--------------------------------------
TO SHAREHOLDERS
WE ARE PLEASED TO REPORT THAT CAPITAL EXCHANGE FUND HAD A TOTAL RETURN OF 32.6%
DURING THE YEAR ENDING OCTOBER 31, 1995. That return represented a rise in net
asset value per share to $230.96 from $176.61 and the reinvestment of $2.70 in
income dividends and $0.025 in capital gains. It is the third-best return
achieved by the Fund in its 29-year history. By comparison, the S&P 500 Index,
an unmanaged index of common stocks, had a return of 26.4% during the same
period.
SHAREHOLDERS RECEIVED INCOME DIVIDENDS TOTALING $2.70 PER SHARE AND CAPITAL
GAIN DISTRIBUTIONS OF $0.025 PER SHARE DURING THE 12 MONTHS THAT ENDED OCTOBER
31, 1995.
THE STOCK MARKET PERFORMED VERY WELL DURING THIS 12-MONTH PERIOD, REACHING
RECORD LEVELS. The market's behavior was a positive response to an improved
interest rate environment and prospects for continuing economic growth. It
appeared that the Federal Reserve had achieved its goal of a "soft landing" for
the economy, balancing slow growth with low inflation levels.
THIS HAS BEEN A PERIOD OF STRONG PERFORMANCE FOR A WIDE RANGE OF STOCKS. Large
capitalization stocks led the market surge early in the period. Many major
corporations saw sharply escalating profits, reflecting a favorable economy and
the substantial cost reduction and productivity initiatives they have undertaken
in recent years.
AMONG THE STRONGER SECTORS OF THE MARKET DURING THIS PERIOD WERE TECHNOLOGY,
HEALTH CARE, FINANCIAL SERVICES AND CONSUMER PRODUCTS. These areas are
well-represented among the Fund's largest holdings.
INTEL CORP., THE FUND'S LARGEST HOLDING, POSTED THE GREATEST GAIN, INCREASING
NEARLY 125% FOR THE YEAR. Hewlett-Packard Co., the second-largest position, was
up 90% for the same period. Texas Instruments Inc. another of the Fund's
significant holdings in the technology sector, was up 78%.
AMONG HEALTH CARE STOCKS, JOHNSON & JOHNSON, THE THIRD-LARGEST HOLDING, ROSE
49%, PFIZER INC. WAS UP 55% AND MERCK & CO., INC. WAS UP 61%. In the financial
services sector, American International Group Inc. was up 35%. Other top
performers among the Fund's largest holdings were Dionex Corp., up 46%; Dover
Corp., up 42%; and Kimberly-Clark Corp., up 41%.
[Photo of Landon T. Clay]
"...we believe that an investment in a representative portfolio of high-quality
common stocks is likely to deliver sound long-term performance."
LOOKING TO THE FUTURE, OUR OUTLOOK REMAINS POSITIVE BECAUSE OF CONTINUED LOW
INFLATION AND SLOW-TO-MODERATE ECONOMIC GROWTH. However, any additional stock
market gains are likely to depend on continued positive earnings results. Some
corporate profit disappoint-ments emerged toward the end of the period; they may
signal the end of the solid gains that marked most of 1995. The market also may
be more vulnerable than usual to a correction after the recent strong runup.
REGARDLESS OF CHANGES IN THE MARKET OR IN INVESTMENT CONDITIONS, WE BELIEVE THAT
AN INVESTMENT IN A REPRESENTATIVE PORTFOLIO OF HIGH-QUALITY COMMON STOCKS IS
LIKELY TO DELIVER SOUND LONG-TERM PERFORMANCE. That remains the strategy of
Capital Exchange Fund, and we are confident the Fund will continue to
participate in the ongoing growth of the economy.
Sincerely,
/s/ Landon T. Clay
LANDON T. CLAY
President
December 5, 1995
<PAGE>
--------------------------------------
CAPITAL EXCHANGE FUND, INC.
OCTOBER 31, 1995
(UNAUDITED)
INVESTMENT CHANGES -- SIX MONTHS ENDED OCTOBER 31, 1995
- ------------------------------------------------------------------------------
SHARES OWNED
INCREASES APR. 30 OCT. 31
- ------------------------------------------------------------------------------
Anadarko Petroleum Corp. -- 29,000
- ------------------------------------------------------------------------------
Nucor Corp. -- 25,000
- ------------------------------------------------------------------------------
DECREASES*
- ------------------------------------------------------------------------------
AMP Inc. 83,780 69,320
- ------------------------------------------------------------------------------
Dun & Bradstreet Corp. 31,968 22,998
- ------------------------------------------------------------------------------
Flightsafety International Inc. 12,000 --
- ------------------------------------------------------------------------------
Hewlett-Packard Co. 85,680 73,390
- ------------------------------------------------------------------------------
Johnson & Johnson 75,410 74,375
- ------------------------------------------------------------------------------
OTHER CHANGES SHARES
- ------------------------------------------------------------------------------
American International Group Inc. in a 1.5 for 1 stock split. 16,875
- ------------------------------------------------------------------------------
Dover Corp. in a 2 for 1 stock split. 50,790
- ------------------------------------------------------------------------------
Intel Corp. in a 2 for 1 stock split less 1,930 shares paid
in-kind on redemptions. 52,754
- ------------------------------------------------------------------------------
Lotus Development Corp. in a cash buyout by International
Business Machines. (45,000)
- ------------------------------------------------------------------------------
Pfizer Inc. in a 2 for 1 stock split. 36,476
- ------------------------------------------------------------------------------
Raytheon Co. in a 2 for 1 stock split. 40,000
- ------------------------------------------------------------------------------
Texas Instruments Inc. in a 2 for 1 stock split. 24,000
- ------------------------------------------------------------------------------
*Includes investments paid in-kind on redemptions.
<PAGE>
--------------------------------------
CAPITAL EXCHANGE FUND, INC.
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- ------------------------------------------------------------------------------
COMMON STOCKS - 98.8%
- ------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- ------------------------------------------------------------------------------
ADVERTISING - 2.2%
Interpublic Group Cos. 66,000 $ 2,557,500
------------
AEROSPACE - 2.3%
Boeing Co. 39,450 $ 2,588,906
------------
BUSINESS PRODUCTS AND SERVICES - 5.4%
Manpower Inc. 110,000 $ 2,983,750
Reuters Holdings PLC, ADR 58,420 3,242,310
------------
$ 6,226,060
------------
CONSTRUCTION AND REAL ESTATE - 3.5%
Dover Corp. 101,580 $ 4,012,410
------------
CONSUMER PRODUCTS - 5.5%
Anheuser-Busch Cos., Inc. 35,820 $ 2,364,120
Procter & Gamble Co. 48,000 3,888,000
------------
$ 6,252,120
------------
COSMETICS AND TOILETRIES - 3.7%
International Flavors & Fragrances, Inc. 88,101 $ 4,250,873
------------
DRUGS & MEDICAL - 15.4%
Bristol-Myers Squibb Co. 29,000 $ 2,211,250
Johnson & Johnson 74,375 6,061,563
Merck & Co., Inc. 56,385 3,242,138
Pfizer Inc. 72,952 4,185,621
SmithKline Beecham PLC 37,520 1,946,350
------------
$ 17,646,922
------------
ELECTRONICS - 20.8%
AMP Inc. 69,320 $ 2,720,810
Hewlett-Packard Co. 73,390 6,797,749
Intel Corp. 107,878 7,537,975
Raytheon Co. 80,000 3,490,000
Texas Instruments Inc. 48,000 3,276,000
------------
$ 23,822,534
------------
ENERGY - 1.1%
Andarko Petroleum Corp. 29,000 $ 1,257,875
------------
FINANCIAL SERVICES - 3.7%
American Express Co. 56,798 $ 2,307,419
Marsh & McLennan Cos., Inc. 24,000 1,965,000
------------
$ 4,272,419
------------
FOOD PROCESSING - 1.5%
McCormick & Co., Inc., Nonvoting 68,400 $ 1,692,900
------------
FOREST PRODUCTS - 3.6%
Kimberly-Clark Corp. 57,310 $ 4,162,139
------------
INSTRUMENTATION AND CONTROLS - 2.4%
Dionex Corp.* 50,000 $ 2,700,000
------------
INSURANCE - 3.7%
American International Group Inc. 50,625 $ 4,271,484
------------
MACHINERY AND EQUIPMENT - 4.8%
Dexter Corp. 47,829 $ 1,141,917
Gould Pumps, Inc. 78,830 1,872,213
Tecumseh Products Co. Class B 13,320 632,700
Tecumseh Products Co. Class A 39,960 1,878,120
------------
$ 5,524,950
------------
METALS & MINING - 1.1%
Nucor Corp. 25,000 $ 1,203,125
------------
PETROLEUM - 3.6%
Atlantic Richfield Co. 6,880 $ 734,440
Exxon Corp. 43,776 3,343,392
------------
$ 4,077,832
------------
PETROLEUM SERVICES AND EQUIPMENT - 2.3%
Schlumberger Ltd. 42,819 $ 2,665,483
------------
PHOTOGRAPHIC PRODUCTS - 2.0%
Eastman Kodak Co. 37,181 $ 2,328,460
------------
PUBLISHING AND PRINTING - 2.9%
Dun & Bradstreet Corp. 22,998 $ 1,374,130
Harcourt General, Inc. 50,000 1,981,250
------------
$ 3,355,380
------------
RETAIL - 7.3%
Albertson's, Inc. 156,048 $ 5,188,596
Wal-Mart Stores, Inc. 148,700 3,215,637
------------
$ 8,404,233
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $17,774,710) $113,273,605
------------
FACE AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATION - 1.9%
- ------------------------------------------------------------------------------
Ford Motor Credit Corp.,
5.76%, due 11/01/95,
at amortized cost $2,200 $ 2,200,000
------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $19,974,710) - 100.7% $115,473,605
Other Assets, less Liabilities - (0.7%) (830,390)
------------
NET ASSETS - 100% $114,643,215
============
*Non-income producing security.
See notes to financial statements
<PAGE>
--------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
October 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost, $19,974,710) $115,473,605
Cash 121,756
Receivable for investments sold 68,543
Dividends receivable 87,205
------------
Total assets $115,751,109
LIABILITIES:
Federal tax on undistributed net realized long- term gain, payable
on behalf of shareholders (Note 1B) $1,023,649
Payable for capital stock redeemed 69,288
Payable to affiliates --
Directors' fees 636
Custodian fee 3,664
Accrued expenses 10,657
----------
Total liabilities 1,107,894
------------
NET ASSETS for 496,384 shares of capital stock outstanding $114,643,215
============
SOURCES OF NET ASSETS:
Accumulated net realized gain on investment transactions (computed
on the basis of identified cost), less the excess of cost of
capital stock redeemed over proceeds from sales of capital stock
(including shares issued to shareholders electing to receive
payment of distributions in capital stock) $ 28,467,066
Unrealized appreciation of investments (computed on the basis of identified cost) 95,498,895
Provision for federal tax on undistributed net realized long-term capital gain (9,348,114)
Undistributed net investment income 25,368
------------
Total $114,643,215
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($114,643,215 / 496,384 shares of capital stock outstanding) $230.96
=======
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
Year Ended October 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding tax
of $8,793) $ 2,009,060
Interest 102,112
-----------
Total income $ 2,111,172
Expenses --
Investment adviser fee (Note 4) $ 634,427
Compensation of Directors not members of the
Investment Adviser's organization 6,722
Custodian fees (Note 4) 52,555
Printing and postage 27,637
Legal and accounting services 24,329
Transfer and dividend disbursing agent fees 15,000
Miscellaneous 7,521
-----------
Total expenses 768,191
-----------
Net investment income $ 1,342,981
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on
the basis of identified cost ($2,924,711 net
gain as computed for federal income tax
purposes) $ 6,830,476
Increase in unrealized appreciation of
investments 21,643,313
-----------
Net realized and unrealized gain on
investments 28,473,789
-----------
Net increase in net assets from
operations $29,816,770
===========
See notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------
1995 1994
------------ -----------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,342,981 $ 1,333,841
Net realized gain on investments 6,830,476 4,135,350
Increase in unrealized appreciation of
investments 21,643,313 2,100,381
------------ -----------
Net increase in net assets from operations $ 29,816,770 $ 7,569,572
------------ -----------
Distributions to shareholders --
From net investment income $ (1,366,266) $(1,319,653)
From net realized gain on investments (12,852) (81,369)
------------ -----------
Total distributions to shareholders $ (1,379,118) $(1,401,022)
------------ -----------
Provision for federal tax on undistributed net
realized long-term gain (Note 1B) $ (1,023,649) $ --
------------ -----------
Net decrease from capital stock transactions
(Note 2) $ (4,059,852) $(4,472,337)
------------ -----------
Net increase in net assets $ 23,354,151 $ 1,696,213
NET ASSETS:
At beginning of year 91,289,064 89,592,851
------------ -----------
At end of year (including undistributed net
investment income of $25,368
and $48,653, respectively) $114,643,215 $91,289,064
============ ===========
See notes to financial staements
<PAGE>
FINANCIAL STATEMENTS (Continued)
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $176.610 $164.860 $156.030 $142.810 $106.030
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 2.657 $ 2.521 $ 2.334 $ 2.178 $ 2.181
Net realized and unrealized gain
on investments 56.480 11.869 9.533 13.332 36.949
-------- -------- -------- -------- --------
Total income from operations $ 59.137 $ 14.390 $ 11.867 $ 15.510 $ 39.130
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (2.700) $ (2.490) $ (2.550) $ (2.130) $ (2.350)
From net realized gain on
investments (0.025) (0.150) -- (0.160) --
-------- -------- -------- -------- --------
Total distributions $ (2.725) $ (2.640) $ (2.550) $ (2.290) $ (2.350)
-------- -------- -------- -------- --------
PROVISION FOR FEDERAL TAX ON
UNDISTRIBUTED NET REALIZED
LONG-TERM GAIN (NOTE 1B) $ (2.062) $ -- $ (0.487) $ -- $ --
-------- -------- -------- -------- --------
NET ASSET VALUE, end of year $230.960 $176.610 $164.860 $156.030 $142.810
======== ======== ======== ======== ========
TOTAL RETURN<F1> 32.56% 8.80% 7.33% 10.94% 37.13%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) $114,643 $ 91,289 $ 89,593 $ 88,632 $ 86,148
Ratio of net expenses to average
net assets 0.76% 0.76% 0.78% 0.78% 0.79%
Ratio of net investment income to
average net assets 1.32% 1.49% 1.46% 1.44% 1.64%
PORTFOLIO TURNOVER 2% 2% 2% 0% 3%
<FN>
<F1> Total investment return is calculated assuming a purchase at the net asset value on the first day
and a sale at the net asset value on the last day of each period reported. Dividends and distributions,
if any, are assumed to be reinvested at the net asset value on the payable date.
</TABLE>
See notes to financial statements
<PAGE>
--------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Capital Exchange Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATIONS -- Investments listed on securities exchanges or in
the NASDAQ National Market are valued at closing sale prices. Listed or
unlisted investments for which closing sale prices are not available are
valued at closing bid prices. Short-term obligations, maturing in 60 days or
less, are valued at amortized cost, which approximates value.
B. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders each year all of its taxable income from dividends,
interest and net realized short-term capital gain. Accordingly, no provision
for federal income or excise tax is necessary on such income. The Fund
generally designates as undistributed any taxable net realized long-term gain
(but reserves the right to distribute such gain in any year) and pays the
federal tax thereon on behalf of shareholders. Provision for such tax is
recorded on the Fund's records on the last business day of the Fund's fiscal
year because the Internal Revenue Code provides that such tax is allocated
among shareholders of record on that date.
C. OTHER -- Investment transactions are accounted for on a trade date basis.
Dividend income and dividends to shareholders are recorded on the ex-dividend
date.
D. DISTRIBUTIONS -- Generally accepted accounting principles require that
differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
- ------------------------------------------------------------------------------
(2) CAPITAL STOCK
At October 31, 1995, there were 4,000,000 shares of $1.00 par value capital
stock authorized. Transactions in capital stock were as follows:
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Redemptions (22,059) $(4,365,843) (28,431) $(4,795,769)
Issued to shareholders
electing to receive payment
of dividends in capital stock 1,533 305,991 1,907 323,432
------- ----------- ------- -----------
Net decrease (20,526) $(4,059,852) (26,524) $(4,472,337)
======= =========== ======= ===========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $2,357,336 and $3,642,429, respectively. In addition, investments
having an aggregate market value of $4,139,899 at dates of redemption were
distributed in payment for capital stock redeemed, resulting in a realized
gain of $3,905,765.
- ------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at the monthly rate of 5/96 of 1% ( 5/8
of 1% annually) of the Fund's average monthly net assets, was paid to Eaton
Vance Management (EVM) as compensation for management and investment advisory
services rendered to the Fund. Except as to directors of the Fund who are not
members of EVM's organization, officers and directors receive remuneration for
their services to the Fund out of such investment adviser fee. The custodian
fee was paid to Investors Bank & Trust Company (IBT) for its services as
custodian of the Fund. Prior to November 10, 1995, IBT was an affiliate of
EVM. One of the Directors of the Fund owns approximately 13% of the voting
stock of Investors Financial Services Corp., the parent company of IBT.
Pursuant to the custodian agreement, IBT receives a fee reduced by credits
which are determined based on the average daily cash balances the Fund
maintains with IBT. Certain of the officers and directors of the Fund are
officers and directors/trustees of the above organizations. Directors of the
Fund 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 year ended October
31, 1995, no significant amounts have been deferred.
- ------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Fund participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of
a $20 million committed facility and a $100 million discretionary facility.
The fund may temporarily borrow up to 5% of its total assets to satisfy
redemption requests or settle transactions. Interest is charged to each fund
based on its borrowings at an amount above either the bank's adjusted
certificate of deposit rate, a variable adjusted certificate of deposit rate,
or a federal funds effective rate. In addition, a fee computed at an annual
rate of 1/4 of 1% on the $20 million committed facility and on the daily
unused portion of the $100 million discretionary facility is allocated among
the participating funds at the end of each quarter. The Fund did not have any
significant borrowings or allocated fees during the year.
- ------------------------------------------------------------------------------
(6) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at October 31, 1995, as computed on a federal income tax basis, are as
follows:
Aggregate cost $19,974,710
===========
Gross unrealized appreciation $95,498,895
Gross unrealized depreciation --
-----------
Net unrealized appreciation $95,498,895
===========
- ------------------------------------------------------------------------------
(7) ANNUAL SHAREHOLDER MEETING (UNAUDITED)
On April 12, 1995, the annual meeting of the shareholders of the Fund was held
for the purpose of voting on the following matters:
1. To fix the number of Directors at seven, and to elect the following
individuals as Directors for the ensuing year and until their successors
are elected and qualified:
Landon T. Clay Peter F. Kiely*
Donald R. Dwight Norton H. Reamer
Samuel L. Hayes, III John L. Thorndike
Jack L. Treynor
*Effective June 19, 1995, Peter F. Kiely resigned as a Director of the Fund.
2. To ratify or reject the selection of Deloitte & Touche LLP as the
independent certified public accountants to be employed by the Fund to sign
or certify financial statements which may be filed by the Fund with the
Securities and Exchange Commission in respect of all or any part of the
fiscal year ending October 31, 1995.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
NO. OF SHARES % OF
VOTING FOR EACH OUTSTANDING % OF SHARES
VOTE NOMINEE SHARES VOTED
- ---- --------------- ----------- -----------
<S> <C> <C> <C>
Affirmative 361,704.558 71.281% 99.993%
Abstain 25.595 0.005 0.007
----------- ------ -------
Total 361,730.153 71.286% 100.000%
=========== ====== =======
The results of the vote on Proposal 2 were as follows:
<CAPTION>
% OF
OUTSTANDING % OF SHARES
VOTE NO. OF SHARES SHARES VOTED
- ---- ------------- ----------- -----------
<S> <C> <C> <C>
Affirmative 361,272.378 71.196% 99.873%
Abstain 457.775 0.090 0.127
----------- ------ -------
Total 361,730.153 71.286% 100.000%
=========== ====== =======
</TABLE>
<PAGE>
--------------------------------------
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
CAPITAL EXCHANGE FUND, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Capital Exchange Fund, Inc. as of
October 31, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended October 31,
1995 and 1994, and the financial highlights for each of the years in the five-
year period ended October 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at October 31, 1995, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Capital Exchange
Fund, Inc. at October 31, 1995, 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
NOVEMBER 21, 1995
<PAGE>
INVESTMENT MANAGEMENT
CAPITAL EXCHANGE OFFICERS AND STAFF INDEPENDENT DIRECTORS
FUND, INC. LANDON T. CLAY DONALD R. DWIGHT
24 Federal Street President, Director President,
Boston, MA 02110 JAMES B. HAWKES Dwight Partners, Inc.
Vice President Chairman, Newspapers of
DUNCAN RICHARDSON New England, Inc.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff Professor of
JAMES L. O'CONNOR Investment Banking,
Treasurer Harvard University Graduate
School of Business
Administration
NORTON H. REAMER
President and Director,
United Asset
Management Corporation
JOHN L. THORNDIKE
Director,
Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
---------------------------------------------------------
INVESTMENT ADVISER TRANSFER AND DIVIDEND
Eaton Vance Management DISBURSING AGENT
24 Federal Street First Data Investor
Boston, MA 02110 Services Group, Inc.
CUSTODIAN BOS725
Investors Bank & Trust P.O. Box 1559
Company Boston, MA 02104
89 South Street INDEPENDENT AUDITORS
P.O. Box 1537 Deloitte & Touche LLP
Boston, MA 02205-1537 125 Summer Street
Boston, MA 02110
<PAGE>
CAPITAL EXCHANGE
FUND, INC.
PERFORMANCE RESULTS+
- ---------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(STANDARDIZED SEC PERFORMANCE DATA
FOR THE PERIODS ENDED OCTOBER 31, 1995)
- ---------------------------------------
One year 32.56%
- ---------------------------------------
Five years 18.65%
- ---------------------------------------
Ten years 15.22%
- ---------------------------------------
Life of Fund (3/29/66) 10.20%
- ---------------------------------------
CUMULATIVE TOTAL RETURN
LIFE OF FUND
(3/29/66 TO 10/31/95)
- ---------------------------------------
Capital Exchange Fund 1,672.27%
- ---------------------------------------
Dow Jones Industrial Average 1,807.94%
- ---------------------------------------
Standard & Poor's 500 2,014.26%
- ---------------------------------------
+ Past performance is no guarantee of future results. Investment returns and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The Dow Jones Industrial Average and the Standard & Poor's 500 are unmanaged
lists of common stocks.
This report must be preceded or accompanied by a prospectus which contains
more complete information on the Fund including its distribution plan, sales
charges and expenses. Please read the prospectus carefully before investing.
CAPITAL
EXCHANGE FUND
An Eaton Vance
Exchange Fund
Annual Report
October 31, 1995
EATON VANCE
The Boston Tradition
Funds offered through
Eaton Vance Distributors, Inc.
24 Federal Street, Boston, Massachusetts 02110
