<PAGE>
THE
EXCHANGE FUND
OF BOSTON
An Eaton Vance
Exchange Fund
Annual Report
June 30, 1996
<PAGE>
- --------------------------------------------------------------------------------
TO SHAREHOLDERS
EXCHANGE FUND OF BOSTON HAD A TOTAL RETURN OF 23.3% DURING THE YEAR ENDED JUNE
30, 1996.
AT A SPECIAL MEETING OF THE SHAREHOLDERS HELD ON JUNE 4, 1996, SHAREHOLDERS OF
THE EXCHANGE FUND OF BOSTON voted to adopt several important changes in the
Fund's organization and operations recommended by the Fund's Board of Directors.
As a result, effective July 1, 1996, the Fund has adopted the Hub-and-Spoke(R)
mutual fund structure and is pursuing its investment objective through investing
in the Tax-Managed Growth Portfolio (the "Portfolio"), a separate open-end
management investment company with substantially the same investment objective,
policies and restrictions as the newly revised Fund. Investing through the
Portfolio enables the Fund to participate in an investment portfolio that is
substantially larger, more diversified and potentially more attractive, and to
achieve cost savings over time. As of July 1, 1996, net assets of the Portfolio
totalled $560.5 million.
FOR THE YEAR ENDED JUNE 30, 1996, THE FUND HAD A TOTAL RETURN OF 23.3%. That
return represented a rise in net asset value per share to $288.73 from $238.23,
the reinvestment of $2.85 per share in income dividends and $0.036 in capital
gains distributions, and the year-end payment of Federal taxes on retained net
long-term capital gains of $1.968 per share.
IN THE PAST YEAR, THE STOCK MARKET HAS BENEFITED FROM A COMBINATION OF
RELATIVELY STRONG ECONOMIC GROWTH, MODERATE INTEREST RATES, AND LOW INFLATION.
On January 31, the Federal Reserve lowered the Federal funds rate (a key
short-term interest rate benchmark) for the third time in six months to 5.25%,
where it remains. Equities have responded well to these favorable conditions.
The S&P 500, an unmanaged index of large capitalization stocks, had a total
return of 25.9% from June 30, 1995 to June 30, 1996.
WHILE PRICE/EARNINGS MULTIPLES ARE HISTORICALLY HIGH, THERE REMAIN ATTRACTIVE
SECTORS IN THE STOCK MARKET. The price/earnings multiple - a measure of how much
investors are willing to pay for a dollar of current earnings has reached an
average of 17 for the S&P 500. This is higher than a year ago, when the average
was at 15.5, but not remarkably higher. Although large capitalization stocks in
general do not appear to be excessively valued, certain market sectors - notably
small capitalization, aggressive growth stocks (and particularly those with a
connection to the Internet) - are quite richly valued and may be vulnerable to a
substantial correction if economic or market conditions deteriorate.
- -------------------------
[Photo of Landon T. Clay]
- -------------------------
THE BLUE-CHIP GROWTH COMPANIES IN WHICH THE FUND AND THE PORTFOLIO TYPICALLY
INVEST HAVE BEEN STRONG PERFORMERS AND CONTINUE TO LOOK ATTRACTIVE FOR THE
MONTHS AND YEARS AHEAD. The largest holdings of the Portfolio as of July 1, 1996
include such well-regarded companies as Intel, Inc., PepsiCo, Inc.,
Hewlett-Packard Co., Johnson & Johnson and Merck & Co., Inc. Each of these
companies is well established as an industry leader and has attractive financial
characteristics and excellent growth prospects. The Portfolio holds investments
in a diverse group of over 120 companies.
"THROUGHOUT ITS 33-YEAR HISTORY, THE EXCHANGE FUND OF BOSTON HAS BEEN MANAGED
FOR THE LONG TERM, AND WITH CONSIDERATION TO SHAREHOLDER TAXES AND AFTER-TAX
RETURNS."
THROUGHOUT ITS 33-YEAR HISTORY, THE EXCHANGE FUND OF BOSTON HAS BEEN MANAGED FOR
THE LONG TERM, AND WITH CONSIDERATION TO SHAREHOLDER TAXES AND AFTER-TAX
RETURNS. Investing in the Portfolio through the Hub and Spoke structure will not
alter this focus, but will enable the Fund to benefit from the Portfolio's
greater size and broader diversification. Looking ahead, Iam confident the Fund
will benefit from the changes being made in its organization and operations, as
well as from the long-term growth of the economy and of stocks of companies
positioned to take advantage of that growth.
Sincerely,
/s/ LANDON T. CLAY
LANDON T. CLAY
President
August 5, 1996
<PAGE>
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THE EXCHANGE FUND OF BOSTON, INC.
JUNE 30, 1996
(UNAUDITED)
INVESTMENT CHANGES
SIX MONTHS ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
Shares Owned
INCREASES 12/31/95 6/30/96
- --------------------------------------------------------------------------------
Boston Scientific Corp. -- 45,000
- --------------------------------------------------------------------------------
DECREASES*
- --------------------------------------------------------------------------------
Bausch & Lomb, Inc. 45,160 33,970
- --------------------------------------------------------------------------------
CBI Industries, Inc. 45,126 --
- --------------------------------------------------------------------------------
Dun & Bradstreet Corp. 32,478 28,948
- --------------------------------------------------------------------------------
Intel Corp. 72,700 72,200
- --------------------------------------------------------------------------------
Novell Inc. 71,000 --
- --------------------------------------------------------------------------------
Phillips Petroleum Co. 50,000 --
- --------------------------------------------------------------------------------
Potlatch Corp. 7,960 1,190
- --------------------------------------------------------------------------------
Union Camp Corp. 43,059 42,509
- --------------------------------------------------------------------------------
OTHER CHANGES
Shares
- --------------------------------------------------------------------------------
1,052 Earthgrains Co., in a 1 per 25 spinoff from Anheuser-Busch
Cos., Inc.
- --------------------------------------------------------------------------------
42,395 Johnson & Johnson in a 2 for 1 stock split.
- --------------------------------------------------------------------------------
45,900 PepsiCo, Inc. in a 2 for 1 stock split.
- --------------------------------------------------------------------------------
*Includes investments paid in kind on redemptions.
<PAGE>
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PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
- -----------------------------------------------------------------------
COMMON STOCKS - 97.4%
- -----------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -----------------------------------------------------------------------
BANKS - MONEY CENTER - 4.0%
BankAmerica Corp. 20,812 $ 1,576,509
First Chicago NBD Corp. 43,007 1,682,645
----------
$ 3,259,154
-----------
BEVERAGES - 6.3%
Anheuser-Busch Co., Inc. 26,310 $ 1,973,250
PepsiCo, Inc. 91,800 3,247,425
-----------
$ 5,220,675
-----------
BROADCAST & CABLE - .9%
Cox Communications Inc. Class A* 34,388 $ 743,641
-----------
BUSINESS SERVICES - MISCELLANEOUS - 2.8%
Ecolab Inc. 69,800 $ 2,303,400
-----------
COMMUNICATIONS EQUIPMENT - 2.4%
Northern Telecom Ltd. 35,870 $ 1,950,431
-----------
COMPUTERS & BUSINESS EQUIPMENT - 5.4%
Digital Equipment Corp.* 10,195 $ 458,775
Hewlett-Packard Co. 25,600 2,550,400
International Business Machines Corp. 14,267 1,412,433
-----------
$ 4,421,608
-----------
DRUGS - 8.3%
ASTRA AB Series A 90,000 $ 3,974,094
Genentech Inc.* 17,500 916,562
Merck & Co., Inc. 30,390 1,963,954
-----------
$ 6,854,610
-----------
ELECTRONICS - SEMICONDUCTORS - 6.4%
Intel Corp. 72,200 $ 5,302,188
-----------
FOODS - 0%
Earthgrains Co.* 1,052 $ 34,466
-----------
PAPER & FOREST PRODUCTS - 2.6%
Potlatch Corp. 1,190 $ 46,559
Union Camp Corp. 42,509 2,072,314
-----------
$ 2,118,873
-----------
HOUSEHOLD PRODUCTS - 6.2%
Procter & Gamble 32,800 $ 2,972,500
Rubbermaid Inc. 78,920 2,150,570
-----------
$ 5,123,070
-----------
INDUSTRIAL EQUIPMENT - 4.0%
Tecumseh Products Co. Class A 60,720 $ 3,263,700
-----------
INFORMATION SERVICES - 6.4%
Dun & Bradstreet Corp. 28,948 $ 1,809,250
Reuters Holdings PLC 48,000 3,480,000
-----------
$ 5,289,250
-----------
INSURANCE - 10.3%
General Re Corp. 28,210 $ 4,294,972
St. Paul Companies, Inc. 52,820 2,825,870
Torchmark Corp. 31,425 1,374,844
-----------
$ 8,495,686
-----------
MEDICAL PRODUCTS - 11.1%
Bausch & Lomb, Inc. 33,970 $ 1,443,725
Boston Scientific Corp.* 45,000 2,025,000
Johnson & Johnson 84,790 4,197,105
Sofamor Danek Group, Inc.* 55,000 1,526,250
-----------
$ 9,192,080
-----------
OIL & GAS - INTEGRATED - 3.5%
Chevron Corp. 15,600 $ 920,400
Mobil Corp. 17,750 1,990,219
-----------
$ 2,910,619
-----------
OIL & GAS - SERVICES AND EQUIPMENT - 2.2%
Schlumberger Ltd. 21,278 $ 1,792,671
-----------
PRINTING & BUSINESS FORMS - 1.5%
Harland (John H.) Co. 51,540 $ 1,269,172
-----------
PUBLISHING - 2.9%
Times-Mirror Co. Class A 55,890 $ 2,431,215
-----------
RESTAURANTS - 4.0%
McDonald's Corp. 71,100 $ 3,323,925
-----------
RETAIL - SPECIALTY & APPAREL - 5.1%
Home Depot, Inc. (The) 40,000 $ 2,160,000
Toys "R" Us, Inc.* 72,000 2,052,000
-----------
$ 4,212,000
-----------
TRANSPORTATION - 1.1%
Union Pacific Corp. 12,890 $ 900,689
-----------
TOTAL COMMON STOCKS
(Identified cost, $14,156,043) $80,413,123
-----------
- ----------------------------------------------------------------------
SHORT-TERM OBLIGATION - 2.8%
- ----------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED)
- ----------------------------------------------------------------------
Ford Motor Credit Corp., 5.37%
due 7/03/96, at amortized cost $2,300 $ 2,299,314
-----------
TOTAL INVESTMENTS
(Identified cost, $16,455,357) - 100.2% $82,712,437
OTHER ASSETS,
LESS LIABILITIES - (0.2%) (215,330)
-----------
NET ASSETS - 100% $82,497,107
===========
*Non-income-producing security.
See notes to financial statements
<PAGE>
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FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
June 30, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$16,455,357) $82,712,437
Cash 220,902
Dividends receivable 131,555
Tax reclaim receivable 11,490
-----------
Total assets $83,076,384
LIABILITIES:
Federal tax on undistributed net realized long-term
gain, payable on behalf of shareholders (Note 1B) $562,400
Payable to affiliate --
Directors' fees 1,680
Accrued expenses 15,197
--------
Total liabilities 579,277
-----------
NET ASSETS for 285,720 shares of capital stock
outstanding $82,497,107
===========
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) $26,935,485
Accumulated distributions of net realized gain on
investments as computed for federal income tax
purposes (2,207,653)
Unrealized appreciation of investments (computed on
the basis of identified cost) 66,257,994
Federal tax on undistributed net realized long-term
capital gain paid on behalf of shareholders (8,670,763)
Undistributed net investment income 182,044
-----------
Total net assets $82,497,107
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($82,497,107 / 285,720 shares of capital stock
outstanding) $288.73
=======
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended June 30, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of withholding tax of $16,485) $ 1,364,909
Interest 63,908
-----------
Total income $ 1,428,817
Expenses --
Investment adviser fee (Note 4) $ 482,131
Compensation of Directors not members of the
Investment Adviser's organization 6,317
Custodian fee (Note 4) 42,436
Legal and accounting services 30,932
Printing and postage 23,602
Transfer and dividend disbursing agent fees 15,000
Miscellaneous 5,105
-----------
Total expenses 605,523
-----------
Net investment income $ 823,294
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on
the basis of identified cost
($1,607,206 net gain as computed for federal
income tax purposes) $ 3,336,591
Increase in unrealized appreciation of
investments 11,874,036
-----------
Net realized and unrealized gain on
investments 15,210,627
-----------
Net increase in net assets from
operations $16,033,921
===========
See notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------
1996 1995
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 823,294 $ 910,356
Net realized gain on investment transactions 3,336,591 4,676,421
Increase in unrealized appreciation of
investments 11,874,036 9,359,550
----------- -----------
Increase in net assets from operations $16,033,921 $14,946,327
----------- -----------
Distributions to shareholders --
From net investment income $ (821,969) $ (937,712)
From net realized gain on investments (10,439) --
----------- -----------
Total distributions to shareholders $ (832,408) $ (937,712)
----------- -----------
Provision for federal tax on undistributed net $
realized long-term gain (Note 1B) $ (562,400) --
----------- -----------
Net decrease from capital stock transactions
(Note 2) $(1,981,116) $(4,879,463)
----------- -----------
Net increase in net assets $12,657,997 $ 9,129,152
NET ASSETS:
At beginning of year 69,839,110 60,709,958
----------- -----------
At end of year (including undistributed net
investment income of $182,044 and $180,719,
respectively) $82,497,107 $69,839,110
=========== ===========
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
NET ASSET VALUE,
beginning of year $238.230 $191.790 $196.100 $187.690 $167.320
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 2.871 $ 3.049 $ 2.805 $ 2.652 $ 2.666
Net realized and
unrealized gain
(loss) on
investments 52.483 46.481 (4.365) 8.408 20.414
-------- -------- -------- -------- --------
Total income
(loss) from
operations $ 55.354 $ 49.530 $ (1.560) $ 11.060 $ 23.080
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment
income $ (2.850) $ (3.090) $ (2.750) $ (2.650) $ (2.710)
From net realized
gain on investments (0.036) -- -- -- --
-------- -------- -------- -------- --------
Total distributions $ (2.886) $ (3.090) $ (2.750) $ (2.650) $ (2.710)
-------- -------- -------- -------- --------
LESS PROVISION FOR
FEDERAL TAX ON
UNDISTRIBUTED NET
REALIZED LONG-TERM
GAIN (NOTE 1B) $ (1.968) $ -- $ -- $ -- $ --
-------- -------- -------- -------- --------
NET ASSET VALUE, end
of year $288.730 $238.230 $191.790 $196.100 $187.690
======== ======== ======== ======== ========
TOTAL RETURN(1) 23.32% 26.01% (0.86)% 5.87% 13.85%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000 omitted) $ 82,497 $ 69,839 $ 60,710 $ 64,996 $ 65,788
Ratio of expenses to
average net assets 0.78% 0.80% 0.79% 0.80% 0.81%
Ratio of net
investment income
to average net
assets 1.07% 1.41% 1.38% 1.34% 1.44%
PORTFOLIO TURNOVER
RATE 3% 2% 8% 3% 7%
AVERAGE COMMISSION
RATE PAID(2) $ 0.0600 -- -- -- --
(1) Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to
be reinvested at the net asset value on the payable date.
(2) For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for security
trades on which commissions are charged. Average commission rate paid is
computed by dividing the total dollar amount of commissions paid during the
fiscal year by the total number of shares purchased and sold during the
fiscal year for which commissions were charged.
See notes to financial statements
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(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 security exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at
closing bid prices. Short-term obligations, maturing in 60 days or less, are
valued at amortized cost, which approximates value.
B. 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 taxable income from dividends,
interest and net realized short-term capital gain. Accordingly, no provision
for federal income or excise tax is necessary. 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. 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) CAPITAL STOCK
At June 30, 1996, there were 3,297,273 shares of $1.00 par value capital stock
authorized. Transactions in capital stock were as follows:
YEAR ENDED YEAR ENDED
JUNE 30, 1996 JUNE 30, 1995
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------- ------------ ------ -----------
Redemptions (8,075) $(2,153,198) (24,267) $(5,068,363)
Issued to shareholders
electing to receive
payment of dividends
in capital stock 633 172,082 878 188,900
------ ----------- ------- -----------
Net decrease (7,442) $(1,981,116) (23,389) $(4,879,463)
====== =========== ======= ===========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $1,931,990 and $4,495,548, respectively. In addition, investments
having an aggregate market value of $1,903,055 at dates of redemption were
distributed in payment for capital stock redeemed, resulting in realized
capital gains of $1,699,520, for book purposes.
- ------------------------------------------------------------------------------
(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. 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. All
significant credit balances are reported as a reduction of expenses in the
Statement of Operations. Certain of the officers and directors of the Fund are
officers and directors/trustees of the above organizations. Trustees of the Fund
that are not affiliated with the Investment Adviser may elect to defer receipt
of all or a portion of their annual fees in accordance with the terms of the
Trustee Deferred Compensation Plan. For the year ended June 30, 1996, no
significant amounts have been deferred.
- ------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Fund participates with other funds managed by EVM and affiliates in a $120
million unsecured line of credit agreement with a bank. The line of credit
consists of a $20 million committed facility and a $100 million discretionary
facility. Borrowings will be made by the Fund solely to facilitate the
handling of unusual and/or unanticipated short-term cash requirements.
Interest is charged to each fund based on its borrowings at an amount above
either the bank's adjusted daily 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 June 30, 1996, as computed on a federal income tax basis, are as
follows:
Aggregate cost $16,455,357
===========
Gross unrealized appreciation $66,257,080
Gross unrealized depreciation --
-----------
Net unrealized appreciation $66,257,080
===========
- ------------------------------------------------------------------------------
(7) SUBSEQUENT EVENT
On July 1, 1996, the Fund transferred substantially all of its investable
assets to the Tax-Managed Growth Portfolio (the Portfolio) for an interest in
the Portfolio. The Portfolio has substantially the same investment objective,
policies and restrictions as the Fund. In addition, the Fund changed its
fiscal year end to
October 31.
- ------------------------------------------------------------------------------
(8) SPECIAL MEETING OF STOCKHOLDERS (UNAUDITED)
The Exchange Fund of Boston, Inc. (the "Fund") held a special meeting of
stockholders on June 4, 1996. On April 15, 1996, the record date of the
meeting, the Fund had 286,045.538 shares outstanding, of which 224,356.041
shares were represented at the meeting. The votes at the meeting were as
follows:
Item 1: To adopt a new investment policy to authorize the Fund to invest its
investable assets in a specific corresponding open-end management
investment company having substantially the same investment objective,
policies and restrictions as the Fund, and to supplement investment
restrictions to permit such investment.
NUMBER OF SHARES
----------------
Affirmative 219,273.966
Against 2,819.986
Abstain 2,262.089
Item 2: To approve an Amendment to the By-Laws of the Fund to change the
fiscal year end of the Fund to October 31.
NUMBER OF SHARES
----------------
Affirmative 219,273.966
Against 2,819.986
Abstain 2,262.089
Item 3: To approve the revision of the Fund's investment objective and certain
of the Fund's investment policies as follows:
A. Reclassification and amendment of the investment objective.
NUMBER OF SHARES
----------------
Affirmative 209,799.966
Against 12,293.986
Abstain 2,262.089
B. Eliminate the restriction concerning investment in other
investment companies.
NUMBER OF SHARES
----------------
Affirmative 209,744.170
Against 12,349.782
Abstain 2,262.089
C. Eliminate the restriction concerning pledging.
NUMBER OF SHARES
----------------
Affirmative 209,749.959
Against 12,293.986
Abstain 2,312.096
D. Reclassify the restriction concerning investment in unseasoned
issuers.
NUMBER OF SHARES
----------------
Affirmative 205,720.959
Against 16,372.993
Abstain 2,262.089
E. Reclassify the restriction concerning investing for control.
NUMBER OF SHARES
----------------
Affirmative 205,720.959
Against 16,372.993
Abstain 2,262.089
F. Amend the restriction concerning diversification.
NUMBER OF SHARES
----------------
Affirmative 215,194.959
Against 6,848.986
Abstain 2,312.096
G. Amend the restriction concerning borrowing and senior securities.
NUMBER OF SHARES
----------------
Affirmative 215,194.959
Against 6,898.993
Abstain 2,262.089
H. Amend the restriction concerning lending.
NUMBER OF SHARES
----------------
Affirmative 219,223.959
Against 2,819.986
Abstain 2,312.096
I. Amend the restriction concerning real estate and commodities.
NUMBER OF SHARES
----------------
Affirmative 218,607.959
Against 3,435.986
Abstain 2,312.096
Item 4: To approve an amendment to the Articles of Organization.
NUMBER OF SHARES
----------------
Affirmative 219,273.966
Against 2,819.986
Abstain 2,262.089
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
The Exchange Fund of Boston, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The Exchange Fund of Boston, Inc.
as of June 30, 1996, and the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended June 30,
1996 and 1995, and the financial highlights for each of the years in the five-
year period ended June 30, 1996. 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 June 30, 1996, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Exchange Fund
of Boston, Inc. at June 30, 1996, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 31, 1996
<PAGE>
- ------------------------------------------------------------------------------
INVESTMENT MANAGEMENT
THE EXCHANGE OFFICERS INDEPENDENT DIRECTORS
FUND OF LANDON T. CLAY DONALD R. DWIGHT
BOSTON, INC. President and Director President,
24 Federal Street JAMES B. HAWKES Dwight Partners, Inc.
Boston, MA 02110 Vice President Chairman, Newspapers of
THOMAS E. FAUST, JR. New England, Inc.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff Professor
JAMES L. O'CONNOR of Investment Banking,
Treasurer Harvard University
THOMAS OTIS Graduate
Clerk 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
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THE EXCHANGE FUND TRANSFER AND DIVIDEND
OF BOSTON, INC. DISBURSING AGENT
24 Federal Street First Data Investor
Boston, MA 02110 Services Group, Inc.
INVESTMENT ADVISER BOS725
Eaton Vance Management P.O. Box 1559
24 Federal Street Boston, MA 02104
Boston, MA 02110 AUDITORS
CUSTODIAN Deloitte & Touche LLP
Investors Bank & Trust 125 Summer Street
Company Boston, MA 02110
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
<PAGE>
THE EXCHANGE FUND
OF BOSTON, INC.
PERFORMANCE RESULTS+
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AVERAGE ANNUAL TOTAL RETURNS
(STANDARDIZED SEC PERFORMANCE DATA
FOR THE PERIODS ENDED 6/30/96)
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One year 23.3%
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Five years 13.2%
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Ten years 10.9%
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Life of Fund (9/5/63) 10.4%
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CUMULATIVE TOTAL RETURN
LIFE OF FUND
(9/5/63 TO 6/30/96)
- --------------------------------------------------------------------------------
Exchange Fund of Boston 2,449.8%
- --------------------------------------------------------------------------------
Dow Jones Industrial Average 2,864.3%
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Standard & Poor's 500 3,046.8%
- --------------------------------------------------------------------------------
+Past performance is no guarantee of future results. Investment returns and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The Dow Jones Industrial Average and the Standard & Poor's 500 are unmanaged
lists of common stocks.
This report must be preceded or accompanied by a prospectus which contains more
complete information on the Fund including its distribution plan, sales charges
and expenses. Please read the prospectus carefully before investing.
{Logo}
EATON VANCE
The Boston Tradition
Funds offered through
Eaton Vance Distributors, Inc.
24 Federal Street, Boston, Massachusetts 02110
6/96
