<PAGE>
SECOND FIDUCIARY
EXCHANGE FUND
An Eaton Vance
Exchange Fund
Annual Report
December 31, 1995
<PAGE>
TO SHAREHOLDERS
SECOND FIDUCIARY EXCHANGE FUND HAD A TOTAL RETURN OF 31.0% DURING THE YEAR ENDED
DECEMBER 31, 1995. That return represented an increase in net asset value per
share to $161.10 from $125.59, and the reinvestment of $2.25 per share in income
dividends and $1.17 per share in capital gain distributions. By comparison, the
S&P 500 Index, an unmanaged index of common stocks, had a return of 37.6% and
the Lipper Growth Fund Index, an index of 30 growth funds, had a return of 31.4%
during the same period.
SHAREHOLDERS RECEIVED INCOME DIVIDENDS TOTALING $2.25 PER SHARE AND CAPITAL
GAIN DISTRIBUTIONS OF $1.17 PER SHARE DURING THE 12 MONTHS ENDED DECEMBER
31, 1995.
THE STOCK MARKET PERFORMED VERY WELL DURING THE YEAR, REACHING RECORD LEVELS ON
SEVERAL OCCASIONS. The market's behavior was a positive response to an improved
interest rate environment and prospects for continuing economic growth. The
crucial issue during the first half of the year was whether the Federal
Reserve's previous tightening of its target federal funds rate would cause a
recession or would provide a "soft landing" for the economy. As the year
progressed, it became clear that the Fed had succeeded in engineering the soft
landing that it had sought.
CONCERNED ABOUT THE ECONOMY SLOWING TOO MUCH, THE FED LOWERED ITS RATE BY A
QUARTER OF A PERCENTAGE POINT IN JULY, THE FIRST DOWNWARD CHANGE SINCE
SEPTEMBER, 1992. Another quarter-point decrease was announced in December. The
stock market reacted positively to both these changes, which, combined with an
overall lack of inflationary pressure, helped the economy continue to advance
slowly but steadily.
THIS HAS BEEN A PERIOD OF STRONG PERFORMANCE FOR A WIDE RANGE OF STOCKS. Large
capitalization stocks led the market surge early in the period. Many major
corporations saw sharply escalating profits, reflecting a favorable economy and
the substantial cost-reduction and productivity initiatives they have undertaken
in recent years.
AMONG THE STRONGER SECTORS OF THE STOCK MARKET DURING MOST OF 1995 WERE
TECHNOLOGY, HEALTH CARE AND FINANCIAL SERVICES. Intel Corp., the only technology
stock among the Fund's 10 largest holdings, gained 76%, while Digital Equipment
Corp. gained nearly 89%. International Business Machines Corp. was up nearly
23%. Among healthcare holdings, Baxter International, Inc. gained 47%, Merck &
Co., up nearly 70%, and Warner Lambert Co., up 26%. In the financial services
sector, Wells Fargo & Co. was up 48%.
[Photo of Landon T. Clay]
"REGARDLESS OF SHORT-TERM CONDITIONS, WE BELIEVE THAT A STRATEGY OF INVESTING IN
A PORTFOLIO OF HIGH-QUALITY COMMON STOCKS IS LIKELY TO PROVIDE SOLID LONG-TERM
PERFORMANCE."
THE FUND'S LARGEST HOLDING, PEPSICO, INC., GAINED 53% DURING THE YEAR. The
second-largest, General Electric Co., was up nearly 40%. Great Lakes Chemical
and Chubb Corp., the Fund's third- and fourth-largest holdings, posted gains of
27% and 24%, respectively.
LOOKING TO 1996, WE CONTINUE TO HAVE A BASICALLY POSITIVE OUTLOOK ABOUT STOCK
INVESTMENTS BECAUSE OF THE CONTINUED PROSPECTS FOR LOW INFLATION AND STEADY
ECONOMIC GROWTH. However, the market may be more vulnerable than usual to a
correction because of the recent strong runup in stock prices.
REGARDLESS OF SHORT-TERM MARKET CONDITIONS, WE BELIEVE THAT A STRATEGY OF
INVESTING IN A PORTFOLIO OF HIGH-QUALITY COMMON STOCKS IS LIKELY TO PROVIDE
SOLID LONG-TERM PERFORMANCE. Because this remains the strategy of Second
Fiduciary Exchange Fund, I am confident that the Fund will continue to
participate in the growth of the economy.
Sincerely,
/s/Landon T. Clay
LANDON T. CLAY
President
February 21, 1996
<PAGE>
- ------------------------------------------------------------------------------
SECOND FIDUCIARY
EXCHANGE FUND, INC.
DECEMBER 31, 1995
(UNAUDITED)
INVESTMENT CHANGES
SIX MONTHS ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
Shares Owned
INCREASES 6/30/95 12/31/95
- ------------------------------------------------------------------------------
Anadarko Petroleum Corp. -- 20,000
- ------------------------------------------------------------------------------
Astra AB ADR -- Series B 8,200 30,000
- ------------------------------------------------------------------------------
Ericsson LTM Telephone -- 44,000
- ------------------------------------------------------------------------------
Houghton Mifflin -- 8,000
- ------------------------------------------------------------------------------
Memtec Ltd. ADR -- 38,750
- ------------------------------------------------------------------------------
MGIC Investment -- 25,000
- ------------------------------------------------------------------------------
Motorola Inc. -- 20,000
- ------------------------------------------------------------------------------
DECREASES*
- ------------------------------------------------------------------------------
Banyan Inc. 70,000 --
- ------------------------------------------------------------------------------
Gap Stores 30,000 --
- ------------------------------------------------------------------------------
General Electric Co. 52,140 52,030
- ------------------------------------------------------------------------------
Intel Corp. 63,840 54,190
- ------------------------------------------------------------------------------
Lotus Development Corp. 11,305 --
- ------------------------------------------------------------------------------
Novell Inc. 72,500 --
- ------------------------------------------------------------------------------
Telephonos De Mexico S.A. de C.V. ADR 8,000 --
- ------------------------------------------------------------------------------
*Includes investments paid in kind on redemptions.
OTHER CHANGES
- ------------------------------------------------------------------------------
Shares
- ------------------------------------------------------------------------------
30,000 Millipore Corp. in a 2 for 1 stock split
- ------------------------------------------------------------------------------
30,900 Raytheon Co. in a 2 for 1 stock split
- ------------------------------------------------------------------------------
40,000 Sealed Air Corp. in a 2 for 1 stock split
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
- ------------------------------------------------------------------------------
COMMON STOCKS - 95.8%
- ------------------------------------------------------------------------------
Name of Company Shares Value
- ------------------------------------------------------------------------------
BANKS - 1.2%
Wells Fargo & Co. 4,265 $ 921,240
-----------
BROADCAST-CABLE - 0.8%
Cox Communications - Class A* 30,503 $ 594,808
-----------
BUSINESS PRODUCTS AND SERVICES - 3.8%
DeLuxe Corp. 57,150 $ 1,657,350
General Motors Corp., Class E 25,000 1,300,000
-----------
$ 2,957,350
-----------
CHEMICALS - 9.7%
Bayer AG ADR 40,000 $ 1,057,796
DuPont (E.I.) de Nemours & Co., Inc. 45,000 3,144,375
Great Lakes Chemical Corp. 45,100 3,247,200
-----------
$ 7,449,371
-----------
CHEMICALS-SPECIALTY - 11.1%
Corning Inc. 35,000 $ 1,120,000
International Specialty Products Inc. 87,500 951,562
Loctite Corp. 23,000 1,092,500
Memtec Ltd. 38,750 644,219
Millipore Corp. 60,000 2,467,500
Sealed Air Corp.* 80,000 2,250,000
-----------
$ 8,525,781
-----------
COMMUNICATIONS EQUIPMENT - 2.6%
Ericsson (L.M.) Telephone Co. 44,000 $ 858,000
Motorola, Inc. 20,000 1,140,000
-----------
$ 1,998,000
-----------
CONSTRUCTION & REAL ESTATE - 1.3%
Gilbert Associates, Inc. Class A 78,125 $ 976,562
-----------
CONSUMER PRODUCTS - 5.1%
PepsiCo, Inc. 69,996 $ 3,911,026
-----------
DRUGS & MEDICAL - 8.6%
Astra AB ADR - Series B 30,000 $ 1,190,541
Bausch & Lomb, Inc. 14,680 581,695
Baxter International Inc. 47,650 1,995,344
Caremark, Inc. 14,625 265,078
Merck & Co., Inc. 25,000 1,643,750
Warner-Lambert Co. 9,442 917,054
-----------
$ 6,593,462
-----------
ELECTRICAL EQUIPMENT - 4.9%
General Electric Co. 52,030 $ 3,746,160
-----------
ELECTRONICS - 7.8%
Intel Corp. 54,190 $ 3,075,283
Raytheon Co. 61,800 2,920,050
-----------
$ 5,995,333
-----------
ENERGY - 1.4%
Anadarko Petroleum Corp. 20,000 $ 1,082,500
-----------
FOREST PRODUCTS - 2.3%
Union Camp Corp. 37,800 $ 1,800,225
-----------
GAS DISTRIBUTION & TRANSMISSION - 1.2%
Sonat, Inc. 27,200 $ 969,000
-----------
INSURANCE - 6.7%
Chubb Corp. 33,060 $ 3,198,555
MGIC Investment Corp. 25,000 1,356,250
Provident Companies, Inc. 20,889 707,615
-----------
$ 5,262,420
-----------
LEISURE/ENTERTAINMENT - 2.2%
Disney (Walt) Company 29,000 $ 1,711,000
-----------
MACHINERY & EQUIPMENT - 3.5%
Illinois Tool Works Inc. 10,000 $ 590,000
Tecumseh Products Co., Class A 40,350 2,088,113
-----------
$ 2,678,113
-----------
OFFICE EQUIPMENT - 3.8%
Digital Equipment Corp.* 23,100 $ 1,481,288
International Business Machines Corp. 15,590 1,430,383
-----------
$ 2,911,671
-----------
PETROLEUM - 4.4%
Chevron Corp. 40,000 $ 2,100,000
Mobil Corp. 11,898 1,332,576
-----------
$ 3,432,576
-----------
PETROLEUM SERVICES AND EQUIPMENT - 3.7%
Schlumberger Ltd. 40,864 $ 2,829,832
-----------
POLLUTION CONTROL - 1.5%
WMX Technologies, Inc. 40,000 $ 1,195,000
-----------
PUBLISHING AND PRINTING - 6.7%
Dun & Bradstreet Corp. 25,700 $ 1,664,075
Houghton Mifflin Co. 8,000 344,000
McGraw-Hill Inc. 12,804 1,115,548
Times Mirror Co., Class A 49,576 1,679,387
Harcourt General, Inc. 10,000 418,750
-----------
$ 5,221,760
-----------
SPECIAL PRODUCTS AND SERVICES - 1.5%
Wheelabrator Technologies Inc. 70,000 $ 1,172,500
-----------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $18,525,691) $73,935,690
-----------
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.4%
- ------------------------------------------------------------------------------
Face Amount
(000 Omitted)
- ------------------------------------------------------------------------------
Ford Motor Credit Corp., 5.92%
due 1/03/96 $ 3,000 $ 2,999,013
Melville Corp., 5.90% due 1/02/96 396 395,935
-----------
TOTAL SHORT-TERM OBLIGATIONS,
AT AMORTIZED COST $ 3,394,948
-----------
TOTAL INVESTMENTS
(IDENTIFIED COST, $21,920,639) - 100.2% $77,330,638
OTHER ASSETS, LESS LIABILITIES - (0.2%) (171,800)
-----------
NET ASSETS - 100% $77,158,838
===========
*Non-income producing security.
See notes to financial statements
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
December 31, 1995
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$21,920,639) $77,330,638
Cash 1,244
Dividends receivable 127,581
Other assets 4,243
-----------
Total assets $77,463,706
LIABILITIES:
Federal tax on undistributed net realized long-term
gain, payable on behalf of shareholders (Note 1B) $293,577
Payable to affiliate --
Directors' fees 1,396
Accrued expenses 9,895
--------
Total liabilities 304,868
-----------
NET ASSETS for 478,938 shares of capital stock outstanding $77,158,838
===========
SOURCES OF NET ASSETS:
Accumulated net realized gain on investment
transactions (computed on the basis of identified
cost), less the excess of cost of capital stock
redeemed over proceeds from sales of capital
stock (including shares issued to shareholders
electing to receive payment of distributions in
capital stock) $32,334,613
Accumulated distributions of net realized gain on
investments as computed for federal income tax
purposes (1,088,092)
Unrealized appreciation of investments (computed on
the basis of identified cost) 55,409,999
Provision for federal tax on undistributed net
realized long-term capital gain, paid on behalf
of shareholders (9,542,602)
Undistributed net investment income 44,920
-----------
Total $77,158,838
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($77,158,838 / 478,938 shares of capital stock
outstanding) $161.10
=======
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended December 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding tax of
$4,502) $ 1,345,753
Interest 261,654
-----------
Total income $ 1,607,407
Expenses --
Investment adviser fee (Note 4) $ 438,395
Compensation of Directors not members of the
Investment Adviser's organization 5,964
Custodian fees (Note 4) 44,821
Printing and postage 17,854
Legal and accounting services 28,237
Transfer and dividend disbursing agent fees 16,507
Miscellaneous 8,766
-----------
Total expenses $ 560,544
Deduct --
Reduction of custodian fee (Note 4) 4,604
-----------
Net expenses 555,940
-----------
Net investment income $ 1,051,467
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on
the basis of identified cost
($1,332,169 net gain as computed for federal
income tax purposes) $ 3,167,576
Increase in unrealized appreciation of
investments 14,892,471
-----------
Net realized and unrealized gain on
investments 18,060,047
-----------
Net increase in net assets from operations $19,111,514
===========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 1,051,467 $ 1,048,756
Net realized gain on investments 3,167,576 4,245,415
Increase in unrealized appreciation of
investments 14,892,471 (4,356,973)
----------- -----------
Increase in net assets from operations $19,111,514 $ 937,198
----------- -----------
Distributions to shareholders --
From net investment income $(1,051,467) $(1,025,956)
In excess of net investment income (31,557) --
From net realized gain on investments (558,284) --
----------- -----------
Total distributions to shareholders $(1,641,308) $(1,025,956)
----------- -----------
Provision for federal tax on undistributed net
realized long-term gain (Note 1B) $ (293,577) $ (245,003)
Net decrease from capital stock transactions
(Note 2) $(1,661,525) $(3,742,321)
----------- -----------
Net increase (decrease) in net assets $15,515,104 $(4,076,082)
----------- -----------
NET ASSETS:
At beginning of year 61,643,734 65,719,816
----------- -----------
At end of year (including undistributed net
investment income of $44,920 and $76,477,
respectively) $77,158,838 $61,643,734
=========== ===========
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $125.590 $126.260 $121.950 $118.850 $ 94.790
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 2.188 $ 2.103 $ 1.745 $ 1.688 $ 1.803
Net realized and unrealized
gain (loss) on investments 37.355 (0.224) 4.666 3.836 24.171
-------- -------- -------- -------- --------
Total income from operations $ 39.543 $ 1.879 $ 6.411 $ 5.524 $ 25.974
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $ (2.184) $ (2.050) $ (1.680) $ (1.710) $ (1.770)
In excess of net investment
income (0.066) -- -- -- --
From net realized gain on
investments (1.170) -- -- -- --
-------- -------- -------- -------- --------
Total distributions $ (3.420) $ (2.050) $ (1.680) $ (1.710) $ (1.770)
-------- -------- -------- -------- --------
PROVISION FOR FEDERAL TAX ON
UNDISTRIBUTED NET REALIZED LONG-
TERM GAIN (NOTE 1B) $ (0.613) $ (0.499) $ (0.421) $ (0.714) $ (0.144)
-------- -------- -------- -------- --------
NET ASSET VALUE, end of year $161.100 $125.590 $126.260 $121.950 $118.850
======== ======== ======== ======== ========
TOTAL RETURN<F1> 31.00% 1.09% 4.92% 4.27% 27.18%
RATIOS/SUPPLEMENTAL DATA (to
average daily net assets):
Net assets, at end of period
(000's omitted) $ 77,159 $ 61,644 $ 65,720 $ 67,529 $ 69,959
Expenses 0.80% 0.82% 0.81% 0.81% 0.82%
Net investment income 1.50% 1.65% 1.40% 1.42% 1.64%
PORTFOLIO TURNOVER 12% 12% 9% 5% 6%
<FN>
<F1> Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale at the
net asset value on the last day of each period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date.
</TABLE>
See notes to financial statements
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The following is a
summary of significant accounting policies consistently followed by the Fund
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Investments listed on security exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at
closing bid prices. Short-term obligations, maturing in 60 days or less, are
valued at amortized cost, which approximates value.
B. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders each year all of its taxable income from dividends,
interest and net realized short-term capital gain. Accordingly, no provision
for federal income or excise tax is necessary on such income. The Fund
generally designates as undistributed any taxable net realized long-term gain
(but reserves the right to distribute such gain in any year) and pays the
federal tax thereon on behalf of shareholders. Provision for such tax is
recorded on the Fund's records on the last business day of the Fund's fiscal
year because the Internal Revenue Code provides that such tax is allocated
among shareholders of record on that date.
C. OTHER -- Investment transactions are accounted for on a trade date basis.
Dividend income and dividends to shareholders are recorded on the ex-dividend
date.
D. DISTRIBUTIONS -- Generally accepted accounting principles require that
differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
- ------------------------------------------------------------------------------
(2) CAPITAL STOCK
At December 31, 1995, there were 3,640,001 shares of $1.00 par value capital
stock authorized. Transactions in capital stock were as follows:
YEAR ENDED DECEMBER 31,
------------------------------------------------
1995 1994
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------- -------- ------------
Redemptions (14,449) $(2,061,373) (31,008) $(3,910,059)
Issued to shareholders
electing to receive
payment of distributions
in capital stock 2,566 399,848 1,325 167,738
------- ----------- ------ -----------
Net decrease (11,883) $(1,661,525) (29,683) $(3,742,321)
======= =========== ======= ===========
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $9,638,460 and $9,298,768, respectively. In addition, investments
having an aggregate market value of $1,917,823 at dates of redemption were
distributed in payment for capital stock redeemed.
- ------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at the monthly rate of 5/96 of 1% (5/8
of 1% annually) of the Fund's average monthly net assets, was paid to Eaton
Vance Management (EVM) as compensation for management and investment advisory
services rendered to the Fund. 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 investment adviser fee. The custodian
fee was paid to Investors Bank & Trust Company (IBT), for its services as
custodian of the Fund. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average daily cash
balances the Fund maintains with IBT. All significant credit balances are
reported as a reduction of expenses in the Statement of Operations. Prior to
November 10, 1995 IBT was an affiliate of EVM. Certain of the officers and
directors of the Fund are officers and directors/trustees of the above
organizations. Directors of the Fund that are not affiliated with the
Investment Adviser may elect to defer receipt of all or a percentage of their
annual fees in accordance with the terms of the Trustees Deferred Compensation
Plan. For the year ended December 31, 1995, no significant amounts have been
deferred.
- ------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Fund participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of
a $20 million committed facility and a $100 million discretionary facility.
Borrowings will be made by the Fund solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of
deposit rate, or a federal funds effective rate. In addition, a fee computed
at an annual rate of 1/4 of 1% on the $20 million committed facility and on
the daily unused portion of the $100 million discretionary facility is
allocated among the participating funds at the end of each quarter. The Fund
did not have any significant borrowings or allocated fees during the year.
- ------------------------------------------------------------------------------
(6) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1995, as computed on a federal income tax basis, are as
follows:
Aggregate cost $21,920,639
===========
Gross unrealized appreciation $55,488,945
Gross unrealized depreciation 78,946
-----------
Net unrealized appreciation $55,409,999
===========
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SECOND FIDUCIARY EXCHANGE FUND, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Second Fiduciary Exchange Fund,
Inc. as of December 31, 1995, and the related statement of operations for the
year then ended, the statement of changes in net assets for the years ended
December 31, 1995 and 1994, and the financial highlights for each of the years
in the five-year period ended December 31, 1995. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at December 31, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights present
fairly, in all material respects, the financial position of Second Fiduciary
Exchange Fund, Inc. as of December 31, 1995, 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
JANUARY 26, 1996
<PAGE>
- -----------------------------------------------------------------------------
INVESTMENT MANAGEMENT
SECOND FIDUCIARY OFFICERS AND STAFF INDEPENDENT DIRECTORS
EXCHANGE LANDON T. CLAY DONALD R. DWIGHT
FUND, INC. President, Director President, Dwight
24 Federal Street JAMES B. HAWKES Partners, Inc.
Boston, MA 02110 Vice President Chairman, Newspapers of
THOMAS E. FAUST New England, Inc.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff Professor
JAMES L. O'CONNOR of Investment Banking,
Treasurer Harvard University
THOMAS OTIS Graduate School of
Clerk Business Administration
NORTON H. REAMER
President and Director,
United Asset Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser and
Consultant
- -----------------------------------------------------------------------------
SECOND FIDUCIARY EXCHANGE TRANSFER AND DIVIDEND
FUND, INC. DISBURSING AGENT
24 Federal Street First Data Investor
Boston, MA 02110 Services Group, Inc.
INVESTMENT ADVISER BOS725
Eaton Vance Management P.O. Box 1559
24 Federal Street Boston, MA 02104
Boston, MA 02110 800-262-1122
CUSTODIAN INDEPENDENT AUDITORS
Investors Bank & Trust Deloitte & Touche LLP
Company 125 Summer Street
89 South Street Boston, MA 02110
P.O. Box 1537
Boston, MA 02205-1537
<PAGE>
SECOND FIDUCIARY
EXCHANGE FUND, INC.
PERFORMANCE RESULTS+
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(STANDARDIZED SEC PERFORMANCE DATA
FOR THE PERIODS ENDED DECEMBER 31, 1995)
- -----------------------------------------------------------------------------
One year 31.0%
- -----------------------------------------------------------------------------
Five years 13.0%
- -----------------------------------------------------------------------------
Ten years 10.8%
- -----------------------------------------------------------------------------
Life of Fund (6/5/67) 9.0%
- -----------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN
LIFE OF FUND
(6/5/67 to 12/31/95)
- -----------------------------------------------------------------------------
Second Fiduciary Exchange Fund 1,077.9%
- -----------------------------------------------------------------------------
Dow Jones Industrial Average 1,924.5%
- -----------------------------------------------------------------------------
Standard &Poor's 500 1,993.2%
- -----------------------------------------------------------------------------
+Past performance is no guarantee of future results. Investment returns and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The Dow Jones Industrial Average and the Standard &Poor's 500 are unmanaged
lists of common stocks.
This report must be preceded or accompanied by a prospectus which contains more
complete information on the Fund including its distribution plan, sales charges
and expenses. Please read the prospectus carefully before investing.
[logo]
EATON VANCE
The Boston Tradition
Funds offered through
Eaton Vance Distributors, Inc.
24 Federal Street, Boston, Massachusetts 02110
2/96
