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Investing
for the
21st
EATON VANCE
============== Century
Mutual Funds
[Photo of Statue of Liberty]
Annual Report October 31, 1997
[Photo of Wall Street Sign]
EV TRADITIONAL TAX-MANAGED GROWTH FUND
Eaton Vance Global Management - Global Distribution
[Photo of IRS Form]
T R A D I T I O N A L
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EV Traditional Tax-Managed Growth Fund as of October 31, 1997
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LETTER TO SHAREHOLDERS
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[Photo of James B. Hawkes]
During the year ended October 31, 1997, EV Traditional Tax-Managed Growth Fund
had a total return of 31.9%.1 This return resulted from an increase in net asset
value to $14.68 per share on October 31, 1997 from $11.17 per share on October
31, 1996 and the reinvestment of $0.047 per share in income dividends. The
Fund's performance compared favorably to the average total return for mutual
funds in the Lipper Growth Funds Category, which was 27.3% during the period.*
In 1997, record highs in the stock market have been accompanied by an increase
in volatility...
Over the past year, the sustained growth of the U.S. economy and low inflation
have produced a near-perfect investment environment in which prices of large
capitalization stocks have soared to record levels. An increase in volatility
has accompanied higher stock valuations, however. Within a six-week period in
March and April, the S&P 500 Index* declined almost 10% and then fully recovered
to reach new record highs. In August, the S&P 500 declined almost 7% but again
recovered this loss by the end of September. In late October, news of turmoil in
several Asian economies precipitated a sharp decline of over 10% in less than a
week, but the market again recovered this loss.
...Further emphasizing the importance of tax-efficient investing...
An increase in stock market volatility can lead to higher turnover -- and,
subsequently, higher taxable distributions to shareholders -- in
actively-managed mutual funds that do not focus specifically on tax efficiency.
The goal of this Fund is to provide high after-tax returns, and its management
employs a style that is consistent with this objective. While volatility in the
stock market can be disconcerting, Eaton Vance recognizes that it is a normal
and even healthy part of the investment process, and that it is always important
to take a long-term view. In the pages that follow, Portfolio Manager Duncan W.
Richardson discusses the past 12 months and offers his outlook for the year
ahead.
Sincerely,
/S/ James B. Hawkes
James B. Hawkes,
President
December 8, 1997
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Performance(2)
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Average Annual Total Returns (at net asset value)
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One Year 31.9%
Life of Fund (3/28/96) 27.4
SEC Average Annual Total Returns (including maximum 5.75% sales charge)
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One Year 24.3%
Life of Fund (3/28/96) 22.7
Ten Largest Equity Holdings3
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Home Depot, Inc. 1.9%
Pfizer, Inc. 1.8
Johnson & Johnson Co. 1.8
Reuters Holdings PLC ADR 1.8
Automatic Data Processing, Inc. 1.7
Intel Corp. 1.7
Merck & Co., Inc. 1.6
Federal National Mortgage Association 1.5
American International Group, Inc. 1.5
Pepsico, Inc. 1.5
(1) This return does not include the maximum 5.75% sales charge.
(2) Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC Returns reflect maximum sales
charge as noted. (3) Ten largest holdings are as of 10/31/97 only and may
not be representative of the Portfolio's current or future investments.
Holdings accounted for 16.8% of the Portfolio's investments, determined by
dividing the total market value of the holdings by the total net assets of
the Portfolio.
* It is not possible to invest directly in a Lipper Category or an Index. Past
performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
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Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
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EV Traditional Tax-Managed Growth Fund as of October 31, 1997
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MANAGEMENT DISCUSSION
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An interview with Duncan W. Richardson, Vice
President and Portfolio Manager of the Tax-Managed Growth Portfolio
[Photo of Duncan W. Richardson]
Duncan W. Richardson
Portfolio Manager
Five Largest Sectors+
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As a percentage of total net assets
Health Care 16.6%
Financial 15.7%
Business Products & Services 14.8%
Technology 13.5%
Consumer Non-Durables 8.8%
+ Sector allocation is subject to change due to active management.
Q: Duncan, how would you describe the stock market's performance during the
past 12 months?
A: The most remarkable thing about this past year was the continuation of
superior absolute returns after two stunningly good years in 1995 and 1996.
This third consecutive year of high returns has taken us into a higher risk
equity environment. Valuation levels are at historical extremes and are
supported somewhat by lower interest rates and lower inflation. While we do
not try to forecast interest rates, it seems that many factors are in place
for the declining trend to continue. Our primary focus is the earnings
levels and growth rates of companies in the Portfolio.
Generally speaking, corporate earnings have not kept pace with the S&P 500
Index's 27% average annual increases over the past three years. This
mismatch between price and earnings levels has translated into an increase
in volatility this year. We have recently set records for volatility, both
within sectors and in individual securities. Investors are having
exaggerated reactions to bad news of any kind - especially if it pertains to
earnings or growth projections. In the Fund, we use periods of short-term
volatility as entry points or accumulation points for investments that we
want to hold for a long period of time.
Q: This has been a very good year for the Fund, having outperformed the Lipper
Growth Fund average. To what do you attribute this strong performance?
A: The Fund's performance is essentially the result of strong earnings growth
among the companies in the Portfolio. The Fund is broadly diversified across
many different sectors. We do not over-concentrate in any one stock or any
one sector, but some of our larger sectors, such as finance, health care,
and technology, have performed well.
Q: Index funds, which are passively managed, have attracted much
attention over the past few years. What influence do these funds have in the
market, and how does this Fund differ from them?
A: A tremendous amount of money has been "indexed" over the last several years,
resulting in a larger portion of market activity being "automatic." A
passive fund "automatically" buys and sells securities without regard to
fundamentals or prices. I believe the recent inflow into index funds has
exerted a near-term positive buying force under the largest capitalization
companies. Some of these companies have reached valuations that appear
vulnerable, and I worry that some could have severe corrections should there
be any disappointment in reported earnings or a general correction in the
overall market. Our investment style, in contrast, is to individually assess
companies on their reward-to-risk characteristics, using fundamental
analysis, realistic earnings projections, and a valuation overlay. This
allows us to not overpay for growth and to take advantage of the short-term
price fluctuations for the benefit of our long-term investors.
We like to think that an aircraft analogy captures the difference between
indexing and actively-managed funds. When there are clear skies (a favorable
investment climate) and no turbulence (market volatility), an aircraft's
auto pilot (indexing) works fine. However, when there is the threat of a
deteriorating forecast and turbulence, it is nice to have someone in the
cockpit at the controls (active management).
Q: How significantly do you think the economic situation in Asia will affect
companies in this Fund?
A: The problems in the stock markets and economies of Asian countries will
affect many U.S. companies, including several in this Fund, but the effects
will vary. Any company that has business ties to an Asian country - whether
exporting products there, owning manufacturing facilities, or holding
investments in a foreign stock market - will be affected. Also, companies
whose primary competitors are in Asia will be affected by the currency
changes. Our job is to look at each company individually, assess the impact,
and then make adjustments accordingly.
So far, the Fund has been well-positioned to handle the events. Our exposure
to Asia is mostly in our multi-national investments, and we are assessing
their abilities to respond to the crisis. After the initial declines in the
currencies and stock markets of several Asian countries, many investors
flocked to U.S. firms that had less exposure to Asia such as broadcasting,
publishing, and retail firms - which boosted their performance. We had
already invested in these industries because we found their fundamentals
attractive, so the Fund has benefited from this recent flight to domestic
stocks.
Q: Home Depot, the Fund's top holding, has shown strong appreciation during the
past year. What accounts for this stock's performance?
A: We are very pleased with Home Depot. As an earnings-driven company with
great fundamentals, it is a good example of the kind of stock we like to
have as a core holding. We bought it last year in the low $30s
(split-adjusted), along with some other retail stocks which were out of
favor at that time. This was a great opportunity because the company had
continued its solid earnings growth. When the price/earnings ratio dropped
to its lowest level in almost a decade, we began to accumulate shares. This
year, after doubling in price over a 12-month period, it has become the
Fund's top holding. While the stock has recently benefited from the interest
in domestic names, but we think it can continue to appreciate in line with
its mid-teens earnings growth rate.
Q: How diversified is this Portfolio?
A: It is highly diversified. There are currently over 350 different stocks,
with the top 20 positions representing less than 30% of the Portfolio's
assets. The top 10 holdings are typically 1.5%-2% positions and the next 10
are 1%-1.5% positions. To achieve above-average returns in the equity
markets, it is necessary to accept some market-related risk, but not excess
company-specific risk. The Fund's broad diversity allows us to hold stocks
for long periods, which lowers turnover and any capital gains realization.
This low turnover style is a very tax-efficient way to invest.
Q: Can you elaborate on any other elements of your management style?
A: Sure. A selling discipline is very important in the achievement of high
pre-tax and after-tax returns. We generally sell securities that have
declined more than 10% from our cost, which accomplishes several things.
First, it preserves capital. Second, taking a limited loss allows us an
offset to gains taken elsewhere, thereby limiting or eliminating any yearly
capital gains distribution. Finally, it helps avoid big mistakes by giving
us time to revisit our analysis of a company. We all do not like to admit
mistakes, but it is important not to let emotions conflict with investment
judgment. We want to own stocks for a minimum of five-years, so we can
easily sit out of an investment for 30 days. Our selling discipline helps
keep the Fund in the right investments at the right prices and adds to the
tax-efficiency of our results.
Q: Why has tax-managed investing become so popular recently?
A: There are several reasons for the current emphasis on tax-efficient
investing. First, the excess equity returns during the past few years,
combined with an increase in momentum-driven, high-turnover portfolio
management, has produced enormous taxable distributions in the form of
long-term gains, short-term gains, and dividends in many mutual funds. After
three years in a row, investors are noticing the huge tax bills on their
mutual fund returns. Combined with this year's reduction in the long-term
capital gains tax -- which increases the spread between long-term gains and
short-term/dividend income -- the result is a heightened sensitivity to the
effect of taxes on investment returns. In addition, mutual fund rating
organizations, such as Lipper and Morningstar, have realized that the tax
efficiency of funds is very important to people who pay taxes on their
investments. The difference between a fund that is tax-efficient and one
that is not can be, on average, as much as 2% per year. This may not sound
like much, but, compounded over a long period of time, the difference
between giving 2% away in taxes every year versus allowing those returns to
compound tax-free can be substantial.
Q: What experience does Eaton Vance have in tax-managed investing?
A: Eaton Vance has incorporated the principles of tax-managed investing for
private clients since its founding in 1924. In the mutual fund area, we have
been managing funds for after-tax returns for over 30 years. While there are
several other tax-managed funds in existence, many are newcomers to this
approach. This Fund is the only open-ended mutual fund whose original
portfolio has a 30-year track record. The principles of tax-efficient
investing guide our general investing objectives for building wealth over a
long period of time: 1) having exposure to the equity market; 2) holding on
to stocks whose earnings can continue to grow; and 3) taking losses early to
preserve capital.
Q: Finally, what is your outlook for the year ahead?
A: We expect somewhat lower equity returns next year and continuing volatility
in the stock market. With the tremendous returns we have seen for the past
three years, we anticipate some reversion to the historic average return of
10% per year. In the long run, stock prices will reflect the earnings power
of individual companies, and earnings are our main focus. In the short run,
emotions, fund flows, and external events can set prices all over the map.
This Fund has relatively low volatility, due, in part, to our "growth at a
reasonable price" investment style and, in part, to our generally lower
exposure to cyclical industries. We hope the Fund's volatility will remain
low as we try to take advantage of the market's volatility through our
research capabilities. As always, our goal is to make the best risk/reward
investment decisions in any market environment that we encounter.
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EV Traditional Tax-Managed Growth Fund as of October 31, 1997
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FUND PERFORMANCE
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE FUND
VS. THE STANDARD & POOR'S 500 INDEX*
From March 31, 1996, through October 31, 1997
Date Fund/NAV Fund/Off Pr S&P 500
---- -------- ----------- -------
3/31/96 $10,000 $9,422 $10,000
4/30/96 $10,282 $9,687 $10,134
5/31/96 $10,503 $9,896 $10,366
6/30/96 $10,543 $9,934 $10,448
7/31/96 $10,050 $9,469 $9,970
8/31/96 $10,342 $9,744 $10,157
9/30/96 $10,956 $10,322 $10,768
10/31/96 $11,237 $10,588 $11,050
11/30/96 $12,042 $11,346 $11,860
12/31/96 $11,831 $11,147 $11,665
1/31/97 $12,525 $11,801 $12,380
2/28/97 $12,435 $11,716 $12,453
3/31/97 $12,052 $11,355 $11,979
4/30/97 $12,676 $11,943 $12,679
5/31/97 $13,471 $12,692 $13,422
6/30/97 $14,090 $13,275 $14,066
7/31/97 $15,227 $14,346 $15,165
8/31/97 $14,583 $13,739 $14,294
9/30/97 $15,378 $14,489 $15,118
10/31/97 $14,816 $13,959 $14,597
Performance(+)
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Average Annual Total Returns (at net asset value)
One Year 31.9%
Life of Fund (3/28/96) 27.4
SEC Average Annual Total Returns (including 5.75% sales charge)
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One Year 24.3%
Life of Fund (3/28/96) 22.7
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
3/28/96. Index information is available only at month-end; therefore, the
line comparison begins at the next month-end following the commencement of
the Fund's investment operations.
The chart compares the Fund's total return with that of the S&P 500 Index, a
broad-based unmanaged index of 500 common stocks. Returns are calculated by
determining the percentage change in net asset value with all distributions
reinvested. The lines on the chart represent the total returns of $10,000
hypothetical investments in the Fund and the S&P 500 Index. The Index's
total return does not reflect any commissions or expenses that would have
been incurred if an investor individually purchased or sold the securities
represented in the Index. It is not possible to invest directly in an Index.
** This figure represents the Fund's performance including the Fund's maximum
5.75% initial sales charge.
(+) Returns are calculated by determining the percentage change in net asset
value with all distributions reinvested. SEC Returns reflect maximum sales
charge as noted.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
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EV Traditional Tax-Managed Growth Fund as of October 31, 1997
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FINANCIAL STATEMENTS
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STATEMENT OF ASSETS AND LIABILITIES
As of October 31, 1997
Assets
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Investment in Tax-Managed Growth Portfolio (Portfolio),
at value (Note 1A) (identified cost, $179,059,367) $201,247,475
Receivable for Fund shares sold 825,493
Deferred organization expenses (Note 1D) 23,828
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Total assets $202,096,796
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Liabilities
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Payable for Fund shares redeemed $ 58,996
Payable to affiliate for Trustees' fees (Note 3) 281
Accrued expenses 50,371
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Total liabilities $ 109,648
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Net Assets for 13,757,199 shares of beneficial interest
outstanding $201,987,148
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Sources of Net Assets
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Paid-in capital $179,874,038
Accumulated net realized loss on investments from Portfoli
(computed on the basis of identified cost) (74,998)
Net unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 22,188,108
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Total $201,987,148
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Net Asset Value, Offering Price and Redemption
Price Per Share
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($201,987,148 / 13,757,199 shares of beneficial interest
outstanding) $ 14.68
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Computation of Offering Price*
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Offering price per share (100 / 95.25 of $14.68) $ 15.41
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*On sales of $100,000 or more the offering price is reduced.
See notes to financial statements
<PAGE>
Statement of Operations
For the Year Ended
October 31, 1997
Investment Income (Note 1B)
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Dividend income allocated from Portfolio
(net of foreign taxes withheld of, $13,215) $ 1,164,999
Interest income allocated from Portfolio 190,033
Expenses allocated from Portfolio (549,086)
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Net investment income from Portfolio $ 805,946
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Expenses
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Compensation of Trustees not members of the Administrator's
organization (Note 3) $ 1,607
Service fees (Note 5) 25,168
Transfer and dividend disbursing agent fees 87,013
Printing and postage 53,969
Registration fees 37,985
Legal and accounting services 19,695
Custodian fee 9,918
Amortization of organization expenses (Note 1D) 6,808
Miscellaneous 17,814
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Total expenses $ 259,977
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Net investment income $ 545,969
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Realized and Unrealized
Gain (Loss) from Portfolio
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Net realized gain (loss) --
Investment transactions (identified cost basis) $ (108,422)
Securities sold short 46,242
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Net realized loss $ (62,180)
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Change in unrealized appreciation (depreciation) --
Investment transactions $ 20,429,946
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Net change in unrealized appreciation $ 20,429,946
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Net realized and unrealized gain $ 20,367,766
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Net increase in net assets from operations $ 20,913,735
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See notes to financial statements
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EV Traditional Tax-Managed Growth Fund as of October 31, 1997
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FINANCIAL STATEMENTS CONT'D
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Statements of Changes in Net Assets
YEAR ENDED PERIOD ENDED
Increase (Decrease) OCTOBER 31, OCTOBER 31,
in Net Assets 1997 1996*
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From operations --
Net investment income $ 545,969 $ 34,522
Net realized loss (62,180) (12,782)
Net change in unrealized appreciation 20,429,946 1,758,162
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Net increase in net assets from operations $ 20,913,735 $ 1,779,902
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Distributions to shareholders (Note 2) --
From net investment income $ (580,491) $ --
In excess of net investment income (24,875) --
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Total distributions to shareholders $ (605,366) $ --
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Transactions in shares of beneficial
interest (Note 4) --
Proceeds from sale of shares $164,306,098 $ 28,709,937
Net asset value of shares issued to
shareholders in payment of distributions
declared 493,305 --
Cost of shares redeemed (13,298,566) (311,907)
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Net increase in net assets from Fund
share transactions $151,500,837 $ 28,398,030
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Net increase in net assets $171,809,206 $ 30,177,932
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Net Assets
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At beginning of period $ 30,177,942 $ 10
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At end of period $201,987,148 $ 30,177,942
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Accumulated undistributed
(distributions in excess of)
net investment income
included in net assets
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At end of period $ -- $ 34,522
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* For the period from the start of business, March 28, 1996 to October 31,
1996.
See notes to financial statements
<PAGE>
EV Traditional Tax-Managed Growth Fund as of October 31, 1997
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FINANCIAL STATEMENTS CONT'D
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Financial Highlights
YEAR ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31,
1997 1996*
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Net asset value -- Beginning of period $ 11.170 $ 10.000
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Income (loss) from operations
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Net investment income $ 0.032 $ 0.013
Net realized and unrealized gain on
investments 3.525 1.157
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Total income from operations $ 3.557 $ 1.170
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Less distributions --
From net investment income $ (0.045) $ --
In excess of net investment income (0.002) --
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Total distributions $ (0.047) $ --
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Net asset value -- End of period $ 14.680 $ 11.170
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Total Return(1) 31.85% 11.70%
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Ratios/Supplemental Data
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Net assets, end of period (000 omitted) $ 201,987 $ 30,178
Ratio of net expenses to average daily
net assets(2) 0.81% 1.05%+
Ratio of net investmen income to average
daily net assets 0.55% 0.47%+
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+ Annualized.
* For the period from the start of business, March 28, 1996, to October 31,
1996.
(1) 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 payable date. Total return is not computed on
an annualized basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
<PAGE>
EV Traditional Tax-Managed Growth Fund as of October 31, 1997
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NOTES TO FINANCIAL STATEMENTS
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1 Significant Accounting Policies
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EV Traditional 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 (7.0% at October 31, 1997). 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.
On June 23, 1997, the Board of Trustees approved a Plan of Reorganization (the
"Plan") for the Trust. Under the terms of the Plan, EV Marathon Tax- Managed
Growth Fund (the Successor Fund) would acquire substantially all of the assets
and liabilities of EV Classic Tax-Managed Growth Fund and EV Traditional
Tax-Managed Growth Fund (the "Acquired Funds"). The transaction will be
structured for tax purposes to qualify as a tax-free reorganization under the
Internal Revenue Code. The trust will issue and deliver to the Acquired Funds
a number of full and fractional shares of beneficial interest of separate
classes of the Successor Fund (Class A shares for EV Traditional Tax-Managed
Growth Fund and Class C shares for EV Classic Tax-Managed Growth Fund), which
will be equal in value to the net asset value per share of the Acquired Funds
multiplied by the number of full and fractional shares of the Acquired Funds
then outstanding. Such transactions will occur at the close of business,
October 31, 1997.
Effective November 1, 1997, the EV Marathon Tax-Managed Growth Fund changed
its name to Eaton Vance Tax-Managed Growth Fund.
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 securities by the Portfolio is
discussed in Note 1A 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 net
realized capital gains. Accordingly, no provision for federal income or excise
tax is necessary. At October 31, 1997, the Fund, for federal income tax
purposes, had a capital loss carryover of $1,402,935 which will reduce taxable
income arising from future net realized gains, if any, to the extent permitted
by the Internal Revenue Code, and thus will reduce the amount of 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 October 31, 2005 ($1,351,357) and October 31, 2004 ($51,578).
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 Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average cash balances the Fund or the Portfolio maintain with IBT. All
significant credit balances used to reduce the Fund's custodian fees are
reported as a reduction of expenses on the Statement of Operations.
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.
2 Distributions to Shareholders
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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 net
investment income allocated to the Fund by the Portfolio (less the Fund's
direct expenses) and at least one distribution annually of as/or substantially
all of its net realized capital gains (reduced by any available capital loss
carryforward from prior years). Distributions are paid in the form of
additional shares of the Fund or, at the election of the shareholder, in cash.
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 only 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. During the period ended October 31, 1997, the Fund has reclassifed
amounts to reflect a decrease in accumulated distribution in excess of net
investment income of $24,875, an increase in accumulated net realized loss of
$36 and a decrease in paid-in capital of $24,839 due to permanent differences
between book and tax accounting for distributions to shareholders. Net
investment loss, net realized loss and net assets were not affected by these
reclassifications.
3 Transactions with Affiliates
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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, as its investment adviser. 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. Eaton Vance Distributors, Inc., (EVD), a
subsidiary of EVM and the Fund's Principal Underwriter, received approximately
$87,013 as its portion of the sales charge on sales of Fund shares for the
year ended October 31, 1997. EVD also receives a contingent deferred sales
charge (CDSC) on shareholder redemptions made within 12 months of purchase,
where the initial investment in the Fund was $1 million or more. EVD received
no CDSC during the period. Certain officers and Trustees of the Fund and the
Portfolio are officers and directors/ trustees of the above organization.
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 were as follows:
Year Ended Period Ended
October 31, October 31,
1997 1996*
- --------------------------------------------------------------------------------
Sales 12,002,498 2,730,678
Issued to shareholders electing to receive
payments of distributions in capital stock 33,693 --
Redemptions (980,653) (29,017)
- --------------------------------------------------------------------------------
Net increase (decrease) 11,055,538 2,701,661
- --------------------------------------------------------------------------------
* For the period from the start of business, March 28, 1996, to October 31,
1996.
5 Service Plan
- --------------------------------------------------------------------------------
The Fund has adopted a service plan (the Plan) pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The Plan provides that the Fund may make
service fee payments to EVD, Authorized Firms or other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for any fiscal year
which is attributable to shares of the Fund which have remained outstanding
for more than one year. The Fund paid or accrued service fees to or payable to
EVD for the year ended October 31, 1997 in the amount of $25,168. Such
payments are made for personal services and/or maintenance of shareholder
accounts.
6 Investment Transactions
- --------------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the year
ended October 31, 1997, aggregated $163,931,804 and $14,059,850, respectively.
<PAGE>
EV Traditional Tax-Managed Growth Fund as of October 31, 1997
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of Eaton Vance Mutual Funds Trust:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of EV
Traditional Tax-Managed Growth Fund (one of the series constituting Eaton Vance
Mutual Funds Trust) as of October 31, 1997, and the related statements of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for the year ended October 31, 1997 and the period
from the start of business, March 28, 1996, to October 31, 1996. These financial
statements and financial highlights are the responsibility of the Trust'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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of EV Traditional
Tax-Managed Growth Fund series of the Eaton Vance Mutual Funds Trust at October
31, 1997, the results of its operations, the changes in its net assets, and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 5, 1997
<PAGE>
Tax-Managed Growth Portfolio as of October 31, 1997
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
- -------------------------------------------------------------------------------
Common Stocks -- 96.4%
Security Shares Value
- -------------------------------------------------------------------------------
Advertising -- 2.3%
- -------------------------------------------------------------------------------
AC Nielson Corp.* 45,668 $ 1,044,655
Advo Systems, Inc.* 170,000 3,814,375
Cognizant Corp. 249,006 9,757,923
Harte-Hanks Communications 72,302 2,512,495
Interpublic Group of Companies, Inc. 256,500 12,183,750
Interpublic Group of Companies, Inc.+ 82,350 3,905,758
Omnicom Group, Inc. 455,100 32,141,438
WPP Group 488,000 2,229,916
- -------------------------------------------------------------------------------
$ 67,590,310
- -------------------------------------------------------------------------------
Aerospace and Defense -- 1.3%
- -------------------------------------------------------------------------------
Boeing Co. 450,740 $ 21,579,178
Raytheon Co. 226,544 12,290,012
United Technologies Corp.+ 66,844 4,672,061
- -------------------------------------------------------------------------------
$ 38,541,251
- -------------------------------------------------------------------------------
Auto and Parts -- 0.9%
- -------------------------------------------------------------------------------
Borg-Warner Automotive, Inc. 80,000 $ 4,360,000
Chrysler Corp. 32,000 1,128,000
General Motors Corp. 2,100 134,794
Magna International, Inc. Class A ADR 275,000 18,115,625
Meritor Automotive, Inc.* 61,133 1,364,037
- -------------------------------------------------------------------------------
$ 25,102,456
- -------------------------------------------------------------------------------
Banks - Regional -- 3.3%
- -------------------------------------------------------------------------------
Banc One Corp. 193,558 $ 10,089,211
Bank of Granite Corp. 18,000 580,500
BB&T Corp. 33,235 1,809,230
Community First Bancshares+ 148,000 7,056,400
Compass Bancshares, Inc. 48,208 1,816,839
Corestates Financial Corp. 160,000 11,640,000
Fifth Third Bancorp 75,000 4,809,375
First Citizens Bancshares Class A 35,300 3,459,400
First Union Corp. 130,800 6,417,375
Fleet Financial Group, Inc. 20,500 1,318,406
Golden West Financial Corp. 7,000 607,250
Keycorp 17,400 1,064,663
Nationsbank Corp. 216,963 12,990,660
Norwest Corp. 730,000 23,405,625
PNC Bank Corp. 25,000 1,187,500
Signet Banking Corp. 16,500 887,906
Sovereign Bancorp, Inc. 305,000 5,413,750
- -------------------------------------------------------------------------------
$ 94,554,090
- -------------------------------------------------------------------------------
Banks and Money Services -- 2.1%
- -------------------------------------------------------------------------------
BankAmerica Corp. 41,624 $ 2,976,116
Chase Manhattan Corp. 32,562 3,756,841
Citicorp 340,000 42,521,250
First Chicago NBD Corp. 43,007 3,128,753
JP Morgan and Co., Inc. 15,000 1,646,250
Washington Mutual, Inc. 65,759 4,500,382
Wells Fargo & Co. 11,542 3,363,050
- -------------------------------------------------------------------------------
$ 61,892,642
- -------------------------------------------------------------------------------
Beverages -- 2.6%
- -------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 238,700 $ 9,533,081
Coca-Cola Co. 405,090 22,887,585
PepsiCo, Inc. 1,172,156 43,149,993
- -------------------------------------------------------------------------------
$ 75,570,659
- -------------------------------------------------------------------------------
Broadcasting and Cable -- 0.8%
- -------------------------------------------------------------------------------
American Radio Systems Corp. 149,451 $ 7,285,736
Clear Channel Communications* 21,000 1,386,000
Comcast Corp. Class A 62,500 1,718,750
Cox Communications, Inc. Class A* 93,319 2,869,559
Liberty Media Group, Class A* 52,552 1,829,467
Tele-Communications, Inc.* 311,073 7,135,237
- -------------------------------------------------------------------------------
$ 22,224,749
- -------------------------------------------------------------------------------
Building Materials -- 0.2%
- -------------------------------------------------------------------------------
Interface, Inc.+ 62,500 $ 1,804,688
Masco Corp. 55,540 2,436,818
Sherwin Williams Co. 28,420 788,655
Sherwin Williams Co.+ 16,250 450,753
Stanley Works 16,270 687,408
- -------------------------------------------------------------------------------
$ 6,168,322
- -------------------------------------------------------------------------------
Business Services - Miscellaneous -- 0.5%
- -------------------------------------------------------------------------------
Corrections Corporation of America* 28,000 $ 854,000
Manpower, Inc. 110,000 4,221,250
Robert Half International, Inc.* 1,800 73,688
Sylvan Learning Systems, Inc.+* 196,789 8,258,650
- -------------------------------------------------------------------------------
$ 13,407,588
- -------------------------------------------------------------------------------
Chemicals -- 1.5%
- -------------------------------------------------------------------------------
Bayer AG ADR 40,000 $ 1,406,032
Dow Chemical Co. 28,360 2,573,670
E.I. Du Pont de Nemours & Co., Inc. 213,300 12,131,438
Eastman Chemical Co. 161 9,600
Monsanto Corp. 506,680 21,660,570
Solutia, Inc.* 200,336 4,432,434
- -------------------------------------------------------------------------------
$ 42,213,744
- -------------------------------------------------------------------------------
Communications Equipment -- 1.7%
- -------------------------------------------------------------------------------
Dialogic Corp.* 80,000 $ 3,300,000
L.M. Ericsson Telephone Co. ADR 86,000 3,805,500
Nokia Corp., Class A ADR 280,000 24,710,000
Northern Telecom Ltd. ADR 55,870 5,010,841
Pairgain Technologies, Inc.+* 210,000 5,923,601
Salient 3 Communications, Inc., Class A 78,125 908,203
Tellabs, Inc.* 110,193 5,950,422
- -------------------------------------------------------------------------------
$ 49,608,567
- -------------------------------------------------------------------------------
Communications Services -- 1.7%
- -------------------------------------------------------------------------------
Ameritech Corp. 1,500 $ 97,500
AT&T Corp. 28,000 1,370,250
BellSouth Corp. 4,000 189,250
Citizens Utilities Co., Class B* 43,545 432,725
Nextel Communications, Inc.* 75,830 1,990,538
SBC Communications, Inc. 1,000 63,625
Telecom Corp. of New Zealand ADR 8,000 311,500
Telephone & Data Systems, Inc. 86,756 3,687,130
Worldcom, Inc.* 1,175,000 39,509,375
- -------------------------------------------------------------------------------
$ 47,651,893
- -------------------------------------------------------------------------------
Computer Software -- 3.4%
- -------------------------------------------------------------------------------
BMC Software, Inc. 4,000 $ 241,500
Cadence Design Systems, Inc.* 28,000 1,491,000
Computer Associates International, Inc. 195,000 14,539,688
CSG Systems International, Inc.* 7,958 311,854
HNC Software, Inc. 50,000 1,850,000
HNC Software, Inc.+ 129,814 4,767,095
Intuit, Inc.* 266,667 8,700,011
Lexmark International Group, Inc.* 100,000 3,056,250
Microsoft Corp.* 63,850 8,300,500
Oracle Corp.* 815,000 29,161,678
PeopleSoft, Inc.* 50,000 3,143,750
PeopleSoft, Inc.+* 60,000 3,766,841
Sapient Corp.+* 161,938 8,590,862
Saville Systems PLC ADR+* 80,000 4,762,075
Saville Systems PLC ADR* 80,000 4,780,000
Security Dynamics Technology, Inc.* 40,000 1,355,000
- -------------------------------------------------------------------------------
$ 98,818,104
- -------------------------------------------------------------------------------
Computers and Business Equipment -- 3.6%
- -------------------------------------------------------------------------------
Cabletron Systems, Inc.* 28,572 $ 828,588
Cisco Systems, Inc.* 218,620 17,933,661
Cisco Systems, Inc.+* 77,375 6,337,647
Digital Equipment Corp.* 29,355 1,469,585
Hewlett-Packard Co. 448,238 27,650,682
International Business Machines Corp. 115,626 11,338,575
Xerox Corp. 485,000 38,466,563
- -------------------------------------------------------------------------------
$ 104,025,301
- -------------------------------------------------------------------------------
Conglomerates -- 0.8%
- -------------------------------------------------------------------------------
General Electric Co. 365,199 $ 23,578,160
- -------------------------------------------------------------------------------
$ 23,578,160
- -------------------------------------------------------------------------------
Consumer Services -- 0.0%
- -------------------------------------------------------------------------------
CUC International, Inc.* 42,000 $ 1,239,000
- -------------------------------------------------------------------------------
$ 1,239,000
- -------------------------------------------------------------------------------
Containers and Packaging -- 0.8%
- -------------------------------------------------------------------------------
Sealed Air Corp.* 425,000 $ 21,914,063
- -------------------------------------------------------------------------------
$ 21,914,063
- -------------------------------------------------------------------------------
Distribution -- 1.1%
- -------------------------------------------------------------------------------
Airgas, Inc.* 61,000 $ 949,313
Cardinal Health, Inc. 96,500 7,165,125
JP Food Service, Inc.* 146,973 4,693,950
Supervalu, Inc. 51,506 1,886,407
Sysco Corp. 367,760 14,710,400
Wilmar Industries, Inc.* 50,000 1,312,500
- -------------------------------------------------------------------------------
$ 30,717,695
- -------------------------------------------------------------------------------
Drugs -- 9.1%
- -------------------------------------------------------------------------------
Amgen, Inc. 201,532 $ 9,925,451
Astra AB Class A 1,074,400 17,370,143
Astra AB Class B ADR 160,000 2,500,000
Bristol-Myers Squibb Co. 340,720 29,898,180
Covance, Inc.* 31,250 552,734
Elan Corp., PLC ADR 381,676 19,036,091
Eli Lilly & Co. 94,440 6,315,675
Genentech, Inc.* 80,000 4,645,000
Genzyme Corp.* 12,150 104,794
Genzyme Corp. Class A* 650,000 17,793,750
Merck & Co., Inc. 526,315 46,973,614
Pfizer, Inc. 742,040 52,499,330
Quintiles Transnational Corp.* 37,210 2,697,725
Quintiles Transnational Corp.+* 50,000 3,619,563
Schering-Plough Corp. 276,240 15,486,705
Smithkline Beecham PLC ADR 98,040 4,669,155
Vertex Pharmaceuticals, Inc.* 85,000 2,507,500
Warner-Lambert Co. 104,644 14,983,713
Watson Pharmaceuticals, Inc.* 348,550 11,066,463
- -------------------------------------------------------------------------------
$ 262,645,586
- -------------------------------------------------------------------------------
Electrical Equipment -- 1.1%
- -------------------------------------------------------------------------------
American Power Conversion Corp.+* 200,000 $ 5,441,825
AMP, Inc. 112,340 5,055,300
Emerson Electric Co. 150,948 7,915,336
General Signal Corp. 68,600 2,752,575
Molex, Inc. Class A 28,000 981,750
Rockwell International Corp. 93,400 4,576,600
Rockwell International Corp.+ 90,000 4,403,385
Thomas & Betts Corp.+ 22,963 1,140,696
- -------------------------------------------------------------------------------
$ 32,267,467
- -------------------------------------------------------------------------------
Electronics - Instruments -- 1.0%
- -------------------------------------------------------------------------------
Analog Devices, Inc.* 50,000 $ 1,528,125
Dionex Corp.* 181,070 9,030,866
Thermo Electron Corp.* 390,000 14,551,875
Waters Corp.+* 29,580 1,299,568
X-Rite, Inc.+ 140,000 2,708,431
- -------------------------------------------------------------------------------
$ 29,118,865
- -------------------------------------------------------------------------------
Electronics - Semiconductors -- 3.6%
- -------------------------------------------------------------------------------
Burr-Brown Corp.+* 400,000 $ 12,081,850
Intel Corp. 637,798 49,110,446
Intel Corp.+ 70,002 5,382,069
KLA-Tencor Corp.* 36,000 1,581,750
Linear Technology Corp. 45,000 2,829,375
Maxim Integrated Products+* 20,000 1,323,013
Motorola, Inc. 55,768 3,443,674
National Semiconductor Corp.+* 79,368 2,852,962
Smart Modular Technologies+* 30,000 1,486,903
Speedfam International, Inc.+* 221,000 8,192,318
Texas Instruments, Inc. 86,890 9,270,077
Ultratech Stepper, Inc.+* 245,129 6,654,716
- -------------------------------------------------------------------------------
$ 104,209,153
- -------------------------------------------------------------------------------
Engineering and Construction -- 0.1%
- -------------------------------------------------------------------------------
Jacobs Engineering Group, Inc.* 45,000 $ 1,215,000
Jacobs Engineering Group, Inc.+* 32,230 868,905
- -------------------------------------------------------------------------------
$ 2,083,905
- -------------------------------------------------------------------------------
Entertainment -- 0.1%
- -------------------------------------------------------------------------------
Regal Cinemas, Inc.* 2,250 $ 51,750
Walt Disney Co. 26,600 2,187,850
- -------------------------------------------------------------------------------
$ 2,239,600
- -------------------------------------------------------------------------------
Environmental Services -- 0.3%
- -------------------------------------------------------------------------------
Browning-Ferris Industries, Inc. 127,000 $ 4,127,500
Waste Management, Inc. 143,504 3,354,406
- -------------------------------------------------------------------------------
$ 7,481,906
- -------------------------------------------------------------------------------
Financial - Miscellaneous -- 4.1%
- -------------------------------------------------------------------------------
American Express Co. 108,148 $ 8,435,544
American General Corp. 74,155 3,781,905
Capital One Financial Corp. 16,000 730,000
Federal Home Loan Mortgage Corp. 352,500 13,350,938
Federal National Mortgage Association 909,820 44,069,406
Household International, Inc. 10,600 1,200,450
MGIC Investment Corp. 210,000 12,665,625
Providian Financial Corp. 64,455 2,384,835
Sunamerica, Inc. 668,524 24,025,081
Travelers, Inc. 90,676 6,347,320
- -------------------------------------------------------------------------------
$ 116,991,104
- -------------------------------------------------------------------------------
Foods -- 2.7%
- -------------------------------------------------------------------------------
CPC International, Inc. 2,000 $ 198,000
Earthgrains Co. 3,545 145,788
Flowers Industries, Inc. 181,000 3,439,000
General Mills, Inc. 17,500 1,155,000
Kellogg Co. 44,714 1,925,497
McCormick & Co., Inc. 229,298 5,732,450
Pioneer Hi-Bred International, Inc. 149,900 13,734,588
Riviana Foods, Inc.+ 150,000 3,032,944
Sara Lee Corp. 269,972 13,802,319
Unilever ADR 490,000 26,153,750
WM. Wrigley, Jr. Co. 106,580 7,713,728
- -------------------------------------------------------------------------------
$ 77,033,064
- -------------------------------------------------------------------------------
Furniture and Appliances -- 0.8%
- -------------------------------------------------------------------------------
Herman Miller, Inc. 60,000 $ 2,932,500
HON Inds, Inc. 254,202 13,123,178
HON Inds, Inc.+ 67,465 3,477,656
Leggett & Platt, Inc. 31,150 1,300,513
Leggett & Platt, Inc.+ 29,420 1,226,443
- -------------------------------------------------------------------------------
$ 22,060,290
- -------------------------------------------------------------------------------
Health Services -- 1.1%
- -------------------------------------------------------------------------------
Aetna, Inc. 4,821 $ 342,592
Aetna, Inc.+ 55,000 3,902,575
FPA Medical Management, Inc.* 315,000 7,599,375
Healthsouth Corp.* 146,000 3,732,125
Integrated Health Services, Inc. 50,000 1,587,500
Medpartners, Inc.* 17,696 450,142
Orthodontic Centers of America, Inc.+* 100,000 1,693,595
Pacificare Health Systems, Inc., Class B* 19,500 1,262,625
Quest Diagnostics, Inc.* 15,625 260,742
Quorum Health Group, Inc.* 6,893 167,143
Quorum Health Group, Inc.+* 48,840 1,182,593
Response Oncology, Inc.* 44,761 458,800
Sunrise Assisted Living, Inc.+* 210,000 7,784,556
United Healthcare Corp. 20,000 926,250
Vencor, Inc.* 25,600 691,200
- -------------------------------------------------------------------------------
$ 32,041,813
- -------------------------------------------------------------------------------
Household Products -- 2.4%
- -------------------------------------------------------------------------------
Blyth Industries, Inc.* 222,000 $ 5,522,250
Blyth Industries, Inc.+* 300,000 7,434,516
Colgate-Palmolive Co. 43,652 2,826,467
Fortune Brands, Inc. 1,500 49,594
Gillette Co. 115,400 10,277,813
Kimberly-Clark Corp. 138,060 7,170,491
Procter & Gamble Co. 349,200 23,745,600
Rubbermaid, Inc. 463,920 11,163,075
- -------------------------------------------------------------------------------
$ 68,189,806
- -------------------------------------------------------------------------------
Industrial Equipment -- 1.2%
- -------------------------------------------------------------------------------
Dover Corp. 164,580 $ 11,109,150
Dover Corp.+ 23,000 1,550,171
Illinois Tool Works, Inc. 81,010 3,984,679
Parker-Hannifin Corp. 150,898 6,309,423
Regal Beloit Corp. 265,000 7,121,875
Tecumseh Products Co. Class A 108,145 5,610,022
Tecumseh Products Co. Class B 5,000 261,250
- -------------------------------------------------------------------------------
$ 35,946,570
- -------------------------------------------------------------------------------
Information Services -- 4.4%
- -------------------------------------------------------------------------------
Automatic Data Processing, Inc. 967,040 $ 49,439,920
Computer Sciences Corp.+* 140,000 9,916,353
Dun & Bradstreet Corp. 107,256 3,063,500
Electronic Data Systems Corp. 155,000 5,996,563
First Data Corp. 128,618 3,737,961
Paychex, Inc. 58,651 2,236,069
Reuters Holdings PLC ADR 791,090 52,014,168
- -------------------------------------------------------------------------------
$ 126,404,534
- -------------------------------------------------------------------------------
Insurance -- 6.6%
- -------------------------------------------------------------------------------
Aegon, N.V. ADR 28,246 $ 2,245,557
Allstate Corp. 20,208 1,676,001
American International Group, Inc. 429,950 43,881,721
AON Corp. 44,054 2,376,163
Berkshire Hathaway, Inc. Class A* 50 2,185,000
Berkshire Hathaway, Inc. Class B* 21 30,849
Chubb Corp. 101,050 6,694,563
General RE Corp. 192,446 37,947,946
Kansas City Life Insurance Co. 35,400 3,115,200
Laboratory Holdings, Inc. 35,960 899,000
Marsh & McLennan Cos., Inc. 474,344 33,678,424
Mutual Risk Management Ltd. 490,000 12,709,375
Progressive Corp. 190,000 19,807,500
Protective Life Corp. 34,012 1,798,385
Provident Companies, Inc. 19,198 640,733
Safeco Corp. 12,122 577,310
St. Paul Cos., Inc. 130,280 10,414,258
Torchmark Corp. 222,850 8,886,144
USF&G Corp. 15,005 303,851
- -------------------------------------------------------------------------------
$ 189,867,980
- -------------------------------------------------------------------------------
Investment Services -- 0.7%
- -------------------------------------------------------------------------------
Merrill Lynch & Co. 242,983 $ 16,431,725
Morgan Stanley Dean Witter Discover & Co. 23,704 1,161,496
T. Rowe Price Associates, Inc. 20,500 1,358,125
- -------------------------------------------------------------------------------
$ 18,951,346
- -------------------------------------------------------------------------------
Lodging and Gaming -- 0.0%
- -------------------------------------------------------------------------------
ITT Corp. 1,892 $ 141,309
- -------------------------------------------------------------------------------
$ 141,309
- -------------------------------------------------------------------------------
Medical Products -- 6.6%
- -------------------------------------------------------------------------------
Abbott Laboratories 150,000 $ 9,196,875
Allegiance Corp. 22,661 628,843
Ballard Medical Products+ 251,058 5,655,999
Bausch & Lomb, Inc. 145,574 5,713,780
Baxter International, Inc. 477,828 22,099,545
Becton Dickinson and Co. 2,000 92,125
Boston Scientific Corp.* 265,000 12,057,500
Dentsply International, Inc. 42,000 1,191,750
Heartport, Inc.* 41,026 1,030,778
Henry Schein, Inc.+* 225,700 7,408,758
Hillenbrand Industries, Inc. 385,029 16,459,990
Johnson & Johnson Co. 908,974 52,152,383
Marquette Medical Systems, Inc.* 55,000 1,416,250
Medtronics, Inc. 832,516 36,214,446
Medtronics, Inc.+ 29,472 1,280,109
Sofamor Danek Group, Inc.* 173,000 11,915,375
United States Surgical Corp. 150,000 4,040,625
- -------------------------------------------------------------------------------
$ 188,555,131
- -------------------------------------------------------------------------------
Metals - Gold -- 0.0%
- -------------------------------------------------------------------------------
Freeport-McMoran Copper & Gold, Inc. Class B 6,000 $ 143,625
- -------------------------------------------------------------------------------
$ 143,625
- -------------------------------------------------------------------------------
Metals - Industrial -- 0.5%
- -------------------------------------------------------------------------------
Cyprus Amax Minerals Co. 20,950 $ 438,641
Inco, Ltd. 124,000 2,557,500
Nucor Corp. 40,000 2,090,000
Potash Corp. of Saskatchewan 120,000 9,832,500
- -------------------------------------------------------------------------------
$ 14,918,641
- -------------------------------------------------------------------------------
Natural Gas Utilities -- 0.2%
- -------------------------------------------------------------------------------
NGC Corp. 290,000 $ 5,510,000
Sonat, Inc. 27,200 1,249,500
- -------------------------------------------------------------------------------
$ 6,759,500
- -------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 2.2%
- -------------------------------------------------------------------------------
Baker Hughes, Inc. 39,234 $ 1,802,312
Dresser Industries, Inc. 79,800 3,361,575
EVI, Inc.* 33,000 2,118,188
Halliburton Co. 177,400 10,577,475
Noble Drilling, Inc.* 120,000 4,267,500
Patterson Energy, Inc.+ 100,000 5,478,200
Schlumberger Ltd. 406,722 35,588,175
- -------------------------------------------------------------------------------
$ 63,193,425
- -------------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 1.0%
- -------------------------------------------------------------------------------
Anadarko Petroleum Corp. 246,000 $ 18,019,500
Apache Corp. 186,440 7,830,480
Burlington Resources, Inc. 38,125 1,865,742
Union Pacific Resources Group, Inc. 79,795 1,964,952
- -------------------------------------------------------------------------------
$ 29,680,674
- -------------------------------------------------------------------------------
Oil and Gas - Integrated -- 1.5%
- -------------------------------------------------------------------------------
Amoco Corp. 89,778 $ 8,231,520
Atlantic Richfield Co. 41,766 3,437,864
Chevron Corp. 55,600 4,611,325
Exxon Corp. 172,879 10,621,254
Mobil Corp. 186,368 13,569,920
Murphy Oil Corp. 29,700 1,720,744
- -------------------------------------------------------------------------------
$ 42,192,627
- -------------------------------------------------------------------------------
Paper and Forest Products -- 0.9%
- -------------------------------------------------------------------------------
Champion International Corp. 61,687 $ 3,404,351
Deltic Timber Corp. 8,486 239,191
Fort James Corp. 26,401 1,047,790
Georgia-Pacific Corp. 160,000 13,570,000
Mead Corp. 19,384 1,172,732
Union Camp Corp. 80,309 4,351,744
Weyerhauser Co. 61,755 2,948,801
- -------------------------------------------------------------------------------
$ 26,734,609
- -------------------------------------------------------------------------------
Photography -- 0.1%
- -------------------------------------------------------------------------------
Eastman Kodak Co. 31,698 $ 1,897,918
- -------------------------------------------------------------------------------
$ 1,897,918
- -------------------------------------------------------------------------------
Printing and Business Products -- 0.4%
- -------------------------------------------------------------------------------
American Business Products, Inc. 146,497 $ 2,939,096
Bowne & Co., Inc. 89,970 3,137,704
Deluxe Corp. 51,750 1,694,813
John H. Harland Co. 51,540 1,156,429
R.R. Donnelley & Sons Co. 47,896 1,562,607
- -------------------------------------------------------------------------------
$ 10,490,649
- -------------------------------------------------------------------------------
Publishing -- 2.2%
- -------------------------------------------------------------------------------
Dow Jones & Co., Inc. 465,000 $ 21,622,500
Gannett Co., Inc. 260,900 13,713,556
Houghton Mifflin Co. 127,400 4,522,700
McGraw-Hill Companies, Inc. 240,608 15,729,748
Times Mirror Co. Class A 151,670 8,209,139
- -------------------------------------------------------------------------------
$ 63,797,643
- -------------------------------------------------------------------------------
REITs -- 0.2%
- -------------------------------------------------------------------------------
Redwood Trust, Inc. 71,710 $ 1,801,714
Rouse Co. 127,700 3,543,675
SLH Corp.* 26,970 1,375,470
- -------------------------------------------------------------------------------
$ 6,720,859
- -------------------------------------------------------------------------------
Restaurants -- 1.1%
- -------------------------------------------------------------------------------
Boston Chicken, Inc.* 38,500 $ 344,094
Brinker International, Inc.* 354,000 4,956,000
McDonald's Corp. 263,100 11,790,169
Starbucks Corp.* 300,000 9,900,000
Tricon Global Restaurants* 117,216 3,553,098
- -------------------------------------------------------------------------------
$ 30,543,361
- -------------------------------------------------------------------------------
Retail - Food and Drug -- 2.1%
- -------------------------------------------------------------------------------
Albertson's, Inc. 974,744 $ 35,943,685
CVS Corp. 330,000 20,233,125
Hannaford Brothers Co. 30,849 1,166,478
Rite Aid Corp. 3,000 178,125
Safeway, Inc.* 50,000 2,906,250
- -------------------------------------------------------------------------------
$ 60,427,663
- -------------------------------------------------------------------------------
Retail - General -- 2.0%
- -------------------------------------------------------------------------------
Dollar Tree Stores, Inc.+* 195,000 $ 7,885,654
J.C. Penney Co., Inc. 543,510 31,897,243
May Department Stores Co. 104,008 5,603,431
Wal-Mart Stores, Inc. 344,390 12,096,699
- -------------------------------------------------------------------------------
$ 57,483,027
- -------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 3.4%
- -------------------------------------------------------------------------------
Burlington Coat Factory Warehouse 205,200 $ 3,398,625
Burlington Coat Factory Warehouse+ 338,400 5,596,343
Harcourt General, Inc. 216,416 10,834,326
Home Depot, Inc. 989,500 55,040,938
Limited, Inc. 135,000 3,180,938
Lowe's Companies+ 30,000 1,246,877
Republic Industries, Inc. 343,457 10,131,982
The Pep Boys - Manny, Moe & Jack+ 35,476 892,211
Toys "R" Us, Inc.* 121,325 4,132,633
Unifi, Inc. 50,000 1,921,875
- -------------------------------------------------------------------------------
$ 96,376,748
- -------------------------------------------------------------------------------
Specialty Chemicals and Materials -- 3.3%
- -------------------------------------------------------------------------------
Corning, Inc. 125,000 $ 5,640,625
Dexter Corp. 47,829 1,877,288
Ecolab, Inc. 678,768 32,283,903
Great Lakes Chemical Corp. 62,780 2,950,660
International Flavors & Fragrances, Inc. 148,101 7,164,386
International Specialty Products, Inc. 59,000 881,313
Lam Research Corp.* 83,000 2,998,375
Memtec Ltd. ADR 77,500 2,557,500
Millipore Corp. 626,440 24,509,465
Minnesota Mining & Manufacturing Co. 26,288 2,405,352
Nalco Chemical Co. 196,020 7,840,800
Pall Corp. 216,000 4,468,500
- -------------------------------------------------------------------------------
$ 95,578,167
- -------------------------------------------------------------------------------
Tobacco -- 0.1%
- -------------------------------------------------------------------------------
Philip Morris Cos., Inc. 30,000 $ 1,188,750
Schweitzer-Mauduit International, Inc. 5,731 241,418
- -------------------------------------------------------------------------------
$ 1,430,168
- -------------------------------------------------------------------------------
Transportation -- 0.6%
- -------------------------------------------------------------------------------
Coach USA, Inc.* 94,666 $ 2,816,314
Coach USA, Inc.+* 74,223 2,204,822
CSX Corp. 9,970 545,234
Heartland Express+* 250,000 6,864,688
Union Pacific Corp. 93,140 5,704,825
- -------------------------------------------------------------------------------
$ 18,135,883
- -------------------------------------------------------------------------------
Trucks and Parts -- 0.1%
- -------------------------------------------------------------------------------
Paccar, Inc. 46,602 $ 2,100,003
- -------------------------------------------------------------------------------
$ 2,100,003
- -------------------------------------------------------------------------------
Total Common Stocks
(identified cost $1,718,891,645) $2,769,653,213
- -------------------------------------------------------------------------------
Convertible Preferred Stocks -- 0.8%
Entertainment -- 0.8%
- -------------------------------------------------------------------------------
Time Warner, Inc., Series J+(1) 166,978 $ 21,507,334
- -------------------------------------------------------------------------------
$ 21,507,334
- -------------------------------------------------------------------------------
Financial - Miscellaneous -- 0.0%
- -------------------------------------------------------------------------------
American General Corp., Series D 21,474 $ 946,198
- -------------------------------------------------------------------------------
$ 946,198
- -------------------------------------------------------------------------------
Insurance -- 0.0%
- -------------------------------------------------------------------------------
Aetna, Inc., Series C 449 $ 32,216
- -------------------------------------------------------------------------------
$ 32,216
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $18,414,229) $ 22,485,748
- -------------------------------------------------------------------------------
Commercial Paper -- 4.3%
Face Amount
Name of Company (000 omitted) Value
- -------------------------------------------------------------------------------
General Electric Capital Corp., 5.68%, 11/3/97 $74,713 $ 74,677,636
Prudential Funding Corp., 5.56%, 11/5/97 48,000 47,948,083
- -------------------------------------------------------------------------------
Total Commercial Paper
(identified cost $122,625,719) $ 122,625,719
- -------------------------------------------------------------------------------
Total Investments -- 101.5%
(identified cost $1,859,931,593) $2,914,764,680
- -------------------------------------------------------------------------------
Other Assets, Less Liabilities -- (1.5)%
$ (43,318,862)
- -------------------------------------------------------------------------------
Net Assets -- 100.0%
$2,871,445,818
- -------------------------------------------------------------------------------
ADR -- American Depositary Receipt.
+ Security exempt from registration under Rule 144A or Rule 145 of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
October 31, 1997, the value of these securities amounted to $224,896,884 or
7.8% of net assets.
* Non-income producing security.
(1) Security valued using methods determined in good faith by or at the
direction of the Trustees.
See notes to financial statements
<PAGE>
Tax-Managed Growth Portfolio as of October 31, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities
As of October 31, 1997
Assets
- -------------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $1,859,931,593) $2,914,764,680
Cash 113,692
Receivable for investments sold 70,718
Dividends and interest receivable 2,515,939
Tax reclaim receivable 38,097
Prepaid expenses 97,457
Deferred organization expenses (Note 1C) 6,704
- -------------------------------------------------------------------------------
Total assets $2,917,607,287
- -------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------
Payable for investments purchased $ 46,013,234
Payable to affiliate --
Trustees' fees (Note 2) 2,487
Accrued expenses 145,748
- --------------------------------------------------------------------------------
Total liabilities $ 46,161,469
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $2,871,445,818
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $1,816,612,731
Net unrealized appreciation of investments
(computed on the basis of identified cost) 1,054,833,087
- --------------------------------------------------------------------------------
Total $2,871,445,818
- --------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
Statement of Operations
For the Year Ended
October 31, 1997
Investment Income (Note 1F)
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $207,276) $ 21,074,140
Interest income 3,332,220
- --------------------------------------------------------------------------------
Total income $ 24,406,360
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 9,455,900
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 27,835
Custodian fee 358,840
Legal and accounting services 87,829
Dividends on securities sold short (Note 1E) 17,000
Amortization of organization expenses (Note 1C) 7,726
Miscellaneous 51,615
- --------------------------------------------------------------------------------
Total expenses $ 10,006,745
- --------------------------------------------------------------------------------
Net investment income $ 14,399,615
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 51,570,685
Securities sold short 1,066,894
- --------------------------------------------------------------------------------
Net realized gain on investments $ 52,637,579
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions (identified cost basis) $ 375,109,348
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 375,109,348
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 427,746,927
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 442,146,542
- --------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
Tax-Managed Growth Portfolio as of October 31, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Period Ended
in Net Assets October 31, October 31,
1997 1996
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 14,399,615 $ 3,104,708
Net realized gain on investments 52,637,579 9,582,500
Net change in unrealized appreciation
(depreciation) of investments 375,109,348 70,637,961
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 442,146,542 $ 83,325,169
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $1,907,707,281 $871,076,582
Withdrawals (415,207,575) (17,702,191)
- --------------------------------------------------------------------------------
Net increase in net assets from capital
transactions $1,492,499,706 $853,374,391
- --------------------------------------------------------------------------------
Net increase in net assets $1,934,646,248 $936,699,560
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 936,799,570 $ 100,010
- --------------------------------------------------------------------------------
At end of period $2,871,445,818 $936,799,570
- --------------------------------------------------------------------------------
* For the period from the start of business, December 1, 1995, to October 31,
1996.
See notes to financial statements
<PAGE>
Tax-Managed Growth Portfolio as of October 31, 1997
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS CONT'D
- -------------------------------------------------------------------------------
Supplementary Data
Year Ended Period Ended
October 31, October 31,
1997 1996
- -------------------------------------------------------------------------------
Ratios to average daily net assets
- -------------------------------------------------------------------------------
Expenses 0.56% 0.66%+
Net investment income 0.81% 0.91%+
Portfolio Turnover 14% 6%
- -------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,871,446 $936,800
Average commission rate (per share)(1) $ 0.0582 $ 0.0585
- --------------------------------------------------------------------------------
+ Annualized.
* For the period from the start of business, December 1, 1995, to October 31,
1996.
(1) Average commission rate paid is computed by dividing the total dollar amount
of commissions paid during the fiscal year by the t otal number of shares
purchased and sold during the fiscal year for which commissions were
charged.
See notes to financial statements
<PAGE>
Tax-Managed Growth Portfolio as of October 31, 1997
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 Significant Accounting Policies
- --------------------------------------------------------------------------------
Tax-Managed Growth Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management 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 from the start of
business, December 1, 1995 to October 31, 1996, additional investors
contributed securities with a value of $639,241,121, including unrealized
appreciation of $512,467,715. During the year ended October 31, 1997,
additional investors contributed securities with a value of $860,796,038. The
following is a summary of significant accounting policies consistently
followed by the Portfolio in the preparation of its financial statements. The
polices 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, which approximates value. 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 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 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 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 Securities Sold Short -- The Portfolio may sell securities short where it
owns an equal amount of the security sold short or another security
convertible or exchangeable for an equal amount of the security sold short.
The Portfolio may do this in anticipation of a decline in the market price of
the securities or in order to hedge portfolio positions. The Portfolio will
generally borrow the security sold in order to make delivery to the buyer.
Upon executing the transaction, the Portfolio records the proceeds as deposits
with brokers in the Statement of Assets and Liabilities and establishes an
offsetting payable for securities sold short for the securities due on
settlement. The security sold short is segregated as collateral for the short
position. The liability is marked to market and the Portfolio is required to
pay the lending broker any dividend or interest income earned while the short
position is open. A gain or loss is realized when the security is delivered to
the broker. The Portfolio may recognize a loss on the transaction if the
market value of the securities sold increases before the securities are
delivered.
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. 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.
G 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.
H Expense Reduction -- Investors Bank & Trust Company (IBT) 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. All significant credit balances
used to reduce the Portfolio's custodian fees are reflected as a reduction of
expenses on the Statement of Operations.
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 year ended October 31, 1997 the adviser fee was 0.53% of the Portfolio's
average net assets (annualized). 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 services to the Portfolio out of such investment
adviser fee. Trustees of the Portfolio that are not affiliated with the
Investment Adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of the Trustees Deferred Compensation
Plan. For the year ended October 31, 1997, no significant amounts have been
deferred. 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 $831,449,166 and $172,736,800, respectively. In addition,
investments having an aggregate market value of $70,856,186 at dates of
withdrawal were distributed in payment for capital withdrawals resulting in
capital gains for book purposes of $63,185,375.
4 Federal Income Tax Basis of Investment
- --------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at October 31, 1997, as computed on a federal income tax
basis, are as follows:
Aggregate cost $1,859,931,593
--------------------------------------------------------------------------
Gross unrealized appreciation $1,056,938,628
Gross unrealized depreciation (2,105,541)
--------------------------------------------------------------------------
Net unrealized appreciation $1,054,833,087
--------------------------------------------------------------------------
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 October 31, 1997.
6 Line of Credit
- --------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $100 million unsecured line of credit agreement
with a group of banks. The Portfolio may temporarily borrow from the line of
credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at the
Eurodollar rate or federal funds rate. In addition, a fee computed at an
annual rate of 0.10% on the daily unused portion of the line of credit is
allocated among the participating portfolios and funds at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the year ended October 31, 1997.
<PAGE>
Tax-Managed Growth Portfolio as of October 31, 1997
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees and Investors
of Tax-Managed Growth Portfolio
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Managed Growth Portfolio (the Portfolio) as
of October 31, 1997, the related statement of operations for the year then
ended, and the statements of changes in net assets, and the supplementary data
for the year ended October 31, 1997 and for the period from the start of
business, December 1, 1995 to October 31, 1996. These financial statements and
supplementary data are the responsibility of the Trust'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
October 31, 1997 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other audit procedures. 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 the
Portfolio, as of October 31, 1997, and the results of its operations, the
changes in its net assets and its supplementary data for the respective stated
periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 5, 1997
<PAGE>
EV Traditional Tax-Managed Growth Fund as of October 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EV Traditional Tax-Managed Growth Fund
<S> <C>
Officers Independent Trustees
M. DOZIER GARDNER DONALD R. DWIGHT
President and Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
JAMES B. HAWKES
Vice President and Trustee SAMUEL L. HAYES, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
WILLIAM H. AHERN, JR. Business Administration
Vice President
NORTON H. REAMER
THOMAS J. FRETTER President and Director, United Asset
Vice President Management Corporation
MICHAEL B. TERRY JOHN L. THORNDIKE
Vice President Formerly Director, Fiduciary Company Incorporated
JAMES L. O'CONNOR JACK L. TREYNOR
Treasurer Investment Adviser and Consultant
ALAN R. DYNNER
Secretary
Tax-Managed Growth Portfolio
Officers Trustees
JAMES B. HAWKES LANDON T. CLAY
President
DUNCAN W. RICHARDSON DONALD R. DWIGHT
Vice President and President, Dwight Partners, Inc.
Portfolio Manager Chairman, Newspapers of New England, Inc.
JAMES L. O'CONNOR SAMUEL L. HAYES, III
Treasurer Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
ALAN R. DYNNER Business Administration
Secretary
NORTON H. REAMER
President and Director, United Asset
Management Corporation
JOHN L. THORNDIKE
Formerly Director, Fiduciary Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
</TABLE>
<PAGE>
INVESTMENT ADVISOR OF
TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV TRADITIONAL 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
200 Clarendon Street, 16th Floor
Boston, MA 02116
TRANSFER AGENT
FIRST DATA INVESTOR SERVICES GROUP, INC.
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
EV TRADITIONAL TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus
which contains more complete information on the Fund, including its
sales charges and expenses. Please read the prospectus carefully
before you invest or send money.
- --------------------------------------------------------------------------------
T-TMGSA-12/97
