<PAGE>
[LOGO OF EATON VANCE Mutual Funds [PHOTO OF STATUE OF LIBERTY
APPEARS HERE] For People APPEARS HERE]
Who Pay
Taxes
EATON VANCE
TAX-MANAGED
GROWTH
FUND
Annual Report December 31, 1998
[PHOTO OF WALL STREET SIGN POST
APPEARS HERE]
[PHOTO OF CALCULATOR & FORM 1120 INCOME TAX
APPEARS HERE]
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Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
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LETTER TO SHAREHOLDERS
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[PHOTO OF JAMES B. HAWKES
APPEARS HERE]
James B. Hawkes
President
The fiscal year-end for Eaton Vance Tax-Managed Growth Fund has changed from
October 31 to December 31. In the two-month period from October 31, 1998 to
December 31, 1998, Eaton Vance Tax-Managed Growth Fund had a total return of
13.4% for Class A shares, 13.2% for Class B shares, and 13.2% for Class C
shares. /1/ For Class A, this return resulted from an increase in net asset
value (NAV) to $19.44 per share on December 31, 1998 from $17.15 per share on
October 31, 1998. For Class B, NAV increased to $19.10 from $16.87, and for
Class C, to $18.38 from $16.24. These returns compared very favorably to the
average total return in the Lipper Growth Funds Category, which was 14.6% during
the same period.*
Dramatic volatility characterized the market this year ...
This year saw unprecedented extremes in the stock market. After posting heavy
losses from August to early October, the stock market performed strongly in the
fourth quarter. Investor confidence, bolstered by the Federal Reserve Board's
interest rate cuts, modest economic growth, and low inflation, kept stock
valuations relatively high, despite the signs of weakness in corporate profits.
By year-end, all major indices had continued an impressive 4-year streak of
double-digit gains.
...While providing opportunities for the tax-conscious investor...
In such a turbulent environment, most actively managed mutual funds not focused
specifically on tax efficiency typically had a high rate of turnover and,
subsequently, higher taxable distributions to shareholders. Eaton Vance
Tax-Managed Growth Fund, however, aims to provide high after-tax returns, and
its management employs a style that is consistent with this objective.
Volatility in the stock market can be troubling, but Eaton Vance believes that,
as a normal and even healthy part of the investment process, it can also present
good opportunities for long-term investors. Beginning on the following page,
Portfolio Manager Duncan W. Richardson discusses the past 12 months and offers
his outlook for the year ahead.
Sincerely,
James B. Hawkes
/s/ James B. Hawkes
President
February 1, 1999
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Fund Information
as of December 31, 1998
Performance/2/ Class A Class B Class C
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Average Annual Total Returns (at net asset value)
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One Year 25.4% 24.5% 24.3%
Life of Fund+ 27.4 26.4 28.7
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
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One Year 18.2% 19.5% 23.3%
Life of Fund+ 24.7 25.5 28.7
+Inception dates: Class A and Class B: 3/28/96; Class C: 8/2/96
Ten Largest Equity Holdings/3/
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By total net assets
Lexmark International Group, Inc. 2.1%
Xerox Corp. 1.8
Home Depot, Inc. (The) 1.8
Albertson's, Inc. 1.7
Automatic Data Processing, Inc. 1.7
SunAmerica, Inc. 1.7
Unilever ADR 1.6
Omnicom Group, Inc. 1.5
Johnson & Johnson Co. 1.5
Gillette Co. 1.5
* It is not possible to invest directly in a Lipper Category or an Index.
/1/These returns do not include the 5.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC) for
Class B and Class C shares. /2/ Returns are historical and are calculated by
determining the percentage change in net asset value with all distributions
reinvested. SEC returns for Class A reflect the maximum 5.75% sales charge. SEC
returns for Class B reflect applicable CDSC based on the following schedule: 5%
- 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th
year. SEC 1-Year return for Class C reflects 1% CDSC. /3/ As of 12/31/98. Ten
largest holdings accounted for 16.9% of the Portfolio's investments. Holdings
are subject to change. 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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2
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Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
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MANAGEMENT DISCUSSION
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An interview with Duncan W. Richardson,
Vice President and Portfolio Manager of
Tax-Managed Growth Portfolio
[PHOTO OF DUNCAN W. RICHARDSON
APPEARS HERE]
Duncan W. Richardson
Portfolio Manager
Q: Duncan, what can you tell us about the extreme highs and lows of the stock
market over the past year?
A: The market volatility that began in 1997 was amplified in 1998. At this
time last year, we were talking about the concern that the Asian economies
would be collapsing. That fear turned out to be well-founded, but the U.S.
market rallied dramatically between January and April. An already high
valuation range for stocks was stretched to historic levels. With higher
valuation levels comes higher risk. In this environment, any external shock
can have an amplified effect on the market. We have seen overreactions to
political developments, the economic slowdowns overseas, the risk of
currency devaluations, and the deflationary threat. All have swung the
market wildly in the past year.
Q: How did the Portfolio perform in this context?
A: Overall, we have continued to do quite well despite increasing volatility
in the marketplace. Year in and year out, our goal is to be in the top
quintile of pre-tax performance for all growth funds, and the top decile
for after-tax performance.
Our Fund "corrected" in line with the rest of the market. While it slightly
lagged the S&P 500 Index for the year, we've actually done better than some
of our more aggressive competitors whose portfolios are more concentrated,
that is, less diversified, than ours. Our style tends to benefit from some
volatility.
Q: Is there one factor that drives the performance of this Portfolio?
A: The performance of the Portfolio can't be attributed to one particular
stock or one particular sector. How the Portfolio performs depends more on
our ability to correctly evaluate the earnings potential of scores of
quality growth companies. We have an extremely well-seasoned team of
analysts, averaging 16 years of experience in their areas of research.
Strong research is central to Eaton Vance's fundamental approach to growth
stock investing.
As a growth fund, we look for companies with a history of strong earnings
and future growth potential. We are disciplined and don't want to overpay
for earnings that might not be delivered. The turbulent economic
environment around the world puts corporate earnings at risk. Companies
have been lowering their guidance for earnings, and as a result there have
been some dramatic devaluations of individual stocks and sectors. We have
used this near-term fear and uncertainty to our advantage, taking the
opportunity to invest when our favored stocks were "on sale."
We are patient in accumulating positions in companies that can grow their
earnings over a 5-year investment horizon. An "ideal" entry point is one
where we have the expectation of the stock doubling over a 5-year period. A
good example of this is Gillette Corporation, in which we have built a
position over the past several months. We've been able to buy it recently
at prices where we think it makes a good deal of long-term investment
sense.
Q: How do you decide when to sell a stock?
A: Our "selling discipline" is a key factor in the success of our management
style. As a rule, we seek to avoid selling highly appreciated securities
that would result in capital gains. Generally, if the market price of a
purchased stock in the Portfolio has underperformed by 10% or more from our
tax cost, we will consider selling the stock and taking a loss. This is a
good investment practice to preserve capital and it also makes sense with
regard to taxes. Taking a limited loss by selling stock allows us
3
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Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
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MANAGEMENT DISCUSSION
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to offset gains taken elsewhere, thereby limiting or eliminating any yearly
capital gains distributions.
Selling an underperforming stock gives us a better perspective from which
to reevaluate both our original investment case and the company's current
fundamentals. Often, with emotion-driven volatility, we've had
opportunities to buy back a stock at a lower price than when we sold it. We
generally 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 add to the tax
efficiency of our results.
Q: What about a selling discipline for your "winners?"
A: As a rule, we try not to sell highly appreciated securities that would
result in capital gains. That said, if an individual stock grows to
constitute too large a portion of the Portfolio, or if there has been a
deterioration in the company's fundamentals, I will generally try to lower
the Portfolio's exposure to that stock. We make every effort to ensure that
any gains are taken from the most favorable tax lots. This is to minimize
any annual distributions to our shareholders.
Q: Earlier you referred to the Portfolio as more diversified than some of its
competitors. Would you elaborate?
A: Certainly. There are other funds that focus more on specific sectors and
have higher concentrations in individual stocks. However, we don't
radically overweight or underweight any particular sector, and our top
holdings tend to be less concentrated versus other funds. We view
diversification as a partial shock absorber. Equity investors must take
some market risk in order to participate in the higher returns equities can
offer, but my mantra for this Fund is "No unnecessary risks." We attempt to
minimize our stock-specific and sector-specific risks.
Our active management style is another factor that distinguishes this
Portfolio from passively managed index funds and other "momentum"-style
funds. A passive fund "automatically" buys securities based on market
capitalizations, without regard to fundamentals or prices. Active
management allows us to try to take advantage of market volatility, rather
than become a victim of it.
Q: What can you tell us about one of the Portfolio's top holdings, Automatic
Data Processing, Inc.?
A: This is a great example of a growth stock. We believe that over the long
haul, stock prices follow earnings. ADP has one of the best track records
for double-digit earnings growth, and we believe that the earnings stream
will continue to grow. As a long-term investor, that's exactly what we're
looking for.. As long as the company's growth continues, we will remain as
investors. While the stock has done well, at less than 2% of the Portfolio,
I'm not yet worried about too much stock-specific risk in Automatic Data,
especially since its fundamentals have remained on track.
Q: It seems there has been an increased awareness of tax-managed investing
lately. Why is that so?
A: Thinking about taxes is something people should do more than once or twice
a year. In many mutual funds, high equity returns over the past few years,
combined with an increase in momentum-driven, high-turnover portfolio
management, have produced enormous taxable distributions. Taxable investors
have seen huge tax bills drag down their actual mutual fund returns over
the past three or four years. This year could be even more interesting and
painful. It may be a lower-return year, but market volatility has led to a
lot more turnover in many funds, which may kick out high distributions
despite modest returns.
New mutual fund rating organizations have realized that the tax efficiency
of funds is very important to investors with assets outside of
4
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Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
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MANAGEMENT DISCUSSION
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qualified plans. The after-tax performance difference between a fund that
is tax-efficient and one that is not can be more than 2% per year. This may
not sound like much, but, compounded over a long period of time, the
difference between losing 2% in taxes every year versus deferring those
taxes and allowing those returns to compound tax-free, can be substantial.
Q: What is Eaton Vance's background in tax-managed investing?
A: Eaton Vance has incorporated the principles of tax-managed investing for
private clients for decades. We have been managing mutual funds that focus
on after-tax returns for over 30 years. There are several other tax-managed
funds starting up, but none have Eaton Vance's depth of experience in using
an active management, research-driven approach. Tax-Managed Growth
Portfolio is the largest pool of actively managed, tax-efficient mutual
fund assets in the industry. The principles of tax-efficient investing
guide our general investment approach for building wealth for our clients
over a long period of time: 1) having exposure to the equity market, which
historically has provided the highest inflation-adjusted returns; 2)
holding on to companies whose business and earnings can continue to grow;
and 3) taking losses early to preserve capital.
Q: What do you see happening in the year ahead?
A: Well, I can essentially repeat my comments from last year, when I predicted
somewhat lower equity returns in 1998 and more volatility in the stock
market. Historically high valuations and the dominance of many passive and
short-term investors in the market should ensure continued volatility. We
continue to anticipate a levelling off of equity market returns to the
historic average of 10% per year. It's important to remember that stock
prices will reflect the earnings power of individual companies, and
evaluating these earnings, not predicting markets, is our main focus.
We expect that downside earnings surprises will continue to play a role
through 1999, especially in certain industries as companies spend an
increasing amount to fix the Year 2000 computer problem. There are a number
of other potentially negative influences on corporate earnings that will
require constant monitoring by our research staff. Overall, we will aim to
keep the Portfolio's volatility low through its diversified structure and
our buy and sell disciplines.
Our entire research staff and I remain grateful to our fellow shareholders,
new and old, for their continued participation in Tax-Managed Growth
Portfolio. Those who purchased shares recently have had a bumpy few
quarters. As always, our goal is to make the best risk/reward investment
decisions in any market environment that we encounter. Long-term investing
success takes patience and persistence, and we are pleased that our
shareholders have placed their confidence in us to help them meet their
objectives.
5
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Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
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FUND PERFORMANCE
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Comparison of Change in Value of a $10,000 Investment in
Eaton Vance Tax-Managed Growth Fund, Class A vs.
Standard & Poor's 500 Index*
March 31, 1996 -- December 31, 1998
Date Fund/NAV Fund/MOP S&P 500
---- -------- -------- -------
3/31/96 $10,000 $9,422 $10,000
4/30/96 $10,282 $9,687 $10,154
5/31/96 $10,503 $9,896 $10,405
6/30/96 $10,543 $9,934 $10,448
7/31/96 $10,050 $9,469 $9,991
8/31/96 $10,342 $9,744 $10,199
9/30/96 $10,956 $10,322 $10,772
10/31/96 $11,237 $10,588 $11,073
11/30/96 $12,042 $11,346 $11,905
12/31/96 $11,831 $11,147 $11,669
1/31/97 $12,525 $11,801 $12,403
2/28/97 $12,435 $11,716 $12,496
3/31/97 $12,052 $11,355 $11,982
4/30/97 $12,676 $11,943 $12,703
5/31/97 $13,471 $12,692 $13,467
6/30/97 $14,090 $13,275 $14,073
7/31/97 $15,227 $14,346 $15,194
8/31/97 $14,583 $13,739 $14,342
9/30/97 $15,378 $14,489 $15,126
10/31/97 $14,816 $13,959 $14,626
11/30/97 $15,250 $14,368 $15,299
12/31/97 $15,644 $14,739 $15,561
1/31/98 $15,704 $14,796 $15,739
2/28/98 $16,956 $15,975 $16,868
3/31/98 $17,773 $16,746 $17,730
4/30/98 $18,076 $17,031 $17,914
5/31/98 $17,521 $16,508 $17,599
6/30/98 $18,187 $17,135 $18,316
7/31/98 $17,773 $16,746 $18,126
8/31/98 $15,179 $14,302 $15,506
9/30/98 $16,169 $15,234 $16,497
10/31/98 $17,309 $16,308 $17,837
11/30/98 $18,207 $17,154 $18,918
12/31/98 $19,620 $18,486 $20,007
Comparison of Change in Value of a $10,000 Investment in
Eaton Vance Tax-Managed Growth Fund, Class B vs.
Standard & Poor's 500 Index*
March 31, 1996 -- December 31, 1998
Date Fund/NAV S&P 500
---- -------- -------
3/31/96 $10,000 $10,000
4/30/96 $10,272 $10,154
5/31/96 $10,503 $10,405
6/30/96 $10,543 $10,448
7/31/96 $10,040 $9,991
8/31/96 $10,332 $10,199
9/30/96 $10,936 $10,772
10/31/96 $11,217 $11,073
11/30/96 $12,002 $11,905
12/31/96 $11,781 $11,669
1/31/97 $12,465 $12,403
2/28/97 $12,374 $12,496
3/31/97 $11,992 $11,982
4/30/97 $12,596 $12,703
5/31/97 $13,360 $13,467
6/30/97 $13,954 $14,073
7/31/97 $15,060 $15,194
8/31/97 $14,416 $14,342
9/30/97 $15,191 $15,126
10/31/97 $14,638 $14,626
11/30/97 $15,060 $15,299
12/31/97 $15,433 $15,561
1/31/98 $15,483 $15,739
2/28/98 $16,700 $16,868
3/31/98 $17,495 $17,730
4/30/98 $17,787 $17,914
5/31/98 $17,233 $17,599
6/30/98 $17,877 $18,316
7/31/98 $17,455 $18,126
8/31/98 $14,909 $15,506
9/30/98 $15,855 $16,497
10/31/98 $16,972 $17,837
11/30/98 $17,847 $18,918
12/31/98 $19,215 $20,007
Performance+ Class A Class B Class C
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Average Annual Total Returns (at net asset value)
One Year 25.4% 24.5% 24.3%
Life of Fund+ 27.4 26.4 28.7
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
One Year 18.2% 19.5% 23.3%
Life of Fund+ 24.7 25.5 28.7
+Inception dates: Class A and Class B: 3/28/96; Class C: 8/2/96
* 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. Past performance is no guarantee of
future results. Investment return and principal fluctuate so that shares,
when redeemed, may be worth more or less their original cost.
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 (NAV) 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. An investment in the Fund's Class C shares on 8/31/96 at net asset
value would have grown to $18,510 on December 31, 1998. 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.
+ Returns are historical and are calculated by determining the percentage
change in net asset value with all distributions reinvested. SEC returns
for Class A reflect the maximum 5.75% sales charge. SEC returns for Class B
reflect applicable CDSC based on the following schedule: 5% - 1st and 2nd
years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. SEC
1-Year return for Class C reflects 1% CDSC.
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.
** This figure represents the performance of the Fund's Class B shares,
including the Fund's applicable CDSC charge.
6
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Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of December 31, 1998
Assets
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<S> <C>
Investment in Tax-Managed Growth Portfolio, at value
(identified cost, $2,956,300,610) $ 3,681,217,704
Receivable for Fund shares sold 20,195,971
Deferred organization expenses 51,062
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Total assets $ 3,701,464,737
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Liabilities
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Payable for Fund shares redeemed $ 3,604,367
Payable to affiliate for Trustees' fees 672
Other accrued expenses 857,907
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Total liabilities $ 4,462,946
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Net Assets $ 3,697,001,791
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Sources of Net Assets
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Paid-in capital $ 3,020,858,472
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (48,773,775)
Net unrealized appreciation from Portfolio
(computed on the basis of identified cost) 724,917,094
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Total $ 3,697,001,791
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Class A Shares
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Net Assets $ 852,966,627
Shares Outstanding 43,871,370
Net Asset Value and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 19.44
Maximum Offering Price Per Share
(100 / 94.25 of $19.44) $ 20.63
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Class B Shares
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Net Assets $ 2,196,794,024
Shares Outstanding 115,011,676
Net Asset Value, Offering Price and Redemption Price Per Share
(net assets / shares of beneficial interest outstanding) $ 19.10
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Class C Shares
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Net Assets $ 647,241,140
Shares Outstanding 35,219,744
Net Asset Value, Offering Price and Redemption Price Per
Share
(net assets / shares of beneficial interest outstanding) $ 18.38
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On sales of $50,000 or more, the offering price of Class A shares is reduced.
<CAPTION>
Statement of Operations
Investment Period Ended Year Ended
Income December 31, 1998 (1) October 31, 1998
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<S> <C> <C>
Dividends allocated from
Portfolio (net of foreign
taxes, $65,124 and
$204,585 respectively) $ 5,149,399 $ 20,819,186
Interest allocated from Portfolio 1,448,111 4,512,363
Expenses allocated from Portfolio (2,647,940) (9,893,499)
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Net investment income from Portfolio $ 3,949,570 $ 15,438,050
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Expenses
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Trustees fees and expenses $ 652 $ 2,987
Distribution and service fees
Class A 86,398 290,289
Class B 2,695,422 9,981,917
Class C 968,423 3,341,182
Transfer and dividend disbursing
agent fees 313,689 1,819,786
Registration fees 55,084 179,128
Printing and postage 33,891 123,496
Legal and accounting services 13,124 17,802
Custodian fee 10,043 32,662
Amortization of organization expenses 3,389 20,168
Miscellaneous 14,029 110,786
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Total expenses $ 4,194,144 $ 15,920,203
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Net investment loss $ (244,574) $ (482,153)
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Realized and Unrealized
Gain (Loss) from Portfolio
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Net realized gain (loss) --
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Investment transactions
(identified cost basis) $ 6,720,816 $ (54,618,739)
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Net realized gain (loss) $ 6,720,816 $ (54,618,739)
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Change in unrealized
appreciation (depreciation) --
Investments $ 410,650,491 $ 217,424,667
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Net change in unrealized
appreciation (depreciation) $ 410,650,491 $ 217,424,667
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Net realized and unrealized gain $ 417,371,307 $ 162,805,928
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Net increase in net assets
from operations $ 417,126,733 $ 162,323,775
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</TABLE>
(1) For the two-month period ended December 31, 1998.
See notes to financial statements
7
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
Increase (Decrease) in Net Assets December 31, 1998(1) October 31, 1998 October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations --
Net investment loss $ (244,574) $ (482,153) $ (425,855)
Net realized gain (loss) 6,720,816 (54,618,739) (444,646)
Net change in unrealized appreciation (depreciation) 410,650,491 217,424,667 57,375,366
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Net increase in net assets from operations $ 417,126,733 $ 162,323,775 $ 56,504,865
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Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 84,520,914 $ 523,912,788 $ --
Class B 172,886,300 1,222,858,520 460,965,429
Class C 62,414,262 396,976,810 --
Issued in reorganization of EV Traditional and EV
Classic Tax-Managed Growth Fund
Class A -- 201,987,148 --
Class C -- 148,819,397 --
Cost of shares redeemed
Class A (17,417,295) (74,448,821) --
Class B (25,909,442) (96,831,316) (20,373,856)
Class C (10,498,617) (46,459,344) --
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Net increase in net assets from Fund share transactions $ 265,996,122 $ 2,276,815,182 $ 440,591,573
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Net increase in net assets $ 683,122,855 $ 2,439,138,957 $ 497,096,438
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Net Assets
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At beginning of period $ 3,013,878,936 $ 574,739,979 $ 77,643,541
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At end of period $ 3,697,001,791 $ 3,013,878,936 $ 574,739,979
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Accumulated undistributed
net investment income
included in net assets
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At end of period $ -- $ -- $ --
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</TABLE>
(1) For the two-month period ended December 31, 1998.
See notes to financial statements
8
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Period Ended December 31, Year Ended October 31,
--------------------------------------- -------------------------------
1998(1)(2) 1998(2)
--------------------------------------- -------------------------------
Class A Class B Class C Class A Class B Class C
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of period $ 17.150 $ 16.870 $ 16.240 $ 14.680 $ 14.550 $ 14.030
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
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Net investment income (loss) $ 0.017 $ (0.005) $ (0.011) $ 0.099 $ (0.027) $ (0.053)
Net realized and unrealized gain 2.273 2.235 2.151 2.371 2.347 2.263
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Total income from operations $ 2.290 $ 2.230 $ 2.140 $ 2.470 $ 2.320 $ 2.210
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Net asset value -- End of period $ 19.440 $ 19.100 $ 18.380 $ 17.150 $ 16.870 $ 16.240
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Total Return (4) 13.35% 13.22% 13.18% 16.83% 15.95% 15.75%
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Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $852,967 $2,196,794 $647,241 $689,283 $1,801,720 $522,877
Ratios (As a percentage of average daily net assets):
Expenses (5) 0.62%(6) 1.37%(6) 1.55%(6) 0.67% 1.43% 1.59%
Net investment income (loss) 0.56%(6) (0.18)%(6) (0.37)%(6) 0.59% (0.16)% (0.33)%
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended October 31,
--------------------------
1997 1996(3)
----------- ----------
Class B Class B
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net asset value -- Beginning of period $ 11.150 $10.000
- ---------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------
Net investment income (loss) $ (0.011) $(0.003)
Net realized and unrealized gain 3.411 1.153
- ---------------------------------------------------------------------------------
Total income from operations $ 3.400 $ 1.150
- ---------------------------------------------------------------------------------
Net asset value -- End of period $ 14.550 $11.150
- ---------------------------------------------------------------------------------
Total Return (4) 30.49% 11.50%
- ---------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $574,740 $77,644
Ratios (As a percentage of average daily net assets):
Expenses (5) 1.50% 1.63%(6)
Net investment income (loss) (0.15)% (0.13)%(6)
- ---------------------------------------------------------------------------------
</TABLE>
(1) For the two-month period ended December 31, 1998.
(2) Net investment income (loss) per share was computed using average shares
outstanding.
(3) For the period from the start of business, March 28, 1996, to October 31,
1996.
(4) 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
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
(5) Includes the Fund's share of the Portfolio's allocated expenses.
(6) Annualized.
See notes to financial statements
9
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
1 Significant Accounting Policies
--------------------------------------------------------------------------
Eaton Vance 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 offers three classes of shares. Class A shares
are sold subject to a sales charge imposed at the time of purchase. Class B
and Class C shares are sold at net asset value and are subject to a contingent
deferred sales charge (see Note 6). All classes of shares have equal rights to
assets and voting privileges. Realized and unrealized gains and losses and net
investment income, other than class specific expenses, are allocated daily to
each class of shares based on the relative net assets of each class to the
total net assets of the Fund. Each class of shares differs in its distribution
plan and certain other class specific expenses. The Fund invests all of its
investable assets in interests in the 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 (42.3% at December
31, 1998). The performance of the Fund is directly affected by the performance
of the Portfolio. The financial statements of the Portfolio, including the
Portfolio of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in, the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuation -- Valuation of 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 the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally
accepted accounting principles.
C Federal Taxes -- The Fund's policy is to comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies and
to distribute to shareholders, each year, all of its net investment income,
and any net realized capital gains. Accordingly, no provision for federal
income or excise tax is necessary. At December 31, 1998 the Fund for
federal income tax purposes, had a capital loss carryover of $58,599,934
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. A portion of such capital loss carryover was acquired through the Fund
Reorganization (see Note 8) and may be subject to certain limitations. Such
capital loss carryover will expire on December 31, 2006 ($56,075,499) and
December 31, 2005 ($2,524,435).
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 Other -- Investment transactions are accounted for on a trade date basis.
Dividends to shareholders are recorded on the ex-dividend date.
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
--------------------------------------------------------------------------
The Fund's policy is to distribute annually (normally in December)
substantially all of the net investment income allocated to the Fund by
the Portfolio (less the Fund's direct expenses) and to distribute annually
all or substantially all of its net realized capital gains (reduced by any
available capital loss carryforwards from prior years) allocated by the
Portfolio to the Fund, if any. 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
10
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
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 year ended
December 31, 1998, $244,574 was reclassified from accumulated net investment
loss to paid-in capital due to permanent differences between book and tax
accounting for operating losses. Additionally, $94 was reclassified from
accumulated net realized loss from Portfolio to paid-in capital due to
permanent differences between book and tax accounting for capital losses. Net
investment loss, net realized gain on investment transactions and net assets
were unaffected by these reclassifications.
3 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:
Period Ended Year Ended
Class A December 31, 1998(1) October 31, 1998
-------------------------------------------------------------------------
Sales 4,641,455 30,965,178
Redemptions (957,899) (4,534,563)
Issued to EV Traditional
Tax-Managed Growth
Fund Shareholders -- 13,757,199
-------------------------------------------------------------------------
Net increase 3,683,556 40,187,814
-------------------------------------------------------------------------
Year Ended October 31,
Period Ended --------------------------
Class B December 31, 1998(1) 1998 1997
-------------------------------------------------------------------------
Sales 9,665,097 73,217,473 34,049,891
Redemptions (1,447,425) (5,928,292) (1,509,922)
-------------------------------------------------------------------------
Net increase 8,217,672 67,289,181 32,539,969
Period Ended Year Ended
Class C December 31, 1998(1) October 31, 1998
-------------------------------------------------------------------------
Sales 3,625,099 24,592,476
Redemptions (608,856) (2,996,704)
-------------------------------------------------------------------------
Issued to EV Classic Tax-Managed Growth
Fund Shareholders --
-------------------------------------------------------------------------
Net increase 3,016,243 32,203,501
-------------------------------------------------------------------------
(1) For the two-month period ended December 31, 1998.
4 Transactions with Affiliates
---------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM. See Note 2 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report. Except for
Trustees of the Fund who are not members of EVM's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
management fee. Certain officers and Trustees of the Fund and the Portfolio
are officers and directors/trustees of the above organizations (Note 5). Eaton
Vance Distributors, Inc. (EVD), a subsidiary of EVM and the Fund's principal
underwriter, received $353,816 and $2,265,177, as its portion of the sales
charge on sales of Class A shares for the period from November 1, 1998 to
December 31, 1998 and the year ended October 31, 1998, respectively.
5 Distribution and Service Plan
---------------------------------------------------------------------------
The Fund has adopted a Service Plan for the Fund's Class A shares (the "Class
A Plan") that is designed to meet the service fee requirements of the sales
charge rule of the National Association of Securities Dealers, Inc. The Class
A Plan provides that the Fund may make service fee payments for personal
services and/or the maintenance of shareholder accounts to the Principal
Underwriter, financial service firms ("Authorized Firms") and other persons in
amounts not exceeding 0.25% of average daily net assets for Class A shares for
any fiscal year. The Trustees have initially implemented the Class A Plan by
authorizing Class A to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed 0.25% of
the average daily net assets for any fiscal year which is based on the value
of Class A shares sold by such persons and remaining outstanding for at least
twelve months. The Fund paid or accrued service fees to or payable to EVD for
the period from November 1, 1998 to December 31, 1998 and for the year ended
October 31, 1998, in the amounts of $86,398 and $290,289, respectively, for
Class A shares.
The Fund has also adopted distribution plans ("Class B Plan" and "Class C
Plan", collectively "the Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The Plans, which are approved annually, require the Fund
to pay the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD) amounts
equal to 1/365 of 0.75% of the Fund's Class B and Class C daily net assets,
for providing ongoing distribution services and facilities to the Fund. The
Fund
11
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
will automatically discontinue payments to EVD during any period in which
there are no outstanding Uncovered Distribution Charges, which are equivalent
to the sum of (i) 5% and 6.25% of the aggregate amount received by the Fund
for the Class B and Class C shares sold, respectively, plus (ii) interest
calculated by applying the rate of 1% over the prevailing prime rate to the
outstanding balance of Uncovered Distribution Charges of EVD of each
respective class reduced by the aggregate amount of contingent deferred sales
charges (see Note 6) and daily distribution fees theretofore paid to EVD by
each respective class. The amount payable to EVD with respect to each day is
accrued on such day as a liability of the Fund and, accordingly, reduces the
Fund's net assets. For the period from November 1, 1998 to December 31, 1998
and the year ended October 31, 1998, the Fund paid or accrued $2,481,872 and
$9,091,696, respectively, to or payable to EVD representing 0.75% (annualized)
of average daily net assets of Class B shares. Also, for the period from
November 1, 1998 to December 31, 1998 and the year ended October 31, 1998, the
Fund paid or accrued $726,317 and $2,538,292, respectively, to or payable to
EVD representing 0.75% (annualized) of average daily net assets of Class C
shares. At December 31, 1998, the amount of Uncovered Distribution Charges of
EVD calculated under the Plans was approximately $80,291,000 and $34,443,000
for Class B and Class C shares, respectively.
In addition, the Plans authorize the Fund to make payments of service fees to
EVD, Authorized Firms and other persons in amounts not exceeding 0.25% of
their average daily net assets for each fiscal year. Service fee payments are
made for personal services and/or the maintenance of shareholder accounts.
Under the Class B Plan, this fee is paid quarterly in arrears based on the
value of Class B shares sold by such persons and remaining outstanding for at
least twelve months. Under the Class C Plan EVD currently expects to pay to an
Authorized Firm (a) a service fee (except on exchange transactions and
reinvestments) at the time of sale equal to 0.25% of the purchase price of the
Class C shares sold by such Firm and (b) monthly service fees approximately
equivalent to 1/12 of 0.25% of the value of Class C shares sold by such Firm
and remaining outstanding for at least one year. During the first year after a
purchase of Class C shares, EVD will retain the service fee as reimbursement
for the service fee payment made to Authorized Firms at the time of sale. The
Fund paid or accrued service fees to or payable to EVD for the period from
November 1, 1998 to December 31, 1998 and the year ended October 31, 1998, in
the amounts of $213,550 and $890,221, respectively, for Class B shares.
Also, for the period from November 1, 1998 to December 31, 1998 and the year
ended October 31, 1998, the Fund paid or accrued service fees to or payable to
EVD in the amounts of $242,106 and $802,890, respectively, for Class C shares.
Service fees are separate and distinct from the sales commissions and
distribution fees payable by the Fund to EVD, and, as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of EVD.
Certain officers and Trustees of this fund are officers or directors of EVD.
6 Contingent Deferred Sales Charge
---------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Class B shares made within six years of purchase. A CDSC is imposed on certain
Class C shares redeemed within one year of purchase. Generally, the CDSC is
based upon the lower of the net asset value at date of redemption or date of
purchase. No charge is levied on shares acquired by reinvestment of dividends
or capital gains distributions. Class B CDSC is imposed at declining rates
that begin at 5% in the case of redemptions in the first and second year after
purchase, declining one percentage point each subsequent year. Class C shares
will be subject to a 1% CDSC if redeemed within one year of purchase. No CDSC
is levied on shares which have been sold to EVM or its affiliates or to their
respective employees or clients. CDSC charges are paid to EVD to reduce the
amount of Uncovered Distribution Charges calculated under each Fund's
Distribution Plan (see Note 5). CDSC charges received when no Uncovered
Distribution Charges exist will be credited to the Fund. EVD received
approximately $649,000 and $46,000 of CDSC paid by shareholders for Class B
shares and Class C shares, respectively, for the period from November 1, 1998
to December 31, 1998, and $1,991,000 and $151,000 of CDSC paid by shareholders
for Class B and Class C shares, respectively, for the year ended October 31,
1998.
7 Investment Transactions
---------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio aggregated
$317,147,474 and $58,296,937, respectively, for the period from November 1,
1998 to December 31, 1998, and $2,136,885,354 and $230,002,510, respectively
for the year ended October 31, 1998. In addition, investments were distributed
in payment for fund shares redeemed resulting in realized capital gains for
book purposes of $54,472 and $4,654,616 for the period from November 1, 1998
to December 31, 1998 and the year ended October 31, 1998, respectively.
12
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
8 Transfer of Net Assets
---------------------------------------------------------------------------
On November 1, 1997, the EV Marathon Tax-Managed Growth Fund acquired the net
assets of the EV Traditional Tax-Managed Growth Fund and EV Classic Tax-
Managed Growth Fund pursuant to an Agreement and Plan of Reorganization dated
June 23, 1997. In accordance with the agreement, EV Marathon Tax-Managed
Growth Fund, at the closing, issued 13,757,199 Class A shares and 10,607,729
Class C shares of the Fund having an aggregate value of $201,987,148 and
$148,819,397, respectively. As a result, the Fund issued one Class A share
and one Class C share for each share of EV Traditional Tax-Managed Growth
Fund and EV Classic Tax-Managed Growth Fund, respectively. The transaction
was structured for tax purposes to qualify as a tax free reorganization under
the Internal Revenue Code. The EV Traditional Tax-Managed Growth Fund's and
EV Classic Tax-Managed Growth Fund's net assets at the date of the
transaction were $201,987,148 and $148,819,397, respectively, including
$22,188,108 and $13,057,866 of unrealized appreciation. Directly after the
merger, the combined net assets of the Eaton Vance Tax-Managed Growth Fund
(formerly "EV Marathon Tax-Managed Growth Fund") were $925,546,524 with a net
asset value of $14.68, $14.55 and $14.03 for Class A, Class B and Class C,
respectively.
9 Name Change
---------------------------------------------------------------------------
Effective November 1, 1997, the EV Marathon Tax-Managed Growth Fund changed
its name to Eaton Vance Tax-Managed Growth Fund.
10 Fiscal Year End Change
---------------------------------------------------------------------------
Effective November 1, 1998, the Fund changed its fiscal year-end to
December 31.
13
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of Eaton Vance Mutual Funds Trust:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of Eaton
Vance Tax-Managed Growth Fund (one of the series constituting Eaton Vance Mutual
Funds Trust) as of December 31, 1998, the related statements of operations for
the two-month period ended December 31, 1998 and the year ended October 31,
1998, the statements of changes in net assets for the two-month period then
ended and each of the years in the two-year period ended October 31, 1998, and
the financial highlights for the two-month period ended December 31, 1998 and
for each of the years in the two-year period ended October 31, 1998 and for 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 Eaton Vance Tax-
Managed Growth Fund at December 31, 1998, 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
February 12, 1999
14
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS
Common Stocks -- 94.7%
Security Shares Value
- --------------------------------------------------------------------------------
Advertising and Marketing Services -- 2.6%
- --------------------------------------------------------------------------------
ACNielsen Corp.(1) 45,668 $ 1,290,121
Advo, Inc.(1) 170,000 4,483,750
Harte-Hanks Communications, Inc. 144,604 4,121,214
Interpublic Group of Companies, Inc. 582,138 46,425,506
Omnicom Group, Inc. 2,298,418 133,308,243
R.H. Donelley Corp. 8,153 118,728
Snyder Communications, Inc.(1)(2) 442,500 14,929,397
Snyder Communications, Inc.(1)(2) 40,000 1,348,875
TMP Worldwide, Inc.(1) 43,000 1,806,000
True North Communications, Inc. 93,000 2,499,375
True North Communications, Inc.(2) 200,000 5,358,248
WPP Group PLC 488,000 2,969,626
Young and Rubicam, Inc.(1) 186,000 6,021,750
- --------------------------------------------------------------------------------
$ 224,680,833
- --------------------------------------------------------------------------------
Aerospace and Defense -- 0.2%
- --------------------------------------------------------------------------------
Allied Signal, Inc. 25,000 $ 1,107,813
Boeing Company (The) 228,127 7,442,643
Raytheon Co., Class B 213,564 11,372,283
- --------------------------------------------------------------------------------
$ 19,922,739
- --------------------------------------------------------------------------------
Apparel & Textiles -- 0.0%
- --------------------------------------------------------------------------------
Unifi, Inc. 50,000 $ 978,125
- --------------------------------------------------------------------------------
$ 978,125
- --------------------------------------------------------------------------------
Auto and Parts -- 0.9%
- --------------------------------------------------------------------------------
Aftermarket Technology Corp.(1)(2) 46,000 $ 361,767
Borg-Warner Automotive, Inc. 225,000 12,557,813
DaimlerChrysler(1) 19,952 1,916,639
Ford Motor Co. 32,000 1,878,000
General Motors Corp. 3,969 284,032
Genuine Parts Co. 147,059 4,917,285
Harley-Davidson, Inc. 1,000 47,375
Magna International, Inc., Class A 875,000 54,250,000
Meritor Automotive, Inc. 61,133 1,295,255
SPX Corp.(1) 47,862 3,206,754
TRW, Inc. 2,000 112,375
- --------------------------------------------------------------------------------
$ 80,827,295
- --------------------------------------------------------------------------------
Banks - Money Center -- 0.1%
- --------------------------------------------------------------------------------
Bank of Montreal 36,650 $ 1,470,581
Chase Manhattan Corp. 78,566 5,347,398
Morgan (J.P.) & Co., Inc. 1,000 105,063
National Westminster Bank PLC 8,753 1,037,231
- --------------------------------------------------------------------------------
$ 7,960,273
- --------------------------------------------------------------------------------
Banks - Regional -- 5.4%
- --------------------------------------------------------------------------------
AmSouth Bancorporation 27,492 $ 1,254,323
Bank of Granite Corp. 22,500 621,563
Bank of New York Co., Inc. (The) 245,144 9,867,046
Bank One Corp. 839,254 42,854,407
Bank United Corp. 65,000 2,551,250
BankAmerica Corp. 611,569 36,770,586
BankBoston Corp. 1,502,000 58,484,125
BB&T Corp. 66,470 2,679,572
City National Corp. 100,000 4,162,500
Colonial Bancgroup, Inc. (The) 310,822 3,729,864
Comerica, Inc. 100,779 6,871,868
Community First Bancshares, Inc. 296,000 6,234,500
Community First Bancshares, Inc.(2) 72,000 1,514,604
Compass Bancshares, Inc. 171,112 6,512,951
Crestar Financial Corp. 83,348 6,001,056
Fifth Third Bancorp 126,710 9,036,007
First Citizens BancShares, Inc. 47,900 4,311,000
First Tennessee National Corp. 33,488 1,274,637
First Union Corp. 1,054,655 64,136,206
Fleet Financial Group, Inc. 114,972 5,137,811
Golden West Financial Corp. 7,000 641,813
Keycorp 422,594 13,523,008
Marshall and Ilsley Corp. 20,000 1,168,750
Mellon Bank Corp. 16,000 1,100,000
Mercantile Bancorporation, Inc. 168,462 7,770,310
National City Corp. 90,150 6,535,875
National Commerce Bancorporation(2) 159,632 3,002,076
Northern Trust Corp. 181,898 15,881,969
Old Kent Financial Corp. 33,000 1,534,500
PNC Bank Corp. 62,502 3,382,921
Regions Financial Corp. 49,300 1,987,406
Southwest Bancorporation of Texas, Inc.(1) 7,688 137,423
Sovereign Bancorp., Inc. 366,000 5,215,500
Summit Bancorp. 21,000 917,438
SunTrust Banks, Inc. 480 36,720
See notes to financial statements
15
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Banks - Regional (continued)
- --------------------------------------------------------------------------------
Synovus Financial 41,776 $ 1,018,290
U.S. Bancorp. 155,474 5,519,327
Union Planters Corp. 56,875 2,577,148
Valley National Bancorp. 230,863 6,507,451
Wachovia Corp. 37,199 3,252,588
Washington Mutual, Inc. 143,506 5,480,135
Wells Fargo & Co. 2,714,048 108,392,291
Westamerica Bancorporation 82,596 3,035,403
Zions Bancorporation 20,000 1,247,500
- --------------------------------------------------------------------------------
$ 473,871,718
- --------------------------------------------------------------------------------
Beverages -- 1.5%
- --------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 546,465 $ 35,861,766
Coca-Cola Company (The) 612,666 40,972,039
PepsiCo, Inc. 1,343,931 55,017,175
- --------------------------------------------------------------------------------
$ 131,850,980
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 1.5%
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc.(1) 108,600 $ 5,918,700
Comcast Corp., Class A 62,500 3,667,969
Cox Communications, Inc., Class A(1) 193,319 13,363,176
Infinity Broadcasting Corp.(1) 34,500 944,438
Liberty Media Group, Class A(1) 91,828 4,229,827
MediaOne Group, Inc.(1) 1,259,024 59,174,128
Tele-Communications, Inc., Series A(1) 546,073 30,204,663
Univision Communications, Inc.(1) 200,649 7,260,986
Univision Communications, Inc.(1)(2) 183,556 6,634,130
- --------------------------------------------------------------------------------
$ 131,398,017
- --------------------------------------------------------------------------------
Building Materials and Tools -- 0.5%
- --------------------------------------------------------------------------------
American Standard Companies, Inc.(1) 172,899 $ 6,224,364
CRH PLC 258,294 4,443,380
Interface, Inc. 484,412 4,495,973
Masco Corp. 228,662 6,574,033
Sherwin-Williams Co. (The) 44,670 1,312,181
Snap-On, Inc. 44,444 1,547,207
Valspar Corp. 620,000 23,133,750
Walter Industries, Inc.(1) 1,000 15,313
- --------------------------------------------------------------------------------
$ 47,746,201
- --------------------------------------------------------------------------------
Business Services - Miscellaneous -- 1.0%
- --------------------------------------------------------------------------------
Cintas Corp. 131,244 $ 9,244,499
Corrections Corporation of America(1) 97,310 1,715,089
Fair, Issac and Co., Inc. 88,828 4,102,743
Fair, Issac and Co., Inc.(2) 150,000 6,922,352
Half (Robert) International, Inc.(1) 1,800 80,438
Manpower, Inc. 110,000 2,770,625
Metzler Group, Inc. (The)(1) 314,880 15,330,720
Metzler Group, Inc. (The)(1)(2) 273,312 13,291,353
Navigant International, Inc.(1) 59,631 458,413
Romac International, Inc.(1)(2) 45,546 1,013,061
ServiceMaster Co. 515,201 11,366,622
Staff Leasing, Inc.(1) 78,125 908,203
Staff Leasing, Inc.(1)(2) 78,125 906,992
Sylvan Learning Systems, Inc.(1) 509,469 15,538,805
Viad Corp. 40,314 1,224,538
- --------------------------------------------------------------------------------
$ 84,874,453
- --------------------------------------------------------------------------------
Chemicals -- 0.8%
- --------------------------------------------------------------------------------
Bayer AG ADR 40,000 $ 1,670,348
Dow Chemical Co. (The) 21,318 1,938,606
DuPont (E.I.) de Nemours & Co. 223,800 11,875,388
Eastman Chemical Co. 123 5,504
Monsanto Co. 1,142,240 54,256,400
Octel Corp.(1) 8,322 115,468
Solutia, Inc. 200,336 4,482,518
- --------------------------------------------------------------------------------
$ 74,344,232
- --------------------------------------------------------------------------------
Communications Equipment -- 2.0%
- --------------------------------------------------------------------------------
3Com Corp.(1) 902,883 $ 40,460,444
Ascend Communications, Inc.(1) 11,000 723,250
Comverse Technology, Inc.(1) 100,000 7,100,000
Dialogic Corp.(1) 80,000 1,572,504
General Cable Corp. 3,000 61,500
General Motors Corp., Class H(1) 300,000 11,906,250
L.M. Ericsson Telephone Co., ADR 452,000 10,819,750
Lucent Technologies, Inc. 19,369 2,130,590
Nokia Corp., Class A ADR 644,720 77,648,464
Northern Telecom Ltd. ADR 138,263 6,930,433
PairGain Technologies, Inc.(1) 350,581 2,695,091
Salient 3 Communications, Inc., Class A 78,125 712,891
Tellabs, Inc.(1) 151,623 10,395,652
- --------------------------------------------------------------------------------
$ 173,156,819
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Communications Services -- 1.9%
- --------------------------------------------------------------------------------
Airtouch Communications, Inc.(1) 1,420 $ 102,418
Aliant Communications, Inc. 86,322 3,528,412
Alltel Corp. 54,746 3,274,520
American Tower Corp., Class A(1) 149,451 4,418,145
Ameritech Corp. 28,968 1,835,847
AT&T Corp. 71,617 5,389,179
Bell Atlantic Corp. 8,448 447,744
BellSouth Corp. 43,912 2,190,111
Citizens Utilities Corp., Class B(1) 45,311 368,154
Frontier Corp. 32,129 1,092,386
GTE Corp. 12,176 791,440
GTE Corp.(2) 17,500 1,128,021
Intermedia Communications, Inc.(1) 113,637 1,960,238
ITC Deltacom, Inc.(1)(2) 628,773 9,536,050
IXC Communications, Inc.(1) 135,000 4,539,375
MCI Worldcom, Inc.(1) 1,422,741 102,081,666
McLeodUSA, Inc.(1) 57,143 1,785,719
McLeodUSA, Inc.(1)(2) 36,000 1,124,625
Nextel Communications, Inc., Class A(1) 75,830 1,791,484
Premiere Technologies, Inc.(1) 28,000 206,500
SBC Communications, Inc. 10,437 559,684
Sprint Corp. 1,885 158,576
Sprint Corp. (PCS Group)(1) 942 21,784
Tel-Save Holdings, Inc.(1) 247,376 4,143,548
Telecom Corp. of New Zealand Ltd. ADR 8,000 285,500
Teleglobe, Inc. 88,500 3,186,000
Telephone & Data Systems, Inc. 131,756 5,920,785
US West, Inc. 26,551 1,715,858
Winstar Communications, Inc.(1) 11,424 445,536
- --------------------------------------------------------------------------------
$ 164,029,305
- --------------------------------------------------------------------------------
Computer Software -- 2.9%
- --------------------------------------------------------------------------------
Aspect Development, Inc.(1)(2) 100,000 $ 4,417,439
Baan Co., NV ADR(1) 223,926 2,351,223
BMC Software, Inc.(1) 8,000 356,500
Boole and Babbage, Inc.(1) 40,000 1,177,500
Cadence Design Systems, Inc.(1) 506,000 15,053,500
Computer Associates International, Inc. 854,500 36,423,063
Compuware Corp.(1) 1,400 109,375
CSG Systems International, Inc.(1) 20,558 1,624,082
HNC Software, Inc.(1) 329,814 13,336,854
HNC Software, Inc.(1)(2) 147,980 5,981,448
Intuit, Inc.(1) 285,917 20,728,983
Microsoft Corp.(1) 281,755 39,075,897
Oracle Corp.(1) 1,262,500 54,445,313
Parametric Technology Corp.(1) 94,600 1,537,250
PeopleSoft, Inc.(1) 354,174 6,707,170
Platinum Technology, Inc.(1) 155,000 2,964,375
Sapient Corp.(1) 323,876 18,137,056
Security Dynamics Technologies, Inc.(1) 40,000 920,000
Siebel Systems, Inc.(1) 118,000 4,004,625
Siebel Systems, Inc.(1)(2) 300,000 10,149,518
Sterling Commerce, Inc.(1) 2,388 107,460
Structural Dynamics Research Corp.(1) 675,000 13,415,625
Wind River Systems, Inc.(1) 21,622 1,016,234
Wind River Systems, Inc.(1)(2) 13,000 610,796
- --------------------------------------------------------------------------------
$ 254,651,286
- --------------------------------------------------------------------------------
Computers and Business Equipment -- 7.6%
- --------------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 33,715 $ 282,363
Cisco Systems, Inc.(1) 1,026,251 95,248,920
Compaq Computer Corp. 38,490 1,614,174
Dell Computer Corp.(1) 3,800 278,113
Dell Computer Corp.(1)(2) 1,500,000 109,744,655
Dell Computer Corp.(1)(2) 150,512 10,999,533
EMC Corp.(1) 22,162 1,883,770
Fore Systems, Inc.(1) 222,250 4,069,953
Fore Systems, Inc.(1)(2) 38,466 703,528
Gateway 2000, Inc.(1)(2) 200,000 10,224,703
Gateway 2000, Inc.(1)(2) 200,000 10,190,578
Hewlett-Packard Co. 588,680 40,214,203
International Business Machines Corp. 154,198 28,488,081
Lexmark International Group, Inc.(1) 1,841,746 185,095,472
Seagate Technology, Inc.(1) 40,000 1,210,000
Sun Microsystems, Inc.(1) 3,500 299,688
Xerox Corp. 1,334,000 157,411,999
- --------------------------------------------------------------------------------
$ 657,959,733
- --------------------------------------------------------------------------------
Conglomerates -- 1.4%
- --------------------------------------------------------------------------------
General Electric Co. 1,066,342 $ 108,833,529
General Electric Co.(2) 21,155 2,157,675
United Technologies Corp. 86,242 9,378,818
- --------------------------------------------------------------------------------
$ 120,370,022
- --------------------------------------------------------------------------------
See notes to financial statements
17
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Consumer Services -- 0.3%
- --------------------------------------------------------------------------------
Block (H&R), Inc. 366,177 $ 16,477,965
Cendant Corp.(1) 187,999 3,583,731
Service Corp. International 130,389 4,962,931
Stewart Enterprises, Inc. 153,992 3,426,322
- --------------------------------------------------------------------------------
$ 28,450,949
- --------------------------------------------------------------------------------
Containers and Packaging -- 0.2%
- --------------------------------------------------------------------------------
Sealed Air Corp.(1) 325,000 $ 16,595,313
Sonoco Products Co. 78,571 2,327,666
- --------------------------------------------------------------------------------
$ 18,922,979
- --------------------------------------------------------------------------------
Distribution Services -- 1.6%
- --------------------------------------------------------------------------------
Airgas, Inc.(1) 536,219 $ 4,792,457
Cardinal Health, Inc. 747,356 56,705,637
School Specialty, Inc.(1) 66,257 1,416,234
Sysco Corp. 1,766,922 48,479,922
U.S. Foodservice, Inc.(1) 505,489 24,768,961
U.S. Foodservice, Inc.(1)(2) 66,438 3,252,749
US Office Products Co.(1) 149,077 577,674
Wilmar Industries, Inc.(1) 50,000 1,015,625
- --------------------------------------------------------------------------------
$ 141,009,259
- --------------------------------------------------------------------------------
Drugs -- 9.3%
- --------------------------------------------------------------------------------
Abbott Laboratories 1,208,935 $ 59,237,814
Agouron Pharmaceuticals, Inc.(1) 355,077 20,860,774
Allergan, Inc. 50,000 3,237,500
American Home Products Corp. 4,600 259,038
Amgen, Inc.(1) 405,532 42,403,440
Astra AB, Class A 1,074,400 21,937,207
Astra AB, Class B ADR 160,000 3,310,000
Bristol-Myers Squibb Co. 383,255 51,284,310
Covance, Inc.(1) 81,250 2,366,406
Elan Corp., PLC ADR(1) 339,630 23,625,512
Genentech, Inc.(1) 80,000 6,375,000
Genzyme Corp., Class A(1) 970,000 48,257,500
Incyte Pharmaceuticals, Inc.(1)(2) 577,571 21,582,639
Incyte Pharmaceuticals, Inc.(1) 150,856 5,638,243
Incyte Pharmaceuticals, Inc.(1)(2) 328,053 12,257,303
Lilly (Eli) & Co. 825,448 73,361,690
Merck & Co., Inc. 597,415 88,230,727
Parexel International Corp.(1) 35,000 875,000
Pfizer, Inc. 881,021 110,513,071
Quintiles Transnational Corp.(1) 195,420 10,430,543
Schering-Plough Corp. 643,784 35,569,066
Sepracor, Inc.(1) 440,000 38,775,000
SmithKline Beecham PLC ADR 301,940 20,984,830
Teva Pharmaceutical Industries 100,000 4,065,834
Ltd. ADR(2)
Vertex Pharmaceuticals, Inc.(1) 35,000 1,041,250
Warner-Lambert Co. 716,032 53,836,656
Watson Pharmaceuticals, Inc.(1) 599,550 37,696,706
Watson Pharmaceuticals, Inc.(1)(2) 122,888 7,720,144
- --------------------------------------------------------------------------------
$ 805,733,203
- --------------------------------------------------------------------------------
Electric Utilities -- 0.2%
- --------------------------------------------------------------------------------
Central and South West Corp. 1,600 $ 43,900
Dominion Resources, Inc. 28,938 1,352,852
Duke Energy Corp. 1,800 115,313
New England Electric System 2,700 129,938
Teco Energy, Inc. 40,000 1,127,500
Texas Utilities Co. 250,196 11,681,026
- --------------------------------------------------------------------------------
$ 14,450,529
- --------------------------------------------------------------------------------
Electrical Equipment -- 0.5%
- --------------------------------------------------------------------------------
American Power Conversion Corp.(1) 200,000 $ 9,687,500
AMP, Inc. 112,340 5,848,701
Emerson Electric Co. 159,148 9,628,454
Molex, Inc., Class A 90,066 2,870,854
Rockwell International Corp. 183,400 8,906,363
Sanmina Corp.(1)(2) 150,000 9,363,281
Thomas and Betts Corp. 22,963 994,585
- --------------------------------------------------------------------------------
$ 47,299,738
- --------------------------------------------------------------------------------
Electronics - Instruments -- 0.2%
- --------------------------------------------------------------------------------
Dionex Corp.(1) 362,140 $ 13,263,378
Dionex Corp.(1)(2) 40,000 1,460,434
Waters Corp.(1) 29,580 2,580,855
X-Rite, Inc. 310,000 2,402,500
X-Rite, Inc.(2) 118,000 914,195
- --------------------------------------------------------------------------------
$ 20,621,362
- --------------------------------------------------------------------------------
See notes to financial statements
18
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Electronics - Semiconductors -- 2.6%
- --------------------------------------------------------------------------------
Altera Corp.(1) 3,600 $ 219,150
Analog Devices, Inc.(1) 1,630,000 51,141,250
Burr-Brown Corp.(1) 600,000 14,062,500
Intel Corp. 857,173 101,628,573
KLA-Tencor Corp.(1) 36,000 1,561,500
Lam Research Corp.(1) 106,000 1,888,125
Level One Communications, Inc.(1) 31,129 1,105,080
Linear Technologies Corp. 66,000 5,911,125
Maxim Integrated Products Co.(1)(2) 20,664 895,311
Maxim Intergrated Products Co.(1) 40,000 1,747,500
Motorola, Inc. 137,188 8,377,042
National Semiconductor Corp.(1) 79,368 1,071,468
Smart Modular Technologies, Inc.(1) 60,000 1,665,000
Speedfam International, Inc.(1) 221,000 3,784,625
Texas Instruments, Inc. 337,948 28,915,676
Ultratech Stepper, Inc.(1) 245,129 3,922,064
Uniphase Corp.(1)(2) 25,932 1,798,433
- --------------------------------------------------------------------------------
$ 229,694,422
- --------------------------------------------------------------------------------
Engineering and Construction -- 0.1%
- --------------------------------------------------------------------------------
Jacobs Engineering Group, Inc.(1) 162,455 $ 6,620,041
- --------------------------------------------------------------------------------
$ 6,620,041
- --------------------------------------------------------------------------------
Entertainment -- 0.6%
- --------------------------------------------------------------------------------
Callaway Golf Co.(2) 35,715 $ 365,932
Disney (Walt) Co. 79,800 2,394,000
Fox Entertainment Group, Inc.(1) 275,500 6,939,156
Mattel, Inc. 20,995 478,948
Time Warner Inc.(2) 62,418 3,866,069
Time Warner Inc. 501,368 31,116,152
Viacom, Inc., Class A(1) 10,727 789,105
Viacom, Inc., Class B(1) 80,105 5,927,770
Westwood One(1)(2) 61,200 1,860,782
- --------------------------------------------------------------------------------
$ 53,737,914
- --------------------------------------------------------------------------------
Environmental Services -- 0.7%
- --------------------------------------------------------------------------------
Allied Waste Industries, Inc.(1) 375,000 $ 8,859,375
Browning-Ferris Industries, Inc. 423,906 12,054,827
Eastern Environmental Services(1) 83,552 2,475,228
U.S. Filter Corp.(1) 160,412 3,669,425
Waste Management, Inc. 741,981 34,594,864
- --------------------------------------------------------------------------------
$ 61,653,719
- --------------------------------------------------------------------------------
Financial Services - Miscellaneous -- 3.4%
- --------------------------------------------------------------------------------
American Express Co. 616,648 $ 63,052,257
Associates First Capital Corp. 600,000 25,425,000
Capital One Financial Corp. 73,411 8,442,265
Citigroup 1,395,960 69,100,019
Fannie Mae 940,805 69,619,569
FirstPlus Financial Group, Inc.(1) 120,000 330,000
Freddie Mac 352,900 22,739,994
Household International, Inc. 339,293 13,444,485
Providian Financial Corp. 266,261 19,969,538
- --------------------------------------------------------------------------------
$ 292,123,127
- --------------------------------------------------------------------------------
Foods -- 3.4%
- --------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 143,775 $ 2,471,133
Bestfoods 22,400 1,192,800
Conagra, Inc. 326,199 10,275,269
Dean Foods Co. 150,944 6,160,402
Flowers Industries, Inc. 435,781 10,431,508
General Mills, Inc. 24,850 1,932,088
Keebler Food Products Co.(1) 40,000 1,505,000
Keebler Food Products Co.(1)(2) 31,480 1,180,744
Kellogg Co. 69,714 2,378,990
McCormick & Co., Inc. 623,058 21,067,149
Nabisco Holdings Corp., Class A 100,000 4,150,000
Pioneer Hi-Bred International, Inc. 952,171 25,708,617
Quaker Oats Co. (The) 39,942 2,376,549
Ralston Purina Group 74,659 2,417,085
Riviana Foods, Inc. 150,000 3,703,125
Riviana Foods, Inc.(2) 100,000 2,465,664
Sara Lee Corp. 1,155,944 32,583,172
Tyson Food, Inc. 870,276 18,493,365
Unilever ADR 1,652,000 137,012,749
Wrigley (Wm.) Jr. Co. 113,180 10,136,684
- --------------------------------------------------------------------------------
$ 297,642,093
- --------------------------------------------------------------------------------
See notes to financial statements
19
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Furniture and Appliances -- 0.5%
- --------------------------------------------------------------------------------
HON Industries, Inc. 1,135,488 $ 27,180,744
HON Industries, Inc.(2) 134,930 3,228,810
Leggett & Platt, Inc. 298,328 6,563,216
Miller (Herman), Inc. 120,000 3,225,000
- --------------------------------------------------------------------------------
$ 40,197,770
- --------------------------------------------------------------------------------
Health Services -- 0.7%
- --------------------------------------------------------------------------------
Aetna, Inc. 59,821 $ 4,703,426
Beverly Enterprises, Inc.(1) 357,143 2,410,715
Concentra Managed Care, Inc.(1) 410,257 4,384,622
FPA Medical Management, Inc.(1)(3) 315,000 3,150
Genesis Health Ventures, Inc.(1) 4,000 35,000
Health Management Associates, Inc., Class A(1) 361,170 7,810,301
HealthSouth Corp.(1) 146,000 2,253,875
Integrated Health Services, Inc. 50,000 706,250
Magellan Health Services, Inc.(1) 50,000 418,750
MedPartners, Inc.(1) 17,696 92,904
Omnicare, Inc. 25,650 891,338
Orthodontic Centers of America, Inc.(1) 100,000 1,943,750
Pacificare Health Systems, Inc., Class B(1) 19,500 1,550,250
PhyCor, Inc.(1) 312,500 2,128,906
Quest Diagnostics, Inc.(1) 15,625 278,320
Quorum Health Group, Inc.(1) 55,733 721,046
Renal Care Group, Inc.(1) 175,282 5,050,313
Renal Care Group, Inc.(1)(2) 196,225 5,646,195
Response Oncology, Inc.(1) 44,761 181,842
Sunrise Assisted Living, Inc.(1) 210,000 10,893,750
Sunrise Assisted Living, Inc.(1)(2) 140,000 7,259,232
United HealthCare Corp. 20,000 861,250
Vencor, Inc.(1) 25,600 115,200
- --------------------------------------------------------------------------------
$ 60,340,385
- --------------------------------------------------------------------------------
Household Products -- 2.7%
- --------------------------------------------------------------------------------
Avon Products, Inc. 8,700 $ 384,975
Blyth Industries, Inc.(1) 522,000 16,312,500
Blyth Industries, Inc.(1)(2) 40,000 1,249,583
Blyth Industries, Inc.(1)(2) 20,000 624,167
Colgate-Palmolive Co. 54,337 5,046,549
Fortune Brands, Inc. 67,500 2,134,688
Gillette Co. 2,632,556 127,185,361
Helen of Troy Ltd.(1) 65,000 954,688
Kimberly-Clark Corp. 551,168 30,038,656
Procter & Gamble Co. 410,462 37,480,311
Rubbermaid, Inc. 463,920 14,584,485
- --------------------------------------------------------------------------------
$ 235,995,963
- --------------------------------------------------------------------------------
Industrial Equipment -- 0.7%
- --------------------------------------------------------------------------------
Dover Corp. 355,445 $ 13,018,173
DT Industries, Inc. 37,728 594,216
Federal Signal Corp. 283,471 7,760,019
Illinois Tool Works, Inc. 169,010 9,802,580
Parker-Hannifin Corp. 150,898 4,941,910
Regal Beloit Corp. 265,000 6,095,000
Tecumseh Products Co., Class A 156,420 7,293,083
Tyco International Ltd. 98,730 7,447,944
- --------------------------------------------------------------------------------
$ 56,952,925
- --------------------------------------------------------------------------------
Information Services -- 4.7%
- --------------------------------------------------------------------------------
Acxiom Corp.(1) 407,088 $ 12,619,728
America Online, Inc.(1) 21,600 3,456,000
At Home Corp., Series A(1)(2) 20,291 1,478,584
At Home Corp., Series A(1)(2) 100,000 7,373,953
Automatic Data Processing, Inc. 1,856,243 148,847,485
Aztec Technology Partners(1) 119,262 432,324
Bell and Howell Co.(1) 115,000 4,348,438
BISYS Group, Inc. (The)(1) 53,873 2,781,194
Ceridian Corp.(1) 90,500 6,318,031
Computer Sciences Corp. 650,202 41,897,391
DST Systems, Inc.(1)(2) 93,000 5,302,390
Dun and Bradstreet Corp. (The) 40,768 1,286,740
Electronic Data Systems Corp. 155,000 7,788,750
Equifax, Inc. 40,000 1,367,500
First Data Corp. 282,761 8,959,989
HBO and Co. 27,599 791,746
IDX Systems Corp.(1)(2) 35,000 1,538,717
IDX Systems Corp.(1)(2) 25,000 1,096,572
IMS Health, Inc. 249,006 18,784,390
Lason, Inc.(1)(2) 165,000 9,597,737
Lason, Inc.(1)(2) 190,000 11,040,884
National Data Corp. 81,333 3,959,900
Nielsen Media Research 83,002 1,494,036
Nova Corp.(1) 75,758 2,627,856
Paychex, Inc. 87,976 4,525,266
See notes to financial statements
20
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Information Services (continued)
- --------------------------------------------------------------------------------
Reuters Holdings PLC ADR 273,945 $ 17,361,264
Reynolds & Reynolds, Inc., Class A 235,989 5,412,998
Saville Systems PLC ADR(1) 320,000 6,080,000
Saville Systems PLC ADR(1)(2) 99,197 1,882,387
Saville Systems PLC ADR(1)(2) 297 5,635
SunGard Data Systems, Inc.(1) 1,732,319 68,751,409
- --------------------------------------------------------------------------------
$ 409,209,294
- --------------------------------------------------------------------------------
Insurance -- 6.6%
- --------------------------------------------------------------------------------
20th Century Industries 70,700 $ 1,639,356
Aegon, N.V. ADR 96,504 11,797,614
Allmerica Financial Corp. 1,500 86,813
Allstate Corp. (The) 170,416 6,582,318
American General Corp. 91,153 7,109,934
American International Group, Inc. 427,911 41,346,901
AON Corp. 78,949 4,371,801
Berkshire Hathaway, Inc., Class A(1) 80 5,600,000
Berkshire Hathaway, Inc., Class B(1) 38,078 89,482,900
Chubb Corp. 101,050 6,555,619
Conseco, Inc.(2) 100,000 3,052,175
Delphi Financial Group, Inc.(1) 40,800 2,139,450
Gallagher (A.J.) and Co. 35,000 1,544,375
HSB Group, Inc. 75,000 3,079,688
Jefferson-Pilot Corp. 38,267 2,870,025
Kansas City Life Insurance Co. 35,400 2,893,950
Lab Holdings, Inc. 35,960 629,300
Marsh & McLennan Cos., Inc. 2,138,866 124,989,981
Mercury General Corp. 2,000 87,625
Mutual Risk Management Ltd. 1,043,500 40,826,938
Progressive Corp. 190,000 32,181,250
Protective Life Corp. 64,346 2,561,775
Safeco Corp. 12,122 520,488
St. Paul Cos., Inc. (The) 275,532 9,574,737
SunAmerica, Inc. 1,810,644 146,888,494
Torchmark Corp. 222,850 7,869,391
Transamerica Corp. 52,304 6,041,112
UICI(1) 57,257 1,402,797
UICI(1) 180,000 4,410,000
UNUM Corp. 152,200 8,884,675
- --------------------------------------------------------------------------------
$ 577,021,482
- --------------------------------------------------------------------------------
Investment Services -- 0.7%
- --------------------------------------------------------------------------------
E*Trade Group, Inc.(1)(2) 100,000 $ 4,634,268
Merrill Lynch & Co., Inc. 349,756 23,346,213
Morgan Stanley Dean Witter & Co. 300,431 21,330,601
Morgan Stanley Dean Witter & Co.(2) 52,000 3,687,385
Price (T. Rowe) Associates, Inc. 86,716 2,970,023
Schwab (Charles) and Co., Inc. 66,750 3,750,516
Waddell & Reed Financial, Inc., Class A 12,680 300,358
Waddell & Reed Financial, Inc., Class B 54,575 1,268,869
- --------------------------------------------------------------------------------
$ 61,288,233
- --------------------------------------------------------------------------------
Lodging and Gaming -- 0.2%
- --------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd.(2) 500,000 $ 18,433,400
Sunterra Corp.(1)(2) 50,000 749,188
- --------------------------------------------------------------------------------
$ 19,182,588
- --------------------------------------------------------------------------------
Medical Products -- 5.8%
- --------------------------------------------------------------------------------
Allegiance Corp. 45,322 $ 2,113,138
Ballard Medical Products 519,966 12,641,673
Bausch & Lomb, Inc. 115,804 6,948,240
Baxter International, Inc. 1,266,028 81,421,425
Becton, Dickinson and Co. 7,265 310,125
Becton, Dickinson and Co.(2) 28,980 1,236,589
Boston Scientific Corp.(1) 1,979,700 53,080,706
Dentsply International, Inc. 42,000 1,081,500
ESC Medical Systems Ltd.(1) 30,000 315,000
ESC Medical Systems Ltd.(1)(2) 150,000 1,571,063
Guidant Corp. 100,000 11,025,000
Heartport, Inc.(1) 41,026 241,028
Hillenbrand Industries, Inc. 647,898 36,849,199
Johnson & Johnson Co. 1,575,542 132,148,584
Medtronics, Inc. 1,086,048 80,639,063
Schein (Henry) Corp.(1)(2) 271,494 12,100,759
Schein (Henry), Corp.(1) 555,700 24,867,575
Schein (Henry), Corp.(1)(2) 17,000 759,799
Schein (Henry), Corp.(1)(2) 281,000 12,557,984
Sofamor Danek Group, Inc.(1) 223,000 27,150,250
St. Jude Medical, Inc.(1) 42,144 1,166,862
Steris Corp.(1) 78,394 2,229,329
- --------------------------------------------------------------------------------
$ 502,454,891
- --------------------------------------------------------------------------------
See notes to financial statements
21
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Metals - Gold -- 0.0%
- --------------------------------------------------------------------------------
Freeport-McMoran Copper & Gold, Inc. 6,000 $ 62,625
- --------------------------------------------------------------------------------
$ 62,625
- --------------------------------------------------------------------------------
Metals - Industrial -- 0.0%
- --------------------------------------------------------------------------------
Cyprus Amax Minerals Co. 20,950 $ 209,500
Nucor Corp.(2) 22,648 979,199
- --------------------------------------------------------------------------------
$ 1,188,699
- --------------------------------------------------------------------------------
Minerals and Fertilizer -- 0.0%
- --------------------------------------------------------------------------------
Mississippi Chemical Corp. 272,180 $ 3,810,520
- --------------------------------------------------------------------------------
$ 3,810,520
- --------------------------------------------------------------------------------
Natural Gas Distribution -- 0.1%
- --------------------------------------------------------------------------------
Columbia Energy Group 1 $ 29
Dynegy, Inc. 290,000 3,171,875
KN Energy, Inc. 20,000 727,500
National Fuel Gas Co. 2,000 90,375
Sonat, Inc. 107,200 2,901,100
- --------------------------------------------------------------------------------
$ 6,890,879
- --------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 1.1%
- --------------------------------------------------------------------------------
Baker Hughes, Inc. 739,234 $ 13,075,201
Core Laboratories(1)(2) 560,000 10,668,767
Halliburton Co. 1,501,550 44,483,419
National-Oilwell, Inc.(1) 50,000 559,375
National-Oilwell, Inc.(1)(2) 416,400 4,652,264
Newpark Resources, Inc.(1) 110,000 749,375
Noble Drilling, Inc.(1) 170,000 2,199,375
Patterson Energy, Inc.(1) 200,000 812,500
Schlumberger Ltd. 367,470 16,949,554
Syntroleum Corp.(1) 2,735 16,923
Weatherford International(1) 56,750 1,099,531
- --------------------------------------------------------------------------------
$ 95,266,284
- --------------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 1.0%
- --------------------------------------------------------------------------------
Anadarko Petroleum Corp. 2,204,000 $ 68,048,499
Apache Corp. 127,003 3,214,763
Burlington Resources, Inc. 119,335 4,273,685
El Paso Energy Corp. 45,000 1,566,563
Oryx Energy Co.(1) 369,103 4,959,822
Triton Energy, Ltd.(1) 700 5,556
Union Pacific Resources Group, Inc. 79,795 723,142
USX-Marathon Group 50,005 1,506,401
- --------------------------------------------------------------------------------
$ 84,298,431
- --------------------------------------------------------------------------------
Oil and Gas - Integrated -- 1.2%
- --------------------------------------------------------------------------------
Amoco Corp. 299,345 $ 17,661,355
Atlantic Richfield Co. 41,766 2,725,232
British Petroleum Co. PLC ADR 512 48,640
Chevron Corp. 55,600 4,611,325
Exxon Corp. 222,963 16,304,169
Mobil Corp. 450,645 39,262,446
Murphy Oil Corp. 29,700 1,225,125
Pennzoil-Quaker State Co. 74,458 1,102,907
Royal Dutch Petroleum Co. 33,417 1,599,839
Texaco, Inc. 700 37,013
Tosco Corp.(2) 314,619 8,138,053
Tosco Corp.(2) 300,000 7,738,307
- --------------------------------------------------------------------------------
$ 100,454,411
- --------------------------------------------------------------------------------
Paper and Forest Products -- 0.6%
- --------------------------------------------------------------------------------
Caraustar Industries, Inc. 224,961 $ 6,425,449
Champion International Corp. 20,203 818,222
Fort James Corp. 56,401 2,256,040
Georgia-Pacific Corp. - G-P Group 305,098 17,867,302
Georgia-Pacific Corp. - G-P Group(2) 14,133 826,974
Georgia-Pacific Corp. - Timber Group 305,098 7,265,146
Louisiana Pacific Corp. 55,364 1,013,853
Mead Corporation (The) 38,768 1,136,387
Union Camp Corp. 80,309 5,420,858
Weyerhaeuser Co. 101,205 5,142,479
Willamette Industries, Inc. 53,000 1,775,500
- --------------------------------------------------------------------------------
$ 49,948,210
- --------------------------------------------------------------------------------
Photography -- 0.1%
- --------------------------------------------------------------------------------
Eastman Kodak Co. 64,225 $ 4,624,200
- --------------------------------------------------------------------------------
$ 4,624,200
- --------------------------------------------------------------------------------
See notes to financial statements
22
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Printing and Business Products -- 0.7%
- --------------------------------------------------------------------------------
American Business Products, Inc. 261,355 $ 6,141,843
Avery Dennison Corp. 803,004 36,185,368
Bowne & Co., Inc. 172,640 3,085,940
Consolidated Graphics, Inc.(1) 35,064 2,369,012
Consolidated Graphics, Inc.(1)(2) 35,151 2,367,488
Consolidated Graphics, Inc.(1)(2) 35,977 2,424,571
Corporate Express, Inc.(1) 92,486 479,771
Danka Business Systems, PLC ADR 1,000 4,188
Deluxe Corp. 80,675 2,949,680
Donnelley (R.R.) & Sons Co. 32,896 1,441,256
Harland (John H.) Co. 51,540 814,976
Ikon Office Solutions, Inc. 115,500 988,969
Workflow Management, Inc.(1) 79,508 526,740
- --------------------------------------------------------------------------------
$ 59,779,802
- --------------------------------------------------------------------------------
Publishing -- 1.2%
- --------------------------------------------------------------------------------
Belo (A.H.) Corp. 110,220 $ 2,197,511
Dow Jones & Co., Inc. 376,300 18,109,438
Gannett Co., Inc. 280,900 18,118,050
Houghton Mifflin Co. 97,400 4,602,150
McGraw-Hill Companies, Inc. (The) 455,608 46,415,065
Meredith Corp. 190,000 7,196,250
The MacClatchy Co., Class A 48,066 1,700,335
Times Mirror Co., Class A 151,670 8,493,520
- --------------------------------------------------------------------------------
$ 106,832,319
- --------------------------------------------------------------------------------
Real Estate -- 0.5%
- --------------------------------------------------------------------------------
Avalonbay Communities, Inc. 55,000 $ 1,883,750
Catellus Development Corp.(1) 290,000 4,150,625
Equity Office Properties Trust 2,812 67,488
Grubb and Ellis Co.(1)(2) 100,000 805,242
LaSalle Partners, Inc.(1)(2) 213,193 6,273,777
Patriot America Hospitality, Inc. 132,212 793,272
Redwood Trust, Inc. 71,710 1,003,940
Rouse Co. (The) 127,700 3,511,750
Trammell Crow Co.(1)(2) 876,098 24,500,081
Ventas, Inc.(1) 25,600 312,000
- --------------------------------------------------------------------------------
$ 43,301,925
- --------------------------------------------------------------------------------
Restaurants -- 1.1%
- --------------------------------------------------------------------------------
Bob Evans Farms, Inc. 48,193 $ 1,256,030
Boston Chicken, Inc.(1)(3) 38,500 385
Brinker International, Inc.(1) 435,034 12,561,607
CKE Restaurants, Inc.(2) 110,000 3,237,046
CKE Restaurants, Inc.(2) 11,000 323,381
Lone Star Steakhouse and Saloon, Inc.(1) 145,981 1,341,200
Lone Star Steakhouse and Saloon, Inc.(1)(2) 200,000 1,835,203
McDonald's Corp. 270,607 20,735,261
Outback Steakhouse, Inc.(1) 77,101 3,074,402
Outback Steakhouse, Inc.(1)(2) 130,181 5,184,479
Outback Steakhouse, Inc.(1)(2) 250,000 9,955,458
Papa John's International, Inc.(1) 25,807 1,138,734
Papa John's International, Inc.(1)(2) 51,744 2,280,350
Sonic Corp.(1)(2) 47,338 1,176,061
Starbucks Corp.(1) 342,000 19,194,750
Tricon Global Restaurants, Inc.(1) 175,767 8,810,321
- --------------------------------------------------------------------------------
$ 92,104,668
- --------------------------------------------------------------------------------
Retail - Food and Drug -- 4.6%
- --------------------------------------------------------------------------------
Albertson's, Inc. 2,340,219 $ 149,042,697
Albertson's, Inc.(2) 10,000 634,890
CVS Corp. 2,176,571 119,711,404
General Nutrition Companies, Inc.(1) 44,460 722,475
Hannaford Brothers Co. 30,849 1,634,997
Kroger Co. (The)(1) 22,800 1,379,400
Rite Aid Corp. 6,000 297,375
Safeway, Inc.(1) 1,777,501 108,316,466
Walgreen Co. 13,750 805,234
Whole Foods Market, Inc.(1) 90,000 4,353,750
Winn-Dixie Stores, Inc. 320,221 14,369,917
- --------------------------------------------------------------------------------
$ 401,268,605
- --------------------------------------------------------------------------------
Retail - General -- 1.8%
- --------------------------------------------------------------------------------
99 Cents Only Stores(1)(2) 428,337 $ 21,033,989
Casey's General Stores, Inc.(2) 75,000 976,529
Department 56, Inc.(1) 190,000 7,136,875
Department 56, Inc.(1)(2) 29,404 1,101,045
Dollar General Corp. 25,625 605,391
Dollar Tree Stores, Inc.(1) 292,500 12,778,594
Dollar Tree Stores, Inc.(1)(2) 247,792 10,821,805
Harcourt General, Inc. 216,416 11,510,626
May Department Stores Co. (The) 104,258 6,294,577
Nordstrom, Inc. 27,610 957,722
Penney (J.C.) Company, Inc. 1,117,673 52,390,922
See notes to financial statements
23
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Retail - General (continued)
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 428,060 $ 34,860,136
- --------------------------------------------------------------------------------
$ 160,468,211
- --------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 2.8%
- --------------------------------------------------------------------------------
Abercrombie and Fitch Co., Class A(1) 2,802 $ 198,242
Burlington Coat Factory Warehouse Corp. 543,600 8,867,475
Home Depot, Inc. (The) 2,517,746 154,054,582
Limited, Inc. (The) 205,000 5,970,625
Lowe's Companies 60,000 3,071,250
Office Depot, Inc.(1) 140,000 5,171,250
OfficeMax, Inc.(1) 672,867 8,242,621
Pep Boys - Manny, Moe & Jack (The) 35,476 556,530
Pep Boys - Manny, Moe & Jack (The)(2) 62,500 980,142
Pier 1 Imports, Inc.(2) 150,000 1,451,914
Pier 1 Imports, Inc.(2) 75,000 725,654
Pier 1 Imports, Inc.(2) 125,000 1,207,163
Republic Industries, Inc.(1) 2,719,023 40,105,589
Staples, Inc.(1) 150,000 6,553,125
Tandy Corp. 60,000 2,471,250
Tiffany and Co. 22,000 1,141,250
TJX Companies, Inc. (The) 50,000 1,450,000
Toys "R" Us, Inc.(1) 73,255 1,236,178
- --------------------------------------------------------------------------------
$ 243,454,840
- --------------------------------------------------------------------------------
Specialty Chemicals and Materials -- 1.3%
- --------------------------------------------------------------------------------
Corning, Inc. 130,000 $ 5,850,000
Dexter Corp. (The) 36,139 1,136,120
Ecolab, Inc. 2,063,536 74,674,208
International Flavors & Fragrances, Inc. 148,101 6,544,213
International Specialty Products, Inc.(1) 59,000 800,188
MacDermid, Inc. 30,000 1,173,750
Millipore Corp. 101,440 2,884,700
Minnesota Mining & Manufacturing Co. 42,731 3,039,242
Morton International, Inc. 34,000 833,000
Nalco Chemical Co. 224,852 6,970,412
Pall Corp. 216,000 5,467,500
RPM, Inc. 70,138 1,122,208
- --------------------------------------------------------------------------------
$ 110,495,541
- --------------------------------------------------------------------------------
Tobacco -- 0.2%
- --------------------------------------------------------------------------------
Philip Morris Cos., Inc. 249,706 $ 13,359,271
- --------------------------------------------------------------------------------
$ 13,359,271
- --------------------------------------------------------------------------------
Transportation -- 0.4%
- --------------------------------------------------------------------------------
Arnold Industries, Inc. 148,543 $ 2,395,256
Burlington Northern Santa Fe Corp. 188,799 6,371,966
Coach USA, Inc.(1) 168,889 5,858,337
Coach USA, Inc.(1)(2) 185,676 6,438,704
FDX Corp.(1) 93,723 8,341,347
Heartland Express, Inc.(1) 250,000 4,375,000
Union Pacific Corp. 92,081 4,149,400
- --------------------------------------------------------------------------------
$ 37,930,010
- --------------------------------------------------------------------------------
Trucks and Parts -- 0.0%
- --------------------------------------------------------------------------------
Paccar, Inc. 46,602 $ 1,916,507
- --------------------------------------------------------------------------------
$ 1,916,507
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $5,715,068,624) $8,246,680,855
- --------------------------------------------------------------------------------
Put Options Purchased -- 0.0%
Security Shares Value
- --------------------------------------------------------------------------------
Computers and Business Equipment -- 0.0%
- --------------------------------------------------------------------------------
Dell Computer, Expires 1/16/99, Strike
Price 45 250,000 $ 31,250
Dell Computer, Expires 1/16/99, Strike
Price 50 250,000 15,625
Dell Computer, Expires 2/20/99, Strike
Price 50 250,000 195,313
Dell Computer, Expires 2/20/99, Strike
Price 55 500,000 562,500
- --------------------------------------------------------------------------------
$ 804,688
- --------------------------------------------------------------------------------
Total Put Options Purchased
(identified cost $5,771,939) $ 804,688
- --------------------------------------------------------------------------------
See notes to financial statements
24
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Rights -- 0.0%
Security Shares Value
- --------------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 0.0%
- --------------------------------------------------------------------------------
Triton Energy, Ltd.(1) 51 $ 0
- --------------------------------------------------------------------------------
$ 0
- --------------------------------------------------------------------------------
Total Rights
(identified cost $0) $ 0
- --------------------------------------------------------------------------------
Convertible Preferred Stocks -- 0.4%
Security Shares Value
- --------------------------------------------------------------------------------
Entertainment -- 0.4%
- --------------------------------------------------------------------------------
Time Warner Inc., Series J(3) 100,187 $ 26,526,391
Time Warner Inc., Series J(2)(3) 21,410 5,657,362
- --------------------------------------------------------------------------------
$ 32,183,753
- --------------------------------------------------------------------------------
Financial - Miscellaneous -- 0.0%
- --------------------------------------------------------------------------------
American General Corp., Series D 21,474 $ 1,406,547
- --------------------------------------------------------------------------------
$ 1,406,547
- --------------------------------------------------------------------------------
Insurance -- 0.0%
- --------------------------------------------------------------------------------
Aetna, Inc., Series C 449 $ 34,152
- --------------------------------------------------------------------------------
$ 34,152
- --------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $14,428,021) $ 33,624,452
- --------------------------------------------------------------------------------
Commercial Paper -- 4.3%
- --------------------------------------------------------------------------------
Short-Term Investments -- 0.7%
Face Amount
Name of Company (000's omitted) Value
- --------------------------------------------------------------------------------
American Express Credit Corp.,
6.00%, 1/8/99 $ 76,827 $ 76,737,368
Associates Corp. of North America,
5.25%, 1/4/99 37,141 37,124,751
Corporate Receivables Corp.,
5.50%, 1/8/99 30,000 29,967,917
Ford Motor Credit Co., 5.53%, 1/8/99 77,696 77,612,455
General Electric Capital Co., 5.50%, 1/4/99 56,607 56,581,055
Prudential Funding Corp., 5.80%, 1/8/99 95,000 94,892,861
- --------------------------------------------------------------------------------
Total Commercial Paper
(identified cost $372,916,407) $ 372,916,407
- --------------------------------------------------------------------------------
Face Amount
Name of Company (000's omitted) Value
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
4.50%, 1/4/99 $ 59,313 $ 59,290,758
- --------------------------------------------------------------------------------
Total Short-Term Investments
(identified cost $59,290,758) $ 59,290,758
- --------------------------------------------------------------------------------
Total Investments -- 100.1%
(identified cost $6,167,475,749) $8,713,317,160
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- (0.1)% $ (8,457,825)
- --------------------------------------------------------------------------------
Net Assets -- 100.0% $8,704,859,335
- --------------------------------------------------------------------------------
ADR-American Depositary Receipt
(1) Non-income producing security.
(2) Security restricted from resale for a period not exceeding one year. At
December 31, 1998, the value of these securities totaled $565,804,292 or
6.5% of net assets.
(3) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
See notes to financial statements
25
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of December 31, 1998
Assets
- ----------------------------------------------------------------------------------------
<S> <C>
Investments, at value
(identified cost $6,167,475,749) $ 8,713,317,160
Cash 208,496
Receivable for investments sold 31,917
Dividends receivable 6,284,080
Tax reclaim receivable 123,448
Other assets 388,094
Deferred organization expenses 4,165
- ----------------------------------------------------------------------------------------
Total assets $ 8,720,357,360
- ----------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------
Payable for investments purchased $ 15,294,800
Payable to affiliate for Trustees' fees 6,091
Other accrued expenses 197,134
- ----------------------------------------------------------------------------------------
Total liabilities $ 15,498,025
- ----------------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 8,704,859,335
- ----------------------------------------------------------------------------------------
Sources of Net Assets
- ----------------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 6,159,017,924
Net unrealized appreciation (computed on the basis of
identified cost) 2,545,841,411
- ----------------------------------------------------------------------------------------
Total $ 8,704,859,335
- ----------------------------------------------------------------------------------------
<CAPTION>
Statement of Operations
Period Ended Year Ended
Investment Income December 31, 1998(1) October 31, 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Dividends (net of foreign taxes,
$151,392 and
$555,644, respectively) $ 12,251,934 $ 54,405,581
Interest 3,422,672 11,564,060
- ----------------------------------------------------------------------------------------
Total investment income $ 15,674,606 $ 65,969,641
- ----------------------------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------------------------
Investment adviser fee $ 6,020,740 $ 24,370,514
Trustees fees and expenses 5,901 30,273
Custodian fee 166,036 729,631
Legal and accounting services 70,710 129,922
Amortization of organization 363 2,176
expenses
Miscellaneous 6,208 384,423
- ----------------------------------------------------------------------------------------
Total expenses $ 6,269,958 $ 25,646,939
- ----------------------------------------------------------------------------------------
Net investment income $ 9,404,648 $ 40,322,702
- ----------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) --
Investments (identified cost
basis) $ 21,475,026 $ (88,268,073)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) $ 21,475,026 $ (88,268,073)
- ----------------------------------------------------------------------------------------
Change in unrealized
appreciation (depreciation) --
Investments (identified cost
basis) $ 950,828,792 $ 540,179,532
- ----------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation) $ 950,828,792 $ 540,179,532
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain $ 972,303,818 $ 451,911,459
- ----------------------------------------------------------------------------------------
Net increase in net assets
from operations $ 981,708,466 $ 492,234,161
- ----------------------------------------------------------------------------------------
</TABLE>
(1) For the two-month period ended December 31, 1998.
See notes to financial statements
26
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
Increase (Decrease) in Net Assets December 31, 1998(1) October 31, 1998 October 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
From operations--
Net investment income $ 9,404,648 $ 40,322,702 $ 14,399,615
Net realized gain (loss) 21,475,026 (88,268,073) 52,637,579
Net change in unrealized appreciation (depreciation) 950,828,792 540,179,532 375,109,348
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 981,708,466 $ 492,234,161 $ 442,146,542
- ------------------------------------------------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 858,758,546 $ 4,084,235,841 $ 1,907,707,281
Withdrawals (121,286,161) (462,237,336) (415,207,575)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from capital transactions $ 737,472,385 $ 3,621,998,505 $ 1,492,499,706
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets $ 1,719,180,851 $ 4,114,232,666 $ 1,934,646,248
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
At beginning of period $ 6,985,678,484 $ 2,871,445,818 $ 936,799,570
- ------------------------------------------------------------------------------------------------------------------------------------
At end of period $ 8,704,859,335 $ 6,985,678,484 $ 2,871,445,818
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the two-month period ended December 31, 1998.
See notes to financial statements
27
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended October 31,
Period Ended ---------------------------------------------------
December 31, 1998(1) 1998 1997 1996(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.48%(3) 0.50% 0.56% 0.66%(3)
Net investment income 0.72%(3) 0.78% 0.81% 0.91%(3)
Portfolio Turnover 3% 12% 14% 6%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $8,704,859 $6,985,678 $2,871,446 $936,800
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the two-month period ended December 31, 1998.
(2) For the period from the start of business, December 1, 1995, to October 31,
1996.
(3) Annualized.
See notes to financial statements
28
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
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. The following is a summary of significant accounting
policies consistently followed by the Portfolio in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A Investment Valuations -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Futures positions on securities or
currencies are generally valued at closing settlement prices. Unlisted or
listed securities for which closing sale prices are not available are
generally 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. Over-the-counter options are normally valued
at the mean between the latest bid and asked price. 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 Put Options -- Upon the purchase of a put option by the Portfolio, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Portfolio will
realize a loss in the amount of the cost of the option. When the Portfolio
enters into a closing sale transaction, the Portfolio will realize a gain
or loss depending on whether the sales proceeds from the closing sale
transaction are greater or less than the cost of the option. When the
Portfolio exercises a put option, settlement is made in cash. The risk
associated with purchasing options is limited to the premium originally
paid.
F Securities Sold Short -- The Portfolio may sell securities it does not
own 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 proceeds are retained by the broker 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 recorded when the
security is delivered to the broker. The Portfolio may recognize a loss
29
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
on the transaction if the market value of the securities sold increases
before the securities are delivered.
G 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.
H 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 Investment Adviser Fee and Other Transactions with Affiliates
---------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered to
the Portfolio. Under the advisory agreement, BMR receives a monthly
advisory fee of 5/96 of 1% (0.625% annually) of the average daily net
assets of the Portfolio up to $500,000,000, and at reduced rates as daily
net assets exceed that level. For the period ended December 31, 1998, the
adviser fee was 0.46% (annualized) of the Portfolio's average net assets.
For the year ended October 31, 1998, the adviser fee was 0.47% of the
Portfolio's average net assets. Except for 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 period ended December 31, 1998
and the year ended October 31, 1998, 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
---------------------------------------------------------------------------
For the two-month period ended December 31, 1998, purchases and sales of
investments, other than short-term obligations, aggregated $472,302,414 and
$190,511,645, respectively. In addition, investments having an aggregate
market value of $24,998,564 at dates of withdrawal were distributed in
payment for capital withdrawals resulting in capital gains for book
purposes of $629,507. During the period ended December 31, 1998, investors
contributed securities with a value of $517,599,932. For the year ended
October 31, 1998, purchases and sales of investments, other than short-term
obligations, aggregated $2,151,267,687 and $608,237,096, respectively. In
addition, investments having an aggregate market value of $136,368,120 at
dates of withdrawal were distributed in payment for capital withdrawals
resulting in capital gains for book purposes of $125,868,954. During the
year ended October 31, 1998, investors contributed securities with a value
of $1,855,101,919.
4 Federal Income Tax Basis of Investment
---------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1998, as computed on a federal income tax
basis, are as follows:
Aggregate cost $3,223,058,075
---------------------------------------------------------------------------
Gross unrealized appreciation $5,518,035,727
Gross unrealized depreciation (27,776,642)
---------------------------------------------------------------------------
Net unrealized appreciation $5,490,259,085
---------------------------------------------------------------------------
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.
30
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
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 December 31, 1998.
6 Line of Credit
-----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $130 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 two-month period ended December 31, 1998 nor
during the year ended October 31, 1998.
7 Fiscal Year End Change
---------------------------------------------------------------------------
Effective November 1, 1998, the Portfolio changed its fiscal year-end to
December 31.
31
<PAGE>
Tax-Managed Growth Portfolio as of December 31, 1998
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 December 31, 1998, the related statements of operations for the two-month
period ended December 31, 1998 and for the year ended October 31, 1998, the
statements of changes in net assets for the two-month period ended December 31,
1998 and for each of the years in the two-year period ended October 31, 1998,
and the supplementary data for the two-months ended December 31, 1998 and for
each of the years in the two-year period ended October 31, 1998 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
Portfolio's management. Our responsibility is to express an opinion on these
financial statements and supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing 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, such financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of the
Portfolio as of December 31, 1998, 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
February 12, 1999
32
<PAGE>
Eaton Vance Tax-Managed Growth Fund as of December 31, 1998
INVESTMENT MANAGEMENT
Eaton Vance Tax-Managed Growth Fund
Officers
James B. Hawkes
Vice President and Trustee
William H. Ahern, Jr.
Vice-President
Thomas J. Fetter
Vice-President
Robert B. MacIntosh
Vice President
Michael B. Terry
Vice-President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Jessica M. Bibliowicz
President and Chief Operating Officer,
John A. Levin & Co.
Director, Baker, Fentress & Company
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Emeritus, Harvard University Graduate School of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Tax-Managed Growth Portfolio
Officers
James B. Hawkes
President and Trustee
Duncan W. Richardson
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Jessica M. Bibliowicz
President and Chief Operating Officer,
John A. Levin & Co.
Director, Baker, Fentress & Company
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Emeritus, Harvard University Graduate School of Business Administration
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
33
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<PAGE>
Investment Adviser of Tax-Managed Growth Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of Eaton Vance 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 and Dividend Disbursing Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
Eaton Vance Tax-Managed Growth Fund
24 Federal Street
Boston, MA 02110
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This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
TGSRC-2/99
<PAGE>
[LOGO OF EATON VANCE Mutual Funds
APPEARS HERE] for People
Who Pay
Taxes
Annual Report December 31, 1998
EATON VANCE
TAX-MANAGED
GROWTH
FUND
