecolab, Inc. 2,063,536 74,674,208
International Flavors &
Fragrances, Inc. 148,101 6,544,213
International Specialty Products,
Inc.(1) 59,000 800,188
MacDermid, Inc. 30,000 1,173,750
Millipore Corp. 101,440 2,884,700
Minnesota Mining & Manufacturing Co. 42,731 3,039,242
Morton International, Inc. 34,000 833,000
Nalco Chemical Co. 224,852 6,970,412
Pall Corp. 216,000 5,467,500
RPM, Inc. 70,138 1,122,208
- --------------------------------------------------------------------------
$ 110,495,541
- --------------------------------------------------------------------------
Tobacco-- 0.2%
- --------------------------------------------------------------------------
Philip Morris Cos., Inc. 249,706 $ 13,359,271
- --------------------------------------------------------------------------
$ 13,359,271
- --------------------------------------------------------------------------
Transportation -- 0.4%
- --------------------------------------------------------------------------
Arnold Industries, Inc. 148,543 $ 2,395,256
Burlington Northern Santa Fe Corp. 188,799 6,371,966
Coach USA, Inc.(1) 168,889 5,858,337
Coach USA, Inc.(1)(2) 185,676 6,438,704
FDX Corp.(1) 93,723 8,341,347
Heartland Express, Inc.(1) 250,000 4,375,000
Union Pacific Corp. 92,081 4,149,400
- --------------------------------------------------------------------------
$ 37,930,010
- --------------------------------------------------------------------------
Trucks and Parts -- 0.0%
- --------------------------------------------------------------------------
Paccar, Inc. 46,602 $ 1,916,507
- --------------------------------------------------------------------------
$ 1,916,507
- --------------------------------------------------------------------------
Total Common Stocks
(identified cost $5,715,068,624) $8,246,680,855
- --------------------------------------------------------------------------
Put Options Purchased -- 0.0%
Security Shares Value
- --------------------------------------------------------------------------
Computers and Business Equipment -- 0.0%
- --------------------------------------------------------------------------
Dell Computer, Expires 1/16/99,
Strike Price 45 250,000 $ 31,250
Dell Computer, Expires 1/16/99,
Strike Price 50 250,000 15,625
Dell Computer, Expires 2/20/99,
Strike Price 50 250,000 195,313
Dell Computer, Expires 2/20/99,
Strike Price 55 500,000 562,500
- --------------------------------------------------------------------------
$ 804,688
- --------------------------------------------------------------------------
Total Put Options Purchased
(identified cost $5,771,939) $ 804,688
- --------------------------------------------------------------------------
See notes to financial statements
21
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Rights--0.0%
Security Shares Value
- --------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 0.0%
- --------------------------------------------------------------------------
Triton Energy, Ltd.(1) 51 $ 0
- --------------------------------------------------------------------------
$ 0
- --------------------------------------------------------------------------
Total Rights
(identified cost $0) $ 0
- --------------------------------------------------------------------------
Convertible Preferred Stocks -- 0.4%
Security Shares Value
- --------------------------------------------------------------------------
Entertainment -- 0.4%
- --------------------------------------------------------------------------
Time Warner Inc., Series J(3) 100,187 $ 26,526,391
Time Warner Inc., Series J(2)(3) 21,410 5,657,362
- --------------------------------------------------------------------------
$ 32,183,753
- --------------------------------------------------------------------------
Financial - Miscellaneous -- 0.0%
- --------------------------------------------------------------------------
American General Corp., Series D 21,474 $ 1,406,547
- --------------------------------------------------------------------------
$ 1,406,547
- --------------------------------------------------------------------------
Insurance -- 0.0%
- --------------------------------------------------------------------------
Aetna, Inc., Series C 449 $ 34,152
- --------------------------------------------------------------------------
$ 34,152
- --------------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $14,428,021) $ 33,624,452
- --------------------------------------------------------------------------
Commercial Paper -- 4.3%
Face Amount
Name of Company (000's omitted) Value
- --------------------------------------------------------------------------
American Express Credit Corp.,
6.00%, 1/8/99 $ 76,827 $ 76,737,368
Associates Corp. of North
America, 5.25%, 1/4/99 37,141 37,124,751
Corporate Receivables Corp.,
5.50%, 1/8/99 30,000 29,967,917
Ford Motor Credit Co., 5.53%,
1/8/99 77,696 77,612,455
General Electric Capital Co.,
5.50%, 1/4/99 56,607 56,581,055
Prudential Funding Corp., 5.80%,
1/8/99 95,000 94,892,861
- --------------------------------------------------------------------------
Total Commercial Paper
(identified cost $372,916,407) $ 372,916,407
- --------------------------------------------------------------------------
Short-Term Investments -- 0.7%
Face Amount
Name of Company (000's omitted) Value
- --------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
4.50%, 1/4/99 $ 59,313 $ 59,290,758
- --------------------------------------------------------------------------
Total Short-Term Investments
(identified cost $59,290,758) $ 59,290,758
- --------------------------------------------------------------------------
Total Investments -- 100.1%
(identified cost $6,167,475,749) $8,713,317,160
- --------------------------------------------------------------------------
Other Assets, Less Liabilities -- (0.1)% $ (8,457,825)
- --------------------------------------------------------------------------
Net Assets -- 100.0% $8,704,859,335
- --------------------------------------------------------------------------
ADR-American Depositary Receipt
(1) Non-income producing security.
(2) Security restricted from resale for a period not exceeding one year. At
December 31, 1998, the value of these securities totaled $565,804,292 or
6.5% of net assets.
(3) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
See notes to financial statements
22
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1998
Assets
- --------------------------------------------------------------------------
Investments, at value
(identified cost $6,167,475,749) $8,713,317,160
Cash 208,496
Receivable for investments sold 31,917
Dividends receivable 6,284,080
Tax reclaim receivable 123,448
Other assets 388,094
Deferred organization expenses 4,165
- --------------------------------------------------------------------------
Total assets $8,720,357,360
- --------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------
Payable for investments purchased $ 15,294,800
Payable to affiliate for Trustees' fees 6,091
Other accrued expenses 197,134
- --------------------------------------------------------------------------
Total liabilities $ 15,498,025
- --------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $8,704,859,335
- --------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $6,159,017,924
Net unrealized appreciation (computed on the basis
of identified cost) 2,545,841,411
- --------------------------------------------------------------------------
Total $8,704,859,335
- --------------------------------------------------------------------------
Statement of Operations
Investment Period Ended Year Ended
Income December 31, 1998(1) October 31, 1998
- --------------------------------------------------------------------------
Dividends (net of foreign
taxes, $151,392 and
$555,644, respectively) $ 12,251,934 $ 54,405,581
Interest 3,422,672 11,564,060
- --------------------------------------------------------------------------
Total investment income $ 15,674,606 $ 65,969,641
- --------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------
Investment adviser fee $ 6,020,740 $ 24,370,514
Trustees fees and expenses 5,901 30,273
Custodian fee 166,036 729,631
Legal and accounting services 70,710 129,922
Amortization of organization expenses 363 2,176
Miscellaneous 6,208 384,423
- --------------------------------------------------------------------------
Total expenses $ 6,269,958 $ 25,646,939
- --------------------------------------------------------------------------
Net investment income $ 9,404,648 $ 40,322,702
- --------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- --------------------------------------------------------------------------
Net realized gain (loss) --
Investments (identified
cost basis) $ 21,475,026 $ (88,268,073)
- --------------------------------------------------------------------------
Net realized gain (loss) $ 21,475,026 $ (88,268,073)
- --------------------------------------------------------------------------
Change in unrealized
appreciation (depreciation) --
Investments (identified
cost basis) $950,828,792 $ 540,179,532
- --------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation) $950,828,792 $ 540,179,532
- --------------------------------------------------------------------------
Net realized and unrealized gain $972,303,818 $ 451,911,459
- --------------------------------------------------------------------------
Net increase in net assets
from operations $981,708,466 $ 492,234,161
- --------------------------------------------------------------------------
(1) For the two-month period ended December 31, 1998.
See notes to financial statements
23
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
Increase (Decrease) in Net Assets December 31, 1998(1) October 31, 1998 October 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations--
Net investment income $ 9,404,648 $ 40,322,702 $ 14,399,615
Net realized gain (loss) 21,475,026 (88,268,073) 52,637,579
Net change in unrealized appreciation (depreciation) 950,828,792 540,179,532 375,109,348
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 981,708,466 $ 492,234,161 $ 442,146,542
- ----------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 858,758,546 $ 4,084,235,841 $ 1,907,707,281
Withdrawals (121,286,161) (462,237,336) (415,207,575)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from capital transactions $ 737,472,385 $ 3,621,998,505 $ 1,492,499,706
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets $ 1,719,180,851 $ 4,114,232,666 $ 1,934,646,248
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
At beginning of period $ 6,985,678,484 $ 2,871,445,818 $ 936,799,570
- ----------------------------------------------------------------------------------------------------------------------------------
At end of period $ 8,704,859,335 $ 6,985,678,484 $ 2,871,445,818
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the two-month period ended December 31, 1998.
See notes to financial statements
24
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended October 31,
Period Ended -------------------------------------------------------
December 31, 1998 (1) 1998 1997 1996(2)
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expenses 0.48%(3) 0.50% 0.56% 0.66%(3)
Net investment income 0.72%(3) 0.78% 0.81% 0.91%(3)
Portfolio Turnover 3% 12% 14% 6%
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 8,704,859 $ 6,985,678 $ 2,871,446 $ 936,800
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the two-month period ended December 31, 1998.
(2) For the period from the start of business, December 1, 1995, to October 31,
1996.
(3) Annualized.
See notes to financial statements
25
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Tax-Managed Growth Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management 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. The following is a summary of significant accounting
policies consistently followed by the Portfolio in the preparation of its
financial statements. 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
generally 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, 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. Over-the-counter options are normally valued
at the mean between the latest bid and asked price. 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 Income Taxes -- The Portfolio is treated as a partnership for Federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes 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, 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 Put Options -- Upon the purchase of a put option by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio will realize a gain or
loss depending on whether the sales proceeds from the closing sale transaction
are greater or less than the cost of the option. When the Portfolio exercises
a put option, settlement is made in cash. The risk associated with purchasing
options is limited to the premium originally paid.
F Securities Sold Short -- The Portfolio may sell securities it does not own
in anticipation of a decline in the market price of the securities or in order
to hedge portfolio positions. The Portfolio will generally borrow the security
sold in order to make delivery to the buyer. Upon executing the transaction,
the Portfolio records the proceeds as deposits with brokers in the Statement
of Assets and Liabilities and establishes an offsetting payable for securities
sold short for the securities due on settlement. The proceeds are retained by
the broker as collateral for the short position. The liability is marked to
market and the Portfolio is required to pay the lending broker any dividend or
interest income earned while the short position is open. A gain or loss is
recorded when the security is delivered to the broker. The Portfolio may
recognize a loss
26
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
on the transaction if the market value of the securities sold increases before
the securities are delivered.
G 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.
H 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 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 ended December 31, 1998, the adviser fee was 0.46% (annualized) of
the Portfolio's average net assets. For the year ended October 31, 1998, the
adviser fee was 0.47% of the Portfolio's average net assets. Except for
Trustees of the Portfolio who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their services to the Portfolio
out of such investment adviser fee. Trustees of the Portfolio that are not
affiliated with the Investment Adviser may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the period ended December 31, 1998 and the
year ended October 31, 1998, no significant amounts have been deferred.
Certain of the officers and Trustees of the Portfolio are officers or
directors/trustees of the above organizations.
3 Investment Transactions
-----------------------------------------------------------------------------
For the two-month period ended December 31, 1998, purchases and sales of
investments, other than short-term obligations, aggregated $472,302,414 and
$190,511,645, respectively. In addition, investments having an aggregate
market value of $24,998,564 at dates of withdrawal were distributed in payment
for capital withdrawals resulting in capital gains for book purposes of
$629,507. During the period ended December 31, 1998, investors contributed
securities with a value of $517,599,932. For the year ended October 31, 1998,
purchases and sales of investments, other than short-term obligations,
aggregated $2,151,267,687 and $608,237,096, respectively. In addition,
investments having an aggregate market value of $136,368,120 at dates of
withdrawal were distributed in payment for capital withdrawals resulting in
capital gains for book purposes of $125,868,954. During the year ended October
31, 1998, investors contributed securities with a value of $1,855,101,919.
4 Federal Income Tax Basis of Investment
------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1998, as computed on a federal income tax
basis, are as follows:
Aggregate cost $3,223,058,075
------------------------------------------------------------------------------
Gross unrealized appreciation $5,518,035,727
Gross unrealized depreciation (27,776,642)
------------------------------------------------------------------------------
Net unrealized appreciation $5,490,259,085
------------------------------------------------------------------------------
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.
27
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
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 December 31, 1998.
6 Line of Credit
------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $130 million unsecured line of credit agreement
with a group of banks. The Portfolio may temporarily borrow from the line of
credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at the
Eurodollar rate or federal funds rate. In addition, a fee computed at an
annual rate of 0.10% on the daily unused portion of the line of credit is
allocated among the participating portfolios and funds at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the two-month period ended December 31, 1998 nor during the year
ended October 31, 1998.
7 Fiscal Year End Change
------------------------------------------------------------------------------
Effective November 1, 1998, the Portfolio changed its fiscal year-end to
December 31.
28
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of Tax-Managed Growth Portfolio:
- -------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Managed Growth Portfolio (the Portfolio) as
of December 31, 1998, the related statements of operations for the two-month
period then ended and for the year ended October 31, 1998, the statements of
changes in net assets for the two-month period ended December 31, 1998 and for
each of the years in the two-year period ended October 31, 1998, and the
supplementary data for the two-months ended December 31, 1998 and for each of
the years in the two-year period ended October 31, 1998 and for the period from
the start of business, December 1, 1995 to October 31, 1996. These financial
statements and supplementary data are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and supplementary data 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 supplementary
data 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 securities owned as of
December 31, 1998 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
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 supplementary data referred to
above present fairly, in all material respects, the financial position of the
Portfolio as of December 31, 1998, the results of its operations, the changes in
its net assets and its supplementary data for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 12, 1999
29
<PAGE>
Capital Exchange Fund as of December 31, 1998
INVESTMENT MANAGEMENT
Capital Exchange Fund
Officers
James B. Hawkes
President and Trustee
Thomas E. Faust, Jr.
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Jessica M. Bibliowicz
President and Chief Operating Officer,
John A. Levin & Co.
Director, Baker, Fentress & Company
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Tax-Managed Growth Portfolio
Officers
James B. Hawkes
President and Trustee
Duncan W. Richardson
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Jessica M. Bibliowicz
President and Chief Operating Officer,
John A. Levin & Co.
Director, Baker, Fentress & Company
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
30
<PAGE>
This Page Intentionally Left Blank
<PAGE>
Investment Adviser of Tax-Managed Growth Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of Capital Exchange Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Custodian
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer and Dividend Disbursing Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
Capital Exchange Fund
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund.
- --------------------------------------------------------------------------------
CAPSRC-2/99
