<PAGE>
TO SHAREHOLDERS
EV Traditional Total Return Fund had a total return of -12.3 percent for the
year ended December 31, 1994. That return was the result of a decline in net
asset value per share to $7.63 from $9.14 on December 31, 1993, adjusted for the
reinvestment of $0.388 per share in income dividends, and does not include the
effect of the Funds 4.75 percent sales charge. For comparison, the Dow Jones
Utility Average - an unmanaged index of utility common stocks - had a total
return of -15.1 percent for the same period.
RISING INTEREST RATES AND INCREASED COMPETITION...
1994 proved to be a tumultuous year for the electric utility sector. Rising
interest rates, increased competition, a shifting regulatory climate, and a rash
of dividend cuts created a difficult environment for the industry and for
investors. A jump in interest rates posed the most immediate threat to investors
as long-term bond yields rose to nearly 8 percent on December 31, 1994 from 6.3
percent a year ago. Because utilities closely track long-term fixed-income
securities, the group trended lower through much of the year. On the other hand,
interest rates remained well below the levels of the 1980s, and that affected
the companies abilities to obtain rate requests. In 1994, utilities filed a
record low $1.1 billion in rate hikes.
The prospect of deregulation has made the utilities sector -- historically one
of the most predictable of industries -- one of the fastest-changing sectors in
the economy. For a possible sign of things to come, many analysts have looked to
California, where the Public Utilities Commission has advocated the complete
deregulation of the electric utilities industry by the year 2002. The likelihood
of heightened competition was an additional factor in the decline of utility
stocks. Price competition clearly hurts companies with higher-cost power plants.
This is especially true of utilities with a large commercial customer base, as
large business customers are increasingly demanding -- and receiving -- special
rates.
AMID INCREASED COMPETITION, SOME POSITIVES FOR THE UTILITY SECTOR...
While there are major hurdles ahead for the utility industry, there are some
positives as well. First, demand for electricity continues to rise around 2
percent annually, consistent with a growing population and increased industrial
demand. Second, energy prices have remained low. Fuel represents a significant
portion of utilities cost structures, and low fuel prices have helped in
utilities efforts to contain costs. Finally, full deregulation is likely to
occur only gradually, which should give companies ample time to adjust to
changing conditions. Unquestionably, this period of rapid changes poses major
questions for industry officials and investors alike. However, looking ahead,
utilities are likely to remain a favored vehicle for income and total
return-minded investors.
Sincerely,
/s/M. Dozier Gardner
[Photograph of M. Dozier Gardner] M. Dozier Gardner
President
February 21, 1995
<PAGE>
A Profile of EV Traditional Total Return Fund
TOTAL RETURN PORTFOLIO:
COMMON STOCK HOLDINGS
Label A B C D
- - --------------------------------------------------------------------------------
Traditional
Total
Return
Label Fund Pie data
1 electric utilities 66.5
2 REITs 19.8
3 telephones 7.4
4 Oil/Gas 5.8
5 other 0.5
6
7 A pie chart showing the Fund holdings according
8 to industry sector on 12/31/94
Based on market value as of December 31, 1994.
IN 1994, CHANGING INDUSTRY CONDITIONS AND SHARPLY HIGHER INTEREST RATES EXACTED
A HEAVY TOLL ON ELECTRIC UTILITY STOCKS
Label A B C
- - -------------------------------------------------------------
Dow Jones 30-year Treasury
Label Date Utility Average* Yields+
1 Dec93 229.3 6.35
2 Jan94 226.01 6.245
3 Feb94 210.45 6.66
4 Mar94 196.28 7.09
5 Apr94 199.43 7.3
6 May94 186.07 7.43
7 Jun94 177.17 7.61
8 Jul94 186.4 7.39
9 Aug94 189.16 7.45
10 Sep94 181.45 7.82
11 Oct94 181.39 7.97
12 Nov94 179.54 8
13 Dec94 181.52 7.88
14
15 A graph showing the relationship between the performance of the
16 Dow Jones Utility Average and the movement in 30-year treasury yields
17
18
*Dow Jones Average (red line, left axis) is an unmanaged index of 15 utility
common stocks.
+U.S. Treasury yields (black line, right axis) refers to yields on 30-year
Treasury bonds.
Sources: Eaton Vance Management, Bloomberg.
...FOCUSING ON COMPANIES WITH GOOD FINANCIAL FLEXIBILITY...
THE PORTFOLIO'S 10 LARGEST HOLDINGS*:
Dividend yield+
CINergy Corp.................................7.4%
Southern Company.............................5.9
Carolina Power & Light Co....................6.6
FPL Group, Inc...............................4.8
DPL Inc......................................5.8
Wisconsin Energy Corp........................5.4
Ameritech Corp...............................5.0
Northern States Power Co.....................6.0
Union Electric Co............................6.9
NIPSCO Industries, Inc.......................5.2
*By market value as of 12/31/94.
+Dividend yield represents the annualized yield based on most recent indicated
dividend and stock price at December 31, 1994.
<PAGE>
MANAGEMENT DISCUSSION
An interview with Timothy P. O'Brien, Vice President and Portfolio Manager of
the Total Return Portfolio.
Q. TIM, 1994 WAS A DIFFICULT YEAR FOR THE UTILITIES SECTOR AND FOR THE FUND.
HOW WOULD YOU EVALUATE THE INDUSTRY?
A. Clearly, 1994 was a challenging year, primarily because of the rise in
interest rates. Moreover, with the likelihood of increased competition in
the future, the fundamental outlook has changed markedly. With interest
rates having declined significantly since the 1980s, utilities' earnings
power has been eroded. Many companies have exacerbated the problem by
continuing to raise their dividends even while earnings have stagnated.
With payouts thus unsustainably high, those companies eventually found
themselves with very little financial flexibility. Given lower allowed
rates of return and little room for earnings growth, many companies have
been forced to reduce dividends. For that reason, we have been increasingly
selective in our electric utility investments.
Q. HOW, THEN, HAVE YOU POSITIONED THE PORTFOLIO?
A. The Portfolio has reduced its electric utility holdings to around 62
percent of investments from 83 percent on December 31, 1993. I've
concentrated electric utility investments on low cost operators, such as
Southern Company, which have maintained their financial flexibility and
have relatively low payout ratios. In addition, many of the Portfolio's
electric utility investments tend to have a smaller commercial customer
base and therefore may be less vulnerable to competition from wholesale
wheeling.
Elsewhere, the Portfolio has significantly increased its investments in
real estate investment trusts (REITs), from 5 percent a year ago to around
18.4 percent at December 31. Telephone stocks represented around 6.9
percent, while energy stocks comprised another 5 percent. Over the longer
term, I'll likely supplement the Portfolio's domestic electric holdings
with some attractive foreign companies, as well as expand into some sectors
not currently represented in the Portfolio, such as water companies.
[Photograph of Timothy P. O'Brien]
Q. REITS COMPRISE A SIZABLE PORTION OF THE PORTFOLIO. WHAT DO YOU LIKE ABOUT
THEM?
A. The fundamentals of the real estate industry are relatively strong. In the
wake of the overbuilding of the 1980s, there has been relatively little new
construction of offices, apartments, hotels, or warehouses. While much of
that surplus inventory has been eliminated, some properties remain on the
market at a significant discount to replacement value. As long as that is
the case, we won't see an acceleration in the construction of commercial
real estate in the near future. REITs currently offer yields comparable to
utility yields and, with a strong economic recovery under way, real estate
stocks have enjoyed good earnings momentum. Naturally, this sector is
subject to some risk, including a degree of interest rate sensitivity as
well as the possibility of a downturn in the real estate sector. Because
these stocks tend to be small and fairly illiquid, the Portfolio has widely
diversified its investments according to asset class and geographical mix.
The Portfolio's holdings comprise a broad range of properties, including
office buildings, residential apartments, shopping centers, and nursing
homes.
Q. WHAT ABOUT THE TELEPHONE SECTOR?
A. Like the electric utilities, telephone companies are vulnerable to
competitive inroads and changing industry dynamics. It's clear that long
distance companies are targeting local telephone business, while local
companies covet long distance business. In addition, some telephone
companies have been active in diversifying into businesses such as wireless
and cellular. While those moves will fuel growth in the future, they tend
to have a dilutive effect on current earnings. I have focused on telephone
companies such as Ameritech that are less vulnerable to competition and
less likely to dilute earnings through diversification.
Q. WHAT'S COMPELLING ABOUT FOREIGN UTILITIES?
A. Foreign electric utilities tend to be regulated on a price cap basis, which
places fewer limitations on what the companies may earn. That's a far cry
from the U.S., where regulation uses an allowed rate of return method. The
foreign companies are therefore less exposed to many of the trends that
have afflicted the domestic industry. One foreign Portfolio investment,
Norweb, is a British electric power distribution company. Unlike U.S.
companies, which are vertically integrated to include generation as well as
delivery, Norweb concentrates solely on distribution. In the foreign
telephone sector, Portfolio holding TeleDanmark, the Danish telephone
company, has superior earnings growth, a competitive yield, and is able to
sustain a high rate of dividend growth. Telecom New Zealand is similarly
well-positioned.
Q. WHAT IS YOUR OUTLOOK FOR THE UTILITY SECTORS?
A. Despite the troubling fundamentals of the electric sector, interest rates
remain the dominant influence on utility stock prices. Moreover, there is a
good likelihood that interest rates will stabilize and that the recent bond
rally will continue well into 1995. While past performance is naturally no
guarantee of future results, a more stable interest rate environment would
present a more favorable climate for these sectors. In an increasingly
challenging period for the utilities sectors, the Portfolio will continue
to search for stocks we believe have prospects for earnings and dividend
growth and provide attractive opportunities for solid long-term total
returns.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN EV CLASSIC TOTAL RETURN
FUND AND THE S&P 500 STOCK INDEX
From December 31, 1984, through December 31, 1994
Average Annual 1 5 10
Returns Year Year Year
------------- ---- ----- -----
With Maximum
4.75% Sales Charge -16.4% 3.9% 10.8%
Without Sales
Charge -12.3% 4.9% 11.4%
Traditional
Total
Return
Date Fund S&P 500
- - ----------------------------------------
12/84 9527 10000
1/85 9639 10741
2/85 9682 10834
3/85 10044 10918
4/85 10305 10868
5/85 10890 11455
6/85 11376 11715
7/85 10710 11658
8/85 10965 11518
9/85 10523 11238
10/85 11121 11716
11/85 11488 12478
12/85 13350 13164
1/86 13875 13195
2/86 14802 14139
3/86 15442 15013
4/86 15056 14801
5/86 15706 15544
6/86 16860 15894
7/86 18025 14961
8/86 19552 16026
9/86 17162 14790
10/86 18041 15599
11/86 18250 15934
12/86 17552 15615
1/87 19314 17673
2/87 18536 18325
3/87 18260 18945
4/87 17670 18728
5/87 17547 18841
6/87 18183 19890
7/87 18275 20850
8/87 18832 21578
9/87 18670 21203
10/87 15382 16589
11/87 14670 15173
12/87 14775 16424
1/88 16253 17088
2/88 15903 17802
3/88 15252 17358
4/88 15272 17522
5/88 16004 17578
6/88 16040 18508
7/88 15839 18408
8/88 15739 17698
9/88 16209 18567
10/88 16517 19049
11/88 16414 18689
12/88 16539 19133
1/89 16935 20494
2/89 16643 19901
3/89 16853 20487
4/89 17638 21513
5/89 18508 22269
6/89 18998 22291
7/89 20054 24261
8/89 19924 24638
9/89 20034 24675
10/89 20252 24054
11/89 20842 24452
12/89 22073 25177
1/90 20696 23445
2/90 20674 23645
3/90 20808 24416
4/90 20088 23759
5/90 20943 25945
6/90 20673 25945
7/90 20901 25809
8/90 19805 23375
9/90 20265 22396
10/90 21656 22246
11/90 21958 23579
12/90 22106 24393
1/91 21692 25406
2/91 22472 27115
3/91 23039 27923
4/91 22965 27933
5/91 22520 29011
6/91 22297 27862
7/91 23225 29112
8/91 23952 29864
9/91 25044 29351
10/91 25374 29699
11/91 25756 28394
12/91 27325 31793
1/92 26008 31160
2/92 25728 31458
3/92 25334 30993
4/92 26045 31858
5/92 26670 31889
6/92 26699 31584
7/92 28400 32827
8/92 28198 32040
9/92 28347 32579
10/92 28114 32648
11/92 28318 33635
12/92 29128 34212
1/93 29937 34453
2/93 31866 34814
3/93 32182 35701
4/93 32057 34794
5/93 31836 35584
6/93 32759 35870
7/93 33556 35679
8/93 34607 36908
9/93 34413 36794
10/93 33736 37508
11/93 31513 37023
12/93 31892 37645
1/94 31388 38868
2/94 30108 37700
3/94 29454 36229
4/94 29962 36647
5/94 28734 37101
6/94 27921 36384
7/94 28325 37530
8/94 28119 38941
9/94 27620 38162
10/94 27652 38959
11/94 27614 37420
12/94 28012 38156
Past performance is not indicative 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. Source: Towers Data Systems,
Bethesda, MD.
FUND PERFORMANCE
In accordance with guidelines issued by the Securities and Exchange Commission,
we are including a performance chart that compares your Fund's total return with
that of a broad- based investment index. The lines on the chart represent the
total returns of a $10,000 hypothetical investment in EV Classic Total Return
Fund and the unmanaged S&P 500 Index.
TOTAL RETURN FIGURES
The solid line on the chart represents the Fund's performance at net asset
value. The Fund's total return figure reflects Fund expenses and transaction
costs, and assumes the reinvestment of income dividends and capital gain
distributions.
The dotted line represents the performance of the S&P 500 Index, a broad-based,
widely recognized unmanaged index of 500 common stocks. The Index's total return
does not reflect any commissions or expenses that would be incurred if an
investor individually purchased or sold the securities represented in the Index.
<PAGE>
------------------------------------------------
EV TRADITIONAL TOTAL RETURN FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- - --------------------------------------------------------------------------------
December 31, 1994
- - --------------------------------------------------------------------------------
ASSETS:
Investment in Total Return Portfolio
(Portfolio) at value (Note 1A) $446,300,824
Receivable for Fund shares sold and
dividend reinvestments 310,439
Deferred organization expenses (Note 1E) 25,236
------------
Total assets $446,636,499
LIABILITIES:
Payable for Fund shares redeemed $1,204,224
Custodian fee payable 1,000
Accrued expenses 297,905
----------
Total liabilities 1,503,129
------------
NET ASSETS for 58,322,677 shares of
beneficial interest outstanding $445,133,370
============
SOURCES OF NET ASSETS:
Proceeds from sales of shares (including
shares issued to shareholders electing to
receive payment of distributions in
shares), less cost of shares redeemed
(Note 1C) $391,184,213
Accumulated net realized losses on
investments and financial futures
transactions (computed on the basis of
identified cost) (13,561,327)
Undistributed net investment income (Note 1C) 53,912,387
Unrealized appreciation of investments and
open financial futures contracts 13,598,097
------------
Total net assets $445,133,370
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($445,133,370 / 58,322,677 shares of beneficial interest) $7.63
=====
COMPUTATION OF OFFERING PRICE:
Offering price per share (100/95.25 of $7.63)
On sales of $100,000 or more, the offering price is reduced. $8.01
=====
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- - --------------------------------------------------------------------------------
For the Year Ended December 31, 1994
- - --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio $ 30,142,266
Interest income allocated from Portfolio 1,226,212
Expenses allocated from Portfolio (4,411,175)
-------------
Total investment income $ 26,957,303
Expenses --
Custodian fees $ 77,499
Service fees (Note 4) 948,661
Transfer and dividend disbursing agent fees 377,242
Printing and postage 103,289
Registration fees 35,814
Legal and accounting services 16,869
Amortization of organization expenses
(Note 1E) 3,102
Miscellaneous fees 122,629
-----------
Total expenses 1,685,105
-------------
Net investment income $ 25,272,198
REALIZED AND UNREALIZED GAIN (LOSS)
FROM PORTFOLIO:
Net realized gain (loss) (identified
cost basis) --
Investment transactions $(17,130,586)
Financial futures contracts 5,439,705
------------
Net realized loss on investment
transactions and financial futures
(identified cost basis) $(11,690,881)
Change in unrealized appreciation of
investments and open financial
futures contracts (89,379,420)
------------
Net realized and unrealized loss
on investments (101,070,301)
-------------
Net decrease in net assets
resulting from operations $ (75,798,103)
=============
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 25,272,198 $ 29,235,961
Net realized gain (loss) on
investments (11,690,881) 42,173,001
Change in unrealized appreciation
from Portfolio (89,379,420) (18,928,721)
------------- -------------
Net increase (decrease) in net
assets resulting from operations $ (75,798,103) $ 52,480,241
------------- -------------
Undistributed net investment
income included in price
of shares redeemed and sold -- $ 85,203
------------- -------------
Distributions to shareholders --
From net investment income $ (24,976,010) $ (28,871,399)
From net realized gain on
investment transactions -- (42,173,001)
In excess of net realized gain
on investment transactions -- (981,524)
------------- -------------
Total distributions to
shareholders $ (24,976,010) $ (72,025,924)
------------- -------------
Net increase (decrease) in net assets
from Fund share transactions (exclusive
of amounts allocated to net investment
income) (Note 2) $ (83,606,054) $ 84,061,155
------------- -------------
Net increase (decrease) in
net assets $(184,380,167) $ 64,600,675
NET ASSETS:
At beginning of period 629,513,537 564,912,862
------------- -------------
At end of period $ 445,133,370 $ 629,513,537
============= =============
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS (for a share
outstanding throughout each year):
NET ASSET VALUE -- Beginning of year $ 9.1400 $ 9.3600 $ 9.7500 $ 9.0700 $ 9.9400
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income $ 0.5458 $ 0.3626 $ 0.5113 $ 0.5204 $ 0.5026
Net realized and unrealized gain
(loss) on investments (1.6678) 0.5524 0.0937 1.4896 (0.5226)
-------- -------- -------- -------- --------
Total income (loss) from
investment operations $(1.1220) $ 0.9150 $ 0.6050 $ 2.0100 $(0.0200)
-------- -------- -------- -------- --------
Less distributions declared to
shareholders:
From net investment income $(0.3880) $(0.4650) $(0.5200) $(0.5200) $(0.5500)
From realized gain -- (0.6544) (0.4750) (0.8100) (0.3000)
In excess of net realized gain
on investment transactions -- (0.0156) -- -- --
-------- -------- -------- -------- --------
Total distributions $(0.3880) $(1.1350) $(0.9950) $(1.3300) $(0.8500)
-------- -------- -------- -------- --------
NET ASSET VALUE -- End of year $ 7.6300 $ 9.1400 $ 9.3600 $ 9.7500 $ 9.0700
======== ======== ======== ======== ========
TOTAL RETURN<F3> (12.28)% 9.49% 6.60% 23.61% 0.15%
RATIOS/SUPPLEMENTAL DATA:
(to average daily net assets)
Interest expense<F1> -- 0.20% 0.29% 0.38% 0.08%
Other expenses<F1> 1.18% 1.11% 1.10% 1.13% 1.19%
Net investment income before
credit for taxes 4.90% 4.64% 5.43% 5.60% 5.49%
PORTFOLIO TURNOVER<F2> -- 63% 54% 69% 52%
NET ASSETS AT END OF YEAR
(000'S OMITTED) $445,133 $629,514 $564,912 $545,731 $491,253
LEVERAGE ANALYSIS:
Amount of debt outstanding
at end of period (000's omitted) -- --<F4> $ 47,045 $ 56,370 --
Average daily balance of debt
outstanding during period
(000's omitted) -- $ 29,906z<F4> $ 27,764 $ 25,901 $ 3,793
Average weekly balance of shares
outstanding during period
(000's omitted) -- 61,377<F4> 57,280 53,281 53,078
Average amount of debt per share
during period -- $ 0.487<F4> $ 0.485 $ 0.486 $ 0.071
<FN>
<F1>Includes the Fund's share of Total Return Portfolio's allocated expenses for the year ended December 31, 1994 and the period
from October 28, 1993, to December 31, 1993.
<F2>Portfolio Turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in
securities. The portfolio turnover for the period since the Fund transferred substantially all of its investable assets to the
Portfolio is shown in the Portfolio's financial statements which are included elsewhere in this report.
<F3>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 to be reinvested at the net asset value on
the record date.
<F4>The Leverage Analysis is for the period January 1 to October 27, 1993 when the Fund transferred the line of credit to the
Portfolio. The analysis for the year ended December 31, 1994 and the period October 28, 1993 to December 31, 1993 is shown in
the Portfolio's financial statements which are included elsewhere in this report. As of January 1, 1994, the Fund discontinued
the use of equalization accounting (see Note 1C).
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional Total Return Fund (the Fund) is a non-diversified entity of the
type commonly known as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund is a series in the Eaton Vance Total Return Trust.
On October 28, 1993, the Fund transferred substantially all of its investable
assets to the Total Return Portfolio (the Portfolio). Prior to this date the
Fund's name was Eaton Vance Total Return Trust. The Fund invests all of its
investable assets in interests in 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 (88.3% at December 31, 1994). 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 VALUATIONS -- Valuations of securities by the Portfolio is
discussed in Note 1 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. Prior to the Fund's investment in the Portfolio, the Fund
held its investments directly.
C. EQUALIZATION -- Prior to January 1, 1994, the Fund followed the accounting
practice known as equalization by which a portion of the proceeds from the sales
and costs of reacquistions of Fund shares was allocated to undistributed net
investment income. As a result, undistributed net investment income per share
was unaffected by sales or reacquistions of Fund shares. As of January 1, 1994,
the Fund discontinued the use of equalization. This change had no effect on the
Fund's net assets, net asset value per share, or its net increase or (decrease)
in net assets from operations. Discontinuing the use of equalization will result
in a simpler and more meaningful financial statement presentation. The
cumulative effect of the change was to decrease proceeds from the sales and
costs of reacquisitions of Fund shares and increase undistributed net investment
income previously reported through December 31, 1993 by $732,639.
D. 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, including any
net realized gain on investments, options and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary. At
December 31, 1994, the Fund, for federal income tax purposes, had a capital loss
carryover of $14,485,410, which will reduce the Fund's taxable income arising
from future net realized gain on investment transactions, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of the
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, 2002.
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization, are being amortized on the straight-line basis over five
years.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income and dividends to shareholders
are recorded on the ex-dividend date. Dividend income may include dividends that
represent returns of capital for federal tax purposes.
<PAGE>
G. 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) 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:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1994 1993
---------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sales 3,279,972 $ 26,885,455 9,640,765 $98,700,212
Issued to shareholders
electing to receive
payment of
distributions in Fund
shares 2,334,236 18,717,592 5,913,702 56,193,777
Redemptions (16,175,890) (129,209,101) (6,996,422) (70,832,834)
----------- ------------ ----------- -----------
Net increase
(decrease) (10,561,682) $ (83,606,054) 8,558,045 $84,061,155
=========== ============= ========= ===========
</TABLE>
-----------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investments in the Portfolio aggregated
$36,906,142 and $140,090,876 respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------------------------------
(4) SERVICE PLAN
The Fund adopted a Service Plan on July 7, 1993 designed to meet the
requirements of Rule 12b-1 under the Investment Company Act of 1940 and the
service fee requirements of the revised sales charge rule of The National
Association of Securities Dealers Inc. The Service Plan replaced the Fund's
distribution plan which became effective on July 1, 1987. The Service Plan
provides that the Fund may make service fee payments to the Principal
Underwriter, Eaton Vance Distributors, Inc., a subsidiary of Eaton Vance
Management, Authorized Firms or other persons in amounts not exceeding .25% of
the Fund's average daily net assets for any fiscal year. The Trustees have
implemented the Service Plan by authorizing the Fund to make quarterly service
fee payments to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed .25% of that portion of the Fund's average daily net assets
for any fiscal year which is attributable to shares of the Fund sold by such
persons and remaining outstanding for at least twelve months. Such payments are
made for personal services and/or the maintenance of shareholder accounts.
During the year ended December 31, 1994 the Fund provided for $948,661 under the
Plan to the Principal Underwriter and Authorized Firms.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------
To the Shareholders and Board of Trustees of EV Traditional Total Return Fund, a
series of Eaton Vance Total Return Trust:
We have audited the accompanying statement of assets and liabilities of EV
Traditional Total Return Fund (formerly Eaton Vance Total Return Trust), a
series of Eaton Vance Total Return Trust, as of December 31, 1994, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended. 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 as of
December 31, 1994 by correspondence with the custodian and brokers. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Traditional Total Return Fund, a series of Eaton Vance Total Return Trust, as of
December 31, 1994, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
- - ------------------------------------------------------------------------------
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS -- 93.4%
- - -------------------------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRIC UTILITIES -- 62.1%
American Electric Power Co. Inc. 200,000 $ 6,575,000
Baltimore Gas & Electric Co. 150,000 3,318,750
Carolina Power & Light Co. 750,000 19,968,750
Central & South West Corp. 479,994 10,859,864
Central Louisiana Electric Co. 326,800 7,720,650
Cinergy Corp. 1,250,250 29,224,594
Dominion Resources, Inc. 200,000 7,150,000
DPL Inc. 950,000 19,475,000
DQE, Inc. 400,000 11,850,000
Duke Power Co. 270,000 10,293,750
FPL Group, Inc. 560,000 19,670,000
General Public Utilities Corp. 320,000 8,400,000
IPALCO Enterprises, Inc. 350,000 10,500,000
Kansas City Power & Light Co. 181,900 4,251,913
LG & E Energy Corp. 125,000 4,609,375
New England Electric System 100,000 3,212,500
NIPSCO Industries, Inc. 400,000 11,900,000
Northern States Power Co. Minn. 322,800 14,203,200
Norweb Ord PLC 200,000 2,690,940
Ohio Edison Co. 200,000 3,700,000
PacifiCorp 583,200 10,570,500
PECO Energy Co. 200,000 4,900,000
Pinnacle West Capital Corp. 300,000 5,925,000
Portland General Corp. 350,000 6,737,500
Public Service Co. of New Mexico<F2> 565,300 7,348,900
Southern Co. 1,072,460 21,449,200
Teco Energy, Inc. 410,000 8,251,250
Union Electric Co. 346,500 12,257,438
United Illuminating Co. 110,200 3,250,900
Western Resources, Inc. 200,000 5,725,000
Wisconsin Energy Corp. 689,650 17,844,694
------------
$313,834,668
------------
OIL & GAS -- 5.4%
Amoco Corp. 165,000 $ 9,755,625
BP Prudhoe Bay Rty Tr Unit Ben Int. 437,000 7,429,000
Mobil Corp. 120,000 10,110,000
------------
$ 27,294,625
------------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
COMMON STOCKS -- (Continued)
- - -------------------------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- - -------------------------------------------------------------------------------------------------
REITS -- 18.5%
Apartment Investment & Management Co. Class A 200,000 $ 3,450,000
Associated Estates Realty Corp. 200,000 4,200,000
Avalon Properties, Inc. 165,000 $ 3,795,000
Bay Apartment Communities 213,400 4,294,675
Bradley Real Estate Trust 72,750 1,109,437
Cali Realty Corp. 150,000 2,400,000
Camden Properties Trust SBI 200,000 4,975,000
Columbus Realty Trust 140,000 2,590,000
Developers Diversified Realty Corp. 170,000 5,312,500
Duke Realty Investments, Inc. 40,000 1,130,000
Equity Residential Properties Trust 80,000 2,400,000
Health Care Property Investors, Inc. 140,000 4,217,500
Healthcare Realty Trust 350,000 7,350,000
LTC Properties, Inc. 490,000 6,492,500
Macerich Co. 175,000 3,740,625
Meditrust Sh Ben Int. 100,000 3,025,000
Mid America Apartment Communities, Inc. 164,500 4,400,375
Nationwide Health Properties, Inc. 320,000 11,440,000
Oasis Residential, Inc. 225,000 5,512,500
Post Properties Inc. 100,000 3,150,000
Simon Property Group, Inc. 150,000 3,637,500
Southwestern Property Trust, Inc. 180,000 2,205,000
Sun Communities Inc. 110,000 2,475,000
------------
$ 93,302,612
------------
TELEPHONE UTILITIES -- 6.9%
Ameritech Corp. 380,000 $ 15,342,500
Bell Atlantic Corp. 100,000 4,975,000
Southern New England
Telecommunications 50,000 1,606,250
Southwestern Bell Corp. 150,000 6,056,250
Tele Danmark A/S<F2> 63,000 1,606,500
Telecom Corp. New Zealand Ltd. ADR 100,000 5,137,500
------------
$ 34,724,000
------------
OTHER -- 0.5%
British Sky Broadcasting Group PLC ADR<F2> 25,000 $ 600,000
Sonat Inc. 71,000 1,988,000
------------
$ 2,588,000
------------
TOTAL COMMON STOCKS
(identified cost, $455,294,874) $471,743,905
------------
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
<CAPTION>
- - -------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 2.0%
- - -------------------------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
Freeport McMoRan Copper & Gold 40,000 $ 830,000
Kenetech Corp., 8.25s 200,000 3,075,000
Philippines Long Distance Telephone, 7s 112,000 6,062,000
------------
$ 9,967,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(identified cost, $10,549,225) $ 9,967,000
------------
<CAPTION>
- - -------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.1%
- - -------------------------------------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED)
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
IDB Communications Group, Inc.,
5s, 8/15/03 (identified cost, $858,750) $1,000 $ 762,500
------------
- - -------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 1.5%
- - -------------------------------------------------------------------------------------------------
U.S. Treasury Bill, 0s, 3/5/95<F1>
(identified cost, $7,696,456) $7,780 $ 7,703,600
------------
- - -------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS -- 1.5%
- - -------------------------------------------------------------------------------------------------
CXC Inc., 5.95s, 1/3/95 $3,499 $ 3,497,265
American Express Credit Corp.,
5.80s, 1/5/95 4,294 4,290,541
------------
TOTAL SHORT-TERM OBLIGATIONS, AT
AMORTIZED COST $ 7,787,806
------------
TOTAL INVESTMENTS -- 98.5%
(identified cost, $482,187,111) $497,964,811
OTHER ASSETS, LESS LIABILITIES -- 1.5% 7,602,081
------------
NET ASSETS -- 100.0% $505,566,892
------------
------------
<FN>
<F1>Collateral for futures held at December 31, 1994 (see Note 6)
<F2>Non-income producing security
</FN>
</TABLE>
The accompanying notes are an integral part
of the financial statements
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A)
(identified cost, $482,187,111) $497,964,811
Cash 2,597
Receivable for investments sold 8,994,384
Dividends receivable 2,364,639
Receivable for daily variation margin on financial
futures contracts 975,000
Deferred organization expenses (Note 1E) 16,027
Foreign tax reclaim receivable 25,565
Interest receivable 29,754
------------
Total assets $510,372,777
LIABILITIES:
Payable for investments purchased $4,775,774
Trustees fees payable 5,160
Custodian fee payable 8,403
Accrued expenses 16,548
----------
Total liabilities 4,805,885
------------
NET ASSETS applicable to investors' interest in Portfolio $505,566,892
------------
------------
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $491,941,692
Unrealized appreciation of investments and open futures
contracts (computed on the basis of identified cost) 13,625,200
------------
Total net assets $505,566,892
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------------
For the Year Ended December 31, 1994
----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 32,158,717
Interest income 1,330,065
-------------
Total income $ 33,488,782
Expenses --
Investment adviser fee (Note 3) $ 4,106,857
Compensation of trustees not members of the
investment adviser's organization
(Note 3) 20,687
Custodian fee (Note 3) 159,872
Interest expense 187,106
Commitment fee 143,450
Audit and legal fees 46,657
Printing and postage fees 14,129
Amortization of deferred organizational expenses
(Note 1E) 4,197
Miscellaneous 19,841
-----------
Total expenses 4,702,796
-------------
Net investment income $ 28,785,986
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) (identified cost basis) --
Investment transactions $(21,035,623)
Financial futures contracts 5,883,625
------------
Net realized loss on investments and financial
futures (identified cost basis) $(15,151,998)
Change in unrealized appreciation on investments and
financial futures contracts (89,492,365)
------------
Net realized and unrealized loss on investments (104,644,363)
-------------
Net decrease in net assets resulting from
operations $ (75,858,377)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1993<F1>
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 28,785,986 $ 5,227,429
Net realized loss on investment transactions and
financial futures contracts (15,151,998) (3,109,783)
Decrease in unrealized appreciation of investments (89,492,365) (31,858,504)
------------- -------------
Net decrease in net assets resulting from
operations $ (75,858,377) $ (29,740,858)
------------- -------------
Capital transactions --
Contributions $ 97,021,559 $ 700,057,818
Withdrawals (152,162,876) (33,850,394)
------------- -------------
Increase (decrease) in net assets resulting from
capital transactions $ (55,141,317) $ 666,207,424
------------- -------------
Total increase (decrease) in net assets $(130,999,694) $ 636,466,566
NET ASSETS:
At beginning of period 636,566,586 100,020
------------- -------------
At end of period $ 505,566,892 $ 636,566,586
------------- -------------
------------- -------------
<FN>
<F1>For the period from the start of business, October 28, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993<F2>
----------------- -----------------
<S> <C> <C>
RATIOS (As a percentage of average net assets):
Expenses 0.85% 0.91%<F1>
Net investment income 5.22% 4.57%<F1>
PORTFOLIO TURNOVER 107% 16%
LEVERAGE ANALYSIS:
Amount of debt outstanding at end of period (000's
omitted) -- --
Average daily balance of debt outstanding during
period (000 omitted) $ 3,137 $15,452
<FN>
<F1>Computed on an annualized basis.
<F2>For the period from the start of business, October 28, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Total Return Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a diversified open-end investment company which was
organized as a trust under the laws of the State of New York on May 1, 1992. The
Declaration of Trust permits the Trustees to issue beneficial interests in the
Portfolio. Investment operations began on October 28, 1993, with the acquisition
of net assets of $668,641,088 in exchange for an interest in the Portfolio by
one of the Portfolio's investors. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sales prices or, if there has been
no sale, at the mean between the closing bid and asked prices. Unlisted
securities are valued at the mean between the latest available bid and asked
prices. Options and financial futures contracts are valued at the last sale
price, as quoted on the principal exchange or board of trade on which such
options or contracts are traded or, in the absence of a sale, the mean between
the last bid and asked prices. Short-term obligations, maturing in 60 days or
less, are valued at amortized cost, which approximates value. Securities for
which market quotations are unavailable are appraised at their fair value as
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. 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 Code) in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investors' 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. OPTION ACCOUNTING PRINCIPLES -- Upon the writing of a covered call option, an
amount equal to the premium received by the Portfolio is included in the
Statement of Assets and Liabilities as a liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written in accordance with the Portfolio's policies on investment
valuations discussed above. Premiums received from writing call options which
expire are treated as realized gains. Premiums received from writing call
options which are exercised or are closed are added to or offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. The Portfolio, as writer of a call option, may have no control over
whether the underlying securities may be sold and, as a result, bears the market
risk of an unfavorable change in the price of the securities underlying the
written option.
D. FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities 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 the
daily fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. When the Portfolio
enters into a closing transaction, the Portfolio will realize for book purposes
a gain or loss equal to the difference between the value of the financial
futures contract to sell and the financial futures contract to buy. The
Portfolio's investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest rates, security prices, commodity
prices or currency exchange rates. Should interest rates, security prices,
commodity prices or currency exchange rates move unexpectedly, the Portfolio may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $574,395,813 and $620,810,869, respectively.
-----------------------------------------------------------------
(3) 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
manage- ment and investment advisory services rendered to the Portfolio. The fee
is based upon a percentage of average daily net assets. For the year ended
December 31, 1994, the fee was equivalent to 0.74% of the Portfolio's average
net assets for such period and amounted to $4,106,857. Except as to Trustees of
the Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their service to the Portfolio out of such
investment adviser fee. Investors Bank & Trust Company (IBT), an affiliate of
EVM and BMR, serves as custodian of the Portfolio. Pursuant to the custodian
agreement, IBT receives a fee reduced by credits which are determined based on
the average daily cash balances the Portfolio maintains with IBT. Certain of the
officers and Trustees of the Portfolio are officers and directors/trustees of
the above organizations.
-------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its 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. The Portfolio expects to use the proceeds
of the advances primarily for leveraging purposes. Borrowings by the Portfolio
under the Credit Agreement will not exceed the lesser of 1/3 of the market value
of the net assets of the Portfolio or $60,000,000. Interest is charged to each
portfolio 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 and portfolios at the end of each quarter. The average daily loan balance
for the year ended December 31, 1994 was $3,137,134 and the average interest
rate was 5.96%. The maximum borrowings outstanding at any month end during the
year ended December 31, 1994, was $26,083,000.
-------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1994, as computed on a federal income tax basis, are as
follows:
Aggregate cost $482,915,174
------------
------------
Gross unrealized appreciation $ 28,239,363
Gross unrealized depreciation 13,189,726
------------
Net unrealized appreciation $ 15,049,637
------------
------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
----------------------------------------------------------------------------
(6) 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. The notational 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 off-setting
transactions are considered.
A summary of obligations under these financial instruments at December 31,
1994 is as follows:
NET
FUTURES CONTRACT UNREALIZED
EXPIRATION DATE CONTRACTS POSITION DEPRECIATION
- - --------------- --------- -------- ------------
3/95 600 S&P 500 Futures Short $2,152,500
At December 31, 1994, the Portfolio has sufficient cash and/or securities to
cover margin requirements on open futures contracts.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- - --------------------------------------------------------------------------------
To the Trustees and Investors of Total Return Portfolio:
We have audited the accompanying statement of assets and liabilities of Total
Return Portfolio, including the portfolio of investments, as of December 31,
1994, the related statement of operations for the year then ended and the
statement of changes in net assets and supplementary data for the year ended
December 31, 1994, and for the period from the start of business, October 28,
1993, to December 31, 1993. 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, 1994 by correspondence with the custodian and brokers. 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, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of Total
Return Portfolio as of December 31, 1994, the results of its operations for the
year then ended, and the changes in its net assets and the supplementary data
for the year ended December 31, 1994, and for the period from the start of
business, October 28, 1993, to December 31, 1993, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
------------------------------------------------
INVESTMENT MANAGEMENT
EV TRADITIONAL OFFICERS TRUSTEES
TOTAL RETURN FUND M. DOZIER GARDNER DONALD R. DWIGHT
24 Federal Street President, Trustee President, Dwight
Boston, MA 02110 LANDON T. CLAY Partners, Inc.
Vice President, Chairman,
Trustee Newspapers of
EDWIN W. BRAGDON New England, Inc.
Vice President JAMES B. HAWKES
A. WALKER MARTIN Executive Vice
Vice President President,
JAMES L. O'CONNOR Eaton Vance
Treasurer Management
THOMAS OTIS SAMUEL L. HAYES, III
Secretary Jacob H. Schiff
WILLIAM J. AUSTIN, JR. Professor of
Assistant Treasurer Investment Banking,
JANET E. SANDERS Harvard
Assistant Treasurer University Graduate
and Assistant School of
Secretary Business
Administration
NORTON H. REAMER
President and
Director,
United Asset
Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Trust Company
JACK L. TREYNOR
Investment Adviser
and Consultant
-------------------------------------------
TOTAL RETURN OFFICERS TRUSTEES
PORTFOLIO M. DOZIER GARDNER DONALD R. DWIGHT
24 Federal Street President, Trustee President, Dwight
Boston, MA 02110 LANDON T. CLAY Partners, Inc.
Vice President, Chairman,
Trustee Newspapers of
EDWIN W. BRAGDON New England, Inc.
Vice President SAMUEL L. HAYES, III
JAMES B. HAWKES Jacob H. Schiff
Vice President, Professor of
Trustee Investment Banking,
A. WALKER MARTIN Harvard
Vice President University Graduate
JAMES L. O'CONNOR School of
Treasurer Business
THOMAS OTIS Administration
Secretary NORTON H. REAMER
WILLIAM J. AUSTIN, JR. President and
Assistant Treasurer Director,
JANET E. SANDERS United Asset
Assistant Treasurer Management
and Assistant Corporation
Secretary JOHN L. THORNDIKE
Director, Fiduciary
PORTFOLIO MANAGER Trust Company
TIMOTHY O'BRIEN JACK L. TREYNOR
Investment Adviser
and Consultant
<PAGE>
INVESTMENT ADVISER OF
TOTAL RETURN PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL
TOTAL RETURN FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
This report must be preceded or accompanied by a
current prospectus which contains more complete
information on the Fund, including its
distribution plan, sales charges and expenses.
Please read the prospectus carefully before you
invest or send money.
EV TRADITIONAL TOTAL RETURN FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-TMSRC
EV TRADITIONAL
TOTAL RETURN
FUND
[Photograph]
Annual Shareholder Report
December 31, 1994
