<PAGE>
EATON VANCE CASH MANAGEMENT FUND
EATON VANCE LIQUID ASSETS FUND
EATON VANCE MONEY MARKET FUND
EATON VANCE TAX FREE RESERVES
EATON VANCE CASH MANAGEMENT FUND ("Cash Fund"), EATON VANCE LIQUID ASSETS
FUND ("Liquid Assets Fund") and EATON VANCE MONEY MARKET FUND ("Money Market
Fund") are diversified money market funds seeking high income consistent with
preservation of capital and maintenance of liquidity. EATON VANCE TAX FREE
RESERVES ("Tax Free Reserves") is a diversified money market fund seeking high
income exempt from regular federal income tax consistent with preservation of
capital and maintenance of liquidity. The Cash, Liquid Assets and Money Market
Funds invest all of their assets in Cash Management Portfolio (the
"Portfolio"), a separate, diversified investment company with the same
investment objective, rather than investing in and managing their own
portfolio of securities as with historically structured mutual funds. Tax Free
Reserves invests directly in its own portfolio of money market instruments.
Each Fund is a series of Eaton Vance Mutual Funds Trust (the "Trust").
AN INVESTMENT IN A FUND IS NOT GUARANTEED OR FEDERALLY INSURED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF A FUND ARE NOT
OBLIGATIONS OR DEPOSITS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER
INSURED DEPOSITORY INSTITUTION. THERE IS NO ASSURANCE THAT A FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF EACH 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 September 1, 1995 for each Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The Statements of Additional
Information are available without charge from the Funds' principal underwriter,
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110 (telephone
(800) 225-6265). TAX FREE RESERVES IS NOT AVAILABLE FOR PURCHASE IN ALL STATES.
CONTACT THE PRINCIPAL UNDERWRITER OR YOUR BROKER FOR INFORMATION.
-------------------------------------------------------------------------------
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
---- ----
<C> <C>
Shareholder and Fund Expenses ...................... 2 How to Redeem Fund Shares ...................... 17
The Funds' Financial Highlights .................... 4 Reports to Shareholders ........................ 19
The Funds' Investment Objectives ................... 7 The Lifetime Investing Account/Distribution
How the Funds Invest their Assets................... 7 Options ...................................... 19
Organization of the Funds and the Portfolio ........ 9 The Eaton Vance Exchange Privilege ............. 20
Management of the Funds and the Portfolio .......... 12 Eaton Vance Shareholder Services ............... 22
Distribution Plans ................................. 13 Distributions and Taxes ........................ 23
Valuing Fund Shares ................................ 15 Yield Information .............................. 24
How to Buy Fund Shares ............................. 16
--------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED SEPTEMBER 1, 1995
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
--------------------------------------------------------------------------------------------------------------------------
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
SHAREHOLDER TRANSACTION EXPENSES ---- ------------- ------------ --------
<S> <C> <C> <C> <C>
Sales Charges Imposed on Purchases of Shares None None None None
Sales Charges Imposed on Reinvested Distributions None None None None
Fees to Exchange Shares None None None None
Range of Declining Contingent Deferred Sales Charges
Imposed on Redemption During the First Seven Years
(as a percentage of redemption proceeds exclusive of
all reinvestments and capital appreciation in the
account) None 5.0% - 0% 5.0% - 0% None
CASH LIQUID ASSETS MONEY MARKET TAX FREE
ANNUAL FUND (AND ALLOCATED PORTFOLIO) OPERATING EXPENSES FUND FUND FUND RESERVES
(as a percentage of average net assets) ---- ------------- ------------ --------
<S> <C> <C> <C> <C>
Investment Adviser Fee 0.50% 0.50% 0.50% 0.10%*
Rule 12b-1 Distribution (and Service) Fees -- 0.05 0.75 --
Interest Expense -- -- -- 0.07
Other Expenses 0.34 0.39 0.45 0.37
---- ---- ---- ----
Total Operating Expenses 0.84% 0.94% 1.70%** 0.54%
==== ==== ==== ====
----------
*After reduction by Investment Adviser.
**After expense reduction.
EXAMPLES
An investor would pay the following contingent deferred sales charge and expenses on a $1,000 investment, assuming 5% annual
return and redemption at the end of each period:
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
---- ------------- ------------ --------
1 Year N/A $ 60 $67 N/A
3 Years N/A 70 94 N/A
5 Years N/A 72 N/A N/A
10 Years N/A 115 N/A N/A
An investor would pay the following expenses on the same investment, assuming 5% annual return and no redemptions:
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
---- ------------- ------------ --------
1 Year $ 9 $ 10 $17 $ 10
3 Years 27 30 54 30
5 Years 47 52 N/A 52
10 Years 104 115 N/A 115
Notes:
The tables and Examples summarize the aggregate expenses of the Funds and the Portfolio and are designed to help
investors understand the costs and expenses they will bear, directly or indirectly, by investing in the Funds.
Information for each of the Funds is based on their expenses for the most recent fiscal year, except that information
for the Money Market Fund is estimated for its current fiscal year, since the Fund was only recently organized. Absent
an expense allocation for the Money Market Fund, Other Expenses would be 0.75% and Total Operating Expenses would be
2.00%. The Investment Adviser Fee for Tax Free Reserves reflects a partial waiver of the fee. In the absence of the
waiver, the Investment Adviser Fee would be 0.50%, and Total Operating Expenses would be 0.94%.
</TABLE>
The Cash, Liquid Assets, and Money Market Funds invest exclusively in the
Portfolio. Their Trustees believe the aggregate per share expenses of each Fund
and the Portfolio should approximate, and over time may be less than, the per
share expense the Fund would incur if the Fund were instead to retain the
services of an investment adviser and its assets were invested directly in the
types of securities being held by the Portfolio.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Examples to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Funds and the Portfolio, see "Organization of the Funds and the
Portfolio", "Management of the Funds and the Portfolio" and "How to Redeem
Fund Shares". A long-term shareholder in the Money Market Fund may pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the rules of the National Association of Securities Dealers, Inc.
In the case of the Liquid Assets and Money Market Funds, no contingent
deferred sales charge is imposed on (a) shares purchased more than six years
prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account,
and no such charge is imposed on exchanges of Fund shares for shares of one or
more other funds listed under "The Eaton Vance Exchange Privilege". See "How
to Redeem Fund Shares".
Other investment companies and investors with different distribution
arrangements and fees may invest in the Portfolio in the future. See
"Organization of the Funds and the Portfolio".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements (with the exception of the Money Market Fund's financial
statements which are unaudited) included in the Statement of Additional
Information, all of which has been so included in reliance upon the reports of
Coopers & Lybrand L.L.P., independent accountants, as experts in accounting and
auditing, which reports are contained in the Statements of Additional
Information. Further information regarding the performance of the Funds, is
contained in their annual reports to shareholders which may be obtained without
charge by contacting the Principal Underwriter, Eaton Vance Distributors, Inc.
<TABLE>
<CAPTION>
MONEY MARKET FUND
--------------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, APRIL 5, 1995, TO JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, beginning of period ........................... $1.00
-------
Income from investment operations:
Net investment income ........................................ $0.0104
Less distributions:
From net investment income ................................... ($0.0104)
-------
NET ASSET VALUE, end of period ................................. $1.00
=======
TOTAL RETURN<F4>................................................ 0.87%
RATIOS/SUPPLEMENTAL DATA<F1>:
Net assets, end of period (000 omitted) ...................... $27,688
Ratio of net expenses to average net assets(2) ............... 1.69%<F3>
Ratio of net investment income to average net assets ......... 4.37%<F3>
During the period the expenses relating to the operations
of the Fund were reduced by a preliminary allocation of
expenses to the Administrator. Had such actions not been
taken, net investment income per share and the ratios would
have been as follows:
NET INVESTMENT INCOME PER SHARE ................................ $0.00970
========
RATIOS (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Expenses(2) .................................................. 2.00%<F3>
Net investment income ........................................ 4.06%<F3>
<CAPTION>
CASH FUND
------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------
1994 1993 1992 1991<F2> 1990<F2> 1989<F2> 1988<F2> 1987<F2> 1986<F2> 1985<F2>
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE --
beginning of year ........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ... $ 0.0345 $ 0.0251 $ 0.0306 $ 0.0537 $ 0.0755 $ 0.0846 $ 0.0688 $ 0.0607 $ 0.0610 $ 0.0738
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net
investment income ...... $(0.0345) $(0.0251) $(0.0306) $(0.0537) $(0.0755) $(0.0846) $(0.0688) $(0.0607) $(0.0610) $(0.0738)
NET ASSET VALUE,
end of year .............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN<F4> 3.49% 2.54% 3.14% 5.51% 7.82% 8.87% 7.12% 6.23% 6.27% 7.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's omitted) ........ $111,622 $112,200 $161,986 $195,488 $250,658 $246,220 $174,842 $257,607 $212,050 $207,328
Ratio of expenses to
average net assets ..... 0.844%<F5> 0.674% 0.760% 0.746% 0.710% 0.710% 0.719% 0.664% 0.697% 0.720%
Ratio of net invesment
income to average
net assets ............. 3.396%<F5> 2.512% 3.088% 5.442% 7.540% 8.460% 6.920% 6.027% 6.130% 7.540%
Note: Certain of the per share amounts have been compiled using average shares outstanding.
(See footnotes on page 6)
<PAGE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
-----------------------------------------------------------------------------------------------------------------------------------
LIQUID ASSETS FUND
--------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
------------------------ -----------------------------------------------------------
1994 1993<F1> 1993<F2> 1992<F2> 1991<F2> 1990<F2> 1989<F2> 1988<F2>
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year ....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.0328 0.0113 0.0217 0.0415 0.0621 0.0726 0.0632 0.0477
LESS DISTRIBUTIONS:
Dividends from net investment income ... (0.0328) (0.0113) (0.0217) (0.0415) (0.0621) (0.0726) (0.0632) (0.0477)
------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year ............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN<F4> 3.29% 1.14% 2.35% 4.38% 6.50% 7.59% 6.37% 4.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) ...................... $118,599 $10,566 $18,553 $9,145 $19,996 $21,601 $10,705 $13,105
Ratio of expenses to average net assets 0.94%<F5> 1.49%<F3> 0.92% 1.23% 1.68% 2.08% 1.71% 1.42%
Ratio of net investment income to
average net assets ................... 3.55%<F5> 1.66%<F3> 2.33% 4.30% 6.23% 7.20% 6.24% 5.82%
<CAPTION>
During each of the periods presented the expenses related to the operation of the Fund were reduced either by a reduction of
the investment advisory fee, an allocation of expenses to the investment adviser, or both. Had such actions not been
undertaken, net investment income per share and the ratios would have been as follows:
YEAR ENDED YEAR ENDED MARCH 31,
DECEMBER 31, -----------------------------------------------------------
1993<F1> 1993<F2> 1992<F2> 1991<F2> 1990<F2> 1989<F2> 1988<F2>
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER SHARE ....................... $0.0092 $0.0171 $0.0372 $0.0570 $0.0687 $0.0559 $0.0374
RATIOS (As a percentage of average net assets):
Expenses ............................................ 1.80%<F3> 1.42% 1.73% 2.19% 2.47% 2.43% 3.16%
======= ======= ======= ======= ======= ======= =======
Net investment income ............................... 1.35%<F3> 1.85% 3.80% 5.72% 6.81% 5.52% 4.08%
======= ======= ======= ======= ======= ======= =======
(See footnotes on page 6)
<PAGE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
---------------------------------------------------------------------------------------------------------------
TAX FREE RESERVES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1993 1992 1991<F2> 1990<F2>
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- Beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM OPERATIONS:
Net investment income $ 0.023548 $ 0.018399 $ 0.023468 $ 0.038797 $ 0.051929
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income ............... $(0.023548) $(0.018399) $(0.023468) $(0.038797) $(0.051929)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, end of year ................. $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN<F4> 2.36% 1.86% 2.36% 3.92% 5.30%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) .... $29,021 $60,247 $44,337 $47,140 $53,753
Interest expense to average net assets ..... 0.07% 0.03% 0.06% 0.09% 0.05%
Net other expenses to average net assets ... 0.47% 0.62% 0.53% 0.49% 0.70%
Net investment income to average net assets 2.27% 1.82% 2.34% 3.92% 5.19%
<CAPTION>
TAX FREE RESERVES [continued]
--------------------------------------------------------------
YEAR ENDED DECEMBER 31, [continued]
--------------------------------------------------------------
1989<F2> 1988<F2> 1987<F2> 1986<F2> 1985<F2>
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE -- Beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM OPERATIONS:
Net investment income $ 0.055218 $ 0.047113 $ 0.039484 $ 0.042457 $ 0.047214
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income ............... $(0.055218) $(0.047113) $(0.039484) $(0.042457) $(0.047214)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, end of year ................. $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN<F4> 5.67% 4.80% 4.01% 4.35% 4.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) .... $26,745 $73,855 $78,369 $77,137 $49,075
Interest expense to average net assets ..... 0.26% 0.08% 0.07% 0.15% -- %
Net other expenses to average net assets ... 0.82% 0.76% 0.75% 0.61% 0.60%
Net investment income to average net assets 5.60% 4.70% 3.96% 4.14% 4.70%
<CAPTION>
During each of the years presented below, the expenses related to the operation of the Fund were reduced either by a
reduction of the investment adviser fee, an allocation of expenses to the investment adviser, or both. Had such actions not
been undertaken, net investment income per share and the ratios would have been as follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1993 1992 1991<F2>
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME PER SHARE ........................... $ 0.018948 $ 0.016668 $ 0.020133 $ 0.034647
========== ========== ========== ==========
RATIOS (As a percentage of average net assets):
Other expenses .......................................... 0.87% 0.82% 0.92% 0.91%
========== ========== ========== ==========
Net investment income ................................... 1.88% 1.65% 2.01% 3.50%
========== ========== ========== ==========
<CAPTION>
YEAR ENDED DECEMBER 31, [continued]
--------------------------------------------------------------
1990<F2> 1989<F2> 1987<F2> 1986<F2> 1985<F2>
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER SHARE ................. $ 0.050052 $ 0.054822 $ 0.008966 $ 0.009147 $ 0.007935
========== ========== ========== ========== ==========
RATIOS (As a percentage of average net assets):
Other expenses ................................ 0.85% 0.85% 0.81% 0.72% 0.79%
========== ========== ========== ========== ==========
Net investment income ......................... 5.04% 5.57% 3.90% 4.03% 4.51%
========== ========== ========== ========== ==========
<CAPTION>
From time to time it has been necessary for Tax Free Reserves to borrow from banks as a temporary measure to facilitate the
orderly sale of portfolio securities to accommodate redemption requests. The following table summarizes such temporary
borrowings:
AVERAGE DAILY AVERAGE WEEKLY AVERAGE AMOUNT
AMOUNT OF BALANCE OF BALANCE OF OF DEBT
YEAR ENDED DEBT OUTSTANDING DEBT OUTSTANDING SHARES OUTSTANDING PER SHARE
DECEMBER 31, AT END OF YEAR DURING YEAR DURING YEAR DURING YEAR
------------ ---------------- ---------------- ------------------ --------------
<C> <C> <C> <C> <C>
1986<F2> .............................. $ -- $1,316,000 66,327,940 $0.020
1987<F2> .............................. -- 1,312,000 68,850,770 0.019
1988<F2> .............................. 166,000 1,401,000 72,897,174 0.019
1989<F2> .............................. 82,000 1,825,000 52,596,221 0.035
1990<F2> .............................. -- 192,000 31,243,924 0.006
1991<F2> .............................. -- 379,000 31,686,707 0.012
1992 .................................. -- 367,000 38,904,763 0.009
1993 .................................. 2,428,000 285,000 48,697,998 0.006
1994 .................................. 6,117,000 440,145 40,463,382 0.011
Footnotes:
<FN>
<F1> For the nine months ended December 31, 1993.
<F2> Audited by the Funds' previous auditors.
<F3> Computed on an annualized basis.
<F4> 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 payable date. Total return is not computed on an annualized basis.
<F5> Includes the Fund's share of Cash Management Portfolio's allocated expenses.
</FN>
</TABLE>
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
--------------------------------------------------------------------------------
The investment objective of EATON VANCE CASH MANAGEMENT FUND, EATON VANCE
LIQUID ASSETS FUND and EATON VANCE MONEY MARKET FUND is to provide as high a
rate of income as may be consistent with preservation of capital and
maintenance of liquidity. The investment objective of EATON VANCE TAX FREE
RESERVES is to provide a means whereby investors may earn as high a rate of
income exempt from regular Federal income tax as may be consistent with the
preservation of capital and maintenance of liquidity. The investment objective
and policies of each Fund may be changed by the Trustees without a vote of
shareholders; as a matter of policy, the Trustees would not materially change
the investment objective of a Fund without shareholder approval. Each Fund
seeks to maintain a constant net asset value of $1 per share, although there
can be no assurance it will be able to do so.
The Cash Fund and Tax Free Reserves are offered to shareholders in exchange
for their shares in the Eaton Vance Traditional Group of Funds. The Money Market
Fund offers its shares to shareholders exchanging their shares from the Eaton
Vance Marathon and Eaton Vance Classic Groups of Funds. (The Money Market Fund
may not be a suitable investment for investors who do not intend to use it as an
exchange vehicle.) The Liquid Assets Fund is currently closed to new
investments, whether by exchange or initial subscription.
HOW THE FUNDS INVEST THEIR ASSETS
--------------------------------------------------------------------------------
CASH FUND, LIQUID ASSETS FUND, AND MONEY MARKET FUND
Each of these Funds seeks its objective by investing all of its assets in
the Portfolio, which is itself an open-end investment company. The Portfolio
invests in the following types of high quality, U.S. dollar-denominated money
market instruments of domestic and foreign issuers:
* U.S. GOVERNMENT SECURITIES: marketable securities issued or guaranteed
as to principal or interest by the U.S. Government or by its agencies or
instrumentalities. Some of these securities are backed by the full faith
and credit of the U.S. Government; others are backed only by the credit
of the agency or instrumentality issuing the securities.
* PRIME COMMERCIAL PAPER: high-grade, short-term obligations issued by
banks, corporations, and other issuers.
* CORPORATE OBLIGATIONS: high-grade, short-term obligations other than
prime commercial paper.
* BANK CERTIFICATES OF DEPOSIT (CDS): negotiable certificates issued
against funds deposited in a commercial bank for a definite period of
time and earning a specified return.
* BANKERS' ACCEPTANCES: negotiable drafts or bills of exchange, which have
been "accepted" by a bank, means, in effect, that the bank has
unconditionally agreed to pay the face value of the instrument on
maturity.
Investments are described further below under "All Funds -- Selection of
Investments." The Portfolio may invest without limit in securities of finance
companies or in securities of banks and thrift institutions (and their holding
companies) whenever yield differentials or money market conditions indicate
that such a concentration of the Portfolio's investments may be desirable.
The Portfolio may invest without limit in U.S. dollar-denominated
obligations of foreign issuers, including foreign banks. Such investments
involve special risks. These include future unfavorable political and economic
developments, possible withholding taxes, seizure of foreign deposits,
interest limitations or other governmental restrictions which might affect
payment of principal or interest. Additionally, there may be less public
information available about foreign banks and their branches. Foreign branches
of foreign banks are not regulated by U.S. banking authorities, and generally
are not bound by accounting, auditing and financial reporting standards
comparable to U.S. banks. Although the Portfolio's investment adviser
carefully considers these factors when making investments, the Portfolio does
not limit the amount of its assets which can be invested in one type of
instrument or in any foreign country.
TAX FREE RESERVES
Tax Free Reserves seeks to achieve its objective by investing in a
diversified portfolio of obligations, including bonds, notes and commercial
paper, issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies and
instrumentalities, and the District of Columbia, the interest from which is
exempt from regular Federal income tax. The Fund may acquire stand-by
commitments with respect to portfolio securities and, with respect to 10% of
net assets, may purchase shares of unaffiliated investment companies with the
same objective. Investments are described further below under "All Funds --
Selection of Investments".
The Fund is designed for those institutional and individual investors who
seek to earn tax-free income and to avoid fluctuation in the value of their
investment while at the same time having the flexibility to liquidate and
withdraw funds at any time. By combining the assets of shareholders, the Fund
can provide yields normally available through investment in tax-free money
market instruments of large denominations, and can obtain the benefits of
diversification and liquidity through investment in the obligations of many
issuers with various maturities.
A portion of the dividends paid by the Fund may be subject to Federal
income tax, and dividends may be subject to state and local taxes. As a matter
of fundamental policy which may not be changed unless authorized by
shareholder vote, the Fund may not purchase any securities which would cause
more than 20% of the value of its total assets to be invested in securities
the interest on which is not exempt from Federal income tax.
Distribution of interest on "public purpose" state and municipal
obligations and on certain "private activity" obligations is exempt from all
types of Federal income taxes applicable to individuals. Interest on certain
other "private activity bonds" issued after August 7, 1986 is exempt from
regular Federal income tax applicable to individuals (and corporations) but is
treated as a tax preference item which could subject the recipient to the
Federal alternative maximum tax. (On December 31, 1994, the Fund did not hold
any of these investments in its portfolio). Interest on municipal obligations
(whenever issued) is included in "adjusted current earnings" for the purposes
of the alternative minimum tax applicable to corporations.
ALL FUNDS -- SELECTION OF INVESTMENTS
The Portfolio and Tax Free Reserves will invest only in U.S. dollar-
denominated high-quality securities and other U.S. dollar-denominated money
market instruments meeting credit criteria which the Trustees believe present
minimal credit risk. "High-quality securities" are (i) short-term obligations
rated in one of the two highest short-term ratings categories by at least two
nationally recognized rating services (or, if only one rating service has
rated the security, by that service), (ii) obligations rated at least AA by
Standard & Poor's Ratings Group or Aa by Moody's Investors Service, Inc. at
the time of investment, and (iii) unrated securities determined by the
investment adviser to be of comparable quality, subject to the overall
supervision of the Trustees. For a description of the instruments and ratings
see the "Appendix" in the Statement of Additional Information. Each of the
Portfolio and Tax Free Reserves will maintain a dollar-weighted average
maturity of 90 days or less and will not invest in securities with remaining
maturities of more than 397 days. The Portfolio and Tax Free Reserves may
invest in variable or floating-rate securities which bear interest at rates
subject to periodic adjustment or which provide for periodic recovery of
principal on demand. Under certain conditions, these securities may be deemed
to have remaining maturities equal to the time remaining until the next
interest adjustment date or the date on which principal can be recovered on
demand. The Portfolio will not invest more than 5% (determined at the time of
investment) of its total assets in securities rated below the highest
applicable rating category, nor will it purchase securities of any issuer if,
immediately thereafter, more than 5% of the Portfolio's total assets would be
invested in securities of that issuer. The Portfolio and Tax Free Reserves
follow investment and valuation policies designed to maintain a stable net
asset value of $1 per Fund share, although there is no assurance that these
policies will be successful.
Considerations of liquidity and preservation of capital mean that the
Portfolio or Tax Free Reserves may not necessarily invest in money market
instruments paying the highest available yield at a particular time.
Consistent with their investment objectives, the Portfolio and Tax Free
Reserves will attempt to maximize yields by portfolio trading and by buying
and selling portfolio investments in anticipation of or in response to
changing economic and money market conditions and trends. The Portfolio and
Tax Free Reserves may also invest to take advantage of what their investment
advisers believe to be temporary disparities in yields of different segments
of the high-grade money market or among particular instruments within the same
segment of the market. These policies, as well as the relatively short
maturities of obligations purchased by the Portfolio and Tax Free Reserves,
may result in frequent changes in their portfolios. The Portfolio and Tax Free
Reserves will not usually pay brokerage commissions in connection with the
purchase or sale of portfolio securities.
Other Practices. The Portfolio and Tax Free Reserves may lend their
portfolio securities to broker-dealers and may enter into repurchase agreements.
These transactions must be fully collateralized at all times, but involve some
risk to the lender if the other party should default on its obligations or if
the lender is delayed or prevented from recovering the collateral. The Portfolio
and Tax Free Reserves may also purchase securities on a when-issued basis and
for future delivery by means of "forward commitments." A segregated account will
be maintained to cover such purchase obligations. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
An investment in a Fund is subject to interest rate risk and credit risks
of the issuers of the money market instruments. Each Fund's income will
fluctuate and net asset value under certain circumstances could change. If any
changes were made in a Fund's investment objective, the Fund may no longer be
appropriate to certain investors. Investments and restrictions thereon are
further described in the Statements of Additional Information.
----------------------------------------------------------------------
NONE OF THE FUNDS IS A COMPLETE INVESTMENT PROGRAM, AND PROSPECTIVE
INVESTORS SHOULD TAKE INTO ACCOUNT THEIR OBJECTIVES AND OTHER
INVESTMENTS WHEN CONSIDERING THE PURCHASE OF FUND SHARES. THE FUNDS
CANNOT ELIMINATE RISK OF LOSS OR ASSURE ACHIEVEMENT OF THEIR INVESTMENT
OBJECTIVES.
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ORGANIZATION OF THE FUNDS AND THE PORTFOLIO
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Each Fund is a diversified series of Eaton Vance Mutual Funds Trust, a business
trust established under Massachusetts law pursuant to a Declaration of Trust
dated May 7, 1984 as amended and restated. 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 Trust
may issue an unlimited number of shares of beneficial interest (no par value per
share) in one or more series, and because the Trust can offer separate series
(such as the Funds) it is known as a "series company." Each share represents an
equal proportionate beneficial interest in a 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. In
the event of the liquidation of a Fund, shareholders are entitled to share pro
rata in the net assets of that Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE 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 Cash, Liquid Assets and Money Market Funds 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 a 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 Funds nor
their shareholders will be adversely affected by reason of the Funds investing
in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Cash, Liquid Assets or Money Market Fund should be aware that each of
those Funds, 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 (although the Fund may
temporarily hold a de minimis amount of cash), 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 various 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 Funds" Investment Objectives''
and "How the Funds Invest their Assets". Further information regarding
investment practices may be found in the Statements of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the relevant 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.
Each of the Cash, Liquid Assets and Money Market Funds 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 a 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, as the case may be. 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 a Fund, those shares may
be subject to a contingent deferred sales charge, as described in "How to
Redeem Fund Shares". In the event a 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 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. A 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 investors in the Portfolio may be
adversely affected by the actions of larger investors in the Portfolio. For
example, if a large investor withdraws from the Portfolio, the remaining
investors 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, Eaton Vance Management sponsored and advised funds with
more traditional organizational structures. 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 Cash, Liquid
Assets and Money Market Funds 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 a 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 a 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. A 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, a 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 noninterested
Trustees, have approved written procedures designed to identify and address
any potential conflicts of interest arising from the fact that some of 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
Statements of Additional Information.
The shareholders of Tax Free Reserves have approved the adoption of an
investment policy for the Fund and the addition of a fundamental investment
provision to permit the Fund to invest its assets in an open-end management
investment company having substantially the same investment policies and
restrictions as the Fund. The Board of Trustees would implement the new
investment policy by investing the assets of the Fund in the Tax Free Reserves
Portfolio. If such action occurs, the foregoing discussion about the two-tier
investment structure would be applicable to Tax Free Reserves.
Although each Fund offers only its own shares of beneficial interest, it
is possible that a Fund might become liable for a misstatement or omission in
this Prospectus regarding another Fund because the Funds use this combined
Prospectus. The Trustees of the Trust have considered this factor in approving
the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS 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. TAX FREE RESERVES ENGAGES 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 1/24 of 1% (equivalent to 0.50% annually) of the average
daily net assets of the Portfolio. For the period from the start of business,
May 2, 1994, to December 31, 1994, the Portfolio paid BMR advisory fees
equivalent to 0.50% (annualized) of the Portfolio's average daily net assets
for such period. BMR furnishes for the use of the Portfolio office space and
all necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio.
Eaton Vance, acting under the general supervision of the Trustees of the
Trust, manages Tax Free Reserves, investments and affairs. Under its
investment advisory agreement with Tax Free Reserves, Eaton Vance receives a
monthly advisory fee of 1/24 of 1% (equivalent to 0.50% annually) of average
monthly net assets of the Fund. Eaton Vance earned advisory fees of 0.50% of
the Fund's average monthly net assets for the fiscal year ended December 31,
1994. To enhance the net income of the Fund, Eaton Vance reduced its fee by
$162,287. Eaton Vance furnishes for the use of Tax Free Reserves office space
and all necessary office facilities, equipment and personnel for servicing the
investments of the Fund.
Money market instruments are often acquired directly from the issuers
thereof or otherwise are normally traded on a net basis (without commission)
through broker-dealers and banks acting for their own account. Such firms
attempt to profit from such transactions by buying at the bid price and selling
at the higher asked price of the market, and the difference is customarily
referred to as the spread. In selecting firms which will execute portfolio
transactions, BMR and Eaton Vance judge such executing firms' professional
ability and quality of service and use their best efforts to obtain execution at
prices which are advantageous and at reasonably competitive spreads. Subject to
the foregoing, BMR and Eaton Vance may consider sales of shares of the Funds or
of other investment companies sponsored by BMR or Eaton Vance as a factor in the
selection of firms to execute portfolio transactions.
Michael B. Terry has acted as the portfolio manager of the Portfolio since
it commenced operations. He has been a Vice President of Eaton Vance since
1984 and of BMR since 1992.
William H. Ahern has been an employee of Eaton Vance and has acted as the
portfolio manager of Tax Free Reserves since 1989. He has been an Assistant
Vice President of Eaton Vance since 1994.
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. EVD is a wholly-owned subsidiary of Eaton Vance.
The Trust has retained the services of Eaton Vance to act as Administrator
of the Cash, Liquid Assets and Money Market Funds. The Trust has not retained
the services of an investment adviser for these Funds since the Trust seeks to
achieve the investment objective of each such Fund by investing the Fund's
assets in the Portfolio. As Administrator, Eaton Vance provides each such Fund
with general office facilities and supervises the overall administration of
the Funds. 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.
The Portfolio and the Funds, as the case may be, will each be responsible
for all of its respective costs and expenses not expressly stated to be
payable by BMR under the investment advisory agreement, by Eaton Vance under
the investment advisory or administrative services agreements, or by EVD under
the distribution agreements. Such costs and expenses to be borne by the
Portfolio and a Fund, as the case may be, include, without limitation: custody
and transfer agency fees and expenses, including those incurred for
determining net asset value and keeping accounting books and records; expenses
of pricing and valuation services; the cost of share certificates; membership
dues in investment company organizations; expenses of acquiring, holding and
disposing of securities and other investments; fees and expenses of
registering under the securities laws and governmental fees; expenses of
reporting to shareholders and investors; proxy statements and other expenses
of shareholders' or investors' meetings; insurance premiums; printing and
mailing expenses; interest, taxes and corporate fees; legal and accounting
expenses; compensation and expenses of Trustees not affiliated with BMR or
Eaton Vance; and investment advisory fees and, if any, administrative services
fees. The Portfolio or a Fund, as the case may be, will also each bear
expenses incurred in connection with litigation in which the Portfolio or a
Fund, as the case may be, is a party and any legal obligation to indemnify its
respective officers and Trustees with respect thereto.
DISTRIBUTION PLANS
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EATON VANCE MONEY MARKET 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 Money
Market 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 subject to, and complies with, the sales charge rule of the
National Association of Securities Dealers, Inc. (the "NASD Rule"). The Plan
is described further in the Statement of Additional Information, and the
following is a description of the salient features of the Plan. The Plan
provides that the Money Market 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 Money Market
Fund shares (excluding reinvestment of 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. The Principal Underwriter currently expects to pay sales
commissions (except on exchange transactions and reinvestments) to a financial
service firm (an "Authorized Firm") at the time of sale equal to 4% of the
purchase price of the shares sold by such Firm. The Principal Underwriter will
use its own funds (which may be borrowed from banks) to pay such commissions.
With respect to Money Market Fund shares acquired as a result of an exchange
from one or more funds in the Eaton Vance Classic Group of Funds, the
Principal Underwriter currently expects to pay monthly sales commissions to an
Authorized Firm approximately equivalent to 1/12 of .75% of the value of such
shares sold by such Firm and remaining outstanding for at least one year from
the date of original purchase of the EV Classic fund shares. Because the
payment of the sales commissions and distribution fees to the Principal
Underwriter is subject to the NASD Rule described below, it will take the
Principal Underwriter a number of years to recoup the sales commissions paid
by it to Authorized Firms from the payments received by it from the Fund
pursuant to the Plan.
THE NASD RULE REQUIRES THE MONEY MARKET FUND TO LIMIT ITS ANNUAL PAYMENTS
OF SALES COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF
THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Accordingly, the
Money Market 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 received by the Principal Underwriter from the Money Market Fund
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.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Money
Market Fund shares during the initial years of the Fund's operations would
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
would result in the incurrence and payment of increased distribution fees
under the Plan. For the period from the start of business, April 5, 1995, to
June 30, 1995, the Money Market Fund paid sales commissions under the Plan
equivalent to .75% (annualized) of the Fund's average daily net assets for
such period. As at June 30, 1995, the outstanding Uncovered Distribution
Charges of the Principal Underwriter calculated under the Plan amounted to
approximately $945,000 (equivalent to 3.4% of the Money Market Fund's net
assets on such day).
THE PLAN AUTHORIZES THE MONEY MARKET FUND TO MAKE PAYMENTS OF SERVICE FEES
TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS. THE
AGGREGATE OF SUCH PAYMENTS DURING ANY FISCAL YEAR OF THE MONEY MARKET FUND
SHALL NOT EXCEED .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR SUCH YEAR.
The Trustees of the Trust have initially implemented the Plan by authorizing
the Money Market Fund to pay service fees to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed .15% of the Fund's average
daily net assets based on the value of Fund shares sold by such persons and
remaining outstanding for at least one year (including in such holding period
the prior holding of any EV Marathon or EV Classic fund shares exchanged for
Fund shares). However, the Plan authorizes the Trustees of the Trust on behalf
of the Fund to increase payments to the Principal Underwriter, Authorized
Firms and other persons from time to time without further action by
shareholders of the Fund, provided that the aggregate amount of payments made
to such persons under the Plan in any fiscal year of the Fund does not exceed
.25% of the Fund's average daily net assets. As permitted by the NASD Rule,
such 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. The Money Market Fund expects to begin accruing for its service
fee payments during the quarter ending June 30, 1996.
EATON VANCE LIQUID ASSETS FUND has also adopted a Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940, which is
described in its Statement of Additional Information. The Liquid Assets Plan
authorizes payments of service fees to the Principal Underwriter, Authorized
Firms and other persons. The aggregate of such payments during any fiscal year
of the Fund shall not exceed .25% of the Fund's average daily net assets for
such year. The Trustees have implemented the Plan by authorizing the Fund to
pay service fees to Authorized Firms in amounts up to .25% per annum of the
Fund's average daily net assets based on the value of Fund shares sold by such
Firms and remaining outstanding for at least one year. As permitted by the
NASD Rule, such payments are made for personal services and/or the maintenance
of shareholder accounts. For the fiscal year ended December 31, 1994 the Fund
made payments under the Plan to the Principal Underwriter and Authorized Firms
equivalent to 0.05% (annualized) of the Fund's average daily net assets for
such period.
With respect to all Funds, 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 a
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.
A 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, a 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 (if
applicable) the amount of Uncovered Distribution Charges of the Principal
Underwriter. A distribution 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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EACH 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). Each Fund's net asset value 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 per share is computed by dividing the value of a Fund's total assets,
less its liabilities, by the number of shares outstanding. The net asset value
of each of the Cash, Liquid Assets and Money Market Funds will reflect the
value of its interest in the Portfolio (which, in turn, reflects the
underlying value of the Portfolio's assets and liabilities). The Portfolio's
net asset value is also determined as of the close of regular trading on the
Exchange by IBT (as custodian and agent for the Portfolio) in the manner
authorized by the Trustees of the Portfolio. Net asset value is computed by
subtracting the liabilities of the Portfolio from the value of its total
assets. Eaton Vance Corp. owns 77.3% of the outstanding stock of IBT, each
Fund's and the Portfolio's custodian.
The investments of the Portfolio and of the Funds are valued at amortized
cost according to a Securities and Exchange Commission rule. The Portfolio and
the Funds will not normally have unrealized gains or losses so long as they
value their investments by the amortized cost method.
HOW TO BUY FUND SHARES
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INVESTORS MAY PURCHASE SHARES OF A FUND THROUGH AUTHORIZED FIRMS AT THE NET
ASSET VALUE PER SHARE OF THE FUND NEXT DETERMINED AFTER AN ORDER IS EFFECTIVE.
An initial investment in a 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 Funds' 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 Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services". Any Fund may suspend the offering of
shares at any time and may refuse an order for the purchase of shares.
BY MAIL: Initial Purchases -- The Account Application form which accompanies
this prospectus should be completed, signed and mailed with a check, Federal
Reserve Draft, or other negotiable bank draft, drawn on a U.S. bank and payable
in U.S. dollars, to the order of the relevant Fund and mailed to:
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
Subsequent Purchases -- Additional purchases may be made at any time by
mailing a check, Federal Reserve Draft, or other negotiable draft, drawn on a
U.S. bank and payable in U.S. dollars, to the order of the relevant Fund to the
Transfer Agent at the above address. The account to which the subsequent
purchase is to be credited should be identified as to the name(s) of the
registered owner(s) and by account number.
BY WIRE: Investors may purchase shares by requesting their bank to transmit
immediately available funds (Federal funds) by wire to:
ABA #011001438
Federal Reserve Bank of Boston
A/C Investors Bank & Trust Company
Further Credit Eaton Vance [name of] Fund
A/C # [Insert your account number -- see below]
Initial Purchases -- Upon making an initial investment by wire, you must
first telephone the Order Department of the Funds 800-225-6265 (extension 3) to
advise of your action and to be assigned an account number. If you neglect to
make the telephone call, it may not be possible to process your order promptly.
In addition, the Account Application form which accompanies this Prospectus
should be promptly forwarded to The Shareholder Services Group, Inc., at the
above address.
Subsequent Purchases -- Additional investments may be made at any time
through the wire procedure described above. The Funds' Order Department must
be immediately advised by telephone 800-225-6265 (extension 3) of each
transmission of funds by wire.
Transactions in money market instruments normally require immediate
settlement in Federal funds. The Funds intend at all times to be as fully
invested as is feasible in order to maximize earnings. Accordingly, purchase
orders will be executed at the net asset value next determined after their
receipt by a Fund only if the Fund has received payment in cash or in Federal
funds. If remitted in other than the foregoing manner, such as by money order
or personal check, purchase orders will be executed as of the close of
business on the second Boston business day after receipt. Information on how
to procure a Federal Reserve Draft or to transmit Federal funds by wire is
available at banks. A bank may charge for these 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 Cash and Money Market Funds 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 participation in
the plan, his or her 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 below under "How to Redeem Fund Shares."
As of the date of this Prospectus, shares of Liquid Assets Fund are not
being offered.
HOW TO REDEEM FUND SHARES
--------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM A FUND'S SHARES BY DELIVERING TO THE SHAREHOLDER
SERVICES GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 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 relevant 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 any Federal income tax required to be withheld. Although
each 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 (which
for some Funds would be withdrawn by it from the Portfolio). The securities so
distributed would be valued pursuant to the Portfolio's or Tax Free Reserves'
valuation procedures. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the
securities to cash.
Shareholders who have given specific written authorization in advance (on
a form available from the Principal Underwriter) may request that redemption
proceeds of $1,000 or more be wired to a bank account. See "Eaton Vance
Shareholder Services -- Wire Transfer to a Bank Account" below.
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 Funds' 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. If the net asset value of
Fund shares is not maintained at $1.00 per share or if a contingent deferred
sales charge (described below) is imposed on the redemption, a redemption may
result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, each 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 -- CASH FUND AND TAX FREE RESERVES. Shares of
the Fund acquired in an exchange for shares of an Eaton Vance Traditional Fund
subject to a contingent deferred sales charge will be subject to a 1% charge
if redeemed within 18 months following the original investment unless such
redemption is in connection with another exchange for shares subject to such a
charge.
CONTINGENT DEFERRED SALES CHARGE -- LIQUID ASSETS AND MONEY MARKET FUNDS.
Shares redeemed within the first six years 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
six years prior to the redemption, (b) all shares in the account acquired
through reinvestment of distributions, and (c) the increase, if any, in value
of all other shares in the account (namely those purchased within the six
years 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. That
is, 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 made in accordance with
the following schedule:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-------------- --------------
First ............................................... 5%
Second .............................................. 5%
Third ............................................... 4%
Fourth .............................................. 3%
Fifth ............................................... 2%
Sixth ............................................... 1%
Seventh and following ............................... 0%
In calculating the contingent deferred sales charge upon the redemption of
Liquid Assets or Money Market Fund shares acquired in an exchange for shares
of a fund in the Eaton Vance Marathon Group of Funds or the Eaton Vance
Classic Group of Funds (see "The Eaton Vance Exchange Privilege" below), the
contingent deferred sales charge schedule applicable to the shares at the time
of purchase will apply and the purchase of Fund shares acquired in the
exchange is deemed to have occurred at the time of the original purchase of
the exchanged shares. See "The Eaton Vance Exchange Privilege" for the
contingent deferred sales charge schedules applicable to Fund shares acquired
in an exchange.
No contingent deferred sales charge will be imposed on any Fund's shares
which have been sold to Eaton Vance or its affiliates, or 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 required distribution from a tax-
sheltered retirement plan or (3) following the death of all beneficial owners
of such shares, provided the redemption is requested within one year of death
(a death certificate and other applicable documents may be required). The
contingent deferred sales charge will be paid to the Principal Underwriter or
the relevant Fund.
-----------------------------------------------------------------------
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT
DEFERRED SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE
MONEY MARKET FUND'S SHARES AND THAT 25 MONTHS LATER THE VALUE OF THE
ACCOUNT HAS GROWN THROUGH THE REINVESTMENT OF DIVIDENDS TO $11,000. THE
INVESTOR THEN MAY REDEEM UP TO $1,000 OF SHARES WITHOUT INCURRING A
CONTINGENT DEFERRED SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $2,000
OF SHARES, A CONTINGENT DEFERRED SALES CHARGE WOULD BE IMPOSED ON
$1,000 OF THE REDEMPTION. THE RATE WOULD BE 4% BECAUSE THE REDEMPTION
WAS MADE IN THE THIRD YEAR AFTER THE PURCHASE WAS MADE AND THE CHARGE
WOULD BE $40.
-----------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
--------------------------------------------------------------------------------
EACH 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 accountants. Shortly after the
end of each calendar year, each Fund will furnish its shareholders with
information necessary for preparing Federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
--------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUNDS' 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. All shares are held in non-certificate form
by the Funds' Transfer Agent for the account of the shareholder, and the Fund
will not issue share certificates.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share 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 Funds' dividend disbursing agent, The Shareholder Services Group. Inc.,
BOS725, P.O. Box 1559, Boston, MA 02104. The currently effective option will
appear on each account statement.
Share Option -- All distributions will be reinvested in additional shares.
Cash Option -- All distributions 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 Cash Option has been selected, 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, distributions 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 a 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 IN SHARES OF A FUND BY SENDING A CHECK FOR $50 OR MORE.
--------------------------------------------------------------------
THE EATON VANCE EXCHANGE PRIVILEGE
--------------------------------------------------------------------------------
Shares of CASH FUND and TAX FREE RESERVES currently may be exchanged for shares
of any fund in the Eaton Vance Traditional Group of Funds and Eaton Vance
Short-Term Treasury Fund. Shares of Cash Fund or Tax Free Reserves acquired
under the exchange privilege which have not previously been subject to payment
of a sales charge may be exchanged for shares of a Fund with a sales charge only
upon payment of the appropriate charge. These offers are available only in
states where shares of the fund being acquired may legally be sold.
LIQUID ASSETS and MONEY MARKET FUND shares currently may be exchanged for
shares of one or more funds in the Eaton Vance Marathon Group of Funds
(currently Eaton Vance Equity-Income Trust and any of the EV Marathon funds)
which are distributed with a contingent deferred sales charge. Only shares
subject to a contingent deferred sales charge schedule equal to that of Eaton
Vance Prime Rate Reserves, EV Marathon Strategic Income Fund or an EV Marathon
Limited Maturity Tax Free Fund (Class I), or shares not subject to such a
charge, may be exchanged from either Fund to Eaton Vance Prime Rate Reserves.
If Fund shares were acquired in exchange for shares of one or more funds in
the Eaton Vance Classic Group of Funds, such shares may be exchanged only for
shares of one or more funds in the Eaton Vance Classic Group of Funds.
Exchanges are made on the basis of the net asset value per share of each fund
at the time of the exchange, provided that such offers are available only in
states where shares of the 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 Funds do 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"). The Shareholder Services Group, Inc. may
require additional documentation if shares are registered in the name of a
corporation, partnership or fiduciary. Applications and prospectuses of the
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 the redemption of
Fund 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. Cash Fund or Tax Free Reserves shares acquired in an
exchange for EV Traditional fund shares subject to a contingent deferred sales
charge if redeemed within 18 months following the original investment will
remain subject to such charge. Liquid Assets and Money Market Fund shares
acquired as the result of an exchange from an EV Marathon fund will be subject
to the contingent deferred sales charge schedule set forth under "How to
Redeem Fund Shares" above, except Fund shares acquired as the result of an
exchange from EV Marathon Strategic Income Fund, Eaton Vance Prime Rate
Reserves or an EV Marathon Limited Maturity Tax Free fund will be subject to a
declining charge of 3.0%-0%. Fund shares acquired as the result of an exchange
from an EV Classic fund will be subject to a contingent deferred sales charge
of 1% in the event of redemption within one year from the date of their
original purchase, except those shares purchased prior to January 30, 1995,
which will not be subject to any such charge.
Shares of the funds in the Eaton Vance Marathon and Eaton Vance Classic
Groups of Funds may be exchanged for Money Market Fund shares on the basis of
the net asset value per share of each fund at the time of the exchange, but
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.,
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 a 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. As long as the net asset value of Fund shares is maintained at
$1.00 per share, an exchange will not result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
--------------------------------------------------------------------------------
THE FUNDS OFFER 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 Funds 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
same 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 AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from a
shareholder's bank account. 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 any amount, except for the Liquid Assets and
Money Market Funds which aggregate amount must 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 REPURCHASED OR REDEEMED 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 A FUND,
provided that the reinvestment is effected within 60 days after such
repurchase or redemption, and the privilege has not been used more than and in
the prior 12 months. 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 a Fund (or by the Fund's Transfer
Agent). To the extent that any shares of a Fund are sold at a loss and the
proceeds are reinvested in Fund shares (or other Fund shares are acquired
within the period beginning 30 days before and ending 30 days after the date
of 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.
CHECKWRITING: Shareholders of Cash Fund and Tax Free Reserves may appoint
Boston Safe Deposit and Trust Company ("Boston Safe") their agent and may
request on the appropriate Account Application form that Boston Safe provide
them with special forms of checks drawn on Boston Safe. These checks may be
made payable by the shareholder to the order of any person in any amount of
$500 or more. When a check is presented to Boston Safe for payment, the number
of full and fractional shares required to cover the amount of the check will
be redeemed from the shareholder's account by Boston Safe as the shareholder's
agent. Through this procedure the shareholder will continue to be entitled to
distributions paid on shares up to the time the check is presented to Boston
Safe for payment. If the amount of the check is greater than the value of the
shares held in the shareholder's account for which the Fund has collected
payment, the check will be returned and the shareholder may be subject to
extra charges. The shareholder will be required to execute signature cards and
will be subject to Boston Safe's rules and regulations governing such checking
accounts. There is no charge to shareholders for this service. This service
may be terminated or suspended at any time by a Fund or Boston Safe.
WIRE TRANSFER TO A BANK ACCOUNT: Shareholders who have given specific written
authorization in advance (on a form available from the Principal Underwriter)
may request that redemption proceeds of $1,000 or more be wired directly to
their bank account. The request may be made by letter or telephone to The
Shareholder Services Group, Inc. at 800-262-1122. To use this service a
shareholder must designate a bank and bank account number on the form used to
establish this service. The bank designated may be any bank in the United
States.
Redemption proceeds, less any applicable contingent deferred sales charge
and the amount of any Federal income tax required to be withheld, will be
wired on the next business day following receipt of the redemption request.
The shareholder will be required to pay any costs of such transaction. A Fund
may limit this method of payment to shares purchased with cash, Federal
Reserve Draft or by wire with Federal funds. Each Fund reserves the right at
any time to suspend or terminate this wire transfer procedure. No Fund will be
responsible for the authenticity of redemption 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
redemption may be difficult to implement.
TAX-SHELTERED RETIREMENT PLANS -- Shares of the Cash and Money Market Funds
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 of 1986, as amended (the
"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
--------------------------------------------------------------------------------
EACH FUND DECLARES DIVIDENDS DAILY AND PAYS DIVIDENDS MONTHLY FROM ITS NET
INVESTMENT INCOME. The net investment income of each of Cash, Liquid Assets
and Money Market Fund consists of net investment income allocated to the Fund
by the Portfolio, less the Fund's direct and allocated expenses. Long-term
capital gains, if any, allocated to a Fund will be distributed at least
annually.
Each Fund intends to qualify as a regulated investment company under the
Code, and to satisfy all requirements necessary to be relieved of federal
taxes on income and gains it distributes to shareholders. As a partnership for
federal tax purposes, the Portfolio does not pay federal taxes. Each Fund will
distribute substantially all of its ordinary income and capital gain net
income on a current basis.
All distributions from Cash, Liquid Assets and Money Market Fund (and
taxable distributions from Tax Free Reserves, if any) are taxable to
shareholders as ordinary income, except that distributions of net long-term
capital gains, if any, are taxable to shareholders as such regardless of the
length of time the shareholder has held the shares. Distributions will be
taxable as described whether received in cash or as additional shares through
reinvestment in a Fund.
Each Fund will provide its shareholders annually with tax information
notices and Forms 1099 to assist in the preparation of their federal and state
tax returns for the prior calendar year's distributions, proceeds from the
redemption or exchange of Fund shares, and federal income tax (if any)
withheld by the Funds' Transfer Agent. Shareholders should consult their tax
advisers about the effect of Fund distributions on their particular tax status
and any state or local taxes that may apply.
TAX FREE RESERVES. Distributions designated by Tax Free Reserves as "exempt-
interest dividends" may be excluded from shareholders' gross income for
federal income tax purposes. Exempt interest dividends are includable in the
tax base for shareholders who receive social security or railroad retirement
benefits and may affect the taxability of such benefits. In addition, exempt
interest dividends generally constitute a tax preference item under the
Federal alternative minimum tax provisions and may be taxable for state and
local tax purposes.
Other distributions from Tax Free Reserves may be taxable to shareholders
as ordinary income or long-term capital gains. Distributions of income from
repurchase agreements, original issue discount and certain market discount
will be taxable to shareholders as ordinary income. However, the Fund's
taxable distributions, if any, will be insubstantial compared to exempt
interest dividends.
Shareholders should consult their own tax advisers to determine the effect
of exempt interest dividends on their particular tax situation, including
liability for state and local taxes. The Fund will report annually to
shareholders with respect to net tax exempt income earned in each state.
----------------------------------------------------------------------
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, A 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 DOES NOT PAY FEDERAL INCOME
OR EXCISE TAXES.
----------------------------------------------------------------------
YIELD INFORMATION
-------------------------------------------------------------------------------
FROM TIME TO TIME A FUND MAY ADVERTISE ITS "YIELD" AND "EFFECTIVE YIELD." Both
yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of a Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized." That
is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment. A
taxable-equivalent yield is computed by using the tax-exempt yield figure and
dividing by 1 minus the tax rate.
<PAGE>
INVESTMENT ADVISERS AND
ADMINISTRATOR
Boston Management and Research
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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
THE EV MONEY MARKET FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
MMFP
[LOGO]
THE EV
MONEY MARKET
FUNDS
* Eaton Vance Cash Management Fund
* Eaton Vance Liquid Assets Fund
* Eaton Vance Money Market Fund
* Eaton Vance Tax Free Reserves
PROSPECTUS
SEPTEMBER 1, 1995
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
September 1, 1995
EATON VANCE CASH MANAGEMENT FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Cash Management Fund (the "Fund") and
certain other series of Eaton Vance Mutual Funds Trust (the "Trust"). Part II
provides information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional
Fund-specific information.
TABLE OF CONTENTS Page
PART I
Investment Objective and Policies ............................. 2
Investment Restrictions ....................................... 4
Trustees and Officers ......................................... 5
Investment Adviser and Administrator .......................... 7
Custodian ..................................................... 9
Service for Withdrawal ........................................ 9
Determination of Net Asset Value .............................. 10
Calculation of Yield Quotations ............................... 11
Taxes ......................................................... 11
Portfolio Security Transactions ............................... 12
Other Information ............................................. 13
Independent Accountants ....................................... 14
Appendix ...................................................... 15
PART II
Fees and Expenses ............................................. a-1
Investment Restrictions ....................................... a-1
Yield Information ............................................. a-1
Principal Underwriter ......................................... a-2
Control Persons and Principal Holders of Securities ........... a-2
Financial Statements .......................................... a-3
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED SEPTEMBER 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>
STATEMENT OF
ADDITIONAL INFORMATION
September 1, 1995
EATON VANCE LIQUID ASSETS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Liquid Assets Fund (the "Fund") and
certain other series of Eaton Vance Mutual Funds Trust (the "Trust"). Part II
provides information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional,
Fund-specific information.
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TABLE OF CONTENTS Page
PART I
Investment Objective and Policies ............................. 2
Investment Restrictions ....................................... 4
Trustees and Officers ......................................... 5
Investment Adviser and Administrator .......................... 7
Custodian ..................................................... 9
Service for Withdrawal ........................................ 9
Determination of Net Asset Value .............................. 10
Calculation of Yield Quotations ............................... 11
Taxes ......................................................... 11
Portfolio Security Transactions ............................... 12
Other Information ............................................. 13
Independent Accountants ....................................... 14
Appendix ...................................................... 15
PART II
Fees and Expenses ............................................. a-1
Investment Restrictions ....................................... a-2
Yield Information ............................................. a-2
Principal Underwriter ......................................... a-2
Distribution Plan ............................................. a-3
Control Persons and Principal Holders of Securities ........... a-3
Financial Statements .......................................... a-5
-------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED SEPTEMBER 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>
STATEMENT OF
ADDITIONAL INFORMATION
September 1, 1995
EATON VANCE MONEY MARKET FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
------------------------------------------------------------------------------
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Money Market Fund (the "Fund") and
certain other series of Eaton Vance Mutual Funds Trust (the "Trust"). Part II
provides information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional,
Fund-specific information.
TABLE OF CONTENTS Page
PART I
Investment Objective and Policies ................................. 2
Investment Restrictions ........................................... 4
Trustees and Officers ............................................. 5
Investment Adviser and Administrator .............................. 7
Custodian ......................................................... 9
Service for Withdrawal ............................................ 9
Determination of Net Asset Value .................................. 10
Calculation of Yield Quotations ................................... 11
Taxes ............................................................. 11
Portfolio Security Transactions ................................... 12
Other Information ................................................. 13
Independent Accountants ........................................... 14
Appendix .......................................................... 15
PART II
Fees and Expenses ................................................. a-1
Investment Restrictions ........................................... a-1
Yield Information ................................................. a-2
Principal Underwriter ............................................. a-2
Distribution Plan ................................................. a-3
Control Persons and Principal Holders of Securities ............... a-4
Financial Statements .............................................. a-5
-------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED SEPTEMBER 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>
STATEMENT OF ADDITIONAL INFORMATION
PART I
This Part I provides information about the Fund, certain other series of the
Trust and the Portfolio. The Fund has the same investment policies as those of
the Portfolio. The Fund currently seeks to achieve its objective by investing in
the Portfolio.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide as high a rate of
income as may be considered consistent with the preservation of capital and the
maintenance of liquidity. It seeks to meet its investment objective by investing
its assets in the Cash Management Portfolio (the "Portfolio"), a separate
registered investment company with the same investment objective as the Fund.
The Portfolio seeks to achieve its investment objective by investing in a
diversified portfolio of money market instruments. The Portfolio's investment
objective is a nonfundamental policy and may be changed by authorized vote of
the Trustees of the Portfolio.
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 invested directly in
investment securities in accordance with the Portfolio's investment policies, as
described below. Except as indicated below, 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.
Because 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.
MONEY MARKET INSTRUMENTS. The Portfolio will invest only in those U.S. dollar
denominated money market securities and corporate obligations determined by the
Trustees of the Portfolio to present minimal credit risks and which are at the
time of acquisition rated by the requisite number of nationally recognized
statistical rating organizations in one of the two highest applicable rating
categories or, in the case of an instrument not so rated, of comparable quality
as determined by the Trustees. At such time or times as the Trustees deem
appropriate and in the best interests of the Portfolio, assets of the Portfolio
may be invested substantially in certificates of deposit of federally insured
banks and/or U.S. Government and agency obligations. The Portfolio intends to
limit its investments to money market instruments maturing in 397 calendar days
or less and to maintain a dollar-weighted average maturity of not more than 90
days. In addition, Rule 2a-7 promulgated under the Investment Company Act of
1940 (the "1940 Act") provides that the Portfolio (so long as it uses the
amortized cost method of valuing its securities or holds itself out to investors
as a money market fund) may not acquire a Second Tier Security (as defined in
the Rule) if, immediately after such acquisition: (a) more than 5% of its total
assets (taken at amortized cost) would be invested in securities which, when
acquired by the Portfolio (either initially or upon any subsequent rollover)
were Second Tier Securities; or (b) more than the greater of 1% of its total
assets (taken at amortized cost) or $1,000,000 would be invested in securities
issued by a single issuer which, when acquired by the Portfolio (either
initially or upon any subsequent rollover) were Second Tier Securities.
The Portfolio may invest in U.S. Government money market obligations, which
are debt securities issued or guaranteed by the U.S. Treasury, including bills,
certificates of indebtedness, notes and bonds, or by an agency or
instrumentality of the U.S. Government established under the authority of an act
of Congress. Not all U.S. Government obligations are backed by the full faith
and credit of the United States. For example, securities issued by the Federal
Farm Credit Bank or by the Federal National Mortgage Association are supported
by the agency's right to borrow money from the U.S. Treasury under certain
circumstances. Securities issued by the Federal Home Loan Bank are supported
only by the credit of the agency. There is no guarantee that the U.S. Government
will support these types of securities, and therefore they involve more risk
than "full faith and credit" government obligations.
OBLIGATIONS OF U.S. AND FOREIGN BANKS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit and bankers'
acceptances of U.S. banks and their branches located outside of the U.S., of
U.S. branches of foreign banks, and foreign branches of foreign banks. The
Portfolio may also invest in U.S. dollar-denominated securities issued or
guaranteed by other domestic or foreign issuers, including domestic and
foreign corporations or other business organizations, foreign governments and
foreign government agencies or instrumentalities, and domestic and foreign
financial institutions, including but not limited to savings and loan
institutions, insurance companies, mortgage bankers and real estate investment
trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by governmental regulation. Payment of
interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as sovereign risk). In addition, evidences of ownership of portfolio
securities may be held outside of the U.S. and the Portfolio may be subject to
the risks associated with the holding of such property overseas. Various
provisions of Federal law governing the establishment and operation of domestic
branches do not apply to foreign branches of domestic banks.
The obligations of U.S. branches of foreign banks may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by Federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office.
The obligations of foreign issuers also involve certain additional risks,
including the risks of adverse political, social and economic developments, the
imposition of withholding taxes on interest income, seizure or nationalization
of foreign deposits, exchange controls, and the adoption of foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Foreign issuers may be subject to less governmental
regulation and supervision than U.S. issuers. Foreign issuers also generally are
not bound by uniform accounting, auditing and financial reporting requirements
comparable to those applicable to domestic issuers.
In connection with its investments in bank obligations and instruments
secured thereby, the Portfolio will invest in certificates of deposit and
bankers' acceptances if they are obligations of a domestic bank or a savings and
loan association having total assets of $1,000,000,000 or more.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Portfolio purchases a security and simultaneously commits to resell that
security to the seller at an agreed upon price on an agreed upon date within a
number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or maturity of the purchased
security. A repurchase agreement involves the obligation of the seller to pay
the agreed upon price, which obligation is in effect secured by the value (at
least equal to the amount of the agreed upon resale price and marked to market
daily) of the underlying security. The Portfolio may enter into a repurchase
agreement with respect to any security in which the Portfolio is authorized to
invest even though the underlying security matures in more than 397 calendar
days. Other than for Federal tax purposes, whether a repurchase agreement is the
purchase and sale of a security or a collateralized loan has not been
definitively established. This might become an issue in the event of the
bankruptcy of the other party to the transaction. While it does not presently
appear possible to eliminate all risks from these transactions (particularly the
possibility of a decline in the market value of the underlying securities, as
well as delay and costs to the Portfolio in connection with bankruptcy
proceedings), it is the policy of the Portfolio to enter into repurchase
agreements only with those member banks of the Federal Reserve System and
primary dealers in U.S. Government securities whose creditworthiness has been
reviewed and found satisfactory by the Portfolio's investment adviser, Boston
Management and Research (the "Investment Adviser" or "BMR").
REVERSE REPURCHASE AGREEMENTS. The Portfolio may also enter into reverse
repurchase agreements, although as of the date of this Statement of Additional
Information there was no intention to do so. Under a reverse repurchase
agreement, the Portfolio temporarily transfers possession of a portfolio
instrument to another party, such as a bank or broker-dealer, in return for
cash. At the same time, the Portfolio agrees to repurchase the instrument at an
agreed upon time (normally within seven days) and price, which reflects an
interest payment. The Portfolio expects that it will enter into reverse
repurchase agreements when it is able to invest the cash so acquired at a rate
higher than the cost of the agreement, which would increase the income earned by
the Portfolio. The Portfolio could also enter into reverse repurchase agreements
as a means of raising cash to satisfy redemption requests without the necessity
of selling portfolio instruments.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another
party or the securities in which the proceeds may be invested would affect the
market value of the Portfolio's assets. As a result, such transactions may
increase fluctuations in the market value of the Portfolio's assets (although
not affecting the amortized cost value of its assets used in determining the
Fund's net asset value per share). While there is a risk that large fluctuations
in the market value of the Portfolio's assets could affect the Fund's net asset
value per share, this risk is not significantly increased by entering into
reverse repurchase agreements, in the opinion of the Portfolio's Investment
Adviser. Because reverse repurchase agreements may be considered to be the
practical equivalent of borrowing funds, they constitute a form of leverage. If
the Portfolio reinvests the proceeds of a reverse repurchase agreement at a rate
lower than the cost of the agreement, entering into the agreement will lower the
Fund's yield.
While BMR does not consider reverse repurchase agreements to involve a
traditional borrowing of money, reverse repurchase agreements will be included
within the aggregate limitation on "borrowings" contained in the Fund's
investment restriction (3) set forth below. The Portfolio does not intend to
purchase securities for investment while temporary borrowings (described in the
investment restriction (3) set forth below) in excess of 5% of its total assets
are outstanding.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to increase its income
by lending portfolio securities. Under present regulatory policies, including
those of the Board of Governors of the Federal Reserve System, and the
Securities and Exchange Commission, such loans may be made to member firms of
the New York Stock Exchange, and would be required to be secured continuously by
collateral in cash or cash equivalents maintained on a current basis at an
amount at least equal to the market value of the securities loaned. The
Portfolio would have the right to call a loan and obtain the securities loaned
at any time on five days' notice. During the existence of a loan, the Portfolio
would continue to receive the equivalent of the interest or dividends paid by
the issuer on the securities loaned and would also receive the interest on
investment of the collateral. The Portfolio would not, however, 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 of 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 collateral
should the borrower of the securities fail financially. However, the loans would
be made only to firms 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 currently from securities loans of this type
justifies the attendant risk.
If the management of the Portfolio determines to make securities loans, it
is not intended that the value of the securities loaned would exceed 30% of the
Portfolio's total assets, or that the payments received on such loans, including
amounts received during the existence of a loan on account of interest and
dividends on the securities loaned, would exceed in the aggregate 10% of the
Portfolio's annual gross income (without offset for realized capital gains)
unless counsel for the Portfolio determines that such amounts are qualifying
income under Federal income tax provisions applicable to regulated investment
companies.
OTHER INVESTMENT POLICIES. Although the Portfolio usually intends to hold
securities purchased until maturity, at which time they will be redeemable at
their full principal value plus accrued interest, it may, at times, engage in
short-term trading to attempt to take advantage of yield variations in the
short-term market. The Portfolio may also sell portfolio securities prior to
maturity based on a revised evaluation of the creditworthiness of the issuer or
to meet redemptions of Fund shares. In the event there are unusually heavy
redemption requests due to changes in interest rates or otherwise, the Portfolio
may have to sell a portion of its investment portfolio at a time when it may be
disadvantageous to do so. However, the Portfolio believes that its ability to
borrow funds to accommodate redemption requests may mitigate in part the
necessity for such portfolio sales during these periods.
The rate of return to shareholders of the Fund will vary with the general
levels of interest rates applicable to the money market instruments in which the
Portfolio invests on behalf of the Fund. The rate will also be affected by the
level of the Fund's operating expenses, which expenses (because of expenditures
under its distribution plan) are expected to be higher than those of most other
money market funds.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following fundamental investment restrictions
that 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 1940 Act. Whenever the
Fund is requested to vote on a change in the investment restrictions of the
Portfolio, the Fund will hold a meeting of its shareholders and will cast its
vote as instructed by the shareholders.
Accordingly, the Portfolio will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one issuer
other than obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and except securities of other investment
companies;
(2) Purchase securities on margin;
(3) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(4) Underwrite securities issued by other persons;
(5) Purchase any securities which would cause more than 25% of the market
value of its total assets at the time of such purchase to be invested in the
securities of issuers having their principal business activities in the same
industry, provided that there is no limitation in respect to investments in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or in certificates of deposit or bankers' acceptances and
provided further, that for purposes of this limitation, finance companies as a
group, banks and bank holding companies as a group and utility companies as a
group will not be considered single industries;
(6) Buy or sell real estate, commodities, or commodity contracts unless
acquired as a result of ownership of securities; or
(7) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements or (c) lending portfolio securities.
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 of the Fund's shareholders or may be
changed with respect to the Portfolio by the Trustees of the Portfolio without
the approval of the Fund or its other investors. As a matter of nonfundamental
policy, neither the Fund nor the Portfolio may: (a) purchase securities of any
issuer with a record of less than three years' continuous operation, including
predecessors, except investments in obligations issued or guaranteed by the U.S.
Government or its agencies, municipal obligations, securities of issuers which
are rated by at least one nationally recognized statistical rating organization,
and obligations issued or guaranteed by any foreign government or its agencies
or instrumentalities, if such purchase would cause its investments in all such
issuers to exceed 5% of its total assets taken at market value; (b) purchase or
retain securities of any issuer if 5% of the issuer's securities are owned by
those officers and Trustees of the Portfolio or the investment adviser of the
Portfolio who own individually more than 1/2 of 1% of the issuer's securities;
(c) make short sales except where, because of ownership of other securities, it
has the right to obtain securities equivalent in kind and amount to those sold;
(d) write or purchase or sell any put or call options or combinations thereof;
(e) purchase warrants; (f) invest in interests in oil, gas or other mineral
exploration or development programs unless acquired as a result of ownership of
securities; or (g) knowingly purchase a security which is subject to legal or
contractual restrictions on resale or for which there is no readily available
market or enter into a repurchase agreement maturing in more than seven days if,
as a result thereof, more than 10% of its total assets (taken at current value)
would be invested in such securities. (The Portfolio may not be able to
liquidate such securities when deemed most advantageous.)
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"); of 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 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 a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
JAMES B. HAWKES (53), Vice President 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.
H. DAY BRIGHAM, JR. (68), Vice President of the Trust and Trustee of the
Portfolio*
Chairman of the Management Committee, 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.
DONALD R. DWIGHT (64), 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
SAMUEL L. HAYES, III (60), Trustee
Jacob H. Schiff, Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
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 Company Incorporated. Director or Trustee of various
investment companies manged by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), 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
WILLIAM H. AHERN, JR. (36), Vice President of the Trust
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
MICHAEL B. TERRY (52), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (50), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various 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 Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (32), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. (State Regulations Supervisor, The
Boston Company, 1991-1993 and Registration Specialist, Fidelity Management &
Research Co., 1986-1991). Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
JOHN P. RYNNE (53), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Corporation. Mr. Rynne became an officer
of the Trust on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate at
Dechert, Price & Rhoads and Gaston & Snow. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary of the Trust and the Portfolio on June 19, 1995.
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 Fund'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 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.
Trustees of the Portfolio who 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.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation earned by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in Part II of this Statement of
Additional Information.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated April 29, 1994. 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 fee of 1/24 of 1% (equivalent to 0.50% annually) of the average daily
net assets of the Portfolio. As at December 31, 1994, the Portfolio had net
assets of $222,813,455. For the period from the start of business, May 2, 1994,
to December 31, 1994, the Portfolio paid BMR advisory fees of $597,131
(equivalent to 0.50% (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 currently 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. For additional information about the
Administrator, see "Fees and Expenses" in the Fund's Part II of this Statement
of Additional Information.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) registration
of the Fund 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 July 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. Brigham, Gardner, Hawkes
and Otis are officers or Trustees of the Fund and/or the Portfolio and are
members of the EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern,
Murphy, O'Connor, Rynne, Terry and Woodbury 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 is engaged in oil and gas operations) and 77.3% of the stock of Investors
Bank & Trust Company, the 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 of the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
management and consulting. EVC owns all of 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
Fund 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 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 period from the start of business, May 2, 1994,
to December 31, 1994, the Portfolio paid IBT $69,593. For the custody fees that
the Fund paid to IBT, see "Fees and Expenses" in Part II of this Statement of
Additional Information.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services -
Withdrawal Plan" in the Fund's Prospectus) 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 Automated 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 the custodian (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, Presidents' Day, Good Friday (a New York Stock Exchange holiday), Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
valuation of the instruments held by the Portfolio at amortized cost is
permitted in accordance with Rule 2a-7 under the 1940 Act (the "Rule") and
certain procedures established by the Trustees of the Trust and the Portfolio
thereunder.
The amortized cost of an instrument is determined by valuing it at cost
originally and thereafter accreting any discount or amortizing any premium from
its face value at a constant rate until maturity, regardless of the effect of
fluctuating interest rates on the market value of the instrument. Although the
amortized cost method provides certainty in valuation, it may result at times in
determinations of value that are higher or lower than the price the Portfolio
would receive if the instruments were sold. Consequently, changes in the market
value of instruments held by the Portfolio during periods of rising or falling
interest rates will not be reflected either in the computation of net asset
value of the Portfolio or in the daily computation of its net investment income.
The procedures of the Fund and the Portfolio are designed to facilitate, to
the extent reasonably possible, the maintenance of the Fund's price per share,
as computed for the purpose of distribution and redemption of shares, at $1.00.
These procedures include review of the Portfolio's holdings by the Trustees, at
such intervals as they may deem appropriate, to determine whether the
Portfolio's net asset value calculated by using readily available market
quotations deviates from the valuation based on amortized cost, and, if so,
whether such deviation may result in material dilution or is otherwise unfair to
existing interest holders. In the event the Trustees determine that such a
deviation exists, they will take such corrective action as they consider to be
necessary or appropriate, which action could include the sale of instruments
held by the Portfolio prior to maturity (to realize capital gains or losses);
the shortening of average portfolio maturity; withholding dividends; redemption
of shares in kind; or establishing a net asset value per share by using readily
available market quotations.
Since the net investment income of the Fund is declared as a dividend each
time such income is determined, the net asset value per share of the Fund
remains at $1.00 per share immediately after such determination and dividend
declaration. It is expected that the Fund's net investment income will be
positive each time it is determined. However, if because of realized losses on
sales of portfolio investments, a sudden rise in interest rates, default by an
issuer of a portfolio security, or for any other reason the net investment
income of the Portfolio determined at any time is a negative amount, the
Portfolio will offset such amount allocable to each then interest holder's
account from dividends accrued with respect to such account. If at the time of
payment of a dividend (either at the regular dividend payment date, or, in the
case of an interest holder who is withdrawing all or substantially all of its
interest in an account, at the time of redemption), such negative amount exceeds
an interest holder's accrued dividends, the Portfolio will reduce the interest
by treating the interest holder as having contributed to the capital of the
Portfolio that amount of its interest which represents the amount of the excess.
Each shareholder is deemed to have agreed to such contribution in these
circumstances by his or her investment in the Fund.
Should the Portfolio incur or anticipate any unusual or unexpected
significant expense, loss or depreciation which would affect disproportionately
the Fund's net investment income for a particular period, the Trustees would at
that time consider whether to adhere to its daily dividend policy or to revise
it in the light of the then prevailing circumstances. Such expenses, losses or
depreciation may nevertheless result in a shareholder's receiving no dividends
for the period during which the shares are held and in receiving upon redemption
a price per share lower than the purchase price of such shares.
CALCULATION OF YIELD QUOTATIONS
From time to time, the Fund quotes a current yield based on a specific seven
calendar day period which is calculated by first dividing the net change in the
value of an account having a balance of one share at the beginning of the period
by the value of the account at such time to determine the seven day base period
return, and then multiplying such return by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent. The net change
in account value is determined by the value of additional shares purchased with
dividends declared on the original share and dividends declared on both the
original share and any such additional shares, but does not include any realized
gains or losses from the sales of securities or any unrealized appreciation or
depreciation on portfolio securities. In addition to the current yield, the Fund
also quotes an effective yield based on a specific seven day period, carried to
at least the nearest hundredth of one percent, computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical preexisting
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then compounding the base period
return by adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result, according to the following formula: Effective
yield = [(Base period return +1)365/7]-1.
Yields will fluctuate from time to time and are not necessarily
representative of future results. A shareholder should remember that yield is a
function of the type and quality of the instruments held by the Portfolio. For
information concerning the current and effective yield of the Fund, see "Yield
Information" in Part II of this Statement of Additional Information.
TAXES
For a general discussion of the federal income tax consequences of investing
in the Fund, see "Distributions and Taxes" in the Fund's current prospectus.
Each series of the Trust is treated as a separate entity for Federal income
tax purposes. In order to qualify each year as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), the
Fund intends to satisfy certain requirements relating to sources of income,
diversification of assets, and distribution of income and gains. So long as the
Fund qualifies as a RIC for tax purposes, it will not be subject to federal
income tax on income and gains paid to shareholders in the form of dividends. In
the unlikely event that the Fund fails to so qualify, it would be subject to
federal income tax at corporate rates and all distributions from earnings and
profits would be taxable to shareholders as ordinary income. In order to
requalify for taxation as a RIC, the Fund might be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
Because the Fund invests substantially all of its assets in the Portfolio,
the Portfolio also intends to satisfy the source of income and diversification
requirements under the Code. The Portfolio will allocate at least annually to
each investor its 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 and will make moneys
available for withdrawal at times and in amounts sufficient to enable the Fund
to satisfy the distribution requirements under the Code.
If the Fund fails to distribute substantially all of its ordinary income and
capital gain net income on a current basis, plus any retained amounts from the
preceding year, the Fund will be subject to a 4% federal excise tax on the
undistributed amounts. The Fund may treat distributions paid in January but
declared in October, November or December of the preceding year as paid by the
Fund on December 31 of that preceding year. As a result, shareholders must
report such distributions on their federal income tax returns for the preceding
year.
The Portfolio may be subject to foreign withholding taxes with respect to
investments in certain foreign securities. 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. However, such taxes may be deducted from
the Fund's net investment income.
If a shareholder sells, redeems or otherwise disposes of Fund shares at a
loss within six months of purchase, such loss will be treated as long-term
capital loss to the extent of any long-term capital gain dividends received. In
addition, all or a portion of any loss realized in the event of a sale,
redemption or other disposition of Fund shares will be disallowed if the
shareholder purchases other Fund shares within 30 days of the disposition
(before or after).
The Fund may be required by federal law to withhold and remit to the U.S.
Treasury 31% of the dividends and other distributions paid to any individual
shareholder who fails to furnish the Fund with a correct taxpayer identification
number (generally the individual's social security number), who has
underreported dividends or interest income, or who fails to certify to the Fund
that he or she is not subject to such withholding. The Fund is also generally
required to withhold on certain distributions made to non-resident aliens and
foreign entities.
Special tax rules apply to Individual Retirement Accounts ("IRAs"),
tax-exempt organizations and to other special classes of shareholders including
foreign shareholders. All shareholders should consult their own tax advisers
with respect to the foreign, U.S. federal, state and local tax consequences of
investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions of the
Portfolio, including the selection of the market and the 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 firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (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 executing firm, 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 firm, the value and
quality of the services rendered by the firm in other transactions, and the
reasonableness of the commission or spread, if any. The money market instruments
purchased and sold by the Portfolio are generally traded in the over-the-counter
market on a net basis (i.e., without commission) through dealers and banks
acting for their own accounts rather than as brokers and the Portfolio may also
acquire such investments directly from the issuers. Firms acting for their own
account attempt to profit from such transactions by buying at one price and
selling at a higher price, and the difference between such prices is customarily
referred to as the spread which generally is not disclosed. While it is
anticipated that the Portfolio will not pay significant brokerage commissions in
connection with such portfolio security transactions, on occasion it may be
necessary or appropriate to purchase or sell a security through a broker on an
agency basis, in which case the Portfolio will incur a brokerage commission.
Although spreads or commissions paid on portfolio security transactions will, in
the judgment of BMR, be reasonable in relation to the value of the services
provided, spreads or commissions exceeding those which another firm might charge
may be paid to firms who were selected to execute transactions on behalf of the
Portfolio and BMR's other clients 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 security transaction on behalf of the
Portfolio may receive compensation which is in excess of the amount of
compensation another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such compensation 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 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 compensation 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;
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 of 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 which
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 spreads or 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 period from the start of business, May 2, 1994, to the fiscal year
ended December 31, 1994, the purchases and sales of portfolio investments were
with the issuer or with major dealers in money market instruments acting as
principal. The cost of securities purchased from underwriters includes a
disclosed, fixed underwriting commission or concession, and the prices for which
securities are purchased from and sold to dealers usually include an undisclosed
dealer mark-up or mark-down. The Portfolio paid no brokerage commissions on
portfolio transactions during the period from the start of business, May 2,
1994, to December 31, 1994.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. 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 and any other outstanding series of shares, 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.
As permitted by Massachusetts law, there will normally be no meeting 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 and may appoint
successor Trustees.
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. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose. The By-laws further provide that under certain circumstances the
shareholders may call a meeting to remove a Trustee and that the Trust is
required to provide assistance in communicating with shareholders about such a
meeting. The By-Laws also provide that the Trustees shall 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.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees of the
Portfolio holding office have been elected by investors. In such an event the
Trustees then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding 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 New York Stock Exchange (the "Exchange") is closed (other than
for customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Securities and Exchange Commission
(the "Commission"), or during any emergency as determined by the Commission
which makes it impracticable for the Portfolio or the Fund 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 and Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the independent accountants for 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.
For the financial statements of the Fund and the Portfolio, see "Financial
Statements" in Part II of this Statement of Additional Information.
<PAGE>
APPENDIX
MOODY'S INVESTORS SERVICE, INC.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
MOODY'S SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of issuers. The two highest designations
are as follows:
PRIME-1 -- Issuers (or supporting institutions) rated Prime-1 or (P-1) have
a superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics:
* Leading market positions in well-established industries.
* High rates of return on funds employed.
* Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
* Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
* Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 -- Issuers (or supporting institutions) rated Prime-2 or (P-2) have
a strong ability for repayment of senior short-term obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
MOODY'S BOND RATINGS
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
STANDARD & POOR'S RATINGS GROUP
DESCRIPTION OF RATINGS OF CORPORATE DEBT
S&P'S COMMERCIAL PAPER RATLNGS
A Standard & Poor's Commercial Paper Rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. The two highest rating
categories are as follows:
"A-1" This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to Possess extremely strong
safety characteristics are denoted with a plus sign ( + ) designation.
"A-2" Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
S&P'S CORPORATE DEBT RATINGS
AAA -- Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
Note: The AA rating may be modified by the addition of a plus or minus
sign to show the relative standing within this category.
DUFF & PHELPS CREDIT RATING CO.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
DUFF & PHELPS COMMERCLAL PAPER RATLNGS
Duff & Phelps' commercial paper ratings are consistent with the short-term
rating criteria utilized by money market participants. The ratings, in effect,
apply to all obligations with maturities (when issued) or under one year.
The distinguishing feature of Duff & Phelps' commercial paper ratings is the
refinement of the traditional "1" category. The majority of commercial paper
issuers carry the highest short-term rating yet significant quality differences
within that tier do exist. As a consequence, Duff & Phelps has incorporated
gradations of "1+" (one plus) and "1-" (one minus), to assist investors in
recognizing those differences. The Duff 2 and Duff 3 categories have not been
similarly refined but could be at some later date.
CATEGORY 1: TOP GRADE
DUFF 1+ -- Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or ready access to alternative sources
of funds, is clearly outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
DUFF 1 -- Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors are
minor.
DUFF 1- -- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
CATEGORY 2: GOOD GRADE
DUFF 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
DUFF & PHELPS' BOND RATINGS
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ AA Aa -- High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
FITCH INVESTORS SERVICE, INC.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
FITCH'S SHORT-TERM DEBT RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch short-term ratings are as follows:
F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2 -- Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned "F-1+" and "F-1" ratings.
FITCH'S INVESTMENT GRADE BOND RATINGS
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future development, short-term debt of these issuers is generally rated "F-1+".
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE CASH MANAGEMENT FUND.
The Fund changed its name from Eaton and Howard Cash Management Fund to Eaton
Vance Cash Management Fund on September 27, 1982. The Fund became a series of
the Trust on June 19, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to the close of business April 29, 1994, (when the Fund transferred
substantially all of its assets to the Portfolio in exchange for an interest in
the Portfolio), the Fund retained Eaton Vance as its investment adviser. For the
period from January 1, 1994, to May 1, 1994, the Fund paid Eaton Vance advisory
fees of $180,479 (equivalent to .50% (annualized) of the Fund's average daily
net assets for such period). The Fund paid Eaton Vance advisory fees of $679,886
and $769,718, respectively, for the fiscal years ended December 31, 1993 and
1992.
CUSTODIAN
For the fiscal year ended December 31, 1994, the Fund paid IBT $44,519.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended December 31, 1994, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation, in
their capacities as Trustees from the Fund, the Portfolio and the other funds in
the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------------
<S> <C> <C> <C>
Donald R. Dwight $165 $1,041 $135,000(2)
Samuel L. Hayes, III 160 1.055 142,500(3)
Norton H. Reamer 953 1,059 135,000
John L. Thorndike 984 1,107 140,000
Jack L. Treynor 984 1,088 140,000
<FN>
------------
(1) The Eaton Vance fund complex consists of 201 registered investment
companies or series thereof.
(2) Includes $8,750 of deferred compensation.
(3) Includes $8,865 of deferred compensation.
</TABLE>
INVESTMENT RESTRICTIONS
The Fund and the Portfolio have adopted the same fundamental investment
restrictions which are enumerated in detail in Part I of this Statement of
Additional Information. The Fund's 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.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed to
be consistent with those of the Portfolio, to the extent applicable.
YIELD INFORMATION
The Fund's annualized current and effective yields for the seven-day period
ending December 31, 1994 were 5.34% and 5.48%, respectively.
PRINCIPAL UNDERWRITER
Although the Fund generally distributes its own shares, the Fund has entered
into a Distribution Contract with Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), a wholly-owned subsidiary of Eaton Vance, to permit the Fund to
distribute its shares through the Principal Underwriter when in the opinion of
the Trustees it will be in the best interest of the Fund to do so. Shares of the
Fund may be purchased directly from the Fund except in those states where they
are distributed through the Principal Underwriter. Shares of the Fund are
currently distributed through the Principal Underwriter in California, Colorado,
District of Columbia, Florida, Illinois, Indiana, Louisiana, Maine, Maryland,
Massachusetts, New Hampshire, New York, North Carolina, Ohio, Oregon, Rhode
Island, South Carolina, Texas and West Virginia.
Under the Distribution Agreement with the Principal Underwriter, the Fund
has agreed to pay all fees and expenses in connection with the registration of
its shares with the Securities and Exchange Commission as well as fees and
expenses in connection with registering and maintaining registrations of the
Fund and of its shares under the various state "blue-sky" laws. The Principal
Underwriter pays all expenses of preparing, printing and distributing
advertising and sales literature and all prospectuses and shareholders' reports
used in the distribution of Fund shares. The Contract provides that the
Principal Underwriter will accept orders at net asset value only, as no sales
commission or load is charged to the investor. The Distribution Contract is
renewable annually by the Trust's Board of Trustees (including a majority of its
Trustees who are not interested persons of the Principal Underwriter or the
Trust), may be terminated on six months' notice by either party, and is
automatically terminated upon assignment.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 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
July 31, 1995, Saturn & Co., a nominee of Investors Bank & Trust Company, an
affiliate of Eaton Vance, was the record owner of approximately 33.1% of the
outstanding shares of the Fund, which it held on behalf of its custody and trust
clients and Eaton Vance Distributors, Inc., Boston, MA 02110 was the record
owner of approximately 29.6% of the outstanding shares of the Fund. To the
knowledge of the Trust, no other person beneficially owns 5% or more of the
Fund's outstanding shares.
<PAGE>
------------------------------------------------
EATON VANCE CASH MANAGEMENT FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------
ASSETS:
Investment in Cash Management Portfolio,
at amortized cost and value (Note 1A) $108,271,524
Receivable for Fund shares sold 4,603,244
------------
Total Assets $112,874,768
LIABILITIES:
Payable for Fund shares redeemed $1,046,623
Dividends payable 171,656
Payable to affiliates --
Trustees' fees 683
Custodian fees 1,299
Accrued expenses 32,999
----------
Total liabilities 1,253,260
------------
NET ASSETS (represented by paid in capital
for 111,621,508 shares outstanding) $111,621,508
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE (Net assets divided by
shares outstanding) $1.00
=====
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
-----------------------------------------------------------------
For the Year Ended December 31, 1994
--------------------------------------------------------------------------------
INVESTMENT INCOME: (NOTE 1B):
Interest income $1,205,808
Interest income allocated from Portfolio 3,154,201
Expenses allocated from Portfolio (385,518)
----------
Total investment income $3,974,491
----------
EXPENSES --
Investment adviser fee (Note 3) $180,479
Compensation of Trustees not members of the
Administrator's organization (Note 3) 3,571
Custodian fee (Note 3) 44,519
Transfer and dividend disbursing agent fees 72,929
Printing and postage 57,049
Registration costs 44,677
Audit and legal fees 20,857
Miscellaneous 57,792
--------
Total expenses 481,873
----------
Net investment income $3,492,618
==========
-------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
From Operations --
Net investment income $ 3,492,618 $ 3,414,729
Distributions paid to shareholders
from net investment income (Note 2) (3,492,618) (3,414,729)
Net decrease in net assets from Fund
share transactions (Note 4) (578,137) (49,786,739)
------------ ------------
Net decrease in net assets $ (578,137) $(49,786,739)
NET ASSETS:
At beginning of year 112,199,645 161,986,384
------------ ------------
At end of year $111,621,508 $112,199,645
============ ============
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS (Continued)
<CAPTION>
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1994 1993 1992 1991<F1> 1990<F1>
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of
year $1.00 $1.00 $1.00 $1.00 $1.00
---- ---- ---- ---- ----
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income $ 0.0345 $ 0.0251 $ 0.0306 $ 0.0537 $ 0.0755
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income $(0.0345) $(0.0251) $(0.0306) $(0.0537) $(0.0755)
-------- -------- -------- -------- --------
NET ASSET VALUE, end of year $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN 3.49% 2.54% 3.14% 5.51% 7.82%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000 omitted) $111,622 $112,200 $161,986 $195,488 $250,658
Ratio of expenses to average
net assets 0.844%<F2> 0.674% 0.760% 0.746% 0.710%
Ratio of net investment income
to average net assets 3.396%<F2> 2.512% 3.088% 5.442% 7.540%
Note: Certain of the per share amounts have been compiled using average shares outstanding
<FN>
<F1>Audited by the Fund's previous auditors.
<F2>Includes the Fund's share of Cash Management Portfolio's allocated income and expenses for the period from May 2, 1994
to December 31, 1994.
<F3>Total return is calculated assuming a purchase at net asset value on the first day and a sale at the net asset value
on the last day of the period. Dividends and distributions, if any, are assumed to be reinvested at the net asset value
on the payable date.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. On May 2, 1994, the Fund
transferred substantially all of its investable assets to the Cash Management
Portfolio (the Portfolio). The Fund invests all of its investable assets in
interests in 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
(48.6% 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 determined in accordance with generally accepted accounting
principles. Prior to the Fund's investment in the Portfolio, the Fund held its
investments directly. For investments held directly, interest income was
determined on the basis of interest accrued, adjusted for amortization of
premium or discount when required for federal income tax purposes.
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
distribute to shareholders each year all of its taxable income, including any
net realized gains on investments. Accordingly, no provision for federal income
or excise tax is necessary.
D. OTHER - Investment transactions are accounted for on a trade date basis.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
-----------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net income of the Fund is determined daily and substantially all of the net
income so determined is declared as a dividend to shareholders of record at the
time of declaration. Dividends are paid monthly. Dividends are paid in the form
of additional shares of the Fund or, at the election of the shareholder, in
cash.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in over-distributions for financial statement purposes only
are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
-----------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Prior to May 2, 1994 (when the Fund transferred substantially all of its assets
to the Portfolio in exchange for an interest in the Portfolio), the Fund
retained Eaton Vance Management (EVM) as its investment adviser. The investment
adviser fee was earned by EVM as compensation for management and investment
advisory services rendered to the Fund. The fee was computed at the rate of 1/2
of 1% per annum of the Fund's average daily net assets and amounted to $180,479
for the period from January 1, 1994, to May 1, 1994. Since May 2, 1994, Eaton
Vance has served only as the administrator of the Fund, but receives no
compensation. The Portfolio has engaged Boston Management and Research (BMR), a
subsidiary of EVM, to render investment advisory services. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report. Except as to Trustees of the Fund and the Portfolio who are not members
of EVM's organization, officers and Trustees receive remuneration for their
services to the Fund out of such investment adviser fee.
Investors Bank & Trust Company (IBT), an affiliate of EVM, serves as custodian
of the Fund and the Portfolio. Pursuant to the respective custodian agreements,
IBT receives a fee reduced by credits which are determined based on the average
cash balances the Fund or the Portfolio maintains with IBT.
As of December 31, 1994, Saturn & Co., a nominee of Investors Bank & Trust
Company, was the record owner of approximately 33% of the outstanding shares of
the Fund which the Trust Company held on behalf of its custody and trust
clients.
Certain of the officers and Trustees of the Fund and Portfolio are officers
and directors/trustees of the above organizations.
<PAGE>
-----------------------------------------------------------------
(4) 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
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sales 746,678,214 $746,678,214 769,671,868 $769,671,868
Issued to shareholders
electing to receive
payments of
distributions in Fund
shares 1,864,353 1,864,353 2,368,150 2,368,150
Redemptions (749,120,704) (749,120,704) (821,826,757) (821,826,757)
------------ ------------ ------------ ------------
Net decrease (578,137) $ (578,137) (49,786,739) $(49,786,739)
============ ============ ============ ============
</TABLE>
-----------------------------------------------------------------
(5) INVESTMENTS TRANSACTIONS
On May 2, 1994, the Fund transferred substantially all of its assets to the
Portfolio in exchange for an interest in the Portfolio. Increases and decreases
in the Fund's investments in the Portfolio for the period from May 2, 1994, to
December 31, 1994 aggregated $422,593,068 and $434,717,518, respectively.
Purchases and sales and maturities of investment securities, other than U.S.
government securities, during the period from January 1, 1994 to May 1, 1994,
aggregate $185,514,973 and $220,446,000, respectively. Purchases and sales and
maturities of U.S. Government Securities, during the period from January 1, 1994
to May 1, 1994, aggregate $374,735,693 and $253,328,485, respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
Eaton Vance Cash Management Fund:
We have audited the accompanying statement of assets and liabilities of Eaton
Vance Cash Management Fund as of December 31, 1994, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the three years in the period then ended. 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. The
financial highlights for each of the two years in the period ended December
31, 1991, presented herein, were audited by other auditors whose report dated
January 21, 1992 expressed an unqualified opinion on such financial
highlights.
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. 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
Eaton Vance Cash Management Fund as of December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the three years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
---------------------------------------
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 66.97%
----------------------------------------------------------------------------------------------------------------------
RATINGS
(UNAUDITED) PRINCIPAL
------------------------- AMOUNT
STANDARD (000
& POOR'S MOODY'S OMITTED) VALUE (NOTE 1)
-----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
AGRICULTURE - 1.86%
A-1+ P-1 $ 3,000 Cargill Financial Services Corp. 6.07s, 3/01/95 $ 2,970,156
A-1+ P-1 1,200 Cargill Financial Services Corp. 6.10s, 3/21/95 1,183,936
------------
$ 4,154,092
------------
AUTOMOTIVE - 0.90%
A-1 P-1 $ 2,000 Ford Motor Credit Co. 5.98s, 1/09/95 $ 1,997,342
------------
BANKING & FINANCE - 18.62%
A-1 P-1 $ 2,000 American Express Credit Corp. 5.60s, 1/18/95 $ 1,994,711
A-1+ P-1 3,000 Asset Securitization Coop. Corp. 5.60s, 1/10/95 2,995,801
A-1+ P-1 2,000 Asset Securitization Coop. Corp. 5.62s, 1/11/95 1,996,877
A-1+ P-1 1,000 Asset Securitization Coop. Corp. 5.73s, 1/23/95 996,498
A-1+ P-1 3,000 Associates Corp. of No. America 5.70s, 1/17/95 2,992,400
A-1+ P-1 2,500 Associates Corp. of No. America 5.40s, 1/05/95 2,498,500
A-1+ P-1 600 Associates Corp. of No. America 6.05s, 2/07/95 596,269
A-1 P-1 4,000 CXC Incorporated 6.05s, 1/18/95 3,988,572
A-1+ P-1 2,500 CIESCO 5.70s, 1/18/95 2,493,271
A-1+ P-1 1,500 CIESCO 5.42s, 1/23/95 1,495,032
A-1+ P-1 2,000 CIESCO 5.92s, 2/02/95 1,989,476
A-1+ P-1 2,000 Corporate Asset Funding Co. 5.77s, 2/01/95 1,990,064
A-1+ P-1 4,000 Corporate Asset Funding Co. 6.00s, 2/06/95 3,976,000
A-1+ P-1 4,000 Corporate Receivables Corp. 5.90s, 1/13/95 3,992,134
A-1+ P-1 2,500 Delaware Funding Corp. 6.10s, 2/10/95 2,483,056
A-1+ P-1 2,000 Norwest Financial Inc. 5.20s, 1/04/95 1,999,133
A-1 P-1 3,000 Norwest Financial Inc. 5.45s, 1/04/95 2,998,637
------------
$ 41,476,431
------------
CONSUMER GOODS - 3.74%
A-1+ P-1 $ 5,000 Coca-Cola Co. 5.95s, 2/28/95 $ 4,952,069
A-1+ P-1 1,000 Heinz (H.J.) Co. 5.90s, 1/05/95 999,344
A-1+ P-1 2,400 Heinz (H.J.) Co. 6.00s, 2/07/95 2,385,200
------------
$ 8,336,613
------------
CREDIT UNION - 3.04%
A-1+ P-1 $ 1,200 AI Credit Corp. 5.90s, 2/06/95 $ 1,192,920
A-1+ P-1 2,600 AI Credit Corp. 6.09s, 2/06/95 2,584,166
A-1+ P-1 3,000 Mid-States Corp. Federal Credit Union 6.05s, 1/12/95 2,994,454
------------
$ 6,771,540
------------
The accompanying notes are an integral part of the financial statements
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
ELECTRICAL EQUIPMENT & ELECTRONICS - 5.59%
A-1+ P-1 $ 1,000 General Electric Capital Corp. 5.40s, 1/12/95 $ 998,350
A-1+ P-1 1,000 General Electric Capital Corp. 5.35s, 1/19/95 997,325
A-1+ P-1 1,500 General Electric Capital Corp. 5.90s, 1/24/95 1,494,346
A-1+ P-1 3,000 General Electric Capital Corp. 5.55s, 1/09/95 2,996,300
A-1+ P-1 2,000 General Electric Capital Corp. 6.03s, 2/07/95 1,987,605
A-1+ P-1 4,000 Motorola Credit Corp. 6.00s, 1/25/95 3,984,000
------------
$ 12,457,926
------------
INSURANCE - 14.98%
A-1+ P-1 $ 4,000 APC Funding Corp. 5.88s, 1/23/95 $ 3,985,639
A-1+ P-1 600 American General Finance Corp. 5.60s, 1/12/95 598,973
A-1+ P-1 3,000 American General Finance Corp. 5.75s, 1/12/95 2,991,375
A-1+ P-1 700 American General Finance Corp. 6.08s, 2/13/95 694,917
A-1+ P-1 2,000 American General Finance Corp. 6.05s, 2/22/95 1,982,522
A-1+ P-1 3,300 Metlife Funding Inc. 5.48s, 1/26/95 3,287,441
A-1+ P-1 2,000 Prudential Funding Corp. 6.05s, 2/21/95 1,982,858
A-1+ P-1 2,000 Prudential Funding Corp. 6.10s, 3/30/95 1,970,178
A-1+ P-1 2,000 Prudential Funding Corp. 6.18s, 3/27/95 1,970,816
A-1+ P-1 4,000 SAFECO Credit Co., 6.25s, 3/14/95 3,949,999
A-1+ P-1 2,000 SAFECO Credit Co., 6.20s, 3/16/95 1,974,511
A-1 P-1 2,000 Transamerica Finance Corp. 6.00s, 1/17/95 1,994,666
A-1+ P-1 2,000 USAA Capital Corp. 5.73s, 1/12/95 1,996,498
A-1+ P-1 2,000 USAA Capital Corp. 5.37s, 1/03/95 1,999,403
A-1+ P-1 2,000 USAA Capital Corp. 6.10s, 2/13/95 1,985,428
------------
$ 33,365,224
------------
LEASING - 0.90%
A-1 P-1 $ 2,000 AML Funding Inc. 6.10s, 1/12/95 $ 1,996,272
------------
OFFICE EQUIPMENT - 2.90%
A-1+ P-1 $ 1,500 Pitney Bowes Credit Corp. 5.95s, 1/11/95 $ 1,497,521
A-1+ P-1 1,200 Pitney Bowes Credit Corp. 5.92s, 1/03/95 1,199,605
A-1+ P-1 3,800 Pitney Bowes Credit Corp. 6.03s, 2/15/95 3,771,359
------------
$ 6,468,485
------------
OIL - 5.55%
A-1+ P-1 $ 3,000 Chevron Oil Finance Co. 5.90s, 1/20/95 $ 2,990,658
A-1+ P-1 3,000 Chevron Oil Finance Co. 5.70s, 1/27/95 2,987,650
A-1+ P-1 1,500 Chevron Oil Finance Co. 5.48s, 1/06/95 1,498,858
A-1 P-1 1,900 American Trading & Production 6.00s, 1/12/95 1,896,517
A-1+ P-1 3,000 Cortez Capital Corp. 6.06s, 1/17/95 2,991,920
------------
$ 12,365,603
------------
The accompanying notes are an integral part of the financial statements
<PAGE>
SPECIALTY RETAILER - 1.77%
A-1+ P-1 $ 4,000 Melville Corp. 6.07s, 3/21/95 $ 3,946,719
------------
TELECOMMUNICATIONS - 4.44%
A-1 P-1 $ 2,000 American Telephone & Telegraph Co. Capital Corp.
6.18s, 2/27/95 $ 990,215
A-1 P-1 3,000 American Telephone & Telegraph Co. Capital Corp.
6.15s, 3/27/95 2,956,437
A-1+ P-1 1,000 Ameritech Capital Funding Corp 6.08s, 2/13/95 992,738
A-1+ P-1 3,000 Ameritech Capital Funding Corp 6.13s, 2/23/95 2,972,926
A-1+ P-1 2,000 Ameritech Capital Funding Corp. 6.04s, 2/27/95 1,980,874
------------
$ 9,893,190
------------
UTILITIES - 2.68%
A-1+ P-1 $ 4,000 Iowa-Illinois Gas & Electric 5.92s, 2/02/95 $ 3,978,952
A-1 P-1 2,000 Potomac Electric Power Co. 6.03s, 1/18/95 1,994,305
------------
$ 5,973,257
------------
TOTAL COMMERCIAL PAPER, AT AMORTIZED COST $149,202,694
============
<PAGE>
-----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 33.0%
-----------------------------------------------------------------------------------------------------------------------
$ 1,900 FNMA Discount Notes 5.55s, 1/09/95 $ 1,897,657
5,000 FNMA Discount Notes 5.85s, 1/30/95 4,976,438
3,600 FNMA Discount Notes 5.96s, 1/31/95 3,582,120
8,000 FNMA Discount Notes 5.87s, 1/31/95 7,960,866
5,000 FNMA Discount Notes 5.88s, 2/08/95 4,968,967
3,995 FNMA Discount Notes 6.04s, 2/15/95 3,964,838
4,700 FNMA Discount Notes 5.99s, 2/22/95 4,659,334
4,300 FNMA Discount Notes 6.05s, 2/23/95 4,261,701
3,575 FNMA Discount Notes 6.05s, 2/27/95 3,540,755
2,675 FNMA Discount Notes 6.08s, 2/27/95 2,649,249
5,900 FFCB Discount Notes 5.86s, 1/06/95 5,895,222
4,500 FHLMC Discount Notes 5.55s, 1/03/95 4,498,613
5,250 FHLMC Discount Notes 5.55s, 1/04/95 5,247,572
13,000 FHLMC Discount Notes 5.90s, 1/24/95 12,950,997
2,500 FHLMC Discount Notes 6.01s, 2/15/95 2,481,218
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS, AT AMORTIZED COST $ 73,535,547
------------
TOTAL INVESTMENTS - 99.97% $222,738,241
OTHER ASSETS, LESS LIABILITIES - 0.03% 75,214
------------
NET ASSETS - 100% $222,813,455
============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
-------------------------------------------------------------------------------
December 31, 1994
-------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost and value (Note 1A $222,738,241
Cash 73,117
Deferred organization expenses (Note 1D) 12,958
------------
Total assets 222,824,316
LIABILITIES:
Accrued expenses 10,861
------------
NET ASSETS $222,813,455
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $222,813,455
============
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
-------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest Income $5,733,942
Expenses:
Investment adviser fee (Note 2) $597,131
Compensation of Trustees not members
of the Investment Adviser's organization
(Note 2) 5,356
Custodian fee (Note 2) 69,593
Audit and legal fees 23,364
Miscellaneous 2,198
--------
Total expenses 697,642
----------
Net investment income $5,036,300
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income $ 5,036,300
Capital transactions -
Contributions 866,299,681
Withdrawals (648,622,546)
-------------
Increase in net assets resulting
from capital transactions $ 217,677,135
-------------
Total increase in net assets $ 222,713,435
NET ASSETS:
At beginning of period 100,020
-------------
At end of period $ 222,813,455
=============
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
RATIOS (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Expenses 0.58%+
Net investment income 4.22%+
+Annualized.
The accompanying notes are an integral part of the financial statements
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Cash Management 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 interests in the Portfolio.
Investment operations began on May 2, 1994, with the acquisition of securities
with an amortized cost and value of $282,781,862 in exchange for interests in
the Portfolio by 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. SECURITY VALUATION - The Portfolio values investment securities utilizing the
amortized cost valuation technique permitted by Rule 2a-7 of the Investment
Company Act of 1940, pursuant to which the Portfolio must comply with certain
conditions. This technique involves initially valuing a portfolio security at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium. It is the normal practice of the Portfolio to hold
portfolio securities to maturity and realize par value unless such sale or other
disposition is mandated by withdrawal requests or other extraordinary
circumstances.
B. INCOME - Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or accretion of discount when required for
federal income tax purposes.
C. 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 investor's distributive
share of the Portfolio's net taxable investment income, net realized capital
gains, and any other items of income, gain, loss, deduction or credit.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
E. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold or the date on which they mature.
<PAGE>
-----------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is computed at the rate of 1/2 of 1% per annum of the Portfolio's average daily
net assets and amounted to $597,131 for the period from the start of business,
May 2, 1994 to December 31, 1994. 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 services to the Portfolio out of such investment adviser
fee.
Investors Bank & Trust Company (IBT), an affiliate of EVM and BMR, serves as a
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives a
fee which is reduced by certain credits 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.
-----------------------------------------------------------------
(3) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR or EVM
in a $120 million unsecured line of credit agreement with a bank. The line of
credit consists of a $20 million committed facility and a $100 million
discretionary facility. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio or fund based on its
borrowings at 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 Portfolio did not have any
significant borrowings or allocated fees during the period.
-----------------------------------------------------------------
(4) INVESTMENTS
Purchases and sales (including maturities) of investments, during the period
ended December 31, 1994, exclusive of U.S. Government securities aggregated
$896,432,907 and $823,611,005, respectively. Purchases and sales (including
maturities) of U.S. Government securities aggregated $943,882,951 and
$907,191,209, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
Cash Management Portfolio:
We have audited the accompanying statement of assets and liabilities, of the
Cash Management Portfolio (the "Portfolio") including the portfolio of
investments as of December 31, 1994, and the related statement of operations,
changes in net assets and supplementary data for the period from May 2, 1994
(start of business), to December 31, 1994. These financial statements and
supplementary data are the reseponsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
supplementary data based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at 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 audit provides 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 Cash
Management Portfolio at December 31, 1994, the results of its operations,
changes in net assets and supplementary data for the period from May 2, 1994
(start of business), to December 31, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
<PAGE>
INVESTMENT ADVISER OF
CASH MANAGEMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
taEaton 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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EATON VANCE CASH
MANAGEMENT FUND
24 FEDERAL STREET
BOSTON, MA 02110
CMSAI
EATON VANCE
CASH
MANAGEMENT
FUND
STATEMENT OF
ADDITIONAL
INFORMATION
SEPTEMBER 1, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE LIQUID ASSETS FUND. The
Fund became a series of the Trust on June 19, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to May 2, 1994 (when the Fund transferred substantially all of its
assets to the Portfolio in exchange for an interest in the Portfolio), the Fund
retained Eaton Vance as its investment adviser. For the period from January 1,
1994, to May 1, 1994, the Fund paid Eaton Vance advisory fees of $80,319
(equivalent to 0.50% (annualized) of the Fund's average daily net assets for
such period). For the nine months ended December 31, 1993, Eaton Vance earned
advisory fees of $53,766. However, pursuant to the Fund's Distribution Plan
which was in effect during the period from April 1, 1993 to June 13, 1993, the
advisory fee was reduced by $13,451 representing contingent deferred sales
charges received by the Principal Underwriter during a period when there were no
outstanding Uncovered Distribution Charges. To enhance the net income of the
Fund for the period from June 14, 1993 to December 31, 1993, Eaton Vance made a
reduction of its fee in the amount of $20,149. During the fiscal year ended
March 31, 1993 Eaton Vance would have earned advisory fees aggregating $66,590.
However, pursuant to the Fund's Distribution Plan which was in effect during
such fiscal year, the advisory fee was reduced by $66,590 representing
contingent deferred sales charges received by the Principal Underwriter during a
period when there were no outstanding Uncovered Distribution Charges. For the
fiscal year ended March 31, 1992, Eaton Vance would have earned investment
advisory fees aggregating $63,438. However, pursuant to the Fund's Distribution
Plan which was in effect during such fiscal year, the advisory fee was reduced
by $63,438, representing contingent deferred sales charges received by the
Principal Underwriter during a period when there were no outstanding Uncovered
Distribution Charges.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1996 and may be continued as described under "Distribution Plan" in
the Prospectus. As at December 31, 1994, the outstanding uncovered distribution
charges of the Principal Underwriter calculated under the Plan amounted to
approximately $4,541,000 (which amount was equivalent to 3.8% of the Fund's net
assets on such day). For the fiscal year ended December 31, 1994, the Fund made
service fee payments under the Plan aggregating $9,464, of which $8,454 was paid
to Authorized Firms and the balance was retained by the Principal Underwriter.
CUSTODIAN
For the fiscal year ended December 31, 1994, the Fund paid IBT $18,811.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio). During the fiscal year ended December 31, 1994, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation, in
their capacities as Trustees from the Fund, the Portfolio and the other funds in
the Eaton Vance fund complex\1/:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight $498 $1,041 $135,000(2)
Samuel L. Hayes, III 495 1,055 142,500(3)
Norton H. Reamer 503 1,059 135,000
John L. Thorndike 508 1,107 140,000
Jack L. Treynor 523 1,088 140,000
</TABLE>
----------
\1/ The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof.
(2) Includes $8,750 of deferred compensation.
(3) Includes $8,865 of deferred compensation.
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 will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one issuer
other than obligations issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and except securities of other investment
companies. The 5% restriction does not apply to or limit the Fund's investments
in certificates of deposit, bankers' acceptances or time deposits of banking and
thrift institutions;
(2) 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);
(3) Borrow money or issue senior securities, except as permitted by the 1940
Act;
(4) Underwrite securities issued by other persons, except insofar as it may
technically be deemed to be an underwriter under the Securities Act of 1933 in
selling or disposing of a portfolio security;
(5) Purchase any security if, as a result of such purchase, more than 25% of
the Fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the same
industry; provided that there is no limitation with respect to (a) investments
by the Fund in certificates of deposit, bankers' acceptances or time deposits of
banking and thrift institutions or (b) obligations issued or guaranteed by the
U. S. Government or any of its agencies or instrumentalities; and provided
further that banking and thrift institutions and their holding companies as a
group, finance companies as a group and utility companies as a group will not be
considered single industries;
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by interests in real estate and securities of
issuers which invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the repurchase or
sale of physical commodities; or
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and policies,
(b) entering into repurchase agreements and (c) lending its portfolio
securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed to
be consistent with those of the Portfolio, to the extent applicable.
YIELD INFORMATION
The Fund's annualized current and effective yields for the seven-day period
ended December 31, 1994 were 5.13% and 5.26%, respectively.
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 Authorized 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 currently 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.
DISTRIBUTION PLAN
The Fund's current Distribution 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 following supplements the discussion of the Plan contained in the
Fund's prospectus.
The Plan authorizes the Fund to make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year. The Trustees of the Trust have
implemented the Plan by authorizing the Fund to pay service fees to Authorized
Firms in amounts up to .25% per annum of the Fund's average daily net assets
based on the value of Fund shares sold by such Firms and remaining outstanding
for at least one year. As permitted by the NASD Rule, such payments are made for
personal services and/or the maintenance of shareholder accounts.
On June 14, 1993 the Fund revised the Plan to provide that all contingent
deferred sales charges will be paid to the Fund whenever there exist no
outstanding uncovered distribution charges of the Principal Underwriter with the
Principal Underwriter being entitled to receive all contingent deferred sales
charges paid or payable with respect to any day on which there exist outstanding
uncovered distribution charges. The Plan requires the Fund to calculate
uncovered distribution charges of the Principal Underwriter in accordance with
the methodology and procedures employed in the Fund's original distribution plan
dated May 28, 1987.
The amount of uncovered distribution charges of the Principal Underwriter is
computed daily to determine whether any contingent deferred sales charges will
be retained by the Principal Underwriter. Briefly, uncovered distribution
charges (as defined in the Fund's original distribution plan) are equivalent to
all unpaid sales commissions and distribution fees to which the Principal
Underwriter would be entitled under the original plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. 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 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
Marathon Group of Funds which result in a reduction of uncovered distribution
charges) and changes in the level of the net assets 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.
The Plan provides that it shall continue in effect 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. 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 will be committed to the discretion of the Trustees who are
not such interested persons. The Trustees have determined that in their judgment
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 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
July 31, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc. of Jacksonville, FL
was the record owner of approximately 16.8% of the outstanding shares of the
Fund, which it held on behalf of its customers who are the beneficial owners of
such shares, and as to which it had voting power under certain limited
circumstances. To the knowledge of the Trust, no other person beneficially owns
5% or more of the Fund's outstanding shares.
<PAGE>
------------------------------------------------
EATON VANCE LIQUID ASSETS TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------
December 31, 1994
------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments in Cash Management Portfolio, at amortized
cost and value (Note 1A) $114,541,931
Receivable for Fund shares sold 5,108,653
------------
Total assets $119,650,584
LIABILITIES:
Payable for Fund shares redeemed $894,869
Dividends payable 83,682
Payable to Affiliates
Trustees' fees 276
Custodian fee 1,000
Accrued service fees (Note 4) 22,839
Accrued expenses 49,326
--------
Total Liabilities 1,051,992
------------
NET ASSETS (represented by paid-in capital for 118,598,592
shares outstanding) $118,598,592
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
(Net assets divided by shares outstanding) $1.00
=====
</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):
Interest income $ 545,916
Interest income allocated from Portfolio 2,579,741
Expenses allocated from Portfolio (312,124)
----------
Total investment income $2,813,533
----------
EXPENSES --
Investment adviser fee (Note 3) $80,319
Compensation of Trustees not members of the Administrator's
organization (Note 3) 2,393
Custodian fee (Note 3) 18,811
Service fees (Note 4) 31,520
Registration costs 82,328
Transfer and dividend disbursing agent fees 69,026
Printing and postage 37,977
Audit and legal fees 17,292
Miscellaneous 1,035
-------
Total expenses 340,701
----------
Net investment income $2,472,832
==========
</TABLE>
<TABLE>
-----------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993<F1>
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 2,472,832 $ 177,667
Distributions paid to shareholders from net investment
income (Note 2) (2,472,832) (177,667)
Net increase (decrease) in net assets from Fund share
transactions (Note 6) 108,032,942 (7,987,268)
------------ -----------
Net increase (decrease) in net assets $108,032,942 $(7,987,268)
NET ASSETS:
At beginning of period 10,565,650 18,552,918
------------ -----------
At end of period $118,598,592 $10,565,650
============ ===========
<FN>
<F1>For the nine months ended 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, YEAR ENDED MARCH 31,
----------------------- ---------------------------------------
1994 1993<F1> 1993<F3> 1992<F3> 1991<F3>
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03276 0.01133 0.02175 0.04155 0.06209
LESS DISTRIBUTIONS:
Dividends from net investment income (0.03276) (0.01133) (0.02175) (0.04155) (0.06209)
--------- --------- --------- --------- ---------
NET ASSET VALUE, end of year $1.00 $1.00 $1.00 $1.00 $1.00
========= ========= ========= ========= =========
TOTAL RETURN<F5> 3.29% 1.14% 2.35% 4.38% 6.50%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $118,599 $10,566 $18,553 $9,145 $19,996
Ratio of expenses to average net assets 0.94%<F4> 1.49%<F2> 0.92% 1.23% 1.68%
Ratio of net investment income to average
net assets 3.55%<F4> 1.66%<F2> 2.33% 4.30% 6.23%
During each period presented below, the expenses relating to the operations of the Trust were reduced either by a reduction of the
investment advisory fee, an allocation of expenses to the investment advisor, or both. Had such actions not been taken, net
investment income per share and the ratios would have been as follows:
<CAPTION>
YEAR ENDED YEAR ENDED MARCH 31,
DECEMBER 31, ----------------------------
1993<F1> 1993<F3> 1992<F3> 1991<F3>
-------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME PER SHARE $0.00919 $0.01708 $0.03719 $0.05701
RATIOS (As a percentage of
average net assets):
Expenses 1.80%<F2> 1.42% 1.73% 2.19%
======= ======= ======== =======
Net investment income 1.35%<F2> 1.85% 3.80% 5.72%
======= ======= ======== =======
<FN>
<F1> For the nine months ended December 31, 1993.
<F2> Computed on an annualized basis.
<F3> Audited by the Trust's previous auditors.
<F4>Includes the Trust's share of Cash Management Portfolio's allocated income
and expenses for the period from May 2, 1994 to December 31, 1994.
<F5>Total return is calculated assuming a purchase at net asset value on the
first day and a sale at net asset value on the last day of the period.
Dividends and distributions, if any, are assumed to be reinvested at the net
asset value on the payable date.
</TABLE>
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. On May 2, 1994, the Trust
transferred substantially all of its investable assets to the Cash Management
Portfolio (the Portfolio). The Trust invests all of its investable assets in
interests in the Portfolio, a New York Trust, having the same investment
objective as the Trust. The value of the Trust's investment in the Portfolio
reflects the Trust's proportionate interest in the net assets of the Portfolio
(51.40% at December 31, 1994). The performance of the Trust 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 Trust's financial statements. The
following is a summary of significant accounting policies consistently followed
by the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. INVESTMENT VALUATION - Valuations of securities by the Fund is discussed in
Note 1 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. INCOME - The Trust's net investment income consists of the Trust's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Trust determined in accordance with generally accepted
accounting principles. Prior to the Trust's investment in the Portfolio, the
Trust held its investments directly. For investments held directly, interest
income was determined on the basis of interest accrued, adjusted for
amortization of premium or discount when required for federal income tax
purposes.
C. FEDERAL TAXES - The Trust's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal income
or excise tax is necessary. At December 31, 1994, the Fund, for federal income
tax purposes had a capital loss carryover of $8,006 which will reduce the
taxable income arising from future net realized gains on investments, 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 carryover will expire on December 31, 2001.
D. OTHER - Investment transactions are accounted for on a trade date basis.
--------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net income of the Trust is determined daily, and substantially all of the
net income so determined is declared as a dividend to shareholders of record at
the time of declaration. Dividends are paid monthly. Dividends are paid in the
form of additional shares of the Trust or, at the election of the shareholder,
in cash.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in over- distributions for financial statement purposes
only are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
<PAGE>
--------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Prior to May 2, 1994 (when the Trust transferred substantially all of its assets
to the Portfolio in exchange for an interest in the Portfolio), the Trust
retained Eaton Vance Management (EVM) as its investment adviser. The investment
adviser fee was earned by EVM as compensation for management and investment
advisory services rendered to the Trust. The fee was computed at the monthly
rate of 1/24 of 1% ( 1/2 of 1% per annum) of the Trust's average daily net
assets and amounted to $80,319 for the period from January 1, 1994, to May 1,
1994. Since May 2, 1994, Eaton Vance has served only as the administrator of the
Trust, but receives no compensation. The Portfolio has engaged Boston Management
and Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. Except as to Trustees of the Trust and the Portfolio
who are not members of EVM's organization, officers and Trustees receive
remuneration for their services to the Trust out of such investment adviser fee.
Investors Bank & Trust Company (IBT), an affiliate of EVM, serves as custodian
of the Trust and the Portfolio. Pursuant to the respective custodian agreements,
IBT receives a fee reduced by credits which are determined based on the average
cash balances the Trust or the Portfolio maintains with IBT.
Certain of the officers and Trustees of the Trust and Portfolio are officers and
directors/trustees of the above organizations.
--------------------------------------------------------------------------------
(4) DISTRIBUTION PLAN
The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan does not provide for annual
payments to the Trust's Principal Underwriter, Eaton Vance Distributors, Inc.
(EVD), for providing ongoing distribution services and facilities to the Trust.
However, the Plan does require the Trust to calculate Uncovered Distribution
Charges of the Principal Underwriter, which are equivalent to the sum of (i) 5%
of the aggregate amount received by the Trust 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 the aggregate amount of contingent deferred sales charges (see Note
5) paid to EVD. At December 31, 1994, outstanding Uncovered Distribution Charges
due EVD amounted to approximately $4,541,000.
In addition, the Plan authorizes the Trust to make service fee payments in
amounts up to .25% per annum of the Trust's average daily net assets to the
Principal Underwriter, Authorized Firms and other persons based on the value of
Trust shares sold and remaining outstanding for specified periods of time.
Service fees amounted to $31,520 for the year ended December 31, 1994.
Certain of the officers and Trustees of the Trust and Portfolio are officers or
directors of EVD.
<PAGE>
--------------------------------------------------------------------------------
(5) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Trust
shares made within six years of purchase. Generally, the CDSC is based upon the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital gain
distributions. The CDSC is imposed at declining rates that begin at 5% in the
case of redemptions in the first and second year after purchase (6% and 5%,
respectively, for shares purchased prior to August 1, 1994), declining one
percentage point each subsequent year. No CDSC is levied on shares which have
been sold to the Investment Adviser or its affiliates or to their respective
employees or clients. CDSC charges are paid to EVD to reduce the amount of
Uncovered Distribution Charges calculated under the Trust's Distribution Plan.
Pursuant to the Trust's Distribution Plan, any CDSC received by the Principal
Underwriter when no outstanding Uncovered Distribution Charges exist is returned
to the Trust and included in the Trust's income from operations. For the year
ended December 31, 1994 approximately $798,000 of CDSC paid by shareholders was
received by EVD.
--------------------------------------------------------------------------------
(6) 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 Trust shares were as follows:
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1994 1993*
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------
Sales 475,275,080 $475,275,080 121,512,241 $121,512,241
Issued to shareholders
electing to receive
payments of
distributions in
Trust shares 1,547,336 1,547,336 65,412 65,412
Redemptions (368,789,474) (368,789,474) (129,564,921) (129,564,921)
------------- ------------- ------------- -------------
Net increase
(decrease) 108,032,942 $108,032,942 (7,987,268) $ (7,987,268)
============ ============= ============= =============
*For the nine months ended December 31, 1993.
--------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
On May 2, 1994, the Trust transferred substantially all of its assets to the
Portfolio in exchange for an interest in the Portfolio. Increases and decreases
in the Trust's investments in the Portfolio for the period from May 2, 1994, to
December 31, 1994 aggregated $243,140,946 and $213,905,028, respectively.
Purchases and sales and maturities of investment securities, other than U.S.
government securities, during the period from January 1, 1994 to May 1, 1994,
aggregated $26,650,860 and $34,484,764, respectively. Purchases and sales and
maturities of U.S. Government Securities during the period from January 1, 1994
to May 1, 1994 aggregate $433,879,905 and $436,988,395, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
---------------------------------------------------------------------------
To the Trustees and Shareholders of
Eaton Vance Liquid Assets Trust:
We have audited the accompanying statement of assets and liabilities of Eaton
Vance Liquid Assets Trust as of December 31, 1994 and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two fiscal years in the period then ended and the financial
highlights for each of the two years in the period then ended. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for each of the three fiscal years in the period ended March 31,
1993, presented herein, were audited by other auditors whose report dated April
30, 1993 expressed an unqualified opinion on such financial highlights.
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 the securities owned at
December 31, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Eaton
Vance Liquid Assets Trust as of December 31, 1994, the results of its operations
for the year then ended, the changes in its net assets for each of the two
fiscal years in the period then ended and the financial highlights for each of
the two years in the period then ended in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 66.97%
---------------------------------------------------------------------------------------------------------------------
RATINGS
(UNAUDITED)
------------------------- PRINCIPAL
STANDARD AMOUNT
& POOR'S MOODY'S (000 OMITTED) VALUE (NOTE 1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGRICULTURE - 1.86%
A-1+ P-1 $ 3,000 Cargill Financial Services Corp. 6.07s, 3/01/95 $ 2,970,156
A-1+ P-1 1,200 Cargill Financial Services Corp. 6.10s, 3/21/95 1,183,936
------------
$ 4,154,092
------------
AUTOMOTIVE - 0.90%
A-1 P-1 $ 2,000 Ford Motor Credit Co. 5.98s, 1/09/95 $ 1,997,342
------------
BANKING & FINANCE - 18.62%
A-1 P-1 $ 2,000 American Express Credit Corp. 5.60s, 1/18/95 $ 1,994,711
A-1+ P-1 3,000 Asset Securitization Coop. Corp. 5.60s, 1/10/95 2,995,801
A-1+ P-1 2,000 Asset Securitization Coop. Corp. 5.62s, 1/11/95 1,996,877
A-1+ P-1 1,000 Asset Securitization Coop. Corp. 5.73s, 1/23/95 996,498
A-1+ P-1 3,000 Associates Corp. of No. America 5.70s, 1/17/95 2,992,400
A-1+ P-1 2,500 Associates Corp. of No. America 5.40s, 1/05/95 2,498,500
A-1+ P-1 600 Associates Corp. of No. America 6.05s, 2/07/95 596,269
A-1 P-1 4,000 CXC Incorporated 6.05s, 1/18/95 3,988,572
A-1+ P-1 2,500 CIESCO 5.70s, 1/18/95 2,493,271
A-1+ P-1 1,500 CIESCO 5.42s, 1/23/95 1,495,032
A-1+ P-1 2,000 CIESCO 5.92s, 2/02/95 1,989,476
A-1+ P-1 2,000 Corporate Asset Funding Co. 5.77s, 2/01/95 1,990,064
A-1+ P-1 4,000 Corporate Asset Funding Co. 6.00s, 2/06/95 3,976,000
A-1+ P-1 4,000 Corporate Receivables Corp. 5.90s, 1/13/95 3,992,134
A-1+ P-1 2,500 Delaware Funding Corp. 6.10s, 2/10/95 2,483,056
A-1+ P-1 2,000 Norwest Financial Inc. 5.20s, 1/04/95 1,999,133
A-1 P-1 3,000 Norwest Financial Inc. 5.45s, 1/04/95 2,998,637
------------
$ 41,476,431
------------
CONSUMER GOODS - 3.74%
A-1+ P-1 $ 5,000 Coca-Cola Co. 5.95s, 2/28/95 $ 4,952,069
A-1+ P-1 1,000 Heinz (H.J.) Co. 5.90s, 1/05/95 999,344
A-1+ P-1 2,400 Heinz (H.J.) Co. 6.00s, 2/07/95 2,385,200
------------
$ 8,336,613
------------
CREDIT UNION - 3.04%
A-1+ P-1 $ 1,200 AI Credit Corp. 5.90s, 2/06/95 $ 1,192,920
A-1+ P-1 2,600 AI Credit Corp. 6.09s, 2/06/95 2,584,166
A-1+ P-1 3,000 Mid-States Corp. Federal Credit Union 6.05s, 1/12/95 2,994,454
------------
$ 6,771,540
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - (Continued)
---------------------------------------------------------------------------------------------------------------------
RATINGS
(UNAUDITED)
------------------------- PRINCIPAL
STANDARD AMOUNT
& POOR'S MOODY'S (000 OMITTED) VALUE (NOTE 1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRICAL EQUIPMENT & ELECTRONICS - 5.59%
A-1+ P-1 $ 1,000 General Electric Capital Corp. 5.40s, 1/12/95 $ 998,350
A-1+ P-1 1,000 General Electric Capital Corp. 5.35s, 1/19/95 997,325
A-1+ P-1 1,500 General Electric Capital Corp. 5.90s, 1/24/95 1,494,346
A-1+ P-1 3,000 General Electric Capital Corp. 5.55s, 1/09/95 2,996,300
A-1+ P-1 2,000 General Electric Capital Corp. 6.03s, 2/07/95 1,987,605
A-1+ P-1 4,000 Motorola Credit Corp. 6.00s, 1/25/95 3,984,000
------------
$ 12,457,926
------------
INSURANCE - 14.98%
A-1+ P-1 $ 4,000 APC Funding Corp. 5.88s, 1/23/95 $ 3,985,639
A-1+ P-1 600 American General Finance Corp. 5.60s, 1/12/95 598,973
A-1+ P-1 3,000 American General Finance Corp. 5.75s, 1/12/95 2,991,375
A-1+ P-1 700 American General Finance Corp. 6.08s, 2/13/95 694,917
A-1+ P-1 2,000 American General Finance Corp. 6.05s, 2/22/95 1,982,522
A-1+ P-1 3,300 Metlife Funding Inc. 5.48s, 1/26/95 3,287,441
A-1+ P-1 2,000 Prudential Funding Corp. 6.05s, 2/21/95 1,982,858
A-1+ P-1 2,000 Prudential Funding Corp. 6.10s, 3/30/95 1,970,178
A-1+ P-1 2,000 Prudential Funding Corp. 6.18s, 3/27/95 1,970,816
A-1+ P-1 4,000 SAFECO Credit Co., 6.25s, 3/14/95 3,949,999
A-1+ P-1 2,000 SAFECO Credit Co., 6.20s, 3/16/95 1,974,511
A-1 P-1 2,000 Transamerica Finance Corp. 6.00s, 1/17/95 1,994,666
A-1+ P-1 2,000 USAA Capital Corp. 5.73s, 1/12/95 1,996,498
A-1+ P-1 2,000 USAA Capital Corp. 5.37s, 1/03/95 1,999,403
A-1+ P-1 2,000 USAA Capital Corp. 6.10s, 2/13/95 1,985,428
------------
$ 33,365,224
------------
LEASING - 0.90%
A-1 P-1 $ 2,000 AML Funding Inc. 6.10s, 1/12/95 $ 1,996,272
------------
OFFICE EQUIPMENT - 2.90%
A-1+ P-1 $ 1,500 Pitney Bowes Credit Corp. 5.95s, 1/11/95 $ 1,497,521
A-1+ P-1 1,200 Pitney Bowes Credit Corp. 5.92s, 1/03/95 1,199,605
A-1+ P-1 3,800 Pitney Bowes Credit Corp. 6.03s, 2/15/95 3,771,359
------------
$ 6,468,485
------------
OIL - 5.55%
A-1+ P-1 $ 3,000 Chevron Oil Finance Co. 5.90s, 1/20/95 $ 2,990,658
A-1+ P-1 3,000 Chevron Oil Finance Co. 5.70s, 1/27/95 2,987,650
A-1+ P-1 1,500 Chevron Oil Finance Co. 5.48s, 1/06/95 1,498,858
A-1 P-1 1,900 American Trading & Production 6.00s, 1/12/95 1,896,517
A-1+ P-1 3,000 Cortez Capital Corp. 6.06s, 1/17/95 2,991,920
------------
$ 12,365,603
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - (Continued)
---------------------------------------------------------------------------------------------------------------------
RATINGS
(UNAUDITED)
------------------------- PRINCIPAL
STANDARD AMOUNT
& POOR'S MOODY'S (000 OMITTED) VALUE (NOTE 1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPECIALTY RETAILER - 1.77%
A-1+ P-1 $ 4,000 Melville Corp. 6.07s, 3/21/95 $ 3,946,719
------------
TELECOMMUNICATIONS - 4.44%
A-1 P-1 $ 2,000 American Telephone & Telegraph Co. Capital Corp.
6.18s, 2/27/95 $ 990,215
A-1 P-1 3,000 American Telephone & Telegraph Co. Capital Corp.
6.15s, 3/27/95 2,956,437
A-1+ P-1 1,000 Ameritech Capital Funding Corp 6.08s, 2/13/95 992,738
A-1+ P-1 3,000 Ameritech Capital Funding Corp 6.13s, 2/23/95 2,972,926
A-1+ P-1 2,000 Ameritech Capital Funding Corp. 6.04s, 2/27/95 1,980,874
------------
$ 9,893,190
------------
UTILITIES - 2.68%
A-1+ P-1 $ 4,000 Iowa-Illinois Gas & Electric 5.92s, 2/02/95 $ 3,978,952
A-1 P-1 2,000 Potomac Electric Power Co. 6.03s, 1/18/95 1,994,305
------------
$ 5,973,257
------------
TOTAL COMMERCIAL PAPER, AT AMORTIZED COST $149,202,694
------------
------------
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 33.0%
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,900 FNMA Discount Notes 5.55s, 1/09/95 $ 1,897,657
5,000 FNMA Discount Notes 5.85s, 1/30/95 4,976,438
3,600 FNMA Discount Notes 5.96s, 1/31/95 3,582,120
8,000 FNMA Discount Notes 5.87s, 1/31/95 7,960,866
5,000 FNMA Discount Notes 5.88s, 2/08/95 4,968,967
3,995 FNMA Discount Notes 6.04s, 2/15/95 3,964,838
4,700 FNMA Discount Notes 5.99s, 2/22/95 4,659,334
4,300 FNMA Discount Notes 6.05s, 2/23/95 4,261,701
3,575 FNMA Discount Notes 6.05s, 2/27/95 3,540,755
2,675 FNMA Discount Notes 6.08s, 2/27/95 2,649,249
5,900 FFCB Discount Notes 5.86s, 1/06/95 5,895,222
4,500 FHLMC Discount Notes 5.55s, 1/03/95 4,498,613
5,250 FHLMC Discount Notes 5.55s, 1/04/95 5,247,572
13,000 FHLMC Discount Notes 5.90s, 1/24/95 12,950,997
2,500 FHLMC Discount Notes 6.01s, 2/15/95 2,481,218
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS, AT AMORTIZED COST $ 73,535,547
------------
TOTAL INVESTMENTS - 99.97% $222,738,241
OTHER ASSETS, LESS LIABILITIES - 0.03% 75,214
------------
NET ASSETS - 100% $222,813,455
------------
------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost and value (Note 1A) $ 222,738,241
Cash 73,117
Deferred organization expenses (Note 1D) 12,958
-------------
Total assets 222,824,316
LIABILITIES:
Accrued expenses 10,861
-------------
NET ASSETS $ 222,813,455
-------------
-------------
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $ 222,813,455
-------------
-------------
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest Income $5,733,942
Expenses:
Investment adviser fee (Note 2) $ 597,131
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 5,356
Custodian fee (Note 2) 69,593
Audit and legal fees 23,364
Miscellaneous 2,198
----------
Total expenses 697,642
----------
Net investment income $5,036,300
----------
----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income $ 5,036,300
Capital transactions -
Contributions 866,299,681
Withdrawals (648,622,546)
--------------
Increase in net assets resulting from capital
transactions $ 217,677,135
--------------
Total increase in net assets $ 222,713,435
NET ASSETS:
At beginning of period 100,020
--------------
At end of period $ 222,813,455
--------------
--------------
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
RATIOS (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Expenses 0.58%+
Net investment income 4.22%+
+ Annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Cash Management 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 interests in the Portfolio.
Investment operations began on May 2, 1994, with the acquisition of securities
with an amortized cost and value of $282,781,862 in exchange for interests in
the Portfolio by 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. SECURITY VALUATION - The Portfolio values investment securities utilizing the
amortized cost valuation technique permitted by Rule 2a-7 of the Investment
Company Act of 1940, pursuant to which the Portfolio must comply with certain
conditions. This technique involves initially valuing a portfolio security at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium. It is the normal practice of the Portfolio to hold
portfolio securities to maturity and realize par value unless such sale or other
disposition is mandated by withdrawal requests or other extraordinary
circumstances.
B. INCOME - Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or accretion of discount when required for
federal income tax purposes.
C. 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 investor's distributive
share of the Portfolio's net taxable investment income, net realized capital
gains, and any other items of income, gain, loss, deduction or credit.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
E. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold or the date on which they mature.
<PAGE>
--------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is computed at the rate of 1/2 of 1% per annum of the Portfolio's average daily
net assets and amounted to $597,131 for the period from the start of business,
May 2, 1994 to December 31, 1994. 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 services to the Portfolio out of such investment adviser
fee.
Investors Bank & Trust Company (IBT), an affiliate of EVM and BMR, serves as a
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives a
fee which is reduced by certain credits 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.
--------------------------------------------------------------------------------
(3) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR or EVM
in a $120 million unsecured line of credit agreement with a bank. The line of
credit consists of a $20 million committed facility and a $100 million
discretionary facility. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio or fund based on its
borrowings at 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 Portfolio did not have any
significant borrowings or allocated fees during the period.
--------------------------------------------------------------------------------
(4) INVESTMENTS
Purchases and sales (including maturities) of investments, during the period
ended December 31, 1994, exclusive of U.S. Government securities aggregated
$896,432,907 and $823,611,005, respectively. Purchases and sales (including
maturities) of U.S. Government securities aggregated $943,882,951 and
$907,191,209, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
Cash Management Portfolio:
We have audited the accompanying statement of assets and liabilities, of the
Cash Management Portfolio (the "Portfolio") including the portfolio of
investments as of December 31, 1994, and the related statement of operations,
changes in net assets and supplementary data for the period from May 2, 1994
(start of business), to December 31, 1994. These financial statements and
supplementary data are the reseponsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
supplementary data based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and supplementary data are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at 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 audit provides 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 Cash
Management Portfolio at December 31, 1994, the results of its operations,
changes in net assets and supplementary data for the period from May 2, 1994
(start of business), to December 31, 1994, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
INVESTMENT ADVISER OF
CASH MANAGEMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EATON VANCE
LIQUID ASSETS 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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EATON VANCE LIQUID ASSETS FUND
24 FEDERAL STREET
BOSTON, MA 02110
LXSAI
EATON VANCE [Logo]
LIQUID ASSETS
FUND
STATEMENT OF
ADDITIONAL
INFORMATION
SEPTEMBER 1, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE MONEY MARKET FUND. The
Fund became a series of the Trust on June 19, 1995.
FEES AND EXPENSES
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
Statement of Additional Information, the Administrator receives no compensation
for providing administrative services to the Fund. For the period from the start
of business, April 5, 1995, to June 30, 1995, $7,210 of the Fund's operating
expenses were allocated, on a preliminary basis, to the Administrator.
DISTRIBUTION PLAN
For the period from the start of business, April 5, 1995, to June 30, 1995,
the Fund paid sales commissions under the Plan to the Principal Underwriter
aggregating $17,834. During such period the Principal Underwriter paid no sales
commissions to Authorized Firms on sales of shares of the Fund. During such
period contingent deferred sales charges aggregating approximately $55,000 were
imposed on early redeeming shareholders and paid to the Principal Underwriter,
which amount was used by the Principal Underwriter to reduce uncovered
distribution charges. As at June 30, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximately $945,000 (which amount was equivalent to 3.4% of the
Fund's net assets on such day). For the period from the start of business, April
5, 1995, to June 30, 1995, the Fund made no service fee payments under the Plan.
The Fund will commence accruing for service fees during the quarter ending June
30, 1996.
CUSTODIAN
No fees paid to date.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) During the fiscal year ended December 31, 1994, the noninterested
Trustees of the Portfolio earned the following compensation, and during the
fiscal year ending December 31, 1995 it is anticipated that the noninterested
Trustees of the Trust will earn the following compensation, in their capacities
as Trustees from the Fund, the Portfolio and the other funds in the Eaton Vance
fund complex\1/:
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND\2/ FROM PORTFOLIO FUND COMPLEX
---- -------------- -------------- ------------------
Donald R. Dwight $250 $1,041 $135,000\3/
Samuel L. Hayes, III 250 1,055 142,500\4/
Norton H. Reamer 250 1,059 135,000
John L. Thorndike 250 1,107 140,000
Jack L. Treynor 250 1,088 140,000
----------
\1/ The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof.
\2/ Estimated compensation for the fiscal year ending December 31, 1995.
\3/ Includes $8,750 of deferred compensation.
\4/ Includes $8,865 of deferred compensation.
INVESTMENT RESTRICTIONS
Certain investment restrictions of the Fund 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 will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one issuer
other than obligations issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities and except securities of other investment
companies. The 5% restriction does not apply to or limit the Fund's investments
in certificates of deposit, bankers' acceptances or time deposits of banking and
thrift institutions;
(2) 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);
(3) Borrow money or issue senior securities, except as permitted by the
Investment Company Act of 1940;
(4) Underwrite securities issued by other persons, except insofar as it may
technically be deemed to be an underwriter under the Securities Act of 1933 in
selling or disposing of a portfolio security;
(5) Purchase any security if, as a result of such purchase, more than 25% of
the Fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the same
industry; provided that there is no limitation with respect to (a) investments
by the Fund in certificates of deposit, bankers' acceptances or time deposits of
banking and thrift institutions or (b) obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities; and provided
further that banking and thrift institutions and their holding companies as a
group, finance companies as a group and utility companies as a group will not be
considered single industries;
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by interests in real estate and securities of
issuers which invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the repurchase
or sale of physical commodities; or
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and policies,
(b) entering into repurchase agreements and (c) lending its portfolio
securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed to
be consistent with those of the Portfolio, to the extent applicable.
YIELD INFORMATION
The Fund's annualized and current effective yields for the seven-day period
ended June 30, 1995 were 4.26% and 4.35%, respectively.
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 Authorized 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 currently 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.
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.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees 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,
expenses (including the Fund's allocated share of Portfolio expenses) accrued by
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 such a liability under accounting principles have
not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of any
day on which there are no outstanding Uncovered Distribution Charges of the
Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Plan.
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.
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 and
payable under the Plan by the Fund to the Principal Underwriter and contingent
deferred sales charges theretofore paid and 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.
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 Marathon or Eaton Vance Classic Group 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.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and service
fees to the Principal Underwriter and Authorized Firms which may be equivalent,
on an aggregate basis during any fiscal year of the Fund, to .90% of the Fund's
average daily net assets for such year. For the sales commission and service fee
payments made by the Fund and the outstanding uncovered distribution charges of
the Principal Underwriter, see "Fees and Expenses -- Distribution Plan" in this
Part II. 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 Prinicpal Underwriter
will use its own funds (which may be borrowed from banks) to pay sales
commissions at the time of sale, 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 sales of Fund shares and through the sales
commissions and distribution fees and contingent deferred sales charges paid to
the Principal Underwriter 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 received by the Principal Underwriter pursuant
to 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 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. Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
initial sole shareholder (Eaton Vance) and by the Board of Trustees of the
Trust, including the Rule 12b-1 Trustees (defined below). The Plan continues in
effect through and including April 28, 1996, 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. 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 the 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 of the Trust 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 of the Trust have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 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
July 31, 1995, no other person owned of record or beneficially 5% of more of the
Fund's outstanding shares.
<PAGE>
EATON VANCE MONEY MARKET FUND
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
ASSETS:
Investment in Cash Management Portfolio, at amortized
cost and value (Note 1A) $27,636,376
Receivable for Fund shares sold 146,650
Receivable from the Administrator (Note 4) 7,210
Deferred organization expenses (Note 1D) 39,501
-----------
Total assets $27,829,737
LIABILITIES:
Dividends payable $ 25,883
Payable for Fund shares redeemed 105,018
Payable to affiliates -
Trustees' fees 41
Accrued expenses 10,394
--------
Total liabilities 141,336
-----------
Net Assets (represented by paid in capital for 27,688,401
shares outstanding (Note 3) $27,688,401
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
(Net assets divided by shares outstanding) $1.00
===========
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the period from the start of business, April 5, 1995, to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $144,210
Expenses allocated from Portfolio (14,326)
--------
Total investment income $129,884
Expenses-
Distribution fees (Note 5) $17,834
Compensation of Trustees not members of the
Administrator's organization 41
Printing and postage 8,890
Legal and accounting services 2,090
Amortization of organization expenses (Note 1D) 1,999
Transfer and dividend disbursing agent fees 150
Registration costs 25
Miscellaneous 2,127
-------
Total expenses $33,156
Deduct prelimary allocation of expenses to the
Administrator (Note 4) 7,210
-------
Net Expenses 25,946
--------
Net investment income $103,938
========
The accompanying notes are an intergal part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the period from the start of business, April 5, 1995, to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income $ 103,938
Distributions paid to shareholders from net investment
income (103,938)
Net increase in net assets from Fund share transactions
(Note 3) 27,688,401
-----------
Net increase in net assets $27,688,401
NET ASSETS:
At beginning of period --
-----------
At end of period $27,688,401
===========
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For the period from the start of business, April 5, 1995, to
June 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income $ 0.0104
LESS DISTRIBUTIONS:
From net investment income $(0.0104)
--------
NET ASSET VALUE, END OF PERIOD $1.00
=====
TOTAL RETURN (2) 0.87%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted) $27,688
Ratio of net expenses to average net assets (1) 1.69%+
Ratio of net investment income to average net assets 4.37%+
*During the period the expenses relating to the operations of the Fund were
reduced by a preliminary allocation of expenses to the Administrator. Had such
actions not been taken, net investment income per share and the ratios would
have been as follows:
NET INVESTMENT INCOME PER SHARE $0.00970
========
RATIOS (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Expenses (1) 2.00%+
Net investment income 4.06%+
+ Computed on an annualized basis.
(1) Includes the Fund's share of Cash Management Portfolio's allocated expenses.
(2) Total return is calculated assuming a purchase at net asset value on the
first day and sale at net asset value on the last day of the period.
Dividends and distributions, if any, are assumed to be reinvested at the net
asset value on payable date.
The accompanying notes are an intergal part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Liquid Assets Trust (the Trust) is an entity of the type commonly
known as a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Trust presently consists of two Funds, one of which, Eaton Vance Money
Market Fund (Money Market Fund), is included in these financial statements. The
Fund invests all of its investable assets in interests of the Cash Management
Portfolio (the "Portfolio"), a separate open-end management investment company,
a New York Trust, having the same investment objective as the Fund. The value of
the Fund's investment in the Portfolio reflects the Funds' proportionate
interest in the net assets of the Portfolio (13.9% at June 30, 1995). 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 Trust in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS - Valuation of securities by the Portfolio is discussed
in Note 1 of the Portfolios' Notes to Financial Statements which are included
elsewhere in this report.
B. INCOME - The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.
C. FEDERAL TAXES - The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal income
or excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on the
straight-line basis over five years.
E. OTHER - Investment transactions are accounted for on a trade date basis.
F. INTERIM FINANCIAL INFORMATION - The interim financial statements relating to
June 30, 1995 and for the period then ended have not been audited by independent
certified public accountants, but in the opinion of the Fund's management,
reflect all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the financial statements.
--------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net income of the Fund is determined daily and substantially all of the net
income so determined is declared as a dividend to shareholders of record at the
time of declaration. Distributions are paid monthly. Distributions are paid in
the form of additional shares or, at the election of the shareholder, in cash.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary overdistributions for financial statements
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital. The
tax treatment of distributions for the calendar year will be reported to
shareholders prior to February 1, 1996 and will be based on tax accounting
methods which may differ from amounts determined for financial statement
purposes.
--------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares for the period from the start of business, April 5,
1995, to June 30, 1995, were as follows:
Shares Amount
------ ------
Sales 81,042,961 $ 81,042,961
Issued to shareholders electing to
receive payments of distributions in
Fund shares 26,077 26,077
Redemptions (53,380,637) (53,380,637)
------------ ------------
Net increase 27,688,401 $ 27,688,401
============ ============
--------------------------------------------------------------------------------
(4) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. To enhance the net income of the Fund, $7,210 of
expenses related to its operation were allocated, on a preliminary basis, to
EVM. Except as to Trustees of the Funds and the Portfolio who are not members of
EVM's or BMR's organization, officers and Trustees receive remuneration for
their services to each Fund out of such investment adviser fee. Investors Bank &
Trust Company (IBT), an affiliate of EVM, serves as custodian to the Fund and
the Portfolio. Pursuant to the respective custodian agreements, IBT receives a
fee reduced by credits which are determined based on the average cash balances
the Fund or the Portfolio maintain with IBT. Certain of the officers and
Trustees of the Fund and Portfolio are officers and directors/trustees of the
above organizations.
--------------------------------------------------------------------------------
(5) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the Plan) pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The Plan requires the Fund to pay the
principal underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal to
1/365 of 0.75% of its daily net assets, for providing ongoing distribution
services and facilities. 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 the aggregate
amount of contingent deferred sales charges (Note 6) and daily 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
Funds net assets. For the period ended June 30, 1995, the Fund paid or accrued
$17,834, to or payable to EVD representing 0.75% (annualized) of average daily
net assets. At June 30, 1995, the amount of Uncovered Distribution Charges of
EVD calculated under the Plans for the Fund was approximately $945,000.
In addition, the Plan authorizes the Fund to 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 any fiscal year. The
Trustees have initially implemented the Plan by authorizing the Fund to make
service fee payments to the Principal Underwriter and Authorized Firms in
amounts not expected to exceed 0.15% of the Fund's average daily net assets
based on the value of Fund's shares sold by such persons and remaining
outstanding for at least one year. It is currently anticipated that the Fund
will begin accruing service fees during the quarter ending June 30, 1996.
Service fee payments are made for personal services and/or maintenance of
shareholder accounts. Service fees paid to EVD and Authorized Firms are separate
and distinct from the sales commissions and distribution fees payable by the
Fund to EVD, and as such are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of EVD.
Certain of the officers and Trustees of the Fund are officers or directors
of EVD.
--------------------------------------------------------------------------------
(6) CONTINGENT DEFERRED SALES CHARGES
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital gain
distributions. The CDSC is imposed at rates that begin at 5% in the case of
redemptions in the first and second year after purchase, declining one
percentage point each subsequent year. No CDSC is levied on shares which have
been sold to EVM or its affiliates or to their respective employees or clients.
CDSC charges are paid to EVD to reduce the amount of Uncovered Distribution
Charges calculated under each Fund's Distribution Plan. CDSC charges received
when no Uncovered Distribution Charges exist will be credited to the Fund. EVD
received approximately $55,000 of CDSC paid by shareholders for the period ended
June 30, 1995.
--------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio for the period
from the start of business, April 5, 1995, to June 30, 1995 were as follows:
Increases $80,897,892
Decreases 53,391,401
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------
CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - 66.97%
---------------------------------------------------------------------------------------------------------------------
RATINGS
(UNAUDITED)
------------------------- PRINCIPAL
STANDARD AMOUNT
& POOR'S MOODY'S (000 OMITTED) VALUE (NOTE 1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AGRICULTURE - 1.86%
A-1+ P-1 $ 3,000 Cargill Financial Services Corp. 6.07s, 3/01/95 $ 2,970,156
A-1+ P-1 1,200 Cargill Financial Services Corp. 6.10s, 3/21/95 1,183,936
------------
$ 4,154,092
------------
AUTOMOTIVE - 0.90%
A-1 P-1 $ 2,000 Ford Motor Credit Co. 5.98s, 1/09/95 $ 1,997,342
------------
BANKING & FINANCE - 18.62%
A-1 P-1 $ 2,000 American Express Credit Corp. 5.60s, 1/18/95 $ 1,994,711
A-1+ P-1 3,000 Asset Securitization Coop. Corp. 5.60s, 1/10/95 2,995,801
A-1+ P-1 2,000 Asset Securitization Coop. Corp. 5.62s, 1/11/95 1,996,877
A-1+ P-1 1,000 Asset Securitization Coop. Corp. 5.73s, 1/23/95 996,498
A-1+ P-1 3,000 Associates Corp. of No. America 5.70s, 1/17/95 2,992,400
A-1+ P-1 2,500 Associates Corp. of No. America 5.40s, 1/05/95 2,498,500
A-1+ P-1 600 Associates Corp. of No. America 6.05s, 2/07/95 596,269
A-1 P-1 4,000 CXC Incorporated 6.05s, 1/18/95 3,988,572
A-1+ P-1 2,500 CIESCO 5.70s, 1/18/95 2,493,271
A-1+ P-1 1,500 CIESCO 5.42s, 1/23/95 1,495,032
A-1+ P-1 2,000 CIESCO 5.92s, 2/02/95 1,989,476
A-1+ P-1 2,000 Corporate Asset Funding Co. 5.77s, 2/01/95 1,990,064
A-1+ P-1 4,000 Corporate Asset Funding Co. 6.00s, 2/06/95 3,976,000
A-1+ P-1 4,000 Corporate Receivables Corp. 5.90s, 1/13/95 3,992,134
A-1+ P-1 2,500 Delaware Funding Corp. 6.10s, 2/10/95 2,483,056
A-1+ P-1 2,000 Norwest Financial Inc. 5.20s, 1/04/95 1,999,133
A-1 P-1 3,000 Norwest Financial Inc. 5.45s, 1/04/95 2,998,637
------------
$ 41,476,431
------------
CONSUMER GOODS - 3.74%
A-1+ P-1 $ 5,000 Coca-Cola Co. 5.95s, 2/28/95 $ 4,952,069
A-1+ P-1 1,000 Heinz (H.J.) Co. 5.90s, 1/05/95 999,344
A-1+ P-1 2,400 Heinz (H.J.) Co. 6.00s, 2/07/95 2,385,200
------------
$ 8,336,613
------------
CREDIT UNION - 3.04%
A-1+ P-1 $ 1,200 AI Credit Corp. 5.90s, 2/06/95 $ 1,192,920
A-1+ P-1 2,600 AI Credit Corp. 6.09s, 2/06/95 2,584,166
A-1+ P-1 3,000 Mid-States Corp. Federal Credit Union 6.05s, 1/12/95 2,994,454
------------
$ 6,771,540
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - (Continued)
---------------------------------------------------------------------------------------------------------------------
RATINGS
(UNAUDITED)
------------------------- PRINCIPAL
STANDARD AMOUNT
& POOR'S MOODY'S (000 OMITTED) VALUE (NOTE 1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ELECTRICAL EQUIPMENT & ELECTRONICS - 5.59%
A-1+ P-1 $ 1,000 General Electric Capital Corp. 5.40s, 1/12/95 $ 998,350
A-1+ P-1 1,000 General Electric Capital Corp. 5.35s, 1/19/95 997,325
A-1+ P-1 1,500 General Electric Capital Corp. 5.90s, 1/24/95 1,494,346
A-1+ P-1 3,000 General Electric Capital Corp. 5.55s, 1/09/95 2,996,300
A-1+ P-1 2,000 General Electric Capital Corp. 6.03s, 2/07/95 1,987,605
A-1+ P-1 4,000 Motorola Credit Corp. 6.00s, 1/25/95 3,984,000
------------
$ 12,457,926
------------
INSURANCE - 14.98%
A-1+ P-1 $ 4,000 APC Funding Corp. 5.88s, 1/23/95 $ 3,985,639
A-1+ P-1 600 American General Finance Corp. 5.60s, 1/12/95 598,973
A-1+ P-1 3,000 American General Finance Corp. 5.75s, 1/12/95 2,991,375
A-1+ P-1 700 American General Finance Corp. 6.08s, 2/13/95 694,917
A-1+ P-1 2,000 American General Finance Corp. 6.05s, 2/22/95 1,982,522
A-1+ P-1 3,300 Metlife Funding Inc. 5.48s, 1/26/95 3,287,441
A-1+ P-1 2,000 Prudential Funding Corp. 6.05s, 2/21/95 1,982,858
A-1+ P-1 2,000 Prudential Funding Corp. 6.10s, 3/30/95 1,970,178
A-1+ P-1 2,000 Prudential Funding Corp. 6.18s, 3/27/95 1,970,816
A-1+ P-1 4,000 SAFECO Credit Co., 6.25s, 3/14/95 3,949,999
A-1+ P-1 2,000 SAFECO Credit Co., 6.20s, 3/16/95 1,974,511
A-1 P-1 2,000 Transamerica Finance Corp. 6.00s, 1/17/95 1,994,666
A-1+ P-1 2,000 USAA Capital Corp. 5.73s, 1/12/95 1,996,498
A-1+ P-1 2,000 USAA Capital Corp. 5.37s, 1/03/95 1,999,403
A-1+ P-1 2,000 USAA Capital Corp. 6.10s, 2/13/95 1,985,428
------------
$ 33,365,224
------------
LEASING - 0.90%
A-1 P-1 $ 2,000 AML Funding Inc. 6.10s, 1/12/95 $ 1,996,272
------------
OFFICE EQUIPMENT - 2.90%
A-1+ P-1 $ 1,500 Pitney Bowes Credit Corp. 5.95s, 1/11/95 $ 1,497,521
A-1+ P-1 1,200 Pitney Bowes Credit Corp. 5.92s, 1/03/95 1,199,605
A-1+ P-1 3,800 Pitney Bowes Credit Corp. 6.03s, 2/15/95 3,771,359
------------
$ 6,468,485
------------
OIL - 5.55%
A-1+ P-1 $ 3,000 Chevron Oil Finance Co. 5.90s, 1/20/95 $ 2,990,658
A-1+ P-1 3,000 Chevron Oil Finance Co. 5.70s, 1/27/95 2,987,650
A-1+ P-1 1,500 Chevron Oil Finance Co. 5.48s, 1/06/95 1,498,858
A-1 P-1 1,900 American Trading & Production 6.00s, 1/12/95 1,896,517
A-1+ P-1 3,000 Cortez Capital Corp. 6.06s, 1/17/95 2,991,920
------------
$ 12,365,603
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER - (Continued)
---------------------------------------------------------------------------------------------------------------------
RATINGS
(UNAUDITED)
------------------------- PRINCIPAL
STANDARD AMOUNT
& POOR'S MOODY'S (000 OMITTED) VALUE (NOTE 1)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SPECIALTY RETAILER - 1.77%
A-1+ P-1 $ 4,000 Melville Corp. 6.07s, 3/21/95 $ 3,946,719
------------
TELECOMMUNICATIONS - 4.44%
A-1 P-1 $ 2,000 American Telephone & Telegraph Co. Capital Corp.
6.18s, 2/27/95 $ 990,215
A-1 P-1 3,000 American Telephone & Telegraph Co. Capital Corp.
6.15s, 3/27/95 2,956,437
A-1+ P-1 1,000 Ameritech Capital Funding Corp 6.08s, 2/13/95 992,738
A-1+ P-1 3,000 Ameritech Capital Funding Corp 6.13s, 2/23/95 2,972,926
A-1+ P-1 2,000 Ameritech Capital Funding Corp. 6.04s, 2/27/95 1,980,874
------------
$ 9,893,190
------------
UTILITIES - 2.68%
A-1+ P-1 $ 4,000 Iowa-Illinois Gas & Electric 5.92s, 2/02/95 $ 3,978,952
A-1 P-1 2,000 Potomac Electric Power Co. 6.03s, 1/18/95 1,994,305
------------
$ 5,973,257
------------
TOTAL COMMERCIAL PAPER, AT AMORTIZED COST $149,202,694
------------
------------
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 33.0%
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,900 FNMA Discount Notes 5.55s, 1/09/95 $ 1,897,657
5,000 FNMA Discount Notes 5.85s, 1/30/95 4,976,438
3,600 FNMA Discount Notes 5.96s, 1/31/95 3,582,120
8,000 FNMA Discount Notes 5.87s, 1/31/95 7,960,866
5,000 FNMA Discount Notes 5.88s, 2/08/95 4,968,967
3,995 FNMA Discount Notes 6.04s, 2/15/95 3,964,838
4,700 FNMA Discount Notes 5.99s, 2/22/95 4,659,334
4,300 FNMA Discount Notes 6.05s, 2/23/95 4,261,701
3,575 FNMA Discount Notes 6.05s, 2/27/95 3,540,755
2,675 FNMA Discount Notes 6.08s, 2/27/95 2,649,249
5,900 FFCB Discount Notes 5.86s, 1/06/95 5,895,222
4,500 FHLMC Discount Notes 5.55s, 1/03/95 4,498,613
5,250 FHLMC Discount Notes 5.55s, 1/04/95 5,247,572
13,000 FHLMC Discount Notes 5.90s, 1/24/95 12,950,997
2,500 FHLMC Discount Notes 6.01s, 2/15/95 2,481,218
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS, AT AMORTIZED COST $ 73,535,547
------------
TOTAL INVESTMENTS - 99.97% $222,738,241
OTHER ASSETS, LESS LIABILITIES - 0.03% 75,214
------------
NET ASSETS - 100% $222,813,455
------------
------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost and value (Note 1A) $ 222,738,241
Cash 73,117
Deferred organization expenses (Note 1D) 12,958
-------------
Total assets 222,824,316
LIABILITIES:
Accrued expenses 10,861
-------------
NET ASSETS $ 222,813,455
-------------
-------------
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $ 222,813,455
-------------
-------------
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest Income $5,733,942
Expenses:
Investment adviser fee (Note 2) $ 597,131
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 5,356
Custodian fee (Note 2) 69,593
Audit and legal fees 23,364
Miscellaneous 2,198
----------
Total expenses 697,642
----------
Net investment income $5,036,300
----------
----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income $ 5,036,300
Capital transactions -
Contributions 866,299,681
Withdrawals (648,622,546)
--------------
Increase in net assets resulting from capital
transactions $ 217,677,135
--------------
Total increase in net assets $ 222,713,435
NET ASSETS:
At beginning of period 100,020
--------------
At end of period $ 222,813,455
--------------
--------------
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
For the period from the start of business, May 2, 1994, to December 31, 1994
--------------------------------------------------------------------------------
RATIOS (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Expenses 0.58%+
Net investment income 4.22%+
+ Annualized.
The accompanying notes are an integral part of the financial statements.
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Cash Management 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 interests in the Portfolio.
Investment operations began on May 2, 1994, with the acquisition of securities
with an amortized cost and value of $282,781,862 in exchange for interests in
the Portfolio by 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. SECURITY VALUATION - The Portfolio values investment securities utilizing the
amortized cost valuation technique permitted by Rule 2a-7 of the Investment
Company Act of 1940, pursuant to which the Portfolio must comply with certain
conditions. This technique involves initially valuing a portfolio security at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium. It is the normal practice of the Portfolio to hold
portfolio securities to maturity and realize par value unless such sale or other
disposition is mandated by withdrawal requests or other extraordinary
circumstances.
B. INCOME - Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or accretion of discount when required for
federal income tax purposes.
C. 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 investor's distributive
share of the Portfolio's net taxable investment income, net realized capital
gains, and any other items of income, gain, loss, deduction or credit.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
E. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold or the date on which they mature.
<PAGE>
--------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR), a
wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation for
management and investment advisory services rendered to the Portfolio. The fee
is computed at the rate of 1/2 of 1% per annum of the Portfolio's average daily
net assets and amounted to $597,131 for the period from the start of business,
May 2, 1994 to December 31, 1994. 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 services to the Portfolio out of such investment adviser
fee.
Investors Bank & Trust Company (IBT), an affiliate of EVM and BMR, serves as a
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives a
fee which is reduced by certain credits 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.
--------------------------------------------------------------------------------
(3) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR or EVM
in a $120 million unsecured line of credit agreement with a bank. The line of
credit consists of a $20 million committed facility and a $100 million
discretionary facility. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio or fund based on its
borrowings at 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 Portfolio did not have any
significant borrowings or allocated fees during the period.
--------------------------------------------------------------------------------
(4) INVESTMENTS
Purchases and sales (including maturities) of investments, during the period
ended December 31, 1994, exclusive of U.S. Government securities aggregated
$896,432,907 and $823,611,005, respectively. Purchases and sales (including
maturities) of U.S. Government securities aggregated $943,882,951 and
$907,191,209, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
Cash Management Portfolio:
We have audited the accompanying statement of assets and liabilities, of the
Cash Management Portfolio (the "Portfolio") including the portfolio of
investments as of December 31, 1994, and the related statement of operations,
changes in net assets and supplementary data for the period from May 2, 1994
(start of business), to December 31, 1994. These financial statements and
supplementary data are the reseponsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
supplementary data based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and supplementary data are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at 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 audit provides 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 Cash
Management Portfolio at December 31, 1994, the results of its operations,
changes in net assets and supplementary data for the period from May 2, 1994
(start of business), to December 31, 1994, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
INVESTMENT ADVISER OF
CASH MANAGEMENT PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EATON VANCE
MONEY MARKET 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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EATON VANCE MONEY MARKET FUND
24 FEDERAL STREET
BOSTON, MA 02110
MMFSAI
[LOGO]
EATON VANCE
MONEY MARKET
FUND
STATEMENT OF
ADDITIONAL
INFORMATION
SEPTEMBER 1, 1995
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
September 1, 1995
EATON VANCE TAX FREE RESERVES
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
------------------------------------------------------------------------------
TABLE OF CONTENTS Page
General Information and History ................................ 2
Investment Objective, Policies and Restrictions ................ 2
Officers and Trustees of the Fund .............................. 4
Control Persons and Principal Holders of Securities ............ 5
Investment Adviser ............................................. 6
Custodian ...................................................... 7
Portfolio Security Transactions ................................ 8
Service for Withdrawal ......................................... 9
Determination of Net Asset Value ............................... 9
Taxes .......................................................... 10
Principal Underwriter .......................................... 11
Other Information .............................................. 11
Calculation of Yield Quotations ................................ 12
Independent Accountants ........................................ 13
Financial Statements ........................................... 14
Appendix ....................................................... 25
--------------------------------------------------------------------------------
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 EATON VANCE TAX FREE RESERVES (THE
"FUND") DATED SEPTEMBER 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 THE
PRINCIPAL UNDERWRITER (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
GENERAL INFORMATION AND HISTORY
Eaton Vance Tax Free Reserves (the "Fund") became a series of Eaton Vance
Mutual Funds Trust (the "Trust") on June 19, 1995. The Fund's investment adviser
is Eaton Vance Management ("Eaton Vance" or the "Investment Adviser"), a
Massachusetts business trust, Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp. ("EVC").
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objectives of the Fund are to provide investors with
liquidity and safety of principal and at the same time as high a level of income
exempt from regular Federal income tax as is consistent with such objectives.
The Fund will attempt to safeguard principal through investment emphasis on high
quality securities and through diversification.
The Fund will seek to achieve its objective by investing in a diversified
portfolio of obligations, including bonds, issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities, and the District of Columbia, the
interest from which is exempt from regular Federal income tax. The Fund will
invest only in those obligations determined by the Trustees of the Trust to
present minimal credit risks and which are at the time of acquisition rated by
the requisite number of nationally recognized statistical rating organizations
in one of the two highest applicable rating categories or, in the case of an
instrument not so rated of comparable quality as determined by the Trustees.
It is contemplated that the Fund's assets will consist principally of the
following:
(1) Floating or variable rate tax-exempt instruments, which provide for
interest rate adjustments at specified intervals. Rate adjustments on such
securities are usually set at the issuer's discretion, in which case the Fund
would normally have the right to resell the security to the issuer or its agent.
Alternatively, rate revisions may be determined in accordance with a prescribed
formula or other contractual procedure. The Fund may also acquire put options in
combination with the purchase of underlying securities. Such put options would
give the Fund the right to require the issuer or some other person to purchase
the underlying security at an agreed upon price. Interest income generated by
certain securities on which the Fund holds a put option may not qualify as
tax-exempt interest.
(2) Tax-exempt notes which are rated at the time of purchase within the
highest grade assigned by Moody's Investors Service, Inc. ("Moody's") (MIG-1),
or within the highest grade assigned by Standard & Poor's Ratings Group ("S&P")
(SP-1), or within the highest grade assigned by Fitch Investors Service, Inc.
("Fitch") (FIN-1).
(3) Project Notes, which are instruments sold by the Department of Housing
and Urban Development but issued by a state or local housing agency, and secured
by the full faith and credit of the United States. Due to changes in the Federal
income tax law enacted in the Deficit Reduction Act of 1984, Project Notes
issued on or after June 19, 1984 must satisfy several new requirements to
maintain their tax-exempt status.
(4) Tax-exempt bonds which are rated at the time of purchase within the two
highest grades assigned by Moody's (Aaa or Aa) or S&P (AAA or AA) or Fitch (AAA
or AA).
(5) Tax-exempt commercial paper rated in the highest grade by such rating
services (Prime-1 or A-1 or F-1+, respectively).
(6) Cash.
For a description of the instruments and ratings listed above, see the
Appendix.
The Fund anticipates being at all times as fully invested as possible in
tax-exempt bonds and notes; however, there may be occasions when, as a result of
maturities of portfolio securities or sales of Fund shares or in order to meet
anticipated redemption requests, or the unavailability of suitable tax-exempt
investments, the Fund may hold cash which is not earning income or invest in
taxable short-term obligations including U.S. Government obligations,
interest-bearing obligations of banks (such as certificates of deposit and
bankers' acceptances), repurchase agreements (see the Appendix for description
of risk), and commercial paper.
With respect to 10% of its net assets, the Fund may also purchase shares of
unaffiliated investment companies consistent with the restrictions of the
Investment Company Act of 1940, as amended. Such investments are subject to
adverse developments affecting the mutual fund industry. In addition, investors
indirectly pay the fees of two investment company service providers.
To facilitate the objective of a stable net asset value, the Fund intends to
limit its portfolio to instruments maturing in 397 calendar days or less from
the date of purchase and to maintain a dollar-weighted average portfolio
maturity of not more than 90 days. For the purpose of complying with these
limitations, the maturity of the Fund's portfolio instruments will be governed
by Rule 2a-7 promulgated under the Investment Company Act of 1940. See "How the
Fund Values Its Shares" in the current prospectus of the Fund.
Some tax-exempt securities may be purchased on a "when-issued" basis. If so,
the Fund generally will not pay for the securities or start earning interest on
them until the securities are received, which may take as long as 45 days. In
order to invest its assets immediately, while awaiting delivery of securities
purchased on a when-issued basis, the Fund will normally attempt to invest in
high-grade short-term debt securities that offer same-day settlement and
earnings. The commitment to purchase a security for which payment is not made at
that time may be deemed a separate security. The value of the when-issued
securities on the delivery date may be less than their cost, effecting an
immediate loss to the Fund. Thus, the purchase of securities on a when-issued
basis may be considered an aggressive investment practice involving some risk.
The Fund does not intend to make such commitments for speculative purposes, but
only to accomplish the goal of the Fund, i.e., to invest in tax-exempt
securities. When the Fund commits to purchase a security on a when-issued basis,
it will set up procedures consistent with the General Statement of Policy of the
Securities and Exchange Commission concerning such purchases. Since the Policy
currently recommends that assets of the Fund equal to the amount of the purchase
be held aside or segregated to be used to pay for the commitment, the Fund will
always have cash or high-grade short-term debt securities sufficient to cover
its commitments. If the Fund determines it is necessary to sell the when-issued
security before delivery, any gain or loss will not be tax-exempt. The Fund has
no specific limit on the amount of securities which may be purchased on a
when-issued basis.
The Fund may acquire "stand-by commitments" with respect to portfolio
obligations. Under a stand-by commitment, the Fund obligates a broker, dealer or
bank to repurchase, at the Fund's option, specified securities at a specified
price and, in this respect, stand-by commitments are comparable to put options.
The exercise of a stand-by commitment therefore is subject to the ability of the
seller to make payment on demand. The Fund will acquire stand-by commitments
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes. The Fund may pay for stand-by
commitments if such action is deemed necessary, thus increasing to a degree the
cost of the underlying obligation and similarly decreasing such security's yield
to investors.
The Fund may purchase securities at a price which would result in a yield to
maturity lower than that generally offered by the seller at the time of purchase
when the Fund can simultaneously acquire the right to sell the securities back
to the issuer or its agent at an agreed-upon price at any time during a
specified period or on a certain date. Such a right is generally known as a
"put."
The following investment restrictions have been adopted by the Fund and may
be changed only by the vote of a majority of the Fund's outstanding voting
securities as defined in the Investment Company Act of 1940.
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer, except for
obligations issued or guaranteed by the United States 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;
(4) Underwrite securities issued by other persons;
(5) Buy 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, physical commodities, or commodity contracts relating to
physical commodities unless acquired as a result of ownership of securities;
(6) Make loans, except by (a) the purchase of debt instruments and making
portfolio investments, (b) entering into repurchase agreements or (c) lending
portfolio securities;
(7) Purchase any securities which would cause more than 25% of the value of
its total assets at the time of such purchase to be invested in the securities
of issuers having their principal business activities in the same industry,
provided that there is no limitation in respect to investments in tax-exempt
notes or bonds or other obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, or in certificates of deposit or bankers'
acceptances; or
(8) Purchase any securities which would cause more than 20% of the value of
its total assets at the time of such purchase to be invested in securities the
interest on which is not exempt from Federal income tax.
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 Fund has adopted the following nonfundamental investment policies which
may be changed by the Trustees of the Fund without approval by the Fund's
shareholders. As a matter of nonfundamental investment policy, the Fund may not:
(a) purchase or retain securities of any issuer if 5% of the issuer's securities
are owned by those officers and Trustees of the Fund or officers and trustees of
its investment adviser who own individually more than 1/2 of 1% of the issuer's
securities; (b) make short sales except where, because of the ownership of other
securities, it has the right to obtain securities equivalent in kind and amount
to those sold; write or purchase or sell any put or call options or combinations
thereof, except that if may acquire rights to resell tax-exempt securities at an
agreed upon price and at or within an agreed upon time; (c) purchase warrants;
or (d) more than 10% 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 Fund or its
delegate, determine to be liquid, based upon the trading markets for the
specific security.
For the purpose of the Fund's investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of principal and interest on the security.
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 may revoke the commitment by
terminating sales of its shares in the state(s) involved.
OFFICERS AND TRUSTEES OF THE TRUST
The Trustees and officers of the Trust 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 Eaton Vance; Eaton Vance's wholly-owned
subsidiary, Boston Management and Research ("BMR"), Eaton Vance's parent, Eaton
Vance Corp. ("EVC") and of Eaton Vance's and BMR's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust, Eaton Vance, BMR, EVC or EV
as defined in the Investment Company Act of 1940 (the "1940 Act") by virtue of
their affiliation with any one or more of the Trust, Eaton Vance, BMR, EVC or
EV, are indicated by an asterisk (*).
M. DOZIER GARDNER, (61), President and Trustee*
President and Chief Executive Officer 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.
H. DAY BRIGHAM, JR., (68) Vice President
Chairman of the Management Committee, Vice President of Eaton Vance, BMR, EVC
and EV and Director of EVC and EV. Director, Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT, (64) 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. Mr. Dwight was elected a Trustee of the Fund on August
20, 1993. Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES, (53) Vice President and Trustee*
Executive Vice President of Eaton Vance, BMR, EVC and EV, and a Director of EVC
and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR. Mr. Hawkes was elected a Trustee of the Fund on
August 20, 1993.
SAMUEL L. HAYES, III, (60) Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR. Mr. Hayes was elected a Trustee of
the Fund on August 20, 1993.
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 and 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 Company Incorporated. Director and Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR, (65) 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
WILLIAM H. AHERN, JR. (36) Vice President
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice President
of the Trust on June 19, 1995.
JAMES L. O'CONNOR, (50) Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS, (63) Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS, (59) Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY, (32), Assistant Secretary
Assistant Vice President of BMR and Eaton Vance since March 1, 1994; employee of
Eaton Vance since March 1993. State Regulations Supervisor, The Boston Company
(1991-1993) and Registration Specialist, Fidelity Management & Research Co.
(1986-1991). Officer of various investment companies managed by Eaton Vance or
BMR. Mr. Murphy was elected Assistant Secretary of the Trust on March 27,
1995.
JOHN P. RYNNE (53), Assistant Secretary
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Corporation. Mr. Rynne became an officer
of the Trust on June 19, 1995.
ERIC G. WOODBURY (38) Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate at
Dechert, Price & Rhoads and Gaston & Snow. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary of the Trust on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust. The Special Committee's
functions include a continuous review of the Trust's contractual relationship
with the investment adviser, making recommendations to the Trustees regarding
the compensation of those Trustees who are not members of the investment
adviser's 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 or the investment
adviser.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust. The Audit Committee's functions include
making recommendations to the Trustees regarding the selection of the
independent certified public accountants, and reviewing with such accountants
and the Treasurer of the Trust matters relative to accounting and auditing
practices and procedures, accounting records, internal accounting controls, and
the functions performed by the custodian, transfer agent and dividend disbursing
agent of the Fund.
The fees and expenses of those Trustees of the Trust who are not members of
the Eaton Vance organization are paid by the Fund. During the fiscal year ended
December 31, 1994, the Trustees of the Trust earned the following compensation
in their capacities as Trustees from the Fund and other funds in the Eaton Vance
fund complex:
<TABLE>
<CAPTION>
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME FROM FUND AND FUND COMPLEX<F1>
---- ------------ -------------------
<S> <C> <C>
Donald R. Dwight ................................. $ 0 $135,000<F2>
Samuel L. Hayes, III ............................. 0 142,500<F3>
Norton H. Reamer ................................. 761 135,000
John L. Thorndike ................................ 786 140,000
Jack L. Treynor .................................. 777 140,000
----------
<FN>
<F1>The Eaton Vance fund complex consists of 201 registered investment companies or series thereof.
<F2>Includes $8,750 of deferred compensation.
<F3>Includes $8,865 of deferred compensation.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at July 31, 1995, the Trustees and officers of the Fund, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
that same date, Saturn & Co., a nominee of Investors Bank & Trust Company, an
affiliate of Eaton Vance, was the record owner of approximately 82.9% of the
outstanding shares of the Fund, which it held on behalf of its custody and trust
clients. To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISER
The Trust engages Eaton Vance as investment adviser of the Fund pursuant to
an investment advisory agreement dated August 15, 1995. Eaton Vance or its
affiliates act 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. It maintains a large staff of experienced fixed-income and
equity investment professionals to service the needs of its 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.
Under the investment advisory agreement Eaton Vance receives a monthly
advisory fee of 1/24 of 1% (equivalent to 1/2 of 1% annually) of average monthly
net assets of the Fund. As at December 31, 1994, the Fund had net assets of
$29,020,545. For the fiscal years ended December 31, 1994, December 31, 1993 and
December 31, 1992, Eaton Vance earned an advisory fee of $204,513, $243,204 and
$194,526, respectively. To enhance the net income of the Trust, Eaton Vance
reduced its fee for the fiscal years ended December 31, 1994, 1993 and 1992 in
the amount of $162,287, $84,713 and $130,011, respectively.
As investment adviser to the Fund, Eaton Vance manages the Fund's
investments and administers its affairs, subject to the supervision of the Board
of Trustees of the Trust. Pursuant to the investment advisory agreement, Eaton
Vance furnishes for the use of the Fund office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Fund,
and compensates all officers and Trustees of the Trust who are members of the
Eaton Vance organization and all personnel of Eaton Vance performing services
relating to research and investment activities. The Fund has agreed to pay all
expenses not expressly stated to be payable by Eaton Vance under the investment
advisory agreement, which expenses payable by the Fund include, without implied
limitation, expenses of maintaining the Fund and continuing its existence,
registration of the Fund under the Investment Company Act of 1940, commissions,
fees and other expenses connected with the purchase or sale of securities,
auditing, accounting and legal expenses, taxes and interest, governmental fees,
expenses of issue, sale, repurchase and redemption of shares, 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, expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
expenses of reports to governmental officers and commissions, insurance
expenses, association membership dues, fees, expenses and disbursements of
custodians and subcustodians for all services to the Fund (including without
limitation safekeeping of funds and securities, keeping of books and accounts
and determination of net asset values), fees, expenses and disbursements of
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, expenses for servicing shareholder
accounts, any direct charges to shareholders approved by the Trustees of the
Trust, compensation and expenses of Trustees of the Trust who are not members of
the Eaton Vance organization, and such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Fund to indemnify its Trustees and officers
with respect thereto.
The Fund is responsible for all expenses for servicing shareholder accounts,
and Eaton Vance performs on behalf of the Fund various functions which relate to
the administration and servicing of existing shareholder accounts without being
reimbursed by the Fund for its costs in connection therewith. It is possible
that Eaton Vance may, in the future, request that the Trustees of the Trust take
action to have the Fund reimburse Eaton Vance for its costs in performing these
services. These services include functions which are primarily administrative
and clerical in nature, and include such matters as handling communications from
shareholders with respect to their accounts and the processing of liquidation
and exchange requests received from dealers or shareholders with respect to such
accounts. If any such request for reimbursement is made, the Trustees of the
Trust intend to review the specific nature and costs of these services prior to
approving any such reimbursement.
The investment advisory agreement with Eaton Vance 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 who are not interested persons of the Trust
or of Eaton Vance 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
Trust or by vote of a majority of the outstanding voting securities of the Fund.
The agreement may be terminated at any time without penalty on sixty days
written notice by the Trustees of either party or by vote of the majority of the
outstanding voting securities of the Fund, and the agreement will terminate
automatically in the event of its assignment. The agreement provides that Eaton
Vance may render services to others and may permit other fund clients and other
corporations and organizations to use the words "Eaton Vance" or "Eaton &
Howard" or "Vance, Sanders" in their names. The agreement also provides that, in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the agreement on the part of Eaton
Vance, Eaton Vance shall not be liable to the Fund or to any shareholder for any
act or omission in the course of or connected with rendering services or for any
losses sustained in the purchase, holding or sale of any security.
A commitment has been made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed expense limitation requirements of such state. The commitment may be
amended or rescinded by Eaton Vance in response to changes in the requirements
of the state or for other reasons.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR. 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, Eaton Vance,
BMR 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 December 31, 1996, the Voting Trustees of which are
Messrs. Brigham, Clay, 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 Eaton Vance and BMR who are also officers and
Directors of EVC and EV. As of July 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. Brigham,
Gardner, Hawkes and Otis, who are officers or Trustees of the Trust are members
of the EVC, Eaton Vance, BMR and EV organizations. Messrs. Ahern, Murphy,
O'Connor, Rynne and Woodbury and Ms. Sanders, who are officers of the Fund, are
also members of the Eaton Vance, BMR and EV organizations. Eaton Vance 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 the Fund's custodian, 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 of the stock of Fulcrum Management, Inc. and MinVen,
Inc., which are engaged in the development of precious metal properties. Eaton
Vance, BMR, EVC 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 Fund's custodian, 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 Fund 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.
IBT has the custody of all cash and securities of the Fund, maintains the Fund's
general ledger and computes the daily per share net asset value. In such
capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Fund's investments, receives
and disburses all funds and performs various other ministerial duties upon
receipt of proper instructions from the Fund. IBT charges fees which are
competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of Fund 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
the Fund's cash balances at the custodian equal to 75% of the 91-day, U.S.
Treasury Bill auction rate applied to the Fund's average daily collected
balances. In view of the ownership of EVC in IBT, the Fund is treated as a
self-custodian pursuant to Rule 17f-2 under the Investment Company Act of 1940,
and the Fund's investments held by IBT as custodian are thus subject to the
additional examinations by the Fund's independent accountants as called for by
such Rule. During the fiscal year ended December 31, 1994, the Fund paid IBT
$45,547 under these arrangements.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security transactions,
including the selection of the market and the executing firm, are made by Eaton
Vance. Eaton Vance is also responsible for the execution of transactions for all
other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many firms. Eaton Vance uses
its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Fund and (when a disclosed commission is
being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance 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 executing firm, 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 firm, the value and quality of the
services rendered by the firm in other transactions, and the reasonableness of
the spread or commission, if any. Municipal obligations purchased and sold by
the Fund are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through broker-dealers and banks acting for their own
account rather than as brokers, or otherwise involve transactions directly with
the issuer of such obligations. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price of
the market for such obligations, and the difference between the bid and asked
price is customarily referred to as the spread. The Fund may also purchase
municipal obligations from underwriters, the cost of which may include
undisclosed fees and concessions to the underwriters. While it is anticipated
that the Fund will not pay significant brokerage commissions in connection with
such portfolio security transactions, on occasion it may be necessary or
appropriate to purchase or sell a security through a broker on an agency basis,
in which case the Fund will incur a brokerage commission. Although spreads or
commissions on portfolio security transactions will, in the judgment of Eaton
Vance, be reasonable in relation to the value of the services provided, spreads
or commissions exceeding those which another firm might charge may be paid to
firms who were selected to execute transactions on behalf of the Fund and Eaton
Vance's other clients for providing brokerage and research services to Eaton
Vance.
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 Fund 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 Eaton
Vance determines in good faith that such compensation 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 overall responsibilities which Eaton Vance and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, Eaton Vance 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; 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 of the investment advisory industry and of 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-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent with
this practice, Eaton Vance receives Research Services from many firms with which
Eaton Vance places the Fund's 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,
and 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 Eaton Vance 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 Eaton Vance 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 Fund is not reduced because Eaton Vance receives such Research
Services. Eaton Vance 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 Eaton Vance believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek and execute Fund portfolio security transactions at advantageous prices and
at reasonably competitive spreads or commission rates, Eaton Vance is authorized
to consider as a factor in the selection of any firm with whom Fund 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 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.
Municipal obligations considered as investments for the Fund may also be
appropriate for other investment accounts managed by Eaton Vance or its
affiliates. Eaton Vance will attempt to allocate equitably portfolio security
transactions among the Fund and the portfolios of its other investment accounts
purchasing municipal obligations whenever decisions are made to purchase or sell
securities by the Fund 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 Fund and such other accounts, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment by the Fund and such accounts, the size of investment
commitments generally held by the Fund and such accounts and the opinions of the
persons responsible for recommending investments to the Fund and such accounts.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Fund from time to time, it is the opinion of the
Trustees that the benefits available from the Eaton Vance organization outweigh
any disadvantage that may arise from exposure to simultaneous transactions.
During the fiscal year ended December 31, 1994 the purchases and sales of
portfolio investments were with the issuer or with major dealers in money market
instruments acting as principal. The cost of securities purchased from
underwriters includes a disclosed, fixed underwriting commission or concession,
and the prices for which securities are purchased from and sold to dealers
usually include an undisclosed dealer mark-up or mark-down. The Fund paid no
brokerage commissions during 1994, 1993 or 1992.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Fund'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. Payments from the proceeds of shares redeemed
to make withdrawal payments may exceed the amounts of distributions paid on Fund
shares and, to that extent, will reduce, or even exhaust, a shareholder's
investment.
To use this service, at least $5,000 in cash or shares at current net asset
value must be deposited with the Fund's agent. The Fund will not exercise its
right to redeem accounts of less than $1,000 in amount in connection with
Withdrawal Accounts. Either the shareholder, the Fund or the Principal
Underwriter may terminate the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The Fund's use of the amortized cost method to value its portfolio
securities was originally permitted by an exemptive order dated October 6, 1981,
issued by the Securities and Exchange Commission under the Investment Company
Act of 1940. The Fund has ceased to rely on such order and relies on Rule 2a-7
promulgated under said Act as the basis for using the amortized cost method to
value its securities. Rule 2a-7 requires that the Fund limit its investments,
including puts and repurchase agreements, to those U.S. dollar-denominated
instruments which the Trustees determine present minimal credit risks and which
are, at the time of acquisition, rated by the requisite number of nationally
recognized statistical rating organizations in one of the two highest applicable
rating categories or, in the case of any instrument that is not so rated, of
comparable quality as determined by the Trustees of the Trust. The Rule also
requires the Fund to maintain a dollar-weighted average portfolio maturity (not
more than 90 days) appropriate to its objective of enabling the Fund to maintain
a stable net asset value of $1.00 per Fund share. In addition, the Rule
precludes the purchase of any instrument with a remaining maturity of more than
397 calendar days. Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash in such a manner as to reduce such maturity to 90 days
or less as soon as reasonably practicable.
The Fund will be closed for business and will not price its shares 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.
TAXES
For a general discussion of the federal income tax consequences of investing
in the Fund, see "Distributions and Taxes" in the Fund's current prospectus.
Each series of the Trust is treated as a separate entity for Federal income
tax purposes. In order to qualify each year as a regulated investment company
under the Internal Revenue Code of 1986, as amended (the "Code"), the Fund
intends to satisfy certain requirements relating to sources of income,
diversification of assets, and distribution of income and gains. So long as the
Fund qualifies as a regulated investment company for tax purposes, it will not
be subject to federal income tax on income and gains paid to shareholders in the
form of dividends. In the unlikely event that the Fund fails to so qualify, it
would be subject to federal income tax at corporate rates and all distributions
from earnings and profits, including distributions of exempt interest, would be
taxable to shareholders as ordinary income. In order to requalify for taxation
as a regulated investment company, the Fund might be required to recognize
unrealized gains, pay substantial taxes and interest, and make certain
distributions.
If the Fund fails to distribute substantially all of its ordinary income and
capital gain net income on a current basis, plus any retained amounts from the
preceding year, the Fund will be subject to a 4% federal excise tax on the
undistributed amounts. The Fund may treat distributions paid in January but
declared in October, November or December of the preceding year as paid by the
Fund on December 31 of that preceding year. As a result, shareholders must
report such distributions on their federal income tax returns for the preceding
year.
The Fund's investment in securities issued at a discount and certain other
obligations will require the Fund to accrue and distribute income not yet
received. In order to generate cash sufficient to make the required
distributions, the Fund may sell securities that it would otherwise have
continued to hold.
The Fund will be qualified to pay exempt-interest dividends so long as, at
the end of each quarter of the Fund's taxable year, at least 50% of the Fund's
assets consists of obligations the interest on which is exempt from federal
income tax. That portion of any indebtedness incurred or continued by a
shareholder in order to purchase or carry shares in the Fund which corresponds
to the portion of total Fund distributions (excluding capital gains dividends)
that are exempt interest dividends is not deductible by the shareholder. Exempt
interest dividends attributable to interest received on certain "private
activity bonds" or industrial development bonds will not be tax exempt to any
shareholders who are "substantial users" (or persons related to "substantial
users") of the facilities financed by such bonds.
If a shareholder sells, redeems or otherwise disposes of Fund shares at a
loss within six months of purchase, the loss will be disallowed for federal
income tax purposes to the extent of any exempt interest dividends received. In
addition, any allowed loss will be treated as long-term capital loss to the
extent of any long-term capital gain dividends received; and all or a portion of
any loss realized will be disallowed if the shareholder purchases other Fund
shares within 30 days of the disposition (before or after).
The Fund may be required by federal law to withhold and remit to the U.S.
Treasury 31% of the taxable dividends and other distributions paid to any
individual shareholder who fails to furnish the Fund with a correct taxpayer
identification number (generally the individual's social security number), who
has underreported dividends or interest income, or who fails to certify to the
Fund that he or she is not subject to such withholding. The Fund is also
generally required to withhold on certain distributions made to non-resident
aliens and foreign entities.
Part or all of any interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of Tax Free Reserves is not deductible
for federal income tax purposes. Further, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by certain private activity obligations and industrial development
bonds should consult their tax advisers before purchasing shares of the Fund.
"Substantial user" is generally a "non-exempt person" who regularly uses in a
trade or business a part of a facility financed from the proceeds of industrial
development bonds or private activity obligations.
Shareholders should consult their own tax advisers with respect to the
federal, state and local tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Although the Fund generally distributes its own shares, the Fund has entered
into a Distribution Contract with Eaton Vance Distributors, Inc. ("Principal
Underwriter"), a wholly-owned subsidiary of Eaton Vance, to permit the Fund to
distribute its shares through the Principal Underwriter when in the opinion of
the Trustees it will be in the best interest of the Fund to do so. Shares of the
Fund may be purchased directly from the Fund except in those states where they
are distributed through the Principal Underwriter. Shares of the Fund are
currently distributed through the Principal Underwriter in California, Colorado,
District of Columbia, Florida, Illinois, Indiana, Louisiana, Maine, Maryland,
Massachusetts, New Hampshire, New York, Ohio, Rhode Island, South Carolina and
Texas.
Under the Distribution Agreement with the Principal Underwriter, the Fund
has agreed to pay all fees and expenses in connection with the registration of
its shares with the Securities and Exchange Commission as well as fees and
expenses in connection with registering and maintaining registrations of the
Fund and of its shares under the various state "blue-sky" laws. The Principal
Underwriter pays all expenses of preparing, printing and distributing
advertising and sales literature and all prospectuses and shareholders' reports
used in the distribution of Fund shares. The Contract provides that the
Principal Underwriter will accept orders at net asset value only, as no sales
commission or load is charged to the investor.
Eaton Vance, the Fund's adviser, makes quarterly distribution assistance
payments to selected broker/dealer firms or institutions who were instrumental
in the acquisition of shareholders for the Fund, or who performed services with
respect to shareholder accounts. Payments by Eaton Vance are made with respect
to accounts aggregating at least $1,000,000 in size only and determined and paid
in arrears by applying a rate of up to 2/10 of 1% per annum on the aggregate
average net asset value of the excess over $1,000,000 in such accounts during
the preceding quarter. The exact rate per annum used in calculating such
payments, the minimum aggregate net asset value required for eligibility for
such payments, and the factors in selecting the broker/dealer firms or
institutions to whom they will be made will be determined from time to time by
Eaton Vance. Such payments are made by Eaton Vance and not the Fund, and do not
constitute a distribution plan subject to Rule 12b-1 under the Investment
Company Act of 1940.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
The Distribution Contract is renewable annually by the Trust's Board of
Trustees (including a majority of its Trustees who are not interested persons of
the Principal Underwriter or the Trust), may be terminated on six months' notice
by either party, and is automatically terminated upon assignment.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. Eaton Vance, pursuant to its agreement with the Trust, controls
the use of the Fund's name and may use the words "Eaton Vance" in other
connections and for other purposes. EVC may require the Fund to cease using such
words in its name if EVC or Eaton Vance or any other subsidiary or affiliate of
EVC ceases to act as investment manager of the Fund.
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. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose. The By-Laws further provide that under certain circumstances the
shareholders may call a meeting to remove a Trustee and that the Trust is
communicating with shareholders about such a meeting. The By-Laws also provide
that the Trustees shall 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 right to redeem can be suspended and the payment of the redemption price
deferred when the New York Stock Exchange is closed (other than for customary
weekend and holiday closings), during periods when trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission,
or during any emergency as determined by the Securities and Exchange Commission
which makes it impracticable for the Fund to dispose of its securities or value
its assets, or during any other period permitted by order of the Securities and
Exchange Commission for the protection of investors.
CALCULATION OF YIELD QUOTATIONS
From time to time, the Fund quotes a current yield based on a specific seven
calendar day period which is calculated by first dividing the net change in the
value of an account having a balance of one share at the beginning of the period
by the value of the account at such time to determine the seven day base period
return, and then multiplying such return by 365/7 with the resulting yield
figure carried to at least the nearest hundredth of one percent. The net change
in account value is determined by the value of additional shares purchased with
dividends declared on the original share and dividends declared on both the
original share and any such additional shares, but does not include any realized
gains or losses from the sales of securities or any unrealized appreciation or
depreciation on portfolio securities. In addition to the current yield, the Fund
also quotes an effective yield based on a specific seven day period carried to
at least the nearest hundredth of one percent, computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical preexisting
account having a balance of one share at the beginning of the period, and
dividing the difference by the value of the account at the end of the base
period to obtain the base period return, and then compounding the base period
return by adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result, according to the following formula:
Effective yield = [(Base period return +1) 365/7]-1: A taxable-equivalent
yield is computed by using the tax-exempt yield figure and dividing by 1 minus
the tax rate.
The Fund's annualized current and effective yields for the seven-day period
ending December 31, 1994 were 3.69% and 3.76%, respectively. The
taxable-equivalent current and effective yields for that same period were 5.35%
and 5.49% (assuming a tax rate of 31%). Yields will fluctuate from time to time
and are not necessarily representative of future results. A shareholder should
remember that yield is a function of the type and quality of the instruments in
the Fund's portfolio.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts, are
the Fund's independent accountants, providing audit services, tax return
preparations, and assistance and consultation with respect to the preparation of
filings with the Securities and Exchange Commission.
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS
--------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
-------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
--------------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND OBLIGATIONS - 72.2%
<S> <C> <C> <C> <C>
NR/A1+ NR/AA $1,000 Adams County, Colorado Floating
Rate Weekly Demand Industrial
Development Revenue Bonds,
(City View Park Project),
Letter of Credit: Barclays Bank $1,000,000
MIG1/NR Aa3/NR 1,000 City of Biddeford, Maine Variable
Rate Demand Resource Revenue
Bonds, (Maine Energy Recovery
Company Project Series 1985),
Letter of Credit: Bank of
America 1,000,000
P1/A Aa2/NR 1,050 Billings Montana Series 1984
Adjustable Tender Industrial D
Revenue Bonds, (CFS Continental
Project), Letter of Credit:
Toronto Dominion Bank 1,050,000
MIG1/A1+ Aaa/AAA 700 Clark County, Nevada Airport
System Refunding Revenue Bonds,
Series 1993A, Municipal Bond
Investors Assurance
Corporation, Letter of Credit:
Industrial Bank of Japan,
Limited 700,000
MIG1/A1+ Aaa/AAA 1,500 Colorado Student Obligation Bond
Authority, Student Loan Revenue
Bonds, 1993 Series C-1, Letter
of Credit: Student Loan
Marketing Association 1,500,000
NR/A1+ NR/NR 425 City of Columbia, Missouri
Adjustable Rate Certificates of
Participation, Series 1986,
Letter of Credit: Sanwa Bank 425,000
MIG1/A1+ Aa3/AA- 750 Dade County, Florida Special
Assessment Revenue Bonds,
(Various Purpose Improvement
Projects), Series 1990A,
Financial Security Assurance
Inc., Letter of Credit: Sanwa
Bank, Limited 750,000
MIG1/NR Aa3/NR 1,035 Dade County Industrial Development
Authority, Florida Industrial
Development Revenue Bonds,
(Stephen M. Greene Project),
Series 1989A, Letter of Credit:
Sun Bank, Miami 1,035,000
NR/A1+ NR/AA- 1,000 Housing Authority of the County of
DeKalb, Georgia Guaranteed
Multifamily Housing Revenue
Bonds, (Wood Hills Apartment
Project), Series 1985P, Letter
of Credit: Bank of Montreal 1,000,000
NR/A1+ NR/AA+ 1,100 Development Authority of
Fulton County Georgia Revenue
B(American National Red Cross
Project), Series 1990,Letter of
Credit: Wachovia Bank 1,100,000
NR/A1+ NR/AA 500 Indiana Employment Development
Commission Industrial D Revenue
Bonds, (Miles Lab), Series
1984B, Letter of Credit:
Barclays Bank PLC 500,000
<PAGE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (Continued)
--------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
-------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
--------------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND OBLIGATIONS (Continued)
<S> <C> <C> <C> <C>
MIG1/A1+ Aa/AA 1,600 State of Kansas Department of
Transportation Adjustable
Tender Highway Revenue Bonds,
Series 1994B Liquidity: Pooled
Money Investment Board, State
of Kansas 1,600,000
NR/A1+ NR/AA- 1,000 Village of Lisle, Illinois
Multi-Family Housing Revenue
Bonds (Ashley of Lisle
Project), Letter of Credit:
Algemene Bank Nederland 1,000,000
NR/A1+ Aaa/AAA 1,500 City of Little Rock, Arkansas
Health Facilities Board
(Southwest Hospital), Revenue
Bonds, Series 1988, Capital
Guarantee Insurance
Corporation, Letter of Credit:
National Westminster Bank PLC,
San Francisco Overseas Branch 1,500,000
MIG1/NR Aaa/NR 1,500 Minnesota Higher Education
Coordination Board,
Supplemental Student Loan
Program Variable Rate Refunding
Revenue Bonds, Series 1994A
(Non-AMT), Letter of Credit:
Norwest Bank 1,500,000
MIG1/A1+ Aaa/AAA 1,100 Montgomery County Higher Education
and Health Authority Variable
Rate Demand Hospital Revenue
Bonds, Series 1988 AMBAC
Insurance, Liquidity: Swiss
Bank 1,100,000
MIG1/NR Aa1/NR 1,000 Industrial Development Authority
of the County of Pima,
Industrial Development Revenue
Refunding Bonds (Tuscon
Retirement Center Project)
Series 1988 Letter of Credit:
Swiss Bank Corporation 1,000,000
MIG1/A2 Aa2/A- 500 The Industrial Development
Authority of The County of Pima
(Arizona), Floating Rate
Monthly Demand Industrial
Revenue Bonds, 1982 Series A,
(Tucson Electric Power Company
Projects), Letter of Credit:
Societe Generale International,
Limited 500,000
NR/A1+ NR/AA- 1,300 Regional Transportation District,
(Colorado) Weekly
Adjustable/Fixed Rate Special
Passenger Fare Revenue Bonds,
Series 1989A, Letter of Credit:
Banque Nationale de Paris 1,300,000
MIG1/NR Aa3/NR 1,400 Tulsa Industrial Authority Revenue
Bonds, (Holland Hall Project),
Series 1989, Letter of Credit:
National Australia Bank 1,400,000
-----------
TOTAL VARIABLE RATE DEMAND OBLIGATIONS $20,960,000
-----------
GENERAL OBLIGATION NOTES/BONDS - 21.8%
NR/NR Aa/AA $ 500 County of Burlington, New Jersey
General Obligation Bonds of 1991,
6.30% 3/15/ 95 $ 502,888
NR/NR Aa1/AA+ 500 State of Delaware, General
Obligation Bonds, Series 1993A,
4.25% 3/1/95 500,000
<PAGE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (Continued)
--------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
-------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
--------------------------------------------------------------------------------------------------------------
GENERAL OBLIGATION NOTES/BONDS (Continued)
<S> <C> <C> <C> <C>
NR/NR Aa1/NR 300 Board of Education of Granite
School District, Salt Lake County,
Utah General Obligation Refunding
Bonds,Series 1992, 4.00% 6/1/95 300,051
MIG1/Sp1+ NR/NR 750 Harris County, Texas Tax
Anticipation Notes, Series 1994,
4.00% 2/28/95 750,456
MIG1/Sp1+ NR/NR 250 State of Illinois, General
Obligation Certificates of August
1994, 4.75% 5/15/95 250,697
MIG1/Sp1+ NR/NR 500 State of Illinois, General
Obligation Certificates of August
1994, 4.75% 6/15/95 501,530
NR/Sp1+ NR/NR 1,000 The Indianapolis Local Public
Improvement Bond Bank Notes,
Series F, 5.25% 7/ 14/95 1,002,073
NR/NR Aaa/AAA 500 State of Maryland, General
Obligation Bonds, State and Local
Facilities Loan of 1991, First
Series, 5.50% 3/15/95 501,823
NR/NR Aa/AA+ 500 City of Milwaukee, Milwaukee
County, Wisconsin General
Obligation Corporate Purpose
Bonds, Series A,6.70% 6/15/95 506,024
MIG1/Sp1+ NR/NR 1,500 The State of New Jersey, Tax and
Revenue Anticipation Notes
(Commercial Paper), Series Fiscal
1995D,5.00% 6/15/95 1,506,461
-----------
TOTAL GENERAL OBLIGATION NOTES/BONDS $ 6,322,003
-----------
PUT BONDS - 1.7%
NR/Sp1+ NR/NR $ 500 Arapahoe County, Colorado Capital
Improvement Trust Fund Highway
Revenue Bonds (E-470 Project)
Series D, Letter of Credit: Union
Bank of Switzerland $ 500,000
-----------
TOTAL PUT BONDS $ 500,000
-----------
REVENUE NOTES/BONDS - 8.4%
NR/NR Aa/AA $ 750 Salt River Project Agricultural
Improvement and Power District,
Arizona Salt River Project
Electric System Revenue Bonds,
1990 Series A, 7.20% 1/1/95 $750,000
NR/NR Aaa/AAA 500 Metropolitan Atlanta Rapid
Transit Authority (Georgia), Sales
Tax Revenue Bonds, Refunding
Series 517,310
NR/NR Aaa/AAA 500 Southern Minnesota Municipal Power
Agency Revenue Bonds Series 1984B,
Prerefunded 11.0% 1/1/95 515,000
NR/NR Aaa/AA 655 San Antonio, Texas Electric and
Gas Revenue Bonds,7.0% 2/1/95 655,000
-----------
TOTAL REVENUE NOTES/BONDS $ 2,437,310
-----------
<PAGE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (Continued)
--------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
-------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
--------------------------------------------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER - 11.4%
<S> <C> <C> <C> <C>
MIG1/A1+ Aaa/AAA $1,500 City of Burlington, Kansas $ 1,500,000
Customized Purchase Pollution
Control Revenue Refunding Bonds,
Kansas City Power and Light
Company Project, Series 1978B
Letter of Credit: Deutsche Bank
NR/NR NR/NR 300 City of Rochester, Minnesota
Health Care Facilities Revenue
Bonds (Mayo Foundation/Mayo
Medical Center), Adjustable Tender
Series 1988E and 1988F 300,000
MIG1/NR Aa3/NR 1,000 SSM Health Care Obligated Group
Health Facilities Revenue ACES,
Health and Educational Facilities
Authority of the State of Missouri
Health Facilities Revenue Bonds,
Series 1988C, Letter of Credit:
Mitsubishi Bank, LTD 1,000,000
MIG1/A1+ Aaa/AAA 500 Lincoln County, Wyoming,
(PacifiCorp Project) Series 1991,
Letter of Credit: Union Bank of
Switzerland 500,000
TOTAL TAX-EXEMPT COMMERCIAL PAPER $ 3,300,000
-----------
TOTAL INVESTMENTS, AT AMORTIZED
COST - 115.5% $33,519,313<F1>
OTHER ASSETS, LESS LIABILITIES -
(15.5%) (4,498,768)
-----------
TOTAL NET ASSETS - 100% $29,020,545
===========
<F1> Federal tax cost basis.
At December 31, 1994, the concentration of the Fund's investments in the various
states, determined as a percentage oftotal investments, is as follows:
Colorado 13%
Kansas 10%
Others representing less than 9% individually 77%
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost and value (Note 1A) $33,519,313
Cash 723
Receivable for Trust shares sold 1,985,505
Interest receivable 282,372
Receivable from the Investment Adviser 41,525
-----------
Total assets $35,829,438
LIABILITIES:
Demand note payable (Note 5) $ 6,117,000
Dividend payable 73,148
Payable for Trust shares redeemed 601,882
Accrued expenses 16,863
-----------
Total liabilities 6,808,893
-----------
NET ASSETS for 29,040,853 shares
outstanding (Note 4) $29,020,545
===========
SOURCES OF NET ASSETS:
Paid-in capital $29,040,853
Accumulated net realized loss on investments (computed
on the basis of identified cost) (20,308)
-----------
Total $29,020,545
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding) $1.00
=====
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Year Ended December 31, 1994
--------------------------------------------------------------------------------
Interest Income $1,148,677
Expenses:
Investment adviser fee (Note 3) $204,513
Trustees' compensation (Note 3) 2,334
Custodian fee (Note 3) 45,547
Printing and postage 27,183
Transfer and dividend disbursing agent fees 11,710
Registration fees 27,818
Interest 26,636
Legal and accounting services 21,028
Miscellaneous 15,208
--------
Total expenses $381,977
Deduct --
Reduction of investment adviser fee (Note 3) 162,287
Net expenses -------- 219,690
----------
Net income $ 928,987
Net realized loss on investments (identified cost basis) (20,308)
----------
Net increase in net assets resulting from operations $ 908,679
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C>
1994 1993
------------ -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net income $ 928,987 $ 888,434
Net realized loss on investments (20,308) --
Dividends paid to shareholders from net income (Note 2) (928,987) (888,434)
------------ ------------
Increase (decrease) in net assets resulting from operations $ (20,308) $ --
------------ ------------
FROM TRUST SHARE (PRINCIPAL) TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE
(Note 4):
Proceeds from sale of shares $135,383,669 $166,667,209
Net asset value of shares issued to shareholders in payment of dividends 240,791 255,383
Cost of shares redeemed (166,830,592) (151,012,381)
------------ ------------
Increase (decrease) in net assets from Trust share transactions $(31,206,132) $ 15,910,211
------------ ------------
Net increase (decrease) in net assets $(31,226,440) $ 15,910,211
NET ASSETS:
Beginning of year 60,246,985 44,336,774
------------ ------------
End of year $ 29,020,545 $ 60,246,985
============ ============
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1994 1993 1992 1991<F1> 1990<F1>
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM OPERATIONS:
Net investment income $ 0.023548 $ 0.018399 $ 0.023468 $ 0.038797 $ 0.051929
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment income $(0.023548) $(0.018399) $(0.023468) $(0.038797) $(0.051929)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, end of year $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN<F2> 2.36% 1.86% 2.36% 3.92% 5.30%
RATIOS/SUPPLEMENTAL DATA:<F3>
Net assets, end of year
(000's omitted) $29,021 $60,247 $44,337 $47,140 $53,753
Interest expense to average net assets 0.07% 0.03% 0.06% 0.09% 0.05%
Net other expenses to average
net assets 0.47% 0.62% 0.53% 0.49% 0.70%
Net investment income to average net 2.27% 1.82% 2.34% 3.92% 5.19%
assets
<FN>
<F1>Audited by the Trust's previous auditors.
<F2>Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date.
<F3>During each of the years in the five year period ended December 31, 1994,
the expenses related to the operation of the Trust were reduced either by a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser, or both. Had such actions not been undertaken, net
investment income per share and the ratios would have been as follows:
</FN>
</TABLE>
<TABLE>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1993 1992 1991<F1> 1990<F1>
--------- --------- --------- --------- ---------
NET INVESTMENT INCOME PER SHARE $0.018948 $0.016668 $0.020133 $0.034647 $0.050052
========= ========= ========= ========= =========
RATIOS (as a percentage of average net assets):
Other expenses 0.87% 0.82% 0.92% 0.91% 0.85%
========= ========= ========= ========= =========
Net investment income 1.88% 1.65% 2.01% 3.50% 5.04%
========= ========= ========= ========= =========
From time to time it has been necessary for the Trust to borrow from banks as a
temporary measure to facilitate the orderly sale of portfolio securities to
accommodate redemption requests. The following table summarizes such temporary
borrowings.
YEAR ENDED AMOUNT OF DEBT OUTSTANDING AVERAGE DAILY BALANCE OF AVERAGE WEEKLY BALANCE OF AVERAGE AMOUNT OF DEBT
DECEMBER 31, AT END OF YEAR DEBT OUTSTANDING DURING YEAR SHARES OUTSTANDING DURING YEAR PER SHARE DURING YEAR
------------------------------------------------------------------------------------------------------------------------------------
1990<F1> $ -- $192,000 31,243,924 $0.006
1991<F1> -- 379,000 31,686,707 0.012
1992 -- 367,000 38,904,763 0.009
1993 2,428,000 285,000 48,697,998 0.006
1994 6,117,000 440,145 40,463,382 0.011
<FN>
<F1>Audited by the Trust's previous auditors.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end, management investment company. The following is a
summary of significant accounting policies consistently followed by the Trust in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS - The Trustees have determined that the best method
currently available for valuing portfolio investments is amortized cost. The
Trust's use of the amortized cost method to value its portfolio investments is
subject to the Trust's compliance with certain conditions as specified under
Rule 2a-7 of the Investment Company Act of 1940.
B. INTEREST INCOME - Interest income consists of interest accrued, less the
amortization of any premium, on the investments of the Trust, accrued ratably to
the date of maturity.
C. FEDERAL TAXES - The Trust's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders each year all of its net income, including any
netrealized gain on investments. Accordingly, no provision forfederal income or
excise tax is necessary. At December 31, 1994, the Trust, for federal income tax
purposes, had a capital loss carryover of $20,308, which will reduce the Trust'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 Trust of any liability for federal income or excise
tax. Such capital loss carryover will expire on December 31, 2002. Dividends
paid by the Trust from net interest earned on tax-exempt municipal bonds are not
includable by shareholders as gross income for federal income tax purposes
because the Trust intends to meet certain requirements of the Internal Revenue
Code applicable to regulated investment companies which will enable the Trust to
pay exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986, may be considered a tax
preference item for shareholders.
D. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold, or the date that they mature.
--------------------------------------------------------------------------------
(2) DIVIDENDS
The net income of the Trust is determined daily, and all of the net income so
determined is declared as a dividend to shareholders of record at the time of
declaration. Such dividends are paid monthly. Dividends are distributed in the
form of additional shares of the Trust or, at the election of the shareholder,
in cash.
--------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONSWITH AFFILIATES
The investment adviser fee was earned by Eaton Vance Management (EVM) as
compensation for management, investment advisory, and other services rendered to
the Trust and is computed at the monthly rate of 1/24 of 1%(1/2 of 1% per annum)
of the Trust's average monthly net assets. To enhance the net income of the
Trust, EVM made a reduction of its fee in the amount of $162,287 during the year
ended December 31, 1994. Except as to Trustees of the Trust who are not members
of EVM's organization, officers and Trustees receive remuneration for their
services to the Trust out of such investment adviser fee. The custodian fee was
paid to Investors Bank & Trust Company (IBT), an affiliate of EVM, for its
services as custodian to the Trust. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Trust maintains with IBT. Certain of the officers and
Trustees of the Trust are officers and directors/trustees of the above
organizations.
<PAGE>
--------------------------------------------------------------------------------
(4) 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).
--------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Trust participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of a
$20 million committed facility and a $100 million discretionary facility.
Borrowings will be made by the Trust solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of deposit
rate, or a federal funds effective rate. In addition, a fee computed at an
annual rate of 1/4 of 1% on the $20 million committed facility and on the daily
unused portion of the $100 million discretionary facility is allocated among the
participating funds at the end of each quarter. As of December 31, 1994, the
Trust had an outstanding balance pursuant to the line of credit of $6,117,000.
The average daily loan balance for the year ended December 31, 1994 was
$440,145, and the average interest rate was 5.74%.
--------------------------------------------------------------------------------
(6) PURCHASES AND SALES OF INVESTMENTS
The Trust invests primarily in debt securities. The ability of the issuers of
the debt securities held by the Trust to meet their obligations may be affected
by economic developments in a specific industry or municipality. Purchases and
sales (including maturities) of investments aggregated $77,893,889 and
$106,177,830, respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
Eaton Vance Tax Free Reserves:
We have audited the accompanying statement of assets and liabilities of Eaton
Vance Tax Free Reserves, including the investment portfolio, as of December 31,
1994, and the related statement of operations for the year then ended and the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the two years in the period ended
December 31, 1991, presented herein, were audited by other auditors whose report
dated January 24, 1992, expressed an unqualified opinion on such financial
highlights.
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 Eaton
Vance Tax Free Reserves as of December 31, 1994, the results of its operations
for the year then ended and the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
three years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
INVESTMENT ADVISER
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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EATON VANCE TAX FREE RESERVES
24 FEDERAL STREET
BOSTON, MA 02110
TRSAI
EATON VANCE
TAX FREE
RESERVES
STATEMENT OF
ADDITIONAL
INFORMATION
SEPTEMBER 1, 1995
