TO SHAREHOLDERS
CAPITAL EXCHANGE FUND HAD A TOTAL RETURN OF 15.4 PERCENT DURING THE SIX MONTHS
THAT ENDED APRIL 30, 1995. That return represented a rise in net asset value per
share to $202.31 from $176.61, and the reinvestment of $1.35 in income dividends
and $0.025 in capital gain distributions. By comparison, the S&P 500, an
unmanaged index of common stocks, had a total return of 10.4 percent during the
same period.
IN GENERAL, THE STOCK MARKET CONTINUED TO PERFORM WELL DURING THIS SIX-MONTH
PERIOD. Interest rates stopped their rapid ascent in November and fears of
runaway inflation dissipated. The market's behavior was a positive response to
the prospect of slow growth without significant inflation. Many companies cut
costs and downsized several years ago to deal with the effects of the recession.
They now are better prepared to deliver economies in an economic slowdown. The
market also responded to changing economic prospects in another way: market
leadership shifted from cyclical stocks to other sectors less exposed to a
slowing economy.
THE TECHNOLOGY SECTOR WAS THE MARKET'S TOP PERFORMER DURING THIS PERIOD. A heavy
weighting in this sector helped account for the Fund's performance. However,
past performance is no guarantee of future returns. Hewlett-Packard, the
Portfolio's top holding, showed a 40 percent price increase during the six month
period. Intel, the second-largest holding, was up 70 percent, while Texas
Instruments, another of the Fund's technology holdings, was up 48 percent.
DRUG COMPANY STOCKS ALSO WERE STRONG PERFORMERS DURING THE SIX-MONTH PERIOD.
Johnson & Johnson, one of the Fund's larger holdings, was up nearly 20 percent.
The Fund's two other drug stocks, SmithKline Beecham and Bristol-Myers Squibb,
gained 21 and 14 percent, respectively.
RETAIL STOCKS GENERALLY PERFORMED POORLY DURING THE SIX-MONTH PERIOD, THOUGH THE
FUND'S TWO HOLDINGS IN THIS SECTOR, ALBERTSON'S AND WAL-MART, BOTH POSTED GAINS
DURING THAT TIME. Financial stocks also turned in a mixed performance during the
period, but the Fund's largest financial holding, American International Group,
was up more than 15 percent.
MOST ECONOMISTS BELIEVE THAT INTEREST RATES WILL PEAK IN THE FIRST HALF OF 1995
AND THAT ECONOMIC GROWTH RATES WILL DECLINE, THOUGH NOT TO RECESSIONARY LEVELS.
If this "soft landing" is achieved, corporate profitability should be
well-maintained and could support higher levels in the stock market for 1995 and
beyond.
NO MATTER HOW ECONOMIC CONDITIONS MAY CHANGE, WE REMAIN CONVINCED THAT OVER THE
LONG TERM, INVESTING IN A REPRESENTATIVE PORTFOLIO OF HIGH-QUALITY COMMON STOCKS
IS LIKELY TO DELIVER SOUND PERFORMANCE. That remains the strategy of Capital
Exchange Fund, and we are confident the Fund will continue to participate in the
economy's ongoing growth.
Sincerely,
/s/Landon T. Clay
LANDON T. CLAY
President
June 5, 1995
- -------------------------------------------------------------------------------
THE FUND HAD A TOTAL RETURN OF 15.4 PERCENT DURING THE SIX MONTHS THAT ENDED
APRIL 30, 1995.
[Photograph of Landon T. Clay]
- -------------------------------------------------------------------------------
"...WE REMAIN CONVINCED THAT OVER THE LONG TERM, INVESTING IN A REPRESENTATIVE
PORTFOLIO OF HIGH-QUALITY COMMON STOCKS IS LIKELY TO DELIVER SOUND
PERFORMANCE."
<PAGE>
- ------------------------------------------------------------------------------
CAPITAL EXCHANGE FUND, INC.
APRIL 30, 1995
(UNAUDITED)
INVESTMENT CHANGES -- SIX MONTHS ENDED APRIL 30, 1995
- ------------------------------------------------------------------------------
Shares Owned
DECREASES* Oct 31 Apr 30
- ------------------------------------------------------------------------------
Albertson's, Inc. 180,328 156,048
- ------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 32,590 29,000
- ------------------------------------------------------------------------------
Dexter Corporation 64,019 47,829
- ------------------------------------------------------------------------------
Johnson & Johnson 81,150 75,410
- ------------------------------------------------------------------------------
Lehman Brothers Holding Inc. 11,359 0
OTHER CHANGES Shares
- ------------------------------------------------------------------------------
Amp Inc., in a 2 for 1 stock split less 3,350
shares paid in kind on redemptions. 38,780
- ------------------------------------------------------------------------------
Hewlett-Packard Co., in a 2 for 1 stock split
less 300 shares paid in kind on redemptions. 42,690
- ------------------------------------------------------------------------------
*Includes investments paid-in kind on redemptions.
<PAGE>
- ------------------------------------------------------------------------------
CAPITAL EXCHANGE FUND, INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
(UNAUDITED)
- ------------------------------------------------------------------------------
COMMON STOCKS - 98.8%
- ------------------------------------------------------------------------------
Name of Company Shares Value
- ------------------------------------------------------------------------------
ADVERTISING - 2.4%
Interpublic Group Cos. 66,000 $ 2,508,000
------------
AEROSPACE - 2.1%
Boeing Co. 39,450 $ 2,169,750
------------
AIR TRANSPORTATION - 0.6%
Flightsafety International, Inc. 12,000 $ 591,000
------------
BUSINESS PRODUCTS AND SERVICES - 7.6%
Lotus Development Corp.* 45,000 $ 1,417,500
Manpower Inc. 110,000 3,671,250
Reuters Holdings PLC, ADR 58,420 2,658,110
------------
$ 7,746,860
------------
CONSTRUCTION AND REAL ESTATE - 3.2%
Dover Corp. 50,790 $ 3,301,350
------------
CONSUMER PRODUCTS - 5.3%
Anheuser-Busch Cos., Inc. 35,820 $ 2,082,037
Procter & Gamble Co. 48,000 3,354,000
------------
$ 5,436,037
------------
COSMETICS AND TOILETRIES - 4.4%
International Flavors & Fragrances, Inc. 88,101 $ 4,526,189
------------
DRUGS & MEDICAL - 13.5%
Bristol-Myers Squibb Co. 29,000 $ 1,888,625
Johnson & Johnson 75,410 4,901,650
Merck & Co., Inc. 56,385 2,417,507
Pfizer Inc. 36,476 3,159,733
SmithKline Beecham PLC 37,520 1,458,590
------------
$ 13,826,105
------------
ELECTRONICS - 19.8%
AMP Inc. 83,780 $ 3,581,595
Hewlett-Packard Co. 85,680 5,665,590
Intel Corp.* 55,124 5,643,319
Raytheon Co. 40,000 2,910,000
Texas Instruments Inc. 24,000 2,544,000
------------
$ 20,344,504
------------
FINANCIAL SERVICES - 3.8%
American Express Co. 56,798 $ 1,973,731
Marsh & McLennan Cos., Inc. 24,000 1,881,000
------------
$ 3,854,731
------------
FOOD PROCESSING - 1.5%
McCormick & Co., Inc., Nonvoting 68,400 $ 1,504,800
------------
FOREST PRODUCTS - 3.2%
Kimberly-Clark Corp. 57,310 $ 3,245,179
------------
INSTRUMENTATION AND CONTROLS - 2.0%
Dionex Corp.* 50,000 $ 2,075,000
------------
INSURANCE - 3.5%
American International Group Inc. 33,750 $ 3,602,813
------------
MACHINERY AND EQUIPMENT - 5.6%
Dexter Corp. 47,829 $ 1,094,088
Gould Pumps, Inc. 78,830 1,951,042
Tecumseh Products Co. Class B 13,320 666,000
Tecumseh Products Co. Class A 39,960 2,007,990
------------
$ 5,719,120
------------
PETROLEUM - 3.7%
Atlantic Richfield Co. 6,880 $ 787,760
Exxon Corp. 43,776 3,047,904
------------
$ 3,835,664
------------
PETROLEUM SERVICES AND EQUIPMENT - 2.6%
Schlumberger Ltd. 42,819 $ 2,692,245
------------
PHOTOGRAPHIC PRODUCTS - 2.1%
Eastman Kodak Co. 37,181 $ 2,137,908
------------
PUBLISHING AND PRINTING - 3.6%
Dun & Bradstreet Corp. 31,968 $ 1,666,332
Harcourt General, Inc. 50,000 2,043,750
------------
$ 3,710,082
------------
RETAIL - 8.3%
Albertson's, Inc. 156,048 $ 4,935,018
Wal-Mart Stores, Inc. 148,700 3,531,625
------------
$ 8,466,643
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $16,227,612) $101,293,980
------------
FACE AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATION - 1.0%
- ------------------------------------------------------------------------------
Ford Motor Credit Corp.,
5.95% due 5/04/95, at amortized cost $1,000 $ 999,416
------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $17,227,088) - 99.8% $102,293,396
Other Assets, less Liabilities - 0.2% 250,596
------------
NET ASSETS - 100% $102,543,992
============
*Non-income producing security.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
April 30, 1995 (unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost, $17,227,088) $102,293,396
Cash 131,015
Dividends receivable 131,627
------------
Total assets $102,556,038
LIABILITIES:
Payable for capital stock redeemed $ 562
Payable to affiliates --
Custodian fee 540
Directors' fees 1,837
Accrued expenses 9,107
------
Total liabilities 12,046
------------
NET ASSETS for 506,868 shares of capital stock outstanding $102,543,992
============
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) $ 25,781,738
Unrealized appreciation of investments (computed on
the basis of identified cost) 85,066,308
Provision for federal tax on undistributed net
realized long-term capital gain (8,324,465)
Undistributed net investment income 20,411
------------
Total $102,543,992
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($102,543,992 / 506,868 shares of capital stock outstanding) $202.31
=======
See notes to financial statements
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
Six Months Ended April 30, 1995 (unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends $ 999,182
Interest 28,971
-----------
Total income $ 1,028,153
Expenses --
Investment adviser fee (Note 4) $ 292,073
Compensation of Directors not members of the
Investment Adviser's organization 3,204
Custodian fees (Note 4) 22,604
Legal and accounting services 21,187
Printing and postage 17,911
Transfer and dividend disbursing agent fees 3,984
Miscellaneous 6,160
-----------
Total expenses 367,123
-----------
Net investment income $ 661,030
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on the
basis of identified cost ($177,939 net gain as
computed for federal income tax purposes) $ 1,856,881
Increase in unrealized appreciation of investments 11,210,726
-----------
Net realized and unrealized gain on investments 13,067,607
-----------
Net increase in net assets from operations $13,728,637
===========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
Six Months
Ended
April 30, 1995 Year Ended
(unaudited) October 31, 1994
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 661,030 $ 1,333,841
Net realized gain on investments 1,856,881 4,135,350
Increase in unrealized appreciation of
investments 11,210,726 2,100,381
------------ -----------
Increase in net assets from operations $ 13,728,637 $ 7,569,572
------------ -----------
Distributions to shareholders --
From net investment income $ (661,030) $(1,319,653)
In excess of net investment income (28,242) --
From net realized gain on investments (12,852) (81,369)
------------ -----------
Total distributions to shareholders $ (702,124) $(1,401,022)
------------ -----------
Net decrease from capital stock transactions
(Note 2) $ (1,771,585) $(4,472,337)
------------ -----------
Net increase in net assets $ 11,254,928 $ 1,696,213
NET ASSETS:
At beginning of period 91,289,064 89,592,851
------------ -----------
At end of period (including undistributed net
investment income of $20,411 and $48,653,
respectively) $102,543,992 $91,289,064
============ ===========
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
<TABLE>
Six Months Year Ended October 31,
Ended April 30, 1995 -------------------------------------------------------------------------
(unaudited) 1994 1993 1992 1991 1990
-------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning
of period $176.610 $164.860 $156.030 $142.810 $106.030 $112.910
-------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 1.296 $ 2.521 $ 2.334 $ 2.178 $ 2.181 $ 2.339
Net realized and
unrealized gain (loss)
on investments 25.779 11.869 9.533 13.332 36.949 (6.769)
-------- -------- -------- -------- -------- --------
Total income (loss) from
operations $ 27.075 $ 14.390 $ 11.867 $ 15.510 $ 39.130 $ (4.430)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (1.296) $ (2.490) $ (2.550) $ (2.130) $ (2.350) $ (2.450)
In excess of net investment
income (0.054) -- -- -- -- --
From net realized gain on
investments (0.025) (0.150) -- (0.160) -- --
-------- -------- -------- -------- -------- --------
Total distributions $ (1.375) $ (2.640) $ (2.550) $ (2.290) $ (2.350) $ (2.450)
-------- -------- -------- -------- -------- --------
Provision for federal
tax on undistributed
net realized long-term
gain (Note 1B) $ -- $ -- $ (0.487) $ -- $ -- $ --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of
period $202.310 $176.610 $164.860 $156.030 $142.810 $106.030
======== ======== ======== ======== ======== ========
TOTAL RETURN<F2> 15.41% 8.80% 7.33% 10.94% 37.13% (4.05)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $102,544 $ 91,289 $ 89,593 $ 88,632 $ 86,148 $ 66,528
Ratio of expenses to
average net assets 0.79%<F1> 0.76% 0.78% 0.78% 0.79% 0.86%
Ratio of net investment
income to average
net assets 1.43%<F1> 1.49% 1.46% 1.44% 1.64% 2.05%
PORTFOLIO TURNOVER 0% 2% 2% 0% 3% 4%
<FN>
<F1>Annualized
- ----------
<F2>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
(UNAUDITED)
- -----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
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.
E. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating
to April 30, 1995 and for the six month period then ended have not been
audited by independent certified public accountants, but in the opinion of the
Fund's management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
statements.
- ------------------------------------------------------------------------------
(2) CAPITAL STOCK
At April 30, 1995, there were 4,000,000 shares of $1.00 par value capital
stock authorized. Transactions in capital stock were as follows:
Six Months Ended
April 30, 1995 Year Ended
(Unaudited) October 31, 1994
----------------------- ----------------------
Shares Amount Shares Amount
------ ------ ------ ------
Redemptions (10,913) $(1,931,244) (28,431) $(4,795,769)
Issued to shareholders
electing to receive payment
of dividends in capital
stock 871 159,659 1,907 323,432
------ ----------- ------- -----------
Net decrease (10,042) $(1,771,585) (26,524) $(4,472,337)
====== =========== ======= ===========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Sales of investments, other than short-term obligations, aggregated $179,404.
There were no purchases of investments. In addition, investments having an
aggregate market value of $1,819,091 at dates of redemption were distributed
in payment for capital stock redeemed.
- ------------------------------------------------------------------------------
(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), an affiliate of EVM, for
its services as custodian of the Fund. 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 six months ended April 30, 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.
Borrowings will be made by the Fund solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of
deposit rate, or a federal funds effective rate. In addition, a fee computed
at an annual rate of 1/4 of 1% on the $20 million committed facility and on
the daily unused portion of the $100 million discretionary facility is
allocated among the participating funds at the end of each quarter. The Fund
did not have any significant borrowings or allocated fees during the period.
- ------------------------------------------------------------------------------
(6) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at April 30, 1995, as computed on a federal income tax basis, are as
follows:
Aggregate cost $17,227,088
===========
Gross unrealized appreciation $85,066,308
Gross unrealized depreciation --
-----------
Net unrealized appreciation $85,066,308
===========
<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 PETER F. KIELY Dwight Partners, Inc.
Vice President, Director Chairman, Newspapers of
JAMES B. HAWKES New England, Inc.
Vice President SAMUEL L. HAYES, III
DUNCAN RICHARDSON Jacob H. Schiff Professor
Vice President and of Investment Banking,
Portfolio Manager Harvard University
JAMES L. O'CONNOR Graduate School of
Treasurer Business Administration
THOMAS OTIS NORTON H. REAMER
Clerk President and Director,
JAMES F. ALBAN United Asset
Assistant Treasurer Management Corporation
JANET E. SANDERS JOHN L. THORNDIKE
Assistant Treasurer Director,
and Assistant Clerk Fiduciary Company
A. JOHN MURPHY Incorporated
Assistant Secretary JACK L. TREYNOR
Investment Adviser and
Consultant
- ------------------------------------------------------------------------------
INVESTMENT ADVISER TRANSFER AND DIVIDEND
Eaton Vance Management DISBURSING AGENT
24 Federal Street The Shareholder
Boston, MA 02110 Services Group, Inc.
BOS725
CUSTODIAN P.O. Box 1559
Investors Bank & Trust Boston, MA 02104
Company
24 Federal Street
Boston, MA 02110
<PAGE>
CAPITAL EXCHANGE
FUND, INC.
SUMMARY
NET ASSET VALUE PER SHARE
- ------------------------------------------------------------------------------
PAST SIX MONTHS
- ------------------------------------------------------------------------------
April 30, 1995 $202.31
- ------------------------------------------------------------------------------
October 31, 1994 $176.61
- ------------------------------------------------------------------------------
PAST YEAR
- ------------------------------------------------------------------------------
April 30, 1995 $202.31
- ------------------------------------------------------------------------------
April 30, 1994 $167.08
- ------------------------------------------------------------------------------
LIFE OF FUND
- ------------------------------------------------------------------------------
April 30, 1995 $202.31
- ------------------------------------------------------------------------------
March 29, 1966 $ 25.00
- ------------------------------------------------------------------------------
CHANGE (3/29/66 TO 4/30/95) IN:
- ------------------------------------------------------------------------------
Share value +709.2%
- ------------------------------------------------------------------------------
Share value plus cumulative Federal taxes paid by Fund* +736.2%
- ------------------------------------------------------------------------------
Dow Jones Industrial Average 380.4%
- ------------------------------------------------------------------------------
Standard & Poor's 500 497.5%
- ------------------------------------------------------------------------------
*Realized capital gains are generally retained by the Fund and the federal tax
thereon is paid on behalf of shareholders. Such taxes aggregated $6.748 per
share over the life of the Fund.
The Dow Jones Industrial Average and the Standard & Poor's 500 are unmanaged
lists of common stocks.
CAPITAL
EXCHANGE FUND
An Eaton Vance
Exchange Fund
Semi-Annual Report
April 30, 1995
