DIVERSIFICATION FUND INC
POS AMI, 1997-02-28
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       As filed with the Securities and Exchange Commission on February 28, 1997
    

                                                      1940 Act File No. 811-1003





                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549



                                    FORM N-1A


                          REGISTRATION STATEMENT UNDER
                    THE INVESTMENT COMPANY ACT OF 1940      [ X ]

   
                             Amendment No. 21               [ X ]
    

                           DIVERSIFICATION FUND, INC.
               (Exact Name of Registrant as Specified in Charter)


                 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
                    (Address of Principal Executive Offices)


                                 (617) 482-8260
               (Registrant's Telephone Number including Area Code)




   
                                 Alan R. Dynner
    
                24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
                     (Name and address of agent for service)
<PAGE>


   
     Throughout this Registration Statement,  information concerning Tax-Managed
Growth  Portfolio  (the  "Portfolio")  (File No.  811-7409) is  incorporated  by
reference  from  Amendment No. 33 to the  Registration  Statement of Eaton Vance
Mutual Funds Trust (File No. 2-90946 under the Securities Act of 1933 (the "1933
Act")) (the "Amendment"), which was filed electronically with the Securities and
Exchange  Commission on January 30, 1997  (Accession No.  0000950156-97-000105).
The Amendment  contains the prospectus  and statement of additional  information
("SAI") of EV  Marathon  Tax-Managed  Growth  Fund (the  "Feeder  Fund"),  which
invests substantially all of its assets in the Portfolio.
    

                                     PART A


     Responses  to  Items 1  through  3 and 5A have  been  omitted  pursuant  to
Paragraph 4 of Instruction F of the General Instructions to Form N-1A.

Item 4. GENERAL DESCRIPTION OF REGISTRANT

     (a) (i) The  Registrant is an open-end  diversified  management  investment
company organized on November 21, 1960, as a Massachusetts Corporation.

     (ii) The investment  objective of the  Registrant is to achieve  long-term,
after-tax  returns  for its  shareholders  through  investing  in a  diversified
portfolio  of  equity  securities.  This  objective  is  nonfundamental  but the
Directors  intend to submit any  proposed  change  which  would be  material  to
shareholders for approval.

   
     Prior to June 1, 1996, the Registrant  invested  directly in a portfolio of
securities.   Information  provided  herein  for  prior  periods  reflects  this
investment practice. Commencing on June 1, 1996, the Registrant seeks to achieve
its investment objective by investing in the Portfolio.  Registrant incorporates
by reference  information  concerning the Portfolio's  investment  objective and
investment   practices  from  "The   Registrant's   Investment   Objective"  and
"Investment Policies and Risks" in the Feeder Fund prospectus.
    

Item 5.  MANAGEMENT OF THE REGISTRANT

     (a) The Board of Directors has overall responsibility for management of the
Registrant.

   
     (b),  (c)  and  (g)  Registrant   incorporates  by  reference   information
concerning the Portfolio's management from "Management of the Registrant and the
Portfolio" in the Feeder Fund prospectus.
    

     (d) Eaton Vance Management ("Eaton Vance" or the  "Administrator")  acts as
Administrator  of the Registrant,  but currently  receives no  compensation  for
providing  administrative  services to the Registrant.  Under its agreement with
the  Registrant,  Eaton Vance has been engaged to  administer  the  Registrant's
affairs, subject to the supervision of the Board of Directors, and shall furnish
for the use of the Registrant office space and all necessary office  facilities,
equipment and personnel for administering the affairs of the Registrant.
<PAGE>

     (e) The  transfer  and  dividend  disbursing  agent is First Data  Investor
Services  Group,  P.O.  Box 5123,  Westborough,  MA  01581-5123  (the  "Transfer
Agent").

   
     (f) The Registrant's ratio of expenses to average net assets for the period
ended October 31, 1996 was 0.74%, annualized.
    

     (g) Not applicable

Item 6.  CAPITAL STOCK AND OTHER SECURITIES

   
     (a)(i), (ii) and (iii) The Registrant has one class of stock, consisting of
shares of common  stock,  par value  $1.00 per share,  all having  equal  voting
rights. All shares participate equally in earnings, dividends and assets. Shares
of the Registrant are fully paid,  nonassessable and fully transferable and have
no pre-emptive or conversion rights.

     Registrant  incorporates by reference  information  concerning interests in
the Portfolio  from  "Organization  of the  Registrant and the Portfolio" in the
Feeder Fund prospectus.
    

     (b) Not applicable

     (c) Not applicable

     (d) Not applicable

     (e) Shareholder inquiries should be forwarded to the Registrant's office at
24 Federal Street, Boston, Massachusetts 02110.

     (f)  Distributions  from net investment income are paid at least quarterly.
These  distributions are paid in shares of the Registrant  computed at net asset
value, subject to an option to each shareholder to elect to be paid in cash. Net
realized  long-term  capital  gains are retained by the  Registrant as described
below.

     (g)(i) Since the Registrant intends to distribute  substantially all of its
net investment  income to  shareholders,  it is not expected that the Registrant
will be  required  to pay any  federal  income  taxes on such  income.  However,
shareholders  of the  Registrant  normally will have to pay federal income taxes
and any state or local taxes, on distributions from investment income.

     (ii) Since the Registrant  retains any net realized  long-term capital gain
and pays the federal tax thereon, shareholders include in their personal federal
income tax return their  proportionate  share of such gains (as allocated by the
Portfolio to the Registrant), take a credit for the payment of taxes thereon and
increase  the tax cost  basis of their  shares by an amount  equal to such gains
less the taxes paid. The Registrant  provides each  shareholder with information
regarding the  shareholder's  federal income tax treatment of any  undistributed
realized long-term capital gain retained by the Registrant.

     (iii)  After  the end of each  calendar  year,  each  shareholder  receives
information for tax purposes  regarding the  distributions  paid during the year
and  the  amount  of any  distributions  eligible  for  the  dividends  received
deduction for corporations.
<PAGE>
   
     (iv) Registrant  incorporates by reference  information  concerning the tax
consequences of certain of the Portfolio's tax consequences  from  "Distribution
and Taxes" in the Feeder Fund's prospectus.

     (h) The Directors of the  Registrant  have  considered  the  advantages and
disadvantages  of investing the assets of the  Registrant in the  Portfolio,  as
well as the advantages and disadvantages of the two-tier format. Such investment
affords the  potential for  economies of scale for the  Registrant  and may over
time  result in lower  expenses.  In  addition  to  selling an  interest  to the
Registrant,   the  Portfolio  may  sell   interests  to  other   affiliated  and
non-affiliated mutual funds or institutional investors.  Such investors may have
different fees than the Registrant, but will invest in the Portfolio on the same
terms  and  conditions  and will pay a  proportionate  share of the  Portfolio's
expenses. Information regarding other investors in the Portfolio may be obtained
by contacting  Eaton Vance  Distributors,  Inc., 24 Federal Street,  Boston,  MA
02110 (617) 482-8260. Whenever the Registrant as an investor in the Portfolio is
requested  to vote on  matters  pertaining  to the  Portfolio  (other  than  the
termination of the Portfolio's business, which may be determined by the Trustees
of the Portfolio without investor approval),  the Registrant will hold a meeting
of Fund  shareholders and will vote its interest in the Portfolio for or against
such matters  proportionately  to the  instructions  to vote for or against such
matters received from the Registrant's  shareholders.  The Registrant shall vote
shares for which it receives no voting  instructions  in the same  proportion as
the shares for which it receives  voting  instructions.  Other  investors in the
Portfolio may alone or collectively  acquire  sufficient voting interests in the
Portfolio to control matters  relating to the operation of the Portfolio,  which
may require the  Registrant to withdraw its  investment in the Portfolio or take
other appropriate action.

     The  Registrant  may withdraw  (completely  redeem) all its assets from the
Portfolio  at any time if the Board of Directors  of the  Registrant  determines
that it is in the best  interest  of the  Registrant  to do so. In the event the
Registrant  withdraws  all of its  assets  from the  Portfolio,  or the Board of
Directors of the  Registrant  determines  that the  investment  objective of the
Portfolio  is  no  longer  consistent  with  the  investment  objective  of  the
Registrant,  such Directors would consider what action might be taken, including
investing the assets of the  Registrant in another pooled  investment  entity or
retaining an investment adviser to manage the Registrant's  assets in accordance
with its investment objective.  The Registrant's  investment  performance may be
affected by a withdrawal of all its assets from the Portfolio.

Item 7.  PURCHASE OF SECURITIES BEING OFFERED

     (a), (c) - (g) Registrant does not offer its shares for sale.

     (b) The  Registrant  values its shares  once on each day the New York Stock
Exchange  (the  "Exchange")  is open for  trading,  as of the  close of  regular
trading on the Exchange (normally 4:00 p.m. New York time). The Registrant's net
asset value per share is determined  by its  custodian,  Investors  Bank & Trust
Company ("IBT"),  (as agent for the Registrant) in the manner  authorized by the
Directors of the Trust. Net asset value is computed by dividing the value of the
Registrant's  total  assets,  less its  liabilities,  by the  number  of  shares
outstanding.  Because  the  Registrant  invests its assets in an interest in the
Portfolio,  the  Registrant's  net asset  value  will  reflect  the value of its
interest in the Portfolio (which, in turn,  reflects the underlying value of the
Portfolio's assets and liabilities).
<PAGE>

     Registrant incorporates by reference information concerning the computation
of net asset value and valuation of Portfolio  assets from  "Valuing  Registrant
Shares" in the Feeder Fund prospectus.  For further information,  see Item 19 of
Part B.
    

Item 8.  REDEMPTION OR REPURCHASE OF REGISTRANT'S SHARES

     A  shareholder  has the right to redeem  fund shares by  delivering  to the
Transfer  Agent during its business  hours a written  request in good order plus
any share  certificates,  or stock powers if no  certificates  have been issued.
Redemption  will be made  at the  net  asset  value  next  computed  after  such
delivery.  Good order means that all relevant  documents must be endorsed by the
record owner(s) exactly as the shares are registered and the  signature(s)  must
be guaranteed by a member of either the Securities Transfer  Association's STAMP
program or the New York Stock Exchange's Medallion Signature Program, or certain
banks,  savings  and  loan  institutions,  credit  unions,  securities  dealers,
securities exchanges,  clearing agencies and registered securities  associations
as required by a  regulation  of the  Securities  and Exchange  Commission  (the
"Commission") acceptable to the Transfer Agent. In addition, in some cases, good
order may require  the  furnishing  of  additional  documentation  if shares are
registered in the name of a corporation,  partnership or fiduciary. Payment will
be made within seven days of the receipt of the aforementioned documents.

     In addition to the redemption of shares in the manner  described above, the
Registrant, for the convenience of its shareholders,  has authorized Eaton Vance
to act as its agent in the repurchase of fund shares.  Eaton Vance will normally
accept orders to repurchase shares by wire or telephone from investment  dealers
for their  customers at the net asset value next  computed  after receipt of the
order by the dealer if such order is  received by Eaton Vance prior to its close
of business that day. It is the dealer's responsibility to transmit promptly the
repurchase order to Eaton Vance. These repurchase  arrangements do not involve a
charge to the  shareholder  by either  the  Registrant  or its  agent;  however,
investment  dealers may make a charge to the  shareholder.  Payment will be made
within  seven days of the receipt of an order to  repurchase  provided  that the
certificates,  or a stock power if no certificates  have been issued,  have been
delivered to the Transfer Agent in good order as described above.

     The Registrant reserves the right to pay the redemption or repurchase price
of shares in whole or in part by a distribution of portfolio  securities in lieu
of cash if, in the opinion of management, it seems advisable to do so; normally,
when the  redemption  or  repurchase  price equals or exceeds  $2,500  portfolio
securities  will  be  used  by  the  Registrant.  Any  portfolio  securities  so
distributed  will be  valued  at the  figure at which  they  were  appraised  in
computing  the  net  asset  value  of  Registrant's  shares.  If  the  portfolio
securities so  distributed  are sold by the redeeming  shareholder he will incur
brokerage commissions or other transaction costs in connection with such sale.

     The  right to redeem  shares of the  Registrant  can be  suspended  and the
payment of the redemption price deferred when the Exchange is closed (other than
for customary weekend and holiday closings),  during periods when trading on the
Exchange is restricted as determined by the Commission,  or during any emergency
as determined by the Commission which makes it  impracticable  for the Portfolio
or the  Registrant to dispose of its  securities or value its assets,  or during
any other period  permitted by order of the  Commission  for the  protection  of
investors.
<PAGE>

Item 9.  PENDING LEGAL PROCEEDING

     Not applicable
<PAGE>


                                     PART B


Item 10. COVER PAGE

     Not applicable

Item 11. TABLE OF CONTENTS

     Not applicable

Item 12. GENERAL INFORMATION AND HISTORY

     Up to May 31, 1996, the  Registrant  invested in a portfolio of securities.
Since then, it has invested its assets in the Portfolio.

Item 13. INVESTMENT OBJECTIVES AND POLICIES

   
     Registrant  incorporates by reference additional information concerning the
investment  policies of the  Portfolio  as well as  information  concerning  the
investment  restrictions  of the Portfolio from  "Additional  Information  about
Investment  Policies"  and  "Investment  Restrictions"  in Part I of the  Feeder
Registrant SAI. The Registrant is subject to the same investment restrictions as
the Portfolio.  The Portfolio's  portfolio turnover rate for the period from the
start of business December 31, 1995 to October 31, 1996 was 6%. The Registrant's
portfolio turnover rate for its fiscal year ended May 31, 1996 was 13%.
    

     (d) Not applicable

Item 14. MANAGEMENT OF THE REGISTRANT

   
     Registrant  incorporates by reference additional information concerning the
management of the Portfolio from "Trustees and Officers" in the Feeder Fund SAI.
Persons  serving  as  officers  and  Trustees  of the  Portfolio  hold  the same
positions  with the  Registrant  and the Board of Trustees of Registrant has the
same committees  with the same  composition as the committees of the Portfolio's
Board.

     (c) The fees and expenses of those Directors of the Registrant and Trustees
of  the  Portfolio  who  are  not  members  of  the  Eaton  Vance   organization
(noninterested Directors/Trustees) are paid by the Registrant and the Portfolio,
respectively. (The Directors of the Registrant and Trustees of the Portfolio who
are members of the Eaton Vance  organization  receive no  compensation  from the
Registrant or the  Portfolio.) For the twelve months ended October 31, 1996, the
noninterested  Directors of the Registrant and Trustees of the Portfolio  earned
the following  compensation in their  capacities as Directors  and/or  Directors
from the funds in the Eaton Vance fund complex(1):
<PAGE>



                                                              Total Compensation
                           Aggregate           Aggregate       from Registrant
  NAME                  FROM REGISTRANT     FROM PORTFOLIO     AND FUND COMPLEX
  ----                  ---------------     --------------     ----------------

  Donald R. Dwight        $  963(2)          $1,617(2)             $142,500

  Samuel L. Hayes, III     1,107(3)           1,740(3)              153,750

  Norton H. Reamer         1,066              1,672                 142,500

  John L. Thorndike        1,129              1,773                 147,500

  Jack L. Treynor          1,084              1,772                 147,500


(1)      The Eaton Vance fund complex consists of 212 registered investment
         companies or series thereof.
(2)      Includes $337 of deferred compensation.
(3)      Includes $445 of deferred compensation.
    

     Trustees  of the  Portfolio  that are not  affiliated  with the  investment
adviser,  BMR, may elect to defer receipt of all or a percentage of their annual
fees in accordance with the terms of a Trustees Deferred  Compensation Plan (the
"Trustees'  Plan").  Under the Trustees' Plan, an eligible  Trustee may elect to
have his deferred  fees  invested by the  Portfolio in the shares of one or more
funds in the Eaton Vance  Family of Funds,  and the amount paid to the  Trustees
under  the  Plan  will  be  determined   based  upon  the  performance  of  such
investments.  Deferral of Trustees'  fees in accordance  with the Trustees' Plan
will have a negligible effect on the Portfolio's  assets,  liabilities,  and net
income,  and will not  obligate  the  Portfolio  to retain the  services  of any
Trustee or obligate the Portfolio to pay any particular level of compensation to
the Trustee.  Neither the Registrant nor the Portfolio has a retirement plan for
Trustees.

Item 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

     (a) Not applicable

   
     (b) As of January 31, 1997,  the Directors and officers of the  Registrant,
as a group, owned in the aggregate less than 1% of the outstanding shares of the
Registrant.  To  the  knowledge  of  the  Registrant  no  person  of  record  or
beneficially  owns 5% or more of its shares,  except the following  shareholders
who owned of record the percentages of outstanding  shares indicated after their
names as of January 31, 1997:  William T. Ragland,  Jr., trustee for the William
T. Ragland,  Jr. UTI dated 9-22-52 c/o J.W. Peddycord,  Winston-Salem,  NC 6.54%
and Mrs. Ruby H. Bryan, Goldsboro, NC 6.25%.
<PAGE>

Item 16. INVESTMENT ADVISORY AND OTHER SERVICES

     (a) - (d)  Registrant  incorporates  by  reference  information  concerning
investment   advisory  and  other  services   provided  to  the  Portfolio  from
"Investment  Adviser and  Administrator" in Part I of the Feeder Fund SAI.

     Prior to investing in the Portfolio, the Registrant retained Eaton Vance as
investment  adviser.  The management  fees paid by the Registrant to Eaton Vance
Management  for the fiscal  years ended May 31, 1996 and 1995 were  $429,320 and
$415,321, respectively.
    

     (e) - (g) Not applicable

   
     (h) and (i)  Investors  Bank & Trust  Company  ("IBT"),  89  South  Street,
Boston,  Massachusetts,  acts as custodian for the Registrant and the Portfolio.
IBT has  custody  of all  cash  and  securities  representing  the  Registrant's
interest in the Portfolio,  has custody of all the Portfolio's assets, maintains
the general  ledger of the Portfolio and the  Registrant  and computes the daily
net asset value of interests in the  Portfolio and the net asset value of shares
of the Registrant. In such capacity it attends to details in connection with the
sale,  exchange,  substitution,  transfer or other dealings with the Portfolio's
investments,  receives  and  disburses  all funds,  and performs  various  other
ministerial  duties upon receipt of proper  instructions from the Registrant and
the Portfolio.  IBT charges fees which are  competitive  within the industry.  A
portion of the fee relates to custody, bookkeeping and valuation services and is
based upon a percentage of the Registrant's and the Portfolio's net assets and a
portion  of the fee  relates  to  activity  charges,  primarily  the  number  of
portfolio  transactions.  These  fees are  then  reduced  by a  credit  for cash
balances of the particular  investment  company at the custodian equal to 75% of
the 91-day, U.S. Treasury Bill auction rate applied to the particular investment
company's  average  daily  collected  balances  for the week.  Landon T. Clay, a
Director  of EVC and an officer,  Trustee or  Director  of other  members of the
Eaton  Vance  organization,  owns  approximately  13% of  the  voting  stock  of
Investors  Financial  Services Corp., the holding company parent of IBT. In view
of Mr. Clay's  interest in IBT, the  Registrant  is treated as a  self-custodian
pursuant  to Rule  17f-2  under  the  Investment  Company  Act of 1940,  and the
Registrant's  investments  held by IBT as  custodian's  are thus  subject to the
additional  examinations  by  the  Registrant's   independent  certified  public
accountants  as called for by such Rule. For the fiscal year ended May 31, 1996,
the Registrant paid IBT $47,747.  For the fiscal year ended October 31, 1996 the
Registrant and the Portfolio paid IBT $4,711 and $125,097, respectively.
    

     Deloitte & Touche LLP, 125 Summer  Street,  Boston,  Massachusetts  are the
independent  certified public  accountants for the Registrant and the Portfolio.
As such they provide  customary  professional  services in  connection  with the
audit function for a management  investment company,  including services leading
to the expression of an opinion on the financial statements in the annual report
to shareholders and preparation of federal tax returns.

Item 17. BROKERAGE ALLOCATION AND OTHER PRACTICES

   
     Registrant  incorporates by reference information  concerning the brokerage
practices of the Portfolio from "Portfolio  Security  Transactions" in Part I of
the Feeder Fund SAI.
<PAGE>

     Prior to investing in the Portfolio,  the Registrant  invested  directly in
Securities.  During the  Registrant's  fiscal years ended May 31, 1996 and 1995,
the Registrant paid brokerage commissions of $21,000 and $18,245,  respectively,
on portfolio security transactions. Of the total brokerage commission of $21,000
and $18,245,  respectively,  paid during the fiscal years ended May 31, 1996 and
1995,  approximately $19,500 and $15,454,  respectively,  was paid in respect of
portfolio  security  transactions  aggregating   approximately  $10,323,400  and
$6,684,989,  respectively,  to firms which  provided some  research  services to
Eaton  Vance  (although  many  of such  firms  may  have  been  selected  in any
particular transaction primarily because of their execution capabilities).
    

Item 18.      CAPITAL STOCK AND OTHER SECURITIES

     (a) The  Registrant  has one class of  securities,  i.e.,  shares of common
stock of the par value of $1.00  each,  all of one class  and all  having  equal
voting  rights.  Shareholders  are entitled to dividends when and as declared by
the  Board of  Directors,  and to  participate  equally  in any  liquidation  or
dissolution  of the  Registrant.  Shares  when  issued  will be  fully  paid and
nonassessable and fully transferable.  Shares have no pre-emptive,  subscription
or conversion rights. There are no sinking fund provisions.

     The rights of the holders of the Common  Stock may be modified by a vote of
the holders of not less than a majority of the outstanding voting securities (as
that term is defined in the Investment Company Act of 1940).

   
     In accordance  with the  Declaration of Trust of the Portfolio,  there will
normally be no meetings of the investors  for the purpose of electing  Directors
unless  and until  such time as less than a  majority  of the  Trustees  holding
office  have been  elected by  investors.  In such an event the  Trustees of the
Portfolio  then in office will call an  investors'  meeting for the  election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in  accordance  with the  Portfolio's  Declaration  of Trust,  the
Trustees shall continue to hold office and may appoint successor Trustees.

     The  Declaration  of Trust of the  Portfolio  provides that no person shall
serve as a Trustee if investors holding  two-thirds of the outstanding  interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration  of Trust  further  provides that under  certain  circumstances  the
investors  may call a  meeting  to remove a Trustee  and that the  Portfolio  is
required to provide  assistance in  communicating  with  investors  about such a
meeting.

     The Declaration of Trust of the Portfolio  provides that the Portfolio will
terminate 120 days after the complete  withdrawal of the Registrant or any other
investor in the Portfolio,  unless either the remaining investors, by a majority
vote at a meeting of such  investors,  or a  majority  of the  Directors  of the
Portfolio,  by written  instrument  consented to by a majority of its investors,
agree to continue the business of the  Portfolio.  This  provision is consistent
with  treatment  of the  Portfolio  as a  partnership  for  federal  income  tax
purposes.
    

     (b) Not applicable
<PAGE>

Item 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED

   
     (a) The Registrant does not offer its shares for sale.

     (b) Registrant  incorporates by reference information  concerning valuation
of the Portfolio's  assets from  "Determination of Net Asset Value" in Part I of
the Feeder Fund SAI.
    

     (c) Not applicable

Item 20. TAX STATUS

   
     The  Registrant  has met the  requirements  of subchapter M for the taxable
year  ending  October 31,  1996 and  intends to meet such  requirements  for the
taxable year ending October 31, 1997.  Accordingly,  the  Registrant  intends to
satisfy   certain   requirements   relating   to   sources  of  its  income  and
diversification of its assets and to distribute all of its net investment income
in accordance with the timing  requirements  imposed by the Code, so as to avoid
any federal income or excise tax on such income.  The Registrant's  treatment of
net realized long-term capital gains is discussed below.  Because the Registrant
invests its assets in the  Portfolio,  the  Portfolio  normally must satisfy the
applicable  source of income and  diversification  requirements in order for the
Registrant to satisfy them.  The Portfolio will allocate at least annually among
its investors,  including the Registrant,  each investor's distributive share of
the Portfolio's net investment income and any other items of income, gain, loss,
deduction  or credit  (other than net realized  long-term  capital gain which is
discussed  below).  The Portfolio  will make  allocations  to the  Registrant in
accordance  with the Code  and  applicable  regulations  and  will  make  moneys
available for  withdrawal  at  appropriate  times and in  sufficient  amounts to
enable the Registrant to satisfy the tax distribution requirements that apply to
the  Registrant  and that must be  satisfied  in order to avoid  federal  income
and/or excise tax on the Registrant.  For purposes of applying the  requirements
of the Code regarding  qualification as a RIC, the Registrant will be deemed (i)
to own its  proportionate  share of each of the assets of the Portfolio and (ii)
to be entitled to the gross income of the Portfolio attributable to such share.
    

     Allocated net realized long-term capital gains are normally retained by the
Portfolio,  and the Portfolio  pays the federal tax thereon.  When this is done,
the  shareholder  includes in his personal  income tax return his  proportionate
share of such gains (as allocated by the Portfolio to the  Registrant),  takes a
credit for the payment of taxes thereon, and increases the tax cost basis of his
shares by an amount equal to such gains less the taxes paid.  Due to regulations
imposed by the Internal Revenue Service the Registrant is required to distribute
net  realized  long-term  capital  gains  (computed on the basis of the one-year
period  ending  on  October  31 of such  year) and 100% of any  income  from the
present year that was not paid out during such year and on which the  Registrant
was not taxed.  The Registrant  therefore  reserves the right to distribute such
capital  gains when  required.  Certain  distributions,  if declared in October,
November  or  December  and  paid  the  following  January,  will  be  taxed  to
shareholders  as if  received  on  December  31 of the  year in  which  they are
declared.
<PAGE>

     In order to avoid federal excise tax, the Code requires that the Registrant
distribute  (or be deemed to have  distributed)  by December 31 of each calendar
year at least 98% of its ordinary income (not including  tax-exempt  income) for
such year,  at least 98% of the excess of its  realized  capital  gains over its
realized capital losses,  generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards,  and 100% of any income and capital gains from the prior year (as

previously  computed)  that  was  not  paid  out  during  such year and on which
the  Registrant  was not taxed.  Further,  under current law,  provided that the
Registrant  qualifies as a RIC for federal income tax purposes and the Portfolio
is treated as a partnership for Massachusetts and federal tax purposes,  neither
the Registrant nor the Portfolio is liable for any income,  corporate  excise or
franchise tax in the Commonwealth of Massachusetts.

     Foreign  exchange gains and losses  realized by the Portfolio and allocated
to the  Registrant in connection  with the  Portfolio's  investments  in foreign
securities and certain options, futures or forward contracts or foreign currency
may be treated as ordinary  income and losses under  special tax rules.  Certain
options,  futures or forward  contracts of the  Portfolio  may be required to be
marked  to  market  (i.e.,  treated  as if  closed  out) on the last day of each
taxable year, and any gain or loss realized with respect to these  contracts may
be  required to be treated as 60%  long-term  and 40%  short-term  gain or loss.
Positions of the Portfolio in securities and offsetting options,  swaps, futures
or  forward  contracts  may be treated  as  "straddles"  and be subject to other
special rules that may, upon allocation of the Portfolio's  income, gain or loss
to the Registrant,  affect the amount,  timing and character of the Registrant's
distributions  to  shareholders.  Certain  uses of foreign  currency and foreign
currency derivatives such as options,  futures,  forward contracts and swaps and
investment by the Portfolio in certain  "passive foreign  investment  companies"
may be limited or a tax election may be made, if available, in order to preserve
the  Registrant's  qualification  as a RIC or avoid  imposition  of a tax on the
Registrant.

     The Portfolio  will allocate at least  annually to the  Registrant  and its
other  investors  their  respective  distributive  shares of any net  investment
income  and net  capital  gains  (except  as  described  above)  which have been
recognized for federal income tax purposes  (including  unrealized  gains at the
end of the Portfolio's  fiscal year on certain options and futures  transactions
that are required to be  marked-to-market).  Such amounts will be distributed by
the Registrant to its shareholders in cash or additional  shares, as they elect.
Shareholders   of  the  Registrant   will  be  advised  of  the  nature  of  the
distributions.

     Certain  investors in the  Portfolio,  including the  Registrant  and other
RICs, have acquired interests in the Portfolio by contributing  securities.  Due
to tax considerations, during the first five years following the contribution of
securities  to  the  Portfolio  by an  investor,  such  securities  will  not be
distributed  to any  investor  other than the  investor  who  contributed  those
securities.  Investors who acquire an interest in the Portfolio by  contributing
securities  and who redeem  that  interest  within  five years  thereafter  will
generally  receive  back  one or more of the  securities  they  contributed.  In
partial  redemptions  by such investors  during this period,  the Portfolio will
attempt to  accommodate  requests  to  distribute  initially  those  contributed
securities and share lots with the highest cost basis.
<PAGE>

     The Portfolio has  significant  holdings of highly  appreciated  securities
that were  contributed to the Portfolio by investors  other than the Registrant.
If such  securities  were to be  sold,  the  resulting  capital  gain  would  be
allocated  disproportionately  among the Portfolio's investors,  with the result
that the  Registrant  would not be subject to taxation on any gain arising prior
to the  contribution  of the  securities to the  Portfolio.  If any  appreciated
securities to be  contributed  to the Portfolio by the  Registrant are sold, the
resulting capital gain would be allocated to the Registrant.

   
     Any loss  realized  upon the  redemption  or  exchange of shares with a tax
holding  period of 6 months or less will be treated as a long-term  capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares.  All or a portion of a loss realized upon a taxable  disposition of
Registrant  shares may be disallowed  under "wash sale" rules if other shares of
the Registrant  are  purchased   (whether  through  reinvestment or dividends or
otherwise)  within 30 days before or after the disposition.  Any disallowed loss
will result in an  adjustment to the  shareholder's  tax basis in some or all of
the other shares acquired.

     The  Registrant  will not be subject  to  Massachusetts  income,  corporate
excise or franchise taxation as long as it qualifies as a RIC under the Code.
    

     Amounts  paid  by  the   Registrant  to   individuals   and  certain  other
shareholders  who have not provided the Registrant  with their correct  taxpayer
identification   number  and  certain  required   certifications,   as  well  as
shareholders with respect to whom the Registrant has received  notification from
the Internal Revenue Service or a broker, may be subject to "backup" withholding
of federal income tax from the Registrant's  taxable dividends and distributions
and the proceeds of redemptions  (including repurchases and exchanges) at a rate
of 31%. An individual's  taxpayer  identification number is generally his or her
social security number.

     Non-resident  alien  individuals,  foreign  corporations  and certain other
foreign entities  generally will be subject to a U.S.  withholding tax at a rate
of 30% on the Registrant's distributions from its ordinary income and the excess
of its net short-term  capital gain over its net long-term  capital loss, unless
the tax is reduced or eliminated by an applicable tax treaty. Distributions from
the  excess  of the  Registrant's  net  long-term  capital  gain  over  its  net
short-term capital loss received by such shareholders and any gain from the sale
or other  disposition of shares of the Registrant  generally will not be subject
to U.S. Federal income  taxation,  provided that  non-resident  alien status has
been certified by the shareholder. Different U.S. tax consequences may result if
the  shareholder  is engaged in a trade or  business  in the United  States,  is
present in the United  States for a  sufficient  period of time during a taxable
year to be  treated  as a U.S.  resident,  or  fails  to  provide  any  required
certifications  regarding  status  as a  non-resident  alien  investor.  Foreign
shareholders  should  consult their tax advisers  regarding the U.S. and foreign
tax consequences of an investment in the Registrant.

     Shareholders should consult their own tax advisers with respect to these or
other special tax rules that may apply in their particular  situations,  as well
as the state, local or foreign tax consequences of investing in the Registrant.
<PAGE>

   
     The foregoing discussion does not describe many of the tax rules applicable
to IRAs nor does it address the special tax rules  applicable  to certain  other
classes of  investors,  such as other  retirement  plans,  tax-exempt  entities,
insurance  companies and financial  institutions.  Shareholders  should  consult
their own tax advisers with respect to these or other special tax rules that may
apply in their particular situations, as well as the state, local or foreign tax
consequences of investing in the Registrant.
    

Item 21. UNDERWRITERS

     Not applicable  because  Registrant does not make a continuous  offering of
Registrants shares.

Item 22. CALCULATION OF PERFORMANCE DATA

     Not applicable

Item 23. FINANCIAL STATEMENTS

   
     Registrant  incorporates by reference the audited financial information for
the  Registrant  and the  Portfolio  contained in the  Registrant's  shareholder
report  for  the  fiscal  year  ended  October  31,  1996  as  previously  filed
electronically  with  the  Commission  on  January  3,  1997  (Accession  Number
0000950156-97-000026).
<PAGE>
    


                                     PART C

                                OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

(a)      THE FOLLOWING FINANCIAL STATEMENTS ARE INCORPORATED BY
         REFERENCE TO THE REPORT TO SHAREHOLDERS OF DIVERSIFICATION
         FUND, INC. DATED OCTOBER 31, 1996 (ACCESSION NO.
         0000950156-97-000026):

                     Portfolio of Investments
                     Statement of Assets and Liabilities
                     Statement of Operations
                     Statement of Changes In Net Assets
                     Financial Highlights For the last Five Years Ended
                     Notes to Financial Statements
                     Independent Auditor's Report

(b)      Exhibits:

 (1)   (a)   Articles of Organization incorporating all amendments
             through August 16, 1983 and currently in effect filed as Exhibit
             (1)(a) to Amendment No. 20 on September 26, 1996 and
             incorporated herein by reference.

       (b)   Articles of Amendment dated March 29, 1996 filed as Exhibit
             (1)(b) to Amendment No. 20 on September 26, 1996 and
             incorporated herein by reference.

 (2)   (a)   By-Laws incorporating all amendments through August 16,
             1983 and currently in effect filed as Exhibit (2)(a) to
             Post-Effective Amendment No. 19 to the Registration
             Statement on September 29, 1995 and incorporated herein
             by reference.

       (b)   Amendment to By-Laws dated September 21, 1995 filed
             as Exhibit (2)(b) to Amendment No. 20 on September 26,
             1996 and incorporated herein by reference.

       (c)   Amendment to By-Laws dated March 15, 1996 filed as Exhibit
             (2)(c) to Amendment No. 20 on September 26, 1996 and
             incorporated herein by reference.

 (3)         Not Applicable

 (4)         Not Applicable
<PAGE>


(5)          Not Applicable

(6)          Not Applicable

(7)          The  Securities  and Exchange  Commission has granted the
             Registrant an exemptive order that permits the Registrant
             to enter into deferred compensation arrangements with its
             independent  Directors.  See in  the  Matter  of  Capital
             Exchange Fund,  Inc.,  Release No. IC-20671  (November 1,
             1994).

(8)    (a)   Custodian Agreement dated December 17, 1990 filed as
             Exhibit (8)(a) to Amendment No. 20 on September 26, 1996
             and incorporated herein by reference.

(8)     (b)  Amendment to Custodian Agreement dated October 23,
             1995 filed as Exhibit (8)(b) to Amendment No. 20 on
             September 26, 1996 and incorporated herein by reference.

(9)           Administrative Services Agreement with Eaton Vance
              Management dated June 3, 1996, filed as Exhibit (9) to
              Amendment No. 20 on September 26, 1996 and incorporated
              herein by reference.

(10)          Not Applicable

(11)          Not Applicable

(12)          Not Applicable

(13)          Not Applicable

(14)          Not Applicable

(15)          Not Applicable

(16)          Not Applicable

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

     Not Applicable
<PAGE>

Item 26. NUMBER OF HOLDERS OF SECURITIES

                      (1)                              (2)

                                                   Number of Record
                  TITLE OF CLASS                       HOLDERS
                  --------------                       -------

                  Capital Stock                          306
                  $1.00 Par Value              as of January 31, 1997

Item 27. INDEMNIFICATION

     Registrant's  Articles of Organization contain the following provision with
respect to indemnification of Directors and officers:

     (a) Subject to the exceptions and  limitations  contained in paragraph (b),
below:

          (i)every  person  who is, or has been,  a  director  or officer of the
     Corporation  shall be indemnified by the  Corporation to the fullest extent
     permitted  by law against  liability  and against all  expenses  reasonably
     incurred  or paid by him in  connection  with any  claim,  action,  suit or
     proceeding  in which he becomes  involved as a party or otherwise by virtue
     of his being or having been a director or officer and against  amounts paid
     or incurred by him in the settlement thereof;

          (ii) the words 'claim',  'action', 'suit', or 'proceeding' shall apply
     to all claims,  actions,  suits or proceedings  (civil,  criminal or other,
     including appeals),  actual or threatened,  whether or not based on any act
     or omission  antedating adoption of this Article XIV; and words 'liability'
     and 'expenses' shall include,  without limitation,  attorneys' fees, costs,
     judgments,   amounts  paid  in  settlement,   fines,  penalties  and  other
     liabilities.

     (b) No  indemnification  shall  be  provided  hereunder  to a  director  or
officer:

          (i)against  any liability to the  Corporation or its  shareholders  by
     reason of wilful  misfeasance,  bad faith,  gross  negligence  or  reckless
     disregard of the duties involved in the conduct of his office;

          (ii) with respect to any matter as to which he shall have been finally
     adjudicated  not to have acted in good faith in the reasonable  belief that
     his action was in the best interests of the Corporation;

          (iii)  in  the  event  of  a  settlement   unless  there  has  been  a
     determination  that  such  director  or  officer  did not  engage in wilful
     misfeasance,  bad faith,  gross  negligence  or reckless  disregard  of the
     duties involved in the conduct of his office,

               (A) by the court or other body approving the settlement; or

               (B) by  vote  of a  majority  of the  outstanding  shares  of the
          Corporation  not including any shares owned by any  affiliated  person
          (as  defined in  Section 2 (a) (3) of the  Investment  Company  Act of
          1940) of the Corporation; or
<PAGE>

               (C) by vote of two-thirds  (2/3) of those members of the Board of
          Directors of the Corporation, constituting at least a majority of such
          Board, who are not themselves  involved in the claim,  action, suit or
          proceeding; or

               (D) by written opinion of independent counsel,

          provided,  however,  that any  shareholder  may, by  appropriate legal
          proceedings,   challenge  any  such  determination  by  the  Board  of
          Directors, or by independent counsel.

     (c) The rights of indemnification herein provided may be insured against by
policies maintained by the Corporation, shall be severable, shall not affect any
other  rights to which any director or officer may now or hereafter be entitled,
shall  continue as to a person who has ceased to be such director or officer and
shall inure to the benefit of the heirs,  executors and administrators of such a
person.  Nothing contained herein shall affect any rights to  indemnification to
which  corporate  personnel other than directors and officers may be entitled by
contract or otherwise under law.

     (d) Expenses of  preparation  and  presentation  of a defense to any claim,
action,  suit or proceeding of the character  described in paragraph (a) of this
Article  XIV may be  advanced  by the  Corporation  prior to  final  disposition
thereof  upon  receipt  of an  undertaking  by or on  behalf  of the  recipient,
guaranteed  by a surety  bond issued by an  insurance  company  qualified  to do
business in the  Commonwealth  of  Massachusetts,  to repay such amount if it is
ultimately  determined  that he is not  entitled to  indemnification  under this
Article XIV."

     The Massachusetts  Business Corporation Laws Section 67 "Indemnification of
officers and directors",  of Chapter 156B of the General Laws of  Massachusetts)
provides as follows:

     "Indemnification of directors and officers, employees and other agents of a
corporation,  and  persons  who serve at its  request  as  directors,  officers,
employees or other agents of another  organization,  or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by it
to whatever  extent shall be specified in or  authorized  by (i) the articles of
organization  or (ii) a  by-law  adopted  by the  stockholders  or  (iii) a vote
adopted by the holders of a majority of the shares of stock  entitled to vote on
the election of  directors.  Except as the articles of  organization  or by-laws
otherwise  require,  indemnification of any persons referred to in the preceding
sentence who are not directors of the  corporation  may be provided by it to the
extent authorized by the directors.  Such indemnification may include payment by
the corporation of expenses  incurred in defending a civil or criminal action or
proceeding  in advance of the final  disposition  of such action or  proceeding,
upon receipt of an undertaking  by the person  indemnified to repay such payment
if he shall be  adjudicated  to be not  entitled to  indemnification  under this
section which  undertaking  may be accepted  without  reference to the financial
ability  of such  person  to make  repayment.  Any such  indemnification  may be
provided  although  the  person  to be  indemnified  is no  longer  an  officer,
director,  employee or agent of the corporation or of such other organization no
longer serves with respect to any such employee benefit plan.

     No  indemnification  shall be provided  for any person with  respect to any
matter as to which he shall have been  adjudicated in any proceeding not to have
acted in good  faith in the  reasonable  belief  that his action was in the best
interest of the corporation or to the extent that such matter relates to service
with  respect  to an  employee  benefit  plan,  in  the  best  interests  of the
participants or beneficiaries of such employee benefit plan.
<PAGE>

     The absence of any express  provision for  indemnification  shall not limit
any right of indemnification existing independently of this section.

     A corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director,  officer, employee or other agent of the
corporation,  or is or was  serving  at the  request  of  the  corporation  as a
director,  officer,  employee  or other  agent of another  organization  or with
respect to any employee benefit plan,  against any liability  incurred by him in
any such  capacity  or  arising  out of his  status as such  whether  or not the
corporation would have the power to indemnify him against such liability."

     So long as the position of the  Division of  Investment  Management  of the
Securities and Exchange  Commission with respect to  indemnification of officers
and  directors  as set forth in Release No.  IC-11330  dated  September  2, 1980
remains in effect, the Registrant undertakes that it will not indemnify any such
officer or  director  pursuant  to clause (B) or (C) of  Paragraph  (b) (iii) of
Article  XIV of the  Registrant's  Articles  of  Organization  in the absence of
written  determination  by  independent  legal  counsel  that the  person  being
indemnified  was not liable to the Registrant or its  shareholders  by reason of
disabling  conduct,  unless in the  opinion of its  counsel  the matter has been
settled by controlling precedent.

     Registrant's  Directors  and officers are insured  under a standard  mutual
fund errors and omissions  insurance  policy covering loss incurred by reason of
negligent errors and omissions committed in their capacities as such.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

     Registrant incorporates herein by reference the information set forth under
the caption  "Investment  Adviser and  Administrator"  from Part I of the Feeder
Fund's SAI.

Item 29.  PRINCIPAL UNDERWRITERS

     Not applicable  because  Registrant does not make a continuous  offering of
its shares.

Item 30.          LOCATION OF ACCOUNTS AND RECORDS

     All applicable accounts,  books, and documents required to be maintained by
Registrant by Section 31(a) of the Investment  Company Act of 1940 and the Rules
promulgated  thereunder are in the  possession  and custody of the  Registrant's
custodian,  Investors Bank & Trust Company,  89 South Street,  Boston, MA 02110,
and the Registrant's  transfer agent,  First Data Investor  Services Group, 4400
Computer Drive,  Westborough,  Massachusetts  01581-5120,  with the exception of
certain  corporate  documents and portfolio  trading documents as prescribed and
listed in Rules  31a-1(b),  (4), (5), (6), (7), (9), (10), and (11) which are in
the possession and custody of the  Registrant's  Treasurer at 24 Federal Street,
Boston,   Massachusetts  02110.  Registrant  is  informed  that  all  applicable
accounts, books and documents required to be maintained by registered investment
advisers  are in the  custody  and  possession  of  the  Portfolio's  investment
adviser, BMR, 24 Federal Street, Boston, Massachusetts 02110.
<PAGE>

Item 31. MANAGEMENT SERVICES

     Not Applicable

Item 32. UNDERTAKINGS

     Not Applicable
<PAGE>

                                    SIGNATURE


     Pursuant to the  requirements  of the  Investment  Company Act of 1940, the
Registrant  has duly  caused  this  Amendment  to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Boston and Commonwealth of
Massachusetts, on the 28th day of February, 1997.



                           DIVERSIFICATION FUND, INC.



                            By /S/ JAMES L. O'CONNOR
                            -----------------------------------
                            James L. O'Connor, Treasurer
<PAGE>


                                  EXHIBIT INDEX


The following exhibits are filed as part of this Registration Statement.




EXHIBIT NO.          DESCRIPTION

<TABLE> <S> <C>

<ARTICLE> 6
<CIK> 0000029156
<NAME> DIVERSIFICATION FUND
       
<S>                             <C>
<PERIOD-TYPE>                   5-MOS
<FISCAL-YEAR-END>                          OCT-31-1996
<PERIOD-END>                               OCT-31-1996
<INVESTMENTS-AT-COST>                       19,970,783
<INVESTMENTS-AT-VALUE>                      87,095,874
<RECEIVABLES>                                        0
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                              87,095,874
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                        6,626
<TOTAL-LIABILITIES>                              6,626
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                             0
<SHARES-COMMON-STOCK>                          339,348
<SHARES-COMMON-PRIOR>                                0
<ACCUMULATED-NII-CURRENT>                      131,719
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                     28,914,221
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                    67,125,091
<NET-ASSETS>                                87,089,248
<DIVIDEND-INCOME>                              491,310
<INTEREST-INCOME>                               57,409
<OTHER-INCOME>                               (229,241)
<EXPENSES-NET>                                  26,972
<NET-INVESTMENT-INCOME>                        292,506
<REALIZED-GAINS-CURRENT>                     2,022,743
<APPREC-INCREASE-CURRENT>                    3,497,874
<NET-CHANGE-FROM-OPS>                        5,813,123
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                      415,402
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                              0
<NUMBER-OF-SHARES-REDEEMED>                     12,342
<SHARES-REINVESTED>                                338
<NET-CHANGE-IN-ASSETS>                       2,493,206
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                            0
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                                0
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                 26,972
<AVERAGE-NET-ASSETS>                        83,308,897
<PER-SHARE-NAV-BEGIN>                           240.77
<PER-SHARE-NII>                                  0.863
<PER-SHARE-GAIN-APPREC>                         16.207
<PER-SHARE-DIVIDEND>                           (1.200)
<PER-SHARE-DISTRIBUTIONS>                            0
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                             256.64
<EXPENSE-RATIO>                                   0.74
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>


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