<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1996
1933 ACT FILE NO. 2-90946
1940 ACT FILE NO. 811-4015
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 31 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 34 [X]
EATON VANCE MUTUAL FUNDS TRUST
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(FORMERLY EATON VANCE GOVERNMENT OBLIGATIONS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
<TABLE>
It is proposed that this filing will become effective pursuant to rule 485 (check appropriate box):
<C> <C>
[ ] immediately upon filing pursuant to paragraph (b) [X] on February 1, 1997 pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (b) [ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a perviously filed post- effective amendment.
</TABLE>
Tax-Managed Growth Portfolio has also executed this Registration
Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on May
24, 1996 filed its "Notice" as required by that Rule for the series of the
Registrant with a fiscal year end of March 31, 1996, on February 23, 1996
filed its "Notice" for the series of the Registrant with a fiscal year end of
December 31, 1995 and on November 8, 1995 filed its "Notice" for the series of
the Registrant with a fiscal year end of October 31, 1995. Registrant
continues its election to register an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2.
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<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act of
1933
Part A--The Prospectuses of:
EV Classic Tax-Managed Growth Fund
EV Marathon Tax-Managed Growth Fund
EV Traditional Tax-Managed Growth Fund
Part B--The Statements of Additional Information of:
EV Classic Tax-Managed Growth Fund
EV Marathon Tax-Managed Growth Fund
EV Traditional Tax-Managed Growth Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any series of the Registrant not identified above.
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
EV CLASSIC TAX-MANAGED GROWTH FUND
EV MARATHON TAX-MANAGED GROWTH FUND
EV TRADITIONAL TAX-MANAGED GROWTH FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ -------------------------------
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial The Fund's Financial
Information Highlights; Performance
Information
4. ............ General Description of The Fund's Investment
Registrant Objective; The Tax-Managed
Mutual Fund Advantage;
Investment Policies and
Risks; Organization of the
Fund and the Portfolio
5. ............ Management of the Fund Management of the Fund and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plan; Service
Plan (for Traditional Fund
only); How to Buy Fund
Shares; The Lifetime
Investing Account/
Distribution Options; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services
8. ............ Redemption or Repurchase How to Redeem Fund Shares
9. ............ Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- -------- ------------ -------------------------------
10. ............ Cover Page Cover Page
11. ............ Table of Contents Table of Contents
12. ............ General Information and Other Information
History
13. ............ Investment Objectives and Additional Information about
Policies Investment Policies;
Investment Restrictions
14. ............ Management of the Fund Trustees and Officers; Fees and
Expenses
15. ............ Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............ Investment Advisory and Investment Adviser and
Other Administrator; Distribution
Services Plan; Service Plan (for
Traditional Fund only);
Custodian; Independent
Accountants; Fees and
Expenses; Other Information
17. ............ Brokerage Allocation and Not Applicable
Other
Practices
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Service for Withdrawal;
Services for Accumulation
(for Traditional Fund only);
Distribution Plan; Service
Plan (for Traditional Fund
only); Fees and Expenses
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter; Fees and
Expenses
22. ............ Calculation of Performance Investment Performance;
Data Performance Information
23. ............ Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
TAX-MANAGED GROWTH FUND
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EV CLASSIC 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. 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 February
1, 1997, 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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PAGE PAGE
Shareholder and Fund Expenses ..... 2 Valuing Fund Shares ............... 11
The Fund's Financial Highlights ... 3 How to Buy Fund Shares ............ 11
The Fund's Investment Objective ... 4 How to Redeem Fund Shares ......... 12
The Tax-Managed Mutual Fund Reports to Shareholders ........... 14
Advantage ....................... 4 The Lifetime Investing Account/
Investment Policies and Risks ..... 5 Distribution Options ............ 14
Organization of the Fund and the The Eaton Vance Exchange
Portfolio ....................... 7 Privilege ......................... 15
Management of the Fund and the Eaton Vance Shareholder Services .. 16
Portfolio ....................... 8 Distributions and Taxes ........... 16
Distribution Plan ................. 9 Performance Information ........... 18
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PROSPECTUS DATED FEBRUARY 1, 1997
<PAGE>
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
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on Redemptions
during the First Year (as a percentage of redemption
proceeds exclusive of all reinvestments and capital
appreciation in the account) 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
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Investment Adviser Fee 0.600%
Rule 12b-1 Distribution (and Service) Fees 1.000%
Other Expenses 0.300%
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Total Operating Expenses 1.900%
======
EXAMPLE 1 YEAR 3 YEARS
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An investor would pay the following expenses
(including a contingent deferred sales charge in the
case of redemption during the first year after
purchase) on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end
of each period: $29 $60
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 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 "The Fund's Financial Highlights,"
"Management of the Fund and the Portfolio" and "How to Redeem Fund Shares." A
long-term shareholder in the Fund may pay more than the economic equivalent of
the maximum front-end sales charge permitted by a rule of the National
Association of Securities Dealers, Inc. See "Distribution Plan."
No contingent deferred sales charge is imposed on (a) shares purchased more
than one year prior to redemption, (b) shares acquired through the
reinvestment of distributions or (c) any appreciation in value of other shares
in the account (see "How to Redeem Fund Shares"), and no such charge is
imposed on exchanges of Fund shares for shares of one or more other funds
listed under "The Eaton Vance Exchange Privilege". In the Example above,
expenses would be $10 less in the first year if there was no redemption.
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio
and others may do so in the future. See "Organization of the Fund and the
Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
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The following information should be read in conjunction with the financial
statements which are incorporated into the Statement of Additional
Information. Further information regarding the performance of the Fund will be
contained in its annual report to shareholders which may be obtained without
charge by contacting the Principal Underwriter.
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FOR THE PERIOD FROM THE START OF BUSINESS, AUGUST 2, 1996, TO
OCTOBER 31, 1996
NET ASSET VALUE, beginning of period $10.000
-------
INCOME FROM OPERATIONS:
Net investment loss $(0.010)
Net realized and unrealized gain on investments 0.790
-------
Total income from investment operations $ 0.780
-------
NET ASSET VALUE, end of period $10.780
=======
TOTAL RETURN(1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets(2) (0.84%)+
Ratio of net investment income to average net
assets (0.84%)+
Net assets, end of period (000's omitted) $10,816
+ Computed on an annualized basis.
(1) Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of the period
reported. Distributions, if any, are assumed to be reinvested at the net
asset value on the payable date. Total return is computed on a
non-annualized basis.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
<PAGE>
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. 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.
Taxes on 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
investment objectives of the Fund and the Portfolio are fundamental, and may
not be changed unless authorized by a vote of the Fund's shareholders or the
Portfolio's investors, as the case may be.
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.
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 by
managing its investments so as to minimize and defer the taxes incurred by
shareholders as a consequence of their investment in the Fund. The Fund seeks
to achieve returns primarily in the form of unrealized capital gains, which do
not give rise to current tax obligations for shareholders.
The Fund is similar to retirement planning instruments (such as nondeductible
IRAs and variable annuities) in that it is a long-term investment that seeks
to maximize after-tax returns. As a mutual fund, however, the Fund avoids a
number of structural disadvantages inherent in a nondeductible 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 a nondeductible 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 nondeductible 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 a
nondeductible 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 less than 25% of the Portfolio's total 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 temporarily invest up to 65% 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.
Taxes on 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. A substantial portion of the assets of
the Portfolio are securities with large accumulated capital gains that have
been contributed by investors in the Portfolio. As a general matter, the
Portfolio will not sell appreciated securities contributed to the Portfolio if
such a sale would give rise to the recognition of capital gains accumulated
prior to investment in the Portfolio by the investor in the Portfolio who
contributed the securities, but will instead seek to manage its exposure to
such securities by using the above-described hedging techniques as
appropriate.
The Portfolio follows the practice of distributing selected appreciated
securities to meet redemptions of certain investors and may use the "Selection
of Securities Used to Meet Redemptions" in the Statement of Additional
Information, as a management tool. By distributing appreciated securities the
Portfolio can reduce its position in such securities without realizing capital
gains. During periods of net withdrawals by investors in the Portfolio, using
distributions of securities also enables the Portfolio to avoid the forced
sale of securities to raise cash for meeting redemptions. The Portfolio's
ability to select the securities used to meet redemptions is limited with
respect to redemptions by investors in the Portfolio who contributed
securities, and with respect to the securities contributed by such investors
in the Portfolio. See "Statement of Additional Information - Selection of
Securities Used to Meet Redemptions." Such limitations could affect the
performance of the Portfolio, and, therefore, the Fund. The Fund currently
meets redemptions solely in cash, but may adopt in the future a policy of
meeting shareholder redemptions in whole or in part through the distribution
of readily marketable securities. Such a policy would only be adopted after
giving notice to the shareholders and only in conjunction with putting in
place a program whereby redeeming shareholders who receive securities could
elect to sell the securities received to the Fund's custodian (or a designated
broker-dealer) at no cost and at a price equal to the price used in
determining the redemption value of the distributed securities. See "How to
Redeem Fund Shares." A redeeming shareholder of the Fund who received
securities would incur no more or less taxable gain than if the redemption had
been paid in cash.
It is expected that by employing the various tax-efficient management
strategies described herein, the Portfolio can minimize the extent to which
shareholders incur taxes as a result of realized capital gains. The Portfolio
may nevertheless realize gains and shareholders will incur tax liability 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. The Portfolio may temporarily borrow up to 5% of the
value of its total assets to satisfy redemption requests or settle securities
transactions.
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 (which may be considered speculative). 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 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 generally will
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. The Portfolio's holdings of illiquid securities may not exceed
15% of its net assets. Illiquid securities include securities legally
restricted as to resale, and securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. Rule 144A securities may, however, be
treated as liquid by the Investment Adviser pursuant to procedures adopted by
the Trustees, which require consideration of factors such as trading activity,
availability of market quotations and number of dealers willing to purchase
the security. Moreover, liquid Rule 144A securities may increase the level of
fund illiquidity to the extent qualified institutional buyers become
uninterested in purchasing such securities.
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 Investment Company Act of 1940 (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 (except with respect to
the borrowing of money and issuing of senior securities) 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.
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 (such as the Fund). 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.
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.
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. Information regarding other funds or
investors that invest in the Portfolio may be obtained by contacting the
Principal Underwriter, 24 Federal Street, Boston, MA 02110
(617) 482-8260.
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.
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. In the event the Fund withdraws all of its
assets from the Portfolio, 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.
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. BMR also
furnishes for the use of the Portfolio office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Portfolio. 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)
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$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%
For the period from the start of business, December 1, 1995, to October 31,
1996, the Portfolio paid BMR advisory fees equivalent to 0.600% (annualized)
of the Portfolio's average daily net assets for such period.
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. Eaton Vance is a wholly-
owned subsidiary of Eaton Vance Corp., a publicly-held holding company, which
through its subsidiaries and affiliates engages primarily in investment
management, administration and marketing activities. The Principal
Underwriter is a wholly-owned subsidiary of Eaton Vance.
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 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. The Fund, the Portfolio and BMR have
adopted Codes of Ethics relating to personal securities transactions. The
Codes permit Eaton Vance personnel to invest in securities (including
securities that may be purchased or held by a Portfolio) for their own
accounts, subject to certain pre-clearance, reporting and other restrictions
and procedures contained in such Codes.
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 the Principal Underwriter 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 any 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, to the extent not
covered by insurance.
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
6.25% of the amount received by the Fund for each share sold and (ii)
distribution fees calculated by applying the rate of 1% over the prime rate
then reported in The Wall Street Journal to the outstanding balance of
Uncovered Distribution Charges (as described below) of the Principal
Underwriter. The Principal Underwriter currently expects to pay to an
Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. The Plan is designed to permit an
investor to purchase Fund shares through an Authorized Firm without incurring
an initial sales charge and at the same time permit the Principal Underwriter
to compensate Authorized Firms in connection with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO 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 made to the
Principal Underwriter pursuant to the Plan, including any contingent deferred
sales charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
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. For
the period from the start of business, August 2, 1996, to October 31, 1996,
the Fund paid or accrued % (annualized) of the Fund's average daily net
assets for such period. As at October 31, 1996, the Uncovered Distribution
Charges of the Principal Underwriter calculated under the Plan amounted to
approximately $ (equivalent to % of the Fund's net assets on such
day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
The Trustees of the Trust have initially implemented this provision of the
Plan by authorizing the Fund to make monthly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.25% of the Fund's average daily net assets for any fiscal year. The Fund
accrues the service fee daily at the rate of 1/365 of .25% of the Fund's net
assets. The Principal Underwriter currently expects to pay to an Authorized
Firm (a) a service fee (except on exchange transactions and reinvestments) at
the time of sale equal to .25% of the purchase price of the shares sold by
such Firm, and (b) monthly service fees approximately equivalent to 1/12 of
.25% of the value of shares sold by such Firm and remaining outstanding for at
least one year. During the first year after a purchase of Fund shares, the
Principal Underwriter will retain the service fee as reimbursement for the
service fee payment made to the Authorized Firm at the time of sale. As
permitted by the NASD Rule, all service fee payments are made for personal
services and/or the maintenance of shareholder accounts. Service fees are
separate and distinct from the sales commissions and distribution fees payable
by the Fund to the Principal Underwriter, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of the Principal Underwriter. For the period from the start of
business, August 2, 1996, to October 31, 1996, the Fund paid or accrued
service fees under the Plan equivalent to % (annualized) of the Fund's
average daily net assets for such period.
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, and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of 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.
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
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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 $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
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. BMR may request that the Portfolio retain the securities for
investment purposes. 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. 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 Classic Tax-Managed Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic 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
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based
on the net asset value per Fund share next computed after a redemption request
is received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123, on any business day a written request for redemption in good
order, plus any share certificates with executed stock powers. Good order
means that all relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed
by a member of either the Securities Transfer Association's STAMP program or
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations as
required by a regulation of the Securities and Exchange Commission and
acceptable to the Transfer Agent. 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.
MEETING REDEMPTIONS BY DISTRIBUTING PORTFOLIO SECURITIES. The Fund currently
will meet redemptions entirely 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 as chosen by the Investment Adviser. The Fund
would only distribute readily marketable securities, which would be valued
pursuant to the Portfolio's valuation procedures. As described under
"Investment Policies and Risks," the practice of distributing appreciated
securities to meet redemptions can be a useful tool for the tax-efficient
management of the Portfolio. A policy of meeting redemptions in whole or in
part through the distribution of securities will only be established in
conjunction with putting in place a program whereby redeeming shareholders who
receive securities could elect to sell the securities received to the Fund's
custodian (or a designated broker-dealer) at no cost and at a price equal to
the price used in determining the redemption value of the distributed
securities. Redeeming shareholders who receive securities and who elect to
participate in this program would receive the same amount of cash as if the
redemption had been paid directly in cash and would incur no more or less
taxable gains than if the redemption had been paid directly in cash. 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
custodian, 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.
If the Fund does adopt a policy of using distributions of securities to meet
redemptions, it may continue to meet redemptions in whole or in part using
cash. At certain times, the Portfolio may not have sufficient quantities of
appreciated securities available to meet redemptions by shareholders.
Moreover, during periods of volatile market conditions the Fund can be
expected to meet redemptions primarily through distributions of cash.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: 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 the
Principal Underwriter, as the Fund's agent, receives the order. It is the
Authorized Firm's responsibility to transmit promptly repurchase orders to the
Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, 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.
If shares were recently purchased, the proceeds of a redemption 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 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 $750. 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 year of
their purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
equal to 1% of the net asset value of the redeemed shares. This contingent
deferred sales charge is imposed on any redemption the amount of which exceeds
the aggregate value at the time of redemption of (a) all shares in the account
purchased more than one year prior to the redemption, (b) all shares in the
account acquired through reinvestment of distributions, and (c) the increase,
if any, in the value of all other shares in the account (namely those
purchased within the year preceding the redemption) over the purchase price of
such shares. Redemptions are processed in a manner to maximize the amount of
redemption proceeds which will not be subject to a contingent deferred sales
charge. 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. As described under "Distribution Plan", the
contingent deferred sales charge will be paid to the Principal Underwriter or
the Fund.
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 purchase of Fund 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 distribution from a retirement plan qualified
under Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"), or (3) as part of a minimum required distribution from
other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent certified public accountants.
Shortly after the end of each 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
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE TRANSFER AGENT
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 $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, P.O. Box 5123, Westborough,
MA 01581-5123 (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, P.O. Box
5123, Westborough, MA 01581-5123. The currently effective option will appear
on each account 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 Classic Group of Funds or Eaton Vance Money Market
Fund, which are distributed subject to a contingent deferred sales charge (or
equivalent early withdrawal charge), 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.
The Transfer Agent makes exchanges at the next determined net asset value
after receiving an exchange request in good order (see "How to Redeem Fund
Shares"). Consult the Transfer Agent 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 purchase of shares acquired in one or more
exchanges is deemed to have occurred at the time of the original purchase of
the exchanged shares.
Shares of the other funds in the Eaton Vance Classic Group of Funds (and
shares of Eaton Vance Money Market Fund acquired as the result of an exchange
from an EV Classic 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 the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call the Transfer Agent at 800-262-1122, Monday through
Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by
telephone exchange must be registered in the same name(s) and with the same
address as the shares being exchanged. Neither the Fund, the Principal
Underwriter nor the Transfer Agent will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Classic Tax-Managed Growth Fund may be mailed directly to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
at any time -- whether or not distributions are reinvested. The name of the
shareholder, the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 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 $5,000 a systematic withdrawal plan through which
they can make regular quarterly redemptions to yield them either a specified
dollar amount of at least $200 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." 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 (for shares held more than one
year, 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 redeemed shares may reinvest,
with credit for any contingent deferred sales charges paid on the redeemed
shares, any portion or all of the 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 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.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
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.
In January 1996, the Clinton administration 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
legislation similar in effect were to be enacted at some future time, 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.
The Fund will provide its shareholders annually with tax information notices
and Forms 1099 to assist in the preparation of their federal and state tax
returns for the prior calendar year's distributions, proceeds from the
redemption or exchange of Fund shares, and federal income tax (if any)
withheld by the Fund's Transfer Agent.
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 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 quote total return for the period
prior to commencement of operations which would reflect the Portfolio's total
return (or that of its predecessor) adjusted to reflect any applicable Fund
sales charge.
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 of the Fund or the Portfolio
are allocated to Eaton Vance, the Fund's performance will be higher.
<PAGE>
[LOGO]
EATON VANCE
- ------------------
Mutual Funds
EV CLASSIC
TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 1, 1997
EV CLASSIC
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 CLASSIC 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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-TGP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
TAX-MANAGED GROWTH FUND
- ------------------------------------------------------------------------------
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. 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 February
1, 1997, 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.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ......................... 2 How to Buy Fund Shares ................................ 11
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ............................. 12
The Fund's Investment Objective ....................... 4 Reports to Shareholders ............................... 14
The Tax-Managed Mutual Fund Advantage ................. 4 The Lifetime Investing Account/
Investment Policies and Risks ......................... 5 Distribution Options ................................ 14
Organization of the Fund and the Portfolio ............ 7 The Eaton Vance Exchange Privilege .................... 15
Management of the Fund and the Portfolio .............. 8 Eaton Vance Shareholder Services ...................... 16
Distribution Plan ..................................... 9 Distributions and Taxes ............................... 17
Valuing Fund Shares ................................... 11 Performance Information ............................... 18
</TABLE>
- --------------------------------------------------------------------------------
PROSPECTUS DATED FEBRUARY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
-------------------------------------------------------------------------------------------------------
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions 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%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
<S> <C>
Investment Adviser Fee 0.600%
Rule 12b-1 Distribution (and Service) Fees 0.850%
Other Expenses 0.300%
-----
Total Operating Expenses 1.750%
=====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
------ -------
<S> <C> <C>
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: $68 $95
An investor would pay the following expenses on the same investment, assuming
(a) 5% annual return and (b) no redemptions: $18 $55
</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. Service Fees
and Other Expenses are estimated for the current fiscal year because the Fund
was only recently organized.
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 "The Fund's Financial Highlights,"
"Management of the Fund and the Portfolio" and "How to Redeem Fund Shares." A
long-term shareholder in the Fund may pay more than the economic equivalent of
the maximum front-end sales charge permitted by a rule of the National
Association of Securities Dealers, Inc. See "Distribution Plan."
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."
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio
and others may do so in the future. See "Organization of the Fund and the
Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements which are incorporated into the Statement of Additional
Information. Further information regarding the performance of the Fund will be
contained in its annual report to shareholders which may be obtained without
charge by contacting the Principal Underwriter.
- -------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, MARCH 28, 1996, TO OCTOBER 31, 1996.
NET ASSET VALUE, beginning of period $10.000
-------
INCOME FROM OPERATIONS:
Net investment loss $(0.003)
Net realized and unrealized gain on investments 1.153
-------
Total income from investment operations $ 1.150
-------
NET ASSET VALUE, end of period $11.150
=======
TOTAL RETURN(1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(2) 1.63%+
Ratio of net investment loss to average net assets (0.13%)+
Net assets, end of period (000's omitted) $77,644
+Computed on an annualized basis.
(1)Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of the period
reported. Distributions, if any, are assumed to be reinvested at the net
asset value on the payable date. Total return is computed on a
non-annualized basis.
(2)Includes the Fund's share of the Portfolio's allocated expenses.
<PAGE>
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. 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.
Taxes on 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
investment objectives of the Fund and the Portfolio are fundamental, and may
not be changed unless authorized by a vote of the Fund's shareholders or the
Portfolio's investors, as the case may be.
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.
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 by
managing its investments so as to minimize and defer the taxes incurred by
shareholders as a consequence of their investment in the Fund. The Fund seeks
to achieve returns primarily in the form of unrealized capital gains, which do
not give rise to current tax obligations for shareholders.
The Fund is similar to retirement planning instruments (such as nondeductible
IRAs and variable annuities) in that it is a long-term investment that seeks
to maximize after-tax returns. As a mutual fund, however, the Fund avoids a
number of structural disadvantages inherent in a nondeductible 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 a nondeductible 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 nondeductible 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 a nondeductible 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.
Taxes on 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. A substantial portion of the assets of the Portfolio are
securities with large accumulated capital gains that have been contributed by
investors in the Portfolio. As a general matter, the Portfolio will not sell
appreciated securities contributed to the Portfolio if such a sale would give
rise to the recognition of capital gains accumulated prior to investment in the
Portfolio by the investor in the Portfolio who contributed the securities, but
will instead seek to manage its exposure to such securities by using the
above-described hedging techniques as appropriate.
The Portfolio follows the practice of distributing selected appreciated
securities to meet redemptions of certain investors and may use the "Selection
of Securities Used to Meet Redemptions" in the Statement of Additional
Information, as a management tool. By distributing appreciated securities the
Portfolio can reduce its position in such securities without realizing capital
gains. During periods of net withdrawals by investors in the Portfolio, using
distributions of securities also enables the Portfolio to avoid the forced
sale of securities to raise cash for meeting redemptions. The Portfolio's
ability to select the securities used to meet redemptions is limited with
respect to redemptions by investors in the Portfolio who contributed
securities, and with respect to the securities contributed by such investors
in the Portfolio. See " Statement of Additional Information - Selection of
Securities Used to Meet Redemptions." Such limitations could affect the
performance of the Portfolio, and, therefore, the Fund. The Fund currently
meets redemptions solely in cash, but may adopt in the future a policy of
meeting shareholder redemptions in whole or in part through the distribution
of readily marketable securities. Such a policy would only be adopted after
giving notice to the shareholders and only in conjunction with putting in
place a program whereby redeeming shareholders who receive securities could
elect to sell the securities received to the Fund's custodian (or a designated
broker-dealer) at no cost and at a price equal to the price used in
determining the redemption value of the distributed securities. See "How to
Redeem Fund Shares." A redeeming shareholder of the Fund who received
securities would incur no more or less taxable gain than if the redemption had
been paid in cash.
It is expected that by employing the various tax-efficient management
strategies described herein, the Portfolio can minimize the extent to which
shareholders incur taxes as a result of realized capital gains. The Portfolio
may nevertheless realize gains and shareholders will incur tax liability 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. The Portfolio may temporarily borrow up to 5% of the
value of its total assets to satisfy redemption requests or settle securities
transactions.
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 Investment Company Act of 1940 (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.
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 (such as the Fund). 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.
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.
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. Information regarding other funds or investors that invest in the
Portfolio may be obtained by contacting the Principal Underwriter, 24 Federal
Street, Boston, MA 02110 (617) 482-8260.
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.
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. In the event the Fund withdraws all of its
assets from the Portfolio, 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.
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. BMR also
furnishes for the use of the Portfolio office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Portfolio. 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%
For the period from the start of business, December 1, 1995, to October 31,
1996, the Portfolio paid BMR advisory fees equivalent to 0.600% (annualized)
of the Portfolio's average daily net assets for such period.
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. Eaton Vance is a wholly-
owned subsidiary of Eaton Vance Corp., a publicly-held holding company, which
through its subsidiaries and affiliates engages primarily in investment
management, administration and marketing activities. The Principal
Underwriter is a wholly-owned subsidiary of Eaton Vance.
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 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. The Fund, the Portfolio and BMR have
adopted Codes of Ethics relating to personal securities transactions. The
Codes permit Eaton Vance personnel to invest in securities (including
securities that may be purchased or held by a Portfolio) for their own
accounts, subject to certain pre-clearance, reporting and other restrictions
and procedures contained in such Codes.
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 the Principal Underwriter 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 any 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, to the extent not
covered by insurance.
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. For
the period from the start of business, March 28, 1996, to October 31, 1996,
the Fund paid 0.75% (annualized) of the Fund's average daily net assets for
such period. As at October 31, 1996, the Uncovered Distribution Charges of the
Principal Underwriter calculated under the Plan amounted to approximately
$_______ (equivalent to ___% of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
The Trustees 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 accruing for
its service fees 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
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of 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.
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
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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 $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services."
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. BMR may request that the Portfolio retain the securities for
investment purposes. 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. 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 IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based
on the net asset value per Fund share next computed after a redemption request
is received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123, on any business day a written request for redemption in good
order, plus any share certificates with executed stock powers. Good order
means that all relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed
by a member of either the Securities Transfer Association's STAMP program or
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations as
required by a regulation of the Securities and Exchange Commission and
acceptable to the Transfer Agent. 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.
MEETING REDEMPTIONS BY DISTRIBUTING PORTFOLIO SECURITIES. The Fund currently
will meet redemptions entirely 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 as chosen by the Investment Adviser. The Fund
would only distribute readily marketable securities, which would be valued
pursuant to the Portfolio's valuation procedures. As described under
"Investment Policies and Risks," the practice of distributing appreciated
securities to meet redemptions can be a useful tool for the tax-efficient
management of the Portfolio. A policy of meeting redemptions in whole or in
part through the distribution of securities will only be established in
conjunction with putting in place a program whereby redeeming shareholders who
receive securities could elect to sell the securities received to the Fund's
custodian (or a designated broker-dealer) at no cost and at a price equal to
the price used in determining the redemption value of the distributed
securities. Redeeming shareholders who receive securities and who elect to
participate in this program would receive the same amount of cash as if the
redemption had been paid directly in cash and would incur no more or less
taxable gain than if the redemption had been paid directly in cash. 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
custodian, 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.
If the Fund does adopt a policy of using distributions of securities to meet
redemptions, it may continue to meet redemptions in whole or in part using
cash. At certain times, the Portfolio may not have sufficient quantities of
appreciated securities available to meet redemptions by shareholders.
Moreover, during periods of volatile market conditions the Fund can be
expected to meet redemptions primarily through distributions of cash.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: 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 the
Principal Underwriter, as the Fund's agent, receives the order. It is the
Authorized Firm's responsibility to transmit promptly repurchase orders to the
Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, 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.
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 $750. 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, in the value of all other shares
in the account (namely those purchased within the six years preceding the
redemption) over the purchase price of such shares. Redemptions are processed
in a manner to maximize the amount of redemption proceeds which will not be
subject to a contingent deferred sales charge. That is, each redemption will
be assumed to have been made first from the exempt amounts referred to in
clauses (a), (b) and (c) above, and second through liquidation of those shares
in the account referred to in clause (c) on a first-in-first-out basis. As
described under "Distribution Plan," the contingent deferred sales charge will
be paid to the Principal Underwriter or the Fund. 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 also be waived for
shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance
Shareholder Services"), (2) as part of a required distribution from a tax-
sheltered retirement plan, or (3) following the death of all beneficial owners
of such shares, provided the redemption is requested within one year of death
(a death certificate and other applicable documents may be required). In
addition, shares acquired as a result of a merger or liquidation of another
Eaton Vance sponsored fund will have a CDSC imposed at the same rate as would
have been imposed in the prior fund.
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 TRANSFER AGENT
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 $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, P.O. Box 5123, Westborough,
MA 01581-5123 (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, P.O. Box
5123, Westborough, MA 01581-5123. The currently effective option will appear
on each account 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, and shares of a money market
fund sponsored by an Authorized Firm and approved by the Principal Underwriter
(an "Authorized Firm fund"). 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.
The Transfer Agent makes exchanges at the next determined net asset value
after receiving an exchange request in good order (see "How to Redeem Fund
Shares"). Consult the Transfer Agent 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, except that time during
which shares are held in an Authorized Firm fund will not be credited toward
completion of the contingent deferred sales charge period. 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 funds listed above 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 the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call the Transfer Agent at 800-262-1122, Monday through
Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by
telephone exchange must be registered in the same name(s) and with the same
address as the shares being exchanged. Neither the Fund, the Principal
Underwriter nor the Transfer Agent will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed.Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of EV
Marathon Tax-Managed Growth Fund may be mailed directly to the Transfer Agent,
P.O. Box 5123, Westborough, MA 01581-5123 at any time -- whether or not
distributions are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 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 $5,000 a systematic withdrawal plan through which
they can make regular quarterly redemptions to yield them either a specified
dollar amount of at least $200 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." 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 (for shares held more than one
year 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 redeemed shares may reinvest,
with credit for any contingent deferred sales charges paid on the redeemed
shares, any portion or all of the 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 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.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
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.
In January 1996, the Clinton administration 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
legislation similar in effect were to be enacted at some future time, 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 of the Fund or the Portfolio
are allocated to Eaton Vance, the Fund's performance will be higher.
<PAGE>
[LOGO: EATON VANCE]
EV MARATHON TAX-MANAGED
GROWTH FUND
- --------------------------------------------------------------------------------
PROSPECTUS
FEBRUARY 1, 1997
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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-TGP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
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. 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 February
1, 1997, 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.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ..................... 2 How to Buy Fund Shares ............................ 10
The Fund's Financial Highlights ................... 3 How to Redeem Fund Shares ......................... 13
The Fund's Investment Objectives .................. 4 Reports to Shareholders ........................... 14
The Tax-Managed Mutual Fund Advantage ............. 4 The Lifetime Investing Account
Investment Policies and Risks ..................... 5 Distribution Options ............................ 14
Organization of the Fund and the Portfolio ........ 7 The Eaton Vance Exchange Privilege ................ 15
Management of the Fund and the Portfolio .......... 8 Eaton Vance Shareholder Services .................. 16
Service Plan ...................................... 9 Distributions and Taxes ........................... 17
Valuing Fund Shares ............................... 10 Performance Information ........................... 18
</TABLE>
- -----------------------------------------------------------------
PROSPECTUS DATED FEBRUARY 1, 1997
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS I
SHARES SHARES
------ ------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.75% None
Sales Charges Imposed on Reinvested Distributions None None
Fees to Exchange Shares None None
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-----------------------------------------------------------------------------------------------------------
CLASS A CLASS I
SHARES SHARES
------ ------
<S> <C> <C>
Investment Advisory Fee 0.600% 0.600%
Service Plan Fees 0.100 0.000
Other Fees 0.300 0.300
----- -----
Total Operating Expense 1.000% 0.900%
<CAPTION>
EXAMPLE
An investor would pay the following expenses and, in the case of Class A
shares, maximum initial sales charge on a $1,000 investment, assuming (a) 5% CLASS A CLASS I
annual return and (b) redemption at the end of each time period: SHARES SHARES
------ ------
<S> <C> <C>
1 Year $57 $ 9
3 Years 78 29
</TABLE>
NOTES:
- ------
The table and Example summarize the aggregate expenses of each class of shares
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 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 "The Fund's Financial Highlights," "Management of
the Fund and the Portfolio" and "Service Plan."
The Fund offers two classes of shares. Class A shares are available to all
investors and are sold subject to a sales charge and a service fee. Class I
shares are offered only through financial intermediaries who charge their
clients a fee for services. See "How to Buy Fund Shares" and "Service Plan."
No sales charge is payable at the time of purchase on investments in Class A
shares of $1 million or more. However, a contingent deferred sales charge of
1% will be imposed on such investments in the event of certain redemptions
within 12 months of purchase. See "How to Buy Fund Shares" and "How to Redeem
Fund Shares."
For Class A 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 accruing for its
service fee payments during the quarter ending June 30, 1997. After such date,
expenses will be higher. See "Service Plan."
The Fund invests exclusively in the Portfolio. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio
and others may do so in the future. See "Organization of the Fund and the
Portfolio."
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements which are incorporated into the Statement of Additional
Information. Further information regarding the performance of the Fund will be
contained in its annual report to shareholders which may be obtained without
charge by contacting the Principal Underwriter. The following information
relates to Class A shares only.
- ------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, MARCH 28, 1996, TO OCTOBER 31, 1996
NET ASSET VALUE, beginning of period $10.000
-------
INCOME FROM OPERATIONS:
Net investment income $ 0.013
Net realized and unrealized gain on investments 1.157
-------
Total income from investment operations $ 1.170
-------
NET ASSET VALUE, end of period $11.170
=======
TOTAL RETURN(1)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(2) 1.05%+
Ratio of net investment income to average net assets 0.46%+
Net assets, end of period (000's omitted) $30,178
+Computed on an annualized basis.
(1)Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of the period
reported. Distributions, if any, are assumed to be reinvested at the net
asset value on the payable date. Total return is computed on a
non-annualized basis.
(2)Includes the Fund's share of the Portfolio's allocated expenses.
<PAGE>
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. 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.
Taxes on 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
investment objectives of the Fund and the Portfolio are fundamental, and may
not be changed unless authorized by a vote of the Fund's shareholders or the
Portfolio's investors, as the case may be.
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.
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 by
managing its investments so as to minimize and defer the taxes incurred by
shareholders as a consequence of their investment in the Fund. The Fund seeks
to achieve returns primarily in the form of unrealized capital gains, which do
not give rise to current tax obligations for shareholders.
The Fund is similar to retirement planning instruments (such as nondeductible
IRAs and variable annuities) in that it is a long-term investment that seeks
to maximize after-tax returns. As a mutual fund, however, the Fund avoids a
number of structural disadvantages inherent in a nondeductible 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 a nondeductible 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 nondeductible 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 a nondeductible 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.
Taxes on 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. A substantial portion of the assets of the Portfolio are
securities with large accumulated capital gains that have been contributed by
investors in the Portfolio. As a general matter, the Portfolio will not sell
appreciated securities contributed to the Portfolio if such a sale would give
rise to the recognition of capital gains accumulated prior to investment in the
Portfolio by the investor in the Portfolio who contributed the securities, but
will instead seek to manage its exposure to such securities by using the
above-described hedging techniques as appropriate.
The Portfolio follows the practice of distributing selected appreciated
securities to meet redemptions of certain investors and may use the "Selection
of Securities Used to Meet Redemptions" in the Statement of Additional
Information, as a management tool. By distributing appreciated securities the
Portfolio can reduce its position in such securities without realizing capital
gains. During periods of net withdrawals by investors in the Portfolio, using
distributions of securities also enables the Portfolio to avoid the forced
sale of securities to raise cash for meeting redemptions. The Portfolio's
ability to select the securities used to meet redemptions is limited with
respect to redemptions by investors in the Portfolio who contributed
securities, and with respect to the securities contributed by such investors
in the Portfolio. See "Statement of Additional Information - Selection of
Securities Used to Meet Redemptions." Such limitations could affect the
performance of the Portfolio, and, therefore, the Fund. The Fund currently
meets redemptions solely in cash, but may adopt in the future a policy of
meeting shareholder redemptions in whole or in part through the distribution
of readily marketable securities. Such a policy would only be adopted after
giving notice to the shareholders and only in conjunction with putting in
place a program whereby redeeming shareholders who receive securities could
elect to sell the securities received to the Fund's custodian (or a designated
broker-dealer) at no cost and at a price equal to the price used in
determining the redemption value of the distributed securities. See "How to
Redeem Fund Shares." A redeeming shareholder of the Fund who received
securities would incur no more or less taxable gain than if the redemption had
been paid in cash.
It is expected that by employing the various tax-efficient management
strategies described herein, the Portfolio can minimize the extent to which
shareholders incur taxes as a result of realized capital gains. The Portfolio
may nevertheless realize gains and shareholders will incur tax liability 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. The Portfolio may temporarily borrow up to 5% of the
value of its total assets to satisfy redemption requests or settle securities
transactions.
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 Investment Company Act of 1940 (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.
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 (such as the Fund). The Trustees of the Trust have divided
the shares of the Fund into two classes, Class A shares and Class I shares.
Each class represents an interest in the Fund, but is subject to different
expenses, rights and privileges. See "Service Plan" and "How to Buy Fund
Shares." The Trustees have the authority under the Declaration of Trust to
create additional classes of shares with rights and privileges different from
those applicable to the existing classes of shares.
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 of each class are entitled to share pro rata in the net
assets of the Fund attributable to that class 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.
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.
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. Information regarding other funds or investors that invest in the
Portfolio may be obtained by contacting the Principal Underwriter, 24 Federal
Street, Boston, MA 02110 (617) 482-8260.
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.
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. In the event the Fund withdraws all of its
assets from the Portfolio, 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.
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. BMR also
furnishes for the use of the Portfolio office space and all necessary office
facilities, equipment and personnel for servicing the investments of the
Portfolio. 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%
For the period from the start of business, December 1, 1995, to October 31,
1996, the Portfolio paid BMR advisory fees equivalent to 0.600% (annualized)
of the Portfolio's average daily net assets for such period.
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. Eaton Vance is a wholly-
owned subsidiary of Eaton Vance Corp., a publicly-held holding company, which
through its subsidiaries and affiliates engages primarily in investment
management, administration and marketing activities. The Principal Underwriter
is a wholly-owned subsidiary of Eaton Vance.
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 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. The Fund, the Portfolio and BMR have
adopted Codes of Ethics relating to personal securities transactions. The
Codes permit Eaton Vance personnel to invest in securities (including
securities that may be purchased or held by a Portfolio) for their own
accounts, subject to certain pre-clearance, reporting and other restrictions
and procedures contained in such Codes.
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 the Principal Underwriter 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 any 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, to the extent not
covered by insurance.
SERVICE PLAN
- ------------------------------------------------------------------------------
In addition to advisory fees and other expenses, Class A shares of the Fund pay
service fees pursuant to a Service Plan (the "Plan") designed to meet the
requirements of Rule 12b-1 under the 1940 Act 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 AVERAGE DAILY NET ASSETS OF THE
FUND ATTRIBUTABLE TO CLASS A SHARES 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 average daily net
assets for any fiscal year which is attributable to Class A shares of the Fund
sold by such persons remaining outstanding for at least twelve months. The Fund
expects to begin accruing for its 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 of each class of shares is computed by dividing the value of
the Fund's total assets attributable to that class, less its liabilities
attributable to that class, by the number of shares of that class 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 share and, in the case of Class A
shares, the public offering price based thereon. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter.
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. 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.
CLASS A SHARES may be purchased 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 assets
value, while the sales charge is divided between the Authorized Firm and the
Principal Underwriter.
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 on purchases of Class A
shares 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* See below**
<FN>
*No sales charge is payable at the time of purchase on investments of $1 million or more, or 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. A contingent deferred
sales charge ("CDSC") of 1% 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.
**A commission on sales of $1 million or more will be paid as follows: 1.00% on sales of more than $1 million but less than $3
million, plus .50% on sales of more than $3 million but less than $5 million, plus .25% on sales of $5 million or more.
Purchases of $1 million or more will be aggregated over a 12-month period for purposes of determining the commission to be
paid.
</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 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.
An initial investment in Class A shares of the Fund must be at least $1,000.
Once an account has been established the investor may send investments of $50
or more at any time directly to the Fund's transfer agent (the "Transfer
Agent") as follows: First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The $1,000 minimum initial investment is waived
for Bank Automated Investing accounts, which may be established with an
investment of $50 or more. See "Eaton Vance Shareholder Services."
Class A 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 clients and current and retired officers and employees of Eaton Vance, its
affiliates and other investment advisers of Eaton Vance sponsored funds; 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. Class A 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) 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") ("Eligible Plans") and "rabbi trusts." 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.
CLASS I SHARES are offered to through certain Authorized Firms that charge
their customers transaction or other fees with respect to their customers'
investment in the Fund. Class I shares may also be sold to certain persons and
entities affiliated with Eaton Vance. An initial investment in Class I shares
of the Fund must be at least $250,000 and the minimum subsequent investment is
$10,000. The minimum investment amounts are waived for persons and entities
affiliated with Eaton Vance.
No sales charge is payable at the time of purchase 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. A CDSC of
0.50% will be imposed on such investments in the event of certain redemptions
within 12 months of purchase and the Authorized Firm will be paid a commission
on such sales of 0.50% of the amount invested.
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 public offering price as determined above.
The minimum value of securities (or securities and cash) accepted for deposit
is $5,000. BMR may request that the Portfolio retain the securities for
investment purposes. 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 public offering price per Fund share on the day such
securities are accepted. 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 public offering price 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 FOR CLASS A SHARES. If the
investor in Class A shares of the Fund, 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 IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based
on the net asset value per Fund share next computed after a redemption request
is received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123, on any business day a written request for redemption in good
order, plus any share certificates with executed stock powers. Good order
means that all relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed
by a member of either the Securities Transfer Association's STAMP program or
the New York Stock Exchange's Medallion Signature Program, or certain banks,
savings and loan institutions, credit unions, securities dealers, securities
exchanges, clearing agencies and registered securities associations as
required by a regulation of the Securities and Exchange Commission and
acceptable to the Transfer Agent. 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.
MEETING REDEMPTIONS BY DISTRIBUTING PORTFOLIO SECURITIES. The Fund currently
will meet redemptions entirely 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 as chosen by the Investment Adviser. The Fund
would only distribute readily marketable securities, which would be valued
pursuant to the Portfolio's valuation procedures. As described under
"Investment Policies and Risks," the practice of distributing appreciated
securities to meet redemptions can be a useful tool for the tax-efficient
management of the Portfolio. A policy of meeting redemptions in whole or in
part through the distribution of securities will only be established in
conjunction with putting in place a program whereby redeeming shareholders who
receive securities could elect to sell the securities received to the Fund's
custodian (or a designated broker-dealer) at no cost and at a price equal to
the price used in determining the redemption value of the distributed
securities. Redeeming shareholders who receive securities and who elect to
participate in this program would receive the same amount of cash as if the
redemption had been paid directly in cash and would incur no more or less
taxable gain than if the redemption had been paid directly in cash. 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
custodian, 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.
If the Fund does adopt a policy of using distributions of securities to meet
redemptions, it may continue to meet redemptions in whole or in part using
cash. At certain times, the Portfolio may not have sufficient quantities of
appreciated securities available to meet redemptions by shareholders.
Moreover, during periods of volatile market conditions the Fund can be
expected to meet redemptions primarily through distributions of cash.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: 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 the
Principal Underwriter, as the Fund's agent, receives the order. It is the
Authorized Firm's responsibility to transmit promptly repurchase orders to the
Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
Within seven days after receipt of a redemption request in good order by the
Transfer Agent, 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.
If shares were recently purchased, the proceeds of a redemption 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 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 $750. 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 Class A shares have been purchased at net asset value 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 1% will be imposed on such redemption.
If shares have been purchased at net asset value because the amount invested
represents redemption proceeds from a mutual fund unaffiliated with Eaton
Vance (as described under "How to Buy Fund Shares") and are redeemed within 12
months of purchase, a CDSC of 0.50% will be imposed on such redemption. The
CDSC will be imposed on an amount equal to the lesser of the current market
value or the original purchase price of the Class A 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 will be retained by the Principal Underwriter.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. 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 TRANSFER
AGENT, 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 $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, P.O. Box 5123, Westborough,
MA 01581-5123 (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, P.O. Box
5123, Westborough, MA 01581-5123. The currently effective option will appear
on each account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares of the same class.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares of the same class.
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 of the same class 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 the same class 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 Class A 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). In the event the fund to be acquired does not offer Class I shares,
Class I shares of the Fund may be exchanged for the existing class of the fund
to be acquired. Such exchange offers are available only in States where shares
of the fund being acquired may be legally sold.
Each exchange must meet the minimum investment amount required by the fund to
be acquired. 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.
Class A 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.
The Transfer Agent makes exchanges at the next determined net asset value
after receiving an exchange request in good order (see "How to Redeem Fund
Shares"). Consult the Transfer Agent 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 of Class A
shares, 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). 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 the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call the Transfer Agent at 800-262-1122, Monday through
Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by
telephone exchange must be registered in the same name(s) and with the same
address as the shares being exchanged. Neither the Fund, the Principal
Underwriter nor the Transfer Agent will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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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 CLASS A SHARE ACCUMULATION: Once the $1,000
minimum investment in Class A shares has been made, checks of $50 or more
payable to the order of EV Traditional Tax-Managed Growth Fund may be mailed
directly to the Transfer Agent, First Data Investor Services Group, P.O. Box
5123, Westborough, MA 01581-5123 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 CLASS A SHARE ACCUMULATION: Cash
investments in Class A shares of $50 or more may be made automatically each
month or quarter from the shareholder's bank account. The $1,000 minimum
initial investment and small account redemption policy are waived for these
accounts.
STATEMENT OF INTENTION: Purchases of $100,000 or more of Class A shares 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 of Class A shares 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 listed 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 $5,000 a systematic withdrawal plan through which
they can make regular quarterly redemptions to yield them either a specified
dollar amount of at least $200 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." 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 (for shares held more than one
year 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 Class A
shares would be disadvantageous because of the sales charge included in such
purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed Class A shares may
reinvest at net asset value any portion or all of the 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 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 redemption, and the privilege has not been used more than once in the
prior 12 months. Class A 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 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.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with certain tax-sheltered retirement plans. Detailed
information concerning these plans, including certain exceptions to minimum
investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, dividends and distributions will be automatically reinvested in
additional shares.
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.
In January 1996, the Clinton administration 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
legislation similar in effect were to be enacted at some future time, 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 same class 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 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 (and, with respect to each class, any class expenses) 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 Class A 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
a sales charge is reduced or eliminated in a subsequent acquisition of Class A
shares of the Fund or similar shares of another fund pursuant to the Fund's
reinvestment or exchange privilege. In addition, losses realized on a
redemption of Class A 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 THE AVERAGE ANNUAL TOTAL RETURN OF
EACH CLASS OF SHARES. The Fund's average annual total return is determined by
the average annual percentage change in value of $1,000 invested at the
maximum public offering price (which in the case of Class A shares includes
the maximum sales charge) for specified periods, assuming reinvestment of all
distributions. The Fund may 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 for Class A shares based
on investments at various sales charge levels or at net asset value. Any
performance data which is based on the net asset value per Class A share would
be lower 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 of the Fund or the Portfolio are allocated to Eaton
Vance, the Fund's performance will be higher.
<PAGE>
[LOGO: EATON VANCE]
EV TRADITIONAL
TAX-MANAGED
GROWTH FUND
PROSPECTUS
FEBRUARY 1, 1997
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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-TGP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1997
EV CLASSIC 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 Classic 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
Page
PART I
Additional Information about Investment Policies ...................... 2
Investment Restrictions ............................................... 4
Trustees and Officers ................................................. 5
Investment Adviser and Administrator .................................. 7
Custodian ............................................................. 10
Service for Withdrawal ................................................ 10
Determination of Net Asset Value ...................................... 10
Investment Performance ................................................ 11
Taxes ................................................................. 13
Portfolio Security Transactions ....................................... 15
Other Information ..................................................... 16
Independent Certified Public Accountants .............................. 18
PART II
Fees and Expenses ..................................................... a-1
Principal Underwriter ................................................. a-1
Distribution Plan ..................................................... a-1
Performance Information ............................................... a-3
Control Persons and Principal Holders of Securities ................... a-4
Financial Statements .................................................. a-5
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1997, AS SUPPLEMENTED
FROM TIME TO TIME, WHICH IS INCORPORATED HEREIN BY REFERENCE. 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.
Forward Foreign Currency Exchange Contracts and Currency Futures. Forward
contracts are individually negotiated and privately traded by currency traders
and their customers. A forward contract involves an obligation to purchase or
sell a specific currency (or basket of currencies) for an agreed price at a
future date, which may be any fixed number of days from the date of the
contract. The Portfolio may enter into a forward contract for the purchase or
sale of a security denominated in a foreign currency, or when the Portfolio
anticipates the receipt in a foreign currency of dividend or interest payments
on such a security which it holds, to "lock" in the U.S. dollar price of the
security or the U.S. dollar equivalent of such dividend or interest payment,
as the case may be. Additionally, when the Investment Adviser believes that
the currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, it may enter into a forward contract to sell, for a
fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Portfolio's securities denominated in such foreign
currency. The precise matching of the forward contract amounts and the value
of the securities involved will not generally be possible. The Portfolio
generally will not enter into a forward contract with a term of greater than
one year.
Currency futures contracts are exchange traded instruments that may be
used by the Portfolio for the purposes describing in the preceding paragraphs
as an alternative to the purchase or sale of forward currency exchange
contracts. Currency futures contracts are similar in structure to stock index
futures contracts, but change in value to reflect the movements of a currency
or basket of currencies rather than a stock index. The Portfolio's investments
in currency contracts are subject to limitations and restrictions similar to
those set forth for the Portfolio's investments in stock index futures and
options on stock index futures. See "Stock Index Futures and Options on Stock
Index Futures."
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 Requirements. Transactions involving reverse repurchase
agreements, the lending of Portfolio securities, 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, futures
contracts or forward contracts, or (2) cash or liquid 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 or liquid securities in a segregated account with its custodian in
the prescribed amount. The securities in the segregated account will be marked
to market daily.
Assets used as cover or held in a segregated account cannot be sold while
the position requiring coverage or segregation is outstanding unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of the Portfolio's assets to segregated accounts or to cover 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.
Selection of Securities Used to Meet Redemptions. Investors in the Portfolio
may redeem interests in the Portfolio at net asset value on a daily basis.
Redemptions by the Fund's shareholders currently are met entirely in cash, but
distributions of securities generally are used to meet redemptions by other
investors in the Portfolio and may in the future be used to meet redemptions
by the Fund's shareholders. See "How to Redeem Fund Shares" in the Fund's
prospectus. The Portfolio's ability to select the securities used to meet
redemptions is limited with respect to the securities contributed by such
investors. Within five years of any contribution of securities, the Portfolio
will not distribute such securities to any investor other than the
contributing investor. In meeting a redemption of an investor within five
years of a contribution of securities by such investor, the Portfolio will
not, unless requested by the redeeming investor, distribute any securities
other than the securities contributed by the redeeming investor while
retaining all or a portion of the securities contributed by such investor. If
the Portfolio were to do otherwise, certain investors who contributed
securities could realize taxable gain. In addition, upon the request at any
time of a redeeming investor in the Portfolio that contributed securities, the
Portfolio will utilize securities held in the Portfolio that were contributed
by such investor to meet the redemption. These redemption practices constrain
the selection of securities distributed to meet redemptions and, consequently,
may adversely affect the performance of the Portfolio and the Fund. The
Trustees of the Portfolio believe that the potential advantages for the
Portfolio to be derived from attracting contributions of securities that would
not be made in the absence of these redemption practices outweigh the
potential disadvantages of reduced flexibility to select securities to meet
redemptions. It is impossible to predict whether the net result will be
beneficial or detrimental to the Fund's performance.
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. 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 30% of the
Portfolio's total assets. Securities lending involves administration expenses,
including finders' fees.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as
used in this 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 investors of 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 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 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).
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 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. Notwithstanding the foregoing, under normal
market conditions the Fund and the Portfolio must take actions necessary to
comply with the policy of investing at least 65% of total assets in equity
securities. Notwithstanding the foregoing, the Fund and Portfolio must always
be in compliance with the borrowing policies set forth above.
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 (63), 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 (55), 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.
DONALD R. DWIGHT (65), 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 (61), 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 (70), 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 (39), 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.
H. DAY BRIGHAM, JR. (70) 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.
WILLIAM H. AHERN, JR. (37), 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 (54), 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 (51), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
M. KATHERINE KREIDER (36), 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 (65), 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 (61), 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 (34), 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 (54), 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 (39), 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. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund, including administrative
services, transfer agency, custodial and fund accounting and distribution
services, and (ii) all other matters in which Eaton Vance or its affiliates
has any actual or potential conflict of interest with the Fund or its
shareholders.
The Nominating Committee is comprised of four Trustees who are not
"interested persons" as that term is defined under the Investment Company Act
of 1940 ("noninterested Trustees"). The Committee has four-year staggered
terms, with one member rotating off the Committee to be replaced by another
noninterested Trustee of the Trust. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and
to assure that at least a majority of the Board of Trustees is independent of
Eaton Vance and its affiliates.
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 trading and brokerage policies and practices,
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, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features
an experience team of investment professionals that began working together in
the mid-1980s. 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 Mumbai.
Together Eaton Vance and Lloyd George manage over $18 billion in assets. 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-term" 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 any legal obligation of the Portfolio to indemnify its
Trustees, officer and investors with respect thereto, to the extent not
covered by insurance.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. For
additional information about the Investment Advisory Agreement, including the
net assets of the Portfolio and the investment advisory fees that the
Portfolio paid BMR under the Investment Advisory Agreement, see "Fees and
Expenses" in the Fund's Part II.
The Investment Advisory Agreement with BMR remains in effect until
February 28, 1997. It may be continued indefinitely thereafter so long as such
continuance 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 shareholders approved by the
Trustees of the Trust, (xvii) compensation and expenses of Trustees of the
Trust who are not members of the Eaton Vance organization, and (xviii) such
non-recurring items as may arise, including expenses incurred in connection
with litigation, proceedings and claims and the obligation of the Trust to
indemnify its Trustees and 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. Hawkes 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
November 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. In view of Mr. Clay's interest in IBT, the
Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under the
Investment Company Act of 1940, and the Portfolio's investments held by IBT as
custodian are thus subject to the additional examinations by the Portfolio's
independent certified public accountants as called for by such Rule.
IBT also provides services in connection with the preparation of
shareholder reports and the electronic filing of such reports with the
Commission for which it receives a separate fee.
SERVICE FOR WITHDRAWAL
The 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.
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 relevant indices, such as 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 or rankings of mutual funds (which
include the Fund) 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. Information, charts and illustrations showing the effect of
compounding interest or relating to inflation and taxes (including their
effects on the dollar and the return on stocks and other investment vehicles)
may also be included in advertisements and materials furnished to present and
prospective investors.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- costs associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and
the results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the
value of investing as early as possible and regularly, as well as staying
invested. The benefits of investing in equity securities by means of a mutual
fund may also be included (such benefits may include diversification,
professional management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time
periods; and results of diversifying assets among several investments with
varying performance. Information in advertisements and materials furnished to
present and prospective investors may also include quotations (including
editorial comments) and statistics concerning investing in securities, as well
as investing in particular types of securities and the performance of such
securities.
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.
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 anticipated 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.
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 certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
notification from the IRS or a broker, may be subject to "backup" withholding
of federal income tax from the Fund's taxable dividends and distributions and
the proceeds of redemptions (including repurchases and exchanges) at a rate of
31%. An individual's taxpayer identification number is generally his or her
social security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the 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 Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
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 Fund and the Portfolio see "Financial
Statements" in Part II.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC TAX-MANAGED GROWTH FUND.
The Fund became a series of the Trust on June 24, 1996.
FEES AND EXPENSES
INVESTMENT ADVISER
As of October 31, 1996, the Portfolio had net assets of $936,799,570. For
the period from the Portfolio's start of business, December 1, 1995 to the
fiscal year ended October 31, 1996, the Portfolio paid BMR advisory fees of
$2,116,576 (equivalent to 0.600% (annualized) of the Portfolio's average daily
net assets for such period).
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund.
DISTRIBUTION PLAN
For the period from the start of business, August 2, 1996, to the fiscal
year ended October 31, 1996, the Principal Underwriter paid to Authorized
Firms sales commissions of $16,878 on sales of Fund shares. During the same
period, the Fund made sales commission payments under the Plan to the
Principal Underwriter aggregating $ , and the Principal Underwriter
received $ in contingent deferred sales charges ("CDSCs") which were
imposed on early redeeming shareholders. These sales commissions and CDSC
payments reduced Uncovered Distribution Charges under the Plan. As at October
31, 1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $
(which amount was equivalent to % of the Fund's net assets on such date).
During the fiscal year ended October 31, 1996, the Fund made service fee
payments to the Principal Underwriter and Authorized Firms aggregating
$ , of which $ was paid to Authorized Firms, and the balance of
which was retained by the Principal Underwriter. The Fund expects to begin
making service fee payments during the quarter ending June 30, 1997.
PRINCIPAL UNDERWRITER
The Fund has authorized the Principal Underwriter to act as its agent in
repurchasing shares at the rate of $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. For the period from the start of
business, August 2, 1996, to the fiscal year ended October 31, 1996, the Fund
paid the Principal Underwriter $22.50 for repurchase transactions handled by
the Principal Underwriter.
BROKERAGE COMMISSIONS
For the period from the Portfolio's start of business, December 1, 1995 to
the fiscal year ended October 31, 1996, the Portfolio paid brokerage
commissions of $144,815 on portfolio security transactions, of which
approximately $112,018 was paid in respect of portfolio security transactions
aggregating approximately $89,523,457 to firms which provided some Research
Services (as defined in Part I) to Eaton Vance (although many of such firms
may have been selected in any particular transaction primarily because of
their execution capabilities).
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, 1997, 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,
1996, 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 $9 $1,254 $142,500(2)
Samuel L. Hayes, III 8 1,220 153,750(3)
Norton H. Reamer 8 1,191 142,500
John L. Thorndike 8 1,270 145,500
Jack L. Treynor 9 1,319 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $42,500 of deferred compensation.
(3) Includes $37,500 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.
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 distributions
declared on Fund shares. The Fund does not accrue possible future payments as
a liability of the Fund or reduce the Fund's current net assets in respect of
unknown amounts which may become payable under the Plan in the future because
the standards for accrual of such a liability under accounting principles have
not been satisfied.
The Plan provides that the Fund will receive all CDSCs 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.
CDSCs 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 CDSCs
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 CDSCs 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 CDSCs
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 CDSC will be imposed, the level and timing of redemptions
of Fund shares upon which no CDSC will be imposed (including redemptions
involving exchanges of Fund shares for shares of another fund in the Eaton
Vance Classic Group of Funds which result in a reduction of uncovered
distribution charges), changes in the level of the net assets of the Fund, and
changes in the interest rate used in the calculation of the distribution fee
under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions, distribution fees and service fees to the Principal
Underwriter which may be equivalent, on an aggregate basis during any fiscal
year of the Fund, to 1% of the Fund's average daily net assets for such year.
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 and
service fees at the time of sale, it is anticipated that the Eaton Vance
organization will profit by reason of the operation of the Plan through an
increase in the Fund's assets (thereby increasing the management fee payable
to Eaton Vance by the Fund and the administration fee payable to Eaton Vance
by the Portfolio) resulting from sale of Fund shares and through the sales
commissions, distribution fees and CDSCs 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 CDSCs have exceeded the total expenses theretofore incurred
by such organization in distributing shares of the Fund. Total expenses for
this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices, which costs will include without
limitation leasing expense, depreciation of building and equipment, utilities,
communication and postage expense, compensation and benefits of personnel,
travel and promotional expense, stationery and supplies, literature and sales
aids, interest expense, data processing fees, consulting and temporary help
costs, insurance, taxes other than income taxes, legal and auditing expense
and other miscellaneous overhead items. Overhead is calculated and allocated
for such purpose by the Eaton Vance organization in a manner deemed equitable
to the Fund.
The provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the
Principal Underwriter. Pursuant to Rule 12b-1, the Plan has been approved by
the Fund's initial sole shareholder (Eaton Vance) and by the Board of Trustees
of the Trust as required by Rule 12b-1. The Plan continues in effect through
and including April 28, 1997, and shall continue in effect for so long as such
continuance is approved at least annually by the vote of both a majority of
(i) the Trustees of the Trust who are not interested persons of the Trust and
who have no direct or indirect financial interest in the operation of the Plan
or any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all
of the Trustees then in office, 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. Pursuant to Rule 12b-1, the Plan has been approved by
the Fund's initial sole shareholder (Eaton Vance) and by the Board of Trustees
of the Trust, including the Rule 12b-1 Trustees. 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, 1996. The total return for the period prior to
the Fund's commencement of operations on August 2, 1996 reflects the
Portfolio's total return (or that of its predecessor) adjusted to reflect any
applicable Fund CDSC. The total return for such prior period has not been
adjusted to reflect the Fund's distribution fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING CDSC DEDUCTING CDSC*
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ----------------------------- --------------------------
PERIOD DATE ON 10/31/96 ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------------- ----------- ----------- -------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 years ended
10/31/96 10/31/86 $3,949.87 $3,949.87 294.99% 14.72% 294.99% 14.72%
5 years ended
10/31/96 10/31/91 $2,095.52 $2,095.52 109.55% 15.95% 109.55% 15.95%
1 year ended
10/31/96 10/31/95 $1,220.21 $1,210.21 22.02% 22.02% 21.02% 21.02%
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.
<FN>
- ----------
*No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 1, 1996, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 1, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 29.65% of the
outstanding shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. In addition, the following shareholders owned
beneficially and of record the percentages of outstanding shares of the Fund
indicated after their names: Painewebber FBO Ann E. Garvey, Trustee, Annie's
Revocable Trust DTD 4/12/90, Wichita, KS (16.76%) and Painewebber FBO Mary L.
G. Theroux, Trustee, Mary L. G. Theroux Revocable Living Trust U/A DTD
9/30/68, Oakland, CA (9.48%). To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding shares as
of such date.
- ------------------------------------------------------------------------------
EV CLASSIC TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
October 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investment in Tax-Managed Growth Portfolio (Portfolio), at
value (Note 1A) (Identified cost, $10,360,908) $10,779,407
Receivable for Fund shares sold 75,315
Deferred organization expenses (Note 1D) 32,335
-----------
Total assets $10,887,057
LIABILITIES:
Payable for Fund shares redeemed $34,656
Accrued organization expense 23,518
Accrued expenses 12,700
-------
Total liabilities 70,874
-----------
NET ASSETS for 1,003,747 shares of beneficial interest
outstanding $10,816,183
===========
SOURCES OF NET ASSETS:
Paid-in capital $10,416,691
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (8,477)
Unrealized appreciation from Portfolio (computed on
the basis of identified cost) 418,499
Accumulated net investment loss (10,530)
-----------
Total $10,816,183
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (NOTE 6)($10,816,183 / 1,003,747 shares
of beneficial interest outstanding) $10.78
======
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the period from the start of business, August 2, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of
foreign taxes, $41) $ 14,902
Interest income allocated from Portfolio 1,487
Expenses allocated from Portfolio (7,752)
--------
Net investment income allocated from Portfolio $ 8,637
Expenses --
Distribution fees (Note 5) $ 12,241
Registration fees 3,560
Amortization of organization expenses (Note 1D) 1,686
Printing and postage 940
Transfer and dividend disbursing agent fees 239
Legal and accounting services 200
Miscellaneous 301
--------
Total expenses 19,167
--------
Net investment loss $(10,530)
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized loss from Portfolio (identified cost
basis) $(8,477)
Unrealized appreciation of investments 418,499
--------
Net realized and unrealized gain $410,022
--------
Net increase in net assets from operations $399,492
========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
For the period from the start of business, August 2, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (10,530)
Net realized loss on investments (8,477)
Unrealized appreciation 418,499
-----------
Net increase in net assets from operations $ 399,492
-----------
Transactions in shares of beneficial interest (Note 4) --
Proceeds from sale of shares $11,069,340
Cost of shares redeemed (652,659)
-----------
Net increase from Fund share transactions $10,416,681
-----------
Net increase in net assets $10,816,173
NET ASSETS:
At beginning of period 10
-----------
At end of period (including accumulated net investment loss of
$10,530) $10,816,183
===========
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
For the period from the start of business, August 2, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
NET ASSET VALUE, beginning of period $ 10.000
--------
INCOME FROM OPERATIONS:
Net investment loss $ (0.010)
Net realized and unrealized gain on investments 0.790
--------
Total income from operations $ 0.780
--------
NET ASSET VALUE, end of period $ 10.780
========
TOTAL RETURN(1) 7.80%
RATIOS/SUPPLEMENTAL DATA:
Ratio of net expenses to average net assets(2) 2.15% +
Ratio of net investment income to average net assets (0.84%)+
Net assets, end of period (000's omitted) $ 10,816
+ Annualized.
(1) Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to
be reinvested at the net asset value on the payable date. Total return is
computed on a non-annualized basis.
(2) Includes the Fund's share of Tax-Managed Growth Portfolio's allocated
expenses for the period from August 1, 1996 to October 31, 1996.
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Classic Tax-Managed Growth Fund (the Fund) is a diversified series of Eaton
Vance Mutual Funds Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund invests all of its investable assets in interests
in Tax-Managed Growth Portfolio (the Portfolio), a New York Trust, having the
same investment objective as the Fund. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (1.2% at October 31, 1996). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
A. INVESTMENT VALUATION -- Valuation of the securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income, and any
net realized capital gains. Accordingly, no provision for federal income or
excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
E. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
F. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT), serves as
custodian of the Fund. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average cash balances the
Fund maintains with IBT. All significant credit balances used to reduce the
Fund's custodian fees are reflected as a reduction of operating expenses in
the Statement of Operations.
- ------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
It is the present policy of the Fund to make at least one distribution
annually (normally in December) of all or substantially all of the investment
income allocated to the Fund by the Portfolio, less the Fund's direct and
allocated expenses and at least one distribution annually of all or
substantially all of the net realized capital gains (reduced by any available
capital loss carryforwards from prior years) allocated by the Portfolio to the
Fund, if any.
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 distinguishes between distributions on a tax basis
and a financial reporting basis. Generally accepted accounting principles
require that only distributions in excess of tax basis earnings and profits be
reported in the financial statements as a return of capital. Differences in
the recognition or classification of income between the financial statements
and tax earnings and profits which result in temporary over distributions for
financial statement purposes are classified as distributions in excess of net
investment income or accumulated net realized gains. Permanent differences
between book and tax accounting relating to distributions are reclassified to
paid-in capital.
- ------------------------------------------------------------------------------
(3) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM as its investment adviser. See Note 2 of
the Portfolio's Notes to Financial Statements which are included elsewhere in
this report. Except as to Trustees of the Fund who are not members of EVM's
organization, officers and Trustees receive remuneration for their services to
the Fund out of such management fee. Certain officers and Trustees of the
Fund and the Portfolio are officers and directors/trustees of the above
organization (Note 5).
- ------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares for the period from the start of business, August
2, 1996 to October 31, 1996 were as follows:
Sales 1,066,787
Issued to shareholders electing to receive payments of
distributions in Fund shares --
Redemptions (63,040)
---------
Net increase 1,003,747
=========
- ------------------------------------------------------------------------------
(5) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay
the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal
to 1/365 of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no
outstanding Uncovered Distribution Charges, which are equivalent to the sum of
(i) 6.25% of the aggregate amount received by the Fund for shares sold plus,
(ii) distribution fees calculated by applying the rate of 1% over the
prevailing prime rate to the outstanding balance of Uncovered Distribution
Charges of EVD reduced by the aggregate amount of contingent deferred sales
charges (see Note 6) and daily amounts theretofore paid to EVD. The amount
payable to EVD with respect to each day is accrued on such day as a liability
of the Fund and, accordingly, reduces the Fund's net assets. The Fund paid
$9,181 to EVD for the period from the start of business August 1, 1996 to
October 31, 1996, representing 0.75% of average daily average net assets. At
October 31, 1996, the amount of Uncovered Distribution Charges of EVD
calculated under the Plan was approximately $ .
In addition, the Plan authorizes the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets for each fiscal
year. The Trustees have initially implemented the Plan by authorizing the Fund
to make monthly payments of service fees to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed 0.25% per annum of the
Fund's average daily net assets for any fiscal year. EVD currently expects to
pay an Authorized Firm a service fee at the time of sale equal to 0.25% of the
purchase price of the shares sold by such Firm and monthly payments of service
fees in amounts not expected to exceed 0.25% per annum of the Fund's average
daily net assets based on the value of Fund shares sold by such Firm and
remaining outstanding for at least one year. For the period from the start of
business, August 2, 1996 to October 31, 1996, the Fund paid service fees to
EVD of $3,060. Service fee payments are made for personal services and/or
maintenance of shareholder accounts. During the first year after a purchase of
Fund shares, EVD will retain the service fee as reimbursement for the service
fee payment made to the Authorized Firm at the time of sale.
Certain officers and Trustees of the Fund are officers or directors of EVD.
- ------------------------------------------------------------------------------
(6) CONTINGENT DEFERRED SALES CHARGE
Shares purchased and redeemed within the first year of their purchase (except
shares acquired through the reinvestment of distributions) generally will be
subject to a contingent deferred sales charge (CDSC) at a rate of one percent of
redemption proceeds, exclusive of all reinvestments and capital appreciation in
the account. No contingent deferred sales charge is imposed on exchanges for
shares of other funds in the Eaton Vance Classic Group of Funds or Eaton Vance
Money Market Fund which are distributed with a contingent deferred sales charge.
EVD received $ of CDSC for the period from the start of business, August 1, 1996
to October 31, 1996.
- ------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$10,994,035 and $633,287, respectively.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND TRUSTEES OF
EATON VANCE MUTUAL FUNDS TRUST:
We have audited the accompanying statement of assets and liabilities of EV
Classic Tax-Managed Growth Fund (one of the series constituting Eaton Vance
Mutual Funds Trust) as of October 31, 1996, and the related statements of
operations and changes in net assets and the financial highlights for the
period from the start of business, August 2, 1996, to October 31, 1996. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. 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 financial statements and financial highlights present
fairly, in all material respects, the financial position of EV Classic Tax-
Managed Growth Fund series of the Eaton Vance Mutual Funds Trust at October
31, 1996, the results of its operations, the changes in its net assets, and
its financial highlights for the period then ended, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
NOVEMBER 29, 1996
<PAGE>
----------------------------------
TAX-MANAGED GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
- ------------------------------------------------------------------------------
COMMON STOCKS - 97.9%
- ------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- ------------------------------------------------------------------------------
ADVERTISING - 0.5%
Interpublic Group of Cos., Inc. 106,000 $ 5,141,000
------------
AEROSPACE & DEFENSE - 2.1%
Boeing Co. 90,370 $ 8,619,039
Raytheon Co. 226,544 11,157,292
------------
$ 19,776,331
------------
BANKS - 1.0%
BankAmerica Corp. 20,812 $ 1,904,298
Citicorp 40,000 3,960,000
First Chicago NBD Corp. 43,007 2,193,353
Wells Fargo & Co. 4,265 1,139,288
------------
$ 9,196,939
------------
BEVERAGES - 6.4%
Anheuser-Busch Cos., Inc. 210,260 $ 8,095,010
Coca-Cola Co. 478,208 24,149,504
PepsiCo, Inc. 900,682 26,682,704
------------
$ 58,927,218
------------
BROADCAST & CABLE - 0.1%
Cox Communications Inc., Class A* 93,319 $ 1,726,402
------------
BUILDING MATERIALS - 0.3%
Masco Corp. 55,540 $ 1,742,567
Stanley Works 40,490 1,143,843
------------
$ 2,886,410
------------
BUSINESS SERVICES - 2.3%
Automatic Data Processing Inc. 211,040 $ 8,784,540
Ecolab Inc. 132,620 4,840,630
Electronic Data Systems Corp. 110,000 4,950,000
Manpower Inc. 110,000 3,121,250
------------
$ 21,696,420
------------
CHEMICALS - 2.5%
Bayer AG Sponsored ADR 40,000 $ 1,512,548
Dow Chemical Co. 25,248 1,963,032
DuPont (E.I.) de Nemours & Co., Inc. 44,800 4,155,200
Monsanto Co. 396,680 15,718,445
------------
$ 23,349,225
------------
COMMUNICATIONS EQUIPMENT - 2.0%
Ericsson (L.M.) Telephone Co. 66,000 $ 1,823,250
Nokia Corp. 280,000 12,985,000
Northern Telecom Ltd. 55,870 3,638,534
------------
$ 18,446,784
------------
COMPUTER SOFTWARE - 1.1%
Microsoft Corp.* 20,000 $ 2,745,000
Oracle Systems Corp.* 180,000 7,616,250
------------
$ 10,361,250
------------
COMPUTER & BUSINESS EQUIPMENT - 5.1%
Bay Networks, Inc.* 200,000 $ 4,050,000
Cisco Systems, Inc. 75,000 4,640,624
Digital Equipment Corp.* 41,620 1,227,790
Hewlett-Packard Co. 481,928 21,265,073
Imation Corp.* 2,628 71,942
International Business Machines Corp. 67,921 8,761,809
Xerox Corp. 160,000 7,420,000
------------
$ 47,437,239
------------
CONTAINERS & PACKAGING - 0.5%
Crown Cork & Seal Co., Inc. 100,000 $ 4,800,000
------------
DISTRIBUTION - 0.5%
Super Valu Stores Inc. 51,506 $ 1,532,304
Sysco Corp. 107,760 3,663,840
------------
$ 5,196,144
------------
DRUGS - 10.0%
Astra AB-Series A 420,000 $ 19,321,973
Astra AB-ADR Series B 60,000 2,741,994
Bristol-Myers Squibb Co. 56,860 6,012,945
Elan Corp., PLC (ADRs)* 300,000 8,325,000
Genentech, Inc.* 34,000 1,831,750
Merck & Co., Inc. 239,075 17,721,434
Pfizer Inc. 290,752 24,059,728
Schering-Plough Corp. 128,120 8,199,680
Smithkline Beecham PLC 37,520 2,349,690
Warner-Lambert Co. 51,644 3,285,850
------------
$ 93,850,044
------------
ELECTRIC UTILITIES - 0.1%
Citizen's Utilities Co., Class A* 55,411 $ 602,595
------------
ELECTRICAL EQUIPMENT - 2.0%
AMP Inc. 112,460 $ 3,809,582
Emerson Electric Co. 75,474 6,717,186
General Electric Co. 74,114 7,170,530
Lincoln Electric Co. 19,700 546,675
Lincoln Electric Co. Class A 19,700 541,750
------------
$ 18,785,723
------------
ELECTRICAL - SEMICONDUCTORS - 6.5%
Intel Corp. 505,796 $ 55,574,335
Texas Instruments Inc. 84,390 4,061,269
------------
$ 59,635,604
------------
ENGINEERING & CONSTRUCTION - 0.1%
Gilbert Associates Inc. Class A 78,125 $ 1,015,625
------------
ENTERTAINMENT - 0.2%
Disney (Walt) Co. 29,000 $ 1,910,375
------------
ENVIRONMENTAL SERVICES - 0.3%
WMX Technologies, Inc. 77,930 $ 2,678,844
------------
FINANCIAL - MISCELLANEOUS - 2.1%
American Express Co. 56,798 $ 2,669,506
Federal National Mortgage Association 303,820 11,886,958
MGIC Investment Corp. 75,000 5,146,875
------------
$ 19,703,339
------------
FOOD - 1.6%
Pioneer Hi-Bred International, Inc. 87,000 $ 5,839,875
Earthgrains Co. 4,204 222,812
McCormick & Co., Inc., Non-voting 375,208 9,051,893
------------
$ 15,114,580
------------
HEALTH SERVICES - 0.7%
Columbia/HCA Healthcare Corp. 180,000 $ 6,435,000
Medpartners, Inc. 17,696 373,828
------------
$ 6,808,828
------------
HOUSEHOLD PRODUCTS - 3.5%
Colgate-Palmolive Co. 21,826 $ 2,007,991
Duracell International Inc. 100,000 6,675,000
Kimberly-Clark Corp. 57,310 5,344,158
Procter & Gamble Co. 170,800 16,909,200
Rubbermaid Inc. 78,920 1,834,890
------------
$ 32,771,239
------------
INDUSTRIAL EQUIPMENT - 3.0%
Dover Corp. 164,580 $ 8,455,297
General Signal Corp. 68,600 2,795,450
Goulds Pumps, Inc. 110,539 2,556,214
Illinois Tool Works Inc. 10,000 702,500
Parker-Hannifin Corp. 76,099 2,882,250
Tecumseh Products Co. Class A 167,090 9,398,813
Tecumseh Products Co. Class B 18,320 980,120
------------
$ 27,770,644
------------
INFORMATION SERVICES - 3.3%
Dun & Bradstreet Corp. 137,006 $ 7,929,222
Reuters Holdings PLC, ADR 310,090 23,062,944
------------
$ 30,992,166
------------
INSURANCE - 7.4%
American International Group, Inc. 206,633 $ 22,445,510
Chubb Corp. 101,050 5,052,500
General Re Corp. 112,446 16,557,671
Highlands Insurance Group* 5,070 100,133
Kansas City Life Insurance Co. 35,400 1,982,400
Marsh & McLennan Cos., Inc. 62,172 6,473,660
Progressive Corp. (The) 50,000 3,437,500
Providian Corp. 46,794 2,199,318
Provident Companies Inc. 18,789 697,542
Seafield Capital Corp. 35,960 1,269,838
St. Paul Cos., Inc. 130,280 7,083,975
Torchmark Corp. 31,425 1,520,184
------------
$ 68,820,231
------------
MEDICAL PRODUCTS - 6.6%
Abbott Laboratories 80,000 $ 4,050,000
Bausch & Lomb Inc. 145,574 4,913,121
Baxter International, Inc. 170,828 7,110,716
Boston Scientific Corp.* 255,000 13,865,625
Johnson & Johnson 449,040 22,115,220
Medtronic, Inc. 72,000 4,635,000
Sofamor Danek Group, Inc.* 173,000 4,757,500
------------
$ 61,447,182
------------
METALS - 0.6%
Inco Ltd. 124,000 $ 3,937,000
Nucor Corp. 40,000 1,895,000
------------
$ 5,832,000
------------
NATURAL GAS UTILITIES - 0.4%
Enron Oil & Gas Co. 100,000 $ 2,575,000
Sonat, Inc. 27,200 1,339,600
------------
$ 3,914,600
------------
OIL & GAS - EXPLORATION & PRODUCTION - 2.2%
Anadarko Petroleum Corp. 161,000 $ 10,243,625
Apache Corp. 66,440 2,358,626
Louisiana Land & Exploration Corp. 25,000 1,421,875
Triton Energy Ltd.* 100,000 4,462,500
Union Pacific Resources Group, Inc. 79,796 2,194,386
------------
$ 20,681,012
------------
OIL & GAS - EQUIPMENT & SERVICES - 2.5%
Baker Hughes, Inc. 39,234 $ 1,397,711
Dresser Industries, Inc. 79,800 2,623,425
Halliburton Co. 50,700 2,870,888
Schlumberger Ltd. 168,393 16,691,956
------------
$ 23,583,980
------------
OIL & GAS - INTEGRATED - 3.1%
Amoco Corp. 47,928 $ 3,630,546
Atlantic Richfield Co. 20,883 2,766,998
Chevron Corp. 55,600 3,655,700
Exxon Corp. 100,704 8,924,892
Mobil Corp. 74,333 8,678,378
Murphy Oil Corp. 29,700 1,466,438
------------
$ 29,122,951
------------
PAPER & FOREST PRODUCTS - 1.0%
Allegiance Corp. 22,661 $ 424,894
Champion International Corp. 41,484 1,804,554
Union Camp Corp. 80,309 3,915,064
Weyerhaeuser Co. 61,630 2,827,276
------------
$ 8,971,788
------------
PHOTOGRAPHY - 1.0%
Eastman Kodak Co. 122,181 $ 9,743,935
------------
PRINTING & BUSINESS FORMS - 1.1%
American Business Products Inc. GA 146,497 $ 3,259,558
Bowne & Co. Inc. 91,770 2,145,124
Deluxe Corp. 57,150 1,864,519
Donnelley, (R.R.) & Sons Co. 47,896 1,454,841
Harland, (John H.) Co. 51,540 1,604,183
Moore Corp., Ltd. 19,075 386,269
------------
$ 10,714,493
------------
PUBLISHING - 2.7%
Gannett Co., Inc. 130,450 $ 9,897,894
Harcourt General, Inc. 90,000 4,477,500
Houghton Mifflin Co. 63,700 3,161,113
McGraw-Hill Inc. 25,608 1,200,375
Times Mirror Co. Class A 151,670 7,014,738
------------
$ 25,751,619
------------
RESTAURANTS - 0.7%
McDonald's Corp. 143,100 $ 6,350,063
------------
RETAIL - GENERAL - 0.8%
Wal-Mart Stores, Inc. 274,390 $ 7,305,634
------------
RETAIL - FOOD & DRUG - 0.6%
Albertson's, Inc. 156,048 $ 5,364,150
------------
RETAIL - SPECIALTY & APPAREL - 2.5%
Home Depot, Inc. (The) 255,000 $ 13,961,250
Toys 'R' Us, Inc.* 287,075 9,724,666
------------
$ 23,685,916
------------
SPECIALTY - CHEMICALS & MATERIALS - 6.1%
Corning Inc. 100,000 $ 3,875,000
Dexter Corp. 47,829 1,482,697
Dionex Corp.* 181,070 6,925,928
Great Lakes Chemical Corp. 68,720 3,582,030
International Flavors & Fragrances, Inc. 148,101 6,127,679
International Specialty Products Inc. 59,000 641,625
Loctite Corp. 177,167 10,386,415
Memtec Ltd. Sponsored ADR 77,500 2,644,688
Millipore Corp. 151,440 5,300,400
Minnesota Mining & Manufacturing Co. 26,288 2,014,318
Nalco Chemical Co. 196,020 7,130,228
Sealed Air Corp.* 180,000 6,997,500
------------
$ 57,108,508
------------
TOBACCO - 0.0%
Schweitzer-Mauduit International Inc. 5,731 $ 176,228
------------
TRANSPORTATION - 0.8%
CSX Corp. 15,270 $ 658,519
Flightsafety International, Ltd. 35,000 1,728,125
Union Pacific Corp. 94,210 5,287,536
------------
$ 7,674,180
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $237,105,867) $916,829,437
------------
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 2.1%
- ------------------------------------------------------------------------------
NAME OF COMPANY FACE AMOUNT VALUE
- ------------------------------------------------------------------------------
Ford Motor Credit Company, 5.35% due 11/6/96 10,000,000 $ 9,992,570
Prudential Funding Corporation, 5.60% due 11/1/96 9,626,000 9,626,000
------------
TOTAL SHORT-TERM OBLIGATIONS AT AMORTIZED COST $ 19,618,570
------------
TOTAL INVESTMENTS (IDENTIFIED COST,
$256,724,437) - 100% $936,448,007
OTHER ASSETS, LESS LIABILITIES - 0.0% 351,563
------------
NET ASSETS - 100% $936,799,570
============
*Non-income producing security.
See notes to financial statements
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
October 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$256,724,437) $936,448,007
Cash 30,274
Receivable for investments sold 504,059
Dividends receivable 572,932
Deferred organization expenses (Note 1C) 8,879
Other assets 64,669
------------
Total assets $937,628,820
LIABILITIES:
Payable for investments purchased $798,425
Payable to affiliate --
Trustees' fees 1,406
Accrued expenses 29,419
--------
Total liabilities 829,250
------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $936,799,570
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $257,075,830
Unrealized appreciation of investments (computed
on the basis of identified cost) 679,723,740
------------
Total $936,799,570
============
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995 to October 31, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding taxes
of $25,573) $ 4,931,924
Interest 442,263
------------
Total income $ 5,374,187
Expenses --
Investment adviser fee (Note 2) $ 2,116,576
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 9,500
Custodian fee 125,097
Legal and accounting services 1,200
Amortization of organization expenses (Note 1C) 2,007
Miscellaneous 15,099
------------
Total expenses 2,269,479
------------
Net investment income $ 3,104,708
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on
the basis of identified cost $ 9,582,500
Unrealized appreciation of investments 679,723,740
------------
Net realized and unrealized gain on
investments 689,306,240
------------
Net increase in net assets from operations $692,410,948
============
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995, to October 31, 1996
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
From operations --
Net investment income $ 3,104,708
Net realized gain on investments 9,582,500
Unrealized appreciation of investments 679,723,740
------------
Net increase in net assets from operations $692,410,948
------------
Capital transactions --
Contributions $261,250,662
Withdrawals (16,962,050)
------------
Increase in net assets from capital transactions $244,288,612
------------
Total increase in net assets $936,699,560
NET ASSETS:
At beginning of period 100,010
-----------
At end of period $936,799,570
============
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995 to October 31, 1996
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Expenses 0.66%+
Net investment income 0.91%+
PORTFOLIO TURNOVER 3%
AVERAGE COMMISSION RATE PAID(1) $0.0585
+ Annualized.
(1) Average commission rate paid is computed by dividing the total dollar amount
of commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were
charged.
See notes to financial statements
<PAGE>
----------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Tax-Managed Growth Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Portfolio, which was organized as a trust under the
laws of the State of New York on December 1, 1995, seeks to provide long-term
after-tax returns by investing in a diversified portfolio of equity
securities. The Declaration of Trust permits the Trustees to issue interests
in the Portfolio. Investment operations began on December 1, 1995, with the
acquisition of investments with a value of $115,586,248, including unrealized
appreciation of $96,618,064, in exchange for an interest in the Portfolio by
one of the Portfolio's investors. During the period, additional investors
contributed securities with a value of $698,990,556, including unrealized
appreciation of $512,467,715. The following is a summary of the significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Futures positions on securities or
currencies are generally valued at closing settlement prices. Unlisted or
listed securities for which closing sale prices are not available are valued
at the mean between the latest bid and asked prices. Short-term debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates value. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for Federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes on its share of such
income. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements (under the Internal Revenue Code) in order
for its investors to satisfy them. The Portfolio will allocate, at least
annually among its investors, each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit.
C. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
D. FUTURES CONTRACTS -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit either in cash or securities an amount
("initial margin") equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on daily
fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed to hedge against
anticipated future changes in price of current or anticipated portfolio
positions. Should prices move unexpectedly, the Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. However, if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as the Portfolio is informed of the ex-
dividend date. Interest income is recorded on the accrual basis.
F. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
G. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
expenses on the Statement of Operations.
- ------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR) a
wholly-owned subsidiary of Eaton Vance Management (EVM) as compensation for
management and investment advisory services rendered to the Portfolio. Under the
advisory agreement, BMR receives a monthly advisory fee of 5/96 of 1% (0.625%
annually) of the average daily net assets of the Portfolio up to $500,000,000,
and at reduced rates as daily net assets exceed that level. For the period from
the start of business, December 1, 1995, to October 31, 1996 the adviser fee was
0.618% of average net assets. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment adviser
fee. Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of the Trustees Deferred Compensation Plan. For the
year ended October 31, 1996, no significant amounts have been deferred. Certain
of the officers and Trustees of the Portfolio are officers or directors/trustees
of the above organizations.
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $138,926,860 and $9,308,829, respectively.
- ------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT
The cost and unrealized appreciation (depreciation) in value of the
investments owned at October 31, 1996, as computed on a federal income tax
basis, are as follows:
Aggregate cost $256,724,437
============
Gross unrealized appreciation $682,343,349
Gross unrealized depreciation 2,619,609
------------
Net unrealized appreciation $679,723,740
============
- -------------------------------------------------------------------------------
(5) FINANCIAL INSTRUMENTS
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
The Portfolio did not have any open obligations under these financial
instruments at October 31, 1996.
- ------------------------------------------------------------------------------
(6) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement
with a bank. Borrowings will be made by the Portfolio solely to facilitate the
handling of unusual and/or unanticipated short-term cash requirements.
Interest is charged to each portfolio based on its borrowings at an amount
above either the bank's base rate, a variable adjusted certificate of deposit
rate, or a Eurodollar rate. In addition, a fee computed at an annual rate of
0.15% on the average daily amount of the unused portion of the facility is
allocated among the participating funds and portfolios at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the period.
<PAGE>
[logo]
EATON VANCE
- ------------
Mutual Funds
EV CLASSIC
TAX-MANAGED GROWTH FUND
- -----------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1997
EV CLASSIC
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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-TGSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1997
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
Page
PART I
Additional Information about Investment Policies ................... 2
Investment Restrictions ............................................ 4
Trustees and Officers .............................................. 6
Investment Adviser and Administrator ............................... 8
Custodian .......................................................... 10
Service for Withdrawal ............................................. 10
Determination of Net Asset Value ................................... 10
Investment Performance ............................................. 11
Taxes .............................................................. 13
Portfolio Security Transactions .................................... 15
Other Information .................................................. 16
Independent Certified Public Accountants ........................... 17
PART II
Fees and Expenses .................................................. a-1
Principal Underwriter .............................................. a-2
Distribution Plan .................................................. a-2
Performance Information ............................................ a-4
Control Persons and Principal Holders of Securities ................ a-4
Financial Statements ............................................... a-5
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1997, 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).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR
EV MARATHON TAX-MANAGED GROWTH FUND THE PART I FOUND IN THE STATEMENT OF
ADDITIONAL INFORMATION OF EV CLASSIC TAX-MANAGED GROWTH FUND CONTAINED IN THIS
AMENDMENT.
<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
As of October 31, 1996, the Portfolio had net assets of $936,799,570. For
the period from the Portfolio's start of business, December 1, 1995 to the
fiscal year ended October 31, 1996, the Portfolio paid BMR advisory fees of
$2,116,576 (equivalent to 0.600% (annualized) of the Portfolio's average daily
net assets for such period).
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund.
DISTRIBUTION PLAN
For the period from the start of business, March 28, 1996, to the fiscal
year ended October 31, 1996, the Principal Underwriter paid to Authorized
Firms sales commissions of $ on sales of Fund shares. During the same
period, the Fund made sales commissions under the Plan to the Principal
Underwriter aggregating $ , and the Principal Underwriter received
$ in contingent deferred sales charges ("CDSCs") imposed on early
redeeming shareholders. These sales commissions and CDSC payments reduced
Uncovered Distribution Charges under the Plan. As at October 31, 1996 the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $ (which amount
was equivalent to % of the Fund's net assets on such date). During the
fiscal year ended October 31, 1996, the Fund paid or accrued service fee
payments under the Plan aggregating $ to the Principal Underwriter. The
Principal Underwriter paid $ as service fees to Authorized Firms, the
balance retained by the Principal Underwriter. The Fund expects to begin
accruing for its service fee payments during the quarter ending June 30, 1997.
PRINCIPAL UNDERWRITER
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. For the
period from the start of business, March 28, 1996, to the fiscal year ended
October 31, 1996, the Fund paid the Principal Underwriter $77.50 for
repurchase transactions handled by the Principal Underwriter.
BROKERAGE COMMISSIONS
For the period from the Portfolio's start of business, December 1, 1995 to
the fiscal year ended October 31, 1996, the Portfolio paid brokerage
commissions of $144,815 on portfolio security transactions, of which
approximately $112,018 was paid in respect of portfolio security transactions
aggregating approximately $89,523,457 to firms which provided some Research
Services (as defined in Part I) to Eaton Vance (although many of such firms
may have been selected in any particular transaction primarily because of
their execution capabilities).
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, 1997, 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,
1996, 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 $88 $1,254 $142,500(2)
Samuel L. Hayes, III 79 1,220 153,750(3)
Norton H. Reamer 78 1,191 142,500
John L. Thorndike 82 1,270 147,500
Jack L. Treynor 88 1,319 147,500
- ----------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $42,500 of deferred compensation.
(3) Includes $37,500 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.
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 CDSCs 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.
CDSCs 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 CDSCs
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 CDSCs 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 CDSCs
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 CDSC will be imposed, the level and timing of redemptions
of Fund shares upon which no CDSC 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 CDSCs 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 CDSCs 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, 1997, 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, 1996. The total return for the period prior to
the Fund's commencement of operations on March 28, 1996 reflects the
Portfolio's total return (or that of its predecessor) adjusted to reflect any
applicable Fund CDSC. The total return for such prior period has not been
adjusted to reflect the Fund's distribution fees and certain other expenses.
<TABLE>
<CAPTION>
VALUE OF $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
BEFORE CDSC AFTER CDSC* BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC*
ON 10/31/96 ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
10 years ended 10/31/96 $3,959.28 $3,959.28 295.93% 14.75% 295.95% 14.75%
5 years ended 10/31/96 $2,100.46 $2,080.46 110.05% 16.00% 108.05% 15.78%
1 year ended 10/31/96 $1,223.09 $1,173.09 22.31% 22.31% 17.31% 17.31%
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.
<FN>
- ----------
*No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 1, 1996, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 1, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 23.59% of the
outstanding shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding shares as
of such date.
<PAGE>
- ------------------------------------------------------------------------------
EV MARATHON TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
October 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investment in Tax-Managed Growth Portfolio (Portfolio), at
value (Note 1A) (Identified cost $73,440,554) $77,680,740
Receivable for Fund shares sold 708,644
Deferred organization expenses (Note 1D) 31,929
-----------
Total assets $78,421,313
LIABILITIES:
Payable for Fund shares redeemed $772,865
Payable to affiliate --
Trustees' fees 14
Accrued expenses 4,893
--------
Total liabilities 777,772
-----------
NET ASSETS for 6,964,854 shares of beneficial interest
outstanding $77,643,541
===========
SOURCES OF NET ASSETS:
Paid-in capital $73,478,300
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (52,489)
Unrealized appreciation from Portfolio (computed on
the basis of identified cost) (4,240,186)
Accumulated net investment loss (22,456)
-----------
Total $77,643,541
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE (NOTE 6) ($77,643,541 / 6,964,854 shares
of beneficial interest outstanding) $11.15
======
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the period from the start of business, March 28, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of
foreign taxes, $943) $ 232,617
Interest income allocated from Portfolio 22,558
Expenses allocated from Portfolio (111,586)
----------
Net investment income allocated from Portfolio $ 143,589
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 5) $ 56
Custodian fees 1,820
Distribution fees (Note 5) 128,580
Transfer and dividend disbursing agent fees 14,564
Registration fees 8,991
Printing and postage 6,558
Amortization of organization expenses (Note 1D) 3,614
Legal and accounting services 678
Miscellaneous 1,184
----------
Total expenses 166,045
----------
Net investment loss $ (22,456)
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized loss from Portfolio (identified cost
basis) $ (52,489)
Unrealized appreciation of investments 4,240,186
----------
Net realized and unrealized gain $4,187,697
----------
Net increase in net assets from operations $4,165,241
==========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
For the period from the start of business, March 28, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (22,456)
Net realized loss on investments (52,489)
Unrealized appreciation of investments 4,240,186
-----------
Net increase in net assets from operations $ 4,165,241
-----------
Transactions in shares of beneficial interest (Note 4) --
Proceeds from sale of shares $74,098,398
Cost of shares redeemed (620,108)
-----------
Net increase from Fund share transactions $73,478,290
-----------
Net increase in net assets $77,643,531
NET ASSETS:
At beginning of period 10
-----------
At end of period (including accumulated net investment loss of
$22,456) $77,643,541
===========
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
For the period from the start of business, March 28, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
NET ASSET VALUE, beginning of period $ 10.000
--------
INCOME FROM OPERATIONS:
Net investment loss $ (0.003)
Net realized and unrealized gain on investments 1.153
--------
Total income from operations $ 1.150
--------
NET ASSET VALUE, end of period $ 11.150
========
TOTAL RETURN(1) 11.50%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(2) 1.63% +
Ratio of net investment loss to average net assets (0.13%)+
Net assets, end of period (000's omitted) $ 77,644
+ Annualized.
(1) Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to
be reinvested at the net asset value on the payable date. Total return is
computed on a non-annualized basis.
(2) Includes the Fund's share of Tax-Managed Growth Portfolio's allocated
expenses for the period from March 28, 1996 to October 31, 1996.
See notes to financial statements
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Tax-Managed Growth Fund (the Fund) is a diversified series of
Eaton Vance Mutual Funds Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund invests all of its investable assets in interests
in Tax-Managed Growth Portfolio (the Portfolio), a New York Trust, having the
same investment objective as the Fund. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (8.3% at October 31, 1996). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
A. INVESTMENT VALUATION -- Valuation of the securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income, and any
net realized capital gains. Accordingly, no provision for federal income or
excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
E. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT), serves as
custodian to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average cash balances the Fund or the Portfolio maintain with IBT. All
significant credit balances used to reduce the Fund's custodian fees are
reported as a reduction of expenses in the statements of operations.
F. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
- ------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
It is the present policy of the Fund to make at least one distribution
annually (normally in December) of all or substantially all of the investment
income allocated to the Fund by the Portfolio, less the Fund's direct and
allocated expenses and at least one distribution annually of all or
substantially all of the net realized capital gains (reduced by any available
capital loss carryforwards from prior years) allocated by the Portfolio to the
Fund, if any.
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 distinguishes between distributions on a tax basis
and a financial reporting basis. Generally accepted accounting principles
require that only distributions in excess of tax basis earnings and profits be
reported in the financial statements as a return of capital. Differences in
the recognition or classification of income between the financial statements
and tax earnings and profits which result in temporary over distributions for
financial statement purposes are classified as distributions in excess of net
investment income or accumulated net realized gains. Permanent differences
between book and tax accounting relating to distributions are reclassified to
paid-in capital.
- ------------------------------------------------------------------------------
(3) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM. See Note 2 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report. Except as to
Trustees of the Fund who are not members of EVM's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
management fee. Certain officers and Trustees of the Fund and the Portfolio
are officers and directors/trustees of the above organization (Note 5).
- ------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares for the period from the start of business, March
28, 1996 to October 31, 1996 were as follows:
Sales 7,023,683
Issued to shareholders electing to receive
payments of distributions in Fund shares --
Redemptions (58,829)
---------
Net increase 6,964,854
=========
- ------------------------------------------------------------------------------
(5) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay
the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD), amounts equal
to 1/365 of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no
outstanding Uncovered Distribution Charges, which are equivalent to the sum of
(i) 5% of the aggregate amount received by the Fund for shares sold plus, (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD
reduced by the aggregate amount of contingent deferred sales charges (see Note
6) and daily amounts theretofore paid to EVD. The amount payable to EVD with
respect to each day is accrued on such day as a liability of the Fund and,
accordingly, reduces the Fund's net assets. The Fund paid $126,080 to EVD for
the period from the start of business March 28, 1996 to October 31, 1996,
representing 0.75% of average daily average net assets. At October 31, 1996,
the amount of Uncovered Distribution Charges of EVD calculated under the Plan
was approximately $ .
In addition, the Plan authorizes the Fund to make payments of service fees
to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets for each fiscal
year. The Trustees have initially implemented the Plan by authorizing the Fund
to make quarterly payments of service fees to the Principal Underwriter and
Authorized Firms in amounts not expected to exceed 0.25% 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. Service fee payments
will be 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 EVD, and, as such, are not
subject to automatic discontinuance where there are no outstanding Uncovered
Distribution Charges of EVD. The Fund expects to begin accruing for its
service fee payments during the quarter ending June 30, 1997.
Certain officers and Trustees of the Fund are officers or directors of EVD.
- ------------------------------------------------------------------------------
(6) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon
the lower of net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital
gain distributions. The CDSC is imposed at declining rates that begin at 5% in
the first and second year of redemption after purchase, declining one
percentage point each year thereafter. No CDSC is levied on shares which have
been sold to EVM or its affiliates or to their respective employees or
clients. CDSC charges are paid to EVD to reduce the amount of Uncovered
Distribution Charges calculated under the Fund's Distribution Plan. CDSC
charges received when no Uncovered Distribution Charges exist will be retained
by the Fund. EVD received no CDSC paid by shareholders for the period ended
October 31, 1996.
- ------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$73,427,041 and $77,587, respectively.
<PAGE>
----------------------------------
TAX-MANAGED GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
- ------------------------------------------------------------------------------
COMMON STOCKS - 97.9%
- ------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- ------------------------------------------------------------------------------
ADVERTISING - 0.5%
Interpublic Group of Cos., Inc. 106,000 $ 5,141,000
------------
AEROSPACE & DEFENSE - 2.1%
Boeing Co. 90,370 $ 8,619,039
Raytheon Co. 226,544 11,157,292
------------
$ 19,776,331
------------
BANKS - 1.0%
BankAmerica Corp. 20,812 $ 1,904,298
Citicorp 40,000 3,960,000
First Chicago NBD Corp. 43,007 2,193,353
Wells Fargo & Co. 4,265 1,139,288
------------
$ 9,196,939
------------
BEVERAGES - 6.4%
Anheuser-Busch Cos., Inc. 210,260 $ 8,095,010
Coca-Cola Co. 478,208 24,149,504
PepsiCo, Inc. 900,682 26,682,704
------------
$ 58,927,218
------------
BROADCAST & CABLE - 0.1%
Cox Communications Inc., Class A* 93,319 $ 1,726,402
------------
BUILDING MATERIALS - 0.3%
Masco Corp. 55,540 $ 1,742,567
Stanley Works 40,490 1,143,843
------------
$ 2,886,410
------------
BUSINESS SERVICES - 2.3%
Automatic Data Processing Inc. 211,040 $ 8,784,540
Ecolab Inc. 132,620 4,840,630
Electronic Data Systems Corp. 110,000 4,950,000
Manpower Inc. 110,000 3,121,250
------------
$ 21,696,420
------------
CHEMICALS - 2.5%
Bayer AG Sponsored ADR 40,000 $ 1,512,548
Dow Chemical Co. 25,248 1,963,032
DuPont (E.I.) de Nemours & Co., Inc. 44,800 4,155,200
Monsanto Co. 396,680 15,718,445
------------
$ 23,349,225
------------
COMMUNICATIONS EQUIPMENT - 2.0%
Ericsson (L.M.) Telephone Co. 66,000 $ 1,823,250
Nokia Corp. 280,000 12,985,000
Northern Telecom Ltd. 55,870 3,638,534
------------
$ 18,446,784
------------
COMPUTER SOFTWARE - 1.1%
Microsoft Corp.* 20,000 $ 2,745,000
Oracle Systems Corp.* 180,000 7,616,250
------------
$ 10,361,250
------------
COMPUTER & BUSINESS EQUIPMENT - 5.1%
Bay Networks, Inc.* 200,000 $ 4,050,000
Cisco Systems, Inc. 75,000 4,640,624
Digital Equipment Corp.* 41,620 1,227,790
Hewlett-Packard Co. 481,928 21,265,073
Imation Corp.* 2,628 71,942
International Business Machines Corp. 67,921 8,761,809
Xerox Corp. 160,000 7,420,000
------------
$ 47,437,239
------------
CONTAINERS & PACKAGING - 0.5%
Crown Cork & Seal Co., Inc. 100,000 $ 4,800,000
------------
DISTRIBUTION - 0.5%
Super Valu Stores Inc. 51,506 $ 1,532,304
Sysco Corp. 107,760 3,663,840
------------
$ 5,196,144
------------
DRUGS - 10.0%
Astra AB-Series A 420,000 $ 19,321,973
Astra AB-ADR Series B 60,000 2,741,994
Bristol-Myers Squibb Co. 56,860 6,012,945
Elan Corp., PLC (ADRs)* 300,000 8,325,000
Genentech, Inc.* 34,000 1,831,750
Merck & Co., Inc. 239,075 17,721,434
Pfizer Inc. 290,752 24,059,728
Schering-Plough Corp. 128,120 8,199,680
Smithkline Beecham PLC 37,520 2,349,690
Warner-Lambert Co. 51,644 3,285,850
------------
$ 93,850,044
------------
ELECTRIC UTILITIES - 0.1%
Citizen's Utilities Co., Class A* 55,411 $ 602,595
------------
ELECTRICAL EQUIPMENT - 2.0%
AMP Inc. 112,460 $ 3,809,582
Emerson Electric Co. 75,474 6,717,186
General Electric Co. 74,114 7,170,530
Lincoln Electric Co. 19,700 546,675
Lincoln Electric Co. Class A 19,700 541,750
------------
$ 18,785,723
------------
ELECTRICAL - SEMICONDUCTORS - 6.5%
Intel Corp. 505,796 $ 55,574,335
Texas Instruments Inc. 84,390 4,061,269
------------
$ 59,635,604
------------
ENGINEERING & CONSTRUCTION - 0.1%
Gilbert Associates Inc. Class A 78,125 $ 1,015,625
------------
ENTERTAINMENT - 0.2%
Disney (Walt) Co. 29,000 $ 1,910,375
------------
ENVIRONMENTAL SERVICES - 0.3%
WMX Technologies, Inc. 77,930 $ 2,678,844
------------
FINANCIAL - MISCELLANEOUS - 2.1%
American Express Co. 56,798 $ 2,669,506
Federal National Mortgage Association 303,820 11,886,958
MGIC Investment Corp. 75,000 5,146,875
------------
$ 19,703,339
------------
FOOD - 1.6%
Pioneer Hi-Bred International, Inc. 87,000 $ 5,839,875
Earthgrains Co. 4,204 222,812
McCormick & Co., Inc., Non-voting 375,208 9,051,893
------------
$ 15,114,580
------------
HEALTH SERVICES - 0.7%
Columbia/HCA Healthcare Corp. 180,000 $ 6,435,000
Medpartners, Inc. 17,696 373,828
------------
$ 6,808,828
------------
HOUSEHOLD PRODUCTS - 3.5%
Colgate-Palmolive Co. 21,826 $ 2,007,991
Duracell International Inc. 100,000 6,675,000
Kimberly-Clark Corp. 57,310 5,344,158
Procter & Gamble Co. 170,800 16,909,200
Rubbermaid Inc. 78,920 1,834,890
------------
$ 32,771,239
------------
INDUSTRIAL EQUIPMENT - 3.0%
Dover Corp. 164,580 $ 8,455,297
General Signal Corp. 68,600 2,795,450
Goulds Pumps, Inc. 110,539 2,556,214
Illinois Tool Works Inc. 10,000 702,500
Parker-Hannifin Corp. 76,099 2,882,250
Tecumseh Products Co. Class A 167,090 9,398,813
Tecumseh Products Co. Class B 18,320 980,120
------------
$ 27,770,644
------------
INFORMATION SERVICES - 3.3%
Dun & Bradstreet Corp. 137,006 $ 7,929,222
Reuters Holdings PLC, ADR 310,090 23,062,944
------------
$ 30,992,166
------------
INSURANCE - 7.4%
American International Group, Inc. 206,633 $ 22,445,510
Chubb Corp. 101,050 5,052,500
General Re Corp. 112,446 16,557,671
Highlands Insurance Group* 5,070 100,133
Kansas City Life Insurance Co. 35,400 1,982,400
Marsh & McLennan Cos., Inc. 62,172 6,473,660
Progressive Corp. (The) 50,000 3,437,500
Providian Corp. 46,794 2,199,318
Provident Companies Inc. 18,789 697,542
Seafield Capital Corp. 35,960 1,269,838
St. Paul Cos., Inc. 130,280 7,083,975
Torchmark Corp. 31,425 1,520,184
------------
$ 68,820,231
------------
MEDICAL PRODUCTS - 6.6%
Abbott Laboratories 80,000 $ 4,050,000
Bausch & Lomb Inc. 145,574 4,913,121
Baxter International, Inc. 170,828 7,110,716
Boston Scientific Corp.* 255,000 13,865,625
Johnson & Johnson 449,040 22,115,220
Medtronic, Inc. 72,000 4,635,000
Sofamor Danek Group, Inc.* 173,000 4,757,500
------------
$ 61,447,182
------------
METALS - 0.6%
Inco Ltd. 124,000 $ 3,937,000
Nucor Corp. 40,000 1,895,000
------------
$ 5,832,000
------------
NATURAL GAS UTILITIES - 0.4%
Enron Oil & Gas Co. 100,000 $ 2,575,000
Sonat, Inc. 27,200 1,339,600
------------
$ 3,914,600
------------
OIL & GAS - EXPLORATION & PRODUCTION - 2.2%
Anadarko Petroleum Corp. 161,000 $ 10,243,625
Apache Corp. 66,440 2,358,626
Louisiana Land & Exploration Corp. 25,000 1,421,875
Triton Energy Ltd.* 100,000 4,462,500
Union Pacific Resources Group, Inc. 79,796 2,194,386
------------
$ 20,681,012
------------
OIL & GAS - EQUIPMENT & SERVICES - 2.5%
Baker Hughes, Inc. 39,234 $ 1,397,711
Dresser Industries, Inc. 79,800 2,623,425
Halliburton Co. 50,700 2,870,888
Schlumberger Ltd. 168,393 16,691,956
------------
$ 23,583,980
------------
OIL & GAS - INTEGRATED - 3.1%
Amoco Corp. 47,928 $ 3,630,546
Atlantic Richfield Co. 20,883 2,766,998
Chevron Corp. 55,600 3,655,700
Exxon Corp. 100,704 8,924,892
Mobil Corp. 74,333 8,678,378
Murphy Oil Corp. 29,700 1,466,438
------------
$ 29,122,951
------------
PAPER & FOREST PRODUCTS - 1.0%
Allegiance Corp. 22,661 $ 424,894
Champion International Corp. 41,484 1,804,554
Union Camp Corp. 80,309 3,915,064
Weyerhaeuser Co. 61,630 2,827,276
------------
$ 8,971,788
------------
PHOTOGRAPHY - 1.0%
Eastman Kodak Co. 122,181 $ 9,743,935
------------
PRINTING & BUSINESS FORMS - 1.1%
American Business Products Inc. GA 146,497 $ 3,259,558
Bowne & Co. Inc. 91,770 2,145,124
Deluxe Corp. 57,150 1,864,519
Donnelley, (R.R.) & Sons Co. 47,896 1,454,841
Harland, (John H.) Co. 51,540 1,604,183
Moore Corp., Ltd. 19,075 386,269
------------
$ 10,714,493
------------
PUBLISHING - 2.7%
Gannett Co., Inc. 130,450 $ 9,897,894
Harcourt General, Inc. 90,000 4,477,500
Houghton Mifflin Co. 63,700 3,161,113
McGraw-Hill Inc. 25,608 1,200,375
Times Mirror Co. Class A 151,670 7,014,738
------------
$ 25,751,619
------------
RESTAURANTS - 0.7%
McDonald's Corp. 143,100 $ 6,350,063
------------
RETAIL - GENERAL - 0.8%
Wal-Mart Stores, Inc. 274,390 $ 7,305,634
------------
RETAIL - FOOD & DRUG - 0.6%
Albertson's, Inc. 156,048 $ 5,364,150
------------
RETAIL - SPECIALTY & APPAREL - 2.5%
Home Depot, Inc. (The) 255,000 $ 13,961,250
Toys 'R' Us, Inc.* 287,075 9,724,666
------------
$ 23,685,916
------------
SPECIALTY - CHEMICALS & MATERIALS - 6.1%
Corning Inc. 100,000 $ 3,875,000
Dexter Corp. 47,829 1,482,697
Dionex Corp.* 181,070 6,925,928
Great Lakes Chemical Corp. 68,720 3,582,030
International Flavors & Fragrances, Inc. 148,101 6,127,679
International Specialty Products Inc. 59,000 641,625
Loctite Corp. 177,167 10,386,415
Memtec Ltd. Sponsored ADR 77,500 2,644,688
Millipore Corp. 151,440 5,300,400
Minnesota Mining & Manufacturing Co. 26,288 2,014,318
Nalco Chemical Co. 196,020 7,130,228
Sealed Air Corp.* 180,000 6,997,500
------------
$ 57,108,508
------------
TOBACCO - 0.0%
Schweitzer-Mauduit International Inc. 5,731 $ 176,228
------------
TRANSPORTATION - 0.8%
CSX Corp. 15,270 $ 658,519
Flightsafety International, Ltd. 35,000 1,728,125
Union Pacific Corp. 94,210 5,287,536
------------
$ 7,674,180
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $237,105,867) $916,829,437
------------
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 2.1%
- ------------------------------------------------------------------------------
NAME OF COMPANY FACE AMOUNT VALUE
- ------------------------------------------------------------------------------
Ford Motor Credit Company, 5.35% due 11/6/96 10,000,000 $ 9,992,570
Prudential Funding Corporation, 5.60% due 11/1/96 9,626,000 9,626,000
------------
TOTAL SHORT-TERM OBLIGATIONS AT AMORTIZED COST $ 19,618,570
------------
TOTAL INVESTMENTS (IDENTIFIED COST,
$256,724,437) - 100% $936,448,007
OTHER ASSETS, LESS LIABILITIES - 0.0% 351,563
------------
NET ASSETS - 100% $936,799,570
============
*Non-income producing security.
See notes to financial statements
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
October 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$256,724,437) $936,448,007
Cash 30,274
Receivable for investments sold 504,059
Dividends receivable 572,932
Deferred organization expenses (Note 1C) 8,879
Other assets 64,669
------------
Total assets $937,628,820
LIABILITIES:
Payable for investments purchased $798,425
Payable to affiliate --
Trustees' fees 1,406
Accrued expenses 29,419
--------
Total liabilities 829,250
------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $936,799,570
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $257,075,830
Unrealized appreciation of investments (computed
on the basis of identified cost) 679,723,740
------------
Total $936,799,570
============
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995 to October 31, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding taxes
of $25,573) $ 4,931,924
Interest 442,263
------------
Total income $ 5,374,187
Expenses --
Investment adviser fee (Note 2) $ 2,116,576
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 9,500
Custodian fee 125,097
Legal and accounting services 1,200
Amortization of organization expenses (Note 1C) 2,007
Miscellaneous 15,099
------------
Total expenses 2,269,479
------------
Net investment income $ 3,104,708
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on
the basis of identified cost $ 9,582,500
Unrealized appreciation of investments 679,723,740
------------
Net realized and unrealized gain on
investments 689,306,240
------------
Net increase in net assets from operations $692,410,948
============
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995, to October 31, 1996
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
From operations --
Net investment income $ 3,104,708
Net realized gain on investments 9,582,500
Unrealized appreciation of investments 679,723,740
------------
Net increase in net assets from operations $692,410,948
------------
Capital transactions --
Contributions $261,250,662
Withdrawals (16,962,050)
------------
Increase in net assets from capital transactions $244,288,612
------------
Total increase in net assets $936,699,560
NET ASSETS:
At beginning of period 100,010
-----------
At end of period $936,799,570
============
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995 to October 31, 1996
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Expenses 0.66%+
Net investment income 0.91%+
PORTFOLIO TURNOVER 3%
AVERAGE COMMISSION RATE PAID(1) $0.0585
+ Annualized.
(1) Average commission rate paid is computed by dividing the total dollar amount
of commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were
charged.
See notes to financial statements
<PAGE>
----------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Tax-Managed Growth Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Portfolio, which was organized as a trust under the
laws of the State of New York on December 1, 1995, seeks to provide long-term
after-tax returns by investing in a diversified portfolio of equity
securities. The Declaration of Trust permits the Trustees to issue interests
in the Portfolio. Investment operations began on December 1, 1995, with the
acquisition of investments with a value of $115,586,248, including unrealized
appreciation of $96,618,064, in exchange for an interest in the Portfolio by
one of the Portfolio's investors. During the period, additional investors
contributed securities with a value of $698,990,556, including unrealized
appreciation of $512,467,715. The following is a summary of the significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Futures positions on securities or
currencies are generally valued at closing settlement prices. Unlisted or
listed securities for which closing sale prices are not available are valued
at the mean between the latest bid and asked prices. Short-term debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates value. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for Federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes on its share of such
income. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements (under the Internal Revenue Code) in order
for its investors to satisfy them. The Portfolio will allocate, at least
annually among its investors, each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit.
C. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
D. FUTURES CONTRACTS -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit either in cash or securities an amount
("initial margin") equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on daily
fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed to hedge against
anticipated future changes in price of current or anticipated portfolio
positions. Should prices move unexpectedly, the Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. However, if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as the Portfolio is informed of the ex-
dividend date. Interest income is recorded on the accrual basis.
F. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
G. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
expenses on the Statement of Operations.
- ------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR) a
wholly-owned subsidiary of Eaton Vance Management (EVM) as compensation for
management and investment advisory services rendered to the Portfolio. Under the
advisory agreement, BMR receives a monthly advisory fee of 5/96 of 1% (0.625%
annually) of the average daily net assets of the Portfolio up to $500,000,000,
and at reduced rates as daily net assets exceed that level. For the period from
the start of business, December 1, 1995, to October 31, 1996 the adviser fee was
0.618% of average net assets. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment adviser
fee. Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of the Trustees Deferred Compensation Plan. For the
year ended October 31, 1996, no significant amounts have been deferred. Certain
of the officers and Trustees of the Portfolio are officers or directors/trustees
of the above organizations.
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $138,926,860 and $9,308,829, respectively.
- ------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT
The cost and unrealized appreciation (depreciation) in value of the
investments owned at October 31, 1996, as computed on a federal income tax
basis, are as follows:
Aggregate cost $256,724,437
============
Gross unrealized appreciation $682,343,349
Gross unrealized depreciation 2,619,609
------------
Net unrealized appreciation $679,723,740
============
- -------------------------------------------------------------------------------
(5) FINANCIAL INSTRUMENTS
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
The Portfolio did not have any open obligations under these financial
instruments at October 31, 1996.
- ------------------------------------------------------------------------------
(6) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement
with a bank. Borrowings will be made by the Portfolio solely to facilitate the
handling of unusual and/or unanticipated short-term cash requirements.
Interest is charged to each portfolio based on its borrowings at an amount
above either the bank's base rate, a variable adjusted certificate of deposit
rate, or a Eurodollar rate. In addition, a fee computed at an annual rate of
0.15% on the average daily amount of the unused portion of the facility is
allocated among the participating funds and portfolios at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the period.
<PAGE>
[LOGO]
EATON VANCE
- ----------------
MUTUAL FUNDS
EV MARATHON
TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1997
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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-TGSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1997
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
Page
PART I
Additional Information about Investment Policies ..................... 2
Investment Restrictions .............................................. 3
Trustees and Officers ................................................ 5
Investment Adviser and Administrator ................................. 7
Custodian ............................................................ 9
Service for Withdrawal ............................................... 9
Determination of Net Asset Value ..................................... 9
Investment Performance ............................................... 10
Taxes ................................................................ 12
Portfolio Security Transactions ...................................... 14
Other Information .................................................... 15
Independent Certified Public Accountants ............................. 16
PART II
Fees and Expenses .................................................... a-1
Services for Accumulation ............................................ a-2
Principal Underwriter ................................................ a-2
Service Plan ......................................................... a-3
Performance Information .............................................. a-4
Control Persons and Principal Holders of Securities .................. a-4
Other Information .................................................... a-4
Financial Statements ................................................. a-5
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED FEBRUARY 1, 1997, 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).
FOR EDGAR FILING PURPOSES ONLY: REGISTRANT INCORPORATES BY REFERENCE FOR
EV TRADITIONAL TAX-MANAGED GROWTH FUND THE PART I FOUND IN THE STATEMENT OF
ADDITIONAL INFORMATION OF EV CLASSIC TAX-MANAGED GROWTH FUND CONTAINED IN THIS
AMENDMENT.
<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
As of October 31, 1996, the Portfolio had net assets of $936,799,570. For
the period from the Portfolio's start of business, December 1, 1995 to the
fiscal year ended October 31, 1996, the Portfolio paid BMR advisory fees of
$2,116,576 (equivalent to 0.600% (annualized) of the Portfolio's average daily
net assets for such period).
ADMINISTRATOR
As stated under "Investment Adviser and Administrator" in Part I of this
SAI, the Administrator currently receives no compensation for providing
administrative services to the Fund.
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 accruing for its
service fee payments during the quarter ending June 30, 1997. The Service Plan
relates to Class A shares only.
PRINCIPAL UNDERWRITER
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.
BROKERAGE COMMISSIONS
For the period from the Portfolio's start of business, December 1, 1995 to
the fiscal year ended October 31, 1996, the Portfolio paid brokerage
commissions of $144,815 on portfolio security transactions, of which
approximately $112,018 was paid in respect of portfolio security transactions
aggregating approximately $89,523,457 to firms which provided some Research
Services (as defined in Part I) to Eaton Vance (although many of such firms
may have been selected in any particular transaction primarily because of
their execution capabilities).
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, 1997, 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,
1996, 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 $9 $1,254 $142,500(2)
Samuel L. Hayes III 8 1,220 153,750(3)
Norton H. Reamer 8 1,191 142,500
John L. Thorndike 8 1,270 147,500
Jack L. Treynor 9 1,319 147,500
- ------------
(1) The Eaton Vance fund complex consists of 228 registered investment
companies or series thereof.
(2) Includes $42,500 of deferred compensation.
(3) Includes $37,500 of deferred compensation.
SERVICES FOR ACCUMULATION
The following services relates to purchases of Class A shares and 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 Class A 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 Class A 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 and purchased an additional $20,000 of 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 each class 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, in the case of Class A shares and 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 Class A shares 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 Class A
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 is filed within 90 days of such
purchase); or (2) purchases of Class A shares 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
Class A 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 Class A 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. In connection with the
sale of Class A shares, 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.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
with respect to Class A shares designed to meet the service fee requirements
of the revised sale charge rule of the National Association of Securities
Dealers, Inc. (the "NASD") (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, 1997 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 Class A 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
Class A 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 there 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.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return
on a hypothetical investment of $1,000 in Class A shares of the Fund covering
the 1, 5, and 10 year periods ended October 31, 1996. 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.
VALUE OF $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT* ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
10 years ended
10/31/96 $952.19 $3,776.66 296.64% 14.77% 277.67% 14.21%
5 years ended
10/31/96 $952.03 $2,003.31 110.42% 16.04% 100.33% 14.91%
1 year ended
10/31/96 $952.29 $1,166.83 22.53% 22.53% 16.68% 16.68%
</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.
- ------------
Initial investment less the current maximum sales charge of 4.75%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 1, 1996, the Trustees and officers of the Trust, as a
group, owned in the aggregate less than 1% of the outstanding shares of the
Fund. As of November 1, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc.,
Jacksonville, FL was the record owner of approximately 18.46% of the
outstanding shares, which were held on behalf of its customers who are the
beneficial owners of such shares, and as to which it had voting power under
certain limited circumstances. To the knowledge of the Trust, no other person
owned of record or beneficially 5% or more of the Fund's outstanding shares as
of such date.
OTHER INFORMATION
Effective February 1, 1997, the Fund began offering two classes of shares.
Prior thereto, all shares of the Fund were offered in the same manner as the
existing Class A shares of the Fund. Each Class may pay a different share of
other expenses (not including advisory or custodial fees or other expenses
related to the management of the Fund's assets) that are actually incurred in
a different amount by that Class or if the Class receives services of a
different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment,
systematic investment and withdrawal plans) attributable to a Class, (b) the
cost of preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration fees of the SEC and state securities agencies, (d) the expense of
administrative personnel and services required to support the shareholders of
a Class, (e) Trustee's fees or expenses incurred as a result of issues or
matters relating to a Class or (f) legal, auditing and accounting expenses
relating to a Class.
<PAGE>
FINANCIAL STATEMENTS
Such statements relate to Class A shares only.
<PAGE>
- ------------------------------------------------------------------------------
EV TRADITIONAL TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
October 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investment in Tax-Managed Growth Portfolio (Portfolio), at
value (Note 1A) (Identified cost, $28,436,030) $30,201,809
Receivable for Fund shares sold 445,952
Deferred organization expenses (Note 1D) 30,636
-----------
Total assets $30,678,397
LIABILITIES:
Payable for Fund shares redeemed $498,370
Payable to affiliate --
Trustees' fees 14
Accrued expenses 2,071
--------
Total liabilities 500,455
-----------
NET ASSETS for 2,701,661 shares of beneficial interest
outstanding $30,177,942
===========
SOURCES OF NET ASSETS:
Paid-in capital $28,398,040
Accumulated net realized loss from Portfolio
(computed on the basis of identified cost) (20,399)
Unrealized appreciation from Portfolio (computed on
the basis of identified cost) 1,765,779
Undistributed net investment income 34,522
-----------
Total $30,177,942
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($30,177,942 / 2,701,661 shares of beneficial interest
outstanding) $11.17
======
COMPUTATION OF OFFERING PRICE PER SHARE:
(100 / 95.25 of $11.17)
On sales of $100,000 or more the offering price is reduced. $11.73
======
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the period from the start of business, March 28, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B):
Dividend income allocated from Portfolio (net of
foreign taxes, $424) $ 102,559
Interest income allocated from Portfolio 10,049
Expenses allocated from Portfolio (48,755)
----------
Net investment income allocated from
Portfolio $ 63,853
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 3) $ 56
Custodian fees 1,249
Service fees (Note 4) 207
Registration fees 10,866
Printing and postage 6,586
Transfer and dividend disbursing agent fees 5,535
Amortization of organization expenses (Note 1D) 3,420
Legal and accounting services 678
Miscellaneous 734
----------
Total expenses 29,331
----------
Net investment income $ 34,522
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized loss from Portfolio (identified cost
basis) $ (20,399)
Unrealized appreciation of investments 1,765,779
----------
Net realized and unrealized gain $1,745,380
----------
Net increase in net assets from operations $1,779,902
==========
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
For the period from the start of business, March 28, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 34,522
Net realized loss on investments (20,399)
Unrealized appreciation 1,765,779
-----------
Net increase in net assets from operations $ 1,779,902
-----------
Transactions in shares of beneficial interest (Note 4) --
Proceeds from sale of shares $28,709,937
Cost of shares redeemed (311,907)
-----------
Net increase from Fund share transactions $28,398,030
-----------
Net increase in net assets $30,177,932
NET ASSETS:
At beginning of period 10
-----------
At end of period (including undistributed net investment
income of $34,522) $30,177,942
===========
See notes to financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
For the period from the start of business, March 28, 1996, to October 31, 1996
- ------------------------------------------------------------------------------
NET ASSET VALUE, beginnin
g of period $ 10.000
--------
INCOME FROM OPERATIONS:
Net investment income $ 0.013
Net realized and unrealized gain 1.157
--------
Total income from operations $ 1.170
--------
NET ASSET VALUE, end of period $ 11.170
========
TOTAL RETURN (1) 11.70%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets (2) 1.05% +
Ratio of net investment income to average net assets 0.47% +
Net assets, end of period (000 omitted) $ 30,178
+ Annualized.
(1) Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to
be reinvested at the net asset value on the payable date. Total return is
computed on a non-annualized basis.
(2) Includes the Fund's share of Tax-Managed Growth Portfolio's allocated
expenses for the period from March 28, 1996 to October 31, 1996.
See notes to financial statements
<PAGE>
- -----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional Tax-Managed Growth Fund (the Fund) is a diversified series of
Eaton Vance Mutual Funds Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund invests all of its investable assets in interests
in Tax-Managed Growth Portfolio (the Portfolio), a New York Trust, having the
same investment objective as the Fund. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (3.2% at October 31, 1996). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial
statements of the Portfolio, including the portfolio of investments, are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
A. INVESTMENT VALUATION -- Valuation of the securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income, and any
net realized capital gains. Accordingly, no provision for federal income or
excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization, including registration costs, are amortized on the
straight-line basis over five years.
E. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT), serves as
custodian to the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average cash balances the Fund or the Portfolio maintain with IBT. All
significant credit balances used to reduce the Fund's custodian fees are
reported as a reduction of expenses in the Statements of Operations.
F. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
- ------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
It is the present policy of the Fund to make at least one distribution
annually (normally in December) of all or substantially all of the investment
income allocated to the Fund by the Portfolio, less the Fund's direct and
allocated expenses and at least one distribution annually of all or
substantially all of the net realized capital gains (reduced by any available
capital loss carryforwards from prior years) allocated by the Portfolio to the
Fund, if any.
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the per share net asset value as of the close of business on
the record date.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in over distributions for financial statement purposes
are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
- ------------------------------------------------------------------------------
(3) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM. See Note 2 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report. Except as to
Trustees of the Fund who are not members of EVM's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
management fee. Eaton Vance Distributors, Inc., (EVD), a subsidiary of EVM and
the Fund's principal underwriter, received approximately $ as its portion
of the sales charge on sales of Fund shares for the period from the start of
business, March 28, 1996, to October 31, 1996. EVD also receives a contingent
deferred sales charge (CDSC) on shareholder redemptions made within 12 months
of purchase, where the initial investment in the Fund was $1 million or more.
EVD received no CDSC during the period. Certain officers and Trustees of the
Fund and the Portfolio are officers and directors/trustees of the above
organizations.
- ------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares for the period from the start of business, March
28, 1996 to October 31, 1996 were as follows:
Sales 2,730,678
Issued to shareholders electing to receive payments of
distributions in Fund shares --
Redemptions (29,017)
---------
Net increase 2,701,661
=========
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Fund has adopted a service plan (the Plan) pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The Plan provides that the Fund may make
service fee payments to EVD, Authorized Firms or other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for any fiscal year
which is attributable to shares of the Fund which have remained outstanding
for more than one year. Such payments are made for personal services and/or
the maintenance of shareholder accounts. The Fund expects to begin accruing
for its service fee payments during the quarter ending June 30, 1997.
- ------------------------------------------------------------------------------
(6) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$28,694,832 and $302,256, respectively.
<PAGE>
----------------------------------
TAX-MANAGED GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
- ------------------------------------------------------------------------------
COMMON STOCKS - 97.9%
- ------------------------------------------------------------------------------
NAME OF COMPANY SHARES VALUE
- ------------------------------------------------------------------------------
ADVERTISING - 0.5%
Interpublic Group of Cos., Inc. 106,000 $ 5,141,000
------------
AEROSPACE & DEFENSE - 2.1%
Boeing Co. 90,370 $ 8,619,039
Raytheon Co. 226,544 11,157,292
------------
$ 19,776,331
------------
BANKS - 1.0%
BankAmerica Corp. 20,812 $ 1,904,298
Citicorp 40,000 3,960,000
First Chicago NBD Corp. 43,007 2,193,353
Wells Fargo & Co. 4,265 1,139,288
------------
$ 9,196,939
------------
BEVERAGES - 6.4%
Anheuser-Busch Cos., Inc. 210,260 $ 8,095,010
Coca-Cola Co. 478,208 24,149,504
PepsiCo, Inc. 900,682 26,682,704
------------
$ 58,927,218
------------
BROADCAST & CABLE - 0.1%
Cox Communications Inc., Class A* 93,319 $ 1,726,402
------------
BUILDING MATERIALS - 0.3%
Masco Corp. 55,540 $ 1,742,567
Stanley Works 40,490 1,143,843
------------
$ 2,886,410
------------
BUSINESS SERVICES - 2.3%
Automatic Data Processing Inc. 211,040 $ 8,784,540
Ecolab Inc. 132,620 4,840,630
Electronic Data Systems Corp. 110,000 4,950,000
Manpower Inc. 110,000 3,121,250
------------
$ 21,696,420
------------
CHEMICALS - 2.5%
Bayer AG Sponsored ADR 40,000 $ 1,512,548
Dow Chemical Co. 25,248 1,963,032
DuPont (E.I.) de Nemours & Co., Inc. 44,800 4,155,200
Monsanto Co. 396,680 15,718,445
------------
$ 23,349,225
------------
COMMUNICATIONS EQUIPMENT - 2.0%
Ericsson (L.M.) Telephone Co. 66,000 $ 1,823,250
Nokia Corp. 280,000 12,985,000
Northern Telecom Ltd. 55,870 3,638,534
------------
$ 18,446,784
------------
COMPUTER SOFTWARE - 1.1%
Microsoft Corp.* 20,000 $ 2,745,000
Oracle Systems Corp.* 180,000 7,616,250
------------
$ 10,361,250
------------
COMPUTER & BUSINESS EQUIPMENT - 5.1%
Bay Networks, Inc.* 200,000 $ 4,050,000
Cisco Systems, Inc. 75,000 4,640,624
Digital Equipment Corp.* 41,620 1,227,790
Hewlett-Packard Co. 481,928 21,265,073
Imation Corp.* 2,628 71,942
International Business Machines Corp. 67,921 8,761,809
Xerox Corp. 160,000 7,420,000
------------
$ 47,437,239
------------
CONTAINERS & PACKAGING - 0.5%
Crown Cork & Seal Co., Inc. 100,000 $ 4,800,000
------------
DISTRIBUTION - 0.5%
Super Valu Stores Inc. 51,506 $ 1,532,304
Sysco Corp. 107,760 3,663,840
------------
$ 5,196,144
------------
DRUGS - 10.0%
Astra AB-Series A 420,000 $ 19,321,973
Astra AB-ADR Series B 60,000 2,741,994
Bristol-Myers Squibb Co. 56,860 6,012,945
Elan Corp., PLC (ADRs)* 300,000 8,325,000
Genentech, Inc.* 34,000 1,831,750
Merck & Co., Inc. 239,075 17,721,434
Pfizer Inc. 290,752 24,059,728
Schering-Plough Corp. 128,120 8,199,680
Smithkline Beecham PLC 37,520 2,349,690
Warner-Lambert Co. 51,644 3,285,850
------------
$ 93,850,044
------------
ELECTRIC UTILITIES - 0.1%
Citizen's Utilities Co., Class A* 55,411 $ 602,595
------------
ELECTRICAL EQUIPMENT - 2.0%
AMP Inc. 112,460 $ 3,809,582
Emerson Electric Co. 75,474 6,717,186
General Electric Co. 74,114 7,170,530
Lincoln Electric Co. 19,700 546,675
Lincoln Electric Co. Class A 19,700 541,750
------------
$ 18,785,723
------------
ELECTRICAL - SEMICONDUCTORS - 6.5%
Intel Corp. 505,796 $ 55,574,335
Texas Instruments Inc. 84,390 4,061,269
------------
$ 59,635,604
------------
ENGINEERING & CONSTRUCTION - 0.1%
Gilbert Associates Inc. Class A 78,125 $ 1,015,625
------------
ENTERTAINMENT - 0.2%
Disney (Walt) Co. 29,000 $ 1,910,375
------------
ENVIRONMENTAL SERVICES - 0.3%
WMX Technologies, Inc. 77,930 $ 2,678,844
------------
FINANCIAL - MISCELLANEOUS - 2.1%
American Express Co. 56,798 $ 2,669,506
Federal National Mortgage Association 303,820 11,886,958
MGIC Investment Corp. 75,000 5,146,875
------------
$ 19,703,339
------------
FOOD - 1.6%
Pioneer Hi-Bred International, Inc. 87,000 $ 5,839,875
Earthgrains Co. 4,204 222,812
McCormick & Co., Inc., Non-voting 375,208 9,051,893
------------
$ 15,114,580
------------
HEALTH SERVICES - 0.7%
Columbia/HCA Healthcare Corp. 180,000 $ 6,435,000
Medpartners, Inc. 17,696 373,828
------------
$ 6,808,828
------------
HOUSEHOLD PRODUCTS - 3.5%
Colgate-Palmolive Co. 21,826 $ 2,007,991
Duracell International Inc. 100,000 6,675,000
Kimberly-Clark Corp. 57,310 5,344,158
Procter & Gamble Co. 170,800 16,909,200
Rubbermaid Inc. 78,920 1,834,890
------------
$ 32,771,239
------------
INDUSTRIAL EQUIPMENT - 3.0%
Dover Corp. 164,580 $ 8,455,297
General Signal Corp. 68,600 2,795,450
Goulds Pumps, Inc. 110,539 2,556,214
Illinois Tool Works Inc. 10,000 702,500
Parker-Hannifin Corp. 76,099 2,882,250
Tecumseh Products Co. Class A 167,090 9,398,813
Tecumseh Products Co. Class B 18,320 980,120
------------
$ 27,770,644
------------
INFORMATION SERVICES - 3.3%
Dun & Bradstreet Corp. 137,006 $ 7,929,222
Reuters Holdings PLC, ADR 310,090 23,062,944
------------
$ 30,992,166
------------
INSURANCE - 7.4%
American International Group, Inc. 206,633 $ 22,445,510
Chubb Corp. 101,050 5,052,500
General Re Corp. 112,446 16,557,671
Highlands Insurance Group* 5,070 100,133
Kansas City Life Insurance Co. 35,400 1,982,400
Marsh & McLennan Cos., Inc. 62,172 6,473,660
Progressive Corp. (The) 50,000 3,437,500
Providian Corp. 46,794 2,199,318
Provident Companies Inc. 18,789 697,542
Seafield Capital Corp. 35,960 1,269,838
St. Paul Cos., Inc. 130,280 7,083,975
Torchmark Corp. 31,425 1,520,184
------------
$ 68,820,231
------------
MEDICAL PRODUCTS - 6.6%
Abbott Laboratories 80,000 $ 4,050,000
Bausch & Lomb Inc. 145,574 4,913,121
Baxter International, Inc. 170,828 7,110,716
Boston Scientific Corp.* 255,000 13,865,625
Johnson & Johnson 449,040 22,115,220
Medtronic, Inc. 72,000 4,635,000
Sofamor Danek Group, Inc.* 173,000 4,757,500
------------
$ 61,447,182
------------
METALS - 0.6%
Inco Ltd. 124,000 $ 3,937,000
Nucor Corp. 40,000 1,895,000
------------
$ 5,832,000
------------
NATURAL GAS UTILITIES - 0.4%
Enron Oil & Gas Co. 100,000 $ 2,575,000
Sonat, Inc. 27,200 1,339,600
------------
$ 3,914,600
------------
OIL & GAS - EXPLORATION & PRODUCTION - 2.2%
Anadarko Petroleum Corp. 161,000 $ 10,243,625
Apache Corp. 66,440 2,358,626
Louisiana Land & Exploration Corp. 25,000 1,421,875
Triton Energy Ltd.* 100,000 4,462,500
Union Pacific Resources Group, Inc. 79,796 2,194,386
------------
$ 20,681,012
------------
OIL & GAS - EQUIPMENT & SERVICES - 2.5%
Baker Hughes, Inc. 39,234 $ 1,397,711
Dresser Industries, Inc. 79,800 2,623,425
Halliburton Co. 50,700 2,870,888
Schlumberger Ltd. 168,393 16,691,956
------------
$ 23,583,980
------------
OIL & GAS - INTEGRATED - 3.1%
Amoco Corp. 47,928 $ 3,630,546
Atlantic Richfield Co. 20,883 2,766,998
Chevron Corp. 55,600 3,655,700
Exxon Corp. 100,704 8,924,892
Mobil Corp. 74,333 8,678,378
Murphy Oil Corp. 29,700 1,466,438
------------
$ 29,122,951
------------
PAPER & FOREST PRODUCTS - 1.0%
Allegiance Corp. 22,661 $ 424,894
Champion International Corp. 41,484 1,804,554
Union Camp Corp. 80,309 3,915,064
Weyerhaeuser Co. 61,630 2,827,276
------------
$ 8,971,788
------------
PHOTOGRAPHY - 1.0%
Eastman Kodak Co. 122,181 $ 9,743,935
------------
PRINTING & BUSINESS FORMS - 1.1%
American Business Products Inc. GA 146,497 $ 3,259,558
Bowne & Co. Inc. 91,770 2,145,124
Deluxe Corp. 57,150 1,864,519
Donnelley, (R.R.) & Sons Co. 47,896 1,454,841
Harland, (John H.) Co. 51,540 1,604,183
Moore Corp., Ltd. 19,075 386,269
------------
$ 10,714,493
------------
PUBLISHING - 2.7%
Gannett Co., Inc. 130,450 $ 9,897,894
Harcourt General, Inc. 90,000 4,477,500
Houghton Mifflin Co. 63,700 3,161,113
McGraw-Hill Inc. 25,608 1,200,375
Times Mirror Co. Class A 151,670 7,014,738
------------
$ 25,751,619
------------
RESTAURANTS - 0.7%
McDonald's Corp. 143,100 $ 6,350,063
------------
RETAIL - GENERAL - 0.8%
Wal-Mart Stores, Inc. 274,390 $ 7,305,634
------------
RETAIL - FOOD & DRUG - 0.6%
Albertson's, Inc. 156,048 $ 5,364,150
------------
RETAIL - SPECIALTY & APPAREL - 2.5%
Home Depot, Inc. (The) 255,000 $ 13,961,250
Toys 'R' Us, Inc.* 287,075 9,724,666
------------
$ 23,685,916
------------
SPECIALTY - CHEMICALS & MATERIALS - 6.1%
Corning Inc. 100,000 $ 3,875,000
Dexter Corp. 47,829 1,482,697
Dionex Corp.* 181,070 6,925,928
Great Lakes Chemical Corp. 68,720 3,582,030
International Flavors & Fragrances, Inc. 148,101 6,127,679
International Specialty Products Inc. 59,000 641,625
Loctite Corp. 177,167 10,386,415
Memtec Ltd. Sponsored ADR 77,500 2,644,688
Millipore Corp. 151,440 5,300,400
Minnesota Mining & Manufacturing Co. 26,288 2,014,318
Nalco Chemical Co. 196,020 7,130,228
Sealed Air Corp.* 180,000 6,997,500
------------
$ 57,108,508
------------
TOBACCO - 0.0%
Schweitzer-Mauduit International Inc. 5,731 $ 176,228
------------
TRANSPORTATION - 0.8%
CSX Corp. 15,270 $ 658,519
Flightsafety International, Ltd. 35,000 1,728,125
Union Pacific Corp. 94,210 5,287,536
------------
$ 7,674,180
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $237,105,867) $916,829,437
------------
- ------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 2.1%
- ------------------------------------------------------------------------------
NAME OF COMPANY FACE AMOUNT VALUE
- ------------------------------------------------------------------------------
Ford Motor Credit Company, 5.35% due 11/6/96 10,000,000 $ 9,992,570
Prudential Funding Corporation, 5.60% due 11/1/96 9,626,000 9,626,000
------------
TOTAL SHORT-TERM OBLIGATIONS AT AMORTIZED COST $ 19,618,570
------------
TOTAL INVESTMENTS (IDENTIFIED COST,
$256,724,437) - 100% $936,448,007
OTHER ASSETS, LESS LIABILITIES - 0.0% 351,563
------------
NET ASSETS - 100% $936,799,570
============
*Non-income producing security.
See notes to financial statements
<PAGE>
- ------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
October 31, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$256,724,437) $936,448,007
Cash 30,274
Receivable for investments sold 504,059
Dividends receivable 572,932
Deferred organization expenses (Note 1C) 8,879
Other assets 64,669
------------
Total assets $937,628,820
LIABILITIES:
Payable for investments purchased $798,425
Payable to affiliate --
Trustees' fees 1,406
Accrued expenses 29,419
--------
Total liabilities 829,250
------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $936,799,570
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $257,075,830
Unrealized appreciation of investments (computed
on the basis of identified cost) 679,723,740
------------
Total $936,799,570
============
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995 to October 31, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income --
Dividends (net of foreign withholding taxes
of $25,573) $ 4,931,924
Interest 442,263
------------
Total income $ 5,374,187
Expenses --
Investment adviser fee (Note 2) $ 2,116,576
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 9,500
Custodian fee 125,097
Legal and accounting services 1,200
Amortization of organization expenses (Note 1C) 2,007
Miscellaneous 15,099
------------
Total expenses 2,269,479
------------
Net investment income $ 3,104,708
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments, computed on
the basis of identified cost $ 9,582,500
Unrealized appreciation of investments 679,723,740
------------
Net realized and unrealized gain on
investments 689,306,240
------------
Net increase in net assets from operations $692,410,948
============
See notes to financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995, to October 31, 1996
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS:
From operations --
Net investment income $ 3,104,708
Net realized gain on investments 9,582,500
Unrealized appreciation of investments 679,723,740
------------
Net increase in net assets from operations $692,410,948
------------
Capital transactions --
Contributions $261,250,662
Withdrawals (16,962,050)
------------
Increase in net assets from capital transactions $244,288,612
------------
Total increase in net assets $936,699,560
NET ASSETS:
At beginning of period 100,010
-----------
At end of period $936,799,570
============
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
For the period from the start of business, December 1, 1995 to October 31, 1996
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Expenses 0.66%+
Net investment income 0.91%+
PORTFOLIO TURNOVER 3%
AVERAGE COMMISSION RATE PAID(1) $0.0585
+ Annualized.
(1) Average commission rate paid is computed by dividing the total dollar amount
of commissions paid during the fiscal year by the total number of shares
purchased and sold during the fiscal year for which commissions were
charged.
See notes to financial statements
<PAGE>
----------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Tax-Managed Growth Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The Portfolio, which was organized as a trust under the
laws of the State of New York on December 1, 1995, seeks to provide long-term
after-tax returns by investing in a diversified portfolio of equity
securities. The Declaration of Trust permits the Trustees to issue interests
in the Portfolio. Investment operations began on December 1, 1995, with the
acquisition of investments with a value of $115,586,248, including unrealized
appreciation of $96,618,064, in exchange for an interest in the Portfolio by
one of the Portfolio's investors. During the period, additional investors
contributed securities with a value of $698,990,556, including unrealized
appreciation of $512,467,715. The following is a summary of the significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Futures positions on securities or
currencies are generally valued at closing settlement prices. Unlisted or
listed securities for which closing sale prices are not available are valued
at the mean between the latest bid and asked prices. Short-term debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates value. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B. INCOME TAXES -- The Portfolio is treated as a partnership for Federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes on its share of such
income. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements (under the Internal Revenue Code) in order
for its investors to satisfy them. The Portfolio will allocate, at least
annually among its investors, each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit.
C. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
D. FUTURES CONTRACTS -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit either in cash or securities an amount
("initial margin") equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on daily
fluctuations in the value of the underlying security, and are recorded for
book purposes as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed to hedge against
anticipated future changes in price of current or anticipated portfolio
positions. Should prices move unexpectedly, the Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the ex-
dividend date. However, if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as the Portfolio is informed of the ex-
dividend date. Interest income is recorded on the accrual basis.
F. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
G. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
expenses on the Statement of Operations.
- ------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research (BMR) a
wholly-owned subsidiary of Eaton Vance Management (EVM) as compensation for
management and investment advisory services rendered to the Portfolio. Under the
advisory agreement, BMR receives a monthly advisory fee of 5/96 of 1% (0.625%
annually) of the average daily net assets of the Portfolio up to $500,000,000,
and at reduced rates as daily net assets exceed that level. For the period from
the start of business, December 1, 1995, to October 31, 1996 the adviser fee was
0.618% of average net assets. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment adviser
fee. Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of the Trustees Deferred Compensation Plan. For the
year ended October 31, 1996, no significant amounts have been deferred. Certain
of the officers and Trustees of the Portfolio are officers or directors/trustees
of the above organizations.
- ------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $138,926,860 and $9,308,829, respectively.
- ------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENT
The cost and unrealized appreciation (depreciation) in value of the
investments owned at October 31, 1996, as computed on a federal income tax
basis, are as follows:
Aggregate cost $256,724,437
============
Gross unrealized appreciation $682,343,349
Gross unrealized depreciation 2,619,609
------------
Net unrealized appreciation $679,723,740
============
- -------------------------------------------------------------------------------
(5) FINANCIAL INSTRUMENTS
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered.
The Portfolio did not have any open obligations under these financial
instruments at October 31, 1996.
- ------------------------------------------------------------------------------
(6) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $120 million unsecured line of credit agreement
with a bank. Borrowings will be made by the Portfolio solely to facilitate the
handling of unusual and/or unanticipated short-term cash requirements.
Interest is charged to each portfolio based on its borrowings at an amount
above either the bank's base rate, a variable adjusted certificate of deposit
rate, or a Eurodollar rate. In addition, a fee computed at an annual rate of
0.15% on the average daily amount of the unused portion of the facility is
allocated among the participating funds and portfolios at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the period.
<PAGE>
[LOGO]
EV TRADITIONAL EATON VANCE
-------------------
TAX-MANAGED MUTUAL FUNDS
GROWTH
FUND
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 1, 1997
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, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
T-TGSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
FOR EV CLASSIC TAX-MANAGED GROWTH FUND:
Financial Highlights for the period from the start of business,
August 2, 1996 through October 31, 1996.
FOR EV MARATHON TAX-MANAGED GROWTH FUND:
Financial Highlights for the period from the start of business,
March 28, 1996, through October 31, 1996.
FOR EV TRADITIONAL TAX-MANAGED GROWTH FUND:
Financial Highlights for the period from the start of business,
March 28, 1996, through October 31, 1996.
INCLUDED IN PART B:
For:
EV Classic Tax-Managed Growth Fund
EV Marathon Tax-Managed Growth Fund
EV Traditional Tax-Managed Growth Fund
The Financial Statements for the above-referenced Funds for the
time periods set forth in the Funds' Annual Reports dated
October 31, 1996 include:
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
For:
Tax-Managed Growth Portfolio
The Financial Statements for the time period set forth in the
Funds' Annual Reports dated October 31, 1996 include:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
(B) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated August 17,
1993 filed as Exhibit (1)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Amendment to Declaration of Trust dated July 10, 1995 filed
as Exhibit (1)(b) to Post- Effective Amendment No. 23 and
incorporated herein by reference.
(c) Amendment and Restatement of Establishment and Designation
of Series dated October 23, 1995 filed as Exhibit (1)(c) to
Post-Effective Amendment No. 26 and incorporated herein by
reference.
(d) Amendment and Restatement of Establishment and Designation
of Series of Shares dated May 7, 1996 filed as Exhibit
(1)(d) to Post-Effective Amendment No. 30 and incorporated
herein by reference.
(e) Establishment and Designation of Classes of Shares of
Beneficial Interest dated November 18, 1996 filed herewith.
(2)(a) By-Laws (As Amended November 3, 1986) filed as Exhibit
(2)(a) to Post-Effective Amendment No. 23 and incorporated
herein by reference.
(b) Amendment to By-Laws of Eaton Vance Government Obligations
Trust dated December 13, 1993 filed as Exhibit (2)(b) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(3) Not applicable
(4) Not applicable
(5)(a) Investment Advisory Agreement with Eaton Vance Management
for Eaton Vance Short-Term Treasury Fund dated February 4,
1991 filed as Exhibit (5)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Investment Advisory Agreement with Eaton Vance Management
for Eaton Vance Tax Free Reserves dated August 15, 1995
filed as Exhibit (5)(b) to Post-Effective Amendment No. 25
and incorporated herein by reference.
(6)(a)(1) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Government Obligations Trust (now EV
Traditional Government Obligations Fund) dated July 9, 1984
filed as Exhibit (6)(a)(1) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(2) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Short-Term Treasury Fund dated February 4,
1991 as Amended and Restated February 25, 1991 filed as
Exhibit (6)(a)(2) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(3) Amended Distribution Agreement with Eaton Vance
Distributors, Inc. for EV Classic Government Obligations
Fund dated January 27, 1995 filed as Exhibit (6)(a)(3) to
Post-Effective Amendment No. 22 and incorporated herein by
reference.
(4) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon Government Obligations Fund dated October
28, 1993 filed as Exhibit (6)(a)(3) to Post-Effective
Amendment No. 2 and incorporated herein by reference.
(5) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon High Income Fund dated July 31, 1995 filed
as Exhibit (6)(a)(5) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(6) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Classic High Income Fund dated July 31, 1995 filed as
Exhibit (6)(a)(6) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(7) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Classic Strategic Income Fund dated August 15, 1995
filed as Exhibit (6)(a)(7) to Post-Effective Amendment No.
24 and incorporated herein by reference.
(8) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon Strategic Income Fund dated August 15, 1995
filed as Exhibit (6)(a)(8) to Post-Effective Amendment No.
24 and incorporated herein by reference.
(9) Distribution Agreement between Eaton Vance Cash Management
Fund and Eaton Vance Distributors, Inc. dated August 15,
1995, filed as Exhibit (6)(a)(9) to Post-Effective Amendment
No. 25 and incorporated herein by reference.
(10) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Liquid Assets Fund dated August 15, 1995
filed as Exhibit (6)(a)(10) to Post-Effective Amendment No.
25 and incorporated herein by reference.
(11) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Money Market Fund dated August 15, 1995
filed as Exhibit (6)(a)(11) to Post-Effective Amendment No.
25 and incorporated herein by reference.
(12) Distribution Agreement between Eaton Vance Tax Free Reserves
and Eaton Vance Distributors, Inc. dated August 15, 1995
filed as Exhibit (6)(a)(12) to Post-Effective Amendment No.
25 and incorporated herein by reference.
(13) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon Tax-Managed Growth Fund dated March 20, 1996
filed as Exhibit (6)(a)(13) to Post-Effective Amendment No.
28 and incorporated herein by reference.
(14) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Traditional Tax- Managed Growth Fund dated March 20,
1996 filed as Exhibit (6)(a)(14) to Post-Effective Amendment
No. 28 and incorporated herein by reference.
(15) Distribution Agreement with EV Distributors, Inc. for EV
Classic Tax-Managed Growth Fund dated May 7, 1996 filed as
Exhibit (6)(a)(15) to Post-Effective Amendment No. 30 and
incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to the
Registration Statement of Eaton Vance Growth Trust Post-
Effective Amendment No. 61 and incorporated herein by
reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as
Exhibit (6)(c) to the Registration Statement of Eaton Vance
Growth Trust Post-Effective Amendment No. 59 and
incorporated herein by reference.
(7) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange
Fund, Inc., Release No. IC-20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company
dated October 15, 1992 filed as Exhibit (8) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995 filed as Exhibit (8)(b) to
Post-Effective Amendment No. 27 and incorporated herein by
reference.
(9)(a) Amended Administrative Services Agreement between Eaton
Vance Mutual Funds Trust (on behalf of each of its series)
and Eaton Vance Management dated July 31, 1995, with
attached schedules (including Amended Schedule A dated
October 23, 1995) under Rule 8b-31 under the Investment
Company Act of 1940, as amended, filed as Exhibit (9)(a) to
Post-Effective Amendment No. 24 and incorporated herein by
reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as
Exhibit 9(d) to the Registration Statement of Eaton Vance
Growth Trust Post-Effective Amendment No. 59 and
incorporated herein by reference.
(c) Amendment to Transfer Agency Agreement dated February 1,
1993 filed as Exhibit 9(e) to the Registration Statement of
Eaton Vance Growth Trust Post-Effective Amendment No. 59 and
incorporated herein by reference.
(d) Amended Schedule A to Administrative Services Agreement
dated May 7, 1996 filed as Exhibit (9)(d) to Post-Effective
Amendment No. 30 and incorporated herein by reference.
(10) Not applicable
(11) Not applicable
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for
Self-Employed Persons with Adoption Agreement and
instructions filed as Exhibit No. 14(1) to Post-Effective
Amendment #22 on Form N-1 under the Securities Act of 1933
(File No. 2-28471) and incorporated herein by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution Prototype
Plan and Trust with Adoption Agreements (1) Basic
Profit-Sharing Retirement Plan, (2) Basic Money Purchase
Pension Plan, (3) Thrift Plan Qualifying as Profit Sharing
Plan, (4) Thrift Plan Qualifying as Money Purchase Plan, (5)
Integrated Profit Sharing Retirement Plan, (6) Integrated
Money Purchase Pension Plan filed as Exhibit 14(2) to
Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and
Investment Instruction Form filed as Exhibit 14(3) to
Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype
Plan and Trust with Adoption Agreement filed as Exhibit
14(b) to Post-Effective Amendment No. 22 on Form N-1 under
the Securities Act of 1933 (File No. 2-28471) and
incorporated herein by reference.
(15)(a) Service Plan for Eaton Vance Government Obligations Fund
(now EV Traditional Government Obligations Fund) dated July
7, 1993 filed as Exhibit (15)(a) to Post-Effective Amendment
No. 23 and incorporated herein by reference.
(b) Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 for Eaton Vance Short-Term
Treasury Fund dated February 4, 1991 as Amended and Restated
February 25, 1991 filed as Exhibit (15)(b) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(c) Amended Distribution Plan for EV Classic Government
Obligations Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated January 27, 1995 filed as Exhibit
(15)(c) to Post-Effective Amendment No. 22 and incorporated
herein by reference.
(d) Distribution Plan for EV Marathon Government Obligations
Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940 dated October 28, 1993 filed as Exhibit (15) (d) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(e) Distribution Plan for EV Marathon High Income Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated
June 19, 1995 filed as Exhibit (15)(e) to Post- Effective
Amendment No. 25 and incorporated herein by reference.
(f) Distribution Plan for EV Classic High Income Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated
June 19, 1995 filed as Exhibit (15)(f) to Post- Effective
Amendment No. 25 and incorporated herein by reference.
(g) Distribution Plan for EV Classic Strategic Income Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated June 19, 1995 filed as Exhibit (15)(g) to Post-
Effective Amendment No. 24 and incorporated herein by
reference.
(h) Distribution Plan for EV Marathon Strategic Income Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated June 19, 1995 filed as Exhibit (15)(h) to
Post-Effective Amendment No. 24 and incorporated herein by
reference.
(i) Distribution Plan for Eaton Vance Liquid Assets Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated June 19, 1995 filed as Exhibit (15)(i) to Post-
Effective Amendment No. 25 and incorporated herein by
reference.
(j) Distribution Plan for Eaton Vance Money Market Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated
June 19, 1995 filed as Exhibit (15)(j) to Post- Effective
Amendment No. 25 and incorporated herein by reference.
(k) Distribution Plan for EV ---Marathon ---Tax-Managed Growth
Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940, dated March 20, 1996, filed as Exhibit (15) (k) to
Post-Effective Amendment No. 28 and incorporated herein by
reference.
(l) Service Plan for EV Traditional Tax-Managed Growth Fund
dated March 20, 1996 filed as Exhibit (15)(l) to
Post-Effective Amendment No. 28 and incorporated herein by
reference.
(m) Distribution Plan for EV Classic Tax-Managed Growth Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated August 1, 1996 filed as Exhibit (15)(m) to
Post-Effective Amendment No. 30 and incorporated herein by
reference.
(16) Schedules for Computation of Performance Quotations filed
herewith.
(17)(a) Power of Attorney for Eaton Vance Mutual Funds Trust dated
July 11, 1995 filed as Exhibit (17)(a) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(b) Power of Attorney for Government Obligations Portfolio dated
June 19, 1995 filed as Exhibit (17)(b) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(c) Power of Attorney for High Income Portfolio dated June 19,
1995 filed as Exhibit (17) (c) to Post-Effective Amendment
No. 23 and incorporated herein by reference.
(d) Power of Attorney for Strategic Income Portfolio dated
August 7, 1995 filed as Exhibit (17)(d) to Post-Effective
Amendment No. 24 and incorporated herein by reference.
(e) Power of Attorney for Cash Management Portfolio dated August
7, 1995 filed as Exhibit (17)(e) to Post-Effective Amendment
No. 25 and incorporated herein by reference.
(f) Power of Attorney for Tax-Managed Growth Portfolio dated
October 23, 1995 filed as Exhibit (17)(f) to Post-Effective
Amendment No. 26 and incorporated herein by reference.
(18) Multiple Class Plan for Institutional Shares dated November
18, 1996 filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of October 31, 1996
<S> <C>
Eaton Vance Short-Term Treasury Fund 67
EV Classic Government Obligations Fund 893
EV Marathon Government Obligations Fund 3,443
EV Traditional Government Obligations Fund 9,712
EV Classic High Income Fund 327
EV Marathon High Income Fund 15,793
EV Classic Strategic Income Fund 15
EV Marathon Strategic Income Fund 5,672
EV Classic Tax-Managed Growth Fund 246
EV Marathon Tax-Managed Growth Fund 2,129
EV Traditional Tax-Managed Growth Fund 926
Eaton Vance Cash Management Fund 2,192
Eaton Vance Liquid Assets Fund 612
Eaton Vance Money Market Fund 654
Eaton Vance Tax Free Reserves 178
</TABLE>
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust, dated
August 17, 1993 permits Trustee and officer indemnification by By-law,
contract and vote. Article XI of the By-laws contains indemnification
provisions. Registrant's Trustees and officers are insured under a standard
mutual fund errors and omissions insurance policy covering insured by reason
of negligent errors and omissions committed in their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the principal underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the captions
"Investment Adviser and Administrator" or "Investment Adiviser" in the
Statements of Additional Information which information is incorporated herein
by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(A) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the investment companies named below:
EV Classic California Municipals Fund
EV Classic Connecticut Municipals Fund
EV Classic Florida Insured Municipals Fund
EV Classic Florida Limited Maturity Municipals Fund
EV Classic Florida Municipals Fund
EV Classic Government Obligations Fund
EV Classic Greater China Growth Fund
EV Classic Growth Fund
EV Classic High Income Fund
EV Classic Information Age Fund
EV Classic Investors Fund
EV Classic Massachusetts Limited Maturity Municipals Fund
EV Classic National Limited Maturity Municipals Fund
EV Classic National Municipals Fund
EV Classic New Jersey Municipals Fund
EV Classic New York Limited Maturity Municipals Fund
EV Classic New York Municipals Fund
EV Classic Pennsylvania Limited Maturity Municipals Fund
EV Classic Pennsylvania Municipals Fund
EV Classic Senior Floating-Rate Fund
EV Classic Strategic Income Fund
EV Classic Special Equities Fund
EV Classic Stock Fund
EV Classic Tax-Managed Growth Fund
EV Classic Total Return Fund
EV Marathon Alabama Municipals Fund
EV Marathon Arizona Municipals Fund
EV Marathon Arkansas Municipals Fund
EV Marathon Asian Small Companies Fund
EV Marathon California Limited Maturity Municipals Fund
EV Marathon California Municipals Fund
EV Marathon Colorado Municipals Fund
EV Marathon Connecticut Limited Maturity Municipals Fund
EV Marathon Connecticut Municipals Fund
EV Marathon Emerging Markets Fund
EV Marathon Florida Insured Municipals Fund
EV Marathon Florida Limited Maturity Municipals Fund
EV Marathon Florida Municipals Fund
EV Marathon Georgia Municipals Fund
EV Marathon Gold & Natural Resources Fund
EV Marathon Government Obligations Fund
EV Marathon Greater China Growth Fund
EV Marathon Greater India Fund
EV Marathon Growth Fund
EV Marathon Hawaii Municipals Fund
EV Marathon High Income Fund
EV Marathon High Yield Municipals Fund
EV Marathon Information Age Fund
EV Marathon Investors Fund
EV Marathon Kansas Municipals Fund
EV Marathon Kentucky Municipals Fund
EV Marathon Louisiana Municipals Fund
EV Marathon Maryland Municipals Fund
EV Marathon Massachusetts Limited Maturity Municipals Fund
EV Marathon Massachusetts Municipals Fund
EV Marathon Michigan Limited Maturity Municipals Fund
EV Marathon Michigan Municipals Fund
EV Marathon Minnesota Municipals Fund
EV Marathon Mississippi Municipals Fund
EV Marathon Missouri Municipals Fund
EV Marathon National Limited Maturity Municipals Fund
EV Marathon National Municipals Fund
EV Marathon New Jersey Limited Maturity Municipals Fund
EV Marathon New Jersey Municipals Fund
EV Marathon New York Limited Maturity Municipals Fund
EV Marathon New York Municipals Fund
EV Marathon North Carolina Municipals Fund
EV Marathon Ohio Limited Maturity Municipals Fund
EV Marathon Ohio Municipals Fund
EV Marathon Oregon Municipals Fund
EV Marathon Pennsylvania Limited Maturity Municipals Fund
EV Marathon Pennsylvania Municipals Fund
EV Marathon Rhode Island Municipals Fund
EV Marathon Strategic Income Fund
EV Marathon South Carolina Municipals Fund
EV Marathon Special Equities Fund
EV Marathon Stock Fund
EV Marathon Tax-Managed Growth Fund
EV Marathon Tennessee Municipals Fund
EV Marathon Texas Municipals Fund
EV Marathon Total Return Fund
EV Marathon Virginia Municipals Fund
EV Marathon West Virginia Municipals Fund
EV Marathon Worldwide Health Sciences Fund
EV Traditional Alabama Municipals Fund
EV Traditional Arizona Municipals Fund
EV Traditional Arkansas Municipals Fund
EV Traditional Asian Small Companies Fund
EV Traditional California Limited Maturity Municipals Fund
EV Traditional California Municipals Fund
EV Traditional Colorado Municipals Fund
EV Traditional Connecticut Limited Maturity Municipals Fund
EV Traditional Connecticut Municipals Fund
EV Traditional Emerging Markets Fund
EV Traditional Florida Insured Municipals Fund
EV Traditional Florida Limited Maturity Municipals Fund
EV Traditional Florida Municipals Fund
EV Traditional Georgia Municipals Fund
EV Traditional Government Obligations Fund
EV Traditional Greater China Growth Fund
EV Traditional Greater India Fund
EV Traditional Growth Fund
EV Traditional Hawaii Municipals Fund
EV Traditional High Yield Municipals Fund
Eaton Vance Income Fund of Boston
EV Traditional Information Age Fund
EV Traditional Investors Fund
EV Traditional Kansas Municipals Fund
EV Traditional Kentucky Municipals Fund
EV Traditional Louisiana Municipals Fund
EV Traditional Maryland Municipals Fund
EV Traditional Massachusetts Municipals Fund
EV Traditional Michigan Limited Maturity Municipals Fund
EV Traditional Michigan Municipals Fund
EV Traditional Minnesota Municipals Fund
EV Traditional Mississippi Municipals Fund
EV Traditional Missouri Municipals Fund
Eaton Vance Municipal Bond Fund L.P.
EV Traditional National Limited Maturity Municipals Fund
EV Traditional National Municipals Fund
EV Traditional New Jersey Limited Maturity Municipals Fund
EV Traditional New Jersey Municipals Fund
EV Traditional New York Limited Maturity Municipals Fund
EV Traditional New York Municipals Fund
EV Traditional North Carolina Municipals Fund
EV Traditional Ohio Limited Maturity Municipals Fund
EV Traditional Ohio Municipals Fund
EV Traditional Oregon Municipals Fund
EV Traditional Pennsylvania Municipals Fund
EV Traditional Rhode Island Municipals Fund
EV Traditional South Carolina Municipals Fund
EV Traditional Special Equities Fund
EV Traditional Stock Fund
EV Traditional Tax-Managed Growth Fund
EV Traditional Tennessee Municipals Fund
EV Traditional Texas Municipals Fund
EV Traditional Total Return Fund
EV Traditional Virginia Municipals Fund
EV Traditional West Virginia Municipals Fund
EV Traditional Worldwide Health Sciences Fund, Inc.
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Prime Rate Reserves
Eaton Vance Short-Term Treasury Fund
Eaton Vance Tax Free Reserves
Massachusetts Municipal Bond Portfolio
<TABLE>
<CAPTION>
(B)
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
---------------- -------------------------- ---------------
<S> <C> <C>
James B. Hawkes* Vice President and Director Vice President and Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Chris Berg* Vice President None
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima* Vice President None
Jeffrey W. Butterfield* Vice President None
David B. Carle* Vice President None
James S. Comforti* Vice President None
Raymond Cox* Vice President None
Mark P. Doman* Vice President None
James Foley* Vice President None
Michael A. Foster* Vice President None
William M. Gillen* Vice President None
Hugh S. Gilmartin* Vice President None
Perry D. Hooker* Vice President None
Brian Jacobs* Senior Vice President None
Thomas P. Luka* Vice President None
Timothy D. McCarthy* Vice President None
Joseph T. McMenamin* Vice President None
Morgan C. Mohrman* Senior Vice President None
James A. Naughton* Vice President None
Mark D. Nelson* Vice President None
Linda D. Newkirk* Vice President None
James L. O'Connor* Vice President Treasurer
Thomas Otis* Secretary and Clerk Secretary
George D. Owen, II* Vice President None
F. Anthony Robinson* Vice President None
Jay S. Rosoff* Vice President None
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
Kevin Schrader* Vice President None
George V.F. Schwab, Jr.* Vice President None
Cornelius J. Sullivan* Vice President None
David M. Thill* Vice President None
Chris Volf* Vice President None
Sue Wilder* Vice President None
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(C) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street,
Boston, MA 02111 and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston,
MA 02110. Certain corporate documents of High Income Portfolio (the
"Portfolio") are also maintained by IBT Trust Company (Cayman), Ltd., The Bank
of Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman
Islands, British West Indies, and certain investor account, Portfolio and the
Registrant's accounting records are held by IBT Fund Services (Canada) Inc., 1
First Canadian Place, Kingstreet West, Suite 2800, P.O. Box 231, Toronto,
Ontario, Canada M5X 1C8. Registrant is informed that all applicable accounts,
books and documents required to be maintained by registered investment
advisers are in the custody and possession of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus
is delivered a copy of the latest annual report to shareholders, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston, and the
Commonwealth of Massachusetts, on the 25th day of November, 1996.
EATON VANCE MUTUAL FUNDS TRUST
By: /s/ M. DOZIER GARDNER
--------------------------------
M. DOZIER GARDNER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
President, Principal
Executive Officer and
/s/ M. DOZIER GARDNER Trustee November 25, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President, Trustee November 25, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee November 25, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee November 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 25, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Tax-Managed Growth Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File
No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on
the 25th day of November, 1996.
TAX-MANAGED GROWTH PORTFOLIO
By: /s/ M. DOZIER GARDNER
--------------------------------
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
Principal Executive
/s/ M. DOZIER GARDNER Officer November 25, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer November 25, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee November 25, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee November 25, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee November 25, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee November 25, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee November 25, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee November 25, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ------------------
<S> <C>
(1)(e) Establishment and Designation of Classes of Shares of Beneficial Interest
dated November 18, 1996.
(16) Schedules for Calculations of Performance Quotations.
(18) Multiple Class Plan for Institutional Shares dated November 18, 1996.
</TABLE>
<PAGE>
EXHIBIT 99.1(E)
EATON VANCE MUTUAL FUNDS TRUST
------------------------------
Establishment and Designation of Classes of Shares
of Beneficial Interest, Without Par Value
WHEREAS, the Trustees of Eaton Vance Mutual Funds Trust, a
Massachusetts business trust (the "Trust"), have previously designated a series
known as EV Traditional Tax-Managed Growth Fund (the "Fund); and
WHEREAS, the Trustees now desire to designate Classes of the Fund
pursuant to Section 5.1 of Article V of the Trust's Amended and Restated
Declaration of Trust dated August 17, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby
establish two Classes of shares of the Fund, each Class to have the following
special and relative rights:
1. The Classes shall be designated as "Class A" and "Class I".
Each existing share of beneficial interest of the Fund shall be designated as a
Class A share of the Fund.
2. In addition to the provisions of Section 5.5 of Article V of
the Declaration of Trust, each Class shall be subject to the terms and
conditions set forth in the Multiple Class Plan for Institutional Shares adopted
by the Board of Trustees of the Trust, as amended from time to time.
Dated: November 18, 1996
/s/ Donald R. Dwight /s/ Norton H. Reamer
- --------------------- ---------------------
Donald R. Dwight Norton H. Reamer
/s/ M. Dozier Gardner /s/ John L. Thorndike
- --------------------- ---------------------
M. Dozier Gardner John L. Thorndike
/s/ James B. Hawkes /s/ Jack L. Treynor
- --------------------- ---------------------
James B. Hawkes Jack L. Treynor
/s/ Samuel L. Hayes, III
------------------------
Samuel L. Hayes, III
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV CLASSIC TAX-MANAGED GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended October 31, 1996. 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 10/31/96 ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
10/31/96 10/31/86 $3,949.87 $3,949.87 294.99% 14.72% 294.99% 14.72%
5 YEARS ENDED
10/31/96 10/31/91 $2,095.52 $2,095.52 109.55% 15.95% 109.55% 15.95%
1 YEAR ENDED
10/31/96 10/31/95 $1,220.21 $1,210.21 22.02% 22.02% 21.02% 21.02%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV MARATHON TAX-MANAGED GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended October 31, 1996. 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE ON 10/31/96 ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
10/31/96 10/31/86 $3,959.28 $3,959.28 295.93% 14.75% 295.93% 14.75%
5 YEARS ENDED
10/31/96 10/31/91 $2,100.46 $2,080.46 110.05% 16.00% 108.05% 15.78%
1 YEAR ENDED
10/31/96 10/31/95 $1,223.09 $1,173.09 22.31% 22.31% 17.31% 17.31%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL TAX-MANAGED GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended October 31, 1996. 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.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 10/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
10/31/96 10/31/86 $952.19 $3,776.66 296.64% 14.77% 277.67% 14.21%
5 YEARS ENDED
10/31/96 10/31/91 $952.03 $2,003.31 110.42% 16.04% 100.33% 14.91%
1 YEAR ENDED
10/31/96 10/31/95 $952.29 $1,166.83 22.53% 22.53% 16.68% 16.68%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<PAGE>
EXHIBIT 99.(18)
MULTIPLE CLASS PLAN FOR INSTITUTIONAL SHARES
Dated November 18, 1996
WHEREAS, each trust or corporation (each a "Trust") listed on Schedule
A engages in business as an open-end investment company and is registered as
such under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, the Trustees or Directors (hereafter the "Trustees") of each
Trust have established two classes of shares of the series of the Trust (each a
"Fund") which are listed on Schedule A hereto or, in the case of EV Traditional
Worldwide Health Sciences Fund, Inc., have established two classes of the Trust
(the term "Fund" as used herein shall also refer to EV Traditional Worldwide
Health Sciences Fund, Inc.); such classes having been designated Class A and
Class I (the "Classes");
WHEREAS, each Fund is established in accordance with Section 18(f)(2)
of the Act (except for EV Traditional Worldwide Health Sciences Fund, Inc.), its
shares are registered on Form N-1A under the Securities Act of 1933, and it is
entitled to have a multiple class plan adopted on its behalf by the Trust
pursuant to Rule 18f-3 under the Act;
WHEREAS, the Trustees of the Trust desire to set forth herein the
separate arrangements, expense allocations, and any related conversion features
or exchange privileges of the Classes; and
WHEREAS, the Trustees of the Trust (including a majority of those
Trustees who are not interested persons of the Trust) have determined that
adoption of this Multiple Class Plan, including the expense allocations set
forth herein, is in the best interests of each Class individually and each Fund
as a whole.
NOW, THEREFORE, the Trust hereby adopts this Multiple Class Plan for
Institutional Shares (the "Plan") on behalf each Fund in accordance with Rule
18f-3 under the Act and containing the following terms and conditions:
1. Pursuant to the Fund's Service Plan and pursuant to various actions
taken by the Trustees, Class A and Class I shares are subject to different
distribution arrangements and accordingly are subject to different expenses
related thereto, including shareholder service expenses. As set forth in the
Fund's prospectus, Class A shares are offered subject to a sales charge and are
subject to service fee payments in amounts not exceeding .25% of the average
daily net assets attributable to such Class for each fiscal year of the Fund.
Class I shares are offered at net asset value to the types of investors
described in the prospectus and are not subject to service fee payments.
2. At the discretion of the Treasurer of the Trust, each Class may pay
a different share of other expenses (not including advisory or custodial fees or
other expenses related to the management of the Fund's assets) that are actually
incurred in a different amount by that Class or if the Class receives services
of a different kind or to a different degree than another Class. Such expenses
include, but are not limited to, the following (a) transfer agency costs
(including entities performing account maintenance, dividend disbursing or
subaccounting activities and administration of dividend reinvestment, systematic
investment and withdrawal plans) attributable to a Class, (b) the cost of
preparing, printing and mailing materials such as shareholder reports,
prospectuses and proxy materials to current shareholders of a Class, (c) any
registration fees of the Securities and Exchange Commission and state securities
agencies, (d) the expense of administrative personnel and services required to
support the shareholders of a Class, (e) Trustees' fees or expenses incurred as
a result of issues or matters relating to a Class, or (f) legal, auditing and
accounting expenses relating to a Class. Such expense allocation is subject to
the continuing availability of a revenue procedure of the Internal Revenue
Service or an opinion of counsel to the effect that the payments made under a
Fund's Service Plan or Distribution Plan and other Class specific expenses with
respect to a Class of shares do not result in such Fund's dividends or
distributions constituting "preferential dividends" under the Internal Revenue
Code.
3. Income, realized and unrealized capital gains and losses, and
expenses of the Fund not allocated to a particular Class pursuant to the
foregoing shall be allocated to each Class on the basis of the net asset value
of that Class in relation to the net asset value of the Fund.
4. Class A and Class I shares may be exchanged for shares of other
funds in the Eaton Vance Traditional family of funds, which may change from time
to time, subject to terms, conditions and limitations set forth in the relevant
prospectus.
5. This Plan shall not take effect until after it has been approved by
both a majority of Trustees and a majority of those Trustees who are not
interested persons of the Trust.
6. This Plan shall continue indefinitely, unless terminated or amended.
All material amendments to this Plan shall be approved in the manner provided
for Trustee approval of this Plan in Section 6. Additional series of a Trust
with Classes of shares may become subject to this Plan upon Trustee approval as
provided for in Section 6 and amendment of Schedule A hereto.
* * *
<PAGE>
Schedule A
Eaton Vance Mutual Funds Trust
EV Traditional Tax-Managed Growth Fund
Eaton Vance Municipals Trust
EV Traditional National Municipals Fund
Eaton Vance Municipals Trust II
EV Traditional High Yield Municipals Fund
EV Traditional Worldwide Health Sciences Fund, Inc.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 15
<NAME> EV CLASSIC TAX-MANAGED GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 10,364
<INVESTMENTS-AT-VALUE> 10,779
<RECEIVABLES> 75
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,886
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70
<TOTAL-LIABILITIES> 70
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,417
<SHARES-COMMON-STOCK> 1,003
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (10)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 415
<NET-ASSETS> 10,816
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 9
<EXPENSES-NET> 19
<NET-INVESTMENT-INCOME> (10)
<REALIZED-GAINS-CURRENT> (6)
<APPREC-INCREASE-CURRENT> 416
<NET-CHANGE-FROM-OPS> 400
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,816
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 19
<AVERAGE-NET-ASSETS> 4,986
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> .0790
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.780
<EXPENSE-RATIO> 2.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 13
<NAME> EV MARATHON TAX-MANAGED GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 73,460
<INVESTMENTS-AT-VALUE> 77,681
<RECEIVABLES> 709
<ASSETS-OTHER> 32
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 78,421
<PAYABLE-FOR-SECURITIES> 773
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 778
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,478
<SHARES-COMMON-STOCK> 6,965
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (22)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (33)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 77,644
<DIVIDEND-INCOME> 233
<INTEREST-INCOME> 23
<OTHER-INCOME> (112)
<EXPENSES-NET> 166
<NET-INVESTMENT-INCOME> (22)
<REALIZED-GAINS-CURRENT> (33)
<APPREC-INCREASE-CURRENT> 4,221
<NET-CHANGE-FROM-OPS> 4,165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,165
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 166
<AVERAGE-NET-ASSETS> 77,644
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.003)
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.150
<EXPENSE-RATIO> 1.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 14
<NAME> EV TRADITIONAL TAX-MANAGED GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 28,444
<INVESTMENTS-AT-VALUE> 30,202
<RECEIVABLES> 446
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,678
<PAYABLE-FOR-SECURITIES> 498
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 500
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,398
<SHARES-COMMON-STOCK> 2,702
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 30,178
<DIVIDEND-INCOME> 103
<INTEREST-INCOME> 10
<OTHER-INCOME> (48)
<EXPENSES-NET> 29
<NET-INVESTMENT-INCOME> 35
<REALIZED-GAINS-CURRENT> (13)
<APPREC-INCREASE-CURRENT> 1,758
<NET-CHANGE-FROM-OPS> 1,780
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,780
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29
<AVERAGE-NET-ASSETS> 30,178
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.013
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.170
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 256,724
<INVESTMENTS-AT-VALUE> 936,448
<RECEIVABLES> 1,076
<ASSETS-OTHER> 30
<OTHER-ITEMS-ASSETS> 74
<TOTAL-ASSETS> 937,628
<PAYABLE-FOR-SECURITIES> 798
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31
<TOTAL-LIABILITIES> 829
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 257,075
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 679,724
<NET-ASSETS> 936,799
<DIVIDEND-INCOME> 4,932
<INTEREST-INCOME> 442
<OTHER-INCOME> 0
<EXPENSES-NET> 2,269
<NET-INVESTMENT-INCOME> 3,105
<REALIZED-GAINS-CURRENT> 9,583
<APPREC-INCREASE-CURRENT> 679,723
<NET-CHANGE-FROM-OPS> 692,411
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 936,700
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,269
<AVERAGE-NET-ASSETS> 372,785
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
