<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1995
1933 ACT FILE NO. 2-74378
1940 ACT FILE NO. 811-3283
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
[X]
POST-EFFECTIVE AMENDMENT NO. 18
[X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
[X]
AMENDMENT NO. 20
[X]
EATON VANCE TOTAL RETURN TRUST
(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)
H. DAY BRIGHAM, JR.
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(NAME AND ADDRESS OF AGENT FOR SERVICE)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON MAY 1, 1995
PURSUANT TO PARAGRAPH (A) OF RULE 485.
THE EXHIBIT INDEX REQUIRED BY RULE 483(A) UNDER THE SECURITIES ACT OF 1933
IS LOCATED ON PAGE IN THE SEQUENTIAL NUMBERING SYSTEM OF THE MANUALLY SIGNED
COPY OF THIS REGISTRATION STATEMENT.
THE REGISTRANT HAS FILED A DECLARATION PURSUANT TO RULE 24F-2 AND ON
FEBRUARY 16, 1995 FILED ITS "NOTICE" AS REQUIRED BY THAT RULE FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1994.
TOTAL RETURN PORTFOLIO HAS ALSO EXECUTED THIS REGISTRATION STATEMENT.
================================================================================
<PAGE>
This Amendment to the Registration Statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under Securities Act of 1933
Part A--The Prospectus of:
EV Classic Total Return Fund
Part B--Statement of Additional Information of:
EV Classic Total Return Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectuses and Statements of
Additional Information of any other Fund of the Trust not identified above.
<PAGE>
EATON VANCE TOTAL RETURN TRUST
EV CLASSIC TOTAL RETURN FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1. Cover Page Cover Page
2. Synopsis Shareholder and Fund Expenses
3. Condensed Financial The Fund's Financial Highlights;
Information Performance Information
4. General Description The Fund's Investment Objectives;
of Registrant How the Fund and the Portfolio
Invest their Assets; Leverage
Through Borrowing -- Lending of
Securities; Options and Futures
Transactions and Strategies;
Organization of the Fund and the
Portfolio
5. Management of the Management of the Fund and the
Fund Portfolio; Organization of the
Fund and the Portfolio; Back Cover
5a. Management's Not Applicable
Discussion of
Fund Performance
6. Capital Stock and Organization of the Fund and the
Other Securities Portfolio; The Lifetime Investing
Account/ Distribution Options;
Distributions and Taxes
7. Purchase of How the Fund and the Portfolio
Securities Being Invest their Assets; How to Buy
Offered Fund Shares;The Lifetime
Investing Account/Distribution
Options; Eaton Vance Shareholder
Services; Distribution Plan; Back
Cover
8. Redemption or How to Redeem Fund Shares
Repurchase
9. Pending Legal Not Applicable
Proceedings
PART B STATEMENT OF
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION CAPTION
- -------- ------------ ------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Investment Objective and Policies
Objectives and
Policies
14. Management of the Trustees and Officers
Fund
15. Control Persons and Control Persons and Principal
Principal Holders Holders of Securities
of Securities
16. Investment Advisory Investment Adviser and
and Other Services Administrator; Custodian;
Distribution Plan; Other
Information; Back Cover
17. Brokerage Allocation Portfolio Security Transactions;
and Other Investment Objective and Policies
Practices
18. Capital Stock and Other Information
Other Securities
19. Purchase, Redemption Determination of Net Asset Value;
and Pricing of Purchase and Redemption of
Securities Being Shares; Distribution Plan
Offered
20. Tax Status Taxes
21. Underwriters Principal Underwriter
22. Calculation of Investment Performance
Performance Data
23. Financial Statements Financial Statements
<PAGE>
Part A
Information Required in a Prospectus
EV CLASSIC TOTAL RETURN FUND
EV CLASSIC TOTAL RETURN FUND (THE "FUND") IS A MUTUAL FUND SEEKING HIGH
TOTAL RETURN FROM RELATIVELY PREDICTABLE INCOME IN CONJUNCTION WITH CAPITAL
APPRECIATION, CONSISTENT WITH PRUDENT MANAGEMENT AND PRESERVATION OF CAPITAL.
THE FUND INVESTS ITS ASSETS IN TOTAL RETURN PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE TOTAL RETURN TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of some
or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated May 1, 1995 for the Fund, as supplemented from
time to time, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. This Statement of Additional Information is
available without charge from the Fund's Principal Underwriter, Eaton Vance
Distributors, Inc., 24 Federal Street, Boston, MA 02110 (telephone (800)
225-6265). The Portfolio's investment adviser is Boston Management and Research
(the "Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management,
and Eaton Vance Management is the administrator (the "Administrator") of the
Fund. The offices of the Investment Adviser and the Administrator are located at
24 Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
Page Page
<S> <C> <S> <C>
Shareholder and Fund Expenses ...................... 2 Valuing Fund Shares ............................ 14
The Fund's Financial Highlights .................... 3 How to Buy Fund Shares ......................... 15
The Fund's Investment Objectives ................... 4 How to Redeem Fund Shares ...................... 16
How the Fund and the Portfolio Invest Reports to Shareholders ........................ 18
their Assets ..................................... 4 The Lifetime Investing Account/Distribution
Leverage Through Borrowing -- Lending of Options ...................................... 18
Securities ....................................... 7 The Eaton Vance Exchange Privilege ............. 19
Organization of the Fund and the Portfolio ......... 8 Eaton Vance Shareholder Services ............... 20
Management of the Fund and the Portfolio ........... 11 Distributions and Taxes ........................ 21
Distribution Plan .................................. 12 Performance Information ........................ 22
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MAY 1, 1995
<PAGE>
<TABLE>
SHAREHOLDER AND FUND EXPENSES<F1>
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charge Imposed on Redemption During the First Year (as a percentage of
redemption proceeds exclusive of all reinvestments and capital appreciation in the account)<F2> 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Adviser Fee 0.74%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Other Expenses 0.92%
----
Total Operating Expenses<F3> 2.66%
====
</TABLE>
<TABLE>
EXAMPLE:
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a contingent deferred
sales charge in the case of redemption during the first year after purchase) on
a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each time period: $37 $83 $141 $299
An investor would pay the following expenses on the same investment,
assuming (a) 5% return and (b) no redemptions: $27 $83 $141 $299
<FN>
Notes:
<F1> The purpose of the above table and Example is to summarize the aggregate
expenses of the Fund and the Portfolio and to assist investors in
understanding the various costs and expenses that investors in the Fund
will bear directly or indirectly. The Trustees of the Trust believe that
over time the aggregate per share expenses of the Fund and the Portfolio
should be approximately equal to the per share expenses which the Fund
would incur if the Trust retained the services of an investment adviser and
the assets of the Fund were invested directly in the type of securities
being held by the Portfolio. The percentages indicated as Annual Fund and
Allocated Portfolio Operating Expenses and the amounts included in the
Example are based on the Fund's and the Portfolio's results for the fiscal
year ended December 31, 1994. The table and Example should not be
considered a representation of future expenses since future expenses and
actual expenses may be greater or less than those shown. For further
information regarding the expenses of both the Fund and the Portfolio see
"The Fund's Financial Highlights," "Organization of the Fund and the
Portfolio", and "Management of the Fund and the Portfolio" and "How to
Redeem Fund Shares". Because the Fund makes payments under its Distribution
Plan adopted under Rule 12b-1, a long-term shareholder may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
a rule of the National Association of Securities Dealers, Inc. See
"Distribution Plan." Other investment companies with different distribution
arrangements and fees are investing in the Portfolio and additional such
companies may do so in the future. See "Organization of the Fund and the
Portfolio".
<F2> The contingent deferred sales charge will be imposed on the redemption of
shares purchased on or after January 30, 1995. No contingent deferred sales
charge is imposed on (a) shares purchased more than one year prior to
redemption, (b) shares acquired through the reinvestment of dividends and
distributions or (c) any appreciation in value of other shares in the
account (see "How to Redeem Fund Shares"), and no such charge is imposed on
exchanges of Fund shares for shares of one or more other funds under "The
Eaton Vance Exchange Privilege."
<F3> Absent an allocation of expenses to the Administrator, Other Expenses would
have been 1.96%, and Total Operating Expenses would have been 3.70%.
</TABLE>
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements included in the Statement of Additional Information, all of which has
been so included in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in the Fund's
annual report to shareholders which may be obtained without charge by contacting
the Fund's Principal Underwriter, Eaton Vance Distributors, Inc.
- ------------------------------------------------------------------------------
1994 1993*
---- ----
NET ASSET VALUE -- Beginning of period $10.0300 $10.0000
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income $ 0.3167 $ 0.0253
Net realized and unrealized gain
(loss) on investments (1.6077) 0.0577
-------- --------
Total income (loss) from
investment operations $(1.2910) $ 0.0830
-------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income $(0.3003) $(0.0253)
Tax return of capital (0.0577) (0.0277)
-------- --------
Total distributions $(0.3590) $(0.0530)
-------- --------
NET ASSET VALUE -- End of period $ 8.3800 $10.0300
======== ========
TOTAL RETURN(1) (12.26)% 0.83%
RATIOS/SUPPLEMENTAL DATA: (to average daily
net assets)**
Expenses(2) 2.66% 0.83%+
Net investment income 3.32% 2.56%+
NET ASSETS AT END OF PERIOD (000'S OMITTED) $ 5,589 $ 3,461
+Computed on an annualized basis.
*For the period from the start of business, November 1, 1993, to December 31,
1993.
**The expenses related to the operation of the Fund reflect an allocation of
expenses to the Administrator. Had such action not been taken, the ratios
would have been as follows:
Ratios (to average daily net assets)
Expenses(2) 3.70% 2.22%+
Net investment income 2.29% 1.17%+
(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 the period
reported. Dividends and distributions, if any, are assumed to be reinvested
at the net asset value on the record date.
(2) Includes the Fund's share of Total Return Portfolio's allocated expenses for
the year ended December 31, 1994 and the period from November 1, 1993, to
December 31, 1993.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO SEEK FOR ITS SHAREHOLDERS A HIGH LEVEL OF
TOTAL RETURN, CONSISTING OF RELATIVELY PREDICTABLE INCOME IN CONJUNCTION WITH
CAPITAL APPRECIATION, CONSISTENT WITH PRUDENT MANAGEMENT AND PRESERVATION OF
CAPITAL. The Fund seeks to meet its investment objective by investing its assets
in the Portfolio, a separate registered investment company which has the same
investment objective as the Fund. The Fund's and the Portfolio's investment
objective are nonfundamental and may be changed when authorized by a vote of the
Trustees of the Trust or the Portfolio, respectively, without obtaining the
approval of the Fund's shareholders or the investors in the Portfolio, as the
case may be. The Trustees of the Trust have no present intention to change the
Fund's objective and intend to submit any proposed material change in the
investment objective to shareholders in advance for their approval.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- ------------------------------------------------------------------------------
THE PORTFOLIO SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING PRINCIPALLY IN COMMON
STOCKS WITH ABOVE AVERAGE YIELDS AND WITH THE POTENTIAL TO INCREASE DIVIDENDS IN
THE FUTURE. The Portfolio may also invest in preferred stocks. The Portfolio
concentrates its investments in common stocks of public utilities ("utility
stocks"), principally electric, gas and telephone companies. Accordingly, the
Portfolio invests at least 25% of its total assets and may invest all of its
assets in utility stocks. Fixed-income securities will also be held from time to
time when their total return potential appears above average. The Portfolio may
invest its cash reserves in high quality money market securities, which include
securities of the U.S. Government and its agencies or instrumentalities maturing
in one year or less, commercial paper, and bankers' acceptances and certificates
of deposit of domestic banks or savings and loan associations having total
assets of $1 billion or more. The Portfolio may also invest in longer term debt
securities which are rated at the time of purchase within the three highest
grades assigned by Moody's Investors Service, Inc., Standard & Poor's Ratings
Group, Fitch Investors Service, Inc. or Duff & Phelps, Inc., or which are
issued, guaranteed, backed or secured at the time of purchase by the U.S.
Government or any of its agencies or instrumentalities. The Portfolio currently
intends to limit its investments in these securities to 5% or less of its total
net assets. The Portfolio would dispose of a debt security whose rating drops
below the three highest grades as promptly as possible.
UTILITY STOCKS. In view of the Portfolio's policy of concentrating its
investments in utility stocks, an investment in shares of the Fund should be
made with an understanding of the characteristics of the public utility industry
and the potential risks of such an investment. Industry-wide problems include
the effects of fluctuating economic conditions, energy conservation practices,
environmental regulations, high capital expenditures, construction delays due to
pollution control and environmental considerations, uncertainties as to fuel
availability and costs, increased competition in deregulated sectors of the
industry, and difficulties in obtaining timely and adequate rate relief from
regulatory commissions. If applications for rate increases are not granted or
are not acted upon promptly, the market prices of and dividend payments on
utility stocks may be adversely affected. The Portfolio's policy of
concentrating in utility stocks is a fundamental policy and may not be changed
unless authorized by an investor vote. The Fund has a similar fundamental policy
which cannot be changed unless authorized by a shareholder vote.
REPURCHASE AGREEMENTS. The Portfolio may also enter into so-called repurchase
agreements with respect to securities of the U.S. Government and its agencies or
instrumentalities with the seller of such securities, usually a bank. Under a
repurchase agreement, the seller agrees to repurchase the securities at the
Portfolio's cost plus interest within a specified time (normally one day).
Repurchase agreements involve a risk that the value of the securities subject to
the repurchase agreement may decline to an amount less than the repurchase price
and that, in the event of the seller's bankruptcy or insolvency, the Portfolio
may be prevented from disposing of such securities. In connection with any
repurchase agreement entered into with a dealer or bank engaged in a securities
related business, the Portfolio will comply with the collateralization policies
of the Securities and Exchange Commission (the "Commission"). These policies
require that the Portfolio or its custodian obtain actual or constructive
possession of the collateral and that the market value of the securities held as
collateral be marked to the market daily and at least equal the repurchase price
during the term of the agreement. The Portfolio intends that the total of its
investments, if any, in repurchase agreements maturing in more than 7 days and
restricted securities will not exceed 15% of its net assets.
REAL ESTATE INVESTMENT TRUSTS. The Portfolio may invest a significant portion of
its assets in the securities of real estate investment trusts ("REITS"), which
are affected by conditions in the real estate industry interest rates and, in
the case of REIT's investing in health care facilities, the health care
industry.
INVESTMENT RESTRICTIONS. The Fund and the Portfolio have adopted certain
fundmental investment restrictions which are enumerated in detail in the
Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote and an investor vote, respectively. Except for
such enumerated restrictions and as otherwise indicated in this prospectus, the
investment objective and policies of the Fund and the Portfolio are not
fundamental policies and accordingly may be changed by the Trustees of the Trust
and the Portfolio without obtaining the approval of the Fund's shareholders or
the investors in the Portfolio, as the case may be. If any changes were made in
the Fund's investment objective, the Fund might have investment objectives
different from the objectives which an investor considered appropriate at the
time the investor became a shareholder of the Fund.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or enter into derivative
instruments to enhance return, to hedge against fluctuations in securities
prices or as a substitute for the purchase or sale of securities. The
Portfolio's transactions in derivative contracts may include the purchase or
sale of futures contracts on securities or indices; options on futures
contracts; or options on securities or indices. All of the Portfolio's
transactions in derivative instruments involve a risk of loss or depreciation
due to unanticipated adverse changes in securities prices. The loss on
derivative contracts (other than purchased options) may exceed the Portfolio's
initial investment in these contracts. In addition, the Portfolio may lose the
entire premium paid for purchased options that expire before they can be
profitably exercised by the Portfolio.
Derivative Contracts. As mentioned above, the Portfolio may purchase and
sell a variety of derivative contracts. The Portfolio incurs liability to a
counterparty in connection with transactions in futures contracts and in selling
options. The Portfolio pays a premium for purchased options. In addition, the
Portfolio incurs transaction costs in opening and closing positions in
derivative contracts.
The Portfolio may write (sell) covered call and put options with respect to
up to 50% of its net assets. All call options written by the Portfolio are
covered, which means that the Portfolio will own the securities subject to the
option or an offsetting call option so long as the option is outstanding. All
put options written by the Portfolio would be covered, which means that the
Portfolio would own offsetting put options or would have deposited with its
custodian cash, U.S. Government securities or other liquid high grade debt
securities with a value at least equal to the exercise price of the put option.
The Portfolio may purchase put and call options on any securities in which the
Portfolio may invest or options on any securities index composed of securities
in which the Portfolio may invest.
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS. There is no assurance that a liquid
secondary market on an options exchange will exist for any particular option, or
at any particular time. If the Portfolio is unable to effect a closing purchase
transaction with respect to covered options it has written, the Portfolio will
not be able to sell the underlying securities or dispose of assets held in a
segregated account until the options expire or are exercised. Similarly, if the
Portfolio is unable to effect a closing sale transaction with respect to options
it has purchased, it would have to exercise the options in order to realize any
profit and will incur transaction costs upon the purchase or sale of underlying
securities.
To hedge against changes in interest rates or securities prices, the
Portfolio has the authority to purchase and sell various kinds of futures
contracts, and purchase and write call and put options on any of such futures
contracts; it may also enter into closing purchase and sale transactions with
respect to any of such contracts and options. The futures contracts may be based
on various securities (such as U.S. Government securities), securities indices
and other financial instruments and indices. The Portfolio may not purchase or
sell futures contracts or purchase or sell related options, except for closing
purchase or sale transactions, if immediately thereafter the sum of the amount
of initial margin deposits on the Portfolio's outstanding positions in futures
and related options and the amount of premiums paid for outstanding positions in
options on futures would exceed 5% of the market value of the Portfolio's net
assets. These transactions involve brokerage costs, require margin deposits and,
in the case of contracts and options obligating the Portfolio to purchase
securities, require the Portfolio to segregate liquid high grade debt securities
in an amount equal to the underlying value of such contracts and options.
RISKS ASSOCIATED WITH DERIVATIVE CONTRACTS. The risks associated with the
Portfolio's transaction in derivative securities and contracts may include some
or all of the following: (1) market risks; (2) leverage and volatility risk; (3)
correlation risk; (4) credit risk; and (5) liquidity and valuation risk.
Market Risk. Entering into a derivative contract involves a risk that the
applicable market will move against the Portfolio's position and that the
Portfolio will incur a loss. For derivative contracts other than purchased
options, this loss may exceed the amount of the initial investment made or the
premium received by the Portfolio.
Leverage and Volatility Risk. Derivative instruments may sometimes increase
or leverage the Portfolio's exposure to a particular market risk. Leverage
enhances the price volatility of derivative instruments held by the Portfolio.
The Portfolio may partially offset the leverage inherent in derivative contracts
by maintaining a segregated account consisting of cash and liquid, high grade
debt securities, by holding offsetting portfolio securities or contracts or by
covering written options.
Correlation Risk. The Portfolio's success in using derivative instruments to
hedge portfolio assets depends on the degree of price correlation between the
derivative instrument and the hedged asset. Imperfect correlation may be caused
by several factors, including temporary price disparities among the trading
markets for the derivative instrument, the assets underlying the derivative
instrument and the Portfolio's assets.
Credit Risk. Derivative securities and over-the-counter derivative
contracts involve a risk that the issuer or counterparty will fail to perform
its contractual obligations.
Liquidity and Valuation Risk. Some derivative securities are not readily
marketable or may become illiquid under adverse market conditions. In addition,
during periods of extreme market volatility, a commodity or exchange may suspend
or limit trading in an exchange-traded derivative contract, which may make the
contract temporarily illiquid and difficult to price. The staff of the Exchange
Commission takes the position that certain over-the-counter options are subject
to the Portfolio's 15% limit on illiquid investments. The Portfolio's ability to
terminate over-the-counter derivative contracts may depend on the cooperation of
the counterparties to such contracts. The Portfolio expects to purchase and
write only exchange traded options until such time as the Portfolio's management
determines that the over-the-counter options market is sufficiently developed
and the Portfolio has amended its prospectus so that appropriate disclosure is
furnished to prospective and existing shareholders. For thinly traded derivative
securities and contracts, the only source of price quotations may be the selling
dealer or counterparty.
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Securities and Exchange Commission (the
"Commission"), such loans would be required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities held by the
Portfolio's custodian and maintained on a current basis at an amount at least
equal to the market value of the securities loaned which will be marked to
market daily. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on five business days' notice. During the
existence of a loan, the Portfolio will continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned and will
also receive a fee, or all or a portion of the interest on investment of the
collateral, if any. However, the Portfolio may pay lending fees to such
borrowers. The Portfolio would not have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities or
the giving or withholding of their consent on a material matter affecting the
investment. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of the
securities fails financially. However, the loans would be made only to
organizations deemed by the Portfolio's management to be of good standing and,
when, in the judgment of the Portfolio's management, the consideration which can
be earned from securities loans of this type justifies the attendant risk. If
the management of the Portfolio decides to make securities loans, it is intended
that the value of the securities loaned would not exceed 30% of the Portfolio's
total assets.
THE FUND IS NOT INTENDED TO BE A COMPLETE INVESTMENT PROGRAM, AND A PROSPECTIVE
INVESTOR SHOULD TAKE INTO ACCOUNT HIS OR HER OBJECTIVES AND OTHER INVESTMENTS
WHEN CONSIDERING THE PURCHASE OF FUND SHARES. THE FUND CANNOT ELIMINATE RISK OR
ASSURE ACHIEVEMENT OF ITS OBJECTIVE.
- ------------------------------------------------------------------------------
LEVERAGE THROUGH BORROWING -- LENDING OF SECURITIES
- ------------------------------------------------------------------------------
THE PORTFOLIO MAY FROM TIME TO TIME INCREASE ITS OWNERSHIP OF PORTFOLIO
SECURITIES ABOVE THE AMOUNTS OTHERWISE POSSIBLE BY BORROWING FROM BANKS ON AN
UNSECURED BASIS AT FIXED OR VARIABLE RATES OF INTEREST AND INVESTING THE
BORROWED FUNDS. The Portfolio's investment adviser, Boston Management and
Research ("BMR" or the "Investment Adviser"), currently anticipates that the
Portfolio will incur borrowings for the purpose of acquiring additional
income-producing securities when it is believed that the interest payable with
respect to such borrowings will be exceeded by (a) the income payable on the
securities acquired with such borrowings or (b) the anticipated total return (a
combination of income and appreciation) on such securities. Such borrowings
might be made, for example, when short-term interest rates fall below the yields
available from the securities acquired with the borrowed funds or the total
return anticipated from such securities.
The Portfolio is required to maintain asset coverage of at least 300% with
respect to such borrowings, which means that the Portfolio may borrow an amount
up to 50% of the value of its net assets (not including such borrowings). The
Portfolio may be required to dispose of securities held by it on unfavorable
terms if market fluctuations or other factors reduce such asset coverage to less
than 300%.
Leveraging will exaggerate any increase or decrease in the market value of
the securities held by the Portfolio. Money borrowed for leveraging will be
subject to interest costs which may or may not exceed the income from the
securities purchased. The Portfolio may also be required to maintain minimum
average balances in connection with such borrowing or to pay a commitment or
other fee to maintain a line of credit; either of these requirements will
increase the cost of borrowing over the stated interest rate. Unless the income
and appreciation, if any, on assets acquired with borrowed funds exceeds the
cost of borrowing, the use of leverage will diminish the investment performance
of the Portfolio compared with what it would have been without leverage.
The Portfolio and the other investment companies managed by BMR or Eaton
Vance Management participate in a Line of Credit Agreement (the "Credit
Agreement") with Citibank N.A. ("Citibank"). Citibank agrees, in the Credit
Agreement, to consider requests from the Portfolio and such other investment
companies that Citibank make advances ("Advances") to the Portfolio and such
other investment companies from time to time. The aggregate amount of all such
Advances to all such borrowers will not exceed $120,000,000, $100,000,000 of
which is a discretionary facility and $20,000,000 a committed facility. The
Portfolio has currently determined that its borrowings under the Credit
Agreement will not exceed, at any one time outstanding, the lesser of (a) 1/3 of
the current market value of the net assets of the Portfolio or (b) $60,000,000
(the "Amount Available to the Portfolio"). The Portfolio is obligated to pay to
Citibank, in addition to interest on Advances made to it, a quarterly fee on the
$20,000,000 committed facility and on the daily unused portion of the Amount
Available to the Portfolio at the rate of 1/4 of 1% per annum. The Credit
Agreement may be terminated by Citibank or the borrowers at any time upon 30
days' prior written notice. The Portfolio expects to use the proceeds of the
Advances primarily for leveraging purposes. As at December 31, 1994, the
Portfolio had no outstanding loans pursuant to the Credit Agreement. The average
daily loan balance for the year ended December 31, 1994 was $3,137,134 and the
average daily interest rate was 5.96%.
The Portfolio will not always borrow money for additional investments. The
Portfolio's willingness to borrow money for investment purposes, and the amount
it will borrow, will depend on many factors, the most important of which are the
investment outlook, market conditions and interest rates. Successful use of a
leveraging strategy depends on the Investment Adviser's ability to predict
correctly interest rates and market movements, and there is no assurance that a
leverage strategy will be successful during any period in which it is employed.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE FUND IS A DIVERSIFIED SERIES OF THE TRUST, A BUSINESS TRUST ESTABLISHED
UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST DATED OCTOBER 9,
1981, AS AMENDED. THE TRUST IS A MUTUAL FUND -- AN OPEN-END MANAGEMENT
INVESTMENT COMPANY. The Trustees of the Trust are responsible for the overall
management and supervision of its affairs. The Fund has one class of shares of
beneficial interest, an unlimited number of which may be issued. Each share
represents an equal proportionate beneficial interest in the Fund. When issued
and outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. Upon liquidation of the Fund, shareholders are entitled to share
pro rata in the net assets of the Fund available for distribution to
shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW
YORK AND IS TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The Portfolio, as
well as the Trust, intends to comply with all applicable Federal and state
securities laws. The Portfolio's Declaration of Trust provides that the Fund and
other entities permitted to invest in the Portfolio (e.g., other U.S. and
foreign investment companies, and common and commingled trust funds) will each
be liable for all obligations of the Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective.
Therefore, the Fund's interest in the securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may sell
interests to other affiliated and non-affiliated mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to sell
their shares at the same public offering price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions, see "The Fund's Investment
Objective" and "How the Fund and the Portfolio Invest their Assets". Further
information regarding investment practices may be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund, at
least when the assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be changed
by the Trustees of the Trust and the Portfolio without obtaining the approval of
the shareholders of the Fund or the investors in the Portfolio. Any such change
of the investment objective will be preceded by thirty days advance written
notice to the shareholders of the Fund or the investors in the Portfolio, as the
case may be. If a shareholder redeems shares because of a change in the
nonfundamental objective or policies of the Fund, those shares may be subject to
a contingent deferred sales charge, as described in "How to Redeem Fund Shares".
In the event the Fund withdraws all of its assets from the Portfolio, or the
Board of Trustees of the Trust determines that the investment objective of the
Portfolio is no longer consistent with the investment objective of the Fund,
such Trustees would consider what action might be taken, including investing all
the assets of the Fund in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal of
all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller funds investing in the Portfolio may be adversely
affected by the actions of larger funds investing in the Portfolio. For example,
if a large fund withdraws from the Portfolio, the remaining funds may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large or
institutional investors.
Until recently, the Administrator sponsored and advised historically
structured funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund industry
and, therefore, the Fund may be subject to additional regulations than
historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all 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. See
"Distributions and Taxes" for further information. Whenever the Fund 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 Fund
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 Fund shareholders. The Fund 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 Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the non-interested
Trustees, have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take action to resolve any conflict of interest between the Fund
and the Portfolio, and it is possible that the creation of separate boards may
be considered. For further information concerning the Trustees and officers of
the Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of .0625% (equal to .75% annually) of the average daily net assets
of the Portfolio up to $500 million. On net assets of $500 million and over the
annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
- -------------------------------------- -------------------
$500 million but less than $1 billion ....................... 0.6875%
$1 billion but less than $1.5 billion ....................... 0.6250%
$1.5 billion but less than $2 billion ....................... 0.5625%
$2 billion but less than $3 billion ......................... 0.5000%
$3 billion and over ......................................... 0.4375%
For the fiscal year ended December 31, 1994, the Portfolio paid BMR advisory
fees equivalent to 0.74% (annualized) of the Portfolio's average daily net
assets for such period.
BMR also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. The Portfolio is responsible for the payment of
all expenses other than those expressly stated to be payable by BMR under the
investment advisory agreement.
BMR places the portfolio security transactions of the Portfolio for
execution with many broker-dealer firms and uses its best efforts to obtain
execution of such transactions at prices which are advantageous to the Portfolio
and at reasonably competitive commission rates. Subject to the foregoing, BMR
may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions.
Timothy O'Brien is the portfolio manager of the Portfolio. Mr. O'Brien
joined Eaton Vance as a Vice President on April 25, 1994. Prior to joining Eaton
Vance, he served as a Vice President of Loomis, Sayles & Co.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly-held holding company. Eaton Vance Corp. through its
subsidiaries and affiliates, engages in investment management and marketing
activities, fiduciary and banking services, oil and gas operations, real estate
investment, consulting and management, and development of precious metals
properties.
The Trust has retained the services of Eaton Vance to act as Administrator
of the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services Eaton Vance currently receives no
compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
DISTRIBUTION PLAN
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THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940.
Rule 12b-1 permits a mutual fund, such as the Fund, to finance distribution
activities and bear expenses associated with the distribution of its shares
provided that any payments made by the Fund are made pursuant to a written plan
adopted in accordance with the Rule. The Plan is also subject to and complies
with the sales charge rule of the National Association of Securities Dealers,
Inc. (the "NASD Rule"). The Plan is described in the Statement of Additional
Information, and the following is a brief description of the salient features of
the Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay
sales commissions and distribution fees to the Principal Underwriter only after
and as a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of dividends and distributions) the Fund will pay the
Principal Underwriter amounts representing (i) sales commissions equal to 6.25%
of the amount received by the Fund for each share sold and (ii) distribution
fees calculated by applying the rate of 1% over the prime rate then reported in
The Wall Street Journal to the outstanding balance of Uncovered Distribution
Charges (as described below) of the Principal Underwriter. On sales made prior
to January 30, 1995, the Principal Underwriter currently pays monthly sales
commissions to a financial service firm (an "Authorized Firm") in amounts
anticipated to be equivalent to .75%, annualized, of the assets maintained in
the Fund by the customers of such Firm. On sales of shares made on January 30,
1995 and thereafter, the Principal Underwriter currently expects to pay to an
Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. The Plan is designed to permit an
investor to purchase Fund shares through an Authorized Firm without incurring an
initial sales charge and at the same time permit the Principal Underwriter to
compensate Authorized Firms in connection with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO THE PRINCIPAL UNDERWRITER TO AN AMOUNT NOT
EXCEEDING .75% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
Accordingly, the Fund accrues daily an amount at the rate of 1/365 of .75% of
the Fund's net assets, and pays such accrued amounts monthly to the Principal
Underwriter. The Plan requires such accruals to be automatically discontinued
during any period in which there are no outstanding Uncovered Distribution
Charges under the Plan. Uncovered Distribution Charges are calculated daily and,
briefly, are equivalent to all unpaid sales commissions and distribution fees to
which the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. The Eaton
Vance organization may be considered to have realized a profit under the Plan if
at any point in time the aggregate amounts of all payments made to the Principal
Underwriter pursuant to the Plan, including any contingent deferred sales
charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this purpose
will include an allocable portion of the overhead costs of such organization and
its branch offices.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan with respect to each day will be accrued on such day as a liability of the
Fund and will accordingly reduce the Fund's net assets upon such accrual, all in
accordance with generally accepted accounting principles. The amount payable on
each day is limited to 1/365 of .75% of the Fund's net assets on such day. The
level of the Fund's net assets changes each day and depends upon the amount of
sales and redemptions of Fund shares, the changes in the value of the
investments held by the Portfolio, the expenses of the Fund and the Portfolio
accrued and allocated to the Fund on such day, income on portfolio investments
of the Portfolio accrued and allocated to the Fund on such day, and any
dividends and distributions declared on Fund shares. The Fund does not accrue
possible future payments as a liability of the Fund or reduce the Fund's current
net assets in respect of unknown amounts which may become payable under the Plan
in the future because the standards for accrual of a liability under such
accounting principles have not been satisfied.
The provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the Principal
Underwriter. The Plan continues in effect through and including April 28, 1995,
and shall continue in effect indefinitely thereafter for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of
the Trustees then in office, and the Distribution Agreement contains a similar
provision. The Plan and Distribution Agreement may be terminated at any time by
vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter. Conversely,
periods with a low level of sales of Fund shares accompanied by a high level of
early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to reduce the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid to the Principal Underwriter during any fiscal year, a
high level of sales of Fund shares during the initial years of the Fund's
operations would cause a large portion of the sales commission attributable to a
sale of Fund shares to be accrued and paid by the Fund to the Principal
Underwriter in fiscal years subsequent to the year in which such shares were
sold. This spreading of sales commissions payments under the Plan over an
extended period would result in the incurrence and payment of increased
distribution fees under the Plan. For the fiscal year ended December 31, 1994,
the Fund paid sales commissions under the Plan equivalent to 0.75% (annualized)
of the Fund's average daily net assets. As at December 31, 1994 the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under the
Plan amounted to approximately $440,459 (equivalent to 7.9% of the Fund's net
assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees have initially implemented the Plan by authorizing the Fund to make
monthly service fee payments to the Principal Underwriter in amounts not
expected to exceed .25% of the Fund's average daily net assets for any fiscal
year. The Fund accrues the service fee daily at the rate of 1/365 of .25% of the
Fund's net assets. On sales made prior to January 30, 1995, the Principal
Underwriter currently makes monthly service fee payments to an Authorized Firm
in amounts anticipated to be equivalent to .25%, annualized, of the assets
maintained in the Fund by the customers of such Firm. On sales of shares made on
January 30, 1995 and thereafter, the Principal Underwriter currently expects to
pay to an Authorized Firm (a) a service fee (except on exchange transactions and
reinvestments) at the time of sale equal to .25% of the purchase price of the
shares sold by such Firm, and (b) monthly service fees approximately equivalent
to 1/12 of .25% of the value of shares sold by such Firm and remaining
outstanding for at least one year. As permitted by the NASD Rule, all service
fee payments are made for personal services and/or the maintenance of
shareholder accounts. Service fees are separate and distinct from the sales
commissions and distribution fees payable by the Fund to the Principal
Underwriter, and as such are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of the Principal Underwriter.
During the first year after a purchase of Fund shares, the Principal Underwriter
will retain the service fee as reimbursement for the service fee payment made to
the Authorized Firm at the time of sale. For the fiscal year ended December 31,
1994 the Fund paid or accrued service fees equivalent to 0.25% (annualized) of
the Fund's average daily net assets for such period.
The Plan as currently implemented by the Trustees authorizes payments of
sales commissions, distribution fees and service fees to the Principal
Underwriter which may be equivalent, on an aggregate basis during any fiscal
year of the Fund, to 1% of the Fund's average daily net assets for such year.
The Fund believes that the combined rate of all these payments may be higher
than the rate of payments made under distribution plans adopted by other
investment companies pursuant to Rule 12b-1. Although the Principal Underwriter
will use its own funds (which may be borrowed from banks) to pay sales
commissions and service fees at the time of sale, it is anticipated that the
Eaton Vance organization will profit by reason of the operation of the Plan
through increases in the Fund's assets (thereby increasing the advisory fees
payable to BMR by the Portfolio) resulting from sale of Fund shares and through
amounts paid under the Plan to the Principal Underwriter and contingent deferred
sales charges paid to the Principal Underwriter.
The Principal Underwriter may, from time to time, at its own expense,
provide additional incentives to Authorized Firms which employ registered
representatives who sell a minimum dollar amount of the Fund's shares and/or
shares of other funds distributed by the Principal Underwriter. In some
instances, such additional incentives may be offered only to certain Authorized
Firms whose representatives are expected to sell significant amounts of shares.
In addition, the Principal Underwriter may from time to time increase or
decrease the sales commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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THE FUND 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 Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT") (as
agent for the Fund) in the manner authorized by the Trustees of the Trust. Net
asset value is computed by dividing the value of the Fund's total assets, less
its liabilities, by the number of shares outstanding. Because the Fund invests
substantially all of its assets in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which, in turn,
reflects an interest in the underlying value of the Portfolio's assets and
liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of
regular trading on the Exchange. IBT (as custodian and agent for the Portfolio)
determines the Portfolio's net asset value in the manner authorized by the
Trustees of the Portfolio. The net asset value is computed by subtracting the
liabilities of the Portfolio from the value of its total assets. Securities
listed on securities exchanges or in the NASDAQ National Market are valued at
closing sales prices. Unlisted or listed securities for which closing sales
prices are not available are valued at the mean between the latest available bid
and asked prices. An option or futures contract is valued at the last sale
price, as quoted on the principal exchange or board of trade on which such
option or contract is traded or, in the absence of a sale, the mean between the
last bid and asked prices. Short-term obligations, maturing in sixty days or
less, are valued at amortized cost, which is believed to represent fair value.
Securities for which market quotations are unavailable, including any security
the disposition of which is restricted under the Securities Act of 1933, and
other assets will be appraised at their fair value as determined in good faith
by or at the direction of the Trustees of the Portfolio. For further information
regarding the valuation of the Portfolio's assets, see "Determination of Net
Asset Value" in the Statement of Additional Information. Eaton Vance Corp. owns
77.3% of the outstanding stock of IBT, the Fund's and the Portfolio's custodian.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THEIR CURRENT NET ASSET VALUE.
- ------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse any order for the purchase of shares.
An initial investment in the Fund must be at least $1,000. Once an account
has been established the investor may send investments of $50 or more at any
time directly to the Fund's Transfer Agent (the "Transfer Agent") as follows:
The Shareholder Services Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104.
The $1,000 minimum initial investment is waived for Bank Draft Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates his or her participation in the plan, the shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities or securities and cash accepted for deposit is $5,000. Securities
accepted will be sold by IBT as agent for the account of their owner on the day
of their receipt by IBT or as soon thereafter as possible. The number of Fund
shares to be issued in exchange for securities will be the aggregate proceeds
from the sale of such securities divided by the applicable net asset value per
Fund share on the day such proceeds are received. Eaton Vance will use
reasonable efforts to obtain the current market price for such securities but
does not guarantee the best available price. Eaton Vance will absorb any
transaction costs, such as commissions, on the sale of securities.
Securities determined to be acceptable should be transferred via book entry
or physically delivered, in proper form for transfer, through an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Classic Total Return Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Total Return Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, are advised to contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities to IBT.
Eaton Vance reserves the right to reject any securities. Exchanging securities
for Fund shares may create a taxable gain or loss. Each investor should consult
his or her tax adviser with respect to the particular Federal, state and local
tax consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
- ------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO THE SHAREHOLDER SERVICES
GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MA 02104 during its business hours a
written request for redemption in good order, plus any share certificates with
executed stock powers. The redemption price will be based on the net asset value
per Fund share 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 and acceptable to The Shareholder Services Group, Inc.
In addition, in some cases, good order may require the furnishing of additional
documents such as where shares are registered in the name of a corporation,
partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by The
Shareholder Services Group, Inc., the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charges described below and Federal
income tax required to be withheld. Although the Fund normally expects to make
payment in cash for redeemed shares, the Trust, subject to compliance with
applicable regulations, has reserved the right to pay the redemption price of
shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or
repurchase) will not be sent until the check (including a certified or cashier's
check) received for the shares purchased has cleared. Payment for shares
tendered for redemption may be delayed up to 15 days from the purchase date when
the purchase check has not yet cleared. Redemptions or repurchases may therefore
result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $1,000. Prior to such a
redemption, shareholders will be given 60 days written notice to make an
additional purchase. Thus, an investor making an initial investment of $1,000
would not be able to redeem shares without being subject to this policy.
However, no such redemption would be required by the Fund if the cause of the
low account balance was a reduction in the net asset value of Fund shares. No
contingent deferred sales charge will be imposed with respect to such
involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares purchased on or after January 30, 1995
and redeemed within the first year of their purchase (except shares acquired
through the reinvestment of distributions) generally will be subject to a
contingent deferred sales charge. This contingent deferred sales charge is
imposed on any redemption, the amount of which exceeds the aggregate value at
the time of redemption of (a) all shares in the account purchased more than one
year prior to the redemption, (b) all shares in the account acquired through
reinvestment of distributions, and (c) the increase, if any, of value in the
other shares in the account (namely those purchased within the year preceding
the redemption) over the purchase price of such shares. Redemptions are
processed in a manner to maximize the amount of redemption proceeds which will
not be subject to a contingent deferred sales charge; i.e., each redemption will
be assumed to have been made first from the exempt amounts referred to in
clauses (a), (b) and (c) above, and second through liquidation of those shares
in the account referred to in clause (c) on a first-in-first- out basis. Any
contingent deferred sales charge which is required to be imposed on share
redemptions will be equal to 1% of the net asset value of redeemed shares.
No contingent deferred sales charge will be imposed on Fund shares which
have been sold to Eaton Vance, its affiliates, to their respective employees or
clients. The contingent deferred sales charge will also be waived for shares
redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder
Services"), (2) as part of a distribution from a retirement plan qualified under
Section 401, 403(b) or 457 of the Internal Revenue Code, or (3) as part of a
minimum required distribution from other tax-sheltered retirement plans. The
contingent deferred sales charge will be paid to the Principal Underwriter or
the Fund. When paid to the Principal Underwriter it will reduce the amount of
Uncovered Distribution Charges calculated under the Fund's Distribution Plan.
See "Distribution Plan."
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each yaer, the Fund will furnish all shareholders with
information necessary for preparing Federal and State income tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE TO The Shareholder Services Group,
Inc.
Any questions concerning a shareholder's account or services available may
be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number.
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME
INVESTING ACCOUNTS and may be changed as often as desired by written notice to
the Fund's dividend-disbursing agent, The Shareholder Services Group, Inc.,
BOS725, P.O. Box 1559, Boston, MA 02104. The currently effective option will
appear on each confirmation statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under Federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the Share Option until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its transfer agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with
the Fund involves special procedures and will require the beneficial owner to
obtain historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL
INVESTMENTS BY SENDING A CHECK FOR $50 OR MORE.
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THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds or, when publicly available,
Eaton Vance Money Market Fund (availability expected on or about April 3, 1995)
which are distributed with a contingent deferred sales charge on the basis of
the net asset value per share of each fund at the time of the exchange, provided
that such offer is available only in states where shares of such fund being
acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Shareholder Services Group, Inc. makes exchanges at the next determined
net asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult The Shareholder Services Group, Inc. for
additional information concerning the exchange privilege. Applications and
prospectuses of other funds are available from Authorized Firms or the Principal
Underwriter. The prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the purchase of shares acquired in one or more
exchanges is deemed to have occurred at the time of the original purchase of the
exchanged shares.
Shares of the other funds in the Eaton Vance Classic Group of Funds and
Eaton Vance Money Market Fund (when available) may be exchanged for Fund shares
at their respective net asset values per share, but subject to any restrictions
or qualifications set forth in a current prospectus of any such fund.
Telephone exchanges are accepted by The Shareholder Services Group, provided
the investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call The Shareholder Services Group, Inc. at 800- 262-1122 or,
within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor The Shareholder
Services Group, Inc. will be responsible for the authenticity of exchange
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed. Telephone
instructions will be tape recorded. In times of drastic economic or market
changes, a telephone exchange may be difficult to implement. An exchange may
result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
may be mailed directly to The Shareholder Services Group, Inc., BOS725, P.O. Box
1559, Boston, MA 02104 at any time -- whether or not distributions are
reinvested. The name of the shareholder, the fund and the account number should
accompany each investment.
BANK DRAFT INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of $50
or more may be made through the shareholder's checking account via bank draft
each month or quarter. The $1,000 minimum initial investment and small account
redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the Plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REDEEMED OR REPURCHASED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO
ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 30 days after such repurchase
or redemption. Shares are sold to a reinvesting shareholder at the next
determined net asset value following timely receipt of a written purchase order
by the Principal Underwriter or by the Fund (or by the Fund's transfer agent).
To the extent that any shares of the Fund are sold at a loss and the proceeds
are reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
the redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
Federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
THE FUND'S POLICY IS TO DISTRIBUTE SUBSTANTIALLY ALL OF ITS NET INVESTMENT
INCOME ALLOCATED TO THE FUND BY THE PORTFOLIO, LESS THE FUND'S DIRECT AND
ALLOCATED EXPENSES, MONTHLY AND SUBSTANTIALLY ALL OF ITS NET REALIZED CAPITAL
GAINS AT LEAST ANNUALLY. A portion of distributions from net investment income
will be eligible for the dividends-received deduction for corporations. The Fund
anticipates that for tax purposes the entire distribution, whether paid in cash
or additional shares of the Fund, will constitute ordinary income to its
shareholders. Shareholders reinvesting such distributions should treat the
amount of the entire distribution as the tax cost basis of the additional shares
acquired by reason of such reinvestment. Distributions by the Fund of long-term
capital gains allocated to the Fund by the Portfolio are taxable to shareholders
as long-term capital gains, whether paid in cash or additional shares of the
Fund and regardless of the length of time Fund shares have been owned by
shareholders. Certain distributions declared by the Fund in October, November or
December and paid the following January will be taxable to shareholders as if
received on December 31 of the year in which they are declared.
In order to qualify as a regulated investment company under the Internal
Revenue Code (the "Code"), the Fund must satisfy certain requirements relating
to the sources of its income, the distribution of its income, and the
diversification of its assets. In satisfying these requirements, the Fund will
treat itself as owning its proportionate share of each of the Portfolio's assets
and as entitled to the income of the Portfolio properly attributable to such
share.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY
FEDERAL INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO
SHAREHOLDERS ITS NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN
ACCORDANCE WITH THE TIMING REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP
UNDER THE CODE, THE PORTFOLIO ALSO DOES NOT PAY FEDERAL INCOME OR EXCISE
TAXES.
- ------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's average annual total return is determined by computing the
average annual percentage change in value of $1,000 invested at the maximum
public offering price (net asset value) for specified periods ending with the
most recent calendar quarter, assuming reinvestment of all distributions. The
average annual total return calculation assumes a complete redemption of the
investment and the deduction of any contingent deferred sales charge at the end
of the period. Performance figures published by the Fund which do not include
the effect of any applicable contingent deferred sales charge would be reduced
if it were included. The Fund may also publish annual and cumulative total
return figures from time to time.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return for
any prior periods should not be considered as a representation of what an
investment may earn or what an investor's yield or total return may be in any
future period. If the expenses of the Fund or the Portfolio are paid by Eaton
Vance, the Fund's performance will be higher.
<PAGE>
INVESTMENT ADVISER OF
TOTAL RETURN PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV CLASSIC TOTAL RETURN FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV CLASSIC
TOTAL RETURN FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-TRP
EV Classic
Total Return Fund
PROSPECTUS
MAY 1, 1995
<PAGE>
Part B
Information Required in a Statement of Additional Information
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1995
EV CLASSIC TOTAL RETURN FUND
24 Federal Street
Boston, Massachusetts 02110
(617) 482-8260
- ------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Investment Objective and Policies ......................................... 2
Investment Restrictions ................................................... 6
Trustees and Officers ..................................................... 7
Control Persons and Principal Holders of Securities ....................... 9
Investment Adviser and Administrator ...................................... 9
Custodian ................................................................. 12
Service for Withdrawal .................................................... 12
Determination of Net Asset Value .......................................... 12
Investment Performance .................................................... 13
Taxes ..................................................................... 15
Principal Underwriter ..................................................... 17
Distribution Plan ......................................................... 17
Portfolio Security Transactions ........................................... 18
Other Information ......................................................... 20
Independent Accountants ................................................... 21
Financial Statements ...................................................... 22
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THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EV CLASSIC TOTAL RETURN FUND (THE
"FUND") DATED MAY 1, 1995, AS SUPPLEMENTED FROM TIME TO TIME. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of EV Classic Total Return Fund (the "Fund"), a
diversified series of Eaton Vance Total Return Trust, (the "Trust"), is to seek
for its shareholders a high level of total return, consisting of relatively
predictable income in conjunction with capital appreciation, consistent with
prudent management and preservation of capital. The Fund seeks to meet its
investment objective by investing its assets in the Total Return Portfolio (the
"Portfolio"), a separate registered investment company with the same investment
objective as the Fund.
The Trustees of the Trust may withdraw the Fund's investment from the
Portfolio at any time, if they determine that it is in the best interests of the
Fund to do so. Upon any such withdrawal, the Fund's assets would be invested in
another investment company with substantially the same investment objective,
policies and restrictions as those of the Fund or directly in investment
securities in accordance with the Portfolio's investment policies, as described
below. Except as indicated in the prospectus, the approval of the Fund's
shareholders would not be required to change the Portfolio's investment
objective or any of the Portfolio's investment policies discussed below,
including those concerning security transactions. Since the investment
characteristics of the Fund will correspond directly to those of the Portfolio,
the following is a discussion of the various investments of and techniques
employed by the Portfolio.
LEVERAGE THROUGH BORROWING
The Investment Company Act of 1940 requires the Portfolio to maintain
continuous asset coverage of not less than 300% with respect to its borrowings.
This allows the Portfolio to borrow for leverage purposes an amount equal to as
much as 50% of the value of its net assets (not including such borrowings). If
such asset coverage should decline to less than 300% due to market fluctuations
or other reasons, the Portfolio may be required to sell some of the securities
held by it within three days in order to reduce the Portfolio's debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. The practice of
leveraging to enhance investment return may be viewed as a speculative activity.
Leveraging will exaggerate any increase or decrease in the market value of the
securities held by the Portfolio. Money borrowed for leveraging will be subject
to interest costs which may or may not exceed the dividends for the securities
purchased. The Portfolio may also be required to maintain minimum average
balances in connection with such borrowing or to pay a commitment or other fee
to maintain a line of credit; either of these requirements will increase the
cost of borrowing over the stated interest rate.
The Portfolio and the other investment companies managed by Boston
Management and Research or Eaton Vance Management participate in a Line of
Credit Agreement (the "Credit Agreement") with Citibank, N.A. ("Citibank"). The
Credit Agreement provides that Citibank will consider requests from the
Portfolio and such other investment companies to make advances ("Advances") of
money for leveraging purposes. The aggregate amount of all such Advances to all
such borrowers will not exceed $120,000,000. The Portfolio has currently
determined that the aggregate amount which it may request as an advance may not
exceed the lesser of $60,000,000 or 33 1/3% of the Portfolio's current net
assets. Advances bear interest, at the Portfolio's choice, at an amount above
either Citibank's adjusted CD rate, a variable adjusted CD rate, or a federal
funds effective rate, all as defined in the Credit Agreement. In addition to
interest paid on such Advances, the Portfolio pays Citibank a fee as indicated
in the Fund's current prospectus. Such fee is computed and paid quarterly.
The Portfolio, like many other investment companies, can also borrow money
for temporary extraordinary or emergency purposes. Such borrowings may not
exceed 5% of the value of the Portfolio's total assets when the loan is made.
The Portfolio may pledge up to 10% of the lesser of cost or value of its total
assets to secure such borrowings.
The ability of the Portfolio to borrow could be partially or entirely
curtailed in the event that the Credit Control Act of 1969 were to be invoked
and the Federal Reserve Board were to limit or prohibit certain extensions of
credit. This Act empowers the Federal Reserve Board, when authorized by the
President, to regulate directly the costs and allocation of funds in the credit
market.
WRITING AND PURCHASING CALL AND PUT OPTIONS
A call option written by the Portfolio obligates the Portfolio to sell
specified securities to the holder of the option at a specified price at any
time before the expiration date. The Portfolio will write a covered call option
on a security for the purpose of increasing its return on such security and/or
to partially hedge against a decline in the value of the security. In
particular, when the Portfolio writes an option which expires unexercised or is
closed out by the Portfolio at a profit, it will retain the premium paid for the
option, which will increase its gross income and will offset in part the reduced
value of the portfolio security underlying the option, or the increased cost of
acquiring the security for its portfolio. However, if the price of the
underlying security moves adversely to the Portfolio's position, the option may
be exercised and the Portfolio will be required to purchase or sell the
underlying security at a disadvantageous price, which may only be partially
offset by the amount of the premium, if at all. The Portfolio does not intend to
write a covered option on any security if after such transaction more than 50%
of its net assets, as measured by the aggregate value of the securities
underlying all covered calls and puts written by the Portfolio, would be subject
to such options.
The Portfolio will only write a put option on a security which it intends to
ultimately acquire for its investment portfolio. A put option written by the
Portfolio would obligate the Portfolio to purchase specified securities from the
option holder at a specified price at any time before the expiration date.
The Portfolio may terminate its obligations under a call or put option by
purchasing an option identical to the one it has written. Such purchases are
referred to as "closing purchase transactions."
The Portfolio may purchase put or call options on securities or securities
indices in anticipation of changes in the value of its existing portfolio
securities or in the prices of securities that the Portfolio intends to purchase
at a later date. In the event that the expected changes occur, the Portfolio may
be able to offset adverse changes in the value of its portfolio, in whole or in
part, through the options purchased. The premium paid for a put or call option
plus any transaction costs will reduce the benefit, if any, realized by the
Portfolio upon exercise or liquidation of the option. Unless the price of the
underlying security changes sufficiently, the option may expire without value to
the Portfolio. The Portfolio does not intend to purchase an option on any
security if after such transaction more than 5% of its net assets, as measured
by the aggregate of all premiums paid for all such options held by the
Portfolio, would be so invested.
The Portfolio would normally purchase call options in anticipation of an
increase in the market value of securities of the type in which the Portfolio
may invest. The purchase of a call option would entitle the Portfolio, in return
for the premium paid, to purchase specified securities at a specified price
during the option period. The Portfolio would ordinarily realize a gain if,
during the option period, the value of such securities exceeded the sum of the
exercise price, the premium paid and transaction costs; otherwise the Portfolio
would realize a loss on the purchase of the call option.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell specified securities at a specified price during the option period. The
purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the securities held by the Portfolio. The
Portfolio would ordinarily realize a gain if, during the option period, the
value of the underlying securities decreased below the exercise price
sufficiently to cover the premium and transaction costs; otherwise the Portfolio
would realize a loss on the purchase of the put option. Gains and losses on the
purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.
The Portfolio would also be able to enter into closing sale transactions in
order to realize gains or minimize losses on options purchased by the Portfolio.
The Portfolio would write and purchase put and call options on securities
indices for the same purposes as the purchase of options on securities. Options
on securities indices are similar to options on securities, except that the
exercise of securities index options requires cash payments and does not involve
the actual purchase or sale of securities. In addition, securities index options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
SPECIAL RISKS ASSOCIATED WITH OPTIONS ON SECURITIES
An options position may be closed out only on an options exchange which
provides a secondary market for an option of the same series. Although the
Portfolio will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option or at any
particular time. For some options no secondary market on an exchange may exist.
In such event, it might not be possible to effect closing transactions in
particular options, with the result that the Portfolio would have to exercise
its options in order to realize any profit and would incur transaction costs
upon the sale of underlying securities pursuant to the exercise of put options.
If the Portfolio as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
Options Clearing Corporation inadequate, and thereby result in the institution
by an exchange of special procedures which may interfere with the timely
execution of customers' orders.
The amount of the premiums which the Portfolio may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing activities.
FUTURES CONTRACTS
A change in the level of interest rates or securities prices may affect the
value of the securities held by the Portfolio (or of securities that the
Portfolio expects to purchase). To hedge against changes in rates or prices or
for non-hedging purposes, the Portfolio may enter into (i) futures contracts for
the purchase or sale of securities, (ii) futures contracts on securities indices
and (iii) futures contracts on other financial instruments and indices. In the
United States futures contracts are traded on exchanges or boards of trade that
are licensed and regulated by the Commodity Futures Trading Commission ("CFTC")
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant exchange. The Portfolio may also enter into
futures contracts traded on a foreign exchange if it is determined by the
investment adviser that trading on such exchange does not subject the Portfolio
to risks, including credit and liquidity risks, that are materially greater than
the risks associated with trading on United States exchanges.
Futures Contracts on Securities. A futures contract on a security is a binding
contractual commitment which, if held to maturity, will result in an obligation
to make or accept delivery, during a particular month, of securities having a
standardized face value and rate of return. By purchasing futures on securities,
the Portfolio will legally obligate itself to accept delivery of the underlying
security and pay the agreed price; by selling futures on securities, it will
legally obligate itself to make delivery of the security against payment of the
agreed price. Open futures positions on securities are valued at the most recent
settlement price, unless such price does not reflect the fair value of the
contract, in which case the positions will be valued by or under the direction
of the Trustees of the Portfolio.
Positions taken in the futures markets are not normally held to maturity but
are instead liquidated through offsetting transactions which may result in a
profit or a loss. While the Portfolio's futures contracts on securities will
usually be liquidated in this manner, it may instead make or take delivery of
the underlying securities whenever it appears economically advantageous for the
Portfolio to do so. A clearing corporation associated with the exchange on which
futures on securities are traded guarantees that, if still open, the sale or
purchase will be performed on the settlement date.
Futures Contracts on Securities Indices. Futures contracts on securities or
other indices do not require the physical delivery of securities, but merely
provide for profits and losses resulting from changes in the market value of a
contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's expiration
date a final cash settlement occurs and the futures position is simply closed
out. Changes in the market value of a particular futures contract reflect
changes in the level of the index on which the futures contract is based.
Hedging Strategies. Hedging by use of futures contracts seeks to establish more
certainly than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Portfolio proposes to acquire.
The Portfolio may, for example, take a "short" position in the futures market by
selling futures contracts in order to hedge against an anticipated rise in
interest rates or a decline in market prices that would adversely affect the
value of the securities held by the Portfolio. Such futures contracts may
include contracts for the future delivery of securities held by the Portfolio or
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of the Portfolio's investment adviser, Boston
Management and Research (the "Investment Adviser"), there is a sufficient degree
of correlation between price trends for the securities held by the Portfolio and
futures contracts based on other financial instruments, securities indices or
other indices, the Portfolio may also enter into such futures contracts as part
of its hedging strategy. Although under some circumstances prices of securities
held by the Portfolio may be more or less volatile than prices of such futures
contracts, the Investment Adviser will attempt to estimate the extent of this
difference in volatility based on historical patterns and to compensate for it
by having the Portfolio enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the securities held by the Portfolio. When hedging of this character
is successful, any depreciation in the value of the portfolio securities will
substantially be offset by appreciation in the value of the futures position.
On other occasions, the Portfolio may take a "long" position by purchasing
such futures contracts. This would be done, for example, when the Portfolio
anticipates the subsequent purchase of particular securities when it has the
necessary cash, but expects the prices then available in the securities market
to be less favorable than prices that are currently available.
OPTIONS ON FUTURES CONTRACTS
The Portfolio may purchase and write call and put options on futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the option period. Upon exercise of
the option, the writer of the option is obligated to convey the appropriate
futures position to the holder of the option. If an option is exercised on the
last trading day before the expiration date of the option, a cash settlement
will be made in an amount equal to the difference between the closing price of
the futures contract and the exercise price of the option.
The Portfolio may use options on futures contracts solely for bona fide
hedging purposes as defined below or for non-hedging purposes subject to
limitations imposed by CFTC regulations. If the Portfolio purchases a call (put)
option on a futures contract it benefits from any increase (decrease) in the
value of the futures contract, but is subject to the risk of decrease (increase)
in value of the futures contract. The benefits received are reduced by the
amount of the premium and transaction costs paid by the Portfolio for the
option. If market conditions do not favor the exercise of the option, the
Portfolio's loss is limited to the amount of such premium and transaction costs
paid by the Portfolio for the option.
If the Portfolio writes a call (put) option on a futures contract, the
Portfolio receives a premium but assumes the risk of a rise (decline) in value
in the underlying futures contract. If the option is not exercised, the
Portfolio gains the amount of the premium, which may partially offset
unfavorable changes in the value of securities held or to be acquired for the
Portfolio. If the option is exercised, the Portfolio will incur a loss, which
will be reduced by the amount of the premium it receives. However, depending on
the degree of correlation between changes in the value of its portfolio
securities and changes in the value of futures positions, the Portfolio's losses
from writing options on futures may be partially offset by favorable changes in
the value of portfolio securities or in the cost of securities to be acquired.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Portfolio's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Portfolio will engage in futures and related options transactions only
for bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. The Portfolio will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Portfolio
or which it expects to purchase. Except as stated below, the Portfolio's futures
transactions will be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to protect against a decline in the price of
securities that the Portfolio owns, or futures contracts will be purchased to
offset an increase in the price of securities it intends to purchase. As
evidence of this hedging intent, the Portfolio expects that on 75% or more of
the occasions on which it takes a long futures (or option) position (involving
the purchase of futures contracts), the Portfolio will have purchased, or will
be in the process of purchasing, equivalent amounts of related securities at the
time when the futures (or option) position is closed out. However, in particular
cases, when it is economically advantageous for the Portfolio to do so, a long
futures position may be terminated (or an option may expire) without the
corresponding purchase of securities. As an alternative to compliance with the
bona fide hedging definition, a CFTC regulation permits the Portfolio to elect
to comply with a different test, under which the aggregate initial margin and
premiums required to establish non-hedging positions in futures contracts and
options on futures will not exceed 5% of the Portfolio's net asset value after
taking into account unrealized profits and losses on such positions and
excluding the in-the-money amount of such options. The Portfolio will engage in
transactions in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the Internal Revenue Code
for maintaining the qualification of the Fund as a regulated investment company
for Federal income tax purposes (see "Taxes").
The Portfolio will be required, in connection with transactions in futures
contracts and the writing of options on futures, to make margin deposits, which
will be held by the Portfolio's custodian for the benefit of the futures
commission merchant through whom the Portfolio engages in such futures and
options transactions. Cash or liquid high grade debt securities required to be
segregated in connection with a "long" futures position taken by the Portfolio
will also be held by the custodian in a segregated account and will be marked to
market daily.
PORTFOLIO TURNOVER
The portfolio turnover rate of the Portfolio is likely to exceed 100%, but
under normal conditions is not likely to exceed 250%. A 100% turnover rate
occurs if all of the securities held by the Portfolio are sold and either
repurchased or replaced within one year. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Portfolio. Reference is made to "Portfolio
Security Transactions" for a discussion of the Portfolio's brokerage practices.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental policies
and as such cannot be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities, which as used in this Statement of
Additional Information means the lesser of (a) 67% of the shares of the Fund
present or represented by proxy at a meeting if the holders of more than 50% of
the shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of any one issuer or purchase more than 10% of
the outstanding voting securities of any one issuer, except obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Make an investment in any one industry if such investment would cause
investments in such industry to exceed 25% of the Fund's total assets (taken at
market value) except that the Fund will concentrate at least 25% of its
investments in utility stocks (i.e., principally electric, gas and telephone
companies);
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(8) Make loans to any person except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing numbered investment restrictions adopted by the
Fund; such restrictions cannot be changed without the approval of a "majority of
the outstanding voting securities" of the Portfolio, which as used in this
Statement of Additional Information means the lesser of (a) 67% of the
outstanding voting securities of the Portfolio present or represented by proxy
at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or (b)
more than 50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in the
Investment Company Act of 1940 (the "1940 Act"). Whenever the Trust is requested
to vote on a change in the investment restrictions of the Portfolio, the Trust
will hold a meeting of Fund shareholders and will cast its vote as instructed by
the shareholders.
The Fund and the Portfolio have each adopted the following nonfundamental
investment policies which may be changed with respect to the Fund by the
Trustees of the Trust without approval by the Fund's shareholders or may be
changed with respect to the Portfolio by the Trustees of the Portfolio with or
without the approval of the Fund or the Portfolio's other investors. As a matter
of nonfundamental policy, the Fund and the Portfolio may not: (a) invest more
than 15% of net assets in investments which are not readily marketable,
including restricted securities and repurchase agreements maturing in more than
seven days. Restricted securities for the purposes of this limitation do not
include securities eligible for resale pursuant to Rule 144A of the Securities
Act of 1933 that the Board of Trustees of the Trust or the Portfolio, or its
delegate, determine to be liquid, based upon the trading markets for the
specific security; (b) purchase warrants in excess of 5% of its net assets, of
which 2% may be warrants which are not listed on the New York or American Stock
Exchange; (c) make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an equal amount of
such securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless no more than 25% of its net
assets (taken at current value) is held as collateral for such sales at any one
time. (It is the present intention of management to make such sales only for the
purpose of deferring realization of gain or loss for Federal income tax
purposes); (d) purchase securities of any issuer which, including predecessors,
has not been in continuous operation for at least three years, except that 5% of
its total assets (taken at market value) may be invested in certain issuers not
in such continuous operation but substantially all of whose assets are (i)
securities of one or more issuers which have had a record of three years'
continuous operation or (ii) assets of an independent division of an issuer
which division has had a record of three years' continuous operation; provided,
however, that exempted from this restriction are U.S. Government securities,
securities of issuers which are rated by at least one nationally recognized
statistical rating organization, municipal obligations and obligations issued or
guaranteed by any foreign government or its agencies or instrumentalities; (e)
purchase or retain in its portfolio any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or trustee
of the Trust or the Portfolio or is a member, officer, director or trustee of
any investment adviser of the Trust or the Portfolio, if after the purchase of
the securities of such issuer by the Fund or the Portfolio one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or securities or
both (all taken at market value) of such issuer and such persons owning more
than 1/2 of 1% of such shares of securities together own beneficially more than
5% of such shares or securities or both (all taken at market value); (f)
purchase oil, gas or other mineral leases or purchase partnership interests in
oil, gas or other mineral exploration or development programs; and (g) invest
more than 5% of its net assets in the securities of foreign issuers. The
securities of some of such foreign issuers may be denominated in foreign
currency.
It is contrary to the present policy of the Fund and the Portfolio which may
be changed without shareholder or investor approval, as the case may be, to
purchase any voting security of any electric or gas utility company (as defined
by the Public Utility Holding Company Act of 1935) if as a result it would then
hold more than 5% of the outstanding voting securities of such company.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR") which is a wholly-owned
subsidiary of Eaton Vance Management ("Eaton Vance"); Eaton Vance's parent,
Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, the Portfolio,
BMR, Eaton Vance, EVC or EV, as defined in the 1940 Act, by virtue of their
affiliation with any one or more of the Trust, the Portfolio, BMR, Eaton Vance,
EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (61), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
LANDON T. CLAY (69), Vice President and Trustee*
Chairman of BMR, Eaton Vance, EVC and EV and a Director of EVC and EV. Director,
Trustee and officer of various investment companies managed by Eaton Vance or
BMR.
DONALD R. DWIGHT (63), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (53), Vice President of the Portfolio and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director of
EVC and EV, Director, Trustee and officer of various investment companies
managed by Eaton Vance or BMR. Mr. Hawkes was elected Trustee of the Trust
on June 14, 1993.
SAMUEL L. HAYES, III (59), Trustee
Jacob H. Schiff, Professor of Investment Banking at Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard Business School, Soldiers Field Road, Boston, Massachusetts
02134
NORTON H. REAMER (59), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), Trustee
Director, Fiduciary Trust Company. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (64), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
EDWIN W. BRAGDON (72), Vice President*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. WALKER MARTIN (49), Vice President*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Martin was elected a Vice
President of the Trust on December 18, 1989.
JAMES L. O'CONNOR (50), Treasurer*
Vice President of BMR, Eaton Vance and EV. Officer of various other investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), Secretary*
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), Assistant Secretary*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Trust's
contractual relationship with the administrator, the Portfolio's contractual
relationship with the investment adviser, making recommendations to the Trustees
regarding the compensation of those Trustees who are not members of the Eaton
Vance organization, and making recommendations to the Trustees regarding
candidates to fill vacancies, as and when they occur, in the ranks of those
Trustees who are not "interested persons" of the Trust, the Portfolio, or the
Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent accountants, and reviewing with such independent accountants
and the Treasurer of the Trust and of the Portfolio matters relative to
accounting and auditing practices and procedures, accounting records, internal
accounting controls, and the functions performed by the custodian and transfer
agent of the Fund and of the Portfolio.
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization are paid by the Fund (and
the other series of the Trust) and the Portfolio, respectively. During the
fiscal year ended December 31, 1994, the Trustees of the Trust and the Portfolio
earned the following compensation in their capacities as Trustees of the Trust,
the Portfolio and the other funds in the Eaton Vance Fund Complex:<F1>
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION COMPENSATION BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
- --- ------------ -------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Donald R. Dwight ...... $59 $4,119<F2> $8,750 $135,000
Samuel L. Hayes, III .. 56 4,079<F3> 8,865 142,500
Norton H. Reamer ...... 55 4,002 --0-- 135,000
John L. Thorndike ..... 56 4,140 --0-- 140,000
Jack L. Treynor ....... 60 4,247 --0-- 140,000
<FN>
- ---------
<F1> The Eaton Vance fund complex consists of 201 registered investment
companies or series thereof.
<F2> Includes $331 of deferred compensation.
<F3> Includes $334 of deferred compensation.
</TABLE>
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 a Trustees Deferred Compensation Plan (the
"Plan"). Under the 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 Plan will have a negligible effect on the
Portfolio's assets, liabilities, and net income per share, 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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at February 15, 1995, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
February 15, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc., New Brunswick NJ
was the record owner of approximately 13.10% of the outstanding shares which
were held on behalf of its customers who are beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. In
addition, as of February 15, 1995, Resources Trust Co., Trustee, FBO James L.
Farkas IRA under Agreement dated November 9, 1993 (Acct. #1278206048) Denver,
Colorado owned beneficially and of record 16.10% of the outstanding shares of
the Fund. To the knowledge of the Trust, no other person benefically owns 5% or
more of the Fund's outstanding shares.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated October 28, 1993. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional clients
with combined assets under management of approximately $15 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
Federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and the obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto.
Under the Investment Advisory Agreement with the Portfolio, BMR receives a
monthly advisory fee of .0625% (equal to .75% annually) of the average daily net
assets of the Portfolio up to $500 million. On net assets of $500 million and
above the annual fee is reduced as follows:
AVERAGE DAILY NET ANNUALIZED FEE RATE
ASSETS FOR THE MONTH (FOR EACH LEVEL)
-------------------- -------------------
$500 million but less than $1 billion ....................... 0.6875%
$1 billion but less than $1.5 billion ....................... 0.6250%
$1.5 billion but less than $2 billion ....................... 0.5625%
$2 billion but less than $3 billion ......................... 0.5000%
$3 billion and over ......................................... 0.4375%
As at December 31, 1994, the Portfolio had net assets of $505,566,892. For
the fiscal year ended December 31, 1994, the Portfolio paid BMR advisory fees of
$4,106,857 (equivalent to 0.74% (annualized) of the Portfolio's average daily
net assets for such period). For the period from the start of business, October
28, 1993 to the fiscal year ended December 31, 1993, the Portfolio paid BMR
advisory fees of $841,228 (equivalent to 0.74% (annualized) of the Portfolio's
average daily net assets for such period).
The Investment Advisory Agreement with BMR remains in effect until February
28, 1996. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1996 is approved at least annually (i) by the
vote of a majority of the Trustees of the Portfolio who are not interested
persons of the Portfolio or of BMR cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time without
penalty on sixty (60) days' written notice by the Board of Trustees of either
party, or by vote of the majority of the outstanding voting securities of the
Portfolio, and the Agreement will terminate automatically in the event of its
assignment. The Agreement provides that BMR may render services to others and
engage in other business activities and may permit other fund clients and other
corporations and organizations to use the words "Eaton Vance" or "Boston
Management and Research" in their names. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance of
its duties, or action taken or omitted under that Agreement, in the absence of
willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but receives no compensation for providing administrative services to the
Fund. Under its Administrative Services Agreement with the Fund, Eaton Vance has
been engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of the registration of the Trust under the 1940 Act, (iii) commissions,
fees and other expenses connected with the purchase or sale of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase and
redemption of shares, (viii) expenses of registering and qualifying the Fund and
its shares under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1996, the Voting Trustees of which are Messrs. Clay,
Brigham, Gardner, Hawkes and Rowland. The Voting Trustees have unrestricted
voting rights for the election of Directors of EVC. All of the outstanding
voting trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers and Directors of EVC and
EV. As of January 31, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of
such voting trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Hawkes and Otis are
officers or Trustees of the Trust and the Portfolio and are members of the EVC,
BMR, Eaton Vance and EV organizations. Messrs. Bragdon, Martin and O'Connor and
Ms. Sanders, are officers or Trustees of the Trust and/or the Portfolio and are
also members of the BMR, Eaton Vance and EV organizations. BMR will receive the
fees paid under the Investment Advisory Agreement.
Eaton Vance owns all of the stock of Energex Corporation which is engaged in
oil and gas operations. EVC owns all of the stock of Marblehead Energy Corp.
(which engages in oil and gas operations) and owns 77.3% of the stock of
Investors Bank & Trust Company, custodian of the Fund and the Portfolio which
provides custodial, trustee and other fiduciary services to investors, including
individuals, employee benefit plans, corporations, investment companies, savings
banks and other institutions. In addition, Eaton Vance owns all the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
consulting and management. EVC owns all the stock of Fulcrum Management, Inc.
and MinVen, Inc., which are engaged in the development of precious metal
properties. EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Trust or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund
and the Portfolio. IBT has the custody of all cash and securities representing
the Fund's interest in the Portfolio, has custody of all the Portfolio's assets,
maintains the general ledger of the Portfolio and the Fund and computes the
daily net asset value of interests in the Portfolio and the net asset value of
shares of the Fund. 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 Fund and
the Portfolio. IBT charges custody 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 Fund and Portfolio 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. In view of the
ownership of EVC in IBT, the Portfolio is treated as a self-custodian pursuant
to Rule 17f-2 under the 1940 Act, and the Portfolio's investments held by IBT as
custodian are thus subject to the additional examinations by the Portfolio's
independent accountants as called for by such Rule. For the fiscal year ended
December 31, 1994, the Portfolio paid IBT $159,872.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any designated amount based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence are a return of principal. Income dividends and capital
gains distributions in connection with withdrawal accounts will be credited at
net asset value as of the record date for each distribution. Continued
withdrawals in excess of current income will eventually use up principal,
particularly in a period of declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price (i.e., net asset value) will have to be deposited with the
Transfer Agent. A shareholder may not have a withdrawal plan in effect at the
same time he has authorized Bank Draft Investing or is otherwise making regular
purchases of Fund shares. Either the shareholder, the Transfer Agent or the
Principal Underwriter will be able to terminate the withdrawal plan at any time
without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio and of shares of the Fund is determined
by its Custodian, IBT, (as agent for the Fund and the Portfolio) in the manner
described under "Valuing Fund Shares" in the Fund's current prospectus. The Fund
and the Portfolio will be closed for business and will not price their
respective shares or interests on the following business holidays: New Year's
Day, Washington's Birthday, Good Friday (a New York Stock Exchange holiday),
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. The investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the Portfolio Valuation Time
on the prior Portfolio Business Day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio for the current
Portfolio Business Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes that all dividends and distributions are reinvested at net
asset value on the reinvestment dates during the period and a complete
redemption of the investment and, if applicable, the deduction of the contingent
deferred sales charge at the end of the period.
The Fund's yield is computed pursuant to a standardized formula by dividing
its net investment income per share earned during a recent thirty-day period by
the maximum offering price (net asset value) per share on the last day of the
period and annualizing the resulting figure. Net investment income per share is
calculated using a standardized formula the income component of which is
computed from dividends on equity securities held by the Portfolio based on the
stated annual dividend rates of such securities, exclusive of special or extra
distributions (with all purchases and sales of securities during such period
included in the income calculation on a settlement date basis), and from the
income earned on short-term debt instruments held by the Portfolio, and such
income is then reduced by accrued Fund expenses for the period, with the
resulting number being divided by the average daily number of Fund shares
outstanding and entitled to receive dividends during the period. This yield
figure does not reflect the deduction of the contingent deferred sales charge
imposed on certain redemptions of shares within one year of their purchase. See
"How to Redeem Fund Shares" in the Prospectus. For the thirty-day period ended
December 31, 1994, the yield of the Fund was 3.17%.
The Fund may publish its distribution rate and/or its effective distribution
rate. The Fund's distribution rate is computed by dividing the most recent
monthly distribution per share annualized, by the current net asset value per
share. The Fund's effective distribution rate is computed by dividing the
distribution rate by 12 and reinvesting the resulting amount for a full year on
a monthly basis. The effective distribution rate will be higher than the
distribution rate because of the compounding effect of the assumed reinvestment.
Investors should note that the Fund's yield is calculated using a standardized
formula the income component of which is computed from dividends on equity
securities held by the Portfolio based on the stated annual dividend rates of
such securities, exclusive of special or extra distributions (with all purchases
and sales of securities during such period included in the income calculation on
a settlement date basis), and from the income earned on short-term debt
instruments held by the Portfolio, whereas the distribution rate is based on the
Fund's last monthly distribution which tends to be relatively stable and may be
more or less than the amount of net investment income and short-term capital
gain actually earned by the Fund during the quarter. The Fund's distribution
rate (calculated on December 30, 1994 and based on the Fund's monthly
distribution paid on December 22, 1994) was 3.15%, and the Fund's effective
distribution rate (calculated on the same date and based on the same monthly
distribution) was 3.19%.
The tables below indicate the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from November 1, 1993 through December 31,
1994.
VALUE OF A $1,000 INVESTMENT**
VALUE OF TOTAL RETURN
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ---------------------
PERIOD DATE INVESTMENT ON 12/31/94 CUMULATIVE ANNUALIZED
---------- ---------- ----------- ----------- ---------- ----------
Life of the Fund* 11/01/93 $1,000 $877.40 -12.26% -10.62%
1 Year Ended
12/31/94 12/31/93 $1,000 $870.16 -12.98% -12.98%
PERCENTAGE CHANGES NOVEMBER 1, 1993 TO DECEMBER 31, 1994
NET ASSET VALUE TO NET ASSET VALUE
WITH ALL DISTRIBUTIONS REINVESTED
--------------------------------------------------
FISCAL YEAR ENDED ANNUAL CUMULATIVE AVERAGE ANNUAL
----------------- ------ ---------- --------------
12/31/93* -- 0.83% --
12/31/94 -12.88% -12.26% -10.63%
Past performance is not indicative of future results. Investment return
and principal value will fluctuate and shares, when redeemed, may be worth more
or less than their original cost.
- ---------
*Investment operations began on November 1, 1993.
**If a portion of the Fund's expenses had not been subsidized and the
contingent deferred sales charge applicable to shares purchased on or after
January 30, 1995 had been imposed, the Fund would have had lower returns.
The Fund's total return and yield may be compared to the Consumer Price
Index and various domestic securities indices, for example: Standard & Poor's
Utilities Index, Standard & Poor's 400 Stock Index, Standard & Poor's 500 Stock
Index. Standard & Poor's Telephone Index, Standard & Poor's Natural Gas Index,
Standard & Poor's Electric Companies Index, Merrill Lynch U.S. Treasury (15-year
plus) Index, Lehman Brothers Government/Corporate Bond Index, Dow Jones 15
Utility Average, and the Dow Jones Industrial Average. The Fund's total return,
yield and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio, including
any other investment companies.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations, (e.g. Ibbotson Associates, Standard &
Poor's Ratings Group, Merrill Lynch, Pierce, Fenner & Smith, Inc., Bloomberg,
L.P., Dow Jones & Company, Inc., and The Federal Reserve Board) or included in
various publications (e.g. The Wall Street Journal, Barron's and The Decade:
Wealth of Investments in U.S. Stocks, Bonds, Bills & Inflation) reflecting the
investment performance or return achieved by various classes and types of
investments (e.g. common stocks, small company stocks, long-term corporate
bonds, long-term government bonds, intermediate-term government bonds, U.S.
Treasury bills) over various periods of time. This information may be used to
illustrate the benefits of long-term investments in common stocks.
From time to time, information about the portfolio allocation and holdings
of the Portfolio may be included in advertisements and other material furnished
to present and prospective shareholders.
From time to time, information, charts and illustrations showing the effect
of compounding interest may be included in advertisements and other material
furnished to present and prospective shareholders. Compounding is the process of
earning income on principal plus income that was earned earlier. Income can be
compounded annually, semi-annually, quarterly or daily, e.g. $1,000 compounded
annually at 9% will grow to $1,090 at the end of the first year and $1,188 at
the end of the second year. The extra $8, which was earned on the $90 income
from the first year, is the compound income. $1,000 compounded annually at 9%
grows to $2,367 at the end of 10 years and $5,604 at the end of 20 years. Other
examples of compounding $1,000 annually are 7% grows to $1,967 at the end of 10
years and $3,870 at the end of 20 years. At 12% the $1,000 grows to $3,106 at
the end of 10 years and $9,646 at the end of 20 years. All of these examples are
for illustrative purposes only and are not meant to indicate performance of the
Fund.
From time to time, information, charts and illustrations relating to
inflation and the effects of inflation on the dollar may be included in
advertisements and other material furnished to present and prospective
shareholders.
For example: After 10 years, the purchasing power of $25,000 would shrink to
$16,621, $14,968, $13,465 and $12,100, respectively, if the annual rates of
inflation during such period were 4%, 5%, 6% and 7%, respectively. (To calculate
the purchasing power, the value at the end of each year is reduced by the above
inflation rates for 10 consecutive years.)
From time to time, evaluations of the Fund's performance made by independent
sources, e.g. Lipper Analytical Services, Inc., CDA/Wiesenberger and
Morningstar, Inc., may be used in advertisements and in information furnished to
present or prospective shareholders.
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze."
TAXES
FEDERAL INCOME TAXES
See "Distributions and Taxes" in the Fund's current prospectus.
The Fund, as a series of a Massachusetts business trust, has elected to be
treated, has qualified and intends to continue to qualify each year, as a
regulated investment company under the Internal Revenue Code ("the Code").
Accordingly, the Fund 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 and net realized capital gains in accordance with the
timing requirements imposed by the Code, so as to avoid any Federal income or
excise tax on the Fund. The Fund so qualified for its fiscal year ended December
31, 1994 (see the Notes to Financial Statements). Because the Fund invests
substantially all of its assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements in
order for the Fund to satisfy them. The Portfolio will allocate at least
annually among its investors, including the Fund, each investor's distributive
share of the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit. The Portfolio will
make allocations to the Fund 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 Fund to satisfy the tax distribution
requirements that apply to the Fund and that must be satisfied in order to avoid
Federal income and/or excise tax on the Fund. For purposes of applying the
requirements of the Code regarding qualification as a regulated investment
company, the Fund 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.
In order to avoid Federal excise tax, the Code requires that the Fund
distribute by December 31 of each calendar year at least 98% of its ordinary
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 December 31 of such year, after reduction by any
available capital loss carryforwards, and 100% of any income from the prior year
(as previously computed) that was not paid out during such year and on which the
Fund paid no Federal income tax. Under current law, provided that the Fund
qualifies as a regulated investment company for Federal income tax purposes and
the Portfolio is treated as a partnership for Massachusetts and Federal tax
purposes, neither the Fund nor the Portfolio is liable for any income, excise or
franchise tax in the Commonwealth of Massachusetts.
Distributions of net investment income and the excess of net short-term
capital gains over net long-term capital losses earned by the Portfolio and
allocated to the Fund are taxable to shareholders of the Fund as ordinary income
whether received in cash or in additional shares. Distributions of the excess of
net long-term capital gains over net short-term capital losses (including any
capital losses carried forward from prior years) earned by the Portfolio and
allocated to the Fund are taxable to shareholders of the Fund as long-term
capital gains, whether received in cash or in additional shares, and regardless
of the length of time their shares have been held.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution would be taxable to the shareholder even though, from
an investment standpoint, it may constitute a return of capital. Therefore,
investors should consider the tax implications of buying shares immediately
before a distribution.
A portion of distributions made by the Fund which are derived from dividends
received by the Portfolio from domestic corporations and allocated to the Fund
may qualify for the dividends-received deduction for corporations. The
dividends-received deduction for corporate shareholders is reduced to the extent
the shares of the Fund with respect to which the dividends are received are
treated as debt-financed under the Federal income tax law and is eliminated if
the shares are deemed to have been held for less than 46 days. Receipt of
certain distributions qualifying for the deduction may result in reduction of
the tax basis of the corporate shareholder's shares. Distributions eligible for
the dividends-received deduction may give rise to or increase an alternative
minimum tax for corporations.
Any loss realized upon the redemption or exchange of shares of the Fund 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. In addition, a loss realized on a redemption of Fund
shares may be disallowed under certain "wash sale" rules if other shares of the
Fund are acquired within a period beginning 30 days before and ending 30 days
after the date of such redemption. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing and character of
Fund distributions to shareholders. For example, certain positions held by the
Portfolio on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out on such day), and any resulting gain or loss
will generally be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by the Portfolio that substantially diminish the
Portfolio's risk of loss with respect to other positions in its portfolio may
constitute "straddles," which are subject to tax rules that may cause deferral
of Portfolio losses, adjustments in the holding period of Portfolio securities
and conversion of short-term into long-term capital losses. The Portfolio may
have to limit its activities in options and futures contracts in order to enable
the Fund to maintain its qualification as a regulated investment company.
The Portfolio may be subject to foreign withholding taxes with respect to
income on certain foreign securities. As it is not expected that more than 50%
of the value of the Fund's total assets, taking into account its allocable share
of the Portfolio's total assets at the close of any taxable year of the Fund
will consist of securities issued by foreign corporations, the Fund will not be
eligible to pass through to shareholders their proportionate share of foreign
taxes paid by the Portfolio and allocated to the Fund, with the result that
shareholders will not be entitled to take any foreign tax credits or deductions
for foreign taxes paid by the Portfolio and allocated to the Fund. However, the
Fund may deduct such taxes in calculating its distributable income earned by the
Portfolio and allocated to the Fund. These taxes may be reduced or eliminated
under the terms of an applicable U.S. income tax treaty. Certain foreign
exchange gains and losses realized by the Portfolio and allocated to the Fund
will be treated as ordinary income and losses. Certain uses of foreign currency
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 Fund's qualification as a regulated investment company and/or
avoid imposition of a tax on the Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
shareholders investing through IRAs should consult their tax advisers for more
information. The deductibility of such contributions may be restricted or
eliminated for particular shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of Federal income tax from the
Fund's 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 and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund'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 Fund'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 Fund 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
Fund.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to financial service firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the plan relating to such payments are included in
the Distribution Agreement. The Distribution Agreement is renewable annually by
the Trust's Board of Trustees (including a majority of its Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Fund's Distribution Plan or the Distribution
Agreement), may be terminated on sixty days' notice either by such Trustees or
by vote of a majority of the outstanding voting securities of the Fund or on six
months' notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold. The Fund has authorized the Principal Underwriter to act as
agent in repurchasing shares and paid the Principal Underwriter $140 for the
fiscal year ended December 31, 1994 (being $2.50 for each repurchase transaction
handled by the Principal Underwriter). The Principal Underwriter estimates that
the expenses incurred by it in acting as repurchase agent for the Fund will
exceed the amounts paid therefor by the Fund.
DISTRIBUTION PLAN
The Distribution Plan ("the Plan") is described in the prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The purpose of the Plan is to compensate the Principal Underwriter for
its distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
In calculating daily, the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal ) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of the
Fund.
It is anticipated that the Eaton Vance organization will profit by reason of
the operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including contingent deferred sales charges, pursuant to the Plan. The Eaton
Vance organization may be considered to have realized a profit under the Plan if
at any point in time the aggregate amounts theretofore paid to the Principal
Underwriter under the Plan, and from contingent deferred sales charges, have
exceeded the total expenses theretofore incurred by such organization in
distributing shares of the Fund. Total expenses for this purpose will include an
allocable portion of the overhead costs of such organization and its branch
offices, which costs will include without limitation leasing expense,
depreciation of building and equipment, utilities, communication and postage
expense, compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton Vance
organization in a manner deemed equitable to the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a contingent deferred sales charge will be imposed, the level and timing of
redemptions of Fund shares upon which no contingent deferred sales charge will
be imposed (including redemptions involving exchanges of Fund shares for shares
of another fund in the Eaton Vance Classic Group of Funds which result in a
reduction of uncovered distribution charges), changes in the level of the net
assets of the Fund, and changes in the interest rate used in the calculation of
the distribution fee under the Plan. (For shares sold prior to January 30, 1995,
Plan payments are as follows: the Principal Underwriter pays monthly sales
commissions and service fee payments to Authorized Firms equivalent to
approximately .75% and .25%, respectively, annualized of the assets maintained
in the Fund by their customers beginning at the time of sale. No payments were
made at the time of sale, and there is no contingent deferred sales charge.) For
the fiscal year ended December 31, 1994, the Fund accrued sales commission
payments under the Plan aggregating $37,182, of which $36,946 was paid to the
Principal Underwriter. The Principal Underwriter paid $36,758 as sales
commissions to Authorized Firms and the balance was retained by the Principal
Underwriter for such services. As at December 31, 1994, the outstanding
uncovered distribution charges of the Principal Underwriter calculated under the
Plan amounted to approximately $440,459 (which amount was equivalent to 7.9% of
the Fund's net assets on such day).
Because of the NASD Rule limitation on the aggregate amount of sales
commissions and distribution fees paid to the Principal Underwriter during any
fiscal year, a high level of sales of Fund shares during the initial years of
the Fund's operations will cause a large portion of the sales commissions
attributable to a sale of Fund shares to be accrued and paid by the Fund to the
Principal Underwriter in fiscal years subsequent to the year in which such
shares were sold. This spreading of sales commissions payments under the Plan
over an extended period will result in the incurrence and payment of increased
distribution fees under the Plan.
The Plan also authorizes the Fund to make payments of service fees. fiscal
year ended December 31, 1994, the Fund made service fee payments under the Plan
to the Principal Underwriter aggregating $12,218 for such period.
The Plan and Distribution Agreement currently remain in effect until April
28, 1995 and will be continued as provided in the Prospectus. Pursuant to Rule
12b-1, the Plan has been approved by the Trust's initial sole shareholder (Eaton
Vance). Under the Plan the President or a Vice President of the Trust shall
provide to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees as required by Rule 12b-1. So long as the Plan is in
effect, the selection and nomination of Trustees who are not interested persons
of the Trust shall be committed to the discretion of the Trustees who are not
such interested persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees have determined that in
their judgment there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the broker-dealer firm, are made by
BMR. BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many broker-dealer firms. BMR
uses its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Portfolio and (when a disclosed commission
is being charged) at reasonably competitive commission rates. In seeking such
execution, BMR will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors, including
without limitation the size and type of the transaction, the general execution
and operational capabilities of the broker-dealer, the nature and character of
the market for the security, the confidentiality, speed and certainty of
effective execution required for the transaction, the reputation, reliability,
experience and financial condition of the broker-dealer, the value and quality
of services rendered by the broker-dealer in other transactions, and the
reasonableness of the commission, if any. Transactions on United States stock
exchanges and other agency transactions involve the payment by the Portfolio of
negotiated brokerage commissions. Such commissions vary among different
broker-dealer firms, and a particular broker-dealer may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities traded
in the over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering the price paid by the Portfolio includes a disclosed fixed commission
or discount retained by the underwriter or dealer. Although commissions paid on
portfolio security transactions will, in the judgment of BMR, be reasonable in
relation to the value of the services provided, commissions exceeding those
which another firm might charge may be paid to broker-dealers who were selected
to execute transactions on behalf of the Portfolio and BMR's other clients in
part for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of the
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealer firms whch
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, BMR receives Research Services from many broker-dealer firms with
which BMR places the Portfolio transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive commission rates. BMR is authorized to consider as a factor in the
selection of any broker-dealer firm with whom portfolio orders may be placed the
fact that such firm has sold or is selling shares of the Fund or of other
investment companies sponsored by BMR or Eaton Vance. This policy is not
inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates. BMR
will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts whenever decisions
are made to purchase or sell securities by the Portfolio and one or more of such
other accounts simultaneously. In making such allocations, the main factors to
be considered are the respective investment objectives of the Portfolio and such
other accounts, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Portfolio
and such accounts, the size of investment commitments generally held by the
Portfolio and such accounts and the opinions of the persons responsible for
recommending investments to the Portfolio and such accounts. While this
procedure could have a detrimental effect on the price or amount of the
securities available to the Portfolio from time to time, it is the opinion of
the Trustees of the Trust and the Portfolio that the benefits available from the
BMR organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions.
For the fiscal year ended December 31, 1994, the Portfolio paid brokerage
commissions of $1,997,260 on portfolio security transactions, of which
approximately $718,689,811 was paid in respect of portfolio security
transactions aggregating approximately $1,509,826 to firms which provided some
research services to BMR or its affiliates. For the period from the start of
business, October 28, 1993 to the fiscal year ended December 31, 1993, the
Portfolio paid brokerage commissions of $382,786 on portfolio security
transactions, of which approximately $126,205,010 was paid in respect of
portfolio security transactions aggregating approximately $211,594 to firms
which provided some research services to BMR or its affiliates.
OTHER INFORMATION
The Trust, which is a Massachusetts business trust established in 1981, was
originally called Eaton Vance Tax-Managed Trust. The Trust changed its name to
Eaton Vance Total Return Trust on August 22, 1986. Eaton Vance, pursuant to its
agreement with the Trust, controls the use of the words "Eaton Vance" in the
Fund's name and may use the words "Eaton Vance" in other connections and for
other purposes.
The Trust's Amended and Restated Declaration of Trust may be amended by the
Trustees when authorized by vote of a majority of the outstanding voting
securities of the Trust, the financial interests of which are affected by the
amendment. The Trustees may also amend the Declaration of Trust without the vote
or consent of shareholders to change the name of the Trust or any series or to
make such other changes as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable Federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class thereof,
or by an instrument or instruments in writing without a meeting, consented to by
the holders of two-thirds of the shares of the Trust or a series or class
thereof, provided, however, that, if such termination is recommended by the
Trustees, the vote of a majority of the outstanding voting securities of the
Trust or a series or class thereof entitled to vote thereon shall be sufficient
authorization; or (2) by means of an instrument in writing signed by a majority
of the Trustees, to be followed by a written notice to shareholders stating that
a majority of the Trustees has determined that the continuation of the Trust or
a series or a class thereof is not in the best interest of the Trust, such
series or class or of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. The Trust's by-laws provide that a Trustee may be removed at any special
meeting of the shareholders of the Trust by a vote of two-thirds of the
outstanding shares of beneficial interest of the Trust (the "shares"). The
Trustees will promptly call a meeting of shareholders for the purpose of voting
upon a question of removal of a Trustee when requested so to do by the record
holders of not less than 10 per centum of the outstanding shares.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, 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 interests
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 right to redeem can be suspended and the payment of the redemption price
deferred when the Exchange is closed (other than 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 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.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts are
the independent accountants of the Fund and the Portfolio, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission.
<PAGE>
------------------------------------------------
EV CLASSIC TOTAL RETURN FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
-------------------------------------------------------------------------------
December 31, 1994
<TABLE>
-----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in Total Return Portfolio (Portfolio),
at value (Note 1A) $5,513,397
Receivable for Fund shares sold 10,114
Deferred organization expenses (Note 1D) 35,595
Receivable from administrator (Note 5) 51,784
----------
Total assets $5,610,890
LIABILITIES:
Payable for Fund shares redeemed $10,072
Accrued expenses 12,304
-------
Total liabilities 22,376
----------
NET ASSETS for 667,204 shares of beneficial interest outstanding $5,588,514
----------
----------
SOURCES OF NET ASSETS:
Proceeds from sales of shares (including shares issued to
shareholders electing to receive payment of distributions
in shares), less cost of shares redeemed $6,165,520
Undistributed net investment income 781
Accumulated net realized loss on investments and
financial futures transactions (400,641)
Unrealized depreciation of investments and open financial
futures contracts (computed on the basis of identified cost) (177,146)
----------
Total net assets $5,588,514
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($5,588,514 / 667,204 shares of beneficial interest) $8.38
----
----
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
------------------------------------------------------------------------------
For the Year Ended December 31, 1994
<TABLE>
--------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio $ 287,658
Interest income allocated from Portfolio 12,384
Expenses allocated from Portfolio (42,270)
---------
Total investment income $ 257,772
Expenses --
Distribution fees (Note 4) $ 37,182
Printing and postage 35,042
Registration fees 18,334
Legal and accounting service fees 16,595
Service fee 12,526
Custodian fee 10,640
Transfer and dividend disbursing agent fee 4,483
Amortization of organization expenses 8,030
Miscellaneous 286
---------
Total expenses $ 143,118
Deduct --
Allocation of expenses to the administrator (Note 5) 51,784
---------
Net expenses 91,334
---------
Net investment income $ 166,438
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (loss) (identified cost basis) --
Investment transactions $(660,119)
Financial futures contracts 56,861
---------
Net realized loss on investment transactions and
financial futures (identified cost basis) $(603,258)
Change in unrealized appreciation of investments and
financial futures contracts (214,075)
---------
Net realized and unrealized loss on investments (817,333)
---------
Net decrease in net assets resulting from operations $(650,895)
---------
---------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993<F1>
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 166,438 $ 7,083
Net realized loss from Portfolio (603,258) (9,404)
Change in unrealized appreciation from Portfolio (214,075) 36,929
---------- ----------
Net increase (decrease) in net assets resulting from
operations $ (650,895) $ 34,608
---------- ----------
Distributions to shareholders
From net investment income $ (160,568) $ (7,083)
Tax return of capital (38,551) (9,550)
---------- ----------
Total distributions to shareholders $ (199,119) $ (16,633)
---------- ----------
Net increase in net assets from Fund share transactions
(Note 2) $2,977,233 $3,443,310
---------- ----------
Net increase in net assets $2,127,219 $3,461,285
---------- ----------
NET ASSETS:
At beginning of period 3,461,295 10
---------- ----------
At end of period $5,588,514 $3,461,295
---------- ----------
---------- ----------
<FN>
<F1>For the period from the start of business, November 1, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993<F3>
--------- --------
<S> <C> <C>
FINANCIAL HIGHLIGHTS (for a share outstanding
throughout the period):
NET ASSET VALUE -- Beginning of period $10.0300 $10.0000
-------- --------
Income from investment operations:
Net investment income $ 0.3167 $ 0.0253
Net realized and unrealized gain (loss)
on investments (1.6077) 0.0577
-------- --------
Total income (loss) from investment
operations $(1.2910) $ 0.0830
-------- --------
Less distributions declared to shareholders:
From net investment income $(0.3013) $(0.0253)
Tax return of capital (0.0577) (0.0277)
-------- --------
Total distributions $(0.3590) $(0.0530)
-------- --------
NET ASSET VALUE -- End of period $ 8.3800 $10.0300
-------- --------
-------- --------
TOTAL RETURN<F5> (12.26%) 0.83%
RATIOS/SUPPLEMENTAL DATA: (to average daily
net assets)<F4>
Expenses<F2> 2.66% 0.83%<F1>
Net investment income 3.32% 2.56%<F1>
NET ASSETS AT END OF PERIOD (000'S OMITTED) $ 5,589 $ 3,461
<FN>
<F1>Computed on an annualized basis.
<F2>Includes the Fund's share of Total Return Portfolio's allocated expenses for the year ended
December 31, 1994 and the period from November 1, 1993, to December 31, 1993.
<F3>For the period from the start of business, November 1, 1993, to December 31, 1993.
<F4>The expenses related to the operation of the fund reflect an allocation of expenses to the
administrator. Had such action not been taken, the ratios would have been as follows:
Ratios (to average daily net assets)
Expenses 3.70% 2.22%<F1>
Net investment income 2.29% 1.17%<F1>
<F5>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 record date.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Classic Total Return Fund (the Fund) is a non-diversified entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund is a series in the Eaton Vance Total Return Trust. The Fund
invests all of its investable assets in interests in the Total Return 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 (1.1% at December 31,
1994). The performance of the Fund is directly affected by the performance of
the Portfolio. The financial statements of the Portfolio, including the
portfolio of investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Valuations of securities by the Portfolio is
discussed in Note 1 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.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distrib- ute 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. At
December 31, 1994, the Fund, for federal income tax purposes, had capital loss
carryovers of $415,918, which will reduce the Fund's taxable income arising from
future net realized gain on investment transactions, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve the
Fund of any liability for federal income or excise tax. Such capital loss
carryovers will expire on December 31, 2001 ($9,001) and December 31, 2002,
($406,917).
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Distributions to shareholders are recorded on
the ex-dividend date. Dividend income may include dividends that represent
returns of capital for federal tax purposes.
F. DISTRIBUTION COSTS -- For book purposes, commissions paid on the sale of Fund
shares and other distribution costs are charged to operations. For tax purposes,
commissions paid were charged to paid-in capital prior to November 23, 1994 and
subsequently charged to operations. The change in the tax accounting practice
was prompted by a recent Internal Revenue Service ruling and has no effect on
either the Fund's current yield or total return (Note 4).
G. DISTRIBUTIONS -- Generally accepted accounting principles require that
differences in the recognition or classification of income between the financial
statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
<PAGE>
-----------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1994 1993<F1>
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--- ---- --- ----
<S> <C> <C> <C> <C>
Sales 418,427 $3,812,962 352,168 $3,515,009
Issued to Shareholders electing to receive payment of
distribution in Fund shares 20,529 179,725 1,181 11,832
Redemptions (116,708) (1,015,454) (8,394) (83,531)
------ --------- ------ ---------
Net increase 322,248 $2,977,233 344,955 $3,443,310
------ --------- ------ ---------
------ --------- ------ ---------
<FN>
<F1>From the start of business, November 1, 1993, to December 31, 1993.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$4,084,598 and $1,222,064, respectively.
- --------------------------------------------------------------------------------
(4) DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay the
principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to
1/365th of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no outstanding
Uncovered Distribution Charges, which are equivalent to the sum of (i) 6.25% of
the aggregate amount received by the Fund for shares sold plus, (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD,
reduced by amounts theretofore paid to EVD.
The amount payable to EVD with respect to each day is accrued on such day
as a liability of the Fund and, accordingly, reduces the Fund's net assets. Such
payments would cease upon termination of the distribution agreement (unless made
in accordance with another distribution agreement). As a result, the Fund does
not accrue amounts which may become payable to EVD in the future because the
conditions for recording any contingent liability under generally accepted
accounting principles have not been satisfied. EVD earned $37,182 for the year
ended December 31, 1994 representing 0.75% (annualized) of average daily net
assets. At December 31, 1994, the amount of Uncovered Distribution Charges of
EVD calculated under the Plan was approximately $440,459.
In addition, the Plan provides that the Fund may make payments of service
fees to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets for each fiscal year.
The Trustees of the Fund have initially implemented this provision of the Plan
by authorizing the Fund to make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons in each fiscal year of the Fund
in amounts not exceeding 0.25% (per annum) of the Fund's average daily net
assets. Provision for service fee payments for the year ended December 31, 1994
amounted to $12,526.
Certain of the officers and Trustees of the Fund are officers or directors
of EVD.
- --------------------------------------------------------------------------------
(5) ADMINISTRATOR
The administrator was allocated $51,784 of the Funds expenses for the year ended
December 31, 1994. Investment Adviser fee and other transactions with affiliates
is discussed in Note 3 of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
- --------------------------------------------------------------------------------
(6) SUBSEQUENT EVENT
Shares purchased on or after January 30, 1995 and redeemed during the first year
after purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
at a rate of one percent of redemption proceeds, exclusive of all reinvestments
and capital appreciation in the account. No contingent deferred sales charge is
imposed on exchanges for shares of other funds in the Eaton Vance Classic Group
of Funds or Eaton Vance Money Market Fund (available on or about April 3, 1995)
which are distributed with a contingent deferred sales charge.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of EV Classic Total Return Fund, a
series of Eaton Vance Total Return Trust:
We have audited the accompanying statement of assets and liabilities of EV
Classic Total Return Fund, a series of Eaton Vance Total Return Trust, as of
December 31, 1994, and the related statements of operations, the statement of
changes in net assets and the financial highlights for the year then ended and
for the period from November 1, 1993 (start of business) to December 31, 1993.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 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
Classic Total Return Fund, a series of Eaton Vance Total Return Trust, as of
December 31, 1994, the results of its operations, the changes in its net assets
and the financial highlights for the year then ended and for the period from
November 1, 1993 (start of business) to December 31, 1993, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
- ------------------------------------------------------------------------------
TOTAL RETURN PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS -- 93.4%
- -------------------------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ELECTRIC UTILITIES -- 62.1%
American Electric Power Co. Inc. 200,000 $ 6,575,000
Baltimore Gas & Electric Co. 150,000 3,318,750
Carolina Power & Light Co. 750,000 19,968,750
Central & South West Corp. 479,994 10,859,864
Central Louisiana Electric Co. 326,800 7,720,650
Cinergy Corp. 1,250,250 29,224,594
Dominion Resources, Inc. 200,000 7,150,000
DPL Inc. 950,000 19,475,000
DQE, Inc. 400,000 11,850,000
Duke Power Co. 270,000 10,293,750
FPL Group, Inc. 560,000 19,670,000
General Public Utilities Corp. 320,000 8,400,000
IPALCO Enterprises, Inc. 350,000 10,500,000
Kansas City Power & Light Co. 181,900 4,251,913
LG & E Energy Corp. 125,000 4,609,375
New England Electric System 100,000 3,212,500
NIPSCO Industries, Inc. 400,000 11,900,000
Northern States Power Co. Minn. 322,800 14,203,200
Norweb Ord PLC 200,000 2,690,940
Ohio Edison Co. 200,000 3,700,000
PacifiCorp 583,200 10,570,500
PECO Energy Co. 200,000 4,900,000
Pinnacle West Capital Corp. 300,000 5,925,000
Portland General Corp. 350,000 6,737,500
Public Service Co. of New Mexico<F2> 565,300 7,348,900
Southern Co. 1,072,460 21,449,200
Teco Energy, Inc. 410,000 8,251,250
Union Electric Co. 346,500 12,257,438
United Illuminating Co. 110,200 3,250,900
Western Resources, Inc. 200,000 5,725,000
Wisconsin Energy Corp. 689,650 17,844,694
------------
$313,834,668
------------
OIL & GAS -- 5.4%
Amoco Corp. 165,000 $ 9,755,625
BP Prudhoe Bay Rty Tr Unit Ben Int. 437,000 7,429,000
Mobil Corp. 120,000 10,110,000
------------
$ 27,294,625
------------
REITS -- 18.5%
Apartment Investment & Management Co. Class A 200,000 $ 3,450,000
Associated Estates Realty Corp. 200,000 4,200,000
Avalon Properties, Inc. 165,000 $ 3,795,000
Bay Apartment Communities 213,400 4,294,675
Bradley Real Estate Trust 72,750 1,109,437
Cali Realty Corp. 150,000 2,400,000
Camden Properties Trust SBI 200,000 4,975,000
Columbus Realty Trust 140,000 2,590,000
Developers Diversified Realty Corp. 170,000 5,312,500
Duke Realty Investments, Inc. 40,000 1,130,000
Equity Residential Properties Trust 80,000 2,400,000
Health Care Property Investors, Inc. 140,000 4,217,500
Healthcare Realty Trust 350,000 7,350,000
LTC Properties, Inc. 490,000 6,492,500
Macerich Co. 175,000 3,740,625
Meditrust Sh Ben Int. 100,000 3,025,000
Mid America Apartment Communities, Inc. 164,500 4,400,375
Nationwide Health Properties, Inc. 320,000 11,440,000
Oasis Residential, Inc. 225,000 5,512,500
Post Properties Inc. 100,000 3,150,000
Simon Property Group, Inc. 150,000 3,637,500
Southwestern Property Trust, Inc. 180,000 2,205,000
Sun Communities Inc. 110,000 2,475,000
------------
$ 93,302,612
------------
TELEPHONE UTILITIES -- 6.9%
Ameritech Corp. 380,000 $ 15,342,500
Bell Atlantic Corp. 100,000 4,975,000
Southern New England
Telecommunications 50,000 1,606,250
Southwestern Bell Corp. 150,000 6,056,250
Tele Danmark A/S<F2> 63,000 1,606,500
Telecom Corp. New Zealand Ltd. ADR 100,000 5,137,500
------------
$ 34,724,000
------------
OTHER -- 0.5%
British Sky Broadcasting Group PLC ADR<F2> 25,000 $ 600,000
Sonat Inc. 71,000 1,988,000
------------
$ 2,588,000
------------
TOTAL COMMON STOCKS
(identified cost, $455,294,874) $471,743,905
----------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK -- 2.0%
- -------------------------------------------------------------------------------------------------
SHARES VALUE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Freeport McMoRan Copper & Gold 40,000 $ 830,000
Kenetech Corp., 8.25s 200,000 3,075,000
Philippines Long Distance Telephone, 7s 112,000 6,062,000
------------
$ 9,967,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(identified cost, $10,549,225) $ 9,967,000
------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS -- 0.1%
- -------------------------------------------------------------------------------------------------
FACE AMOUNT
(000 OMITTED)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
IDB Communications Group, Inc.,
5s, 8/15/03 (identified cost, $858,750) $1,000 $ 762,500
------------
- -------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 1.5%
- -------------------------------------------------------------------------------------------------
U.S. Treasury Bill, 0s, 3/5/95<F1>
(identified cost, $7,696,456) $7,780 $ 7,703,600
------------
- -------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS -- 1.5%
- -------------------------------------------------------------------------------------------------
CXC Inc., 5.95s, 1/3/95 $3,499 $ 3,497,265
American Express Credit Corp.,
5.80s, 1/5/95 4,294 4,290,541
------------
TOTAL SHORT-TERM OBLIGATIONS, AT
AMORTIZED COST $ 7,787,806
------------
TOTAL INVESTMENTS -- 98.5%
(identified cost, $482,187,111) $497,964,811
OTHER ASSETS, LESS LIABILITIES -- 1.5% 7,602,081
------------
NET ASSETS -- 100.0% $505,566,892
------------
------------
<FN>
<F1>Collateral for futures held at December 31, 1994 (see Note 6)
<F2>Non-income producing security
</FN>
</TABLE>
The accompanying notes are an integral part
of the financial statements
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A)
(identified cost, $482,187,111) $497,964,811
Cash 2,597
Receivable for investments sold 8,994,384
Dividends receivable 2,364,639
Receivable for daily variation margin on financial
futures contracts 975,000
Deferred organization expenses (Note 1E) 16,027
Foreign tax reclaim receivable 25,565
Interest receivable 29,754
------------
Total assets $510,372,777
LIABILITIES:
Payable for investments purchased $4,775,774
Trustees fees payable 5,160
Custodian fee payable 8,403
Accrued expenses 16,548
----------
Total liabilities 4,805,885
------------
NET ASSETS applicable to investors' interest in Portfolio $505,566,892
------------
------------
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $491,941,692
Unrealized appreciation of investments and open futures
contracts (computed on the basis of identified cost) 13,625,200
------------
Total net assets $505,566,892
------------
------------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------------
For the Year Ended December 31, 1994
----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $ 32,158,717
Interest income 1,330,065
-------------
Total income $ 33,488,782
Expenses --
Investment adviser fee (Note 3) $ 4,106,857
Compensation of trustees not members of the
investment adviser's organization
(Note 3) 20,687
Custodian fee (Note 3) 159,872
Interest expense 187,106
Commitment fee 143,450
Audit and legal fees 46,657
Printing and postage fees 14,129
Amortization of deferred organizational expenses
(Note 1E) 4,197
Miscellaneous 19,841
-----------
Total expenses 4,702,796
-------------
Net investment income $ 28,785,986
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) (identified cost basis) --
Investment transactions $(21,035,623)
Financial futures contracts 5,883,625
------------
Net realized loss on investments and financial
futures (identified cost basis) $(15,151,998)
Change in unrealized appreciation on investments and
financial futures contracts (89,492,365)
------------
Net realized and unrealized loss on investments (104,644,363)
-------------
Net decrease in net assets resulting from
operations $ (75,858,377)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1993<F1>
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 28,785,986 $ 5,227,429
Net realized loss on investment transactions and
financial futures contracts (15,151,998) (3,109,783)
Decrease in unrealized appreciation of investments (89,492,365) (31,858,504)
------------- -------------
Net decrease in net assets resulting from
operations $ (75,858,377) $ (29,740,858)
------------- -------------
Capital transactions --
Contributions $ 97,021,559 $ 700,057,818
Withdrawals (152,162,876) (33,850,394)
------------- -------------
Increase (decrease) in net assets resulting from
capital transactions $ (55,141,317) $ 666,207,424
------------- -------------
Total increase (decrease) in net assets $(130,999,694) $ 636,466,566
NET ASSETS:
At beginning of period 636,566,586 100,020
------------- -------------
At end of period $ 505,566,892 $ 636,566,586
------------- -------------
------------- -------------
<FN>
<F1>For the period from the start of business, October 28, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
-----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993<F2>
----------------- -----------------
<S> <C> <C>
RATIOS (As a percentage of average net assets):
Expenses 0.85% 0.91%<F1>
Net investment income 5.22% 4.57%<F1>
PORTFOLIO TURNOVER 107% 16%
LEVERAGE ANALYSIS:
Amount of debt outstanding at end of period (000's
omitted) -- --
Average daily balance of debt outstanding during
period (000 omitted) $ 3,137 $15,452
<FN>
<F1>Computed on an annualized basis.
<F2>For the period from the start of business, October 28, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Total Return Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a diversified open-end investment company which was
organized as a trust under the laws of the State of New York on May 1, 1992. The
Declaration of Trust permits the Trustees to issue beneficial interests in the
Portfolio. Investment operations began on October 28, 1993, with the acquisition
of net assets of $668,641,088 in exchange for an interest in the Portfolio by
one of the Portfolio's investors. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sales prices or, if there has been
no sale, at the mean between the closing bid and asked prices. Unlisted
securities are valued at the mean between the latest available bid and asked
prices. Options and financial futures contracts are valued at the last sale
price, as quoted on the principal exchange or board of trade on which such
options or contracts are traded or, in the absence of a sale, the mean between
the last bid and asked prices. Short-term obligations, maturing in 60 days or
less, are valued at amortized cost, which approximates value. Securities for
which market quotations are unavailable are appraised at their fair value as
determined in good faith by or at the direction of the Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. 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 Code) in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investors' distributive
share of the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
C. OPTION ACCOUNTING PRINCIPLES -- Upon the writing of a covered call option, an
amount equal to the premium received by the Portfolio is included in the
Statement of Assets and Liabilities as a liability. The amount of the liability
is subsequently marked-to-market to reflect the current market value of the
option written in accordance with the Portfolio's policies on investment
valuations discussed above. Premiums received from writing call options which
expire are treated as realized gains. Premiums received from writing call
options which are exercised or are closed are added to or offset against the
proceeds or amount paid on the transaction to determine the realized gain or
loss. The Portfolio, as writer of a call option, may have no control over
whether the underlying securities may be sold and, as a result, bears the market
risk of an unfavorable change in the price of the securities underlying the
written option.
D. FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on the
daily fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. When the Portfolio
enters into a closing transaction, the Portfolio will realize for book purposes
a gain or loss equal to the difference between the value of the financial
futures contract to sell and the financial futures contract to buy. The
Portfolio's investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest rates, security prices, commodity
prices or currency exchange rates. Should interest rates, security prices,
commodity prices or currency exchange rates move unexpectedly, the Portfolio may
not achieve the anticipated benefits of the financial futures contracts and may
realize a loss.
E. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
------------------------------------------------------------------------------
(2) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $574,395,813 and $620,810,869, respectively.
-----------------------------------------------------------------
(3) 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
manage- ment and investment advisory services rendered to the Portfolio. The fee
is based upon a percentage of average daily net assets. For the year ended
December 31, 1994, the fee was equivalent to 0.74% of the Portfolio's average
net assets for such period and amounted to $4,106,857. Except as to Trustees of
the Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their service to the Portfolio out of such
investment adviser fee. Investors Bank & Trust Company (IBT), an affiliate of
EVM and BMR, serves as custodian of the Portfolio. Pursuant to the custodian
agreement, IBT receives a fee reduced by credits which are determined based on
the average daily cash balances the Portfolio maintains with IBT. Certain of the
officers and Trustees of the Portfolio are officers and directors/trustees of
the above organizations.
-------------------------------------------------------------------------------
(4) 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 bank. The line of credit consists of a $20 million committed facility and a
$100 million discretionary facility. The Portfolio expects to use the proceeds
of the advances primarily for leveraging purposes. Borrowings by the Portfolio
under the Credit Agreement will not exceed the lesser of 1/3 of the market value
of the net assets of the Portfolio or $60,000,000. Interest is charged to each
portfolio based on its borrowings at an amount above either the bank's adjusted
certificate of deposit rate, a variable adjusted certificate of deposit rate, or
a federal funds effective rate. In addition, a fee computed at an annual rate of
1/4 of 1% on the $20 million committed facility and on the daily unused portion
of the $100 million discretionary facility is allocated among the participating
funds and portfolios at the end of each quarter. The average daily loan balance
for the year ended December 31, 1994 was $3,137,134 and the average interest
rate was 5.96%. The maximum borrowings outstanding at any month end during the
year ended December 31, 1994, was $26,083,000.
-------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1994, as computed on a federal income tax basis, are as
follows:
Aggregate cost $482,915,174
------------
------------
Gross unrealized appreciation $ 28,239,363
Gross unrealized depreciation 13,189,726
------------
Net unrealized appreciation $ 15,049,637
------------
------------
----------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Portfolio may trade in financial instruments with off-balance sheet risk in
the normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and financial futures contracts and
may involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. The notational or contractual
amounts of these instruments represent the investment the Portfolio has in
particular classes of financial instruments and does not necessarily represent
the amounts potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and off-setting
transactions are considered.
A summary of obligations under these financial instruments at December 31,
1994 is as follows:
NET
FUTURES CONTRACT UNREALIZED
EXPIRATION DATE CONTRACTS POSITION DEPRECIATION
- --------------- --------- -------- ------------
3/95 600 S&P 500 Futures Short $2,152,500
At December 31, 1994, the Portfolio has sufficient cash and/or securities to
cover margin requirements on open futures contracts.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Investors of Total Return Portfolio:
We have audited the accompanying statement of assets and liabilities of Total
Return Portfolio, including the portfolio of investments, as of December 31,
1994, the related statement of operations for the year then ended and the
statement of changes in net assets and supplementary data for the year ended
December 31, 1994, and for the period from the start of business, October 28,
1993, to December 31, 1993. These financial statements and supplementary data
are the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and supplementary data based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 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 Total
Return Portfolio as of December 31, 1994, the results of its operations for the
year then ended, and the changes in its net assets and the supplementary data
for the year ended December 31, 1994, and for the period from the start of
business, October 28, 1993, to December 31, 1993, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
PORTFOLIO INVESTMENT ADVISER
Boston Management and Research
24 Federal Street
Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV CLASSIC
TOTAL RETURN FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-TRSAI
EV Classic
Total Return Fund
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1995
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
Financial Highlights for the period from the start of business,
November 1, 1993, to December 31, 1994.
INCLUDED IN PART B:
Financial Statements for EV Classic Total Return Fund:
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the period from the start of
business, November 1, 1993, to December 31, 1994
Statement of Changes in Net Assets for the period from the
start of business, November 1, 1993, to December 31, 1994
Financial Highlights for the years ended December 31, 1994 and
1993
Notes to Financial Statements
Report of Independent Accountants
Financial Statements for Total Return Portfolio:
Portfolio of Investments as of December 31, 1994
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the period from the start of
business, October 28, 1993, to December 31, 1994
Statement of Changes in Net Assets for the period from the
start of business, October 28, 1993, to December 31, 1994
Supplementary Data for the period from the start of business,
October 28, 1993, to December 31, 1994
Notes to Financial Statements
Report of Independent Accountants
(B) EXHIBITS
(1)(a) Amended and Restated Declaration of Trust dated August
17, 1993 filed as Exhibit (1)(a) to Post-Effective
Amendment No. 15 and incorporated herein by reference.
(b) Establishment and Designation of Series dated September
27, 1993 filed as Exhibit (1)(b) to Post-Effective
Amendment No. 17 and incorporated herein by reference.
(2)(a) By-Laws as amended through November 18, 1983 filed as
Exhibit (2) to Post-Effective Amendment No. 3 and
incorporated herein by reference.
(b) Amendment to By-Laws for Eaton Vance Total Return Trust
dated December 13, 1993, filed as Exhibit (2)(b) to Post
Effective Amendment No. 17 and incorporated herein by
reference.
(3) Not applicable
(4)(a) Specimen certificate representing share of beneficial
interest for EV Traditional Total Return Fund filed as
Exhibit (4)(a) to Post Effective Amendment No. 17 and
incorporated herein by reference..
(b) Specimen certificate representing share of beneficial
interest for EV Classic Total Return Fund filed as Exhibit
(4)(b) to Post Effective Amendment No. 17 and incorporated
herein by reference..
(c) Specimen certificate representing share of beneficial
interest for EV Marathon Total Return Fund filed as
Exhibit (4)(c) to Post Effective Amendment No. 17 and
incorporated herein by reference.
(5) Investment Advisory Agreement with Eaton Vance Management
dated November 1, 1990 filed as Exhibit (5) to
Post-Effective Amendment No. 11 and incorporated herein by
reference.
(6)(a)(1) Distribution Agreement with Eaton & Howard, Vance Sanders
Distributors Inc. dated March 24, 1982 filed as Exhibit
6(a) to Post-Effective Amendment No. 2 and incorporated
herein by reference.
(a)(2) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Classic Total Return Fund dated October 28, 1993,
filed as Exhibit (6)(a)(2) to Post Effective Amendment No.
17 and incorporated herein by reference.
(a)(3) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon Total Return Fund dated October 28, 1993,
filed as Exhibit (6)(a)(3) to Post Effective Amendment No.
17 and incorporated herein by reference..
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to
Post-Effective Amendment No. 14 and incorporated herein by
reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as
Exhibit (6)(c) to Post-Effective Amendment No. 14 and
incorporated herein by reference.
(7) Not applicable
(8) Custodian Agreement with Investors Bank & Trust Company
dated December 17, 1990 filed as Exhibit (8) to
Post-Effective Amendment No. 11 and incorporated herein by
reference.
(9)(a) Administrative Services Agreement with Eaton Vance
Management for EV Traditional Total Return Fund dated
October 28, 1993, filed as Exhibit (9)(a) to Post
Effective Amendment No. 17 and incorporated herein by
reference.
(b) Administrative Services Agreement with Eaton Vance
Management for EV Classic Total Return Fund dated October
28, 1993, filed as Exhibit (9)(b) to Post Effective
Amendment No. 17 and incorporated herein by reference.
(c) Administrative Services Agreement with Eaton Vance
Management for EV Marathon Total Return Fund dated October
28, 1993, filed as Exhibit (9)(c) to Post Effective
Amendment No. 17 and incorporated herein by reference.
(10) Not applicable
(11) Consent of Independent Accountants for EV Classic Total
Return Fund filed herewith.
(12) Not applicable
(13) Agreement with Eaton & Howard, Vance Sanders Inc. in
consideration of providing initial capital, dated November
4, 1981 filed as Exhibit (13) to the original Registration
Statement or Pre-Effective Amendment No. 2 and
incorporated herein by reference.
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for
Self-Employed Persons with Adoption Agreement and
instructions filed as Exhibit #14(1) to Post-Effective
Amendment #22 on Form N-1 under the Securities Act of 1933
(File No. 2-28471) and incorporated herein by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution
Prototype Plan and Trust with Adoption Agreements (1)
Basic Profit-Sharing Retirement Plan, (2) Basic Money
Purchase Plan, (3) Thrift Plan Qualifying as Profit
Sharing Plan, (4) Thrift Plan Qualifying as Money Purchase
Pension Plan, (5) Integrated Profit Sharing Retirement
Plan, (6) Integrated Money Purchase Pension Plan filed as
Exhibit #14(2) to Post-Effective Amendment #22 on Form N-1
under the Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and
Investment Instruction Form filed as Exhibit 14(3) to
Post-Effective Amendment #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype
Plan and Trust with Adoption Agreement filed as Exhibit
14(d) to Post-Effective Amendment #22 on Form N-1 under
the Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(15)(a) Service Plan dated July 7, 1993 pursuant to Rule 12b-1
under the Investment Company Act of 1940 filed as Exhibit
(15)(a) to Post-Effective Amendment No. 15 and
incorporated herein by reference.
(b) Distribution Plan for EV Classic Total Return Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated October 28, 1993, filed as Exhibit (15)(b) to
Post Effective Amendment No. 17 and incorporated herein by
reference.
(c) Distribution Plan for EV Marathon Total Return Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated October 28, 1993, filed as Exhibit (15)(c) to
Post Effective Amendment No. 17 and incorporated herein by
reference.
(16) Schedules for Computation of Performance Quotations filed
herewith.
(17)(a) Power of Attorney for Eaton Vance Total Return Trust dated
April 22, 1994, filed as Exhibit (17)(a) to Post Effective
Amendment No. 17 and incorporated herein by reference.
(b) Power of Attorney for Total Return Portfolio dated August
16, 1993 filed as Exhibit (17)(b) to Post-Effective
Amendment No. 15 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial as of January 31, 1995
interest without par value
EV Classic Total Return Fund 332
EV Marathon Total Return Fund 1,880
EV Traditional Total Return Fund 23,856
ITEM 27. INDEMNIFICATION
No change from the information set forth in Item 4 of Form N-1 filed as
Pre-Effective Amendment No. 2, which information is incorporated herein by
reference.
Registrant's Trustees 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
Reference is made to the information set forth under the caption
"Investment Adviser and Administrator" in the Statement of Additional
Information, which information is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management is the principal underwriter
for each of the mutual funds named below.
<TABLE>
<S> <C>
EV Classic Alabama Tax Free Fund EV Classic Connecticut Limited Maturity
EV Classic Arizona Tax Free Fund Tax Free Fund
EV Classic Arkansas Tax Free Fund EV Classic Connecticut Tax Free Fund
EV Classic California Limited EV Classic Florida Insured Tax Free Fund
Maturity Tax Free Fund EV Classic Florida Limited Maturity
EV Classic California Municipals Fund Tax Free Fund
EV Classic Colorado Tax Free Fund EV Classic Florida Tax Free Fund
<PAGE>
EV Classic Georgia Tax Free Fund EV Marathon Connecticut Limited Maturity Tax Free Fund
EV Classic Government Obligations Fund EV Marathon Connecticut Tax Free Fund
EV Classic Greater China Growth Fund EV Marathon Emerging Markets Fund
EV Classic Growth Fund Eaton Vance Equity-Income Trust
EV Classic Hawaii Tax Free Fund EV Marathon Florida Insured Tax Free Fund
EV Classic High Income Fund EV Marathon Florida Limited Maturity Tax Free Fund
EV Classic Investors Fund EV Marathon Florida Tax Free Fund
EV Classic Kansas Tax Free Fund EV Marathon Georgia Tax Free Fund
EV Classic Kentucky Tax Free Fund EV Marathon Gold & Natural Resources Fund
EV Classic Louisiana Tax Free Fund EV Marathon Government Obligations Fund
EV Classic Maryland Tax Free Fund EV Marathon Greater China Growth Fund
EV Classic Massachusetts Limited Maturity Tax Free Fund EV Marathon Greater India Fund
EV Classic Massachusetts Tax Free Fund EV Marathon Growth Fund
EV Classic Michigan Limited Maturity Tax Free Fund EV Marathon Hawaii Tax Free Fund
EV Classic Michigan Tax Free Fund EV Marathon High Income Fund
EV Classic Minnesota Tax Free Fund EV Marathon Investors Fund
EV Classic Mississippi Tax Free Fund EV Marathon Kansas Tax Free Fund
EV Classic Missouri Tax Free Fund EV Marathon Kentucky Tax Free Fund
EV Classic National Limited Maturity Tax Free Fund EV Marathon Louisiana Tax Free Fund
EV Classic National Municipals Fund EV Marathon Maryland Tax Free Fund
EV Classic New Jersey Limited Maturity Tax Free Fund EV Marathon Massachusetts Limited Maturity Tax Free Fund
EV Classic New Jersey Tax Free Fund EV Marathon Massachusetts Tax Free Fund
EV Classic New York Limited Maturity Tax Free Fund EV Marathon Michigan Limited Maturity Tax Free Fund
EV Classic New York Tax Free Fund EV Marathon Michigan Tax Free Fund
EV Classic North Carolina Tax Free Fund EV Marathon Minnesota Tax Free Fund
EV Classic Ohio Limited Maturity Tax Free Fund EV Marathon Mississippi Tax Free Fund
EV Classic Ohio Tax Free Fund EV Marathon Missouri Tax Free Fund
EV Classic Oregon Tax Free Fund EV Marathon National Limited Maturity Tax Free Fund
EV Classic Pennsylvania Limited Maturity Tax Free Fund EV Marathon National Municipals Fund
EV Classic Pennsylvania Tax Free Fund EV Marathon New Jersey Limited Maturity Tax Free Fund
EV Classic Rhode Island Tax Free Fund EV Marathon New Jersey Tax Free Fund
EV Classic Short-Term Strategic Income Fund EV Marathon New York Limited Maturity Tax Free Fund
EV Classic South Carolina Tax Free Fund EV Marathon New York Tax Free Fund
EV Classic Special Equities Fund EV Marathon North Carolina Limited Maturity Tax Free Fund
EV Classic Stock Fund EV Marathon North Carolina Tax Free Fund
EV Classic Tennessee Tax Free Fund EV Marathon Ohio Limited Maturity Tax Free Fund
EV Classic Texas Tax Free Fund EV Marathon Ohio Tax Free Fund
EV Classic Total Return Fund EV Marathon Oregon Tax Free Fund
EV Classic Virginia Tax Free Fund EV Marathon Pennsylvania Limited Maturity Tax Free Fund
EV Classic West Virginia Tax Free Fund EV Marathon Pennsylvania Tax Free Fund
EV Marathon Alabama Tax Free Fund EV Marathon Rhode Island Tax Free Fund
EV Marathon Arizona Limited Maturity Tax Free Fund EV Marathon Short-Term Strategic Income Fund
EV Marathon Arizona Tax Free Fund EV Marathon South Carolina Tax Free Fund
EV Marathon Arkansas Tax Free Fund EV Marathon Special Equities Fund
EV Marathon California Limited Maturity Tax Free Fund EV Marathon Stock Fund
EV Marathon California Municipals Fund EV Marathon Tennessee Tax Free Fund
EV Marathon Colorado Tax Free Fund EV Marathon Texas Tax Free Fund
EV Marathon Total Return Fund
<PAGE>
EV Marathon Virginia Limited Maturity Tax Free Fund EV Traditional National Limited Maturity Tax Free Fund
EV Marathon Virginia Tax Free Fund EV Traditional National Municipals Fund
EV Marathon West Virginia Tax Free Fund EV Traditional New Jersey Tax Free Fund
EV Traditional California Municipals Fund EV Traditional New York Limited Maturity Tax Free Fund
EV Traditional Connecticut Tax Free Fund EV Traditional New York Tax Free Fund
EV Traditional Emerging Markets Fund EV Traditional Pennsylvania Tax Free Fund
EV Traditional Florida Insured Tax Free Fund EV Traditional Special Equities Fund
EV Traditional Florida Limited Maturity Tax Free Fund EV Traditional Stock Fund
EV Traditional Florida Tax Free Fund EV Traditional Total Return Fund
EV Traditional Government Obligations Fund Eaton Vance Cash Management Fund
EV Traditional Greater China Growth Fund Eaton Vance Liquid Assets Trust
EV Traditional Greater India Fund Eaton Vance Prime Rate Reserves
EV Traditional Growth Fund Eaton Vance Short-Term Treasury Fund
Eaton Vance Income Fund of Boston Eaton Vance Tax Free Reserves
EV Traditional Investors Fund Massachusetts Municipal Bond Portfolio
Eaton Vance Municipal Bond Fund L.P.
</TABLE>
(b)
<TABLE>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
---------------- -------------------------- ---------------
<S> <C> <C>
James B. Hawkes<F1> Vice President and Director Vice President and Trustee
William M. Steul<F1> Vice President and Director None
Wharton P. Whitaker<F1> President and Director None
Howard D. Barr Vice President None
2750 Royal View Court
Oakland, Michigan
Nancy E. Belza Vice President None
463-1 Buena Vista East
San Francisco, California
Chris Berg Vice President None
45 Windsor Lane
Palm Beach Gardens, Florida
H. Day Brigham, Jr.<F1> Vice President None
Susan W. Bukima Vice President None
106 Princess Street
Alexandria, Virginia
Jeffrey W. Butterfield Vice President None
9378 Mirror Road
Columbus, Indiana
Mark A. Carlson<F1> Vice President None
Jeffrey Chernoff Vice President None
115 Concourse West
Bright Waters, New York
William A. Clemmer<F1> Vice President None
James S. Comforti Vice President None
1859 Crest Drive
Encinitas, California
Mark P. Doman Vice President None
107 Pine Street
Philadelphia, Pennsylvania
Michael A. Foster Vice President None
850 Kelsey Court
Centerville, Ohio
William M. Gillen Vice President None
280 Rea Street
North Andover, Massachusetts
Hugh S. Gilmartin Vice President None
1531-184th Avenue, NE
Bellevue, Washington
Richard E. Houghton<F1> Vice President None
Brian Jacobs<F1> Senior Vice President None
Stephen D. Jonhson Vice President None
13340 Providence Lake Drive
Alpharetta, Georgia
Thomas J. Marcello Vice President None
553 Belleville Avenue
Glen Ridge, New Jersey
Timothy D. McCarthy Vice President None
9801 Germantown Pike
Lincoln Woods Apt. 416
Lafayette Hill, Pennsylvania
Morgan C. Mohrman<F1> Senior Vice President None
Gregory B. Norris Vice President None
6 Halidon Court
Palm Beach Gardens, Florida
Thomas Otis<F1> Secretary and Clerk Secretary
George D. Owen Vice President None
1911 Wildwood Court
Blue Springs, Missouri
F. Anthony Robinson Vice President None
510 Gravely Hill Road
Wakefield, Rhode Island
Benjamin A. Rowland, Jr.<F1> Vice President, Treasurer and Director None
John P. Rynne<F1> Vice President None
George V.F. Schwab, Jr. Vice President None
9501 Hampton Oaks Lane
Charlotte, North Carolina
Cornelius J. Sullivan<F1> Vice President None
Maureen C. Tallon Vice President None
518 Armistead Drive
Nashville, Tennessee
David M. Thill Vice President None
126 Albert Drive
Lancaster, New York
William T. Toner Vice President None
747 Lilac Drive
Santa Barbara, California
Chris Volf Vice President None
6517 Thoroughbred Loop
Odessa, Florida
Donald E. Webber<F1> Senior Vice President None
Sue Wilder Vice President None
141 East 89th Street
New York, New York
<FN>
<F1>Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
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, 24 Federal Street, Boston, MA 02110
and 89 South Street, Boston, MA 02111 and its transfer agent, The Shareholder
Services Group, Inc., 53 State Street, Boston, MA 02104, with the exception of
certain corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston, MA
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 Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Boston, and the Commonwealth of
Massachusetts on the 15th day of February, 1995.
EATON VANCE TOTAL RETURN TRUST
By: /s/ M. DOZIER GARDNER
M. DOZIER GARDNER, President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- -----
Trustee, President and Principal
/s/M. DOZIER GARDNER Executive Officer February 15, 1995
M. DOZIER GARDNER
Treasurer and Principal
/s/JAMES L. O'CONNOR Financial and Accounting Officer February 15, 1995
JAMES L. O'CONNOR
/s/LANDON T. CLAY Trustee February 15, 1995
LANDON T. CLAY
DONALD R. DWIGHT* Trustee February 15, 1995
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee February 15, 1995
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 15, 1995
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 15, 1995
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 15, 1995
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 15, 1995
JACK L. TREYNOR
*By: /s/H. DAY BRIGHAM, JR.
As Attorney-in-fact
<PAGE>
SIGNATURES
Total Return Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of Eaton Vance Total Return Trust (File No. 2-74378) to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 15th day of
February, 1995.
TOTAL RETURN PORTFOLIO
By: /s/ M. DOZIER GARDNER
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Total Return Trust (File No. 2-74378) has been signed below by the following
persons in the capacities on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- -----
Trustee, President and February 15, 1995
/s/M. DOZIER GARDNER Principal Executive Officer
M. DOZIER GARDNER
Treasurer and Principal February 15, 1995
Financial and Accounting
/s/JAMES L. O'CONNOR Officer
JAMES L. O'CONNOR
/s/LANDON T. CLAY Trustee February 15, 1995
LANDON T. CLAY
DONALD R. DWIGHT* Trustee February 15, 1995
DONALD R. DWIGHT
/s/JAMES B. HAWKES Trustee February 15, 1995
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 15, 1995
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 15, 1995
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 15, 1995
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 15, 1995
JACK L. TREYNOR
*By: /s/H. DAY BRIGHAM, JR.
As Attorney-in-fact
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as a part of this amendment to the
Registration Statement.
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
(11) Consent of Independent Accountants for
EV Classic Total Return Fund
(16) Schedule of Computation of Performance
Quotations.
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 18 to the
Registration Statement on Form N-1A (1933 Act File Number 2-74378) of Eaton
Vance Total Return Trust: EV Classic Total Return Fund (the "Fund") of our
report dated February 3, 1995 on our audit of the financial statements and
financial highlights of the Fund and of our report on our audit of the financial
statements and supplementary data of Total Return Portfolio dated February 3,
1995, which reports are included in the Annual Report to Shareholders for the
period ended December 31, 1994, which is also included in this Registration
Statement.
We also consent to the reference to our Firm under the Caption "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 16, 1995
<PAGE>
EXHIBIT 16
<TABLE>
EV CLASSIC TOTAL RETURN FUND
INVESTMENT PERFORMANCE
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the life of the fund ending December 31, 1994. Past performance is not
indicative of future results. Investment return and principal value will
fluctuate and shares, when redeemed, may be worth more or less than their
original cost.
<CAPTION>
NUMBER OF
SHARES GAINED
NAV ON THROUGH TOTAL
INVEST- INVEST- AMT OF NUMBER DATE OF REINVESTMENT OF NUMBER OF 12/31/94 12/31/94 TOTAL RETURN
MENT MENT INVEST- OF SHARES INVEST- ALL DISTRIBUTIONS SHARES AS NET ASSET VALUE OF THROUGH 12/31/94
PERIOD DATE MENT PURCHASED MENT THROUGH 12/31/94 OF 12/31/94 VALUE<F2> INVESTMENT CUMULATIVE<F1> ANNUALIZED<F3>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFE OF 11/01/93 $1,000 100.000 $10.00 4.702 104.702 $8.38 $877.40 -12.26% -10.62%
THE FUND
(1.16 YR)
1 YEAR
ENDING 12/31/93 $1,000 99.701 $10.03 4.137 103.838 $8.38 $870.16 -12.98% -12.98%
12/31/94
<FN>
<F1> Cumulative total return (net asset value to net asset value) is c culated
by dividing the cumulative net asset value on 12/31/94 by the initial net
asset value.
<F2> 12/31/94 Net Asset Value is an unaudited figure.
<F2> Average annual total return is the average annual compounded rate of return
based on the cumulative value for each period. It is calculated by taking
the nth root of 1 + the cumulative total return, where n = the number of
years invested.
</TABLE>
<PAGE>
EXHIBIT 16
EV CLASSIC TOTAL RETURN FUND
CALCULATION OF DISTRIBUTION RATE
AND EFFECTIVE DISTRIBUTION RATE
AS OF 12/31/94
DISTRIBUTION RATE
Annualize
Most Recent
Monthly : $0.022 x 12
Distribution
Divide by
Current Maximum : $8.38
Offering Price
Distribution
Rate Equals : 0.0315 ( or 3.15% )
EFFECTIVE DISTRIBUTION RATE
Divide
Distribution : 0.0315
Rate by 12 ----- + 1
and Add 1. 12
The Resulting
Number Equals : 1.0026
Take this
Number to the 12
12th power : ( 1.0026 ) - 1
and Subtract 1.
Effective
Distribution : 0.0319 ( or 3.19% )
Rate Equals
<PAGE>
EXHIBIT 16
EV CLASSIC TOTAL RETURN FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/94:
Interest Income Earned: $24,828
Plus Dividend Income Earned:
----------
Equal Gross Income: $24,828
Minus Expenses: $10,168
----------
Equal Net Investment Income: $14,660
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 666,117
----------
Equal Net Investment Income Earned Per Share: $0.0220
Maximum Offering Price Per Share 12/31/94: $8.39
30 Day Yield*: 3.17%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0220/$8.39)+1) -1]
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000355758
<NAME> EATON VANCE TOTAL RETURN TRUST
<SERIES>
<NUMBER> 2
<NAME> EV CLASSIC TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 5,513,397
<RECEIVABLES> 61,898
<ASSETS-OTHER> 35,595
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,610,890
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22,376
<TOTAL-LIABILITIES> 22,376
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,165,520
<SHARES-COMMON-STOCK> 667,204
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 781
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (400,641)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (177,146)
<NET-ASSETS> 5,588,514
<DIVIDEND-INCOME> 287,658
<INTEREST-INCOME> 12,384
<OTHER-INCOME> (42,270)
<EXPENSES-NET> 91,334
<NET-INVESTMENT-INCOME> 166,438
<REALIZED-GAINS-CURRENT> (603,258)
<APPREC-INCREASE-CURRENT> (214,075)
<NET-CHANGE-FROM-OPS> (650,895)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 160,568
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 38,551
<NUMBER-OF-SHARES-SOLD> 418,427
<NUMBER-OF-SHARES-REDEEMED> 116,708
<SHARES-REINVESTED> 20,529
<NET-CHANGE-IN-ASSETS> 2,127,219
<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> 143,118
<AVERAGE-NET-ASSETS> 5,014,214
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.317
<PER-SHARE-GAIN-APPREC> (1.608)
<PER-SHARE-DIVIDEND> (0.301)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> (0.058)
<PER-SHARE-NAV-END> 8.38
<EXPENSE-RATIO> 2.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000912751
<NAME> TOTAL RETURN PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 482,187,111
<INVESTMENTS-AT-VALUE> 497,964,811
<RECEIVABLES> 12,389,342
<ASSETS-OTHER> 16,027
<OTHER-ITEMS-ASSETS> 2,597
<TOTAL-ASSETS> 510,372,777
<PAYABLE-FOR-SECURITIES> 4,775,774
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,111
<TOTAL-LIABILITIES> 4,805,885
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 491,941,692
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,625,200
<NET-ASSETS> 505,566,892
<DIVIDEND-INCOME> 32,158,717
<INTEREST-INCOME> 1,330,065
<OTHER-INCOME> 0
<EXPENSES-NET> 4,702,796
<NET-INVESTMENT-INCOME> 28,785,986
<REALIZED-GAINS-CURRENT> (15,151,998)
<APPREC-INCREASE-CURRENT> (89,492,365)
<NET-CHANGE-FROM-OPS> (75,858,377)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (75,858,377)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,106,857
<INTEREST-EXPENSE> 143,450
<GROSS-EXPENSE> 4,702,796
<AVERAGE-NET-ASSETS> 551,436,458
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
