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EV MARATHON
TAX-MANAGED GROWTH FUND
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EV MARATHON TAX-MANAGED GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM, AFTER-TAX RETURNS FOR ITS SHAREHOLDERS THROUGH INVESTING IN A
DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES. THE FUND CURRENTLY INTENDS TO
PURSUE ITS INVESTMENT OBJECTIVE BY INVESTING ITS ASSETS IN TAX-MANAGED GROWTH
PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY INVESTING DIRECTLY
IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH AN HISTORICALLY
STRUCTURED MUTUAL FUND. THE FUND IS A SEPARATE SERIES OF EATON VANCE MUTUAL
FUNDS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing in the Fund. Please retain this document for future
reference. A Statement of Additional Information for the Fund dated March 20,
1996, as supplemented from time to time, has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. The Statement
of Additional Information is available without charge from the Fund's
principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Portfolio's investment adviser is Boston Management and Research (the
"Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management,
and Eaton Vance Management is the administrator (the "Administrator") of the
Fund. The offices of the Investment Adviser and the Administrator are located
at 24 Federal Street, Boston, MA 02110.
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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.
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Shareholder and Fund Expenses .................. 2 How to Redeem Fund Shares .................... 11
The Fund's Investment Objective ................ 3 Reports to Shareholders ...................... 13
The Tax-Managed Mutual Fund Advantage .......... 3 The Lifetime Investing Account/
Investment Policies and Risks .................. 4 Distribution Options ....................... 13
Organization of the Fund and the Portfolio ..... 6 The Eaton Vance Exchange Privilege ........... 14
Management of the Fund and the Portfolio ....... 8 Eaton Vance Shareholder Services ............. 15
Distribution Plan .............................. 9 Distributions and Taxes ...................... 16
Valuing Fund Shares ............................ 10 Performance Information ...................... 17
How to Buy Fund Shares ......................... 10
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PROSPECTUS DATED MARCH 20, 1996
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SHAREHOLDER AND FUND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES
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Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
Range of Declining Contingent Deferred Sales Charges Imposed on Redemptions
During the First Seven Years (as a percentage of redemption proceeds exclusive
of all reinvestments and capital appreciation in the account) 5.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
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Investment Adviser Fee 0.625%
Rule 12b-1 Distribution (and Service) Fees 0.750%
Other Expenses 0.250%
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Total Operating Expenses 1.625%
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EXAMPLE 1 YEAR 3 YEARS
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An investor would pay the following contingent deferred sales charge and
expenses on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each time period: $67 $91
An investor would pay the following expenses on the same investment, assuming
(a) 5% annual return and (b) no redemptions: $17 $51
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NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear directly or indirectly by investing in the Fund. Other Expenses
are estimated for the current fiscal year because the Fund was only recently
organized.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should be
approximate, and over time may be less than, the per share expenses the Fund
would incur if the Trust retained the services of an investment adviser for
the Fund and the Fund's assets were invested directly in the type of
securities being held by the Portfolio.
The Example 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 Example to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Fund and the Portfolio see "Organization of the Fund and the
Portfolio," "Management of the Fund and the Portfolio," "How to Redeem Fund
Shares" and "Distribution Plan." Because the Fund makes payments under its
Distribution Plan adopted under Rule 12b-1, a long-term shareholder may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc.
No contingent deferred sales charge is imposed on (a) shares purchased more
than six years prior to the 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."
For shares sold by Authorized Firms and remaining outstanding for at least one
year, the Fund will pay service fees not exceeding .25% per annum of its
average daily net assets. The Fund expects to begin making service fee
payments during the quarter ending June 30, 1997. Therefore, expenses after
year one will be higher. See "Distribution Plan."
Other investment companies with different distribution arrangements and fees
are investing in the Portfolio and additional such companies and other
investors may do so in the future. See "Organization of the Fund and the
Portfolio."
THE FUND'S INVESTMENT OBJECTIVE
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THE FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM, AFTER-TAX RETURNS FOR
ITS SHAREHOLDERS THROUGH INVESTING IN A DIVERSIFIED PORTFOLIO OF EQUITY
SECURITIES. THE FUND CURRENTLY INTENDS TO PURSUE ITS INVESTMENT OBJECTIVE BY
INVESTING ITS ASSETS IN TAX-MANAGED GROWTH PORTFOLIO (THE "PORTFOLIO"), A
SEPARATE REGISTERED INVESTMENT COMPANY WITH THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS THE FUND. THIS INVESTMENT STRUCTURE IS COMMONLY REFERRED TO AS A
"MASTER/FEEDER" STRUCTURE. USING THIS STRUCTURE ENABLES THE FUND TO
PARTICIPATE IN A WELL-ESTABLISHED INVESTMENT PORTFOLIO WITHOUT EXPOSING THE
FUND TO THE UNREALIZED GAINS ACCRUED PRIOR TO THE FUND'S OPERATIONS.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities.
Realized capital gains are minimized by maintaining relatively low portfolio
turnover, and by employing a variety of tax-efficient management strategies.
See "Investment Policies and Risks" for further information.
The Fund is designed for long-term taxable investors. The Fund is not intended
to be a complete investment program. Prospective investors should take into
account their objectives and other investments when considering the purchase
of Fund shares. The Fund cannot assure achievement of its investment
objective. While the Fund seeks to minimize investor taxes associated with the
Fund's investment income and realized capital gains, the Fund may have taxable
investment income and may realize taxable gains from time to time. The Fund's
and the Portfolio's investment objectives are nonfundamental and may be
changed when authorized by a vote of the Trustees of the Trust or the
Portfolio, respectively, without obtaining the approval of the Fund's
shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the objective to
shareholders for their approval.
THE TAX-MANAGED MUTUAL FUND ADVANTAGE
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Taxes are a major influence on the net returns that investors receive on their
taxable investments. Today, dividends and short-term capital gains distributed
by mutual funds are taxed at federal income tax rates as high as 39.6% and
distributions of long-term capital gains are taxed at federal tax rates of up
to 28%. Including state taxes and the federal itemized deduction phaseout, the
top tax rates in high-tax states such as California, New York, and
Massachusetts are in a range of 45-48% on dividend income and short-term gains
and 33-36% on long-term capital gains. There is legislation before Congress
that may reduce federal tax rates on long-term capital gains, but its status
is uncertain.
Most equity mutual funds are managed to maximize PRE-TAX returns, largely
ignoring the considerable impact on returns of taxes incurred by investors in
connection with distributions of income and capital gains. In contrast, the
Fund seeks to achieve long-term, AFTER-TAX returns for its shareholders.
In seeking to achieve long-term, after-tax returns, the Fund is similar to and
competitive with retirement planning instruments such as IRAs and variable
annuities. As a mutual fund, however, the Fund avoids a number of structural
disadvantages inherent in an IRA or a variable annuity--including the
limitations and penalties on early withdrawals, the taxing of all income and
gain upon withdrawal at ordinary income rates, and the inability to gain a
step up in basis at death. A variable annuity may also have higher annual
expenses than the Fund due to the embedded insurance features. Annual
deductions for contributions to IRAs are limited.
An analysis of long-term hypothetical returns achievable from a tax-managed
equity fund compared to a conventional equity mutual fund and a variable
annuity or an IRA can illustrate the fundamental soundness of a tax-managed
equity fund approach. Assuming identical annual pre-tax returns, over a
holding period of several years a tax-managed fund can generate liquidation
proceeds higher than a conventional managed equity mutual fund and higher than
a variable annuity or IRA. If the investments are passed into an estate
(thereby triggering a step-up in basis), the relative performance advantage of
a tax-managed fund compared to a conventional fund, or to a variable annuity
or an IRA, can be substantial, again assuming equivalent annual returns before
taxes. Of course, actual returns achieved by long-term investors in the Fund
cannot be predicted.
INVESTMENT POLICIES AND RISKS
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It is the policy of the Portfolio to invest in a broadly diversified selection
of equity securities, emphasizing common stocks of domestic and foreign growth
companies that are considered to be high in quality and attractive in their
long-term investment prospects. Under normal market conditions, the Portfolio
will invest at least 65% of its assets in common stocks. Although the
Portfolio may invest in investment-grade preferred stocks and debt securities,
purchase of such securities will normally be limited to securities convertible
into common stocks and temporary investments in short-term notes or government
obligations. The Portfolio's holdings will represent a number of different
industries, and not more than 25% of the Portfolio's assets will be invested
in any one industry. During defensive periods in which the Investment Adviser
believes that returns on common stock investments may be unfavorable, the Fund
may invest a portion of its assets in U.S. government obligations and high
quality short-term notes.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities. The
Fund can be expected to distribute relatively low levels of taxable investment
income, if any.
Realized capital gains are minimized in part by maintaining relatively low
portfolio turnover, investing primarily in established companies with
characteristics of above-average growth, predictability and stability that are
acquired with the expectation of being held for a period of years. The
Portfolio will generally seek to avoid realizing short-term capital gains.
When a decision is made to sell a particular appreciated security, the
Portfolio will select for sale those share lots with holding periods
sufficient to qualify for long-term capital gains treatment and among those,
the share lots with the highest cost basis. The Portfolio may, when prudent,
sell securities to realize capital losses that can be used to offset realized
capital gains.
To protect against price declines in securities holdings with large
accumulated capital gains, the Portfolio may use hedging techniques such as
short sales against-the-box of securities held, the purchase of put options,
the sale of stock index futures contracts, and equity swaps. By using these
techniques rather than selling such securities the Portfolio can reduce its
exposure to price declines in the securities without realizing substantial
capital gains under current tax law. To avoid the sale of appreciated
securities and the realization of capital gains, the Portfolio and the Fund
may adopt in the future a policy of meeting redemptions in whole or in part
through the distribution of readily marketable securities. The practice of
distributing securities to meet shareholder redemptions may provide the
Portfolio with a useful management tool, allowing appreciated stock positions
to be reduced without causing capital gains to be realized. A redeeming
shareholder who received securities would incur no more or less taxable gain
than if the redemption had been paid in cash, and could elect to sell the
distributed securities through Eaton Vance to a broker-dealer at no cost.
Shareholders would be notified in writing of this procedure before it was
implemented. See "How to Redeem Fund Shares." It is expected that by employing
these strategies for tax-efficient management, the Portfolio can minimize the
extent to which net capital gains are realized each year, and the extent to
which shareholders incur taxes as a result of these realized gains. The
Portfolio may nevertheless realize taxable gains from time to time.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio will be managed for
long-term, after-tax returns. In managing the Portfolio, the Investment
Adviser will generally avoid selling securities with large accumulated capital
gains. Such securities are expected to comprise a substantial portion of the
assets of the Portfolio. Although the Portfolio may utilize certain hedging
strategies in lieu of selling appreciated securities, the Fund's exposure to
losses during stock market declines may nonetheless be higher than that of
other funds that do not follow a general policy of avoiding sales of highly-
appreciated securities.
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies involves considerations and possible risks not typically associated
with investing in securities issued by U.S. companies. The value of foreign
investments to U.S. investors may be adversely affected by changes in currency
exchange rates. Foreign brokerage commissions, custody fees and other costs of
investing are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
government supervision than in the United States. Investments in foreign
securities could be adversely affected by other factors not present in the
United States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards, and potential difficulties in enforcing
contractual obligations. To reduce some of these risks, the Portfolio will
only invest in issuers located in developed countries whose securities are
traded in established markets.
DERIVATIVE INVESTMENTS. The Portfolio may purchase or sell derivative
instruments to hedge against securities price declines and currency movements
and to enhance returns. The Portfolio may engage in transactions in derivative
instruments (which derive their value by reference to other securities,
indices, instruments, or currencies) in the U.S. and abroad. Such transactions
may include the purchase and sale of stock index futures contracts and options
on stock index futures; the purchase of put options and the sale of call
options on securities held in the Portfolio; equity swaps; and the purchase
and sale of forward currency exchange contracts and currency futures. The
Portfolio may use transactions in derivative instruments as a substitute for
the purchase and sale of securities. Derivative transactions may be more
advantageous in a given circumstance than transactions involving securities
due to more favorable current tax treatment, lower transaction costs, or
greater liquidity. While many derivative instruments have built-in leveraging
characteristics, the Portfolio will not use them to leverage its net assets.
The purchase and sale of derivative instruments is a highly specialized
activity (which may be considered speculative) that can expose the Portfolio
to a significant risk of loss. The built-in leveraging inherent to many
derivative instruments can result in losses that substantially exceed the
initial amount paid or received. Equity swaps and over-the-counter options are
private contracts in which there is a risk of loss in the event of a default
on an obligation to pay by a counterparty. Derivative instruments may be
difficult to value, may be illiquid, and may be subject to wide swings in
valuation caused by changes in the value of an underlying security, index,
instrument, or currency. There can be no assurance that the use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio will only enter into equity swaps and over-the-counter options
contracts with counterparties whose credit quality or claims paying ability
are considered to be investment grade by the Investment Adviser. In addition,
at the time of entering into a transaction, the Portfolio's credit exposure to
any one counterparty will be limited to 5% or less of the net assets of the
Portfolio. The Portfolio's investment in illiquid assets, which may include
equity swaps and over-the-counter options, may not represent more than 15% of
net assets at the time any such illiquid assets are acquired.
All futures contracts entered into by the Portfolio will be traded on
exchanges or boards of trade that are licensed and regulated by the
Commodities Futures Trading Commission (the "CFTC") and must be executed
through a futures commission merchant or brokerage firm that is a member of
the relevant exchange. Under CFTC regulations, the Portfolio may only enter
into futures contracts if, immediately thereafter, the value of the aggregate
initial margin with respect to all currently outstanding non-hedging positions
in futures contracts does not exceed 5% of the Fund's net asset value, after
taking into account unrealized profits and losses on such positions.
SHORT SALES AGAINST-THE-BOX. The Portfolio may sell securities short where it
owns at least an equal amount of the security sold short or another security
convertible or exchangeable for an equal amount of the security sold short
without payment of further compensation (a short sale against-the-box). Under
current tax law, short sale against-the-box transactions enable the Portfolio
to hedge its exposure to securities that it holds without selling the
securities and recognizing gains. A short sale against-the-box requires that
the short seller absorb certain costs so long as the position is open. In a
short sale against-the-box, the short seller is exposed to the risk of being
forced to deliver appreciated stock to close the position if the borrowed
stock is called in, causing a gain to be recognized. The Portfolio expects
normally to close its short sale against-the-box transactions by delivering
newly-acquired stock.
RESTRICTED SECURITIES. Securities that are not freely tradeable or which are
subject to restrictions on sale under the Securities Act of 1933 are
considered restricted. Such securities are illiquid and may be difficult to
properly value. Not more than 15% of the Portfolio's net assets may be
invested in restricted securities or other illiquid assets at the time any
such illiquid assets are acquired.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn income by
lending portfolio securities to broker-dealers or other institutional
borrowers. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of
the securities fails financially. However, the loans will be made only to
organizations deemed by the Investment Adviser to be sufficiently creditworthy
and when, in the judgment of the Investment Adviser, the consideration which
can be earned from securities loans of this type justifies the attendant risk.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote and an investor vote, respectively.
Among the fundamental restrictions, neither the Fund nor the Portfolio may (a)
borrow money, except as permitted by the 1940 Act, or (b) with respect to 75%
of its total assets, invest more than 5% of total assets (taken at current
value) in the securities of any one issuer, or invest in more than 10% of
total assets in the outstanding voting securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies.
Investment restrictions are considered at the time of acquisition of assets;
the sale of portfolio assets is not required in the event of a subsequent
change in circumstances.
Except for the fundamental investment restrictions and policies specifically
identified above and enumerated in the Statement of Additional Information,
the policies of the Fund and the Portfolio are not fundamental policies and
accordingly may be changed by the Trustees of the Trust and the Portfolio
without obtaining the approval of the shareholders of the Fund or the
investors in the Portfolio, as the case may be. If any changes were made, the
Fund might have investment objectives different from the objectives which an
investor considered appropriate at the time the investor became a shareholder
in the Fund.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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The 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. 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. Each share represents an equal proportionate beneficial
interest in the Fund. When issued and outstanding, the shares are fully paid
and nonassessable by the Trust and redeemable as described under "How to
Redeem Fund Shares." Shareholders are entitled to one vote for each full share
held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND 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 Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, common and commingled trust funds and
other accredited investors) will each be liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate
insurance exists and the Portfolio itself is unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund investing in the
Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimus amount of cash).
Therefore, the Fund's interest in 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 and other
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 investment companies investing in the Portfolio either do
not sell their shares or 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 of the Portfolio, see "How the Fund and
the Portfolio Invest their Assets." Further information regarding the
investment practices of the Portfolio may also be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that by
investing in the Portfolio, the Fund can participate in a substantially larger
and more diverse pool of equity investments than if it were to invest its
assets directly.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, 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 the
Fund, those shares may be subject to a contingent deferred sales charge, as
described in "How to Redeem Fund Shares." In the event the Fund withdraws all
of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets from the Portfolio.
Information regarding other funds or investors that 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 1992, the Administrator sponsored and advised only historically
structured funds. Funds which invest all their assets in interests in a
separate investment company are a relatively new development in the mutual
fund industry and, therefore, the Fund may be subject to additional
regulations than historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, or the
Trustees of the Portfolio, by written instrument consented to by a majority of
all investors, agree to continue the business of the Portfolio. This provision
is consistent with treatment of the Portfolio as a partnership for federal
income tax purposes. See "Distributions and Taxes" for further information.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. The Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that most 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
Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR" OR THE "INVESTMENT
ADVISER"), A WHOLLY-OWNED SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON
VANCE"), AS ITS INVESTMENT ADVISER. EATON VANCE, ITS AFFILIATES AND ITS
PREDECESSOR COMPANIES HAVE BEEN MANAGING ASSETS OF INDIVIDUALS AND
INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs and furnishes
for the use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolio. Under
the investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of the average
daily net assets of the Portfolio up to $500 million. On net assets of $500
million and over the annual fee is reduced and the advisory fee is computed as
follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
------------------------------------------------------------------------
$500 million but less than $1 billion 0.5625%
$1 billion but less than $1.5 billion 0.5000%
$1.5 billion and over 0.4375%
BMR places the portfolio securities transactions of the Portfolio with many
broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices which are advantageous to the Portfolio and at
reasonably competitive commission rates. Subject to the foregoing, BMR may
consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions.
Duncan W. Richardson has acted as a portfolio manager of the Portfolio since
it commenced operations. He has been a Vice President of Eaton Vance since
1990, a Vice President of BMR since 1992 and an employee of Eaton Vance since
1987.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $16 BILLION. EATON VANCE HAS BEEN MANAGING INVESTMENT COMPANIES WITH
OBJECTIVES SIMILAR TO THAT OF THE FUND SINCE 1961, AND CURRENTLY MANAGES FUNDS
WITH SUCH SIMILAR OBJECTIVES HAVING ASSETS OF OVER $700 MILLION. 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
primarily in investment management, administration and marketing activities.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for such services.
The Fund and the Portfolio, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement. Such costs and
expenses to be borne by the Fund or the Portfolio, 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; brokerage
commissions and fees; fees and expenses of registering under the securities
laws; expenses of reports 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 Fund and the Portfolio, as the case may be, will also each
bear expenses incurred in connection with litigation in which the Fund or the
Portfolio, as the case may be, is a party and any legal obligation to indemnify
its respective officers and Trustees with respect thereto.
DISTRIBUTION PLAN
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THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. Rule 12b-1 permits a
mutual fund, such as the Fund, to finance distribution activities and bear
expenses associated with the distribution of its shares provided that any
payments made by the Fund are made pursuant to a written plan adopted in
accordance with the Rule. The Plan is 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 Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and as
a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter amounts representing (i) sales commissions equal to 5% 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 services 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. 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 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. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. The Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the 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 Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commission attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in
the incurrence and payment of increased distribution fees under the Plan.
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented this provision of the Plan by
authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% per
annum 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. 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 Fund expects to begin making service fee payments during the
quarter ending June 30, 1997.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund 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 sell or
are expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including, without limitation, the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, the
accumulated unrealized capital gains of the Fund and the amount of Uncovered
Distribution Charges of the Principal Underwriter. The Plan may continue in
effect and payments may be made under the Plan following any such suspension,
discontinuance or limitation of the offering of Fund shares; however, the Fund
is not contractually obligated to continue the Plan for any particular period of
time. Suspension of the offering of Fund shares would not, of course, affect a
shareholder's ability to redeem shares.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of Fund shares outstanding. Because the
Fund invests its assets in an interest in the Portfolio, the Fund's net asset
value will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value 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. Securities listed on securities
exchanges or in the NASDAQ National Market are valued at closing sale prices.
For further information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. The Fund may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $5,000. Once an account has
been established the investor may send investments of $500 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$5,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $500 or more. See
"Eaton Vance Shareholder Services."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares acquired at their net asset value as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. The number of Fund shares to be issued to an investor exchanging
securities that are retained by the Portfolio will be the value of the
securities, as determined by the Portfolio's valuation procedures, divided by
the applicable net asset value per Fund share on the day such securities are
accepted. BMR may request that the Portfolio retain the securities for
investment purposes. Securities accepted for exchange may also be sold for the
account of their owner on the day of their receipt or as soon thereafter as
possible. The number of Fund shares acquired to be issued in exchange for
securities will be the aggregate value of or proceeds from the sale of such
securities, divided by the applicable net asset value per Fund share on the
day such proceeds are received. Eaton Vance will use reasonable efforts to
obtain the then current market price for such securities, but does not
guarantee the best price available. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Marathon Tax-Managed Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Tax-Managed Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, on any business day
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 First
Data Investor Services Group. 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 First
Data Investor Services Group, the Fund will make payment 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.
MEETING REDEMPTIONS BY DISTRIBUTING PORTFOLIO SECURITIES. The Portfolio and
the Fund currently will meet redemptions in cash, but in the future may adopt
a policy of meeting redemption requests in whole or in part by distributing
appreciated securities held in the Portfolio chosen by the Investment Adviser
to reduce the realization of capital gains. At the request of a redeeming
investor who is to receive securities, the Portfolio might, at the discretion
of the Investment Adviser, provide the redeeming investor with a diversified
selection of securities. The Fund would only distribute readily marketable
securities valued pursuant to the Portfolio's valuation procedures. Even if an
in-kind redemption policy were adopted, many redemptions would still be paid
in cash. Sufficient quantities of appreciated securities may not be available
for distribution. Moreover, during periods of volatile market conditions, the
Fund could be expected to meet redemptions primarily through distributions of
cash. If a redeeming shareholder received securities, a procedure would be
implemented whereby the shareholder could elect to sell them through Eaton
Vance to a broker-dealer at no cost and at a price equal to the price used in
determining the redemption value of the distributed securities. This election
would need to be made in a letter of instruction which would be provided to
shareholders before the policy was implemented. Shareholders not making an
affirmative election to sell distributed securities to the designated broker-
dealer, would be required to take delivery of any securities distributed upon
a redemption of shares. Such shareholders could incur brokerage charges and
other costs and may be exposed to market risk in selling the distributed
securiies.
ADDITIONAL REDEMPTION INFORMATION. To sell Fund 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 next computed after EVD, as the Fund's agent,
receives the order. It is the Authorized Firm's responsibility to transmit
promptly repurchase orders to EVD. Throughout this Prospectus, the word
"redemption" is generally meant to include a repurchase.
If shares were recently purchased, the proceeds of a redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may result in a taxable
gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $4,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Fund
if the cause of the low account balance was a reduction in the net asset value
of Fund shares. No contingent deferred sales charge will be imposed with respect
to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares 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, of value in the 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 or 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 Fund
shares acquired in an exchange for shares of a fund currently listed under "The
Eaton Vance Exchange Privilege," the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and the purchase of
shares acquired in the exchange is deemed to have occurred at the time of the
original purchase of the exchanged shares.
No contingent deferred sales charge will be imposed on Fund shares which have
been sold to Eaton Vance or its affiliates, or to their respective employees or
clients. The contingent deferred sales charge will 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 Fund. When paid to the Principal
Underwriter it will reduce the amount of Uncovered Distribution Charges
calculated under the Fund's Distribution Plan. See "Distribution Plan."
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED SALES
CHARGE. ASSUME THAT AN INVESTOR PURCHASES $100,000 OF THE FUND'S SHARES AND THAT
16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT
PERFORMANCE AND REINVESTMENT OF DIVIDENDS TO $120,000. THE INVESTOR THEN MAY
REDEEM UP TO $20,000 OF SHARES WITHOUT INCURRING A CONTINGENT DEFERRED SALES
CHARGE. IF THE INVESTOR SHOULD REDEEM $30,000 OF SHARES, A CHARGE WOULD BE
IMPOSED ON $10,000 OF THE REDEMPTION. THE RATE WOULD BE 5% BECAUSE THE
REDEMPTION WAS MADE IN THE SECOND YEAR AFTER THE PURCHASE WAS MADE AND THE
CHARGE WOULD BE $500.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent certified public accountants.
Shortly after the end of each calendar year, the Fund will furnish all
shareholders with information necessary for preparing federal and state income
tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund, which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the shareholder
will receive a statement showing complete details of the transaction and the
current balance in the account. (Under certain investment plans, statements may
be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT PERMITS A SHAREHOLDER TO
MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A CHECK FOR $500 OR MORE to
First Data Investor Services Group.
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 First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
confirmation statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under Federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in the account in shares at the then current net asset value.
Furthermore, the distribution option on the account will be automatically
changed to the SHARE OPTION until such time as the shareholder selects a
different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains, if any, may be invested in
additional shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity fund) or Eaton Vance Money Market Fund, which
are distributed subject to a contingent deferred sales charge. Shares of the
Fund may also be exchanged for shares of Eaton Vance Prime Rate Reserves, which
are subject to an early withdrawal charge. Any such exchange will be made on the
basis of the net asset value per share of each fund at the time of the exchange,
provided that such exchange 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 Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investors Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon the redemption of shares
acquired in an exchange, the contingent deferred sales charge schedule
applicable to the shares at the time of purchase will apply and 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. For the contingent deferred
sales charge schedule applicable to the Eaton Vance Marathon Group of Funds
(except EV Marathon Strategic Income Fund, Class I shares of any EV Marathon
Limited Maturity Fund and Eaton Vance Prime Rate Reserves), see "How to Redeem
Fund Shares." The contingent deferred sales charge or early withdrawal charge
schedule applicable to EV Marathon Strategic Income Fund, Class I shares of any
EV Marathon Limited Maturity Fund and Eaton Vance Prime Rate Reserves is 3%,
2.5%, 2% or 1% in the event of a redemption occurring in the first, second,
third or fourth year, respectively, after the original share purchase.
Shares of the other funds in the Eaton Vance Marathon Group of Funds and shares
of Eaton Vance Money Market Fund may be exchanged for 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 First Data Investor Services Group provided
that the investor has not disclaimed in writing the use of the privilege. To
effect such exchanges, call First Data Investor Services Group at 800-262-1122
or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group 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, and if such procedures
are not followed, the Fund, the Principal Underwriter or First Data Investor
Services Group may be liable for any losses due to unauthorized or fraudulent
telephone instructions. Telephone instructions will be tape recorded. In times
of drastic economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter. The
cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $5,000 minimum
investment has been made, checks of $500 or more payable to the order of EV
Marathon Tax-Managed Growth Fund may be mailed directly to First Data Investor
Services Group 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
$500 or more may be made automatically each month or quarter from the
shareholder's bank account. The $5,000 minimum initial investment and small
account redemption policy are waived for these accounts.
SYSTEMATIC WITHDRAWAL PLAN: The Fund will make available to shareholders making
a deposit of at least $20,000 a systematic withdrawal plan through which they
can make regular quarterly redemptions to yield them either a specified dollar
amount of at least $800 per year or a specified percentage of net asset value of
at least 4% but not more than 12% annually. Such amount will not be subject to a
contingent deferred sales charge. See "How to Redeem Fund Shares." These
redemptive distributions will be paid in cash. Such distributions would be paid
at the option of each shareholder and would reduce the number of Fund shares
held by any shareholder electing to receive them. Distributions would consist of
an untaxed return of capital component and a taxable capital gain or capital
loss. The all-in tax rate on the amount of cash received in such redemptions
(equal to the capital gains rate multiplied by the percentage of the
distribution that is gain rather than return of capital) would be substantially
below the rate payable by mutual fund investors on dividend distributions (equal
to the ordinary income tax rate).
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 THE FUND,
provided that the reinvestment is effected within 60 days after such repurchase
or redemption, and the privilege has not been used more than once in the prior
12 months. Shares are sold to a reinvesting shareholder at the net asset value
next determined following timely receipt of a written purchase order by the
Principal Underwriter or by the Fund (or by the Fund's Transfer Agent). To the
extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
the redemption), some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
The Portfolio will be managed toward an objective of achieving long-term,
after-tax returns in part by minimizing shareholders taxes. Because
distributions of net investment income and realized capital gains give rise to
shareholder taxes, the Portfolio will generally seek to select and manage its
investments so as to minimize net investment income and net realized gains and
associated distributions. The Fund can be expected to generally distribute a
lesser percentage of returns each year than other equity mutual funds. There can
be no assurance, however, that the Portfolio can be managed to avoid taxable
distributions. The Portfolio's ability to utilize various tax management
techniques may be curtailed or eliminated by future tax and other legislation,
regulations, administrative interpretations, or court decisions. As of the date
of this Prospectus, the Clinton administration had proposed legislation that
would have the effect of substantially eliminating the tax advantages of short
sales against-the-box, equity swaps, and certain options transactions. If the
legislation were to be enacted in the form proposed, use of these techniques by
the Portfolio would effectively be precluded.
DISTRIBUTIONS. To the extent that the Fund has net investment income and net
realized capital gains in any year, the Fund's present policy is to make (A) at
least one distribution annually (normally in December) of all or substantially
all of the investment income (if any) allocated to the Fund by the Portfolio,
less the Fund's direct and allocated expenses and (B) at least one distribution
annually of all or substantially all of the net realized capital gains (if any)
allocated to the Fund by the Portfolio (reduced by any available capital loss
carryforwards from prior years).
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the net asset value per share as of the close of business on the
record date.
The Fund's net investment income consists of the Fund's allocated 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.
The Portfolio's net investment income consists of all income accrued on the
Portfolio's assets, less all actual and accrued expenses of the Portfolio
determined in accordance with generally accepted accounting principles. The
Fund's net realized capital gains, if any, consist of the net realized capital
gains (if any) allocated to the Fund by the Portfolio for tax purposes, after
taking into account any available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's net investment income, net short-term capital gains and
certain foreign exchange gains are taxable to shareholders as ordinary income,
whether received in cash or reinvested in additional shares of the Fund. The
Fund's distributions will generally not qualify for the dividends- received
deduction for corporate shareholders.
Capital gains referred to in clause (B) above, if any, realized by the Portfolio
and allocated to the Fund for the Fund's fiscal year, which ends on October 31,
will usually be distributed by the Fund prior to the end of December.
Distributions by the Fund of long-term capital gains allocated to the Fund by
the Portfolio are taxable to shareholders as long-term capital gains, whether
paid in cash or reinvested in additional shares of the Fund and regardless of
the length of time Fund shares have been owned by the shareholder.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some portion
of the price back as a taxable distribution. The amount, timing and character of
the Fund's distributions to shareholders may be affected by special tax rules
governing the Portfolio's activities in options, futures and forward foreign
currency exchange transactions or certain other investments.
Certain distributions, if declared by the Fund in October, November or December
and paid the following January, will be taxable to shareholders as if received
on December 31 of the year in which they are declared.
The Fund intends to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code") and to satisfy all requirements
necessary to be relieved of federal taxes on income and gains it distributes to
shareholders. In satisfying these requirements, the Fund will treat itself as
owning its proportionate share of each of the Portfolio's assets and as entitled
to the income of the Portfolio properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 invested at the maximum public offering price
(net asset value) by the average annual compounded rate of return (including
capital appreciation/depreciation, and distributions paid and reinvested) for
the stated period and annualizing the result. The average annual total return
calculation assumes a complete redemption of the investment and the deduction of
any contingent deferred sales charge at the end of the period. The Fund may also
publish annual and cumulative total return figures from time to time. The Fund
may use such total return figures, together with comparisons with the Consumer
Price Index, various domestic and foreign securities indices and performance
studies prepared by independent organizations, in advertisements and in
information furnished to present or prospective shareholders. The Fund may use
total return figures showing after-tax returns, including comparisons to
tax-deferred vehicles.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take
into account the contingent deferred sales charge would be reduced to the
extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior
period should not be considered a representation of what an investment may
earn or what the Fund's total return may be in any future period. The Fund's
investment results are based on many factors, including market conditions, the
composition of the security holdings of the Portfolio and the operating
expenses of the Fund and the Portfolio. Investment results also often reflect
the risks associated with the particular investment objective and policies of
the Fund and the Portfolio. Among others, these factors should be considered
when comparing the Fund's investment results to those of other mutual funds
and other investment vehicles. If the expenses related to the operation of the
Fund or the Portfolio are allocated to Eaton Vance, the Fund's performance
will be higher.
<PAGE>
[LOGO]
EV MARATHON TAX-MANAGED
GROWTH FUND
- ------------------------------------------------------------------------------
PROSPECTUS
MARCH 20, 1996
EV MARATHON
TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- ------------------------------------------------------------------------------
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON TAX-MANAGED GROWTH 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, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-TGP
<PAGE>
EV TRADITIONAL
TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
EV TRADITIONAL TAX-MANAGED GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING
LONG-TERM, AFTER-TAX RETURNS FOR ITS SHAREHOLDERS THROUGH INVESTING IN A
DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES. THE FUND CURRENTLY INTENDS TO
PURSUE ITS INVESTMENT OBJECTIVE BY INVESTING ITS ASSETS IN TAX-MANAGED GROWTH
PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY INVESTING DIRECTLY
IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH AN HISTORICALLY
STRUCTURED MUTUAL FUND. THE FUND IS A SEPARATE SERIES OF EATON VANCE MUTUAL
FUNDS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing in the Fund. Please retain this document for future
reference. A Statement of Additional Information for the Fund dated March 20,
1996, as supplemented from time to time, has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. The Statement
of Additional Information is available without charge from the Fund's
principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Portfolio's investment adviser is Boston Management and Research (the
"Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management,
and Eaton Vance Management is the administrator (the "Administrator") of the
Fund. The offices of the Investment Adviser and the Administrator are located
at 24 Federal Street, Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PAGE
Shareholder and Fund Expenses ......................... 2
The Fund's Investment Objectives ...................... 3
The Tax-Managed Mutual Fund Advantage ................. 3
Investment Policies and Risks ......................... 4
Organization of the Fund and the Portfolio ............ 6
Management of the Fund and the Portfolio .............. 7
Service Plan .......................................... 8
Valuing Fund Shares ................................... 9
PAGE
How to Buy Fund Shares ................................ 9
How to Redeem Fund Shares ............................. 12
Reports to Shareholders ............................... 13
The Lifetime Investing Account Distribution Options 13
The Eaton Vance Exchange Privilege .................... 14
Eaton Vance Shareholder Services ...................... 15
Distributions and Taxes ............................... 16
Performance Information ............................... 17
- ---------------------------------------------------------------
PROSPECTUS DATED MARCH 20, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
----------------------------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75%
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
----------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.625%
Other Expenses (including Service Plan Fees) 0.250
-----
Total Operating Expenses 0.875%
=====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
------ -------
<S> <C> <C>
An investor would pay the following maximum initial sales charge and
expenses on a $1,000 investment, assuming (a) 5% annual return and (b)
redemption at the end of each time period: $56 $74
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear directly or indirectly by investing in the Fund. Other Expenses
are estimated for the current fiscal year because the Fund has only recently
organized.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the type of securities being held by
the Portfolio.
The Example 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 Example to assume a 5% annual return, but actual
return will vary. For further information regarding the expenses of both the
Fund and the Portfolio see "Organization of the Fund and the Portfolio,"
"Management of the Fund and the Portfolio" and "Service Plan."
No sales charge is payable at the time of purchase on investments of $1
million or more. However, a contingent deferred sales charge of 0.50% will be
imposed on such investments in the event of certain redemptions within 12
months of purchase. See "How to Buy Fund Shares," "How to Redeem Fund Shares"
and "Eaton Vance Shareholder Services."
For shares sold by Authorized Firms and remaining outstanding for at least one
year, the Fund will pay service fees not exceeding .25% per annum of its
average daily net assets. The Fund expects to begin making service fee
payments during the quarter ending June 30, 1997. After such date, expenses
will be higher. See "Service Plan."
Other investment companies with different distribution arrangements and fees
are investing in the Portfolio and additional such companies and other
investors may do so in the future. See "Organization of the Fund and the
Portfolio."
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM, AFTER-TAX RETURNS FOR
ITS SHAREHOLDERS THROUGH INVESTING IN A DIVERSIFIED PORTFOLIO OF EQUITY
SECURITIES. THE FUND CURRENTLY INTENDS TO PURSUE ITS INVESTMENT OBJECTIVE BY
INVESTING ITS ASSETS IN TAX-MANAGED GROWTH PORTFOLIO (THE "PORTFOLIO"), A
SEPARATE REGISTERED INVESTMENT COMPANY WITH THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS THE FUND. THIS INVESTMENT STRUCTURE IS COMMONLY REFERRED TO AS A
"MASTER/FEEDER" STRUCTURE. USING THIS STRUCTURE ENABLES THE FUND TO
PARTICIPATE IN A WELL-ESTABLISHED INVESTMENT PORTFOLIO WITHOUT EXPOSING THE
FUND TO THE UNREALIZED GAINS ACCRUED PRIOR TO THE FUND'S OPERATIONS.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities.
Realized capital gains are minimized by maintaining relatively low portfolio
turnover, and by employing a variety of tax-efficient management strategies.
See "Investment Policies and Risks" for further information.
The Fund is designed for long-term taxable investors. The Fund is not intended
to be a complete investment program. Prospective investors should take into
account their objectives and other investments when considering the purchase
of Fund shares. The Fund cannot assure achievement of its investment
objective. While the Fund seeks to minimize investor taxes associated with the
Fund's investment income and realized capital gains, the Fund may have taxable
investment income and may realize taxable gains from time to time. The Fund's
and the Portfolio's investment objectives are nonfundamental and may be
changed when authorized by a vote of the Trustees of the Trust or the
Portfolio, respectively, without obtaining the approval of the Fund's
shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the objective to
shareholders for their approval.
THE TAX-MANAGED MUTUAL FUND ADVANTAGE
- --------------------------------------------------------------------------------
Taxes are a major influence on the net returns that investors receive on their
taxable investments. Today, dividends and short-term capital gains distributed
by mutual funds are taxed at federal income tax rates as high as 39.6% and
distributions of long-term capital gains are taxed at federal tax rates of up
to 28%. Including state taxes and the federal itemized deduction phaseout, the
top tax rates in high-tax states such as California, New York, and
Massachusetts are in a range of 45-48% on dividend income and short-term gains
and 33-36% on long-term capital gains. There is legislation before Congress
that may reduce federal tax rates on long-term capital gains, but its status
is uncertain.
Most equity mutual funds are managed to maximize PRE-TAX returns, largely
ignoring the considerable impact on returns of taxes incurred by investors in
connection with distributions of income and capital gains. In contrast, the
Fund seeks to achieve long-term, AFTER-TAX returns for its shareholders.
In seeking to achieve long-term, after-tax returns, the Fund is similar to and
competitive with retirement planning instruments such as IRAs and variable
annuities. As a mutual fund, however, the Fund avoids a number of structural
disadvantages inherent in an IRA or a variable annuity--including the
limitations and penalties on early withdrawals, the taxing of all income and
gain upon withdrawal at ordinary income rates, and the inability to gain a
step up in basis at death. A variable annuity may also have higher annual
expenses than the Fund due to the embedded insurance features. Annual
deductions for contributions to IRAs are limited.
An analysis of long-term hypothetical returns achievable from a tax-managed
equity fund compared to a conventional equity mutual fund and a variable
annuity or an IRA can illustrate the fundamental soundness of a tax-managed
equity fund approach. Assuming identical annual pre-tax returns, over a
holding period of several years a tax-managed fund can generate liquidation
proceeds higher than a conventional managed equity mutual fund and higher than
a variable annuity or IRA. If the investments are passed into an estate
(thereby triggering a step-up in basis), the relative performance advantage of
a tax-managed fund compared to a conventional fund, or to a variable annuity
or an IRA, can be substantial, again assuming equivalent annual returns before
taxes. Of course, actual returns achieved by long-term investors in the Fund
cannot be predicted.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
It is the policy of the Portfolio to invest in a broadly diversified selection
of equity securities, emphasizing common stocks of domestic and foreign growth
companies that are considered to be high in quality and attractive in their
long-term investment prospects. Under normal market conditions, the Portfolio
will invest at least 65% of its assets in common stocks. Although the
Portfolio may invest in investment-grade preferred stocks and debt securities,
purchase of such securities will normally be limited to securities convertible
into common stocks and temporary investments in short-term notes or government
obligations. The Portfolio's holdings will represent a number of different
industries, and not more than 25% of the Portfolio's assets will be invested
in any one industry. During defensive periods in which the Investment Adviser
believes that returns on common stock investments may be unfavorable, the Fund
may invest a portion of its assets in U.S. government obligations and high
quality short-term notes.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities. The
Fund can be expected to distribute relatively low levels of taxable investment
income, if any.
Realized capital gains are minimized in part by maintaining relatively low
portfolio turnover, investing primarily in established companies with
characteristics of above-average growth, predictability and stability that are
acquired with the expectation of being held for a period of years. The
Portfolio will generally seek to avoid realizing short-term capital gains.
When a decision is made to sell a particular appreciated security, the
Portfolio will select for sale those share lots with holding periods
sufficient to qualify for long-term capital gains treatment and among those,
the share lots with the highest cost basis. The Portfolio may, when prudent,
sell securities to realize capital losses that can be used to offset realized
capital gains.
To protect against price declines in securities holdings with large
accumulated capital gains, the Portfolio may use hedging techniques such as
short sales against-the-box of securities held, the purchase of put options,
the sale of stock index futures contracts, and equity swaps. By using these
techniques rather than selling such securities the Portfolio can reduce its
exposure to price declines in the securities without realizing substantial
capital gains under current tax law. To avoid the sale of appreciated
securities and the realization of capital gains, the Portfolio and the Fund
may adopt in the future a policy of meeting redemptions in whole or in part
through the distribution of readily marketable securities. The practice of
distributing securities to meet shareholder redemptions may provide the
Portfolio with a useful management tool, allowing appreciated stock positions
to be reduced without causing capital gains to be realized. A redeeming
shareholder who received securities would incur no more or less taxable gain
than if the redemption had been paid in cash, and could elect to sell the
distributed securities through Eaton Vance to a broker-dealer at no cost.
Shareholders would be notified in writing of the procedure before it was
implemented. See "How to Redeem Fund Shares." It is expected that by employing
these strategies for tax-efficient management, the Portfolio can minimize the
extent to which net capital gains are realized each year, and the extent to
which shareholders incur taxes as a result of these realized gains. The
Portfolio may nevertheless realize taxable gains from time to time.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio will be managed for
long-term, after-tax returns. In managing the Portfolio, the Investment
Adviser will generally avoid selling securities with large accumulated capital
gains. Such securities are expected to comprise a substantial portion of the
assets of the Portfolio. Although the Portfolio may utilize certain hedging
strategies in lieu of selling appreciated securities, the Fund's exposure to
losses during stock market declines may nonetheless be higher than that of
other funds that do not follow a general policy of avoiding sales of highly-
appreciated securities.
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies involves considerations and possible risks not typically associated
with investing in securities issued by U.S. companies. The value of foreign
investments to U.S. investors may be adversely affected by changes in currency
exchange rates. Foreign brokerage commissions, custody fees and other costs of
investing are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
government supervision than in the United States. Investments in foreign
securities could be adversely affected by other factors not present in the
United States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards, and potential difficulties in enforcing
contractual obligations. To reduce some of these risks, the Portfolio will
only invest in issuers located in developed countries whose securities are
traded in established markets.
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or sell derivative
instruments to hedge against securities price declines and currency movements
and to enhance returns. The Portfolio may engage in transactions in derivative
instruments (which derive their value by reference to other securities,
indices, instruments, or currencies) in the U.S. and abroad. Such transactions
may include the purchase and sale of stock index futures contracts and options
on stock index futures; the purchase of put options and the sale of call
options on securities held in the Portfolio; equity swaps; and the purchase
and sale of forward currency exchange contracts and currency futures. The
Portfolio may use transactions in derivative instruments as a substitute for
the purchase and sale of securities. Derivative transactions may be more
advantageous in a given circumstance than transactions involving securities
due to more favorable current tax treatment, lower transaction costs, or
greater liquidity. While many derivative instruments have built-in leveraging
characteristics, the Portfolio will not use them to leverage its net assets.
The purchase and sale of derivative instruments is a highly specialized
activity (which may be considered speculative) that can expose the Portfolio
to a significant risk of loss. The built-in leveraging inherent to many
derivative instruments can result in losses that substantially exceed the
initial amount paid or received. Equity swaps and over-the-counter options are
private contracts in which there is a risk of loss in the event of a default
on an obligation to pay by a counterparty. Derivative instruments may be
difficult to value, may be illiquid, and may be subject to wide swings in
valuation caused by changes in the value of an underlying security, index,
instrument, or currency. There can be no assurance that the use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio will only enter into equity swaps and over-the-counter options
contracts with counterparties whose credit quality or claims paying ability
are considered to be investment grade by the Investment Adviser. In addition,
at the time of entering into a transaction, the Portfolio's credit exposure to
any one counterparty will be limited to 5% or less of the net assets of the
Portfolio. The Portfolio's investment in illiquid assets, which may include
equity swaps and over-the-counter options, may not represent more than 15% of
net assets at the time any such illiquid assets are acquired.
All futures contracts entered into by the Portfolio will be traded on
exchanges or boards of trade that are licensed and regulated by the
Commodities Futures Trading Commission (the "CFTC") and must be executed
through a futures commission merchant or brokerage firm that is a member of
the relevant exchange. Under CFTC regulations, the Portfolio may only enter
into futures contracts if, immediately thereafter, the value of the aggregate
initial margin with respect to all currently outstanding non-hedging positions
in futures contracts does not exceed 5% of the Fund's net asset value, after
taking into account unrealized profits and losses on such positions.
SHORT SALES AGAINST-THE-BOX. The Portfolio may sell securities short where it
owns at least an equal amount of the security sold short or another security
convertible or exchangeable for an equal amount of the security sold short
without payment of further compensation (a short sale against-the-box). Under
current tax law, short sale against-the-box transactions enable the Portfolio
to hedge its exposure to securities that it holds without selling the
securities and recognizing gains. A short sale against-the-box requires that
the short seller absorb certain costs so long as the position is open. In a
short sale against-the-box, the short seller is exposed to the risk of being
forced to deliver appreciated stock to close the position if the borrowed
stock is called in, causing a gain to be recognized. The Portfolio expects
normally to close its short sale against-the-box transactions by delivering
newly-acquired stock.
RESTRICTED SECURITIES. Securities that are not freely tradeable or which are
subject to restrictions on sale under the Securities Act of 1933 are
considered restricted. Such securities are illiquid and may be difficult to
properly value. Not more than 15% of the Portfolio's net assets may be
invested in restricted securities or other illiquid assets at the time any
such illiquid assets are acquired.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn income by
lending portfolio securities to broker-dealers or other institutional
borrowers. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of
the securities fails financially. However, the loans will be made only to
organizations deemed by the Investment Adviser to be sufficiently creditworthy
and when, in the judgment of the Investment Adviser, the consideration which
can be earned from securities loans of this type justifies the attendant risk.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote and an investor vote, respectively.
Among the fundamental restrictions, neither the Fund nor the Portfolio may (a)
borrow money, except as permitted by the 1940 Act, or (b) with respect to 75%
of its total assets, invest more than 5% of total assets (taken at current
value) in the securities of any one issuer, or invest in more than 10% of
total assets in the outstanding voting securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies.
Investment restrictions are considered at the time of acquisition of assets;
the sale of portfolio assets is not required in the event of a subsequent
change in circumstances.
Except for the fundamental investment restrictions and policies specifically
identified above and enumerated in the Statement of Additional Information,
the policies of the Fund and the Portfolio are not fundamental policies and
accordingly may be changed by the Trustees of the Trust and the Portfolio
without obtaining the approval of the shareholders of the Fund or the
investors in the Portfolio, as the case may be. If any changes were made, the
Fund might have investment objectives different from the objectives which an
investor considered appropriate at the time the investor became a shareholder
in the Fund.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
The 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. 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. Each share represents an equal proportionate beneficial
interest in the Fund. When issued and outstanding, the shares are fully paid
and nonassessable by the Trust and redeemable as described under "How to
Redeem Fund Shares." Shareholders are entitled to one vote for each full share
held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND 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 Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, common and commingled trust funds and
other accredited investors) will each be liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate
insurance exists and the Portfolio itself is unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund investing in the
Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimis amount of cash).
Therefore, the Fund's interest in 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 and other
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 investment companies investing in the Portfolio either do
not sell their shares or 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 of the Portfolio, see "How the Fund and
the Portfolio Invest their Assets." Further information regarding the
investment practices of the Portfolio may also be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that by
investing in the Portfolio, the Fund can participate in a substantially larger
and more diverse pool of equity investments than if it were to invest its
assets directly.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, 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 the
Fund, those shares may be subject to a contingent deferred sales charge, as
described in "How to Redeem Fund Shares." In the event the Fund withdraws all
of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets from the Portfolio.
Information regarding other funds or investors that 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 1992, the Administrator sponsored and advised only historically
structured funds. Funds which invest all their assets in interests in a
separate investment company are a relatively new development in the mutual
fund industry and, therefore, the Fund may be subject to additional
regulations than historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, or the
Trustees of the Portfolio, by written instrument consented to by a majority of
all investors, agree to continue the business of the Portfolio. This provision
is consistent with treatment of the Portfolio as a partnership for federal
income tax purposes. See "Distributions and Taxes" for further information.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. The Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that most 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
Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR" OR THE "INVESTMENT
ADVISER"), A WHOLLY-OWNED SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON
VANCE"), AS ITS INVESTMENT ADVISER. EATON VANCE, ITS AFFILIATES AND ITS
PREDECESSOR COMPANIES HAVE BEEN MANAGING ASSETS OF INDIVIDUALS AND
INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs, and furnishes
for the use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolio. Under
the investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of the average
daily net assets of the Portfolio up to $500 million. On net assets of $500
million and over the annual fee is reduced and the advisory fee is computed as
follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
-----------------------------------------------------------------------------
$500 million but less than $1 billion 0.5625%
$1 billion but less than $1.5 billion 0.5000%
$1.5 billion and over 0.4375%
BMR places the portfolio securities transactions of the Portfolio with many
broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices which are advantageous to the Portfolio and at
reasonably competitive commission rates. Subject to the foregoing, BMR may
consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions.
Duncan W. Richardson has acted as a portfolio manager of the Portfolio since
it commenced operations. He has been a Vice President of Eaton Vance since
1990, a Vice President of BMR since 1992 and an employee of Eaton Vance since
1987.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $16 BILLION. EATON VANCE HAS BEEN MANAGING INVESTMENT COMPANIES WITH
OBJECTIVES SIMILAR TO THAT OF THE FUND SINCE 1961, AND CURRENTLY MANAGES FUNDS
WITH SUCH SIMILAR OBJECTIVES HAVING ASSETS OF OVER $700 MILLION. 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
primarily in investment management, administration and marketing activities.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services Eaton Vance currently receives
no compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
The Fund and the Portfolio, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by EVD under the distribution agreement.
Such costs and expenses to be borne by the Fund or the Portfolio, 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; brokerage commissions and fees; fees and expenses of
registering under the securities laws; expenses of reports 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 Fund and the Portfolio,
as the case may be, will also each bear expenses incurred in connection with
litigation in which the Fund or the Portfolio, as the case may be, is a party
and any legal obligation to indemnify its respective officers and Trustees
with respect thereto.
SERVICE PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the requirements of
Rule 12b-1 under the Investment Company Act of 1940 and the service fee
requirements of the revised sales charge rule of the National Association of
Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS
TO THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICE FIRMS ("AUTHORIZED FIRMS") AND
OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET
ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have implemented the
Plan by authorizing the Fund to make quarterly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.25% of that portion of the Fund's average daily net assets for any fiscal
year which is attributable to shares of the Fund sold by such persons
remaining outstanding for at least twelve months. The Fund expects to begin
making service fee payments during the quarter ending June 30, 1997.
VALUING FUND SHARES
- --------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of Fund shares outstanding. Because the
Fund invests its assets in an interest in the Portfolio, the Fund's net asset
value will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value 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. Securities listed on securities
exchanges or in the NASDAQ National Market are valued at closing sale prices.
For further information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
---------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
---------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- --------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the effective public offering price, which price is based on the
effective net asset value per share plus the applicable sales charge. The Fund
receives the net asset value, while the sales charge is divided between the
Authorized Firm and the Principal Underwriter. The Principal Underwriter will
furnish the names of Authorized Firms to an investor upon request. An
Authorized Firm may charge its customers a fee in connection with transactions
executed by that Firm. The Fund may suspend the offering of shares at any time
and may refuse an order for the purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement
to purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced
sales charges under a Statement of Intention, Right of Accumulation, or
various employee benefit plans are available from Authorized Firms or the
Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER DISCOUNT
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.15%
$250,000 but less than $500,000 2.75% 2.83% 2.30%
$500,000 but less than $1,000,000 2.00% 2.04% 1.70%
$1,000,000 or more 0.00%* 0.00%* 0.50%
<FN>
*No sales charge is payable at the time of purchase on investments of $1 million or more. A contingent deferred sales
charge ("CDSC") of 0.50% will be imposed on such investments, (as described below) in the event of certain redemptions
within 12 months of purchase. The CDSC will be waived on redemptions by employee retirement plans organized under the
Internal Revenue Code relating to distributions to plan participants or beneficiaries upon retirement, disability or
death.
</FN>
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in
the Securities Act of 1933. The Principal Underwriter may, from time to time,
at its own expense, provide additional incentives to Authorized Firms which
employ registered representatives who sell a minimum dollar amount of the
Fund's shares and/or shares of other funds distributed by the Principal
Underwriter. In some instances, such additional incentives may be offered only
to certain Authorized Firms whose representatives are expected to sell
significant amounts of shares.
An initial investment in the Fund must be at least $5,000. Once an account has
been established the investor may send investments of $500 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$5,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $500 or more. See
"Eaton Vance Shareholder Services."
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms; to bank
employees who refer customers to registered representatives of Authorized
Firms; and to such persons' spouses and children under the age of 21 and their
beneficial accounts. Shares may also be issued at net asset value (1) in
connection with the merger of an investment company with the Fund, (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with Eaton Vance provides multiple investment services,
such as management, brokerage and custody, (3) where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with Eaton
Vance, if the redemption occurred no more than 60 days prior to the purchase
of Fund shares and the redeemed shares were subject to a sales charge and (4)
to investment advisors, financial planners or other intermediaries who place
trades for their own accounts or the accounts of their clients and who charge
a management, consulting or other fee for their services; clients of such
investment advisors, financial planners or other intermediaries who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisor, financial planner or other intermediary on the
books and records of the broker or agent; and retirement and deferred
compensation plans and trusts used to fund those plans, including, but not
limited to, those defined in Section 401(a), 403(b) or 457 of the Internal
Revenue Code of 1986, as amended (the "Code") and "rabbi trusts."
No initial sales charge and no contingent deferred sales charge will be
payable or imposed with respect to shares of the Fund purchased by retirement
plans qualified under Section 401, 403(b) or 457 of the Code ("Eligible
Plans"). In order to purchase shares without a sales charge, the plan sponsor
of an Eligible Plan must notify the Transfer Agent of the Fund of its status
as an Eligible Plan. Participant accounting services (including trust fund
reconciliation services) will be offered only through third party record-
keepers and not by EVD. The Fund's Principal Underwriter may pay commissions
to Authorized Firms who initiate and are responsible for purchases of shares
of the Fund by Eligible Plans of up to 1.00% of the amount invested in such
shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares acquired at their net asset value as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. The number of Fund shares to be issued to an investor exchanging
securities that are retained by the Portfolio will be the value of the
securities, as determined by the Portfolio's valuation procedures, divided by
the applicable net asset value per Fund share on the day such securities are
accepted. BMR may request that the Portfolio retain the securities for
investment purposes. Securities accepted for exchange may also be sold for the
account of their owner on the day of their receipt or as soon thereafter as
possible. The number of Fund shares acquired to be issued in exchange for
securities will be the aggregate value of or proceeds from the sale of such
securities, divided by the applicable net asset value per Fund share on the
day such proceeds are received. Eaton Vance will use reasonable efforts to
obtain the then current market price for such securities, but does not
guarantee the best price available. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional Tax-Managed Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional Tax-Managed Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an
application, makes a Statement of Intention to invest a specified amount over
a thirteen-month period, then out of the initial purchase (or subsequent
purchases if necessary) 5% of the dollar amount specified on the application
shall be held in escrow by the escrow agent in the form of shares (computed to
the nearest full share at the public offering price applicable to the initial
purchase hereunder) registered in the investor's name. All income dividends
and capital gains distributions on escrowed shares will be paid to the
investor or to the investor's order. When the minimum investment so specified
is completed, the escrowed shares will be delivered to the investor. If the
investor has an accumulation account the shares will remain on deposit under
the investor's account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such
difference in sales charge, the escrow agent will redeem an appropriate number
of the escrowed shares in order to realize such difference. Full shares
remaining after any such redemption together with any excess cash proceeds of
the shares so redeemed will be delivered to the investor or to the investor's
order by the escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of the Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation a firm other than the original firm is placing the orders, the
adjustment will be made only on those shares purchased through the firm then
handling the account.
---------------------------------------------------------------------------
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
---------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, on any business day 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 First
Data Investor Services Group. 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 First
Data Investor Services Group, the Fund will make payment for the net asset
value of the shares as of the date determined above, reduced by the amount of
any federal income tax required to be withheld.
MEETING REDEMPTIONS BY DISTRIBUTING PORTFOLIO SECURITIES. The Portfolio and
the Fund currently will meet redemptions in cash, but in the future may adopt
a policy of meeting redemption requests in whole or in part by distributing
appreciated securities held in the Portfolio chosen by the Investment Adviser
to reduce the realization of capital gains. At the request of a redeeming
investor who is to receive securities, the Portfolio might, at the discretion
of the Investment Adviser, provide the redeeming investor with a diversified
selection of securities. The Fund would only distribute readily marketable
securities valued pursuant to the Portfolio's valuation procedures. Even if an
in-kind redemption policy were adopted, many redemptions would still be paid
in cash. Sufficient quantities of appreciated securities may not be available
for distribution. Moreover, during periods of volatile market conditions, the
Fund could be expected to meet redemptions primarily through distributions of
cash. If a redeeming shareholder received securities, a procedure would be
implemented whereby the shareholder could elect to sell them through Eaton
Vance to a broker-dealer at no cost and at a price equal to the price used in
determining the redemption value of the distributed securities. This election
would need to be made in a letter of instruction which would be provided to
shareholders before the policy was implemented. Shareholders not making an
affirmative election to sell distributed securities to the designated broker-
dealer, would be required to take delivery of any securities distributed upon
a redemption of shares. Such shareholders could incur brokerage charges and
other costs and may be exposed to market risk in selling the distributed
securities.
ADDITIONAL REDEMPTION INFORMATION. To sell Fund 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 next computed after EVD, as
the Fund's agent, receives the order. It is the Authorized Firm's
responsibility to transmit promptly repurchase orders to EVD. Throughout this
Prospectus, the word "redemption" is generally meant to include a repurchase.
If shares were recently purchased, the proceeds of a redemption (or
repurchase) will not be sent until the check (including a certified or
cashier's check) received for the shares purchased has cleared. Payment for
shares tendered for redemption may be delayed up to 15 days from the purchase
date when the purchase check has not yet cleared. Redemptions or repurchases
may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $4,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. 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.
If shares have been purchased at net asset value with no initial sales charge
by virtue of the purchase having been in the amount of $1 million or more and
are redeemed within 12 months of purchase, a CDSC of 0.50% will be imposed on
such redemption. The CDSC will be retained by the Principal Underwriter.
The CDSC will be imposed on an amount equal to the lesser of the current
market value or the original purchase price of the shares redeemed.
Accordingly, no CDSC will be imposed on increases in account value above the
initial purchase price, including any dividends or distributions that have
been reinvested in additional shares. It will be assumed that redemptions are
made first from any shares in the shareholder's account that are not subject
to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. No initial
sales charge or CDSC will be imposed on Fund shares purchased by qualified
retirement plans. If a shareholder reinvests redemption proceeds within a 60-
day period and in accordance with the conditions set forth under "Eaton Vance
Shareholder Services -- Reinvestment Privilege," the shareholder's account
will be credited with the amount of any CDSC paid on such redeemed shares.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent certified public accountants.
Shortly after the end of each calendar year, the Fund will furnish all
shareholders with information necessary for preparing federal and state income
tax returns. Consistent with applicable law, duplicate mailings of shareholder
reports and certain other Fund information to shareholders residing at the
same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund, which
at all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
Each time a transaction takes place in a shareholder's account, the
shareholder will receive a statement showing complete details of the
transaction and the current balance in the account. (Under certain investment
plans, statements may be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT
PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A
CHECK FOR $500 OR MORE to First Data Investor Services Group.
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 First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each confirmation statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under Federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the SHARE OPTION until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains, if any, may be invested in
additional shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the
following funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of
Boston, Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves
and any fund in the Eaton Vance Traditional Group of Funds on the basis of the
net asset value per share of each fund at the time of the exchange (plus, in
the case of an exchange made within six months of the date of purchase of
shares subject to an initial sales charge, an amount equal to the difference,
if any, between the sales charge previously paid on the shares being exchanged
and the sales charge payable on the shares being acquired). Such exchange
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 Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of
the above funds without incurring the CDSC. The shares acquired in an exchange
may be subject to a CDSC upon redemption. For purposes of computing the CDSC
payable upon the redemption of shares acquired in an exchange, the holding
period of the original shares is added to the holding period of the shares
acquired in the exchange.
First Data Investors Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. Applications and
prospectuses of other funds are available from Authorized Firms or the
Principal Underwriter. The prospectus for each fund describes its investment
objectives and policies, and shareholders should obtain a prospectus and
consider these objectives and policies carefully before requesting an
exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net
asset value per share of each fund at the time of the exchange (plus, in the
case of an exchange made within six months of the date of purchase, an amount
equal to the difference, if any, between the sales charge previously paid on
the shares being exchanged and the sales charge payable on the Fund shares
being acquired). Any such exchange is subject to any restrictions or
qualifications set forth in the current prospectus of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group
provided that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call First Data Investor Services Group
at 800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as
the shares being exchanged. Neither the Fund, the Principal Underwriter nor
First Data Investor Services Group 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, and if such procedures are not followed, the Fund, the Principal
Underwriter or First Data Investor Services Group may be liable for any losses
due to unauthorized or fraudulent telephone instructions. Telephone
instructions will be tape recorded. In times of drastic economic or market
changes, a telephone exchange may be difficult to implement. An exchange may
result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $5,000 minimum
investment has been made, checks of $500 or more payable to the order of EV
Traditional Tax-Managed Growth Fund may be mailed directly to First Data
Investor Services Group 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 $500 or more may be made automatically each month or quarter from the
shareholder's bank account. The $5,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more made over a 13-month
period are eligible for reduced sales charges. See "How to Buy Fund Shares --
Statement of Intention and Escrow Agreement."
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when
the current market value of holdings (shares at current offering price), plus
new purchases, reaches $100,000 or more. Shares of the Eaton Vance funds
mentioned under "The Eaton Vance Exchange Privilege" may be combined under the
Statement of Intention and Right of Accumulation.
SYSTEMATIC WITHDRAWAL PLAN: The Fund will make available to shareholders
making a deposit of at least $20,000 a systematic withdrawal plan through
which they can make regular quarterly redemptions to yield them either a
specified dollar amount of at least $800 per year or a specified percentage of
net asset value of at least 4% but not more than 12% annually. See "How to
Redeem Fund Shares." These redemptive distributions will be paid in cash. Such
distributions would be paid at the option of each shareholder and would reduce
the number of Fund shares held by any shareholder electing to receive them.
Distributions would consist of an untaxed return of capital component and a
taxable capital gain or capital loss. The all-in tax rate on the amount of
cash received in such redemptions (equal to the capital gains rate multiplied
by the percentage of the distribution that is gain rather than return of
capital) would be substantially below the rate payable by mutual fund
investors on dividend distributions (equal to the ordinary income tax rate).
The maintenance of a systematic withdrawal plan concurrently with purchases of
additional shares would be disadvantageous because of the sales charge
included in such purchases.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS REPURCHASED OR REDEEMED SHARES
MAY REINVEST AT NET ASSET VALUE ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE
TO ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARE) IN SHARES OF THE FUND,
or, provided that the shares repurchased or redeemed have been held for at
least 60 days, in shares of any of the other funds offered by the Principal
Underwriter subject to an initial sales charge, provided that the reinvestment
is effected within 60 days after such repurchase or redemption, and the
privilege has not been used more than once in the prior 12 months. Shares are
sold to a reinvesting shareholder at the net asset value next determined
following timely receipt of a written purchase order by the Principal
Underwriter or by the fund the shares of which are to be purchased (or by such
fund's transfer agent). The privilege is also available to shareholders of the
funds listed under "The Eaton Vance Exchange Privilege" who wish to reinvest
such redemption or repurchase proceeds in shares of a Fund. If a shareholder
reinvests redemption proceeds within the 60-day period, the shareholder's
account will be credited with the amount of any CDSC paid on such redeemed
shares. To the extent that any shares of the Fund are sold at a loss and the
proceeds are reinvested in shares of the Fund (or other shares of the Fund are
acquired within the period beginning 30 days before and ending 30 days after
the date of the redemption), some or all of the loss generally will not be
allowed as a tax deduction. Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
The Portfolio will be managed toward an objective of achieving long-term,
after-tax returns in part by minimizing shareholders taxes. Because
distributions of net investment income and realized capital gains give rise to
shareholder taxes, the Portfolio will generally seek to select and manage its
investments so as to minimize net investment income and net realized gains and
associated distributions. The Fund can be expected to generally distribute a
lesser percentage of returns each year than other equity mutual funds. There
can be no assurance, however, that the Portfolio can be managed to avoid
taxable distributions. The Portfolio's ability to utilize various tax
management techniques may be curtailed or eliminated by future tax and other
legislation, regulations, administrative interpretations, or court decisions.
As of the date of this Prospectus, the Clinton administration had proposed
legislation that would have the effect of substantially eliminating the tax
advantages of short sales against-the-box, equity swaps, and certain options
transactions. If the legislation were to be enacted in the form proposed, use
of these techniques by the Portfolio would effectively be precluded.
DISTRIBUTIONS. To the extent that the Fund has net investment income and net
realized capital gains in any year, the Fund's present policy is to make (A)
at least one distribution annually (normally in December) of all or
substantially all of the investment income (if any) allocated to the Fund by
the Portfolio, less the Fund's direct and allocated expenses and (B) at least
one distribution annually of all or substantially all of the net realized
capital gains (if any) allocated to the Fund by the Portfolio (reduced by any
available capital loss carryforwards from prior years).
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the net asset value per share as of the close of business on
the record date.
The Fund's net investment income consists of the Fund's allocated 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. The Portfolio's net investment income consists of all income
accrued on the Portfolio's assets, less all actual and accrued expenses of the
Portfolio determined in accordance with generally accepted accounting
principles. The Fund's net realized capital gains, if any, consist of the net
realized capital gains (if any) allocated to the Fund by the Portfolio for tax
purposes, after taking into account any available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's net investment income, net short-term capital gains
and certain foreign exchange gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the
Fund. The Fund's distributions will generally not qualify for the dividends-
received deduction for corporate shareholders.
Capital gains referred to in clause (B) above, if any, realized by the
Portfolio and allocated to the Fund for the Fund's fiscal year, which ends on
October 31, will usually be distributed by the Fund prior to the end of
December. Distributions by the Fund of long-term capital gains allocated to
the Fund by the Portfolio are taxable to shareholders as long-term capital
gains, whether paid in cash or reinvested in additional shares of the Fund and
regardless of the length of time Fund shares have been owned by the
shareholder.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some
portion of the price back as a taxable distribution. The amount, timing and
character of the Fund's distributions to shareholders may be affected by
special tax rules governing the Portfolio's activities in options, futures and
forward foreign currency exchange transactions or certain other investments.
Certain distributions, if declared by the Fund in October, November or
December and paid the following January, will be taxable to shareholders as if
received on December 31 of the year in which they are declared.
Sales charges paid upon a purchase of shares of the Fund cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange
of the shares before the 91st day after their purchase to the extent shares of
the Fund or of another fund are subsequently acquired pursuant to the Fund's
reinvestment or exchange privilege. In addition, losses realized on a
redemption of Fund shares may be disallowed under certain "wash sale" rules if
within a period beginning 30 days before and ending 30 days after the date of
redemption other shares of the Fund are acquired. Any disregarded amounts will
result in an adjustment to the shareholder's tax basis in some or all of any
other shares acquired.
The 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. In satisfying these
requirements, the Fund will treat itself as owning its proportionate share of
each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compounded rate of
return (including capital appreciation/depreciation, and distributions paid
and reinvested) for the stated period and annualizing the result. The average
annual total return calculation assumes the maximum sales charge is deducted
from the initial $1,000 purchase order and that all distributions are
reinvested at net asset value on the reinvestment dates during the period. The
Fund may also publish annual and cumulative total return figures from time to
time. The Fund may use such total return figures, together with comparisons
with the Consumer Price Index, various domestic and foreign securities indices
and performance studies prepared by independent organizations, in
advertisements and in information furnished to present or prospective
shareholders. The Fund may use total return figures showing after-tax returns,
including comparisons to tax-deferred vehicles.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which
is based on the Fund's net asset value per share would be reduced if a sales
charge were taken into account. The Fund's performance may be compared in
publications to the performance of various indices and investments for which
reliable data is available, and to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior
period should not be considered a representation of what an investment may
earn or what the Fund's total return may be in any future period. The Fund's
investment results are based on many factors, including market conditions, the
composition of the security holdings of the Portfolio and the operating
expenses of the Fund and the Portfolio. Investment results also often reflect
the risks associated with the particular investment objective and policies of
the Fund and the Portfolio. Among others, these factors should be considered
when comparing the Fund's investment results to those of other mutual funds
and other investment vehicles. If the expenses related to the operation of the
Fund or the Portfolio are allocated to Eaton Vance, the Fund's performance
will be higher.
<PAGE>
EV TRADITIONAL
TAX-MANAGED
GROWTH FUND
PROSPECTUS
MARCH 20, 1996
EV TRADITIONAL TAX-MANAGED
GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL TAX-MANAGED GROWTH 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, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
[LOGO]
T-TGP
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
March 20, 1996
EV MARATHON TAX-MANAGED GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Marathon Tax-Managed Growth Fund (the "Fund"),
Tax-Managed Growth Portfolio (the "Portfolio") and certain other series of Eaton
Vance Mutual Funds Trust (the "Trust"). The Fund's Part II (the "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. This Statement of Additional Information is sometimes
referred herein to as the "SAI".
TABLE OF CONTENTS
PART I
Page
Additional Information about Investment Policies..................... 2
Investment Restrictions.............................................. 5
Trustees and Officers................................................ 7
Investment Adviser and Administrator................................. 10
Custodian............................................................ 13
Service for Withdrawal............................................... 13
Determination of Net Asset Value..................................... 14
Investment Performance............................................... 15
Taxes................................................................ 18
Portfolio Security Transactions...................................... 20
Other Information.................................................... 22
Independent Certified Public Accountants............................. 23
PART II
Fees and Expenses.................................................... a-1
Principal Underwriter................................................ a-2
Distribution Plan.................................................... a-2
Performance Information.............................................. a-5
Control Persons and Principal Holders of Securities.................. a-5
Financial Statements................................................. a-6
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 MARCH 20, 1996, 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. Capitalized terms used in this SAI and not
otherwise defined have the meanings given to them in the Fund's Prospectus. The
Fund is subject to the same investment policies as those of the Portfolio. The
Fund currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
FOREIGN SECURITIES. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable to
those applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of the Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
FOREIGN CURRENCY TRANSACTIONS. The value of foreign assets of the Portfolio as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations. Currency
exchange rates can also be affected unpredictably by intervention by U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad. The Portfolio
may conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market or
through entering into swaps, forward contracts, options or futures on currency.
On spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Portfolio at one
rate, while offering a lesser rate of exchange should the Portfolio desire to
resell that currency to the dealer.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the price
volatility of derivative instruments it holds. The Portfolio's success in using
derivative instruments to hedge portfolio assets depends on the degree of price
correlation between the derivative instruments and the hedged asset. Imperfect
correlation may be caused by several factors, including temporary price
disparities among the trading markets for the derivative instrument, the assets
underlying the derivative instrument and the Portfolio assets. Over-the-counter
("OTC") derivative instruments involve an enhanced risk that the issuer or
counterparty will fail to perform its contractual obligations. Some derivative
instruments are not readily marketable or may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in an exchange-traded derivative
instrument, which may make the contract temporarily illiquid and difficult to
price. Commodity exchanges may also establish daily limits on the amount that
the price of a futures contract or futures option can vary from the previous
day's settlement price. Once the daily limit is reached, no trades may be made
that day at a price beyond the limit. This may prevent the Portfolio from
closing out positions and limiting its losses. The staff of the Securities and
Exchange Commission (the "Commission") takes the position that purchased OTC
options, and assets used as cover for written OTC options, are subject to the
Portfolio's 15% limit on illiquid investments. However, with respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the formula
price. The Portfolio's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such contracts. For thinly
traded derivative instruments, the only source of price quotations may be the
selling dealer or counterparty. In addition, certain provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), limit the extent to which the
Portfolio may purchase and sell derivative instruments. The Portfolio will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Code for
maintaining the qualification of the Fund as a regulated investment company for
federal income tax purposes. See "Taxes".
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS. Transactions using forward contracts,
futures contracts and options (other than options that the Portfolio has
purchased) expose the Portfolio to an obligation to another party. The Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options or
futures contracts or forward contracts, or (2) cash, receivables, and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its custodian in
the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding forward contract, futures contract or
option is open, unless they are replaced with other appropriate assets. As a
result, the commitment of a large portion of the Portfolio's assets to cover or
segregated accounts could impede portfolio management or the Portfolio's ability
to meet redemption requests or other current obligations.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio may enter into
futures contracts, and options on futures contracts, traded on an exchange
regulated by the CFTC and on foreign exchanges, but, with respect to foreign
exchange-traded futures contracts and options on such futures contracts, only
if the Investment Adviser determines that trading on each such foreign exchange
does not subject the Portfolio to risks, including credit and liquidity risks,
that are materially greater than the risks associated with trading on
CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, the
Portfolio may use futures contracts on securities held in its Portfolio or on
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of the Investment Adviser, there is a sufficient
degree of correlation between price trends for the securities held by the
Portfolio and futures contracts based on other financial instruments, securities
indices or other indices, the Portfolio may also enter into such futures
contracts as part of its hedging strategy.
All call options on securities written by the Portfolio will be
covered. This means that, the Portfolio will own the securities subject to the
call option or an offsetting call option so long as the call option is
outstanding.
REPURCHASE AGREEMENTS. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. At no time will the Portfolio commit more
than 15% of its net assets to repurchase agreements which mature in more than
seven days and other illiquid securities. The Portfolio's repurchase agreements
will provide that the value of the collateral underlying the repurchase
agreement will always be at least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement, and will be marked to
market daily.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase
agreements. 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 assets.
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. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Portfolio's net asset value, this risk is not significantly
increased by entering into reverse repurchase agreements, in the opinion of the
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 Portfolio's yield.
At all times that a reverse repurchase agreement is outstanding, the
Portfolio will maintain cash or high grade liquid securities in a segregated
account at its custodian bank with a value at least equal to its obligation
under the agreement. Securities and other assets held in the segregated account
may not be sold while the reverse repurchase agreement is outstanding, unless
other suitable assets are substituted. Although the Investment Adviser 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 Portfolio's investment restriction
(1) set forth below.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally be lower than that of most other equity mutual funds and will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less). A 100% annual turnover rate would occur, for example, if all
the securities in the portfolio were replaced once in a period of one year. A
high turnover rate (100% or more) necessarily involves greater expenses to the
Portfolio.
LENDING PORTFOLIO SECURITIES. If the Investment Adviser decides to make
securities loans, the Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. Under
present regulatory policies of the Commission, such loans are required to be
secured continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to market value of the securities loaned, which will
be marked to market daily. Cash equivalents include certificates of deposit,
commercial paper and other short-term money market instruments. The financial
condition of the borrower will be monitored by the Investment Adviser on an
ongoing basis. 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 a fee, or all or a portion of the interest on investment of the
collateral. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. The Portfolio
would not have the right to vote any securities having voting rights during the
existence of a loan, but could call the loan in anticipation of an important
vote to be taken among holder of the securities or the giving or holding of
their consent on a material matter affecting the investment. If the Investment
Adviser decides to make securities loans, it is intended that the value of the
securities loaned would not exceed 1/3 of the Portfolio's total assets.
INVESTMENT RESTRICTIONS
Whenever an investment policy or investment restriction set forth in
the Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset.
The Fund and the Portfolio have each adopted the following investment
restrictions which may not be changed without the approval by the holders of a
majority of the outstanding voting securities of the Fund or the Portfolio, as
the case may be, which as used in this SAI means the lesser of (a) 67% or more
of the outstanding voting securities of the Fund or the Portfolio, as the case
may be, present or represented by proxy at a meeting if the holders of more than
50% of the outstanding voting securities of the Fund or the Portfolio are
present or represented at the meeting or (b) more than 50% of the outstanding
voting securities of the Fund or the Portfolio. Neither the Fund nor the
Portfolio may:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities or evidences of interest therein on
"margin," that is to say in a transaction in which it has borrowed all or a
portion of the purchase price and pledged the purchased securities or evidences
of interest therein as collateral for the amount so borrowed;
(3) Engage in the underwriting of securities; or
(4) 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), commodities or commodity contracts for the
purchase or sale of physical commodities;
(5) Make loans to other persons, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(6) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer, or
invest in more than 10% of the outstanding voting securities of any one issuer,
except obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies; or
(7) Concentrate its investments in any particular industry, but, if
deemed appropriate for the Fund's objective, up to 25% of the value of its
assets may be invested in any one industry.
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. Notwithstanding the investment policies and restrictions of the Portfolio,
the Portfolio may invest part of its assets in another investment company
consistent with the Investment Company Act of 1940 (the "1940 Act").
The Fund and the Portfolio have each adopted the following investment
policies which may be changed without shareholder or investor approval. Neither
the Fund nor the Portfolio may invest more than 15% of its net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements with a maturity longer than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust or the Portfolio, or their delegate, determines to be
liquid. Neither the Fund nor the Portfolio will purchase securities of any
issuer which has a record of less than three (3) years' continuous operation
including, however, in such three (3) years the operation of any predecessor
company or companies, partnership or individual enterprise if the issuer whose
securities are proposed as an investment for funds of the Trust has come into
existence as a result of a merger, consolidation, reorganization, or the
purchase of substantially all the assets of such predecessor company or
companies, partnership or individual enterprise, provided that nothing in this
provision shall prevent (a) the purchase of securities of a company
substantially all of whose assets are (i) securities of one or more companies
which have had a record of three (3) years' continuous operation, or (ii) assets
of an independent division of another company, which division has had a record
of three (3) years' continuous operation; (b) the purchase of securities of (i)
a public utility subject to supervision or regulation as to its rates or charges
by a commission or board or officer of the United States or of any state or
territory thereof, or of the government of Canada or of any province or
territory of Canada or (ii) companies operating or formed for the purpose of
operating pipe or transmission lines for the transmission of oil, gas or
electric energy or like products; provided that no security shall be purchased
pursuant to exception (a) or (b) of this provision if such purchase at the time
thereof will cause more than five per cent (5%) of the total assets of the Fund
(taken at market value) to be invested in securities of companies which would
not then be eligible for purchase but for those exceptions. Neither the Fund nor
the Portfolio will sell or contract to sell any security which it does not own
unless by virtue of its ownership of other securities it has at the time of sale
a right to obtain securities equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale is made upon the
same conditions. Neither the Fund nor the Portfolio will invest for the purpose
of exercising control or management of other companies. Neither the Fund nor the
Portfolio will purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
Neither the Fund nor the Portfolio will purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or is a member, officer,
director or trustee of the Investment Adviser of the Trust or the Portfolio, if
after the purchase of the securities of such issuer by the Fund or the Portfolio
one or more of such persons owns beneficially more than 1/2 of 1% of the shares
or securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
market value).
Neither the Fund nor the Portfolio will purchase an option on any
security if, after such transaction, more than 5% of its net assets, as measured
by the aggregate of all premiums paid for all such options held by the
Portfolio, would be so invested.
In order to permit the sale of shares of the Fund in certain states,
the Fund and the Portfolio may make commitments more restrictive than the
fundamental 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.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money; pledge
its assets; or make loans to other persons.
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 Eaton Vance's and BMR's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, Eaton Vance,
BMR, EVC or EV as defined in the 1940 Act by virtue of their affiliation with
any one or more of the Trust, the Portfolio Eaton Vance, BMR, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (62), President and Trustee of the Trust*
President and Chief Executive Officer of BMR, Eaton Vance, 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.
LANDON T. CLAY (70), President and Trustee of the Portfolio*
Chairman 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.
JAMES B. HAWKES (54), Vice President of the Portfolio and the Trust and Trustee
of the Trust*
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.
H. DAY BRIGHAM, JR. (69) Vice President of the Trust
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. 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 (61), 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 (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), 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
DUNCAN W. RICHARDSON (38), Vice President of the Portfolio
Vice President of Eaton Vance and EV since January 19, 1990 and of BMR since
August 11, 1992. Officer of various investment companies managed by Eaton Vance
or BMR. Mr. Richardson was elected Vice President of the Portfolio on October
23, 1995.
WILLIAM H. AHERN, JR. (36), Vice President of the Trust
Assistant Vice President of BMR, Eaton Vance and EV and an employee of Eaton
Vance since July 17, 1989. 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 (53), Vice President of the Trust
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 Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
M. KATHERINE KREIDER (35), Assistant Treasurer
Assistant Vice President of Eaton Vance, BMR and EV since February 5, 1996.
Senior Audit Manager (1993-1996), Audit Manager (1991-1993) -- Financial
Services Industry Practice, Deloitte & Touche (1987-1996). Officer of various
investment companies managed by Eaton Vance or BMR. Ms. Kreider was elected
Assistant Treasurer of the Trust on February 21, 1996.
THOMAS OTIS (64), 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 (60), 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 (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV 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 and of the Portfolio on October 23, 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 Energy Corporation. Mr. Rynne became an
officer of the Trust on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr. Woodbury
was elected Assistant Secretary of the Trust on June 19, 1995 and of the
Portfolio on October 23, 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 Board of Trustees
regarding the selection of the independent certified public 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 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. Neither the Portfolio
nor the Fund has a retirement plan for its Trustees.
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 received by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an
Investment Advisory Agreement dated October 23, 1995. BMR or Eaton Vance acts as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of over $16 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 cover
stocks ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities and tax-free U.S.
government and corporate bonds. Lloyd George Management, an investment
management firm based in Hong Kong, has advised Eaton Vance's international
equity funds since 1992. Lloyd George's staff includes 11 highly qualified
investment professionals who manage U.S. $1.3 billion. Lloyd George analysts
cover East Asia, the India subcontinent, Russia and Eastern Europe, Latin
America, Australia and New Zealand from offices in Hong Kong, London and Bombay.
Eaton Vance mutual funds are distributed by Eaton Vance Distributors both within
the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
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)
commission, 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 interest 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 registration 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, officer and investors
with respect thereto.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus.
The Investment Advisory Agreement with BMR remains in effect until
February 28, 1997. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1997 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. 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 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.
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 Trust under the 1940 Act, (iii) commission, 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 purpose and for distribution of the same to shareholders
and investors, and fees and expenses of registering and maintaining registration
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 registrar for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholder 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 officer
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. 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 of 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 March 1, 1996, 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. Clay,
Gardner, Hawkes and Otis, who are officers or Trustees of the Trust and/or the
Portfolio, are members of the EVC, Eaton Vance, BMR and EV organizations.
Messrs. Ahern, Murphy, O'Connor, Richardson, Rynne, Terry and Woodbury, and Ms.
Kreider and Ms. Sanders are officers of the Trust and/or the Portfolio and are
also members of the Eaton Vance, BMR and EV organizations. BMR will receive the
fees paid under the Investment Advisory Agreement.
EVC owns all of the stock of Energex Energy Corporation, which engages
in oil and gas exploration and development. In addition, Eaton Vance owns all
the stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC also owns 24% of the Class A shares of Lloyd George Management
(B.V.I.) Limited, a registered investment adviser. EVC owns all the stock of
Fulcrum Management, Inc. and MinVen, Inc., which are engaged in the development
of precious metal mining, venture investment and management. EVC, Eaton Vance,
BMR 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 will not be influenced by
existing or potential custodial or other relationships between the Trust or the
Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts 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 disburse all funds and performs various other ministerial duties
upon receipt of proper instruction 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 colles")d balances
for the week. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular quarterly payments of any permitted amount designated by the
shareholder (see "Eaton Vance Shareholder Services - Systematic Withdrawal Plan"
in the Fund's current 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 gain 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.
A shareholder may not have a withdrawal plan in effect at the same time
he or she 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 IBT (as agent and custodian for the Fund and the Portfolio) in the
manner described under "Valuing Fund Shares" in the Fund's current Prospectus.
The Fund and Portfolio will be closed for business and will not price their
shares 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 Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market conditions.
Securities listed on foreign or U.S. securities exchanges or in the NASDAQ
National Market System generally are valued at closing sale prices or, if there
were no sales, at the mean between the closing bid and asked prices therefor on
the exchange where such securities are principally traded or on such National
Market System. Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices. An
option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of
a sale, at the mean between the last bid and asked prices. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short-term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each day the New York Stock Exchange
(the "Exchange") is open for trading ("Portfolio Business Day") as of the close
of regular trading on the Exchange (the "Portfolio Valuation Time"). The value
of each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represents that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, that amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's share are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Portfolio's net asset value (unless the Portfolio deems that such events would
materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the
Portfolio will be valued in U.S. dollars; such values will be computed by the
custodian based on foreign currency exchange rate quotations supplied by Reuters
Information Service.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period. For further information concerning the
total return of the Fund, see "Performance Information" in Part II.
The Fund may use total return figures showing after-tax returns,
including comparisons to tax-deferred vehicles such as Individual Retirement
Accounts ("IRAs") and variable annuities. In calculating after-tax returns, the
Fund will, in general, assume that its shareholders are U.S. individual
taxpayers subject to federal income taxes at the highest marginal rate then
applicable to ordinary income and long-term capital gains. After-tax returns may
also be calculated using different tax rate assumptions and taking into account
state and local income taxes as well as federal taxes. In calculating after-tax
returns, distributions made by the Fund are assumed to be reduced by the amount
of taxes payable on the distribution, and the after-tax proceeds of the
distribution are reinvested in the Fund at net asset value on the reinvestment
date.
The Fund's total return may be compared to the Consumer Price Index and
various domestic and foreign securities indices, for example: Standard & Poor's
Index of 400 Common Stocks, Standard & Poor's Index of 500 Common Stocks,
Merrill Lynch U.S. Treasury (15-year plus) Index, Lehman Brothers
Government/Corporate Bond Index, the Dow Jones Industrial Average and Morgan
Stanley Global Equity. The Fund's total return and comparisons with these
indices may be used in advertisements and in information furnished to present or
prospective shareholders. The Fund's performance may differ from that of other
investors in the Portfolio, and other investment companies.
Information used in advertisements and in materials furnished to
present or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations (e.g. Ibbotson Associates,
Standard & Poor's Ratings Group, Merrill Lynch Private Client Group, Bloomberg,
L.P., Dow Jones & Company, Inc., and the Federal Reserve Board) or included in
various publications (e.g. The Wall Street Journal, Barron's and The Decade:
Wealth of Investments in U.S. Stocks, Bonds, Bills & Inflation) reflecting the
investment performance or return achieved by various classes and types of
investments (e.g. common stocks, small company stocks, long-term corporate
bonds, long-term government bonds, intermediate-term government bonds, U.S.
Treasury bills) over various periods of time. This information may be used to
illustrate the benefits of long-term investments in common stocks.
Information about the allocation and holdings of investments in the
Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
Evaluations of the Fund's performance made by independent sources
(e.g., Lipper Analytical Services, Inc., CDA/Weisenberger and Morningstar, Inc.)
may be used in advertisements and in information furnished to present or
prospective shareholders.
The Fund may provide information about Eaton Vance, its affiliates and
other investment advisers to the funds in the Eaton Vance Family of Funds in
sales material or advertisements provided to investors or prospective investors.
Such material or advertisements may also provide information on the use of
investment professionals by such investors.
Information used in advertisements and in materials furnished to
present and prospective shareholders may include statements or illustrations
relating to the appropriateness of types of securities and/or mutual funds which
may be employed to meet specific financial goals, such as (1) funding
retirement, (2) paying for children's education, and (3) financially supporting
aging parents. These three financial goals may be referred to in such
advertisements or materials as the "Triple Squeeze".
HYPOTHETICAL RETURNS
The following analysis compares the after-tax returns achieved from
three hypothetical investments with identical pre-tax returns of 10% per year.
The first hypothetical investment is a tax- managed equity mutual fund whose
returns consist entirely of deferred gains (no dividend income and no realized
capital gains). Note - It is possible the Fund will distribute some net
investment income and capital gains in some years, so the hypothetical may not
be entirely applicable. The second hypothetical investment is a conventional
equity mutual fund, managed without regard to investor tax considerations, whose
10% annual returns consist of 2% return from dividend income and 8% return from
realized capital gains, three-quarters of which are long-term gains and
one-quarter of which are short-term gains. The third hypothetical investment is
a variable annuity fund, which by its structure defers taxation on all income
and gains. The third hypothetical investment is a variable annuity fund, which
by its structure defers taxation on all income and gains. The investor is amused
to pay federal taxes at the highest rate applicable to individual income and
gains, including the effect of the itemized deduction phaseout. this rate is
40.8% for dividend income and short-term capital gains and 29.2% for long-term
capital gains. The investor is assumed to pay no state or local taxes.
An initial investment of $10,000 in each of the three hypothetical
funds would grow in value to:
Conventional Equity Variable
Tax-Managed Fund Mutual Fund Annuity Fund
---------------- ------------------- ------------
After 10 years: $25,937 $18,942 $25,937
After 20 years: $67,275 $35,881 $67,275
The returns from the tax-managed fund and the variable annuity fund are
the same since the pre-tax returns are assumed to be identical and no taxes have
been paid in either case. The returns from the conventional fund are
substantially lower due to the taxes paid each year in connection with the funds
dividend income and realized long-term and short-term capital gains.
If the hypothetical fund investments were each to be sold, the amount
realized from the sale, net of taxes, would be:
Conventional Equity Variable
Tax-Managed Fund Mutual Fund Annuity Fund
---------------- ------------------- ------------
After 10 years: $21,286 $18,942 $19,437
After 20 years: $50,558 $35,881 $43,914
The proceeds from selling the conventional fund, net of taxes, equals
the value of the shares (from above), since no gain is recognized at sale. The
net-of-tax proceeds of the tax-managed fund position is reduced by the capital
gains taxes due on the accumulated gain. The net-of-tax proceeds of the variable
annuity is reduced by taxes on the accumulated income and gain, all of which is
taxed as ordinary income.
If the holder of the hypothetical fund investments were to die, the
value of the investment passing to the estate would be:
Conventional Equity Variable
Tax-Managed Fund Mutual Fund Annuity Fund
---------------- ------------------- ------------
After 10 years: $25,937 $18,942 $19,437
After 20 years: $67,275 $35,881 $43,914
The value of the tax-managed fund and the conventional fund would pass
through to the estate without being taxed and their tax basis would be adjusted
upward to the value at the time of death. The value of the variable annuity
would be reduced by taxes at the ordinary income rate on the accumulated income
and gain, as if the investor had sold the position.
For additional information, charts and illustrations relating to the
Fund's investment performance, see "Performance Information" in Part II.
TAXES
See also "Distribution and Taxes" in the Fund's current Prospectus.
The Fund, as a series of a Massachusetts business trust, will be
treated as a separate entity for accounting and tax purposes. The Fund intends
to elect to be treated, and to qualify each year as a regulated investment
company ("RIC") under the Code. Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its assets
and to distribute all of its net investment income and net realized capital
gains in accordance with the timing requirements imposed by the Code, so as to
avoid any federal income or excise tax on the Fund. Because the Fund invests its
assets in the Portfolio, the Portfolio normally must satisfy the applicable
source of income and diversification requirements in order for the Fund to
satisfy them. The Portfolio will allocate at least annually among its investors,
including the Fund, each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit. The Portfolio will make allocations to the Fund
in accordance with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the Fund to satisfy the tax distribution requirements that apply to the
Fund and that must be satisfied in order to avoid federal income and/or excise
tax on the Fund. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund will be deemed (i) to own its proportionate
share of each of the assets of the Portfolio and (ii) to be entitled to the
gross income of the Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards, and 100% of any income and capital gains from the prior year (as
previously computed) that was not paid out during such year and on which the
Fund was not taxed. Further, under current law, provided that the Fund qualifies
as a RIC for federal income tax purposes and the Portfolio is treated as a
partnership for Massachusetts and federal tax purposes, neither the Fund nor the
Portfolio is liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Portfolio and
allocated to the Fund in connection with the Portfolio's investments in foreign
securities and certain options, futures or forward contracts or foreign currency
may be treated as ordinary income and losses under special tax rules. Certain
options, futures or forward contracts of the Portfolio may be required to be
marked to market (i.e., treated as if closed out) on the last day of each
taxable year, and any gain or loss realized with respect to these contracts may
be required to be treated as 60% long-term and 40% short-term gain or loss.
Positions of the Portfolio in securities and offsetting options, swaps, futures
or forward contracts may be treated as "straddles" and be subject to other
special rules that may, upon allocation of the Portfolio's income, gain or loss
to the Fund, affect the amount, timing and character of the Fund's distributions
to shareholders. Certain uses of foreign currency and foreign currency
derivatives such as options, futures, forward contracts and swaps and investment
by the Portfolio in certain "passive foreign investment companies" may be
limited or a tax election may be made, if available, in order to preserve the
Fund's qualification as a RIC or avoid imposition of a tax on the Fund.
The Portfolio will allocate at least annually to the Fund and its other
investors their respective distributive shares of any net investment income and
net capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's fiscal year on certain
options and futures transactions that are required to be marked-to-market). Such
amounts will be distributed by the Fund to its shareholders in cash or
additional shares, as they elect. Shareholders of the Fund will be advised of
the nature of the distributions.
Certain investors in the Portfolio, including RICs, have acquired
interests in the Portfolio by contributing securities. Due to tax
considerations, during the first five years following the contribution of
securities to the Portfolio by an investor, such securities will not be
distributed to any investor other than the investor who contributed those
securities. Investors who acquire an interest in the Portfolio by contributing
securities and who redeem that interest within five years thereafter will
generally receive back one or more of the securities they contributed. In
partial redemptions by such investors during this period, the Portfolio will
attempt to accommodate requests to distribute initially those contributed
securities and share lots with the highest cost basis.
The Portfolio has significant holdings of highly appreciated securities
that were contributed to the Portfolio by investors other than the Fund. If such
securities were to be sold, the resulting capital gain would be allocated
disproportionately among the Portfolio's investors, with the result that the
Fund would not be subject to taxation on any gain arising prior to the
contribution of the securities to the Portfolio.
Distributions by the Fund of the excess of net long-term capital gains
over short-term capital losses earned by the Portfolio and allocated to the
Fund, taking into account any capital loss carryforwards that may be available
to the Fund in years after its first taxable year, are taxable to shareholders
of the Fund as long-term capital gains, whether received in cash or in
additional shares and regardless of the length of time their shares have been
held. Certain distributions, if declared in October, November or December and
paid the following January, will be taxed to shareholders as if received on
December 31 of the year in which they are declared.
Any loss realized upon the redemption or exchange of shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. All or a portion of a loss realized upon a taxable disposition of
Fund shares may be disallowed under "wash sale" rules if other Fund shares are
purchased (whether through reinvestment of dividends or otherwise) within 30
days before or after the disposition. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
The Fund will not be subject to Massachusetts income, corporate excise
or franchise taxation as long as it qualifies as a RIC under the Code.
Amounts paid by the Fund to individuals and certain other shareholders
who have not provided the Fund with their correct taxpayer identification number
and certain required certifications, as well as shareholders with respect to
whom the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges) at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and
other foreign entities generally will be subject to a U.S. withholding tax at a
rate of 30% on the Fund's distributions from its ordinary income and the excess
of its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax treaty. Distributions from
the excess of the Fund's net long-term capital gain over its net short-term
capital loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. Federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not describe many of the tax rules
applicable to IRAs nor does it address the special tax rules applicable to
certain other classes of investors, such as other retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to these or other special tax rules
that may apply in their particular situations, as well as the state, local or
foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions
by the Portfolio, including the selection of the market and the broker-dealer
firm, are made by BMR. BMR is also responsible for the execution of transactions
for all other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of
certain other accounts managed by it for execution with many broker-dealer
firms. BMR uses its best efforts to obtain execution of portfolio transactions
at prices which are advantageous to the Portfolio and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, BMR will use its best judgment in evaluating the terms
of a transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the general
execution and operational capabilities of the broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the broker-dealer, the value
and quality of services rendered by the broker-dealer in other transactions, and
the reasonableness of the commission, if any. Transactions on stock exchanges
and other agency transactions involve the payment by the Portfolio of negotiated
brokerage commissions. Such commissions vary among different broker-dealer
firms, and a particular broker-dealer may charge different commissions according
to such factors as the difficulty and size of the transaction and the volume of
business done with such broker-dealer. Transactions in foreign securities
usually involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States. There is generally no stated commission
in the case of securities traded in the over-the-counter markets, but the price
paid or received by the Portfolio usually includes an undisclosed dealer markup
or markdown. In an underwritten offering the price paid by the Portfolio
includes a disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions paid on portfolio transactions will, in the
judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and BMR's other clients in part for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934,
a broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction or
on the basis of overall responsibilities which BMR and its affiliates have for
accounts over which it exercises investment discretion. In making any such
determination, BMR will not attempt to place a specific dollar value on the
brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice 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-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, BMR may receive Research Services from broker-dealer firms with
which BMR places the portfolio transactions of the Portfolio and from third
parties with which these broker-dealers have arrangements. These Research
Services may 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 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 of the Portfolio at advantageous
prices and at reasonably competitive commission rates or spreads, 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 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 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 Portfolio that the benefits available from BMR's
organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions. For the brokerage commissions paid by the Portfolio
on portfolio transactions, see "Fees and Expenses" in Part II.
OTHER INFORMATION
On July 10, 1995, the Trust changed its name from Eaton Vance
Government Obligations Trust to Eaton Vance Mutual Funds Trust. The Trust is
organized as a business trust under the laws of the Commonwealth of
Massachusetts under a Declaration of Trust dated May 7, 1984, as amended. Eaton
Vance, pursuant to its agreement with the Trust, controls the use of the words
"Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton Vance" or
"EV" in other connections and for other purposes.
The Declaration of Trust may be amended by the Trustees when authorized
by a majority of the outstanding voting securities of the Trust 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 rights
or interests of shareholders or if they deem it necessary to conform the
Declaration to the requirements of federal laws 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 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 shareholder's meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust 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 Bylaws 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 set 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
holding office have been elected by investors. In such an event the Trustees of
the Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment
of the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
or the 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 CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are
the independent certified public accountants of the Fund, 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 Portfolio see "Financial
Statements" in Part II.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON TAX-MANAGED GROWTH
FUND. The Fund became a series of the Trust on October 23, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
No fees paid to date.
DISTRIBUTION PLAN
The Fund has not made any sales commission payments to the Principal
Underwriter under the Plan to date. The Fund expects to begin making service fee
payments during the quarter ending June 30, 1997.
PRINCIPAL UNDERWRITER
No fees paid to date.
BROKERAGE
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.) For the fiscal year ending October 31, 1996, it is estimated
that the noninterested Trustees of the Trust and the Portfolio will receive the
following compensation in their capacities as Trustees of the Trust and the
Portfolio and, during the one year period ended September 30, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees of the other funds in the Eaton
Vance fund complex(1):
Estimated Estimated Total Compensation
Compensation Compensation from Trust and
Name from Fund from Portfolio Fund Complex
- ---- --------- -------------- ------------
Donald R. Dwight $50 $1,600 $135,000(2)
Samuel L. Hayes, III 50 1,600 150,000(3)
Norton H. Reamer 50 1,600 135,000
John L. Thorndike 50 1,600 140,000
Jack L. Treynor 50 1,600 140,000
(1) The Eaton Vance fund complex consists of 219 registered investment companies
or series thereof.
(2) Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
The Principal Underwriter is a wholly-owned subsidiary of Eaton Vance.
Under the Distribution Agreement the Principal Underwriter acts as principal in
selling shares of the Fund. The expenses of printing copies of prospectuses used
to offer shares to financial service firms ("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
states securities laws is borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the plan relating
to such payments are included in the Distribution Agreement. The Distribution
Agreement is renewable annually by the Trust's Board of Trustees (including a
majority of its Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Fund's
Distribution Plan or the Distribution Agreement), may be terminated on sixty
days' notice either by such Trustees or by vote of a majority of the outstanding
voting securities of the Fund or on six months' notice by the Principal
Underwriter and is automatically terminated upon assignment. The Principal
Underwriter distributes Fund shares on a "best efforts" basis under which it is
required to take and pay for only such shares as may be sold. The Fund reserves
the right to suspend or limit the offering of shares to the public at any time.
The Fund has authorized the Principal Underwriter to act as its agent
in repurchasing shares and will pay the Principal Underwriter $2.50 for each
repurchase transaction handled by the Principal Underwriter. The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Fund will exceed the amounts paid therefor by the Fund.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and
is designed to meet the requirements of Rule 12b-1 under the 1940 Act and the
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,
the expenses of the Fund and the Portfolio accrued and allocated to the Fund on
such day, income on portfolio investments of the Portfolio accrued and allocated
to the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of a liability under such accounting principles have not been satisfied.
The 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 Distributions 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 or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of 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 Group of Funds which
result in a reduction of Uncovered Distribution Charges), changes in the level
of the net assets of the Fund, and changes in the interest rate used in the
calculation of the distribution fee under the Plan.
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 1% 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 many other investment companies pursuant to Rule 12b-1. Although the
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay sales commissions 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 sale of Fund shares and through the sales
commissions and distribution fees and contingent deferred sales charges paid to
the Principal Underwriter. The Eaton Vance organization may be considered to
have realized a profit in distributing shares of the Fund if at any point in
time the aggregate amounts theretofore received by the Principal Underwriter
from the Fund 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.
Pursuant to Rule 12b-1, the Plan has been approved by the Fund's
initial sole shareholder (Eaton Vance Management) and by the Board of Trustees
of the Trust as required by Rule 12b-1. The Plan provides that it shall continue
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 the
Distribution Agreement may each 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. 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. Under the Plan the President or a Vice President of the
Trust shall provide to the Trustees for their review, and the Trustees shall
review at least quarterly, a written report of the amount expended under the
Plan and the purposes for which such expenditures were made. The Plan may not be
amended to increase materially the payments described therein without approval
of the shareholders of the Fund, and all material amendments of the Plan must
also be approved by the Trustees as required by Rule 12b-1. So long as the Plan
is in effect, the selection and nomination of Trustees who are not interested
persons of the Trust shall be committed to the discretion of the Trustees who
are not such interested persons.
The Trustees 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 Authorized Firms under the Plan would 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.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total
return on a hypothetical investment of $1,000 in the Fund covering the 1, 5, and
10 year periods ended October 31, 1995. The total return for the period prior to
the Fund's commencement of operations reflects the Portfolio's total return (or
that of its predecessor) adjusted to reflect any applicable Fund contingent
deferred sales charge ("CDSC"). The total return for such prior period has not
been adjusted to reflect the Fund's distribution fees and certain other
expenses.
VALUE OF $1,000 INVESTMENT
<TABLE>
<CAPTION>
Value of Value of
Investment Investment Total Return Total Return
Before CDSC After CDSC* Before deducting CDSC After deducting CDSC*
on 10/31/95 on 10/31/95 Cumulative Annualized Cumulative Annualized
----------- ----------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C>
10 years
ended
10/31/95 $4,128.69 $4,128.69 312.87% 15.22% 312.87% 15.23%
5 years
ended
10/31/95 $2,355.07 $2,335.07 135.51% 18.65% 133.51% 18.48%
1 year
ended
10/31/95 $1,325.60 $1,275.60 32.56% 32.56% 27.56% 27.56%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ------------------
*No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of October 23, 1995, Eaton Vance owned one share of the Fund, being
the only share of the Fund outstanding on such date. Eaton Vance is a
Massachusetts business trust and a wholly-owned subsidiary of EVC.
<PAGE>
FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 23, 1995
ASSETS:
Cash............................................................. $100,010
Deferred organization expenses................................... 6,850
--------
Total assets........................................... $106,860
LIABILITIES:
Accrued organization expenses.................................... 6,850
--------
NET ASSETS....................................................... $100,010
--------
NOTES:
(1) Tax-Managed Growth Portfolio (the "Portfolio") was organized as a New York
Trust on October 23, 1995 and has been inactive since that date, except for
matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of interests
therein at the purchase price of $100,000 to Eaton Vance Management and the
sale of interest therein at the purchase price of $10 to Boston Management &
Research (the "Initial Interests").
(2) Organization expenses are being deferred and will be amortized on a
straight-line basis over a period not to exceed five years, commencing on
the effective date of the Portfolio's initial offering of its interests. The
amount paid by the Portfolio on any withdrawal by the holders of the Initial
Interests of any of the respective Initial Interests will be reduced by a
portion of any unamortized organization expenses, determined by the
proportion of the amount of the Initial Interests withdrawn to the Initial
Interests then outstanding.
(3) At 4:00 p.m., New York City time, on each business day of the Portfolio, the
value of an investor's interest in the Portfolio is equal to the product of
(1) the aggregate net asset value of the Portfolio multiplied by (ii) the
percentage representing that investor's share of the aggregate interest in
the Portfolio effective for that day.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of
Tax-Managed Growth Portfolio:
We have audited the accompanying statement of assets and liabilities of
Tax-Managed Growth Portfolio (a New York Trust) as of October 23, 1995. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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, such statement of assets and liabilities presents
fairly, in all material respects, the financial position of Tax-Managed Growth
Portfolio as of October 23, 1995, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 24, 1995
<PAGE>
EV MARATHON
TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
MARCH 20, 1996
EV MARATHON
TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & touche LLP, 125 Summer Street, Boston, MA 02110
M-TGSAI
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
March 20, 1996
EV TRADITIONAL TAX-MANAGED GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Traditional Tax-Managed Growth Fund (the "Fund"),
Tax-Managed Growth Portfolio (the "Portfolio") and certain other series of Eaton
Vance Mutual Funds Trust (the "Trust"). The Fund's Part II (the "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. This Statement of Additional Information is sometimes
referred herein to as the "SAI".
TABLE OF CONTENTS
PART I
Page
Additional Information about Investment Policies.................. 2
Investment Restrictions........................................... 5
Trustees and Officers............................................. 7
Investment Adviser and Administrator.............................. 10
Custodian......................................................... 13
Service for Withdrawal............................................ 13
Determination of Net Asset Value.................................. 14
Investment Performance............................................ 15
Taxes ......................................................... 18
Portfolio Security Transactions................................... 20
Other Information................................................. 22
Independent Certified Public Accountants.......................... 23
PART II
Fees and Expenses................................................. a-1
Services for Accumulation......................................... a-2
Principal Underwriter............................................. a-2
Service Plan...................................................... a-4
Performance Information........................................... a-5
Control Persons and Principal Holders of Securities............... a-5
Financial Statements.............................................. a-6
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 MARCH 20, 1996, 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. Capitalized terms used in this SAI and not
otherwise defined have the meanings given to them in the Fund's Prospectus. The
Fund is subject to the same investment policies as those of the Portfolio. The
Fund currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
FOREIGN SECURITIES. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable to
those applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of the Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
FOREIGN CURRENCY TRANSACTIONS. The value of foreign assets of the Portfolio as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations. Currency
exchange rates can also be affected unpredictably by intervention by U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad. The Portfolio
may conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market or
through entering into swaps, forward contracts, options or futures on currency.
On spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Portfolio at one
rate, while offering a lesser rate of exchange should the Portfolio desire to
resell that currency to the dealer.
RISKS ASSOCIATED WITH DERIVATIVE INSTRUMENTS. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the price
volatility of derivative instruments it holds. The Portfolio's success in using
derivative instruments to hedge portfolio assets depends on the degree of price
correlation between the derivative instruments and the hedged asset. Imperfect
correlation may be caused by several factors, including temporary price
disparities among the trading markets for the derivative instrument, the assets
underlying the derivative instrument and the Portfolio assets. Over-the-counter
("OTC") derivative instruments involve an enhanced risk that the issuer or
counterparty will fail to perform its contractual obligations. Some derivative
instruments are not readily marketable or may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in an exchange-traded derivative
instrument, which may make the contract temporarily illiquid and difficult to
price. Commodity exchanges may also establish daily limits on the amount that
the price of a futures contract or futures option can vary from the previous
day's settlement price. Once the daily limit is reached, no trades may be made
that day at a price beyond the limit. This may prevent the Portfolio from
closing out positions and limiting its losses. The staff of the Securities and
Exchange Commission (the "Commission") takes the position that purchased OTC
options, and assets used as cover for written OTC options, are subject to the
Portfolio's 15% limit on illiquid investments. However, with respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the formula
price. The Portfolio's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such contracts. For thinly
traded derivative instruments, the only source of price quotations may be the
selling dealer or counterparty. In addition, certain provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), limit the extent to which the
Portfolio may purchase and sell derivative instruments. The Portfolio will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Code for
maintaining the qualification of the Fund as a regulated investment company for
federal income tax purposes. See "Taxes".
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS. Transactions using forward contracts,
futures contracts and options (other than options that the Portfolio has
purchased) expose the Portfolio to an obligation to another party. The Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options or
futures contracts or forward contracts, or (2) cash, receivables, and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its custodian in
the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold
while the position in the corresponding forward contract, futures contract or
option is open, unless they are replaced with other appropriate assets. As a
result, the commitment of a large portion of the Portfolio's assets to cover or
segregated accounts could impede portfolio management or the Portfolio's ability
to meet redemption requests or other current obligations.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS. The Portfolio may enter into
futures contracts, and options on futures contracts, traded on an exchange
regulated by the CFTC and on foreign exchanges, but, with respect to foreign
exchange-traded futures contracts and options on such futures contracts, only if
the Investment Adviser determines that trading on each such foreign exchange
does not subject the Portfolio to risks, including credit and liquidity risks,
that are materially greater than the risks associated with trading on
CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, the
Portfolio may use futures contracts on securities held in its Portfolio or on
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of the Investment Adviser, there is a sufficient
degree of correlation between price trends for the securities held by the
Portfolio and futures contracts based on other financial instruments, securities
indices or other indices, the Portfolio may also enter into such futures
contracts as part of its hedging strategy.
All call options on securities written by the Portfolio will be
covered. This means that, the Portfolio will own the securities subject to the
call option or an offsetting call option so long as the call option is
outstanding.
REPURCHASE AGREEMENTS. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. At no time will the Portfolio commit more
than 15% of its net assets to repurchase agreements which mature in more than
seven days and other illiquid securities. The Portfolio's repurchase agreements
will provide that the value of the collateral underlying the repurchase
agreement will always be at least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement, and will be marked to
market daily.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase
agreements. 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 assets.
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. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Portfolio's net asset value, this risk is not significantly
increased by entering into reverse repurchase agreements, in the opinion of the
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 Portfolio's yield.
At all times that a reverse repurchase agreement is outstanding, the
Portfolio will maintain cash or high grade liquid securities in a segregated
account at its custodian bank with a value at least equal to its obligation
under the agreement. Securities and other assets held in the segregated account
may not be sold while the reverse repurchase agreement is outstanding, unless
other suitable assets are substituted. Although the Investment Adviser 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 Portfolio's investment restriction
(1) set forth below.
PORTFOLIO TURNOVER. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally be lower than that of most other equity mutual funds and will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less). A 100% annual turnover rate would occur, for example, if all
the securities in the portfolio were replaced once in a period of one year. A
high turnover rate (100% or more) necessarily involves greater expenses to the
Portfolio.
LENDING PORTFOLIO SECURITIES. If the Investment Adviser decides to make
securities loans, the Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. Under
present regulatory policies of the Commission, such loans are required to be
secured continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to market value of the securities loaned, which will
be marked to market daily. Cash equivalents include certificates of deposit,
commercial paper and other short-term money market instruments. The financial
condition of the borrower will be monitored by the Investment Adviser on an
ongoing basis. 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 a fee, or all or a portion of the interest on investment of the
collateral. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. The Portfolio
would not have the right to vote any securities having voting rights during the
existence of a loan, but could call the loan in anticipation of an important
vote to be taken among holder of the securities or the giving or holding of
their consent on a material matter affecting the investment. If the Investment
Adviser decides to make securities loans, it is intended that the value of the
securities loaned would not exceed 1/3 of the Portfolio's total assets.
INVESTMENT RESTRICTIONS
Whenever an investment policy or investment restriction set forth in
the Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset.
The Fund and the Portfolio have each adopted the following investment
restrictions which may not be changed without the approval by the holders of a
majority of the outstanding voting securities of the Fund or the Portfolio, as
the case may be, which as used in this SAI means the lesser of (a) 67% or more
of the outstanding voting securities of the Fund or the Portfolio, as the case
may be, present or represented by proxy at a meeting if the holders of more than
50% of the outstanding voting securities of the Fund or the Portfolio are
present or represented at the meeting or (b) more than 50% of the outstanding
voting securities of the Fund or the Portfolio. Neither the Fund nor the
Portfolio may:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities or evidences of interest therein on
"margin," that is to say in a transaction in which it has borrowed all or a
portion of the purchase price and pledged the purchased securities or evidences
of interest therein as collateral for the amount so borrowed;
(3) Engage in the underwriting of securities; or
(4) 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), commodities or commodity contracts for the
purchase or sale of physical commodities;
(5) Make loans to other persons, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(6) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer, or
invest in more than 10% of the outstanding voting securities of any one issuer,
except obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies; or
(7) Concentrate its investments in any particular industry, but, if
deemed appropriate for the Fund's objective, up to 25% of the value of its
assets may be invested in any one industry.
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. Notwithstanding the investment policies and restrictions of the Portfolio,
the Portfolio may invest part of its assets in another investment company
consistent with the Investment Company Act of 1940 (the "1940 Act").
The Fund and the Portfolio have each adopted the following investment
policies which may be changed without shareholder or investor approval. Neither
the Fund nor the Portfolio may invest more than 15% of its net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements with a maturity longer than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust or the Portfolio, or their delegate, determines to be
liquid. Neither the Fund nor the Portfolio will purchase securities of any
issuer which has a record of less than three (3) years' continuous operation
including, however, in such three (3) years the operation of any predecessor
company or companies, partnership or individual enterprise if the issuer whose
securities are proposed as an investment for funds of the Trust has come into
existence as a result of a merger, consolidation, reorganization, or the
purchase of substantially all the assets of such predecessor company or
companies, partnership or individual enterprise, provided that nothing in this
provision shall prevent (a) the purchase of securities of a company
substantially all of whose assets are (i) securities of one or more companies
which have had a record of three (3) years' continuous operation, or (ii) assets
of an independent division of another company, which division has had a record
of three (3) years' continuous operation; (b) the purchase of securities of (i)
a public utility subject to supervision or regulation as to its rates or charges
by a commission or board or officer of the United States or of any state or
territory thereof, or of the government of Canada or of any province or
territory of Canada or (ii) companies operating or formed for the purpose of
operating pipe or transmission lines for the transmission of oil, gas or
electric energy or like products; provided that no security shall be purchased
pursuant to exception (a) or (b) of this provision if such purchase at the time
thereof will cause more than five per cent (5%) of the total assets of the Fund
(taken at market value) to be invested in securities of companies which would
not then be eligible for purchase but for those exceptions. Neither the Fund nor
the Portfolio will sell or contract to sell any security which it does not own
unless by virtue of its ownership of other securities it has at the time of sale
a right to obtain securities equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale is made upon the
same conditions. Neither the Fund nor the Portfolio will invest for the purpose
of exercising control or management of other companies. Neither the Fund nor the
Portfolio will purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
Neither the Fund nor the Portfolio will purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or is a member, officer,
director or trustee of the Investment Adviser of the Trust or the Portfolio, if
after the purchase of the securities of such issuer by the Fund or the Portfolio
one or more of such persons owns beneficially more than 2 of 1% of the shares or
securities or both (all taken at market value) of such issuer and such persons
owning more than 2 of 1% of such shares or securities together own beneficially
more than 5% of such shares or securities or both (all taken at market value).
Neither the Fund nor the Portfolio will purchase an option on any
security if, after such transaction, more than 5% of its net assets, as measured
by the aggregate of all premiums paid for all such options held by the
Portfolio, would be so invested.
In order to permit the sale of shares of the Fund in certain states,
the Fund and the Portfolio may make commitments more restrictive than the
fundamental 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.
Although permissible under the Fund's investment restrictions, the Fund
has no present intention during the coming fiscal year to: borrow money; pledge
its assets; or make loans to other persons.
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 Eaton Vance's and BMR's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, Eaton Vance,
BMR, EVC or EV as defined in the 1940 Act by virtue of their affiliation with
any one or more of the Trust, the Portfolio Eaton Vance, BMR, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (62), President and Trustee of the Trust*
President and Chief Executive Officer of BMR, Eaton Vance, 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.
LANDON T. CLAY (70), President and Trustee of the Portfolio*
Chairman 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.
JAMES B. HAWKES (54), Vice President of the Portfolio and the Trust and Trustee
of the Trust*
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.
H. DAY BRIGHAM, JR. (69) Vice President of the Trust
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. 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 (61), 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 (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), 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
DUNCAN W. RICHARDSON (38), Vice President of the Portfolio
Vice President of Eaton Vance and EV since January 19, 1990 and of BMR since
August 11, 1992. Officer of various investment companies managed by Eaton Vance
or BMR. Mr. Richardson was elected Vice President of the Portfolio on October
23, 1995.
WILLIAM H. AHERN, JR. (36), Vice President of the Trust
Assistant Vice President of BMR, Eaton Vance and EV and an employee of Eaton
Vance since July 17, 1989. 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 (53), Vice President of the Trust
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 Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
M. KATHERINE KREIDER (35), Assistant Treasurer
Assistant Vice President of Eaton Vance, BMR and EV since February 5, 1996.
Senior Audit Manager (1993-1996), Audit Manager (1991-1993) -- Financial
Services Industry Practice, Deloitte & Touche (1987-1996). Officer of various
investment companies managed by Eaton Vance or BMR. Ms. Kreider was elected
Assistant Treasurer of the Trust on February 21, 1996.
THOMAS OTIS (64), 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 (60), 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 (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV 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 and of the Portfolio on October 23, 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 Energy Corporation. Mr. Rynne became an
officer of the Trust on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr. Woodbury
was elected Assistant Secretary of the Trust on June 19, 1995 and of the
Portfolio on October 23, 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 Ainterested 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 Board of Trustees
regarding the selection of the independent certified public 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 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. Neither the Portfolio
nor the Fund has a retirement plan for its Trustees.
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 received by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an
Investment Advisory Agreement dated October 23, 1995. BMR or Eaton Vance acts as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of over $16 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 cover
stocks ranging from blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities and tax-free U.S.
government and corporate bonds. Lloyd George Management, an investment
management firm based in Hong Kong, has advised Eaton Vance's international
equity funds since 1992. Lloyd George's staff includes 11 highly qualified
investment professionals who manage U.S. $1.3 billion. Lloyd George analysts
cover East Asia, the India subcontinent, Russia and Eastern Europe, Latin
America, Australia and New Zealand from offices in Hong Kong, London and Bombay.
Eaton Vance mutual funds are distributed by Eaton Vance Distributors both within
the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
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)
commission, 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 interest 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 registration 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, officer and investors
with respect thereto.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus.
The Investment Advisory Agreement with BMR remains in effect until
February 28, 1997. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1997 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. 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 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.
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 Trust under the 1940 Act, (iii) commission, 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 purpose and for distribution of the same to shareholders
and investors, and fees and expenses of registering and maintaining registration
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 registrar for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholder 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 officer
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. 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 of 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 March 1, 1996, 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. Clay,
Gardner, Hawkes and Otis, who are officers or Trustees of the Trust and/or the
Portfolio, are members of the EVC, Eaton Vance, BMR and EV organizations.
Messrs. Ahern, Murphy, O'Connor, Richardson, Rynne, Terry and Woodbury, and Ms.
Kreider and Ms. Sanders are officers of the Trust and/or the Portfolio and are
also members of the Eaton Vance, BMR and EV organizations. BMR will receive the
fees paid under the Investment Advisory Agreement.
EVC owns all of the stock of Energex Energy Corporation, which engages
in oil and gas exploration and development. In addition, Eaton Vance owns all
the stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC also owns 24% of the Class A shares of Lloyd George Management
(B.V.I.) Limited, a registered investment adviser. EVC owns all the stock of
Fulcrum Management, Inc. and MinVen, Inc., which are engaged in the development
of precious metal mining, venture investment and management. EVC, Eaton Vance,
BMR 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 will not be influenced by
existing or potential custodial or other relationships between the Trust or the
Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts 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 disburse all funds and performs various other ministerial duties
upon receipt of proper instruction 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. Landon T. Clay, a Director of EVC and an officer, Trustee or
Director of other entities in the Eaton Vance organization, owns approximately
13% of the voting stock of Investors Financial Services Corp., the holding
company parent of IBT.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular quarterly payments of any permitted amount designated by the
shareholder (see "Eaton Vance Shareholder Services Systematic Withdrawal Plan"
in the Fund's current 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 gain 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.
A shareholder may not have a withdrawal plan in effect at the same time
he or she 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 IBT (as agent and custodian for the Fund and the Portfolio) in the
manner described under "Valuing Fund Shares" in the Fund's current Prospectus.
The Fund and Portfolio will be closed for business and will not price their
shares 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 Trustees of the Portfolio have established the following procedures
for the fair valuation of the Portfolio's assets under normal market conditions.
Securities listed on foreign or U.S. securities exchanges or in the NASDAQ
National Market System generally are valued at closing sale prices or, if there
were no sales, at the mean between the closing bid and asked prices therefor on
the exchange where such securities are principally traded or on such National
Market System. Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices. An
option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of
a sale, at the mean between the last bid and asked prices. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short-term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each day the New York Stock Exchange
(the "Exchange") is open for trading ("Portfolio Business Day") as of the close
of regular trading on the Exchange (the "Portfolio Valuation Time"). The value
of each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represents that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, that amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's share are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Portfolio's net asset value (unless the Portfolio deems that such events would
materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the
Portfolio will be valued in U.S. dollars; such values will be computed by the
custodian based on foreign currency exchange rate quotations supplied by Reuters
Information Service.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period. For further information concerning the
total return of the Fund, see "Performance Information" in Part II.
The Fund may use total return figures showing after-tax returns,
including comparisons to tax-deferred vehicles such as Individual Retirement
Accounts ("IRAs") and variable annuities. In calculating after-tax returns, the
Fund will, in general, assume that its shareholders are U.S. individual
taxpayers subject to federal income taxes at the highest marginal rate then
applicable to ordinary income and long-term capital gains. After-tax returns may
also be calculated using different tax rate assumptions and taking into account
state and local income taxes as well as federal taxes. In calculating after-tax
returns, distributions made by the Fund are assumed to be reduced by the amount
of taxes payable on the distribution, and the after-tax proceeds of the
distribution are reinvested in the Fund at net asset value on the reinvestment
date.
The Fund's total return may be compared to the Consumer Price Index and
various domestic and foreign securities indices, for example: Standard & Poor's
Index of 400 Common Stocks, Standard & Poor's Index of 500 Common Stocks,
Merrill Lynch U.S. Treasury (15-year plus) Index, Lehman Brothers
Government/Corporate Bond Index, the Dow Jones Industrial Average and Morgan
Stanley Global Equity. The Fund's total return and comparisons with these
indices may be used in advertisements and in information furnished to present or
prospective shareholders. The Fund's performance may differ from that of other
investors in the Portfolio, and other investment companies.
Information used in advertisements and in materials furnished to
present or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations (e.g. Ibbotson Associates,
Standard & Poor's Ratings Group, Merrill Lynch Private Client Group, Bloomberg,
L.P., Dow Jones & Company, Inc., and the Federal Reserve Board) or included in
various publications (e.g. The Wall Street Journal, Barron's and The Decade:
Wealth of Investments in U.S. Stocks, Bonds, Bills & Inflation) reflecting the
investment performance or return achieved by various classes and types of
investments (e.g. common stocks, small company stocks, long-term corporate
bonds, long-term government bonds, intermediate-term government bonds, U.S.
Treasury bills) over various periods of time. This information may be used to
illustrate the benefits of long-term investments in common stocks.
Information about the allocation and holdings of investments in the
Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
Evaluations of the Fund's performance made by independent sources
(e.g., Lipper Analytical Services, Inc., CDA/Weisenberger and Morningstar, Inc.)
may be used in advertisements and in information furnished to present or
prospective shareholders.
The Fund may provide information about Eaton Vance, its affiliates and
other investment advisers to the funds in the Eaton Vance Family of Funds in
sales material or advertisements provided to investors or prospective investors.
Such material or advertisements may also provide information on the use of
investment professionals by such investors.
Information used in advertisements and in materials furnished to
present and prospective shareholders may include statements or illustrations
relating to the appropriateness of types of securities and/or mutual funds which
may be employed to meet specific financial goals, such as (1) funding
retirement, (2) paying for children's education, and (3) financially supporting
aging parents. These three financial goals may be referred to in such
advertisements or materials as the "Triple Squeeze".
HYPOTHETICAL RETURNS
The following analysis compares the after-tax returns achieved from
three hypothetical investments with identical pre-tax returns of 10% per year.
The first hypothetical investment is a tax-managed equity mutual fund whose
returns consist entirely of deferred gains (no dividend income and no realized
capital gains). Note - It is possible the Fund will distribute some net
investment income and capital gains in some years, so the hypothetical may not
be entirely applicable. The second hypothetical investment is a conventional
equity mutual fund, managed without regard to investor tax considerations, whose
10% annual returns consist of 2% return from dividend income and 8% return from
realized capital gains, three-quarters of which are long-term gains and
one-quarter of which are short-term gains. The third hypothetical investment is
a variable annuity fund, which by its structure defers taxation on all income
and gains. The third hypothetical investment is a variable annuity fund, which
by its structure defers taxation on all income and gains. The investor is amused
to pay federal taxes at the highest rate applicable to individual income and
gains, including the effect of the itemized deduction phaseout. this rate is
40.8% for dividend income and short-term capital gains and 29.2% for long-term
capital gains. The investor is assumed to pay no state or local taxes.
An initial investment of $10,000 in each of the three hypothetical
funds would grow in value to:
<TABLE>
<CAPTION>
Tax-Managed Fund Conventional Equity Mutual Fund Variable Annuity Fund
---------------- ------------------------------- ---------------------
<S> <C> <C> <C>
After 10 years: $25,937 $18,942 $25,937
After 20 years: $67,275 $35,881 $67,275
</TABLE>
The returns from the tax-managed fund and the variable annuity fund are
the same since the pre-tax returns are assumed to be identical and no taxes have
been paid in either case. The returns from the conventional fund are
substantially lower due to the taxes paid each year in connection with the funds
dividend income and realized long-term and short-term capital gains.
If the hypothetical fund investments were each to be sold, the amount
realized from the sale, net of taxes, would be:
<TABLE>
<CAPTION>
Tax-Managed Fund Conventional Equity Mutual Fund Variable Annuity Fund
---------------- ------------------------------- ---------------------
<S> <C> <C> <C>
After 10 years: $21,286 $18,942 $19,437
After 20 years: $50,558 $35,881 $43,914
</TABLE>
The proceeds from selling the conventional fund, net of taxes, equals
the value of the shares (from above), since no gain is recognized at sale. The
net-of-tax proceeds of the tax-managed fund position is reduced by the capital
gains taxes due on the accumulated gain. The net-of-tax proceeds of the variable
annuity is reduced by taxes on the accumulated income and gain, all of which is
taxed as ordinary income.
If the holder of the hypothetical fund investments were to die, the
value of the investment passing to the estate would be:
<TABLE>
<CAPTION>
Tax-Managed Fund Conventional Equity Mutual Fund Variable Annuity Fund
---------------- ------------------------------- ---------------------
<S> <C> <C> <C>
After 10 years: $25,937 $18,942 $19,437
After 20 years: $67,275 $35,881 $43,914
</TABLE>
The value of the tax-managed fund and the conventional fund would pass
through to the estate without being taxed and their tax basis would be adjusted
upward to the value at the time of death. The value of the variable annuity
would be reduced by taxes at the ordinary income rate on the accumulated income
and gain, as if the investor had sold the position.
For additional information, charts and illustrations relating to the
Fund's investment performance, see "Performance Information" in Part II.
TAXES
See also "Distribution and Taxes" in the Fund's current Prospectus.
The Fund, as a series of a Massachusetts business trust, will be
treated as a separate entity for accounting and tax purposes. The Fund intends
to elect to be treated, and to qualify each year as a regulated investment
company ("RIC") under the Code. Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its assets
and to distribute all of its net investment income and net realized capital
gains in accordance with the timing requirements imposed by the Code, so as to
avoid any federal income or excise tax on the Fund. Because the Fund invests its
assets in the Portfolio, the Portfolio normally must satisfy the applicable
source of income and diversification requirements in order for the Fund to
satisfy them. The Portfolio will allocate at least annually among its investors,
including the Fund, each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit. The Portfolio will make allocations to the Fund
in accordance with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the Fund to satisfy the tax distribution requirements that apply to the
Fund and that must be satisfied in order to avoid federal income and/or excise
tax on the Fund. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund will be deemed (i) to own its proportionate
share of each of the assets of the Portfolio and (ii) to be entitled to the
gross income of the Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards, and 100% of any income and capital gains from the prior year (as
previously computed) that was not paid out during such year and on which the
Fund was not taxed. Further, under current law, provided that the Fund qualifies
as a RIC for federal income tax purposes and the Portfolio is treated as a
partnership for Massachusetts and federal tax purposes, neither the Fund nor the
Portfolio is liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Portfolio and
allocated to the Fund in connection with the Portfolio's investments in foreign
securities and certain options, futures or forward contracts or foreign currency
may be treated as ordinary income and losses under special tax rules. Certain
options, futures or forward contracts of the Portfolio may be required to be
marked to market (i.e., treated as if closed out) on the last day of each
taxable year, and any gain or loss realized with respect to these contracts may
be required to be treated as 60% long-term and 40% short-term gain or loss.
Positions of the Portfolio in securities and offsetting options, swaps, futures
or forward contracts may be treated as "straddles" and be subject to other
special rules that may, upon allocation of the Portfolio's income, gain or loss
to the Fund, affect the amount, timing and character of the Fund's distributions
to shareholders. Certain uses of foreign currency and foreign currency
derivatives such as options, futures, forward contracts and swaps and investment
by the Portfolio in certain "passive foreign investment companies" may be
limited or a tax election may be made, if available, in order to preserve the
Fund's qualification as a RIC or avoid imposition of a tax on the Fund.
The Portfolio will allocate at least annually to the Fund and its other
investors their respective distributive shares of any net investment income and
net capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's fiscal year on certain
options and futures transactions that are required to be marked-to-market). Such
amounts will be distributed by the Fund to its shareholders in cash or
additional shares, as they elect. Shareholders of the Fund will be advised of
the nature of the distributions.
Certain investors in the Portfolio, including RICs, have acquired
interests in the Portfolio by contributing securities. Due to tax
considerations, during the first five years following the contribution of
securities to the Portfolio by an investor, such securities will not be
distributed to any investor other than the investor who contributed those
securities. Investors who acquire an interest in the Portfolio by contributing
securities and who redeem that interest within five years thereafter will
generally receive back one or more of the securities they contributed. In
partial redemptions by such investors during this period, the Portfolio will
attempt to accommodate requests to distribute initially those contributed
securities and share lots with the highest cost basis.
The Portfolio has significant holdings of highly appreciated securities
that were contributed to the Portfolio by investors other than the Fund. If such
securities were to be sold, the resulting capital gain would be allocated
disproportionately among the Portfolio's investors, with the result that the
Fund would not be subject to taxation on any gain arising prior to the
contribution of the securities to the Portfolio.
Distributions by the Fund of the excess of net long-term capital gains
over short-term capital losses earned by the Portfolio and allocated to the
Fund, taking into account any capital loss carryforwards that may be available
to the Fund in years after its first taxable year, are taxable to shareholders
of the Fund as long-term capital gains, whether received in cash or in
additional shares and regardless of the length of time their shares have been
held. Certain distributions, if declared in October, November or December and
paid the following January, will be taxed to shareholders as if received on
December 31 of the year in which they are declared.
Any loss realized upon the redemption or exchange of shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. All or a portion of a loss realized upon a taxable disposition of
Fund shares may be disallowed under "wash sale" rules if other Fund shares are
purchased (whether through reinvestment of dividends or otherwise) within 30
days before or after the disposition. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
The Fund will not be subject to Massachusetts income, corporate excise
or franchise taxation as long as it qualifies as a RIC under the Code.
Amounts paid by the Fund to individuals and certain other shareholders
who have not provided the Fund with their correct taxpayer identification number
and certain required certifications, as well as shareholders with respect to
whom the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges) at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and
other foreign entities generally will be subject to a U.S. withholding tax at a
rate of 30% on the Fund's distributions from its ordinary income and the excess
of its net short-term capital gain over its net long-term capital loss, unless
the tax is reduced or eliminated by an applicable tax treaty. Distributions from
the excess of the Fund's net long-term capital gain over its net short-term
capital loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. Federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not describe many of the tax rules
applicable to IRAs nor does it address the special tax rules applicable to
certain other classes of investors, such as other retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to these or other special tax rules
that may apply in their particular situations, as well as the state, local or
foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions
by the Portfolio, including the selection of the market and the broker-dealer
firm, are made by BMR. BMR is also responsible for the execution of transactions
for all other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of
certain other accounts managed by it for execution with many broker-dealer
firms. BMR uses its best efforts to obtain execution of portfolio transactions
at prices which are advantageous to the Portfolio and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, BMR will use its best judgment in evaluating the terms
of a transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the general
execution and operational capabilities of the broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the broker-dealer, the value
and quality of services rendered by the broker-dealer in other transactions, and
the reasonableness of the commission, if any. Transactions on stock exchanges
and other agency transactions involve the payment by the Portfolio of negotiated
brokerage commissions. Such commissions vary among different broker-dealer
firms, and a particular broker-dealer may charge different commissions according
to such factors as the difficulty and size of the transaction and the volume of
business done with such broker-dealer. Transactions in foreign securities
usually involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States. There is generally no stated commission
in the case of securities traded in the over-the-counter markets, but the price
paid or received by the Portfolio usually includes an undisclosed dealer markup
or markdown. In an underwritten offering the price paid by the Portfolio
includes a disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions paid on portfolio transactions will, in the
judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and BMR's other clients in part for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934,
a broker or dealer who executes a portfolio transaction on behalf of the
Portfolio may receive a commission which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction or
on the basis of overall responsibilities which BMR and its affiliates have for
accounts over which it exercises investment discretion. In making any such
determination, BMR will not attempt to place a specific dollar value on the
brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice 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-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, BMR may receive Research Services from broker-dealer firms with
which BMR places the portfolio transactions of the Portfolio and from third
parties with which these broker-dealers have arrangements. These Research
Services may 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 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 of the Portfolio at advantageous
prices and at reasonably competitive commission rates or spreads, 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 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 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 Portfolio that the benefits available from BMR's
organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions. For the brokerage commissions paid by the Portfolio
on portfolio transactions, see "Fees and Expenses" in Part II.
OTHER INFORMATION
On July 10, 1995, the Trust changed its name from Eaton Vance
Government Obligations Trust to Eaton Vance Mutual Funds Trust. The Trust is
organized as a business trust under the laws of the Commonwealth of
Massachusetts under a Declaration of Trust dated May 7, 1984, as amended. Eaton
Vance, pursuant to its agreement with the Trust, controls the use of the words
"Eaton Vance" and "EV" in the Fund's name and may use the words "Eaton Vance" or
"EV" in other connections and for other purposes.
The Declaration of Trust may be amended by the Trustees when authorized
by a majority of the outstanding voting securities of the Trust 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 rights
or interests of shareholders or if they deem it necessary to conform the
Declaration to the requirements of federal laws 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 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 shareholder's meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust 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 set 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
holding office have been elected by investors. In such an event the Trustees of
the Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment
of the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
or the 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 CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are
the independent certified public accountants of the Fund, 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 Portfolio see "Financial
Statements" in Part II.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL TAX-MANAGED
GROWTH FUND. The Fund became a series of the Trust on October 23, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
No fees paid to date.
SERVICE PLAN
The Fund has not made any sales commission payments to the Principal
Underwriter under the Plan to date. The Fund expects to begin making service fee
payments during the quarter ending June 30, 1997.
PRINCIPAL UNDERWRITER
No fees paid to date.
CUSTODIAN
No fees paid to date.
BROKERAGE
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 Fund and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) For the fiscal year ending October 31, 1996, it is estimated
that the noninterested Trustees of the Trust and the Portfolio will receive the
following compensation in their capacities as Trustees of the Trust and the
Portfolio and, during the one year period ended September 30, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees of the other funds in the Eaton
Vance fund complex(1):
Estimated Estimated Total Compensation
Compensation Compensation from Trust and
Name from Fund from Portfolio Fund Complex
- ---- --------- -------------- ------------
Donald R. Dwight $50 $1,600 $135,000(2)
Samuel L. Hayes, III 50 1,600 150,000(3)
Norton H. Reamer 50 1,600 135,000
John L. Thorndike 50 1,600 140,000
Jack L. Treynor 50 1,600 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
<PAGE>
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge, other
than the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Intended Quantity Investment - Statement of Intention. If it is
anticipated that $100,000 or more of Fund shares and shares of the other
continuously offered open-end funds listed under "The Eaton Vance Exchange
Privilege" in the Prospectus will be purchased within a 13-month period, a
Statement of Intention should be signed so that shares may be obtained at the
same reduced sales charge as though the total quantity were invested in one lump
sum. Shares held under the Right of Accumulation (see below) as of the date of
the Statement will be included toward the completion of the Statement. The
Statement authorizes the Fund's transfer agent to hold in escrow sufficient
shares (5% of the dollar amount specified in the Statement) which can be
redeemed to make up any difference in sales charge on the amount intended to be
invested and the amount actually invested. Execution of a Statement does not
obligate the shareholder to purchase or the Fund to sell the full amount
indicated in the Statement, and should the amount actually purchased during the
13-month period be more or less than that indicated on the Statement, price
adjustments will be made accordingly. For sales charges and other information on
quantity purchases, see "How to Buy Fund Shares" in the Prospectus. Any investor
considering signing a Statement of Intention should read it carefully.
Right of Accumulation - Cumulative Quantity Discount. The applicable
sales charge level for the purchase of Fund shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated at
the maximum current offering price) of the shares the shareholder owns in his or
her account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the Prospectus. The sales
charge on the shares being purchase will then be at the rate applicable to the
aggregate. For example, if the shareholder owned shares valued at $80,000 of the
Fund and purchased an additional $20,000 of Fund shares, the sales charge for
the $20,000 purchase would be at the rate of 3.75% of the offering price (3.90%
of the net amount invested), which is the rate applicable to single transactions
of $100,000. For sales charges on quantity purchases, see "How to Buy Fund
Shares" in the Prospectus. Shares purchased (i) by an individual, his or her
spouse and their children under the age of twenty-one and (ii) by a trustee,
guardian or other fiduciary of a single trust estate or a single fiduciary
account, will be combined for the purpose of determining whether a purchase will
qualify for the Right of Accumulation and if qualifying, the applicable sales
charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm (defined below) must provide the
Principal Underwriter (in the case of a purchase made through an Authorized
Firm) or the Transfer Agent (in the case of an investment made by mail) with
sufficient information to permit verification that the purchase order qualifies
for the accumulation privilege. Confirmation of the order is subject to such
verification. The Right of Accumulation privilege may be amended or terminated
at any time as to purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through Authorized Firms which have agreements with the Principal
Underwriter. The Principal Underwriter is a wholly-owned subsidiary of Eaton
Vance.
The public offering price is the net asset value next computed after
receipt of the order, plus, where applicable, a variable percentage sales charge
depending upon the amount of purchase as indicated by the sales charge table set
forth in the Prospectus. Such table is applicable to purchases of the Fund alone
or in combination with purchases of certain other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
or her spouse and their children under the age of twenty-one, purchasing shares
for his or her or their own account; and (ii) a trustee or other fiduciary
purchasing shares for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $100,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
the first purchase pursuant to a written Statement of Intention, in the form
provided by the Principal Underwriter, which includes provisions for a price
adjustment depending upon the amount actually purchased within such period (a
purchase not made pursuant to such Statement may be included thereunder if the
Statement if filed within 90 days of such purchase); or (2) purchases of the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may
issue shares at net asset value in the event that an investment company (whether
a regulated or private investment company or a personal holding company) is
merged or consolidated with or acquired by the Fund. Normally no sales charges
will be paid in connection with an exchange of Fund shares for the assets of
such investment company.
Shares may be sold at net asset value to any officer, director,
trustee, general partner or employee of the Fund, the Portfolio or any
investment company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or administered
by Eaton Vance or by any parent, subsidiary or other affiliate of Eaton Vance,
or any officer, director, trustee or employee of any parent, subsidiary or other
affiliate of Eaton Vance. The terms "officer," "director," "trustee," "general
partner" or "employee" as used in this paragraph include any such person's
spouse and minor children, and also retired officers, directors, trustees,
general partners and employees and their spouses and minor children. Shares may
also be sold at net asset value to registered representatives and employees of
certain investment dealers and to such person's spouses and children under the
age of 21 and their beneficial accounts.
The Fund reserves the right to suspend or limit the offering of shares
to the public at any time.
The Principal Underwriter acts as principal in selling shares of the
Fund under the distribution agreement with the Fund. 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 Principal Underwriter or the
Trust), may be terminated on six months' notice by either party, and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold. The Principal Underwriter allows Authorized
Firms discounts from the applicable public offering price which are alike for
all Authorized Firms. See "How to Buy Fund Shares" in the current Prospectus for
the discounts allowed to Authorized Firms. The Principal Underwriter may allow,
upon notice to all Authorized Firms with whom it has agreements, discounts up to
the full sales charge during the periods specified in the notice. During periods
when the discount includes the full sales charge, such Authorized Firms may be
deemed to be underwriters as that term is defined in the Securities Act of 1933.
The Fund has authorized the Principal Underwriter to act as its agent
in repurchasing shares and will pay the Principal Underwriter $2.50 for each
repurchase transaction handled by the Principal Underwriter. The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Fund will exceed the amounts paid therefor by the Fund.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the revised sale charge rule of
the National Association of Securities Dealers, Inc. (Management believes
service fee payments are not distribution expenses governed by Rule 12b-1 under
the 1940 Act, but has chosen to have the Plan approved as if that Rule were
applicable.) The following supplements the discussion of the Plan contained in
the Fund's Prospectus.
The Plan remains in effect through and including April 28, 1996 and
from year to year thereafter provided such continuance is approved by a vote of
both a majority of (i) the Trustees 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 it (the "Non-interested Trustees") and (ii)
all of the Trustees then in office, cast in person at a meeting (or meetings)
called for the purpose of voting on this Plan. The Plan may be terminated any
time by vote of the Non-interested Trustees or by vote of a majority of the
outstanding voting securities of the Fund. Pursuant to the Rule, the Plan has
been approved by the Board of Trustees of the Trust, including the
Non-interested Trustees.
Under the Plan, the President or 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 herein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees of the Trust as prescribed by the Rule. So long as the
Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons. The Trustees have determined that
in their judgment thee is a reasonable likelihood that the Plan will benefit the
Fund and its shareholder. For the service fees paid by the Fund under the Plan,
see "Fees and Expenses" in this Part II.
<PAGE>
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total
return on a hypothetical investment of $1,000 in the Fund covering the 1, 5, and
10 year periods ended October 31, 1995. Total return for the period prior to the
Fund's commencement of operations is for the Portfolio (or its predecessor)
adjusted for the Fund's sales charge.
<TABLE>
<CAPTION>
VALUE OF $1,000 INVESTMENT
Value of Value of Total Return Total Return
Initial Investment Excluding Sales Charge Including Sales Charge
Investment* on 10/31/95 Cumulative Annualized Cumulative Annualized
----------- ----------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C>
10 years
ended
10/31/95 $952.48 $3,932.55 312.87% 15.22% 293.26% 31.50%
5 years
ended
10/31/95 $952.47 $2,243.19 135.51% 18.65% 124.32% 17.54%
1 year
ended
10/31/95 $952.46 $1,262.58 32.56% 32.56% 26.26% 26.26%
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ----------
* Initial investment less the current maximum sales charge of 4.75%.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of October 23, 1995, Eaton Vance owned one share of the Fund, being
the only share of the Fund outstanding on such date. Eaton Vance is a
Massachusetts business trust and a wholly-owned subsidiary of EVC.
<PAGE>
FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 23, 1995
ASSETS:
Cash......................................................... $100,010
Deferred organization expenses............................... 6,850
--------
Total assets....................................... $106,860
LIABILITIES:
Accrued organization expenses............................. . 6,850
--------
NET ASSETS................................................... $100,010
--------
NOTES:
(1) Tax-Managed Growth Portfolio (the "Portfolio") was organized as a New York
Trust on October 23, 1995 and has been inactive since that date, except for
matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of interests
therein at the purchase price of $100,000 to Eaton Vance Management and the
sale of interest therein at the purchase price of $10 to Boston Management
& Research (the "Initial Interests").
(2) Organization expenses are being deferred and will be amortized on a
straight-line basis over a period not to exceed five years, commencing on
the effective date of the Portfolio's initial offering of its interests.
The amount paid by the Portfolio on any withdrawal by the holders of the
Initial Interests of any of the respective Initial Interests will be
reduced by a portion of any unamortized organization expenses, determined
by the proportion of the amount of the Initial Interests withdrawn to the
Initial Interests then outstanding.
(3) At 4:00 p.m., New York City time, on each business day of the Portfolio,
the value of an investor's interest in the Portfolio is equal to the
product of (1) the aggregate net asset value of the Portfolio multiplied by
(ii) the percentage representing that investor's share of the aggregate
interest in the Portfolio effective for that day.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of
Tax-Managed Growth Portfolio:
We have audited the accompanying statement of assets and liabilities of
Tax-Managed Growth Portfolio (a New York Trust) as of October 23, 1995. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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, such statement of assets and liabilities presents
fairly, in all material respects, the financial position of Tax-Managed Growth
Portfolio as of October 23, 1995, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 24, 1995
<PAGE>
[LOGO]
EV TRADITIONAL
TAX-MANAGED
GROWTH
FUND
STATEMENT OF ADDITIONAL
INFORMATION
MARCH 20, 1996
EV TRADITIONAL
TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-TGSAI
