<PAGE>
[LOGO OF EATON VANCE APPEARS HERE]
[PHOTO OF EARTH APPEARS HERE]
Annual Report August 31, 1997
EV
TRADITIONAL
WORLDWIDE HEALTH SCIENCES FUND, INC.
Traditional
Eaton Vance
Global Management-Global Distribution
[PHOTO OF SURGEONS AND SURGERY APPEARS HERE]
[PHOTO OF MOLECULES APPEARS HERE]
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
LETTER TO SHAREHOLDERS
[PHOTO OF JAMES B. HAWKES, PRESIDENT APPEARS HERE]
EV Traditional Worldwide Health Sciences Fund Inc. had a total return of 17.7%
during the year ended August 31, 1997. That return was the result of a rise in
net asset value per share from $13.54 on August 31, 1996 to $14.93, and the
reinvestment of $0.295 in capital gain distributions./1/ By comparison, the
S&P 500 Index - a widely recognized, unmanaged index of U.S. common stocks - had
a total return of 40.7% for the same period, while the Morgan Stanley Capital
International Europe, Australasia, and Far East Index -an index composed of
global common stocks - had a return of 9.4%./2/
1997 brought new revelations in the war against life-threatening disease...
In June, The New England Journal of Medicine (NEJM) reported the remarkable
results of a 12-year program in Taiwan to vaccinate people against hepatitis B.
A review of the program showed that, in addition to curbing the spread of the
infectious hepatitis disease, attacking the microbes had also proven to be an
effective deterrent to some forms of cancer.
A possible link of microbes to
non-infectious disease...
The results of the Taiwan study were significant because they suggested a
possible microbial link to noninfectious ailments. Microbes have long been
associated with diseases such as malaria, cholera, polio, and bubonic plague.
However, the Taiwan study suggested that the presence of parasites, viruses, or
bacteria may be a co-factor in the rise of heart disease, diabetes and cancer.
The link was even more compelling when combined with a suppressed immune system
or a genetic predisposition.
Biotech remains in the forefront of the search for treatments...
The NEJM findings are exciting because they point out another potential avenue
in the fight against disease. In addition, they illustrate the role of biotech
companies - the investment universe of the Portfolio - in advancing the cause of
genetic research and anti-viral therapy. We believe these companies offer unique
opportunities for investors. In the following pages, portfolio manager Samuel D.
Isaly looks at some recent biotech developments and comments on the fiscal year
just ended.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
October 9, 1997
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
<TABLE>
<CAPTION>
Performance/3/
- ------------------------------------------------
Average Annual Total Return (at net asset value)
- ------------------------------------------------
<S> <C>
One year 17.7%
Five year 21.6
Ten year 15.5
</TABLE>
<TABLE>
<CAPTION>
SEC Average Annual Total Returns (including 5.75% sales charge)
- ---------------------------------------------------------------
<S> <C>
One year 10.9%
Five year 20.1
Ten year 14.9
</TABLE>
<TABLE>
<CAPTION>
Ten Largest Holdings/4/By total net assets
- -------------------------------------------
<S> <C>
Centocor, Inc. 5.9%
Novartis 4.7%
Genzyme Corp. 4.6
Swiss Serum Institute 4.1
Ares-Serono 4.1
Vertex Pharmaceuticals, Inc. 4.0
Biogen, Inc. 3.9
Fujisawa Pharmaceutical 3.8
Agouron Pharmaceuticals, Inc. 3.8
Pharmacia & Upjohn, Inc. 3.4
</TABLE>
/1/ This return does not reflect the Fund's maximum 5.75% initial sales charge.
/2/ It is not possible to invest directly in the Indices.
/3/ Average annual total returns are calculated by determining the percentage
change in net asset value with all distributions reinvested. SEC average
annual returns reflect the Fund's 5.75% maximum initial sales charge.
/4/ Ten largest holdings account for 42.3% of the Portfolio's investments,
determined by dividing the total market value of the holdings by the total
net assets of the Portfolio. Holdings are subject to change.
Past performance is no guarantee of future results. Investment returns and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
MANAGEMENT DISCUSSION
[PHOTO OF SAMUEL D. ISALY, PORTFOLIO MANAGER APPEARS HERE]
An interview with Samuel D. Isaly, a partner of Mehta and Isaly Asset
Management, Inc., and portfolio manager of Worldwide Health Sciences Portfolio.
Q: Sam, how would you evaluate drug stock performance during the past year?
A: In the U.S., we saw a fair amount of sector rotation during the year, with
consumer stocks alternating market leadership with technology issues. While
drug and biotech stocks participated in the U.S. rally, they were not subject
to the euphoria that characterized the so-called "Nifty Fifty." In general,
the drug stocks' performance reflected their fundamentals, which are driven
by strong sales momentum and breakthroughs on the research front. Earnings of
drug companies remained strong, while biotech companies continued to inch
toward profitability. In the broader market, many large-cap stocks reached
overvalued status relative to their smaller cap counterparts. That dynamic
proved true in the drug and biotech sectors as well.
Q: Have you made many changes to the Portfolio in the past year?
A: Not major changes. Roughly half (53.8%) of the Portfolio remains invested in
North America, while 22% is invested in the Far East, and Europe accounts for
another 18%. We made a number of new purchases in U.S.-based specialty
companies with promising clinical trial results or research developments.
These included Gilead Sciences, Leukosite, Inc., and Ontogeny, Inc. We
eliminated our holding in Cambridge Neurosciences. Among large-cap issues, we
added U.S.-based Biogen, Inc.
Q: The Fund's risk-adjusted performance earned it a Four-Star Overall Rating
among international equity funds covered by Morningstar, Inc. - a nationally
recognized monitor of fund performance - for the period ended August 31./1/
What accounts for that performance?
A: Our overall strategy hasn't changed at all. We continued to employ a long-
term outlook, with a fairly concentrated investment approach: one that seeks
to focus our research where it will provide the greatest potential returns.
The Fund benefited as some of our large-cap holdings with successful existing
drugs have used their marketing muscle to gain market share. The stable
growth rates of the major pharmaceutical companies made them especially
attractive in an increasingly volatile market. Some biotech holdings,
meanwhile, had success on the regulatory front. While profitability in the
biotech sector remains selective, the earnings prospects have nonetheless
improved.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sector Distribution/2/
- -------------------------------------
By total investments
<S> <C>
Major Parmaceutical Companies 50.3%
Specialty/Biotech Companies 49.7%
</TABLE>
<TABLE>
<CAPTION>
Regional Distribution/2/
- -------------------------------------
By total investments
<S> <C>
North American Specialty 35.5%
NA Majors 21.7%
Far East Majors 16.4%
Europe Majors 12.2%
Europe Specialty 7.3%
Far East Specialty 6.9%
</TABLE>
/1/ Morningstar ratings reflect historical risk-adjusted performance through
8/31/97 and are subject to change. Past performance is no guarantee of
future results. Funds are assigned ratings from 1 star (lowest) to 5 stars
(highest). Ratings are calculated from the funds 3-,5-, and 10-year returns
(with fee adjustment) in excess of 90-day Treasury bill returns. The top 10%
of the funds in a category receive 5 stars, the next 22.5%, 4 stars, and the
following 35%, 3 stars. For the 3-year period, the Fund was rated 4 stars
(573 funds); for the 5-year period, 3 stars (246 funds); and for the 10-year
period, 4 stars (89 funds).
/2/ Because the Portfolio is actively managed, sector weightings and regional
distributions are subject to change.
3
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
MANAGEMENT DISCUSSION CONT'D
[PHOTO APPEARS HERE]
- --------------------------------------------------------------------------------
Rising Drug Expenditures
In the U.S., the 75-and-over age group is the fastest-growing, soon to be
replaced by those 85-and-over. It's estimated that by the year 2050, America's
over-85 population will reach 18 million. Health care costs are expected to rise
commensurately.
Source: U.S. Census Bureau
- --------------------------------------------------------------------------------
Q: North American companies are your largest regional weighting. Could we look
at some U.S. holdings?
A: Certainly. Among larger cap issues, Genzyme Corp. has been a strong
performer in the past year. The company has been a leader in several forms
of gene therapy treatment, including that for Gaucher disease, a
debilitating disorder caused by defective genes. More recently, the company
has benefited from enthusiasm over its new Seprafilm product, a treatment
used to reduce post-surgery scarring.
Another large-cap holding, Warner-Lambert, has sold its generic drug
division. Much of its revenue base comes from over-the-counter drugs,
although it has recently licensed several new drug candidates that should
contribute to growth down the road. Given its 1% global market share and
considerable marketing prowess, Warner remains a leading acquisition
candidate.
Q: Could we turn to some smaller stocks in the U.S.?
A: Yes. Specialty and biotech companies continue to make inroads both in
research and in the regulatory approval process. Agouron Pharmaceuticals is
a good example. The California company is a pioneer in "rational drug
design," a technique that first determines the three-dimensional structure
of target proteins and then designs drugs to interact with that structure. A
product of that technique, Agouron's Viracept is a protease inhibitor that
received FDA approval in March. Protease inhibitors have been very
successful as part of combination therapy for HIV patients.
Viracept appears to be equally as effective as its competitor drugs, easier
for patients to take, and has fewer side-effects. The drug has been licensed
through Roche Holdings and is expected to triple Agouron's sales in 1998. On
the strength of its Viracept success, Agouron is moving from losses to
profitability, and its stock has nearly doubled in price in the past year.
The company has recently started clinical trials on protease inhibitors
aimed at the rhinovirus family, the viruses that cause colds.
Q: You suggested that foreign drug companies represent better values than major
U.S. companies. Could you expand on that?
A: Yes. If we examine the prices accorded large cap U.S. pharmaceutical stocks,
they sell at a significant premium to similar drug companies abroad. Swiss-
based Novartis and U.S. giant Merck provide an interesting comparison. For
the first half of 1997, the two companies enjoyed roughly the same level of
net profits. However, the market cap of Novartis, which has a cash horde of
$6 billion, is only $105 billion, while Merck, with just $2 billion in cash,
has a market cap of $125 billion. That represents a 20% premium and a
significant gap in valuations. That gap is quite common in Europe, but the
greatest discrepancy is, by far, with Japan. Japanese drug companies
currently have the lowest absolute and relative valuations measures in the
world.
Q: Has that value gap had an effect on the way you've positioned the Portfolio
in recent months?
A: In some respects, yes. Typically, when we analyze valuations of global
companies, we apply traditional measures such as price-earnings multiples
and cash flow multiples, as well as the companies' valuation relative to
general market levels. We will also make adjustments to account for
unusually high cash levels or
4
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
MANAGEMENT DISCUSSION CONT'D
issues that might lead to dilution. With the sharp run-up in U.S. prices, we
find that global companies with equally compelling fundamentals are much
more attractive. Europe's powerhouse Novartis is the product of a merger
between Sandoz and Ciba-Geigy. With a 4.4% global market share, Novartis has
continued to realize further economies of scale following the merger. In the
years ahead, the company is sure to set new standards for the global
pharmaceuticals sector.
Q: Could we take a brief look at one of those Japanese companies?
A: Certainly. Among larger foreign drug companies, Takeda Chemicals is one of
Japan's top distributors of pharmaceuticals. In addition to its large
domestic market share, the company boasts two large-selling drugs in the
West: Lupron, which is used to treat prostate cancer; and Takepron, which is
a treatment for ulcers. The company has pledged recently to trim costs by
25% over the next five years, a move that has aided many U.S. drug companies
in recent years. Interestingly, the company is also attractive for its
portfolio of financial assets, the largest of any drug company in the world.
Q: And how about some examples of smaller Japanese companies?
A: Teikoku Hormone Manufacturing is a small-cap company specializing in peptide
chemistry and various hormones. The company is noted for the strength of its
research, and we remain alert to the possibility of a research breakthrough.
Teikoku also has a large portfolio of financial assets that is equal to the
company's market value. The financial assets provide a huge cushion while
waiting for new developments to occur on the research front.
Q: There is increasing pressure being exerted on the FDA to speed the drug
approval process. Is that a positive development for your universe?
A: In a general sense, yes. While the public is obviously served by rigorous
drug testing, it's clear that the regulatory authorities in Europe and the
U.S. have increased the pace of approvals of new drugs in recent years. In
the U.S., the FDA approved more drugs in 1996 alone than in all of 1994 and
1995. For Agouron's Viracept, for instance, it took only 36 months from the
time the drug was first synthesized to the time of the company's application
for accelerated approval.
A faster pace of approvals has several favorable consequences. First, and
perhaps most importantly, it gives hope to patients and may help improve the
quality of their lives. Second, it makes it somewhat easier for the biotech
sector to attract the massive investment necessary to fund research and
development. Viracept cost $100 million to develop, half of which came from
a Japanese company whose principal business activity is not in the drug
industry. And finally, it brings nearer the day when biotech companies will
become profitable. We believe that this trend is likely to continue.
Q: We saw an increase in merger activity in the past year in areas such as
telecom, media, and financial services. Do you foresee any such trend in the
pharmaceutical/biotech sectors?
A: We're likely to see mergers where they make financial and marketing sense.
In the past decade, there have been a number of major combinations,
including Pharmacia & Upjohn, Smithkline Beecham, and more recently,
Sandoz/Ciba-Geigy. I believe that merger activity will continue to take
place in situations where joint operations will produce substantial cost
savings, gains in market share, fill out a company's product line, or
significantly expand a company's global reach.
As an alternative to outright mergers, we've seen a modest trend toward
partnering, whereby biotech companies join forces with large pharmaceutical
companies to gain R&D funding as well as assistance in marketing approved
products. However, partnering comes at a cost to the biotech company because
it effectively dilutes the discovery value of new drugs. It's therefore less
attractive from the investment standpoint.
5
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
MANAGEMENT DISCUSSION CONT'D
Q: What is your outlook for the pharmaceutical and biotech sectors in the year
ahead?
A: I'm optimistic about the prospects of the companies. As I indicated earlier,
drug companies have historically produced relatively stable earnings growth.
As for the biotech stocks, with the FDA likely to increase the pace of
approvals, we should see more drugs come to market. That should help the
companies along the road to profitability.
Apart from their attractive fundamentals, biotech and pharmaceutical stocks
are likely to get a closer look on a valuation basis. Many of the market
leaders in the past year - beverages, financial services, technology
stocks - have reached levels that are discounting earnings two years out or
more. The drug stocks, by contrast, have much more stable earnings and are
not prone to sometimes volatile product cycles as are the technology stocks.
Naturally, past performance is not a guarantee of future results. And, of
course, these stocks are subject to regulatory changes, foreign currency
risk and intense industry competition. But with aging populations around the
globe, and biotech breakthroughs changing the face of the drug industry, we
believe the future of these sectors is bright.
Comparison of Change in Value of a $10,000 Investment in the Fund vs. the S&P
500, and Europe, Australasia & Far East Indexes*
From August 31, 1987 through August 31, 1997
[LINE GRAPH APPEARS HERE]
<TABLE>
<CAPTION> EV Traditional
Date Worldwide Health Fund/including S&P 500 EAFE
Sciences Fund max. sales charge Index Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8/31/87 $10,000 $9,426 $10,000 $10,000
9/30/87 $9,739 $9,180 $9,826 $9,844
10/31/87 $7,519 $7,088 $7,688 $8,467
11/30/87 $6,772 $6,383 $7,031 $8,552
12/31/87 $7,315 $6,895 $7,611 $8,808
1/31/88 $7,717 $7,274 $7,919 $8,967
2/29/88 $7,956 $7,499 $8,250 $9,568
3/31/88 $7,921 $7,466 $8,044 $10,158
4/30/88 $7,815 $7,367 $8,120 $10,307
5/31/88 $7,576 $7,141 $8,146 $9,979
6/30/88 $7,752 $7,307 $8,577 $9,718
7/31/88 $7,794 $7,347 $8,531 $10,025
8/31/88 $7,470 $7,041 $8,201 $9,375
9/30/88 $7,724 $7,280 $8,604 $9,787
10/31/88 $7,724 $7,280 $8,828 $10,626
11/30/88 $7,357 $6,935 $8,661 $11,261
12/31/88 $7,512 $7,081 $8,867 $11,326
1/31/89 $8,048 $7,586 $9,497 $11,528
2/28/89 $7,949 $7,493 $9,222 $11,589
3/31/89 $8,365 $7,885 $9,494 $11,364
4/30/89 $8,823 $8,316 $9,970 $11,472
5/31/89 $9,063 $8,542 $10,320 $10,850
6/30/89 $8,619 $8,124 $10,330 $10,669
7/31/89 $9,598 $9,047 $11,243 $12,011
8/31/89 $9,810 $9,246 $11,418 $11,473
9/30/89 $10,409 $9,811 $11,435 $11,998
10/31/89 $10,162 $9,578 $11,147 $11,518
11/30/89 $10,657 $10,045 $11,331 $12,100
12/31/89 $10,931 $10,303 $11,668 $12,549
1/31/90 $10,620 $10,010 $10,865 $12,085
2/28/90 $10,449 $9,849 $10,958 $11,244
3/31/90 $10,679 $10,066 $11,315 $10,075
4/30/90 $10,627 $10,017 $11,011 $9,998
5/31/90 $11,762 $11,086 $12,023 $11,141
6/30/90 $11,992 $11,303 $12,023 $11,046
7/31/90 $11,984 $11,296 $11,961 $11,204
8/31/90 $10,902 $10,275 $10,833 $10,119
9/30/90 $9,982 $9,409 $10,379 $8,712
10/31/90 $11,443 $10,786 $10,309 $10,072
11/30/90 $11,357 $10,705 $10,927 $9,481
12/31/90 $11,523 $10,861 $11,304 $9,638
1/31/91 $12,096 $11,401 $11,774 $9,953
2/28/91 $13,532 $12,755 $12,566 $11,023
3/31/91 $13,972 $13,170 $12,940 $10,364
4/30/91 $13,673 $12,888 $12,945 $10,468
5/31/91 $13,657 $12,872 $13,444 $10,581
6/30/91 $12,910 $12,168 $12,912 $9,806
7/31/91 $13,740 $12,951 $13,491 $10,290
8/31/91 $14,238 $13,420 $13,756 $10,084
9/30/91 $14,736 $13,890 $13,602 $10,655
10/31/91 $15,666 $14,766 $13,763 $10,809
11/30/91 $15,241 $14,366 $13,159 $10,307
12/31/91 $16,389 $15,447 $14,734 $10,843
1/31/92 $17,393 $16,394 $14,440 $10,614
2/29/92 $16,691 $15,732 $14,579 $10,237
3/31/92 $16,131 $15,204 $14,363 $9,564
4/30/92 $15,153 $14,282 $14,764 $9,612
5/31/92 $16,068 $15,145 $14,778 $10,259
6/30/92 $15,562 $14,668 $14,637 $9,775
7/31/92 $15,642 $14,743 $15,213 $9,528
8/31/92 $15,953 $15,036 $14,848 $10,129
9/30/92 $15,775 $14,869 $15,098 $9,932
10/31/92 $16,086 $15,162 $15,130 $9,414
11/30/92 $16,669 $15,711 $15,588 $9,506
12/31/92 $16,759 $15,796 $15,855 $9,558
1/31/92 $16,257 $15,323 $15,966 $9,560
2/28/92 $15,845 $14,935 $16,134 $9,851
3/31/93 $16,759 $15,796 $16,545 $10,713
4/30/93 $17,885 $16,857 $16,124 $11,732
5/31/93 $19,140 $18,041 $16,491 $11,983
6/30/93 $18,407 $17,350 $16,623 $11,799
7/31/93 $18,216 $17,170 $16,535 $12,215
8/31/93 $19,361 $18,249 $17,104 $12,877
9/30/93 $19,673 $18,543 $17,051 $12,590
10/31/93 $20,376 $19,206 $17,382 $12,981
11/30/93 $20,316 $19,149 $17,158 $11,849
12/31/93 $21,185 $19,968 $17,445 $12,707
1/31/94 $22,022 $20,757 $18,012 $13,784
2/28/94 $21,076 $19,866 $17,471 $13,749
3/31/94 $19,805 $18,668 $16,789 $13,159
4/30/94 $19,610 $18,483 $16,983 $13,721
5/31/94 $19,447 $18,330 $17,194 $13,645
6/30/94 $18,588 $17,521 $16,861 $13,841
7/31/94 $18,643 $17,572 $17,392 $13,977
8/31/94 $19,881 $18,739 $18,046 $14,311
9/30/94 $20,175 $19,016 $17,685 $13,863
10/31/94 $19,892 $18,750 $18,055 $14,328
11/30/94 $20,107 $18,952 $17,341 $13,643
12/31/94 $19,825 $18,686 $17,682 $13,731
1/31/95 $20,775 $19,582 $18,112 $13,207
2/28/95 $21,256 $20,035 $18,765 $13,172
3/31/95 $21,456 $20,223 $19,399 $13,998
4/30/95 $21,878 $20,621 $19,941 $14,528
5/31/95 $22,817 $21,506 $20,665 $14,359
6/30/95 $24,177 $22,789 $21,244 $14,111
7/31/95 $26,148 $24,646 $21,919 $14,993
8/31/95 $27,462 $25,885 $21,912 $14,425
9/30/95 $27,838 $26,238 $22,928 $14,710
10/31/95 $27,357 $25,785 $22,813 $14,318
11/30/95 $28,518 $26,880 $23,750 $14,721
12/31/95 $31,960 $30,124 $24,303 $15,317
1/31/96 $33,568 $31,640 $25,096 $15,384
2/29/96 $33,621 $31,690 $25,270 $15,440
3/31/96 $33,914 $31,966 $25,606 $15,772
4/30/96 $35,469 $33,431 $25,950 $16,234
5/31/96 $37,090 $34,959 $26,543 $15,939
6/30/96 $36,904 $34,784 $26,753 $16,033
7/31/96 $33,954 $32,003 $25,529 $15,568
8/31/96 $35,987 $33,920 $26,009 $15,606
9/30/96 $37,031 $34,903 $27,574 $16,025
10/31/96 $36,112 $34,038 $28,294 $15,865
11/30/96 $36,196 $34,117 $30,370 $16,500
12/31/96 $37,837 $35,664 $29,869 $16,292
1/31/97 $39,479 $37,211 $31,700 $15,725
2/28/97 $40,313 $37,998 $31,888 $15,986
3/31/97 $39,006 $36,765 $30,675 $16,048
4/30/97 $37,476 $35,323 $32,466 $16,137
5/31/97 $41,565 $39,178 $34,368 $17,191
6/30/97 $42,317 $39,886 $36,018 $18,143
7/31/97 $44,014 $41,485 $38,832 $18,440
8/31/97 $42,347 $39,914 $36,602 $17,067
</TABLE>
Performance +
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (At Net Asset Value)
- --------------------------------------------------------------------------------
<S> <C>
One year 17.7%
Five year 21.6
Ten year 15.5
Value at 8/31/97 $42,347
<CAPTION>
SEC Average Annual Total Returns (Including Initial 5.75% sales charge)
- --------------------------------------------------------------------------------
<S> <C>
One year 10.9%
Five year 20.1
Ten year 14.9
Value at 8/31/97 $39,914
</TABLE>
* Source: Towers Data Systems, Bethesda, MD. 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.
The performance chart above compares the Fund's total return with that of a
broad-based securities market index. 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, the S&P 500 Index - a broad-based,
widely recognized index of 500 common stocks traded in the U.S. - and the
Morgan Stanley Capital International Europe, Australasia, and Far East Index
(EAFE) - a broad-based Index of common stocks traded in foreign markets. The
Indices' total returns do not reflect any commissions or expenses that would
have been incurred if an investor individually purchased or sold the
securities represented in the Indices. It is not possible to invest directly
in an index.
** This figure represents the Fund's performance including the Fund's maximum
5.75% initial sales charge.
+ Returns are calculated by determining the percentage change in net asset
value (NAV) with all distributions reinvested. SEC returns reflect a maximum
sales charge as noted.
6
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of August 31, 1997
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investment in Worldwide Health Sciences Portfolio (Portfolio),
at value (identified cost, $69,362,233) $88,014,617
Receivable for Fund shares sold 437,081
Receivable from the Manager (Note 3) 138,464
Other receivables 22,091
- --------------------------------------------------------------------------------
Total assets $88,612,253
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 211,705
Payable to affiliate for Trustees' fees (Note 3) 693
Accrued expenses 50,636
- --------------------------------------------------------------------------------
Total liabilities $ 263,034
- --------------------------------------------------------------------------------
Net Assets for 5,917,564 shares of beneficial interest
outstanding $88,349,219
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $69,696,835
Net unrealized appreciation of investments from Portfolio
(computed on basis of identified cost) 18,652,384
- --------------------------------------------------------------------------------
Total $88,349,219
- --------------------------------------------------------------------------------
Net Asset Value and Redemption Price Per Share (Note 6)
- --------------------------------------------------------------------------------
($88,349,219 / 5,917,564 shares of beneficial interest
outstanding) $ 14.93
- --------------------------------------------------------------------------------
Computation of Offering Price
- --------------------------------------------------------------------------------
Offering price per share (100 / 95.25 of $14.93) $ 15.67
- --------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price is reduced.
<CAPTION>
Statement of Operations
For the Year Ended
August 31, 1997
Investment Income (Note 1B)
- --------------------------------------------------------------------------------
<S> <C>
Dividend income allocated from Portfolio (net of foreign taxes,
$31,085) $ 268,225
Expenses allocated from Portfolio (810,110)
- --------------------------------------------------------------------------------
Net investment loss from Portfolio $ (541,885)
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Management fee (Note 3) $ 169,792
Compensation of Trustees not members of the Manager's
organization (Note 3) 1,524
Transfer and dividend disbursing agent fees 195,818
Distribution fees (Note 5) 169,792
Registration fees 56,450
Printing and postage 53,089
Legal and accounting services 24,039
Custodian fee (Note 1C) 11,970
Miscellaneous 8,106
- --------------------------------------------------------------------------------
Total expenses $ 690,580
- --------------------------------------------------------------------------------
Deduct --
Reduction of Management fee (Note 3) $ 138,464
Reduction of custodian fee (Note 1C) 6,870
- --------------------------------------------------------------------------------
Total expense reductions $ 145,334
- --------------------------------------------------------------------------------
Net expenses $ 545,246
- --------------------------------------------------------------------------------
Net investment loss $(1,087,131)
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,765,727
Foreign currency transactions 31,309
- --------------------------------------------------------------------------------
Net realized gain on investments $ 1,797,036
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $ 9,595,417
Foreign currency 3,766
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments $ 9,599,183
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $11,396,219
- --------------------------------------------------------------------------------
Net increase in net assets from operations $10,309,088
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
7
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended Year Ended
in Net Assets August 31, 1997 August 31, 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment loss $ (1,087,131) $ (653,017)
Net realized gain on investments 1,797,036 4,038,381
Net change in unrealized
appreciation (depreciation) 9,599,183 4,934,158
- -------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations $ 10,309,088 $ 8,319,522
- -------------------------------------------------------------------------------------
Distributions to shareholders (Note 2)--
From net realized gain $ (4,230,217) $ (2,558,056)
- -------------------------------------------------------------------------------------
Total distributions to shareholders $ (4,230,217) $ (2,558,056)
- -------------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 4)--
Proceeds from sale of shares $ 50,014,627 $ 68,676,368
Net asset value of shares issued
to shareholders in payment
of distributions declared 3,802,439 2,491,303
Cost of shares redeemed (26,562,560) (39,602,995)
- -------------------------------------------------------------------------------------
Net increase in net assets from
Fund share transactions $ 27,254,506 $ 31,564,676
- -------------------------------------------------------------------------------------
Net increase in net assets $ 33,333,377 $ 37,326,142
- -------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------
At beginning of year $ 55,015,842 $ 17,689,700
- -------------------------------------------------------------------------------------
At end of year $ 88,349,219 $ 55,015,842
- -------------------------------------------------------------------------------------
Accumulated
net investment loss
included in net assets
- -------------------------------------------------------------------------------------
At end of year $ -- $ (653,017)
- -------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
8
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended August 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $13.540 $11.710 $ 9.150 $ 9.640 $ 8.970
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss $(0.133) $(0.230) $(0.170) $(0.160) $(0.130)
Net realized and unrealized gain on investments 1.818 3.460 3.410 0.430 1.860
- ------------------------------------------------------------------------------------------------------------------------------------
Total income from operations $ 1.685 $ 3.230 $ 3.240 $ 0.270 $ 1.730
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments $(0.295) $(1.400) $(0.680) $(0.760) $(1.060)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.295) $(1.400) $(0.680) $(0.760) $(1.060)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value-- End of year $14.930 $13.540 $11.710 $ 9.150 $ 9.640
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return /1/ 17.67% 31.04% 38.13% 2.69% 21.37%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data +
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $88,349 $55,016 $17,690 $13,231 $10,223
Ratio of net expenses to average net assets /2/ 2.07% 2.21% 2.44% 2.50% 2.50%
Ratio of net expenses to average net assets after custodian
fee reduction /2//3/ 2.00% -- -- -- --
Ratio of net investment loss to average net assets (1.60)% (1.81)% (1.80)% (1.65)% (1.53)%
Portfolio Turnover /4/ -- 66% 45% 49% 77%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission rate /5/ $ -- $0.0864 $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Fund and the Portfolio may reflect a reduction
of the Investment Adviser fee, an allocation of expenses to the
Manager/Administrator, or both. Had such actions not been taken, the ratios
and net investment income (loss) per share would have been as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets):
Expenses /2/ 2.29% -- -- 2.67% 2.87%
Expenses after custodian fee reduction /2//3/ 2.22% -- -- -- --
Net investment loss (1.82)% -- -- (1.82)% (1.90)%
Net investment loss per share $(0.151) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the ex-dividend date. Total return is not computed
on an annualized basis.
/2/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses subsequent to September 1, 1996.
/3/ The expense ratios for the years ended August 31, 1997 and 1996 have been
adjusted to reflect a change in reporting requirements. The new reporting
requirements require the fund to increase its expense ratio by the effect of
any expense offset arrangements with its service provider. The expense
ratios for each of the prior periods have not been adjusted to reflect this
change.
/4/ Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred substantially all of
its investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
/5/ Average commission rate (per share of security) as required by amended
disclosure requirements effective September 1, 1995. Average commission rate
for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
See notes to financial statements
9
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
------------------------------------------------------------------------------
EV Traditional Worldwide Health Sciences Fund, Inc. (the Fund) is a
diversified, open-end management investment company. The Fund invests all of
its investable assets in interests in the Worldwide Health Sciences 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 (57.6% at August 31,
1997). The performance of the Fund is directly affected by the performance of
the Portfolio. The financial statements of the Portfolio, including the
portfolio of investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
On June 23, 1997, the Board of Trustees of the Trust adopted a multiple class
plan for the Fund which permits the Fund to issue more than one class of
shares. Initially, the Fund will offer two classes of shares, and effective
September 1, 1997, the existing shares of the Fund will be designated as Class
A shares. On June 23, 1997, the Board of Trustees also approved a Plan of
Reorganization (the "Plan") for the Fund. Under the terms of the Plan, the
Fund will acquire substantially all of the assets and liabilities of the EV
Marathon Worldwide Health Sciences Fund (the Marathon Fund). The transaction
will be structured for tax purposes to qualify as a tax-free reorganization
under the Internal Revenue Code. As a result of the reorganization,
shareholders of the Marathon Fund will receive Class B shares of the Fund. The
reorganization will occur after the close of business, August 31, 1997.
The following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuations -- Valuation of securities by the Portfolio is
discussed in Note 1A of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
B Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average daily cash balances the Fund or the Portfolio maintains with
IBT. All significant credit balances used to reduce the Fund's custodian fees
are reported as a reduction of expenses on the statement of operations.
D Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income, if any,
and any net realized capital gains. Accordingly, no provision for federal
income or excise tax is necessary. Pursuant to Section 852 of the Internal
Revenue Code, the Fund designates $3,235,562 as a long term capital gain
distribution for its taxable year ended August 31, 1997.
E Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
F Other -- Investment transactions are accounted for on a trade date basis.
2 Distributions to Shareholders
------------------------------------------------------------------------------
It is the present policy of the Fund to make at least one distribution
annually (normally in December) of all or substantially all of the investment
income allocated to the Fund by the Portfolio, less the Fund's direct and
allocated expenses and at least one distribution annually of all or
substantially all of the net realized capital gain (reduced by any available
capital loss carry forwards from prior years) allocated by the Portfolio to
the Fund, if any. Shareholders may reinvest all distributions in shares of the
Fund at the per share net asset value as of the close of business on the ex-
dividend date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in over distributions for financial statement purposes
10
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
3 Management Fee and Other Transactions with Affiliates
----------------------------------------------------------------------------
The management fee is earned by Eaton Vance Management (EVM) as compensation
for management and administration of the business affairs of the Fund. The
fee is based on a percentage of average daily net assets. For the year ended
August 31, 1997, the fee was equivalent to 0.25% of the Fund's average net
assets for such period and amounted to $169,792. EVM has agreed that through
August 31, 1999, if the annual aggregate expenses of the Fund (excluding
extraordinary expenses) exceed 2.00% of average daily net assets, then EVM
will reduce its fees and take other actions to the extent required to reduce
the Fund's expenses. For the year ended August 31, 1997, EVM made a waiver
of it's management fee in the amount of $138,464. Except as to Directors of
the Fund who are not members of EVM's organization, officers and Directors
receive remuneration for their services to the Fund out of such management
fee. Certain officers and Directors/Trustees of the Fund and the Portfolio
are officers and directors/trustees of the above organizations. In addition,
administrative fees are paid by the Portfolio to EVM. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
the report.
4 Capital Stock
----------------------------------------------------------------------------
Capital stock has been adjusted to reflect a 100% stock dividend declared to
shareholders of record at the opening of business on September 1, 1996.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------
1997 1996
------------------------------------------------------------------------
<S> <C> <C>
Shares sold 3,479,728 5,439,762
Shares issued to shareholders in
reinvestment of distributions 274,867 236,367
Shares redeemed (1,900,964) (3,123,278)
------------------------------------------------------------------------
Net Increase 1,853,631 2,552,851
------------------------------------------------------------------------
</TABLE>
5 Distribution Plan
----------------------------------------------------------------------------
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan provides that the Fund
will pay a monthly distribution fee to the Principal Underwriter, Eaton
Vance Distributors, Inc. (EVD), in an amount equal to 0.25% on an annual
basis of the Fund's average daily net assets. EVD may pay up to the entire
amount of the distribution fee to Authorized Firms for providing personal
services to shareholders. For the year ended August 31, 1997, the Fund paid
or accrued $169,792 to or payable to EVD.
6 Investment Transactions
----------------------------------------------------------------------------
At the close of business, August 30, 1996, the Fund transferred
substantially all of its assets to the Worldwide Health Sciences Portfolio
in exchange for an interest in the Portfolio. Increases and decreases in the
Fund's investment in the Portfolio for the year ended August 31, 1997
aggregated $96,259,024 and $28,128,667, respectively.
7 Special Meeting of Stockholders (Unaudited)
----------------------------------------------------------------------------
EV Traditional Worldwide Health Sciences Fund, Inc. (the Fund) held a
special meeting of stockholders on August 20, 1997. On June 23, 1997, the
record date for the meeting, the Fund had 5,338,984.932 shares outstanding,
of which 2,916,646.132 shares were represented at the meeting. The votes for
the meeting were as follows:
Item 1: To consider and act upon a proposal to approve an Agreement and Plan
of Reorganization pursuant to which the Fund would be reorganized from a
Maryland corporation to a series fund of Eaton Vance Growth Trust, a
Massachusetts business trust.
<TABLE>
<CAPTION>
Number of Shares
----------------------------------------------------------------------------
<S> <C>
Affirmative 2,681,576.668
Against 111,322.745
Abstain 123,746.719
</TABLE>
8 Subsequent Event for Organization
-----------------------------------------------------------------------------
Effective September 1, 1997, the EV Traditional Worldwide Health Sciences
Fund, Inc. will change its name to Eaton Vance Worldwide Health Sciences Fund
and shares of the Fund will be designated Class A shares. One additional
class of shares will also be offered.
11
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
INDEPENDENT ACCOUNTANTS' REPORT
To the Directors and Shareholders
of EV Traditional Worldwide Health
Sciences Fund, Inc.:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities of EV
Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997, and the
related statement of operations, the statement of changes in net assets and the
financial highlights for the year ended August 31, 1997. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
The statement of changes in net assets for the year ended August 31, 1996 and
the financial highlights for each of the four years in the period then ended
were audited by other auditors whose report dated September 26, 1996 expressed
an unqualified opinion on such financial statements and financial highlights.
We conducted our audit 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. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
present fairly, in all material respects, the financial position of EV
Traditional Worldwide Health Sciences Fund, Inc. at August 31, 1997, the results
of its operations, the changes in its net assets and financial highlights for
the year then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
12
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
Common Stocks and Warrants -- 94.02%
<TABLE>
<CAPTION>
Percentage of
Security Shares Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Major Capitalization - Europe -- 11.45%
- --------------------------------------------------------------------------------
Altana 55,000 $ 4,123,477 2.70%
Ares-Serono 4,000 6,233,417 4.08%
Novartis 5,000 7,122,586 4.67%
- --------------------------------------------------------------------------------
$ 17,479,480 11.45%
- --------------------------------------------------------------------------------
Major Capitalization - Far East -- 15.39%
- --------------------------------------------------------------------------------
Banyu Pharmaceutical Co. 300,000 $ 5,011,371 3.28%
Eisai Co., Ltd. 250,000 4,734,339 3.10%
Fujisawa Pharmaceutical 600,000 5,805,251 3.80%
Sankyo Co., Ltd. 140,000 4,237,337 2.78%
Takeda Chemical Industries 140,000 3,716,353 2.43%
- --------------------------------------------------------------------------------
$ 23,504,651 15.39%
- --------------------------------------------------------------------------------
Major Capitalization - North America -- 20.36%
- --------------------------------------------------------------------------------
Biogen, Inc./(a)/ 150,000 $ 5,906,250 3.87%
Centocor, Inc./(a)/ 200,000 8,975,000 5.88%
Genzyme Corp./(a)/ 250,000 7,031,250 4.60%
Pharmacia & Upjohn,
Inc./(a)/ 150,000 5,109,375 3.35%
Warner-Lambert Co. 32,000 4,066,000 2.66%
- --------------------------------------------------------------------------------
$ 31,087,875 20.36%
- --------------------------------------------------------------------------------
Specialty Capitalization - Europe -- 6.83%
- --------------------------------------------------------------------------------
Cambridge Antibody
Technology, Ltd. 307,040 $ 2,414,647 1.58%
Cambridge Antibody
Technology, Ltd. -
Warrants(a) 15,500 44,185 0.03%
Celltech Group, PLC/(a)/ 225,000 1,003,303 0.66%
Ethical Holdings ADR/(a)/ 150,000 712,500 0.46%
Swiss Serum Institute/(a)/ 420 6,262,972 4.10%
- --------------------------------------------------------------------------------
$ 10,437,607 6.83%
- --------------------------------------------------------------------------------
Specialty Capitalization - Far East -- 6.53%
- --------------------------------------------------------------------------------
Amrad Corp., Ltd./(a)/ 1,110,658 $ 2,081,792 1.36%
Biota Holdings, Ltd./(a)/ 644,640 2,037,523 1.33%
Biota Holdings, Ltd. -
Warrants/(a)/ 78,738 163,443 0.11%
Rohto Pharmaceutical 300,000 2,853,008 1.87%
Teikoku Hormone
Manufacturing 350,000 2,836,469 1.86%
- --------------------------------------------------------------------------------
$ 9,972,235 6.53%
- --------------------------------------------------------------------------------
Specialty Capitalization - North America-- 33.46%
- --------------------------------------------------------------------------------
Agouron Pharmaceuticals,
Inc./(a)/ 130,000 $ 5,720,000 3.75%
Alexion Pharmaceuticals,
Inc./(a)/ 270,000 2,970,000 1.94%
Arris Pharmaceutical
Corp./(a)/ 250,000 3,406,250 2.23%
Aviron 125,000 3,125,000 2.05%
CytoTherapeutics, Inc./(a)/ 120,000 645,000 0.42%
Gilead Sciences, Inc./(a)/ 80,000 2,590,000 1.70%
Immunex Corp./(a)/ 100,000 4,375,000 2.86%
Incyte Pharmaceuticals,
Inc./(a)/ 60,000 3,630,000 2.38%
Isis Pharmaceuticals,
Inc./(a)/ 150,000 2,259,375 1.48%
Leukosite, Inc./(a)/ 175,000 1,060,938 0.69%
Millennium
Pharmaceuticals/(a)/ 225,000 3,037,500 1.99%
Neurocrine BioScience, Inc. 130,000 1,056,250 0.69%
Ontogeny, Inc./(b)/ 600,000 1,500,000 0.98%
Pharmacopeia, Inc./(a)/ 215,000 3,386,250 2.22%
Premier Research Worldwide 235,000 1,953,438 1.28%
SangStat Medical Corp./(a)/ 125,000 2,875,000 1.88%
Sequana Therapeutics,
Inc./(a)/ 50,000 543,750 0.36%
Tularik, Inc./(b)(a)/ 80,000 800,000 0.52%
Vertex Pharmaceuticals,
Inc./(a)/ 180,000 6,165,000 4.04%
- --------------------------------------------------------------------------------
$ 51,098,751 33.46%
- --------------------------------------------------------------------------------
Total Common Stocks and Warrants
(identified cost $121,559,390) $143,580,599
- --------------------------------------------------------------------------------
Total Investments
(identified cost $121,559,390) $143,580,599 94.02%
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities $ 9,136,389 5.98%
- --------------------------------------------------------------------------------
Net Assets $152,716,988 100.00%
- --------------------------------------------------------------------------------
</TABLE>
/(a)/ Non-income producing security.
/(b)/ Restricted Security (Note 7)
See notes to financial statements
13
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of August 31, 1997
Assets
- --------------------------------------------------------------------------
<S> <C>
Investments, at value (Note 1A)
(identified cost basis $121,559,390) $143,580,599
Cash 9,142,727
Dividends receivable 12,160
Deferred organization expenses (Note 1E) 10,641
- --------------------------------------------------------------------------
Total assets $152,746,127
- --------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------
Payable to affiliate for Trustees' fees (Note 2) $ 2,842
Accrued expenses 26,297
- --------------------------------------------------------------------------
Total liabilities $ 29,139
- --------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $152,716,988
- --------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $130,695,779
Net unrealized appreciation of investments (computed
on the basis of identified cost) 22,021,209
- --------------------------------------------------------------------------
Total $152,716,988
- --------------------------------------------------------------------------
Statement of Operations
For the Year Ended
August 31, 1997
Investment Income
- --------------------------------------------------------------------------
Dividends (net of foreign taxes, $77,443) $ 339,253
- --------------------------------------------------------------------------
Total income $ 339,253
- --------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 800,167
Administration fee (Note 2) 231,722
Compensation of Trustees not members of the
Administrator's organization (Note 2) 8,019
Custodian fee (Note 1D) 66,262
Legal and accounting services 39,057
Registration fees 10,465
Amortization of organization expenses (Note 1E) 2,590
Miscellaneous 2,553
- --------------------------------------------------------------------------
Total expenses $ 1,160,835
- --------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1D) $ 64,632
- --------------------------------------------------------------------------
Total expense reductions $ 64,632
- --------------------------------------------------------------------------
Net expenses $ 1,096,203
- --------------------------------------------------------------------------
Net investment loss $ (756,950)
- --------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,764,064
Foreign currency transactions 42,629
- --------------------------------------------------------------------------
Net realized gain on investments $ 1,806,693
- --------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 22,021,209
- --------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 22,021,209
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 23,827,902
- --------------------------------------------------------------------------
Net increase in net assets from operations $ 23,070,952
- --------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended
in Net Assets August 31, 1997
- --------------------------------------------------------------------------
<S> <C>
From operations --
Net investment loss $ (756,950)
Net realized gain on investments 1,806,693
Net change in unrealized appreciation (depreciation) 22,021,209
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 23,070,952
- --------------------------------------------------------------------------
Capital transactions --
Contributions $160,659,674
Withdrawals (31,113,638)
- --------------------------------------------------------------------------
Net increase in net assets resulting from
capital transactions $129,546,036
- --------------------------------------------------------------------------
Net increase in net assets $152,616,988
- --------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------
At beginning of year $ 100,000
- --------------------------------------------------------------------------
At end of year $152,716,988
- --------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended
August 31, 1997
- --------------------------------------------------------------------------------
<S> <C>
Ratios to average daily net assets
- --------------------------------------------------------------------------------
Expenses 1.25%
Net expenses, after custodian fee reduction 1.18%
Net investment loss (0.81)%
Portfolio Turnover 14%
- --------------------------------------------------------------------------------
Average commission rate (per share)/(1)/ $ 0.0438
- --------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $152,717
- --------------------------------------------------------------------------------
</TABLE>
/(1)/Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the fiscal year by the total number of
shares purchased and sold during the fiscal year for which commissions were
charged.
See notes to financial statements
16
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
----------------------------------------------------------------------------
Worldwide Health Sciences Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company which was organized as a trust under the laws of the
State of New York on March 26, 1996. The Declaration of the Trust permits
the Trustees to issue interests in the Portfolio. Investment operations
began on September 1, 1996, with the acquisition of securities with a value
of $51,528,696, including unrealized appreciation of $9,053,201, in exchange
for an interest in the Portfolio by one of the Portfolio's investors. The
following is a summary of the significant accounting policies of the
Portfolio. The policies are in conformity with generally accepted accounting
principles.
A Investment Valuations -- Securities listed on a recognized stock exchange,
whether U.S. or foreign, are valued at the last reported sale price on that
exchange prior to the time when assets are valued or prior to the close of
trading on the New York Stock exchange. In the event that there are no
sales, the last available sale price will be used. If a security is traded
on more than one exchange, the security is valued at the last sale price on
the exchange where the stock is primarily traded. Securities for which
market quotations are not readily available and other assets are valued on a
consistent basis at fair value as determined in good faith by or under the
supervision of the Portfolio's officers in a manner specifically authorized
by the Board of Trustees.
B Income -- Dividend income is recorded on the ex-dividend date, except that
certain dividends from foreign securities are recorded on the ex-dividend
date or as soon thereafter as the Portfolio is informed of the dividend.
C Federal Taxes -- The Portfolio has elected to be treated as a partnership
for Federal tax purposes. No provision is made by the Portfolio for federal
or state taxes on any taxable income of the Portfolio because each investor
in the Portfolio is ultimately responsible for the payment of any taxes.
Since some of the Portfolio's investors are regulated investment companies
that invest all or substantially all of their assets in the Portfolio, the
Portfolio must satisfy the applicable source of income and diversification
requirement, (under the Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors each
investors' distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit.
D Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT
receives a fee reduced by the credits which are determined based on the
average daily cash balances the Portfolio maintains with IBT. All
significant credit balances used to reduce the Portfolio's custodian fees
are reflected as a reduction of operating expense on the Statement of
Operations.
E Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
F Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
G Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to foreign currency rates are recorded
for financial statement purposes as net realized gains and losses on
investments. That portion of unrealized gains and losses on investments that
result from fluctuations in foreign currency exchange rates are not
separately disclosed.
H Forward Foreign Currency Exchange Contracts -- The Portfolio may enter
into forward foreign currency exchange contracts for the purchase or sale of
a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from movements in
the value of a foreign currency relative to the U.S. dollar. The Portfolio
will enter into forward contracts for hedging purposes as well as nonhedging
purposes. The forward foreign currency exchange contracts are adjusted by
the daily exchange rate of the underlying currency and any gains and losses
are recorded for financial statement purposes as unrealized until such time
as the contracts have been closed.
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
I Other -- Investment transactions are accounted for on a trade date basis.
2 Investment Advisory Fees, Administrator's Fees and Other Transactions with
Affiliates
---------------------------------------------------------------------------
Pursuant to the Advisory Agreement, Mehta and Isaly Asset Management, Inc.
("M&I") serve as the Investment Adviser of the Portfolio. Under this
agreement M&I received a monthly fee at the annual rate of 1% of the
Portfolio's first $30 million in average net assets, 0.90% of the next $20
million in average net assets, and 0.75% of average net assets in excess of
$50 million. The fee rate declines for net assets of $500 million and
greater. Beginning September 1, 1997, M&I may receive a performance based
adjustment of up to 0.25% of the average daily net assets of the Portfolio
based upon the investment performance of the Portfolio compared to the
Standard & Poor's Index of 500 Common Stocks over specified periods. For the
year ended August 31, 1997, the fee was equivalent to 0.86% of the
Portfolio's average daily net assets and amounted to $800,167.
Under an Administration Agreement between the Portfolio and its
Administrator, Eaton Vance Management (EVM), EVM manages and administers
the affairs of the Portfolio. EVM earns a monthly fee in the amount of
1/48th of 1% (equal to 0.25% annually) of the average daily net assets of
the Portfolio up to $500,000,000, and at reduced rates as daily net assets
exceed that level. For the year ended August 31, 1997, the administration
fee was 0.25% of average net assets.
Except as to Trustees of the Portfolio who are not members of the Adviser or
EVM's organization, officers and Trustees receive remuneration for their
services to the Portfolio out of such investment adviser and administrative
fees. Certain officers and Trustees of the Portfolio are also officers or
directors/trustees of the above organizations. Trustees of the Portfolio
that are not affiliated with the Investment Adviser may elect to defer
receipt of all or a portion of their annual fees in accordance with the
terms of the Trustee Deferred Compensation Plan. For the year ended August
31, 1997, no significant amounts have been deferred.
3 Investments
----------------------------------------------------------------------------
Purchases and sales of investments other than U.S. Government securities and
short-term obligations aggregated $89,798,719 and $12,478,888, respectively.
4 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at August 31, 1997, as computed on a federal income tax
basis, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $121,559,390
----------------------------------------------------------------------------
Gross unrealized appreciation $ 28,413,965
Gross unrealized depreciation (6,392,756)
----------------------------------------------------------------------------
Net unrealized appreciation $ 22,021,209
----------------------------------------------------------------------------
</TABLE>
5 Risks Associated with Foreign Investments
----------------------------------------------------------------------------
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the
Portfolio, political or financial instability or diplomatic and other
developments which could affect such investments. Foreign stock markets,
while growing in volume and sophistication, are generally not as developed
as those in the United States, and securities of some foreign issuers
(particularly those in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In general, there is
less overall governmental supervision and regulation of foreign securities
markets, broker-dealers, and issuers than in the United States.
18
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
6 Line of Credit
----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by EVM
and its affiliates in a committed $120 million unsecured line of credit
agreement with a group of banks. Borrowings will be made by the Portfolios
and funds solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each portfolio or fund
based on its borrowings at the bank's base rate or at an amount above either
the bank's adjusted certificate of deposit rate, Eurodollar rate or federal
funds effective rate. In addition, a fee computed at an annual rate of 0.15%
on the daily unused portion of the facility is allocated among the
participating portfolios and funds at the end of each quarter. The Portfolio
did not have any significant borrowings or allocated fees during the year
ended August 31, 1997.
7 Restricted Securities
----------------------------------------------------------------------------
At August 31, 1997, the Portfolio owned the following securities
(representing 1.51% of net assets) which were restricted as to public resale
and not registered under the Securities Act of 1933. The Portfolio has
various registration rights (exercisable under a variety of circumstances)
with respect to these securities. The fair value of these securities is
determined based on valuations provided by brokers when available, or if not
available, they are valued at fair value using methods determined in good
faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
Date of
Description Acquisition Shares/Face Cost Fair Value
---------------------------------------------------------------------------
Common Stocks
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ontogeny, Inc. 3/13/97 600,000 $1,500,000 $1,500,000
Tularik, Inc. 10/14/96 80,000 800,000 800,000
---------------------------------------------------------------------------
$2,300,000 $2,300,000
---------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Worldwide Health Sciences Portfolio as of August 31, 1997
INDEPENDENT ACCOUNTANTS' REPORT
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Worldwide Health Sciences Portfolio as of
August 31, 1997, and the related statement of operations, the statement of
changes in net assets and the supplementary data for the year ended August 31,
1997. 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 audit.
We conducted our audit 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 the securities owned at August 31, 1997 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary data present fairly,
in all material respects, the financial position of Worldwide Health Sciences
Portfolio at August 31, 1997, the results of its operations, the changes in its
net assets and supplementary data for the year then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND
Chartered Accountants
Toronto, Ontario
October 3, 1997
20
<PAGE>
EV Traditional Worldwide Health Sciences Fund, Inc. as of August 31, 1997
INVESTMENT MANAGEMENT
EV Traditional Worldwide Health Sciences Fund, Inc.
Officers
James B. Hawkes
President and Director
M. Dozier Gardner
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Directors
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, 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
Worldwide Health Sciences Portfolio
Officers
James B. Hawkes
President and Trustee
Samuel D. Isaly
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Viren Mehta
Vice President
William Chisholm
Vice President
Raymond O'Neill
Vice President
Michel Normandeau
Vice President
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Former Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
21
<PAGE>
This Page Intentionally Left Blank
<PAGE>
This Page Intentionally Left Blank
<PAGE>
Sponsor and Manager of
EV Traditional Worldwide Health Sciences Fund, Inc. &
Administrator of Worldwide Health Sciences Portfolio
Eaton Vance Management
24 Federal Street
Boston, MA02110
Advisor of Worldwide Health Sciences Portfolio
Mehta and Isaly Asset Management, Inc.
41 Madison Avenue
New York, NY 10010-2202
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617)482-8260
Custodian
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
(800) 262-1122
EV Traditional Worldwide Health Sciences Fund, Inc.
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund,including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
T-HSSRC-10/97
