<PAGE>
Mutual
EATON VANCE Funds
for the
MUTUAL FUNDS 21st
Century
INVESTMENT ADVISER OF
TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research
24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF
EV MARATHON TAX-MANAGED GROWTH 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
89 South Street, P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group, Inc.
BOS725, P.O. Box 1559
Boston, MA 02104
Eaton Vance
Marathon
Tax-Managed
Growth Fund
Semi-Annual Shareholder Report
April 30, 1996
EV Marathon Tax-Managed Growth Fund
24 Federal Street
Boston, MA 02110
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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.
- --------------------------------------------------------------------------------
M-TMGSA-6/96
EATON VANCE
MARATHON
TAX-MANAGED
GROWTH FUND
--------------------------------
SEMI-ANNUAL SHAREHOLDER REPORT
APRIL 30, 1996
--------------------------------
EV MARATHON TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
<PAGE>
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TO SHAREHOLDERS
We are pleased to welcome shareholders of EV Marathon Tax-Managed Growth Fund
with this first shareholder report. The Fund had a total return of 2.1% during
the period from the beginning of operations on March 28, 1996, through April 30,
1996. That return was the result of a rise in net asset value per share to
$10.21 on April 30, 1996 from $10.00 on March 28, 1996. It does not include the
effect of the Fund's contingent deferred sales charge on certain redeeming
shareholders. For comparison, the S&P 500 Stock Index - an unmanaged index of
common stocks - had a total return of -0.7% for the same period.
INVESTORS POUR $99 BILLION INTO STOCK FUNDS IN FIRST FOUR MONTHS OF 1996
ALONE...
Most investors agree that, over the long-term, common stocks have afforded the
best returns among all asset classes. While there's no absolute assurance of
future returns, stocks give investors an ownership stake in growing enterprises
and the possibility to participate in the success of new products and expanding
markets. Increasingly, investors have been drawn to growth stocks.
Interestingly, in the first four months of this year, investors poured a
staggering $99 billion into equity mutual funds, according to the Investment
Company Institute, a prominent mutual fund trade group.
DESPITE HIGHER POTENTIAL RETURNS, MANY INVESTORS FACE THE PROBLEMS OF A
LARGER-THAN-EXPECTED TAX BITE...
While the market has historically rewarded equity investors - especially over
the long-term - they may nonetheless face an unexpectedly difficult hurdle: the
impact of taxes on their investment returns. As a result, taxes can have a
devastating effect on even the most successful investor. Dividends and
short-term gains may be taxed as high as 39.6% at present-day federal tax rates.
Even long-term capital gains face a significant tax burden, 28% at the present
tax rate. State taxes may further reduce an investor's return.
TAX-MANAGED GROWTH PORTFOLIO: SEEKING TO REDUCE TAXES WHILE INCREASING INVESTOR
RETURNS...
The fact is, no stock fund is completely tax-free. Tax-Managed Growth Portfolio,
however, is managed with tax considerations in mind. Naturally, past trends are
no guarantee of future performance. But applying sound tax strategies to a
portfolio of high-quality growth stocks has historically delivered good
investment results.
In the pages that follow, portfolio manager Duncan Richardson discusses the
Fund's structure and the unique strategies that focus on increasing investors'
after-tax returns.
Sincerely,
/s/ James B. Hawkes
[Photo of James B. Hawkes] -------------------------------
James B. Hawkes
President
June 10, 1996
<PAGE>
MANAGEMENT DISCUSSION
An interview with Duncan W. Richardson, Vice President and Portfolio Manager of
Tax-Managed Growth Portfolio.
Q. DUNCAN, HOW HAVE YOU STRUCTURED THE PORTFOLIO IN ITS FIRST MONTHS OF
OPERATION?
A. There are two major considerations with respect to managing this Portfolio.
First and foremost, as the name implies, this is a growth fund. The
Portfolio's investments are dominated by large cap growth stocks. These are
companies that, in our view, are poised to post earnings growth well above
that of the market as a whole and to compound those growth rates over the
long haul. Because stock prices tend to follow earnings, we believe these
growth-oriented companies have the potential to provide significant long-term
gains.
Second, while maintaining a portfolio focused on growth stocks, the Fund is
pursuing a series of strategies aimed at limiting tax liabilities. Those
broad strategies include reducing the realization and distribution of
capital gains and the distribution of income to shareholders.
We believe that the combination of long-term investments in growth companies
with an eye toward the tax consequences of portfolio decisions is a
practical means of building wealth over time.
Q. LET'S FIRST FOCUS ON SOME OF THE FUND'S TAX-REDUCTION STRATEGIES. WHAT DO
THEY ENTAIL?
A. We reduce capital gains distributions by taking
a multi-year investment approach to our
portfolio holdings. Studies have shown that a
short-term focus - characterized by repeated
buying and selling - is inferior to a sound, [Photo of
long-term strategy. We are investors, not Duncan W. Richardson]
traders. It is impossible to consistently time
the market accurately. This applies to trading
stocks in the near-term, as well. Often as not,
short-term trading is driven more by emotions
and news events than by long-term fundamentals. Duncan W. Richardson
The tax impact of even successful short-term
trading can dramatically reduce an investor's
actual returns.
In contrast, a long-term discipline eliminates the problem of timing the
market and allows a company's long-term growth trends to work for investors.
And equally as important, a long-term approach sharply reduces portfolio
turnover, the distribution of any capital gains and, subsequently, the taxes
on returns.
Q. WHAT ABOUT THOSE OCCASIONS WHEN YOU MUST SELL SECURITIES?
A. In those instances when it is necessary to sell appreciated securities, we
will seek to sell shares that qualify for long-term capital gains treatment.
That will afford the Fund's shareholders a more favorable tax treatment than
that for short-term gains. We also have a discipline for selling investments
that don't perform as anticipated. Our sell discipline has the dual benefit
of preserving capital and reducing distributed gains to shareholders.
Q. AND WHAT ABOUT REDUCING TAXABLE INCOME?
A. Income dividends must be distributed to shareholders and are taxed as
ordinary income, which is very burdensome. The Portfolio generally
concentrates on companies that are in a fast-growth phase and typically pay
little or no dividends. Dividends that are double-taxed - once at the
corporate level and again when distributed - are tax-inefficient for growing
companies. Instead, our growth companies tend to reinvest earnings into their
businesses. We prefer our investments to favor expanding capacity or
enhancing their technology over the paying of dividends. This growth-minded
approach helps the Portfolio build value over the longer-term while reducing
current taxable income.
A CONTINUING EMPHASIS ON
ABOVE-AVERAGE EARNINGS GROWTH . . .
THE PORTFOLIO'S 10 LARGEST HOLDINGS*:
Company Business
Hewlett Packard Co. .................... Computers/business equip.
Pfizer Inc. ............................ Health care
Intel Corp. ............................ Electronics
PepsiCo Inc. ........................... Beverages
Reuters Holdings PLC, ADR .............. Business services
Johnson & Johnson ...................... Health care
Albertson's, Inc. ...................... Retail
Coca-Cola Co. .......................... Beverages
Exxon Corp. ............................ Oil
Dover Corp. ............................ Construction/RE
*The holdings above represent 34.4% of the Portfolio's investments at 4/30/96.
Q. IN WHAT INDUSTRIES HAVE YOU BEEN FOCUSING THE PORTFOLIO'S INVESTMENTS?
A. Under the umbrella of a large growth stock universe, we have pursued several
major themes: the globalization of U.S. industry; the growth possibilities
within the health care sector; and expanding opportunities in electronics and
technology.
Accordingly, the Portfolio's three largest sector weightings at April 30,
1996, were health care, computer and business equipment, and beverages. Each
of these industries has generated major successes, and each is a critical
element of the global economy. These industries are therefore likely to
continue playing a significant role in the Portfolio.
Q. WHAT ARE SOME OF THE PORTFOLIO'S LARGEST INDIVIDUAL INVESTMENTS?
A. Pfizer, Inc. and Johnson & Johnson are the Portfolio's largest health care
holdings. The drug sector was under pressure in 1994 because of fears of a
drastic overhaul of the health care system which would have negatively
impacted drug company revenues. However, with those fears having abated, drug
stocks have rebounded significantly in the past year. Pfizer is among the
leading U.S. drug companies, boosted by the strength of its impressive lineup
of cardiovascular treatments. Johnson & Johnson is the world's largest health
care company and is a major participant in the consumer, professional and
pharmaceutical segments of industry.
Q. AND SOME EXAMPLES IN THE OTHER MAJOR SECTORS?
A. In the electronics sector, Intel Corp. is the world's leading chip maker. The
company is the major beneficiary of the increasing usage of computers around
the globe. Intel provides the bulk of the value added in personal computers,
which should remain a growth industry into the next century.
In beverages, the Portfolio has large investments in Coca-Cola Co. and
PepsiCo Inc. While these beverage giants continue their fierce competition in
the U.S., each is expanding its brands abroad, especially in emerging
markets.
Q. YOU'VE DISCUSSED THE TAX-MANAGED STRATEGIES OF THE PORTFOLIO. FOR WHAT KIND
OF INVESTOR IS TAX-MANAGED GROWTH PORTFOLIO ESPECIALLY WELL-SUITED?
A. Broadly speaking, the Portfolio is designed for tax-conscious investors who
want meaningful growth while reducing the effect of taxes on their investment
returns. That includes a wide range of investors. For example, those who want
to avoid the large, year-end capital gains distributions they've experienced
with other stock funds. Or, grandparents who want to set aside assets for a
grandchild's education but don't want to lose control of those assets, as
they eventually do under the Uniform Gift to Minors Act. Or, investors
looking for an alternative or companion to an IRA account. The Portfolio is
very versatile in that it provides a vehicle to meet a range of investor
needs on a tax-efficient basis.
Q. IN CLOSING, DUNCAN, WHAT IS YOUR INVESTMENT OUTLOOK FOR THE YEAR AHEAD?
A. We use bottom-up, company-by-company research to focus on promising growth
stocks. Therefore, while we're not oblivious to the economic cycle, it is not
our first concern. A broad range of industries - including those I
highlighted earlier - present opportunities for growth, even in a more slowly
growing economy. I believe that we have targeted many of the stocks that will
be long-term beneficiaries of major secular trends. And together with our
time-tested, tax-managed strategies, I believe the Fund should continue to
provide favorable long-term returns.
<PAGE>
EV MARATHON TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investment in Tax-Managed Growth Portfolio (Portfolio), at
value (Note 1A) $1,753,021
Receivable for Fund shares sold 144,440
Deferred organization expenses (Note 1D) 41,839
----------
Total assets $1,939,300
LIABILITIES:
Payable for Fund shares redeemed $87,648
Accrued organization expense 42,000
Accrued expenses 2,212
-------
Total liabilities 131,860
----------
NET ASSETS for 177,082 shares of beneficial interest outstanding $1,807,440
==========
SOURCES OF NET ASSETS:
Paid-in capital $1,784,715
Accumulated net realized gain on investment
transactions (computed on the basis of identified
cost) 428
Unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 24,895
Accumulated net investment loss (2,598)
----------
Total $1,807,440
==========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($1,807,440 / 177,082 shares of beneficial interest
outstanding) $10.21
======
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
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For the period from the start of business,
March 28, 1996, to April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Income --
Dividend income allocated from Portfolio $ 218
Interest income allocated from Portfolio 77
Expenses allocated from Portfolio (259)
-------
Total investment income $ 36
Expenses --
Distribution fees (Note 5) $ 329
Printing and postage 1,800
Amortization of organization expenses (Note 1D) 161
Miscellaneous 344
-------
Total expenses 2,634
-------
Net investment loss $(2,598)
REALIZED AND UNREALIZED GAIN FROM PORTFOLIO:
Net realized gain on investment transactions (identified
cost basis) $ 428
Change in unrealized appreciation of investments 24,895
-------
Net realized and unrealized gain on investments 25,323
-------
Net increase in net assets from operations $22,725
=======
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
For the period from the start of business,
March 28, 1996, to April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (2,598)
Net realized gain on investments 428
Unrealized appreciation of investments 24,895
-----------
Net increase in net assets from operations $ 22,725
-----------
Transactions in shares of beneficial interest (Note 4) --
Proceeds from sale of shares $ 1,834,815
Cost of shares redeemed (50,110)
-----------
Net increase from Fund share transactions $ 1,784,705
-----------
Total increase in net assets $ 1,807,430
NET ASSETS:
At beginning of period 10
-----------
At end of period (including accumulated net investment loss of
$2,598) $ 1,807,440
===========
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
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For the period from the start of business,
March 28, 1996, to April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
NET ASSET VALUE, beginning of period $ 10.000
--------
INCOME FROM OPERATIONS:
Net investment loss $ (0.015)
Net realized and unrealized gain on investments 0.225
--------
Total income from operations $ 0.210
--------
NET ASSET VALUE, end of period $ 10.210
========
TOTAL RETURN (1) 2.10%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets 5.96%+
Ratio of net investment loss to average
net assets (5.36%)+
Net assets, end of period (000's omitted) $ 1,807
+Annualized.
(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.
See notes to financial statements
<PAGE>
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(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Tax-Managed Growth Fund (the Fund) is a diversified series of Eaton
Vance Mutual Funds Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund invests all of its investable assets in interests
in Tax-Managed Growth Portfolio (the Portfolio), a New York Trust, having the
same investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio (0.8% at April 30, 1996). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the portfolio of investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATION -- Valuation of the 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 determined in accordance with generally accepted accounting
principles.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income, and any
net realized capital gains. Accordingly, no provision for federal income or
excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
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.
F. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to
April 30, 1996 and for the 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 the fair presentation of the financial statements.
- ------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
It is the present policy of the Fund to make at least one distribution annually
(normally in December) of all or substantially all of the investment income
allocated to the Fund by the Portfolio, less the Fund's direct and allocated
expenses and at least one distribution annually of all or substantially all of
the net realized capital gains (reduced by any available capital loss
carryforwards from prior years) allocated by the Portfolio to the Fund, if any.
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the net asset value per share as of the close of business on
the record date. The Fund distinguishes between distributions on a tax basis
and a financial reporting basis. Generally accepted accounting principles
require that only distributions in excess of tax basis earnings and profits be
reported in the financial statements as a return of capital. Differences in
the recognition or classification of income between the financial statements
and tax earnings and profits which result in temporary over distributions for
financial statement purposes are classified as distributions in excess of net
investment income or accumulated net realized gains. Permanent differences
between book and tax accounting relating to distributions are reclassified to
paid-in capital.
- ------------------------------------------------------------------------------
(3) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM. See Note 2 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report. Except as to
Trustees of the Fund who are not members of EVM's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
management fee. Certain officers and Trustees of the Fund and the Portfolio are
officers and directors/trustees of the above organization (Note 5).
- ------------------------------------------------------------------------------
(4) 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 for the period from the start of business March 28,
1996 to April 30, 1996 were as follows:
Sales 182,088
Issued to shareholders electing to receive payments of
distributions in Fund shares --
Redemptions (5,006)
-------
Net increase 177,082
=======
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(5) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay the
Principal Underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to
1/365 of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no outstanding
Uncovered Distribution Charges, which are equivalent to the sum of (i) 5% of the
aggregate amount received by the Fund for shares sold plus, (ii) distribution
fees calculated by applying the rate of 1% over the prevailing prime rate to the
outstanding balance of Uncovered Distribution Charges of EVD reduced by the
aggregate amount of contingent deferred sales charges (see Note 6) and daily
amounts theretofore paid to EVD. The amount payable to EVD with respect to each
day is accrued on such day as a liability of the Fund and, accordingly, reduces
the Fund's net assets. The Fund paid $329 to EVD for the period from the start
of business March 28, 1996 to April 30, 1996, representing 0.75% of average
daily average net assets. At April 30, 1996, the amount of Uncovered
Distribution Charges of EVD calculated under the Plan was approximately $76,000.
In addition, the Plan authorizes the Fund to make payments of service fees to
the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for each fiscal year. The
Trustees have initially implemented the Plan by authorizing the Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.25% per annum of the Fund's average
daily net assets based on the value of Fund shares sold by such persons and
remaining outstanding for at least one year. Service fee payments will be made
for personal services and/or the maintenance of shareholder accounts. Service
fees are separate and distinct from the sales commissions and distribution fees
payable by the Fund to EVD, and, as such, are not subject to automatic
discontinuance where there are no outstanding Uncovered Distribution Charges of
EVD. The Fund expects to begin accruing for its service fee payments during the
quarter ending June 30, 1997.
Certain officers and Trustees of the Fund are officers or directors of EVD.
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(6) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon
the lower of net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gain distributions. The CDSC is imposed at declining rates that begin at 5% in
the first and second year of redemption after purchase, declining one
percentage point each year thereafter. No CDSC is levied on shares which have
been sold to EVM or its affiliates or to their respective employees or
clients. CDSC charges are paid to EVD to reduce the amount of Uncovered
Distribution Charges calculated under the Fund's Distribution Plan. CDSC
charges received when no Uncovered Distribution Charges exist will be retained
by the Fund. EVD received no CDSC paid by shareholders for the period ended
April 30, 1996.
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(7) INVESTMENT TRANSACTIONS
Increases in the Fund's investment in the Portfolio aggregated $1,727,662. There
were no decreases in the Fund's investment in the Portfolio.
<PAGE>
--------------------------------
TAX-MANAGED GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
(UNAUDITED)
- ------------------------------------------------------------------------------
COMMON STOCKS - 96.4%
- ------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- ------------------------------------------------------------------------------
ADVERTISING 1.5%
Interpublic Group Cos. 66,000 $ 3,085,500
------------
AEROSPACE/DEFENSE - 4.3%
Boeing Co. 60,370 $ 4,957,886
Raytheon 80,000 4,050,000
------------
$ 9,007,886
------------
BEVERAGES - 7.0%
Anheuser-Busch Cos., Inc. 35,820 $ 2,404,418
Coca-Cola Co. 67,206 5,477,289
PepsiCo Inc. 106,985 6,793,547
------------
$ 14,675,254
------------
BUSINESS PRODUCTS AND SERVICES - 5.2%
Manpower Inc. 110,000 $ 4,070,000
Reuters Holdings PLC, ADR 100,420 6,790,903
------------
$ 10,860,903
------------
CHEMICALS - 1.4%
Monsanto Co. 19,336 $ 2,929,404
------------
COMPUTER & BUSINESS EQUIPMENT - 7.0%
Digital Equipment Corp.* 8,325 $ 497,419
International Business Machines 14,400 1,548,000
Hewlett-Packard Co. 118,570 12,553,599
------------
$ 14,599,018
------------
CONSTRUCTION AND REAL ESTATE - 2.5%
Dover Corp. 101,580 $ 5,231,370
------------
CONSUMER PRODUCTS - 1.9%
Procter & Gamble Co. 48,000 $ 4,056,000
------------
COSMETICS AND TOILETRIES - 2.0%
International Flavors & Fragrances, Inc. 88,101 $ 4,327,962
------------
HEALTH CARE - 14.1%
Astra AB - Series A 80,000 $ 3,548,576
Bristol-Myers Squibb Co. 29,000 2,385,250
Genentech Inc.* (Redeemable Common) 16,500 872,438
Johnson & Johnson 69,575 6,435,688
Merck & Co., Inc. 72,045 4,358,722
Pfizer Inc. 144,952 9,983,569
SmithKline Beecham PLC 37,520 2,026,080
------------
$ 29,610,323
------------
ELECTRONICS - 6.0%
AMP Inc. 61,530 $ 2,753,467
Intel Corp. 104,278 7,064,835
Texas Instruments Inc. 48,000 2,712,000
------------
$ 12,530,302
------------
FINANCIAL - MISC. - 0.9%
Federal National Mortgage Association 62,620 $ 1,917,738
------------
FINANCIAL SERVICES - 2.4%
American Express Co. 56,798 $ 2,754,703
Marsh & McLennan Cos., Inc. 24,000 2,256,000
------------
$ 5,010,703
------------
FOOD PROCESSING - 1.5%
Earthgrains Co. 1,433 $ 46,387
McCormick & Co., Inc., Non-voting 145,120 3,228,920
------------
$ 3,275,307
------------
FOREST PRODUCTS - 2.0%
Kimberly-Clark Corp. 57,310 $ 4,162,139
------------
INDUSTRIAL EQUIPMENT - 0.5%
Parker Hannifin Corp. 22,369 $ 945,090
------------
INSTRUMENTATION AND CONTROLS - 1.7%
Dionex Corp.* 100,000 $ 3,662,500
------------
INSURANCE - 5.1%
American International Group Inc. 50,625 $ 4,625,859
General Re Corp. 31,920 4,560,570
St. Paul Cos., Inc. 27,620 1,467,313
------------
$ 10,653,742
------------
MACHINERY AND EQUIPMENT - 2.9%
Dexter Corp. 47,829 $ 1,285,404
Gould Pumps, Inc. 78,830 1,832,797
Tecumseh Products Co. Class B 13,320 705,960
Tecumseh Products Co. Class A 39,960 2,257,740
------------
$ 6,081,901
------------
MEDICAL PRODUCTS - 1.3%
Baxter International Inc. 23,950 $ 1,059,787
Sofamor/Danek Group, Inc.* 50,000 1,637,500
------------
$ 2,697,287
------------
METALS & MINING - 0.7%
Nucor Corp. 25,000 $ 1,406,250
------------
MISCELLANEOUS - 0.0%
Schweitzer-Maudit International Inc. 5,731 $ 155,453
------------
OIL - 3.8%
Atlantic Richfield Co. 6,880 $ 810,120
Exxon Corp. 63,774 5,420,790
Andarko Petroleum Corp. 29,000 1,689,250
------------
$ 7,920,160
------------
OIL & GAS - EQUIPMENT & SERVICE - 3.6%
Baker Hughes Inc. 39,234 $ 1,245,679
Dresser Industries, Inc. 79,800 2,543,625
Schlumberger Ltd. 42,819 3,778,777
------------
$ 7,568,081
------------
PAPER & FOREST PRODUCTS - 0.5%
Champion International Corp. 1,438 $ 69,383
Weyerhaeuser Co. 19,380 959,310
------------
$ 1,028,693
------------
PHOTOGRAPHIC PRODUCTS - 1.4%
Eastman Kodak Co. 37,181 $ 2,844,347
------------
PRINTING & BUSINESS FORMS - 1.8%
Bowne & Co., Inc. 91,770 $ 1,651,860
Donnelley (R.R.) & Sons Co. 47,896 1,724,256
Moore Corp., Ltd. 19,075 348,119
------------
$ 3,724,235
------------
PUBLISHING AND PRINTING - 3.1%
Dun & Bradstreet Corp. 21,098 $ 1,284,341
Harcourt General, Inc. 50,000 2,200,000
Houghton Mifflin Co. 63,700 2,954,087
------------
$ 6,438,428
------------
RESTAURANTS - 1.6%
McDonald's Corp. 72,000 $ 3,447,000
------------
RETAIL - 4.6%
Albertson's, Inc. 156,048 $ 6,007,848
Wal-Mart Stores, Inc. 148,700 3,550,213
------------
$ 9,558,061
------------
RETAIL - SPECIALTY & APPAREL - 1.9%
Home Depot, Inc. (The) 40,000 $ 1,895,000
Toys "R" Us, Inc. 72,000 2,007,000
------------
$ 3,902,000
------------
TRANSPORTATION - 2.2%
CSX Corp. 15,270 $ 782,587
Flightsafety International Ltd. 15,000 830,625
Union Pacific Corp. 44,530 3,033,606
------------
$ 4,646,818
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $28,531,980) $201,959,855
------------
- --------------------------------------------------------------------------
SHORT-TERM OBLIGATION - 3.1%
- --------------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED) VALUE
- --------------------------------------------------------------------------
Ford Motor Credit Corp., 5.27%
due 5/01/96, at amortized cost $ 6,400 $ 6,400,000
------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $34,931,980) - 99.5% $208,359,855
OTHER ASSETS, LESS LIABILITIES - 0.5% 1,084,812
------------
NET ASSETS - 100% $209,444,667
============
*Non-income producing security.
See notes to financial statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$34,931,980) $208,359,855
Cash 908,206
Dividends and interest receivable 170,736
Deferred organization expenses (Note 1C) 6,280
Other assets 8,360
------------
Total assets $209,453,437
LIABILITIES:
Payable to affiliate --
Trustees' fees $1,104
Accrued expenses 7,666
------
Total liabilities 8,770
------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $209,444,667
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $ 36,016,792
Unrealized appreciation of investments (computed on
the basis of identified cost) 173,427,875
------------
Total $209,444,667
============
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995, to April 30, 1996
(Unaudited)
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding tax of
$7,541) $ 864,332
Interest 47,216
-----------
Total income $ 911,548
Expenses --
Investment adviser fee (Note 2) $ 356,359
Compensation of Directors not members of the
Investment Adviser's organization (Note 2) 3,293
Custodian fees 24,502
Amortization of organization expenses (Note 1C) 570
Miscellaneous 712
-----------
Total expenses 385,436
-----------
Net investment income $ 526,112
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on
the basis of identified cost $ 1,907,186
Increase in unrealized appreciation of
investments 12,138,526
-----------
Net realized and unrealized gain on
investments 14,045,712
-----------
Net increase in net assets from
operations $14,571,824
===========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995, to April 30, 1996
(Unaudited)
- ------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
From operations --
Net investment income $ 526,112
Net realized gain on investments 1,907,186
Increase in unrealized appreciation of investments 12,138,526
-----------
Net increase in net assets from operations $ 14,571,824
-----------
Capital transactions --
Contributions $197,452,649
Withdrawals (2,679,816)
-----------
Increase in net assets from capital transactions $194,772,833
-----------
Total increase in net assets $209,344,657
NET ASSETS:
At beginning of period 100,010
-----------
At end of period $209,444,667
============
SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995, to April 30, 1996
(Unaudited)
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Expenses 0.68%+
Net investment income 1.35%+
PORTFOLIO TURNOVER 0%
+Annualized.
See notes to financial statements
<PAGE>
--------------------------------
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Tax-Managed Growth Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company.
The Portfolio, which was organized as a trust under the laws of the State of
New York on December 1, 1995, seeks to provide long-term after-tax returns by
investing in a diversified portfolio of equity securities. The Declaration of
Trust permits the Trustees to issue interests in the Portfolio. Investment
operations began on December 1, 1995, with the acquisition of investments with
a value of $115,586,248, including unrealized appreciation of $96,618,064, in
exchange for an interest in the Portfolio by one of the Portfolio's investors.
During the period, additional investors contributed securities with a value of
$77,830,309, including unrealized appreciation of $64,671,645. The following
is a summary of the significant accounting policies of the Portfolio. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Futures positions on securities or
currencies are generally valued at closing settlement prices. Unlisted or
listed securities for which closing sale prices are not available are valued
at the mean between the latest bid and asked prices. Short-term debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost. Other fixed income and debt securities, including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of valuations furnished by a pricing service.
Investments for which valuations or market quotations are unavailable are
valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
B. FEDERAL TAXES -- The Portfolio is treated as a partnership for Federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes on its share of such
income. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements, (under the Internal Revenue Code), in order
for its investors to satisfy them. The Portfolio will allocate, at least
annually among its investors, each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit.
C. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
D. FUTURES CONTRACTS -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit either in cash or securities an amount
("initial margin") equal to a certain percentage of the purchase price indicated
in the financial futures contract. Subsequent payments are made or received by
the Portfolio ("margin maintenance") each day, dependent on daily fluctuations
in the value of the underlying security, and are recorded for book purposes as
unrealized gains or losses by the Portfolio. The Portfolio's investment in
financial futures contracts is designed to hedge against anticipated future
changes in price of current or anticipated portfolio positions. Should prices
move unexpectedly, the Portfolio may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. However, if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as the Portfolio is informed of the ex-
dividend date. Interest income is recorded on the accrual basis.
F. 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.
G. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to
April 30, 1996 and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the Portfolio's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
- ------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR) a
wholly-owned subsidiary of Eaton Vance Management (EVM) as compensation for
management and investment advisory services rendered to the Portfolio. Under the
advisory agreement, BMR receives a monthly advisory fee of 5/96 of 1% (0.625%
annually) of the average daily net assets of the Portfolio up to $500,000,000,
and at reduced rates as daily net assets exceed that level. For the period from
the start of business, December 1, 1995, to April 30, 1996 the adviser fee was
0.625% of average net assets. Except as to Trustees of the Portfolio who are not
members of EVM's organization, officers and Trustees receive remuneration for
their services to the Portfolio out of such investment adviser and
administrative fees. Certain of the officers and Trustees of the Portfolio are
officers or directors/trustees of the above organizations.
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $54,486 and $96,714, respectively.
- ------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT
The cost and unrealized appreciation (depreciation) in value of the
investments owned at April 30, 1996, as computed on a federal income tax
basis, are as follows:
Aggregate cost $ 34,931,980
============
Gross unrealized appreciation $173,427,875
Gross unrealized depreciation --
-----------
Net unrealized appreciation $173,427,875
============
- ------------------------------------------------------------------------------
(5) FINANCIAL INSTRUMENTS
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
The Portfolio did not have any open obligations under these financial
instruments at April 30, 1996.
- ------------------------------------------------------------------------------
(6) 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. Borrowings will be made by the
Portfolio solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. 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 Portfolio did not have
any significant borrowings or allocated fees during the period.
<PAGE>
INVESTMENT MANAGEMENT
MARATHON OFFICERS INDEPENDENT TRUSTEES
TAX-MANAGED M. DOZIER GARDNER DONALD R. DWIGHT
GROWTH President, Trustee President, Dwight Partners, Inc.
24 Federal JAMES B. HAWKES Chairman, Newspapers of
Street Vice President, New England, Inc.
Boston, MA Trustee SAMUEL L. HAYES, III
02110 H. DAY BRIGHAM, JR. Jacob H. Schiff Professor of
Vice President Investment Banking, Harvard University
WILLIAM H. AHERN, JR. Graduate School of Business
Vice President Administration
MICHAEL B. TERRY NORTON H. REAMER
Vice President President and Director, United Asset
JAMES L. O'CONNOR Management Corporation
Treasurer JOHN L. THORNDIKE
THOMAS OTIS Director, Fiduciary Company
Secretary Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
------------------------------------------------------------
TAX-MANAGED OFFICERS INDEPENDENT TRUSTEES
GROWTH LANDON T. CLAY DONALD R. DWIGHT
PORTFOLIO President, Trustee President, Dwight Partners, Inc.
24 Federal JAMES B. HAWKES Chairman, Newspapers of New England, Inc.
Street Vice President SAMUEL L. HAYES, III
Boston, MA DUNCAN W. RICHARDSON Jacob H. Schiff Professor of
02110 Vice President and Investment Banking, Harvard University
Portfolio Manager Graduate School of Business Administration
JAMES L. O'CONNOR NORTON H. REAMER
Treasurer President and Director, United Asset
THOMAS OTIS Management Corporation
Secretary JOHN L. THORNDIKE
Director, Fiduciary Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
