<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 1996
1933 ACT FILE NO. 2-90946
1940 ACT FILE NO.11-4015
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 28 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 31 [X]
EATON VANCE MUTUAL FUNDS TRUST
---------------------------------------------------------------------
(FORMERLY EATON VANCE GOVERNMENT OBLIGATIONS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
H. DAY BRIGHAM, JR.
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
--------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective on May 1, 1996
pursuant to paragraph (b) of Rule 485.
Cash Management Portfolio and Government Obligations Portfolio have also
executed this Registration Statement.
CALCULATION OF REGISTRATION FEE
<TABLE>
=============================================================================================================
<CAPTION>
AMOUNT OF PROPOSED MAXIMUM PROPOSED AGGREGATE AMOUNT OF
TITLE OF SECURITIES SHARES BEING OFFERING PRICE MAXIMUM REGISTRATION
BEING REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest 6,312,148 $4.40(1) $27,773,451(2) $100
=============================================================================================================
(1) Computed under Rule 457(d) on the basis of the maximum aggregate offering
price per share at the close of business on April 18, 1996.
(2) Registrant elects to calculate the maximum aggregate offering price
pursuant to Rule 24e-2 for those series with a fiscal year end of December
31, 1995. $593,815,195 of shares were redeemed during the fiscal year
ended December 31, 1995. $566,331,744 of shares were used for reductions
pursuant to Paragraph (c) of Rule 24f-2 during such fiscal year.
$27,483,451 of shares redeemed are being used for the reduction of the
registration fee in this Amendment. While no fee is required for the
$27,483,451 of shares, the Registrant has elected to register, for $100,
an additional $290,000 of shares.
</TABLE>
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on May
24, 1995 filed its "Notice" as required by that Rule for the series of the
Registrant with a fiscal year end of March 31, 1995, on November 8, 1995 filed
its "Notice" for the series of the Registrant with a fiscal year end of
October 31, 1995 and on February 23, 1996 filed its "Notice" for the series of
the Registrant with a fiscal year end of December 31, 1995.
==============================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheets required by Rule 481(a) under the Securities Act of
1933
Part A--The Prospectuses of:
EV Classic Government Obligations Fund
EV Marathon Government Obligations Fund
EV Traditional Government Obligations Fund
Eaton Vance Short-Term Treasury Fund
The Prospectus of:
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Tax Free Reserves
Part B--The Statements of Additional Information of:
EV Classic Government Obligations Fund
EV Marathon Government Obligations Fund
EV Traditional Government Obligations Fund
Eaton Vance Short-Term Treasury Fund
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Tax Free Reserves
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any series of the Registrant not identified above.
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
EV MARATHON GOVERNMENT OBLIGATIONS FUND
EV TRADITIONAL GOVERNMENT OBLIGATIONS 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; How the Fund and
the Portfolio Invest their
Assets; 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 (for
Classic and Marathon Funds);
Service Plan (for Traditional
Fund); 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 (for Classic and
Marathon Funds); Service Plan
(for Traditional Fund);
Custodian; Independent
Accountants; Fees and
Expenses; Other Information
17. ............ Brokerage Allocation and Portfolio Security
Other Transactions; Fees and
Practices Expenses
<PAGE>
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
(Traditional Fund only);
Distribution Plan (for
Classic and Marathon Funds);
Service Plan (for Traditional
Fund); 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>
EATON VANCE MUTUAL FUNDS TRUST
EATON VANCE SHORT-TERM TREASURY 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; How the Fund
Invests Its Assets;
Organization of the Fund
5. ............ Management of the Fund Management of the Fund
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund;
Securities Reports to Shareholders; The
Lifetime Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plan; 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 Investment Objectives and
Policies Policies; Investment
Restrictions
14. ............ Management of the Fund Trustees and Officers
15. ............ Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............ Investment Advisory and Investment Adviser;
Other Distribution Plan; Custodian;
Services Independent Accountants;
Other Information
17. ............ Brokerage Allocation and Portfolio Security Transactions
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 Distribution Plan
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter
22. ............ Calculation of Performance Investment Performance
Data
23. ............ Financial Statements Financial Statements
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
EATON VANCE CASH MANAGEMENT FUND
EATON VANCE LIQUID ASSETS FUND
EATON VANCE MONEY MARKET FUND
EATON VANCE TAX FREE RESERVES
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 Funds' Financial
Information Highlights; Yield Information
4. ............ General Description of The Funds' Investment
Registrant Objectives; How the Funds
Invest their Assets;
Organization of the Funds and
the Portfolio
5. ............ Management of the Fund Management of the Funds and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Funds 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 Plans (Eaton
Vance Liquid Assets Fund and
Eaton Vance Money Market 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; (Investment
Services Adviser for Eaton Vance Tax
Free Reserves) Distribution
Plan (Eaton Vance Liquid
Assets Fund and Eaton Vance
Money Market Fund only);
Custodian; Independent
Accountants; Fees and
Expenses; Other Information
17. ............ Brokerage Allocation and Portfolio Security
Other Transactions; Fees and
Practices Expenses
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;
Distribution Plan (Eaton
Vance Liquid Assets Fund and
Eaton Vance Money Market Fund
only); Fees and Expenses
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ------ ------------ -------------------------------
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter; Fees and
Expenses
22. ............ Calculation of Performance Calculation of Yield
Data Quotations; Yield Information
23. ............ Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
GOVERNMENT OBLIGATIONS FUND
- ------------------------------------------------------------------------------
EV CLASSIC GOVERNMENT OBLIGATIONS FUND (THE "FUND") IS A MUTUAL FUND SEEKING A
HIGH CURRENT RETURN, BY INVESTING IN SECURITIES ISSUED, GUARANTEED OR OTHERWISE
BACKED BY THE U.S. GOVERNMENT AND ENGAGING IN ACTIVE MANAGEMENT STRATEGIES. THE
FUND INVESTS ITS ASSETS IN GOVERNMENT OBLIGATIONS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE 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. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (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 ............................ 12
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ......................... 13
The Fund's Investment Objective ....................... 4 Reports to Shareholders ........................... 14
Investment Policies and Risks ......................... 4 The Lifetime Investing Account/Distribution Options 14
Organization of the Fund and the Portfolio ............ 8 The Eaton Vance Exchange Privilege ................ 15
Management of the Fund and the Portfolio .............. 9 Eaton Vance Shareholder Services .................. 16
Distribution Plan ..................................... 10 Distributions and Taxes ........................... 17
Valuing Fund Shares ................................... 12 Performance Information ........................... 18
- --------------------------------------------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1996
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
- -------------------------------------------------------------------------------------------------------
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
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)
- -------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.75%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Other Expenses (including Interest and Securities Lending Expenses of 0.71%) 1.07%
-----
Total Operating Expenses 2.82%
=====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including
a contingent deferred sales charge in the case of redemption
during the first year after purchase) on a $1,000 investment,
assuming (a) 5% annual return and (b) redemption at the end
of each period: $39 $87 $149 $315
</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. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the type of securities being held by the
Portfolio.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return but actual annual return will
vary. For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Organization of the Fund and
the Portfolio", "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 computation of Annual Fund and Allocated Portfolio Operating Expenses as a
percentage of average daily net assets in the above table and of contingent
deferred sales charges and expenses incurred on a $1,000 investment in the above
Example is based in part on interest expense allocated to the Fund from the
Portfolio's borrowings and lending fees allocated to the Fund from the
Portfolio's securities lending activities during the fiscal year ended December
31, 1995. The Portfolio's borrowings, interest expense, securities lending
activities and lending fees will vary from year to year (see "Investment
Policies and Risks -- Active Management Strategies"). If the Fund had not been
allocated interest expense and lending fees in 1995, its Total Operating
Expenses as a percentage of average daily net assets would have been 2.11%, and
contingent deferred sales charges and expenses incurred on a $1,000 investment
for one, three, five and ten years would have been $31, $66, $113 and $244,
respectively (assuming redemption) and $21, $66, $113 and $244, respectively
(assuming no redemption).
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 audited
financial statements included in the Fund's annual report to shareholders which
is incorporated by reference into the Statement of Additional Information in
reliance upon the report of Coopers & Lybrand L.L.P., independent accountants,
as experts in accounting and auditing. Further information regarding the
performance of the Fund is contained in its annual report to shareholders which
may be obtained without charge by contacting the Principal Underwriter.
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------
1995 1994 1993*
---- ---- -----
NET ASSET VALUE, beginning of year $ 8.980 $ 9.940 $10.000
------- ------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.609 $ 0.626 $ 0.107
Net realized and unrealized
gain (loss) on investment 0.520 (0.876) (0.051)
------- ------- -------
Total income (loss from operations $ 1.129 $(0.250) $ 0.056
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $(0.609) $(0.626) $(0.107)
In excess of net
investment income(3) (0.010) (0.084) (0.009)
------- ------- -------
Total distributions $(0.619) $(0.710) $(0.116)
------- ------- -------
NET ASSET VALUE, end of year $ 9.490 $ 8.980 $ 9.940
======= ======= =======
TOTAL RETURN(1) 12.94% (2.54)% 0.34%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense
to average daily net assets(2) 0.71% 0.57% 0.54%+
Ratio of other expenses to
average daily net assets(2) 2.11% 2.15% 2.31%+
Ratio of net investment
income to average daily net assets 2.11% 2.15% 2.31%+
NET ASSETS AT END OF PERIOD
(000's omitted) $42,038 $39,586 $17,441
+Computed on an annualized basis.
(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. Distributions, if any, are assumed to be reinvested at
the net asset value on the payable date. Total return is not computed on an
annualized basis.
(2)Includes the Fund's share of the Portfolio's allocated expenses.
(3)The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distribution by Investment Companies. The SOP requires that
differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
*For the period from the start of business, November 1, 1993, to December 31,
1993.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO REALIZE A HIGH CURRENT RETURN. The Fund
currently seeks to meet its investment objective by investing its assets in the
Government Obligations Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. This investment structure is commonly referred to as a "master/feeder"
structure. The Fund's and the Portfolio's investment objectives are
nonfundamental and may be changed when authorized by a vote of the Trustees of
the Trust or the Portfolio, respectively, without obtaining the approval of the
Fund's shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the investment objective to
shareholders in advance for their approval.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
IN SEEKING HIGH CURRENT RETURN, THE PORTFOLIO INVESTS IN SECURITIES ISSUED,
GUARANTEED OR OTHERWISE BACKED BY THE U.S. GOVERNMENT, INCLUDING MORTGAGE-
BACKED SECURITIES OF FEDERAL AGENCIES AND FEDERALLY CHARTERED CORPORATIONS, AND
ENGAGES IN ACTIVE MANAGEMENT STRATEGIES, INCLUDING FUTURES TRANSACTIONS AND
RELATED TECHNIQUES PRIMARILY FOR HEDGING PURPOSES. The Portfolio's management
believes that a high current return may be derived from yields on U.S.
Government securities, including market discount accrued on obligations
purchased below their stated redemption value.
U.S. GOVERNMENT SECURITIES. U.S. Government securities include (1) U.S. Treasury
obligations, which differ in their interest rates, maturities and times of
issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years) and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities which are supported by any of
the following: (a) the full faith and credit of the U.S. Treasury, (b) the right
of the issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government to purchase
certain obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. The Portfolio may also invest in any
other security or agreement collateralized or otherwise secured by U.S.
Government securities. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association ("FNMA"), Government National Mortgage
Association ("GNMA"), Student Loan Marketing Association, United States Postal
Service, Small Business Administration, Tennessee Valley Authority and any other
enterprise established or sponsored by the U.S. Government. Because the U.S.
Government generally is not obligated to provide support to its
instrumentalities, the Portfolio will invest in obligations issued by these
instrumentalities only if the Investment Adviser determines that the credit risk
with respect to such obligations is minimal.
MORTGAGE-BACKED SECURITIES. The Portfolio may invest in mortgage-backed
securities that are either issued by the U.S. Government or one of its agencies
or instrumentalities or, if privately issued, collateralized by mortgages that
are insured, guaranteed or otherwise backed by the U.S. Government, its agencies
or instrumentalities. Mortgage-backed securities represent participation
interests in pools of adjustable and fixed-rate mortgage loans. Unlike
conventional debt obligations, mortgage-backed securities provide monthly
payments derived from the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. The
mortgage loans underlying mortgage-backed securities are generally subject to a
greater rate of principal prepayments in a declining interest rate environment
and to a lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest and prepayment rate scenarios, the Portfolio
may fail to recover the full amount of its investment in mortgage-backed
securities, notwithstanding any direct or indirect governmental or agency
guarantee. Because faster than expected prepayments must usually be invested in
lower yielding securities, mortgage-backed securities are less effective than
conventional bonds in "locking in" a specified interest rate. To mitigate
prepayment risk, the Investment Adviser considers the selection of
mortgage-backed securities that as a group have a history of more stable
prepayment rates relative to interest rate fluctuations. In a rising interest
rate environment, a declining prepayment rate will extend the average life of
many mortgage-backed securities. This possibility is often referred to as
extension risk. Extending the average life of a mortgage-backed security
increases the risk of depreciation due to future increases in market interest
rates. As of December 31, 1995, the Portfolio had approximately 38.5% of its net
assets invested in FNMA Mortgage-Backed Certificates, approximately 42.5% of its
net assets invested in Participation Certificates of FHLMC and approximately
9.5% of its net assets invested in GNMA Certificates. FNMA guarantees the timely
payment of principal and interest of its Certificates, FHLMC guarantees the
timely payment of interest and ultimate collection of the principal of its
Participation Certificates, and GNMA Certificates are guaranteed by the full
faith and credit of the U.S. Government.
The Portfolio may also invest in classes of collateralized mortgage obligations
("CMOs") and various other mortgage-backed securities. Senior CMO classes will
typically have priority over residual CMO classes as to the receipt of principal
and/or interest payments on the underlying mortgages. In choosing among CMO
classes, the Investment Adviser will evaluate the total income potential of each
class and other factors. If such obligations or securities are privately issued
they will currently be considered by the Investment Adviser as possible
investments for the Portfolio only when the mortgage collateral is insured,
guaranteed or otherwise backed by the U.S. Government or one or more of its
agencies or instrumentalities. As of December 31, 1995, the Portfolio had
approximately 5.0% of its net assets invested in CMOs (including one which was
privately issued).
The Portfolio may invest in securities that fluctuate in value with an index.
Such securities generally will either be issued by the U.S. Government or one of
its agencies or instrumentalities or, if privately issued, collateralized by
mortgages that are insured, guaranteed or otherwise backed by the U.S.
Government, its agencies or instrumentalities. The interest rate or, in some
cases, the principal payable at the maturity of an indexed security may change
positively or inversely in relation to one or more interest rates, financial
indices, securities prices or other financial indicators ("reference prices").
An indexed security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on an indexed security is a
multiple of the change in the reference price. Thus, indexed securities may
decline in value due to adverse market changes in reference prices. As of
December 31, 1995, the Portfolio held no such securities. Because
mortgage-backed and indexed securities derive their value from another
instrument, security or index, they are considered derivative debt securities,
and are subject to different combinations of prepayment, extension, interest
rate and/ or other market risks.
The Portfolio may enter into contracts to purchase securities for a fixed price
at a future date beyond the customary settlement time if the Portfolio holds and
maintains until the settlement date in a segregated account cash, U.S.
Government securities and liquid high-grade debt obligations in an amount
sufficient to meet the purchase price, or if the Portfolio enters into
offsetting contracts for the forward sale of other securities it owns. Such
contracts are customarily referred to as "forward commitments" and involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date.
The principal of and/or interest on certain U.S. Government securities which may
be purchased by the Portfolio could be (a) payable in foreign currencies rather
than U.S. dollars or (b) increased or diminished as a result of changes in the
value of the U.S. dollar relative to the value of foreign currencies. The value
of such portfolio securities denominated in foreign currencies may be affected
favorably or unfavorably by changes in the exchange rate between foreign
currencies and the U.S. dollar. In order to limit the risk inherent in this type
of security, it is the current policy of the Portfolio not to purchase any such
security if after such purchase (i) more than 5% of its net assets (taken at
market value) would be invested in securities denominated in foreign currencies
or (ii) more than 2% of its net assets (taken at market value) would be invested
in securities denominated in any one foreign currency.
The Portfolio may from time to time have temporary investments in short-term
debt obligations (including certificates of deposit, bankers' acceptances and
commercial paper) pending the making of other investments or as a reserve to
service redemptions and repurchases of its shares.
ACTIVE MANAGEMENT STRATEGIES
The Portfolio may engage in several active management strategies to enhance
income and reduce investment risk. Each strategy requires the Investment Adviser
to consider special factors. In addition, the Portfolio may temporarily borrow
up to 5% of the value of its total assets to satisfy redemption requests or
settle securities transactions.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. During
the existence of a loan, the Portfolio will continue to receive the equivalent
of the interest paid by the issuer on the securities loaned and will also
receive a fee, or all or a portion of the interest on investment of the
collateral, if any. However, the Portfolio may pay lending fees to such
borrowers. 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 Portfolio's management to be of good standing and
when, in the judgment of the Portfolio's management, the consideration which can
be earned from securities loans of this type justifies the attendant risk. The
financial condition of the borrower will be monitored by the Investment Adviser
on an ongoing basis. The value of the securities loaned will not exceed 30% of
the Portfolio's total assets. During the year ended December 31, 1995, the
Portfolio typically had outstanding approximately $61 million in collateralized
loans with terms of 7 days.
FUTURES CONTRACTS AND OTHER DERIVATIVE INSTRUMENTS. The Portfolio may purchase
or sell derivative instruments (which are instruments that derive their value
from another instrument, security, index or currency) to hedge against
fluctuations in interest rates, securities prices or currency exchange rates, to
change the duration of the Portfolio's fixed income portfolio, as a substitute
for the purchase or sale of securities or currency, or to enhance return. The
Portfolio's transactions in derivative instruments may include the purchase or
sale of futures contracts on securities, (such as U.S. Government securities),
indices, other financial instruments (such as certificates of deposit,
Eurodollar time deposits, and economic indices) or currencies; options on
futures contracts; exchange-traded and over-the-counter ("OTC") options on
securities, indices or currencies; and forward contracts to purchase or sell
currencies. All of the Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to: unanticipated adverse changes in
interest rates, securities prices or currency exchange rates; the inability to
close out a position; default by the counterparty; imperfect correlation between
a position and the desired hedge; tax constraints on closing out positions; and
portfolio management constraints on securities subject to such transactions. The
loss on derivative instruments (other than purchased options) may substantially
exceed the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets. OTC derivative instruments involve a heightened risk that
the issuer or counterparty will fail to perform its contractual obligations. The
staff of the Securities and Exchange Commission takes the position that
purchased OTC options, assets used as cover for written OTC options, and certain
other derivative instruments (and securities) are subject to the Portfolio's 15%
limit on illiquid investments. The Portfolio's ability to terminate OTC
derivative instruments may depend on the cooperation of the counterparties to
such instruments. For thinly traded derivative securities and contracts, the
only source of price quotations may be the selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
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 securities to close the position if the borrowed security is
called in, causing a gain to be recognized.
SHORT-TERM TRADING. Securities may be sold in anticipation of a market decline
(a rise in interest rates) or purchased in anticipation of a market rise (a
decline in interest rates) and later sold. In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Portfolio believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, such as changes in the overall demand for or
supply of various types of fixed-income securities or changes in the investment
objectives of investors.
MORTGAGE ROLLS. The Portfolio may enter into mortgage "dollar rolls" in which
the Portfolio sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio forgoes principal and interest paid on the mortgage-backed
securities. The Portfolio is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
The Portfolio will only enter into covered rolls. Covered rolls are not treated
as a borrowing or other senior security and will be excluded from the
calculation of the Portfolio's borrowings and other senior securities.
LEVERAGE THROUGH BORROWING. The Portfolio may borrow from banks to increase its
portfolio holdings of debt securities on which call options may be written and
to acquire U.S. Treasury bills which may be deposited with the Portfolio's
custodian or a broker-dealer in connection with various Portfolio investments.
Such borrowings will be unsecured. The Investment Company Act of 1940 requires
the Portfolio to maintain continuous asset coverage of not less than 300% with
respect to such borrowings. This allows the Portfolio to borrow for such
purposes an amount (when taken together with any borrowings for temporary
extraordinary or emergency purposes as described below) equal to as much as 50%
of the value of its net assets (not including such borrowings). If such asset
coverage should decline to less than 300% due to market fluctuations or other
reasons, the Portfolio may be required to sell some of its portfolio holdings
within three days in order to reduce the Portfolio's debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. Leveraging will exaggerate any
increase or decrease in the net asset value of the securities held by Portfolio,
and in that respect may be considered a speculative practice. Money borrowed for
leveraging will be subject to interest costs which may or may not exceed the
option premiums and interest received from the securities purchased. The
Portfolio may also be required to maintain minimum average balances in
connection with such borrowings or to pay a commitment or other fee to maintain
a line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to U.S. Government securities. Under a repurchase agreement, the seller
agrees to repurchase such securities at the Portfolio's cost plus interest
within a specified time (normally one day). While repurchase agreements involve
certain risks not associated with direct investments in U.S. Government
securities, the Portfolio follows procedures designed to moderate such risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized banks. In addition, the Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreements
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling bank, the Portfolio will seek to liquidate such
collateral. However, the exercise of the Portfolio's right to liquidate such
collateral would involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase are less
than the repurchase price, the Portfolio could suffer a loss.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio expects that various new types of investments, hedging techniques
and management strategies will be developed and made available to institutional
investors in the future. The Investment Adviser will consider making such
investments or adopting such techniques or strategies if it determines that they
are consistent with the Portfolio's investment objective and policies. Of
course, the total mix of the Portfolio's investments can change daily.
FLUCTUATIONS IN VALUE. Because interest yields on U.S. Government and other
securities and opportunities to realize additional income and net gains from
active management strategies will vary from time to time because of general
economic and market conditions and many other factors, the Fund's current return
will fluctuate, and there can be no assurance that the Fund's objective will be
achieved. As a result of their high credit quality and market liquidity, U.S.
Government securities generally provide a lower current return than obligations
of other issuers. As with other debt securities, the value of U.S. Government
securities changes as interest rates fluctuate. Fluctuations in the value of
securities held by the Portfolio will not affect interest income on existing
portfolio securities but will be reflected in the Fund's net asset value. Thus,
a decrease in interest rates will generally result in an increase in the value
of Fund shares. Conversely, during periods of rising interest rates, the value
of Fund shares will generally decline. The magnitude of these fluctuations will
generally be greater at times when the Portfolio's average maturity is longer.
In addition, as set forth above, the derivative securities the Portfolio may
hold may magnify those risks and pose additional risks. Active management
techniques, if successful, may only partly offset these risks. Shares of the
Fund are not government guaranteed.
INVESTMENT RESTRICTIONS. The Fund and the Portfolio have adopted certain
fundamental investment restrictions which are enumerated in detail in the
Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote and an investor vote, respectively. These
restrictions are designed to reduce investment risk. Except for such enumerated
restrictions and as otherwise indicated in the Prospectus, the investment
objective and policies of the Fund and the Portfolio are not fundamental
policies, and accordingly may be changed by the Trustees of the Trust and the
Portfolio without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be. If any changes were made in the
Fund's investment objective, the Fund might have an investment objective
different from the objective which an investor considered appropriate at the
time the investor became a shareholder of the Fund.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST (THE
"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, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimis amount of cash). Therefore,
the Fund's interest in the securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective" and "Investment Policies and Risks". Further
information regarding investment practices may be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective will be preceded by thirty days'
advance written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. If a shareholder redeems shares within one year
of their purchase because of a change in the nonfundamental objective or
policies of the Fund, those shares may be subject to a contingent deferred sales
charge as described in "How to Redeem Fund Shares." In the event the Fund
withdraws all of its assets from the Portfolio, or the Board of Trustees of the
Trust determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of the Fund
in another pooled investment entity or retaining an investment adviser to manage
the Fund's assets in accordance with its investment objective. The Fund's
investment performance may be affected by a withdrawal of all its assets from
the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, (617)
482-8260. Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured funds which have large or institutional
investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Trustees of the Trust and
the Trustees of the Portfolio are the same. Such procedures require each Board
to take action to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Trustees and officers of the
Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. 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 its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of .0625% (equivalent to .75% annually) of the average daily net
assets of the Portfolio up to $500 million. On net assets of $500 million and
over the annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
-------------------------------------- ------------------
$500 million but less than $1 billion 0.6875%
$1 billion but less than $1.5 billion 0.6250%
$1.5 billion but less than $2 billion 0.5625%
$2 billion but less than $3 billion 0.5000%
$3 billion and over 0.4375%
As at December 31, 1995, the Portfolio had net assets of $521,788,905. For the
fiscal year ended December 31, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.75% of the Portfolio's average daily net assets for such year.
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 is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company. Eaton Vance Corp., through its subsidiaries and
affiliates, engages primarily in investment management, administration and
marketing activities.
Susan Schiff has acted as the portfolio manager of the Portfolio since it
commenced operations. She has been a Vice President of Eaton Vance and of BMR
since 1993.
BMR places the portfolio 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. 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 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 Portfolio and the Fund, as the case may be, will each be responsible for all
of its respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
DISTRIBUTION PLAN
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THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
(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. On sales of shares
made prior to January 30, 1995, the Principal Underwriter currently pays monthly
sales commissions to a financial service firm (an "Authorized Firm") in amounts
anticipated to be equivalent to .75%, annualized, of the assets maintained in
the Fund by the customers of such Firm. On sales of shares made on January 30,
1995 and thereafter, the Principal Underwriter currently expects to pay to an
Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. The Plan is designed to permit an
investor to purchase Fund shares through an Authorized Firm without incurring an
initial sales charge and at the same time permit the Principal Underwriter to
compensate Authorized Firms in connection with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO 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 its 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 commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan. During the
fiscal year ended December 31, 1995, the Fund paid or accrued sales commissions
under the Plan equivalent to .75% of the Fund's average daily net assets for
such year. As at December 31, 1995, the outstanding Uncovered Distribution
Charges of the Principal Underwriter calculated under the Plan amounted to
approximately $6,791,000 (which amount was equivalent to 16.15% 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 in amounts not expected to exceed .25% of the Fund's average daily
net assets for any fiscal year. The Fund accrues the service fee daily at the
rate of 1/365 of .25% of the Fund's net assets. On sales of shares made prior to
January 30, 1995, the Principal Underwriter currently makes monthly service fee
payments to an Authorized Firm in amounts anticipated to be equivalent to .25%,
annualized, of the assets maintained in the Fund by the customers of such Firm.
On sales of shares made on January 30, 1995 and thereafter, the Principal
Underwriter currently expects to pay to an Authorized Firm (a) a service fee
(except on exchange transactions and reinvestments) at the time of sale equal to
.25% of the purchase price of the shares sold by such Firm, and (b) monthly
service fees approximately equivalent to 1/12 of .25% of the value of shares
sold by such Firm and remaining outstanding for at least one year. 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 fiscal year ended December 31, 1995, the Fund paid or accrued service
fees under the Plan equivalent to .25% of the Fund's average daily net assets
for such year.
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
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which in turn, reflects
the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) 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. Mortgage-backed "pass-through" securities are valued through use of a
matrix pricing system which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. The Fund may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $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, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities, but does not guarantee the best available price. Eaton
Vance will absorb any transaction costs, such as commissions, on the sale of 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 Government Obligations Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Government Obligations Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner(s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to First
Data Investor Services Group. In addition, in some cases, good order may require
the furnishing of additional documents such as where shares are registered in
the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charge (described below) and any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may 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 additional purchases.
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, of value in
the other shares in the account (namely those purchased within the year
preceding the redemption) over the purchase price of such shares. Redemptions
are processed in a manner to maximize the amount of redemption proceeds which
will not be subject to a contingent deferred sales charge. 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 also be waived for shares
redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder
Services"), (2) as part of a distribution from a retirement plan qualified under
Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, as amended (the
"Code"), or (3) as part of a minimum required distribution from other
tax-sheltered retirement plans.
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 accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE to First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2 or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
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 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.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
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 First Data Investor Services Group provided
the investor has not disclaimed in writing the use of the privilege. To effect
such exchanges, call First Data Investor Services Group at 800-262- 1122 or,
within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone, provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. 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 Government Obligations Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time --
whether or not dividends 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.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has repurchased or redeemed shares may
reinvest, with credit for any contingent deferred sales charges paid on the
repurchased or redeemed shares, any portion or all of the repurchase or
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such repurchase
or redemption and the privilege has not been used more than once in the prior 12
months. Shares are sold to a reinvesting shareholder at the next determined net
asset value following timely receipt of a written purchase order by the
Principal Underwriter or by the Fund (or by the Fund's Transfer Agent). To the
extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
the redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and non-profit organizations meeting certain
requirements of the Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
Federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION AND
WILL GENERALLY BE TAXABLE TO SHAREHOLDERS AS ORDINARY INCOME, WHETHER TAKEN IN
CASH OR REINVESTED IN ADDITIONAL SHARES. Such distributions, whether taken in
cash or reinvested in additional shares, will ordinarily be paid on the
twenty-second day of each month or the next business day thereafter. Daily
distribution crediting will commence on the day that collected funds for the
purchase of Fund shares are available at the Transfer Agent. Distributions from
net short-term capital gains and certain net foreign exchange gains are taxable
to shareholders as ordinary income, and distributions from net long-term capital
gains designated as such by the Fund are taxable to shareholders as long-term
capital gains, whether received in cash or reinvested in additional shares of
the Fund and regardless of the length of time Fund shares have been owned by the
shareholders. Gains or losses attributable to transactions by the Portfolio in
options on securities, certain currency forward contracts, futures contracts and
options on futures may be treated as 40% short-term and 60% long-term capital
gains or losses, or, in the case of certain of such transactions relating to
foreign currencies, as ordinary income or loss for federal income tax purposes.
The Portfolio may have to limit its activities in these transactions in order to
enable the Fund to maintain its qualification as a regulated investment company.
The amount of the Fund's distributions will vary from time to time depending on
general economic and market conditions, the composition of the Portfolio's
investments, its current investment strategies and the operating expenses of the
Fund and the Portfolio. While distributions will vary from time to time in
response to the factors referred to above, the Fund's management will attempt to
pursue a policy of maintaining a relatively stable monthly distribution payment
to its shareholders. The distributions paid by the Fund during any particular
period may be more or less than the amount of net investment income and net
short-term capital gain actually earned by the Portfolio and allocated to the
Fund during such period. The Portfolio has elected mixed straddle accounting
under the Code for one or more designated classes of activities involving mixed
straddles.
The Portfolio is required to accrue original issue discount on zero coupon and
certain other securities and has elected to accrue market discount on debt
obligations which are purchased at a market discount. While enhancing the Fund's
current return, such accrual will also accelerate the Fund's recognition of
interest income, distributions of which will be taxable as ordinary income.
Furthermore, because the Fund seeks to stabilize monthly distribution payments
and the Portfolio has elected mixed straddle accounting under the Code, it is
possible that a portion of the Fund's aggregate distributions during any year
will be treated as a return of capital for tax purposes, rather than taxable
distributions of dividends or capital gains. The Fund will inform the
shareholders after the end of each year what portion, if any, of such
distributions constitutes a return of capital for tax purposes.
Shareholders will receive annually 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.
In order to qualify as a regulated investment company under the Code, the Fund
must satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
Shareholders should consult with their tax advisors concerning the applicability
of state, local or other taxes to an investment in the Fund.
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 YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by computing the average annual percentage change in value of $1,000
invested at the maximum public offering price (net asset value) for specified
periods ending with the most recent calendar quarter, assuming reinvestment of
all distributions. The average annual total return calculation assumes a
complete redemption of the investment and the deduction of any applicable
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 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 yield, or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
<PAGE>
[LOGO]
EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
- -------------------------------------------------------------------------------
PROSPECTUS
MAY 1, 1996
EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104,
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
C-GOP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV MARATHON
GOVERNMENT OBLIGATIONS FUND
- ------------------------------------------------------------------------------
EV MARATHON GOVERNMENT OBLIGATIONS FUND (THE "FUND") IS A MUTUAL FUND SEEKING A
HIGH CURRENT RETURN, BY INVESTING IN SECURITIES ISSUED, GUARANTEED OR OTHERWISE
BACKED BY THE U.S. GOVERNMENT AND ENGAGING IN ACTIVE MANAGEMENT STRATEGIES. THE
FUND INVESTS ITS ASSETS IN GOVERNMENT OBLIGATIONS PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS
THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL FUNDS. THE FUND IS A SERIES OF
EATON VANCE 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. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (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 ............................ 12
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ......................... 13
The Fund's Investment Objective ....................... 4 Reports to Shareholders ........................... 15
Investment Policies and Risks ......................... 4 The Lifetime Investing Account/Distribution Options 15
Organization of the Fund and the Portfolio ............ 8 The Eaton Vance Exchange Privilege ................ 16
Management of the Fund and the Portfolio .............. 9 Eaton Vance Shareholder Services .................. 16
Distribution Plan ..................................... 10 Distributions and Taxes ........................... 17
Valuing Fund Shares ................................... 12 Performance Information ........................... 18
- --------------------------------------------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1996
</TABLE>
<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%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
- -------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.75%
Rule 12b-1 Distribution (and Service) Fees 0.82%
Other Expenses (including Interest and Securities Lending Expenses of 0.71%) 0.98%
----
Total Operating Expenses 2.55%
====
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
<S> <C> <C> <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 period: $76 $119 $156 $289
An investor would pay the following expenses on the same
investment, assuming (a) 5% annual return and (b) no redemptions: $26 $ 79 $136 $289
</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. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time, may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the type of securities being held by the
Portfolio.
The Example should not be considered a representation of past or future expenses
and actual expenses may be greater or less than those shown. Federal regulations
require the Example to assume a 5% annual return but actual annual return will
vary. For further information regarding the expenses of both the Fund and the
Portfolio see "The Fund's Financial Highlights", "Organization of the Fund and
the Portfolio", "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 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".
The computation of Annual Fund and Allocated Portfolio Operating Expenses as a
percentage of average daily net assets in the above table and of contingent
deferred sales charges and expenses incurred on a $1,000 investment in the above
Example is based in part on interest expense allocated to the Fund from the
Portfolio's borrowings and lending fees allocated to the Fund from the
Portfolio's securities lending activities during the fiscal year ended December
31, 1995. The Portfolio's borrowings, interest expense, securities lending
activities and lending fees will vary from year to year (see "Investment
Policies and Risks -- Active Management Strategies"). If the Fund had not been
allocated interest expense and lending fees in 1995, Total Operating Expenses as
a percentage of average daily net assets would have been 1.84%, and contingent
deferred sales charges and expenses incurred on a $1,000 investment for one,
three, five and ten years would have been $69, $98, $120 and $216, respectively
(assuming redemption), and $19, $58, $100 and $216, respectively (assuming no
redemption).
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 audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993*
-------- -------- --------
NET ASSET VALUE, beginning of year $ 8.9900 $ 9.9300 $10.0000
-------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 0.6395 $ 0.6582 $ 0.1266
Net realized and unrealized
gain (loss) on
investments 0.5205 (0.8655) (0.0624)
-------- -------- --------
Total income (loss) from
operations $ 1.1600 $(0.2073) $ 0.0642
-------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.6352) $(0.6582) $(0.1266)
In excess of net investment
income(3) (0.0148) (0.0745) (0.0076)
-------- -------- --------
Total distributions $(0.6500) $(0.7327) $(0.1342)
-------- -------- --------
NET ASSET VALUE, end of year $ 9.5000 $ 8.9900 $ 9.9300
======== ======== ========
TOTAL RETURN(1) 13.29% (2.09)% 0.25%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to
average net assets(2) 0.71% 0.60% 0.54%+
Ratio of net expenses to
average net assets(2) 1.84% 1.83% 2.06%+
Ratio of net investment
income to average net assets 6.81% 6.91% 5.83%+
NET ASSETS AT END OF YEAR
(000's omitted) $117,165 $ 85,935 $ 20,951
+Computed on an annualized basis.
(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. Distributions, if any, are assumed to be reinvested at
the net asset value on the payable date. Total return is not computed on an
annualized basis.
(2)Includes the Fund's share of the Portfolio's allocated expenses.
(3)The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distribution by Investment Companies. The SOP requires that
differences in the recognition or classification of income between the
financial statement and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
*For the period from the start of business, November 1, 1993, to
December 31, 1993.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO REALIZE A HIGH CURRENT RETURN. The Fund
currently seeks to meet its investment objective by investing its assets in the
Government Obligations Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. This investment structure is commonly referred to as a "master/feeder"
structure. The Fund's and the Portfolio's investment objectives are
nonfundamental and may be changed when authorized by a vote of the Trustees of
the Trust or the Portfolio, respectively, without obtaining the approval of the
Fund's shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the investment objective to
shareholders in advance for their approval.
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
IN SEEKING HIGH CURRENT RETURN, THE PORTFOLIO INVESTS IN SECURITIES ISSUED,
GUARANTEED OR OTHERWISE BACKED BY THE U.S. GOVERNMENT, INCLUDING MORTGAGE-
BACKED SECURITIES OF FEDERAL AGENCIES AND FEDERALLY CHARTERED CORPORATIONS, AND
ENGAGES IN ACTIVE MANAGEMENT STRATEGIES, INCLUDING FUTURES TRANSACTIONS AND
RELATED TECHNIQUES PRIMARILY FOR HEDGING PURPOSES. The Portfolio's management
believes that a high current return may be derived from yields on U.S.
Government securities, including market discount accrued on obligations
purchased below their stated redemption value.
U.S. GOVERNMENT SECURITIES. U.S. Government securities include (1) U.S. Treasury
obligations, which differ in their interest rates, maturities and times of
issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years) and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities which are supported by any of
the following: (a) the full faith and credit of the U.S. Treasury, (b) the right
of the issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government to purchase
certain obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. The Portfolio may also invest in any
other security or agreement collateralized or otherwise secured by U.S.
Government securities. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association ("FNMA"), Government National Mortgage
Association ("GNMA"), Student Loan Marketing Association, United States Postal
Service, Small Business Administration, Tennessee Valley Authority and any other
enterprise established or sponsored by the U.S. Government. Because the U.S.
Government generally is not obligated to provide support to its
instrumentalities, the Portfolio will invest in obligations issued by these
instrumentalities only if the Investment Adviser determines that the credit risk
with respect to such obligations is minimal.
MORTGAGE-BACKED SECURITIES. The Portfolio may invest in mortgage-backed
securities that are either issued by the U.S. Government or one of its agencies
or instrumentalities or, if privately issued, collateralized by mortgages that
are insured, guaranteed or otherwise backed by the U.S. Government, its agencies
or instrumentalities. Mortgage-backed securities represent participation
interests in pools of adjustable and fixed-rate mortgage loans. Unlike
conventional debt obligations, mortgage-backed securities provide monthly
payments derived from the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. The
mortgage loans underlying mortgage-backed securities are generally subject to a
greater rate of principal prepayments in a declining interest rate environment
and to a lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest and prepayment rate scenarios, the Portfolio
may fail to recover the full amount of its investment in mortgage-backed
securities, notwithstanding any direct or indirect governmental or agency
guarantee. Because faster than expected prepayments must usually be invested in
lower yielding securities, mortgage-backed securities are less effective than
conventional bonds in "locking in" a specified interest rate. To mitigate
prepayment risk, the Investment Adviser considers the selection of
mortgage-backed securities that as a group have a history of more stable
prepayment rates relative to interest rate fluctuations. In a rising interest
rate environment, a declining prepayment rate will extend the average life of
many mortgage-backed securities. This possibility is often referred to as
extension risk. Extending the average life of a mortgage-backed security
increases the risk of depreciation due to future increases in market interest
rates. As of December 31, 1995, the Portfolio had approximately 38.5% of its net
assets invested in FNMA Mortgage-Backed Certificates, approximately 42.5% of its
net assets invested in Participation Certificates of FHLMC and approximately
9.5% of its net assets invested in GNMA Certificates. FNMA guarantees the timely
payment of principal and interest of its Certificates, FHLMC guarantees the
timely payment of interest and ultimate collection of the principal of its
Participation Certificates, and GNMA Certificates are guaranteed by the full
faith and credit of the U.S. Government.
The Portfolio may also invest in classes of collateralized mortgage obligations
("CMOs") and various other mortgage-backed securities. Senior CMO classes will
typically have priority over residual CMO classes as to the receipt of principal
and/or interest payments on the underlying mortgages. In choosing among CMO
classes, the Investment Adviser will evaluate the total income potential of each
class and other factors. If such obligations or securities are privately issued
they will currently be considered by the Investment Adviser as possible
investments for the Portfolio only when the mortgage collateral is insured,
guaranteed or otherwise backed by the U.S. Government or one or more of its
agencies or instrumentalities. As of December 31, 1995, the Portfolio had
approximately 5.0% of its net assets invested in CMOs (including one which was
privately issued).
The Portfolio may invest in securities that fluctuate in value with an index.
Such securities generally will either be issued by the U.S. Government or one of
its agencies or instrumentalities or, if privately issued, collateralized by
mortgages that are insured, guaranteed or otherwise backed by the U.S.
Government, its agencies or instrumentalities. The interest rate or, in some
cases, the principal payable at the maturity of an indexed security may change
positively or inversely in relation to one or more interest rates, financial
indices, securities prices or other financial indicators ("reference prices").
An indexed security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on an indexed security is a
multiple of the change in the reference price. Thus, indexed securities may
decline in value due to adverse market changes in reference prices. As of
December 31, 1995, the Portfolio held no such securities. Because
mortgage-backed and indexed securities derive their value from another
instrument, security or index, they are considered derivative debt securities,
and are subject to different combinations of prepayment, extension, interest
rate and/or other market risks.
The Portfolio may enter into contracts to purchase securities for a fixed price
at a future date beyond the customary settlement time if the Portfolio holds and
maintains until the settlement date in a segregated account cash, U.S.
Government securities and liquid high-grade debt obligations in an amount
sufficient to meet the purchase price, or if the Portfolio enters into
offsetting contracts for the forward sale of other securities it owns. Such
contracts are customarily referred to as "forward commitments" and involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date.
The principal of and/or interest on certain U.S. Government securities which may
be purchased by the Portfolio could be (a) payable in foreign currencies rather
than U.S. dollars or (b) increased or diminished as a result of changes in the
value of the U.S. dollar relative to the value of foreign currencies. The value
of such portfolio securities denominated in foreign currencies may be affected
favorably or unfavorably by changes in the exchange rate between foreign
currencies and the U.S. dollar. In order to limit the risk inherent in this type
of security, it is the current policy of the Portfolio not to purchase any such
security if after such purchase (i) more than 5% of its net assets (taken at
market value) would be invested in securities denominated in foreign currencies
or (ii) more than 2% of its net assets (taken at market value) would be invested
in securities denominated in any one foreign currency.
The Portfolio may from time to time have temporary investments in short-term
debt obligations (including certificates of deposit, bankers' acceptances and
commercial paper) pending the making of other investments or as a reserve to
service redemptions and repurchases of its shares.
ACTIVE MANAGEMENT STRATEGIES
The Portfolio may engage in several active management strategies to enhance
income and reduce investment risk. Each strategy requires the Investment Adviser
to consider special factors. In addition, the Portfolio may temporarily borrow
up to 5% of the value of its total assets to satisfy redemption requests or
settle securities transactions.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. During
the existence of a loan, the Portfolio will continue to receive the equivalent
of the interest paid by the issuer on the securities loaned and will also
receive a fee, or all or a portion of the interest on investment of the
collateral, if any. However, the Portfolio may pay lending fees to such
borrowers. 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 Portfolio's management to be of good standing and
when, in the judgment of the Portfolio's management, the consideration which can
be earned from securities loans of this type justifies the attendant risk. The
financial condition of the borrower will be monitored by the Investment Adviser
on an ongoing basis. The value of the securities loaned will not exceed 30% of
the Portfolio's total assets. During the year ended December 31, 1995, the
Portfolio typically had outstanding approximately $61 million in collateralized
loans with terms of 7 days.
FUTURES CONTRACTS AND OTHER DERIVATIVE INSTRUMENTS. The Portfolio may purchase
or sell derivative instruments (which are instruments that derive their value
from another instrument, security, index or currency) to hedge against
fluctuations in interest rates, securities prices or currency exchange rates, to
change the duration of the Portfolio's fixed income portfolio, as a substitute
for the purchase or sale of securities or currency, or to enhance return. The
Portfolio's transactions in derivative instruments may include the purchase or
sale of futures contracts on securities, (such as U.S. Government securities),
indices, other financial instruments (such as certificates of deposit,
Eurodollar time deposits, and economic indices) or currencies; options on
futures contracts; exchange-traded and over-the-counter ("OTC") options on
securities; indices or currencies; and forward contracts to purchase or sell
currencies. All of the Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to: unanticipated adverse changes in
interest rates, securities prices or currency exchange rates; the inability to
close out a position; default by the counterparty; imperfect correlation between
a position and the desired hedge; tax constraints on closing out positions; and
portfolio management constraints on securities subject to such transactions. The
loss on derivative instruments (other than purchased options) may substantially
exceed the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets. OTC derivative instruments involve a heightened risk that
the issuer or counterparty will fail to perform its contractual obligations. The
staff of the Securities and Exchange Commission takes the position that
purchased OTC options, assets used as cover for written OTC options, and certain
other derivative instruments (and securities) are subject to the Portfolio's 15%
limit on illiquid investments. The Portfolio's ability to terminate OTC
derivative instruments may depend on the cooperation of the counterparties to
such instruments. For thinly traded derivative securities and contracts, the
only source of price quotations may be the selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
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 securities to close the position if the borrowed security is
called in, causing a gain to be recognized.
SHORT-TERM TRADING. Securities may be sold in anticipation of a market decline
(a rise in interest rates) or purchased in anticipation of a market rise (a
decline in interest rates) and later sold. In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Portfolio believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, such as changes in the overall demand for or
supply of various types of fixed-income securities or changes in the investment
objectives of investors.
MORTGAGE ROLLS. The Portfolio may enter into mortgage "dollar rolls" in which
the Portfolio sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio forgoes principal and interest paid on the mortgage-backed
securities. The Portfolio is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
The Portfolio will only enter into covered rolls. Covered rolls are not treated
as a borrowing or other senior security and will be excluded from the
calculation of the Portfolio's borrowings and other senior securities.
LEVERAGE THROUGH BORROWING. The Portfolio may borrow from banks to increase its
portfolio holdings of debt securities on which call options may be written and
to acquire U.S. Treasury bills which may be deposited with the Portfolio's
custodian or a broker-dealer in connection with various Portfolio investments.
Such borrowings will be unsecured. The Investment Company Act of 1940 requires
the Portfolio to maintain continuous asset coverage of not less than 300% with
respect to such borrowings. This allows the Portfolio to borrow for such
purposes an amount (when taken together with any borrowings for temporary
extraordinary or emergency purposes as described below) equal to as much as 50%
of the value of its net assets (not including such borrowings). If such asset
coverage should decline to less than 300% due to market fluctuations or other
reasons, the Portfolio may be required to sell some of its portfolio holdings
within three days in order to reduce the Portfolio's debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. Leveraging will exaggerate any
increase or decrease in the net asset value of the securities held by Portfolio,
and in that respect may be considered a speculative practice. Money borrowed for
leveraging will be subject to interest costs which may or may not exceed the
option premiums and interest received from the securities purchased. The
Portfolio may also be required to maintain minimum average balances in
connection with such borrowings or to pay a commitment or other fee to maintain
a line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to U.S. Government securities. Under a repurchase agreement, the seller
agrees to repurchase such securities at the Portfolio's cost plus interest
within a specified time (normally one day). While repurchase agreements involve
certain risks not associated with direct investments in U.S. Government
securities, the Portfolio follows procedures designed to moderate such risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized banks. In addition, the Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreements
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling bank, the Portfolio will seek to liquidate such
collateral. However, the exercise of the Portfolio's right to liquidate such
collateral would involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase are less
than the repurchase price, the Portfolio could suffer a loss.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio expects that various new types of investments, hedging techniques
and management strategies will be developed and made available to institutional
investors in the future. The Investment Adviser will consider making such
investments or adopting such techniques or strategies if it determines that they
are consistent with the Portfolio's investment objective and policies. Of
course, the total mix of the Portfolio's investments can change daily.
FLUCTUATIONS IN VALUE. Because interest yields on U.S. Government and other
securities and opportunities to realize additional income and net gains from
active management strategies will vary from time to time because of general
economic and market conditions and many other factors, the Fund's current return
will fluctuate, and there can be no assurance that the Fund's objective will be
achieved. As a result of their high credit quality and market liquidity, U.S.
Government securities generally provide a lower current return than obligations
of other issuers. As with other debt securities, the value of U.S. Government
securities changes as interest rates fluctuate. Fluctuations in the value of
securities held by the Portfolio will not affect interest income on existing
portfolio securities but will be reflected in the Fund's net asset value. Thus,
a decrease in interest rates will generally result in an increase in the value
of Fund shares. Conversely, during periods of rising interest rates, the value
of Fund shares will generally decline. The magnitude of these fluctuations will
generally be greater at times when the Portfolio's average maturity is longer.
In addition, as set forth above, the derivative securities the Portfolio may
hold may magnify those risks and pose additional risks. Active management
techniques, if successful, may only partly offset these risks. Shares of the
Fund are not government guaranteed.
INVESTMENT RESTRICTIONS. The Fund and the Portfolio have adopted certain
fundamental investment restrictions which are enumerated in detail in the
Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote and an investor vote, respectively. These
restrictions are designed to reduce investment risk. Except for such enumerated
restrictions and as otherwise indicated in the Prospectus, the investment
objective and policies of the Fund and the Portfolio are not fundamental
policies, and accordingly may be changed by the Trustees of the Trust and the
Portfolio without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be. If any changes were made in the
Fund's investment objective, the Fund might have an investment objective
different from the objective which an investor considered appropriate at the
time the investor became a shareholder of the Fund.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST (THE
"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, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio itself
is unable to meet its obligations. Accordingly, the Trustees of the Trust
believe that neither the Fund nor its shareholders will be adversely affected by
reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimis amount of cash). Therefore,
the Fund's interest in the securities owned by the Portfolio is indirect. In
addition to selling an interest to the Fund, the Portfolio may sell interests to
other affiliated and non-affiliated mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions of the Portfolio, see "The
Fund's Investment Objective" and "Investment Policies and Risks". Further
information regarding investment practices may be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that the structure
offers opportunities for substantial growth in the assets of the Portfolio, and
affords the potential for economies of scale for the Fund, at least when the
assets of the Portfolio exceed $500 million.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. The investment objective and the nonfundamental
investment policies of the Fund and the Portfolio may be changed by the Trustees
of the Trust and the Portfolio without obtaining the approval of the
shareholders of the Fund or the investors in the Portfolio, as the case may be.
Any such change of the investment objective will be preceded by thirty days'
advance written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. If a shareholder redeems shares because of a
change in the nonfundamental objective or policies of the Fund, those shares may
be subject to a contingent deferred sales charge, as described in "How to Redeem
Fund Shares". In the event the Fund withdraws all of its assets from the
Portfolio, or the Board of Trustees of the Trust determines that the investment
objective of the Portfolio is no longer consistent with the investment objective
of the Fund, such Trustees would consider what action might be taken, including
investing the assets of the Fund in another pooled investment entity or
retaining an investment adviser to manage the Fund's assets in accordance with
its investment objective. The Fund's investment performance may be affected by a
withdrawal of all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest in
the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, (617)
482-8260. Smaller investors in the Portfolio may be adversely affected by the
actions of a larger investor in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured funds which have large or institutional
investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate investment
company are a relatively new development in the mutual fund industry and,
therefore, the Fund may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any potential
conflicts of interest arising from the fact that the Trustees of the Trust and
the Trustees of the Portfolio are the same. Such procedures require each Board
to take actions to resolve any conflict of interest between the Fund and the
Portfolio, and it is possible that the creation of separate Boards may be
considered. For further information concerning the Trustees and officers of the
Trust and the Portfolio, see the Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), 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 its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of .0625% (equivalent to .75% annually) of the average daily net
assets of the Portfolio up to $500 million. On net assets of $500 million and
over the annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
------------------------------------------------------------------------
$500 million but less than $1 billion 0.6875%
$1 billion but less than $1.5 billion 0.6250%
$1.5 billion but less than $2 billion 0.5625%
$2 billion but less than $3 billion 0.5000%
$3 billion and over 0.4375%
As at December 31, 1995, the Portfolio had net assets of $521,788,905. For the
fiscal year ended December 31, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.75% of the Portfolio's average daily net assets for such year.
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 is a wholly-owned subsidiary of Eaton Vance Corp.,
a publicly-held holding company. Eaton Vance Corp., through its subsidiaries and
affiliates, engages primarily in investment management, administration and
marketing activities.
Susan Schiff has acted as the portfolio manager of the Portfolio since it
commenced operations. She has been a Vice President of Eaton Vance and of BMR
since 1993.
BMR places the portfolio 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. 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 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 Portfolio and the Fund, as the case may be, will each be responsible for all
of its respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
DISTRIBUTION PLAN
- -------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
(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 service firm (an "Authorized Firm") at the time of
sale equal to 4% of the purchase price of the shares sold by such Firm. The
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay such commissions. 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 its 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 commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased distribution fees under the Plan. During the
fiscal year ended December 31, 1995, the Fund paid sales commissions under the
Plan to the Principal Underwriter equivalent to .75% of the Fund's average daily
net assets for such year. As at December 31, 1995, the outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated under the Plan
amounted to approximatley $4,453,000 (which amount was equivalent to 3.8% 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 payments of service fees 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 based on the value of Fund
shares sold by such persons and remaining outstanding for at least twelve
months. 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. For the fiscal year ended December 31,
1995, the Fund made service fee payments under the Plan equivalent to .07% of
the Fund's average daily net assets for such year.
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
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of shares outstanding. Because the Fund
invests its assets in an interest in the Portfolio, the Fund's net asset value
will reflect the value of its interest in the Portfolio (which in turn, reflects
the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) 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. Mortgage-backed "pass-through" securities are valued through use of a
matrix pricing system which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. The Fund may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $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, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates participation in the plan, his or her shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. The minimum value of
securities (or securities and cash) accepted for deposit is $5,000. Securities
accepted will be sold on the day of their receipt or as soon thereafter as
possible. The number of Fund shares to be issued in exchange for securities will
be the aggregate proceeds from the sale of such securities, divided by the
applicable net asset value per Fund share on the day such proceeds are received.
Eaton Vance will use reasonable efforts to obtain the then current market price
for such securities, but does not guarantee the best available price. Eaton
Vance will absorb any transaction costs, such as commissions, on the sale of 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 Government Obligations Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon Government Obligations 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 BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to First
Data Investor Services Group. In addition, in some cases, good order may require
the furnishing of additional documents such as where shares are registered in
the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash for the net
asset value of the shares as of the date determined above, reduced by the amount
of any applicable contingent deferred sales charge (described below) and any
federal income tax required to be withheld. Although the Fund normally expects
to make payment in cash for redeemed shares, the Trust, subject to compliance
with applicable regulations, has reserved the right to pay the redemption price
of shares of the Fund, either totally or partially, by a distribution in kind of
readily marketable securities withdrawn by the Fund from the Portfolio. The
securities so distributed would be valued pursuant to the Portfolio's valuation
procedures. If a shareholder received a distribution in kind, the shareholder
could incur brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may 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 additional purchases.
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 REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES 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).
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE FUND'S SHARES
AND THAT 16 MONTHS LATER THE VALUE OF THE ACCOUNT HAS GROWN THROUGH INVESTMENT
PERFORMANCE AND REINVESTMENT OF DISTRIBUTIONS TO $12,000. THE INVESTOR THEN
MAY REDEEM UP TO $2,000 OF SHARES WITHOUT INCURRING A CONTINGENT DEFERRED
SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $3,000 OF SHARES, A CONTINGENT
DEFERRED SALES CHARGE WOULD BE IMPOSED ON $1,000 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 $50.
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 accountants. Shortly after the end of each
calendar year, the Fund will furnish all shareholders with information necessary
for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE to First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, BOS725, P.O. Box
1559, Boston, MA 02104. The currently effective option will appear on each
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 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 with 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.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the 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, Eaton Vance Prime Rate Reserves
and Class I shares of any EV Marathon Limited Maturity Fund), see "How to Redeem
Fund Shares". The contingent deferred sales charge or early withdrawal charge
schedule applicable to EV Marathon Strategic Income Fund, Eaton Vance Prime Rate
Reserves and Class I shares of any EV Marathon Limited Maturity Fund 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 First Data Investor Services Group provided
that the investor has not disclaimed in writing the use of the privilege. To
effect such exchanges, call First Data Investor Services Group at 800-262-1122
or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone, provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. 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 Government Obligations Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time --
whether or not distributions are reinvested. The name of the shareholder, the
Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$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.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has repurchased or redeemed shares may
reinvest, with credit for any contingent deferred sales charges paid on the
repurchased or redeemed shares, any portion or all of the repurchase or
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such repurchase
or redemption and the privilege has not been used more than once in the prior 12
months. Shares are sold to a reinvesting shareholder at the next determined net
asset value following timely receipt of a written purchase order by the
Principal Underwriter or by the Fund (or by the Fund's Transfer Agent). To the
extent that any shares of the Fund are sold at a loss and the proceeds are
reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
the redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and non-profit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the
"Code.")
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF DECLARATION AND
WILL GENERALLY BE TAXABLE TO SHAREHOLDERS AS ORDINARY INCOME, WHETHER TAKEN IN
CASH OR REINVESTED IN ADDITIONAL SHARES. Such distributions, whether taken in
cash or reinvested in additional shares, will ordinarily be paid on the
fifteenth day of each month or the next business day thereafter. Daily
distribution crediting will commence on the day that collected funds for the
purchase of Fund shares are available at the Transfer Agent. Distributions from
net short-term capital gains and certain net foreign exchange gains are taxable
to shareholders as ordinary income, and distributions from net long-term capital
gains designated as such by the Fund are taxable to shareholders as long-term
capital gains, whether received in cash or reinvested in additional shares of
the Fund and regardless of the length of time Fund shares have been owned by the
shareholders. Gains or losses attributable to transactions by the Portfolio in
options on securities, certain currency forward contracts, futures contracts and
options on futures may be treated as 40% short-term and 60% long-term capital
gains or losses or, in the case of certain of such transactions relating to
foreign currencies, as ordinary income or loss for federal income tax purposes.
The Portfolio may have to limit its activities in these transactions in order to
enable the Fund to maintain its qualification as a regulated investment company.
The amount of the Fund's distributions will vary from time to time depending on
general economic and market conditions, the composition of the Portfolio's
investments, its current investment strategies and the operating expenses of the
Fund and the Portfolio. While distributions will vary from time to time in
response to the factors referred to above, the Fund's management will attempt to
pursue a policy of maintaining a relatively stable monthly distribution payment
to its shareholders. The distributions paid by the Fund during any particular
period may be more or less than the amount of net investment income and net
short-term capital gain actually earned by the Portfolio and allocated to the
Fund during such period. The Portfolio has elected mixed straddle accounting
under the Code for one or more designated classes of activities involving mixed
straddles.
The Portfolio is required to accrue original issue discount on zero coupon and
certain other securities and has elected to accrue market discount on debt
obligations which are purchased at a market discount. While enhancing the Fund's
current return, such accrual will also accelerate the Fund's recognition of
interest income, distributions of which will be taxable as ordinary income.
Furthermore, because the Fund seeks to stabilize monthly distribution payments
and the Portfolio has elected mixed straddle accounting under the Code, it is
possible that a portion of the Fund's aggregate distributions during any year
will be treated as a return of capital for tax purposes, rather than taxable
distributions of dividends or capital gains. The Fund will inform the
shareholders after the end of each year what portion, if any, of such
distributions constitutes a return of capital for tax purposes.
Shareholders will receive annually 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.
In order to qualify as a regulated investment company under the Code, the Fund
must satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
Shareholders should consult with their tax advisors concerning the applicability
of state, local or other taxes to an investment in the Fund.
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 YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The Fund's current yield is calculated by dividing the net investment
income per share earned during a recent 30-day period by the maximum offering
price per share (net asset value) of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by computing the average annual percentage change in value of $1,000
invested at the maximum public offering price (net asset value) for specified
periods ending with the most recent calendar quarter, assuming reinvestment of
all distributions. The average annual total return calculation assumes a
complete redemption of the investment and the deduction of any applicable
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 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 yield or total return for any
prior period should not be considered as a representation of what an investment
may earn or what the Fund's yield or total return may be in any future period.
<PAGE>
[LOGO]
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
PROSPECTUS
MAY 1, 1996
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
M-GOP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV TRADITIONAL
GOVERNMENT OBLIGATIONS FUND
- ------------------------------------------------------------------------------
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND (THE "FUND") IS A MUTUAL FUND SEEKING
A HIGH CURRENT RETURN, BY INVESTING IN SECURITIES ISSUED, GUARANTEED OR
OTHERWISE BACKED BY THE U.S. GOVERNMENT AND ENGAGING IN ACTIVE MANAGEMENT
STRATEGIES. THE FUND INVESTS ITS ASSETS IN GOVERNMENT OBLIGATIONS PORTFOLIO (THE
"PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY DIRECTLY INVESTING IN AND
MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH HISTORICALLY STRUCTURED MUTUAL
FUNDS. THE FUND IS A SERIES OF EATON VANCE 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. Please retain this document for future reference. A Statement
of Additional Information dated May 1, 1996 for the Fund, as supplemented from
time to time, has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. This Statement of Additional Information is
available without charge from the Fund's principal underwriter, Eaton Vance
Distributors, Inc. (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 ......................... 13
The Fund's Investment Objective ....................... 4 Reports to Shareholders ........................... 14
Investment Policies and Risks ......................... 4 The Lifetime Investing Account/Distribution
Organization of the Fund and the Portfolio ............ 8 Options.......................................... 14
Management of the Fund and the Portfolio .............. 9 The Eaton Vance Exchange Privilege ................ 15
Service Plan .......................................... 10 Eaton Vance Shareholder Services .................. 16
Valuing Fund Shares ................................... 11 Distributions and Taxes ........................... 17
Performance Information ........................... 18
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MAY 1, 1996
<PAGE>
SHAREHOLDER AND FUND EXPENSES
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
- -------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.75%
Other Expenses (including Service Plan Fees and Interest and Securities Lending
Expenses of 0.71%) 1.12%
-----
Total Operating Expenses 1.87%
=====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following maximum initial sales
charge and expenses on a $1,000 investment, assuming (a) 5%
annual return and (b) redemption at the end of each period: $56 $94 $135 $248
</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. Information
for the Fund is based on its expenses for the most recent fiscal year.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should approximate,
and over time may be less than, the per share expenses the Fund would incur if
the Trust retained the services of an investment adviser for the Fund and the
Fund's assets were invested directly in the type of securities being held by
the Portfolio.
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return but actual annual
return will vary. For further information regarding the expenses of both the
Fund and the Portfolio see "The Fund's Financial Highlights", "Organization of
the Fund and the Portfolio", "Management of the Fund and the Portfolio" and
"Service Plan".
No sales charge is payable at the time of purchase on investments of $1
million or more. However, a contingent deferred sales charge of 0.50% will be
imposed on such investments in the event of certain redemptions within 12
months of purchase. See "How to Buy Fund Shares," "How to Redeem Fund Shares"
and "Eaton Vance Shareholder Services."
The computation of Annual Fund and Allocated Portfolio Operating Expenses as a
percentage of average daily net assets in the above table and of maximum
initial sales charge and expenses incurred on a $1,000 investment in the above
Example is based in part on interest expense allocated to the Fund from the
Portfolio's borrowings and lending fees allocated to the Fund from the
Portfolio's securities lending activities during the fiscal year ended
December 31, 1995. The Portfolio's borrowings, interest expense, securities
lending activities and lending fees will vary from year to year (see
"Investment Policies and Risks -- Active Management Strategies"). If the Fund
had not been allocated interest expense and lending fees in 1995, Total
Operating Expenses as a percentage of average daily net assets would have been
1.16%, and maximum initial sales charge and expenses incurred on a $1,000
investment for one, three, five and ten years would have been $49, $73, $99
and $173, respectively.
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 audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. The financial
highlights for each of the two years in the period ended December 31, 1987,
presented herein, were audited by other auditors whose report dated January
15, 1988, expressed an unqualified opinion on such financial highlights.
Further information regarding the performance of the Fund is contained in its
annual report to shareholders which may be obtained without charge by
contacting the Principal Underwriter.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $10.4200 $11.4800 $11.3800 $11.8000 $11.3700 $11.5200
-------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 0.8070 $ 0.8052 $ 0.9192 $ 0.9751 $ 1.1005 $ 1.1085
Net realized and unrealized gain (loss) on
investments 0.6030 (1.0290) 0.1058 (0.3886) 0.4395 (0.1485)
-------- -------- -------- -------- -------- --------
Total income (loss) from operations $ 1.4100 $(0.2238) $ 1.0250 $ 0.5865 $ 1.5400 $ 0.9600
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.8100) $(0.8052) $(0.9192) $(1.0065) $(1.1100) $(1.1100)
In excess of net investment income(4) -- (0.0310) (0.0058) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions $(0.8100) $(0.8362) $(0.9250) $(1.0065) $(1.1100) $(1.1100)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of year $11.0200 $10.4200 $11.4800 $11.3800 $11.8000 $11.3700
======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 13.97% (2.03)% 9.26% 5.29% 14.42% 8.97%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to average net assets 0.71%* 0.56%* 0.40%* 0.31% 0.78% 1.19%
Ratio of other expenses to average net assets 1.16%* 1.17%* 1.12%* 1.10% 1.18% 1.22%
Ratio of net investment income to average net assets 7.53% 7.70% 7.86% 8.52% 9.61% 9.86%
PORTFOLIO TURNOVER(2) -- -- 52% 26% 25% 22%
NET ASSETS, end of year (000 omitted) $359,738 $386,186 $503,150 $468,960 $352,480 $279,747
LEVERAGE ANALYSIS(3):
Amount of debt outstanding at end of period
(000 omitted) -- -- -- -- -- $ 4,695
Average daily balance of debt outstanding during
period (000 omitted) -- -- $ 2,313 $ 1,687 $ 2,321 $ 11,009
Average weekly balance of shares outstanding during
period (000 omitted) -- -- 43,731 37,474 25,915 25,285
Average amount of debt per share during period -- -- $0.053 $0.045 $0.090 $0.435
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1989 1988 1987++ 1986++
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $11.2300 $11.5400 $12.3600 $12.2600
-------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 1.1280 $ 1.1260 $ 1.1360 $ 1.1580
Net realized and unrealized gain (loss) on
investments 0.2745 (0.2960) (0.6610) 0.3920
-------- -------- -------- --------
Total income (loss) from operations $ 1.4025 $ 0.8300 $ 0.4750 $ 1.5500
-------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.1125) $(1.1400) $(1.1600) $(1.2000)
In excess of net investment income(4) -- -- (0.1350) (0.2500)
-------- -------- -------- --------
Total distributions $(1.1125) $(1.1400) $(1.2950) $(1.4500)
-------- -------- -------- --------
NET ASSET VALUE, end of year $11.5200 $11.2300 $11.5400 $12.3600
======== ======== ======== ========
TOTAL RETURN(1) 13.21% 7.46% 4.17% 13.37%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to average net assets 1.11% 0.66% 0.22% 0.26%
Ratio of other expenses to average net assets 1.22% 1.19% 1.19% 1.20%
Ratio of net investment income to average net assets 10.02% 9.82% 9.63% 9.40%
PORTFOLIO TURNOVER(2) 25% 42% 36% 37%
NET ASSETS, end of year (000 omitted) $296,405 $321,584 $374,936 $416,095
LEVERAGE ANALYSIS(3):
Amount of debt outstanding at end of period
(000 omitted) $ 259 $ 7,006 $ 18,285 $ 11,076
Average daily balance of debt outstanding during
period (000 omitted) $ 3,218 $ 18,301 $ 10,900 $ 10,421
Average weekly balance of shares outstanding during
period (000 omitted) 26,839 30,570 34,372 27,263
Average amount of debt per share during period $0.120 $0.599 $0.317 $0.382
<FN>
*Includes the Fund's share of the Portfolio's allocated expenses.
+Computed on an annualized basis.
++Audited by the Fund's previous auditors.
(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. Distributions, if any, are assumed to be reinvested at
the net asset value on the payable date. Total return is not computed on an
annualized basis.
(2) Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included in the Fund's Statement of Additional
Information.
(3) The Leverage Analysis is for the period prior to the date the Fund
transferred substantially all of its investable assets to the Portfolio. For
subsequent periods, the leverage analysis is shown in the Portfolio's
financial statements which are included in the Fund's Statement of
Additional Information.
(4) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distribution by Investment Companies. The SOP requires
that differences in the recognition or classification of income between the
financial statements and tax earnings and profits that result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
</FN>
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO REALIZE A HIGH CURRENT RETURN. The Fund
currently seeks to meet its investment objective by investing its assets in the
Government Obligations Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. This investment structure is commonly referred to as a "master/feeder"
structure. The Fund's and the Portfolio's investment objectives are
nonfundamental and may be changed when authorized by a vote of the Trustees of
the Trust or the Portfolio, respectively, without obtaining the approval of the
Fund's shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the investment objective to
shareholders in advance for their approval.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
IN SEEKING HIGH CURRENT RETURN, THE PORTFOLIO INVESTS IN SECURITIES ISSUED,
GUARANTEED OR OTHERWISE BACKED BY THE U.S. GOVERNMENT, INCLUDING MORTGAGE-
BACKED SECURITIES OF FEDERAL AGENCIES AND FEDERALLY CHARTERED CORPORATIONS, AND
ENGAGES IN ACTIVE MANAGEMENT STRATEGIES, INCLUDING FUTURES TRANSACTIONS AND
RELATED TECHNIQUES PRIMARILY FOR HEDGING PURPOSES. The Portfolio's management
believes that a high current return may be derived from yields on U.S.
Government securities, including market discount accrued on obligations
purchased below their stated redemption value.
U.S. GOVERNMENT SECURITIES. U.S. Government securities include (1) U.S. Treasury
obligations, which differ in their interest rates, maturities and times of
issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years) and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities which are supported by any of
the following: (a) the full faith and credit of the U.S. Treasury, (b) the right
of the issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government to purchase
certain obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. The Portfolio may also invest in any
other security or agreement collateralized or otherwise secured by U.S.
Government securities. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association ("FNMA"), Government National Mortgage
Association ("GNMA"), Student Loan Marketing Association, United States Postal
Service, Small Business Administration, Tennessee Valley Authority and any other
enterprise established or sponsored by the U.S. Government. Because the U.S.
Government generally is not obligated to provide support to its
instrumentalities, the Portfolio will invest in obligations issued by these
instrumentalities only if the Investment Adviser determines that the credit risk
with respect to such obligations is minimal.
MORTGAGE-BACKED SECURITIES. The Portfolio may invest in mortgage-backed
securities that are either issued by the U.S. Government or one of its agencies
or instrumentalities or, if privately issued, collateralized by mortgages that
are insured, guaranteed or otherwise backed by the U.S. Government, its agencies
or instrumentalities. Mortgage-backed securities represent participation
interests in pools of adjustable and fixed-rate mortgage loans. Unlike
conventional debt obligations, mortgage-backed securities provide monthly
payments derived from the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. The
mortgage loans underlying mortgage-backed securities are generally subject to a
greater rate of principal prepayments in a declining interest rate environment
and to a lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest and prepayment rate scenarios, the Portfolio
may fail to recover the full amount of its investment in mortgage-backed
securities, notwithstanding any direct or indirect governmental or agency
guarantee. Because faster than expected prepayments must usually be invested in
lower yielding securities, mortgage-backed securities are less effective than
conventional bonds in "locking in" a specified interest rate. To mitigate
prepayment risk, the Investment Adviser considers the selection of mortgage-
backed securities that as a group have a history of more stable prepayment rates
relative to interest rate fluctuations. In a rising interest rate environment, a
declining prepayment rate will extend the average life of many mortgage-backed
securities. This possibility is often referred to as extension risk. Extending
the average life of a mortgage-backed security increases the risk of
depreciation due to future increases in market interest rates. As of December
31, 1995, the Portfolio had approximately 38.5% of its net assets invested in
FNMA Mortgage-Backed Certificates, approximately 42.5% of its net assets
invested in Participation Certificates of FHLMC and approximately 9.5% of its
net assets invested in GNMA Certificates. FNMA guarantees the timely payment of
principal and interest of its Certificates, FHLMC guarantees the timely payment
of interest and ultimate collection of the principal of its Participation
Certificates, and GNMA Certificates are guaranteed by the full faith and credit
of the U.S. Government.
The Portfolio may also invest in classes of collateralized mortgage
obligations ("CMOs") and various other mortgage-backed securities. Senior CMO
classes will typically have priority over residual CMO classes as to the
receipt of principal and/or interest payments on the underlying mortgages. In
choosing among CMO classes, the Investment Adviser will evaluate the total
income potential of each class and other factors. If such obligations or
securities are privately issued they will currently be considered by the
Investment Adviser as possible investments for the Portfolio only when the
mortgage collateral is insured, guaranteed or otherwise backed by the U.S.
Government or one or more of its agencies or instrumentalities. As of December
31, 1995, the Portfolio had approximately 5.0% of its net assets invested in
CMOs (including one which was privately issued).
The Portfolio may invest in securities that fluctuate in value with an index.
Such securities generally will either be issued by the U.S. Government or one
of its agencies or instrumentalities or, if privately issued, collateralized
by mortgages that are insured, guaranteed or otherwise backed by the U.S.
Government, its agencies or instrumentalities. The interest rate or, in some
cases, the principal payable at the maturity of an indexed security may change
positively or inversely in relation to one or more interest rates, financial
indices, securities prices or other financial indicators ("reference prices").
An indexed security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on an indexed security is a
multiple of the change in the reference price. Thus, indexed securities may
decline in value due to adverse market changes in reference prices. As of
December 31, 1995, the Portfolio held no such securities. Because mortgage-
backed and indexed securities derive their value from another instrument,
security or index, they are considered derivative debt securities, and are
subject to different combinations of prepayment, extension, interest rate and/
or other market risks.
The Portfolio may enter into contracts to purchase securities for a fixed
price at a future date beyond the customary settlement time if the Portfolio
holds and maintains until the settlement date in a segregated account cash,
U.S. Government securities and liquid high-grade debt obligations in an amount
sufficient to meet the purchase price, or if the Portfolio enters into
offsetting contracts for the forward sale of other securities it owns. Such
contracts are customarily referred to as "forward commitments" and involve a
risk of loss if the value of the security to be purchased declines prior to
the settlement date.
The principal of and/or interest on certain U.S. Government securities which
may be purchased by the Portfolio could be (a) payable in foreign currencies
rather than U.S. dollars or (b) increased or diminished as a result of changes
in the value of the U.S. dollar relative to the value of foreign currencies.
The value of such portfolio securities denominated in foreign currencies may
be affected favorably or unfavorably by changes in the exchange rate between
foreign currencies and the U.S. dollar. In order to limit the risk inherent in
this type of security, it is the current policy of the Portfolio not to
purchase any such security if after such purchase (i) more than 5% of its net
assets (taken at market value) would be invested in securities denominated in
foreign currencies or (ii) more than 2% of its net assets (taken at market
value) would be invested in securities denominated in any one foreign
currency.
The Portfolio may from time to time have temporary investments in short-term
debt obligations (including certificates of deposit, bankers' acceptances and
commercial paper) pending the making of other investments or as a reserve to
service redemptions and repurchases of its shares.
ACTIVE MANAGEMENT STRATEGIES
The Portfolio may engage in several active management strategies to enhance
income and reduce investment risk. Each strategy requires the Investment
Adviser to consider special factors. In addition, the Portfolio may
temporarily borrow up to 5% of the value of its total assets to satisfy
redemption requests or settle securities transactions.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers.
During the existence of a loan, the Portfolio will continue to receive the
equivalent of the interest paid by the issuer on the securities loaned and
will also receive a fee, or all or a portion of the interest on investment of
the collateral, if any. However, the Portfolio may pay lending fees to such
borrowers. 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 Portfolio's management to be of good standing and
when, in the judgment of the Portfolio's management, the consideration which
can be earned from securities loans of this type justifies the attendant risk.
The financial condition of the borrower will be monitored by the Investment
Adviser on an ongoing basis. The value of the securities loaned will not
exceed 30% of the Portfolio's total assets. During the year ended December 31,
1995, the Portfolio typically had outstanding approximately $61 million in
collateralized loans with terms of 7 days.
FUTURES CONTRACTS AND OTHER DERIVATIVE INSTRUMENTS. The Portfolio may purchase
or sell derivative instruments (which are instruments that derive their value
from another instrument, security, index or currency) to hedge against
fluctuations in interest rates, securities prices or currency exchange rates,
to change the duration of the Portfolio's fixed income portfolio, as a
substitute for the purchase or sale of securities or currency, or to enhance
return. The Portfolio's transactions in derivative instruments may include the
purchase or sale of futures contracts on securities, (such as U.S. Government
securities), indices, other financial instruments (such as certificates of
deposit, Eurodollar time deposits, and economic indices) or currencies;
options on futures contracts; exchange-traded and over-the-counter ("OTC")
options on securities; indices or currencies; and forward contracts to
purchase or sell currencies. All of the Portfolio's transactions in derivative
instruments involve a risk of loss or depreciation due to: unanticipated
adverse changes in interest rates, securities prices or currency exchange
rates; the inability to close out a position; default by the counterparty;
imperfect correlation between a position and the desired hedge; tax
constraints on closing out positions; and portfolio management constraints on
securities subject to such transactions. The loss on derivative instruments
(other than purchased options) may substantially exceed the Portfolio's
initial investment in these instruments. In addition, the Portfolio may lose
the entire premium paid for purchased options that expire before they can be
profitably exercised by the Portfolio. The Portfolio incurs transaction costs
in opening and closing positions in derivative instruments. There can be no
assurance that the Investment Adviser's use of derivative instruments will be
advantageous to the Portfolio.
The Portfolio's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by
several factors, including temporary price disparities among the trading
markets for the derivative instrument, the assets underlying the derivative
instrument and the Portfolio's assets. OTC derivative instruments involve a
heightened risk that the issuer or counterparty will fail to perform its
contractual obligations. The staff of the Securities and Exchange Commission
takes the position that purchased OTC options, assets used as cover for
written OTC options, and certain other derivative instruments (and securities)
are subject to the Portfolio's 15% limit on illiquid investments. The
Portfolio's ability to terminate OTC derivative instruments may depend on the
cooperation of the counterparties to such instruments. For thinly traded
derivative securities and contracts, the only source of price quotations may
be the selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
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 securities to close the position if the borrowed
security is called in, causing a gain to be recognized.
SHORT-TERM TRADING. Securities may be sold in anticipation of a market decline
(a rise in interest rates) or purchased in anticipation of a market rise (a
decline in interest rates) and later sold. In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Portfolio believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for
reasons not directly related to the investment quality of particular issues or
the general movement of interest rates, such as changes in the overall demand
for or supply of various types of fixed-income securities or changes in the
investment objectives of investors.
MORTGAGE ROLLS. The Portfolio may enter into mortgage "dollar rolls" in which
the Portfolio sells mortgage-backed securities for delivery in the current
month and simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on a specified future date. During the
roll period, the Portfolio forgoes principal and interest paid on the
mortgage-backed securities. The Portfolio is compensated by the difference
between the current sales price and the lower forward price for the future
purchase (often referred to as the "drop") as well as by the interest earned
on the cash proceeds of the initial sale. A "covered roll" is a specific type
of dollar roll for which there is an offsetting cash position or a cash
equivalent security position which matures on or before the forward settlement
date of the dollar roll transaction. The Portfolio will only enter into
covered rolls. Covered rolls are not treated as a borrowing or other senior
security and will be excluded from the calculation of the Portfolio's
borrowings and other senior securities.
LEVERAGE THROUGH BORROWING. The Portfolio may borrow from banks to increase
its portfolio holdings of debt securities on which call options may be written
and to acquire U.S. Treasury bills which may be deposited with the Portfolio's
custodian or a broker-dealer in connection with various Portfolio investments.
Such borrowings will be unsecured. The Investment Company Act of 1940 requires
the Portfolio to maintain continuous asset coverage of not less than 300% with
respect to such borrowings. This allows the Portfolio to borrow for such
purposes an amount (when taken together with any borrowings for temporary
extraordinary or emergency purposes as described below) equal to as much as
50% of the value of its net assets (not including such borrowings). If such
asset coverage should decline to less than 300% due to market fluctuations or
other reasons, the Portfolio may be required to sell some of its portfolio
holdings within three days in order to reduce the Portfolio's debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Leveraging will
exaggerate any increase or decrease in the net asset value of the securities
held by Portfolio, and in that respect may be considered a speculative
practice. Money borrowed for leveraging will be subject to interest costs
which may or may not exceed the option premiums and interest received from the
securities purchased. The Portfolio may also be required to maintain minimum
average balances in connection with such borrowings or to pay a commitment or
other fee to maintain a line of credit; either of these requirements would
increase the cost of borrowing over the stated interest rate.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to U.S. Government securities. Under a repurchase agreement, the
seller agrees to repurchase such securities at the Portfolio's cost plus
interest within a specified time (normally one day). While repurchase
agreements involve certain risks not associated with direct investments in
U.S. Government securities, the Portfolio follows procedures designed to
moderate such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized banks. In addition, the
Portfolio's repurchase agreements will provide that the value of the
collateral underlying the repurchase agreements will always be at least equal
to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
bank, the Portfolio will seek to liquidate such collateral. However, the
exercise of the Portfolio's right to liquidate such collateral would involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase are less than the repurchase price,
the Portfolio could suffer a loss.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio expects that various new types of investments, hedging
techniques and management strategies will be developed and made available to
institutional investors in the future. The Investment Adviser will consider
making such investments or adopting such techniques or strategies if it
determines that they are consistent with the Portfolio's investment objective
and policies. Of course, the total mix of the Portfolio's investments can
change daily.
FLUCTUATIONS IN VALUE. Because interest yields on U.S. Government and other
securities and opportunities to realize additional income and net gains from
active management strategies will vary from time to time because of general
economic and market conditions and many other factors, the Fund's current
return will fluctuate, and there can be no assurance that the Fund's objective
will be achieved. As a result of their high credit quality and market
liquidity, U.S. Government securities generally provide a lower current return
than obligations of other issuers. As with other debt securities, the value of
U.S. Government securities changes as interest rates fluctuate. Fluctuations
in the value of securities held by the Portfolio will not affect interest
income on existing portfolio securities but will be reflected in the Fund's
net asset value. Thus, a decrease in interest rates will generally result in
an increase in the value of Fund shares. Conversely, during periods of rising
interest rates, the value of Fund shares will generally decline. The magnitude
of these fluctuations will generally be greater at times when the Portfolio's
average maturity is longer. In addition, as set forth above, the derivative
securities the Portfolio may hold may magnify those risks and pose additional
risks. Active management techniques, if successful, may only partly offset
these risks. Shares of the Fund are not government guaranteed.
INVESTMENT RESTRICTIONS. The Fund and the Portfolio have adopted certain
fundamental investment restrictions which are enumerated in detail in the
Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote and an investor vote, respectively. These
restrictions are designed to reduce investment risk. Except for such
enumerated restrictions and as otherwise indicated in the Prospectus, the
investment objective and policies of the Fund and the Portfolio are not
fundamental policies, and accordingly may be changed by the Trustees of the
Trust and the Portfolio without obtaining the approval of the Fund's
shareholders or the investors in the Portfolio, as the case may be. If any
changes were made in the Fund's investment objective, the Fund might have an
investment objective different from the objective which an investor considered
appropriate at the time the investor became a shareholder of the Fund.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST (THE
"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, and common and commingled trust funds)
will each be liable for all obligations of the Portfolio. However, the risk of
the Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Portfolio
itself is unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund investing in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimis amount of cash).
Therefore, the Fund's interest in the securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds or
institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the
Portfolio's expenses. However, the other investors investing in the Portfolio
are not required to sell their shares at the same public offering price as the
Fund due to variations in sales commissions and other operating expenses.
Therefore, investors in the Fund should be aware that these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Such differences in returns are also present in
other mutual fund structures, including funds that have multiple classes of
shares. For information regarding the investment objective, policies and
restrictions of the Portfolio, see "The Fund's Investment Objective" and
"Investment Policies and Risks". Further information regarding investment
practices may be found in the Statement of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund, at
least when the assets of the Portfolio exceed $500 million. The public
shareholders of the Fund have previously approved the policy of investing the
Fund's assets in an interest in the Portfolio.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, as
the case may be. Any such change of the investment objective will be preceded
by thirty days' advance written notice to the shareholders of the Fund or the
investors in the Portfolio, as the case may be. In the event the Fund
withdraws all of its assets from the Portfolio, or the Board of Trustees of
the Trust determines that the investment objective of the Portfolio is no
longer consistent with the investment objective of the Fund, such Trustees
would consider what action might be taken, including investing the assets of
the Fund in another pooled investment entity or retaining an investment
adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal
of all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller investors in the Portfolio may be adversely affected
by the actions of a larger investor in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large
or institutional investors.
Until 1992, the Administrator sponsored and advised historically structured
funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund
industry and, therefore, the Fund may be subject to additional regulations
than historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. The Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust and the Trustees of the Portfolio are the same. Such procedures require
each Board to take actions to resolve any conflict of interest between the
Fund and the Portfolio, and it is possible that the creation of separate
Boards may be considered. For further information concerning the Trustees and
officers of the Trust and the Portfolio, see the Statement of Additional
Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), 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 its investment advisory agreement with the Portfolio BMR
receives a monthly advisory fee of .0625% (equivalent to .75% annually) of the
average daily net assets of the Portfolio up to $500 million. On net assets of
$500 million and over the annual fee is reduced as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
-----------------------------------------------------------------------------
$500 million but less than $1 billion 0.6875%
$1 billion but less than $1.5 billion 0.6250%
$1.5 billion but less than $2 billion 0.5625%
$2 billion but less than $3 billion 0.5000%
$3 billion and over 0.4375%
As at December 31, 1995, the Portfolio had net assets of $521,788,905. For the
fiscal year ended December 31, 1995, the Portfolio paid BMR advisory fees
equivalent to 0.75% of the Portfolio's average daily net assets for such year.
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 is a wholly-owned subsidiary of Eaton Vance
Corp., a publicly-held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages primarily in investment management,
administration and marketing activities.
Susan Schiff has acted as the portfolio manager of the Portfolio since it
commenced operations. She has been a Vice President of Eaton Vance and BMR
since 1993.
BMR places the portfolio 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. 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 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 Portfolio and the Fund, as the case may be, will each be responsible for all
of its respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by EVD under the distribution agreement.
SERVICE PLAN
- -------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays service fees
pursuant to a Service Plan (the "Plan") designed to meet the requirements of
Rule 12b-1 under the Investment Company Act of 1940 and the service fee
requirements of the revised sales charge rule of the National Association of
Securities Dealers, Inc. THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE
PAYMENTS FOR PERSONAL SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS
TO THE PRINCIPAL UNDERWRITER, FINANCIAL SERVICES FIRMS ("AUTHORIZED FIRMS")
AND OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF THE FUND'S AVERAGE DAILY
NET ASSETS FOR ANY FISCAL YEAR. The Trustees of the Trust have implemented the
Plan by authorizing the Fund to make quarterly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.25% of the Fund's average daily net assets for any fiscal year based on the
value of Fund shares sold by such persons and remaining outstanding for at
least twelve months. During the fiscal year ended December 31, 1995, the Fund
paid or accrued service fees under the Plan equivalent to .20% of the Fund's
average daily net assets for such year. The Plan is described further in the
Statement of Additional Information,
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of 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 and the public offering
price based thereon. It is the Authorized Firms' responsibility to transmit
orders promptly to the Principal Underwriter, which is a wholly-owned
subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) 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. Mortgage-backed "pass-through" securities are valued through use of a
matrix pricing system which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the effective public offering price, which price is based on the
effective net asset value per share plus the applicable sales charge. The Fund
receives the net asset value, while the sales charge is divided between the
Authorized Firm and the Principal Underwriter. The Principal Underwriter will
furnish the names of Authorized Firms to an investor upon request. An
Authorized Firm may charge its customers a fee in connection with transactions
executed by that Firm. The Fund may suspend the offering of shares at any time
and may refuse an order for the purchase of shares.
The sales charge may vary depending on the size of the purchase and the number
of shares of Eaton Vance funds the investor may already own, any arrangement to
purchase additional shares during a 13-month period or special purchase
programs. Complete details of how investors may purchase shares at reduced sales
charges under a Statement of Intention, Right of Accumulation, or various
employee benefit plans are available from Authorized Firms or the Principal
Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS DEALER COMMISSION
PERCENTAGE OF PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75% 2.83% 3.00%
$100,000 but less than $250,000 2.25% 2.30% 2.50%
$250,000 but less than $500,000 1.75% 1.78% 2.00%
$500,000 but less than $1,000,000 1.25% 1.27% 1.50%
$1,000,000 or more 0.00%* 0.00%* 0.50%
<FN>
*No sales charge is payable at the time of purchase on investments of $1
million or more. A contingent deferred sales charge ("CDSC") of 0.50% will be
imposed on such investments (as described below) in the event of certain
redemptions within 12 months of purchase. Such purchases made before March
27, 1995 will be subject to a CDSC of 1% in the event of certain redemptions
within 18 months of purchase.
</FN>
</TABLE>
The Principal Underwriter may at times allow discounts up to the full sales
charge. During periods when the discount includes the full sales charge,
Authorized Firms may be deemed to be underwriters as that term is defined in
the Securities Act of 1933. The Principal Underwriter may, from time to time,
at its own expense, provide additional incentives to Authorized Firms which
employ registered representatives who sell 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 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, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms and bank
employees who refer customers to registered representatives of Authorized
Firms; and to such persons' spouses and children under the age of 21 and their
beneficial accounts. Shares may also be issued at net asset value (1) in
connection with the merger of an investment company with the Fund, (2) to
investors making an investment as part of a fixed fee program whereby an
entity unaffiliated with the investment adviser provides multiple investment
services, such as management, brokerage and custody, (3) where the amount
invested represents redemption proceeds from a mutual fund unaffiliated with
Eaton Vance, if the redemption occurred no more than 60 days prior to the
purchase of Fund shares and the redeemed shares were subject to a sales
charge, and (4) to investment advisors, financial planners or other
intermediaries who place trades for their own accounts or the accounts of
their clients and who charge a management, consulting or other fee for their
services; clients of such investment advisors, financial planners or other
intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment advisor, financial planner or
other intermediary on the books and records of the broker or agent; and
retirement and deferred compensation plans and trusts used to fund those
plans, including, but not limited to, those defined in Section 401(a), 403(b)
or 457 of the Internal Revenue Code of 1986, as amended (the "Code") and
"rabbi trusts."
No initial sales charge and no contingent deferred sales charge will be
payable or imposed with respect to shares of the Fund purchased by retirement
plans qualified under Section 401, 403(b) or 457 of the Code ("Eligible
Plans"). In order to purchase shares without a sales charge, the plan sponsor
of an Eligible Plan must notify the Transfer Agent of the Fund of its status
as an Eligible Plan. Participant accounting services (including trust fund
reconciliation services) will be offered only through third party
recordkeepers and not by EVD. The Fund's Principal Underwriter may pay
commissions to Authorized Firms who initiate and are responsible for purchases
of shares of the Fund by Eligible Plans of up to 1.00% of the amount invested
in such shares.
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares at the applicable public offering price as determined above.
The minimum value of securities (or securities and cash) accepted for deposit
is $5,000. Securities accepted will be sold on the day of their receipt or as
soon thereafter as possible. The number of Fund shares to be issued in
exchange for securities will be the aggregate proceeds from the sale of such
securities, divided by the applicable 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 available price. 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 Government Obligations Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Traditional Government Obligations Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an
application, makes a Statement of Intention to invest a specified amount over
a thirteen-month period, then out of the initial purchase (or subsequent
purchases if necessary) 5% of the dollar amount specified on the application
shall be held in escrow by the escrow agent in the form of shares (computed to
the nearest full share at the public offering price applicable to the initial
purchase hereunder) registered in the investor's name. All income dividends
and capital gain 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 this 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 investor's account.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
- --------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good order
means that all relevant documents must be endorsed by the record owner (s)
exactly as the shares are registered and the signature(s) must be guaranteed by
a member of either the Securities Transfer Association's STAMP program or the
New York Stock Exchange's Medallion Signature Program, or certain banks, savings
and loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to First
Data Investor Services Group. In addition, in some cases, good order may require
the furnishing of additional documents such as where shares are registered in
the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment in cash 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. Although the Fund
normally expects to make payment in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to
pay the redemption price of shares of the Fund, either totally or partially,
by a distribution in kind of readily marketable securities withdrawn by the
Fund from the Portfolio. The securities so distributed would be valued
pursuant to the Portfolio's valuation procedures. If a shareholder received a
distribution in kind, the shareholder could incur brokerage or other charges
in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, who may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. Redemptions or repurchases may 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
additional purchases. However, no such redemption would be required by the
Fund if the cause of the low account balance was a reduction in the net asset
value of Fund shares.
If shares have been purchased at net asset value with no initial sales charge
by virtue of the purchase having been in the amount of $1 million or more and
are redeemed within 12 months of purchase, a CDSC of 0.50% will be imposed on
such redemption. (Such purchases made before March 27, 1995 will be subject to
a CDSC of 1% in the event of certain redemptions made within 18 months of
purchase.) The CDSC will be retained by the Principal Underwriter. The CDSC
will be imposed on an amount equal to the lesser of the current market value
or the original purchase price of the shares redeemed. Accordingly, no CDSC
will be imposed on increases in account value above the initial purchase
price, including any distributions that have been reinvested in additional
shares. In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible rate
being charged. It will be assumed that redemptions are made first from any
shares in the shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. 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 accountants. Shortly after the
end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state tax returns. Consistent
with applicable law, duplicate mailings of shareholder reports and certain
other Fund information to shareholders residing at the same address may be
eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to First Data
Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each 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 may be invested in additional
shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of any of the
following funds: Eaton Vance Cash Management Fund, Eaton Vance Income Fund of
Boston, Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax Free Reserves
and any fund in the Eaton Vance Traditional Group of Funds on the basis of the
net asset value per share of each fund at the time of the exchange (plus, in
the case of an exchange made within six months of the date of purchase of
shares subject to an initial sales charge, an amount equal to the difference,
if any, between the sales charge previously paid on the shares being exchanged
and the sales charge payable on the shares being acquired). Such exchange
offers are available only in states where shares of the fund being acquired
may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Fund does not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
Shares of the Fund which are subject to a CDSC may be exchanged into any of
the above funds without incurring the CDSC. The shares acquired in an exchange
may be subject to a CDSC upon redemption. For purposes of computing the CDSC
payable upon redemption of shares acquired in an exchange, the holding period
of the original shares is added to the holding period of the shares acquired
in the exchange.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for additional
information concerning the exchange privilege. Applications and prospectuses of
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies,
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
Shares of certain other funds for which Eaton Vance acts as investment adviser
or administrator may be exchanged for Fund shares on the basis of the net
asset value per share of each fund at the time of the exchange (plus, in the
case of an exchange made within six months of the date of purchase of shares
subject to an initial sales charge, an amount equal to the difference, if any,
between the sales charge previously paid on the shares being exchanged and the
sales charge payable on the Fund shares being acquired). Any such exchange is
subject to any restrictions or qualifications set forth in the current
prospectus of any such fund.
Telephone exchanges are accepted by First Data Investor Services Group provided
that the investor has not disclaimed in writing the use of the privilege. To
effect such exchanges, call First Data Investor Services Group at 800-262-1122
or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). Shares acquired by telephone exchange must be
registered in the same name(s) and with the same address as the shares being
exchanged. Neither the Fund, the Principal Underwriter nor First Data Investor
Services Group will be responsible for the authenticity of exchange instructions
received by telephone, provided that reasonable procedures to confirm that
instructions communicated are genuine have been followed. 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
Traditional Government Obligations Fund may be mailed directly to First Data
Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time
- -- whether or not distributions are reinvested. The name of the shareholder,
the Fund and the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $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 $50,000 or more made over a 13-month
period are eligible for reduced sales charges. See "How to Buy Fund Shares --
Statement of Intention and Escrow Agreement".
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges when
the current market value of holdings (shares at current offering price), plus
new purchases, reaches $50,000 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.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an amount specified by the shareholder. A minimum
deposit of $5,000 in shares is required. The maintenance of a withdrawal plan
concurrently with purchases of additional shares would be disadvantageous
because of the sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has repurchased or redeemed shares may
reinvest at net asset value any portion or all of the repurchase or redemption
proceeds (plus that amount necessary to acquire a fractional share to round off
the purchase to the nearest full share) in shares of the Fund, or, provided that
the shares repurchased or redeemed have been held for at least 60 days, in
shares of any of the other funds offered by the Principal Underwriter subject to
an initial sales charge, provided that the reinvestment is effected within 60
days after such repurchase or redemption and the privilege has not been used
more than once in the prior 12 months. Shares are sold to a reinvesting
shareholder at the next determined net asset value 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 repurchase or redemption proceeds
in shares of the 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. See "Distributions and Taxes".
Shareholders should consult their tax advisers concerning the tax consequences
of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and non-profit organizations meeting certain
requirements of the Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
Federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED
DAILY AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AT THE TIME OF THE
DECLARATION AND WILL GENERALLY BE TAXABLE TO SHAREHOLDERS AS ORDINARY INCOME,
WHETHER TAKEN IN CASH OR REINVESTED IN ADDITIONAL SHARES. Such distributions,
whether taken in cash or reinvested in additional shares, will ordinarily be
paid on the fifteenth day of each month or the next business day thereafter.
Daily distribution crediting will commence on the day that collected funds for
the purchase of Fund shares are available at the Transfer Agent. Distributions
from net short-term capital gains and certain net foreign exchange gains are
taxable to shareholders as ordinary income, and distributions from net long-
term capital gains designated as such by the Fund are taxable to shareholders
as long-term capital gains, whether received in cash or reinvested in
additional shares of the Fund and regardless of the length of time Fund shares
have been owned by the shareholders. Gains or losses attributable to
transactions by the Portfolio in options on securities, certain currency
forward contracts, futures contracts and options on futures may be treated as
40% short-term and 60% long-term capital gains or losses or, in the case of
certain of such transactions relating to foreign currencies, as ordinary
income or loss for federal income tax purposes. The Portfolio may have to
limit its activities in these transactions in order to enable the Fund to
maintain its qualification as a regulated investment company.
The amount of the Fund's distributions will vary from time to time depending
on general economic and market conditions, the composition of the Portfolio's
investments, its current investment strategies and the operating expenses of
the Fund and the Portfolio. While distributions will vary from time to time in
response to the factors referred to above, the Fund's management will attempt
to pursue a policy of maintaining a relatively stable monthly distribution
payment to its shareholders. The distributions paid by the Fund during any
particular period may be more or less than the amount of net investment income
and net short-term capital gain actually earned by the Portfolio and allocated
to the Fund during such period. The Portfolio has elected mixed straddle
accounting under the Code for one or more designated classes of activities
involving mixed straddles.
The Portfolio is required to accrue original issue discount on zero coupon and
certain other securities and has elected to accrue market discount on debt
obligations which are purchased at a market discount. While enhancing the
Fund's current return, such accrual will also accelerate the Fund's
recognition of interest income, distributions of which will be taxable as
ordinary income. Furthermore, because the Fund seeks to stabilize monthly
distribution payments and the Portfolio has elected mixed straddle accounting
under the Code, it is possible that a portion of the Fund's aggregate
distributions during any year will be treated as a return of capital for tax
purposes, rather than taxable distributions of dividends or capital gains. The
Fund will inform the shareholders after the end of each year what portion, if
any, of such distributions constitutes a return of capital for tax purposes.
Sales charges paid upon a purchase of shares of the Fund cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange
of the shares before the 91st day after their purchase to the extent shares of
the Fund or of another fund are subsequently acquired pursuant to the Fund's
reinvestment or exchange privilege. Any disregarded amounts will result in an
adjustment to the shareholder's tax basis in some or all of any other shares
acquired.
Shareholders will receive annually 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.
In order to qualify as a regulated investment company under the Code, the Fund
must satisfy certain requirements relating to the sources of its income, the
distribution of its income, and the diversification of its assets. In satisfying
these requirements, the Fund will treat itself as owning its proportionate share
of each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
Shareholders should consult with their tax advisors concerning the
applicability of state, local or other taxes to an investment in the Fund.
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 YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by
the average annual compounded rate of return (including capital appreciation/
depreciation, and distributions paid and reinvested) for the stated period and
annualizing the result. The average annual total return calculation assumes
the maximum sales charge is deducted from the initial $1,000 purchase order
and that all distributions are reinvested at net asset value on the
reinvestment dates during the period. The Fund may also publish annual and
cumulative total return figures from time to time.
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which
is based on the Fund's net asset value per share would be reduced if a sales
charge were taken into account. The Fund's performance may be compared in
publications to the performance of various indices and investments for which
reliable data is available, and to averages, performance rankings, or other
information prepared by recognized mutual fund statistical services.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield or total return for any
prior period should not be considered as a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period.
<PAGE>
[LOGO]
EV TRADITIONAL
GOVERNMENT
OBLIGATIONS FUND
PROSPECTUS
MAY 1, 1996
EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
T-GOP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE SHORT-TERM
TREASURY FUND
- ------------------------------------------------------------------------------
EATON VANCE SHORT-TERM TREASURY FUND (THE "FUND") IS A MUTUAL FUND SEEKING
CURRENT INCOME AND LIQUIDITY, BY INVESTING EXCLUSIVELY IN U.S. TREASURY
OBLIGATIONS. THE FUND IS A 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. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1996 for the Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. This Statement of
Additional Information is available without charge from the Fund's principal
underwriter, Eaton Vance Distributors, Inc. (the "Principal Underwriter"), 24
Federal Street, Boston, MA 02110 (telephone (800) 225-6265). The Fund's
investment adviser is Eaton Vance Management (the "Investment Adviser"), which
is located at the same address.
- ------------------------------------------------------------------------------
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 ............................ 7
The Fund's Financial Highlights ....................... 3 How to Redeem Fund Shares ......................... 8
The Fund's Investment Objective ....................... 4 Reports to Shareholders ........................... 8
How the Fund Invests Its Assets ....................... 4 The Lifetime Investing Account/Distribution Options 9
Organization of the Fund .............................. 5 The Eaton Vance Exchange Privilege ................ 9
Management of the Fund ................................ 5 Eaton Vance Shareholder Services .................. 10
Distribution Plan ..................................... 6 Distributions and Taxes ........................... 11
Valuing Fund Shares ................................... 6 Performance Information ........................... 12
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED MAY 1, 1996
<PAGE>
<TABLE>
SHAREHOLDER AND FUND EXPENSES
- ---------------------------------------------------------------------------------------------------------
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
ANNUAL FUND OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
Investment Adviser Fee (after fee reduction) 0.04%
Rule 12b-1 Distribution Fees 0.25%
Other Expenses 0.33%
----
Total Operating Expenses (after reduction) 0.62%
====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (a) 5% annual return and (b) redemption at
the end of each period: $6 $20 $35 $77
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and are
designed to help investors understand the costs and expenses they will bear
directly or indirectly, by investing in the Fund. Information for the Fund is
based on its expenses for the most recent fiscal year. Absent a reduction of
the Investment Adviser Fee, expenses of the Fund would have been the following
percentage of average daily net assets: Investment Adviser Fee would have been
0.31% and Total Operating Expenses would have been 0.89%.
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 assume a 5% annual return, but actual return
will vary. For further information regarding the expenses of the Fund, see
"The Fund's Financial Highlights," "Management of the Fund" 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."
The Fund's monthly advisory fee has two components, a fee based on daily net
assets and a fee based on daily gross income, as set forth in the fee schedule
on page 5.
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in the Fund's annual report to shareholders
which is incorporated by reference into the Statement of Additional
Information in reliance upon the report of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in its annual
report to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991++
---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year ................... $57.52 $55.58 $54.30 $52.64 $50.18
------ ------ ------ ------ ------
INCOME FROM OPERATIONS:
Net investment income .............................. $ 3.47 $ 1.80 $ 1.34 $ 1.61 $ 2.15
Net realized and unrealized gain (loss) on
investments ...................................... 0.44 0.14 (0.06) 0.05 0.31
------ ------ ------ ------ ------
Total income from operations ..................... $ 3.91 $ 1.94 $ 1.28 $ 1.66 $ 2.46
------ ------ ------ ------ ------
NET ASSET VALUE, end of year ......................... $61.43 $57.52 $55.58 $54.30 $52.64
====== ====== ====== ====== ======
TOTAL RETURN(1) ...................................... 6.80% 3.49% 2.36% 3.15% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's omitted) ............ $1,915 $1,175 $1,743 $4,917 $100,976
Ratio of expenses to average daily net assets* ..... 0.62% 0.84% 0.60% 0.60% 0.60%+
Ratio of net investment income to average daily net
assets* ............................................ 5.25% 2.97% 2.48% 3.01% 4.66%+
*The expenses related to the operation of the Fund reflect a reduction of the investment adviser fee and/or an
allocation of expenses to the Investment Adviser. Had such action not been taken, net investment income per share
and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE ...................... $ 3.29 $ 1.56 $ 1.28 $ 1.56 $ 2.07
====== ====== ====== ====== ======
RATIOS (as a percentage of average daily net assets):
Expenses ......................................... 0.89% 1.23% 0.70% 0.70% 0.78%+
====== ====== ====== ====== ======
Net investment income ............................ 4.98% 2.58% 2.38% 3.11% 4.49%+
====== ====== ====== ====== ======
Note: Certain of the per share amounts have been computed using average shares outstanding.
+ Computed on an annualized basis.
++ Period from the date of initial public offering, February 4, 1991, to December 31, 1991. For the period from the
start of business, January 11, 1991, to February 3, 1991, net investment income aggregating $0.18 per share
($367) was earned by the Fund. The financial highlights for the period were audited by the Fund's previous
auditors.
(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 each period reported. Distributions, if any, are assumed to be reinvested at the
net asset value on the payable date. Total return is not computed on an annualized basis.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
Eaton Vance Short-Term Treasury Fund is a no-load diversified mutual fund
which continuously offers its shares of beneficial interest to the public. The
Fund's investment objective is to seek current income and liquidity. The Fund
invests exclusively in U.S. Treasury obligations (bills, notes and bonds) with
a remaining maturity of up to five years and will maintain a dollar weighted
average portfolio maturity of not more than one year. The Fund's investment
objective is a nonfundamental policy which may be changed by Trustee vote. The
Trustees, however, have indicated that they intend to submit any material
change in the investment objective to shareholders for their approval. The
Fund provides shareholders ease of investment and redemption by allowing
direct purchases, check-writing, same-day wire purchases and redemptions, and
access through broker-dealers. No commissions or redemption fees are charged
on Fund purchases or redemptions.
HOW THE FUND INVESTS ITS ASSETS
- ------------------------------------------------------------------------------
The Fund invests exclusively in U.S. Treasury obligations with a remaining
maturity of up to five years. U.S. Treasury obligations include the following
(which differ in their interest rates, maturities and times of issuance): U.S.
Treasury bills (maturities of one year or less), U.S. Treasury notes
(maturities of one to ten years) and U.S. Treasury bonds (generally maturities
of greater than ten years). The Fund invests in U.S. Treasury notes and bonds
only to the extent that their remaining maturity is five years or less. U.S.
Treasury bills, notes and bonds, are supported by the full faith and credit of
the United States.
The Fund will maintain a dollar weighted average portfolio maturity of not
more than one year. In measuring the dollar weighted average portfolio
maturity of the Fund, the Fund will use the concept of "duration." Duration
represents the dollar weighted average maturity of expected cash flows (i.e.,
interest and principal payments) on one or more debt obligations, discounted
to their present values. The duration of an obligation is generally equal to
or less than its stated maturity and is related to the degree of volatility in
the market value of the obligation. Maturity measures only the time until a
debt security provides its final payment; it takes no account of the pattern
of a security's payments over time. Duration takes both interest and principal
payments into account and, thus, in the Investment Adviser's opinion, is a
more accurate measure of a debt security's longevity.
The net asset value of the Fund's shares will change in response to interest
rate fluctuations. When interest rates decline, the value of a portfolio
primarily invested in debt securities can be expected to rise. Conversely,
when interest rates rise, the value of a portfolio primarily invested in debt
securities can be expected to decline. However, a shorter maturity is
generally associated with a lower level of market value volatility.
Accordingly, the Investment Adviser expects that the net asset value of the
Fund's shares normally will fluctuate significantly less than that of a
longer-term bond fund since the dollar weighted average portfolio maturity of
the Fund will not exceed one year.
The Fund has 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. Except for
such enumerated restrictions and policies, the investment objective and
policies of the Fund are not fundamental policies and accordingly may be
changed by the Trustees without obtaining the approval of the Fund's
shareholders.
The shareholders have authorized the Fund to invest its assets in an open-end
management investment company having substantially the same investment
policies and restrictions as the Fund. The Board of Trustees, should it
implement the new investment policy, would invest the assets of the Fund in
the Short-Term Treasury Portfolio (the "Portfolio"). The Portfolio is a trust
which, like the Fund, would be registered as an open-end management investment
company under the Investment Company Act of 1940. It is anticipated that the
Fund, by investing its assets in the Portfolio, would be in a position to
realize certain benefits from an increase in the size of the underlying
investment portfolio. There can be no assurance that these anticipated
benefits would be realized. This policy has not been implemented given the
current asset size of the Fund and the lack of other investment vehicles
available to invest in the Portfolio. Conversion to this two-tier investment
structure may, however, become attractive in the future.
ORGANIZATION OF THE FUND
- ------------------------------------------------------------------------------
THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE MUTUAL FUNDS TRUST (THE
"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.
MANAGEMENT OF THE FUND
- ------------------------------------------------------------------------------
THE FUND ENGAGES 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. Eaton Vance's expertise in the management of
fixed-income securities ranges from government obligations, high-grade
corporate and municipal securities and bank loan interests to higher yielding
instruments.
Acting under the general supervision of the Board of Trustees of the Trust,
Eaton Vance manages the Fund's investments and affairs. Under its investment
advisory agreement with the Trust on behalf of the Fund, Eaton Vance receives
a monthly advisory fee equal to the aggregate of:
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each
Category as indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which
portion shall bear the same relationship to the total daily gross
income on such day as that portion of the total daily net assets in
the same Category bears to the total daily net assets on such day) in
each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 up to $20 million 0.150% 1.50%
2 $20 million but less than $40 million 0.200% 2.00%
3 $40 million but less than $500 million 0.250% 2.50%
4 $500 million but less than $1 billion 0.225% 2.25%
5 $1 billion but less than $1.5 billion 0.200% 2.00%
6 $1.5 billion but less than $2 billion 0.190% 1.90%
7 $2 billion but less than $3 billion 0.180% 1.80%
8 $3 billion and over 0.170% 1.70%
</TABLE>
Total daily gross income is the total investment income, exclusive of capital
gains and losses and before deduction of expenses, earned each day by the
Fund.
As at December 31, 1995, the Fund had net assets of $1,915,161. For the fiscal
year ended December 31, 1995, Eaton Vance would have earned, absent a fee
reduction, advisory fees equivalent to 0.31% of the Fund's average daily net
assets for such year. To enhance the net income of the Fund, Eaton Vance made
a reduction of its advisory fee in the amount of $122,471.
EATON VANCE OR ITS AFFILIATES ACT AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF OVER $16 BILLION. Eaton Vance is a wholly-owned subsidiary of
Eaton Vance Corp., a publicly-held holding company. Eaton Vance Corp., through
its subsidiaries and affiliates, engages primarily in investment management,
administration and marketing activities. Eaton Vance Distributors, Inc. (the
"Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110, a
wholly-owned subsidiary of Eaton Vance, acts as Principal Underwriter to the
Fund.
Michael B. Terry has acted as the portfolio manager since January, 1991. He
has been a Vice President of Eaton Vance since 1984.
Eaton Vance also furnishes for the use of the Fund office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Fund and has arranged for certain members of the Eaton
Vance organization to serve without salary as officers or Trustees of the
Trust. The Fund is responsible for the payment of all expenses other than
those expressly stated to be payable by Eaton Vance under the investment
advisory agreement or by EVD under the distribution agreement.
Most of the obligations which the Fund will acquire for its portfolio will
normally be traded on a net basis (without commission) through broker-dealers
and banks acting for their own account. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price
of the market, and the difference is customarily referred to as the spread. In
selecting firms which will execute Fund portfolio transactions Eaton Vance
judges their professional ability and quality of service and uses its best
efforts to obtain execution at prices which are advantageous to the Fund and
at reasonably competitive spreads. Subject to the foregoing, Eaton Vance may
consider sales of shares of the Fund or of other investment companies
sponsored by Eaton Vance as a factor in the selection of firms to execute
portfolio transactions.
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
In addition to advisory fees and other expenses, the Fund pays for certain
expenses pursuant to a Distribution Plan (the "Plan") designed to meet the
requirements of Rule 12b-1 under the Investment Company Act of 1940. THE PLAN
PROVIDES THAT THE FUND WILL PAY THE PRINCIPAL UNDERWRITER A QUARTERLY
DISTRIBUTION FEE EQUAL TO .25% ON AN ANNUAL BASIS OF THE FUND'S AVERAGE DAILY
NET ASSETS. The Principal Underwriter may pay up to the entire amount of the
distribution fee to financial service firms (including banking institutions)
(an "Authorized Firm") and their employees, or to employees of the Principal
Underwriter and its affiliates for providing distribution services to the Fund
or services to shareholders. During the fiscal year ended December 31, 1995,
the Fund paid the Principal Underwriter distribution fees under the Plan
equivalent to .25% of the Fund's average daily net assets for such year. To
the extent that the distribution fee is not paid to Authorized Firms and other
persons, the Principal Underwriter may use such fee for its expenses of
distribution of Fund shares. If such fees exceed its expenses, the Principal
Underwriter will realize a profit from these arrangements.
Rule 12b-1 is broadly worded and currently permits mutual funds, such as the
Fund, to finance distribution activities and bear expenses associated with the
distribution of their shares. While the Rule does not describe in detail the
specific types of activities which may be financed or expenses which may be
borne by a fund, it currently states that such permissible activities include
the compensation of underwriters, dealers and sales personnel. Accordingly,
the Plan adopted by the Fund is designed to compensate the Principal
Underwriter and the Authorized Firms through which the Fund's shares are
distributed. The Plan is described further in the Statement of Additional
Information.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES TWICE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, AT NOON AND AS OF THE CLOSE OF REGULAR
TRADING ON THE EXCHANGE (NORMALLY 4:00 P.M. NEW YORK TIME). The Fund's net
asset value per share is determined by its custodian, Investors Bank & Trust
Company ("IBT"), (as agent for the Fund) in the manner authorized by the
Trustees of the Trust. Net asset value is computed by dividing the value of
the Fund's total assets, less its liabilities, by the number of shares
outstanding. Debt securities will normally be valued on the basis of market
valuations provided by a pricing service. Other assets are valued at fair
value using methods determined in good faith by the Trustees.
The net asset value so determined is effective for orders received by
Authorized Firms prior to the price determination (which for this purpose
shall be deemed to have been made at noon and as of the close of regular
trading on the Exchange, except under extraordinary circumstances) and
communicated by the Authorized Firm to the Principal Underwriter (see "How to
Buy Fund Shares") at noon or prior to the close of the Principal Underwriter's
business day. It is the Authorized Firm's responsibility to transmit orders
promptly to the Principal Underwriter.
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 ARE SOLD WITHOUT A SALES CHARGE AT THE NET ASSET VALUE PER
SHARE NEXT DETERMINED AFTER THE RECEIPT OF A PURCHASE ORDER AS DESCRIBED
BELOW. The minimum initial purchase of shares is $5,000. Once an account has
been established the investor may send additional investments of $500 or more
at any time directly to the Fund's transfer agent (the "Transfer Agent") as
follows: First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA
02104. See "Eaton Vance Shareholder Services." An Authorized Firm may charge
its customers a fee in connection with transactions executed by that Firm. The
Fund reserves the right to reject any order for the purchase of its shares or
to limit or suspend, without prior notice, the offering of its shares.
FUND SHARES MAY BE PURCHASED IN THE FOLLOWING WAYS:
PURCHASES THROUGH AUTHORIZED FIRMS. 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. Pursuant to its Distribution Agreement
with EVD, the Trust engages EVD to distribute the Fund's shares on a "best
efforts" basis through Authorized Firms. EVD will furnish the names of
Authorized Firms to an investor upon request. Authorized Firms include
financial service firms with whom the Principal Underwriter has agreements.
BY MAIL: Initial Purchases -- The Account Application form which accompanies
this Prospectus should be completed, signed and mailed with a check, Federal
Reserve Draft, or other negotiable bank draft, drawn on a U.S. bank and
payable in U.S. dollars, to the order of Eaton Vance Short-Term Treasury Fund
and mailed to:
First Data Investor Services Group
BOS725
P.O. Box 1559
Boston, MA 02104
Subsequent Purchases-- Additional purchases may be made at any time by mailing
a check, Federal Reserve Draft, or other negotiable bank draft, drawn on a
U.S. bank and payable in U.S. dollars, to the order of Eaton Vance Short-Term
Treasury Fund, to the Transfer Agent at the above address. The account to
which the subsequent purchase is to be credited should be identified as to the
name(s) of the registered owner(s) and by account number.
BY WIRE: Investors may also purchase shares by requesting their bank to
transmit immediately available funds (Federal Funds) by wire to:
ABA #011001438
Federal Reserve Bank of Boston
A/C Investors Bank & Trust Company
Further Credit Eaton Vance Short-Term Treasury Fund
A/C # [Insert your account number -- see below]
Initial Purchases -- Upon making an initial investment by wire, you must first
telephone the Fund Order Department at 800-225-6265 (extension 3) to advise of
your action and to be assigned an account number. If you neglect to make the
telephone call, it may not be possible to process your order promptly. In
addition, the Account Application form which accompanies this Prospectus
should be promptly forwarded to First Data Investor Services Group, at the
above address.
Subsequent Purchases -- Additional investments may be made at any time through
the wire procedure described above. The Fund Order Department must be
immediately advised by telephone 800-225-6265 (extension 3) of each
transmission of funds by wire.
Purchases received by wire before noon on any business day are invested at the
net asset value determined at noon on that day. Those purchases received by
wire between noon and 4:00 p.m. on any business day are invested at the net
asset value determined at 4:00 p.m. on that day. (See "Valuing Fund Shares").
Transactions in the U.S. Treasury obligations in which the Fund invests
require immediate settlement in Federal Funds. The Fund intends at all times
to be as fully invested as is feasible in order to maximize its earnings.
Accordingly, purchase orders will be executed at the net asset value next
determined after their receipt by the Fund only if the Fund has received
payment in cash or in Federal Funds. If remitted in other than the foregoing
manner, such as by money order or personal check, purchase orders will be
executed as of the close of business on the second Boston business day after
receipt. Information on how to procure a Federal Reserve Draft or transmit
Federal Funds by wire is available at banks. A bank may charge a fee for these
services.
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is
$5,000 or more, the Fund may accept initial investments of less than $5,000 on
the part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates participation in the plan, his or her
shares will be transferred to a regular individual account. However, such
account will be subject to the right of redemption by the Fund as described
below under "How to Redeem Fund Shares."
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value next computed after such delivery. Good order means that
all relevant documents must be endorsed by the record owner(s) exactly as the
shares are registered and the signature(s) must be guaranteed by a member of
either the Securities Transfer Association's STAMP program or the New York
Stock Exchange's Medallion Signature Program, or certain banks, savings and
loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to First
Data Investor Services Group. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
Payment will normally be made by check within one business day after receipt
of the redemption request and must, in any event, be made within seven days of
such receipt, unless expedited payment has been authorized and requested by
the shareholder.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. Net asset value is calculated on the day the
Authorized Firm places the order with EVD, as the Fund's agent, if the Firm
receives the order prior to the close of regular trading on the Exchange and
communicates it to EVD on the same day before EVD closes. It is the Authorized
Firm's responsibility to transmit promptly repurchase orders to EVD.
If shares were recently purchased by check, the proceeds of redemption (or
repurchase) will not be sent until the check (including a certified or
cashier's check) received for the shares purchased has cleared. Payment for
shares tendered for redemption may be delayed up to 15 days from the purchase
date when the purchase check has not yet cleared. The value of shares redeemed
or repurchased may be more or less than their cost depending on portfolio
performance during the period they were owned. Redemptions and repurchases of
shares are taxable events on which shareholders may realize a gain or a loss.
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 accountants. Shortly after the
end of each calendar year, the Fund will furnish its shareholders with
information necessary for preparing federal and state tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
At least quarterly shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $500 OR MORE to First Data
Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each 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.
"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 Eaton Vance Cash
Management Fund on the basis of the net asset value per share of each fund at
the time of the exchange, provided that such exchange offer is available only
in states where shares of Eaton Vance Cash Management Fund may be legally
sold.
Each exchange must involve shares with an aggregate net asset value of at
least $1,000. The exchange privilege may be changed or discontinued without
penalty. Shareholders will be given sixty (60) days' notice prior to any
termination or material amendment of the exchange privilege. The Fund does not
permit the exchange privilege to be used for "Market Timing" and may terminate
the exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult First Data Investor Services Group for
additional information concerning the exchange privilege. The application and
prospectus for Eaton Vance Cash Management Fund is available from Authorized
Firms or the Principal Underwriter. The prospectus for Eaton Vance Cash
Management Fund describes its investment objective and policies, and
shareholders should obtain a prospectus and consider the objective and
policies carefully before requesting an exchange.
Telephone exchanges are accepted by First Data Investor Services Group
provided that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call First Data Investor Services Group
at 800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as
the shares being exchanged. Neither the Fund, the Principal Underwriter nor
First Data Investor Services Group will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to
implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $5,000 minimum
investment has been made, checks of $500 or more payable to the order of Eaton
Vance Short-Term Treasury Fund may be mailed directly to First Data Investor
Services Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether
or not distributions are reinvested. The name of the shareholder, the Fund and
the account number should accompany each investment.
CHECKWRITING: To sell shares by writing a check, shareholders holding shares
for which certificates have not been issued may appoint Boston Safe Deposit
and Trust Company ("Boston Safe") their agent and may request on the Account
Application form that Boston Safe provide them with special forms of checks
drawn on Boston Safe. These checks may be made payable by the shareholder to
the order of any person in any amount of $500 or more. When a check is
presented to Boston Safe for payment, the number of full and fractional shares
required to cover the amount of the check will be redeemed from the
shareholder's account by Boston Safe as the shareholder's agent. Through this
procedure the shareholder will continue to be entitled to distributions paid
on his or her shares up to the time the check is presented to Boston Safe for
payment. If the amount of the check is greater than the value of the shares
held in the shareholder's account, for which the Fund has collected payment,
the check will be returned and the shareholder may be subject to extra
charges. The shareholder will be required to execute signature cards and will
be subject to Boston Safe's rules and regulations governing such checking
accounts. There is no charge to shareholders for this service. This service
may be terminated or suspended at any time by the Fund or Boston Safe.
WIRE TRANSFER TO A BANK ACCOUNT: Shareholders who have given specific written
authorization in advance (on a form available from the Principal Underwriter)
may request that redemption proceeds of $1,000 or more be wired directly to
their bank account. The request may be made by letter or telephone to the Fund
Order Department at 800-225-6265 (extension 3). However, shareholders holding
certificates for shares in the Fund must return such certificates in properly
endorsed form requesting redemption prior to being eligible to have redemption
proceeds wired directly to their bank account. To use this service a
shareholder must designate a bank and bank account number on the Account
Application form used to open the account. The bank designated may be any bank
in the United States.
Proceeds of redemption requests received before noon on any business day will
be wired that same day, if so requested by the shareholder. Redemption
requests received between noon and 4:00 p.m. on any business day will be
processed at 4:00 p.m. and the proceeds will be wired on the next business
day. The shareholder may be required to pay any costs of such transaction;
however, no such costs are currently charged. The Fund will limit this method
of payment to shares purchased with cash, Federal Reserve Draft, by wire with
Federal Funds, or by other means when payment for shares purchased has been
assured. The Fund reserves the right at any time to suspend or terminate the
expedited payment procedure; however, the Fund would provide reasonable
advance notice (in no event less than 30 days) of its intention to suspend or
terminate this procedure. The Fund will process redemption instructions
received by telephone if the shareholder has authorized telephone redemptions
when completing the Account Application form. However, the Fund will not
process redemption requests by telephone if share certificates have been
issued to such shareholders. The responsibility for the authenticity of
redemption instructions received by telephone is discussed under "The Eaton
Vance Exchange Privilege".
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
--Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
--Individual Retirement Account Plans for individuals and their non-
employed spouses; and
--403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the
"Code").
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from
the Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans, all
distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
The Fund has elected to be treated, has qualified and intends to continue to
qualify each year as a regulated investment company 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 a
sufficient amount of its investment company taxable income so as to effect
such qualification. The Fund may also distribute part or all of its net
investment income and realized capital gains in accordance with the timing
requirements imposed by the Code, so as to reduce or avoid federal income or
excise tax to the Fund.
The Fund distributes its net investment income and capital gains to
shareholders as dividends annually to the extent required for the Fund to
qualify as a regulated investment company under the Code and generally to
avoid federal income or excise tax to the Fund. Under current law, the Fund
intends on its tax return to treat as a distribution of investment company
taxable income and net capital gain the portion of redemption proceeds paid to
redeeming shareholders that represents the redeeming shareholders' portion of
the Fund's undistributed investment company taxable income and net capital
gain. This practice, which involves the use of equalization accounting, will
have the effect of reducing the amount of income and gains that the Fund is
required to distribute as dividends to shareholders in order for the Fund to
avoid federal income tax and excise tax. This practice may also reduce the
amount of distributions required to be made to nonredeeming shareholders and
defer the recognition of taxable income by such shareholders. However, since
the amount of any undistributed income will be reflected in the value of the
Fund's shares, the total return on a shareholder's investment will not be
reduced as a result of the Fund's distribution policy. Investors who purchase
shares shortly before the record date of a distribution will pay the full
price for the shares and then receive some portion of the price back as a
taxable distribution.
Distributions of taxable net investment income are taxable to shareholders as
ordinary income, whether paid in cash or additional shares of the Fund.
Capital gains, if any, realized by the Fund on sales of investments during the
Fund's taxable year, which ends on December 31, will be offset by any capital
loss carryovers and will usually be distributed after the close of such
taxable year, in compliance with the distribution requirements of the Code.
Distributions from net long-term capital gain included therein are taxable to
shareholders as such, 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. Distributions from net short-term capital gain included
therein are taxable to shareholders as ordinary income, whether paid in cash
or reinvested in additional shares of the Fund. Certain distributions declared
by the Fund in October, November or December and paid the following January
will be taxable to shareholders as if received on December 31 of the year in
which they are declared. Shareholders should consult their own tax advisors
with respect to special tax rules, such as Section 1258 of the Code, that may
apply in their particular situations.
Shareholders will receive one or more 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.
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. For the taxable
year ended December 31, 1995, the Fund did not incur any federal income or
excise taxes although it may incur such taxes in the future if management
determines that retention of some income or gains is appropriate. Under
current law, provided that the Fund qualifies as a regulated investment
company for federal income tax purposes, the Fund is not liable for any
income, corporate excise or franchise tax in the Commonwealth of
Massachusetts. The Fund incurred no state tax liability in respect of its
taxable year ended December 31, 1995.
STATE, LOCAL AND FOREIGN TAXES
Distributions of the Fund which are derived from interest on obligations of
the U.S. Government will be exempt from personal and/or corporate income taxes
in most states. The Fund will inform shareholders of the proportion of its
distributions which are derived from interest on such obligations.
Shareholders should consult their tax advisers regarding the proper treatment
of such portion of their distributions for state and local income tax purposes
and with respect to the state, local or foreign tax consequences of investing
in the Fund.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL
TOTAL RETURN. The Fund's current yield is calculated by dividing the net
investment income per share earned during a recent 30-day period by the
maximum offering price per share (net asset value) of the Fund on the last day
of the period and annualizing the resulting figure. Yield should not be
considered the equivalent of dividends. The Fund's average annual total return
is determined by computing the average annual percentage change in value of
$1,000 invested at the maximum public offering price (net asset value) for
specified periods ending with the most recent calendar quarter, assuming
reinvestment of all distributions. The average annual total return calculation
assumes a complete redemption of the investment. The Fund may also publish
annual and cumulative total return figures from time to time.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's current yield or total return
for any prior period should not be considered a representation of what an
investment may earn or what the Fund's yield or total return may be in any
future period. If the expenses of the Fund are paid by Eaton Vance, the Fund's
performance will be higher.
<PAGE>
[LOGO]
EATON VANCE
SHORT-TERM
TREASURY FUND
PROSPECTUS
MAY 1, 1996
EATON VANCE SHORT-TERM
TREASURY FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., One Post Office Square, Boston, MA 02109
TYP
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EATON VANCE CASH MANAGEMENT FUND
EATON VANCE LIQUID ASSETS FUND
EATON VANCE MONEY MARKET FUND
EATON VANCE TAX FREE RESERVES
- ------------------------------------------------------------------------------
EATON VANCE CASH MANAGEMENT FUND ("Cash Fund"), EATON VANCE LIQUID ASSETS FUND
("Liquid Assets Fund") and EATON VANCE MONEY MARKET FUND ("Money Market Fund")
are diversified money market funds seeking high income consistent with
preservation of capital and maintenance of liquidity. EATON VANCE TAX FREE
RESERVES ("Tax Free Reserves") is a diversified money market fund seeking high
income exempt from regular federal income tax consistent with preservation of
capital and maintenance of liquidity. The Cash, Liquid Assets and Money Market
Funds invest all of their assets in Cash Management Portfolio (the
"Portfolio"), a separate, diversified investment company with the same
investment objective, rather than investing in and managing their own
portfolio of securities as with historically structured mutual funds. Tax Free
Reserves invests directly in its own portfolio of money market instruments.
Each Fund is a series of Eaton Vance Mutual Funds Trust (the "Trust").
AN INVESTMENT IN A FUND IS NOT GUARANTEED OR FEDERALLY INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENT AGENCY. SHARES OF A FUND ARE NOT OBLIGATIONS OR
DEPOSITS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER INSURED
DEPOSITORY INSTITUTION. THERE IS NO ASSURANCE THAT A FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SHARES OF EACH FUND
INVOLVE INVESTMENT RISKS, INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE
LOSS OF SOME OR ALL OF THE PRINCIPAL INVESTMENT.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A
Statement of Additional Information dated May 1, 1996 for each Fund, as
supplemented from time to time, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The Statements of
Additional Information are available without charge from the Funds' principal
underwriter, Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA
02110 (telephone (800) 225-6265). TAX FREE RESERVES IS NOT AVAILABLE FOR
PURCHASE IN ALL STATES. CONTACT THE PRINCIPAL UNDERWRITER OR YOUR BROKER FOR
INFORMATION.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ........................ 2 How to Buy Fund Shares ........................... 15
The Funds' Financial Highlights ...................... 4 How to Redeem Fund Shares ........................ 16
The Funds' Investment Objectives ..................... 8 Reports to Shareholders .......................... 17
How the Funds Invest their Assets..................... 8 The Lifetime Investing Account/Distribution Options 18
Organization of the Funds and the Portfolio .......... 10 The Eaton Vance Exchange Privilege ............... 18
Management of the Funds and the Portfolio ............ 12 Eaton Vance Shareholder Services ................. 20
Distribution Plans ................................... 13 Distributions and Taxes .......................... 21
Valuing Fund Shares .................................. 15 Yield Information ................................ 22
- ------------------------------------------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1996
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
- -----------------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
---------------------------------------------------------------------------------------------------------------------
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
---- ------------- ------------ --------
<S> <C> <C> <C> <C>
Sales Charges Imposed on Purchases of Shares None None None None
Sales Charges Imposed on Reinvested Distributions None None None None
Fees to Exchange Shares None None None None
Range of Declining Contingent Deferred Sales Charges
Imposed on Redemption During the First Seven Years (as a
percentage of redemption proceeds exclusive of all
reinvestments and capital appreciation in the account) None 5.0% - 0% 5.0% - 0% None
<CAPTION>
ANNUAL FUND (AND ALLOCATED PORTFOLIO) OPERATING EXPENSES (as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
---- ------------- ------------ --------
<S> <C> <C> <C> <C>
Investment Adviser Fee 0.50% 0.50% 0.50% 0.11%*
Rule 12b-1 Distribution (and/or Service) Fees -- 0.22 0.78 --
Interest Expense -- -- -- 0.05
Other Expenses 0.24 0.38 0.43 ** 0.23
---- ---- ---- ----
Total Operating Expenses 0.74% 1.10% 1.71%** 0.39%
==== ==== ==== ====
- ----------
*After reduction by Investment Adviser.
**After expense reduction.
EXAMPLES
An investor would pay the following contingent deferred sales charge and expenses on a $1,000 investment, assuming 5%
annual return and redemption at the end of each period:
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
---- ------------- ------------ --------
1 Year N/A $ 61 $ 67 N/A
3 Years N/A 75 94 N/A
5 Years N/A 81 N/A N/A
10 Years N/A 134 N/A N/A
An investor would pay the following expenses on the same investment, assuming 5% annual return and no redemptions:
CASH LIQUID ASSETS MONEY MARKET TAX FREE
FUND FUND FUND RESERVES
---- ------------- ------------ --------
1 Year $ 8 $ 11 $ 17 $ 4
3 Years 24 35 54 13
5 Years 41 61 N/A 22
10 Years 92 134 N/A 49
</TABLE>
NOTES:
The tables and Examples summarize the aggregate expenses of the Funds and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear, directly or indirectly, by investing in the Funds. Information
for the Cash Fund, Liquid Assets Fund and Tax Free Reserves is based on their
expenses for the most recent fiscal year, except that the Rule 12b-1
Distribution (and/or Service) Fees for the Liquid Assets Fund are estimated
for the current fiscal year. Information for the Money Market Fund is
estimated for the current fiscal year. Other Expenses and Total Operating
Expenses for the Money Market Fund reflect the expected expense allocation for
the current fiscal year, absent which Other Expenses and Total Operating
Expenses would be estimated to be 0.60% and 1.88%, respectively. Absent an
expense allocation, Tax Free Reserves Investment Adviser Fee and Total
Operating Expenses would be 0.50% and 0.78%, respectively.
The Cash, Liquid Assets, and Money Market Funds invest exclusively in the
Portfolio. Their Trustees believe the aggregate per share expenses of each
Fund and the Portfolio should approximate, and over time may be less than, the
per share expense the Fund would incur if the Trust retained the services of
an investment adviser for the Fund and the Fund's assets were invested
directly in the types of securities being held by the Portfolio.
The Examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown. Federal
regulations require the Examples to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Funds and the Portfolio, see "The Funds" Financial Highlights'',
"Organization of the Funds and the Portfolio", "Management of the Funds and
the Portfolio" and "How to Redeem Fund Shares". A long-term shareholder in the
Money Market Fund may pay more than the economic equivalent of the maximum
front-end sales charge permitted by a rule of the National Association of
Securities Dealers, Inc. See "Distribution Plans".
In the case of the Liquid Assets and Money Market Funds, no contingent
deferred sales charge is imposed on (a) shares purchased more than six years
prior to redemption, (b) shares acquired through the reinvestment of
distributions or (c) any appreciation in value of other shares in the account,
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".
Other investment companies with different distribution arrangements and fees
may invest in the Portfolio and others may do so in the future. See
"Organization of the Funds and the Portfolio".
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the audited
financial statements included in each Fund's annual report to shareholders
which are incorporated by reference into the Statement of Additional
Information, in reliance upon the reports of Coopers & Lybrand L.L.P.,
independent accountants, as experts in accounting and auditing. Further
information regarding the performance of the Funds, is contained in their
annual reports to shareholders which may be obtained without charge by
contacting the Principal Underwriter.
MONEY MARKET FUND
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM THE START OF BUSINESS, APRIL 5, 1995, TO DECEMBER 31, 1995
- --------------------------------------------------------------------------------
NET ASSET VALUE, beginning of year $ 1.00
-------
Income from operations:
Net investment income $0.0312
Less distributions:
From net investment income ($0.0312)
-------
NET ASSET VALUE, end of year $ 1.00
=======
TOTAL RETURN(1) 3.17%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) $12,951
RATIOS: (As a percentage of average daily net assets)(2)
Expenses 1.68%
Net investment income 4.19%
For the period indicated, the operating expenses of the
Fund reflect an allocation of expenses to the Administrator.
Had such action not been taken, net investment income per share
and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $0.0300
-------
RATIOS (As a percentage of average net assets)(2):
Expenses 1.85%
Net investment income 4.03%
(See footnotes on page 7)
<PAGE>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIQUID ASSETS FUND
--------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
-------------------------- ---------------------------------------------------
1995 1994 1993* 1993+ 1992+ 1991+ 1990+ 1989+ 1988+
------ ------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM OPERATIONS:
Net investment income 0.0505 0.0328 0.0113 0.0217 0.0415 0.0621 0.0726 0.0632 0.0477
LESS DISTRIBUTIONS:
From net investment income (0.0505) (0.0328) (0.0113) (0.0217) (0.0415) (0.0621) (0.0726) (0.0632) (0.0477)
------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN(1) 5.16% 3.29% 1.14% 2.35% 4.38% 6.50% 7.59% 6.37% 4.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's omitted) $34,026 $118,599 $10,566 $18,553 $ 9,145 $19,996 $21,601 $10,705 $13,105
RATIOS (As a percentage of average
daily net assets)(2):
Expenses 0.91% 0.94% 1.49% 0.92% 1.23% 1.68% 2.08% 1.71% 1.42%
Net investment income 5.11% 3.55% 1.66%++ 2.33% 4.30% 6.23% 7.20% 6.24% 5.82%
For the periods indicated, the operating expenses of the Fund reflect an allocation of expenses. Had such actions not been
undertaken, net investment income per share and the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $0.0092 $0.0171 $0.0372 $0.0570 $0.0687 $0.0559 $0.0374
RATIOS (As a percentage of average net assets)(2):
Expenses 1.80%++ 1.42% 1.73% 2.19% 2.47% 2.43% 3.16%
Net investment income 1.35%++ 1.85% 3.80% 5.72% 6.81% 5.52% 4.08%
(See footnotes on page 7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
TAX FREE RESERVES
------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991+ 1990+ 1989+ 1988+ 1987+ 1986+
---- ---- ---- ---- ---- ---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning
of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM OPERATIONS:
Net
investment
income $ 0.034693 $ 0.023548 $ 0.018399 $ 0.023468 $ 0.038797 $ 0.051929 $ 0.055218 $ 0.047113 $ 0.039484 $ 0.042457
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net
investment
income $(0.034693) $(0.023548) $(0.018399) $(0.023468) $(0.038797) $(0.051929) $(0.055218) $(0.047113) $(0.039484) $(0.042457)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE,
end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ========== ========== ========== ========== ========== ==========
TOTAL RETURN(1) 3.53% 2.36% 1.86% 2.36% 3.92% 5.30% 5.67% 4.80% 4.01% 4.35%
RATIOS/
SUPPLEMENTAL DATA:
Net assets,
end of year
(000's
omitted) $ 23,912 $ 29,021 $ 60,247 $ 44,337 $ 47,140 $ 53,753 $ 26,745 $ 73,855 $ 78,369 $ 77,137
Interest
expense to
average net
assets 0.05% 0.05% 0.07% 0.06% 0.09% 0.05% 0.26% 0.08% 0.07% 0.15%
Net other
expenses to
average net
assets 0.34% 0.47% 0.62% 0.53% 0.49% 0.70% 0.82% 0.76% 0.75% 0.61%
Net investment
income to
average net
assets 3.47% 2.27% 1.82% 2.34% 3.92% 5.19% 5.60% 4.70% 3.96% 4.14%
<PAGE>
For the periods indicated, the expenses related to the operation of the Fund were reduced either by a reduction of the
investment adviser fee, an allocation of expenses to the investment adviser, or both. Had such actions not been
undertaken, net investment income per share and the ratios would have been as follows:
NET INVESTMENT
INCOME PER
SHARE $ 0.030291 $ 0.018948 $ 0.016668 $ 0.020133 $ 0.034647 $ 0.050052 $ 0.054822 $ 0.008966 $ 0.009147
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
RATIOS (As a
percentage of
average net
assets):
Other expenses 0.73% 0.87% 0.82% 0.92% 0.91% 0.85% 0.85% 0.81% 0.72%
Net investment
income 3.02% 1.88% 1.65% 2.01% 3.50% 5.04% 5.57% 3.90% 4.03%
<CAPTION>
From time to time it has been necessary for Tax Free Reserves to borrow from banks as a temporary measure to facilitate
the orderly sale of portfolio securities to accommodate redemption requests. The following table summarizes such
temporary borrowings:
AVERAGE DAILY AVERAGE WEEKLY AVERAGE AMOUNT
AMOUNT OF BALANCE OF BALANCE OF OF DEBT
YEAR ENDED DEBT OUTSTANDING DEBT OUTSTANDING SHARES OUTSTANDING PER SHARE
DECEMBER 31, AT END OF YEAR DURING YEAR DURING YEAR DURING YEAR
------------ ---------------- ---------------- ------------------ -----------
<S> <C> <C> <C> <C>
1986+ $ -- $1,316,000 66,327,940 $0.020
1987+ -- 1,312,000 68,850,770 0.019
1988+ 166,000 1,401,000 72,897,174 0.019
1989+ 82,000 1,825,000 52,596,221 0.035
1990+ -- 192,000 31,243,924 0.006
1991+ -- 379,000 31,686,707 0.012
1992 -- 367,000 38,904,763 0.009
1993 2,428,000 285,000 48,697,998 0.006
1994 6,117,000 440,145 40,463,382 0.011
1995 1,266,000 279,586 51,107,215 0.005
(See footnotes on page 7)
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
THE FUNDS' FINANCIAL HIGHLIGHTS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FUND
------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991+ 1990+ 1989+ 1988+ 1987+ 1986+
---- ---- ---- ---- ---- ---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 0.0522 $ 0.0345 $ 0.0251 $ 0.0306 $ 0.0537 $ 0.0755 $ 0.0846 $ 0.0688 $ 0.0607 $ 0.0610
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.0522) $(0.0345) $(0.0251) $(0.0306) $(0.0537) $(0.0755) $(0.0846) $(0.0688) $(0.0607) $(0.0610)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(1) 5.35% 3.49% 2.54% 3.14% 5.51% 7.82% 8.87% 7.12% 6.23% 6.27%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's omitted) $155,251 $111,622 $112,200 $161,986 $195,488 $250,658 $246,220 $174,842 $257,607 $212,050
RATIOS: (As a percentage of
average daily net assets)(2):
Expenses 0.74% 0.84% 0.67% 0.76% 0.75% 0.71% 0.71% 0.72% 0.66% 0.70%
Net investment income 5.22% 3.40% 2.51% 3.09% 5.44% 7.54% 8.46% 6.92% 6.03% 6.13%
</TABLE>
Note: Certain of the per share amounts have been compiled using average shares
outstanding.
FOOTNOTES:
*For the nine months ended December 31, 1993. The Fund changed its fiscal year
end from March 31 to December 31, effective June 14, 1993.
+Audited by the Funds' previous auditors.
++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 each period
reported. Distributions, if any, are assumed to be reinvested at the net
asset value on the payable date. Total return is not computed on an
annualized basis.
(2)Includes Money Market Fund's, Cash Fund's and Liquid Assets Fund's share of
the Portfolio's allocated expenses for the periods from April 5, 1995, May 2,
1994 and May 2, 1994, to December 31, 1995, December 31, 1994 and December
31, 1994, respectively.
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES
- -------------------------------------------------------------------------------
THE INVESTMENT OBJECTIVE OF CASH MANAGEMENT FUND, LIQUID ASSETS FUND and
MONEY MARKET FUND is to provide as high a rate of income as may be consistent
with preservation of capital and maintenance of liquidity. The investment
objective of TAX FREE RESERVES is to provide a means whereby investors may
earn as high a rate of income exempt from regular federal income tax as may be
consistent with the preservation of capital and maintenance of liquidity. The
investment objective and policies of each Fund may be changed by the Trustees
without a vote of shareholders; as a matter of policy, the Trustees would not
materially change the investment objective of a Fund without shareholder
approval. EACH FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1 PER
SHARE, ALTHOUGH THERE CAN BE NO ASSURANCE IT WILL BE ABLE TO DO SO.
The Cash Fund and Tax Free Reserves are offered to shareholders in exchange
for their shares in the Eaton Vance Traditional Group of Funds. The Money
Market Fund offers its shares to shareholders exchanging their shares from the
Eaton Vance Marathon and Eaton Vance Classic Groups of Funds. (The Money
Market Fund may not be a suitable investment for investors who do not intend
to use it as an exchange vehicle.) The Liquid Assets Fund is currently closed
to new investments, whether by exchange or initial subscription.
HOW THE FUNDS INVEST THEIR ASSETS
- -------------------------------------------------------------------------------
CASH FUND, LIQUID ASSETS FUND, AND MONEY MARKET FUND
Each of these Funds seeks its objective by investing all of its assets in the
Portfolio, which is itself an open-end investment company. This investment
structure is commonly referred to as a "master/feeder" structure. The Portfolio
invests in the following types of high quality, U.S. dollar- denominated money
market instruments of domestic and foreign issuers:
* U.S. GOVERNMENT SECURITIES: marketable securities issued or guaranteed
as to principal or interest by the U.S. Government or by its agencies or
instrumentalities. Some of these securities are backed by the full faith
and credit of the U.S. Government; others are backed only by the credit
of the agency or instrumentality issuing the securities.
* PRIME COMMERCIAL PAPER: high-grade, short-term obligations issued by
banks, corporations, and other issuers.
* CORPORATE OBLIGATIONS: high-grade, short-term obligations other than
prime commercial paper.
* BANK CERTIFICATES OF DEPOSIT (CDS): negotiable certificates issued
against funds deposited in a commercial bank for a definite period of
time and earning a specified return.
* BANKERS' ACCEPTANCES: negotiable drafts or bills of exchange, which have
been "accepted" by a bank, means, in effect, that the bank has
unconditionally agreed to pay the face value of the instrument on
maturity.
Investments are described further below under "All Funds -- Selection of
Investments." The Portfolio may invest without limit in securities of finance
companies or in securities of banks and thrift institutions (and their holding
companies) whenever yield differentials or money market conditions indicate
that such a concentration of the Portfolio's investments may be desirable.
The Portfolio may invest without limit in U.S. dollar-denominated obligations
of foreign issuers, including foreign banks. Such investments involve special
risks. These include future unfavorable political and economic developments,
possible withholding taxes, seizure of foreign deposits, interest limitations
or other governmental restrictions which might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign branches of foreign banks are not
regulated by U.S. banking authorities, and generally are not bound by
accounting, auditing and financial reporting standards comparable to U.S.
banks. Although the Portfolio's investment adviser carefully considers these
factors when making investments, the Portfolio does not limit the amount of
its assets which can be invested in one type of instrument or in any foreign
country.
TAX FREE RESERVES
Tax Free Reserves seeks to achieve its objective by investing in a diversified
portfolio of obligations, including bonds, notes and commercial paper, issued
by or on behalf of states, territories and possessions of the United States
and their political subdivisions, agencies and instrumentalities, and the
District of Columbia, the interest from which is exempt from regular federal
income tax.
The Fund may acquire stand-by commitments with respect to portfolio securities
and, with respect to 10% of net assets, may purchase shares of unaffiliated
investment companies with the same objective. Investments are described further
below under "All Funds -- Selection of Investments".
The Fund is designed for those institutional and individual investors who seek
to earn tax-free income and to avoid fluctuation in the value of their
investment while at the same time having the flexibility to liquidate and
withdraw funds at any time. By combining the assets of shareholders, the Fund
can provide yields normally available through investment in tax-free money
market instruments of large denominations, and can obtain the benefits of
diversification and liquidity through investment in the obligations of many
issuers with various maturities.
A portion of the dividends paid by the Fund may be subject to federal income
tax, and dividends may be subject to state and local taxes. As a matter of
fundamental policy which may not be changed unless authorized by shareholder
vote, the Fund may not purchase any securities which would cause more than 20%
of the value of its total assets to be invested in securities the interest on
which is not exempt from federal income tax.
Interest income from certain types of municipal obligations may be subject to
the federal alternative minimum tax (the "AMT"). On December 31, 1995, the
Fund did not hold any of such obligations in its portfolio. Distributions to
corporate investors of certain interest income may also be subject to the AMT.
ALL FUNDS -- SELECTION OF INVESTMENTS
The Portfolio and Tax Free Reserves will invest only in U.S. dollar-
denominated high-quality securities and other U.S. dollar-denominated money
market instruments meeting credit criteria which the Trustees believe present
minimal credit risk. "High-quality securities" are (i) short-term obligations
rated in one of the two highest short-term ratings categories by at least two
nationally recognized rating services (or, if only one rating service has
rated the security, by that service), (ii) obligations rated at least AA by
Standard & Poor's Ratings Group or Aa by Moody's Investors Service, Inc. at
the time of investment, and (iii) unrated securities determined by the
investment adviser to be of comparable quality, subject to the overall
supervision of the Trustees. For a description of the instruments and ratings
see the "Appendix" in the Statement of Additional Information. Each of the
Portfolio and Tax Free Reserves will maintain a dollar-weighted average
maturity of 90 days or less and will not invest in securities with remaining
maturities of more than 397 days. The Portfolio and Tax Free Reserves may
invest in variable or floating-rate securities which bear interest at rates
subject to periodic adjustment or which provide for periodic recovery of
principal on demand. Under certain conditions, these securities may be deemed
to have remaining maturities equal to the time remaining until the next
interest adjustment date or the date on which principal can be recovered on
demand. The Portfolio will not invest more than 5% (determined at the time of
investment) of its total assets in securities rated below the highest
applicable rating category, nor will it purchase securities of any issuer if,
immediately thereafter, more than 5% of the Portfolio's total assets would be
invested in securities of that issuer. The Portfolio and Tax Free Reserves
follow investment and valuation policies designed to maintain a stable net
asset value of $1 per Fund share, although there is no assurance that these
policies will be successful.
Considerations of liquidity and preservation of capital mean that the
Portfolio or Tax Free Reserves may not necessarily invest in money market
instruments paying the highest available yield at a particular time.
Consistent with their investment objectives, the Portfolio and Tax Free
Reserves will attempt to maximize yields by portfolio trading and by buying
and selling portfolio investments in anticipation of or in response to
changing economic and money market conditions and trends. The Portfolio and
Tax Free Reserves may also invest to take advantage of what their investment
advisers believe to be temporary disparities in yields of different segments
of the high-grade money market or among particular instruments within the same
segment of the market. These policies, as well as the relatively short
maturities of obligations purchased by the Portfolio and Tax Free Reserves,
may result in frequent changes in their portfolios. The Portfolio and Tax Free
Reserves will not usually pay brokerage commissions in connection with the
purchase or sale of portfolio securities.
OTHER PRACTICES. The Portfolio and Tax Free Reserves may lend their portfolio
securities to broker-dealers and may enter into repurchase agreements. These
transactions must be fully collateralized at all times, but involve some risk
to the lender if the other party should default on its obligations or if the
lender is delayed or prevented from recovering the collateral. The Portfolio
and Tax Free Reserves may also purchase securities on a when-issued basis and
for future delivery by means of "forward commitments." A segregated account
will be maintained to cover such purchase obligations. In addition, the
Portfolio may temporarily borrow up to 5% of the value of its total assets to
satisfy redemption requests or settle securities transactions.
An investment in a Fund is subject to interest rate risk and credit risks of
the issuers of the money market instruments. EACH FUND'S INCOME WILL FLUCTUATE
AND NET ASSET VALUE UNDER CERTAIN CIRCUMSTANCES COULD CHANGE. If any changes
were made in a Fund's investment objective, the Fund may no longer be
appropriate to certain investors. Investments and restrictions thereon are
further described in the Statements of Additional Information.
NONE OF THE FUNDS IS A COMPLETE INVESTMENT PROGRAM, AND PROSPECTIVE
INVESTORS SHOULD TAKE INTO ACCOUNT THEIR OBJECTIVES AND OTHER INVESTMENTS
WHEN CONSIDERING THE PURCHASE OF FUND SHARES. THE FUNDS CANNOT ELIMINATE
RISK OF LOSS OR ASSURE ACHIEVEMENT OF THEIR INVESTMENT OBJECTIVES.
ORGANIZATION OF THE FUNDS AND THE PORTFOLIO
- ------------------------------------------------------------------------------
Each Fund is a diversified series of Eaton Vance Mutual Funds Trust (the
"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 Funds). Each share
represents an equal proportionate beneficial interest in a Fund. When issued
and outstanding, the shares are fully paid and nonassessable by the Trust and
redeemable as described under "How to Redeem Fund Shares". Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of a Fund, shareholders are
entitled to share pro rata in the net assets of that Fund available for
distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Cash, Liquid Assets and Money Market Funds and other entities permitted to
invest in the Portfolio (e.g., other U.S. and foreign investment companies,
and common and commingled trust funds) will each be liable for all obligations
of the Portfolio. However, the risk of a Fund incurring financial loss on
account of such liability is limited to circumstances in which both inadequate
insurance exists and the Portfolio itself is unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Funds nor
their shareholders will be adversely affected by reason of the Funds investing
in the Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Cash, Liquid Assets or Money Market Fund should be aware that each of
those Funds, unlike mutual funds which directly acquire and manage their own
portfolios of securities, seeks to achieve its investment objective by
investing its assets in an interest in the Portfolio, which is a separate
investment company with an identical investment objective (although the Fund
may temporarily hold a de minimis amount of cash). Therefore, the Fund's
interest in the securities owned by the Portfolio is indirect. In addition to
selling an interest to the Fund, the Portfolio may sell interests to other
affiliated and non-affiliated mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to sell their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the various funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information
regarding the investment objective, policies and restrictions of the
Portfolio, see "The Funds" Investment Objectives'' and "How the Funds Invest
their Assets". Further information regarding investment practices may be found
in the Statements of Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the relevant Fund in the Portfolio, as well as the
advantages and disadvantages of the two-tier format. The Trustees believe that
the structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund. The
public shareholders of the Cash Fund and the Liquid Assets Fund have
previously approved the policy of investing their assets in the Portfolio.
Each of the Cash, Liquid Assets and Money Market Funds may withdraw
(completely redeem) all its assets from the Portfolio at any time if the Board
of Trustees of the Trust determines that it is in the best interest of the
Fund to do so. The investment objective and the nonfundamental investment
policies of a Fund and the Portfolio may be changed by the Trustees of the
Trust and the Portfolio without obtaining the approval of the shareholders of
the Fund or the investors in the Portfolio, as the case may be. Any such
change of the investment objective will be preceded by thirty days' advance
written notice to the shareholders of the Fund or the investors in the
Portfolio, as the case may be. If a shareholder redeems shares because of a
change in the nonfundamental objective or policies of a Fund, those shares may
be subject to a contingent deferred sales charge, as described in "How to
Redeem Fund Shares". In the event a Fund withdraws all of its assets from the
Portfolio, or the Board of Trustees of the Trust determines that the
investment objective of the Portfolio is no longer consistent with the
investment objective of the Fund, such Trustees would consider what action
might be taken, including investing the assets of the Fund in another pooled
investment entity or retaining an investment adviser to manage the Fund's
assets in accordance with its investment objective. A Fund's investment
performance may be affected by a withdrawal of all its assets from the
Portfolio.
Information regarding other pooled investment entities or funds which invest
in the Portfolio may be obtained by contacting Eaton Vance Distributors, Inc.
(the "Principal Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110,
(617) 482-8260. Smaller investors in the Portfolio may be adversely affected
by the actions of a larger investor in the Portfolio. For example, if a large
investor withdraws from the Portfolio, the remaining investors may experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio may become less diverse, resulting in increased
portfolio risk, and experience decreasing economies of scale. However, this
possibility exists as well for historically structured funds which have large
or institutional investors.
Until 1992, Eaton Vance Management sponsored and advised funds with more
traditional organizational structures. Funds which invest all their assets in
interests in a separate investment company are a relatively new development in
the mutual fund industry and, therefore, the Cash, Liquid Assets and Money
Market Funds may be subject to additional regulations than historically
structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of a Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
Whenever a Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. A Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, a Fund could incur brokerage, tax or other charges
in converting the securities to cash. In addition, the distribution in kind
may result in a less diversified portfolio of investments or adversely affect
the liquidity of the Fund. Notwithstanding the above, there are other means
for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that some of the
Trustees of the Trust and the Trustees of the Portfolio are the same. Such
procedures require each Board to take action to resolve any conflict of
interest between the Fund and the Portfolio, and it is possible that the
creation of separate Boards may be considered. For further information
concerning the Trustees and officers of the Trust and the Portfolio, see the
Statements of Additional Information.
The shareholders of Tax Free Reserves have approved the adoption of an
investment policy for the Fund and the addition of a fundamental investment
provision to permit the Fund to invest its assets in an open-end management
investment company having substantially the same investment policies and
restrictions as the Fund. The Board of Trustees would implement the new
investment policy by investing the assets of the Fund in the Tax Free Reserves
Portfolio. If such action occurs, the foregoing discussion about the two-tier
investment structure would be applicable to Tax Free Reserves.
Although each Fund offers only its own shares of beneficial interest, it is
possible that a Fund might become liable for a misstatement or omission in
this Prospectus regarding another Fund because the Funds use this combined
Prospectus. The Trustees of the Trust have considered this factor in approving
the use of a combined Prospectus.
MANAGEMENT OF THE FUNDS AND THE PORTFOLIO
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THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT
ADVISER. TAX FREE RESERVES ENGAGES EATON VANCE AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. 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 its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of 1/24 of 1% (equivalent to 0.50% annually) of the average daily
net assets of the Portfolio. For the fiscal year ended December 31, 1995, the
Portfolio paid BMR advisory fees equivalent to 0.50% of the Portfolio's average
daily net assets for such year.
Eaton Vance, acting under the general supervision of the Trustees of the
Trust, manages Tax Free Reserves, investments and affairs. Eaton Vance also
furnishes for the use of Tax Free Reserves office space and all necessary
office facilities, equipment and personnel for servicing the investments of
the Fund. Under its investment advisory agreement with Tax Free Reserves,
Eaton Vance receives a monthly advisory fee of 1/24 of 1% (equivalent to
0.50% annually) of average monthly net assets of the Fund. For the fiscal year
ended December 31, 1995, Eaton Vance earned advisory fees of 0.50% of the
Fund's average monthly net assets for such year. To enhance the net income of
the Fund, Eaton Vance made a reduction of its advisory fee in the amount of
$200,851.
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 is a wholly-owned subsidiary of Eaton Vance
Corp., a publicly-held holding company. Eaton Vance Corp., through its
subsidiaries and affiliates, engages primarily in investment management,
administration and marketing activities, EVD is a wholly-owned subsidiary of
Eaton Vance.
Money market instruments are often acquired directly from the issuers thereof
or otherwise are normally traded on a net basis (without commission) through
broker-dealers and banks acting for their own account. Such firms attempt to
profit from such transactions by buying at the bid price and selling at the
higher asked price of the market, and the difference is customarily referred
to as the spread. In selecting firms which will execute portfolio
transactions, BMR and Eaton Vance judge such executing firms' professional
ability and quality of service and use their best efforts to obtain execution
at prices which are advantageous and at reasonably competitive spreads.
Subject to the foregoing, BMR and Eaton Vance may consider sales of shares of
the Funds or of other investment companies sponsored by BMR or Eaton Vance as
a factor in the selection of firms to execute portfolio transactions.
Michael B. Terry has acted as the portfolio manager of the Portfolio since it
commenced operations. He has been a Vice President of Eaton Vance since 1984
and of BMR since 1992.
William H. Ahern has acted as the portfolio manager of Tax Free Reserves since
1989. He has been an employee of Eaton Vance since 1989 and an Assistant Vice
President since 1994.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Cash, Liquid Assets and Money Market Funds. The Trust has not retained the
services of an investment adviser for these Funds since the Trust seeks to
achieve the investment objective of each such Fund by investing the Fund's
assets in the Portfolio. As Administrator, Eaton Vance provides each such Fund
with general office facilities and supervises the overall administration of
the Funds. For these services, Eaton Vance currently receives no compensation.
The Trustees of the Trust may determine, in the future, to compensate Eaton
Vance for such services.
The Portfolio and the Funds, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreement, by Eaton Vance under the
investment advisory or administrative services agreements, or by EVD under the
distribution agreements. Such costs and expenses to be borne by the Portfolio
and a Fund, as the case may be, include, without limitation: custody and
transfer agency fees and expenses, including those incurred for determining
net asset value and keeping accounting books and records; expenses of pricing
and valuation services; the cost of share certificates; membership dues in
investment company organizations; expenses of acquiring, holding and disposing
of securities and other investments; fees and expenses of registering under
the securities laws and governmental fees; expenses of reporting to
shareholders and investors; proxy statements and other expenses of
shareholders' or investors' meetings; insurance premiums; printing and mailing
expenses; interest, taxes and corporate fees; legal and accounting expenses;
compensation and expenses of Trustees not affiliated with BMR or Eaton Vance;
and investment advisory fees and, if any, administrative services fees. The
Portfolio or a Fund, as the case may be, will also each bear expenses incurred
in connection with litigation in which the Portfolio or a Fund, as the case
may be, is a party and any legal obligation to indemnify its respective
officers and Trustees with respect thereto.
DISTRIBUTION PLANS
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EATON VANCE MONEY MARKET FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED
A DISTRIBUTION PLAN (THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT
COMPANY ACT OF 1940 (THE "1940 ACT"). Rule 12b-1 permits a mutual fund, such
as the Money Market Fund, to finance distribution activities and bear expenses
associated with the distribution of its shares provided that any payments made
by the Fund are made pursuant to a written plan adopted in accordance with the
Rule. The Plan is subject to, and complies with, the sales charge rule of the
National Association of Securities Dealers, Inc. (the "NASD Rule"). The Plan
is described further in the Statement of Additional Information, and the
following is a description of the salient features of the Plan. The Plan
provides that the Money Market Fund, subject to the NASD Rule, will pay sales
commissions and distribution fees to the Principal Underwriter only after and
as a result of the sale of shares of the Fund. On each sale of Money Market
Fund shares (excluding reinvestment of distributions) the Fund will pay the
Principal Underwriter amounts representing (i) sales commissions equal to
6.25% of the amount received by the Fund for each share sold and (ii)
distribution fees calculated by applying the rate of 1% over the prime rate
then reported in The Wall Street Journal to the outstanding balance of
Uncovered Distribution Charges (as described below) of the Principal
Underwriter. The Principal Underwriter currently expects to pay sales
commissions (except on exchange transactions and reinvestments) to a financial
service firm (an "Authorized Firm") at the time of sale equal to 4% of the
purchase price of the shares sold by such Firm. The Principal Underwriter will
use its own funds (which may be borrowed from banks) to pay such commissions.
With respect to Money Market Fund shares acquired as a result of an exchange
from one or more funds in the Eaton Vance Classic Group of Funds, the
Principal Underwriter currently expects to pay monthly sales commissions to an
Authorized Firm approximately equivalent to 1/12 of .75% of the value of such
shares sold by such Firm and remaining outstanding for at least one year from
the date of original purchase of the EV Classic fund shares. Because the
payment of the sales commissions and distribution fees to the Principal
Underwriter is subject to the NASD Rule described below, it will take the
Principal Underwriter a number of years to recoup the sales commissions paid
by it to Authorized Firms from the payments received by it from the Fund
pursuant to the Plan.
THE NASD RULE REQUIRES THE MONEY MARKET FUND TO LIMIT ITS ANNUAL PAYMENTS OF
SALES COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE
FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Accordingly, the Money
Market Fund accrues daily an amount at the rate of 1/365 of .75% of its net
assets, and pays such accrued amounts monthly to the Principal Underwriter.
The Plan requires such accruals to be automatically discontinued during any
period in which there are no outstanding Uncovered Distribution Charges under
the Plan. Uncovered Distribution Charges are calculated daily and, briefly,
are equivalent to all unpaid sales commissions and distribution fees to which
the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts of all payments received by
the Principal Underwriter from the Money Market Fund pursuant to the Plan,
including any contingent deferred sales charges, have exceeded the total
expenses theretofore incurred by such organization in distributing shares of
the Fund. Total expenses for this purpose will include an allocable portion of
the overhead costs of such organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Money
Market Fund shares during the initial years of the Fund's operations would
cause a large portion of the sales commissions attributable to a sale of Fund
shares to be accrued and paid by the Fund to the Principal Underwriter in
fiscal years subsequent to the year in which such shares were sold. This
spreading of sales commissions payments under the Plan over an extended period
would result in the incurrence and payment of increased distribution fees
under the Plan. For the period from the start of business, April 5, 1995 to
December 31, 1995, the Money Market Fund paid sales commissions under the Plan
equivalent to .75% (annualized) of the Fund's average daily net assets for
such period. As at December 31, 1995, the outstanding Uncovered Distribution
Charges of the Principal Underwriter calculated under the Plan amounted to
approximately $434,000 (equivalent to 3.3% of the Money Market Fund's net
assets on such day).
THE PLAN ALSO AUTHORIZES THE MONEY MARKET FUND TO MAKE PAYMENTS OF SERVICE
FEES TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN
AMOUNTS NOT EXCEEDING .25% OF THE MONEY MARKET 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 Money Market Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed .15% of the Fund's average daily net
assets for each fiscal year based on the value of Fund shares sold by such
persons and remaining outstanding for at least twelve months (including in
such holding period the prior holding of any EV Marathon or EV Classic fund
shares exchanged for Fund shares). However, the Plan authorizes the Trustees
of the Trust on behalf of the Fund to increase payments to the Principal
Underwriter, Authorized Firms and other persons from time to time without
further action by shareholders of the Fund, provided that the aggregate amount
of payments made to such persons under the Plan in any fiscal year of the Fund
does not exceed .25% of the Fund's average daily net assets. As permitted by
the NASD Rule, such payments are made for personal services and/or the
maintenance of shareholder accounts. Service fees are separate and distinct
from the sales commissions and distribution fees payable by the Fund to the
Principal Underwriter, and as such are not subject to automatic discontinuance
when there are no outstanding Uncovered Distribution Charges of the Principal
Underwriter. The Money Market Fund began accruing for its service fee payments
during the quarter ended March 31, 1996.
EATON VANCE LIQUID ASSETS FUND has also adopted a Distribution Plan pursuant
to Rule 12b-1 under the 1940 Act, which is described in its Statement of
Additional Information. The Liquid Assets Plan authorizes payments of service
fees to the Principal Underwriter, Authorized Firms and other persons. The
aggregate amount of such payments during any fiscal year of the Fund shall not
exceed .25% of the Fund's average daily net assets for such year. The Trustees
have implemented the Plan by authorizing the Fund to pay service fees to
Authorized Firms in amounts up to .25% per annum of the Fund's average daily
net assets based on the value of Fund shares sold by such Firms and remaining
outstanding for at least one year. As permitted by the NASD Rule, such
payments are made for personal services and/or the maintenance of shareholder
accounts. For the fiscal year ended December 31, 1995, the Fund made payments
under the Plan to the Principal Underwriter and Authorized Firms equivalent to
0.03% (annualized) of the Fund's average daily net assets for such period.
With respect to all Funds, the Principal Underwriter may, from time to time,
at its own expense, provide additional incentives to Authorized Firms which
employ registered representatives who sell a Fund's shares and/or shares of
other funds distributed by the Principal Underwriter. In some instances, such
additional incentives may be offered only to certain Authorized Firms whose
representatives 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.
A Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, a Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares and (if
applicable) the amount of Uncovered Distribution Charges of the Principal
Underwriter. A distribution plan may continue in effect and payments may be
made under the plan following any such suspension, discontinuance or
limitation of the offering of Fund shares; however, the Fund is not
contractually obligated to continue the plan for any particular period of
time. Suspension of the offering of Fund shares would not, of course, affect a
shareholder's ability to redeem shares.
VALUING FUND SHARES
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EACH FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Fund's net asset value 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 per share is computed by dividing the value of a Fund's total
assets, less its liabilities, by the number of shares outstanding. The net
asset value of each of the Cash, Liquid Assets and Money Market Funds will
reflect the value of its interest in the Portfolio (which, in turn, reflects
the underlying value of the Portfolio's assets and liabilities). The
Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in
the manner authorized by the Trustees of the Portfolio. Net asset value is
computed by subtracting the liabilities of the Portfolio from the value of its
total assets.
The investments of the Portfolio and of the Funds are valued at amortized cost
according to a Securities and Exchange Commission rule. The Portfolio and the
Funds will not normally have unrealized gains or losses so long as they value
their investments by the amortized cost method.
HOW TO BUY FUND SHARES
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INVESTORS MAY PURCHASE SHARES OF A FUND THROUGH AUTHORIZED FIRMS AT THE NET
ASSET VALUE PER SHARE OF THE FUND NEXT DETERMINED AFTER AN ORDER IS EFFECTIVE.
An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. Any Fund may suspend the offering of
shares at any time and may refuse an order for the purchase of shares.
An initial investment in a Fund must be at least $1,000. Once an account has
been established the investor may send investments of $50 or more at any time
directly to the Funds' transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See
"Eaton Vance Shareholder Services".
BY MAIL: INITIAL PURCHASES -- The Account Application form which accompanies
this prospectus should be completed, signed and mailed with a check, Federal
Reserve Draft, or other negotiable bank draft, drawn on a U.S. bank and
payable in U.S. dollars, to the order of the relevant Fund and mailed to:
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104.
SUBSEQUENT PURCHASES -- Additional purchases may be made at any time by
mailing a check, Federal Reserve Draft, or other negotiable draft, drawn on a
U.S. bank and payable in U.S. dollars, to the order of the relevant Fund to
the Transfer Agent at the above address. (Please provide the shareholder name
and account number.)
BY WIRE: Investors may purchase shares by requesting their bank to transmit
immediately available funds (federal funds) by wire to:
ABA #011001438
Federal Reserve Bank of Boston
A/C Investors Bank & Trust Company
Further Credit Eaton Vance [name of] Fund
A/C # [Insert your account number -- see below]
INITIAL PURCHASES -- Upon making an initial investment by wire, you must
first telephone the Order Department of the Funds 800-225-6265 (extension 3)
to advise of your action and to be assigned an account number. If you neglect
to make the telephone call, it may not be possible to process your order
promptly. In addition, the Account Application form which accompanies this
Prospectus should be promptly forwarded to First Data Investor Services Group,
at the above address.
SUBSEQUENT PURCHASES -- Additional investments may be made at any time
through the wire procedure described above. The Funds' Order Department must
be immediately advised by telephone 800-225-6265 (extension 3) of each
transmission of funds by wire.
Transactions in money market instruments normally require immediate settlement
in federal funds. The Funds intend at all times to be as fully invested as is
feasible in order to maximize earnings. Accordingly, purchase orders will be
executed at the net asset value next determined after their receipt by a Fund
only if the Fund has received payment in cash or in federal funds. If remitted
in other than the foregoing manner, such as by money order or personal check,
purchase orders will be executed as of the close of business on the second
Boston business day after receipt. Information on how to procure a Federal
Reserve Draft or to transmit federal funds by wire is available at banks. A
bank may charge for these services.
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is
$1,000 or more, the Cash and Money Market Funds may accept initial investments
of less than $1,000 on the part of an individual participant. In the event a
shareholder who is a participant of such a plan terminates participation in
the plan, his or her shares will be transferred to a regular individual
account. However, such account will be subject to the right of redemption by
the Fund as described below under "How to Redeem Fund Shares."
As of the date of this Prospectus, shares of Liquid Assets Fund are not being
offered.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM A FUND'S SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business
hours a written request for redemption in good order, plus any share
certificates with executed stock powers. The redemption price will be based on
the net asset value per Fund share next computed after such delivery. Good
order means that all relevant documents must be endorsed by the record owner
(s) exactly as the shares are registered and the signature(s) must be
guaranteed by a member of either the Securities Transfer Association's STAMP
program or the New York Stock Exchange's Medallion Signature Program, or
certain banks, savings and loan institutions, credit unions, securities
dealers, securities exchanges, clearing agencies and registered securities
associations as required by a regulation of the Securities and Exchange
Commission and acceptable to First Data Investor Services Group. In addition,
in some cases, good order may require the furnishing of additional documents
such as where shares are registered in the name of a corporation, partnership
or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the relevant Fund will make payment in cash for
the net asset value of the shares as of the date determined above, reduced by
the amount of any applicable contingent deferred sales charges (described
below) and any federal income tax required to be withheld. Although each Fund
normally expects to make payment in cash for redeemed shares, the Trust,
subject to compliance with applicable regulations, has reserved the right to
pay the redemption price of shares of the Fund, either totally or partially,
by a distribution in kind of readily marketable securities (which for some
Funds would be withdrawn by it from the Portfolio). The securities so
distributed would be valued pursuant to the Portfolio's or Tax Free Reserves'
valuation procedures. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the
securities to cash.
Shareholders who have given specific written authorization in advance (on a
form available from the Principal Underwriter) may request that redemption
proceeds of $1,000 or more be wired to a bank account. See "Eaton Vance
Shareholder Services -- Wire Transfer to a Bank Account" below.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Funds' agent, receives the order. It
is the Authorized Firm's responsibility to transmit promptly repurchase orders
to EVD. Throughout this Prospectus, the word "redemption" is generally meant
to include a repurchase.
If shares were recently purchased, the proceeds of redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the
purchase check has not yet cleared. If the net asset value of Fund shares is
not maintained at $1.00 per share or if a contingent deferred sales charge
(described below) is imposed on the redemption, a redemption may result in a
taxable gain or loss.
Due to the high cost of maintaining small accounts, each Fund reserves the
right to redeem accounts with balances of less than $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 -- CASH FUND AND TAX FREE RESERVES. Shares of
the Fund acquired in an exchange for shares of an Eaton Vance Traditional Fund
subject to a contingent deferred sales charge will be subject to the
contingent deferred sales charge applicable to the exchanged shares at the
time of their purchase, unless such redemption is in connection with another
exchange for shares subject to such a charge.
CONTINGENT DEFERRED SALES CHARGE -- LIQUID ASSETS AND MONEY MARKET FUNDS.
Shares redeemed within the first six years of their purchase (except shares
acquired through the reinvestment of distributions) generally will be subject
to a contingent deferred sales charge. This contingent deferred sales charge
is imposed on any redemption the amount of which exceeds the aggregate value
at the time of redemption of (a) all shares in the account purchased more than
six years prior to the redemption, (b) all shares in the account acquired
through reinvestment of distributions, and (c) the increase, if any, in 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 Plans," the
contingent deferred sales charge will be paid to the Principal Underwriter or
the relevant 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 REDEMPTION CONTINGEN TDEFERRED
AFTER PURCHASE SALES CHARGE
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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
Liquid Assets or Money Market Fund shares acquired in an exchange for shares
of a fund in the Eaton Vance Marathon Group of Funds or the Eaton Vance
Classic Group of Funds (see "The Eaton Vance Exchange Privilege" below), the
contingent deferred sales charge schedule applicable to the shares at the time
of purchase will apply and the purchase of Fund shares acquired in the
exchange is deemed to have occurred at the time of the original purchase of
the exchanged shares. See "The Eaton Vance Exchange Privilege" for the
contingent deferred sales charge schedules applicable to Fund shares acquired
in an exchange.
No contingent deferred sales charge will be imposed on any Fund's shares which
have been sold to Eaton Vance or its affiliates, or to their respective
employees or clients. The contingent deferred sales charge will also be waived
for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance
Shareholder Services"), (2) as part of a required distribution from a tax-
sheltered retirement plan or (3) following the death of all beneficial owners
of such shares, provided the redemption is requested within one year of death
(a death certificate and other applicable documents may be required).
THE FOLLOWING EXAMPLE ILLUSTRATES THE OPERATION OF THE CONTINGENT DEFERRED
SALES CHARGE. ASSUME THAT AN INVESTOR PURCHASES $10,000 OF THE MONEY
MARKET FUND'S SHARES AND THAT 25 MONTHS LATER THE VALUE OF THE ACCOUNT HAS
GROWN THROUGH THE REINVESTMENT OF DIVIDENDS TO $11,000. THE INVESTOR THEN
MAY REDEEM UP TO $1,000 OF SHARES WITHOUT INCURRING A CONTINGENT DEFERRED
SALES CHARGE. IF THE INVESTOR SHOULD REDEEM $2,000 OF SHARES, A CONTINGENT
DEFERRED SALES CHARGE WOULD BE IMPOSED ON $1,000 OF THE REDEMPTION. THE
RATE WOULD BE 4% BECAUSE THE REDEMPTION WAS MADE IN THE THIRD YEAR AFTER
THE PURCHASE WAS MADE AND THE CHARGE WOULD BE $40.
REPORTS TO SHAREHOLDERS
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EACH FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent accountants. Shortly after the
end of each calendar year, each Fund will furnish its shareholders with
information necessary for preparing federal and state tax returns. 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
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUNDS'
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund which at
all times shows the balance of shares owned. All shares are held in non-
certificate form by the Funds' Transfer Agent for the account of the
shareholder, and the Fund will not issue share certificates.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to First Data
Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265
extension 2, or in writing to First Data Investor Services Group, BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Funds' dividend disbursing agent, First Data Investor Services Group, BOS725,
P.O. Box 1559, Boston, MA 02104. The currently effective option will appear on
each account statement.
Share Option -- All distributions will be reinvested in additional shares.
Cash Option -- All distributions will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under federal income tax laws.
If the Cash Option has been selected, distribution checks which are returned
by the United States Postal Service as not deliverable or which remain
uncashed for six months or more will be reinvested in the account in shares at
the then current net asset value. Furthermore, the distribution option on the
account will be automatically changed to the Share Option until such time as
the shareholder selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, distributions may be invested in additional shares of another
Eaton Vance fund. Before selecting this option, a shareholder should obtain a
prospectus of the other Eaton Vance fund and consider its objectives and
policies carefully.
"STREET NAME" ACCOUNTS. If shares of a Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
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Shares of CASH FUND and TAX FREE RESERVES currently may be exchanged for
shares of any fund in the Eaton Vance Traditional Group of Funds and Eaton
Vance Short-Term Treasury Fund. Shares of Cash Fund or Tax Free Reserves
acquired under the exchange privilege which have not previously been subject
to payment of a sales charge may be exchanged for shares of a Fund with a
sales charge only upon payment of the appropriate charge. These offers are
available only in states where shares of the fund being acquired may legally
be sold.
LIQUID ASSETS and MONEY MARKET FUND shares currently may be exchanged for
shares of one or more funds in the Eaton Vance Marathon Group of Funds
(currently any of the EV Marathon funds) which are distributed with a
contingent deferred sales charge. Such shares may also be exchanged for Eaton
Vance Prime Rate Reserves, which are subject to an early withdrawal charge. If
Fund shares were acquired in exchange for shares of one or more funds in the
Eaton Vance Classic Group of Funds, such shares may be exchanged only for
shares of one or more funds in the Eaton Vance Classic Group of Funds.
Exchanges are made on the basis of the net asset value per share of each fund
at the time of the exchange, provided that such offers are available only in
states where shares of the fund being acquired may be legally sold.
Each exchange must involve shares which have a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days' notice prior to any termination or
material amendment of the exchange privilege. The Funds do not permit the
exchange privilege to be used for "Market Timing" and may terminate the
exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
First Data Investor Services Group makes exchanges at the next determined net
asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). First Data Investor Services Group may require
additional documentation if shares are registered in the name of a
corporation, partnership or fiduciary. Applications and prospectuses of the
other funds are available from Authorized Firms or the Principal Underwriter.
The prospectus for each fund describes its investment objectives and policies
and shareholders should obtain a prospectus and consider these objectives and
policies carefully before requesting an exchange.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of Fund
shares acquired in an exchange, the purchase of shares acquired in one or more
exchanges is deemed to have occurred at the time of the original purchase of
the exchanged shares. Cash Fund or Tax Free Reserves shares acquired in an
exchange for EV Traditional fund shares subject to a contingent deferred sales
charge will remain subject to such charge as in effect at the time the
exchanged shares were purchased. Liquid Assets and Money Market Fund shares
acquired as the result of an exchange from an EV Marathon fund will be subject
to the contingent deferred sales charge schedule set forth under "How to
Redeem Fund Shares" above, except Fund shares acquired as the result of an
exchange from EV Marathon Strategic Income Fund, Eaton Vance Prime Rate
Reserves or Class I shares of any EV Marathon Limited Maturity Municipals Fund
will be subject to a declining charge of 3.0%-0%. Fund shares acquired as the
result of an exchange from an EV Classic fund will be subject to a contingent
deferred sales charge of 1% in the event of redemption within one year from
the date of their original purchase.
Shares of the funds in the Eaton Vance Marathon and Eaton Vance Classic Groups
of Funds may be exchanged for Money Market Fund shares on the basis of the net
asset value per share of each fund at the time of the exchange, but subject to
any restrictions or qualifications set forth in the current prospectus of any
such fund.
Telephone exchanges are accepted by First Data Investor Services Group,
provided the investor has not disclaimed in writing the use of the privilege.
To effect such exchanges, call First Data Investor Services Group, at 800-262-
1122 or, within Massachusetts, 617-573-9403 Monday through Friday, 9:00 a.m.
to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither a Fund, the Principal Underwriter nor First Data
Investor Services Group will be responsible for the authenticity of exchange
instructions received by telephone; provided that reasonable procedures to
confirm that instructions communicated are genuine have been followed.
Telephone instructions will be tape recorded. In times of drastic economic or
market changes, a telephone exchange may be difficult to implement. As long as
the net asset value of Fund shares is maintained at $1.00 per share, an
exchange will not result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUNDS OFFER THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Funds as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the
Fund being purchased may be mailed directly to First Data Investor Services
Group, BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether or not
distributions are reinvested. The name of the shareholder, the Fund and the
account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $50 or more may be made automatically each month or quarter from a
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
WITHDRAWAL PLAN: A shareholder may draw on Cash Fund or Tax Free Reserves
shareholdings systematically with monthly or quarterly checks in any amount.
Monthly or quarterly withdrawals of Liquid Assets and Money Market Fund
shareholdings may also be made, provided the aggregate amount of the
withdrawals does not exceed annually 12% of the account balance at the time
the plan was established (such amount will not be subject to a contingent
deferred sales charge). See "How to Redeem Fund Shares". A minimum deposit of
$5,000 in shares is required.
REINVESTMENT PRIVILEGE: A shareholder who has repurchased or redeemed shares
may reinvest, with credit for any contingent deferred sales charges paid on
the repurchased or redeemed shares, any portion or all of the repurchase or
redemption proceeds (plus that amount necessary to acquire a fractional share
to round off the purchase to the nearest full share) in shares of a Fund,
provided that the reinvestment is effected within 60 days after such
repurchase or redemption, and the privilege has not been used more than are in
the prior 12 months. Shares are sold to a reinvesting shareholder at the next
determined net asset value following timely receipt of a written purchase
order by the Principal Underwriter or by a Fund (or by the Fund's Transfer
Agent). To the extent that any shares of a Fund are sold at a loss and the
proceeds are reinvested in Fund shares (or other Fund shares are acquired
within the period beginning 30 days before and ending 30 days after the date
of redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
CHECKWRITING: Shareholders of Cash Fund and Tax Free Reserves may appoint
Boston Safe Deposit and Trust Company ("Boston Safe") their agent and may
request on the appropriate Account Application form that Boston Safe provide
them with special forms of checks drawn on Boston Safe. These checks may be
made payable by the shareholder to the order of any person in any amount of
$500 or more. When a check is presented to Boston Safe for payment, the number
of full and fractional shares required to cover the amount of the check will
be redeemed from the shareholder's account by Boston Safe as the shareholder's
agent. Through this procedure the shareholder will continue to be entitled to
distributions paid on shares up to the time the check is presented to Boston
Safe for payment. If the amount of the check is greater than the value of the
shares held in the shareholder's account for which the Fund has collected
payment, the check will be returned and the shareholder may be subject to
extra charges. The shareholder will be required to execute signature cards and
will be subject to Boston Safe's rules and regulations governing such checking
accounts. There is no charge to shareholders for this service. This service
may be terminated or suspended at any time by a Fund or Boston Safe.
WIRE TRANSFER TO A BANK ACCOUNT: Shareholders who have given specific written
authorization in advance (on a form available from the Principal Underwriter)
may request that redemption proceeds of $1,000 or more be wired directly to
their bank account. The request may be made by letter or telephone to First
Data Investor Services Group at 800-262-1122. To use this service a
shareholder must designate a bank and bank account number on the form used to
establish this service. The bank designated may be any bank in the United
States.
Redemption proceeds, less any applicable contingent deferred sales charge and
the amount of any federal income tax required to be withheld, will be wired on
the next business day following receipt of the redemption request. The
shareholder will be required to pay any costs of such transaction. A Fund may
limit this method of payment to shares purchased with cash, Federal Reserve
Draft or by wire with federal funds. Each Fund reserves the right at any time
to suspend or terminate this wire transfer procedure. No Fund will be
responsible for the authenticity of redemption instructions received by
telephone; provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be
tape recorded. In times of drastic economic or market changes, a telephone
redemption may be difficult to implement.
TAX-SHELTERED RETIREMENT PLANS: Shares of the Cash and Money Market Funds are
available for purchase in connection with the following tax-sheltered
retirement plans:
-- Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations;
-- Individual Retirement Account Plans for individuals and their non-
employed spouses; and
-- 403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code of 1986, as amended (the
"Code").
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from
the Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
EACH FUND DECLARES DIVIDENDS DAILY AND PAYS DIVIDENDS MONTHLY FROM ITS NET
INVESTMENT INCOME. The net investment income of each of Cash, Liquid Assets
and Money Market Fund consists of net investment income allocated to the Fund
by the Portfolio, less the Fund's direct and allocated expenses. Long-term
capital gains, if any, allocated to a Fund will be distributed at least
annually.
Each Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributes to shareholders. As a partnership for federal
tax purposes, the Portfolio does not pay federal taxes. Each Fund will
distribute substantially all of its ordinary income and capital gain net
income on a current basis.
All distributions from Cash, Liquid Assets and Money Market Fund (and taxable
distributions from Tax Free Reserves, if any) are taxable to shareholders as
ordinary income, except that distributions of net long-term capital gains, if
any, are taxable to shareholders as such regardless of the length of time the
shareholder has held the shares. Distributions will be taxable as described
whether received in cash or as additional shares through reinvestment in a
Fund.
Each Fund will provide its shareholders annually with tax information notices
and Forms 1099 to assist in the preparation of their federal and state tax
returns for the prior calendar year's distributions, proceeds from the
redemption or exchange of Fund shares, and federal income tax (if any)
withheld by the Funds' Transfer Agent. Shareholders should consult their tax
advisers about the effect of Fund distributions on their particular tax status
and any state or local taxes that may apply.
TAX FREE RESERVES. Distributions designated by Tax Free Reserves as "exempt-
interest dividends" may be excluded from shareholders' gross income for
federal income tax purposes. Exempt interest dividends are includable in the
tax base for shareholders who receive social security or railroad retirement
benefits and may affect the taxability of such benefits. In addition, exempt
interest dividends generally constitute a tax preference item under the
Federal alternative minimum tax provisions and may be taxable for state and
local tax purposes.
Other distributions from Tax Free Reserves may be taxable to shareholders as
ordinary income or long-term capital gains. Distributions of income from
repurchase agreements, original issue discount and certain market discount
will be taxable to shareholders as ordinary income. However, the Fund's
taxable distributions, if any, will be insubstantial compared to exempt
interest dividends.
Shareholders should consult their own tax advisers to determine the effect of
exempt interest dividends on their particular tax situation, including
liability for state and local taxes. The Fund will report annually to
shareholders with respect to net tax exempt income earned in each state.
As a regulated investment company under the Code, a Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its
net investment income and net realized capital gains in accordance with the
timing requirements imposed by the Code. As a partnership under the Code, the
Portfolio does not pay federal income or excise taxes.
YIELD INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME A FUND MAY ADVERTISE ITS "YIELD" AND "EFFECTIVE YIELD." Both
yield figures are based on historical earnings and are not intended to
indicate future performance. The "yield" of a Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized." That
is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" is calculated similarly
but, when annualized, the income earned by an investment in the Fund is
assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" because of the compounding effect of this assumed reinvestment. A
taxable-equivalent yield is computed by using the tax-exempt yield figure and
dividing by 1 minus the tax rate.
<PAGE>
[LOGO]
THE EV
MONEY MARKET
FUNDS
EATON VANCE CASH MANAGEMENT FUND
EATON VANCE LIQUID ASSETS FUND
EATON VANCE MONEY MARKET FUND
EATON VANCE TAX FREE RESERVES
PROSPECTUS
MAY 1, 1996
THE EV
MONEY MARKET FUNDS
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISERS AND ADMINISTRATOR
Boston Management and Research, Eaton Vance Management, 24 Federal Street,
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P., One Post Office Square, Boston, MA 02109
MMFP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EV CLASSIC GOVERNMENT OBLIGATIONS 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 Government Obligations Fund (the
"Fund"), Government Obligations Portfolio (the "Portfolio") and certain other
series of Eaton Vance Mutual Funds Trust (the "Trust"). Part II provides
information solely about the Fund. Where appropriate, Part I includes cross-
references to the relevant sections of Part II that provide additional, Fund-
specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI".
TABLE OF CONTENTS Page
PART I
Additional Information about Investment Policies .............. 1
Investment Restrictions ....................................... 6
Trustees and Officers ......................................... 7
Investment Adviser and Administrator .......................... 9
Custodian ..................................................... 11
Service for Withdrawal ........................................ 12
Determination of Net Asset Value .............................. 12
Investment Performance ........................................ 13
Taxes ......................................................... 14
Portfolio Security Transactions ............................... 17
Other Information ............................................. 18
Independent Accountants ....................................... 19
Financial Statements .......................................... 20
PART II
Fees and Expenses ............................................. a-1
Principal Underwriter ......................................... a-1
Distribution Plan ............................................. a-2
Performance Information ....................................... a-3
Control Persons and Principal Holders of Securities ........... a-4
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 MAY 1, 1996, 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 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
MORTGAGE-BACKED SECURITIES
The Portfolio's investments in mortgage-backed securities may include
conventional mortgage pass-through securities, SMBS and certain classes of
multiple class CMOs (as described below). Examples of SMBS include interest
only and principal only securities. The CMO classes in which the Portfolio may
invest include sequential and parallel pay CMOs, including planned
amortization class and target amortization class securities. The Portfolio may
also invest in the floating rate mortgage-backed securities listed under
"Indexed Securities."
GNMA Certificates are mortgage-backed securities representing part
ownership of a pool of mortgage loans. These loans -- issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations -- are
either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group or such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once such pool is approved by GNMA, the timely payment of interest
and principal on the Certificates issued representing such pool is guaranteed
by the full faith and credit of the U.S. Government. As mortgage-backed
securities, GNMA Certificates differ from bonds in that the principal is paid
back by the borrower over the length of the loan rather than returned in a
lump sum at maturity. GNMA Certificates are called "pass-through" securities
because a pro rata share of both regular interest and principal payments, as
well as unscheduled early prepayments, on the underlying mortgage pool is
passed through monthly to the holder of the Certificate (i.e., the Portfolio).
As indicated below, since the unscheduled prepayment rate of the underlying
mortgage pool covered by a "pass-through" security cannot be predicted with
accuracy, the average life of a particular issue of GNMA Certificates cannot
be accurately predicted. The Portfolio may purchase GNMA Certificates and
various other mortgage-backed securities on a when-issued basis subject to
certain limitations and requirements.
The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the U.S. Government created by Congress for the purposes of
increasing the availability of mortgage credit for residential housing, issues
participation certificates ("PCs") representing undivided interests in FHLMC's
mortgage portfolio. While FHLMC guarantees the timely payment of interest and
ultimate collection of the principal of its PCs, its PCs are not backed by the
full faith and credit of the U.S. Government. FHLMC PCs differ from GNMA
Certificates in that the mortgages underlying the PCs are mostly
"conventional" mortgages rather than mortgages insured or guaranteed by a
federal agency or instrumentality. However, in several other respects, such as
the monthly pass-through of interest and principal (including unscheduled
prepayments) and the unpredictability of future unscheduled prepayments on the
underlying mortgage pools, FHLMC PCs are similar to GNMA Certificates.
The Federal National Mortgage Association ("FNMA"), a federally chartered
corporation owned entirely by private stockholders, purchases both
conventional and federally insured or guaranteed residential mortgages from
various entities, including savings and loan associations, savings banks,
commercial banks, credit unions and mortgage bankers, and packages pools of
such mortgages in the form of pass-through securities generally called FNMA
Mortgage-Backed Certificates, which are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. Government. Like GNMA Certificates and FHLMC PCs, these pass-
through securities are subject to the unpredictability of unscheduled
prepayments on the underlying mortgage pools.
While it is not possible to accurately predict the life of a particular
issue of a mortgage-backed "pass-through" security held by the Portfolio, the
actual life of any such security is likely to be substantially less than the
average maturity of the mortgage pool underlying the security. This is because
unscheduled early prepayments of principal on the security owned by the
Portfolio will result from the prepayment, refinancing or foreclosure of the
underlying mortgage loans in the mortgage pool. The Portfolio, when the
monthly payments (which may include unscheduled prepayments) on such a
security are passed through to it, may be able to reinvest them only at a
lower rate of interest. Because of the regular scheduled payments of principal
and the early unscheduled prepayments of principal, the mortgage-backed "pass-
through" security is less effective than other types of obligations as a means
of "locking-in" attractive long-term interest rates. As a result, this type of
security may have less potential for capital appreciation during periods of
declining interest rates than other U.S. Government securities of comparable
maturities, although many issues of mortgage-backed "pass-through" securities
may have a comparable risk of decline in market value during periods of rising
interest rates. If such a security has been purchased by the Portfolio at a
premium above its par value, both a scheduled payment of principal and an
unscheduled prepayment of principal, which would be made at par, will
accelerate the realization of a loss equal to that portion of the premium
applicable to the payment or prepayment and will reduce the Fund's total
return. If such a security has been purchased by the Portfolio at a discount
from its par value, both a scheduled payment of principal and an unscheduled
prepayment of principal will increase current and total returns and will
accelerate the recognition of income, which, when distributed to Fund
shareholders, will be taxable as ordinary income. The Portfolio intends to
acquire the majority of its holdings of mortgage-backed "pass-through"
securities at a discount from par value.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are debt securities issued by the FHLMC and by financial institutions
and other mortgage lenders which are generally fully collateralized by a pool
of mortgages held under an indenture. The key feature of the CMO structure is
the prioritization of the cash flows from a pool of mortgages among the
several classes of CMO holders, thereby creating a series of obligations with
varying rates and maturities appealing to a wide range of investors. CMOs
generally are secured by an assignment to a trustee under the indenture
pursuant to which the bonds are issued of collateral consisting of a pool of
mortgages. Payments with respect to the underlying mortgages generally are
made to the trustee under the indenture. Payments of principal and interest on
the underlying mortgages are not passed through to the holders of the CMOs as
such (that is, the character of payments of principal and interest is not
passed through and therefore payments to holders of CMOs attributable to
interest paid and principal repaid on the underlying mortgages do not
necessarily constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest on and
repayment of principal of the CMOs. CMOs are issued in two or more classes or
series with varying maturities and stated rates of interest determined by the
issuer. Because the interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on which
are used to pay interest to each class and to retire successive maturities in
sequence. CMOs are designed to be retired as the underlying mortgages are
repaid. In the event of sufficient early prepayments on such mortgages, the
class or series of CMO first to mature generally will be retired prior to
maturity. Therefore, although in most cases the issuer of CMOs will not supply
additional collateral in the event of such prepayments, there will be
sufficient collateral to secure CMOs that remain outstanding. Currently, the
Investment Adviser will consider privately issued CMOs or other mortgage-
backed securities as possible investments for the Portfolio only when the
mortgage collateral is insured, guaranteed or otherwise backed by the U.S.
Government or one or more of its agencies or instrumentalities (e.g., insured
by the Federal Housing Administration or Farmers Home Administration or
guaranteed by the Administrator of Veterans Affairs or consisting in whole or
in part of U.S. Government securities).
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS")
The Portfolio may invest in SMBS, which are derivative multiclass mortgage
securities. The Portfolio may only invest in SMBS issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. SMBS are usually
structured with two classes that receive different proportions of the interest
and principal distributions from a pool of mortgages. A common type of SMBS
will have one class receiving all of the interest from the mortgages, while
the other class will receive all of the principal. However, in some instances,
one class will receive some of the interest and most of the principal while
the other class will receive most of the interest and the remainder of the
principal. If the underlying mortgages experience greater than anticipated
prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities. Although the market for such securities is
increasingly liquid, certain SMBS may not be readily marketable and will be
considered illiquid for purposes of the Portfolio's limitation on investments
in illiquid securities. The determination of whether a particular SMBS is
liquid will be made by the Investment Adviser under guidelines and standards
established by the Trustees of the Portfolio. The market value of the class
consisting entirely of principal payments generally is unusually volatile in
response to changes in interest rates. The yields on a class of SMBS that
receives all or most of the interest from mortgages are generally higher than
prevailing market yields on other mortgage-backed securities because their
cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be fully recouped. The Investment Adviser will
seek to manage these risks (and potential benefits) by investing in a variety
of such securities and by using certain hedging techniques.
INDEXED SECURITIES
The indexed securities purchased by the Portfolio may include interest
only ("IO") and principal only ("PO") securities, floating rate securities
linked to the Cost of Funds Index ("COFI floaters"), other "lagging rate"
floating rate securities, floating rate securities that are subject to a
maximum interest rate ("capped floaters"), leveraged floating rate securities
("super floaters"), leveraged inverse floating rate securities ("inverse
floaters"), dual index floaters, range floaters, index amortizing notes and
various currency indexed notes.
RISKS OF CERTAIN MORTGAGE-BACKED AND INDEXED SECURITIES
The risk of early prepayments is the primary risk associated with mortgage
IOs, super floaters and other leveraged floating rate mortgage-backed
securities. The primary risks associated with COFI floaters, other "lagging
rate" floaters, capped floaters, inverse floaters, POs and leveraged inverse
IOs are the potential extension of average life and/or depreciation due to
rising interest rates. Although not mortgage-backed securities, index
amortizing notes and other callable securities are subject to extension risk
resulting from the issuer's failure to exercise its option to call or redeem
the notes before their stated maturity date. The residual classes of CMOs are
subject to both prepayment and extension risk.
Other types of floating rate derivative debt securities present more
complex types of interest rate risks. For example, range floaters are subject
to the risk that the coupon will be reduced to below market rates if a
designated interest rate floats outside of a specified interest rate band or
collar. Dual index or yield curve floaters are subject to depreciation in the
event of an unfavorable change in the spread between two designated interest
rates. The market values of currency-linked securities may be very volatile
and may decline during periods of unstable currency exchange rates.
LEVERAGE THROUGH BORROWING
The Portfolio and the other investment companies managed by the Investment
Adviser or Eaton Vance Management participate in a Line of Credit Agreement
(the "Credit Agreement") with Citibank, N.A. ("Citibank"). Citibank agrees, in
the Credit Agreement, to consider requests from the Portfolio and such other
investment companies that Citibank make advances ("Advances") to the Portfolio
and such other investment companies from time to time. The aggregate amount of
all such Advances to all such borrowers will not exceed $120,000,000, of which
$100,000,000 is a discretionary facility and $20,000,000 a committed facility.
The Portfolio has currently determined that its borrowings under the Credit
Agreement will not exceed, at any one time outstanding, the lesser of (a) 1/3
of the current market value of the net assets of the Portfolio or (b)
$7,500,000 (the "Amount Available to the Portfolio"). The Portfolio is
obligated to pay to Citibank, in addition to interest on the Advances made to
it, a quarterly fee on the average daily unused portion of the Amount
Available to the Portfolio at the rate of 1/4 of 1% per annum. The Credit
Agreement may be terminated by Citibank or the borrowers at any time upon 30
days' prior written notice. The Portfolio expects to use the proceeds of the
Advances primarily for leveraging purposes. As at December 31, 1995, the
Portfolio had outstanding loans pursuant to the Credit Agreement amounting to
$3,835,000. The average daily loan balance for the fiscal year ended December
31, 1995, was $1,067,197 and the average daily interest rate was 7.41%.
The Portfolio, like many other investment companies, may also borrow money
for temporary extraordinary or emergency purposes. Such borrowings may not
exceed 5% of the value of the Portfolio's total assets at the time of
borrowing. The Portfolio may pledge up to 10% of the lesser of cost or value
of its total assets to secure such borrowings.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Portfolio may purchase and sell securities on a "forward commitment"
or "when-issued" basis. Forward commitment or when-issued transactions arise
when securities are purchased or sold by the Portfolio with payment and
delivery taking place in the future in order to secure what is considered to
be an advantageous price and yield to the Portfolio at the time of entering
into the transaction. However, the yield on a comparable security when the
transaction is consummated may vary from the yield on the security at the time
that the forward commitment or when-issued transaction was made. From the time
of entering into the transaction until delivery and payment is made at a later
date, the securities that are the subject of the transaction are subject to
market fluctuations. When the Portfolio engages in forward commitment or when-
issued transactions, the Portfolio relies on the seller or buyer, as the case
may be, to consummate the sale. Failure to do so may result in the Portfolio
missing the opportunity of obtaining a price or yield considered to be
advantageous. Forward commitment or when-issued transactions may be expected
to occur a month or more before delivery is due. However, no payment or
delivery is made by the Portfolio until it receives payment or delivery from
the other party to the transaction. The Portfolio will maintain in a
segregated account with its custodian cash, U.S. Government securities or
other liquid high-grade debt securities having an aggregate value equal to the
amount of such purchase commitments until payment is made. To the extent the
Portfolio engages in forward commitment or when-issued transactions, it will
do so for the purpose of acquiring or disposing of securities held by the
Portfolio consistent with the Portfolio's investment objective and policies
and not for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Securities and Exchange Commission (the
"Commission"), such loans are required to be secured continuously by
collateral in cash, cash equivalents or U.S. Government securities held by the
Portfolio's custodian and maintained on a current basis at an amount at least
equal to the market value of the securities loaned, which will be marked to
market daily. Cash equivalents include certificates of deposit, commercial
paper and other short-term money market instruments. The 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 would call
the loan in anticipation of an important vote to be taken among holders of the
securities or the giving or withholding of their consent on a material matter
affecting the investment. Securities lending involves administration expenses,
including finders' fees.
WRITING AND PURCHASING CALL AND PUT OPTIONS
The Portfolio may write covered put and call options on U.S. Government
securities. The Portfolio does not intend to write a covered option on U.S.
Government securities if after such transaction more than 25% of its net
assets, as measured by the aggregate value of such securities underlying all
covered calls and puts written by the Portfolio, would be subject to such
options. The Portfolio will only write a put option on a security which it
intends to ultimately acquire for its investment portfolio. The Portfolio does
not intend to purchase an option on any U.S. Government security if after such
transaction more than 5% of its net assets, as measured by the aggregate of
all premiums paid for all options held by the Portfolio, would be so invested.
Securities dealers make over-the-counter ("OTC") markets in options on
certain "pass-through" mortgage-backed securities, such as GNMA Certificates,
FHLMC PCs and FNMA Mortgage-Backed Certificates. These dealers buy and sell
call and put options on such securities, and the Portfolio may enter into
option transactions with such dealers. Since the remaining principal balance
of a "pass-through" mortgage-backed security declines each month as a result
of regular scheduled payments and early unscheduled prepayments of principal,
the Portfolio, as a writer of a call option holding such a security as "cover"
to satisfy its delivery obligation in the event of exercise, may find that the
security it holds no longer has a sufficient remaining principal balance for
this purpose. Should this occur, the Portfolio will purchase additional
securities in order to maintain its "cover."
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures Contracts. The Portfolio may enter into futures contracts traded
on an exchange regulated by the Commodity Futures Trading Commission ("CFTC")
and on foreign exchanges, but, with respect to foreign exchange-traded 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.
Hedging Strategies. 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.
Although under some circumstances prices of securities held by the Portfolio
may be more or less volatile than prices of such futures contracts, the
Investment Adviser will attempt to estimate the extent of this difference in
volatility based on historical patterns and to compensate for it by having the
Portfolio enter into a greater or lesser number of futures contracts or by
attempting to achieve only a partial hedge against price changes affecting the
securities held by the Portfolio.
Options on Futures Contracts. The Portfolio may purchase and write call
and put options on futures contracts which are traded on a United States
exchange or board of trade or any foreign exchange on which the Portfolio is
permitted to trade futures contracts. The Portfolio will not purchase or write
options on futures contracts unless, in the opinion of the Investment Adviser,
the market for such options has developed sufficiently that the risks
associated with such options transactions are not greater than the risks
associated with futures transactions.
Some derivative securities 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 in an exchange-
traded derivative instrument, which may make the instrument 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.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS AND CERTAIN OPTIONS
The Portfolio will engage in futures and related options transactions for
bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. In general, the Portfolio will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Portfolio or that it expects to purchase. To evidence its hedging intent,
the Portfolio expects that, on 75% or more of the occasions on which it takes
a long futures (or option on futures) position, the Portfolio will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities at the time when the futures (or option) position is closed
out. However, in particular cases, when it is economically advantageous for
the Portfolio to do so, a long futures (or options) position may be terminated
(or an option may expire) without the corresponding purchase of securities.
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").
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
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 engage in cross-hedging by
using forward contracts in one currency (or basket of currencies) to hedge
against fluctuations in the value of securities denominated in a different
currency if the Investment Adviser determines that there is an established
historical pattern of correlation between the two currencies (or the basket of
currencies and the underlying currency). Use of a different foreign currency
magnifies the Portfolio's exposure to foreign currency exchange rate
fluctuations.
The precise projection of short-term currency market movements is not
possible and short-term hedging provides a means of fixing the dollar value of
only a portion of the Portfolio's foreign assets. The Portfolio will not enter
into forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Portfolio to deliver an
amount of foreign currency in excess of the value of the securities held by
the Portfolio or other assets denominated in that currency.
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS
Transactions using forward contracts, futures contracts and options (other
than options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, or other options, futures contracts or forward
contracts, or (2) cash, receivables and short-term debt securities with a
value sufficient at all times to cover its potential obligations not covered
as provided in (1) above. The Portfolio will comply with Commission guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash, U.S. Government securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed
amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding forward contract, futures contract or option
is open, unless they are replaced with other appropriate assets. As a result,
the commitment of a large portion of the Portfolio's assets to cover or
segregated accounts could impede portfolio management or the Portfolio's
ability to meet redemption requests or other current obligations.
PORTFOLIO TURNOVER
If the Portfolio writes a substantial number of call options and the
market prices of the underlying securities appreciate, or if the Portfolio
writes a substantial number of put options and the market prices of the
underlying securities depreciate, there may be a very substantial turnover of
securities held by the Portfolio. Although it is not anticipated that the
annual portfolio turnover rate will exceed 200% under such circumstance,
portfolio turnover may be greater than 200% but is not expected to exceed
300%. A 200% turnover rate would occur if all of the securities held by the
Portfolio were sold and either repurchased or replaced twice within one year.
High portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs, which will be borne directly by the Portfolio. It
may also result in the realization of capital gains. The Portfolio pays
brokerage commissions in connection with futures transactions and the writing
of options and effecting of closing purchase or sale transactions, as well as
for purchases and sales of portfolio securities. See "Portfolio Security
Transactions" for a discussion of the Portfolio's brokerage practices.
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% of the shares of the Fund present
or represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of a single issuer or purchase more than 10% of
the outstanding voting securities of a single issuer, except obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and except securities of other investment companies; or invest more than 25%
of its total assets in any single industry (other than securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities);
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance
margin in connection with futures contracts or related options transactions is
not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling
a portfolio security under circumstances which may require the registration of
the same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(6) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities;
(7) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities; or
(8) Buy investment securities from or sell them to any of its officers or
Trustees of the Trust, the investment adviser or its underwriter, as
principal; however, any such person or concerns may be employed as a broker
upon customary terms.
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.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund;
such restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following nonfundamental
investment policies which may be changed by the Trust with respect to the Fund
without approval by the Fund's shareholders or by the Portfolio with respect
to the Portfolio without the approval of the Fund or its other investors. As a
matter of nonfundamental policy, neither the Fund nor the Portfolio may: (a)
purchase put or call options on U.S. Government securities if after such
purchase more than 5% or its net assets, as measured by the aggregate of the
premiums paid for such options held by the Fund or the Portfolio, would be so
invested; (b) purchase any put options, long futures contracts, or call
options on a futures contract if at the date of such purchase realized net
losses from such transactions during the fiscal year to date exceed 5% of its
average net assets during such period; (c) make short sales of securities or
maintain a short position, unless at all times when a short position is open
it owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short, and
unless not more than 25% of its net assets (taken at current value) is held as
collateral for such sales at any one time; (d) purchase securities of any
issuer which, including predecessors, has not been in continuous operation for
at least three years, except that 5% of its total assets (taken at market
value) may be invested in certain issuers not in such continuous operation but
substantially all of whose assets are (i) securities of one or more issuers
which have had a record of three years' continuous operation or (ii) assets of
an independent division of an issuer which division has had a record of three
years' continuous operation; provided, however, that exempted from this
restriction are U.S. Government securities, securities of issuers which are
rated by at least one nationally recognized statistical rating organization,
municipal obligations and obligations issued or guaranteed by any foreign
government or its agencies or instrumentalities; (e) invest more than 15% of
net assets in investments which are not readily marketable, including
restricted securities and repurchase agreements maturing in more than seven
days. Restricted securities for the purposes of this limitation do not include
securities elegible for resale pursuant to Rule 144A of 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, based upon the trading markets for the specific security; (f)
purchase or retain in its portfolio any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or
Trustee of the Trust or the Portfolio or is a member, officer, director or
trustee of any investment adviser of the Trust or the Portfolio, if after the
purchase of the securities of such issuer by the Fund or the Portfolio one or
more of such persons owns beneficially more than 1/2 of 1% of the shares or
securities or both (all taken at market value) of such issuer and such persons
owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
market value); or (g) purchase oil, gas or other mineral leases or purchase
partnership interests in oil, gas or other mineral exploration or development
programs.
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 securitiy 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, the Fund and the
Portfolio must always be in compliance with the borrowing policies set forth
above.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the fundamental policies
described above. Should the Fund determine that any such commitment is no
longer in the best interests of the Fund and its shareholders, it will revoke
the commitment by terminating sales of its shares in the state(s) involved.
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"), a wholly-owned subsidiary of
Eaton Vance Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust, the Portfolio, BMR, Eaton
Vance, EVC or EV, as defined in the 1940 Act, by virtue of their affiliation
with any one or more of the Trust, the Portfolio, BMR, Eaton Vance, EVC or EV,
are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (62), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
JAMES B. HAWKES (54), Vice President and Trustee*
Executive Vice President, BMR, Eaton Vance, EVC and EV and a Director of EVC
and EV. Director, Trustee and officer of various investment companies
managed by Eaton Vance or BMR. Mr. Hawkes was elected Vice President and
Trustee of the Trust on December 16, 1991.
DONALD R. DWIGHT (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc., since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff, Professor of Investment Banking at Harvard University
Graduate School of Business Administration. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
SUSAN SCHIFF (35), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Ms. Schiff was elected Vice
President of the Trust on February 24, 1992.
WILLIAM H. AHERN, JR. (36), Vice President of the Trust
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
H. DAY BRIGHAM, JR. (69), Vice President of the Trust
Chairman of the Management Committee, Vice President of Eaton Vance, BMR, EVC
and EV, and a Director of EVC and EV. Director or Trustee and officer of
various investment companies managed by Eaton Vance or BMR. Mr. Brigham was
elected Vice President of the Trust on June 19, 1995.
MICHAEL B. TERRY (53), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
MARK S. VENEZIA (46), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (51), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (64), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management
& Research Co. (1986-1991). Officer of various investment companies managed
by Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
JOHN P. RYNNE (53), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected an officer of the Trust on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate
attorney at Dechert, Price & Rhoades and Gaston & Snow. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Woodbury was elected
Assistant Secretary of the Trust and the Portfolio on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
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 1940 Act
("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. Messrs. Hayes (Chairman), Reamer, Thorndike and Treynor
are currently serving on the Committee. 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 Trustees regarding
the selection of the independent accountants, and reviewing with such
accountants and the Treasurer of the Trust and of the Portfolio matters
relative to 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 Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred
fees invested by the Portfolio in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustees under the Plan will
be determined based upon the performance of such investments. Deferral of
Trustees' fees in accordance with the Plan will have a negligible effect on
the Portfolio's assets, liabilities, and net income per share, and will not
obligate the Portfolio to retain the services of any Trustee or obligate the
Portfolio to pay any particular level of compensation to the Trustee. Neither
the Fund nor the Portfolio 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 its investment adviser pursuant to an
Investment Advisory Agreement dated October 28, 1993. BMR or Eaton Vance acts
as investment adviser to investment companies and various individual and
institutional clients with combined assets under management of 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 covers 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 experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Bombay. 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- 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 help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide
you with tailored financial advice.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolio investment research, advice and supervision, furnishes an investment
program and determines what securities will be purchased, held or sold by the
Portfolio and what portion, if any, of the Portfolio's assets will be held
uninvested. The Investment Advisory Agreement requires BMR to pay the salaries
and fees of all officers and Trustees of the Portfolio who are members of the
BMR organization and all personnel of BMR performing services relating to
research and investment activities. The Portfolio is responsible for all
expenses not expressly stated to be payable by BMR under the Investment
Advisory Agreement, including, without implied limitation, (i) expenses of
maintaining the Portfolio and continuing its existence, (ii) registration of
the Portfolio under the 1940 Act, (iii) commissions, fees and other expenses
connected with the acquisition, holding and disposition of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale and redemption
of interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or other
offering statements or memoranda for such purposes and for distributing the
same to investors, and fees and expenses of registering and maintaining
registrations of the Portfolio and of the Portfolio's placement agent as
broker-dealer or agent under state securities laws, (ix) expenses of reports
and notices to investors and of meetings of investors and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions,
(xi) insurance expenses, (xii) association membership dues, (xiii) fees,
expenses and disbursements of custodians and subcustodians for all services to
the Portfolio (including without limitation safekeeping of funds, securities
and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax
capital account balances), (xiv) fees, expenses and disbursements of transfer
agents, dividend disbursing agents, investor servicing agents and registrars
for all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of
the Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio
who are not members of BMR's organization, and (xviii) such non-recurring
items as may arise, including expenses incurred in connection with litigation,
proceedings and claims and the obligation of the Portfolio to indemnify its
Trustees, officers and investors with respect thereto.
On March 28, 1994, the Trustees of the Portfolio voted to accept a waiver
of BMR's compensation by instituting the breakpoints set forth in the
Prospectus (effective as of April 1, 1994) in the advisory fee rate then
provided for in the Investment Advisory Agreement. Prior to April 1, 1994, the
Investment Advisory Agreement provided for a monthly advisory fee of .0625%
(equivalent to .75% annually) of the average daily net assets of the
Portfolio.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. As at
December 31, 1995, the Portfolio had net assets of $521,788,905. For the
period from the start of business, October 28, 1993, to December 31, 1993, and
for the fiscal years ended December 31, 1994 and 1995, the Portfolio paid BMR
advisory fees of $727,254, $4,259,500 and $3,928,237, respectively,
(equivalent to 0.75%, 0.74% and 0.75% (annualized) of the Portfolio's average
daily net assets for each such period).
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 Administrative Services Agreement with Trust
on behalf of the Fund, Eaton Vance has been engaged to administer the Fund's
affairs, subject to the supervision of the Trustees of the Trust, and shall
furnish for the use of the Fund office space and all necessary office
facilities, equipment and personnel for administering the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) registration
of the Trust under the 1940 Act, (iii) commissions, fees and other expenses
connected with the purchase or sale of securities and other investments, (iv)
auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale, repurchase and redemption of
shares, (viii) expenses of registering and qualifying the Fund and its shares
under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1996, the Voting Trustees of which are Messrs. Clay,
Brigham, Gardner, Hawkes and Rowland. The Voting Trustees have unrestricted
voting rights for the election of Directors of EVC. All of the outstanding
voting trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers and Directors of EVC and
EV. As of March 29, 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. Brigham, Gardner, Hawkes
and Otis are officers or Trustees of the Trust and/or the Portfolio and are
members of the EVC, BMR, Eaton Vance and EV organizations. Messers. Ahern,
Murphy, O'Connor, Rynne, Terry, Venezia and Woodbury and Ms. Sanders and Ms.
Schiff who are officers or Trustees of the Trust and/or the Portfolio, are also
members of the BMR, Eaton Vance 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 is engaged 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 of the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in precious metal mining
venture investment and management. EVC, BMR, Eaton Vance and EV may also enter
into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 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 disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Fund and the Portfolio. IBT
charges fees which are competitive within the industry. A portion of the fee
relates to custody, bookkeeping and valuation services and is based upon a
percentage of Fund and Portfolio net assets and a portion of the fee relates
to activity charges, primarily the number of portfolio transactions. These
fees are then reduced by a credit for cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. Landon T. Clay, a Director of EVC and an
officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors
Financial Services Corp., the holding company parent of IBT. Management
believes that such ownership does not create an affiliated person relationship
between the Fund or the Portfolio and IBT under the 1940 Act.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's 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 gains distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices. 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. 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 shares of the Fund is determined by IBT (as
agent and custodian for the Fund) in the manner described under "Valuing Fund
Shares" in the Fund's current Prospectus. The net asset value of the Portfolio
is also computed by IBT (as agent and custodian for the Portfolio) by
subtracting the liabilities of the Portfolio from the value of its total
assets. The Fund and the Portfolio will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Presidents' Day, Good Friday (a New York Stock Exchange
holiday), Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Except as described below, debt securities for which the over-the-counter
market is the primary market are normally valued at the mean between the
latest available bid and asked prices. OTC options are valued at the mean
between the bid and asked prices provided by dealers. Financial futures
contracts listed on commodity exchanges and exchange-traded options are valued
at closing settlement prices. Short-term obligations having remaining
maturities of less than 60 days are valued at amortized cost, which
approximates value, unless the Trustees determine that under particular
circumstances such method does not result in fair value. As authorized by the
Trustees, debt securities (other than short-term obligations) may be valued on
the basis of valuations furnished by a pricing service which determines
valuations based upon market transactions for normal, institutional-size
trading units of such securities. Mortgage-backed "pass-through" securities
are valued through use of a matrix pricing system which takes into account
closing bond valuations, yield differentials, anticipated prepayments and
interest rates. Securities for which there is no such quotation or valuation
and all other assets are valued at fair value as determined in good faith by
or at the direction of the Trustees of the Portfolio.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying
the net asset value of the Portfolio by the percentage, determined on the
prior Portfolio Business Day, which represented that investor's share of the
aggregate interests in the Portfolio on such prior day. Any additions or
withdrawals for the current Portfolio Business Day will then be recorded. 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, the amount of any additions to or withdrawals from the investor's
investment in the Portfolio on the current Portfolio Business Day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
the Portfolio Valuation Time on the prior Portfolio Business Day plus or
minus, as the case may be, the amount of the net additions to or withdrawals
from the aggregate investment in the Portfolio on the current Portfolio
Business Day by all investors in the Portfolio. The percentage so determined
will then be applied to determine the value of the investor's interest in the
Portfolio for the current Portfolio Business Day.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes that all distributions are reinvested at net asset value
on the reinvestment dates during the period, and either (i) the deduction of
the maximum sales charge from the initial $1,000 purchase order, or (ii) a
complete redemption of the investment and, if applicable, the deduction of the
contingent deferred sales charge at the end of the period. For further
information concerning the total return of the Fund, see "Performance
Information" in Part II.
Yield is computed pursuant to a standardized formula by dividing net
investment income per share earned during a recent thirty-day period by the
maximum offering price (including, if applicable, the maximum initial sales
charge) per share on the last day of the period and annualizing the resulting
figure. Net investment income per share is calculated from the yields to
maturity of all obligations held by the Portfolio based on prescribed methods,
reduced by accrued Fund expenses for the period with the resulting number
being divided by the average daily number of Fund shares outstanding and
entitled to receive distributions during the period. The yield figure does not
reflect the deduction of any contingent deferred sales charges (if applicable)
imposed on certain redemptions at the rate set forth under "How to Redeem Fund
Shares" in the Fund's current Prospectus. Yield calculations assume the
current initial sales charge (if applicable) set forth under "How to Buy Fund
Shares" in the Fund's current Prospectus. (Actual yield may be affected by
variations in sales charges on investments.) For the yield of the Fund, see
"Performance Information" in Part II.
The Principal Underwriter may publish to Authorized Firms the Fund's
distribution rate and/or its effective distribution rate. The Fund's
distribution rate is computed by dividing the most recent monthly distribution
per share annualized, by the current net asset value per share or, where
applicable, the maximum public offering price per share (which includes the
maximum initial sales charge). The Fund's effective distribution rate is
computed by dividing the distribution rate by the ratio (the days in a year
divided by the accrual days of the monthly period) used to annualize the most
recent monthly distribution and reinvesting the resulting amount for a full
year on the basis of such ratio. The effective distribution rate will be
higher than the distribution rate because of the compounding effect of the
assumed reinvestment. Investors should note that the Fund's yield is
calculated using a standardized formula the income component of which is
computed from the yields to maturity of all obligations held by the Portfolio
based on prescribed methods (with all purchases and sales of securities during
such period included in the income calculation on a settlement date basis),
whereas the distribution rate is based on the Fund's last monthly distribution
which tends to be relatively stable and may be more or less than the amount of
net investment income and short-term capital gain actually earned by the Fund
during the month. See "Distributions and Taxes" in the Fund's current
Prospectus.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices. The Fund's total
return and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. Advertisements
and information provided to present and prospective investors may also contain
information concerning the stability of the net asset value of the Fund over
varying time periods and a comparison of such net asset value to the value of
other types of investments over similar time periods. The Fund's performance
may differ from that of other investors in the Portfolio, including any other
investment companies.
From time to time, advertisements and other material furnished to present
and prospective shareholders may include information, charts and/or
illustrations of the Fund's net asset value per share history.
From time to time, evaluations of the Fund's performance or rankings of
mutual funds (which include the Fund) may be made by independent sources, e.g.
Lipper Analytical Services, Inc., CDA/Wiesenberger and Morningstar, Inc., may be
used in advertisements and in information furnished to present or prospective
shareholders. Information, 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.
From time to time, information about the portfolio allocation, portfolio
turnover and holdings of the Portfolio may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information, for example, may include the Portfolio's diversification by asset
type, including mortgage-backed securities with varying maturities and interest
rates.
For example, the Portfolio's diversification by asset type as of March 31,
1996 was:
PORTFOLIO ASSET ALLOCATION PERCENT OF INVESTMENTS
-------------------------- ----------------------
Mortgage-Backed Securities
Low Coupons: 4-9% 59%
High Coupons: 11-16% 22%
Other 4%
U.S. Treasuries, U.S. Government Agency
Debentures & Other Mortgage-Backed Securities 15%
---
TOTAL 100%
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:
-- cost 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.
TAXES
See "Distributions and Taxes" in the Fund's current Prospectus.
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated, has qualified and intends to
continue 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 (after reduction by
any available capital loss carryforwards) in accordance with the timing
requirements imposed by the Code, so as to avoid any federal income or excise
tax to the Fund. The Fund so qualified for its taxable year ended December 31,
1995 (see the Notes to Financial Statements incorporated by reference into this
SAI). 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 ordinary income and capital gains from the prior
year (as previously computed) that was not paid out during such year and on
which the Fund paid no federal income tax. Under current law, provided that the
Fund qualifies as a 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.
The Portfolio's transactions in foreign currency, foreign currency
denominated debt securities, payables and receivables denominated in a foreign
currency, options and futures on foreign currency and forward foreign currency
exchange contracts are subject to special tax rules that may convert capital
gain or loss into ordinary income or loss and may affect the amount, timing
and character of the Portfolio's income or loss and hence of allocations and/
or distributions to the Fund's shareholders.
Positions held by the Portfolio which consist of one or more debt securities
and one or more listed options or futures contracts which substantially diminish
the risk of loss of the Portfolio with respect to such debt securities will be
treated as "mixed straddles" for federal income tax purposes. Such straddles are
ordinarily subject to the provisions of Section 1092 of the Code, the operation
of which can result in deferral of losses, adjustments in the holding periods of
the Portfolio's debt securities and conversion of short-term capital losses into
long-term capital losses. The operation of these rules can be mitigated or
eliminated by means of various elections which are available to the Portfolio
for federal income tax purposes.
To eliminate the application of these rules, the Portfolio has elected mixed
straddle accounting for one or more designated classes of activities involving
mixed straddles. Under this method of accounting, figures are derived for
aggregate short-term and long-term capital gains and losses associated with all
positions in a mixed straddle account on a daily basis. Specifically, gains and
losses are computed for all positions disposed of on a given day, and all
outstanding positions on such day are marked to market (subject to subsequent
adjustments to reflect the gain or loss realized thereby). Gains and losses from
all positions in debt securities in the account are netted, as are gains and
losses from all positions in options and futures. If the two resulting figures
both represent net gains or net losses, the net gain or loss attributable to the
debt securities is treated as short- term capital gain or loss, and the net gain
or loss attributable to the options and futures contracts is treated as 60%
long-term and 40% short-term capital gain or loss. Alternatively, if the
resulting figures represent a net gain and a net loss, the two figures are
further netted to arrive at a single figure for the day. This figure is treated
as 60% long-term and 40% short-term capital gain or loss unless it reflects the
fact that the net gain or loss from the debt securities outweighed the net gain
or loss from the options and futures, in which case this figure is treated as
short-term capital gain or loss.
On the last business day of the taxable year the annual account net gain
or loss for each mixed straddle account is determined by netting the daily net
gains or losses for each business day during the taxable year. (The annual
account net gain or loss is adjusted to take into account any interest and
carrying charges incurred in connection with positions in the account which
were required to be capitalized.) Annual account net gains or losses are then
netted for all mixed straddle accounts to yield the total annual account net
gain or loss. This figure is subject to an overall limitation such that no
more than 50% of it will be treated as long-term capital gain and no more than
40% of it will be treated as short-term capital loss.
The Portfolio may make other tax elections with respect to mixed straddles
which do not properly belong in any of its mixed straddle accounts.
In the absence of a mixed straddle election, futures or currency forward
contracts entered into by the Portfolio and listed nonequity options written
or purchased by the Portfolio (including options on debt securities, options
on futures contracts, options on securities indexes and options on broad-based
stock indexes, but possibly excluding certain foreign currency-related
options, futures or forward contracts) will be governed by Section 1256 of the
Code. Absent a tax election to the contrary, gain or loss attributable to the
lapse, exercise or closing out of any such position will be treated as 60%
long-term and 40% short-term capital gain or loss, and on the last trading day
of the Portfolio's taxable year all outstanding Section 1256 positions will be
marked to market (i.e., treated as if such positions were closed out at their
closing price on such day), and any resulting gain or loss will be recognized
as 60% long-term and 40% short-term capital gain or loss. Under certain
circumstances, entry into a futures contract to sell a security or the
purchase of a put option with respect to a security may constitute a short
sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security held
by the Portfolio.
The Portfolio will monitor its transactions in options, futures contracts
and forward contracts in order to enable the Fund to maintain its qualification
as a RIC for federal income tax purposes.
The Portfolio's investment in securities acquired at a market discount, or
zero coupon and certain other securities with original issue discount will
cause it to realize income prior to the receipt of cash payments with respect
to these securities. Such income will be allocated daily to interests in the
Portfolio and, in order to enable the Fund to distribute its proportionate
share of this income and avoid a tax payable by the Fund, the Portfolio may be
required to liquidate portfolio securities that it might otherwise have
continued to hold in order to generate cash that the Fund may withdraw from
the Portfolio for subsequent distribution to Fund shareholders.
Redemptions (including exchanges) of Fund shares are taxable transactions.
Any loss realized upon the redemption or exchange of shares of the Fund with a
tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution of net long-term capital gains with
respect to such shares. 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 a period beginning 30 days before and ending 30 days 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.
Distributions by the Fund may reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a shareholder's
cost basis, such distribution would be taxable to the shareholder even though,
from an investment standpoint, it may constitute a return of a portion of the
purchase price. Therefore, investors should consider the tax implications of
buying shares immediately before a distribution. Certain distributions
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.
Distributions of the Fund will not qualify for the dividends received
deduction available to certain corporations under the Code. A state income (and
possibly local income and/or intangible property) tax exemption is generally
available to the extent the Fund's distributions are derived from interest on
(or, in the case of intangibles taxes, the value of its assets is attributable
to) certain U.S. Government obligations, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. The Fund will inform shareholders of the proportion of its
distributions which are derived from interest on such obligations. Shareholders
are urged to consult their tax advisers regarding the proper treatment of such
portion of their distributions for state and local income tax purposes.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and to
other retirement plans, and persons investing through such plans should consult
their tax advisers for more information. The deductibility of contributions to
IRAs may be restricted or eliminated for particular shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain 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 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 special tax rules
applicable to certain classes of investors, such as IRAs and 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,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the commission or spread, if any. The debt securities and
obligations purchased and sold by the Portfolio are generally traded in the
domestic over-the-counter markets on a net basis (i.e. without commission)
through broker-dealers and banks acting for their own accounts rather than as
brokers, or otherwise involve transactions with the issuer of such obligations.
Such firms attempt to profit from such transactions by buying at the bid price
and selling at the higher asked price of the market for such obligations, and
the difference between the bid and asked price is customarily referred to as the
spread. The Portfolio may also purchase such obligations from domestic
underwriters, the cost of which may include undisclosed fees and concessions to
the underwriters. Although spreads or commissions paid on portfolio security
transactions will, in the judgment of BMR, be reasonable in relation to the
value of the services provided, spreads or commissions exceeding those which
another firm might charge may be paid to firms who were selected to execute
transactions on behalf of the Portfolio and BMR's other clients for providing
brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio 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 compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the compensation should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealer firms which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, BMR receives Research Services from many broker-dealer firms with
which BMR places the Portfolio transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates. BMR
will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts whenever decisions
are made to purchase or sell securities by the Portfolio and one or more of such
other accounts simultaneously. In making such allocations, the main factors to
be considered are the respective investment objectives of the Portfolio and such
other accounts, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Portfolio
and such accounts, the size of investment commitments generally held by the
Portfolio and such accounts and the opinions of the persons responsible for
recommending investments to the Portfolio and such accounts. While this
procedure could have a detrimental effect on the price or amount of the
securities available to the Portfolio from time to time, it is the opinion of
the Trustees of the Trust and the Portfolio that the benefits available from the
BMR organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions. For the fiscal years ended December 31, 1994 and
1995, and for the period from the start of business, October 28, 1993, to
December 31, 1993, the Portfolio paid no brokerage commissions on portfolio
security transactions.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. Eaton Vance, pursuant to its agreement with the Trust, controls
the use of the words "Eaton Vance" and "EV" in the Fund's name and may use the
words "Eaton Vance" or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's by-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of shareholders
to change the name of the Trust or any series or to make such other changes as
do not have a materially adverse effect on the financial interests of
shareholders or if they deem it necessary to conform it to applicable federal or
state laws or regulations. The Trust or any series or class thereof may be
terminated by: (1) the affirmative vote of the holders of not less than
two-thirds of the shares outstanding and entitled to vote at any meeting of
shareholders of the Trust or the appropriate series or class thereof, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the shares of the Trust or a series or class thereof,
provided, however, that, if such termination is recommended by the Trustees, the
vote of a majority of the outstanding voting securities of the Trust or a series
or class thereof entitled to vote thereon shall be sufficient authorization; or
(2) by means of an instrument in writing signed by a majority of the Trustees,
to be followed by a written notice to shareholders stating that a majority of
the Trustees has determined that the continuation of the Trust or a series or a
class thereof is not in the best interest of the Trust, such series or class or
of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed
from office either by declaration in writing filed with the custodian of the
assets of the Trust or by votes cast in person or by proxy at a meeting called
for the purpose. The By-laws further provide that under certain circumstances
the shareholders may call a meeting to remove a Trustee and that the Trust is
required to provide assistance in communicating with shareholders about such a
meeting. The By-Laws also provide that the Trustees shall promptly call a
meeting of shareholders for the purpose of voting upon a question of removal
of a Trustee when requested so to do by the record holders of not less than 10
per centum of the outstanding shares.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action
of the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
are the independent accountants of the Fund and the Portfolio, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference
into this SAI and have been so incorporated in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, as experts in accounting
and auditing. A copy of the Fund's most recent Annual Report accompanies this
SAI.
Registrant incorporates by reference the audited financial information for
the Funds listed below and for the Portfolio for the fiscal year ended
December 31, 1995 as previously filed electronically with the Securities and
Exchange Commission:
EV Classic Government Obligations Fund
(Accession No. 0000950156-96-000289)
EV Marathon Government Obligations Fund
(Accession No. 0000950156-96-000290)
EV Traditional Government Obligations Fund
(Accession No. 0000950156-96-000291)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC GOVERNMENT OBLIGATIONS
FUND. The Fund became a series of the Trust on September 27, 1993.
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1995, the Principal Underwriter
paid to Authorized Firms sales commissions of $261,989 on sales of shares of
the Fund. During the same period, the Fund made sales commission payments
under the Plan to the Principal Underwriter aggregating $323,665 and the
Principal Underwriter received $8,800 in contingent deferred sales charges
("CDSCs") which were imposed on early redeeming shareholders. These sales
commissions and CDSC payments reduced Uncovered Distributions Charges under
the Plan. As at December 31, 1995 the outstanding Uncovered Distritubion
Charges of the Principal Underwriter calculated under the Plan amounted to
approximately $6,791,000 (which amount was equivalent to 16.2% of the Fund's
net assets on such day). During the fiscal year ended December 31, 1995, the
Fund made service fee payments to the Principal Underwriter and Authorized
Firms aggregating $107,889 of which $86,570 was paid to Authorized Firms and
the balance of which was retained by the Principal Underwriter.
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 fiscal year ended
December 31, 1995, the Fund paid the Principal Underwriter $1,502.50 for
repurchase transactions handled by the Principal Underwriter.
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 Trust
or the Portfolio.) During the fiscal year ended December 31, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Fund, the Portfolio and
the other funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- --------------
Donald R. Dwight $33 $3,970(2) $135,000(4)
Samuel L. Hayes, III 32 3,912(3) 150,000(5)
Norton H. Reamer 31 3,895 135,000
John L. Thorndike 32 4,012 140,000
Jack L. Treynor 34 4,118 140,000
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $1,335 of deferred compensation.
(3) Includes $1,900 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws is borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the Fund's
Distribution 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 by
the Fund 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 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 Distribution Charges under the
Fund's 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 outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a 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. (For shares sold prior
to January 30, 1995, Plan payments are as follows: the Principal Underwriter
pays monthly sales commissions and service fee payments to Authorized Firms
equivalent to approximately .75% and .25%, respectively, annualized, of the
assets maintained in the Fund by their customers beginning at the time of sale.
No payments were made at the time of sale and there was no CDSC.)
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 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 amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time the
aggregate amounts theretofore received by the Principal Underwriter pursuant to
the Plan and from 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) and by the Board of Trustees of the Trust,
including the Rule 12b-1 Trustees. The Plan continues 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 Distribution Agreement may
be terminated at any time by vote of a majority of the Rule 12b-1 Trustees or by
a vote of a majority of the outstanding voting securities of the Fund. 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 the Principal Underwriter and Authorized Firms
under the Plan provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing
incentives to the Principal Underwriter and Authorized Firms, the Plan is
expected to result in the maintenance of, and possible future growth in, the
assets of the Fund. Based on the foregoing and other relevant factors, the
Trustees have determined that in their judgment there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
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 December 31, 1995. The total return for the period prior
to the Fund's commencement of operations on November 1, 1993 reflects the
Portfolio's total return (or that of its predecessor) adjusted to reflect any
applicable Fund contingent deferred sales charge ("CDSC"). Total return for
this time period has not been adjusted to reflect the Fund's distribution and/
or service fees and certain other expenses. If such an adjustment were made,
the performance would have been lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC* ON --------------------------- --------------------------
PERIOD DATE INVESTMENT 12/31/95 12/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------- ------------ ----------- --------------- --------------- -------------- ----------- ------------- -----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
Ended
12/31/95 12/31/85 $1,000 $2,277.70 $2,277.70 127.77% 8.58% 127.77% 8.58%
5 Years
Ended
12/31/95 12/31/90 $1,000 $1,454.90 $1,454.90 45.49% 7.79% 45.49% 7.79%
1 Year
Ended
12/31/95 12/31/94 $1,000 $1,129.36 $1,119.36 12.94% 12.94% 11.94% 11.94%
Past performance is not indicative of future results. Investment return and principal value will fluctuate; shares, when
redeemed, may be worth more or less than their original cost.
- ----------
*No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended December 31, 1995, the yield of the Fund
was 4.58%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 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 at
March 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 29.5% of the outstanding shares, which it
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. In
addition, on such date, Chicago Public Schools Dept. of Treasury Fund, Chicago,
IL was the record and beneficial owner of approximately 13.2% of the outstanding
shares. 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>
[LOGO]
EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1996
EV CLASSIC GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC GOVERNMENT OBLIGATIONS 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 1559, Boston, MA 02104,
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
C-GOSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EV MARATHON GOVERNMENT OBLIGATIONS 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 Government Obligations Fund (the "Fund"),
Government Obligations Portfolio (the "Portfolio") and certain other series of
Eaton Vance Government Obligations Trust (the "Trust"). Part II provides
information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional,
Fund-specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI."
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies .......................... 1
Investment Restrictions ................................................... 11
Trustees and Officers ..................................................... 12
Investment Adviser and Administrator ...................................... 14
Custodian ................................................................. 17
Service for Withdrawal .................................................... 17
Determination of Net Asset Value .......................................... 17
Investment Performance .................................................... 18
Taxes ..................................................................... 20
Portfolio Security Transactions ........................................... 22
Other Information ......................................................... 23
Independent Accountants ................................................... 24
Financial Statements ......................................................
PART II
Fees and Expenses ......................................................... a-1
Principal Underwriter ..................................................... a-1
Distribution Plan ......................................................... a-2
Performance Information ................................................... a-4
Control Persons and Principal Holders of Securities ....................... a-4
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 MAY 1, 1996, 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).
For EDGAR filing purposes only: Registrant incorporates by reference for EV
Marathon Government Obligations Fund the Part I found in the Statement of
Additional Information of EV Classic Government Obligations Fund contained in
this Amendment.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON GOVERNMENT OBLIGATIONS
FUND. The Fund became a series of the Trust on September 27, 1993.
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1995, the Principal Underwriter
paid to Authorized Firms sales commissions of $776,323 on sales of shares of the
Fund. During the same period, the Fund made sales commission payments under the
Plan to the Principal Underwriter aggregating $773,567 and the Principal
Underwriter received approximately $710,000 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 of
December 31, 1995 the outstanding Uncovered Distribution Charges of the
Principal Underwriter calculated under the Plan amounted to approximately
$4,453,000 (which amount was equivalent to 3.8% of the Fund's net assets on such
day). During the fiscal year ended December 31, 1995, the Fund made service fee
payments to the Principal Underwriter and Authorized Firms aggregating $53,039
of which $53,020 was paid to Authorized Firms and the balance of which was
retained by the Principal Underwriter.
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 fiscal year ended December 31,
1995, the Fund paid the Principal Underwriter $2,045.00 for repurchase
transactions handled by the Principal Underwriter.
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 of the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Trust or the
Portfolio.) During the fiscal year ended December 31, 1995, the noninterested
Trustees of the Trust and the Portfolio earned the following compensation in
their capacities as Trustees from the Fund, the Portfolio and the other funds in
the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------------
Donald R. Dwight $501 $3,970(2) $135,000(4)
Samuel L. Hayes, III 475 3,912(3) 150,000(5)
Norton H. Reamer 471 3,895 135,000
John L. Thorndike 478 4,012 140,000
Jack L. Treynor 511 4,118 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment companies
or series thereof.
(2) Includes $1,335 of deferred compensation.
(3) Includes $1,900 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to Authorized Firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
Prospectus; the provisions of the Fund's Distribution 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 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 Distribution Charges under the Fund's 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 outstanding Uncovered Distribution
Charges with respect to such day. The amount of outstanding Uncovered
Distribution Charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a 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 commissions and service
fee payments made by the Fund and the outstanding Uncovered Distribution Charges
of the Principal Underwriter, see "Fees and Expenses -- Distribution Plan" in
this Part II. The Fund believes that the combined rate of all these payments may
be higher than the rate of payments made under distribution plans adopted by
other investment companies pursuant to Rule 12b-1. Although the 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 amounts
paid to the Principal Underwriter, including CDSCs, pursuant to the Plan. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts theretofore received by the
Principal Underwriter pursuant to the Plan and from 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) and by the Board of Trustees of the Trust,
including the Rule 12b-1 Trustees. The Plan continues 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 Distribution Agreement may
be terminated at any time by vote of a majority of the Rule 12b-1 Trustees or
by a vote of a majority of the outstanding voting securities of the Fund. 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 believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees have determined that in
their judgment there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
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 December 31, 1995. The total return for the period prior to the
Fund's commencement of operations on November 1, 1993 reflects the Portfolio's
total return (or that of its predecessor) adjusted to reflect any applicable
Fund CDSC. Total return for this time period has not been adjusted to reflect
the Fund's distribution and/or service fees and certain other expenses. If such
adjustments were made, the performance would have been lower.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE BEFORE VALUE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING THE DEDUCTING THE DEDUCTING THE CDSC DEDUCTING THE CDSC*
INVESTMENT INVESTMENT AMOUNT OF CDSC ON CDSC* ON ------------------------ -------------------------
PERIOD DATE INVESTMENT 12/31/95 12/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ---------- ------------- -------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
ended
12/31/95 12/31/85 $1,000 $2,293.49 $2,293.49 129.35% 8.66% 129.35% 8.66%
5 Years
ended
12/31/95 12/31/90 $1,000 $1,465.00 $1,445.00 46.50% 7.94% 44.50% 7.64%
1 Year
ended
12/31/95 12/31/94 $1,000 $1,132.89 $1,082.89 13.29% 13.29% 8.29% 8.29%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ----------
* No CDSC is imposed on certain redemptions. See the Fund's current
Prospectus.
For the thirty-day period ended December 31, 1995, the yield of the Fund was
4.79%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 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 at
March 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 13.5% of the outstanding shares, which it
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1996
EV MARATHON GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
M-GOSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EV TRADITIONAL GOVERNMENT OBLIGATIONS 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 Government Obligations Fund (the
"Fund"), Government Obligations Portfolio (the "Portfolio") and certain other
series of Eaton Vance Mutual Funds Trust (the "Trust"). Part II provides
information solely about the Fund. Where appropriate, Part I includes cross-
references to the relevant sections of Part II that provide additional, Fund-
specific information. This Statement of Additional Information is sometimes
referred to herein as the "SAI".
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ...................... 1
Investment Restrictions ............................................... 11
Trustees and Officers ................................................. 12
Investment Adviser and Administrator .................................. 14
Custodian ............................................................. 17
Service for Withdrawal ................................................ 17
Determination of Net Asset Value ...................................... 17
Investment Performance ................................................ 18
Taxes ................................................................. 20
Portfolio Security Transactions ....................................... 22
Other Information ..................................................... 23
Independent Accountants ............................................... 24
Financial Statements ..................................................
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
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 MAY 1, 1996, 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).
For EDGAR filing purposes only: Registrant incorporates by reference for EV
Traditional Government Obligations Fund the Part I found in the Statement of
Additional Information of EV Classic Government Obligations Fund contained in
this Amendment.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND. The Fund became a series of the Trust on February 1, 1991.
The Fund changed its name from Eaton Vance Traditional Government Obligations
Fund to EV Traditional Government Obligations Fund on September 27, 1993.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to the close of business on October 27, 1993 (when the Fund
transferred its assets to the Portfolio in exchange for an interest in the
Portfolio), the Fund retained Eaton Vance as its investment adviser. For the
period from January 1, 1993, to October 27, 1993, the Fund paid Eaton Vance
advisory fees of $3,124,314 (equivalent to .75% (annualized) of the Fund's
average daily net assets for such period). For the fiscal year ended December
31, 1992, the Fund paid Eaton Vance advisory fees of $3,212,369.
SERVICE PLAN
During the fiscal year ended December 31, 1995, the Fund made service fee
payments under the Plan to the Principal Underwriter aggregating $793,965, of
which $742,985 was paid to Authorized Firms and the balance of which was
retained by the Principal Underwriter.
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 fiscal year ended
December 31, 1995, the Fund paid the Principal Underwriter $5,565.00 for
repurchase transactions handled by the Principal Underwriter.
The total sales charges for sales of shares of the Fund during the fiscal
years ended December 31, 1995, 1994 and 1993, were $216,170, $727,826 and
$2,735,964, respectively, of which $10,288, $119,053 and $424,933,
respectively, was received by the Principal Underwriter and Authorized Firms
received $205,882, $608,773 and $2,311,031, respectively.
BROKERAGE COMMISSIONS
Prior to the close of business on October 27, 1993 (when the Fund
transferred its assets to the Portfolio in exchange for an interest in the
Portfolio), the Fund retained Eaton Vance as its investment adviser. During
the period from January 1, 1993, to October 27, 1993, the Fund paid no
brokerage commissions on portfolio security transactions.
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 Trust
or the Portfolio.) During the fiscal year ended December 31, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Fund, the Portfolio and
the other funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------------
Donald R. Dwight ......... $ 668 $3,970(2) $135,000(4)
Samuel L. Hayes, III ..... 637 3,912(3) 150,000(5)
Norton H. Reamer ......... 629 3,895 135,000
John L. Thorndike ........ 638 4,012 140,000
Jack L. Treynor .......... 682 4,118 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $1,335 of deferred compensation.
(3) Includes $1,900 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
<PAGE>
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
INTENDED QUANTITY INVESTMENT -- STATEMENT OF INTENTION. If it is
anticipated that $50,000 or more of Fund shares and shares of the other
continuously offered open-end funds listed under "The Eaton Vance Exchange
Privilege" in the current Prospectus of the Fund 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 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 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. For sales charges and other
information on quantity purchases, see "How to Buy Fund Shares" in the Fund's
current Prospectus. Any investor considering signing a Statement of Intention
should read it carefully.
RIGHT OF ACCUMULATION -- CUMULATIVE QUANTITY DISCOUNT. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated
at the maximum current offering price) of the shares the shareholder owns in
his account(s) in the Fund and in the other continuously offered open-end
funds listed under "The Eaton Vance Exchange Privilege" in the current
Prospectus of the Fund for which Eaton Vance acts as investment adviser or
administrator at the time of purchase. The sales charge on the shares being
purchased will then be at the rate applicable to the aggregate. For example,
if the shareholder owned shares valued at $30,000 in EV Traditional California
Municipals Fund, and purchased an additional $20,000 of Fund shares, the sales
charge for the $20,000 purchase would be at the rate of 2.75% of the offering
price (2.83% of the net amount invested) which is the rate applicable to
single transactions of $50,000. For sales charges on quantity purchases, see
"How to Buy Fund Shares" in the Fund's current 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 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. Corfirmation of the order is subject to such verification. The
Right of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain Authorized Firms which have agreements with the
Principal Underwriter. The Principal Underwriter is a wholly-owned subsidiary
of Eaton Vance. The public offering price is the net asset value next computed
after receipt of the order, plus, where applicable, a variable percentage
(sales charge) depending upon the amount of purchase as indicated by the sales
charge table set forth in the Fund's current Prospectus (see "How to Buy Fund
Shares"). Such table is applicable to purchases of the Fund alone or in
combination with purchases of the 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 their own account; and (ii) a trustee or other fiduciary
purchasing shares for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by
the Principal Underwriter through one dealer aggregating $50,000 or more made
by any of the persons enumerated above within a thirteen-month period starting
with 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 the
Fund pursuant to the Right of Accumulation and declared as such at the time of
purchase.
Subject to the applicable provisions of the 1940 Act, the Fund may issue
shares at net asset value in the event that an investment company (whether a
regulated or private investment company or a personal holding company) is
merged or consolidated with or acquired by the Fund. Normally no sales charges
will be paid in connection with an exchange of Fund shares for the assets of
such investment company.
Shares may be sold at net asset value to any officer, director, trustee,
general partner or employee of the Fund, the Portfolio or any investment
company for which Eaton Vance or BMR acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or
administered by Eaton Vance or by any parent, subsidiary or other affiliate of
Eaton Vance, or any officer, director 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 of the Fund may also be sold at net asset value to registered
representatives and employees of certain Authorized Firms and to such persons'
spouses and children under the age of 21 and their beneficial accounts.
The Trust reserves the right to suspend or limit the offering of shares of
the Fund to the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the Distribution Agreement with the Trust on behalf of the Fund. The
expenses of printing copies of prospectuses used to offer shares to Authorized
Firms or investors and other selling literature and of advertising are borne
by the Principal Underwriter. The fees and expenses of qualifying and
registering and maintaining qualifications and registrations of the Fund and
its shares under federal and state securities laws are borne by the Fund. The
Distribution Agreement is renewable annually by the Board of Trustees of the
Trust (including a majority of its Trustees who are not interested persons of
the Principal Underwriter or the Trust), may be terminated on six months'
notice by either party, and is automatically terminated upon assignment. The
Principal Underwriter distributes Fund shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all Authorized Firms. However, 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. See "How to Buy Fund Shares" in the Fund's current
Prospectus for the discounts allowed to Authorized Firms. 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. See "Fees and Expenses" for the sales charge paid to the Principal
Underwriter and Authorized Firms.
See the Statement of Assets and Liabilities in the Fund's Financial
Statements for a specimen price make-up sheet showing the computation of
maximum offering price per share as at December 31, 1995.
SERVICE PLAN
The Trust on behalf of the Fund has adopted a Service Plan (the "Plan")
designed to meet the service fee requirements of the revised sales charge rule
of the National Association of Securities Dealers, Inc. (Management believes
service fee payments are not distribution expenses governed by Rule 12b-1
under the 1940 Act, but has chosen to have the Plan approved as if that Rule
were applicable.) The following supplements the discussion of the Plan
contained in the Fund's Prospectus.
Pursuant to such Rule, the Plan has been approved by the independent
Trustees of the Trust, who have no direct or indirect financial interest in
the Plan, and by all of the Trustees of the Trust on behalf of the Fund. The
Plan amends and replaces the Fund's original distribution plan, which
originally became effective on July 9, 1984 and which was approved by the
Fund's shareholders. The Plan remains in effect through April 28, 1997, and
from year to year thereafter, provided such continuance is approved by a vote
of both a majority of (i) those 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 "Noninterested 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 Noninterested Trustees or by a vote of a
majority of the outstanding voting securities of the Fund. The Plan has been
approved by the Board of Trustees of the Trust, including the Noninterested
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 herein without approval
of the shareholders of the Fund, and all material amendments of the Plan must
also be approved by the Trustees of the Trust as prescribed by 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 have
determined that in their judgment there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders. 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 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 December 31, 1995.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
INVESTMENT AMOUNT OF INVESTMENT ------------------------ -----------------------
INVESTMENT PERIOD DATE INVESTMENT* ON 12/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
----------------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C> <C>
10 Years Ended 12/31/95 8.26% 12/31/85 $962.32 $2,214.17 130.09% 8.68% 121.42%
5 Years Ended 12/31/95 7.17% 12/31/90 $962.74 $1,414.97 46.97% 7.99% 41.50%
1 Year Ended 12/31/95 9.65% 12/31/94 $962.14 $1,096.53 13.97% 13.97% 9.65%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate and shares, when redeemed, may be worth
more or less than their original cost.
- ------------
*Initial investment less the maximum sales charge of 3.75%.
For the 30-day period ended December 31, 1995, the yield of the Fund was
5.34%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 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
at March 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville,
FL was the record owner of approximately 17.9% of the outstanding shares,
which it held on behalf of its customers who are the beneficial owners of such
shares, and as to which it had voting power under certain limited
circumstances. To the knowledge of the Trust, no other person owned of record
or beneficially 5% or more of the Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EV TRADITIONAL
GOVERNMENT
OBLIGATIONS FUND
STATEMENT OF
ADDITIONAL INFORMATION
MAY 1, 1996
EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
T-GOSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EATON VANCE SHORT-TERM TREASURY FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- ------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Investment Objective and Policies ..................................... 2
Investment Restrictions ............................................... 2
Trustees and Officers ................................................. 3
Control Persons and Principal Holders of Securities ................... 5
Investment Adviser .................................................... 5
Custodian ............................................................. 7
Determination of Net Asset Value ...................................... 7
Investment Performance ................................................ 8
Taxes ................................................................. 8
Principal Underwriter ................................................. 10
Distribution Plan ..................................................... 10
Portfolio Security Transactions ....................................... 10
Other Information ..................................................... 12
Independent Accountants ............................................... 13
Financial Statements .................................................. 13
- ------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE SHORT-TERM TREASURY FUND (THE
"FUND") DATED MAY 1, 1996, 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>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of Eaton Vance Short-Term Treasury Fund (the
"Fund"), a series of Eaton Vance Mutual Funds Trust (the "Trust"), is to seek
current income and liquidity. The Fund invests exclusively in U.S. Treasury
obligations (bills, notes and bonds) with a remaining maturity of up to five
years and will maintain a dollar weighted average portfolio maturity of not
more than one year.
PORTFOLIO TURNOVER
The Fund cannot accurately predict its portfolio turnover rate, but it is
anticipated that the annual turnover rate will generally not exceed 25%
(excluding maturity of securities). The Fund engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective either directly by
increasing income or indirectly by enhancing the Fund's net asset value.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental
policies and as such cannot be changed without the approval of the holders of
a majority of the Fund's outstanding voting securities, which as used in this
Statement of Additional Information means the lesser of (a) 67% of the shares
of the Fund present or represented by proxy at a meeting if the holders of
more than 50% of the shares are present or represented at the meeting or (b)
more than 50% of the shares of the Fund.
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of a single issuer, or purchase more than 10%
of the outstanding voting securities of a single issuer, except obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalitites and except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling
a portfolio security under circumstances which may require the registration of
the same under the Securities Act of 1933;
(4) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(5) Purchase or sell physical commodities or futures contracts for the
purchase or sale of physical commodities, provided that the Fund may enter
into all types of futures and forward contracts on currency, securities and
securities, economic and other indices and may purchase and sell options on
such futures contracts;
(6) Make loans to any person, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements or (c) lending portfolio securities;
(7) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin; or
(8) Invest 25% or more of its total assets in any single industry
(provided there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities).
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.
The Fund has adopted the following nonfundamental investment policies
which may be changed by the Trustees of the Trust without approval by the
Fund's shareholders. As a matter of nonfundamental policy, the Fund may not:
(a) 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 their delegate, determines to be liquid; (b) invest more than 5% of its
total assets (taken at current value) in the securities of issuers which,
including their predecessors, have been in operation for less than three
years; (c) purchase put or call options on securities if after such purchase
more than 5% of its net assets, as measured by the aggregate of the premiums
paid for such options, would be invested in such options; (d) purchase
warrants with a value in excess of 5% of net assets, or warrants which are not
listed on the New York or American Stock Exchange with a value in excess of 2%
of the Fund's net assets; (e) make short sales of securities or maintain a
short position, unless at all times when a short position is open the Fund
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short, and
unless not more than 25% of the Fund's net assets (taken at current value) is
held as collateral for such sales at any time. (The Fund will make such sales
only for the purpose of deferring realization of gain or loss for federal
income tax purposes); (f) purchase or retain in its portfolio any securities
issued by an issuer any of whose officers, directors, trustees or security
holder is an officer or Trustee of the Trust or is a member, officer, director
or trustee of any investment adviser of the Fund, if after the purchase of the
securities of such issuer by the Fund one or more of such persons owns
benefically more than 1/2 of 1% of the shares of 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 benefically more than 5% of
such shares or securities or both (all taken at market value); or (g) purchase
oil, gas or other mineral leases or purchase partnership interests in oil, gas
or other mineral exploration or development programs.
The Fund has no current intention during the coming year of lending
portfolio securities, entering into futures or options contracts, investing in
other investment companies or engaging in short sales. The Fund has the
authority, pending the investment of uninvested cash in Treasury obligations,
to invest up to 5% of its assets in repurchase agreements with respect to U.S.
Treasury obligations; however, the Fund has no current intention to exercise
that authority.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this Statement of Additional Information 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 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 to dispose of such security or other
asset. Notwithstanding the foregoing, the Fund must always be in compliance
with the borrowing policy set forth above.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it may revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Fund's investment
adviser, Eaton Vance Management ("Eaton Vance" or the "Investment Adviser");
of Eaton Vance's wholly-owned subsidiary, Boston Management and Research
("BMR"); 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 who are "interested
persons" of the Trust, Eaton Vance, BMR, EVC or EV, as defined in the
Investment Company Act of 1940 (the "1940 Act"), by virtue of their
affiliation with any one or more of the Trust, Eaton Vance, BMR, EVC or EV,
are indicated by an asterisk(*).
M. DOZIER GARDNER (62), President and Trustee*
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV and a
Director of EVC and EV. Director or Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
JAMES B. HAWKES (54), Vice President and Trustee*
Executive Vice President of Eaton Vance, BMR, EVC and EV and a Director of EVC
and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR. Mr. Hawkes was elected Vice President and
Trustee of the Trust on December 16, 1991.
H. DAY BRIGHAM, JR. (68), Vice President
Chairman of the Management Committee, Vice President of Eaton Vance, BMR, EVC
and EV, and a Director of EVC and EV. Director, Trustee and officer of
various investment companies managed by Eaton Vance or BMR. Mr. Brigham was
elected Vice President of the Trust on June 19, 1995.
DONALD R. DWIGHT (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc., since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
WILLIAM H. AHERN, JR. (36), Vice President
Assistant Vice President of Eaton Vance, BMR and EV. Officer of various
investment companies managed by Eaton Vance or BMR. Mr. Ahern was elected
Vice President of the Trust on June 19, 1995.
MICHAEL B. TERRY (53), Vice President
Vice President of Eaton Vance, BMR 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.
THOMAS OTIS (64), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of Eaton Vance, BMR 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.
JOHN P. RYNNE (53), Assistant Secretary
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EV, EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected Assistant Secretary of the Trust on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance, BMR and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Woodbury was
elected Assistant Secretary of the Trust on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust. The 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. Messrs. Hayes (Chairman), Reamer,
Thorndike and Treynor are currently serving on the Committee. 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. The Audit Committee's functions include
making recommendations to the Board regarding the selection of the independent
accountants, and reviewing with such accountants and the Treasurer of the
Trust matters relative to trading and brokerage policies and practices,
accounting and auditing practices and procedures, accounting records, internal
account- ing controls, and the functions performed by the custodian, transfer
agent and dividend disbursing agent of the Trust.
The fees and expenses of those Trustees of the Trust who are not members
of the Eaton Vance organization (the noninterested Trustees) are paid by the
Fund (and the other series of the Trust). (The Trustees of the Trust who are
members of the Eaton Vance organization receive no compensation from the
Fund.) During the fiscal year ended December 31, 1995, the noninterested
Trustees of the Trust earned the following compensation in their capacities as
Trustees from the Trust and the other funds in the Eaton Vance fund complex
(1):
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME FROM FUND FUND COMPLEX
- --- -------- -----------
Donald R. Dwight ...................... $555(2) $135,000(4)
Samuel L. Hayes, III .................. 600(3) 150,000(5)
Norton H. Reamer ...................... 600 135,000
John L. Thorndike ..................... 640 140,000
Jack L. Treynor ....................... 601 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $187 of deferred compensation.
(3) Includes $311 of deferred compensation.
(4) Includes $35,000 of deferred compensation.
(5) Includes $33,750 of deferred compensation.
Trustees of the Trust who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred
fees invested by the Trust 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 Fund's assets, liabilities, and net income per share, and will not
obligate the Trust to retain the services of any Trustee or obligate the Trust
to pay any particular level of compensation to the Trustee. The Trust does not
have a retirement plan for its Trustees.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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 March 31, 1996, Eaton Vance owned 32.9% of the outstanding shares of the
Fund; Eaton Vance is a Massachusetts business trust and a wholly-owned
subsidiary of EVC. In addition, as of the same date, the following
shareholders owned of record the percentages of the Fund's outstanding shares
indicated after their names; Moorman Manufacturing Company, Quincy, IL
(16.6%); Western Consummer Services Inc., Irvine, CA (16.1%); and Intracon
Inc., Burton, MI (15.6%). To the Trust's knowledge, no other person owned of
record or beneficially 5% or more of the Fund's outstanding shares as of such
date.
INVESTMENT ADVISER
The Fund engages Eaton Vance as its investment adviser pursuant to an
Investment Advisory Agreement dated February 4, 1991. Eaton Vance or its
affiliates act as investment adviser to investment companies and various
individual and institutional clients with combined assets under management of
over $16 billion. Eaton Vance is a wholly-owned subsidiary of EVC, a publicly-
held holding company.
Eaton Vance, its affiliates and its predecessor companies have been
managing assets of individuals and institutions since 1924 and managing
investment companies since 1931. It maintains a large staff of experienced
fixed-income and equity investment professionals to service the needs of its
clients. The fixed-income division focuses on all kinds of taxable investment-
grade and high-yield securities, tax-exempt investment-grade and high-yield
securities, and U.S. Government securities. The equity division covers stocks
ranging from blue chip to emerging growth companies.
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, an investment management firm based in Hong Kong, has advised
Eaton Vance's international equity funds since 1992. Lloyd George's staff
includes 11 highly qualified investment professionals who manage $U.S. 1.3
billion. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Bombay. Eaton Vance mutual funds are distributed by
Eaton Vance Distributors both within the United States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy.
Before making an investment recommendation, a representative can help you
carefully consider your short- and long-term financial goals, your tolerance
for investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
Eaton Vance manages the investments and affairs of the Fund subject to the
supervision of the Trust's Board of Trustees. Eaton Vance furnishes to the
Fund investment advice and assistance, administrative services, office space,
equipment and personnel, and has arranged for certain members of the Eaton
Vance organization to serve without salary as officers or Trustees of the
Trust.
For a description of the compensation that the Fund pays Eaton Vance under
its Investment Advisory Agreement, see the Fund's current Prospectus. As at
December 31, 1995, the Fund had net assets of $1,915,161. For the fiscal year
ended December 31, 1995, Eaton Vance would have earned, absent a fee
reduction, advisory fees of $139,640 (equivalent to 0.31% of the Fund's
average daily net assets for such year). To enhance the net income of the
Fund, Eaton Vance made a reduction of its advisory fee in the amount of
$122,471. For the fiscal year ended December 31, 1994, Eaton Vance would have
earned, absent a fee reduction, advisory fees of $42,301 (equivalent to 0.22%
of the Fund's average daily net assets for such year). To enhance the net
income of the Fund, Eaton Vance made a reduction of its fee in the full amount
and was allocated a portion of the Fund's operating expenses in the amount of
$31,702. For the fiscal year ended December 31, 1993, Eaton Vance would have
earned, absent a fee reduction, advisory fees of $198,724 (equivalent to 0.27%
of the Fund's average daily net assets for such year). To enhance the net
income of the Fund, Eaton Vance made a reduction of its fee in the amount of
$73,896.
The Investment Advisory Agreement with Eaton Vance remains in effect
through and including February 28, 1997. It may be continued indefinitely
thereafter so long as such continuance after February 28, 1997 is approved at
least annually (i) by the vote of a majority of the Trustees who are not
interested persons of the Trust or of Eaton Vance cast in person at meeting
specifically called for the purpose of voting on such approval and (ii) by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund. The Agreement may be terminated at any time
without penalty on sixty (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 Fund, and the Agreement will terminate automatically in the event of
its assignment. The Agreement provides that Eaton Vance may render services to
others and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" in their names. The Agreement
also provides that, in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under the Agreement
on the part of Eaton Vance, Eaton Vance shall not be liable to the Fund or to
any shareholder for any act or omission in the course of or connected with
rendering services or for any losses sustained in the purchase, holding or
sale of any security.
The Fund will be responsible for all costs and expenses not expressly
stated to be payable by Eaton Vance under the Investment Advisory Agreement or
by Eaton Vance Distributors, Inc. under its Distribution Agreement with the
Fund. Such costs and expenses to be borne by the Fund include, without
limitation, the fees and expenses of the Fund's custodian and transfer agent,
including those incurred for determining the Fund's net asset value and
keeping the Fund's books; 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 its shares;
expenses of reports to shareholders, proxy statements, and other expenses of
shareholders' meetings; insurance premiums; printing and mailing expenses;
interest, taxes and corporate fees; legal and accounting expenses;
compensation and expenses of Trustees not affiliated with Eaton Vance; and
investment advisory fees. The Fund will also bear expenses incurred in
connection with litigation in which the Fund is a party and the legal
obligation the Fund may have to indemnify the Trust's officers and Trustees
with respect thereto.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes, and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Gardner is president and chief executive officer of
EVC, Eaton Vance, BMR and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust which expires on December 31,
1996, the Voting Trustees of which are Messrs. Clay, Brigham, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of Eaton
Vance and BMR who are also officers and Directors of EVC and EV. As of March
31, 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. Brigham, Gardner, Hawkes and Otis who are
officers or Trustees of the Trust, are also members of the EVC, Eaton Vance,
BMR and EV organizations. Messrs. Ahern, Murphy, O'Connor, Rynne, Terry and
Woodbury and Ms. Sanders are officers of the Trust and are also members of the
Eaton Vance, BMR and EV organizations. Eaton Vance 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 of
the stock of Northeast Properties, Inc., which is engaged in real estate
investment. EVC owns all of the stock of Fulcrum Management, Inc. and MinVen,
Inc., which are engaged in precious metal mining venture investment and
management. EVC also owns 24% of the Class A shares of Lloyd George Management
(B.V.I.) Limited, a registered investment adviser. 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 Fund's custodian,
Investors Bank & Trust Company. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund and
such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund. IBT has the custody of all cash
and securities of the Fund, maintains the Fund's general ledger, and computes
the daily per share net asset value. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Fund's investments, receives and disburses all funds and performs
various other ministerial duties upon receipt of proper instructions from the
Fund. IBT charges fees which are competitive within the industry. A portion of
the fee relates to custody, bookkeeping and valuation services and is based
upon a percentage of the Fund's net assets and a portion of the fee relates to
activity charges, primarily the number of portfolio transactions. These fees
are then reduced by a credit for cash balances of the particular investment
company at the custodian equal to 75% of the 91-day, U.S. Treasury Bill
auction rate applied to the particular investment company's average daily
collected balances for the week. Landon T. Clay, a Director of EVC and an
officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors
Financial Services Corp., the holding company parent of IBT. Management
believes that such ownership does not create an affiliated person relationship
between the Fund and IBT under the 1940 Act.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value is determined by the Fund's custodian (as agent
for the Fund) in the manner described under "Valuing Fund Shares" in the
Fund's current prospectus. The Fund will be closed for business and will not
price its 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.
INVESTMENT PERFORMANCE
The Fund's average annual total return is determined by multiplying a
hypothetical initial purchase order of $1,000 by the average annual compound
rate of return (including capital appreciation/depreciation, and dividends and
distributions paid and reinvested) for the stated period and annualizing the
result. The calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period, and
a complete redemption of the investment at the end of the period.
The Fund's yield is computed pursuant to a standardized formula by
dividing its net investment income per share earned during a recent thirty-day
period by the net asset value per share on the last day of the period and
annualizing the resulting figure. Net investment income per share is
calculated from the yields to maturity of all debt obligations in the Fund's
portfolio based on prescribed methods, reduced by accrued Fund expenses for
the period, with the resulting number being divided by the average daily
number of Fund shares outstanding and entitled to receive dividends during the
period. For the thirty-day period ended December 31, 1995, the yield of the
Fund was 4.76%. If a portion of the expenses related to the operation of the
Fund had not been allocated to the Investment Adviser, the Fund would have had
a lower yield.
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 period from the date of the initial public offering,
February 4, 1991, to December 31, 1995, and the one-year period ended December
31, 1995.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF TOTAL RETURN
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT ------------------------------
PERIOD DATE INVESTMENT ON 12/31/95 CUMULATIVE ANNUALIZED
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Life of the
Fund** 2/4/91* $1,000.00 $1,224.18 22.42% 4.21%
1 Year Ended
12/31/95** 12/13/94 $1,000.00 $1,067.96 6.80% 6.80%
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.
- ----------
*Date of the initial public offering (February 4, 1991).
**If a portion of the expenses of the Fund had not been subsidized, the Fund
would have had lower returns.
</TABLE>
The Fund's yield and total return may be compared to the Consumer Price
Index and various domestic, international and global securities indices. The
Fund's yield and total return and comparisons with these indices may be used
in advertisements and in information furnished to present or prospective
shareholders.
From time to time evaluations of the Fund's performance made by
independent sources, e.g. Lipper Analytical Services, Inc., CDA/Weisenberger
and Morningstar, Inc., may be used in advertisements and in information
furnished to present or prospective shareholders.
The Fund may provide information about Eaton Vance, its affiliates and
other investment advisers to the funds in the Eaton Vance Family of Funds in
sales material or advertisements provided to investors or prospective
investors. Such material or advertisements may also provide information on the
use of investment professionals by such investors.
Information used in advertisements and in materials furnished to present
and prospective shareholders may include statements or illustrations relating
to the appropriateness of types of securities and/or mutual funds which may be
employed to meet specific financial goals, such as (1) funding retirement, (2)
paying for children's education, and (3) financially supporting aging parents.
These three financial goals may be referred to in such advertisements or
materials as the "Triple Squeeze."
TAXES
FEDERAL INCOME TAXES
See "Distribution and Taxes" in the Fund's current Prospectus.
Each series of the Trust is treated as a separate entity for federal
income tax purposes. The Fund has elected to be treated, has qualified, and
intends to continue to qualify each year as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute a
sufficient amount of its investment company taxable income so as to effect
such qualification. The Fund may also distribute part or all of its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code, so as to reduce or avoid any federal income
or excise tax to the Fund. The Fund qualified as a RIC under the Code for its
taxable year ended December 31, 1995 (see Notes to Financial Statements
incorporated by reference in this Statement of Additional Information).
In order to avoid federal excise tax, the Code requires 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 or capital gains from the
prior year (as previously computed) that was not paid out during such year and
on which the Fund paid no federal income tax. Under current law, provided the
Fund qualifies as a RIC for federal tax purposes, the Fund is not liable for
any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
The Fund's distributions of taxable net investment income and of excess of
net short-term capital gain over net long-term capital loss are taxable to
shareholders as ordinary income whether paid in cash or reinvested in
additional shares. Distributions of the excess of net long-term capital gain
over net short-term capital loss (reduced by any capital losses carried
forward from prior years) are taxable to shareholders as long-term capital
gains, whether received in cash or in additional shares and regardless of the
length of time their shares of the Fund have been held. Distributions made by
the Fund will not qualify for the dividends-received deduction for
corporations.
Under the Code, the redemption or exchange of shares of a regulated
investment company normally results in capital gain or loss if such shares are
held as capital assets. Section 1258 of the Code recharacterizes all or a
portion of any capital gain from the disposition or other termination of a
position held as part of a "conversion transaction" as ordinary income.
Conversion transactions include, among other things, certain transactions
which are marketed or sold as producing a capital gain. Investors should
consult their own tax advisers concerning whether Section 1258 may apply to
their transactions in Fund shares.
Any loss realized upon the redemption or exchanges of shares of the Fund
with a tax holding period of 6 months or less will be treated as a long-term
capital loss to the extent of any distribution of net long-term capital gains
with respect to such shares. In addition, a loss realized on a redemption or
other disposition of Fund shares may be disallowed under certain "wash sale"
rules if other shares of the Fund are acquired within a period beginning 30
days before and ending 30 days after the date of such redemption or other
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
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 ("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 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.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and to
other retirement plans and persons investing through such plans should consult
their tax advisers for more information.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to special tax rules that may
apply in their particular situations, as well as the state, local or foreign
tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expense of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws are 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 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. The
following supplements the discussion of the Plan contained in the Prospectus.
The Plan remains in effect through and including April 28, 1997 and from
year to year thereafter, provided such continuance is approved annually by a
vote of both a majority of (i) those 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 "Rule 12b-1
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 at any time by vote of the Rule 12b-1 Trustees or by a vote
of a majority of the outstanding voting securities of the Fund. The Plan may
not be amended to increase materially the amount to be spent for the services
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.
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 be
terminated at any time without payment of any penalty by vote of the Rule 12b-
1 Trustees or by a vote of a majority of the outstanding voting securities of
the Fund. Pursuant to such Rule, the Plan has been approved by the Fund's
shareholders and by the Trustees, including a majority of the Rule 12b-1
Trustees.
During the fiscal year ended December 31, 1995, the Fund paid $84,128 in
distribution fees to the Principal Underwriter and the Principal Underwriter
in turn paid $56,454 of this amount to Authorized Firms or others as described
in the Prospectus and used the balance of $27,674 to compensate employees of
the Principal Underwriter and its affiliates and to defray part of its
expenses associated with distributing shares of the Fund.
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 shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security
transactions, including the selection of the market and the executing firm,
are made by Eaton Vance. Eaton Vance is also responsible for the execution of
transactions for all other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many firms. Eaton Vance
uses its best efforts to obtain execution of portfolio security transactions
at prices which are advantageous to the Fund and (when a disclosed commission
is being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors including
without limitation the size and type of the transaction, the general execution
and operational capabilities of the executing firm, the nature and character
of the market for the security, the confidentiality, speed and certainty of
effective execution required for the transaction, the reputation, reliability,
experience and financial condition of the firm, the value and quality of
services rendered by the firm in other transactions, and the reasonableness of
the commission or spread, if any. The U.S. Treasury bills, notes and bonds
purchased and sold by the Fund are generally traded in the over-the-counter
market on a net basis (i.e., without commission) through dealers and banks
acting for their own account rather than as brokers, and the Fund may also
acquire such obligations in the periodic auctions of the U.S. Treasury. Firms
acting for their own account attempt to profit from such transactions by
buying at the bid price and selling at a higher asked price for such
obligations, and the difference between such prices is customarily referred to
as the spread. While it is anticipated that the Fund will not pay significant
brokerage commissions in connection with such portfolio security transactions,
on occasion it may be necessary or appropriate to purchase or sell a security
through a broker on an agency basis, in which case the Fund will incur a
brokerage commission. Although spreads or commissions on portfolio security
transactions will, in the judgment of Eaton Vance, be reasonable in relation
to the value of the services provided, spreads or commissions exceeding those
which another firm might charge may be paid to firms who were selected to
execute transactions on behalf of the Fund and Eaton Vance's other clients for
providing brokerage and research services to Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund
may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
Eaton Vance determines in good faith that such 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 Eaton Vance and its
affiliates have for accounts over which they exercise investment discretion.
In making any such determination, Eaton Vance will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealers
which execute portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements. Consistent
with this practice, Eaton Vance receives Research Services from many broker-
dealer firms with which Eaton Vance places the Fund's portfolio transactions
and from third parties with which these broker-dealers have arrangements.
These Research Services include such matters as general economic and market
reviews, industry and company reviews, evaluations of securities and portfolio
strategies and transactions, recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by Eaton Vance in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to Eaton Vance in rendering
investment advisory services to all or a significant portion of its clients,
or may be relevant and useful for the management of only one client's account
or of a few clients' accounts, or may be useful for the management of merely a
segment of certain clients' accounts, regardless of whether any such account
or accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Fund is not reduced because
Eaton Vance receives such Research Services. Eaton Vance evaluates the nature
and quality of the various Research Services obtained through broker-dealer
firms and attempts to allocate sufficient commissions to such firms to ensure
the continued receipt of Research Services which Eaton Vance believes are
useful or of value to it in rendering investment advisory services to its
clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund portfolio security transactions at advantageous prices
and at reasonably competitive commission rates or spreads, Eaton Vance is
authorized to consider as a factor in the selection of any broker-dealer firm
with whom Fund portfolio orders may be placed the fact that such firm has sold
or is selling shares of the Fund or of other investment companies sponsored by
Eaton Vance. This policy is not inconsistent with a rule of the National
Association of Securities Dealers, Inc., which rule provides that no firm
which is a member of the Association shall favor or disfavor the distribution
of shares of any particular investment company or group of investment
companies on the basis of brokerage commissions received or expected by such
firm from any source.
Securities considered as investments for the Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Eaton
Vance will attempt to allocate equitably portfolio security transactions among
the Fund and the portfolios of its other investment accounts whenever
decisions are made to purchase or sell securities by the Fund and one or more
of such other accounts simultaneously. In making such allocations, the main
factors to be considered are the respective investment objectives of the Fund
and such other accounts, the relative size of portfolio holdings of the same
or comparable securities, the availability of cash for investment by the Fund
and such accounts, the size of investment commitments generally held by the
Fund and such accounts and the opinions of the persons responsible for
recommending investments to the Fund and such accounts. While this procedure
could have a detrimental effect on the price or amount of the securities
available to the Fund from time to time, it is the opinion of the Board of
Trustees of the Trust that the benefits available from the Eaton Vance
organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions.
During the fiscal year ended December 31, 1995, the Fund's purchases and
sales of portfolio securities were with major dealers in U.S. Treasury
obligations. The prices for which securities are purchased from and sold to
such dealers usually include an undisclosed dealer spread. The Fund paid no
brokerage commissions for the fiscal years ended December 31, 1995, 1994 and
1993 on portfolio securities transactions.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust
on July 10, 1995. Eaton Vance, pursuant to its agreement with the Trust,
controls the use of the Fund's name and may use the words "Eaton Vance" in
other connections and for other purposes. EVC may require the Fund to cease
using such words in its name if EVC or Eaton Vance or any other subsidiary or
affiliate of EVC ceases to act as investment manager of the Fund.
The Trust's Declaration of Trust may be amended by the Trustees when
authorized by vote of a majority of the outstanding voting securities of the
Trust, the financial interests of which are affected by the amendment. The
Trustees may also amend the Declaration of Trust without the vote or consent
of shareholders to change the name of the Trust or any series or to make such
other changes as do not have a materially adverse effect on the financial
interests of shareholders or if they deem it necessary to conform it to
applicable Federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed
from office either by declaration in writing filed with the custodian of the
assets of the Trust or by votes cast in person or by proxy at a meeting called
for the purpose. The By-Laws further provide that under certain circumstances
the shareholders may call a meeting to remove a Trustee and that the Trust is
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.
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 holding office have been elected by
shareholders. In such an event the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-Laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The right to redeem can be suspended and the payment of the redemption
price deferred when the New York Stock Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Securities and Exchange
Commission, or during any emergency as determined by the Securities and
Exchange Commission which makes it impracticable for the Fund to dispose of
its securities or value its assets, or during any other period permitted by
order of the Securities and Exchange Commission for the protection of
investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
are the Fund's independent accountants, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation
of filings with the Securities and Exchange Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund, which are included in the Fund's
Annual Report to Shareholders, are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, as experts
in accounting and auditing. A copy of the Annual Report accompanies this
Statement of Additional Information.
Registrant incorporates by reference the audited financial information for
the Fund for the fiscal year ended December 31, 1995 as previously filed
electronically with the Securities and Exchange Commission (Accession No.
0000950156-96-000163).
<PAGE>
[LOGO]
EATON VANCE
SHORT-TERM
TREASURY FUND
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1996
EATON VANCE SHORT-TERM
TREASURY FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
TYSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EATON VANCE CASH MANAGEMENT FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Cash Management Fund (the "Fund"), Cash
Management Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). Part II provides information solely about
the Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. This
Statement of Additional Information is sometimes referred to herein 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 ............................................................. 9
Service for Withdrawal ................................................ 9
Determination of Net Asset Value ...................................... 10
Calculation of Yield Quotations ....................................... 11
Taxes ................................................................. 11
Portfolio Security Transactions ....................................... 12
Other Information ..................................................... 13
Independent Accountants ............................................... 14
Financial Statements .................................................. 14
Appendix .............................................................. 16
PART II
Fees and Expenses ..................................................... a-1
Investment Restrictions ............................................... a-1
Principal Underwriter ................................................. a-1
Yield Information ..................................................... a-2
Control Persons and Principal Holders of Securities ................... a-2
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 MAY 1, 1996, 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 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
MONEY MARKET INSTRUMENTS. The Portfolio will invest only in those U.S. dollar
denominated money market securities and corporate obligations determined by
the Trustees of the Portfolio to present minimal credit risks and which are at
the time of acquisition rated by the requisite number of nationally recognized
statistical rating organizations in one of the two highest applicable rating
categories or, in the case of an instrument not so rated, of comparable
quality as determined by the Trustees. At such time or times as the Trustees
deem appropriate and in the best interests of the Portfolio, assets of the
Portfolio may be invested substantially in certificates of deposit of
federally insured banks and/or U.S. Government and agency obligations. The
Portfolio intends to limit its investments to money market instruments
maturing in 397 calendar days or less and to maintain a dollar-weighted
average maturity of not more than 90 days. In addition, Rule 2a-7 promulgated
under the 1940 Act provides that the Portfolio (so long as it uses the
amortized cost method of valuing its securities or holds itself out to
investors as a money market fund) may not acquire a Second Tier Security (as
defined in the Rule) if, immediately after such acquisition: (a) more than 5%
of its total assets (taken at amortized cost) would be invested in securities
which, when acquired by the Portfolio (either initially or upon any subsequent
rollover) were Second Tier Securities; or (b) more than the greater of 1% of
its total assets (taken at amortized cost) or $1,000,000 would be invested in
securities issued by a single issuer which, when acquired by the Portfolio
(either initially or upon any subsequent rollover) were Second Tier
Securities.
The Portfolio may invest in U.S. Government money market obligations,
which are debt securities issued or guaranteed by the U.S. Treasury, including
bills, certificates of indebtedness, notes and bonds, or by an agency or
instrumentality of the U.S. Government established under the authority of an
act of Congress. Not all U.S. Government obligations are backed by the full
faith and credit of the United States. For example, securities issued by the
Federal Farm Credit Bank or by the Federal National Mortgage Association are
supported by the agency's right to borrow money from the U.S. Treasury under
certain circumstances. Securities issued by the Federal Home Loan Bank are
supported only by the credit of the agency. There is no guarantee that the
U.S. Government will support these types of securities, and therefore they
involve more risk than "full faith and credit" government obligations.
OBLIGATIONS OF U.S. AND FOREIGN BANKS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit and bankers'
acceptances of U.S. banks and their branches located outside of the U.S., of
U.S. branches of foreign banks, and foreign branches of foreign banks. The
Portfolio may also invest in U.S. dollar-denominated securities issued or
guaranteed by other domestic or foreign issuers, including domestic and
foreign corporations or other business organizations, foreign governments and
foreign government agencies or instrumentalities, and domestic and foreign
financial institutions, including but not limited to savings and loan
institutions, insurance companies, mortgage bankers and real estate investment
trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by governmental regulation.
Payment of interest and principal upon these obligations may also be affected
by governmental action in the country of domicile of the branch (generally
referred to as sovereign risk). In addition, evidences of ownership of
portfolio securities may be held outside of the U.S. and the Portfolio may be
subject to the risks associated with the holding of such property overseas.
Various provisions of federal law governing the establishment and operation of
domestic branches do not apply to foreign branches of domestic banks.
The obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as by governmental action in the country in which the
foreign bank has its head office.
The obligations of foreign issuers also involve certain additional risks,
including the risks of adverse political, social and economic developments,
the imposition of withholding taxes on interest income, seizure or
nationalization of foreign deposits, exchange controls, and the adoption of
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Foreign issuers may be subject to
less governmental regulation and supervision than U.S. issuers. Foreign
issuers also generally are not bound by uniform accounting, auditing and
financial reporting requirements comparable to those applicable to domestic
issuers.
In connection with its investments in bank obligations and instruments
secured thereby, the Portfolio will invest in certificates of deposit and
bankers' acceptances if they are obligations of a domestic bank or a savings
and loan association having total assets of $1,000,000,000 or more.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions in which the
Portfolio purchases a security and simultaneously commits to resell that
security to the seller at an agreed upon price on an agreed upon date within a
number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or maturity of the purchased
security. A repurchase agreement involves the obligation of the seller to pay
the agreed upon price, which obligation is in effect secured by the value (at
least equal to the amount of the agreed upon resale price and marked to market
daily) of the underlying security. The Portfolio may enter into a repurchase
agreement with respect to any security in which the Portfolio is authorized to
invest even though the underlying security matures in more than 397 calendar
days. Other than for federal tax purposes, whether a repurchase agreement is
the purchase and sale of a security or a collateralized loan has not been
definitively established. This might become an issue in the event of the
bankruptcy of the other party to the transaction. While it does not presently
appear possible to eliminate all risks from these transactions (particularly
the possibility of a decline in the market value of the underlying securities,
as well as delay and costs to the Portfolio in connection with bankruptcy
proceedings), it is the policy of the Portfolio to enter into repurchase
agreements only with those member banks of the Federal Reserve System and
primary dealers in U.S. Government securities whose creditworthiness has been
reviewed and found satisfactory by the Investment Adviser.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may also enter into reverse
repurchase agreements, although as of the date of this SAI there was no
intention to do so. Under a reverse repurchase agreement, the Portfolio
temporarily transfers possession of a portfolio instrument to another party,
such as a bank or broker-dealer, in return for cash. At the same time, the
Portfolio agrees to repurchase the instrument at an agreed upon time (normally
within seven days) and price, which reflects an interest payment. The
Portfolio expects that it will enter into reverse repurchase agreements when
it is able to invest the cash so acquired at a rate higher than the cost of
the agreement, which would increase the income earned by the Portfolio. The
Portfolio could also enter into reverse repurchase agreements as a means of
raising cash to satisfy redemption requests without the necessity of selling
portfolio instruments.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to
another party or the securities in which the proceeds may be invested would
affect the market value of the Portfolio's assets. As a result, such
transactions may increase fluctuations in the market value of the Portfolio's
assets (although not affecting the amortized cost value of its assets used in
determining the Fund's net asset value per share). While there is a risk that
large fluctuations in the market value of the Portfolio's assets could affect
the Fund's net asset value per share, this risk is not significantly increased
by entering into reverse repurchase agreements, in the opinion of the
Portfolio's Investment Adviser. Because reverse repurchase agreements may be
considered to be the practical equivalent of borrowing funds, they constitute
a form of leverage. If the Portfolio reinvests the proceeds of a reverse
repurchase agreement at a rate lower than the cost of the agreement, entering
into the agreement will lower the Fund's yield.
While BMR does not consider reverse repurchase agreements to involve a
traditional borrowing of money, reverse repurchase agreements will be included
within the aggregate limitation on "borrowings" contained in the Fund's
investment restriction (3) set forth below. The Portfolio does not intend to
purchase securities for investment while temporary borrowings (described in
the investment restriction (3) set forth below) in excess of 5% of its total
assets are outstanding.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to increase its
income by lending portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve System, and
the Securities and Exchange Commission (the "Commission"), such loans may be
made to member firms of the New York Stock Exchange (the "Exchange"), and
would be required to be secured continuously by collateral in cash or cash
equivalents maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Portfolio would have the right to
call a loan and obtain the securities loaned at any time on five days' notice.
During the existence of a loan, the Portfolio would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and would also receive the interest on investment of the collateral.
The Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities
or of the giving or withholding of their consent on a material matter
affecting the investment. As with other extensions of credit there are risks
of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to firms deemed by the Portfolio's management to be of good standing, and
when, in the judgment of the Portfolio's management, the consideration which
can be earned currently from securities loans of this type justifies the
attendant risk. Securities lending involves administration expenses, including
finders' fees. If the management of the Portfolio determines to make
securities loans, it is not intended that the value of the securities loaned
would exceed 30% of the Portfolio's total assets, or that the payments
received on such loans, including amounts received during the existence of a
loan on account of interest and dividends on the securities loaned, would
exceed in the aggregate 10% of the Portfolio's annual gross income (without
offset for realized capital gains) unless counsel for the Portfolio determines
that such amounts are qualifying income under federal income tax provisions
applicable to regulated investment companies.
OTHER INVESTMENT POLICIES. Although the Portfolio usually intends to hold
securities purchased until maturity, at which time they will be redeemable at
their full principal value plus accrued interest, it may, at times, engage in
short-term trading to attempt to take advantage of yield variations in the
short-term market. The Portfolio may also sell portfolio securities prior to
maturity based on a revised evaluation of the creditworthiness of the issuer
or to meet redemptions of Fund shares. In the event there are unusually heavy
redemption requests due to changes in interest rates or otherwise, the
Portfolio may have to sell a portion of its investment portfolio at a time
when it may be disadvantageous to do so. However, the Portfolio believes that
its ability to borrow funds to accommodate redemption requests may mitigate in
part the necessity for such portfolio sales during these periods.
The rate of return to shareholders of the Fund will vary with the general
levels of interest rates applicable to the money market instruments in which
the Portfolio invests on behalf of the Fund. The rate will also be affected by
the level of the Fund's operating expenses, which expenses (because of
expenditures under its distribution plan) are expected to be higher than those
of most other money market funds.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following fundamental investment
restrictions that cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio, which as used in this SAI
means the lesser of (a) 67% of the outstanding voting securities of the
Portfolio present or represented by proxy at a meeting if the holders of more
than 50% of the outstanding voting securities of the Portfolio are present or
represented at the meeting or (b) more than 50% of the outstanding voting
securities of the Portfolio. The term "voting securities" as used in this
paragraph has the same meaning as in the 1940 Act. Whenever the Trust is
requested to vote on a change in the fundamental investment restrictions of
the Portfolio, the Trust will hold a meeting of Fund shareholders and will
cast its vote as instructed by the shareholders. Accordingly, the Portfolio
will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one
issuer other than obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities and except securities of other investment
companies;
(2) Purchase securities on margin;
(3) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(4) Underwrite securities issued by other persons;
(5) Purchase any securities which would cause more than 25% of the market
value of its total assets at the time of such purchase to be invested in the
securities of issuers having their principal business activities in the same
industry, provided that there is no limitation in respect to investments in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, or in certificates of deposit or bankers' acceptances and
provided further, that for purposes of this limitation, finance companies as a
group, banks and bank holding companies as a group and utility companies as a
group will not be considered single industries;
(6) Buy or sell real estate, commodities, or commodity contracts unless
acquired as a result of ownership of securities; or
(7) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements or (c) lending portfolio securities.
For the fundamental policies of the Fund, see "Investment Restrictions" in
Part II.
The Fund and the Portfolio have each adopted the following nonfundamental
investment policies which may be changed by the Trust with respect to the Fund
without approval of the Fund's shareholders or by the Portfolio with respect
to the Portfolio without the approval of the Fund or its other investors. As a
matter of nonfundamental policy, neither the Fund nor the Portfolio may: (a)
purchase securities of any issuer with a record of less than three years'
continuous operation, including predecessors, except investments in
obligations issued or guaranteed by the U.S. Government or its agencies,
municipal obligations, securities of issuers which are rated by at least one
nationally recognized statistical rating organization, and obligations issued
or guaranteed by any foreign government or its agencies or instrumentalities,
if such purchase would cause its investments in all such issuers to exceed 5%
of its total assets taken at market value; (b) purchase or retain securities
of any issuer if 5% of the issuer's securities are owned by those officers and
Trustees of the Portfolio or the investment adviser of the Portfolio who own
individually more than 1/2 of 1% of the issuer's securities; (c) make short
sales except where, because of ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to those sold; (d) write or
purchase or sell any put or call options or combinations thereof; (e) purchase
warrants; (f) invest in interests in oil, gas or other mineral exploration or
development programs unless acquired as a result of ownership of securities;
or (g) knowingly purchase a security which is subject to legal or contractual
restrictions on resale or for which there is no readily available market or
enter into a repurchase agreement maturing in more than seven days if, as a
result thereof, more than 10% of its total assets (taken at current value)
would be invested in such securities. (The Portfolio may not be able to
liquidate such securities when deemed most advantageous.) Securities
determined to be liquid by the Board of Trustees of the Trust or the
Portfolio, or its delegate, pursuant to procedures adopted by the Trustees
shall not be subject to restriction (g).
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other
offices in the same company for the last five years. Unless otherwise noted,
the business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's Investment
Adviser, Boston Management and Research ("BMR"), a wholly-owned subsidiary of
Eaton Vance Management ("Eaton Vance"); of Eaton Vance's parent, Eaton Vance
Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance, Inc.
("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees who are "interested persons" of the Trust, the Portfolio, BMR, Eaton
Vance, EVC or EV, as defined in the 1940 Act, by virtue of their affiliation
with any one or more of the Trust, the Portfolio, BMR, Eaton Vance, EVC or EV,
are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (62), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
JAMES B. HAWKES (54), Vice President and Trustee*
Executive Vice President of BMR, Eaton Vance, EVC and EV, and a Director of
EVC and EV. Director, Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
H. DAY BRIGHAM, JR. (69), Vice President of the Trust and Trustee of the
Portfolio*
Chairman of the Management Committee, Vice President of BMR, Eaton Vance, EVC
and EV, and a Director of EVC and EV. Director, Trustee and officer of
various investment companies managed by Eaton Vance or BMR. Mr. Brigham was
elected Vice President of the Trust on June 19, 1995.
DONALD R. DWIGHT (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc., since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff, Professor of Investment Banking at Harvard University
Graduate School of Business Administration. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies manged 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
WILLIAM H. AHERN, JR. (36), Vice President of the Trust
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
MICHAEL B. TERRY (53), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Terry was elected Vice
President of the Trust on December 17, 1990.
JAMES L. O'CONNOR (51), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (64), Secretary
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. Officer of various investment
companies managed by Eaton Vance or BMR. (State Regulations Supervisor, The
Boston Company, 1991-1993 and Registration Specialist, Fidelity Management &
Research Co., 1986-1991). Mr. Murphy was elected Assistant Secretary of the
Trust and the Portfolio on March 27, 1995.
JOHN P. RYNNE (53), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected Assistant Secretary of the Trust on June 19, 1995.
ERIC G. WOODBURY (38), Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate at
Dechert, Price & Rhoades and Gaston & Snow. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary of the Trust and the Portfolio on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
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 1940 Act
("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. Messrs. Hayes (Chairman), Reamer, Thorndike and Treynor
are currently serving on the Committee. 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 Trustees regarding
the selection of the independent accountants, and reviewing with such
accountants and the Treasurer of the Trust and of the Portfolio matters
relative to 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 Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred
fees invested by the Portfolio in the shares of one or more funds in the Eaton
Vance Family of Funds, and the amount paid to the Trustees under the Plan will
be determined based upon the performance of such investments. Deferral of
Trustees' fees in accordance with the Plan will have a negligible effect on
the Portfolio's assets, liabilities, and net income per share, and will not
obligate the Portfolio to retain the services of any Trustee or obligate the
Portfolio to pay any particular level of compensation to the Trustee. Neither
the Fund nor the Portfolio 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 earned 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 April 29, 1994. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional
clients with combined assets under management of 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 covers 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 experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Bombay. 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- 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 help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide
you with tailored financial advice.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the
Portfolio investment research, advice and supervision, furnishes an investment
program and determines what securities will be purchased, held or sold by the
Portfolio and what portion, if any, of the Portfolio's assets will be held
uninvested. The Investment Advisory Agreement requires BMR to pay the salaries
and fees of all officers and Trustees of the Portfolio who are members of the
BMR organization and all personnel of BMR performing services relating to
research and investment activities. The Portfolio is responsible for all
expenses not expressly stated to be payable by BMR under the Investment
Advisory Agreement, including, without implied limitation, (i) expenses of
maintaining the Portfolio and continuing its existence, (ii) registration of
the Portfolio under the 1940 Act, (iii) commissions, fees and other expenses
connected with the acquisition, holding and disposition of securities and
other investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale and redemption
of interests in the Portfolio, (viii) expenses of registering and qualifying
the Portfolio and interests in the Portfolio under federal and state
securities laws and of preparing and printing registration statements or other
offering statements or memoranda for such purposes and for distributing the
same to investors, and fees and expenses of registering and maintaining
registrations of the Portfolio and of the Portfolio's placement agent as
broker-dealer or agent under state securities laws, (ix) expenses of reports
and notices to investors and of meetings of investors and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions,
(xi) insurance expenses, (xii) association membership dues, (xiii) fees,
expenses and disbursements of custodians and subcustodians for all services to
the Portfolio (including without limitation safekeeping of funds, securities
and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax
capital account balances), (xiv) fees, expenses and disbursements of transfer
agents, dividend disbursing agents, investor servicing agents and registrars
for all services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of
the Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio
who are not members of BMR's organization, and (xviii) such non-recurring
items as may arise, including expenses incurred in connection with litigation,
proceedings and claims and the obligation of the Portfolio to indemnify its
Trustees, officers and investors with respect thereto.
For a description of the compensation that the Portfolio pays BMR under
the Investment Advisory Agreement, see the Fund's current Prospectus. As at
December 31, 1995, the Portfolio had net assets of $204,899,715. For the
fiscal year ended December 31, 1995 and for the period from the start of
business, May 2, 1994, to December 31, 1994, the Portfolio paid BMR advisory
fees of $965,361 and $597,131, respectively (equivalent to 0.50% and 0.50%
(annualized) of the Portfolio's average daily net assets for each such
period).
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 Administrative Services Agreement with the
Trust on behalf of 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
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 Fund under the 1940 Act, (iii) commissions, fees and other
expenses connected with the purchase or sale of securities and other
investments, (iv) auditing, accounting and legal expenses, (v) taxes and
interest, (vi) governmental fees, (vii) expenses of issue, sale, repurchase
and redemption of shares, (viii) expenses of registering and qualifying the
Fund and its shares under Federal and state securities laws and of preparing
and printing prospectuses for such purposes and for distributing the same to
shareholders and investors, and fees and expenses of registering and
maintaining registrations of the Fund and of the Fund's principal underwriter,
if any, as broker-dealer or agent under state securities laws, (ix) expenses
of reports and notices to shareholders and of meetings of shareholders and
proxy solicitations therefor, (x) expenses of reports to governmental officers
and commissions, (xi) insurance expenses, (xii) association membership dues,
(xiii) fees, expenses and disbursements of custodians and subcustodians for
all services to the Fund (including without limitation safekeeping of funds,
securities and other investments, keeping of books and accounts and
determination of net asset values), (xiv) fees, expenses and disbursements of
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars for all services to the Fund, (xv) expenses for servicing
shareholder accounts, (xvi) any direct charges to shareholders approved by the
Trustees of the Trust, (xvii) compensation and expenses of Trustees of the
Trust who are not members of the Eaton Vance organization, and (xviii) such
non-recurring items as may arise, including expenses incurred in connection
with litigation, proceedings and claims and the obligation of the Trust to
indemnify its Trustees and officers with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are
both wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both
Massachusetts business trusts, and EV is the trustee of BMR and Eaton Vance.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Gardner is president and chief executive officer of
EVC, BMR, Eaton Vance and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust which expires on December 31,
1996, the Voting Trustees of which are Messrs. Clay, Brigham, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of BMR and
Eaton Vance who are also officers and Directors of EVC and EV. As of March 31,
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. Brigham, Gardner, Hawkes and Otis are
officers or Trustees of the Fund and/or the Portfolio and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. Ahern, Murphy, O'Connor,
Rynne, Terry and Woodbury and Ms. Sanders, are officers or Trustees of the
Trust and/or the Portfolio and are also members of the BMR, Eaton Vance and EV
organizations. BMR will receive the fees paid under the Investment Advisory
Agreement.
EVC owns all of the stock of Energex Energy Corporation, which is engaged
in oil and gas exploration and development. In addition, Eaton Vance owns all
of 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 of the stock
of Fulcrum Management, Inc. and MinVen, Inc., which are engaged in precious
metal mining venture investment and management. EVC, BMR, Eaton Vance and EV
may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion
that the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between
the Fund or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 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 disburses all funds and performs various other ministerial duties
upon receipt of proper instructions from the Fund and the Portfolio. IBT
charges fees which are competitive within the industry. A portion of the fee
relates to custody, bookkeeping and valuation services and is based upon a
percentage of Fund and Portfolio net assets and a portion of the fee relates
to activity charges, primarily the number of portfolio transactions. These
fees are then reduced by a credit for cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. Landon T. Clay, a Director of EVC and an
officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors
Financial Services Corp., the holding company parent of IBT. Management
believes that such ownership does not create an affiliated person relationship
between the Fund or the Portfolio and IBT under the 1940 Act.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's 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 gains distributions in
connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices. 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. 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 shares of the Fund is determined by IBT (as
agent and custodian for the Fund) in the manner described under "Valuing Fund
Shares" in the Fund's current Prospectus. The net asset value of the Portfolio
is also computed by IBT (as agent and custodian for the Portfolio) by
subtracting the liabilities of the Portfolio from the value of its total
assets. The Fund and the Portfolio will be closed for business and will not
price their respective shares or interests on the following business holidays:
New Year's Day, Presidents' Day, Good Friday (a New York Stock Exchange
holiday), Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The valuation of the instruments held by the Portfolio at
amortized cost is permitted in accordance with Rule 2a-7 under the 1940 Act
(the "Rule") and certain procedures established by the Trustees of the Trust
and the Portfolio thereunder.
The amortized cost of an instrument is determined by valuing it at cost
originally and thereafter accreting any discount or amortizing any premium
from its face value at a constant rate until maturity, regardless of the
effect of fluctuating interest rates on the market value of the instrument.
Although the amortized cost method provides certainty in valuation, it may
result at times in determinations of value that are higher or lower than the
price the Portfolio would receive if the instruments were sold. Consequently,
changes in the market value of instruments held by the Portfolio during
periods of rising or falling interest rates will not be reflected either in
the computation of net asset value of the Portfolio or in the daily
computation of its net investment income.
The procedures of the Fund and the Portfolio are designed to facilitate,
to the extent reasonably possible, the maintenance of the Fund's price per
share, as computed for the purpose of distribution and redemption of shares,
at $1.00. These procedures include review of the Portfolio's holdings by the
Trustees, at such intervals as they may deem appropriate, to determine whether
the Portfolio's net asset value calculated by using readily available market
quotations deviates from the valuation based on amortized cost, and, if so,
whether such deviation may result in material dilution or is otherwise unfair
to existing interest holders. In the event the Trustees determine that such a
deviation exists, they will take such corrective action as they consider to be
necessary or appropriate, which action could include the sale of instruments
held by the Portfolio prior to maturity (to realize capital gains or losses);
the shortening of average portfolio maturity; withholding dividends;
redemption of shares in kind; or establishing a net asset value per share by
using readily available market quotations.
Since the net investment income of the Fund is declared as a dividend each
time such income is determined, the net asset value per share of the Fund
remains at $1.00 per share immediately after such determination and dividend
declaration. It is expected that the Fund's net investment income will be
positive each time it is determined. However, if because of realized losses on
sales of portfolio investments, a sudden rise in interest rates, default by an
issuer of a portfolio security, or for any other reason the net investment
income of the Portfolio determined at any time is a negative amount, the
Portfolio will offset such amount allocable to each then interest holder's
account from dividends accrued with respect to such account. If at the time of
payment of a dividend (either at the regular dividend payment date, or, in the
case of an interest holder who is withdrawing all or substantially all of its
interest in an account, at the time of redemption), such negative amount
exceeds an interest holder's accrued dividends, the Portfolio will reduce the
interest by treating the interest holder as having contributed to the capital
of the Portfolio that amount of its interest which represents the amount of
the excess. Each shareholder is deemed to have agreed to such contribution in
these circumstances by his or her investment in the Fund.
Should the Portfolio incur or anticipate any unusual or unexpected
significant expense, loss or depreciation which would affect
disproportionately the Fund's net investment income for a particular period,
the Trustees would at that time consider whether to adhere to its daily
dividend policy or to revise it in the light of the then prevailing
circumstances. Such expenses, losses or depreciation may nevertheless result
in a shareholder's receiving no dividends for the period during which the
shares are held and in receiving upon redemption a price per share lower than
the purchase price of such shares.
CALCULATION OF YIELD QUOTATIONS
From time to time, the Fund quotes a current yield based on a specific
seven calendar day period which is calculated by first dividing the net change
in the value of an account having a balance of one share at the beginning of
the period by the value of the account at such time to determine the seven day
base period return, and then multiplying such return by 365/7 with the
resulting yield figure carried to at least the nearest hundredth of one
percent. The net change in account value is determined by the value of
additional shares purchased with dividends declared on the original share and
dividends declared on both the original share and any such additional shares,
but does not include any realized gains or losses from the sales of securities
or any unrealized appreciation or depreciation on portfolio securities. In
addition to the current yield, the Fund also quotes an effective yield based
on a specific seven day period, carried to at least the nearest hundredth of
one percent, computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance
of one share at the beginning of the period, and dividing the difference by
the value of the account at the beginning of the base period to obtain the
base period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from
the result, according to the following formula: Effective yield = [(Base
period return +1)365/7]-1.
Yields will fluctuate from time to time and are not necessarily
representative of future results. A shareholder should remember that yield is
a function of the type and quality of the instruments held by the Portfolio.
For information concerning the current and effective yield of the Fund, see
"Yield Information" in Part II.
TAXES
See "Distributions and Taxes" in the Fund's current prospectus.
Each series of the Trust is treated as a separate entity for federal
income tax purposes. In order to qualify each year as a regulated investment
company ("RIC") under the Code, the Fund intends to satisfy certain
requirements relating to sources of income, diversification of assets, and
distribution of income and gains. So long as the Fund qualifies as a RIC for
tax purposes, it will not be subject to federal income tax on income and gains
paid to shareholders in the form of dividends. In the unlikely event that the
Fund fails to so qualify, it would be subject to federal income tax at
corporate rates and all distributions from earnings and profits would be
taxable to shareholders as ordinary income. In order to requalify for taxation
as a RIC, the Fund might be required to recognize unrealized gains, pay
substantial taxes and interest, and make certain distributions.
Because the Fund invests substantially all of its assets in the Portfolio,
the Portfolio also intends to satisfy the source of income and diversification
requirements under the Code. The Portfolio will allocate at least annually to
each investor its distributive share of the Portfolio's net investment
income, net realized capital gains and any other items of income, gain, loss,
deduction or credit. The Portfolio will make allocations to the Fund and will
make moneys available for withdrawal at times and in amounts sufficient to
enable the Fund to satisfy the distribution requirements under the Code.
If the Fund fails to distribute substantially all of its ordinary income
and capital gain net income on a current basis, plus any retained amounts from
the preceding year, the Fund will be subject to a 4% federal excise tax on the
undistributed amounts. The Fund may treat distributions paid in January but
declared in October, November or December of the preceding year as paid by the
Fund on December 31 of that preceding year. As a result, shareholders must
report such distributions on their federal income tax returns for the
preceding year.
The Portfolio may be subject to foreign withholding taxes with respect to
investments in certain foreign securities. The Fund will not be eligible to
pass through to shareholders their proportionate share of foreign taxes paid
by the Portfolio and allocated to the Fund. However, such taxes may be
deducted from the Fund's net investment income.
If a shareholder sells, redeems or otherwise disposes of Fund shares at a
loss within six months of purchase, such loss will be treated as long-term
capital loss to the extent of any long-term capital gain dividends received.
In addition, all or a portion of any loss realized in the event of a sale,
redemption or other disposition of Fund shares will be disallowed if the
shareholder purchases other Fund shares within 30 days of the disposition
(before or after).
The Fund may be required by federal law to withhold and remit to the U.S.
Treasury 31% of the dividends and other distributions paid to any individual
shareholder who fails to furnish the Fund with a correct taxpayer
identification number (generally the individual's social security number), who
has underreported dividends or interest income, or who fails to certify to the
Fund that he or she is not subject to such withholding. The Fund is also
generally required to withhold on certain distributions made to non-resident
aliens and foreign entities.
Special tax rules apply to Individual Retirement Accounts ("IRAs"), tax-
exempt organizations and to other special classes of shareholders including
foreign shareholders. All shareholders should consult their own tax advisers
with respect to the foreign, U.S. federal, state and local tax consequences of
investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other
accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the general execution and operational capabilities of the
executing firm, the reputation, reliability, experience and financial
condition of the firm, the value and quality of the services rendered by the
firm in this and other transactions, and the reasonableness of the commission
or spread, if any. The money market instruments purchased and sold by the
Portfolio are generally traded in the over-the-counter market on a net basis
(i.e., without commission) through dealers and banks acting for their own
accounts rather than as brokers and the Portfolio may also acquire such
investments directly from the issuers. Firms acting for their own account
attempt to profit from such transactions by buying at one price and selling at
a higher price, and the difference between such prices is customarily referred
to as the spread which generally is not disclosed. While it is anticipated
that the Portfolio will not pay significant brokerage commissions in
connection with such portfolio security transactions, on occasion it may be
necessary or appropriate to purchase or sell a security through a broker on an
agency basis, in which case the Portfolio will incur a brokerage commission.
Although spreads or commissions paid on portfolio security transactions will,
in the judgment of BMR, be reasonable in relation to the value of the services
provided, spreads or commissions exceeding those which another firm might
charge may be paid to firms who were selected to execute transactions on
behalf of the Portfolio and BMR's other clients for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio 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 compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that
particular transaction or on the basis of overall responsibilities which BMR
and its affiliates have for accounts over which they exercise investment
discretion. In making any such determination, BMR will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the compensation should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have arrangements.
Consistent with this practice, BMR receives Research Services from many
broker-dealer firms with which BMR places the Portfolio transactions and from
third parties with which these broker-dealers have arrangements. These
Research Services include such matters as general economic and market reviews,
industry and company reviews, evaluations of securities and portfolio
strategies and transactions, recommendations as to the purchase and sale of
securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by BMR in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to BMR in rendering investment
advisory services to all or a significant portion of its clients, or may be
relevant and useful for the management of only one client's account or of a
few clients' accounts, or may be useful for the management of merely a segment
of certain clients' accounts, regardless of whether any such account or
accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Portfolio is not reduced
because BMR receives such Research Services. BMR evaluates the nature and
quality of the various Research Services obtained through broker-dealer firms
and attempts to allocate sufficient commissions to such firms to ensure the
continued receipt of Research Services which BMR believes are useful or of
value to it in rendering investment advisory services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc., which rule provides that no firm which is a
member of the Association shall favor or disfavor the distribution of shares
of any particular investment company or group of investment companies on the
basis of brokerage commissions received or expected by such firm from any
source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates.
BMR will attempt to allocate equitably portfolio security transactions among
the Portfolio and the portfolios of its other investment accounts whenever
decisions are made to purchase or sell securities by the Portfolio and one or
more of such other accounts simultaneously. In making such allocations, the
main factors to be considered are the respective investment objectives of the
Portfolio and such other accounts, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment by
the Portfolio and such accounts, the size of investment commitments generally
held by the Portfolio and such accounts and the opinions of the persons
responsible for recommending investments to the Portfolio and such accounts.
While this procedure could have a detrimental effect on the price or amount of
the securities available to the Portfolio from time to time, it is the opinion
of the Trustees of the Trust and the Portfolio that the benefits available
from the BMR organization outweigh any disadvantage that may arise from
exposure to simultaneous transactions.
During the fiscal year ended December 31, 1995, the purchases and sales of
portfolio investments were with the issuer or with major dealers in money
market instruments acting as principal. The cost of securities purchased from
underwriters includes a disclosed, fixed underwriting commission or
concession, and the prices for which securities are purchased from and sold to
dealers usually include an undisclosed dealer mark-up or mark-down. For the
fiscal year ended December 31, 1995 and for the period from the start of
business, May 2, 1994, to December 31, 1994, the Portfolio paid no brokerage
commissions on portfolio security transactions.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust
on July 10, 1995. On September 1, 1995, the Fund was reorganized as a series
of the Trust. Prior thereto, the Fund was a series of Eaton Vance Liquid
Assets Trust. Eaton Vance, pursuant to its agreement with the Trust, controls
the use of the words "Eaton Vance" in the Fund's name and may use the words
"Eaton Vance" or "EV" in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meeting of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's By-laws, the Trustees shall continue to hold and
may appoint successor Trustees.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such
other changes as do not have a materially adverse effect on the financial
interests of shareholders or if they deem it necessary to conform it to
applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust, such series or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed
from office either by declaration in writing filed with the custodian of the
assets of the Trust or by votes cast in person or by proxy at a meeting called
for the purpose. The By-laws further provide that under certain circumstances
the shareholders may call a meeting to remove a Trustee and that the Trust is
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
interests have removed him from that office either by a written declaration
filed with the Portfolio's custodian or by votes cast at a meeting called for
that purpose. The Declaration of Trust further provides that under certain
circumstances the investors may call a meeting to remove a Trustee and that
the Portfolio is required to provide assistance in communicating with
investors about such a meeting.
The right to redeem can be suspended and the payment of the redemption
price deferred when the Exchange is closed (other than 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 ACCOUNTANTS
Coopers and Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the independent accountants for the Fund and the Portfolio, providing
audit services, tax return preparation, and assistance and consultation with
respect to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund and the Portfolio, which are included
in the Fund's Annual Report to Shareholders, are incorporated by reference
into this SAI and have been so incorporated in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, as experts in accounting
and auditing. A copy of the Fund's most recent Annual Report accompanies this
SAI.
Registrant incorporates by reference the audited financial information for
the Funds listed below and for the Portfolio for the fiscal year ended
December 31, 1995 as previously filed electronically with the Commission:
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
(Accession No. 0000928816-96-000034)
<PAGE>
APPENDIX
MOODY'S INVESTORS SERVICE, INC.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
MOODY'S SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as
letters-of-credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of issuers. The two highest
designations are as follows:
PRIME-1 -- Issuers (or supporting institutions) rated Prime-1 or (P-1)
have a superior ability for repayment of senior short-term debt obligations.
P-1 repayment ability will often be evidenced by many of the following
characteristics:
* Leading market positions in well-established industries.
* High rates of return on funds employed.
* Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
* Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
* Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 -- Issuers (or supporting institutions) rated Prime-2 or (P-2)
have a strong ability for repayment of senior short-term obligations. This
will normally be evidenced by many of the characteristics cited above, but to
a lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
MOODY'S BOND RATINGS
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
STANDARD & POOR'S RATINGS GROUP
DESCRIPTION OF RATINGS OF CORPORATE DEBT
S&P'S COMMERCIAL PAPER RATLNGS
A Standard & Poor's Commercial Paper Rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. The two highest rating
categories are as follows:
"A-1" This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to Possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
"A-2" Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
S&P'S CORPORATE DEBT RATINGS
AAA -- Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
Note: The AA rating may be modified by the addition of a plus or minus
sign to show the relative standing within this category.
DUFF & PHELPS CREDIT RATING CO.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
DUFF & PHELPS COMMERCLAL PAPER RATLNGS
Duff & Phelps' commercial paper ratings are consistent with the short-term
rating criteria utilized by money market participants. The ratings, in effect,
apply to all obligations with maturities (when issued) or under one year.
The distinguishing feature of Duff & Phelps' commercial paper ratings is
the refinement of the traditional "1" category. The majority of commercial
paper issuers carry the highest short-term rating yet significant quality
differences within that tier do exist. As a consequence, Duff & Phelps has
incorporated gradations of "1+" (one plus) and "1-" (one minus), to assist
investors in recognizing those differences. The Duff 2 and Duff 3 categories
have not been similarly refined but could be at some later date.
CATEGORY 1: TOP GRADE
DUFF 1+ -- Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or ready access to alternative
sources of funds, is clearly outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
DUFF 1 -- Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors. Risk factors
are minor.
DUFF 1- -- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small.
CATEGORY 2: GOOD GRADE
DUFF 2--Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing internal funds needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
DUFF & PHELPS' BOND RATINGS
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ AA AA -- High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
FITCH INVESTORS SERVICE, INC.
DESCRIPTION OF RATINGS OF CORPORATE DEBT
FITCH'S SHORT-TERM DEBT RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for timely
payment.
F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2 -- Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of safety
is not as great as for issues assigned "F-1+" and "F-1" ratings.
FITCH'S INVESTMENT GRADE BOND RATINGS
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future development, short-term debt of these issuers is generally
rated "F-1+".
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE CASH MANAGEMENT FUND.
The Fund became a series of the Trust on September 1, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to the close of business April 29, 1994, (when the Fund transferred
substantially all of its assets to the Portfolio in exchange for an interest
in the Portfolio), the Fund retained Eaton Vance as its investment adviser.
For the period from January 1, 1994, to May 1, 1994, and for the fiscal year
ended December 31, 1993, the Fund paid Eaton Vance advisory fees of $180,479
and $679,886, respectively (equivalent to .50% and .50% (annualized) of the
Fund's average daily net assets for such periods).
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 Trust
or the Portfolio.) During the fiscal year ended December 31, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees from the Fund, the Portfolio and
the other funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------------
Donald R. Dwight $668 $2,166 $135,000(2)
Samuel L. Hayes, III 637 2,196 150,000(3)
Norton H. Reamer 629 2,197 135,000
John L. Thorndike 638 2,292 140,000
Jack L. Treynor 682 2,278 140,000
- ------------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
INVESTMENT RESTRICTIONS
The Fund and the Portfolio have adopted the same fundamental investment
restrictions which are enumerated in detail in Part I of this SAI. The Fund's
investment restrictions are designated as fundamental policies and as such
cannot be changed without the approval of the holders of a majority of the
Fund's outstanding voting securities, which as used in this SAI means the
lesser of (a) 67% of the shares of the Fund present or represented by proxy at
a meeting if the holders of more than 50% of the shares are present or
represented at the meeting or (b) more than 50% of the shares of the Fund.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed
to be consistent with those of the Portfolio, to the extent applicable.
PRINCIPAL UNDERWRITER
Although the Fund generally distributes its own shares, the Fund has
entered into a Distribution Contract with the Principal Underwriter, a wholly-
owned subsidiary of Eaton Vance, to permit the Fund to distribute its shares
through the Principal Underwriter when in the opinion of the Trustees it will
be in the best interest of the Fund to do so. Shares of the Fund may be
purchased directly from the Fund except in those states where they are
distributed through the Principal Underwriter. Shares of the Fund are
currently distributed through the Principal Underwriter in California,
Colorado, District of Columbia, Florida, Illinois, Indiana, Louisiana, Maine,
Maryland, Massachusetts, New Hampshire, New York, North Carolina, Ohio,
Oregon, Rhode Island, South Carolina, Texas and West Virginia.
Under the Distribution Agreement with the Principal Underwriter, the
Trust, on behalf of the Fund has agreed to pay all fees and expenses in
connection with the registration of its shares with the Commission as well as
fees and expenses in connection with registering and maintaining registrations
of the Fund and of its shares under the various state "blue-sky" laws. The
Principal Underwriter pays all expenses of preparing, printing and
distributing advertising and sales literature and all prospectuses and
shareholders' reports used in the distribution of Fund shares. The Contract
provides that the Principal Underwriter will accept orders at net asset value
only, as no sales commission or load is charged to the investor. The
Distribution Contract is renewable annually by the Trust's Board of Trustees
(including a majority of its Trustees who are not interested persons of the
Principal Underwriter or the Trust), may be terminated on six months' notice
by either party, and is automatically terminated upon assignment.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
YIELD INFORMATION
The Fund's annualized current and effective yields for the seven-day
period ending December 31, 1995 were 5.19% and 5.32%, respectively.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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 March 31, 1996, Eaton Vance Distributors, Inc., Boston, MA 02110 was the
record owner of approximately 29.6% of the outstanding shares of the Fund and
Saturn & Co., a nominee of Investors Bank & Trust Company, was the record
owner of approximately 27.3% of the outstanding shares of the Fund, which it
held on behalf of its custody and trust clients. To the knowledge of the
Trust, no other person owned of record or beneficially 5% or more of the
Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EATON VANCE
CASH MANAGEMENT
FUND
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
EATON VANCE CASH
MANAGEMENT FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF CASH MANAGEMENT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE CASH MANAGEMENT FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
CMSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EATON VANCE LIQUID ASSETS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Liquid Assets Fund (the "Fund"), Cash
Management Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). Part II provides information solely about
the Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. This
Statement of Additional Information is sometimes referred to herein as the
"SAI".
TABLE OF CONTENTS
Page
PART I
Additonal Information about Investment Policies ....................... 2
Investment Restrictions ............................................... 4
Trustees and Officers ................................................. 5
Investment Adviser and Administrator .................................. 7
Custodian ............................................................. 9
Service for Withdrawal ................................................ 9
Determination of Net Asset Value ...................................... 10
Calculation of Yield Quotations ....................................... 11
Taxes ................................................................. 11
Portfolio Security Transactions ....................................... 12
Other Information ..................................................... 13
Independent Accountants ............................................... 14
Financial Statements .................................................. 14
Appendix .............................................................. 16
PART II
Fees and Expenses ..................................................... a-1
Investment Restrictions ............................................... a-1
Principal Underwriter ................................................. a-2
Distribution Plan ..................................................... a-2
Yield Information ..................................................... a-3
Control Persons and Principal Holders of Securities ................... a-3
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED MAY 1, 1996, 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).
For EDGAR filing purposes only: Registrant incorporates by reference for Eaton
Vance Liquid Assets Fund the Part I found in the Statement of Additional
Information of Eaton Vance Cash Management Fund contained in this
Amendment.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE LIQUID ASSETS FUND.
The Fund became a series of the Trust on September 1, 1995.
FEES AND EXPENSES
INVESTMENT ADVISER
Prior to the close of business, April 29, 1994 (when the Fund transferred
substantially all of its assets to the Portfolio in exchange for an interest
in the Portfolio), the Fund retained Eaton Vance as its investment adviser.
For the period from January 1, 1994, to May 1, 1994, the Fund paid Eaton Vance
advisory fees of $80,319 (equivalent to 0.50% (annualized) of the Fund's
average daily net assets for such period). For the nine months ended December
31, 1993, Eaton Vance earned advisory fees of $53,766. However, pursuant to
the Fund's Distribution Plan which was in effect during the period from April
1, 1993 to June 13, 1993, the advisory fee was reduced by $13,451 representing
contingent deferred sales charges ("CDSCs") received by the Principal
Underwriter during a period when there were no outstanding Uncovered
Distribution Charges. To enhance the net income of the Fund for the period
from June 14, 1993 to December 31, 1993, Eaton Vance made a reduction of its
fee in the amount of $20,149. During the fiscal year ended March 31, 1993
Eaton Vance would have earned advisory fees aggregating $66,590. However,
pursuant to the Fund's Distribution Plan which was in effect during such
fiscal year, the advisory fee was reduced by $66,590 representing CDSCs
received by the Principal Underwriter during a period when there were no
outstanding Uncovered Distribution Charges.
DISTRIBUTION PLAN
As at December 31, 1995, the outstanding Uncovered Distribution Charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$2,330,000 (which amount was equivalent to 6.8% of the Fund's net assets on
such day). For the fiscal year ended December 31, 1995, the Fund made service
fee payments under the Plan aggregating $32,314, of which $32,254 was paid to
Authorized Firms and the balance of which was retained by the Principal
Underwriter.
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 Trust
or the Portfolio). During the fiscal year ended December 31, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation, in their capacities as Trustees from the Fund, the Portfolio and
the other funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------------
Donald R. Dwight $267 $2,166 $135,000(2)
Samuel L. Hayes, III 259 2,196 150,000(3)
Norton H. Reamer 252 2,197 135,000
John L. Thorndike 255 2,292 140,000
Jack L. Treynor 271 2,278 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental
policies and as such cannot be changed without the approval of the holders of
a majority of the Fund's outstanding voting securities, which as used in this
SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one
issuer other than obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities and except securities of other
investment companies. The 5% restriction does not apply to or limit the Fund's
investments in certificates of deposit, bankers' acceptances or time deposits
of banking and thrift institutions;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities);
(3) Borrow money or issue senior securities, except as permitted by the
1940 Act;
(4) Underwrite securities issued by other persons, except insofar as it
may technically be deemed to be an underwriter under the Securities Act of
1933 in selling or disposing of a portfolio security;
(5) Purchase any security if, as a result of such purchase, more than 25%
of the Fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the same
industry; provided that there is no limitation with respect to (a) investments
by the Fund in certificates of deposit, bankers' acceptances or time deposits
of banking and thrift institutions or (b) obligations issued or guaranteed by
the U. S. Government or any of its agencies or instrumentalities; and provided
further that banking and thrift institutions and their holding companies as a
group, finance companies as a group and utility companies as a group will not
be considered single industries;
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by interests in real estate and securities of
issuers which invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the repurchase
or sale of physical commodities; or
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and policies,
(b) entering into repurchase agreements and (c) lending its portfolio
securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed
to be consistent with those of the Portfolio, to the extent applicable.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws is borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the plan
relating to such payments are included in the Distribution Agreement. The
Distribution Agreement is renewable annually by the Trust's Board of Trustees
(including a majority of its Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation
of the Fund's Distribution Plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter 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 following supplements the discussion of the Plan contained in
the Fund's Prospectus.
The Plan authorizes the Fund to make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of
such payments during any fiscal year of the Fund shall not exceed .25% of the
Fund's average daily net assets for such year. The Trustees of the Trust have
implemented the Plan by authorizing the Fund to pay service fees to Authorized
Firms in amounts up to .25% per annum of the Fund's average daily net assets
based on the value of Fund shares sold by such Firms and remaining outstanding
for at least one year. As permitted by the NASD Rule, such payments are made
for personal services and/or the maintenance of shareholder accounts.
On June 14, 1993, the Fund revised the Plan to provide that all CDSCs will
be paid to the Fund whenever there exist no outstanding Uncovered Distribution
Charges of the Principal Underwriter with the Principal Underwriter being
entitled to receive all CDSCs paid or payable with respect to any day on which
there exist outstanding Uncovered Distribution Charges. The Plan requires the
Fund to calculate Uncovered Distribution Charges of the Principal Underwriter
in accordance with the methodology and procedures employed in the Fund's
original distribution plan dated May 28, 1987.
The amount of Uncovered Distribution Charges of the Principal Underwriter
is computed daily to determine whether any CDSCs will be retained by the
Principal Underwriter. Briefly, Uncovered Distribution Charges (as defined in
the Fund's original distribution plan) are equivalent to all unpaid sales
commissions and distribution fees to which the Principal Underwriter would be
entitled under the original plan less all CDSCs theretofore paid to the
Principal Underwriter. The amount of Uncovered Distribution Charges of the
Principal Underwriter at any particular time depends upon various changing
factors, including the level and timing of sales of Fund shares, the nature of
such sales (i.e., whether they result from exchange transactions or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a 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) and changes in the level of the net assets of the Fund.
Periods with a high level of sales of Fund shares accompanied by a low
level of early redemptions of Fund shares resulting in the imposition of 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.
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. Under the Plan the President or a Vice President of the Trust shall
provide to the Trustees for their review, and the Trustees shall review at
least quarterly, a written report of the amount expended under the Plan and
the purposes for which such expenditures were made. The Plan may not be
amended to increase materially the payments described therein without approval
of the shareholders of the Fund, and all material amendments of the Plan must
also be approved by the Trustees as required by Rule 12b-1. So long as the
Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust will be committed to the discretion of the
Trustees who are not such interested persons. The Trustees have determined
that in their judgment there is a reasonable likelihood that the Plan will
benefit the Fund and its shareholders.
YIELD INFORMATION
The Fund's annualized current and effective yields for the seven-day
period ended December 31, 1995 were 4.37% and 4.46%, respectively.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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 March 31, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville,
FL was the record owner of approximately 11.7% of the outstanding shares of
the Fund, which it held on behalf of its customers who are the beneficial
owners of such shares, and as to which it had voting power under certain
limited circumstances. To the knowledge of the Trust, no other person owned of
record or beneficially 5% or more of the Fund's outstanding shares as of such
date.
<PAGE>
[LOGO]
EATON VANCE
LIQUID ASSETS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1996
EATON VANCE
LIQUID ASSETS FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF CASH MANAGEMENT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE LIQUID ASSETS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
LXSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EATON VANCE MONEY MARKET FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about Eaton Vance Money Market Fund (the "Fund"), Cash
Management Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). Part II provides information solely about
the Fund. Where appropriate, Part I includes cross-references to the relevant
sections of Part II that provide additional, Fund-specific information. This
Statement of Additional Information is sometimes referred to herein 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 ............................................................. 9
Service for Withdrawal ................................................ 10
Determination of Net Asset Value ...................................... 10
Calculation of Yield Quotations ....................................... 11
Taxes ................................................................. 11
Portfolio Security Transactions ....................................... 12
Other Information ..................................................... 13
Independent Accountants ............................................... 14
Financial Statements .................................................. 15
Appendix .............................................................. 16
PART II
Fees and Expenses ..................................................... a-1
Investment Restrictions ............................................... a-1
Principal Underwriter ................................................. a-2
Distribution Plan ..................................................... a-2
Yield Information ..................................................... a-4
Control Persons and Principal Holders of Securities ................... a-4
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 MAY 1, 1996, 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).
For EDGAR filing purposes only: Registrant incorporates by reference for Eaton
Vance Money Market Fund the Part I found in the Statement of Additional
Information of Eaton Vance Cash Management Fund contained in this Amendment.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EATON VANCE MONEY MARKET FUND. The
Fund became a series of the Trust on September 1, 1995.
FEES AND EXPENSES
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. For the period from the start of
business, April 5, 1995, to December 31, 1995, $17,405 of expenses related to
the operation of the Fund were allocated to the Administrator.
DISTRIBUTION PLAN
During the period from the start of business, April 5, 1995, to December
31, 1995, the Principal Underwriter paid to Authorized Firms sales commissions
of $19,721 on sales of shares of the Fund. During the same period, the Fund
made sales commission payments under the Plan to the Principal Underwriter
aggregating $79,429 and the Principal Underwriter received approximately
$118,000 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 of December 31, 1995, the
outstanding Uncovered Distribution Charges of the Principal Underwriter
calculated under the Plan amounted to approximately $434,000 (which amount was
equivalent to 3.3% of the Fund's net assets on such day). For the period from
the start of business, April 5, 1995, to December 31, 1995, the Fund made no
service fee payments under the Plan. The Fund commenced accruing for service
fees during the quarter ending March 31, 1996.
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
Trust or the Portfolio.) During the fiscal year ended December 31, 1995, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation, in their capacities as Trustees from the Fund, the Portfolio and
the other funds in the Eaton Vance fund complex(1):
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
---- ------------ -------------- ------------------
Donald R. Dwight $17 $2,166 $135,000(2)
Samuel L. Hayes, III 16 2,196 150,000(3)
Norton H. Reamer 16 2,197 135,000
John L. Thorndike 16 2,292 140,000
Jack L. Treynor 17 2,278 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
INVESTMENT RESTRICTIONS
Certain investment restrictions of the Fund are designated as fundamental
policies and as such cannot be changed without the approval of the holders of
a majority of the Fund's outstanding voting securities, which as used in this
SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the
shares are present or represented at the meeting or (b) more than 50% of the
shares of the fund. Accordingly, the Fund will not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets taken at current market value in the securities of any one issuer
or purchase more than 10% of the outstanding voting securities of any one
issuer other than obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities and except securities of other
investment companies. The 5% restriction does not apply to or limit the Fund's
investments in certificates of deposit, bankers' acceptances or time deposits
of banking and thrift institutions;
(2) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities);
(3) Borrow money or issue senior securities, except as permitted by the
Investment Company Act of 1940;
(4) Underwrite securities issued by other persons, except insofar as it
may technically be deemed to be an underwriter under the Securities Act of
1933 in selling or disposing of a portfolio security;
(5) Purchase any security if, as a result of such purchase, more than 25%
of the Fund's total assets (taken at current value) would be invested in the
securities of issuers having their principal business activities in the same
industry; provided that there is no limitation with respect to (a) investments
by the Fund in certificates of deposit, bankers' acceptances or time deposits
of banking and thrift institutions or (b) obligations issued or guaranteed by
the U.S. Government or any of its agencies or instrumentalities; and provided
further that banking and thrift institutions and their holding companies as a
group, finance companies as a group and utility companies as a group will not
be considered single industries;
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by interests in real estate and securities of
issuers which invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the repurchase
or sale of physical commodities; or
(8) Make loans to other persons, except by (a) the acquisition of money
market instruments, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and policies,
(b) entering into repurchase agreements and (c) lending its portfolio
securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. When so invested, the Fund's investment restrictions shall be construed
to be consistent with those of the Portfolio, to the extent applicable.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising is borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under federal and
state securities laws is borne by the Fund. In addition, the Fund makes
payments to the Principal Underwriter pursuant to its Distribution Plan as
described in the Fund's current Prospectus; the provisions of the plan
relating to such payments are included in the Distribution Agreement. The
Distribution Agreement is renewable annually by the Trust's Board of Trustees
(including a majority of its Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation
of the Fund's Distribution Plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter 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 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 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 Distribution Charges under the
Fund's 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 and
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 outstanding Uncovered
Distribution Charges with respect to such day. The amount of outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of
the Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter
at any particular time depends upon various changing factors, including the
level and timing of sales of Fund shares, the nature of such sales (i.e.,
whether they result from exchange transactions, reinvestments or from cash
sales through Authorized Firms), the level and timing of redemptions of Fund
shares upon which a 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 or Eaton Vance Classic Group Funds which result in a reduction
of Uncovered Distribution Charges), changes in the level of the net assets of
the Fund, and changes in the interest rate used in the calculation of the
distribution fee under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions and distribution fees to the Principal Underwriter and
service fees to the Principal Underwriter and Authorized Firms which may be
equivalent, on an aggregate basis during any fiscal year of the Fund, to .90%
of the Fund's average daily net assets for such year. For the sales commission
and service fee payments made by the Fund and the outstanding Uncovered
Distribution Charges of the Principal Underwriter, see "Fees and Expenses --
Distribution Plan" in this Part II. The Fund believes that the combined rate
of all these payments may be higher than the rate of payments made under
distribution plans adopted by other investment companies pursuant to Rule 12b-
1. Although the Prinicpal Underwriter will use its own funds (which may be
borrowed from banks) to pay sales commissions at the time of sale, it is
anticipated that the Eaton Vance organization will profit by reason of the
operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from
sales of Fund shares and through the amounts paid to the Principal
Underwriter, including CDSCs, pursuant to the Plan. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts theretofore received by the Principal
Underwriter pursuant to the Plan and from 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) and by the Board of Trustees of the Trust,
including the Rule 12b-1 Trustees. The Plan continues 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 Distribution
Agreement may be terminated at any time by vote of a majority of the Rule 12b-
1 Trustees, or by a vote of a majority of the outstanding voting securities of
the Fund. 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 the Trustees who are
not interested persons of the Trust shall be committed to the discretion of
the Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the
Principal Underwriter and Authorized Firms, the Plan is expected to result in
the maintenance of, and possible future growth in, the assets of the Fund.
Based on the foregoing and other relevant factors, the Trustees have
determined that in their judgment there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
YIELD INFORMATION
The Fund's annualized and current effective yields for the seven-day
period ended December 31, 1995 were 4.19% and 4.28%, respectively.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 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 March 31, 1996, no person owned of record or beneficially 5% of more of the
Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EATON VANCE MONEY
MARKET FUND
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1996
EATON VANCE MONEY MARKET FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF CASH MANAGEMENT PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE MONEY MARKET FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
MMFSAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1996
EATON VANCE TAX FREE RESERVES
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- ------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Investment Objectives and Policies .................................... 2
Investment Restrictions ............................................... 3
Trustees and Officers ................................................. 4
Control Persons and Principal Holders of Securities ................... 6
Investment Adviser .................................................... 6
Custodian ............................................................. 8
Service for Withdrawal ................................................ 8
Determination of Net Asset Value ...................................... 9
Calculation of Yield Quotations ....................................... 9
Taxes ................................................................. 9
Principal Underwriter ................................................. 10
Portfolio Security Transactions ....................................... 11
Other Information ..................................................... 13
Independent Accountants ............................................... 13
Financial Statements .................................................. 14
Appendix .............................................................. 15
- ------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EATON VANCE TAX FREE RESERVES (THE
"FUND") DATED MAY 1, 1996, 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>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of Eaton Vance Tax Free Reserves (the "Fund"), a
series of Eaton Vance Mutual Funds Trust (the "Trust"), are to provide
investors with liquidity and safety of principal and at the same time maintain
as high a level of income exempt from regular federal income tax as is
consistent with such objectives. The Fund will attempt to safeguard principal
through investment emphasis on high quality securities and through
diversification. The Fund became a series of the Trust on September 1, 1995.
Capitalized terms used in this Statement of Additional Information ("SAI") and
not otherwise defined have the meanings given them in the Fund's Prospectus.
The Fund will seek to achieve its objectives by investing in a diversified
portfolio of obligations, including bonds, issued by or on behalf of states,
territories and possessions of the United States and their political
subdivisions, agencies and instrumentalities, and the District of Columbia,
the interest from which is exempt from regular federal income tax. The Fund
will invest only in those obligations determined by the Trustees of the Trust
to present minimal credit risks and which are at the time of acquisition rated
by the requisite number of nationally recognized statistical rating
organizations in one of the two highest applicable rating categories or, in
the case of an instrument not so rated of comparable quality as determined by
the Trustees.
It is contemplated that the Fund's assets will consist principally of the
following:
(1) Floating or variable rate tax-exempt instruments, which provide for
interest rate adjustments at specified intervals. Rate adjustments on such
securities are usually set at the issuer's discretion, in which case the Fund
would normally have the right to resell the security to the issuer or its
agent. Alternatively, rate revisions may be determined in accordance with a
prescribed formula or other contractual procedure. The Fund may also acquire
put options in combination with the purchase of underlying securities. Such
put options would give the Fund the right to require the issuer or some other
person to purchase the underlying security at an agreed upon price. Interest
income generated by certain securities on which the Fund holds a put option
may not qualify as tax-exempt interest.
(2) Tax-exempt notes which are rated at the time of purchase within the
highest grade assigned by Moody's Investors Service, Inc. ("Moody's") (MIG-1),
or within the highest grade assigned by Standard & Poor's Ratings Group
("S&P") (SP-1), or within the highest grade assigned by Fitch Investors
Service, Inc. ("Fitch") (FIN-1).
(3) Project Notes, which are instruments sold by the Department of Housing
and Urban Development but issued by a state or local housing agency, and
secured by the full faith and credit of the United States. Due to changes in
the federal income tax law enacted in the Deficit Reduction Act of 1984,
Project Notes issued on or after June 19, 1984 must satisfy several new
requirements to maintain their tax-exempt status.
(4) Tax-exempt bonds which are rated at the time of purchase within the
two highest grades assigned by Moody's (Aaa or Aa) or S&P (AAA or AA) or Fitch
(AAA or AA).
(5) Tax-exempt commercial paper rated in the highest grade by such rating
services (Prime-1 or A-1 or F-1+, respectively).
(6) Cash.
For a description of the instruments and ratings listed above, see the
Appendix.
The Fund anticipates being at all times as fully invested as possible in
tax-exempt bonds and notes; however, there may be occasions when, as a result
of maturities of portfolio securities or sales of Fund shares or in order to
meet anticipated redemption requests, or the unavailability of suitable tax-
exempt investments, the Fund may hold cash which is not earning income or
invest in taxable short-term obligations including U.S. Government
obligations, interest-bearing obligations of banks (such as certificates of
deposit and bankers' acceptances), repurchase agreements (see the Appendix for
description of risk), and commercial paper.
With respect to 10% of its net assets, the Fund may also purchase shares
of unaffiliated investment companies consistent with the restrictions of the
1940 Act, as amended. Such investments are subject to adverse developments
affecting the mutual fund industry. In addition, investors indirectly pay the
fees of two investment company service providers.
To facilitate the objective of a stable net asset value, the Fund intends
to limit its portfolio to instruments maturing in 397 calendar days or less
from the date of purchase and to maintain a dollar-weighted average portfolio
maturity of not more than 90 days. For the purpose of complying with these
limitations, the maturity of the Fund's portfolio instruments will be governed
by Rule 2a-7 promulgated under the 1940 Act. See "Valuing Fund Shares" in the
Fund's current Prospectus.
Some tax-exempt securities may be purchased on a "when-issued" basis. If
so, the Fund generally will not pay for the securities or start earning
interest on them until the securities are received, which may take as long as
45 days. In order to invest its assets immediately, while awaiting delivery of
securities purchased on a when-issued basis, the Fund will normally attempt to
invest in high-grade short-term debt securities that offer same-day settlement
and earnings. The commitment to purchase a security for which payment is not
made at that time may be deemed a separate security. The value of the when-
issued securities on the delivery date may be less than their cost, effecting
an immediate loss to the Fund. Thus, the purchase of securities on a when-
issued basis may be considered an aggressive investment practice involving
some risk. The Fund does not intend to make such commitments for speculative
purposes, but only to accomplish the goal of the Fund, i.e., to invest in tax-
exempt securities. When the Fund commits to purchase a security on a when-
issued basis, it will set up procedures consistent with the General Statement
of Policy of the Securities and Exchange Commission (the "Commission")
concerning such purchases. Since the Policy currently recommends that assets
of the Fund equal to the amount of the purchase be held aside or segregated to
be used to pay for the commitment, the Fund will always have cash or high-
grade short-term debt securities sufficient to cover its commitments. If the
Fund determines it is necessary to sell the when-issued security before
delivery, any gain or loss will not be tax-exempt. The Fund has no specific
limit on the amount of securities which may be purchased on a when-issued
basis.
The Fund may acquire "stand-by commitments" with respect to portfolio
obligations. Under a stand-by commitment, the Fund obligates a broker, dealer
or bank to repurchase, at the Fund's option, specified securities at a
specified price and, in this respect, stand-by commitments are comparable to
put options. The exercise of a stand-by commitment therefore is subject to the
ability of the seller to make payment on demand. The Fund will acquire stand-
by commitments solely to facilitate portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes. The Fund may pay for
stand-by commitments if such action is deemed necessary, thus increasing to a
degree the cost of the underlying obligation and similarly decreasing such
security's yield to investors.
The Fund may purchase securities at a price which would result in a yield
to maturity lower than that generally offered by the seller at the time of
purchase when the Fund can simultaneously acquire the right to sell the
securities back to the issuer or its agent at an agreed-upon price at any time
during a specified period or on a certain date. Such a right is generally
known as a "put."
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental
policies and as such cannot be changed without the approval of a majority of
the Fund's outstanding voting securities, which as used in this SAI means the
lesser of (a) 67% of the shares of the Fund present or represented by proxy at
a meeting if the holders of more than 50% of the shares are present or
represented at the meeting or (b) more than 50% of the shares of the Fund.
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer, except for
obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities and except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin;
(4) Underwrite securities issued by other persons;
(5) Buy or sell real estate, although it may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate, physical commodities, or commodity contracts relating to
physical commodities unless acquired as a result of ownership of securities;
(6) Make loans, except by (a) the purchase of debt instruments and making
portfolio investments, (b) entering into repurchase agreements or (c) lending
portfolio securities;
(7) Purchase any securities which would cause more than 25% of the value
of its total assets at the time of such purchase to be invested in the
securities of issuers having their principal business activities in the same
industry, provided that there is no limitation in respect to investments in
tax-exempt notes or bonds or other obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, or in certificates of
deposit or bankers' acceptances; or
(8) Purchase any securities which would cause more than 20% of the value
of its total assets at the time of such purchase to be invested in securities
the interest on which is not exempt from federal income tax.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Fund has adopted the following nonfundamental investment policies
which may be changed by the Trustees of the Fund without approval of the
Fund's shareholders. As a matter of nonfundamental investment policy, the Fund
may not: (a) purchase or retain securities of any issuer if 5% of the issuer's
securities are owned by those officers and Trustees of the Fund or officers
and trustees of its investment adviser who own individually more than 1/2 of
1% of the issuer's securities; (b) make short sales except where, because of
the ownership of other securities, it has the right to obtain securities
equivalent in kind and amount to those sold; write or purchase or sell any put
or call options or combinations thereof, except that it may acquire rights to
resell tax-exempt securities at an agreed upon price and at or within an
agreed upon time; (c) purchase warrants; or (d) invest more than 10% of net
assets in investments which are not readily marketable, including restricted
securities and repurchase agreements maturing in more than seven days.
Restricted securities for the purposes of this limitation do not include
securities eligible for resale pursuant to Rule 144A of the Securities Act of
1933 and commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or its delegate, determine to be liquid, based
upon the trading markets for the specific security.
For the purpose of the Fund's investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of principal and interest on the security.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it may revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of Eaton Vance; Eaton Vance's
wholly-owned subsidiary, Boston Management and Research ("BMR"), Eaton Vance's
parent, Eaton Vance Corp. ("EVC") and of Eaton Vance's and BMR's trustee,
Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees who are "interested persons" of the Trust,
Eaton Vance, BMR, EVC or EV as defined in the 1940 Act by virtue of their
affiliation with any one or more of the Trust, Eaton Vance, BMR, EVC or EV,
are indicated by an asterisk (*).
M. DOZIER GARDNER, (62) President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
H. DAY BRIGHAM, JR., (69) Vice President
Chairman of the Management Committee, Vice President of Eaton Vance, BMR, EVC
and EV and Director of EVC and EV. Director, Trustee and officer of various
investment companies managed by Eaton Vance or BMR. Mr. Brigham was elected
Vice President of the Trust on June 19, 1995.
DONALD R. DWIGHT, (65) Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New
England, Inc. since 1983. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES, (54) Vice President and Trustee*
Executive Vice President of Eaton Vance, BMR, EVC and EV, and a Director of
EVC and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
SAMUEL L. HAYES, III, (61) Trustee
Jacob H. Schiff Professor of Investment Banking at Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02134.
NORTON H. REAMER, (60) Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director and Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE, (69) Trustee
Director, Fiduciary Company Incorporated. Director and 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
WILLIAM H. AHERN, Jr. (36) Vice President
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
MICHAEL B. TERRY (53), Vice President
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Terry was elected Vice
President of the Trust on December 17, 1990.
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.
THOMAS OTIS, (64) Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of
various investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS, (60) Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY, (33) Assistant Secretary
Assistant Vice President of BMR and Eaton Vance since March 1, 1994; employee
of Eaton Vance since March 1993. State Regulations Supervisor, The Boston
Company (1991-1993) and Registration Specialist, Fidelity Management &
Research Co. (1986-1991). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust
on March 27, 1995.
JOHN P. RYNNE (53), Assistant Secretary
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected Assistant Secretary of the Trust on June 19, 1995.
ERIC G. WOODBURY (38) Assistant Secretary
Vice President of Eaton Vance since February 1993; formerly, associate at
Dechert, Price & Rhoades and Gaston & Snow. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant
Secretary of the Trust on June 19, 1995.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust. The 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 1940 Act
("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. Messrs. Hayes (Chairman), Reamer, Thorndike and Treynor
are currently serving on the Committee. 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. The Audit Committee's functions include
making recommendations to the Trustees regarding the selection of the
independent certified public accountants, and reviewing with such accountants
and the Treasurer of the Trust matters relative to trading and brokerage
policies and practices, accounting and auditing practices and procedures,
accounting records, internal accounting controls, and the functions performed
by the custodian, transfer agent and dividend disbursing agent of the Fund.
The fees and expenses of those Trustees of the Trust who are not members
of the Eaton Vance organization (the noninterested Trustees) are paid by the
Fund (and the other series of the Trust). (The Trustees of the Trust who are
members of the Eaton Vance organization receive no compensation from the
Trust). During the fiscal year ended December 31, 1995, the Trustees of the
Trust earned the following compensation in their capacities as Trustees from
the Fund and the other funds in the Eaton Vance fund complex:
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST AND
NAME FROM FUND FUND COMPLEX(1)
- ---- ------------ ------------------
Donald R. Dwight ................. $659 $135,000(2)
Samuel L. Hayes, III ............. 698 150,000(3)
Norton H. Reamer ................. 775 135,000
John L. Thorndike ................ 817 140,000
Jack L. Treynor .................. 790 140,000
- ----------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $35,000 of deferred compensation.
(3) Includes $33,750 of deferred compensation.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at March 31, 1996, the Trustees and officers of the Fund, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As
of March 31, 1996, Saturn & Co., a nominee of Investors Bank & Trust Company,
was the record owner of approximately 26.4% of the outstanding shares of the
Fund, which it held on behalf of its custody and trust clients. In addition,
as of the same date, the following shareholders held of record the percentage
of outstanding shares of the Fund indicated after their names: James Campisi,
c/o The Newport Group, Heathrow, FL (31.0%) and Peter S. Cahill TTEE Peter S.
Cahill Revocable Trust U/A DTD 8/4/94, c/o The Newport Group, Heathrow, FL
(23.4%). To the knowledge of the Trust, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISER
The Trust on behalf of the Fund engages Eaton Vance as investment adviser
for the Fund pursuant to an Investment Advisory Agreement dated August 15,
1995. Eaton Vance or its affiliates act as investment adviser to investment
companies and various individual and institutional clients with combined
assets under management of 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 covers 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 experienced team of investment professionals that began working together in
the mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent,
Russia and Eastern Europe, Latin America, Australia and New Zealand from
offices in Hong Kong, London and Bombay. 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- 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 help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide
you with tailored financial advice.
Under the investment advisory agreement Eaton Vance receives a monthly
advisory fee of 1/24 of 1% (equivalent to 1/2 of 1% annually) of average
monthly net assets of the Fund. As at December 31, 1995, the Fund had net
assets of $23,912,397. For the fiscal years ended December 31, 1995, 1994 and
1993, Eaton Vance would have earned, absent a fee reduction, advisory fees of
$255,933, $204,513 and $243,204, respectively. To enhance the net income of
the Fund, Eaton Vance made a reduction of its fee for the fiscal years ended
December 31, 1995, 1994 and 1993 in the amount of $200,851, $162,287 and
$84,713, respectively.
Eaton Vance manages the investments and affairs of the Fund, subject to
the supervision of the Trust's Board of Trustees. Eaton Vance furnishes for
the use of the Fund office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Fund, and
compensates all officers and Trustees of the Trust who are members of the
Eaton Vance organization and all personnel of Eaton Vance performing services
relating to research and investment activities. The Fund has agreed to pay all
expenses not expressly stated to be payable by Eaton Vance under the
Investment Advisory Agreement, including, without limitation, (i) expenses of
maintaining the Fund and continuing its existence, (ii) registration of the
Fund under the 1940 Act, (iii) commissions, fees and other expenses connected
with the purchase or sale of securities, (iv) auditing, accounting and legal
expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses of
issue, sale, repurchase and redemption of shares, (viii) expenses of
registering and qualifying the Fund and its shares under federal and state
securities laws and of preparing and printing prospectuses for such purposes
and for distributing the same to shareholders, (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
and securities, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all
services to the Fund, (xv) expenses for servicing shareholder accounts, (xvi)
any direct charges to shareholders approved by the Trustees, (xvii)
compensation and expenses of Trustees not affiliated with Eaton Vance, and
(xviii) such non-recurring items as may arise, including expenses incurred in
connection with litigation, proceedings and claims and the obligation of the
Fund to indemnify the Trust's Trustees and officers with respect thereto.
The Fund is responsible for all expenses for servicing shareholder
accounts, and Eaton Vance performs on behalf of the Fund various functions
which relate to the administration and servicing of existing shareholder
accounts without being reimbursed by the Fund for its costs in connection
therewith. It is possible that Eaton Vance may, in the future, request that
the Trustees of the Trust take action to have the Fund reimburse Eaton Vance
for its costs in performing these services. These services include functions
which are primarily administrative and clerical in nature, and include such
matters as handling communications from shareholders with respect to their
accounts and the processing of liquidation and exchange requests received from
dealers or shareholders with respect to such accounts. If any such request for
reimbursement is made, the Trustees of the Trust intend to review the specific
nature and costs of these services prior to approving any such reimbursement.
The Investment Advisory Agreement with Eaton Vance remains in effect until
February 28, 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 who are not interested persons of the Trust or of Eaton Vance cast in
person at a meeting specifically called for the purpose of voting on such
approval and (ii) by the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund. The Agreement may
be terminated at any time without penalty on sixty (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 Fund, and the Agreement will terminate
automatically in the event of its assignment. The Agreement provides that
Eaton Vance may render services to others. The Agreement also provides that,
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the Agreement on the part of Eaton
Vance, Eaton Vance shall not be liable to the Fund or to any shareholder for
any act or omission in the course of or connected with rendering services or
for any losses sustained in the purchase, holding or sale of any security.
A commitment has been made to a state securities authority that Eaton
Vance will take certain actions, if necessary, so that the Fund's expenses
will not exceed expense limitation requirements of such state. The commitment
may be amended or rescinded by Eaton Vance in response to changes in the
requirements of the state or for other reasons.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Gardner is president and chief executive officer of
EVC, Eaton Vance, BMR and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust which expires December 31, 1996,
the Voting Trustees of which are Messrs. Brigham, Clay, Gardner, Hawkes and
Rowland. The Voting Trustees have unrestricted voting rights for the election
of Directors of EVC. All of the outstanding voting trust receipts issued under
said Voting Trust are owned by certain of the officers of Eaton Vance and BMR
who are also officers and Directors of EVC and EV. As of March 31, 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. Brigham, Gardner, Hawkes and Otis, who are
officers or Trustees of the Trust are members of the EVC, Eaton Vance, BMR and
EV organizations. Messrs. Ahern, Murphy, O'Connor, Rynne and Woodbury and Ms.
Sanders, who are officers of the Fund, are also members of the Eaton Vance,
BMR and EV organizations. Eaton Vance will receive the fees paid under the
Investment Advisory Agreement.
EVC owns all of the stock of Energex Energy Corporation which is engaged
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 of the stock
of Fulcrum Management, Inc. and MinVen, Inc., which are engaged in precious
metal mining venture investment and management. Eaton Vance, BMR, EVC and EV
may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian,
Investors Bank & Trust Company. It is Eaton Vance's opinion that the terms and
conditions of such transactions were not and will not be influenced by
existing or potential custodial or other relationships between the Fund and
such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund. IBT has the custody of all cash
and securities of the Fund, maintains the Fund's general ledger and computes
the daily per share net asset value. In such capacity it attends to details in
connection with the sale, exchange, substitution, transfer or other dealings
with the Fund's investments, receives and disburses all funds and performs
various other ministerial duties upon receipt of proper instructions from the
Fund. IBT charges fees which are competitive within the industry. A portion of
the fee relates to custody, bookkeeping and valuation services and is based
upon a percentage of Fund net assets and a portion of the fee relates to
activity charges, primarily the number of portfolio transactions. These fees
are then reduced by a credit for the Fund's cash balances at the custodian
equal to 75% of the 91-day, U.S. Treasury Bill auction rate applied to the
Fund's average daily collected balances. Landon T. Clay, a Director of EVC and
an officer, Trustee or Director of other entities in the Eaton Vance
organization, owns approximately 13% of the voting stock of Investors
Financial Services Corp., the holding company parent of IBT. Management
believes that such ownership does not create an affiliated person relationship
between the Fund or the Portfolio and IBT under the 1940 Act.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any permitted amount
designated by the shareholder (see "Eaton Vance Shareholder Services --
Withdrawal Plan" in the Fund's current Prospectus) based upon the value of the
shares held. Payments from the proceeds of shares redeemed to make withdrawal
payments may exceed the amounts of distributions paid on Fund shares and, to
that extent, will reduce, or even exhaust, a shareholder's investment. 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. The shareholder, the Fund or the Principal
Underwriter may terminate the withdrawal plan at any time without penalty.
DETERMINATION OF NET ASSET VALUE
The Fund's use of the amortized cost method to value its portfolio
securities was originally permitted by an exemptive order dated October 6,
1981, issued by the Commission under the 1940 Act. The Fund has ceased to rely
on such order and relies on Rule 2a-7 promulgated under said Act as the basis
for using the amortized cost method to value its securities. Rule 2a-7
requires that the Fund limit its investments, including puts and repurchase
agreements, to those U.S. dollar-denominated instruments which the Trustees
determine present minimal credit risks and which are, at the time of
acquisition, rated by the requisite number of nationally recognized
statistical rating organizations in one of the two highest applicable rating
categories or, in the case of any instrument that is not so rated, of
comparable quality as determined by the Trustees of the Trust. The Rule also
requires the Fund to maintain a dollar-weighted average portfolio maturity
(not more than 90 days) appropriate to its objective of enabling the Fund to
maintain a stable net asset value of $1.00 per Fund share. In addition, the
Rule precludes the purchase of any instrument with a remaining maturity of
more than 397 calendar days. Should the disposition of a portfolio security
result in a dollar-weighted average portfolio maturity of more than 90 days,
the Fund will invest its available cash in such a manner as to reduce such
maturity to 90 days or less as soon as reasonably practicable.
The Fund will be closed for business and will not price its shares on the
following business holidays: New Year's Day, Presidents' Day, Good Friday (a
New York Stock Exchange holiday), Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
CALCULATION OF YIELD QUOTATIONS
From time to time, the Fund quotes a current yield based on a specific
seven calendar day period which is calculated by first dividing the net change
in the value of an account having a balance of one share at the beginning of
the period by the value of the account at such time to determine the seven day
base period return, and then multiplying such return by 365/7 with the
resulting yield figure carried to at least the nearest hundredth of one
percent. The net change in account value is determined by the value of
additional shares purchased with dividends declared on the original share and
dividends declared on both the original share and any such additional shares,
but does not include any realized gains or losses from the sales of securities
or any unrealized appreciation or depreciation on portfolio securities. In
addition to the current yield, the Fund also quotes an effective yield based
on a specific seven day period carried to at least the nearest hundredth of
one percent, computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical preexisting account having a balance
of one share at the beginning of the period, and dividing the difference by
the value of the account at the end of the base period to obtain the base
period return, and then compounding the base period return by adding 1,
raising the sum to a power equal to 365 divided by 7, and subtracting 1 from
the result, according to the following formula:
Effective yield = [(Base period return +1) 365/7]-1: A taxable-equivalent
yield is computed by using the tax-exempt yield figure and dividing by 1 minus
the tax rate.
The Fund's annualized current and effective yields for the seven-day
period ending December 31, 1995 were 3.50% and 3.56%, respectively. The
taxable-equivalent current and effective yields for that same period were
5.07% and 5.20% (assuming a tax rate of 31%). Yields will fluctuate from time
to time and are not necessarily representative of future results. A
shareholder should remember that yield is a function of the type and quality
of the instruments in the Fund's portfolio.
TAXES
See "Distributions and Taxes" in the Fund's current Prospectus.
Each series of the Trust is treated as a separate entity for federal
income tax purposes. In order to qualify each year as a regulated investment
company ("RIC") under the Code, the Fund intends to satisfy certain
requirements relating to sources of income, diversification of assets, and
distribution of income and gains. So long as the Fund qualifies as a RIC for
tax purposes, it will not be subject to federal income tax on income and gains
paid to shareholders in the form of dividends. In the unlikely event that the
Fund fails to so qualify, it would be subject to federal income tax at
corporate rates and all distributions from earnings and profits, including
distributions of exempt interest, would be taxable to shareholders as ordinary
income. In order to requalify for taxation as a RIC, the Fund might be
required to recognize unrealized gains, pay substantial taxes and interest,
and make certain distributions.
If the Fund fails to distribute substantially all of its ordinary income
and capital gain net income on a current basis, plus any retained amounts from
the preceding year, the Fund will be subject to a 4% federal excise tax on the
undistributed amounts. The Fund may treat distributions paid in January but
declared in October, November or December of the preceding year as paid by the
Fund on December 31 of that preceding year. As a result, shareholders must
report such distributions on their federal income tax returns for the
preceding year.
The Fund's investment in securities issued at a discount and certain other
obligations will require the Fund to accrue and distribute income not yet
received. In order to generate cash sufficient to make the required
distributions, the Fund may sell securities that it would otherwise have
continued to hold.
The Fund will be qualified to pay exempt-interest dividends so long as, at
the end of each quarter of the Fund's taxable year, at least 50% of the Fund's
assets consists of obligations the interest on which is exempt from federal
income tax. That portion of any indebtedness incurred or continued by a
shareholder in order to purchase or carry shares in the Fund which corresponds
to the portion of total Fund distributions (excluding capital gains dividends)
that are exempt interest dividends is not deductible by the shareholder.
Exempt interest dividends attributable to interest received on certain
"private activity bonds" or industrial development bonds will not be tax
exempt to any shareholders who are "substantial users" (or persons related to
"substantial users") of the facilities financed by such bonds.
If a shareholder sells, redeems or otherwise disposes of Fund shares at a
loss within six months of purchase, such loss will be disallowed for federal
income tax purposes to the extent of any exempt interest dividends received.
In addition, any allowed loss will be treated as long-term capital loss to the
extent of any long-term capital gain dividends received; and all or a portion
of any loss realized will be disallowed if the shareholder purchases other
Fund shares within 30 days of the disposition (before or after).
The Fund may be required by federal law to withhold and remit to the U.S.
Treasury 31% of the taxable dividends and other distributions paid to any
individual shareholder who fails to furnish the Fund with a correct taxpayer
identification number (generally the individual's social security number), who
has underreported dividends or interest income, or who fails to certify to the
Fund that he or she is not subject to such withholding. The Fund is also
generally required to withhold on certain distributions made to non-resident
aliens and foreign entities.
Part or all of any interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares of the Fund is not deductible for
federal income tax purposes. Further, entities or persons who are "substantial
users" (or persons related to "substantial users") of facilities financed by
certain private activity obligations and industrial development bonds should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is generally a "non-exempt person" who regularly uses in a trade or
business a part of a facility financed from the proceeds of industrial
development bonds or private activity obligations.
Shareholders should consult their own tax advisers with respect to the
federal, state and local tax consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Although the Fund generally distributes its own shares, the Trust on
behalf of the Fund has entered into a Distribution Contract with the Principal
Underwriter, a wholly-owned subsidiary of Eaton Vance, to permit the Fund to
distribute its shares through the Principal Underwriter when in the opinion of
the Trustees it will be in the best interest of the Fund to do so. Shares of
the Fund may be purchased directly from the Fund except in those states where
they are distributed through the Principal Underwriter. Shares of the Fund are
currently distributed through the Principal Underwriter in California,
Colorado, District of Columbia, Florida, Illinois, Indiana, Louisiana, Maine,
Maryland, Massachusetts, New Hampshire, New York, Ohio, Rhode Island, South
Carolina and Texas.
Under the Distribution Agreement with the Principal Underwriter, the Fund
has agreed to pay all fees and expenses in connection with the registration of
its shares with the Commission as well as fees and expenses in connection with
registering and maintaining registrations of the Fund and of its shares under
the various state "blue-sky" laws. The Principal Underwriter pays all expenses
of preparing, printing and distributing advertising and sales literature and
all prospectuses and shareholders' reports used in the distribution of Fund
shares. The Contract provides that the Principal Underwriter will accept
orders at net asset value only, as no sales commission or load is charged to
the investor.
Eaton Vance, the Fund's adviser, makes quarterly distribution assistance
payments to selected broker/dealer firms or institutions who were instrumental
in the acquisition of shareholders for the Fund, or who performed services
with respect to shareholder accounts. Payments by Eaton Vance are made with
respect to accounts aggregating at least $1,000,000 in size only and
determined and paid in arrears by applying a rate of up to 2/10 of 1% per
annum on the aggregate average net asset value of the excess over $1,000,000
in such accounts during the preceding quarter. The exact rate per annum used
in calculating such payments, the minimum aggregate net asset value required
for eligibility for such payments, and the factors in selecting the broker/
dealer firms or institutions to whom they will be made will be determined from
time to time by Eaton Vance. Such payments are made by Eaton Vance and not the
Fund, and do not constitute a distribution plan subject to Rule 12b-1 under
the 1940 Act.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
The Distribution Contract is renewable annually by the Trust's Board of
Trustees (including a majority of its Trustees who are not interested persons
of the Principal Underwriter or the Trust), may be terminated on six months'
notice by either party, and is automatically terminated upon assignment.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security
transactions, including the selection of the market and the executing firm,
are made by Eaton Vance. Eaton Vance is also responsible for the execution of
transactions for all other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many firms. Eaton Vance
uses its best efforts to obtain execution of portfolio security transactions
at prices which are advantageous to the Fund and (when a disclosed commission
is being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the general
execution and operational capabilities of the executing firm, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions,
and the reasonableness of the spread or commission, if any. Municipal
obligations purchased and sold by the Fund are generally traded in the over-
the-counter market on a net basis (i.e., without commission) through broker-
dealers and banks acting for their own account rather than as brokers, or
otherwise involve transactions directly with the issuer of such obligations.
Such firms attempt to profit from such transactions by buying at the bid price
and selling at the higher asked price of the market for such obligations, and
the difference between the bid and asked price is customarily referred to as
the spread. The Fund may also purchase municipal obligations from
underwriters, the cost of which may include undisclosed fees and concessions
to the underwriters. While it is anticipated that the Fund will not pay
significant brokerage commissions in connection with such portfolio security
transactions, on occasion it may be necessary or appropriate to purchase or
sell a security through a broker on an agency basis, in which case the Fund
will incur a brokerage commission. Although spreads or commissions on
portfolio security transactions will, in the judgment of Eaton Vance, be
reasonable in relation to the value of the services provided, spreads or
commissions exceeding those which another firm might charge may be paid to
firms who were selected to execute transactions on behalf of the Fund and
Eaton Vance's other clients for providing brokerage and research services to
Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund
may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
Eaton Vance determines in good faith that such compensation was reasonable in
relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction
or on the basis of overall responsibilities which Eaton Vance and its
affiliates have for accounts over which they exercise investment discretion.
In making any such determination, Eaton Vance will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the
performance of accounts; effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement); and the
"Research Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry and of the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assist such advisers in the performance
of their investment responsibilities ("Research Services") from broker-
dealers which execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have arrangements.
Consistent with this practice, Eaton Vance receives Research Services from
many firms with which Eaton Vance places the Fund's portfolio transactions and
from third parties with which these broker-dealers have arrangements. These
Research Services include such matters as general economic and market reviews,
industry and company reviews, evaluations of securities and portfolio
strategies and transactions, and recommendations as to the purchase and sale
of securities and other portfolio transactions, financial, industry and trade
publications, news and information services, pricing and quotation equipment
and services, and research oriented computer hardware, software, data bases
and services. Any particular Research Service obtained through a broker-dealer
may be used by Eaton Vance in connection with client accounts other than those
accounts which pay commissions to such broker-dealer. Any such Research
Service may be broadly useful and of value to Eaton Vance in rendering
investment advisory services to all or a significant portion of its clients,
or may be relevant and useful for the management of only one client's account
or of a few clients' accounts, or may be useful for the management of merely a
segment of certain clients' accounts, regardless of whether any such account
or accounts paid commissions to the broker-dealer through which such Research
Service was obtained. The advisory fee paid by the Fund is not reduced because
Eaton Vance receives such Research Services. Eaton Vance evaluates the nature
and quality of the various Research Services obtained through broker-dealer
firms and attempts to allocate sufficient commissions to such firms to ensure
the continued receipt of Research Services which Eaton Vance believes are
useful or of value to it in rendering investment advisory services to its
clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek and execute portfolio security transactions at advantageous prices and at
reasonably competitive spreads or commission rates, Eaton Vance is authorized
to consider as a factor in the selection of any firm with whom portfolio
orders may be placed the fact that such firm has sold or is selling shares of
the Fund or of other investment companies sponsored by Eaton Vance. This
policy is not inconsistent with a rule of the National Association of
Securities Dealers, Inc., which rule provides that no firm which is a member
of the Association shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Municipal obligations considered as investments for the Fund may also be
appropriate for other investment accounts managed by Eaton Vance or its
affiliates. Eaton Vance will attempt to allocate equitably portfolio security
transactions among the Fund and the portfolios of its other investment
accounts purchasing municipal obligations whenever decisions are made to
purchase or sell securities by the Fund and one or more of such other accounts
simultaneously. In making such allocations, the main factors to be considered
are the respective investment objectives of the Fund and such other accounts,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment by the Fund and such accounts, the
size of investment commitments generally held by the Fund and such accounts
and the opinions of the persons responsible for recommending investments to
the Fund and such accounts. While this procedure could have a detrimental
effect on the price or amount of the securities available to the Fund from
time to time, it is the opinion of the Trustees that the benefits available
from the Eaton Vance organization outweigh any disadvantage that may arise
from exposure to simultaneous transactions.
During the fiscal year ended December 31, 1995 the purchases and sales of
portfolio investments were with the issuer or with major dealers in money
market instruments acting as principal. The cost of securities purchased from
underwriters includes a disclosed, fixed underwriting commission or
concession, and the prices for which securities are purchased from and sold to
dealers usually include an undisclosed dealer mark-up or mark-down. The Fund
paid no brokerage commissions during 1995, 1994 or 1993.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust
on July 10, 1995. On September 1, 1995, the Fund was reorganized as a series
of the Trust. Prior thereto, the Fund was a separate Massachusetts business
trust. Eaton Vance, pursuant to its agreement with the Trust, controls the use
of the words "Eaton Vance" in the Fund's name and may use the words "Eaton
Vance" or "EV" in other connections and for other purposes. Eaton Vance may
require the Fund to cease using such words in its name if Eaton Vance or any
other subsidiary or affiliate of Eaton Vance ceases to act as investment
adviser of the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will
call a shareholders' meeting for the election of Trustees. Except for the
foregoing circumstances and unless removed by action of the shareholders in
accordance with the Trust's by-laws, the Trustees shall continue to hold
office and may appoint successor Trustees.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of
shareholders to change the name of the Trust or any series or to make such
other changes as do not have a materially adverse effect on the financial
interests of shareholders or if they deem it necessary to conform it to
applicable federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class
thereof, or by an instrument or instruments in writing without a meeting,
consented to by the holders of two-thirds of the shares of the Trust or a
series or class thereof, provided, however, that, if such termination is
recommended by the Trustees, the vote of a majority of the outstanding voting
securities of the Trust or a series or class thereof entitled to vote thereon
shall be sufficient authorization; or (2) by means of an instrument in writing
signed by a majority of the Trustees, to be followed by a written notice to
shareholders stating that a majority of the Trustees has determined that the
continuation of the Trust or a series or a class thereof is not in the best
interest of the Trust such series, or class or of their respective
shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed
from office either by declaration in writing filed with the custodian of the
assets of the Trust or by votes cast in person or by proxy at a meeting called
for the purpose. The By-Laws further provide that under certain circumstances
the shareholders may call a meeting to remove a Trustee and that the Trust is
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.
The right to redeem 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 Fund to
dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts,
are the Fund's independent accountants, providing audit services, tax return
preparations, and assistance and consultation with respect to the preparation
of filings with the Commission.
FINANCIAL STATEMENTS
The financial statements of the Fund, which are included in the Fund's
Annual Report to Shareholders, are incorporated by reference into this SAI and
have been so incorporated in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, as experts in accounting and auditing. A copy
of the Fund's most recent Annual Report accompanies this SAI.
Registrant incorporates by reference the auditied financial information
for the Fund for the fiscal year ended December 31, 1995 as previously filed
electronically with the Commission (Accession No. 0000950156-96-000178).
<PAGE>
APPENDIX
Some of the terms used in this Statement of Additional Information are
described below.
Description of permitted Fund investments:
(1) Project Notes (PNs) are auctioned by the Department of Housing and Urban
Development on behalf of local government authorities to finance urban renewal
and low income housing projects. They are backed by the full faith and credit
of the U.S. Government.
(2) Other Tax-Exempt Notes are issued by or on behalf of states and their
political subdivisions, agencies and instrumentalities for a variety of short-
term needs. These include but are not limited to:
Tax and/or Revenue Anticipation Notes: (TANs, RANs, TRANs) are generally
issued to finance seasonal working capital needs in anticipation of
various taxes or revenues, and payable from these specific future
revenues. Additionally, most TANs, RANs and TRANs are general obligations
of the issuing entity.
Bond Anticipation Notes: (BANs) are issued to provide interim financing
until long-term financing can be arranged. In most cases, the long-term
bonds, then provide the funds to pay off the BANs. Additionally, most
BAN's may be general obligations of the issuing entity.
Construction Loan Notes: (CLNs) are issued primarily by housing agencies
to provide interim construction financing. After completion, most projects
receive permanent financing through the Federal National Mortgage
Association (FNMA) or the Government National Mortgage Association (GNMA);
others are financed by the issuance of long-term bonds. In either case,
the permanent financing provides the "take-out" for the holder of the
notes.
Federal Grant Anticipation Notes: (FANs, GANs) are issued to provide
interim financing, most often for water and sewer projects, in
anticipation of matching federal grants. Additionally, most FAN's and
GAN's may be general obligations of the issuing entity.
Temporary Notes: (TNs) are short-term general obligations issued for
various purposes.
(3) Tax-Exempt Bonds are issued by or on behalf of states and their political
subdivisions, agencies and instrumentalities for longer term capital needs and
generally have original maturities of longer than one year. They are usually
classified as either General Obligations or Revenue Bonds.
Revenue Bonds are secured by the revenues derived from a particular
facility or class of facilities or from some other specific revenue source or
in the case of industrial development bonds, by the earnings of the private
enterprise whose facility is being financed.
There are also a variety of hybrid and special types of municipal
obligations. Some tax-exempt bonds are additionally secured by insurance, bank
credit agreements, or escrow accounts.
While most tax-exempt bonds pay a fixed rate of interest, others are
variable rate instruments whose interest rates are adjusted at specified
intervals (weekly, monthly, semi-annually, etc.).
Most tax-exempt bonds have a fixed final maturity date; however, some have
"put" or "'demand" features that allow early redemption by the bondholder.
(4) Tax-Exempt Commercial Paper consists of unsecured obligations of state or
local governments or instrumentalities which are payable from available funds
of the issuer. These obligations are often backed by a bank letter of credit
or supported by a tender agreement permitting the holder to resell the
obligation to the issuer's agent. Maturities range from one day to 270 days.
(5) Taxable Commercial Paper consists of promissory notes of corporations,
usually with a bank line of credit, with maturities ranging from one day to
270 days.
(6) U.S. Government, Agency and Instrumentality Obligations are as follows:
U.S. Government obligations are issued by the Treasury and include bills,
certificates of indebtedness, notes, and bonds. Agencies and instrumentalities
of the U.S. Government are established under the authority of an act of
Congress and include, but are not limited to, the Government National Mortgage
Association, the Tennessee Valley Authority, the Bank for Cooperatives, the
Farmers Home Administration, Federal Home Loan Banks, Federal Intermediate
Credit Banks, Federal Land Banks, and the Federal National Mortgage
Association.
(7) Floating or Variable Rate Obligations normally provide that the holder can
demand payment of the obligation on short notice at par with accrued interest
and which are frequently secured by letters of credit or other credit support
arrangements provided by banks. To the extent that such letters of credit or
other arrangements constitute an unconditional guarantee of the issuer's
obligations, the banks may be treated as the issuer of a security for the
purpose of complying with the diversification requirements set forth in
Section 5(b) of the Investment Company Act and Rule 5b-2 thereunder.
(8) Repurchase Agreements involve purchase of debt securities of the U.S.
Treasury, or a Federal agency, Federal instrumentality or Federally created
corporation. At the same time the Fund purchases the security it resells it to
the vendor (a member bank of the Federal Reserve System or recognized
securities dealer), and is obligated to redeliver the security to the vendor
on an agreed-upon date in the future. The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford an opportunity for
the Fund to earn, at no market risk, a return on cash which is only
temporarily available. The Fund's risk is in the ability of the vendor to pay
an agreed-upon sum upon the delivery date, and the Fund believes the risk is
limited to the difference between the market value of the security and the
repurchase price provided for in the repurchase agreement. However, in the
event of bankruptcy or insolvency proceedings affecting the vendor of the
security which is subject to the repurchase agreement, the Fund's ability to
dispose of such underlying security may be impaired.
The Investment Company Act of 1940 prohibits registered investment
companies from acquiring securities issued by broker-dealers. A transaction
whereby the Fund enters into a repurchase agreement with a broker-dealer might
be construed as a contravention of this prohibition. In the event the law is
so interpreted, the Fund will cease such transactions.
(9) Certificates of Deposit are certificates issued against funds deposited in
a commercial bank, are for a definite period of time, earn a specified rate of
return, and are normally negotiable.
(10) Bankers' Acceptances are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
DESCRIPTION OF AVAILABLE QUALITY RATINGS
(1) MOODY'S INVESTORS SERVICE, INC.
RATINGS OF TAX-EXEMPT NOTES
RATINGS: Moody's rating for state and municipal short term obligations will
be designated Moody's Investment Grade or (MIG). Such rating recognizes the
differences between short term credit risk and long term risk. Factors
affecting the liquidity of the borrower and short term cyclical elements are
critical in short term ratings, while other factors of major importance in
bond risk, long term secular trends for example, may be less important over
the short run.
A short term rating may also be assigned on an issue having a demand
feature, variable rate demand obligation (VRDO). Such ratings will be
designated as VMIG SG or if the demand feature is not rated, NR. A short term
rating on issues with demand features are differentiated by the use of the
VMIG symbol to reflect such characteristics as payment upon periodic demand
rather than fixed maturity dates and payment relying on external liquidity.
Additionally, investors should be alert to the fact that the source of payment
may be limited to the external liquidity with no or limited legal recourse to
the issuer in the event the demand is not met.
RATINGS OF COMMERCIAL PAPER
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 (P-1) have a
superior ability for repayment of senior short-term debt obligations.
RATINGS OF TAX-EXEMPT BONDS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks somewhat larger than in Aaa securities.
(2) STANDARD & POOR'S RATINGS GROUP
RATINGS OF TAX-EXEMPT BONDS
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
NOTE RATING SYMBOLS ARE AS FOLLOWS:
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus sign (+) designation.
RATINGS OF COMMERCIAL PAPER
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A: Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
(3) FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category,
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of
a project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
TAX-EXEMPT INVESTMENT NOTE RATINGS
The ratings on tax-exempt notes, with maturities generally up to three years,
reflect Fitch's current appraisal of the degree of assurance of timely
payment, whatever the source.
FIN-1: Notes regarded as having the strongest degree of assurance for timely
payment.
PLUS (+): Plus signs may be used in the "FIN-1" category to indicate relative
standing. The note ratings will usually correspond with bond ratings, although
certain security enhancements or market access may mean that notes will not
track bonds.
DEMAND BOND OR NOTE RATINGS
Certain demand securities empower the holder at his option to require the
issuer, usually through a remarketing agent, to repurchase the security upon
notice at par with accrued interest. This is also referred to as a put option.
The ratings of the demand provision may be changed or withdrawn at any time
if, in Fitch's judgment, changing circumstances warrant such action. Fitch
demand provision ratings carry the same symbols and related definitions as its
short-term ratings.
* * * * * * * *
Investors should note that the assignment of a rating to a bond by a
rating service may not reflect the effect of recent developments on the
issuer's ability to make interest and principal payments
<PAGE>
[LOGO]
EATON VANCE
TAX FREE
RESERVES
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
EATON VANCE
TAX FREE RESERVES
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109
TRSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A ARE THE FINANCIAL HIGHLIGHTS OF THE FOLLOWING FUNDS
FOR THE PERIOD(S) INDICATED:
EV Classic Government Obligations Fund (each of the two years ended
December 31, 1995 and for the period from the start of business,
November 1, 1993, to December 31, 1993).
EV Marathon Government Obligations Fund (each of the two years ended
December 31, 1995 and for the period from the start of business,
November 1, 1993, to December 31, 1993).
EV Traditional Government Obligations Fund (each of the ten years
ended December 31, 1995).
Eaton Vance Short-Term Treasury Fund (each of the four years ended
December 31, 1995 and for the period from the start of business,
January 11, 1991, to December 31, 1991).
Eaton Vance Cash Management Fund (each of the ten years ended December
31, 1995).
Eaton Vance Liquid Assets Fund (each of the three years ended December
31, 1995, for each of the five years ended March 31, 1993 and for
the period from the start of business, May 28, 1987, to March 31,
1988).
Eaton Vance Money Market Fund (from the start of business, April 5,
1995, to December 31, 1995).
Eaton Vance Tax-Free Reserves (each of the ten years ended December
31, 1995).
INCORPORATED BY REFERENCE INTO PART B ARE THE FINANCIAL STATEMENTS
CONTAINED IN THE ANNUAL REPORTS OF THE FOLLOWING FUNDS, EACH DATED
DECEMBER 31, 1995 (WHICH WERE PREVIOUSLY FILED ELECTRONICALLY PURSUANT
TO SECTION 30 (B)(2) OF THE INVESTMENT COMPANY ACT OF 1940):
EV Classic Government Obligations Fund
(Accession No. 0000950156-96-000289)
EV Marathon Government Obligations Fund
(Accession No. 0000950156-96-000290)
EV Traditional Government Obligations Fund
(Accession No. 0000950156-96-000291)
Eaton Vance Short-Term Treasury Fund
(Accession No. 0000950156-96-000163)
Eaton Vance Tax Free Reserves (Accession No. 0000950156-96-000178)
Eaton Vance Cash Management Fund (Accession No. 0000928816-96-000034)
Eaton Vance Liquid Assets Fund (Accession No. 0000928816-96-000034)
Eaton Vance Money Market Fund (Accession No. 0000928816-96-000034)
THE FINANCIAL STATEMENTS CONTAINED IN EACH FUND'S ANNUAL REPORT ARE AS
FOLLOWS:
Portfolio of Investments (for Eaton Vance Short-Term Treasury Fund and
Eaton Vance Tax Free Reserves only)
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS OF THE GOVERNMENT OBLIGATIONS PORTFOLIO AND THE CASH
MANAGEMENT PORTFOLIO WHICH ARE CONTAINED IN THE ANNUAL REPORTS DATED
DECEMBER 31, 1995 OF THE CLASSIC, MARATHON AND TRADITIONAL GOVERNMENT
OBLIGATIONS FUNDS AND THE MONEY MARKET FUNDS (BEING CASH MANAGEMENT
FUND, MONEY MARKET FUND AND LIQUID ASSETS FUND), RESPECTIVELY:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Report of Independent Accountants
(B) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated August 17,
1993 filed as Exhibit (1)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Amendment to Declaration of Trust dated July 10, 1995 filed
as Exhibit (1)(c) 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)(d) to
Post-Effective Amendment No. 26 and incorporated herein by
reference.
(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 herewith as Exhibit (6)(a)(13).
(14) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Traditional Tax- Managed Growth Fund dated March 20,
1996 filed herewith as Exhibit (6)(a)(14).
(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.
(10) Opinion of Counsel filed herewith.
(11)(a) Consent of Independent Accountants for EV Classic
Government Obligations Fund filed herewith.
(b) Consent of Independent Accountants for EV Marathon
Government Obligations Fund filed herewith.
(c) Consent of Independent Accountants for EV Traditional
Government Obligations Fund filed herewith.
(d) Consent of Independent Accountants for Eaton Vance
Short-Term Treasury Fund filed herewith.
(e) Consent of Independent Accountants for Eaton Vance Tax Free
Reserves filed herewith.
(f) Consent of Independent Accountants for Eaton Vance Cash
Management Fund, Eaton Vance Liquid Assets Fund and Eaton
Vance Money Market Fund filed herewith.
(12) 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 #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 #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and
Investment Instruction Form filed as Exhibit 14(3) to
Post-Effective Amendment #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype
Plan and Trust with Adoption Agreement filed as Exhibit
14(b) to Post-Effective Amendment #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(15)(a) Service Plan for Eaton Vance Government Obligations Fund
(now EV Traditional Government Obligations Fund) pursuant to
Rule 12b-1 under the Investment Company Act of 1940 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 herewith as Exhibit
(15)(k).
(l) Service Plan for EV Traditional Tax-Managed Growth Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940, dated March 20, 1996 filed herewith as Exhibit
(15)(l).
(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.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of March 31, 1996
Eaton Vance Short-Term Treasury Fund 70
EV Classic Government Obligations Fund 1,008
EV Marathon Government Obligations Fund 3,523
EV Traditional Government Obligations Fund 10,518
EV Classic High Income Fund 220
EV Marathon High Income Fund 15,106
EV Classic Strategic Income Fund 7
EV Marathon Strategic Income Fund 6,112
EV Marathon Tax-Managed Growth Fund 2
EV Traditional Tax-Managed Growth Fund 2
Eaton Vance Cash Management Fund 2,290
Eaton Vance Liquid Assets Fund 759
Eaton Vance Money Market Fund 712
Eaton Vance Tax Free Reserves 192
ITEM 27. INDEMNIFICATION
The Registrant's By-Laws filed as Exhibit (2)(a) to Post-Effective
Amendment No. 23 contain provisions limiting the liability, and providing for
indemnification, of the Trustees and officers under certain circumstances.
Registrant's Trustees and officers are insured under a standard mutual fund
errors and omissions insurance policy covering loss incurred by reason of
negligent errors and omissions committed in their capacities as such.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the 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:
<TABLE>
<S> <C>
EV Classic California Municipals Fund EV Classic Florida Municipals Fund
EV Classic Connecticut Municipals Fund EV Classic Government Obligations Fund
EV Classic Florida Insured Municipals Fund EV Classic Greater China Growth Fund
EV Classic Florida Limited Maturity EV Classic Growth Fund
Municipals Fund EV Classic High Income Fund
EV Classic Information Age Fund EV Marathon Michigan Municipals Fund
EV Classic Investors Fund EV Marathon Minnesota Municipals Fund
EV Classic Massachusetts Limited Maturity EV Marathon Mississippi Municipals Fund
Municipals Fund EV Marathon Missouri Municipals Fund
EV Classic National Limited Maturity EV Marathon National Limited Maturity
Municipals Fund Municipals Fund
EV Classic National Municipals Fund EV Marathon National Municipals Fund
EV Classic New Jersey Municipals Fund EV Marathon New Jersey Limited Maturity
EV Classic New York Limited Maturity Municipals Fund
Municipals Fund EV Marathon New Jersey Municipals Fund
EV Classic New York Municipals Fund EV Marathon New York Limited Maturity
EV Classic Pennsylvania Limited Maturity Municipals Fund
Municipals Fund EV Marathon New York Municipals Fund
EV Classic Pennsylvania Municipals Fund EV Marathon North Carolina Municipals Fund
EV Classic Rhode Island Municipals Fund EV Marathon Ohio Limited Maturity
EV Classic Senior Floating-Rate Fund Municipals Fund
EV Classic Strategic Income Fund EV Marathon Ohio Municipals Fund
EV Classic Special Equities Fund EV Marathon Oregon Municipals Fund
EV Classic Stock Fund EV Marathon Pennsylvania Limited Maturity
EV Classic Total Return Fund Municipals Fund
EV Marathon Alabama Municipals Fund EV Marathon Pennsylvania Municipals Fund
EV Marathon Arizona Municipals Fund EV Marathon Rhode Island Municipals Fund
EV Marathon Arkansas Municipals Fund EV Marathon Strategic Income Fund
EV Marathon Asian Small Companies Fund EV Marathon South Carolina Municipals Fund
EV Marathon California Limited Maturity EV Marathon Special Equities Fund
Municipals Fund EV Marathon Stock Fund
EV Marathon California Municipals Fund EV Marathon Tax-Managed Growth Fund
EV Marathon Colorado Municipals Fund EV Marathon Tennessee Municipals Fund
EV Marathon Connecticut Limited Maturity EV Marathon Texas Municipals Fund
Municipals Fund EV Marathon Total Return Fund
EV Marathon Connecticut Municipals Fund EV Marathon Virginia Municipals Fund
EV Marathon Emerging Markets Fund EV Marathon West Virginia Municipals Fund
EV Marathon Florida Insured Municipals Fund EV Traditional Alabama Municipals Fund
EV Marathon Florida Limited Maturity EV Traditional Arizona Municipals Fund
Municipals Fund EV Traditional Arkansas Municipals Fund
EV Marathon Florida Municipals Fund EV Traditional Asian Small Companies Fund
EV Marathon Georgia Municipals Fund EV Traditional California Limited Maturity
EV Marathon Gold & Natural Resources Fund Municipals Fund
EV Marathon Government Obligations Fund EV Traditional California Municipals Fund
EV Marathon Greater China Growth Fund EV Traditional Colorado Municipals Fund
EV Marathon Greater India Fund EV Traditional Connecticut Limited Maturity
EV Marathon Growth Fund Municipals Fund
EV Marathon Hawaii Municipals Fund EV Traditional Connecticut Municipals Fund
EV Marathon High Income Fund EV Traditional Emerging Markets Fund
EV Marathon High Yield Municipals Fund EV Traditional Florida Insured Municipals Fund
EV Marathon Information Age Fund EV Traditional Florida Limited Maturity
EV Marathon Investors Fund Municipals Fund
EV Marathon Kansas Municipals Fund EV Traditional Florida Municipals Fund
EV Marathon Kentucky Municipals Fund EV Traditional Georgia Municipals Fund
EV Marathon Louisiana Municipals Fund EV Traditional Government Obligations Fund
EV Marathon Maryland Municipals Fund EV Traditional Greater China Growth Fund
EV Marathon Massachusetts Limited Maturity EV Traditional Greater India Fund
Municipals Fund EV Traditional Growth Fund
EV Marathon Massachusetts Municipals Fund EV Traditional Hawaii Municipals Fund
EV Marathon Michigan Limited Maturity EV Traditional High Yield Municipals Fund
Municipals Fund Eaton Vance Income Fund of Boston
EV Traditional Information Age Fund EV Traditional North Carolina Municipals Fund
EV Traditional Investors Fund EV Traditional Ohio Limited Maturity
EV Traditional Kansas Municipals Fund Municipals Fund
EV Traditional Kentucky Municipals Fund EV Traditional Ohio Municipals Fund
EV Traditional Louisiana Municipals Fund EV Traditional Oregon Municipals Fund
EV Traditional Maryland Municipals Fund EV Traditional Pennsylvania Municipals Fund
EV Traditional Massachusetts Municipals Fund EV Traditional South Carolina Municipals Fund
EV Traditional Michigan Limited Maturity EV Traditional Special Equities Fund
Municipals Fund EV Traditional Stock Fund
EV Traditional Michigan Municipals Fund EV Traditional Tax-Managed Growth Fund
EV Traditional Minnesota Municipals Fund EV Traditional Tennessee Municipals Fund
EV Traditional Mississippi Municipals Fund EV Traditional Texas Municipals Fund
EV Traditional Missouri Municipals Fund EV Traditional Total Return Fund
Eaton Vance Municipal Bond Fund L.P. EV Traditional Virginia Municipals Fund
EV Traditional National Limited Maturity EV Traditional West Virginia Municipals Fund
Municipals Fund Eaton Vance Cash Management Fund
EV Traditional National Municipals Fund Eaton Vance Liquid Assets Trust
EV Traditional New Jersey Limited Maturity Eaton Vance Money Market Fund
Municipals Fund Eaton Vance Prime Rate Reserves
EV Traditional New Jersey Municipals Fund Eaton Vance Short-Term Treasury Fund
EV Traditional New York Limited Maturity Eaton Vance Tax Free Reserves
Municipals Fund Massachusetts Municipal Bond Portfolio
EV Traditional New York Municipals Fund
</TABLE>
(B)
<TABLE>
<CAPTION>
(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
Jeffrey Chernoff* 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
Brian Jacobs* Senior Vice President None
Thomas J. Marcello* 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
James L. O'Connor* Vice President Treasurer
Thomas Otis* Secretary and Clerk Secretary
George D. Owen* Vice President None
F. Anthony Robinson* 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, 53 State
Street, Boston, MA 02104, with the exception of certain corporate documents and
portfolio trading documents which are in the possession and custody of Eaton
Vance Management, 24 Federal Street, Boston, MA 02110. 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, King Street 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 file a Post-Effective Amendment on behalf of
EV Marathon Tax-Managed Growth Fund and EV Traditional Tax-Managed Growth Fund,
using financial statements which need not be certified, within four to six
months from the effective date of Post-Effective Amendment No. 26.
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 certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and 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 24th day of April, 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 April 24, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 24, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President, Trustee April 24, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee April 24, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 24, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 24, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 24, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 24, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Cash Management 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
24th day of April, 1996.
CASH MANAGEMENT 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 April 24, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 24, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ H. DAY BRIGHAM, JR. Trustee April 24, 1996
- ------------------------------------
H. DAY BRIGHAM, JR.
/s/ JAMES B. HAWKES Trustee April 24, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee April 24, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee April 24, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 24, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 24, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 24, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Government Obligations 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
24th day of April, 1996.
GOVERNMENT OBLIGATIONS 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 April 24, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer April 24, 1996
- ------------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee April 24, 1996
- ------------------------------------
DONALD D. DWIGHT
/s/ JAMES B. HAWKES Trustee April 24, 1996
- ------------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee April 24, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee April 24, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee April 24, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee April 24, 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> <C>
(6)(a)(13) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Marathon Tax-
Managed Growth Fund dated March 20, 1996.
(6)(a)(14) Distribution Agreement with Eaton Vance Distributors, Inc. for EV Traditional Tax-
Managed Growth Fund dated March 20, 1996.
(10) Opinion of Counsel.
(11)(a) Consent of Independent Accountants for EV Classic Government Obligations Fund.
(11)(b) Consent of Independent Accountants for EV Marathon Government Obligations Fund.
(11)(c) Consent of Independent Accountants for EV Traditional Government Obligations Fund.
(11)(d) Consent of Independent Accountants for Eaton Vance Short-Term Treasury Fund.
(11)(e) Consent of Independent Accountants for Eaton Vance Tax Free Reserves.
(11)(f) Consent of Independent Accountants for Eaton Vance Cash Management Fund, Eaton
Vance Liquid Assets Fund and Eaton Vance Money Market Fund.
(15)(k) Distribution Plan for EV Marathon Tax-Managed Growth Fund dated March 20, 1996.
(15)(l) Service Plan for EV Traditional Tax-Managed Growth Fund dated March 20, 1996.
(16) Schedules for Computation of Performance Quotations.
</TABLE>
EXHIBIT 99.(6)(A)(13)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF EV MARATHON TAX-MANAGED GROWTH FUND
AGREEMENT effective as of March 20, 1996 between EATON VANCE MUTUAL
FUNDS TRUST, a Massachusetts business trust having its principal place of
business in Boston in the Commonwealth of Massachusetts, hereinafter called the
"Trust", on behalf of EV Marathon Tax-Managed Growth Fund (the "Fund"), and
EATON VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its principal
place of business in said Boston, hereinafter sometimes called the "Principal
Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
equal to the price paid by investors upon purchasing such shares. The Principal
Underwriter shall notify Investors Bank & Trust Company, Custodian of the Fund,
at the end of each business day, or as soon thereafter as the orders placed with
it have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be equal to the net
asset value at which the Principal Underwriter is to purchase the shares.
The net asset value of shares of the Fund shall be determined by the
Trust or Investors Bank & Trust Company, as the agent of the Fund, as of the
close of regular trading on the New York Stock Exchange on each business day on
which said Exchange is open, or as of such other time on each such business day
as may be determined by the Trustees of the Trust, in accordance with the
methodology and procedures for calculating such net asset value authorized by
the Trustees. The Trust may also cause the net asset value to be determined in
substantially the same manner or estimated in such manner and as of such other
time or times as may from time to time be agreed upon by the Trust and Principal
Underwriter. The Trust will notify the Principal Underwriter each time the net
asset value of the Fund's shares is determined and when such value is so
determined it shall be applicable to transactions as set forth in the current
Prospectus relating to the Fund's shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust agrees that it will, from time to time, but subject to the
necessary approval of the Fund's shareholders, take such steps as may be
necessary to register the Fund's shares under the federal Securities Act of 1933
(as amended from time to time) to the end that there will be available for sale
such number of shares as the Principal Underwriter may reasonably be expected to
sell. The Trust agrees to indemnify and hold harmless the Principal Underwriter
and each person, if any, who controls the Principal Underwriter within the
meaning of Section 15 of the Securities Act of 1933 against any loss, liability,
claim, damages or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, claim, damages or expense and reasonable
counsel fees incurred in connection therewith), arising by reason of any person
acquiring any shares of the Fund, which may be based upon the Securities Act of
1933 or on any other statute or at common law, on the ground that the
Registration Statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished in writing to the
Trust in connection therewith by or on behalf of the Principal Underwriter;
provided, however, that in no case (i) is the indemnity of the Trust in favor of
the Principal Underwriter and any such controlling person to be deemed to
protect such Principal Underwriter or any such controlling person against any
liability to the Trust or the Fund or its security holders to which such
Principal Underwriter or any such controlling person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust or the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Principal Underwriter or any such controlling
person unless the Principal Underwriter or any such controlling person, as the
case may be, shall have notified the Trust in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the Principal Underwriter or such
controlling person (or after such Principal Underwriter or such controlling
person shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve it from any
liability which the Fund may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Trust shall be entitled to participate, at the expense of the
Fund, in the defense, or, if the Trust so elects, to assume the defense of any
suit brought to enforce any such liability, but if the Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Principal Underwriter or controlling person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any such suit and retains such counsel, the Principal Underwriter or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Trust does not elect to assume the defense of any such suit, the Fund shall
reimburse the Principal Underwriter or controlling person or persons, defendant
or defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them. The Trust agrees promptly to notify the Principal Underwriter
of the commencement of any litigation or proceedings against it or any of its
officers or Trustees in connection with the issuance or sale of any of the
Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the Securities Act of 1933, against any loss, liability,
damages, claim or expense (including the reasonable cost of investigating or
defending any alleged loss, liability, damages, claim or expense and reasonable
counsel fees incurred in connection therewith), arising by reason of any person
acquiring any shares of the Fund, which may be based upon the Securities Act of
1933 or any other statute or at common law, on account of any wrongful act of
the Principal Underwriter or any of its employees (including any failure to
conform with any requirement of any state or federal law relating to the sale of
such shares) or on the ground that the registration statement or Prospectus, as
from time to time amended and supplemented, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, insofar as any
such statement or omission was made in reliance upon, and in conformity with
information furnished in writing to the Fund in connection therewith by or on
behalf of the Principal Underwriter, provided, however, that in no case (i) is
the indemnity of the Principal Underwriter in favor of any person indemnified to
be deemed to protect the Fund or any such person against any liability to which
the Fund or any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its or his
duties or by reason of its or his reckless disregard of its obligations and
duties under this Agreement, or (ii) is the Principal Underwriter to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Fund or any person indemnified unless the Trust or such
person, as the case may be, shall have notified the Principal Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon the
Trust, the Fund or upon such person (or after the Trust or such person shall
have received notice of such service on any designated agent), but failure to
notify the Principal Underwriter of any such claim shall not relieve it from any
liability which it may have to the Fund or any person against whom such action
is brought otherwise than on account of its indemnity agreement contained in
this paragraph. The Principal Underwriter shall be entitled to participate, at
its own expense, in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Principal Underwriter
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Trust, or to its officers or Trustees, or to any
controlling person or persons, defendant or defendants in the suit. In the event
that the Principal Underwriter elects to assume the defense of any such suit and
retains such counsel, the Fund or such officers or Trustees or controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them or the Trust, but, in case
the Principal Underwriter does not elect to assume the defense of any such suit,
it shall reimburse the Fund, any such officers and Trustees or controlling
person or persons, defendant or defendants in such suit, for the reasonable fees
and expenses of any counsel retained by them or the Trust. The Principal
Underwriter agrees promptly to notify the Trust of the commencement of any
litigation or proceedings against it in connection with the issue and sale of
any of the Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (as said Registration Statement and
Prospectus may be amended or supplemented from time to time), covering the
shares of the Fund. Neither the Principal Underwriter nor any financial service
firm nor any other person is authorized to act as agent for the Trust or the
Fund in connection with the offering or sale of shares of the Fund to the public
or otherwise. All such sales made by the Principal Underwriter shall be made by
it as principal, for its own account. The Principal Underwriter may, however,
act as agent in connection with the repurchase of shares as provided in
paragraph 6 below, or in connection with "exchanges" between investment
companies for which the Principal Underwriter acts as Principal Underwriter or
for which an affiliate of the Principal Underwriter acts as investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the Securities Act
of 1933, as amended, covering its shares and all amendments and supplements
thereto, and preparing and mailing periodic reports to shareholders (including
the expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) The cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder; and
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder.
(b) The Principal Underwriter agrees that, after the Prospectus and
periodic reports have been set up in type, it will bear the expense of printing
and distributing any copies thereof which are to be used in connection with the
offering of shares of the Fund to financial service firms or investors. The
Principal Underwriter further agrees that it will bear the expenses of
preparing, printing and distributing any other literature used by the Principal
Underwriter or furnished by it for use by financial service firms in connection
with the offering of the shares of the Fund for sale to the public and any
expenses of advertising in connection with such offering. The Fund agrees to pay
the expenses of registration and maintaining registration of its shares for sale
under federal and state securities laws, and, if necessary or advisable in
connection therewith, of qualifying the Trust or the Fund as a dealer or broker,
in such states as shall be selected by the Principal Underwriter and the fees
payable to each such state for continuing the qualification therein until the
Principal Underwriter notifies the Trust that it does not wish such
qualification continued.
(c) In addition, the Trust agrees, in accordance with the Fund's
Distribution Plan (the "Plan"), adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") with respect to
shares, to make certain payments as follows. The Principal Underwriter shall be
entitled to be paid by the Fund a sales commission equal to an amount not
exceeding 5% of the price received by the Fund for each sale of shares
(excluding reinvestment of dividends and distributions), such payment to be made
in the manner set forth in this paragraph 5. The Principal Underwriter shall
also be entitled to be paid by the Fund a separate distribution fee (calculated
in accordance with paragraph 5(d)), such payment to be made in the manner set
forth and subject to the terms of this paragraph 5.
(d) The sales commissions and distribution fees referred to in
paragraph 5(c) shall be accrued and paid by the Fund in the following manner.
The Fund shall accrue daily an amount calculated at the rate of .75% per annum
of the daily net assets of the Fund, which net assets shall be computed as
described in paragraph 2. The daily amounts so accrued throughout the month
shall be paid to the Principal Underwriter on the last day of each month. The
amount of such daily accrual, as so calculated, shall first be applied and
charged to all unpaid sales commissions, and the balance, if any, shall then be
applied and charged to all unpaid distribution fees. No amount shall be accrued
with respect to any day on which there exist no outstanding uncovered
distribution charges of the Principal Underwriter. The amount of such uncovered
distribution charges shall be calculated daily. For purposes of this
calculation, distribution charges of the Principal Underwriter shall include (a)
the aggregate of all sales commissions which the Principal Underwriter has been
paid pursuant to this paragraph (d) plus all sales commissions which it is
entitled to be paid pursuant to paragraph 5(c) through and including the day
next preceding the date of calculation, and (b) an amount equal to the aggregate
of all distribution fees referred to below which the Principal Underwriter has
been paid pursuant to this paragraph (d) plus all such fees which it is entitled
to be paid pursuant to paragraph 5(c) through and including the day next
preceding the date of calculation. From this sum (distribution charges) there
shall be subtracted (i) the aggregate amount paid or payable to the Principal
Underwriter pursuant to this paragraph (d) through and including the day next
preceding the date of calculation and (ii) the aggregate amount of all
contingent deferred sales charges paid or payable to the Principal Underwriter
through and including the day next preceding the date of calculation. If the
result of such subtraction is a positive amount, a distribution fee [computed at
the rate of 1% per annum above the prime rate (being the base rate on corporate
loans posted by at least 75% of the nation's 30 largest banks) then being
reported in the Eastern Edition of The Wall Street Journal or if such prime rate
is not so reported such other rate as may be designated from time to time by
vote or other action of a majority of (i) those Trustees of the Trust who are
not "interested persons" of the Trust (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of the Plan or any
agreements related to it and (ii) all of the Trustees then in office] shall be
computed on such amount and added to such amount, with the resulting sum
constituting the amount of outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day for all purposes of this
Agreement. If the result of such subtraction is a negative amount, there shall
exist no outstanding uncovered distribution charges of the Principal Underwriter
with respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this paragraph (d) during any fiscal year of the Fund shall not
exceed .75% of the average daily net assets of the Fund for such year.
(e) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. shall be imposed.
(f) The persons authorized to direct the disposition of monies paid or
payable on behalf of the Fund pursuant to the Plan or this Agreement shall be
the President or any Vice President of the Trust. Such persons shall provide to
the Trust's Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.
(g) In addition to the payments to the Principal Underwriter provided
for in paragraph 5(d), the Fund may make payments of service fees to the
Principal Underwriter, Authorized Firms and other persons. The aggregate of such
payments during any fiscal year of the Fund shall not exceed .25% of the Fund's
average daily net assets for such year.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing Investors Bank &
Trust Company, Custodian of the Fund, at the end of each business day, or as
soon thereafter as the repurchases in each pricing period have been compiled, of
the number of shares repurchased for the account of the Fund since the last
previous report, together with the prices at which such repurchases were made,
and upon the request of any officer or Trustee of the Trust shall furnish
similar information with respect to all repurchases made up to the time of the
request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct Investors Bank & Trust
Company, Custodian, to pay, for the account of the Fund, the purchase price of
any shares so repurchased against delivery of the certificates in proper form
for transfer to the Fund or for cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect
of any repurchase of shares under the foregoing authorization and appointment as
agent, except for any sales commission, distribution fee or contingent deferred
sales charges payable under paragraph 5.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Securities and Exchange Commission or other governmental
authority or to obtain any advantage under Massachusetts or federal tax laws,
and shall notify the Principal Underwriter of the form of amendment which it
deems necessary or advisable and the reasons therefor, and, if the Principal
Underwriter declines to assent to such amendment, the Trust may terminate this
Agreement forthwith by written notice to the Principal Underwriter. If, at any
time during the existence of its agreement upon request by the Principal
Underwriter, the Trust fails (after a reasonable time) to make any changes in
its Declaration of Trust, as amended, or in its methods of doing business which
are necessary in order to comply with any requirement of federal law or
regulations of the Securities and Exchange Commission or of a national
securities association of which the Principal Underwriter is or may be a member,
relating to the sale of the shares of the Fund, the Principal Underwriter may
terminate this Agreement forthwith by written notice to the Trust.
8. The term "net asset value" as used in this Agreement with reference
to the shares of the Fund shall have the same meaning as used in the Declaration
of Trust, as amended, and calculated in the manner referred to in paragraph 2
above.
9. (a) The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, and during the life of
this Agreement will continue to be so resident in the United States, so
organized and a member in good standing of said Association. The Principal
Underwriter will comply with the Trust's Declaration of Trust and By-Laws, and
the 1940 Act and the rules promulgated thereunder, insofar as they are
applicable to the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States
and preserve therein for such period or periods as the Securities and Exchange
Commission shall prescribe by rules and regulations applicable to it as
Principal Underwriter of an open-end investment company registered under the
1940 Act such accounts, books and other documents as are necessary or
appropriate to record its transactions with the Fund. Such accounts, books and
other documents shall be subject at any time and from time to time to such
reasonable periodic, special and other examinations by the Securities and
Exchange Commission or any member or representative thereof as the Securities
and Exchange Commission may prescribe. The Principal Underwriter shall furnish
to the Securities and Exchange Commission within such reasonable time as the
Securities and Exchange Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Securities
and Exchange Commission may by order require.
10. This Agreement shall continue in force indefinitely until
terminated as in this Agreement above provided, except that:
(a) this Agreement shall remain in effect through and including
April 28, 1996 and shall continue in full force and effect indefinitely
thereafter, but only so long as such continuance after April 28, 1996 is
specifically approved at least annually (i) by the vote of a majority of the
Trustees of the Trust who are not "interested persons" (as defined in Section
2(a)(19) of the 1940 Act) of the Trust and who have no direct or indirect
interest in the operation of the Plan or this Agreement (the "Rule 12b-1
Trustees") cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act)
of the Fund;
(b) this Agreement may be terminated at any time by vote of a
majority of the Rule 12b-1 Trustees or by vote of a majority of the outstanding
voting securities of the Fund on not more than sixty days' notice to the
Principal Underwriter. The Principal Underwriter shall be entitled to receive
all contingent deferred sales charges paid or payable with respect to any day
subsequent to the termination of this Agreement;
(c) the Principal Underwriter shall have the right to terminate this
Agreement on six (6) months' written notice thereof given in writing to the
Fund; and
(d) the Trust shall have the right to terminate this Agreement
forthwith in the event that it shall have been established by a court of
competent jurisdiction that the Principal Underwriter or any director or officer
of the Principal Underwriter has taken any action which results in a breach of
the covenants set out in paragraph 9 hereof.
11. In the event of the assignment (as defined in Section 2(a)(4) of
the 1940 Act) of this Agreement by the Principal Underwriter, this Agreement
shall automatically terminate.
12. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
13. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or investment
companies, and (b) engage in other business and activities from time to time.
14. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
15. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse to the Trust or the Fund for payment
of claims or obligations as between the Trust or the Fund and the Principal
Underwriter arising out of this Agreement and shall not seek satisfaction from
the shareholders or any shareholder of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on
the 20th day of March, 1996.
EATON VANCE MUTUAL FUNDS TRUST
(on behalf of EV MARATHON TAX-
MANAGED GROWTH FUND)
By /s/ M. Dozier Gardner
--------------------------
President
EATON VANCE DISTRIBUTORS, INC.
By /s/ Wharton P. Whitaker
--------------------------
President
EXHIBIT 99.(6)(A)(14)
EATON VANCE MUTUAL FUNDS TRUST
ON BEHALF OF EV TRADITIONAL TAX-MANAGED GROWTH FUND
DISTRIBUTION AGREEMENT
AGREEMENT effective as of March 20, 1996 between EATON VANCE MUTUAL
FUNDS TRUST, hereinafter called the "Trust", a Massachusetts business trust
having its principal place of business in Boston in the Commonwealth of
Massachusetts, on behalf of EV Traditional Tax-Managed Growth Fund (the "Fund")
and EATON VANCE DISTRIBUTORS, INC., a Massachusetts corporation having its
principal place of business in said Boston, hereinafter sometimes called the
"Principal Underwriter".
IN CONSIDERATION of the mutual promises and undertakings herein
contained, the parties hereto agree:
1. The Trust grants to the Principal Underwriter the right to purchase
shares of the Fund upon the terms hereinbelow set forth during the term of this
Agreement. While this Agreement is in force, the Principal Underwriter agrees to
use its best efforts to find purchasers for shares of the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
shares needed, but not more than the shares needed (except for clerical errors
and errors of transmission) to fill unconditional orders for shares of the Fund
placed with the Principal Underwriter by financial service firms or investors as
set forth in the current Prospectus relating to shares of the Fund. The price
which the Principal Underwriter shall pay for the shares so purchased shall be
the net asset value used in determining the public offering price on which such
orders were based. The Principal Underwriter shall notify Investors Bank & Trust
Company, Custodian of the Fund ("IBT"), and The Shareholder Services Group,
Inc., Transfer Agent of the Fund, or a successor transfer agent, ("TSSG"), at
the end of each business day, or as soon thereafter as the orders placed with it
have been compiled, of the number of shares and the prices thereof which the
Principal Underwriter is to purchase as principal for resale. The Principal
Underwriter shall take down and pay for shares ordered from the Fund on or
before the eleventh business day (excluding Saturdays) after the shares have
been so ordered.
The right granted to the Principal Underwriter to buy shares from the
Fund shall be exclusive, except that said exclusive right shall not apply to
shares issued in connection with the merger or consolidation of any other
investment company or personal holding company with the Fund or the acquisition
by purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company, by the Fund; nor shall it apply to
shares, if any, issued by the Fund in distribution of income or realized capital
gains of the Fund payable in shares or in cash at the option of the shareholder.
2. The shares may be resold by the Principal Underwriter to or through
financial service firms having agreements with the Principal Underwriter, and to
investors, upon the following terms and conditions.
The public offering price, i.e., the price per share at which the
Principal Underwriter or financial service firm purchasing shares from the
Principal Underwriter may sell shares to the public, shall be the public
offering price as set forth in the current Prospectus relating to said shares,
but not to exceed the net asset value at which the Principal Underwriter is to
purchase the shares, plus a sales charge not to exceed 7.25% of the public
offering price (the net asset value divided by .9275). If the resulting public
offering price does not come out to an even cent, the public offering price
shall be adjusted to the nearer cent.
The Principal Underwriter may also sell shares at the net asset value
at which the Principal Underwriter is to purchase such shares, provided such
sales are not inconsistent with the provisions of Section 22(d) of the
Investment Company Act of 1940, as amended from time to time (the "1940 Act"),
and the rules thereunder, including any applicable exemptive orders or
administrative interpretations or "no-action" positions with respect thereto.
The net asset value of shares of the Fund shall be determined by the
Trust or IBT, as the agent of the Fund, as of the close of regular trading on
the New York Stock Exchange on each business day on which said Exchange is open,
or as of such other time on each such business day as may be determined by the
Trustees of the Trust, in accordance with the methodology and procedures for
calculating such net asset value authorized by the Trustees. The Trust may also
cause the net asset value to be determined in substantially the same manner or
estimated in such manner and as of such other time or times as may from time to
time be agreed upon by the Trust and Principal Underwriter. The Trust will
notify the Principal Underwriter each time the net asset value of the Fund's
shares is determined and when such value is so determined it shall be applicable
to transactions as set forth in the current Prospectus and Statement of
Additional Information (hereafter the "Prospectus") relating to the Fund's
shares.
No shares of the Fund shall be sold by the Fund during any period when
the determination of net asset value is suspended pursuant to the Declaration of
Trust, except to the Principal Underwriter, in the manner and upon the terms
above set forth to cover contracts of sale made by the Principal Underwriter
with its customers prior to any such suspension, and except as provided in the
last paragraph of paragraph 1 hereof. The Trust shall also have the right to
suspend the sale of the Fund's shares if in the judgment of the Trust conditions
obtaining at any time render such action advisable. The Principal Underwriter
shall have the right to suspend sales at any time, to refuse to accept or
confirm any order from an investor or financial service firm, or to accept or
confirm any such order in part only, if in the judgment of the Principal
Underwriter such action is in the best interests of the Fund.
3. The Trust covenants and agrees that it will, from time to time, but
subject to the necessary approval of the Fund's shareholders, take such steps as
may be necessary to register the Fund's shares under the federal Securities Act
of 1933, as amended from time to time (the "1933 Act"), to the end that there
will be available for sale such number of shares as the Principal Underwriter
may reasonably be expected to sell. The Trust covenants and agrees to indemnify
and hold harmless the Principal Underwriter and each person, if any, who
controls the Principal Underwriter within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including the
reasonable cost of investigating or defending any alleged loss, liability,
claim, damages or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any shares of the Fund,
which may be based upon the 1933 Act or on any other statute or at common law,
on the ground that the Registration Statement or Prospectus, as from time to
time amended and supplemented, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust in connection therewith by or on behalf of the
Principal Underwriter; provided, however, that in no case (i) is the indemnity
of the Trust in favor of the Principal Underwriter and any such controlling
person to be deemed to protect such Principal Underwriter or any such
controlling person against any liability to the Trust or the Fund or its
security holders to which such Principal Underwriter or any such controlling
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement, or (ii)
is the Trust or the Fund to be liable under its indemnity agreement contained in
this paragraph with respect to any claim made against the Principal Underwriter
or any such controlling person unless the Principal Underwriter or any such
controlling person, as the case may be, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the Principal
Underwriter or such controlling person (or after such Principal Underwriter or
such controlling person shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve it from any liability which the Fund may have to the person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Trust shall be entitled to participate, at the
expense of the Fund, in the defense, or, if the Trust so elects, to assume the
defense of any suit brought to enforce any such liability, but if the Trust
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Principal Underwriter or controlling person or
persons, defendant or defendants in the suit. In the event the Trust elects to
assume the defense of any such suit and retains such counsel, the Principal
Underwriter or controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
them, but, in case the Trust does not elect to assume the defense of any such
suit, the Fund shall reimburse the Principal Underwriter or controlling person
or persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Trust agrees promptly to notify
the Principal Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or Trustees in connection with the issuance or
sale of any of the Fund's shares.
4. The Principal Underwriter covenants and agrees that, in selling the
shares of the Fund, it will use its best efforts in all respects duly to conform
with the requirements of all state and federal laws relating to the sale of such
shares, and will indemnify and hold harmless the Trust and each of its Trustees
and officers and each person, if any, who controls the Trust within the meaning
of Section 15 of the 1933 Act, against any loss, liability, damages, claim or
expense (including the reasonable cost of investigating or defending any alleged
loss, liability, damages, claim or expense and reasonable counsel fees incurred
in connection therewith), arising by reason of any person acquiring any shares
of the Fund, which may be based upon the 1933 Act or any other statute or at
common law, on account of any wrongful act of the Principal Underwriter or any
of its employees (including any failure to conform with any requirement of any
state or federal law relating to the sale of such shares) or on the ground that
the registration statement or Prospectus, as from time to time amended and
supplemented, includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading, insofar as any such statement or omission was
made in reliance upon, and in conformity with information furnished in writing
to the Trust in connection therewith by or on behalf of the Principal
Underwriter, provided, however, that in no case (i) is the indemnity of the
Principal Underwriter in favor of any person indemnified to be deemed to protect
the Fund or any such person against any liability to which the Fund or any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its or his duties or by reason of its
or his reckless disregard of its obligations and duties under this Agreement, or
(ii) is the Principal Underwriter to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Fund or
any person indemnified unless the Trust or such person, as the case may be,
shall have notified the Principal Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Trust, the Fund or upon such
person (or after the Trust, the Fund or such person shall have received notice
of such service on any designated agent), but failure to notify the Principal
Underwriter of any such claim shall not relieve it from any liability which it
may have to the Fund or any person against whom such action is brought otherwise
than on account of its indemnity agreement contained in this paragraph. The
Principal Underwriter shall be entitled to participate, at its own expense, in
the defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Principal Underwriter elects to assume
the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Trust, or to its officers or Trustees, or to any controlling
person or persons, defendant or defendants in the suit. In the event that the
Principal Underwriter elects to assume the defense of any such suit and retains
such counsel, the Fund or such officers or Trustees or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional counsel retained by them or the Trust, but, in case the
Principal Underwriter does not elect to assume the defense of any such suit, it
shall reimburse the Fund, any such officers and Trustees or controlling person
or persons, defendant or defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them or the Trust. The Principal Underwriter
agrees promptly to notify the Trust of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Fund's shares.
Neither the Principal Underwriter nor any financial service firm nor
any other person is authorized by the Trust to give any information or to make
any representations, other than those contained in the Registration Statement or
Prospectus filed with the Securities and Exchange Commission (the "Commission")
under the 1933 Act (as said Registration Statement and Prospectus may be amended
or supplemented from time to time), covering the shares of the Fund. Neither the
Principal Underwriter nor any financial service firm nor any other person is
authorized to act as agent for the Trust or the Fund in connection with the
offering or sale of shares of the Fund to the public or otherwise. All such
sales made by the Principal Underwriter shall be made by it as principal, for
its own account. The Principal Underwriter may, however, act as agent in
connection with the repurchase of shares as provided in paragraph 6 below, or in
connection with "exchanges" between investment companies for which the Principal
Underwriter (or an affiliate thereof) acts as principal underwriter or
investment adviser.
5(a). The Fund will pay, or cause to be paid -
(i) all the costs and expenses of the Fund, including fees and
disbursements of its counsel, in connection with the preparation and filing of
any required Registration Statement and/or Prospectus under the 1933 Act, or the
1940 Act, covering its shares and all amendments and supplements thereto, and
preparing and distributing periodic reports to shareholders (including the
expense of setting up in type any such Registration Statement, Prospectus or
periodic report);
(ii) the cost of preparing temporary and permanent share
certificates (if any) for shares of the Fund;
(iii) the cost and expenses of delivering to the Principal
Underwriter at its office in Boston, Massachusetts, all shares of the Fund
purchased by it as principal hereunder;
(iv) all the federal and state (if any) issue and/or transfer
taxes payable upon the issue by or (in the case of treasury shares) transfer
from the Fund to the Principal Underwriter of any and all shares of the Fund
purchased by the Principal Underwriter hereunder;
(v) the fees, costs and expenses of the registration or
qualification of shares of the Fund for sale in the various states, territories
or other jurisdictions (including without limitation the registering or
qualifying the Fund as a broker or dealer or any officer of the Fund as agent or
salesman in any state, territory or other jurisdiction); and
(vi) all payments to be made by the Fund pursuant to any
written plan approved in accordance with Rule 12b-1 under the 1940 Act.
(b) The Principal Underwriter agrees that, after the Prospectus (other
than to existing shareholders of the Fund) and periodic reports have been set up
in type, it will bear the expense of printing and distributing any copies
thereof which are to be used in connection with the offering of shares of the
Fund to financial service firms or investors. The Principal Underwriter further
agrees that it will bear the expenses of preparing, printing and distributing
any other literature used by the Principal Underwriter or furnished by it for
use by financial service firms in connection with the offering of the shares of
the Fund for sale to the public and any expenses of advertising in connection
with such offering.
(c) The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges imposed in accordance with the Prospectus on
early redemptions of Fund shares.
6. The Trust hereby authorizes the Principal Underwriter to repurchase,
upon the terms and conditions set forth in written instructions given by the
Trust to the Principal Underwriter from time to time, as agent of the Fund and
for its account, such shares of the Fund as may be offered for sale to the Fund
from time to time.
(a) The Principal Underwriter shall notify in writing IBT and TSSG, at
the end of each business day, or as soon thereafter as the repurchases in each
pricing period have been compiled, of the number of shares repurchased for the
account of the Fund since the last previous report, together with the prices at
which such repurchases were made, and upon the request of any officer or Trustee
of the Trust shall furnish similar information with respect to all repurchases
made up to the time of the request on any day.
(b) The Trust reserves the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by an
officer of the Principal Underwriter, by telegraph or by written instrument from
an officer of the Trust duly authorized by its Trustees. In the event that the
authorization of the Principal Underwriter is, by the terms of such notice,
suspended for more than twenty-four hours or until further notice, the
authorization given by this paragraph 6 shall not be revived except by action of
a majority of the Trustees of the Trust.
(c) The Principal Underwriter shall have the right to terminate the
operation of this paragraph 6 upon giving to the Trust thirty (30) days' written
notice thereof.
(d) The Trust agrees to authorize and direct IBT, to pay, for the
account of the Fund, the purchase price of any shares so repurchased against
delivery of the certificates in proper form for transfer to the Fund or for
cancellation by the Fund.
(e) The Principal Underwriter shall receive no commission in respect of
any repurchase of shares under the foregoing authorization and appointment as
agent.
(f) The Trust agrees that the Fund will reimburse the Principal
Underwriter, from time to time on demand, for any reasonable expenses incurred
in connection with the repurchase of shares of the Fund pursuant to this
paragraph 6.
7. If, at any time during the existence of this Agreement, the Trust
shall deem it necessary or advisable in the best interests of the Fund that any
amendment of this Agreement be made in order to comply with the recommendations
or requirements of the Commission or other governmental authority or to obtain
any advantage under Massachusetts or federal tax laws, and shall notify the
Principal Underwriter of the form of amendment which it deems necessary or
advisable and the reasons therefor, and, if the Principal Underwriter declines
to assent to such amendment, the Trust may terminate this Agreement forthwith by
written notice to the Principal Underwriter. If, at any time during the
existence of this Agreement upon request by the Principal Underwriter, the Trust
fails (after a reasonable time) to make any changes in its Declaration of Trust,
as amended, or in its methods of doing business which are necessary in order to
comply with any requirement of federal law or regulations of the Commission or
of a national securities association of which the Principal Underwriter is or
may be a member, relating to the sale of the shares of the Fund, the Principal
Underwriter may terminate this Agreement forthwith by written notice to the
Trust.
8(a). The Principal Underwriter is a corporation in the United States
organized under the laws of Massachusetts and holding membership in the National
Association of Securities Dealers, Inc., a securities association registered
under Section 15A of the Securities Exchange Act of 1934, as amended from time
to time, and during the life of this Agreement will continue to be so resident
in the United States, so organized and a member in good standing of said
Association. The Principal Underwriter covenants that it and its officers and
directors will comply with the Trust's Declaration of Trust and By-Laws, and the
1940 Act and the rules promulgated thereunder, insofar as they are applicable to
the Principal Underwriter.
(b) The Principal Underwriter shall maintain in the United States and
preserve therein for such period or periods as the Commission shall prescribe by
rules and regulations applicable to it as Principal Underwriter of an open-end
investment company registered under the 1940 Act such accounts, books and other
documents as are necessary or appropriate to record its transactions with the
Fund. Such accounts, books and other documents shall be subject at any time and
from time to time to such reasonable periodic, special and other examinations by
the Commission or any member or representative thereof as the Commission may
prescribe. The Principal Underwriter shall furnish to the Commission within such
reasonable time as the Commission may prescribe copies of or extracts from such
records which may be prepared without effort, expense or delay as the Commission
may by order require.
9. This Agreement shall continue in force indefinitely until terminated
as in this Agreement above provided, except that:
(a) this Agreement shall continue in effect through and including April
28, 1996 and shall continue in full force and effect indefinitely thereafter,
but only so long as such continuance is specifically approved at least annually
(i) by the vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Principal Underwriter cast in person
at a meeting called for the purpose of voting on such approval, and (ii) by the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund;
(b) that either party shall have the right to terminate this Agreement
on six (6) months' written notice thereof given in writing to the other; and
(c) additional series of the Trust will become parties hereto upon
approval by the Trustees of the Trust.
10. In the event of the assignment of this Agreement by the Principal
Underwriter, this Agreement shall automatically terminate.
11. Any notice under this Agreement shall be in writing, addressed and
delivered, or mailed postage paid, to the other party, at such address as such
other party may designate for the receipt of such notices. Until further notice
to the other party, it is agreed that the record address of the Trust and that
of the Principal Underwriter, shall be 24 Federal Street, Boston, Massachusetts
02110.
12. The services of the Principal Underwriter to the Fund hereunder are
not to be deemed to be exclusive, the Principal Underwriter being free to (a)
render similar services to, and to act as principal underwriter in connection
with the distribution of shares of, other series of the Trust or other
investment companies, and (b) engage in other business and activities from time
to time.
13. The terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested persons," when used herein, shall have
the respective meanings specified in the 1940 Act, subject, however, to such
exemptions as may be granted by the Commission by any rule, regulation or order.
14. The Principal Underwriter expressly acknowledges the provision in
the Trust's Declaration of Trust limiting the personal liability of the
shareholders of the Fund or the Trustees of the Trust. The Principal Underwriter
hereby agrees that it shall have recourse only to the assets of the Fund for
payment of claims or obligations as between the Trust on behalf of the Fund, and
the Principal Underwriter arising out of this Agreement and shall not seek
satisfaction from any shareholders of the Trust or from the Trustees or any
Trustee of the Trust. The Fund shall not be responsible for obligations of any
other series of the Trust.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement the
20th day of March, 1996.
EATON VANCE MUTUAL FUNDS TRUST
(on behalf of EV Traditional Tax-Managed
Growth Fund)
By /s/ M. Dozier Gardner
------------------------------
President
EATON VANCE DISTRIBUTORS INC.
By /s/ H. Day Brigham, Jr.
------------------------------
Vice President
EXHIBIT 99.10
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
April 24, 1996
Eaton Vance Mutual Funds Trust
24 Federal Street
Boston, MA 02110
Gentlemen:
Eaton Vance Mutual Funds Trust (the "Trust") is a Massachusetts
business trust created under a Declaration of Trust dated May 7, 1984 executed
and delivered in Boston, Massachusetts and currently operating under an Amended
and Restated Declaration of Trust dated August 17, 1993 (the "Declaration of
Trust"). I am of the opinion that all legal requirements have been complied with
in the creation of the Trust, and that said Declaration of Trust is legal and
valid.
The Trustees of the Trust have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided. As
provided in the Declaration of Trust, the interest of shareholders is divided
into shares of beneficial interest without par value, and the number of shares
that may be issued is unlimited. The Trustees may from time to time issue and
sell or cause to be issued and sold shares for cash or for property. All such
shares, when so issued, shall be fully paid and nonassessable by the Trust.
By votes duly adopted, the Trustees of the Trust have authorized the
issuance of shares of beneficial interest, without par value. The Trust intends
to register under the Securities Act of 1933, as amended, 6,312,148 of its
shares of beneficial interest with Post-Effective Amendment No. 28 to its
Registration Statement on Form N-1A (the "Amendment") with the Securities and
Exchange Commission.
I have examined originals, or copies, certified or otherwise identified
to my satisfaction, of such certificates, records and other documents as I have
deemed necessary or appropriate for the purpose of this opinion, including the
Declaration of Trust and votes adopted by the Trustees. Based upon the
foregoing, and with respect to Massachusetts law (other than the Massachusetts
Uniform Securities Act), only to the extent that Massachusetts law may be
applicable and without reference to the laws of the other several states or of
the United States of America, I am of the opinion that under existing law:
1. The Trust is a trust with transferable shares of beneficial interest
organized in compliance with the laws of The Commonwealth of Massachusetts, and
the Declaration of Trust is legal and valid under the laws of The Commonwealth
of Massachusetts.
2. Shares of beneficial interest registered by the Amendment may be
legally and validly issued in accordance with the Declaration of Trust upon
receipt by the Trust of payment in compliance with the Declaration of Trust and,
when so issued and sold, will be fully paid and nonassessable by the Trust.
I am a member of the Massachusetts and New York bars, and I hereby
consent to the filing of this opinion with the Securities and Exchange
Commission as an exhibit thereto.
Very truly yours,
/s/ H. Day Brigham, Jr.
H. Day Brigham, Jr., Esq.
Vice President, Eaton Vance Management
a:mutfnds.opn
EXHIBIT 99.11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 28 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of EV Classic Government Obligations Fund of our report dated
February 2, 1996, relating to EV Classic Government Obligations Fund, and of
our report dated February 2, 1996, relating to Government Obligations
Portfolio, which reports are included in the Annual Report to Shareholders for
the year ended December 31, 1995, which is incorporated by reference in the
Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Financial
Statements" and "Independent Accountants" in the Statement of Additional
Information of the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
April 24, 1996
Boston, Massachusetts
EXHIBIT 99.11(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 28 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of EV Marathon Government Obligations Fund of our report
dated February 2, 1996, relating to EV Marathon Government Obligations Fund,
and of our report dated February 2, 1996, relating to Government Obligations
Portfolio, which reports are included in the Annual Report to Shareholders for
the year ended December 31, 1995, which is incorporated by reference in the
Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Financial
Statements" and "Independent Accountants" in the Statement of Additional
Information of the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
April 24, 1996
Boston, Massachusetts
EXHIBIT 99.11(C)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 28 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of EV Traditional Government Obligations Fund of our report
dated February 2, 1996, relating to EV Traditional Government Obligations
Fund, and of our report dated February 2, 1996, relating to Government
Obligations Portfolio, which reports are included in the Annual Report to
Shareholders for the year ended December 31, 1995, which is incorporated by
reference in the Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Financial
Statements" and "Independent Accountants" in the Statement of Additional
Information of the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
April 24, 1996
Boston, Massachusetts
EXHIBIT 99.11(D)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 28 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of Eaton Vance Short-Term Treasury Fund of our report dated
February 2, 1996, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1995, which is incorporated by
reference in the Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Financial
Statements" and "Independent Accountants" in the Statement of Additional
Information of the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
April 24, 1996
Boston, Massachusetts
EXHIBIT 99.11(E)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 28 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of Eaton Vance Tax Free Reserves of our report dated February
2, 1996, which report is included in the Annual Report to Shareholders for the
year ended December 31, 1995, which is incorporated by reference in the
Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the captions "Financial
Statements" and "Independent Accountants" in the Statement of Additional
Information of the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
April 24, 1996
Boston, Massachusetts
EXHIBIT 99.11(F)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 28 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File No.
2-90946) on behalf of Eaton Vance Cash Management Fund, Eaton Vance Liquid
Assets Fund and Eaton Vance Money Market Fund of our report dated February 2,
1996, relating to Eaton Vance Cash Management Fund, Eaton Vance Liquid Assets
and Eaton Vance Money Market Fund, and of our report dated February 2, 1996,
relating to Cash Management Portfolio, which reports are included in the
Annual Report to Shareholders for the year ended December 31, 1995, which is
incorporated by reference in the Statement of Additional Information.
We also consent to the reference to our Firm under the heading "The Funds"
Financial Highlights'' in the Prospectus and under the captions "Financial
Statements" and "Independent Accountants" in the Statements of Additional
Information of the Registration Statement.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
April 24, 1996
Boston, Massachusetts
EXHIBIT 99.(15)(K)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION PLAN
ON BEHALF OF
EV MARATHON TAX-MANAGED GROWTH FUND (THE "FUND")
WHEREAS, Eaton Vance Mutual Funds Trust (the "Trust") engages in
business as an open-end investment company with multiple series and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of shares of the Fund, but does
not intend to remunerate the Principal Underwriter unless and until the
Principal Underwriter sells shares of the Fund;
WHEREAS, the Fund will pay the Principal Underwriter sales commissions
and distribution fees only in connection with the sale of shares of the Fund;
WHEREAS, the Fund intends to pay service fees as contemplated in
subsections (b) and (d) of Section 26 of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD
Rules"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that adoption of this Distribution Plan will benefit the
Fund and its shareholders.
NOW, THEREFORE, the Trust hereby adopts this Distribution Plan (this
"Plan") on behalf of the Fund in accordance with Rule 12b-1 under the Act and
containing the following terms and conditions:
1. The Fund will pay sales commissions and distribution fees to the
Principal Underwriter only after and as a result of the sales of shares of the
Fund. The Principal Underwriter will provide the Fund with such distribution
services and facilities as the Trust may from time to time consider necessary to
accomplish the sale of shares of the Fund. It is understood that the Principal
Underwriter may pay such sales commissions and make such other payments to
Authorized Firms and other persons as it considers appropriate to encourage
distribution of such shares.
2. On each sale of Fund shares (excluding reinvestment of dividends and
distributions), the Fund shall pay the Principal Underwriter a sales commission
in an amount not exceeding 5% of the price received by the Fund therefor, such
payment to be made in the manner set forth and subject to the terms of this
Plan. The amount of the sales commission shall be established from time to time
by vote or other action of a majority of (i) those Trustees of the Trust who are
not "interested persons" (as defined in the Act) of the Trust and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Trustees") and (ii) all of the Trustees then in
office. The Fund shall also pay the Principal Underwriter a separate
distribution fee (calculated in accordance with Section 3), such payment to be
made in the manner set forth and subject to the terms of this Plan.
3. The sales commissions and distribution fees referred to in Section 2
shall be accrued and paid by the Fund in the following manner. The Fund shall
accrue daily an amount calculated at the rate of .75% per annum of the daily net
assets of the Fund, which net assets shall be computed in accordance with the
governing documents of the Trust and applicable votes and determinations of the
Trustees of the Trust. The daily amounts so accrued throughout the month shall
be paid to the Principal Underwriter on the last day of each month. The amount
of such daily accrual, as so calculated, shall first be applied and charged to
all unpaid sales commissions, and the balance, if any, shall then be applied and
charged to all unpaid distribution fees. No amount shall be accrued with respect
to any day on which there exist no outstanding uncovered distribution charges of
the Principal Underwriter. The amount of such uncovered distribution charges
shall be calculated daily. For purposes of this calculation, distribution
charges of the Principal Underwriter shall include (a) the aggregate of all
sales commissions which the Principal Underwriter has been paid pursuant to this
Section 3 plus all sales commissions which it is entitled to be paid pursuant to
Section 2 through and including the day next preceding the date of calculation,
and (b) an amount equal to the aggregate of all distribution fees referred to
below which the Principal Underwriter has been paid pursuant to this Section 3
plus all such fees which it is entitled to be paid pursuant to Section 2 through
and including the day next preceding the date of calculation. From this sum
(distribution charges) there shall be subtracted (i) the aggregate amount paid
or payable to the Principal Underwriter pursuant to this Section 3 through and
including the day next preceding the date of calculation and (ii) the aggregate
amount of all contingent deferred sales charges paid or payable to the Principal
Underwriter through and including the day next preceding the date of
calculation. If the result of such subtraction is a positive amount, a
distribution fee [computed at the rate of 1% per annum above the prime rate
(being the base rate on corporate loans posted by at least 75% of the nation's
30 largest banks) then being reported in the Eastern Edition of The Wall Street
Journal or if such prime rate is not so reported such other rate as may be
designated from time to time by vote or other action of a majority of (i) the
Rule 12b-1 Trustees and (ii) all of the Trustees then in office] shall be
computed on such amount and added to such amount, with the resulting sum
constituting the amount of outstanding uncovered distribution charges of the
Principal Underwriter with respect to such day for all purposes of this Plan. If
the result of such subtraction is a negative amount, there shall exist no
outstanding uncovered distribution charges of the Principal Underwriter with
respect to such day and no amount shall be accrued or paid to the Principal
Underwriter with respect to such day. The aggregate amounts accrued and paid
pursuant to this Section 3 during any fiscal year of the Fund shall not exceed
.75% of the average daily net assets of the Fund for such year.
4. The Principal Underwriter shall be entitled to receive all
contingent deferred sales charges paid or payable with respect to any day on
which there exist outstanding uncovered distribution charges of the Principal
Underwriter. The Fund shall be entitled to receive all remaining contingent
deferred sales charges paid or payable by shareholders with respect to any day
on which there exist no outstanding uncovered distribution charges of the
Principal Underwriter, provided that no such sales charge which would cause the
Fund to exceed the maximum applicable cap imposed thereon by paragraph (2) of
subsection (d) of Section 26 of Article III of the NASD Rules shall be imposed.
5. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
6. This Plan shall not take effect until after it has been approved by
both a majority of (i) the Rule 12b-1 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.
7. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 6.
8. This Plan shall continue in effect through and including April 28,
1996 and shall continue in effect indefinitely thereafter, but only so long as
such continuance after April 28, 1996 is specifically approved at least annually
in the manner provided for Trustee approval of this Plan in Section 6.
9. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
Such persons shall provide to the Trustees of the Trust and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made.
10. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. The Principal Underwriter shall also be entitled to
receive all contingent deferred sales charges paid or payable with respect to
any day subsequent to termination of this Plan on which there exist outstanding
uncovered distribution charges of the Principal Underwriter.
11. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Sections 2, 3 and 5 unless such amendment is
approved by a vote of at least a majority of the outstanding voting securities
of the Fund. In addition, all material amendments to this Plan shall be approved
in the manner provided for Trustee approval of this Plan in Section 6.
12. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
13. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 9, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
14. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
15. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities of the Fund" shall mean the vote of the lesser of
(a) 67 per centum or more of the shares of the Fund present or represented by
proxy at the meeting if the holders of more than 50 per centum of the
outstanding shares of the Fund are present or represented by proxy at the
meeting, or (b) more than 50 per centum of the outstanding shares of the Fund.
16. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
ADOPTED MARCH 20, 1996
* * *
EXHIBIT 99.(15)(L)
EATON VANCE MUTUAL FUNDS TRUST
ON BEHALF OF EV TRADITIONAL TAX-MANAGED GROWTH FUND
SERVICE PLAN
WHEREAS, Eaton Vance Mutual Funds Trust (the "Trust") engages in
business as an open-end management investment company with multiple series,
including EV Traditional Tax-Managed Growth Fund (the "Fund"), and is registered
as such under the Investment Company Act of 1940, as amended (the "Act");
WHEREAS, The Trust desires to adopt a Service Plan pursuant to which
the Fund as a series of the Trust intends to pay service fees as contemplated in
subsections (b) and (d) of Section 26 of Article III of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD
Rules"); and
WHEREAS, the Trust employs Eaton Vance Distributors, Inc. to act as
Principal Underwriter (as defined in the Act) of Fund shares.
NOW, THEREFORE, the Trust hereby adopts this Service Plan (the "Plan")
on behalf of the Fund in accordance with Rule 12b-1 under the Act and containing
the following terms and conditions:
1. The Fund may make payments of service fees to the Principal
Underwriter, Authorized Firms and other persons. The aggregate of such payments
during any fiscal year of the Fund shall not exceed .25% of the Fund's average
daily net assets for such year. Appropriate adjustment of service fee payments
shall be made whenever necessary to ensure that no such payment shall cause the
Fund to exceed the applicable maximum cap imposed thereon by paragraph (5) of
subsection (d) of Section 26 of Article III of the NASD Rules.
2. This Plan shall not take effect until after it has been approved by
both a majority of (i) those Trustees of the Trust who are not "interested
persons" of the Trust (as defined in the Act) and have no direct or indirect
financial interest in the operations of this Plan or any agreements related to
it (the "Rule 12b-1 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.
3. Any agreements between the Trust on behalf of the Fund and any
person relating to this Plan shall be in writing and shall not take effect until
approved in the manner provided for Trustee approval of this Plan in Section 2.
4. This Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for Trustee
approval of this Plan in Section 2.
5. The persons authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement made on
behalf of the Fund shall be the President or any Vice President of the Trust.
One or more of such persons shall provide to the Trustees of the Trust and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund.
7. This Plan may not be amended to increase materially the payments to
be made by the Fund as provided in Section 1 unless such amendment, if required
by law, is approved by a vote of at least a majority of the outstanding voting
securities of the Fund. In addition, all material amendments to this Plan shall
be approved in the manner provided for in Section 2.
8. While this Plan is in effect, the selection and nomination of the
Rule 12b-1 Trustees shall be committed to the discretion of the Rule 12b-1
Trustees.
9. The Trust shall preserve copies of this Plan and any related
agreements made by the Trust on behalf of the Fund and all reports made pursuant
to Section 5, for a period of not less than six years from the date of this
Plan, or of the agreements or of such report, as the case may be, the first two
years in an easily accessible place.
10. Consistent with the limitation of shareholder, officer and Trustee
liability as set forth in the Trust's Declaration of Trust, any obligations
assumed by the Fund pursuant to this Plan shall be limited in all cases to the
assets of the Fund and no person shall seek satisfaction thereof from the
shareholders of the Trust, officers or Trustees of the Trust or any other series
of the Trust.
11. When used in this Plan, the term "service fees" shall have the same
meaning as such term has in subsections (b) and (d) of Section 26 of Article III
of the NASD Rules. When used in this Plan, the term "vote of a majority of the
outstanding voting securities" shall mean the vote of the lesser of (a) 67 per
centum or more of the shares of the Fund present or represented by proxy at the
meeting if the holders of more than 50 per centum of the outstanding shares of
the Fund are present or represented by proxy at the meeting, or (b) more than 50
per centum of the outstanding shares of the Fund.
12. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or regulation of the Securities and Exchange
Commission or otherwise, the remainder of this Plan shall not be affected
thereby.
ADOPTED MARCH 20, 1996
* * *
<PAGE>
EXHIBIT 99.16
INVESTMENT PERFORMANCE -- EV CLASSIC GOVERNMENT OBLIGATIONS 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 December 31, 1995. Total return for the
period prior to the Fund's commencement of operations is for the Portfolio (or
its predecessor) adjusted for the Fund's sales charge.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 12/31/95 ON 12/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/95 12/31/85 $2,277.70 $2,277.70 127.77% 8.58% 127.77% 8.58%
5 YEARS ENDED
12/31/95 12/31/90 $1,454.90 $1,454.90 45.49% 7.79% 45.49% 7.79%
1 YEAR ENDED
12/31/95 12/31/94 $1,129.36 $1,119.36 12.94% 12.94% 11.94% 11.94%
</TABLE>
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
on the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on
the ending investment value before deducting the CDSC.
<PAGE>
EXHIBIT 99.16
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/95:
Interest Income Earned: $255,741
Plus Dividend Income Earned:
----------
Equal Gross Income: $255,741
Minus Expenses: $97,381
----------
Equal Net Investment Income: $158,360
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 4,412,733
----------
Equal Net Investment Income Earned Per Share: $0.0359
Maximum Offering Price Per Share 12/31/95: $9.49
30 Day Yield*: 4.58%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0359/$9.49)+1) -1]
<PAGE>
EXHIBIT 99.16
INVESTMENT PERFORMANCE -- EV MARATHON GOVERNMENT OBLIGATIONS 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 December 31, 1995. Total return for the
period prior to the Fund's commencement of operations is for the Portfolio (or
its predecessor) adjusted for the Fund's sales charge.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 12/31/95 ON 12/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/95 12/31/85 $2,293.49 $2,293.49 129.35% 8.66% 129.35% 8.66%
5 YEARS ENDED
12/31/95 12/31/90 $1,465.00 $1,445.00 46.50% 7.94% 44.50% 7.64%
1 YEAR ENDED
12/31/95 12/31/94 $1,132.89 $1,082.89 13.29% 13.29% 8.29% 8.29%
</TABLE>
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 on
the ending investment value before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the
ending investment value before deducting the CDSC.
<PAGE>
EXHIBIT 99.16
EV MARATHON GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/95:
Interest Income Earned: $713,075
Plus Dividend Income Earned:
----------
Equal Gross Income: $713,075
Minus Expenses: $251,188
----------
Equal Net Investment Income: $461,887
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 12,293,281
----------
Equal Net Investment Income Earned Per Share: $0.0376
Maximum Offering Price Per Share 12/31/95: $9.50
30 Day Yield*: 4.79%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0376/$9.50)+1) -1]
<PAGE>
EXHIBIT 99.16
INVESTMENT PERFORMANCE -- EV TRADITIONAL GOVERNMENT OBLIGATIONS 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 December 31, 1995.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 12/31/95 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
12/31/95 12/31/85 $962.32 $2,214.17 130.09% 8.68% 121.42% 8.26%
5 YEARS ENDED
12/31/95 12/31/90 $962.74 $1,414.97 46.97% 7.99% 41.50% 7.17%
1 YEAR ENDED
12/31/95 12/31/94 $962.14 $1,096.53 13.97% 13.97% 9.65% 9.65%
</TABLE>
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 3.75%.
** 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 3.75%.
*** The cumulative total return including the sales charge is calculated based
on an initial investment of $1,000 less maximum initial sales charge
of 3.75%.
<PAGE>
EXHIBIT 99.16
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/95:
Interest Income Earned: $2,220,279
Plus Dividend Income Earned:
----------
Equal Gross Income: $2,220,279
Minus Expenses: $557,449
----------
Equal Net Investment Income: $1,662,830
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 32,966,793
----------
Equal Net Investment Income Earned Per Share: $0.0504
Maximum Offering Price Per Share 12/31/95: $11.45
30 Day Yield*: 5.34%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0504/$11.45)+1) -1]
<PAGE>
EXHIBIT 99.16
EATON VANCE SHORT-TERM TREASURY FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/95:
Interest Income Earned: $189,342
Plus Dividend Income Earned:
--------
Equal Gross Income: $189,342
Minus Expenses: $ 20,999
--------
Equal Net Investment Income: $168,343
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 698,273
----------
Equal Net Investment Income Earned Per Share: $0.2411
Maximum Offering Price Per Share 12/31/95: $61.43
30 Day Yield*: 4.76%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.2411/$61.43)+1) -1]
<PAGE>
INVESTMENT PERFORMANCE -- EATON VANCE SHORT TERM TREASURY 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 period from February 4, 1991 through December 31, 1995 and for the 1 year
period ended December 31, 1995.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF
INVESTMENT INVESTMENT INVESTMENT TOTAL RETURN
PERIOD DATE ON 12/31/95 CUMULATIVE ANNUALIZED
- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
LIFE OF
FUND 02/04/91 $1,224.18 22.42% 4.21%
1 YEAR ENDED
12/31/95 12/31/94 $1,067.96 6.80% 6.80%
</TABLE>
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
<PAGE>
EXHIBIT 99.16
EATON VANCE CASH MANAGEMENT FUND
Quotation of Yield
For the seven day period ending December 31, 1995
The value of an account with a beginning balance of one share equal to $1.00
grew to $1.000995227. The difference of $0.000995227 is the Base Period Return.
Dividing the Base Period Return by the beginning value of $1.00 and multiplying
by (365/7) gives a yield of 5.19%.
Adding 1 to the Base Period Return and taking this to the power of (365/7) and
subtracting 1 gives an effective yield of 5.32%.
<PAGE>
EXHIBIT 99.16
EATON VANCE LIQUID ASSETS TRUST
Quotation of Yield
For the seven day period ending December 31, 1995
The value of an account with a beginning balance of one share equal to $1.00
grew to $1.0008387828 The difference of $0.000837828 is the Base Period Return.
Dividing the Base Period Return by the beginning value of $1.00 and multiplying
by (365/7) gives a yield of 4.37%.
Adding 1 to the Base Period Return and taking this to the power of (365/7) and
subtracting 1 gives an effective yield of 4.46%.
<PAGE>
EXHIBIT 99.16
EATON VANCE MONEY MARKET FUND
Quotation of Yield
For the seven day period ending December 31, 1995
The value of an account with a beginning balance of one share equal to $1.00
grew to $1.000803444. The difference of $0.000803444 is the Base Period Return.
Dividing the Base Period Return by the beginning value of $1.00 and multiplying
by (365/7) gives a yield of 4.19%.
Adding 1 to the Base Period Return and taking this to the power of (365/7) and
subtracting 1 gives an effective yield of 4.28%.
<PAGE>
EXHIBIT 99.16
EATON VANCE TAX FREE RESERVES
Quotation of Yield
For the seven day period ending December 31, 1995
The value of an account with a beginning balance of one share equal to $1.00
grew to $1.000670682. The difference of $0.000670682 is the Base Period Return.
Dividing the Base Period Return by the beginning value of $1.00 and multiplying
by (365/7) gives a yield of 3.50%.
Adding 1 to the Base Period Return and taking this to the power of (365/7) and
subtracting 1 gives an effective yield of 3.56%.
Taking the current yield of 3.50% and dividing by 1 minus the tax rate (assuming
a tax rate of 31%) gives a taxable equivalent current yield of 5.07%
(3.50%/.69).
Dividing the taxable equivalent yield by (365/7), adding 1, taking this to the
power of (365/7) and subtracting 1 gives a taxable equivalent effective yield of
5.20%.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> EV CLASSIC GOVERNMENT OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 42660
<INVESTMENTS-AT-VALUE> 42331
<RECEIVABLES> 148
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42492
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 454
<TOTAL-LIABILITIES> 454
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44410
<SHARES-COMMON-STOCK> 4430
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (69)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1974)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (329)
<NET-ASSETS> 42038
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3353
<EXPENSES-NET> 550
<NET-INVESTMENT-INCOME> 2803
<REALIZED-GAINS-CURRENT> (1360)
<APPREC-INCREASE-CURRENT> 3760
<NET-CHANGE-FROM-OPS> 5203
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2803)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (45)
<NUMBER-OF-SHARES-SOLD> 1676
<NUMBER-OF-SHARES-REDEEMED> 1831
<SHARES-REINVESTED> 177
<NET-CHANGE-IN-ASSETS> 2452
<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> 550
<AVERAGE-NET-ASSETS> 42643
<PER-SHARE-NAV-BEGIN> 8.98
<PER-SHARE-NII> .609
<PER-SHARE-GAIN-APPREC> .520
<PER-SHARE-DIVIDEND> (.609)
<PER-SHARE-DISTRIBUTIONS> (.010)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.49
<EXPENSE-RATIO> 2.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> EV MARATHON GOVERNMENT OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 114300
<INVESTMENTS-AT-VALUE> 117599
<RECEIVABLES> 366
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 117979
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 814
<TOTAL-LIABILITIES> 814
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 117621
<SHARES-COMMON-STOCK> 12338
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (283)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3472)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3299
<NET-ASSETS> 117165
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 8077
<EXPENSES-NET> 1047
<NET-INVESTMENT-INCOME> 7030
<REALIZED-GAINS-CURRENT> (2701)
<APPREC-INCREASE-CURRENT> 8131
<NET-CHANGE-FROM-OPS> 12460
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7030)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (164)
<NUMBER-OF-SHARES-SOLD> 5382
<NUMBER-OF-SHARES-REDEEMED> 2904
<SHARES-REINVESTED> 303
<NET-CHANGE-IN-ASSETS> 31230
<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> 1047
<AVERAGE-NET-ASSETS> 103230
<PER-SHARE-NAV-BEGIN> 8.99
<PER-SHARE-NII> .639
<PER-SHARE-GAIN-APPREC> .520
<PER-SHARE-DIVIDEND> (.635)
<PER-SHARE-DISTRIBUTIONS> (.014)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.50
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 337945
<INVESTMENTS-AT-VALUE> 361860
<RECEIVABLES> 67
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 361927
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2189
<TOTAL-LIABILITIES> 2189
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 394841
<SHARES-COMMON-STOCK> 32634
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1166)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (57852)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23915
<NET-ASSETS> 359738
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 29671
<EXPENSES-NET> 1279
<NET-INVESTMENT-INCOME> 28392
<REALIZED-GAINS-CURRENT> (11641)
<APPREC-INCREASE-CURRENT> 32964
<NET-CHANGE-FROM-OPS> 49715
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (28339)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2555
<NUMBER-OF-SHARES-REDEEMED> 8290
<SHARES-REINVESTED> 1311
<NET-CHANGE-IN-ASSETS> (26448)
<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> 1279
<AVERAGE-NET-ASSETS> 377210
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> .807
<PER-SHARE-GAIN-APPREC> .603
<PER-SHARE-DIVIDEND> (.810)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.02
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> EATON VANCE SHORT TERM TREASURY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1924
<INVESTMENTS-AT-VALUE> 1935
<RECEIVABLES> 3
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6
<TOTAL-ASSETS> 1943
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 28
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1904
<SHARES-COMMON-STOCK> 31
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11
<NET-ASSETS> 1915
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2639
<OTHER-INCOME> 0
<EXPENSES-NET> 267
<NET-INVESTMENT-INCOME> 2372
<REALIZED-GAINS-CURRENT> 289
<APPREC-INCREASE-CURRENT> 10
<NET-CHANGE-FROM-OPS> 299
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2506
<NUMBER-OF-SHARES-REDEEMED> 2495
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 740
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 140
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 404
<AVERAGE-NET-ASSETS> 45179
<PER-SHARE-NAV-BEGIN> 57.52
<PER-SHARE-NII> 3.47
<PER-SHARE-GAIN-APPREC> .44
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 61.43
<EXPENSE-RATIO> .62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> EATON VANCE CASH MANAGEMENT FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 157055
<INVESTMENTS-AT-VALUE> 157055
<RECEIVABLES> 626
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 157681
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2431
<TOTAL-LIABILITIES> 2431
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155250
<SHARES-COMMON-STOCK> 155250
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 155250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 6871
<EXPENSES-NET> 189
<NET-INVESTMENT-INCOME> 6682
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6682)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 554616
<NUMBER-OF-SHARES-REDEEMED> 515316
<SHARES-REINVESTED> 4332
<NET-CHANGE-IN-ASSETS> 43630
<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> 189
<AVERAGE-NET-ASSETS> 128122
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .052
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .052
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> EATON VANCE LIQUID ASSETS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 34332
<INVESTMENTS-AT-VALUE> 34332
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34332
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 306
<TOTAL-LIABILITIES> 306
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34026
<SHARES-COMMON-STOCK> 34026
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 34026
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2913
<EXPENSES-NET> 170
<NET-INVESTMENT-INCOME> 2743
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2744)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 54191
<NUMBER-OF-SHARES-REDEEMED> 140509
<SHARES-REINVESTED> 1745
<NET-CHANGE-IN-ASSETS> (84572)
<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> 170
<AVERAGE-NET-ASSETS> 53734
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .050
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.050)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> EATON VANCE MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 13512
<INVESTMENTS-AT-VALUE> 13512
<RECEIVABLES> 304
<ASSETS-OTHER> 35
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13851
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 900
<TOTAL-LIABILITIES> 900
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12951
<SHARES-COMMON-STOCK> 12951
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 12951
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 558
<EXPENSES-NET> 115
<NET-INVESTMENT-INCOME> 443
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (444)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 197167
<NUMBER-OF-SHARES-REDEEMED> 184396
<SHARES-REINVESTED> 180
<NET-CHANGE-IN-ASSETS> 12951
<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> 132
<AVERAGE-NET-ASSETS> 14264
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .031
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .031
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> EATON VANCE TAX FREE RESERVES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 25333
<INVESTMENTS-AT-VALUE> 25333
<RECEIVABLES> 421
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25754
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1841
<TOTAL-LIABILITIES> 1841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23933
<SHARES-COMMON-STOCK> 23933
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 23913
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 1943
<EXPENSES-NET> 165
<NET-INVESTMENT-INCOME> 1778
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 151505
<NUMBER-OF-SHARES-REDEEMED> 156967
<SHARES-REINVESTED> 354
<NET-CHANGE-IN-ASSETS> (5108)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 256
<INTEREST-EXPENSE> 24
<GROSS-EXPENSE> 397
<AVERAGE-NET-ASSETS> 51246
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .035
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000979971
<NAME> CASH MANAGEMENT PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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<INVESTMENTS-AT-VALUE> 204906
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<NET-CHANGE-FROM-OPS> 10343
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (17914)
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<GROSS-EXPENSE> 1149
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<PER-SHARE-NAV-BEGIN> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 555,044
<INVESTMENTS-AT-VALUE> 582,515
<RECEIVABLES> 7,382
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 589,908
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 68,119
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</TABLE>
