-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UqPb8OVge83Y9AISRSvA42HSmJ5nkb/HMMMJS+aI+svtOX9CrX/JDA5zdrRCQG1S YaeTMUy8gGBUT1d7L82dYQ== 0000950109-97-007086.txt : 19971124 0000950109-97-007086.hdr.sgml : 19971124 ACCESSION NUMBER: 0000950109-97-007086 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971121 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATON VANCE GROWTH TRUST CENTRAL INDEX KEY: 0000102816 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042325690 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01241 FILM NUMBER: 97726279 BUSINESS ADDRESS: STREET 1: 24 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174828260 MAIL ADDRESS: STREET 1: 24 FEDERAL ST STREET 2: 11TH FLOOR CITY: BOSTON STATE: MA ZIP: 02210 FORMER COMPANY: FORMER CONFORMED NAME: EATON VANCE GROWTH FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: VANCE SANDERS COMMON STOCK FUND INC DATE OF NAME CHANGE: 19820915 FORMER COMPANY: FORMER CONFORMED NAME: BOSTON STOCK FUND INC DATE OF NAME CHANGE: 19730619 N-30D 1 EV TRADITIONAL GROWTH FUND ANNUAL REPORT [EATON VANCE LOGO [PHOTO OF APPEARS HERE] CALCULATOR AND NEWSPAPER] Annual Report August 31, 1997 [PHOTO OF N.Y. STOCK EXCHANGE BUILDING & FLAG] EV TRADITIONAL GROWTH FUND Eaton Vance Global Management-Global Distribution [PHOTO OF TRADING FLOOR AT N.Y. STOCK EXCHANGE] EV Traditional Growth Fund as of August 31, 1997 LETTER TO SHAREHOLDERS [PHOTO OF JAMES B. HAWKES APPEARS HERE] During the year ended August 31, 1997, EV Traditional Growth Fund had a total return of 33.0%./1/ This return resulted from an increase in net asset value to $10.36 per share on August 31, 1997 from $9.24 per share on August 31, 1996 and the reinvestment of distributions totaling $1.745 per share. By comparison, the average total return for mutual funds in the Lipper Growth Funds Category was 33.5% during this period.* The economic environment in the past year has been extraordinary for the equity markets... Over the past year, the sustained growth of the U.S. economy and low inflation have produced a near-perfect investment environment in which prices of large capitalization stocks have soared to record levels. In the year ended August 31, 1997, the S&P 500 Index had a total return of 40.7%.* An increase in volatility has accompanied higher stock valuations, however. Within a six-week period in March and April, the S&P 500 Index declined almost 10% and then fully recovered to reach new record highs. In August, the S&P 500 declined almost 7% but again recovered this loss by the end of September.* Short-term interest rates rose on March 25 when the Federal Reserve raised the Fed Funds Rate 0.25% to 5.50%. Long-term bonds sold off in the first quarter but rallied in the second and third quarters when inflation fears were quelled. From a peak of over 7% at the end of March, the yield on the 30-year Treasury bond has generally trended downward, reaching a level of 6.23% on July 30 before closing the period at 6.61% on August 29. By reducing the cost of borrowing, lower interest rates have fueled mergers and acquisitions activity and increased corporate profitability - both of which have contributed to stock gains. ...But increased volatility may suggest a peaking bull market... The increase in volatility during the past six months is symptomatic of a market that is highly valued. In the pages that follow, Portfolio Manager Thomas E. Faust Jr. discusses the current investment climate and its implications for investors. Eaton Vance continues to believe that active, professional management and a long-term outlook are a sensible way to approach investing in any market environment. Sincerely, /s/ James B. Hawkes James B. Hawkes President October 7, 1997 - ------------------------------------------------------------------------------- Growth of a $10,000 Investment/2/ - ---------------------------------- [LINE GRAPH APPEARS HERE]
DATE VALUE ---- ----- 8/31/95 $ 10,000 9/30/95 9,627 10/31/95 9,457 11/30/95 9,831 12/31/95 10,103 1/31/96 10,361 2/29/96 10,619 3/31/96 10,695 4/30/96 11,001 5/31/96 11,307 6/30/96 11,107 7/31/96 10,448 8/31/96 10,872 9/30/96 11,373 10/31/96 11,409 11/30/96 12,093 12/31/96 11,945 1/31/97 12,791 2/28/97 12,778 3/31/97 12,202 4/30/97 12,842 5/31/97 13,740 6/30/97 14,265 7/31/97 15,316 8/31/97 14,461
Ten Largest Holdings/3/ - ---------------------------------------------- As a percentage of total net assets Sofomor Danek Group, Inc. 4.5% Allstate Corp. 3.9 Intel Corp. 3.6 Franklin Resources, Inc. 3.2 MGIC Investment 3.1 Federal National Mortgage Association 2.9 Eli Lilly & Company 2.9 General Re Corp. 2.7 Sealed Air Corp. 2.6 Norwest Corp. 2.6
/1/ This return does not include the maximum 5.75% initial sales charge. /2/ For illustration purposes only. Chart reflects a hypothetical investment on 8/31/95 with the applicable 5.75% sales charge deducted and includes reinvestment of all distributions. /3/ Ten largest holdings are as of 8/31/97 only and may not be representative of the Portfolio's current or future investments. Holdings accounted for 32.0% of the Portfolio's investments at 8/31/97, determined by dividing the total market value of the holdings by the total net assets of the Portfolio on that date. * It is not possible to invest directly in an index, average, or Lipper Category. Part 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. - ------------------------------------------------------------------------------- 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 EV Traditional Growth Fund as of August 31, 1997 MANAGEMENT DISCUSSION An interview with Thomas E. Faust Jr., Vice President and Manager of the Eaton Vance Growth Portfolio Q. How would you describe the stock market's performance over the past 12 months? A. The market for stocks has been unusually strong during this 12-month period. Several factors have contributed to making this an optimal environment for the equity markets: rising earnings and earnings expectations, stable interest rates, low inflation, favorable demographic trends - the aging of baby boomers in prime savings years and their belief in stocks as the best vehicle for retirement funds - and strong money flows into the stock market. Interest rates have been a factor, but not the driving force of this rally. Rather, it has resulted from strong, consistent economic growth with low inflation, which, putting everything else aside, is a recipe for high stock valuations. Stocks are expensive relative to historical standards in terms of price to earnings, price to book value, and price to cash flow, and the issue we face now is whether growth rates of companies have accelerated to an extent sufficient to justify the higher prices. So far, investors seem to believe higher valuations are justified. Q. How concerned are you about the market's volatility? A. U.S. stock market volatility is not as high as some people may think - given the number of days with movements of more than 100 points in the Dow Jones Industrial Average - because the overall level of the market is so much higher that a 100-point swing is not terribly significant. Over the past few months, the market - on a percentage basis - has been somewhat more volatile than the historical average, but not overly so. Q. Does the Fund try to time the market by raising and lowering cash levels, or does it tend to remain fully invested? A. As we have mentioned in many reports, market timing is generally not our style. We typically remain fully invested, as long as we can identify attractive stocks in which to invest. The Fund's cash levels now are higher than they have been, but remain within our normal, conservative range. [PHOTO OF THOMAS E. FAUST, JR. APPEARS HERE] Thomas E. Faust Jr., Portfolio Manager Q. What sectors look attractive to you now? A. The Fund currently has significant exposure to the financial and health care sectors, both of which have done quite well over the past year. We continue to seek high-quality companies with strong growth prospects, reasonable valuations, and with an identified catalyst for outperformance. While we typically do not make "sector bets," we have found many financial services and health care companies that meet our criteria. Going forward, we believe companies in these industries should continue to perform well. Q. How long do you think the U.S. economy can continue to grow with low inflation? A. The so-called "new economy" theory - which essentially states that the historical link between growth and inflation has weakened due to technology- driven productivity enhancements and the globalization of many markets - is getting quite a lot of media attention. It is hard not to give the theory some credibility. We are seeing a sustained level of high growth, high productivity and low inflation that has not been seen for at least three decades. While I would not say that the basic 3 EV Traditional Growth Fund as of August 31, 1997 MANAGEMENT DISCUSSION CONT'D rules of economics have fundamentally changed, there are major sectors of the economy - especially technology - where we are actually expecting annual price decreases. This has a very powerful effect on the overall economy. I certainly would not say that we will never have inflation again, but there is simply no evidence at this point of a serious inflationary threat. And, with a strong dollar helping keep the price of imports down, our current outlook for inflation is that it should continue to remain low. Q. Some of the stalwart blue-chip growth stocks have recently had steep price declines. Have you added any of these to the Fund? A. No. Rather than focusing on stocks that have had large price decreases, but which may remain richly valued or which may have faltering fundamentals, we look for companies with good financial characteristics, attractive valuations and positive business momentum - thereby offering better risk/reward possibilities. Recently, we have emphasized investments in certain smaller companies with high growth rates and good prospects for sustaining above- average growth. We think this makes sense. A good example is Sofomor Danek, our largest holding, which is an established, market-leading company within the spinal implant business. It has a price/earnings ratio of 23 times earnings, a growth rate of more than 20 percent, rising earnings estimates, a strong competitive position, and interesting new products. When I compare a company with these characteristics to companies that have lower growth rates but much higher price multiples, I am much more inclined to stick to the former and continue to seek others like it. In recent years we have seen large, blue chip consumer products companies go from expensive to even more expensive, sometimes without fundamental justification. We think the best opportunities in the market lie elsewhere. Five Largest Sectors - 8/31/97/*/ ------------------------------------- As a percentage of total net assets Drugs 11.3% Medical Products 9.6% Insurance 8.6% Financials 8.4% Specialty Chemical & Materials 6.2%
/*/ Sectors are as of 8/31/97 only and may not be representative of the Portfolio's current or future investments. Sectors accounted for 44.1% of the Portfolio's investments, determined by dividing the total market value of the holdings by the total net assets. Q. Can you give examples of recent additions to the Fund? A. Absolutely. Magna International, a new holding, is a good example of the type of company we are looking for. The company provides auto parts and value- added assemblies to automobile manufacturers, which is a very good business to be in because of the tremendous increase in outsourcing by Ford, GM and Chrysler. Magna is selling at 14 times earnings and has an expected annual growth rate of 15%. The company has executed very well, and continues to benefit from the increased efficiencies within the automotive industry. Unilever, another recent purchase, is a global consumer products company that has traditionally been a less profitable competitor of companies like Procter & Gamble. We bought the stock because of management changes that we feel have the potential to increase profit margins and, consequently, earnings and the share price. 4 EV Traditional Growth Fund as of August 31, 1997 MANAGEMENT DISCUSSION CONT'D Q. With price/earnings ratios at such a high level, have you used any other measures to value companies? A. I don't focus on price/earnings ratios exclusively. I look primarily at growth and sustainability of growth. We analyze a company's business and its industry environment to assess if it is likely to provide continued growth. Companies like Coca-Cola, though probably overpriced, have several advantages-global brand dominance, market leadership, high margins, and tremendous cash flow. These things imply sustainability and durability and inspire confidence that above-average profit growth can be maintained over time. [LINE GRAPH APPEARS HERE]
EV Traditional Growth Fund EV Traditional (including maximum S&P 500 Date Growth Fund 5.75% sales charge) Index - -------------------------------------------------------------------------------- 8/31/87 $10,000 $9,425 $10,000 9/30/87 $9,846 $9,280 $9,826 10/31/87 $7,607 $7,170 $7,688 11/30/87 $7,103 $6,695 $7,031 12/31/87 $7,793 $7,345 $7,611 1/31/88 $7,901 $7,447 $7,919 2/28/88 $8,261 $7,786 $8,250 3/31/88 $8,116 $7,650 $8,044 4/30/88 $8,225 $7,752 $8,120 5/31/88 $8,189 $7,718 $8,146 6/30/88 $8,586 $8,092 $8,577 7/31/88 $8,478 $7,990 $8,531 8/31/88 $8,104 $7,638 $8,201 9/30/88 $8,347 $7,867 $8,604 10/31/88 $8,480 $7,993 $8,828 11/30/88 $8,299 $7,821 $8,661 12/31/88 $8,458 $7,971 $8,867 1/31/89 $9,071 $8,549 $9,497 2/28/89 $8,933 $8,419 $9,222 3/31/89 $9,147 $8,621 $9,494 4/30/89 $9,588 $9,036 $9,970 5/31/89 $9,890 $9,321 $10,320 6/30/89 $9,814 $9,250 $10,330 7/31/89 $10,544 $9,938 $11,243 8/31/89 $10,770 $10,151 $11,418 9/30/89 $10,874 $10,249 $11,435 10/31/89 $10,741 $10,123 $11,147 11/30/89 $10,861 $10,236 $11,331 12/31/89 $11,024 $10,390 $11,668 1/31/90 $10,270 $9,679 $10,865 2/28/90 $10,431 $9,831 $10,958 3/31/90 $10,702 $10,086 $11,315 4/30/90 $10,404 $9,806 $11,011 5/31/90 $11,595 $10,928 $12,023 6/30/90 $11,662 $10,992 $12,023 7/31/90 $11,446 $10,788 $11,961 8/31/90 $10,485 $9,882 $10,833 9/30/90 $9,803 $9,239 $10,379 10/31/90 $9,487 $8,941 $10,309 11/30/90 $10,179 $9,593 $10,927 12/31/90 $10,422 $9,822 $11,304 1/31/90 $10,832 $10,210 $11,774 2/28/91 $11,760 $11,084 $12,566 3/31/91 $11,989 $11,300 $12,940 4/30/91 $12,005 $11,314 $12,945 5/31/91 $12,616 $11,891 $13,444 6/30/91 $11,898 $11,214 $12,912 7/31/91 $12,586 $11,862 $13,491 8/31/91 $12,922 $12,179 $13,756 9/30/91 $12,769 $12,035 $13,602 10/31/91 $13,307 $12,542 $13,763 11/30/91 $12,861 $12,122 $13,159 12/31/91 $14,555 $13,718 $14,734 1/31/92 $14,442 $13,612 $14,440 2/28/92 $14,474 $13,642 $14,579 3/31/92 $13,970 $13,167 $14,363 4/30/92 $13,775 $12,983 $14,764 5/31/92 $13,791 $12,998 $14,778 6/30/92 $13,580 $12,799 $14,637 7/31/92 $14,002 $13,197 $15,213 8/31/92 $13,856 $13,059 $14,848 9/30/92 $14,052 $13,244 $15,098 10/31/92 $14,215 $13,398 $15,130 11/30/92 $15,130 $14,260 $15,588 12/31/92 $15,316 $14,435 $15,855 1/31/92 $15,224 $14,349 $15,966 2/28/93 $14,709 $13,863 $16,134 3/31/93 $15,097 $14,229 $16,545 4/30/93 $14,100 $13,289 $16,124 5/31/93 $14,395 $13,567 $16,491 6/30/93 $14,266 $13,446 $16,623 7/31/93 $14,026 $13,219 $16,535 8/31/93 $14,913 $14,055 $17,104 9/30/93 $15,061 $14,195 $17,051 10/31/93 $15,191 $14,317 $17,382 11/30/93 $14,671 $13,828 $17,158 12/31/93 $14,931 $14,073 $17,445 1/31/94 $15,619 $14,720 $18,012 2/28/94 $15,266 $14,388 $17,471 3/31/94 $14,204 $13,387 $16,789 4/30/94 $14,278 $13,457 $16,983 5/31/94 $14,446 $13,615 $17,194 6/30/94 $13,812 $13,018 $16,861 7/31/94 $14,353 $13,527 $17,392 8/31/94 $14,837 $13,984 $18,046 9/30/94 $14,482 $13,649 $17,685 10/31/94 $14,800 $13,949 $18,055 11/30/94 $14,239 $13,420 $17,341 12/31/94 $14,273 $13,452 $17,682 1/31/95 $14,355 $13,530 $18,112 2/28/95 $14,994 $14,131 $18,765 3/31/95 $15,448 $14,560 $19,399 4/30/95 $15,531 $14,638 $19,941 5/31/95 $15,923 $15,007 $20,665 6/30/95 $16,439 $15,494 $21,244 7/31/95 $16,914 $15,942 $21,919 8/31/95 $17,203 $16,214 $21,912 9/30/95 $17,576 $16,565 $22,928 10/31/95 $17,265 $16,273 $22,813 11/30/95 $17,948 $16,916 $23,750 12/31/95 $18,444 $17,384 $24,303 1/31/96 $18,915 $17,828 $25,096 2/28/96 $19,387 $18,272 $25,270 3/31/96 $19,526 $18,403 $25,606 4/30/96 $20,085 $18,930 $25,950 5/31/96 $20,643 $19,456 $26,543 6/30/96 $20,278 $19,112 $26,753 7/31/96 $19,075 $17,978 $25,529 8/31/96 $19,849 $18,707 $26,009 9/30/96 $20,764 $19,570 $27,574 10/31/96 $20,829 $19,631 $28,294 11/30/96 $22,078 $20,808 $30,370 12/31/96 $21,808 $20,554 $29,869 1/31/97 $23,353 $22,010 $31,700 2/28/97 $23,329 $21,988 $31,888 3/31/97 $22,276 $20,995 $30,675 4/30/97 $23,446 $22,098 $32,466 5/31/97 $25,084 $23,642 $34,368 6/30/97 $26,044 $24,546 $36,018 7/31/97 $27,962 $26,354 $38,832 8/31/97 $26,400 $24,882** $36,602 - --------------------------------------------------------------------------------
Performance+ - ------------------------------------------------------------------------------ Average Annual Total Returns (at net asset value) - ------------------------------------------------------------------------------ One Year 33.0% Five Years 13.8 Ten Years 10.2 SEC Average Annual Total Returns (including maximum 5.75% sales charge) - ------------------------------------------------------------------------------ One Year 25.4% Five Years 12.4 Ten Years 9.5
* 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 and the S&P 500 Stock Index, a broad- based, widely recognized, unmanaged index of 500 common stocks. The Index's total return does not reflect any commissions or expenses that would have been incurred if an investor individually purchased or sold the securities represented in the Index. It is not possible to invest directly in an index. ** This figure represents the Fund's performance including the Fund's maximum 5.75% initial sales charge. + Returns are calculated by determining the percentage change in net asset value (NAV) with all distributions reinvested. SEC Returns reflect maximum sales charge as noted. 5 EV Traditional Growth Fund as of August 31, 1997 FINANCIAL STATEMENTS Statement of Assets and Liabilities
As of August 31, 1997 Assets - -------------------------------------------------------------------------------- Investment in Growth Portfolio, at value (Note 1A) (identified cost, $105,916,058) $ 165,580,575 Receivable for Fund shares sold 129,873 Other assets 54,652 - -------------------------------------------------------------------------------- Total assets $ 165,765,100 - -------------------------------------------------------------------------------- Liabilities - -------------------------------------------------------------------------------- Payable for Fund shares redeemed $ 16,344 Accrued expenses 72,649 - -------------------------------------------------------------------------------- Total liabilities $ 88,993 - -------------------------------------------------------------------------------- Net Assets for 15,997,503 shares of beneficial interest outstanding $ 165,676,107 - -------------------------------------------------------------------------------- Sources of Net Assets - -------------------------------------------------------------------------------- Paid-in capital $ 106,016,002 Accumulated distributions in excess of investment income (4,412) Net unrealized appreciation of investments (computed on basis of identified cost) 59,664,517 - -------------------------------------------------------------------------------- Total $ 165,676,107 - -------------------------------------------------------------------------------- Net Asset Value and Redemption Price Per Share - -------------------------------------------------------------------------------- ($165,676,107 / 15,997,503 shares of beneficial interest outstanding) $ 10.36 - -------------------------------------------------------------------------------- Computation of Offering Price - -------------------------------------------------------------------------------- Offering price per share (100 / 95.25 of $10.36) $ 10.88 - --------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price is reduced. Statement of Operations
For the Year Ended August 31, 1997 Investment Income (Note 1B) - -------------------------------------------------------------------------------- Dividend income allocated from Portfolio (net of foreign taxes, $7,564) $ 1,610,757 Interest income allocated from Portfolio (includes security lending income) 236,313 Expenses allocated from Portfolio (1,109,084) - -------------------------------------------------------------------------------- Total investment income $ 737,986 - -------------------------------------------------------------------------------- Expenses - -------------------------------------------------------------------------------- Compensation of Trustees not members of the Administrator's organization (Note 4) $ 3,020 Custodian fee 16,804 Service fees (Note 5) 164,595 Transfer and dividend disbursing agent fees 121,925 Printing and postage 79,599 Legal and accounting services 15,361 Registration fees 21,234 Miscellaneous 24,688 - -------------------------------------------------------------------------------- Total expenses $ 447,226 - -------------------------------------------------------------------------------- Net investment income $ 290,760 - -------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) from Portfolio - -------------------------------------------------------------------------------- Net realized gain -- Investment transactions (identified cost basis) $ 13,147,715 Foreign currency transactions 76 - -------------------------------------------------------------------------------- Net realized gain on investment transactions $ 13,147,791 - -------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation)-- Investment transactions $ 29,932,971 Foreign currency transactions (2,447) - -------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) of investments $ 29,930,524 - -------------------------------------------------------------------------------- Net realized and unrealized gain on investments $ 43,078,315 - -------------------------------------------------------------------------------- Net increase in net assets from operations $ 43,369,075 - --------------------------------------------------------------------------------
See notes to financial statements 6 EV Traditional Growth Fund as of August 31, 1997 FINANCIAL STATEMENTS CONT'D Statement of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended in Net Assets August 31, 1997 August 31, 1996 - -------------------------------------------------------------------------------- From operations -- Net investment income $ 290,760 $ 655,719 Net realized gain on investments 13,147,791 14,862,253 Net change in unrealized appreciation (depreciation) 29,930,524 4,038,278 - -------------------------------------------------------------------------------- Net increase in net assets resulting from operations $ 43,369,075 $ 19,556,250 - -------------------------------------------------------------------------------- Distributions to shareholders -- From net investment income $ (290,760) $ (544,098) In excess of net investment income (264,761) -- From net realized gain (13,147,791) (4,607,568) In excess of net realized gain (11,492,907) -- Paid in capital (599,793) -- - -------------------------------------------------------------------------------- Total distributions to shareholders $ (25,796,012) $ (5,151,666) - -------------------------------------------------------------------------------- Transactions in shares of beneficial interest (Note 3) -- Proceeds from sale of shares $ 3,859,499 $ 3,289,100 Net asset value of shares issued to shareholders in payment of distributions declared 21,757,950 4,324,311 Cost of shares redeemed (15,766,240) (14,732,257) - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from Fund share transactions $ 9,851,209 $ (7,118,846) - -------------------------------------------------------------------------------- Net increase in net assets $ 27,424,272 $ 7,285,738 - -------------------------------------------------------------------------------- Net Assets - -------------------------------------------------------------------------------- At beginning of year $ 138,251,835 $ 130,966,097 - -------------------------------------------------------------------------------- At end of year $ 165,676,107 $ 138,251,835 - -------------------------------------------------------------------------------- Accumulated undistributed (distributions in excess of) net investment income included in net assets - -------------------------------------------------------------------------------- $ (4,412) $ 260,273 - --------------------------------------------------------------------------------
See notes to financial statements 7 EV Traditional Growth Fund as of August 31, 1997 FINANCIAL STATEMENTS CONT'D Financial Highlights
Year Ended August 31, ------------------------------------------------------------------------- 1997 1996 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value -- Beginning of year $ 9.240 $ 8.330 $ 7.960 $ 8.070 $ 8.520 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) from operations - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income $ 0.020 $ 0.043 $ 0.024 $ 0.052 $ 0.030 Net realized and unrealized gain (loss) on investments 2.845 1.202 1.086 (0.092) 0.660 - ---------------------------------------------------------------------------------------------------------------------------------- Total income (loss) from operations $ 2.865 $ 1.245 $ 1.110 $ (0.040) $ 0.690 - ---------------------------------------------------------------------------------------------------------------------------------- Less distributions - ---------------------------------------------------------------------------------------------------------------------------------- From net investment income $ (0.019) $ (0.035) $ (0.032) $ (0.060) $ -- In excess of net investment income (0.018) -- (0.018) -- -- From net realized gain on investments (0.890) (0.300) (0.083) (0.010) (1.140) In excess of net realized gain on investments (0.762) -- (0.607) -- -- Paid in capital (0.056) -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions $ (1.745) $ (0.335) $ (0.740) $ (0.070) $ (1.140) - ---------------------------------------------------------------------------------------------------------------------------------- Net asset value -- End of year $ 10.360 $ 9.240 $ 8.330 $ 7.960 $ 8.070 - ---------------------------------------------------------------------------------------------------------------------------------- Total Return/(1)/ 33.01% 15.38% 15.95% (0.75)% 7.63% - ---------------------------------------------------------------------------------------------------------------------------------- Ratios/Supplemental Data - ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of year (000 omitted) $ 165,676 $138,252 $130,966 $130,269 $143,264 Ratio of net expenses to average net assets/(2)/ 1.01% 0.98% 0.98% 0.95% 0.89% Ratio of net investment income to average net assets 0.19% 0.48% 0.42% 0.61% 0.56% Portfolio Turnover/(3)/ -- -- -- 89% 84% - ----------------------------------------------------------------------------------------------------------------------------------
/(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. /(3)/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. See notes to financial statements 8 EV Traditional Growth Fund as of August 31, 1997 NOTES TO FINANCIAL STATEMENTS 1 Significant Accounting Policies ----------------------------------------------------------------------------- EV Traditional Growth Fund (the "Fund") is a diversified series of Eaton Vance Growth Trust (the "Trust"). The Trust is an entity of the type commonly known as a Massachusetts business trust and is registered under the Investment Company Act of 1940 (1940 Act), as amended, as an open-end management investment company. The Fund invests all of its investable assets in interests in the Growth Portfolio (the "Portfolio"), a New York Trust, having the same investment objective as the Fund. The value of the Fund's investment in the Portfolio reflects the Fund's proportionate interest in the net assets of the Portfolio, (92.1% 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 three 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 Trust. Under the terms of the Plan, the Fund will acquire substantially all of the assets and liabilities of the EV Marathon Growth Fund (the Marathon Fund) and EV Classic Growth Fund (the Classic Fund). The transactions 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 and the Classic Fund will receive Class B shares and Class C shares of the Fund, respectively. The reorganization will occur after the close of business, August 31, 1997. 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 -- 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. 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 used to reduce the Fund's custodian fees are reflected as a reduction of operating 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 taxable income, including any net realized gain on investments, option and financial futures transactions. Accordingly, no provision for federal income or excise tax is necessary. Pursuant to Section 852 of the IRC, the Fund designated $20,393,838 as a long-term capital gain distribution for its taxable year ended August 31, 1997. E Other -- Investment transactions are accounted for on a trade-date basis. F Use of Estimates -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. 2 Distributions to Shareholders ----------------------------------------------------------------------------- The Fund's policy is to distribute semi-annually substantially all of the net investment income allocated to the Fund by the Portfolio (less the Fund's direct expenses) and to distribute at least annually substantially all of its net realized capital gains. Distributions are paid in the form of additional shares of the Fund or, at the election of the shareholder, in cash. The Fund distinguishes between 9 EV Traditional Growth Fund as of August 31, 1997 NOTES TO FINANCIAL STATEMENTS CONT'D 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 only for financial statement purposes are classified as distributions in excess of net investment income or accumulated net realized gains. Permanent differences between book and tax accounting relating to distributions are reclassified to paid-in capital. 3 Shares of Beneficial Interest ----------------------------------------------------------------------------- The Fund's Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in Fund shares were as follows:
Year Ended Year Ended August 31, 1997 August 31, 1996 ----------------------------------------------------------------------------- Sales 373,615 366,590 Issued to shareholders electing to receive payment of distribution in Fund shares 2,219,161 516,484 Redemptions (1,553,297) (1,649,722) ----------------------------------------------------------------------------- Net Increase (Decrease) 1,039,479 (776,648) -----------------------------------------------------------------------------
4 Transactions with Affiliates ----------------------------------------------------------------------------- Eaton Vance Management (EVM) serves only as the Administrator of the Fund, but receives no compensation. The Portfolio has engaged Boston Management and Research (BMR), a subsidiary of EVM, to render investment advisory services. See Note 2 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Except as to Trustees of the Fund and Portfolio who are not members of EVM's or BMR's organization, officers and Trustees receive remuneration for their services to the Fund out of such investment adviser fee. Certain of the officers and Trustees of the Fund and Portfolio are officers and directors/trustees of the above organizations. 5 Service Plan ----------------------------------------------------------------------------- The Fund has adopted a Service plan (the "Plan") on July 7, 1993 pursuant to Rule 12b-1 under the Investment Company Act of 1940 and the service fee requirements of the revised sales charge rule of The National Association of Securities Dealers, Inc. The Service Plan replaced the Fund's distribution plan which became effective on June 12, 1989. The Service Plan provides that the Fund may make payments of service fees to the Principal Underwriter, Eaton Vance Management, Authorized Firms, or other persons in amounts not exceeding 0.25% of the Fund's average daily net assets for any fiscal year. The Trustees have implemented the Plan by authorizing the Fund to make quarterly service fee payments to the Principal Underwriter and Authorized Firms in amounts not expected to exceed 0.25% of that portion of the Fund's average daily net assets for any fiscal year which is attributable to shares of the Fund sold by such persons and remaining outstanding for at least twelve months. During the year ended August 31, 1997, the Fund paid or accrued $164,595 under the Service Plan to the Principal Underwriter and Authorized Firms. 6 Investment Transactions ----------------------------------------------------------------------------- Increases and decreases in the Fund's investment in the Portfolio aggregated $4,161,863 and $20,741,005, respectively. 7 Subsequent Event ----------------------------------------------------------------------------- Effective September 1, 1997, the EV Traditional Growth Fund will change its name to Eaton Vance Growth Fund and shares of the Fund will be designated Class A shares. Two additional classes of shares will also be offered. 10 EV Traditional Growth Fund as of August 31, 1997 INDEPENDENT AUDITORS' REPORT To the Trustees and Shareholders of EV Traditional Growth Fund: - -------------------------------------------------------------------------------- We have audited the accompanying statement of assets and liabilities of EV Traditional Growth Fund, a series of Eaton Vance Growth Trust, as of August 31, 1997, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period 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 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 held as of 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of EV Traditional Growth Fund, a series of Eaton Vance Growth Trust, as of August 31, 1997, the results of its operations for the year then ended, and the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND LLP Boston, Massachusetts September 25, 1997 11 Growth Portfolio as of August 31, 1997 PORTFOLIO OF INVESTMENTS
Common Stocks -- 94.5% Shares Value - -------------------------------------------------------------------------------- Aerospace and Defense -- 2.4% - -------------------------------------------------------------------------------- Boeing Co. 80,000 $ 4,355,000 Makes the Boeing 737, 747, 757, 767, and 777 jets, which represent a variety of passenger and cargo configurations and capabilities. Boeing's Defense & Space Group has jointly developed the F22 fighter (with Lockheed Martin), the V-22 Osprey tiltrotor aircraft (Bell Helicopter Textron) and the RAH-66 Comanche helicopter (with Sikorsky) - -------------------------------------------------------------------------------- $ 4,355,000 - -------------------------------------------------------------------------------- Auto and Parts -- 2.2% - -------------------------------------------------------------------------------- Magna International, Inc. Class A 60,000 $ 3,975,000 Based in Canada, Magna International is a diversified supplier of advanced automotive systems - -------------------------------------------------------------------------------- $ 3,975,000 - -------------------------------------------------------------------------------- Banks - International -- 0.8% - -------------------------------------------------------------------------------- Banco Latinoamericano de 30,000 $ 1,361,250 Exportaciones This specialized multinational bank, based in Panama City, primarily provides short-term, trade related financing to stockholder banks from 22 member countries in Latin America and the Caribbean - -------------------------------------------------------------------------------- $ 1,361,250 - -------------------------------------------------------------------------------- Banks - Regional -- 2.6% - -------------------------------------------------------------------------------- Norwest Corp. 80,000 $ 4,595,000 Provides community banking through more than 700 branches in a 16 state region - -------------------------------------------------------------------------------- $ 4,595,000 - -------------------------------------------------------------------------------- Beverages -- 2.3% - -------------------------------------------------------------------------------- PepsiCo, Inc. 115,000 $ 4,140,000 Global soft drink producer with businesses in snack foods and fast food restaurants - -------------------------------------------------------------------------------- $ 4,140,000 - -------------------------------------------------------------------------------- Chemicals -- 3.9% - -------------------------------------------------------------------------------- Monsanto Corp. 100,000 $ 4,393,750 Produces a range of products for the agricultural, home furnishings, automobile, construction and personal care markets Praxair, Inc. 50,000 2,671,875 The largest producer of industrial gases in North and South America - -------------------------------------------------------------------------------- $ 7,065,625 - -------------------------------------------------------------------------------- Computers and Business Equipment -- 3.3% - -------------------------------------------------------------------------------- Hewlett Packard Co. 40,000 $ 2,452,500 One of the world's most successful high tech companies. Products include servers, computers and workstations for home and business Xerox Corp. 45,000 3,397,500 The dominant producer of high end document processing machines - -------------------------------------------------------------------------------- $ 5,850,000 - -------------------------------------------------------------------------------- Drugs -- 11.3% - -------------------------------------------------------------------------------- American Home Products Corp. 40,000 $ 2,880,000 Leading manufacturer of prescription drugs, medical supplies and diagnostics, as well as agricultural herbicides, consumer medications and branded food products Astra AB Class A 213,333 3,410,175 Swedish based international pharmaceutical firm with drugs for the control of ulcers and asthma Elan Corp., PLC ADR* 95,000 4,322,500 Develops drug delivery systems designed to improve and control the absorption and utilization of pharmaceutical compounds Eli Lilly & Co. 50,000 5,231,250 A major U.S. drug company, researches, produces and markets pharmaceuticals spanning the entire drug spectrum Pfizer, Inc. 80,000 4,430,000 A large international ethical pharmaceutical manufacturer with important positions in hospital products and animal health - -------------------------------------------------------------------------------- $20,273,925 - -------------------------------------------------------------------------------- Electronics - Semiconductors -- 3.6% - -------------------------------------------------------------------------------- Intel Corp. 70,000 $ 6,448,750 A manufacturer of semiconductors and other microcomputer components and systems which comprise the heart of the personal computer - -------------------------------------------------------------------------------- $ 6,448,750 - --------------------------------------------------------------------------------
See notes to financial statements 12 Growth Portfolio as of August 31, 1997 PORTFOLIO OF INVESTMENTS CONT'D
- -------------------------------------------------------------------------------- Shares Value - -------------------------------------------------------------------------------- Financial - Miscellaneous -- 8.4% - -------------------------------------------------------------------------------- Federal National Mortgage 120,000 $ 5,280,000 Association U.S. Government sponsored mortgage lender and provider of secondary mortgage market MBNA Corp. 112,500 4,324,219 Dominant issuer of MasterCard/Visa credit cards to affinity groups MGIC Investment Corp. 110,000 5,534,375 The leading provider of private mortgage insurance coverage to U.S. banks and other mortgage suppliers - -------------------------------------------------------------------------------- $15,138,594 - -------------------------------------------------------------------------------- Foods -- 1.9% - -------------------------------------------------------------------------------- Unilever ADR 17,000 $ 3,421,250 One of the world's largest packaged consumer goods companies - -------------------------------------------------------------------------------- $ 3,421,250 - -------------------------------------------------------------------------------- Health Services -- 0.3% - -------------------------------------------------------------------------------- Covance, Inc.* 21,250 $ 387,813 The second largest contract research organization in the world offering a full range of drug development services to pharmaceutical and biotechnology companies worldwide Quest Diagnostics, Inc.* 10,625 198,555 A major provider of clinical labratory testing services in the U.S. with over 30 regional and branch laboratories that process more than 60 million patient requisitions each year - -------------------------------------------------------------------------------- $ 586,368 - -------------------------------------------------------------------------------- Information Services -- 4.4% - -------------------------------------------------------------------------------- Automatic Data Processing, 80,000 $ 3,645,000 Inc. The leading independent computing and payroll processing services firm in the U.S. Reuters Holdings, PLC ADR 70,000 4,261,250 Worldwide provider of proprietary financial data and information - -------------------------------------------------------------------------------- $ 7,906,250 - -------------------------------------------------------------------------------- Insurance -- 8.6% - -------------------------------------------------------------------------------- Allstate Corp. 95,000 $ 6,940,937 Leading underwriter of automotive and homeowners insurance as well as a life insurance carrier General Re Corp. 25,000 $ 4,846,875 Is the parent company of General Reinsurance, the largest property/casualty reinsurer in the U.S. and one of the 3 largest in the world Mutual Risk Management Ltd. 80,000 3,700,000 Provides risk management services to clients seeking an alternative to traditional commercial insurance, particularly for workers' compensation - -------------------------------------------------------------------------------- $15,487,812 - -------------------------------------------------------------------------------- Investment Services -- 3.2% - -------------------------------------------------------------------------------- Franklin Resources, Inc. 75,000 $ 5,803,125 Provides investment management and related services to a family of equity and fixed income mutual funds - -------------------------------------------------------------------------------- $ 5,803,125 - -------------------------------------------------------------------------------- Machinery -- 1.9% - -------------------------------------------------------------------------------- Deere & Co. 60,000 $ 3,360,000 The largest agricultural equipment company and also producer of earthmoving and forestry machinery - -------------------------------------------------------------------------------- $ 3,360,000 - -------------------------------------------------------------------------------- Medical Products -- 9.6% - -------------------------------------------------------------------------------- Baxter International, Inc. 85,000 $ 4,520,938 Leading U.S. maker and distributor of health care products used in hospitals and other medical facilities Boston Scientific Corp.* 65,000 4,582,500 Medical device manufacturer focusing primarily on disposable products in less invasive surgery procedures Sofamor Danek Group, Inc.* 170,000 8,149,374 The dominant supplier of spinal implant devices used in surgical treatment of spinal diseases and deformities - -------------------------------------------------------------------------------- $17,252,812 - -------------------------------------------------------------------------------- Metals and Minerals -- 4.5% - -------------------------------------------------------------------------------- Freeport McMoran Copper & 100,000 $ 2,675,000 Gold, Inc. Operator of third largest copper mine in the world with world's largest gold reserves - --------------------------------------------------------------------------------
See notes to financial statements 13 Growth Portfolio as of August 31, 1997 PORTFOLIO OF INVESTMENTS CONT'D
Shares Value - -------------------------------------------------------------------------------- Metals and Minerals (continued) - -------------------------------------------------------------------------------- J & L Specialty Steel, Inc. 190,000 $2,375,000 Manufactures flat rolled stainless steel. The company's products are used in a variety of industrial, commercial and consumer products including chemical and refining equipment, cargo containers & beer kegs. Potash Corp. of Saskatchewan, Inc./1/ 40,000 2,957,500 The global leader of potash production and number three in phosphates, two of the three components of fertilizer nutrients. - -------------------------------------------------------------------------------- $8,007,500 - -------------------------------------------------------------------------------- Oil and Gas - Exploration and Production -- 4.2% - -------------------------------------------------------------------------------- Anadarko Petroleum Corp. 60,000 $4,406,250 Leading independent natural gas and crude oil production company. Triton Energy Ltd.* 80,000 3,080,000 Independent oil and gas producer with major developments in Colombia and Thailand. - -------------------------------------------------------------------------------- $7,486,250 - -------------------------------------------------------------------------------- Publishing -- 1.8% - -------------------------------------------------------------------------------- McGraw-Hill, Inc. 53,500 $3,280,219 Supplies informational products and services for businesses, education and industry through a broad range of media. - -------------------------------------------------------------------------------- $3,280,219 - -------------------------------------------------------------------------------- Retail - Food and Drug -- 2.5% - -------------------------------------------------------------------------------- CVS Corp. 80,000 $4,510,000 The largest drugstore chain in the Northeast. - -------------------------------------------------------------------------------- $4,510,000 - -------------------------------------------------------------------------------- Retail - Specialty and Apparel -- 2.9% - -------------------------------------------------------------------------------- Home Depot, Inc. 75,000 $ 3,539,063 A chain of do-it-yourself warehouse style stores. Lowes Companies 50,000 1,728,125 Operator of discount stores that cater to home building and the home improvement market. - -------------------------------------------------------------------------------- $ 5,267,188 - -------------------------------------------------------------------------------- Specialty Chemicals and Materials -- 6.2% - -------------------------------------------------------------------------------- Corning, Inc. 85,000 $ 4,494,375 Manufactures specialty glass. Its consumer products division makes Corelle dinnerware, Corning Ware cookware, Pyrex glassware, Serengeti sunglasses, and Steuben crystal. Millipore Corp. 40,000 1,980,000 Products use membrane separations technology to analyze and purify fluids for a variety of high tech industries. Sealed Air Corp.* 90,000 4,668,750 Global manufacturer of a broad line of protective and specialty packaging materials and systems. - -------------------------------------------------------------------------------- $ 11,143,125 - -------------------------------------------------------------------------------- Transportation -- 1.7% - -------------------------------------------------------------------------------- Southwest Airlines, Inc. 110,000 $ 3,080,000 Discount airline expanding throughout the U.S. - -------------------------------------------------------------------------------- $ 3,080,000 - -------------------------------------------------------------------------------- Total Common Stocks (identified cost $106,915,521) $169,795,043 - -------------------------------------------------------------------------------- Commercial Paper -- 3.1% Principal Amount (000 omitted) Value - -------------------------------------------------------------------------------- Ford Motor Credit Co., 5.53%, 9/3/97 $ 4,194 $ 4,192,712 General Electric Capital Corp., 5.60%, 9/2/97 1,449 1,448,773 - -------------------------------------------------------------------------------- Total Commercial Paper (identified cost $5,641,485) $ 5,641,485 - -------------------------------------------------------------------------------- Total Investments -- 97.6% (identified cost $112,557,006) $175,436,528 - -------------------------------------------------------------------------------- Other Assets, Less Liabilities -- 2.4% $ 4,348,218 - -------------------------------------------------------------------------------- Net Assets -- 100% $179,784,746 - --------------------------------------------------------------------------------
ADR -- American Depositary Receipt * Non-income producing security. /1/ Foreign Security. See notes to financial statements 14 Growth Portfolio as of August 31, 1997 FINANCIAL STATEMENTS Statement of Assets and Liabilities
As of August 31, 1997 Assets - -------------------------------------------------------------------------------- Investments, at value (Note 1A) (identified cost, $112,557,006) $175,436,528 Cash 259,134 Receivable for investments sold 3,906,712 Dividends and interest receivable 185,082 Tax reclaim receivable 11,635 Deferred organization expenses (Note 1D) 6,255 - -------------------------------------------------------------------------------- Total assets $179,805,346 - -------------------------------------------------------------------------------- Liabilities - -------------------------------------------------------------------------------- Accrued expenses $ 20,600 - -------------------------------------------------------------------------------- Total liabilities $ 20,600 - -------------------------------------------------------------------------------- Net Assets applicable to investors' interest in Portfolio $179,784,746 - -------------------------------------------------------------------------------- Sources of Net Assets - -------------------------------------------------------------------------------- Net proceeds from capital contributions and withdrawals $116,906,433 Net unrealized appreciation of investments (computed on the basis of identified cost) 62,878,313 - -------------------------------------------------------------------------------- Total $179,784,746 - --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended August 31, 1997 Investment Income - -------------------------------------------------------------------------------- Dividends (net of foreign taxes, $8,164) $ 1,729,718 Interest 254,117 - -------------------------------------------------------------------------------- Total income $ 1,983,835 - -------------------------------------------------------------------------------- Expenses - -------------------------------------------------------------------------------- Investment adviser fee (Note 2) $ 1,038,600 Compensation of Trustees not members of the Administrator's organization (Note 2) 10,651 Custodian fee (Note 1C) 97,178 Legal and accounting services 35,655 Amortization of organization expenses (Note 1D) 3,285 Miscellaneous 5,828 - -------------------------------------------------------------------------------- Total expenses $ 1,191,197 - -------------------------------------------------------------------------------- Deduct -- Reduction of custodian fee (Note 1C) $ 659 - -------------------------------------------------------------------------------- Total expense reductions $ 659 - -------------------------------------------------------------------------------- Net expenses $ 1,190,538 - -------------------------------------------------------------------------------- Net investment income $ 793,297 - -------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) on Investments - -------------------------------------------------------------------------------- Net realized gain (loss) -- Investment transactions (identified cost basis) $ 13,698,771 Foreign currency transactions 87 - -------------------------------------------------------------------------------- Net realized gain on investment transactions $ 13,698,858 - -------------------------------------------------------------------------------- Change in unrealized appreciation (depreciation)-- Investments (identified cost basis) $ 32,474,116 Foreign currency transactions (2,617) - -------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) of investments $ 32,471,499 - -------------------------------------------------------------------------------- Net realized and unrealized gain on investments $ 46,170,357 - -------------------------------------------------------------------------------- Net increase in net assets from operations $ 46,963,654 - --------------------------------------------------------------------------------
See notes to financial statements 15 Growth Portfolio as of August 31, 1997 FINANCIAL STATEMENTS CONT'D Statement of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended in Net Assets August 31, 1997 August 31, 1996 - -------------------------------------------------------------------------------- From operations -- Net investment income $ 793,297 $ 1,045,595 Net realized gain on investments 13,698,858 15,075,037 Net change in unrealized appreciation (depreciation) 32,471,499 4,390,133 - -------------------------------------------------------------------------------- Net increase in net assets from operations $ 46,963,654 $ 20,510,765 - -------------------------------------------------------------------------------- Capital transactions -- Contributions $ 12,015,988 $ 12,571,319 Withdrawals (25,926,786) (20,352,794) - ------------------------------------------------------------------------------- Net decrease in net assets from capital transactions $ (13,910,798) $ (7,781,475) - -------------------------------------------------------------------------------- Net increase in net assets $ 33,052,856 $ 12,729,290 - -------------------------------------------------------------------------------- Net Assets - -------------------------------------------------------------------------------- At beginning of year $ 146,731,890 $ 134,002,600 - -------------------------------------------------------------------------------- At end of year $ 179,784,746 $ 146,731,890 - --------------------------------------------------------------------------------
See notes to financial statements 16 Growth Portfolio as of August 31, 1997 FINANCIAL STATEMENTS CONT'D Supplementary Data
Year Ended August 31, ---------------------------------------------------- 1997 1996 1995 1994* - ---------------------------------------------------------------------------------------------------------- Ratios to average daily net assets - ---------------------------------------------------------------------------------------------------------- Expenses 0.72% 0.72% 0.73% 0.73%+ Net investment income 0.48% 0.73% 0.67% 0.66%+ Portfolio Turnover 28% 62% 84% 4% - ---------------------------------------------------------------------------------------------------------- Average commission rate (per share)/(1)/ $ 0.0599 $ 0.0595 -- -- - ---------------------------------------------------------------------------------------------------------- Net assets, end of year (000s omitted) $179,785 $146,732 $134,003 $131,536 - ----------------------------------------------------------------------------------------------------------
+ Annualized. * For the period from the start of business, August 2, 1994, to August 31, 1994. /(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. For fiscal years beginning on or after September 1, 1995, a Fund is required to disclose its average commission rate per share for security trades on which commissions were charged. See notes to financial statements 17 Growth Portfolio as of August 31, 1997 NOTES TO FINANCIAL STATEMENTS 1 Significant Accounting Policies ----------------------------------------------------------------------------- Growth 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 August 2, 1994, with the acquisition of investments with a value of $127,122,709, including unrealized appreciation of $6,444,330 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 -- Marketable securities, including options, that are listed on foreign or U.S. securities exchanges or in the NASDAQ National Market System are valued at closing sale prices, on the exchange where such securities are principally traded. Futures positions on securities or currencies are generally valued at closing settlement prices. Unlisted or listed securities for which closing sale prices are not available are valued at the mean between the latest bid and asked prices. Short-term debt securities with a remaining maturity of 60 days or less are valued at amortized cost. Other fixed income and debt securities, including listed securities and securities for which price quotations are available, will normally be valued on the basis of valuations furnished by a pricing service. Investments for which valuations or market quotations are unavailable are valued at fair value using methods determined in good faith by or at the direction of the Trustees. B Federal Taxes -- The Portfolio is treated as a partnership for Federal tax purposes. No provision is made by the Portfolio for Federal or state taxes on any taxable income of the Portfolio because each investor in the Portfolio is individually responsible for the payment of any taxes on its share of such income. Since some of the Portfolio's investors are regulated investment companies that invest all or substantially all of their assets in the Portfolio, the Portfolio normally must satisfy the applicable source of income and diversification requirements (under the Internal Revenue Code), in order for its investors to satisfy them. The Portfolio will allocate, at least annually among its investors, each investor's distributive share of the Portfolio's net taxable (if any) and tax-exempt investment income, net realized capital gains, and any other items of income, gain, loss, deduction or credit. Withholding taxes on foreign dividends and capital gains have been provided for in accordance with the Trust's understanding of the applicable countries' tax rules and rates. C Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian of the Portfolio. Pursuant to the respective custodian agreements, IBT receives a fee reduced by the credits which are determined based on the average daily cash balances each Portfolio maintains with IBT. All significant credit balances used to reduce the Portfolio's custodian fees are reflected as a reduction of operating expenses on the Statement of Operations. D Deferred Organization Expenses -- Costs incurred by the Portfolio in connection with its organization are being amortized on the straight-line basis over five years. E Other -- Investment transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. However, if the ex-dividend date has passed, certain dividends from foreign securities are recorded as the Portfolio is informed of the ex-dividend date. Interest income is recorded on the accrual basis. F Use of Estimates -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. 2 Investment Adviser Fee and Other Transactions with Affiliates ----------------------------------------------------------------------------- The investment adviser fee is earned by Boston Management and Research (BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for management and investment advisory services rendered to the Portfolio. The fee is based upon a percentage of average daily net assets. For the year ended August 31, 1997, the fee was equivalent to 0.625% of the Portfolio's average daily net assets for such period and amounted to $1,038,600. Except as to the Trustees of the Portfolio, who are not members of EVM's or BMR's organization, officers and Trustees receive remuneration for their services to the Portfolio out of such investment adviser fee. Certain of the officers and Trustees of the Portfolio are officers and 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 percentage of their annual fees in accordance with the terms of the Trustees Deferred 18 Growth Portfolio as of August 31, 1997 NOTES TO FINANCIAL STATEMENTS CONT'D Compensation Plan. For the year ended August 31, 1997, no significant amounts have been deferred. 3 Investment Transactions ----------------------------------------------------------------------------- Purchase and sales of investments, other than short-term obligations, aggregated $45,231,299 and $58,692,399, 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: Aggregate cost $112,557,006 -------------------------------------------------------------------------- Gross unrealized appreciation $65,138,733 Gross unrealized depreciation (2,259,211) -------------------------------------------------------------------------- Net unrealized appreciation $62,879,522 --------------------------------------------------------------------------
5 Line of Credit ----------------------------------------------------------------------------- The Portfolio participates with other portfolios and funds managed by BMR and EVM and its affiliates in a $120 million unsecured line of credit agreement with a group of banks. The Portfolio may temporarily borrow from the line of credit to satisfy redemption requests or settle investment transactions. Interest is charged to each portfolio or fund based on its borrowings at an amount above the banks' adjusted certificate of deposit rate, eurodollar rate or federal funds rate. In addition, a fee computed at an annual rate of 0.15% on the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. The Portfolio did not have any significant borrowings or allocated fees during the year ended August 31, 1997. 19 Growth Portfolio as of August 31, 1997 INDEPENDENT AUDITORS' REPORT To the Trustees and Shareholders of Growth Portfolio: - ------------------------------------------------------------------------------- We have audited the accompanying statement of assets and liabilities of Growth Portfolio, including the Portfolio of investments, as of August 31, 1997, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the supplementary data for each of the three years in the period ended and for the period from August 2, 1994 (start of business) to August 31, 1994. These financial statements and supplementary data are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and supplementary data based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and supplementary data are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities held as of 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements and supplementary data referred to above present fairly, in all material respects, the financial position of Growth Portfolio as of August 31, 1997, the results of its operations for the year then ended, and the changes in its net assets for each of the two years in the period then ended, and the supplementary data for each of the three years then ended, and for the period from August 2, 1994 (start of business) to August 31, 1994, in conformity with generally accepted accounting principles. COOPERS & LYBRAND LLP Boston, Massachusetts September 25, 1997 20 EV Traditional Growth Fund as of August 31, 1997 INVESTMENT MANAGEMENT EV Traditional Growth Fund Officers Independent Trustees James B. Hawkes Donald R. Dwight President and Trustee President, Dwight Partners, Inc. Chairman, Newspapers of New England, Inc. M. Dozier Gardner Samuel L. Hayes, III Vice President Jacob H. Schiff Professor of Investment William D. Burt Banking, Harvard University Graduate Vice President School of Business Administration Barclay Tittmann Norton H. Reamer Vice President President and Director, United Asset Management Corporation James L. O'Connor John L. Thorndike Treasurer Formerly Director, Fiduciary Company Incorporated Alan R. Dynner Jack L. Treynor Secretary Investment Adviser and Consultant Growth Portfolio Officers Independent Trustees James B. Hawkes Donald R. Dwight President and Trustee President, Dwight Partners, Inc. Chairman, Newspapers of New England, Inc. M. Dozier Gardner Vice President Samuel L. Hayes, III Jacob H. Schiff Professor of Investment Thomas E. Faust, Jr. Banking, Harvard University Graduate Vice President and School of Business Administration Portfolio Manager Norton H. Reamer James L. O'Connor President and Director, United Asset Treasurer Management Corporation Alan R. Dynner John L. Thorndike Secretary Formerly Director, Fiduciary Company Incorporated Jack L. Treynor Investment Adviser and Consultant 21 This Page Intentionally Left Blank This Page Intentionally Left Blank Investment Adviser of Growth Portfolio Boston Management and Research 24 Federal Street Boston, MA 02110 Administrator of EV Traditional Growth Fund Eaton Vance Management 24 Federal Street Boston, MA 02110 Principal Underwriter Eaton Vance Distributors, Inc. 24 Federal Street Boston, MA 02110 (617)482-8260 Custodian Investors Bank & Trust Company 200 Clarendon Street, 16th Floor Boston, MA 02116 Transfer Agent First Data Investor Services Group Attention: Eaton Vance Funds P.O. Box 5123 Westborough, MA 01581-5123 EV Traditional Growth Fund 24 Federal Street Boston, MA 02110 - -------------------------------------------------------------------------------- This report must be preceded or accompanied by a current prospectus which contains more complete information on the Fund, including its sales charges and expenses. Please read the prospectus carefully before you invest or send money. - -------------------------------------------------------------------------------- J-GFSRC-10/97 -----END PRIVACY-ENHANCED MESSAGE-----