<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1996
1933 ACT FILE NO. 2-90946
1940 ACT FILE NO. 811-4015
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 30 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 33 [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 August 1, 1996
pursuant to paragraph (b) of Rule 485.
High Income Portfolio and Tax-Managed Growth Portfolio have also executed
this Registration Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on May
24, 1996 filed its "Notice" as required by that Rule for the series of the
Registrant with a fiscal year end of March 31, 1996, on February 23, 1996
filed its "Notice" for the series of the Registrant with a fiscal year end of
December 31, 1995 and on November 8, 1995 filed its "Notice" for the series of
the Registrant with a fiscal year end of October 31, 1995.
==============================================================================
<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheet required by Rule 481(a) under the Securities Act of
1933
Part A--The Prospectuses of:
EV Classic High Income Fund
EV Marathon High Income Fund
EV Classic Tax-Managed Growth Fund
Part B--The Statements of Additional Information of:
EV Classic High Income Fund
EV Marathon High Income Fund
EV Classic Tax-Managed Growth Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(b) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectus and Statement of
Additional Information of any series of the Registrant not identified above.
<PAGE>
EATON VANCE MUTUAL FUNDS TRUST
EV CLASSIC HIGH INCOME FUND
EV MARATHON HIGH INCOME 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 Not Applicable
Information
4. ............ General Description of The Fund's Investment
Registrant Objective; Investment
Policies and Risks;
Organization of the Fund and
the Portfolio
5. ............ Management of the Fund Management of the Fund and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plan; 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
ITEM NO. ITEM CAPTION PROSPECTUS 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 Services Administrator; Distribution
Plan; Custodian; Independent
Accountants; Fees and
Expenses; Other Information
17. ............ Brokerage Allocation and Not Applicable
Other Practices
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Service for Withdrawal;
Distribution Plan; 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
EV CLASSIC TAX-MANAGED GROWTH FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------ -------- -------------------------------
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial Not Applicable
Information
4. ............ General Description of The Fund's Investment
Registrant Objective; The Tax-Managed
Mutual Fund Advantage;
Investment Policies and
Risks; Organization of the
Fund and the Portfolio
5. ............ Management of the Fund Management of the Fund and the
Portfolio
5A............. Management's Discussion of Not Applicable
Fund Performance
6. ............ Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Reports to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............ Purchase of Securities Valuing Fund Shares;
Being Offered Distribution Plan; 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
ITEM NO. ITEM CAPTION PROSPECTUS 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 Services Administrator; Distribution
Plan; Custodian; Independent
Accountants; Fees and
Expenses; Other Information
17. ............ Brokerage Allocation and Not Applicable
Other Practices
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Service for Withdrawal;
Distribution Plan; Fees and
Expenses
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter; Fees and
Expenses
22. ............ Calculation of Performance Investment Performance;
Data Performance Information
23. ............ Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC
HIGH INCOME FUND
- ------------------------------------------------------------------------------
EV CLASSIC HIGH INCOME FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO PROVIDE A
HIGH LEVEL OF CURRENT INCOME. THE FUND INVESTS ITS ASSETS IN HIGH INCOME
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").
THE PORTFOLIO SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING UP TO
100% OF ITS ASSETS IN LOWER-RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT
ENTAIL GREATER RISKS, INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED
SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS AND INVEST FOR THE
LONG TERM. SEE "THE FUND'S INVESTMENT OBJECTIVE" AND "INVESTMENT POLICIES AND
RISKS."
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 August 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>
Shareholder and Fund Expenses ......................... 2 How to Redeem Fund Shares .......................... 13
The Funds' Financial Highlights ........................ 3 Reports to Shareholders ............................ 14
The Funds' Investment Objective ....................... 4 The Lifetime Investing Account/Distribution
Investment Policies and Risks .......................... 4 Options ......................................... 15
Organization of the Fund and the The Eaton Vance Exchange Privilege ................. 15
Portfolio ........................................... 7 Eaton Vance Shareholder Services ................... 16
Management of the Fund and the Portfolio ............... 9 Distributions and Taxes ............................ 17
Distribution Plan ..................................... 10 Performance Information ............................ 18
Valuing Fund Shares .................................... 12 Appendix A ......................................... 19
How to Buy Fund Shares ................................. 12 Appendix B ......................................... 21
</TABLE>
- -------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1996
<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
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%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
<S> <C>
Investment Adviser Fee 0.63%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Other Expenses (after expense reduction) 0.06%
----
Total Operating Expenses (after expense reduction) 1.69%
====
<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: $27 $53 $92 $200
</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. Absent an
allocation of expenses to the Administrator, Other Expenses would have been
1.61% and Total Operating Expenses would have been 3.24%.
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 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 Portfolio'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 9.
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".
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 Deloitte & Touche LLP, independent
certified public accountants, as experts in accounting and auditing. Further
information regarding the performance of the Fund is contained in the Fund's
annual report to shareholders which may be obtained without charge by contacting
the Principal Underwriter.
- ------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
-------------------------
1996 1995*
------------ -----------
NET ASSET VALUE, beginning of year $ 9.430 $ 10.000
----------- ----------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.888 $ 0.735
Net realized and unrealized gain (loss)
on investments 0.225 (0.544)
----------- -----------
Total income from operations $ 1.113 $ 0.191
----------- -----------
LESS DISTRIBUTIONS:
From net investment income $ (0.888) $ (0.735)
In excess of net investment
income(1) (0.005) (0.026)
----------- -----------
Total distributions $ (0.893) $ (0.761)
----------- -----------
NET ASSET VALUE, end of year $ 9.650 $ 9.430
=========== ==========
TOTAL RETURN(2) 12.25% 1.89%
RATIOS/SUPPLEMENTAL DATA*:
Net assets, end of period (000 omitted $ 7,614 $ 2,076
Ratio of net expenses to average daily
net assets(3) 1.69% 2.04%+
Ratio of net investment income to
average daily net assets 9.17% 9.17%+
*For the periods 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 $ 0.738 $ 0.482
=========== ==========
RATIOS (As a percentage of average daily net assets):
Expenses(3) 3.24% 5.20%
Net investment income 7.62% 6.01%
*For the period from the start of business, June 8, 1994, to March 31, 1995.
+Computed on an annualized basis.
(1)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.
(2)Total investment return is calculated asuming 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 computed on a
non-annualized basis.
(3)Includes the Fund's share of High Income Portfolio's allocated expenses.
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME.
The Fund currently seeks to meet its investment objective by investing its
assets in the Portfolio, a separate registered investment company which has the
same investment objective as the Fund. This investment structure is commonly
referred to as a "master/feeder" structure. The Portfolio seeks to invest a
significant portion of its assets in high-yielding, high risk, fixed-income
securities (commonly referred to as "junk-bonds") to achieve this objective. 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. The Fund may not be appropriate for investors who cannot
assume the greater risk of capital depreciation or loss inherent in seeking
higher yields.
INVESTMENT POLICIES AND RISKS
- -------------------------------------------------------------------------------
The Portfolio normally is invested as follows:
* at least 80% of its net assets in fixed-income securities, including
convertible securities; and
* up to 20% of its net assets in common stocks and other equity securities
when consistent with its objective or acquired as part of a unit combining
fixed-income and equity securities.
THE PORTFOLIO WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN THE LOWEST
INVESTMENT GRADE AND LOWER RATED OBLIGATIONS (RATED BAA OR LOWER BY MOODY'S
INVESTORS SERVICE, INC. ("MOODY'S") OR BBB OR LOWER BY STANDARD & POOR'S RATINGS
GROUP ("S&P")) AND UNRATED OBLIGATIONS. For a description of Moody's and S&P's
ratings of fixed-income securities, see Appendix A to this Prospectus. Unrated
bonds are generally regarded as being speculative and expose the investor to
risks with respect to the issuer's capacity to pay interest and repay principal
which are similar to the risks of lower rated bonds. At March 31, 1996, the
Portfolio had approximately 93.6% of its assets invested in high yield, high
risk bonds that were rated lower than investment grade or unrated. See Appendix
B to this Prospectus for the Portfolio's asset composition information for the
most recent fiscal year of the Fund.
The Portfolio invests a substantial portion of its assets in high yield, high
risk securities issued in connection with mergers, acquisitions, leveraged
buy-outs, recapitalizations and other highly leveraged transactions. These
securities are subject to substantially greater credit risks than some of the
other fixed-income securities in which the Portfolio may invest. These credit
risks include the possibility of default or bankruptcy of the issuer. These
securities are less liquid than other fixed-income securities. During periods of
deteriorating economic conditions and contraction in the credit markets, the
ability of issuers of such securities to service their debt, meet projected
goals, or obtain additional financing may be impaired. For more detailed
information about the risks associated with investing in such securities, see
"Risk Considerations" below.
The Portfolio may also invest a portion of its assets in debt securities that
are not paying current income in anticipation of the receipt of possible future
income or capital appreciation. Interest and/or principal payments thereon could
be in arrears when such securities are acquired, and the issuer may be in
bankruptcy or undergoing a debt restructuring or reorganization. Such securities
may be unrated or the lowest rated obligations (rated C by Moody's or D by S&P).
Bonds rated C by Moody's are regarded as having extremely poor prospects of ever
attaining any real investment standing. Bonds rated D by S&P are in payment
default or a bankruptcy petition has been filed and debt service payments are
jeopardized. The Portfolio may retain defaulted obligations in its portfolio
when such retention is considered desirable by the Investment Adviser. The
Portfolio may also acquire other securities issued in exchange for such
obligations or issued in connection with the debt restructuring or
reorganization of the issuers, or where such acquisition, in the judgment of the
Investment Adviser, may enhance the value of such obligations or would otherwise
be consistent with the Portfolio's investment policies.
Although the Investment Adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt maturity
schedules and borrowing requirements, and relative values based on anticipated
cash flow, interest and asset coverages, and earnings prospects. Because of the
greater number of investment considerations involved in investing in high yield,
high risk bonds, the achievement of the Portfolio's objective depends more on
the Investment Adviser's judgment and analytical abilities than would be the
case if the Portfolio were investing primarily in securities in the higher
rating categories.
When the Investment Adviser believes that it is appropriate to do so, for
defensive purposes, more than 35% of the Portfolio's assets may be temporarily
invested in securities rated A or better by Moody's or S&P. All or a portion of
the Portfolio's assets may be invested temporarily in cash or short-term
obligations including, but not limited to, certificates of deposit, commercial
paper, short-term notes, obligations issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities and repurchase agreements.
FIXED-INCOME OBLIGATIONS. The fixed-income securities in which the Portfolio may
invest include preferred and preference stocks and all types of debt obligations
of both domestic and foreign issuers, such as bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional sale
contracts, commercial paper, and obligations issued or guaranteed by the U.S.
Government, any state or territory of the United States, any foreign government
or any of their respective political subdivisions, agencies or
instrumentalities. Debt securities may bear fixed, fixed and contingent,
variable or floating rates of interest. Investments in foreign securities may
not exceed 25% of total assets.
The Portfolio may also invest a portion of its assets in loan interests, which
are interests in amounts owed by a corporate, governmental or other borrower to
lenders or lending syndicates. Loan interests purchased by the Portfolio may
have a maturity of any number of days or years, may be secured or unsecured, and
may be of any credit quality. Loan interests, which may take the form of
participation interests in, assignments of or novations of a loan, may be
acquired from U.S. and foreign banks, insurance companies, finance companies or
other financial institutions which have made loans or are members of a lending
syndicate or from the holders of loan interests. Loan interests involve the risk
of loss in case of default or bankruptcy of the borrower and, in the case of
participation interests, involve the risk of insolvency of the agent lending
bank or other financial intermediary. The Portfolio may hold up to 15% of net
assets in illiquid securities, including securities legally restricted as to
resale, and securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933. Rule 144A securities may, however, be treated as liquid
by the Investment Adviser pursuant to procedures adopted by the Trustees, which
require consideration of factors such as trading activity, availability of
market quotations and number of dealers willing to purchase the security.
INVESTMENT PRACTICES
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 or as a substitutes for the
purchase or sale of securities or currency. Options may be written to enhance
income. The Portfolio's transaction 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, Euro-dollar time deposits, and economic indices) or currencies; options
on futures contracts; exchange-traded 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; tax
constraints on closing out positions; default by the counterparty; imperfect
correlation between a position and the desired hedge; and portfolio management
constraints on disposing of 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.
The Portfolio may write (sell) covered call and put options only with respect to
up to 25% of its net assets. 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 (the "CPTC"), 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 contacts the Portfolio has entered into. The Portfolio did not engage in
such transactions during the fiscal year ended March 31, 1996, and there is no
assurance that it will engage in such transactions in the future.
SHORT-TERM TRADING. Securities may be sold in anticipation of a market decline
(a rise in interest rates) and later purchased, 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. Such trading may be expected to increase
the portfolio turnover rate and the expenses incurred in connection with such
trading. The Portfolio anticipates that its annual portfolio turnover rate will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less).
RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of owning
shares of a mutual fund that invests in below investment grade debt obligations
(commonly referred to as "junk bonds") before making an investment in the Fund.
The lower ratings of certain securities held by the Portfolio reflect a greater
possibility that adverse changes in the financial condition of an issuer, or in
general economic conditions, or both, or an unanticipated rise in interest
rates, may impair the ability of the issuer to make payments of interest and
principal. The inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the values of securities
held by the Fund more volatile and could limit the Portfolio's ability to sell
its securities at prices approximating the values the Portfolio has placed on
such securities. It is possible that legislation may be adopted in the future
limiting the ability of certain financial institutions to purchase such
securities; such legislation may adversely affect the liquidity of such
securities. In the absence of a liquid trading market for securities held by it,
the Portfolio may be unable at times to establish the fair market value of such
securities.
The rating assigned to a security by a rating agency does not reflect an
assessment of the volatility of the security's market value or of the liquidity
of an investment in the securities. Credit ratings are based largely on the
issuer's historical financial condition and the rating agency's investment
analysis at the timing of rating, and the rating assigned to any particular
security is not necessarily a reflection of the issuer's current financial
condition. Credit quality in the high yield, high risk bond market can change
from time to time, and recently issued credit ratings may not fully reflect the
actual risks posed by a particular high yield security.
While the Investment Adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance that
a broadly diversified portfolio of such securities would substantially lessen
the risks of defaults brought about by an economic downturn or recession.
The net asset value of the Fund will change in response to fluctuations in
prevailing interest rates and changes in the value of the securities held by the
Portfolio. When interest rates decline, the value of securities already held by
the Portfolio can be expected to rise. Conversely, when interest rates rise, the
value of existing portfolio security holdings can be expected to decline.
Changes in the credit quality of issuers of debt obligations held by the
Portfolio will affect the principal value (and possibly the income earned) on
such obligations. In addition, the values of such securities are affected by
changes in general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized rating services in
their ratings of any fixed-income security and in the ability of an issuer to
make payments of interest and principal may also affect the value of these
investments. The Portfolio will not dispose of a security solely because its
rating is reduced below its rating at the time of purchase, although the
Investment Adviser will monitor the investment to determine whether continued
investment in the security will assist in meeting the Portfolio's investment
objective.
Interest and/or principal payments on securities in default may be in arrears
when such securities are acquired, and the issuer may be in bankruptcy or
undergoing a debt restructuring or reorganization. In order to enforce its
rights in the event of a default under such securities, the Portfolio may be
required to take possession of and manage assets securing the issuer's
obligation on such securities, which may increase the Portfolio's operating
expenses and adversely affect the Portfolio's net asset value. As at March 31,
1996 the Portfolio held one obligation in default, which represented less than
1% of the Portfolio's net assets. This obligation was sold from the Portfolio.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities held
by the Portfolio during a time of declining interest rates, the Portfolio may
not be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed. 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.
Loan interests generally are not rated by any nationally recognized rating
service and are, at present, not readily marketable and may be subject to
contractual restrictions on resale. An investment in restricted securities may
involve relative greater risk and cost to the Portfolio because of their
illiquidity. Moreover, liquid Rule 144A securities may increase the level of
Portfolio liquidity to the extent qualified institutional buyers become
uninterested in purchasing such securities.
Fixed-income securities that the Portfolio may invest in also include zero
coupon bonds, deferred interest bonds and bonds on which the interest is payable
in kind ("PIK bonds"). Zero coupon and deferred interest bonds are debt
obligations which are issued at a significant discount from face value. While
zero coupon bonds do not require the periodic payment of interest, deferred
interest bonds provide for a period of delay before the regular payment of
interest begins. PIK bonds are debt obligations which provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments may experience greater volatility
in market value due to changes in interest rates than debt obligations which
make regular payments of interest. The Portfolio will accrue income on such
investments for tax and accounting purposes, in accordance with applicable law,
the Fund's share of which income is distributable to shareholders. Because no
cash is received at the time such income is accrued, the Portfolio may be
required to liquidate other portfolio securities to enable the Fund to satisfy
its distribution obligations.
Investing in foreign securities may represent a greater degree of risk than
investing in domestic securities, because of the possibility of exchange rate
fluctuations, less publicly-available financial and other information, more
volatile and less liquid markets, less securities regulation, higher brokerage
costs, imposition of foreign withholding and other taxes, war, expropriation or
other adverse governmental actions.
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. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT FUNDAMENTAL
POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE
PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE
INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN
THE FUND'S INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE AN INVESTMENT OBJECTIVE
DIFFERENT FROM THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE
TIME THE INVESTOR BECAME A SHAREHOLDER IN THE FUND.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE FUND IS A DIVERSIFIED SERIES OF 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, see "The Fund's Investment
Objective" and "Investment Policies and Risks". Further information regarding
the 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 larger investors in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured mutual 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
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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 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:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
As of March 31, 1996, the Portfolio had net assets of $511,347,139. For the
fiscal year ended March 31, 1996, the Portfolio paid BMR advisory fees
equivalent to 0.63% of the Portfolio's average daily net assets for such year.
Hooker Talcott, Jr. has acted as the Portfolio's manager since it commenced
operations. Mr. Talcott has been a Vice President of Eaton Vance since 1987
and of BMR since 1992. Michael Weilheimer is the co-portfolio manager and has
been a Vice President of Eaton Vance since 1992.
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 which through its subsidiaries and affiliates
engages primarly in investment management and marketing activities.
BMR places the portfolio transactions of the Portfolio for execution with many
broker-dealer firms. Fixed-income securities 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 to
execute portfolio transactions, BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices which
are advantageous to the Portfolio and at reasonably competitive spreads. 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 firms to execute portfolio transactions.
The Fund, the Portfolio and BMR have adopted Codes of Ethics relating to
personal securities transactions. The Codes permit Eaton Vance personnel to
invest in securities (including securities that may be purchased or held by the
Portfolio) for their own accounts, subject to certain pre-clearance, reporting
and other restrictions and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for its 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 services 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
intial sales charge and at the same time permit the Principal Underwriter to
compensate Authorized Firms and other persons in connection with the sale of
Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. The Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments made to the Principal
Underwriter pursuant to the Plan, including any contingent deferred sales
charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this purpose
will include an allocable portion of the overhead costs of such organization and
its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales 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 March 31, 1996, the Fund paid or accrued sales commissions
under its Plan equivalent to 0.75% (annualized) of the Fund's average daily net
assets. As at March 31, 1996, the outstanding Uncovered Distribution Charges of
the Principal Underwriter calculated under the Plan amounted to approximately
$744,000 (equivalent to 9.8% 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 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.
During the fiscal year ended March 31, 1996, the Fund paid or accrued service
fee payments under its Plan equivalent to 0.25% (annualized) of the Fund's
average daily net assets for such period.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed by
the Principal Underwriter. In some instances, such additional incentives may be
offered only to certain Authorized Firms whose representatives sell or are
expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares, and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by IBT Fund Services (Canada) Inc., (as agent for the Fund)
in the manner authorized by the Trustees of the Trust. IBT Fund Services
(Canada) Inc. is a subsidiary of Investors Bank & Trust Company ("IBT"), the
Fund's and the Portfolio's custodian. 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 Fund Services (Canada) Inc. (as 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. Fixed-income securities (other than short-term
obligations), including listed securities and securities for which price
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. 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, P.O. Box 5153, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
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 High Income Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic High Income Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to First Data Investor
Services Group, P.O. Box 5123, Westborough, Massachusetts 01581-5123, 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 share of the Fund 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.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. If such procedures are not followed, the Fund, the Principal
Underwriter or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent telephone instructions. Telephone instructions will
be tape recorded. In times of drastic economic or market changes, a telephone
redemption may be difficult to implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: 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.
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 CDSCs (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.
If shares were recently purchased, the proceeds of a redemption (or repurchase)
will not be sent until the check (including a certified or cashier's check)
received for the shares purchased has cleared. Payment for shares tendered for
redemption may be delayed up to 15 days from the purchase date when the purchase
check has not yet cleared. Redemptions or repurchases may result in a taxable
gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the right
to redeem accounts with balances of less than $750. Prior to such a redemption,
shareholders will be given 60 days' written notice to make an additional
purchase. However, no such redemption would be required by the Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares. No contingent deferred sales charge will be imposed with respect to such
involunatry 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 ("CDSC"). Any
CDSC which is required to be imposed on share redemptions will be equal to 1% of
the net asset value of redeemed shares. This CDSC is imposed on any redemption
the amount of which exceeds the aggregate value at the time of redemption of (a)
all shares in the account purchased more than one year prior to the redemption,
(b) all shares in the account acquired through reinvestment of distributions,
and (c) the increase, if any, in the value 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 CDSC. 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 CDSC will be paid to the
Principal Underwriter or the Fund.
In calculating the CDSC 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 CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholders 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 certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state income tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to 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, P.O. Box 5123,
Westborough, MA 01581-5123 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under the 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.
Further, 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 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 CDSC 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 CDSC is imposed on exchanges. For purposes of calculating the CDSC 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
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
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 High Income Fund may be mailed directly to First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 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 CDSC. 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 CDSC 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 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,
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.
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. The Fund anticipates that for tax purposes the entire
distribution, whether paid in cash or reinvested in additional shares of the
Fund, will constitute income to its shareholders. Shareholders reinvesting the
monthly distribution should treat the amount of the entire distribution as the
tax cost basis of the additional shares acquired by reason of such reinvestment.
Certain distributions if declared by the Fund in October, November or December
and paid the following January will be taxable to shareholders as if received on
December 31 of the year in which they are declared.
Distributions of the Fund which are derived from net investment income, net
short-term capital gains and certain foreign exchange gains are taxable to
shareholders as ordinary income, whether received in cash or reinvested in
additional shares. Only a small portion, if any, of such distributions may be
eligible for the dividends-received deduction for corporations subject to
certain limitations.
Capital gains, if any, realized on sales of investments and on options and
futures transactions during the fiscal year, which ends on March 31, will be
offset by capital losses, including any capital loss carryovers, and will
usually be distributed with the Fund's first monthly distribution paid after the
close of such fiscal year. However, the Fund could make additional distributions
of capital gains in any year in order to comply with the distribution
requirements of the Code. Distributions of long-term capital gains 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 shareholder.If shares are purchased shortly
before the record date of such a distribution, the shareholder will pay the full
price for the shares and then receive some portion of the price back as a
taxable distribution.
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.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes,
income and gains it distributes to shareholders. In satisfying these
requirements, the Fund will treat itself as owning its proportionate share of
each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
does not pay federal income or excise taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS 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 CDSC at the end
of the period. The Fund may also publish annual and cumulative total return
figures from time to time.The Fund may quote total return for the period prior
to commencement of operations which would reflect the Portfolio's total return
(and 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 CDSC which may be imposed upon redemption at the end of the specified
period. Any performance figure which does not take into account the CDSC 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 current 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. If the expenses of the Fund or the Portfolio are allocated to
Eaton Vance, the Fund's performance will be higher.
<PAGE>
APPENDIX A
DESCRIPTION OF MOODY'S CORPORATE 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.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Bonds rated AAA have the highest rating assigned by S&P's. Capacity to
pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Bonds may lack a Standard & Poor's rating because no public rating has been
requested, because there is insufficient information on which to base a rating,
or because Standard & Poor's does not rate a particular type of obligation as a
matter of policy.
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Portfolio is dependent on the
Investment Adviser's judgment, analysis and experience in the evaluation of such
bonds.
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>
APPENDIX B
HIGH INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE PERIOD ENDED MARCH 31, 1996
PERCENT OF
NET ASSETS
----------
Preferred Stocks and Other Equity Securities ............. 1.7%
Short-Term Obligations ................................... 3.5%
Debt Securities -- Moody's Rating
Ba ................................................... 5.4%
B1 ................................................... 12.9%
B2 ................................................... 25.5%
B3 ................................................... 40.5%
Caa .................................................. 7.2%
Unrated .............................................. 3.3%
----
Total ................................................ 100.0%
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the fiscal year ended March 31, 1996, with the debt
securities rated by Moody's separated into the indicated categories. The
weighted average indicated above was calculated on a dollar weighted basis and
was computed as at the end of each month during the year. The charge does not
necessarily indicate what the composition of the Portfolio will be in the
current and subsequent fiscal years.
For a description of Moody's ratings of fixed-income securities, see Appendix A
to this Prospectus.
<PAGE>
[LOGO]
EV CLASSIC HIGH INCOME FUND
- --------------------------------------------------------------------------------
PROSPECTUS
AUGUST 1, 1996
EV CLASSIC
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC HIGH INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-HIP
<PAGE>
Part A
Information Required in a Prospectus
EV MARATHON
HIGH INCOME FUND
- -------------------------------------------------------------------------------
EV MARATHON HIGH INCOME FUND (THE "FUND") IS A MUTUAL FUND SEEKING TO PROVIDE A
HIGH LEVEL OF CURRENT INCOME. THE FUND INVESTS ITS ASSETS IN HIGH INCOME
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").
THE PORTFOLIO SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING UP TO
100% OF ITS ASSETS IN LOWER-RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT
ENTAIL GREATER RISKS, INCLUDING DEFAULT, THAN THOSE OF HIGHER-RATED
SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS AND INVEST FOR THE
LONG TERM. SEE "THE FUND'S INVESTMENT OBJECTIVE" AND "INVESTMENT POLICIES AND
RISKS."
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 August 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 Redeem Fund Shares .......................... 13
The Funds' Financial Highlights ........................ 3 Reports to Shareholders ............................ 15
The Funds' Investment Objective ........................ 4 The Lifetime Investing Account/Distribution
Investment Policies and Risks .......................... 4 Options ......................................... 15
Organization of the Fund and the The Eaton Vance Exchange Privilege ................. 16
Portfolio ............................................. 7 Eaton Vance Shareholder Services ................... 17
Management of the Fund and the Portfolio ............... 9 Distributions and Taxes ............................ 17
Distribution Plan ...................................... 10 Performance Information ............................ 18
Valuing Fund Shares .................................... 11 Appendix A ......................................... 19
How to Buy Fund Shares ................................. 12 Appendix B ......................................... 21
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED AUGUST 1, 1996
<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
Range of Declining Contingent Deferred Sales Charges Imposed on Redemptions
during the First Seven Years (as a percentage of redemption proceeds exclusive
of all reinvestments and capital appreciation in the account) 5.00%-0%
<CAPTION>
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a percentage of average daily net assets)
-------------------------------------------------------------------------------------------------------
<S> <C>
Investment Adviser Fee 0.63%
Rule 12b-1 Distribution (and Service) Fees 0.92
Other Expenses 0.23
----
Total Operating Expenses 1.78%
=====
<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: $68 $96 $116 $209
An investor would pay the following expenses on the same
investment, assuming (a) 5% annual return and (b) no
redemptions: $18 $56 $ 96 $209
</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
that 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 return will vary.
For further information regarding the expenses of 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 the 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 Portfolio'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 9 of this prospectus.
Other investment companies with different distribution arrangements and fees
are investing in the Portfolio and others may do so in the future. See
"Organization of the Fund and the Portfolio".
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements 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 Deloitte & Touche LLP, independent certified
public accountants, as experts in accounting and auditing. Further information
regarding the performance of the Fund is contained in the Fund's annual report
to shareholders which may be obtained without charge by contacting the
Principal Underwriter.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987(a)*
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
beginning of year $ 6.920 $ 7.450 $ 7.480 $ 7.380 $ 6.120 $ 7.430 $ 9.230 $ 9.330 $ 10.380 $ 10.000
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income $ 0.665 $ 0.671 $ 0.697 $ 0.767 $ 0.825 $ 0.973 $ 1.053 $ 1.054 $ 1.041 $ 0.701
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Net realized and unrealized
gain (loss) on investments 0.189 (0.507) 0.047 0.170 1.356 (1.187) (1.708) (0.023) (0.916) 0.427
Commissions paid on sale of
Fund shares -- -- -- -- -- -- -- -- -- (0.046)
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Total income (loss) from
operations $ 0.854 $ 0.164 $ 0.744 $ 0.937 $ 2.181 $ (0.214) $ (0.655) $ 1.031 $ 0.125 $ 1.082
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
LESS DISTRIBUTIONS:
From net investment income $ (0.665) $ (0.671) $ (0.697) $ (0.767) $ (0.825) $ (0.973) $ (1.078) $ (1.038) $ (1.030) $ (0.702)
In excess of net investment
income(1) (0.009) (0.023) (0.077) (0.070) (0.096) (0.123) (0.067) (0.093) (0.095) --
From realized capital gains -- -- -- -- -- -- -- -- (0.050) --
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
Total distributions $ (0.674) $ (0.694) $ (0.774) $ (0.837) $ (0.921) $ (1.096) $ (1.145) $ (1.131) $ (1.125) $ (0.702)
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
NET ASSET VALUE, end
of year $ 7.100 $ 6.920 $ 7.450 $ 7.480 $ 7.380 $ 6.120 $ 7.430 $ 9.230 $ 9.330 $ 10.380
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN(2) 12.8% 2.51% 10.28% 13.41% 38.21% (2.84)% (8.14)% 11.58% 1.52% 2.00%
-------- -------- -------- -------- -------- -------- -------- -------- --------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000 omitted) $496,966 $439,171 $399,259 $332,854 $252,967 $170,655 $214,075 $268,080 $231,648 $189,035
Ratio of expenses to average
daily net assets(3) 1.78% 1.78% 1.82% 2.09% 2.19% 2.37% 2.20% 2.19% 2.02% 1.01%+
Ratio of net investment
income to average daily
net assets 9.38% 9.52% 9.09% 10.31% 12.00% 14.54% 12.12% 11.28% 10.89% 11.06%+
PORTFOLIO TURNOVER(4) -- 11% 96% 91% 82% 57% 53% 57% 59% 47%
*Period from the start of business, August 19, 1986, to March 31, 1987.
+Computed on an annualized basis.
Notes:
(1)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.
(2)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.
(3)Includes the Fund's share of the Portfolio's allocated expenses subsequent to June 1, 1994.
(4)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 Annual Report.
(a)On June 12, 1987, the Securities and Exchange Commission adopted a new rule which requires sales commissions paid to the
Principal Underwriter under the Distribution Plan to be treated as an operating expense rather than a charge to paid-in
capital. Accordingly, such commissions for the years ended after March 31, 1987 are reflected as an expense. As a result, for
such periods, expenses per share are increased and net income per share is decreased, with no effect on net asset value per
share. Also, the ratios of expenses and net investment income to average net assets are correspondingly affected. Had the rule
been in effect for the period from the start of business, August 19, 1986, to March 31, 1987, the annualized ratios of expenses
and net investment income to average net assets would have been 2.01% and 10.06%, respectively.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME.
The Fund currently seeks to meet its investment objective by investing its
assets in the Portfolio, a separate registered investment company which has the
same investment objective as the Fund. This investment structure is commonly
referred to as a "master/feeder" structure. The Portfolio seeks to invest a
significant portion of its assets in high-yielding, high risk, fixed-income
securities (commonly referred to as "junk-bonds"), to achieve this objective.
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. The Fund may not be appropriate for
investors who cannot assume the greater risk of capital depreciation or loss
inherent in seeking higher yields.
INVESTMENT POLICIES AND RISKS
- -------------------------------------------------------------------------------
The Portfolio normally is invested as follows:
* at least 80% of its net assets in fixed-income securities, including
convertible securities; and
* up to 20% of its net assets in common stocks and other equity securities
when consistent with its objective or acquired as part of a unit combining
fixed-income and equity securities.
THE PORTFOLIO WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN THE LOWEST
INVESTMENT GRADE AND LOWER RATED OBLIGATIONS (RATED BAA OR LOWER BY MOODY'S
INVESTORS SERVICE, INC. ("MOODY'S") OR BBB OR LOWER BY STANDARD & POOR'S RATINGS
GROUP ("S&P")) AND UNRATED OBLIGATIONS. For a description of Moody's and S&P's
ratings of fixed-income securities, see Appendix A to this Prospectus. Unrated
bonds are generally regarded as being speculative and expose the investor to
risks with respect to the issuer's capacity to pay interest and repay principal
which are similar to the risks of lower rated bonds. At March 31, 1996, the
Portfolio had approximately 93.6% of its assets invested in high yield, high
risk bonds that were rated lower than investment grade or unrated. See Appendix
B to this Prospectus for the Portfolio's asset composition information for the
most recent fiscal year of the Fund.
The Portfolio invests a substantial portion of its assets in high yield, high
risk securities issued in connection with mergers, acquisitions, leveraged
buy-outs, recapitalizations and other highly leveraged transactions. These
securities are subject to substantially greater credit risks than some of the
other fixed-income securities in which the Portfolio may invest. These credit
risks include the possibility of default or bankruptcy of the issuer. These
securities are less liquid than other fixed-income securities. During periods of
deteriorating economic conditions and contraction in the credit markets, the
ability of issuers of such securities to service their debt, meet projected
goals, or obtain additional financing may be impaired. For more detailed
information about the risks associated with investing in such securities, see
"Risk Considerations" below.
The Portfolio may also invest a portion of its assets in debt securities that
are not paying current income in anticipation of the receipt of possible future
income or capital appreciation. Interest and/or principal payments thereon could
be in arrears when such securities are acquired, and the issuer may be in
bankruptcy or undergoing a debt restructuring or reorganization. Such securities
may be unrated or the lowest rated obligations (rated C by Moody's or D by S&P).
Bonds rated C by Moody's are regarded as having extremely poor prospects of ever
attaining any real investment standing. Bonds rated D by S&P are in payment
default or a bankruptcy petition has been filed and debt service payments are
jeopardized. The Portfolio may retain defaulted obligations in its portfolio
when such retention is considered desirable by the Investment Adviser. The
Portfolio may also acquire other securities issued in exchange for such
obligations or issued in connection with the debt restructuring or
reorganization of the issuers, or where such acquisition, in the judgment of the
Investment Adviser, may enhance the value of such obligations or would otherwise
be consistent with the Portfolio's investment policies.
Although the Investment Adviser considers security ratings when making
investment decisions, it performs its own credit and investment analysis and
does not rely primarily on the ratings assigned by the rating services. In
evaluating the quality of a particular issue, whether rated or unrated, the
Investment Adviser will normally take into consideration, among other things,
the issuer's financial resources and operating history, its sensitivity to
economic conditions and trends, the ability of its management, its debt maturity
schedules and borrowing requirements, and relative values based on anticipated
cash flow, interest and asset coverages, and earnings prospects. Because of the
greater number of investment considerations involved in investing in high yield,
high risk bonds, the achievement of the Portfolio's objective depends more on
the Investment Adviser's judgment and analytical abilities than would be the
case if the Portfolio were investing primarily in securities in the higher
rating categories.
When the Investment Adviser believes that it is appropriate to do so, for
defensive purposes, more than 35% of the Portfolio's assets may be temporarily
invested in securities rated A or better by Moody's or S&P. All or a portion of
the Portfolio's assets may be invested temporarily in cash or short-term
obligations including, but not limited to, certificates of deposit, commercial
paper, short-term notes, obligations issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities and repurchase agreements.
FIXED-INCOME OBLIGATIONS. The fixed-income securities in which the Portfolio may
invest include preferred and preference stocks and all types of debt obligations
of both domestic and foreign issuers, such as bonds, debentures, notes,
equipment lease certificates, equipment trust certificates, conditional sale
contracts, commercial paper, and obligations issued or guaranteed by the U.S.
Government, any state or territory of the United States, any foreign government
or any of their respective political subdivisions, agencies or
instrumentalities. Debt securities may bear fixed, fixed and contingent,
variable or floating rates of interest. Investments in foreign securities may
not exceed 25% of total assets.
The Portfolio may also invest a portion of its assets in loan interests, which
are interests in amounts owed by a corporate, governmental or other borrower to
lenders or lending syndicates. Loan interests purchased by the Portfolio may
have a maturity of any number of days or years, may be secured or unsecured, and
may be of any credit quality. Loan interests, which may take the form of
participation interests in, assignments of or novations of a loan, may be
acquired from U.S. and foreign banks, insurance companies, finance companies or
other financial institutions which have made loans or are members of a lending
syndicate or from the holders of loan interests. Loan interests involve the risk
of loss in case of default or bankruptcy of the borrower and, in the case of
participation interests, involve the risk of insolvency of the agent lending
bank or other financial intermediary.
The Portfolio may hold up to 15% of net assets in illiquid securities, including
securities legally restricted as to resale, and securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933. Rule 144A securities
may, however, be treated as liquid by the Investment Adviser pursuant to
procedures adopted by the Trustees, which require consideration of factors such
as trading activity, availability of market quotations and number of dealers
willing to purchase the security.
INVESTMENT PRACTICES
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 or as a substitute for the
purchase or sale of securities or currency. Options may be written to enhance
income. 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 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; tax
constraints on closing out positions; default by the counterparty; imperfect
correlation between a position and the desired hedge; and portfolio management
constraints on disposing of 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.
The Portfolio may write (sell) covered call and put options only with respect to
up to 25% of its net assets. 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 (the "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 contacts the Portfolio has entered into. The Portfolio did not engage in
such transactions during the period from June 1, 1994 (commencement of
operations) to March 31, 1996, and there is no assurance that it will engage in
such transactions in the future.
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. Such trading may be expected to increase the portfolio
turnover rate and the expenses incurred in connection with such trading. The
Portfolio anticipates that its annual portfolio turnover rate will generally not
exceed 100% (excluding turnover of securities having a maturity of one year or
less).
ADDITIONAL RISK CONSIDERATIONS
Investors should carefully consider their ability to assume the risks of owning
shares of a mutual fund that invests in below investment grade debt obligations
(commonly referred to as "junk bonds") before making an investment in the Fund.
The lower ratings of certain securities held by the Portfolio reflect a greater
possibility that adverse changes in the financial condition of an issuer, or in
general economic conditions, or both, or an unanticipated rise in interest
rates, may impair the ability of the issuer to make payments of interest and
principal. The inability (or perceived inability) of issuers to make timely
payment of interest and principal would likely make the values of securities
held by the Fund more volatile and could limit the Portfolio's ability to sell
its securities at prices approximating the values the Portfolio has placed on
such securities. It is possible that legislation may be adopted in the future
limiting the ability of certain financial institutions to purchase such
securities; such legislation may adversely affect the liquidity of such
securities. In the absence of a liquid trading market for securities held by it,
the Portfolio may be unable at times to establish the fair market value of such
securities.
The rating assigned to a security by a rating agency does not reflect an
assessment of the volatility of the security's market value or of the liquidity
of an investment in the securities. Credit ratings are based largely on the
issuer's historical financial condition and the rating agency's investment
analysis at the timing of rating, and the rating assigned to any particular
security is not necessarily a reflection of the issuer's current financial
condition. Credit quality in the high yield, high risk bond market can change
from time to time, and recently issued credit ratings may not fully reflect the
actual risks posed by a particular high yield security.
While the Investment Adviser will attempt to reduce the risks of investing in
lower rated or unrated securities through active portfolio management,
diversification, credit analysis and attention to current developments and
trends in the economy and the financial markets, there can be no assurance that
a broadly diversified portfolio of such securities would substantially lessen
the risks of defaults brought about by an economic downturn or recession.
The net asset value of the Fund will change in response to fluctuations in
prevailing interest rates and changes in the value of the securities held by the
Portfolio. When interest rates decline, the value of securities already held by
the Portfolio can be expected to rise. Conversely, when interest rates rise, the
value of existing portfolio security holdings can be expected to decline.
Changes in the credit quality of issuers of debt obligations held by the
Portfolio will affect the principal value (and possibly the income earned) on
such obligations. In addition, the values of such securities are affected by
changes in general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized rating services in
their ratings of any fixed-income security and in the ability of an issuer to
make payments of interest and principal may also affect the value of these
investments. The Portfolio will not dispose of a security solely because its
rating is reduced below its rating at the time of purchase, although the
Investment Adviser will monitor the investment to determine whether continued
investment in the security will assist in meeting the Portfolio's investment
objective.
Interest and/or principal payments on securities in default may be in arrears
when such securities are acquired, and the issuer may be in bankruptcy or
undergoing a debt restructuring or reorganization. In order to enforce its
rights in the event of a default under such securities, the Portfolio may be
required to take possession of and manage assets securing the issuer's
obligation on such securities, which may increase the Portfolio's operating
expenses and adversely affect the Portfolio's net asset value. As at March 31,
1996, the Portfolio held one obligation in default, which represented less than
1% of the Portfolio's net assets. This obligation was sold from the Portfolio.
Certain securities held by the Portfolio may permit the issuer at its option to
"call", or redeem, its securities. If an issuer were to redeem securities held
by the Portfolio during a time of declining interest rates, the Portfolio may
not be able to reinvest the proceeds in securities providing the same investment
return as the securities redeemed. 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.
Loan interests generally are not rated by any nationally recognized rating
service and are, at present, not readily marketable and may be subject to
contractual restrictions on resale. An investment in restricted securities may
involve relative greater risk and cost to the Portfolio because of their
illiquidity. Moreover, liquid Rule 144A securities may increase the level of
Portfolio liquidity to the extent qualified institutional buyers become
uninterested in purchasing such securities.
Fixed-income securities that the Portfolio may invest in also include zero
coupon bonds, deferred interest bonds and bonds on which the interest is payable
in kind ("PIK bonds"). Zero coupon and deferred interest bonds are debt
obligations which are issued at a significant discount from face value. While
zero coupon bonds do not require the periodic payment of interest, deferred
interest bonds provide for a period of delay before the regular payment of
interest begins. PIK bonds are debt obligations which provide that the issuer
thereof may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments may experience greater volatility
in market value due to changes in interest rates than debt obligations which
make regular payments of interest. The Portfolio will accrue income on such
investments for tax and accounting purposes, in accordance with applicable law,
the Fund's share of which income is distributable to shareholders. Because no
cash is received at the time such income is accrued, the Portfolio may be
required to liquidate other portfolio securities to enable the Fund to satisfy
its distribution obligations.
Investing in foreign securities may represent a greater degree of risk than
investing in domestic securities, because of the possibility of exchange rate
fluctuations, less publicly-available financial and other information, more
volatile and less liquid markets, less securities regulation, higher brokerage
costs, imposition of foreign withholding and other taxes, war, expropriation or
other adverse governmental actions.
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. EXCEPT FOR SUCH ENUMERATED
RESTRICTIONS AND AS OTHERWISE INDICATED IN THIS PROSPECTUS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT FUNDAMENTAL
POLICIES AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE
PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE
INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN
THE FUND'S INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE AN INVESTMENT OBJECTIVE
DIFFERENT FROM THE OBJECTIVE WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE
TIME THE INVESTOR BECAME A SHAREHOLDER IN THE FUND.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE FUND IS A DIVERSIFIED SERIES OF 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, see "The Fund's Investment
Objective" and "Investment Policies and Risks". Further information regarding
the investment practices may also be found in the Statement of Additional
Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages and
disadvantages of the two-tier format. The Trustees believe that 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. 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 larger investors in the Portfolio. For example, if a large investor
withdraws from the Portfolio, the remaining investors may experience higher pro
rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured funds which have large or institutional
investors.
Until 1992, the Administrator sponsored and advised 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
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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 invesments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR 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:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------------------------------------------------------------------------------
1 up to $500 million 0.300% 3.00%
2 $500 million but less than $1 billion 0.275% 2.75%
3 $1 billion but less than $1.5 billion 0.250% 2.50%
4 $1.5 billion but less than $2 billion 0.225% 2.25%
5 $2 billion but less than $3 billion 0.200% 2.00%
6 $3 billion and over 0.175% 1.75%
As of March 31, 1996, the Portfolio had net assets of $511,347,139. For the
fiscal year ended March 31, 1996, the Portfolio paid BMR advisory fees
equivalent to 0.63% 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 which through its subsidiaries and affiliates
engages primarily in investment management and marketing activities.
Hooker Talcott, Jr. has acted as portfolio manager of the Portfolio since it
commenced operations. Mr. Talcott has been a Vice President of Eaton Vance
since 1987 and of BMR since 1992. Michael Weilheimer is the co-portfolio
manager and has been a Vice President of Eaton Vance since 1992.
BMR places the portfolio transactions of the Portfolio for execution with many
broker-dealer firms. Fixed-income securities 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 to
execute portfolio transactions, BMR judges their professional ability and
quality of service and uses its best efforts to obtain execution at prices which
are advantageous to the Portfolio and at reasonably competitive spreads. 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 firms to execute portfolio transactions.
The Fund, the Portfolio and BMR have adopted Codes of Ethics relating to
personal securities transactions. The Codes permit Eaton Vance personnel to
invest in securities (including securities that may be purchased or held by the
Portfolio) for their own accounts, subject to certain pre-clearance, reporting
and other restrictions and procedures contained in such Codes.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser since
the Trust seeks to achieve the investment objective of the Fund by investing the
Fund's assets in the Portfolio. As Administrator, Eaton Vance provides the Fund
with general office facilities and supervises the overall administration of the
Fund. For these services Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for its 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 5% of
the amount received by the Fund for each share sold and (ii) distribution fees
calculated by applying the rate of 1% over the prime rate then reported in The
Wall Street Journal to the outstanding balance of Uncovered Distribution Charges
(as described below) of the Principal Underwriter. The Principal Underwriter
currently expects to pay sales commissions (except on exchange transactions and
reinvestments) to a financial services firm (an "Authorized Firm") at the time
of sale equal to 4% of the purchase price of the shares sold by such Firm. The
Principal Underwriter will use its own funds (which may be borrowed from banks)
to pay such commissions. Because the payment of the sales commissions and
distribution fees to the Principal Underwriter is subject to the NASD Rule
described below, it will take the Principal Underwriter a number of years to
recoup the sales commissions paid by it to Authorized Firms from the payments
received by it from the Fund pursuant to the Plan.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE FUND'S
AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the Fund accrues
daily an amount at the rate of 1/365 of .75% of the Fund's net assets, and pays
such accrued amounts monthly to the Principal Underwriter. The Plan requires
such accruals to be automatically discontinued during any period in which there
are no outstanding Uncovered Distribution Charges under the Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent to all
unpaid sales commissions and distribution fees to which the Principal
Underwriter is entitled under the Plan less all contingent deferred sales
charges theretofore paid to the Principal Underwriter. The Eaton Vance
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all payments received by the
Principal Underwriter from the Fund pursuant to the Plan, including any
contingent deferred sales charges, have exceeded the total expenses theretofore
incurred by such organization in distributing shares of the Fund. Total expenses
for this purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales 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 March 31, 1996, the Fund paid or accrued sales commissions
under its Plan to the Principal Underwriter equivalent to .75% of the Fund's
average daily net assets for such year. As at March 31, 1996, the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under the
Plan amounted to approximately $15,354,000 (which amount was equivalent to 3.1%
of the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The
Trustees of the Trust have initially implemented this provision of the Plan by
authorizing the Fund to make quarterly service fee payments to the Principal
Underwriter and Authorized Firms in amounts not expected to exceed .25% 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 March 31, 1996,
the Fund paid or accrued service fee payments under the Plan equivalent to 0.17%
(annualized) 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
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by IBT Fund Services (Canada) Inc., (as agent for the Fund)
in the manner authorized by the Trustees of the Trust. IBT Fund Services
(Canada) Inc. is a subsidiary of Investors Bank & Trust Company ("IBT"), the
Fund's and the Portfolio's custodian. 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 Fund Services (Canada) Inc. (as 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. Fixed-income securities (other than short-term
obligations), including listed securities and securities for which price
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. For further information regarding the
valuation of the Portfolio's assets, see "Determination of Net Asset Value" in
the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined after an order is
effective. An Authorized Firm may charge its customers a fee in connection with
transactions executed by that Firm. The Fund may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment in the Fund must be at least $1,000. Once an account has
been established, the investor may send investments of $50 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123. The
$1,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $50 or more. See "Eaton
Vance Shareholder Services".
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 High Income Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Marathon High Income Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per Fund share next computed after a redemption request is
received in the proper form as described below.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to First Data Investor
Services Group, P.O. Box 5123, Westborough, Massachusetts 01581-5123, during its
business hours a written request for redemption in good order, plus any share
certificates with executed stock powers. Good order means that all relevant
documents must be endorsed by the record owner(s) exactly as the shares are
registered and the signature(s) must be guaranteed by a member of either the
Securities Transfer Association's STAMP program or the New York Stock Exchange's
Medallion Signature Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations as required by a regulation of the Securities
and Exchange Commission and acceptable to 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.
REDEMPTION BY TELEPHONE: Shares may be redeemed by telephone provided the
investor has not disclaimed in writing the use of the privilege. Such
redemptions can be effected by calling the Transfer Agent at 800-262-1122,
Monday through Friday, 9:00 a.m. to 4:00 p.m. (Eastern Standard Time). The
proceeds of a telephone redemption may be no greater than the maximum amount
established by the Principal Underwriter (currently $50,000) and may be mailed
only to the account address of record. Shares held by corporations, trusts or
certain other entities, or subject to fiduciary arrangements, may not be
redeemed by telephone. Neither the Fund, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. If such procedures are not followed, the Fund, the Principal
Underwriter or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent telephone instructions. Telephone instructions will
be tape recorded. In times of drastic economic or market changes, a telephone
redemption may be difficult to implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: 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.
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 charges (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.
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 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
involunatry 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
("CDSC"). This CDSC 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 in the other shares in the account (namely those purchased
within 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 CDSC. 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 CDSC will be paid to the
Principal Underwriter or the Fund. Any CDSC which is required to be imposed on
share redemptions will be made in accordance with the following schedule:
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
-----------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
In calculating the CDSC upon the redemption of Fund shares acquired in an
exchange for shares of a fund currently listed under "The Eaton Vance Exchange
Privilege", the CDSC 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 CDSC will be imposed on Fund shares which have been sold to Eaton Vance or
its affiliates, or to their respective employees or clients. The CDSC will also
be waived for shares redeemed (1) pursuant to a Withdrawal Plan (see "Eaton
Vance Shareholders 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 CDSC. 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 CDSC WOULD BE IMPOSED ON $1,000 OF THE
REDEMPTION. THE RATE WOULD BE 5% BECAUSE IT WAS THE SECOND YEAR AFTER THE
PURCHASE WAS MADE AND THE CDSC WOULD BE $50.
REPORTS TO SHAREHOLDERS
- ------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent certified public accountants. Shortly
after the end of each calendar year, the Fund will furnish all shareholders with
information necessary for preparing federal and state 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 $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, P.O. Box 5123,
Westborough, MA 01581-5123 (please provide the name of the shareholder, the Fund
and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the Fund's
dividend disbursing agent, First Data Investor Services Group, P.O. Box 5123,
Westborough, MA 01581-5123. The currently effective option will appear on each
account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid i 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 the 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.
Further, 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 a
Fund involves special procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the account from the
Authorized Firm. Before establishing a "street name" account with an investment
firm, or transferring the account to another investment firm, an investor
wishing to reinvest distributions should determine whether the firm which will
hold the shares allows reinvestment of distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Marathon Group of Funds (including Class I shares of
any EV Marathon Limited Maturity Fund) or Eaton Vance Money Market Fund, which
are distributed subject to a CDSC. 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 CDSC is imposed on exchanges. For purposes of calculating the CDSC upon the
redemption of shares acquired in an exchange, the CDSC 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. However, the time during which shares
are held in an Authorized Firm fund will not be credited toward completion of
the CDSC period. For the CDSC 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 CDSC 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
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 the EV
Marathon High Income Fund may be mailed directly to First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 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 CDSC. 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 CDSC 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 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,
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.
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. The Fund anticipates that for tax purposes the entire
distribution, whether paid in cash or reinvested in additional shares of the
Fund, will constitute income to its shareholders. Shareholders reinvesting the
monthly distribution should treat the amount of the entire distribution as the
tax cost basis of the additional shares acquired by reason of such reinvestment.
Certain distributions, if declared by the Fund in October, November or December
and paid the following January, will be taxable to shareholders as if received
on December 31 of the year in which they are declared.
Distributions of the Fund which are derived from net investment income, net
short-term capital gains and certain foreign exchange gains are taxable to
shareholders as ordinary income, whether received in cash or reinvested in
additional shares. Only a small portion, if any, of such distributions may be
eligible for the dividends-received deduction for corporations subject to
certain limitations.
Capital gains, if any, realized on sales of investments and on options and
futures transactions during the fiscal year, which ends on March 31, will be
offset by capital losses, including any capital loss carryovers, and will
usually be distributed with the Fund's first monthly distribution paid after the
close of such fiscal year. However, the Fund could make additional distributions
of capital gains in any year in order to comply with the distribution
requirements of the Code. Distributions designated by the Fund as from long-term
capital gains are taxable to shareholders as long-term capital gains whether
received in cash or additional shares of the Fund and regardless of the length
of time Fund shares have been owned by the shareholder. If shares are purchased
shortly before the record date of such a distribution, the shareholder will pay
the full price for the shares and then receive some portion of the price back as
a taxable distribution.
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.
Shareholders should consult with their tax advisers concerning the applicability
of state, local or other taxes to an investment in the Fund.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributes to shareholders. In satisfying these
requirements, the Fund will treat itself as owning its proportionate share of
each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay federal
income or excise taxes to the extent that it distributes to shareholders its net
investment income and net realized capital gains in accordance with the timing
requirements imposed by the Code. As a partnership under the Code, the Portfolio
does not pay federal income or excise taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS 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 publish total return figures which do not take into account
any CDSC which may be imposed upon redemptions at the end of the specified
period. Any performance figure which does not take into account the CDSC 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 current 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. If the expenses of the Fund or the Portfolio are allocated to
Eaton Vance, the Fund's performance will be higher.
<PAGE>
APPENDIX A
DESCRIPTION OF MOODY'S CORPORATE 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.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF S&P'S CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Bonds rated AAA have the highest rating assigned by S&P's. Capacity to
pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST WILL INCLUDE THOSE IN THE FOLLOWING
CATEGORIES:
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Bonds may lack a Standard & Poor's rating because no public rating has been
requested, because there is insufficient information on which to base a rating,
or because Standard & Poor's does not rate a particular type of obligation as a
matter of policy.
NOTES: Bonds which are unrated expose the investor to risks with respect to
capacity to pay interest or repay principal which are similar to the risks of
lower-rated speculative obligations. The Portfolio is dependent on the
Investment Adviser's judgment, analysis and experience in the evaluation of such
bonds.
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>
APPENDIX B
HIGH INCOME PORTFOLIO
ASSET COMPOSITION INFORMATION
FOR THE FISCAL YEAR ENDED MARCH 31, 1996
PERCENT OF
NET ASSETS
----------
Preferred Stocks and Other Equity Securities ............. 1.7%
Short-term Obligations ................................... 3.5%
Debt Securities -- Moody's Rating
Ba ................................................... 5.4%
B1 ................................................... 12.9%
B2 ................................................... 25.5%
B3 ................................................... 40.5%
Caa .................................................. 7.2%
Unrated .............................................. 3.3%
-------
Total ................................................ 100.00%
The chart above indicates the weighted average composition of the securities
held by the Portfolio for the fiscal year ended March 31, 1996, with the debt
securities rated by Moody's separated into the indicated categories. The
weighted average indicated above was calculated on a dollar weighted basis and
was computed as at the end of each month during the fiscal year. The chart does
not necessarily indicate what the composition of the Fund's portfolio will be in
the current and subsequent fiscal years.
For a description of Moody's ratings of fixed-income securities, see Appendix A
to this Prospectus.
<PAGE>
[LOGO]
EV MARATHON
HIGH INCOME
FUND
PROSPECTUS
AUGUST 1, 1996
EV MARATHON
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON HIGH INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-HIP
<PAGE>
EV CLASSIC
TAX-MANAGED GROWTH FUND
- ------------------------------------------------------------------------------
EV CLASSIC TAX-MANAGED GROWTH FUND (THE "FUND") IS A MUTUAL FUND SEEKING LONG-
TERM, AFTER-TAX RETURNS FOR ITS SHAREHOLDERS THROUGH INVESTING IN A
DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES. THE FUND CURRENTLY INTENDS TO
PURSUE ITS INVESTMENT OBJECTIVE BY INVESTING ITS ASSETS IN TAX-MANAGED GROWTH
PORTFOLIO (THE "PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING
THE SAME INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN BY INVESTING DIRECTLY
IN AND MANAGING ITS OWN PORTFOLIO OF SECURITIES AS WITH AN HISTORICALLY
STRUCTURED MUTUAL FUND. THE FUND IS A SEPARATE SERIES OF EATON VANCE MUTUAL
FUNDS TRUST (THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, and are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other government agency. Shares of the Fund involve
investment risks, including fluctuations in value and the possible loss of
some or all of the principal investment.
This Prospectus is designed to provide you with information you should know
before investing in the Fund. Please retain this document for future
reference. A Statement of Additional Information for the Fund dated August 1,
1996, as supplemented from time to time, has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. The Statement
of Additional Information is available without charge from the Fund's
principal underwriter, Eaton Vance Distributors, Inc. (the "Principal
Underwriter"), 24 Federal Street, Boston, MA 02110 (telephone (800) 225-6265).
The Portfolio's investment adviser is Boston Management and Research (the
"Investment Adviser"), a wholly-owned subsidiary of Eaton Vance Management,
and Eaton Vance Management is the administrator (the "Administrator") of the
Fund. The offices of the Investment Adviser and the Administrator are located
at 24 Federal Street, Boston, MA 02110.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Shareholder and Fund Expenses ..................... 2 How to Buy Fund Shares ................................ 10
The Fund's Investment Objective.................... 3 How to Redeem Fund Shares ............................. 11
The Tax-Managed Mutual Fund Advantage ............. 3 Reports to Shareholders ............................... 13
Investment Policies and Risks ..................... 4 The Lifetime Investing Account/Distribution Options 13
Organization of the Fund and the Portfolio ........ 6 The Eaton Vance Exchange Privilege .................... 14
Management of the Fund and the Portfolio .......... 8 Eaton Vance Shareholder Services ...................... 14
Distribution Plan ................................. 9 Distributions and Taxes ............................... 15
Valuing Fund Shares................................ 10 Performance Information ............................... 16
</TABLE>
- ------------------------------------------------------------------------------
PROSPECTUS DATED AUGUST 1, 1996
<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
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 0.625%
Rule 12b-1 Distribution (and Service) Fees 1.000%
Other Expenses 0.250%
-----
Total Operating Expenses 1.875%
======
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
------ -------
<S> <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: $29 $59
An investor would pay the following expenses on the same investment, assuming
(a) 5% annual return and (b) no redemptions: $19 $59
</TABLE>
NOTES:
The table and Example summarize the aggregate expenses of the Fund and the
Portfolio and are designed to help investors understand the costs and expenses
they will bear directly or indirectly by investing in the Fund. Other Expenses
are estimated for the current fiscal year because the Fund was only recently
organized.
The Fund invests exclusively in the Portfolio. The Trustees believe the
aggregate per share expenses of the Fund and the Portfolio should be
approximate, and over time may be less than, the per share expenses the Fund
would incur if the Trust retained the services of an investment adviser for
the Fund and the Fund's assets were invested directly in the type of
securities being held by the Portfolio.
The Example should not be considered a representation of past or future
expenses, and actual expenses may be greater or less than those shown. Federal
regulations require the Example to assume a 5% annual return, but actual
annual return will vary. For further information regarding the expenses of
both the Fund and the Portfolio see "Organization of the Fund and the
Portfolio," "Management of the Fund and the Portfolio," "How to Redeem Fund
Shares" and "Distribution Plan." Because the Fund makes payments under its
Distribution Plan adopted under Rule 12b-1, a long-term shareholder may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc.
No contingent deferred sales charge is imposed on (a) shares purchased more
than 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.
Other investment companies with different distribution arrangements and fees
are investing in the Portfolio and additional such companies and other
investors may do so in the future. See "Organization of the Fund and the
Portfolio."
THE FUND'S INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
THE FUND'S INVESTMENT OBJECTIVE IS TO ACHIEVE LONG-TERM, AFTER-TAX RETURNS FOR
ITS SHAREHOLDERS THROUGH INVESTING IN A DIVERSIFIED PORTFOLIO OF EQUITY
SECURITIES. THE FUND CURRENTLY INTENDS TO PURSUE ITS INVESTMENT OBJECTIVE BY
INVESTING ITS ASSETS IN TAX-MANAGED GROWTH PORTFOLIO (THE "PORTFOLIO"), A
SEPARATE REGISTERED INVESTMENT COMPANY WITH THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS THE FUND. THIS INVESTMENT STRUCTURE IS COMMONLY REFERRED TO AS A
"MASTER/FEEDER" STRUCTURE. USING THIS STRUCTURE ENABLES THE FUND TO
PARTICIPATE IN A WELL-ESTABLISHED INVESTMENT PORTFOLIO WITHOUT EXPOSING THE
FUND TO THE UNREALIZED GAINS ACCRUED PRIOR TO THE FUND'S OPERATIONS.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities.
Realized capital gains are minimized by maintaining relatively low portfolio
turnover, and by employing a variety of tax-efficient management strategies.
See "Investment Policies and Risks" for further information.
The Fund is designed for long-term taxable investors. The Fund is not intended
to be a complete investment program. Prospective investors should take into
account their objectives and other investments when considering the purchase
of Fund shares. The Fund cannot assure achievement of its investment
objective. While the Fund seeks to minimize investor taxes associated with the
Fund's investment income and realized capital gains, the Fund may have taxable
investment income and may realize taxable gains from time to time. The Fund's
and the Portfolio's investment objectives are nonfundamental and may be
changed when authorized by a vote of the Trustees of the Trust or the
Portfolio, respectively, without obtaining the approval of the Fund's
shareholders or the investors in the Portfolio, as the case may be. The
Trustees of the Trust have no present intention to change the Fund's objective
and intend to submit any proposed material change in the objective to
shareholders for their approval.
THE TAX-MANAGED MUTUAL FUND ADVANTAGE
- ------------------------------------------------------------------------------
Taxes are a major influence on the net returns that investors receive on their
taxable investments. Today, dividends and short-term capital gains distributed
by mutual funds are taxed at federal income tax rates as high as 39.6% and
distributions of long-term capital gains are taxed at federal tax rates of up
to 28%. Including state taxes and the federal itemized deduction phaseout, the
top tax rates in high-tax states such as California, New York, and
Massachusetts are in a range of 45-48% on dividend income and short-term gains
and 33-36% on long-term capital gains. There is legislation before Congress
that may reduce federal tax rates on long-term capital gains, but its status
is uncertain.
Most equity mutual funds are managed to maximize PRE-TAX returns, largely
ignoring the considerable impact on returns of taxes incurred by investors in
connection with distributions of income and capital gains. In contrast, the
Fund seeks to achieve long-term, AFTER-TAX returns for its shareholders.
The Fund is similar to retirement planning instruments (such as IRAs and
variable annuities) in that it is a long-term investment that seeks to
maximize after-tax returns. As a mutual fund, however, the Fund avoids a
number of structural disadvantages inherent in an IRA or a variable annuity--
including the limitations and penalties on early withdrawals, the taxing of
all income and gain upon withdrawal at ordinary income rates, and the
inability to gain a step up in basis at death. A variable annuity may also
have higher annual expenses than the Fund due to the embedded insurance
features. Annual deductions for contributions to IRAs are limited.
An analysis of long-term hypothetical returns achievable from a tax-managed
equity fund compared to a conventional equity mutual fund and a variable
annuity or an IRA can illustrate the fundamental soundness of a tax-managed
equity fund approach. Assuming identical annual pre-tax returns, over a
holding period of several years a tax-managed fund can generate liquidation
proceeds higher than a conventional managed equity mutual fund and higher than
a variable annuity or IRA. If the investments are passed into an estate
(thereby triggering a step-up in basis), the relative performance advantage of
a tax-managed fund compared to a conventional fund, or to a variable annuity
or an IRA, can be substantial, again assuming equivalent annual returns before
taxes. Of course, actual returns achieved by long-term investors in the Fund
cannot be predicted.
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
It is the policy of the Portfolio to invest in a broadly diversified selection
of equity securities, emphasizing common stocks of domestic and foreign growth
companies that are considered to be high in quality and attractive in their
long-term investment prospects. Under normal market conditions, the Portfolio
will invest at least 65% of its assets in common stocks. Although the
Portfolio may invest in investment-grade preferred stocks and debt securities,
purchase of such securities will normally be limited to securities convertible
into common stocks and temporary investments in short-term notes or government
obligations. The Portfolio's holdings will represent a number of different
industries, and less than 25% of the Portfolio's total assets will be invested
in any one industry. During defensive periods in which the Investment Adviser
believes that returns on common stock investments may be unfavorable, the Fund
may temporarily invest up to 65% of its assets in U.S. government obligations
and high quality short-term notes.
In its operations, the Portfolio seeks to achieve after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Portfolio's investment income and realized capital gains. Taxes on investment
income are minimized by investing primarily in lower yielding securities. The
Fund can be expected to distribute relatively low levels of taxable investment
income, if any.
Realized capital gains are minimized in part by maintaining relatively low
portfolio turnover, investing primarily in established companies with
characteristics of above-average growth, predictability and stability that are
acquired with the expectation of being held for a period of years. The
Portfolio will generally seek to avoid realizing short-term capital gains.
When a decision is made to sell a particular appreciated security, the
Portfolio will select for sale those share lots with holding periods
sufficient to qualify for long-term capital gains treatment and among those,
the share lots with the highest cost basis. The Portfolio may, when prudent,
sell securities to realize capital losses that can be used to offset realized
capital gains.
To protect against price declines in securities holdings with large
accumulated capital gains, the Portfolio may use hedging techniques such as
short sales against-the-box of securities held, the purchase of put options,
the sale of stock index futures contracts, and equity swaps. By using these
techniques rather than selling such securities the Portfolio can reduce its
exposure to price declines in the securities without realizing substantial
capital gains under current tax law. To avoid the sale of appreciated
securities and the realization of capital gains, the Portfolio and the Fund
may adopt in the future a policy of meeting redemptions in whole or in part
through the distribution of readily marketable securities. The practice of
distributing securities to meet shareholder redemptions may provide the
Portfolio with a useful management tool, allowing appreciated stock positions
to be reduced without causing capital gains to be realized. A redeeming
shareholder who received securities would incur no more or less taxable gain
than if the redemption had been paid in cash, and could elect to sell the
distributed securities through Eaton Vance to the Custodian or a broker-dealer
at no cost. Shareholders would be notified in writing of this procedure before
it was implemented. See "How to Redeem Fund Shares." It is expected that by
employing these strategies for tax-efficient management, the Portfolio can
minimize the extent to which net capital gains are realized each year, and the
extent to which shareholders incur taxes as a result of these realized gains.
The Portfolio may nevertheless realize taxable gains from time to time.
An investment in the Fund entails the risk that the principal value of Fund
shares may not increase or may decline. The Portfolio will be managed for
long-term, after-tax returns. In managing the Portfolio, the Investment
Adviser will generally avoid selling securities with large accumulated capital
gains. Such securities are expected to comprise a substantial portion of the
assets of the Portfolio. Although the Portfolio may utilize certain hedging
strategies in lieu of selling appreciated securities, the Fund's exposure to
losses during stock market declines may nonetheless be higher than that of
other funds that do not follow a general policy of avoiding sales of highly-
appreciated securities. The Portfolio may temporarily borrow up to 5% of the
value of its total assets to satisfy redemption requests or settle securities
transactions.
INVESTING IN FOREIGN SECURITIES. Investing in securities issued by foreign
companies involves considerations and possible risks not typically associated
with investing in securities issued by U.S. companies. The value of foreign
investments to U.S. investors may be adversely affected by changes in currency
exchange rates. Foreign brokerage commissions, custody fees and other costs of
investing are generally higher than in the United States, and foreign
securities markets may be less liquid, more volatile and less subject to
government supervision than in the United States. Investments in foreign
securities could be adversely affected by other factors not present in the
United States, including expropriation, confiscatory taxation, lack of uniform
accounting and auditing standards, and potential difficulties in enforcing
contractual obligations. To reduce some of these risks, the Portfolio will
only invest in issuers located in developed countries whose securities are
traded in established markets.
DERIVATIVE INVESTMENTS. The Portfolio may purchase or sell derivative
instruments to hedge against securities price declines and currency movements
and to enhance returns (which may be considered speculative). The Portfolio
may engage in transactions in derivative instruments (which derive their value
by reference to other securities, indices, instruments, or currencies) in the
U.S. and abroad. Such transactions may include the purchase and sale of stock
index futures contracts and options on stock index futures; the purchase of
put options and the sale of call options on securities held in the Portfolio;
equity swaps; and the purchase and sale of forward currency exchange contracts
and currency futures. The Portfolio may use transactions in derivative
instruments as a substitute for the purchase and sale of securities.
Derivative transactions may be more advantageous in a given circumstance than
transactions involving securities due to more favorable current tax treatment,
lower transaction costs, or greater liquidity. While many derivative
instruments have built-in leveraging characteristics, the Portfolio will not
use them to leverage its net assets.
The purchase and sale of derivative instruments is a highly specialized
activity that can expose the Portfolio to a significant risk of loss. The
built-in leveraging inherent to many derivative instruments can result in
losses that substantially exceed the initial amount paid or received. Equity
swaps and over-the-counter options are private contracts in which there is a
risk of loss in the event of a default on an obligation to pay by a
counterparty. Derivative instruments may be difficult to value, may be
illiquid, and may be subject to wide swings in valuation caused by changes in
the value of an underlying security, index, instrument, or currency. There can
be no assurance that the use of derivative instruments will be advantageous to
the Portfolio.
The Portfolio will only enter into equity swaps and over-the-counter options
contracts with counterparties whose credit quality or claims paying ability
are considered to be investment grade by the Investment Adviser. In addition,
at the time of entering into a transaction, the Portfolio's credit exposure to
any one counterparty will be limited to 5% or less of the net assets of the
Portfolio. The Portfolio's investment in illiquid assets, which generally will
include equity swaps and over-the-counter options, may not represent more than
15% of net assets at the time any such illiquid assets are acquired.
All futures contracts entered into by the Portfolio will be traded on
exchanges or boards of trade that are licensed and regulated by the
Commodities Futures Trading Commission (the "CFTC") and must be executed
through a futures commission merchant or brokerage firm that is a member of
the relevant exchange. Under CFTC regulations, the Portfolio may only enter
into futures contracts if, immediately thereafter, the value of the aggregate
initial margin with respect to all currently outstanding non-hedging positions
in futures contracts does not exceed 5% of the Fund's net asset value, after
taking into account unrealized profits and losses on such positions.
SHORT SALES AGAINST-THE-BOX. The Portfolio may sell securities short where it
owns at least an equal amount of the security sold short or another security
convertible or exchangeable for an equal amount of the security sold short
without payment of further compensation (a short sale against-the-box). Under
current tax law, short sale against-the-box transactions enable the Portfolio
to hedge its exposure to securities that it holds without selling the
securities and recognizing gains. A short sale against-the-box requires that
the short seller absorb certain costs so long as the position is open. In a
short sale against-the-box, the short seller is exposed to the risk of being
forced to deliver appreciated stock to close the position if the borrowed
stock is called in, causing a gain to be recognized. The Portfolio expects
normally to close its short sale against-the-box transactions by delivering
newly-acquired stock.
RESTRICTED SECURITIES. Securities that are not freely tradeable or which are
subject to restrictions on sale under the Securities Act of 1933 are
considered restricted. Such securities are illiquid and may be difficult to
properly value. The Portfolio's holdings of illiquid securities may not exceed
15% of its net assets. Illiquid securities include securities legally
restricted as to resale, and securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. Rule 144A securities may, however, be
treated as liquid by the Investment Adviser pursuant to procedures adopted by
the Trustees, which require consideration of factors such as trading activity,
availability of market quotations and number of dealers willing to purchase
the security. Moreover, liquid Rule 144A securities may increase the level of
fund illiquidity to the extent qualified institutional buyers become
uninterested in purchasing such securities.
LENDING OF PORTFOLIO SECURITIES. The Portfolio may seek to earn income by
lending portfolio securities to broker-dealers or other institutional
borrowers. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of
the securities fails financially. However, the loans will be made only to
organizations deemed by the Investment Adviser to be sufficiently creditworthy
and when, in the judgment of the Investment Adviser, the consideration which
can be earned from securities loans of this type justifies the attendant risk.
CERTAIN INVESTMENT POLICIES. The Fund and the Portfolio have adopted certain
fundamental investment restrictions and policies which are enumerated in
detail in the Statement of Additional Information and which may not be changed
unless authorized by a shareholder vote and an investor vote, respectively.
Among the fundamental restrictions, neither the Fund nor the Portfolio may (a)
borrow money, except as permitted by the 1940 Act, or (b) with respect to 75%
of its total assets, invest more than 5% of total assets (taken at current
value) in the securities of any one issuer, or invest in more than 10% of
total assets in the outstanding voting securities of any one issuer, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies.
Investment restrictions (except with respect to the borrowing of money and
issuing of senior securities) are considered at the time of acquisition of
assets; the sale of portfolio assets is not required in the event of a
subsequent change in circumstances.
Except for the fundamental investment restrictions and policies specifically
identified above and enumerated in the Statement of Additional Information,
the policies of the Fund and the Portfolio are not fundamental policies and
accordingly may be changed by the Trustees of the Trust and the Portfolio
without obtaining the approval of the shareholders of the Fund or the
investors in the Portfolio, as the case may be. If any changes were made, the
Fund might have investment objectives different from the objectives which an
investor considered appropriate at the time the investor became a shareholder
in the Fund.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
The Fund is a diversified series of Eaton Vance Mutual Funds Trust, a business
trust established under Massachusetts law pursuant to a Declaration of Trust
dated May 7, 1984, as amended. The Trust is a mutual fund - an open-end
management investment company. THE TRUSTEES OF THE TRUST ARE RESPONSIBLE FOR
THE OVERALL MANAGEMENT AND SUPERVISION OF ITS AFFAIRS. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series. Each share represents an equal proportionate beneficial
interest in the Fund. When issued and outstanding, the shares are fully paid
and nonassessable by the Trust and redeemable as described under "How to
Redeem Fund Shares." Shareholders are entitled to one vote for each full share
held. Fractional shares may be voted proportionately. Shares have no
preemptive or conversion rights and are freely transferable. In the event of
the liquidation of the Fund, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW YORK
AND INTENDS TO BE TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, common and commingled trust funds and
other accredited investors) will each be liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate
insurance exists and the Portfolio itself is unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund investing in the
Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective
(although the Fund may temporarily hold a de minimis amount of cash).
Therefore, the Fund's interest in securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may
sell interests to other affiliated and non-affiliated mutual funds and other
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investment companies investing in the Portfolio either do
not sell their shares or are not required to sell their shares at the same
public offering price as the Fund due to variations in sales commissions and
other operating expenses. Therefore, investors in the Fund should be aware
that these differences may result in differences in returns experienced by
investors in the various funds that invest in the Portfolio. Such differences
in returns are also present in other mutual fund structures, including funds
that have multiple classes of shares. For information regarding the investment
objective, policies and restrictions of the Portfolio, see "How the Fund and
the Portfolio Invest their Assets." Further information regarding the
investment practices of the Portfolio may also be found in the Statement of
Additional Information.
The Trustees of the Trust have considered the advantages and disadvantages of
investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that by
investing in the Portfolio, the Fund can participate in a substantially larger
and more diverse pool of equity investments than if it were to invest its
assets directly.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be
changed by the Trustees of the Trust and the Portfolio without obtaining the
approval of the shareholders of the Fund or the investors in the Portfolio, as
the case may be. Any such change of the investment objective will be preceded
by thirty days' advance written notice to the shareholders of the Fund or the
investors in the Portfolio, as the case may be. If a shareholder redeems
shares because of a change in the nonfundamental objective or policies of the
Fund, those shares may be subject to a contingent deferred sales charge, as
described in "How to Redeem Fund Shares." In the event the Fund withdraws all
of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, such Trustees would
consider what action might be taken, including investing the assets of the
Fund in another pooled investment entity or retaining an investment adviser to
manage the Fund's assets in accordance with its investment objective. The
Fund's investment performance may be affected by a withdrawal of all its
assets from the Portfolio.
Information regarding other funds or investors that invest in the Portfolio
may be obtained by contacting Eaton Vance Distributors, Inc. (the "Principal
Underwriter" or "EVD"), 24 Federal Street, Boston, MA 02110 (617) 482-8260.
Smaller investors in the Portfolio may be adversely affected by the actions of
larger investors in the Portfolio. For example, if a large investor withdraws
from the Portfolio, the remaining investors may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk, and
experience decreasing economies of scale. However, this possibility exists as
well for historically structured funds which have large or institutional
investors.
Until 1992, the Administrator sponsored and advised only historically
structured funds. Funds which invest all their assets in interests in a
separate investment company are a relatively new development in the mutual
fund industry and, therefore, the Fund may be subject to additional
regulations than historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, or the
Trustees of the Portfolio, by written instrument consented to by a majority of
all investors, agree to continue the business of the Portfolio. This provision
is consistent with treatment of the Portfolio as a partnership for federal
income tax purposes. See "Distributions and Taxes" for further information.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters
received from Fund shareholders. The Fund shall vote shares for which it
receives no voting instructions in the same proportion as the shares for which
it receives voting instructions. Other investors in the Portfolio may alone or
collectively acquire sufficient voting interests in the Portfolio to control
matters relating to the operation of the Portfolio, which may require the Fund
to withdraw its investment in the Portfolio or take other appropriate action.
Any such withdrawal could result in a distribution "in kind" of portfolio
securities (as opposed to a cash distribution from the Portfolio). If
securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
The Trustees of the Trust, including a majority of the noninterested Trustees,
have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that most of the
Trustees of the Trust and the Trustees of the Portfolio are the same. Such
procedures require each Board to take action to resolve any conflict of
interest between the Fund and the Portfolio, and it is possible that the
creation of separate Boards may be considered. For further information
concerning the Trustees and officers of the Trust and the Portfolio, see the
Statement of Additional Information.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- ------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR" OR THE "INVESTMENT
ADVISER"), A WHOLLY-OWNED SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON
VANCE"), AS ITS INVESTMENT ADVISER. EATON VANCE, ITS AFFILIATES AND ITS
PREDECESSOR COMPANIES HAVE BEEN MANAGING ASSETS OF INDIVIDUALS AND
INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs and furnishes
for the use of the Portfolio office space and all necessary office facilities,
equipment and personnel for servicing the investments of the Portfolio. Under
the investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of 5/96 of 1% (equivalent to 0.625% annually) of the average
daily net assets of the Portfolio up to $500 million. On net assets of $500
million and over the annual fee is reduced and the advisory fee is computed as
follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
------------------------------------------------------------------
$500 million but less than $1 billion 0.5625%
$1 billion but less than $1.5 billion 0.5000%
$1.5 billion and over 0.4375%
For the period from the start of business, December 1, 1995, to April 30,
1996, the Portfolio paid BMR advisory fees equivalent to 0.625% (annualized)
of the Portfolio's average daily net assets for such period.
BMR places the portfolio securities transactions of the Portfolio with many
broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices which are advantageous to the Portfolio and at
reasonably competitive commission rates. Subject to the foregoing, BMR may
consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions.
Duncan W. Richardson has acted as a portfolio manager of the Portfolio since
it commenced operations. He has been a Vice President of Eaton Vance since
1990, a Vice President of BMR since 1992 and an employee of Eaton Vance since
1987.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $16 BILLION. EATON VANCE HAS BEEN MANAGING INVESTMENT COMPANIES WITH
OBJECTIVES SIMILAR TO THAT OF THE FUND SINCE 1961, AND CURRENTLY MANAGES FUNDS
WITH SUCH SIMILAR OBJECTIVES HAVING ASSETS OF OVER $700 MILLION. Eaton Vance
is a wholly-owned subsidiary of Eaton Vance Corp., a publicly held holding
company which through its subsidiaries and affiliates engages primarily in
investment management, administration and marketing activities.
The Trust has retained the services of Eaton Vance to act as Administrator of
the Fund. The Trust has not retained the services of an investment adviser
since the Trust seeks to achieve the investment objective of the Fund by
investing the Fund's assets in the Portfolio. As Administrator, Eaton Vance
provides the Fund with general office facilities and supervises the overall
administration of the Fund. For these services Eaton Vance currently receives
no compensation. The Trustees of the Trust may determine, in the future, to
compensate Eaton Vance for such services.
The Fund and the Portfolio, as the case may be, will each be responsible for
all respective costs and expenses not expressly stated to be payable by BMR
under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by EVD under the distribution agreement.
Such costs and expenses to be borne by the Fund or the Portfolio, as the case
may be, include, without limitation: custody and transfer agency fees and
expenses, including those incurred for determining net asset value and keeping
accounting books and records; expenses of pricing and valuation services; the
cost of share certificates; membership dues in investment company
organizations; brokerage commissions and fees; fees and expenses of
registering under the securities laws; expenses of reports to shareholders and
investors; proxy statements, and other expenses of shareholders' or investors'
meetings; insurance premiums, printing and mailing expenses; interest, taxes
and corporate fees; legal and accounting expenses; compensation and expenses
of Trustees not affiliated with BMR or Eaton Vance; and investment advisory
fees, and, if any, administrative services fees. The Fund and the Portfolio,
as the case may be, will also each bear expenses incurred in connection with
litigation in which the Fund or the Portfolio, as the case may be, is a party
and any legal obligation to indemnify its respective officers and Trustees
with respect thereto.
DISTRIBUTION PLAN
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THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. Rule 12b-1 permits a
mutual fund, such as the Fund, to finance distribution activities and bear
expenses associated with the distribution of its shares provided that any
payments made by the Fund are made pursuant to a written plan adopted in
accordance with the Rule. The Plan is subject to, and complies with, the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The Plan is described further in the Statement of Additional
Information, and the following is a description of the salient features of the
Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay
sales commissions and distribution fees to the Principal Underwriter only
after and as a result of the sale of shares of the Fund. On each sale of Fund
shares (excluding reinvestment of distributions) the Fund will pay the
Principal Underwriter amounts representing (i) sales commissions equal to
6.25% of the amount received by the Fund for each share sold and (ii)
distribution fees calculated by applying the rate of 1% over the prime rate
then reported in The Wall Street Journal to the outstanding balance of
Uncovered Distribution Charges (as described below) of the Principal
Underwriter. The Principal Underwriter currently expects to pay to an
Authorized Firm (a) sales commissions (except on exchange transactions and
reinvestments) at the time of sale equal to .75% of the purchase price of the
shares sold by such Firm, and (b) monthly sales commissions approximately
equivalent to 1/12 of .75% of the value of shares sold by such Firm and
remaining outstanding for at least one year. The Plan is designed to permit an
investor to purchase Fund shares through an Authorized Firm without incurring
an initial sales charge and at the same time permit the Principal Underwriter
to compensate Authorized Firms in connection with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO AN AMOUNT NOT EXCEEDING .75% OF THE
FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. Under its Plan, the
Fund accrues daily an amount at the rate of 1/365 of .75% of the Fund's net
assets, and pays such accrued amounts monthly to the Principal Underwriter.
The Plan requires such accruals to be automatically discontinued during any
period in which there are no outstanding Uncovered Distribution Charges under
the Plan. Uncovered Distribution Charges are calculated daily and, briefly,
are equivalent to all unpaid sales commissions and distribution fees to which
the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. The
Eaton Vance organization may be considered to have realized a profit under the
Plan if at any point in time the aggregate amounts of all payments made to the
Principal Underwriter pursuant to the Plan, including any contingent deferred
sales charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this
purpose will include an allocable portion of the overhead costs of such
organization and its branch offices.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid during any fiscal year, a high level of sales of Fund
shares during the initial years of the Fund's operations would cause a large
portion of the sales commission attributable to a sale of Fund shares to be
accrued and paid by the Fund to the Principal Underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period would result in
the incurrence and payment of increased distribution fees under the Plan.
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
The Trustees of the Trust have initially implemented this provision of the
Plan by authorizing the Fund to make monthly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
.25% of the Fund's average daily net assets for any fiscal year. The Fund
accrues the service fee daily at the rate of 1/365 of .25% of the Fund's net
assets. The Principal Underwriter currently expects to pay to an Authorized
Firm (a) a service fee (except on exchange transactions and reinvestments) at
the time of sale equal to .25% of the purchase price of the shares sold by
such Firm, and (b) monthly service fees approximately equivalent to 1/12 of
.25% of the value of shares sold by such Firm and remaining outstanding for at
least one year. During the first year after a purchase of Fund shares, the
Principal Underwriter will retain the service fee as reimbursement for the
service fee payment made to the Authorized Firm at the time of sale. As
permitted by the NASD Rule, all service fee payments are made for personal
services and/or the maintenance of shareholder accounts. Service fees are
separate and distinct from the sales commissions and distribution fees payable
by the Fund to the Principal Underwriter, and as such are not subject to
automatic discontinuance when there are no outstanding Uncovered Distribution
Charges of the Principal Underwriter.
The Principal Underwriter may, from time to time, at its own expense, provide
additional incentives to Authorized Firms which employ registered
representatives who sell Fund shares and/or shares of other funds distributed
by the Principal Underwriter. In some instances, such additional incentives
may be offered only to certain Authorized Firms whose representatives sell or
are expected to sell significant amounts of shares. In addition, the Principal
Underwriter may from time to time increase or decrease the sales commissions
payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant
factors, including without limitation the size of the Fund, the investment
climate and market conditions, the volume of sales and redemptions of Fund
shares, and the amount of Uncovered Distribution Charges of the Principal
Underwriter. The Plan may continue in effect and payments may be made under
the Plan following any such suspension, discontinuance or limitation of the
offering of Fund shares; however, the Fund is not contractually obligated to
continue the Plan for any particular period of time. Suspension of the
offering of Fund shares would not, of course, affect a shareholder's ability
to redeem shares.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT"),
(as agent for the Fund) in the manner authorized by the Trustees of the Trust.
Net asset value is computed by dividing the value of the Fund's total assets,
less its liabilities, by the number of Fund shares outstanding. Because the
Fund invests its assets in an interest in the Portfolio, the Fund's net asset
value will reflect the value of its interest in the Portfolio (which, in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio)
based on market or fair value in the manner authorized by the Trustees of the
Portfolio. Net asset value is computed by subtracting the liabilities of the
Portfolio from the value of its total assets. Securities listed on securities
exchanges or in the NASDAQ National Market are valued at closing sale prices.
For further information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING
THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE
FOR SECURITIES. Investors may purchase shares of the Fund through Authorized
Firms at the net asset value per share of the Fund next determined after an
order is effective. An Authorized Firm may charge its customers a fee in
connection with transactions executed by that Firm. The Fund may suspend the
offering of shares at any time and may refuse an order for the purchase of
shares.
An initial investment in the Fund must be at least $5,000. Once an account has
been established the investor may send investments of $500 or more at any time
directly to the Fund's transfer agent (the "Transfer Agent") as follows: First
Data Investor Services Group, BOS725, P.O. Box 1559, Boston, MA 02104. The
$5,000 minimum initial investment is waived for Bank Automated Investing
accounts, which may be established with an investment of $500 or more. See
"Eaton Vance Shareholder Services."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange
for Fund shares acquired at their net asset value as determined above. The
minimum value of securities (or securities and cash) accepted for deposit is
$5,000. The number of Fund shares to be issued to an investor exchanging
securities that are retained by the Portfolio will be the value of the
securities, as determined by the Portfolio's valuation procedures, divided by
the applicable net asset value per Fund share on the day such securities are
accepted. BMR may request that the Portfolio retain the securities for
investment purposes. Securities accepted for exchange may also be sold for the
account of their owner on the day of their receipt or as soon thereafter as
possible. The number of Fund shares acquired to be issued in exchange for
securities will be the aggregate value of or proceeds from the sale of such
securities, divided by the applicable net asset value per Fund share on the
day such proceeds are received. Eaton Vance will use reasonable efforts to
obtain the then current market price for such securities, but does not
guarantee the best price available. Eaton Vance will absorb any transaction
costs, such as commissions, on the sale of the securities.
Securities determined to be acceptable should be transferred via book entry or
physically delivered, in proper form for transfer, through an Authorized Firm,
together with a completed and signed Letter of Transmittal in approved form
(available from Authorized Firms), as follows:
IN THE CASE OF BOOK ENTRY:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Classic Tax-Managed Growth Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic Tax-Managed Growth Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, must contact Eaton Vance to determine whether
the securities are acceptable before forwarding such securities. Eaton Vance
reserves the right to reject any securities. Exchanging securities for Fund
shares may create a taxable gain or loss. Each investor should consult his or
her tax adviser with respect to the particular federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO FIRST DATA INVESTOR
SERVICES GROUP, P.O. BOX 5123, WESTBOROUGH, MA 01581-5123, on any business day
a written request for redemption in good order, plus any share certificates
with executed stock powers. The redemption price will be based on the net
asset value per Fund share next computed after such delivery. Good order means
that all relevant documents must be endorsed by the record owner(s) exactly as
the shares are registered and the signature(s) must be guaranteed by a member
of either the Securities Transfer Association's STAMP program or the New York
Stock Exchange's Medallion Signature Program, or certain banks, savings and
loan institutions, credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations as required by a
regulation of the Securities and Exchange Commission and acceptable to First
Data Investor Services Group. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request in good order by First
Data Investor Services Group, the Fund will make payment for the net asset
value of the shares as of the date determined above, reduced by the amount of
any applicable contingent deferred sales charges (described below) and any
federal income tax required to be withheld.
MEETING REDEMPTIONS BY DISTRIBUTING PORTFOLIO SECURITIES. The Portfolio and
the Fund currently will meet redemptions in cash, but in the future may adopt
a policy of meeting redemption requests in whole or in part by distributing
appreciated securities held in the Portfolio chosen by the Investment Adviser
to reduce the realization of capital gains. At the request of a redeeming
investor who is to receive securities, the Portfolio might, at the discretion
of the Investment Adviser, provide the redeeming investor with a diversified
selection of securities. The Fund would only distribute readily marketable
securities valued pursuant to the Portfolio's valuation procedures. Even if an
in-kind redemption policy were adopted, many redemptions would still be paid
in cash. Sufficient quantities of appreciated securities may not be available
for distribution. Moreover, during periods of volatile market conditions, the
Fund could be expected to meet redemptions primarily through distributions of
cash. If a redeeming shareholder received securities, a procedure would be
implemented whereby the shareholder could elect to sell them through Eaton
Vance to the Custodian or a broker-dealer at no cost and at a price equal to
the price used in determining the redemption value of the distributed
securities. This election would need to be made in a letter of instruction
which would be provided to shareholders before the policy was implemented.
Shareholders not making an affirmative election to sell distributed securities
to the designated broker-dealer, would be required to take delivery of any
securities distributed upon a redemption of shares. Such shareholders could
incur brokerage charges and other costs and may be exposed to market risk in
selling the distributed securities.
ADDITIONAL REDEMPTION INFORMATION. To sell Fund shares at their net asset
value through an Authorized Firm (a repurchase), a shareholder can place a
repurchase order with the Authorized Firm, which may charge a fee. The value
of such shares is based upon the net asset value next computed after EVD, as
the Fund's agent, receives the order. It is the Authorized Firm's
responsibility to transmit promptly repurchase orders to EVD. Throughout this
Prospectus, the word "redemption" is generally meant to include a repurchase.
If shares were recently purchased, the proceeds of a redemption (or
repurchase) will not be sent until the check (including a certified or
cashier's check) received for the shares purchased has cleared. Payment for
shares tendered for redemption may be delayed up to 15 days from the purchase
date when the purchase check has not yet cleared. Redemptions or repurchases
may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $4,000. Prior to such a
redemption, shareholders will be given 60 days' written notice to make an
additional purchase. However, no such redemption would be required by the Fund
if the cause of the low account balance was a reduction in the net asset value
of Fund shares. 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 be waived for shares
redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholder
Services"), (2) as part of a distribution from a retirement plan qualified
under Section 401, 403(b) or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"), or (3) as part of a minimum required distribution from
other tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
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THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual
reports are audited by the Fund's independent certified public accountants.
Shortly after the end of each calendar year, the Fund will furnish all
shareholders with information necessary for preparing federal and state income
tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S
TRANSFER AGENT, FIRST DATA INVESTOR SERVICES GROUP, WILL SET UP A LIFETIME
INVESTING ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a
complete record of all transactions between the investor and the Fund, which
at all times shows the balance of shares owned. The Fund will not issue share
certificates except upon request.
Each time a transaction takes place in a shareholder's account, the
shareholder will receive a statement showing complete details of the
transaction and the current balance in the account. (Under certain investment
plans, statements may be sent only quarterly.) THE LIFETIME INVESTING ACCOUNT
PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN SHARES BY SENDING A
CHECK FOR $500 OR MORE to First Data Investor Services Group.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to First Data Investor Services Group, P.O. Box
5123, Westborough, MA 01581-5123 (please provide the name of the shareholder,
the Fund and the account number).
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME INVESTING
ACCOUNTS and may be changed as often as desired by written notice to the
Fund's dividend disbursing agent, First Data Investor Services Group, P.O. Box
5123, Westborough, MA 01581-5123. The currently effective option will appear
on each account statement.
SHARE OPTION -- Dividends and capital gains will be reinvested in additional
shares.
INCOME OPTION -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
CASH OPTION -- Dividends and capital gains will be paid in cash.
The SHARE OPTION will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by any withholding
required under Federal income tax laws.
If the INCOME OPTION or CASH OPTION has been selected, dividend and/or capital
gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more
will be reinvested in the account in shares at the then current net asset
value. Furthermore, the distribution option on the account will be
automatically changed to the SHARE OPTION until such time as the shareholder
selects a different option.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains, if any, may be invested in
additional shares of another Eaton Vance fund. Before selecting this option, a
shareholder should obtain a prospectus of the other Eaton Vance fund and
consider its objectives and policies carefully.
''STREET NAME'' ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its Transfer Agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the
account, or to obtain information about the account. The transfer of shares in
a "street name" account to an account with another dealer or to an account
directly with the Fund involves special procedures and will require the
beneficial owner to obtain historical purchase information about the shares in
the account from the Authorized Firm. Before establishing a "street name"
account with an investment firm, or transferring the account to another
investment firm, an investor wishing to reinvest distributions should
determine whether the firm which will hold the shares allows reinvestment of
distributions in "street name" accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
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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 that the investor has not disclaimed in writing the use of the
privilege. To effect such exchanges, call First Data Investor Services Group
at 800-262-1122 or, within Massachusetts, 617-573-9403, Monday through Friday,
9:00 a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone
exchange must be registered in the same name(s) and with the same address as
the shares being exchanged. Neither the Fund, the Principal Underwriter nor
First Data Investor Services Group will be responsible for the authenticity of
exchange instructions received by telephone, provided that reasonable
procedures to confirm that instructions communicated are genuine have been
followed, and if such procedures are not followed, the Fund, the Principal
Underwriter or First Data Investor Services Group may be liable for any losses
due to unauthorized or fraudulent telephone instructions. Telephone
instructions will be tape recorded. In times of drastic economic or market
changes, a telephone exchange may be difficult to implement. An exchange may
result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUND OFFERS THE FOLLOWING SERVICES, WHICH ARE VOLUNTARY, INVOLVE NO EXTRA
CHARGE, AND MAY BE CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full
information on each of the services described below and an application, where
required, are available from Authorized Firms or the Principal Underwriter.
The cost of administering such services for the benefit of shareholders who
participate in them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $5,000 minimum
investment has been made, checks of $500 or more payable to the order of EV
Classic Tax-Managed Growth Fund may be mailed directly to First Data Investor
Services Group BOS725, P.O. Box 1559, Boston, MA 02104 at any time -- whether
or not distributions are reinvested. The name of the shareholder, the Fund and
the account number should accompany each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments
of $500 or more may be made automatically each month or quarter from the
shareholder's bank account. The $5,000 minimum initial investment and small
account redemption policy are waived for these accounts.
SYSTEMATIC WITHDRAWAL PLAN: The Fund will make available to shareholders
making a deposit of at least $20,000 a systematic withdrawal plan through
which they can make regular quarterly redemptions to yield them either a
specified dollar amount of at least $800 per year or a specified percentage of
net asset value of at least 4% but not more than 12% annually. Such amount
will not be subject to a contingent deferred sales charge. See "How to Redeem
Fund Shares." These redemptive distributions will be paid in cash. Such
distributions would be paid at the option of each shareholder and would reduce
the number of Fund shares held by any shareholder electing to receive them.
Distributions would consist of an untaxed return of capital component and a
taxable capital gain or capital loss. The all-in tax rate on the amount of
cash received in such redemptions (equal to the capital gains rate multiplied
by the percentage of the distribution that is gain rather than return of
capital) would be substantially below the rate payable by mutual fund
investors on dividend distributions (equal to the ordinary income tax rate).
REINVESTMENT PRIVILEGE: A shareholder who has repurchased or redeemed shares
may reinvest, with credit for any contingent deferred sales charges paid on
the repurchased or redeemed shares, any portion or all of the repurchase or
redemption proceeds (plus that amount necessary to acquire a fractional share
to round off the purchase to the nearest full share) in shares of the Fund,
provided that the reinvestment is effected within 60 days after such
repurchase or redemption, and the privilege has not been used more than once
in the prior 12 months. Shares are sold to a reinvesting shareholder at the
net asset value next determined following timely receipt of a written purchase
order by the Principal Underwriter or by the Fund (or by the Fund's Transfer
Agent). To the extent that any shares of the Fund are sold at a loss and the
proceeds are reinvested in shares of the Fund (or other shares of the Fund are
acquired within the period beginning 30 days before and ending 30 days after
the date of the redemption), some or all of the loss generally will not be
allowed as a tax deduction. Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
DISTRIBUTIONS AND TAXES
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The Portfolio will be managed toward an objective of achieving long-term,
after-tax returns in part by minimizing shareholders taxes. Because
distributions of net investment income and realized capital gains give rise to
shareholder taxes, the Portfolio will generally seek to select and manage its
investments so as to minimize net investment income and net realized gains and
associated distributions. The Fund can be expected to generally distribute a
lesser percentage of returns each year than other equity mutual funds. There
can be no assurance, however, that the Portfolio can be managed to avoid
taxable distributions. The Portfolio's ability to utilize various tax
management techniques may be curtailed or eliminated by future tax and other
legislation, regulations, administrative interpretations, or court decisions.
As of the date of this Prospectus, the Clinton administration had proposed
legislation that would have the effect of substantially eliminating the tax
advantages of short sales against-the-box, equity swaps, and certain options
transactions. If the legislation were to be enacted in the form proposed, use
of these techniques by the Portfolio would effectively be precluded.
DISTRIBUTIONS. To the extent that the Fund has net investment income and net
realized capital gains in any year, the Fund's present policy is to make (A)
at least one distribution annually (normally in December) of all or
substantially all of the investment income (if any) allocated to the Fund by
the Portfolio, less the Fund's direct and allocated expenses and (B) at least
one distribution annually of all or substantially all of the net realized
capital gains (if any) allocated to the Fund by the Portfolio (reduced by any
available capital loss carryforwards from prior years).
Shareholders may reinvest all distributions in shares of the Fund without a
sales charge at the net asset value per share as of the close of business on
the record date.
The Fund's net investment income consists of the Fund's allocated share of the
net investment income of the Portfolio, less all actual and accrued expenses
of the Fund determined in accordance with generally accepted accounting
principles. The Portfolio's net investment income consists of all income
accrued on the Portfolio's assets, less all actual and accrued expenses of the
Portfolio determined in accordance with generally accepted accounting
principles. The Fund's net realized capital gains, if any, consist of the net
realized capital gains (if any) allocated to the Fund by the Portfolio for tax
purposes, after taking into account any available capital loss carryovers.
TAXES. Distributions by the Fund which are derived from the Fund's allocated
share of the Portfolio's net investment income, net short-term capital gains
and certain foreign exchange gains are taxable to shareholders as ordinary
income, whether received in cash or reinvested in additional shares of the
Fund. The Fund's distributions will generally not qualify for the dividends-
received deduction for corporate shareholders.
Capital gains referred to in clause (B) above, if any, realized by the
Portfolio and allocated to the Fund for the Fund's fiscal year, which ends on
October 31, will usually be distributed by the Fund prior to the end of
December. Distributions by the Fund of long-term capital gains allocated to
the Fund by the Portfolio are taxable to shareholders as long-term capital
gains, whether paid in cash or reinvested in additional shares of the Fund and
regardless of the length of time Fund shares have been owned by the
shareholder.
The Fund will provide its shareholders annually with tax information notices
and Forms 1099 to assist in the preparation of their federal and state tax
returns for the prior calendar year's distributions, proceeds from the
redemption or exchange of Fund shares, and federal income tax (if any)
withheld by the Fund's Transfer Agent.
If shares are purchased shortly before the record date of a distribution, the
shareholder will pay the full price for the shares and then receive some
portion of the price back as a taxable distribution. The amount, timing and
character of the Fund's distributions to shareholders may be affected by
special tax rules governing the Portfolio's activities in options, futures and
forward foreign currency exchange transactions or certain other investments.
Certain distributions, if declared by the Fund in October, November or
December and paid the following January, will be taxable to shareholders as if
received on December 31 of the year in which they are declared.
The Fund intends to qualify as a regulated investment company under the Code
and to satisfy all requirements necessary to be relieved of federal taxes on
income and gains it distributes to shareholders. In satisfying these
requirements, the Fund will treat itself as owning its proportionate share of
each of the Portfolio's assets and as entitled to the income of the Portfolio
properly attributable to such share.
As a regulated investment company under the Code, the Fund does not pay
federal income or excise taxes to the extent that it distributes to
shareholders its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code. As a partnership
under the Code, the Portfolio does not pay federal income or excise taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS AVERAGE ANNUAL TOTAL RETURN. The
Fund's average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 invested at the maximum public offering price
(net asset value) by the average annual compounded rate of return (including
capital appreciation/depreciation, and distributions paid and reinvested) for
the stated period and annualizing the result. The average annual total return
calculation assumes a complete redemption of the investment and the deduction
of any contingent deferred sales charge at the end of the period. The Fund may
also publish annual and cumulative total return figures from time to time. The
Fund may use such total return figures, together with comparisons with the
Consumer Price Index, various domestic and foreign securities indices and
performance studies prepared by independent organizations, in advertisements
and in information furnished to present or prospective shareholders. The Fund
may use total return figures showing after-tax returns, including comparisons
to tax-deferred vehicles. The Fund may also quote total return for the period
prior to commencement of operations which would reflect the Portfolio's total
return (or that of its predecessor) adjusted to reflect any applicable Fund
sales charge.
The Fund may also publish total return figures which do not take into account
any contingent deferred sales charge which may be imposed upon redemptions at
the end of the specified period. Any performance figure which does not take
into account the contingent deferred sales charge would be reduced to the
extent such charge is imposed upon a redemption.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any prior
period should not be considered a representation of what an investment may
earn or what the Fund's total return may be in any future period. The Fund's
investment results are based on many factors, including market conditions, the
composition of the security holdings of the Portfolio and the operating
expenses of the Fund and the Portfolio. Investment results also often reflect
the risks associated with the particular investment objective and policies of
the Fund and the Portfolio. Among others, these factors should be considered
when comparing the Fund's investment results to those of other mutual funds
and other investment vehicles. If the expenses related to the operation of the
Fund or the Portfolio are allocated to Eaton Vance, the Fund's performance
will be higher.
<PAGE>
[LOGO] EV CLASSIC
TAX-MANAGED GROWTH FUND
PROSPECTUS
AUGUST 1, 1996
EV CLASSIC
TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC TAX-MANAGED GROWTH FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-TGP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1996
EV CLASSIC HIGH INCOME 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 High Income Fund (the "Fund") and certain
other series of Eaton Vance Mutual Funds Trust (the "Trust"). Part II provides
information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS Page
PART I
Investment Objective and Policies ................................ 2
Investment Restrictions .......................................... 7
Trustees and Officers ............................................ 8
Investment Adviser and Administrator ............................ 10
Custodian ........................................................ 12
Service for Withdrawal ........................................... 13
Determination of Net Asset Value ................................. 13
Investment Performance ........................................... 14
Taxes ............................................................ 15
Principal Underwriter ............................................ 17
Portfolio Security Transactions .................................. 17
Other Information ................................................ 18
Independent Accountants .......................................... 19
Financial Statements ............................................. 19
PART II
Fees and Expenses ................................................ a-1
Distribution Plan ................................................ a-1
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 FUNDS' PROSPECTUS DATED AUGUST 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 INVESTMENT OBJECTIVE AND POLICIES
OTHER FIXED-INCOME SECURITIES
Included in the fixed-income securities in which the Portfolio may invest
are preferred, preference and convertible stocks, equipment lease certificates,
equipment trust certificates and conditional sales contracts. Preference stocks
are stocks that have many characteristics of preferred stocks, but are typically
junior to an existing class of preferred stocks. Equipment lease certificates
are debt obligations secured by leases on equipment (such as railroad cars,
airplanes or office equipment), with the issuer of the certificate being the
owner and lessor of the equipment. Equipment trust certificates are debt
obligations secured by an interest in property (such as railroad cars or
airplanes), the title of which is held by a trustee while the property is being
used by the borrower. Conditional sales contracts are agreements under which the
seller of property continues to hold title to the property until the purchase
price is fully paid or other conditions are met by the buyer.
The Portfolio may purchase fixed-rate bonds which have a demand feature
allowing the holder to redeem the bonds at specified times. These bonds are more
defensive than conventional long-term bonds (protecting to some degree against a
rise in interest rates) while providing greater opportunity than comparable
intermediate term bonds, since the Portfolio may retain the bond if interest
rates decline. By acquiring these kinds of bonds the Portfolio obtains the
contractual right to require the issuer of the bonds to purchase the security at
an agreed upon price, which right is contained in the obligation itself rather
than in a separate agreement or instrument. Since this right is assignable only
with the bond, the Portfolio will not assign any separate value to such right.
The Portfolio may also purchase floating or variable rate obligations, which it
would anticipate using as short-term investments pending longer term investment
of its funds.
CONCENTRATION
Although there is no current intention to do so, the Portfolio may invest up
to 25% of its assets in securities of issuers in each of the electric, gas and
telephone utility industries if, in the opinion of the Investment Adviser, the
relative return available from such securities and the relative risk,
marketability, quality or availability of securities of issuers in such industry
justifies such an investment. The value of such investments may be affected to a
greater degree by adverse developments in such industries. Industry-wide
problems include the effects of fluctuating economic conditions, energy
conservation practices, environmental regulations, high capital expenditures,
construction delays due to pollution control and environmental considerations,
uncertainties as to fuel availability and costs, increased competition in
deregulated sectors of such industries and difficulties in obtaining timely and
adequate rate relief from regulatory commissions. If applications for rate
increases are not granted or are not acted upon promptly, the market prices of
and interest or dividend payments on utility securities may be adversely
affected.
LOAN INTERESTS
A loan in which the Portfolio may acquire a loan interest (a "Loan
Interest") is typically originated, negotiated and structured by a U.S. or
foreign commercial bank, insurance company, finance company or other financial
institution (the "Agent") for a lending syndicate of financial institutions. The
Agent typically administers and enforces the loan on behalf of the other lenders
in the syndicate. In addition, an institution, typically but not always the
Agent (the "Collateral Bank"), holds collateral (if any) on behalf of the
lenders. These Loan Interests may take the form of participation interests in,
assignments of or novations of a loan during its secondary distribution, or
direct interests during a primary distribution. Such Loan Interests may be
acquired from U.S. or foreign banks, insurance companies, finance companies or
other financial institutions who have made loans or are members of a lending
syndicate or from other holders of Loan Interests. The Portfolio may also
acquire Loan Interests under which the Portfolio derives its rights directly
from the borrower. Such Loan Interests are separately enforceable by the
Portfolio against the borrower and all payments of interest and principal are
typically made directly to the Portfolio from the borrower. In the event that
the Portfolio and other lenders become entitled to take possession of shared
collateral, it is anticipated that such collateral would be held in the custody
of a Collateral Bank for their mutual benefit. The Portfolio may not act as an
Agent, a Collateral Bank, a guarantor or sole negotiator or structurer with
respect to a loan.
The investment adviser will analyze and evaluate the financial condition of
the borrower in connection with the acquisition of any Loan Interest. The
Investment Adviser also analyzes and evaluates the financial condition of the
Agent and, in the case of Loan Interests in which the Portfolio does not have
privity with the borrower, those institutions from or through whom the Portfolio
derives its rights in a loan (the "Intermediate Participants"). From time to
time the Investment Adviser and its affiliates may borrow money from various
banks in connection with their business activities. Such banks may also sell
interests in loans to or acquire such interests from the Portfolio or may be
Intermediate Participants with respect to loans in which the Portfolio owns
interests. Such banks may also act as Agents for loans in which the Portfolio
owns interests.
In a typical loan the Agent administers the terms of the loan agreement. In
such cases, the Agent is normally responsible for the collection of principal
and interest payments from the borrower and the apportionment of these payments
to the credit of all institutions which are parties to the loan agreement. The
Portfolio will generally rely upon the Agent or an Intermediate Participant to
receive and forward to the Portfolio its portion of the principal and interest
payments on the loan. Furthermore, unless under the terms of a participation
agreement the Portfolio has direct recourse against the borrower, the Portfolio
will rely on the Agent and the other members of the lending syndicate to use
appropriate credit remedies against the borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the loan
agreement based upon reports prepared by the borrower. The seller of the Loan
Interest usually does, but is often not obligated to, notify holders of Loan
Interests of any failures of compliance. The Agent may monitor the value of the
collateral and, if the value of the collateral declines, may accelerate the
loan, may give the borrower an opportunity to provide additional collateral or
may seek other protection for the benefit of the participants in the loan. The
Agent is compensated by the borrower for providing these services under a loan
agreement, and such compensation may include special fees paid upon structuring
and funding the loan and other fees paid on a continuing basis. With respect to
Loan Interests for which the Agent does not perform such administrative and
enforcement functions, the Portfolio will perform such tasks on its own behalf,
although a Collateral Bank will typically hold any collateral on behalf of the
Portfolio and the other lenders pursuant to the applicable loan agreement.
A financial institution's appointment as Agent may usually be terminated in
the event that it fails to observe the requisite standard of care or becomes
insolvent, enters Federal Deposit Insurance Corporation ("FDIC") receivership,
or, if not FDIC insured, enters into bankruptcy proceedings. A successor Agent
would generally be appointed to replace the terminated Agent, and assets held by
the Agent under the loan agreement should remain available to holders of Loan
Interests. However, if assets held by the Agent for the benefit of the Portfolio
were determined to be subject to the claims of the Agent's general creditors,
the Portfolio might incur certain costs and delays in realizing payment on a
loan interest, or suffer a loss of principal and/or interest. In situations
involving Intermediate Participants similar risks may arise.
Purchasers of loan interests depend primarily upon the creditworthiness of
the borrower for payment of principal and interest. If the Portfolio does not
receive scheduled interest or principal payments on such indebtedness, the
Portfolio could be adversely affected. Loans that are fully secured offer the
Portfolio more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of borrowers
whose creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may never
pay off their indebtedness, or may pay only a small fraction of the amount owed.
Direct indebtedness of developing countries will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
The Portfolio limits the amount of total assets that it will invest in any
one issuer or in issuers within the same industry. See Investment Restrictions
(1) and (5) below. For purposes of these restrictions, the Portfolio generally
will treat the borrower as the "issuer" of a Loan Interest held by the
Portfolio. In the case of loan participations where the Agent or Intermediate
Participant serves as financial intermediary between the Portfolio and the
borrower, the Portfolio, in appropriate circumstances, will treat both the Agent
or Intermediate Participant and the borrower as "issuers" for the purposes of
determining whether the Portfolio has invested more than 5% of its total assets
in a single issuer. Treating a financial intermediary as an issuer of
indebtedness may restrict the Portfolio's ability to invest in indebtedness
related to a single intermediary, or a group of intermediaries engaged in the
same industry, even if the underlying borrowers represent many different
companies and industries.
FOREIGN INVESTMENTS
Investing in foreign issuers involves certain special considerations,
including those set forth below, which are not typically associated with
investing in U.S. issuers. Since investments in foreign issuers may involve
currencies of foreign countries, and since the Portfolio may temporarily hold
funds in bank deposits in foreign currencies during completion of investment
programs, the Portfolio may be affected favorably or unfavorably by changes in
currency rates and in exchange control regulations and may incur costs in
connection with conversions between various currencies.
Since foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a domestic company.
Foreign stock markets, while growing in volume of trading activity, have
substantially less volume than the Exchange, and securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies. Similarly, volume and liquidity in most foreign bond markets is less
than in the United States and, at times, volatility of price can be greater than
in the United States. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on U.S. exchanges, although the Portfolio
endeavors to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States. Mail
service between the United States and foreign countries may be slower or less
reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. In addition, with respect to certain foreign countries, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect the Portfolio's
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The Portfolio may enter into forward foreign currency exchange contracts. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of the contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
At the maturity of a forward contract the Portfolio may either accept or
make delivery of the currency specified in the contract or, at or prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract.
The Portfolio does not intend to enter into forward foreign currency
exchange contracts to protect the value of its portfolio securities on a regular
continuous basis, and will not do so if, as a result, the Portfolio will have
more than 15% of the value of its total assets committed to the consummation of
such contracts. The Portfolio also will not enter into such 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's or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the long-term
investment decisions made with regard to overall diversification strategies.
However, the Portfolio believes that it is important to have the flexibility to
enter into such forward contracts when it determines that the best interests of
the Portfolio will be served. The Portfolio generally will not enter into a
forward contract with a term of greater than one year.
OPTIONS ON SECURITIES
An options position may be closed out only on an options exchange which
provides a secondary market for an option of the same series. Although the
Portfolio will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option, or at any
particular time. For some options, no secondary market on an exchange may exist.
In such event, it might not be possible to effect closing transactions in
particular options, with the result that the Portfolio would have to exercise
its options in order to realize any profit and would incur transaction costs
upon the sale of underlying securities pursuant to the exercise of put options.
If the Portfolio as a covered call option writer is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the Options Clearing Corporation ("OCC") may not at all times be adequate to
handle current trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the OCC as a result of trades on that exchange would continue to
be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
OCC inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with the timely execution of customers' orders.
FUTURES CONTRACTS
All futures contracts entered into by the Portfolio are traded on exchanges
or boards of trade that are licensed and regulated by the CFTC.
The Portfolio may purchase and write call and put options on futures
contracts which are traded on a U.S. exchange or board of trade.
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. The Portfolio will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Portfolio
or which it expects to purchase. Except as stated below, the Portfolio's futures
transactions will be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to protect against a decline in the price of
securities that the Portfolio owns, or futures contracts will be purchased to
protect the Portfolio against an increase in the price of securities it intends
to purchase. As evidence of this hedging intent, the Portfolio expects that on
75% or more of the occasions on which it takes a long futures (or option)
position (involving the purchase of futures contracts), the Portfolio will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities in the cash market at the time when the futures (or option)
position is closed out. However, in particular cases, when it is economically
advantageous for the Portfolio to do so, a long futures position may be
terminated (or an option may expire) without the corresponding purchase of
securities. As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation permits the Portfolio to elect to comply with a
different test, under which the aggregate initial margin and premiums required
to establish non-hedging positions in futures contracts and options on futures
will not exceed 5% of the Portfolio's net asset value after taking into account
unrealized profits and losses on such positions and excluding the in-the-money
amount of such options. The Portfolio will engage in transactions in futures
contracts and related options only to the extent such transactions are
consistent with the requirements of the Code for maintaining the qualification
of the Fund as a regulated investment company for federal income tax purposes
(see "Taxes").
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS
Transactions using forward contracts, futures contracts and options (other
than options that the Portfolio has purchased) expose the Portfolio to an
obligation to another party. The Portfolio will not enter into any such
transactions unless it owns either (1) an offsetting ("covered") position in
securities, currencies, or other options, 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 Securities and Exchange
Commission the ("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.
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 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. 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 of a
portion of the interest on investment of the collateral, if any. However, the
Portfolio may pay lending fees to such borrowers. The Portfolio would not have
the right to vote any securities having voting rights during the existence of 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. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities
loaned if the borrower of the securities fails financially. However, the loans
would be made only to organizations deemed by the Portfolio's management to be
of good standing and when, in the judgment of the Portfolio's management, the
consideration which can be earned from securities loans of this type justifies
the attendant risk. Securities lending involves administration expenses,
including finders' fees. The financial condition of the borrower will be
monitored by the Investment Adviser on an ongoing basis. If the Investment
Adviser 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. As of
the present time, the Trustees of the Portfolio have not made a determination to
engage in this activity, and have no present intention of making such a
determination during the current fiscal year.
PORTFOLIO TURNOVER
The Portfolio cannot accurately predict its portfolio turnover rate, but it
is anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A 100%
annual turnover rate would occur, for example, if all the securities held by the
Portfolio were replaced once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Portfolio. The Portfolio
engages in portfolio trading (including short-term trading) if it believes that
a transaction including all costs will help in achieving its investment
objective.
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. Such trading may be expected to increase the portfolio turnover rate
and the expenses incurred in connection with such trading.
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 total assets of the Fund, purchase any security
if such purchase, at the time thereof, would cause more than 5% of the total
assets of the Fund (taken at market value) to be invested in the securities of a
single issuer, or cause more than 10% of the total outstanding voting securities
of such issuer to be held by the Fund, except obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and except securities
of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase any security if such purchase, at the time thereof, would cause
more than 25% of the Fund's total assets to be invested in any single industry,
provided that the electric, gas and telephone utility industries shall be
treated as separate industries for purposes of this restriction and further
provided that there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities; or
(8) Make loans to any person except by (i) the acquisition of debt
securities and making portfolio investments, (ii) entering into repurchase
agreements or (iii) lending portfolio securities.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing 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 each adopted the following nonfundamental
investment policies which may be changed with respect to the Fund by the
Trustees of the Trust without the approval by the Fund's shareholders or may be
changed with respect to the Portfolio by the Trustees of the Portfolio without
the approval by the Fund or its other investors. As a matter of nonfundamental
policy, neither the Fund nor the Portfolio may (a) invest more than 15% of its
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 under the Securities Act of
1933 and commercial paper issued pursuant to Section 4(2) of said Act that the
Board of Trustees of the Trust or the Portfolio, or its 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 only 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 so
invested; (d) purchase warrants in excess of 5% of net assets, of which 2% may
be warrants which are not listed on the New York or American Stock Exchanges;
(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 issuer 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
one 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 holders is an officer or Trustee of
the Trust or the Portfolio or is a member, officer, director or trustee of an
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 security or other asset, or describes a policy regarding quality
standards, such percentage limitation or standard 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, other than subsequent
rating change will not compel the Fund or the Portfolio, as the case may be, to
dispose of such security or other asset. Notwithstanding the foregoing, under
normal market conditions the Portfolio must take actions necessary to comply
with the policy of investing at least 65% of total assets in the lowest
investment grade and lower rated and unrated debt obligations. Moreover, the
Fund and 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 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, a wholly-owned subsidiary of Eaton Vance; of Eaton Vance's parent,
Eaton Vance Corp. ("EVC"); and BMR's and Eaton Vance's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, the Portfolio,
BMR, Eaton Vance, EVC or EV, as defined in the Investment Company Act of 1940
(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 (63), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
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 BMR, Eaton Vance, EV and EVC and a Director of EV
and EVC. 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.
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff, Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
WILLIAM H. AHERN, JR. (37), Vice President of the Trust
Vice President of BMR, Eaton Vance 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.
H. DAY BRIGHAM, JR., (69) Vice President of the Trust
Chairman of the Management Committee, Vice President of Eaton Vance, BMR, EVC
and EV and Director of EVC and EV. Director, Trustee and officer of various
investment companies managed by Eaton Vance or BMR. Mr. Brigham was elected
Vice President of the Trust on June 19, 1995.
WILLIAM CHISHOLM (35), Vice President of the Portfolio
Senior Trust Officer of The Bank of Nova Scotia Trust Company (Cayman)
Limited. Officer of various investment companies managed by Eaton Vance or
BMR.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of Nova
Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman Islands,
British West Indies.
MICHAEL WEILHEIMER (35), Vice President of the Portfolio Vice President of Eaton
Vance Management since 1992; employee of Eaton Vance since November 26, 1990.
Mr. Weilheimer was elected Vice President of Portfolio on December 18, 1995.
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.
MARK S. VENEZIA (47), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JOHN P. RYNNE (54), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne was
elected an officer of the Trust on June 19, 1995.
MICHEL NORMANDEAU (44),Vice President of the Portfolio
Assistant Manager -- Trust Services of The Bank of Nova Scotia Trust Company
(Cayman) Limited. Officer of various investment companies managed by Eaton
Vance or BMR.
Address: The Bank of Nova Scotia Trust Company (Cayman) Ltd., The Bank of Nova
Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman Islands,
British West Indies. Mr. Normandeau was elected Vice President of the Trust
on June 19, 1995.
RAYMOND O'NEILL (34), Vice President of the Portfolio
Managing Director of IBT Trust and Custodian Services (Ireland) Limited since
January, 1995. Vice President, Atlantic Corporate Management Limited,
Warwick, Bermuda 1991-1994. Officer, The Bank of Bermuda Limited, Hamilton,
Bermuda 1987-1991. Officer of various investment companies managed by Eaton
Vance or BMR. Mr. O'Neill was elected Vice President of the Trust on June
19, 1995.
Address: Earlsfort Terrace, Dublin 2, Ireland
HOOKER TALCOTT (54), Jr., Vice President of the Portfolio Vice President of BMR,
Eaton Vance and EV. Officer of various investment companies managed by Eaton
Vance or BMR.
MICHAEL B. TERRY (53), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (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, EV and EVC. 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). Mr. Murphy was elected Assistant Secretary of
the Trust on March 27, 1995 and of the Portfolio on June 19, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr. Woodbury
was elected Assistant Secretary of the Trust and Portfolio on June 19, 1995.
Officer of various investment companies managed by Eaton Vance or BMR.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
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, 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, its shareholders or the
Portfolio.
The Nominating Commitee is comprised of four Trustees who are not
"interested persons" as that term is defined by 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.
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 public accountants, and reviewing with such accountants and
the Treasurer of the Trust and of the Portfolio matters relative to trading and
brokerage policies and practices, accounting and auditing practices and
procedures, accounting records, internal accounting controls, and the functions
performed by the custodian and transfer agent of the Fund and of the Portfolio.
Trustees of the Portfolio who 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 Portfolio nor
the Trust 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. Messrs. Chisholm,
Normandeau and O'Neill are not U.S. residents. It may be difficult to effect
service of process within the U.S. or to realize judgments of U.S. courts upon
them. It is uncertain whether courts in other countries would entertain original
actions against them.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated May 31, 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, 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 Mumbai, India. Eaton Vance mutual funds are distributed by Eaton
Vance Distributors both within the United States and offshore. EVC owns 24% of
the Class A shares of Lloyd George Management (B.V.I.) Limited, a registered
investment adviser.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short-term and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell of 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 March
31, 1996, the Portfolio had net assets of $511,347,139. For the fiscal year
ended March 31, 1996, the Portfolio paid BMR advisory fees of $3,094,793
(equivalent to 0.63% of the Portfolio's average daily net assets for such
period). For the period from the Portfolio's start of business, June 1, 1994 to
March 31, 1995, the Portfolio paid BMR advisory fees of $2,260,748 (equivalent
to 0.64% (annualized) of the Portfolio's average daily net assets for 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 after February 28, 1997 is approved at least annually (i) by the
vote of a majority of the Trustees of the Portfolio who are not interested
persons of the Portfolio or of BMR cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time without
penalty on sixty (60) days' written notice by the Board of Trustees of either
party, or by vote of the majority of the outstanding voting securities of the
Portfolio, and the Agreement will terminate automatically in the event of its
assignment. The Agreement provides that BMR may render services to others and
engage in other business activities and may permit other fund clients and other
corporations and organizations to use the words "Eaton Vance" or "Boston
Management and Research" in their names. The Agreement also provides that BMR
shall not be liable for any loss incurred in connection with the performance of
its duties, or action taken or omitted under that Agreement, in the absence of
willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
thereunder, or for any losses sustained in the acquisition, holding or
disposition of any security or other investment.
IBT Trust Company (Cayman), Ltd. maintains the Portfolio's principal
office and certain of its records and provides administrative assistance in
connection with meetings of the Portfolio's Trustees and interestholders.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the Fund,
Eaton Vance has been engaged to administer the Fund's affairs, subject to the
supervision of the Trustees of the Trust, and shall furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund. For additional information about the
Administrator, see "Fees and Expenses" in Part II.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of 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 June 30, 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, Dwight,
Hayes, Reamer, Thorndike, Hawkes and Treynor are officers or Trustees of the
Trust and/or the Portfolio and are members of the EVC, BMR, Eaton Vance and EV
organizations. Messrs. Ahern, Chisholm, Normandeau, O'Neill, Otis, Murphy,
O'Connor, Talcott, Terry and Woodbury and Ms. Sanders are officers 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 Corporation, which engages in oil and
gas exploration and development. In addition, Eaton Vance owns all the stock of
Northeast Properties, Inc., which is engaged in real estate investment. EVC owns
all the stock of Fulcrum Management, Inc. and MinVen, Inc., which are engaged in
the 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, IBT. 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
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 and has custody of all the Portfolio's
assets. Its subsidiary, IBT Fund Services (Canada) Inc., One First Canadian
Place, King Street West, Toronto, Ontario, Canada, 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 its
capacity as custodian, IBT attends to details in connection with the sale,
exchange, substitution, transfer or other dealings with the Portfolio's
investments, receives and disburses all funds and performs various other
ministerial duties upon receipt of proper instructions from the Fund and the
Portfolio. IBT charges custody fees which are competitive within the industry. A
portion of the fee relates to custody, bookkeeping and valuation services and is
based upon a percentage of the 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 members of the Eaton Vance
organization, owns approximately 13% of the 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
Portfolio and IBT under the Investment Company Act of 1940.
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 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/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 Portfolio and of shares of the Fund is
determined by IBT Fund Services (Canada) Inc. (as agent for the Fund and the
Portfolio) in the manner described under "Valuing Fund Shares" in the Fund's
current Prospectus. The Fund and the Portfolio will be closed for business and
will not price their respective shares or interests on the following business
holidays: New Year's Day, Presidents' Day, Good Friday (a New York Stock
Exchange holiday), Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The Portfolio's net asset value is computed by subtracting the liabilities
of the Portfolio from the value of its total assets. Fixed-income securities
(other than short-term obligations), including listed securities and securities
for which price quotations are available, will normally be valued on the basis
of market valuations furnished by a pricing service. The pricing service uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities, various relationships between
securities, and yield to maturity in determining value. Securities listed on
securities exchanges or in the NASDAQ National Market are valued at closing sale
prices. Unlisted or listed securities for which closing sale prices are not
available are valued at the mean between the latest bid and asked prices.
Short-term obligations maturing in sixty days or less are valued at amortized
cost, which approximates market. Other assets are valued at fair value using
methods determined in good faith by the Trustees.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day 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 a complete redemption of the
investment and, if applicable, the deduction of a CDSC at the end of the period.
For further information regarding the total return of the Fund, see "Performance
Information" in the Fund's 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 (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 held by the
Portfolio based on the market value of such obligations and from dividends from
equity securities based on stated annual rates, exclusive of special or extra
distributions, reduced by accrued Fund expenses for the period with the
resulting number being divided by the average daily number of Fund shares
outstanding and entitled to receive dividends during the period. This yield
figure does not reflect the deduction of any CDSC which are imposed upon certain
redemptions at the rates set forth under "How to Redeem Fund Shares" in the
Fund's current Prospectus. For information concerning the yield of the Fund, see
"Performance Information" in the Fund's Part II.
The Principal Underwriter may also 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. 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 debt obligations held by
the Portfolio based on the market value of such obligations and from dividends
from equity securities based on stated annual rates, exclusive of special or
extra distributions, (with all purchases and sales of securities during such
period included in the income calculation on a settlement date basis), 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.
The Fund's total return may be compared to related indices, such as the
Consumer Price Index, the Bond Buyer 25 Revenue Bond Index and the Lehman
Brothers Municipal Bond Index which may be used in advertisements and in
information furnished to present or prospective shareholders. The Fund's
performance may differ from that of other investors in the Portfolio, including
the other investment companies.
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 showing the effects of compounding interest may be included in
advertisements and other material furnished to present and prospective
shareholders. Compounding is the process of earning interest on principal plus
interest that was earned earlier.
Evaluations of the Fund's performance made by independent sources, e.g.
Lipper Analytical Services, Inc., CDA/Wiesenberger and Morningstar, Inc., may be
used in advertisements and in information furnished to present or prospective
shareholders. Information, charts and illustrations relating to inflation and
the effects of inflation on the dollar may be included in advertisements and
other material furnished to present and prospective shareholders.
Information, charts and illustrations showing comparative historical
information of high-yielding bonds as represented by The First Boston High Yield
Index over 10-year U.S. Treasury bonds may be used in advertisements and other
material furnished to present or prospective shareholders. The First Boston High
Yield Index is an unmanaged index of high-yielding securities. The principal and
interest of U.S. Treasury bonds are guaranteed by the United States Government,
while high yield bonds, sometimes referred to as "junk bonds", are of lower
quality than investment-grade bonds and U.S. Government securities. Rates are
given for illustrative purposes only and are not meant to imply or predict
actual results of an investment in the Fund.
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 bond funds.
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
qualify each year, as a regulated investment company under the Internal Revenue
Code. Accordingly, the Fund intends to satisfy certain requirements relating to
sources of its income and diversification of its assets and to distribute all of
its net investment income and net realized capital gains in accordance with the
timing requirements imposed by the Code, so as to avoid any federal income or
excise tax on the Fund. The Fund so qualified for its fiscal year ended March
31, 1996 (see the Notes to the Financial Statements incorporated, reference in
this SAI). Because the Fund invests substantially all of its assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of income
and diversification requirements in order for the Fund to satisfy them. The
Portfolio will allocate at least annually among its investors, including the
Fund, each investor's distributive share of the Portfolio's net taxable and
tax-exempt (if any) investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. For purposes of applying the
requirements of the Code regarding qualification as a regulated investment
company, the Fund will be deemed (i) to own its proportionate share of each of
the assets of the Portfolio and (ii) to be entitled to the gross income of the
Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses, generally
computed on the basis of the one-year period ending on October 31 of such year,
after reduction by any available capital loss carryforwards, and 100% of any
income from the prior year (as previously computed) that was not paid out during
such year and on which the Fund paid no federal income tax. Under current law,
provided that the Fund qualifies as a 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, excise or
franchise tax in the Commonwealth of Massachusetts.
The Portfolio's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of the Fund's distributions to shareholders. For example,
certain positions held by the Portfolio on the last business day of each taxable
year will be marked to market (i.e., treated as if closed out on such day), and
any resulting gain or loss will generally be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by the Portfolio that
substantially diminish the Portfolio's risk of loss with respect to other
positions in its portfolio may constitute "straddles," which are subject to tax
rules that may cause deferral of Portfolio losses, adjustments in the holding
periods of Portfolio securities and conversion of short-term into long-term
capital losses. The Portfolio may have to limit its activities in options,
futures contracts and forward contracts in order to enable the Fund to maintain
its qualification as a RIC.
The Portfolio may be subject to foreign withholding or other foreign taxes
with respect to income (possibly including, in some cases, capital gains) on
certain foreign securities. These taxes may be reduced or eliminated under the
terms of an applicable U.S. income tax treaty in some cases. As it is not
expected that more than 50% of the value of the total assets of the Fund taking
into account its allocable share of the Portfolio's total assets, at the close
of any taxable year of the Fund will consist of securities issued by foreign
corporations, the Fund will not be eligible to pass through to shareholders
their proportionate share of any foreign tax credits or deductions for foreign
taxes paid by the Portfolio and allocated to the Fund. Certain foreign exchange
gains and losses realized by the Fund will be treated as ordinary income and
losses. Certain uses of foreign currency and foreign currency options, futures
and forward contracts and investment by the Portfolio in certain "passive
foreign investment companies" may be limited or a tax election may be made, if
available, in order to seek to preserve the Fund's qualification as a regulated
investment company and/or avoid imposition of a tax on the Fund.
The Portfolio's investment in zero coupon and certain securities 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.
Investments in lower-rated or unrated securities may present special tax
issues for the Portfolio and hence for the Fund to the extent actual or
anticipated defaults may be more likely with respect to such securities. Tax
rules are not entirely clear about issues such as when the Portfolio may cease
to accrue interest, original issue discount, or market discount; when and to
what extent deductions may be taken for bad debts or worthless securities; how
payments received on obligations in default should be allocated between
principal and income; and whether exchanges of debt obligations in a workout
context are taxable.
Any loss realized upon the sale 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 treated as long-term capital gains with
respect to such shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
shares of the Fund are purchased (whether through the reinvestment of
distributions or otherwise) within 30 days before or after such disposition.
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.
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 address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement, the Principal Underwriter acts as
principal in selling shares of the Fund. The expenses of printing copies of
prospectuses used to offer shares to 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 provisions of the 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. For the amount
paid to the Principal Underwriter for acting as repurchase agent, see "Fees and
Expenses" in Part II.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the broker-dealer firm, are made by
Eaton Vance. Eaton Vance is also responsible for the execution of transactions
for all other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many broker-dealer firms. BMR
uses its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Portfolio and (when a disclosed commission
is being charged) at reasonably competitive commission rates. In seeking such
execution, BMR will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors including
without limitation the size and type of the transaction, the general execution
and operational capabilities of the broker-dealer, the nature and character of
the market for the security, the confidentiality, speed and certainty of
effective execution required for the transaction, the reputation, reliability,
experience and financial condition of the broker-dealer, the value and quality
of services rendered by the broker-dealer in other transactions, and the
reasonableness of the commission or spread, if any. Transactions on United
States stock exchanges and other agency transactions involve the payment by the
Portfolio of negotiated brokerage commissions. Such commissions vary among
different broker-dealer firms, and a particular broker-dealer may charge
different commissions according to such factors as the difficulty and size of
the transaction and the volume of business done with the broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities traded
in the over-the-counter markets, but the price paid or received by the Portfolio
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering, the price paid by the Portfolio often includes a disclosed fixed
commission or discount retained by the underwriter or dealer. Although
commissions paid on portfolio security transactions will, in the judgment of
BMR, be reasonable in relation to the value of the services provided,
commissions exceeding those which another firm might charge may be paid to
broker-dealers who were selected to execute transactions on behalf of the
Portfolio and BMR's other clients in part for providing brokerage and research
services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; 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, BMR receives Research Services from many broker-dealer firms with
which BMR places the portfolio transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive commission rates or spreads, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by 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.
For the fiscal year ended March 31, 1996, the Portfolio paid no brokerage
commissions on portfolio transactions. During the period from June 1, 1994, to
March 31, 1995 (when the Fund transferred its assets to the Portfolio in
exchange for an interest in the Portfolio), the Fund paid brokerage commissions
of $3,684 on portfolio security transactions, of which $569 was paid in respect
of portfolio security transactions aggregating approximately $206,198. During
the Fund's fiscal year ended March 31, 1994, the Fund paid brokerage commissions
of $5,466 on portfolio transactions. Of the total brokerage commissions of
$5,466 paid during the fiscal year ended March 31, 1994, approximately $5,466
was paid in respect of portfolio security transactions aggregating approximately
$1,819,100 to firms which provided some research services to Eaton Vance
(although many of such firms may have been selected in any particular
transaction primarily because of their execution capabilities).
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or Eaton Vance or its
affiliates. BMR or Eaton Vance 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 that the benefits
available from the BMR organization outweigh any disadvantage that may arise
from exposure to simultaneous transactions.
OTHER INFORMATION
The Trust changed its name from Eaton Vance Government Obligations Trust on
July 10, 1995. On August 1, 1995, the Fund was reorganized as a series of the
Trust. Prior thereto, the Fund was a series of Eaton Vance High Income Trust.
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" and "EV" in other connections and for other purposes.
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 will 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 Trust is organized as a Massachusetts business trust. As permitted by
Massachusetts law, there will normally be no meetings of shareholders for the
purpose of electing Trustees of the Trust unless and until such time as less
than a majority of the Trustees of the Trust holding office have been elected by
shareholders. In such an event the Trustees then in office will call a
shareholder's meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes 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 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 SEC, or during any emergency as
determined by the SEC 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 SEC for the protection of investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund and the Portfolio,
respectively, providing audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the SEC.
Deloitte & Touche, Grand Cayman, Cayman Islands, British West Indies, are the
independent certified public accountants of the Portfolio.
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 Statement of Additional Information and have been so incorporated in
reliance on the report of Deloitte & Touche LLP and Deloitte & Touche,
independent certified public 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 March 31,
1996 as previously filed electronically with the Commission:
Eaton Vance Marathon High Income Fund
Eaton Vance Classic High Income Fund
High Income Portfolio
(Accession No. 0000950156-96-000510)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC HIGH INCOME FUND. The
Fund became a series of the Trust on August 1, 1995.
FEES AND EXPENSES
ADMINISTRATOR
For the fiscal year ended March 31, 1996, $79,084 of the Fund's operating
expenses were allocated to the Administrator.
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1996, the Principal Underwriter paid
to Authorized Firms sales commissions of $16,878 on sales of Fund shares. During
the same period, the Fund made sales commission payments under the Plan to the
Principal Underwriter aggregating $37,777, and the Principal Underwriter
received $20,899 in contingent deferred sales charges ("CDSCs") which were
imposed on early redeeming shareholders. These sales commissions and CDSC
payments reduced Uncovered Distribution Charges under the Plan. As at March 31,
1996, the outstanding Uncovered Distribution Charges of the Principal
Underwriter calculated under the Plan amounted to approximately $744,000 (which
amount was equivalent to 9.8% of the Fund's net assets on such date). During the
fiscal year ended March 31, 1996, the Fund made service fee payments to the
Principal Underwriter and Authorized Firms aggregating $12,593, of which $4,578
was paid to Authorized Firms, and the balance of which was retained by the
Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended March 31, 1996, the Fund paid the Principal
Underwriter $192.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
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 March 31, 1996, 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 ......... 9 $3,740(2) $137,500(4)
Samuel L. Hayes, III ..... 8 3,693(3) 153,750(5)
Norton H. Reamer ......... 8 3,662 137,500
John L. Thorndike ........ 8 3,774 142,500
Jack L. Treynor .......... 9 3,869 142,500
- ------------------
(1) The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
(2) Includes $1,253 of deferred compensation.
(3) Includes $1,272 of deferred compensation.
(4) Includes $35,313 of deferred compensation.
(5) Includes $37,500 of deferred compensation.
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 contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of any
day on which there are no outstanding Uncovered Distribution Charges of the
Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter. Conversely,
periods with a low level of sales of Fund shares accompanied by a high level of
early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to reduce the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal ) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of outstanding Uncovered
Distribution Charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of the
Fund.
The amount of Uncovered Distribution Charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a contingent deferred sales charge will be imposed, the level and timing of
redemptions of Fund shares upon which no contingent deferred sales charge will
be imposed (including redemptions involving exchanges of Fund shares for shares
of another fund in the Eaton Vance Classic Group of Funds which result in a
reduction of Uncovered Distribution Charges), changes in the level of the net
assets of the Fund, and changes in the interest rate used in the calculation of
the distribution fee under the Plan. (For shares sold prior to January 30, 1995,
Plan payments are as follows: the Principal Underwriter pays monthly sales
commissions and service fee payments to Authorized Firms equivalent to
approximately .75% and .25%, respectively, annualized of the assets maintained
in the Fund by their customers beginning at the time of sale. No payments were
made at the time of sale, and there is no contingent deferred sales charge.)
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 and service fees at the time of
sale, it is anticipated that the Eaton Vance organization will profit by reason
of the operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including CDSC, pursuant to the Plan. The Eaton Vance organization may be
considered to have realized a profit under the Plan if at any point in time the
aggregate amounts theretofore paid to the Principal Underwriter under the Plan,
and from CDSC, 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 growth of the Fund's assets, resulting in increased investment
flexibility and advantages which have benefited and will continue to benefit the
Fund and its shareholders. Payments for sales commissions and distribution fees
made to the Principal Underwriter under the Plan will compensate the Principal
Underwriter for its services and expenses in distributing shares of the Fund.
Service fee payments made to the Principal Underwriter and Authorized Firms
under the Plan provide incentives to provide continuing personal services to
investors and the maintenance of shareholder accounts. By providing incentives
to the Principal Underwriter and Authorized Firms, the Plan is expected to
result in the maintenance of, and possible future growth in, the assets of the
Fund. Based on the foregoing and other relevant factors, the Trustees of the
Trust have determined that in their judgment there is a reasonable likelihood
that the Plan will benefit the Fund and its shareholders.
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 periods from August
19, 1986 through March 31, 1996 and the five and one-year periods ended March
31, 1996. The total return for the period prior to the Fund's commencement of
operations on June 8, 1994 reflect the Portfolio's total return (or that of its
predecessor) adjusted to reflect any applicable Fund CDSC. The total return for
such prior period has not been adjusted to reflect the Fund's distribution fees
and certain other expenses. If such an adjustment were made, the performance
would be lower.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE
VALUE BEFORE AFTER TOTAL RETURN TOTAL RETURN
DEDUCTING DEDUCTING BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC**
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC** -------------------------- --------------------------
PERIOD DATE INVESTMENT ON 3/31/96 ON 3/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ------------ ---------- ----------- --------------- --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of Fund 8/19/86 $1,000 $2,205.43 $2,205.43 120.54% 8.57% 120.54% 8.57%
5 Years Ended
3/31/96 3/31/91 $1,000 $1,970.67 $1,970.67 97.07% 14.53% 97.07% 14.53%
1 Year Ended
3/31/96* 3/31/95 $1,000 $1,122.52 $1,112.52 12.25% 12.25% 11.25% 11.25%
- ----------
*If a portion of the Fund's expenses had not been subsidized, the Fund would have had lower returns.
**No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
</TABLE>
For the thirty-day period ended March 31, 1996, the yield of the Fund was
9.85%. If a portion of the Fund's expenses had not been allocated to Eaton
Vance, the Fund would have had a lower yield.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 28, 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
June 28, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc. New Brunswick, NJ was
the record owner of approximately 17.40% of the outstanding shares, which were
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares on such date.
<PAGE>
[LOGO]
EV CLASSIC HIGH INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1996
EV CLASSIC
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV CLASSIC HIGH INCOME 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 02110
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-HISAI
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1996
EV MARATHON HIGH INCOME 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 High Income Fund (the "Fund"), High
Income Portfolio (the "Portfolio") and certain other series of Eaton Vance
Mutual Funds Trust (the "Trust"). The Fund's Par II (the "Part II") provides
information solely about the Fund. Where appropriate, Part I includes cross-
references to the relevant sections of Part II.
This Statement of Additional Information is sometimes referred to herein
as the "SAI".
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
PART I
Additional Investment Policies .............................. 2
Investment Restrictions ..................................... 7
Trustees and Officers ....................................... 8
Investment Adviser and Administrator ........................ 10
Custodian ................................................... 13
Service for Withdrawal ...................................... 13
Determination of Net Asset Value ............................ 13
Investment Performance ...................................... 14
Taxes ....................................................... 15
Principal Underwriter ....................................... 17
Portfolio Security Transactions ............................. 17
Other Information ........................................... 19
Independent Certified Public Accountants .................... 20
Financial Statements ........................................ 20
PART II
Fees and Expenses ........................................... 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 AUGUST 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 HIGH INCOME FUND THE PART I FOUND IN THE STATEMENT OF ADDITIONAL
INFORMATION OF EV CLASSIC HIGH INCOME FUND CONTAINED IN THIS AMENDMENT.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV MARATHON HIGH INCOME FUND. The
Fund became a series of the Trust on August 1, 1995.
FEES AND EXPENSES
DISTRIBUTION PLAN
During the fiscal year ended March 31, 1996, the Principal Underwriter
paid to Authorized Firms sales commissions of $2,817,575 on sales of Fund
shares. During the same period, the Fund made sales commissions under the Plan
to the Principal Underwriter aggregating $3,601,214, and the Principal
Underwriter received $1,715,000 in CDSCs imposed on early redeeming
shareholders. These sales commissions and CDSC payments reduced Uncovered
Distribution Charges under the Plan. As at March 31, 1996 the outstanding
Uncovered Distribution Charges of the Principal Underwriter calculated under
the Plan amounted to approximately $15,354,000 (which amount was equivalent to
3.1% of the Fund's net assets on such date). During the fiscal year ended
March 31, 1996, the Fund paid or accrued service fee payments under the Plan
aggregating $793,318 to the Principal Underwriter. The Principal Underwriter
paid $788,655 as service fees to Authorized Firms, the balance 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 March 31, 1996, the Fund paid the Principal
Underwriter $9,342.50 for repurchase transactions handled by the Principal
Underwriter (being $2.50 for each such transaction).
BROKERAGE COMMISSIONS
For the fiscal year ended March 31, 1996, the Portfolio paid no brokerage
commissions on portfolio transactions. During the period from June 1, 1994, to
March 31, 1995 (when the Fund transferred its assets to the Portfolio in
exchange for an interest in the Portfolio), the Fund paid brokerage
commissions of $3,684 on portfolio security transactions, of which $569 was
paid in respect of portfolio security transactions aggregating approximately
$206,198. During the Fund's fiscal year ended March 31, 1994, the Fund paid
brokerage commissions of $5,466 on portfolio security transactions. Of the
total brokerage commissions of $5,466 paid during the fiscal year ended March
31, 1994, approximately $5,466 was paid in respect of portfolio security
transactions aggregating approximately $1,819,100 to firms which provided some
research services to Eaton Vance (although many of such firms may have been
selected in any particular transaction primarily because of their execution
capabilities).
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested
Trustees) are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and of the Portfolio who
are members of the Eaton Vance organization receive no compensation from the
Fund or the Portfolio.) During the fiscal year ended March 31, 1996, 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
COMPENSATION COMPENSATION TOTAL COMPENSATION
NAME ------------ ------------ FROM TRUST AND
- ---- FROM FUND FROM PORTFOLIO FUND COMPLEX
-----------
Donald R. Dwight ....
$680
Samuel L. Hayes, III
633
Norton H. Reamer .... 631 3,662 137,500
John L. Thorndike ... 639 3,774 142,500
Jack L. Treynor ..... 684 3,869 142,500
- ----------
\1/ The Eaton Vance fund complex consists of 219 registered investment
companies or series thereof.
\2/ Includes $1,253 of deferred compensation.
\3/ Includes $1,272 of deferred compensation.
\4/ Includes $35,313 of deferred compensation.
\5/ Includes $37,500 of deferred compensation.
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 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 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
Plan.
Periods with a high level of sales of Fund shares accompanied by a low
level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to increase the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
Conversely, periods with a low level of sales of Fund shares accompanied by a
high level of early redemptions of Fund shares resulting in the imposition of
contingent deferred sales charges will tend to reduce the time during which
there will exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily the amount of Uncovered Distribution Charges,
distribution charges will include the aggregate amount of sales commissions
and distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled
to be paid under the Plan since its inception. Payments theretofore paid or
payable under the Plan by the Fund to the Principal Underwriter and contingent
deferred sales charges theretofore paid or payable to the Principal
Underwriter will be subtracted from such distribution charges; if the result
of such subtraction is positive, a distribution fee (computed at 1% over the
prime rate then reported in The Wall Street Journal) will be computed on such
amount and added thereto, with the resulting sum constituting the amount of
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 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". The Fund believes that the combined rate of all of these
payments may be higher than the rate of payments made under distributions
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 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, including 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 will 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 agreement 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 will provide to the Trustees for their review, and the Trustees will
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 of the Trust believe that the Plan will be a significant
factor in the growth of the Fund's assets, resulting in increased investment
flexibility and advantages which have benefited and will continue to benefit
the Fund and its shareholders. Payments for sales commissions and distribution
fees made to the Principal Underwriter under the Plan will compensate the
Principal Underwriter for its services and expenses in distributing shares of
the Fund. Service fee payments made to the Principal Underwriter and
Authorized Firms under the Plan provide incentives to provide continuing
personal services to investors and the maintenance of shareholder accounts.
By providing incentives to the Principal Underwriter and Authorized Firms, the
Plan is expected to result in the maintenance of, and possible future growth
in, the assets of the Fund. Based on the foregoing and other relevant factors,
the Trustees of the Trust have determined that in their judgment there is a
reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
PERFORMANCE INFORMATION
The table below indicates the cummulative and average annual total return
on a hypothetical investment of $1,000 in the Fund covering the life of the
Fund from August 19, 1986, through March 31, 1996 and for the five and one-
year periods ended March 31, 1996.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE BEFORE VALUE AFTER TOTAL RETURN TOTAL RETURN
DEDUCTING DEDUCTING BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC ------------------------ ------------------------
PERIOD DATE INVESTMENT ON 3/31/96 ON 3/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Life of the Fund* 8/19/86 $1,000 $2,237.10 $2,237.10 123.71% 8.73% 123.71% 8.73%
5 Years Ended 3/31/96 3/31/91 $1,000 $1,998.92 $1,978.92 99.89% 14.86% 97.89% 14.63%
1 Year Ended 3/31/96 3/31/95 $1,000 $1,128.05 $1,078.05 12.80% 12.80% 7.80% 7.80%
</TABLE>
For the thirty-day period ended March 31, 1996, the yield of the Fund was
9.87%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of June 28, 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 June 28, 1996, Merrill Lynch, Pierce, Fenner & Smith, Inc., New Brunswick,
NJ was the record owner of approximately 24.84% of the outstanding shares,
which were held on behalf of its customers who are the beneficial owners of
such shares, and as to which it had voting power under certain limited
circumstances. To the knowledge of the Trust, no other person owned of record
or beneficially 5% or more of the Fund's outstanding shares as of such date.
<PAGE>
[LOGO]
EV MARATHON
HIGH INCOME
FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1996
EV MARATHON
HIGH INCOME FUND
24 FEDERAL STREET
BOSTON, MA 02110
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EV MARATHON HIGH INCOME FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
M-HISAI
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
August 1, 1996
EV CLASSIC TAX-MANAGED GROWTH FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic Tax-Managed Growth Fund (the "Fund"),
Tax-Managed Growth Portfolio (the "Portfolio") and certain other series of Eaton
Vance Mutual Funds Trust (the "Trust"). The Fund's Part II (the "Part II")
provides information solely about the Fund. Where appropriate, Part I includes
cross-references to the relevant sections of Part II that provide additional,
Fund-specific information. This Statement of Additional Information is sometimes
referred herein to as the "SAI".
TABLE OF CONTENTS
Page
PART I
Additional Information about Investment Policies ................... 2
Investment Restrictions ............................................ 4
Trustees and Officers .............................................. 6
Investment Adviser and Administrator ............................... 8
Custodian .......................................................... 10
Service for Withdrawal ............................................. 11
Determination of Net Asset Value ................................... 11
Investment Performance ............................................. 12
Taxes .............................................................. 14
Portfolio Security Transactions .................................... 16
Other Information .................................................. 17
Independent Certified Public Accountants ........................... 18
PART II
Fees and Expenses .................................................. a-1
Distribution Plan .................................................. a-1
Performance Information ............................................ a-3
Control Persons and Principal Holders of Securities ................ a-4
Financial Statements ............................................... a-5
Independent Auditors' Report ....................................... a-6
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUND'S PROSPECTUS DATED AUGUST 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 to them in the Fund's Prospectus. The Fund is
subject to the same investment policies as those of the Portfolio. The Fund
currently seeks to achieve its objective by investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
Foreign Securities. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Foreign issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice comparable to
those applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of the Portfolio, political or financial instability or
diplomatic and other developments which could affect such investments. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In addition, foreign
brokerage commissions are generally higher than commissions on securities traded
in the United States and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
Foreign Currency Transactions. The value of foreign assets of the Portfolio as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations. Currency
exchange rates can also be affected unpredictably by intervention by U.S. or
foreign governments or central banks, or the failure to intervene, or by
currency controls or political developments in the U.S. or abroad. The Portfolio
may conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market or
through entering into swaps, forward contracts, options or futures on currency.
On spot transactions, foreign exchange dealers do not charge a fee for
conversion, but they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Portfolio at one
rate, while offering a lesser rate of exchange should the Portfolio desire to
resell that currency to the dealer.
Risks Associated With Derivative Instruments. Entering into a derivative
instrument involves a risk that the applicable market will move against the
Portfolio's position and that the Portfolio will incur a loss. For derivative
instruments other than purchased options, this loss may exceed the amount of the
initial investment made or the premium received by the Portfolio. Derivative
instruments may sometimes increase or leverage the Portfolio's exposure to a
particular market risk. Leverage enhances the Portfolio's exposure to the price
volatility of derivative instruments it holds. The Portfolio's success in using
derivative instruments to hedge portfolio assets depends on the degree of price
correlation between the derivative instruments and the hedged asset. Imperfect
correlation may be caused by several factors, including temporary price
disparities among the trading markets for the derivative instrument, the assets
underlying the derivative instrument and the Portfolio assets. Over-the-counter
("OTC") derivative instruments involve an enhanced risk that the issuer or
counterparty will fail to perform its contractual obligations. Some derivative
instruments are not readily marketable or may become illiquid under adverse
market conditions. In addition, during periods of market volatility, a commodity
exchange may suspend or limit trading in an exchange-traded derivative
instrument, which may make the contract temporarily illiquid and difficult to
price. Commodity exchanges may also establish daily limits on the amount that
the price of a futures contract or futures option can vary from the previous
day's settlement price. Once the daily limit is reached, no trades may be made
that day at a price beyond the limit. This may prevent the Portfolio from
closing out positions and limiting its losses. The staff of the Securities and
Exchange Commission (the "Commission") takes the position that purchased OTC
options, and assets used as cover for written OTC options, are subject to the
Portfolio's 15% limit on illiquid investments. However, with respect to options
written with primary dealers in U.S. Government securities pursuant to an
agreement requiring a closing purchase transaction at a formula price, the
amount of illiquid securities may be calculated with reference to the formula
price. The Portfolio's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such contracts. For thinly
traded derivative instruments, the only source of price quotations may be the
selling dealer or counterparty. In addition, certain provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), limit the extent to which the
Portfolio may purchase and sell derivative instruments. The Portfolio will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Code for
maintaining the qualification of the Fund as a regulated investment company for
federal income tax purposes. See "Taxes".
Asset Coverage for Derivative Instruments. Transactions using forward contracts,
futures contracts and options (other than options that the Portfolio has
purchased) expose the Portfolio to an obligation to another party. The Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options or
futures contracts or forward contracts, or (2) cash, receivables, and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. The Portfolio will comply with
Commission guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash, U.S. Government securities or other
liquid, high-grade debt securities in a segregated account with its custodian in
the prescribed amount.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding forward contract, futures contract or option
is open, unless they are replaced with other appropriate assets. As a result,
the commitment of a large portion of the Portfolio's assets to cover or
segregated accounts could impede portfolio management or the Portfolio's ability
to meet redemption requests or other current obligations.
Limitations on Futures Contracts and Options. The Portfolio may enter into
futures contracts, and options on futures contracts, traded on an exchange
regulated by the CFTC and on foreign exchanges, but, with respect to foreign
exchange-traded futures contracts and options on such futures contracts, only if
the Investment Adviser determines that trading on each such foreign exchange
does not subject the Portfolio to risks, including credit and liquidity risks,
that are materially greater than the risks associated with trading on
CFTC-regulated exchanges.
In order to hedge its current or anticipated portfolio positions, the
Portfolio may use futures contracts on securities held in its Portfolio or on
securities with characteristics similar to those of the securities held by the
Portfolio. If, in the opinion of the Investment Adviser, there is a sufficient
degree of correlation between price trends for the securities held by the
Portfolio and futures contracts based on other financial instruments, securities
indices or other indices, the Portfolio may also enter into such futures
contracts as part of its hedging strategy.
All call options on securities written by the Portfolio will be covered.
This means that, the Portfolio will own the securities subject to the call
option or an offsetting call option so long as the call option is outstanding.
Repurchase Agreements. Under a repurchase agreement the Portfolio buys a
security at one price and simultaneously promises to sell that same security
back to the seller at a higher price. At no time will the Portfolio commit more
than 15% of its net assets to repurchase agreements which mature in more than
seven days and other illiquid securities. The Portfolio's repurchase agreements
will provide that the value of the collateral underlying the repurchase
agreement will always be at least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement, and will be marked to
market daily.
Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase
agreements. Under a reverse repurchase agreement, the Portfolio temporarily
transfers possession of a portfolio instrument to another party, such as a bank
or broker-dealer, in return for cash. At the same time, the Portfolio agrees to
repurchase the instrument at an agreed upon time (normally within seven days)
and price, which reflects an interest payment. The Portfolio expects that it
will enter into reverse repurchase agreements when it is able to invest the cash
so acquired at a rate higher than the cost of the agreement, which would
increase the income earned by the Portfolio. The Portfolio could also enter into
reverse repurchase agreements as a means of raising cash to satisfy redemption
requests without the necessity of selling portfolio assets.
When the Portfolio enters into a reverse repurchase agreement, any
fluctuations in the market value of either the securities transferred to another
party or the securities in which the proceeds may be invested would affect the
market value of the Portfolio's assets. As a result, such transactions may
increase fluctuations in the market value of the Portfolio's assets. While there
is a risk that large fluctuations in the market value of the Portfolio's assets
could affect the Portfolio's net asset value, this risk is not significantly
increased by entering into reverse repurchase agreements, in the opinion of the
Investment Adviser. Because reverse repurchase agreements may be considered to
be the practical equivalent of borrowing funds, they constitute a form of
leverage. If the Portfolio reinvests the proceeds of a reverse repurchase
agreement at a rate lower than the cost of the agreement, entering into the
agreement will lower the Portfolio's yield.
At all times that a reverse repurchase agreement is outstanding, the
Portfolio will maintain cash or high grade liquid securities in a segregated
account at its custodian bank with a value at least equal to its obligation
under the agreement. Securities and other assets held in the segregated account
may not be sold while the reverse repurchase agreement is outstanding, unless
other suitable assets are substituted. Although the Investment Adviser does not
consider reverse repurchase agreements to involve a traditional borrowing of
money, reverse repurchase agreements will be included within the aggregate
limitation on "borrowings" contained in the Portfolio's investment restriction
(1) set forth below.
Portfolio Turnover. The Portfolio cannot accurately predict its portfolio
turnover rate, but it is anticipated that the annual turnover rate will
generally be lower than that of most other equity mutual funds and will
generally not exceed 100% (excluding turnover of securities having a maturity of
one year or less). A 100% annual turnover rate would occur, for example, if all
the securities in the portfolio were replaced once in a period of one year. A
high turnover rate (100% or more) necessarily involves greater expenses to the
Portfolio.
Lending Portfolio Securities. If the Investment Adviser decides to make
securities loans, the Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. Under
present regulatory policies of the Commission, such loans are required to be
secured continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to market value of the securities loaned, which will
be marked to market daily. Cash equivalents include certificates of deposit,
commercial paper and other short-term money market instruments. The financial
condition of the borrower will be monitored by the Investment Adviser on an
ongoing basis. The Portfolio would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would also
receive a fee, or all or a portion of the interest on investment of the
collateral. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. The Portfolio
would not have the right to vote any securities having voting rights during the
existence of a loan, but could call the loan in anticipation of an important
vote to be taken among holder of the securities or the giving or holding of
their consent on a material matter affecting the investment. If the Investment
Adviser decides to make securities loans, it is intended that the value of the
securities loaned would not exceed 30% of the Portfolio's total assets.
Securities lending involves administration expenses, including finders' fees.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% or more of the outstanding voting
securities of the Fund or the Portfolio, as the case may be, present or
represented by proxy at a meeting if the holders of more than 50% of the
outstanding voting securities of the Fund or the Portfolio are present or
represented at the meeting or (b) more than 50% of the outstanding voting
securities of the Fund or investors of the Portfolio. Neither the Fund nor the
Portfolio may:
(1) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(2) Purchase any securities or evidences of interest therein on
"margin," that is to say in a transaction in which it has borrowed all or a
portion of the purchase price and pledged the purchased securities or
evidences of interest therein as collateral for the amount so borrowed;
(3) Engage in the underwriting of securities; or
(4) Buy or sell real estate (although it may purchase and sell
securities which are secured by real estate and securities of companies
which invest or deal in real estate), commodities or commodity contracts for
the purchase or sale of physical commodities;
(5) Make loans to other persons, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities;
(6) With respect to 75% of its total assets, invest more than 5% of its
total assets (taken at current value) in the securities of any one issuer,
or invest in more than 10% of the outstanding voting securities of any one
issuer, except obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and except securities of other investment
companies; or
(7) Concentrate its investments in any particular industry, but, if
deemed appropriate for the Fund's objective, up to 25% of the value of its
assets may be invested in any one industry.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or other asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. Notwithstanding the investment policies and restrictions of the Portfolio,
the Portfolio may invest part of its assets in another investment company
consistent with the Investment Company Act of 1940 (the "1940 Act").
The Fund and the Portfolio have each adopted the following investment
policies which may be changed without shareholder or investor approval. Neither
the Fund nor the Portfolio may invest more than 15% of its net assets in
investments which are not readily marketable, including restricted securities
and repurchase agreements with a maturity longer than seven days. Restricted
securities for the purposes of this limitation do not include securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933 and
commercial paper issued pursuant to Section 4(2) of said Act that the Board of
Trustees of the Trust or the Portfolio, or their delegate, determines to be
liquid. Neither the Fund nor the Portfolio will purchase securities of any
issuer which has a record of less than three (3) years' continuous operation
including, however, in such three (3) years the operation of any predecessor
company or companies, partnership or individual enterprise if the issuer whose
securities are proposed as an investment for funds of the Trust has come into
existence as a result of a merger, consolidation, reorganization, or the
purchase of substantially all the assets of such predecessor company or
companies, partnership or individual enterprise, provided that nothing in this
provision shall prevent (a) the purchase of securities of a company
substantially all of whose assets are (i) securities of one or more companies
which have had a record of three (3) years' continuous operation, or (ii) assets
of an independent division of another company, which division has had a record
of three (3) years' continuous operation; (b) the purchase of securities of (i)
a public utility subject to supervision or regulation as to its rates or charges
by a commission or board or officer of the United States or of any state or
territory thereof, or of the government of Canada or of any province or
territory of Canada or (ii) companies operating or formed for the purpose of
operating pipe or transmission lines for the transmission of oil, gas or
electric energy or like products; provided that no security shall be purchased
pursuant to exception (a) or (b) of this provision if such purchase at the time
thereof will cause more than five per cent (5%) of the total assets of the Fund
(taken at market value) to be invested in securities of companies which would
not then be eligible for purchase but for those exceptions. Neither the Fund nor
the Portfolio will sell or contract to sell any security which it does not own
unless by virtue of its ownership of other securities it has at the time of sale
a right to obtain securities equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale is made upon the
same conditions. Neither the Fund nor the Portfolio will invest for the purpose
of exercising control or management of other companies. Neither the Fund nor the
Portfolio will purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
Neither the Fund nor the Portfolio will purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or is a member, officer,
director or trustee of the Investment Adviser of the Trust or the Portfolio, if
after the purchase of the securities of such issuer by the Fund or the Portfolio
one or more of such persons owns beneficially more than 1/2 of 1% of the shares
or securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
market value).
Neither the Fund nor the Portfolio will purchase an option on any security
if, after such transaction, more than 5% of its net assets, as measured by the
aggregate of all premiums paid for all such options held by the Portfolio, would
be so invested.
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any security or other asset, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Notwithstanding the foregoing, under normal market
conditions the Fund and the Portfolio must take actions necessary to comply with
the policy of investing at least 65% of total assets in equity securities.
Notwithstanding the foregoing, the Fund and Portfolio must always be in
compliance with the borrowing policies set forth above.
In order to permit the sale of shares of the Fund in certain states, the
Fund and the Portfolio may make commitments more restrictive than the
fundamental policies described above. Should the Fund determine that any such
commitment is no longer in the best interests of the Fund and its shareholders,
it will revoke the commitment by terminating sales of its shares in the state(s)
involved.
Although permissible under the Fund's investment restrictions, the Fund has
no present intention during the coming fiscal year to: borrow money; pledge its
assets; or make loans to other persons.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's Investment
Adviser, Boston Management and Research ("BMR"), which is a wholly-owned
subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton Vance's parent,
Eaton Vance Corp. ("EVC"); and of Eaton Vance's and BMR's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, Eaton Vance,
BMR, EVC or EV as defined in the 1940 Act by virtue of their affiliation with
any one or more of the Trust, the Portfolio Eaton Vance, BMR, EVC or EV, are
indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (63), President and Trustee of the Trust*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
LANDON T. CLAY (70), President and Trustee of the Portfolio*
Chairman of Eaton Vance, BMR, EVC and EV and a Director of EVC and EV.
Director or Trustee and officer of various investment companies managed by
Eaton Vance or BMR.
JAMES B. HAWKES (54), Vice President of the Portfolio and the Trust and
Trustee of the Trust*
Executive Vice President of Eaton Vance, BMR, EVC and EV, and a Director of
EVC and EV. Director or Trustee and officer of various investment companies
managed by Eaton Vance or BMR.
H. DAY BRIGHAM, JR. (69) Vice President of the Trust
Chairman of the Management Committee, Vice President of Eaton Vance, BMR, EVC
and EV and Director of EVC and EV, Director, Trustee and officer of various
investment companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (65), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
SAMUEL L. HAYES, III (61), Trustee
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration,
Soldiers Field Road, Boston, Massachusetts 02163
NORTON H. REAMER (60), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms). Chairman, President and
Director, UAM Funds (mutual funds). Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (69), Trustee
Director, Fiduciary Company Incorporated. Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (66), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
DUNCAN W. RICHARDSON (38), Vice President of the Portfolio
Vice President of Eaton Vance and EV since January 19, 1990 and of BMR since
August 11, 1992. Officer of various investment companies managed by Eaton
Vance or BMR. Mr. Richardson was elected Vice President of the Portfolio on
October 23, 1995.
WILLIAM H. AHERN, JR. (36), Vice President of the Trust
Assistant Vice President of BMR, Eaton Vance and EV and an employee of Eaton
Vance since July 17, 1989. Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Ahern was elected Vice President of the Trust on June
19, 1995.
MICHAEL B. TERRY (53), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (51), Treasurer
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
M. KATHERINE KREIDER (35), Assistant Treasurer
Assistant Vice President of Eaton Vance, BMR and EV since February 5, 1996.
Senior Audit Manager (1993-1996), Audit Manager (1991-1993) -- Financial
Services Industry Practice, Deloitte & Touche (1987-1996). Officer of various
investment companies managed by Eaton Vance or BMR. Ms. Kreider was elected
Assistant Treasurer of the Trust on February 21, 1996.
THOMAS OTIS (64), Secretary
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (60), Assistant Treasurer and Assistant Secretary
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
A. JOHN MURPHY (33), Assistant Secretary
Assistant Vice President of BMR, Eaton Vance and EV since March 1, 1994;
employee of Eaton Vance since March 1993. State Regulations Supervisor, The
Boston Company (1991-1993) and Registration Specialist, Fidelity Management &
Research Co. (1986-1991). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust on
March 27, 1995 and of the Portfolio on October 23, 1995.
JOHN P. RYNNE (54), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR, and Treasurer of Energex Energy Corporation. Mr. Rynne became
an officer of the Trust on June 19, 1995.
ERIC G. WOODBURY (39), Assistant Secretary
Vice President of BMR, Eaton Vance and EV since February 1993; formerly,
associate attorney at Dechert, Price & Rhoads and Gaston & Snow. Mr. Woodbury
was elected Assistant Secretary of the Trust on June 19, 1995 and of the
Portfolio on October 23, 1995.
ADDITIONAL OFFICER INFORMATION
The Portfolio has the following officer not listed under "Officers of the
Trust and the Portfolio" in the Fund's Part I of this Statement of Additional
Information.
RAYMOND E. HENDER (51), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV and an employee of Eaton Vance since
September 8, 1992. Senior Vice President, Bank of New England (1989-1992).
Fidelity Management & Research Company--Portfolio Manager (1977-1988).
Officer of various investment companies managed by Eaton Vance or BMR. Mr.
Hender was elected Vice President of 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 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 and of the Portfolio. The Audit Committee's
functions include making recommendations to the Board of Trustees regarding the
selection of the independent certified public accountants, and reviewing with
such accountants and the Treasurer of the Trust and of the Portfolio matters
relative to trading and brokerage policies and practices, accounting and
auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent of the
Fund and of the Portfolio.
Trustees of the Portfolio who not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Plan"). Under the
Plan, an eligible Trustee may elect to have his deferred fees invested by the
Portfolio in the shares of one or more funds in the Eaton Vance Family of Funds,
and the amount paid to the Trustees under the Plan will be determined based upon
the performance of such investments. Deferral of Trustees' fees in accordance
with the Plan will have a negligible effect on the Portfolio's assets,
liabilities, and net income per share, and will not obligate the Portfolio to
retain the services of any Trustee or obligate the Portfolio to pay any
particular level of compensation to the Trustee. Neither the Portfolio nor the
Fund has a retirement plan for its Trustees.
The fees and expenses of those Trustees of the Trust and the Portfolio who
are not members of the Eaton Vance organization (the noninterested Trustees) are
paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. For the compensation received by the noninterested Trustees of the
Trust and the Portfolio, see "Fees and Expenses" in Part II.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement dated October 23, 1995. BMR or Eaton Vance acts as investment
adviser to investment companies and various individual and institutional clients
with combined assets under management of over $16 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division cover stocks ranging from
blue chip to emerging growth companies.
Eaton Vance and its affiliates act as adviser to over 150 mutual funds,
individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experience team of investment professionals that began working together in the
mid-1980s. Lloyd George's staff includes 11 highly qualified investment
professionals who manage U.S. $1.3 billion. Lloyd George analysts cover East
Asia, the India subcontinent, Russia and Eastern Europe, Latin America,
Australia and New Zealand from offices in Hong Kong, London and Mumbai. Together
Eaton Vance and Lloyd George manage over $18 billion in assets. Eaton Vance
mutual funds are distributed by Eaton Vance Distributors both within the United
States and offshore.
Eaton Vance Distributors believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your "short-term" and "long-term" financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can provide you with tailored financial advice and
help you decide when to buy, sell or persevere with your investments.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commission, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interest in the Portfolio under
federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registration of the Portfolio and of the Portfolio's placement agent
as broker-dealer or agent under state securities laws, (ix) expenses of reports
and notices to investors and of meetings of investors and proxy solicitations
therefor, (x) expenses of reports to governmental officers and commissions, (xi)
insurance expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Portfolio
(including without limitation safekeeping of funds, securities and other
investments, keeping of books, accounts and records, and determination of net
asset values, book capital account balances and tax capital account balances),
(xiv) fees, expenses and disbursements of transfer agents, dividend disbursing
agents, investor servicing agents and registrars for all services to the
Portfolio, (xv) expenses for servicing the accounts of investors, (xvi) any
direct charges to investors approved by the Trustees of the Portfolio, (xvii)
compensation and expenses of Trustees of the Portfolio who are not members of
BMR's organization, and (xviii) such non-recurring items as may arise, including
expenses incurred in connection with litigation, proceedings and claims and the
obligation of the Portfolio to indemnify its Trustees, officer and investors
with respect thereto.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus.
The Investment Advisory Agreement with BMR remains in effect until February
28, 1997. It may be continued indefinitely thereafter so long as such
continuance after February 28, 1997 is approved at least annually (i) by the
vote of a majority of the Trustees of the Portfolio who are not interested
persons of the Portfolio or of BMR cast in person at a meeting specifically
called for the purpose of voting on such approval and (ii) by the Board of
Trustees of the Portfolio or by vote of a majority of the outstanding voting
securities of the Portfolio. The Agreement may be terminated at any time without
penalty on sixty (60) days' written notice by the Board of Trustees of either
party, or by vote of the majority of the outstanding voting securities of the
Portfolio, and the Agreement will terminate automatically in the event of its
assignment. The Agreement provides that BMR may render services to others. The
Agreement also provides that BMR shall not be liable for any loss incurred in
connection with the performance of its duties, or action taken or omitted under
that Agreement, in the absence of willful misfeasance, bad faith, gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties thereunder, or for any losses sustained
in the acquisition, holding or disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its agreement with the Fund, Eaton Vance has been
engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund. For additional information about the Administrator, see
"Fees and Expenses" in the Fund's Part II.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) registration
of the Trust under the 1940 Act, (iii) commission, fees and other expenses
connected with the purchase or sale of securities and other investments, (iv)
auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale, repurchase and redemption of
shares, (viii) expenses of registering and qualifying the Fund and its shares
under federal and state securities laws and of preparing and printing
prospectuses for such purpose and for distribution of the same to shareholders
and investors, and fees and expenses of registering and maintaining registration
of the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrar for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officer
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. Eaton Vance and BMR are both Massachusetts
business trusts, and EV is the trustee of Eaton Vance and BMR. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G.L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner
is president and chief executive officer of EVC, Eaton Vance, BMR and EV. All of
the issued and outstanding shares of Eaton Vance and of EV are owned by EVC. All
of the issued and outstanding shares of BMR are owned by Eaton Vance. All shares
of the outstanding Voting Common Stock of EVC are deposited in a Voting Trust
which expires December 31, 1996, the Voting Trustees of which are Messrs.
Brigham, Clay, Gardner, Hawkes and Rowland. The Voting Trustees have
unrestricted voting rights for the election of Directors of EVC. All of the
outstanding voting trust receipts issued under said Voting Trust are owned by
certain of the officers of Eaton Vance and BMR who are also officers and
Directors of EVC and EV. As of May 1, 1996, Messrs. Clay, Gardner and Hawkes
each owned 24% of such voting trust receipts and Messrs. Rowland and Brigham
owned 15% and 13%, respectively, of such voting trust receipts. Messrs. Clay,
Gardner, Hawkes and Otis, who are officers or Trustees of the Trust and/or the
Portfolio, are members of the EVC, Eaton Vance, BMR and EV organizations.
Messrs. Ahern, Murphy, O'Connor, Richardson, Rynne, Terry and Woodbury, and Ms.
Kreider and Ms. Sanders are officers of the Trust and/or the Portfolio and are
also members of the Eaton Vance, BMR and EV organizations. BMR will receive the
fees paid under the Investment Advisory Agreement.
EVC owns all of the stock of Energex Energy Corporation, which engages in
oil and gas exploration and development. In addition, Eaton Vance owns all the
stock of Northeast Properties, Inc., which is engaged in real estate investment.
EVC also owns 24% of the Class A shares of Lloyd George Management (B.V.I.)
Limited, a registered investment adviser. EVC owns all the stock of Fulcrum
Management, Inc. and MinVen, Inc., which are engaged in the development of
precious metal mining, venture investment and management. EVC, Eaton Vance, BMR
and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions will not be influenced by existing
or potential custodial or other relationships between the Trust or the Portfolio
and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 89 South Street, Boston,
Massachusetts acts as custodian for the Fund and the Portfolio. IBT has the
custody of all cash and securities representing the Fund's interest in the
Portfolio, has custody of all the Portfolio's assets, maintains the general
ledger of the Portfolio and the Fund and computes the daily net asset value of
interests in the Portfolio and the net asset value of shares of the fund. In
such capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Portfolio's investments,
receives and disburse all funds and performs various other ministerial duties
upon receipt of proper instruction from the Fund and the Portfolio. IBT charges
fees which are competitive within the industry. A portion of the fee relates to
custody, bookkeeping and valuation services and is based upon a percentage of
Fund and Portfolio net assets and a portion of the fee relates to activity
charges, primarily the number of portfolio transactions. These fees are then
reduced by a credit for cash balances of the particular investment company at
the custodian equal to 75% of the 91-day, U.S. Treasury Bill auction rate
applied to the particular investment company's average daily collected balances
for the week. In view of Mr. Clay's interest in IBT, the Portfolio is treated as
a self-custodian pursuant to Rule 17f-2 under the Investment Company Act of
1940, and the Portfolio's investments held by IBT as custodian are thus subject
to the additional examinations by the Portfolio's independent certified public
accountants as called for by such Rule.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular quarterly payments of any permitted amount designated by the
shareholder (see "Eaton Vance Shareholder Services - Systematic Withdrawal Plan"
in the Fund's current Prospectus) based upon the value of the shares held. The
checks will be drawn from share redemptions and hence, are a return of
principal. Income dividends and capital gain distributions in connection with
withdrawal accounts will be credited at net asset value as of the record date
for each distribution. Continued withdrawals in excess of current income will
eventually use up principal, particularly in a period of declining market
prices. A shareholder may not have a withdrawal plan in effect at the same time
he or she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. Either the shareholder, the Transfer Agent or the
Principal Underwriter will be able to terminate the withdrawal plan at any time
without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio and of shares of the Fund is
determined by IBT (as agent and custodian for the Fund and the Portfolio) in the
manner described under "Valuing Fund Shares" in the Fund's current Prospectus.
The Fund and Portfolio will be closed for business and will not price their
shares on the following business holidays: New Year's Day, Presidents' Day, Good
Friday (a New York Stock Exchange holiday), Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
The Trustees of the Portfolio have established the following procedures for
the fair valuation of the Portfolio's assets under normal market conditions.
Securities listed on foreign or U.S. securities exchanges or in the NASDAQ
National Market System generally are valued at closing sale prices or, if there
were no sales, at the mean between the closing bid and asked prices therefor on
the exchange where such securities are principally traded or on such National
Market System. Unlisted or listed securities for which closing sale prices are
not available are valued at the mean between the latest bid and asked prices. An
option is valued at the last sale price as quoted on the principal exchange or
board of trade on which such option or contract is traded, or in the absence of
a sale, at the mean between the last bid and asked prices. Futures positions on
securities or currencies are generally valued at closing settlement prices.
Short-term debt securities with a remaining maturity of 60 days or less are
valued at amortized cost. If securities were acquired with a remaining maturity
of more than 60 days, their amortized cost value will be based on their value on
the sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. All other securities are valued at fair value as determined in
good faith by or at the direction of the Trustees.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represents that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. Each investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to a fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the Portfolio Valuation Time on the
prior Portfolio Business Day plus or minus, as the case may be, that amount of
any additions to or withdrawals from the investor's investment in the Portfolio
on the current Portfolio Business Day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of the Portfolio Valuation Time on
the prior Portfolio Business Day plus or minus, as the case may be, the amount
of the net additions to or withdrawals from the aggregate investment in the
Portfolio on the current Portfolio Business Day by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio for the current Portfolio
Business Day.
Generally, trading in the foreign securities owned by the Portfolio is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's share are computed as of such times. Occasionally, events
affecting the value of foreign securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Portfolio's net asset value (unless the Portfolio deems that such events would
materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the
Portfolio will be valued in U.S. dollars; such values will be computed by the
custodian based on foreign currency exchange rate quotations supplied by Reuters
Information Service.
INVESTMENT PERFORMANCE
Average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and annualizing the result. The calculation
assumes that all distributions are reinvested at net asset value on the
reinvestment dates during the period.
The Fund may use total return figures showing after-tax returns, including
comparisons to tax-deferred vehicles such as Individual Retirement Accounts
("IRAs") and variable annuities. In calculating after-tax returns, the Fund
will, in general, assume that its shareholders are U.S. individual taxpayers
subject to federal income taxes at the highest marginal rate then applicable to
ordinary income and long-term capital gains. After-tax returns may also be
calculated using different tax rate assumptions and taking into account state
and local income taxes as well as federal taxes. In calculating after-tax
returns, distributions made by the Fund are assumed to be reduced by the amount
of taxes payable on the distribution, and the after-tax proceeds of the
distribution are reinvested in the Fund at net asset value on the reinvestment
date.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic and foreign securities indices, for
example: Standard & Poor's Index of 400 Common Stocks, Standard & Poor's Index
of 500 Common Stocks, Merrill Lynch U.S. Treasury (15-year plus) Index, Lehman
Brothers Government/Corporate Bond Index, the Dow Jones Industrial Average and
Morgan Stanley Global Equity. The Fund's total return and comparisons with these
indices may be used in advertisements and in information furnished to present or
prospective shareholders. The Fund's performance may differ from that of other
investors in the Portfolio, and other investment companies.
Information used in advertisements and in materials furnished to present or
prospective shareholders may include statistics, data and performance studies
prepared by independent organizations (e.g. Ibbotson Associates, Standard &
Poor's Ratings Group, Merrill Lynch Private Client Group, Bloomberg, L.P., Dow
Jones & Company, Inc., and the Federal Reserve Board) or included in various
publications (e.g. The Wall Street Journal, Barron's and The Decade: Wealth of
Investments in U.S. Stocks, Bonds, Bills & Inflation) reflecting the investment
performance or return achieved by various classes and types of investments (e.g.
common stocks, small company stocks, long-term corporate bonds, long-term
government bonds, intermediate-term government bonds, U.S. Treasury bills) over
various periods of time. This information may be used to illustrate the benefits
of long-term investments in common stocks.
Information about the allocation and holdings of investments in the
Portfolio may be included in advertisements and other material furnished to
present and prospective shareholders.
Evaluations of the Fund's performance or rankings of mutual funds (which
include the Fund) made by independent sources (e.g., Lipper Analytical Services,
Inc., CDA/Weisenberger and Morningstar, Inc.) may be used in advertisements and
in information furnished to present or prospective shareholders. Information,
charts and illustrations showing the effect of compounding interest or relating
to inflation and taxes (including their effects on the dollar and the return on
stocks and other investment vehicles) may also be included in advertisements and
materials furnished to present and prospective investors.
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- costs associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the value
of investing as early as possible and regularly, as well as staying invested.
The benefits of investing in equity securities by means of a mutual fund may
also be included (such benefits may include diversification, professional
management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
The Fund may provide information about Eaton Vance, its affiliates and other
investment advisers to the funds in the Eaton Vance Family of Funds in sales
material or advertisements provided to investors or prospective investors. Such
material or advertisements may also provide information on the use of investment
professionals by such investors.
HYPOTHETICAL RETURNS
The following analysis compares the after-tax returns achieved from three
hypothetical investments with identical pre-tax returns of 10% per year. The
first hypothetical investment is a tax-managed equity mutual fund whose returns
consist entirely of deferred gains (no dividend income and no realized capital
gains). Note - It is anticipated the Fund will distribute some net investment
income and capital gains in some years, so the hypothetical may not be entirely
applicable. The second hypothetical investment is a conventional equity mutual
fund, managed without regard to investor tax considerations, whose 10% annual
returns consist of 2% return from dividend income and 8% return from realized
capital gains, three-quarters of which are long-term gains and one-quarter of
which are short-term gains. The third hypothetical investment is a variable
annuity fund, which by its structure defers taxation on all income and gains.
The third hypothetical investment is a variable annuity fund, which by its
structure defers taxation on all income and gains. The investor is amused to pay
federal taxes at the highest rate applicable to individual income and gains,
including the effect of the itemized deduction phaseout. this rate is 40.8% for
dividend income and short-term capital gains and 29.2% for long-term capital
gains. The investor is assumed to pay no state or local taxes.
An initial investment of $10,000 in each of the three hypothetical funds
would grow in value to:
CONVENTIONAL EQUITY VARIABLE
TAX-MANAGED FUND MUTUAL FUND ANNUITY FUND
---------------- ------------------- ------------
After 10 years: $25,937 $18,942 $25,937
After 20 years: $67,275 $35,881 $67,275
The returns from the tax-managed fund and the variable annuity fund are the
same since the pre-tax returns are assumed to be identical and no taxes have
been paid in either case. The returns from the conventional fund are
substantially lower due to the taxes paid each year in connection with the funds
dividend income and realized long-term and short-term capital gains.
If the hypothetical fund investments were each to be sold, the amount
realized from the sale, net of taxes, would be:
CONVENTIONAL EQUITY VARIABLE
TAX-MANAGED FUND MUTUAL FUND ANNUITY FUND
---------------- ------------------- ------------
After 10 years: $21,286 $18,942 $19,437
After 20 years: $50,558 $35,881 $43,914
The proceeds from selling the conventional fund, net of taxes, equals the
value of the shares (from above), since no gain is recognized at sale. The
net-of-tax proceeds of the tax-managed fund position is reduced by the capital
gains taxes due on the accumulated gain. The net-of-tax proceeds of the variable
annuity is reduced by taxes on the accumulated income and gain, all of which is
taxed as ordinary income.
If the holder of the hypothetical fund investments were to die, the value of
the investment passing to the estate would be:
CONVENTIONAL EQUITY VARIABLE
TAX-MANAGED FUND MUTUAL FUND ANNUITY FUND
---------------- ------------------- ------------
After 10 years: $25,937 $18,942 $19,437
After 20 years: $67,275 $35,881 $43,914
The value of the tax-managed fund and the conventional fund would pass
through to the estate without being taxed and their tax basis would be adjusted
upward to the value at the time of death. The value of the variable annuity
would be reduced by taxes at the ordinary income rate on the accumulated income
and gain, as if the investor had sold the position.
TAXES
See also "Distribution and Taxes" in the Fund's current Prospectus.
The Fund, as a series of a Massachusetts business trust, will be treated as
a separate entity for accounting and tax purposes. The Fund intends to elect to
be treated, and to qualify each year as a regulated investment company ("RIC")
under the Code. Accordingly, the Fund intends to satisfy certain requirements
relating to sources of its income and diversification of its assets and to
distribute all of its net investment income and net realized capital gains in
accordance with the timing requirements imposed by the Code, so as to avoid any
federal income or excise tax on the Fund. Because the Fund invests its assets in
the Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements in order for the Fund to satisfy them.
The Portfolio will allocate at least annually among its investors, including the
Fund, each investor's distributive share of the Portfolio's net investment
income, net realized capital gains, and any other items of income, gain, loss,
deduction or credit. The Portfolio will make allocations to the Fund in
accordance with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the Fund to satisfy the tax distribution requirements that apply to the
Fund and that must be satisfied in order to avoid federal income and/or excise
tax on the Fund. For purposes of applying the requirements of the Code regarding
qualification as a RIC, the Fund will be deemed (i) to own its proportionate
share of each of the assets of the Portfolio and (ii) to be entitled to the
gross income of the Portfolio attributable to such share.
In order to avoid federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses, generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards, and 100% of any income and capital gains from the prior year (as
previously computed) that was not paid out during such year and on which the
Fund was not taxed. Further, under current law, provided that the Fund qualifies
as a RIC for federal income tax purposes and the Portfolio is treated as a
partnership for Massachusetts and federal tax purposes, neither the Fund nor the
Portfolio is liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
Foreign exchange gains and losses realized by the Portfolio and allocated to
the Fund in connection with the Portfolio's investments in foreign securities
and certain options, futures or forward contracts or foreign currency may be
treated as ordinary income and losses under special tax rules. Certain options,
futures or forward contracts of the Portfolio may be required to be marked to
market (i.e., treated as if closed out) on the last day of each taxable year,
and any gain or loss realized with respect to these contracts may be required to
be treated as 60% long-term and 40% short-term gain or loss. Positions of the
Portfolio in securities and offsetting options, swaps, futures or forward
contracts may be treated as "straddles" and be subject to other special rules
that may, upon allocation of the Portfolio's income, gain or loss to the Fund,
affect the amount, timing and character of the Fund's distributions to
shareholders. Certain uses of foreign currency and foreign currency derivatives
such as options, futures, forward contracts and swaps and investment by the
Portfolio in certain "passive foreign investment companies" may be limited or a
tax election may be made, if available, in order to preserve the Fund's
qualification as a RIC or avoid imposition of a tax on the Fund.
The Portfolio will allocate at least annually to the Fund and its other
investors their respective distributive shares of any net investment income and
net capital gains which have been recognized for federal income tax purposes
(including unrealized gains at the end of the Portfolio's fiscal year on certain
options and futures transactions that are required to be marked-to-market).
Such amounts will be distributed by the Fund to its shareholders in cash or
additional shares, as they elect. Shareholders of the Fund will be advised of
the nature of the distributions.
Certain investors in the Portfolio, including RICs, have acquired interests
in the Portfolio by contributing securities. Due to tax considerations, during
the first five years following the contribution of securities to the Portfolio
by an investor, such securities will not be distributed to any investor other
than the investor who contributed those securities. Investors who acquire an
interest in the Portfolio by contributing securities and who redeem that
interest within five years thereafter will generally receive back one or more of
the securities they contributed. In partial redemptions by such investors during
this period, the Portfolio will attempt to accommodate requests to distribute
initially those contributed securities and share lots with the highest cost
basis.
The Portfolio has significant holdings of highly appreciated securities that
were contributed to the Portfolio by investors other than the Fund. If such
securities were to be sold, the resulting capital gain would be allocated
disproportionately among the Portfolio's investors, with the result that the
Fund would not be subject to taxation on any gain arising prior to the
contribution of the securities to the Portfolio.
Distributions by the Fund of the excess of net long-term capital gains over
short-term capital losses earned by the Portfolio and allocated to the Fund,
taking into account any capital loss carryforwards that may be available to the
Fund in years after its first taxable year, are taxable to shareholders of the
Fund as long-term capital gains, whether received in cash or in additional
shares and regardless of the length of time their shares have been held. Certain
distributions, if declared in October, November or December and paid the
following January, will be taxed to shareholders as if received on December 31
of the year in which they are declared.
Any loss realized upon the redemption or exchange of shares with a tax
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. All or a portion of a loss realized upon a taxable disposition of
Fund shares may be disallowed under "wash sale" rules if other Fund shares are
purchased (whether through reinvestment of dividends or otherwise) within 30
days before or after the disposition. Any disallowed loss will result in an
adjustment to the shareholder's tax basis in some or all of the other shares
acquired.
The Fund will not be subject to Massachusetts income, corporate excise or
franchise taxation as long as it qualifies as a RIC under the Code.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain certifications required by the Internal Revenue Service (the "IRS"), as
well as shareholders with respect to whom the Fund has received notification
from the IRS or a broker, may be subject to "backup" withholding of federal
income tax from the Fund's dividends and distributions and the proceeds of
redemptions (including repurchases and exchanges) at a rate of 31%. An
individual's taxpayer identification number is generally his or her social
security number.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. Federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not describe many of the tax rules applicable
to IRAs nor does it address the special tax rules applicable to certain other
classes of investors, such as other retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to these or other special tax rules that may
apply in their particular situations, as well as the state, local or foreign tax
consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions by the
Portfolio, including the selection of the market and the broker-dealer firm, are
made by BMR. BMR is also responsible for the execution of transactions for all
other accounts managed by it.
BMR places the portfolio security transactions of the Portfolio and of
certain other accounts managed by it for execution with many broker-dealer
firms. BMR uses its best efforts to obtain execution of portfolio transactions
at prices which are advantageous to the Portfolio and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, BMR will use its best judgment in evaluating the terms
of a transaction, and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the general
execution and operational capabilities of the broker-dealer, the nature and
character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the broker-dealer, the value
and quality of services rendered by the broker-dealer in other transactions, and
the reasonableness of the commission, if any. Transactions on stock exchanges
and other agency transactions involve the payment by the Portfolio of negotiated
brokerage commissions. Such commissions vary among different broker-dealer
firms, and a particular broker-dealer may charge different commissions according
to such factors as the difficulty and size of the transaction and the volume of
business done with such broker-dealer. Transactions in foreign securities
usually involve the payment of fixed brokerage commissions, which are generally
higher than those in the United States. There is generally no stated commission
in the case of securities traded in the over-the-counter markets, but the price
paid or received by the Portfolio usually includes an undisclosed dealer markup
or markdown. In an underwritten offering the price paid by the Portfolio
includes a disclosed fixed commission or discount retained by the underwriter or
dealer. Although commissions paid on portfolio transactions will, in the
judgment of BMR, be reasonable in relation to the value of the services
provided, commissions exceeding those which another firm might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolio and BMR's other clients in part for providing brokerage and
research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided. This determination may be
made on the basis of either that particular transaction or on the basis of
overall responsibilities which BMR and its affiliates have for accounts over
which it exercises investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the commission should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealers which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, BMR may receive Research Services from broker-dealer firms with which
BMR places the portfolio transactions of the Portfolio and from third parties
with which these broker-dealers have arrangements. These Research Services may
include such matters as general economic and market reviews, industry and
company reviews, evaluations of securities and portfolio strategies and
transactions and recommendations as to the purchase and sale of securities and
other portfolio transactions, financial, industry and trade publications, news
and information services, pricing and quotation equipment and services, and
research oriented computer hardware, software, data bases and services. Any
particular Research Service obtained through a broker-dealer may be used by BMR
in connection with client accounts other than those accounts which pay
commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to BMR in rendering investment advisory services to all or a
significant portion of its clients, or may be relevant and useful for the
management of only one client's account or of a few clients' accounts, or may be
useful for the management of merely a segment of certain clients' accounts,
regardless of whether any such account or accounts paid commissions to the
broker-dealer through which such Research Service was obtained. The advisory fee
paid by the Portfolio is not reduced because BMR receives such Research
Services. BMR evaluates the nature and quality of the various Research Services
obtained through broker-dealer firms and attempts to allocate sufficient
commissions to such firms to ensure the continued receipt of Research Services
which BMR believes are useful or of value to it in rendering investment advisory
services to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions of the Portfolio at advantageous prices
and at reasonably competitive commission rates or spreads, BMR is authorized to
consider as a factor in the selection of any broker-dealer firm with whom
Portfolio orders may be placed the fact that such firm has sold or is selling
shares of the Fund or of other investment companies sponsored by Eaton Vance.
This policy is not inconsistent with a rule of the National Association of
Securities Dealers, Inc., which rule provides that no firm which is a member of
the Association shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates. BMR
will attempt to allocate equitably portfolio transactions among the Portfolio
and the portfolios of its other investment accounts whenever decisions are made
to purchase or sell securities by the Portfolio and one or more of such other
accounts simultaneously. In making such allocations, the main factors to be
considered are the respective investment objectives of the Portfolio and such
other accounts, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Portfolio
and such accounts, the size of investment commitments generally held by the
Portfolio and such accounts and the opinions of the persons responsible for
recommending investments to the Portfolio and such accounts. While this
procedure could have a detrimental effect on the price or amount of the
securities available to the Portfolio from time to time, it is the opinion of
the Trustees of the Portfolio that the benefits available from BMR's
organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions. For the brokerage commissions paid by the Portfolio
on portfolio transactions, see "Fees and Expenses" in Part II.
OTHER INFORMATION
On July 10, 1995, the Trust changed its name from Eaton Vance Government
Obligations Trust to Eaton Vance Mutual Funds Trust. The Trust is organized as a
business trust under the laws of the Commonwealth of Massachusetts under a
Declaration of Trust dated May 7, 1984, as amended. Eaton Vance, pursuant to its
agreement with the Trust, controls the use of the words "Eaton Vance" and "EV"
in the Fund's name and may use the words "Eaton Vance" or "EV" in other
connections and for other purposes.
The Declaration of Trust may be amended by the Trustees when authorized by a
majority of the outstanding voting securities of the Trust affected by the
amendment. The Trustees may also amend the Declaration of Trust without the vote
or consent of shareholders to change the name of the Trust or any series or to
make such other changes as do not have a materially adverse effect on the rights
or interests of shareholders or if they deem it necessary to conform the
Declaration to the requirements of federal laws or state laws or regulations.
The Trust or any series or class thereof may be terminated by: (1) the
affirmative vote of the holders of not less than two-thirds of the shares
outstanding and entitled to vote at any meeting of shareholders of the Trust or
the appropriate series or class thereof, or by an instrument or instruments in
writing without a meeting, consented to by the holders of two-thirds of the
shares of the Trust or a series or class thereof, provided, however, that, if
such termination is recommended by the Trustees, the vote of a majority of the
outstanding voting securities of the Trust or a series or class thereof entitled
to vote thereon shall be sufficient authorization; or (2) by means of an
instrument in writing signed by a majority of the Trustees, to be followed by a
written notice to shareholders stating that a majority of the Trustees has
determined that the continuation of the Trust or a series or a class thereof is
not in the best interest of the Trust, such series or class or of their
respective shareholders.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholder's meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's By-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes set in person or by proxy at a meeting called for the
purpose. The By-laws further provide that under certain circumstances the
shareholders may call a meeting to remove a Trustee and that the Trust is
required to provide assistance in communicating with shareholders about such a
meeting. The By-laws also provide that the Trustees shall promptly call a
meeting of shareholders for the purpose of voting upon a question of removal of
a Trustee when requested so to do by the record holders of not less than 10 per
centum of the outstanding shares.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interest
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
or the Fund to dispose of its securities or value its assets, or during any
other period permitted by order of the Commission for the protection of
investors.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts, are the
independent certified public accountants of the Fund, providing audit services,
tax return preparation, and assistance and consultation with respect to the
preparation of filings with the Securities and Exchange Commission.
For the financial statements of the Portfolio see "Financial Statements" in
Part II.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV CLASSIC TAX-MANAGED GROWTH FUND.
The Fund became a series of the Trust on June 24, 1996.
FEES AND EXPENSES
INVESTMENT ADVISER
As of April 30, 1996, the Portfolio had net assets of $209,444,667. For the
period from the start of business, December 1, 1995, to April 30, 1996, the
Portfolio paid BMR advisory fees of $356,359 (equivalent to 0.625% (annualized)
of the Portfolio's average daily net assets for such period).
DISTRIBUTION PLAN
The Fund has not made any sales commission payments to the Principal
Underwriter under the Plan to date.
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.
BROKERAGE
No fees paid to date.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization (the noninterested Trustees)
are paid by the Fund (and the other series of the Trust) and the Portfolio,
respectively. (The Trustees of the Trust and the Portfolio who are members of
the Eaton Vance organization receive no compensation from the Fund or the
Portfolio.) For the fiscal year ending October 31, 1996, it is estimated that
the noninterested Trustees of the Trust and the Portfolio will receive the
following compensation in their capacities as Trustees of the Trust and the
Portfolio and, during the one year period ended March 31, 1996, the
noninterested Trustees of the Trust and the Portfolio earned the following
compensation in their capacities as Trustees of the other funds in the Eaton
Vance fund complex(1):
ESTIMATED ESTIMATED TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FUND COMPLEX
- ---- --------- --------- ------------
Donald R. Dwight $50 $1,600 $137,500(2)
Samuel L. Hayes, III 50 1,600 153,750(3)
Norton H. Reamer 50 1,600 137,500
John L. Thorndike 50 1,600 142,500
Jack L. Treynor 50 1,600 142,500
- ----------
(1)The Eaton Vance fund complex consists of 219 registered investment companies
or series thereof.
(2)Includes $35,313 of deferred compensation.
(3)Includes $37,500 of deferred compensation.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the NASD
Rule. The purpose of the Plan is to compensate the Principal Underwriter for its
distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
The amount payable by the Fund to the Principal Underwriter pursuant to the
Plan as sales commissions and distribution fees with respect to each day will be
accrued on such day as a liability of the Fund and will accordingly reduce the
Fund's net assets upon such accrual, all in accordance with generally accepted
accounting principles. The amount payable on each day is limited to 1/365 of
.75% of the Fund's net assets on such day. The level of the Fund's net assets
changes each day and depends upon the amount of sales and redemptions of Fund
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Fund and the Portfolio accrued and allocated to the Fund on such
day, income on portfolio investments of the Portfolio accrued and allocated to
the Fund on such day, and any distributions declared on Fund shares. The Fund
does not accrue possible future payments as a liability of the Fund or reduce
the Fund's current net assets in respect of unknown amounts which may become
payable under the Plan in the future because the standards for accrual of such a
liability under accounting principles have not been satisfied.
The Plan provides that the Fund will receive all contingent deferred sales
charges and will make no payments to the Principal Underwriter in respect of any
day on which there are no outstanding Uncovered Distribution Charges of the
Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distributions Charges under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter. Conversely,
periods with a low level of sales of Fund shares accompanied by a high level of
early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to reduce the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of uncovered distribution charges
with respect to such day. The amount of outstanding uncovered distribution
charges of the Principal Underwriter calculated on any day does not constitute a
liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e. whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a contingent deferred sales charge will be imposed, the level and timing of
redemptions of Fund shares upon which no contingent deferred sales charge will
be imposed (including redemptions involving exchanges of Fund shares for shares
of another fund in the Eaton Vance Classic Group of Funds which result in a
reduction of uncovered distribution charges), changes in the level of the net
assets of the Fund, and changes in the interest rate used in the calculation of
the distribution fee under the Plan.
As currently implemented by the Trustees, the Plan authorizes payments of
sales commissions, distribution fees and service fees to the Principal
Underwriter which may be equivalent, on an aggregate basis during any fiscal
year of the Fund, to 1% of the Fund's average daily net assets for such year.
For the sales commission and service fee payments made by the Fund and the
outstanding uncovered distribution charges of the Principal Underwriter, see
"Fees and Expenses -- Distribution Plan" in this Part II. The Fund believes that
the combined rate of all these payments may be higher than the rate of payments
made under distribution plans adopted by many other investment companies
pursuant to Rule 12b-1. Although the Principal Underwriter will use its own
funds (which may be borrowed from banks) to pay sales commissions and service
fees at the time of sale, it is anticipated that the Eaton Vance organization
will profit by reason of the operation of the Plan through an increase in the
Fund's assets (thereby increasing the management fee payable to Eaton Vance by
the Fund and the administration fee payable to Eaton Vance by the Portfolio)
resulting from sale of Fund shares and through the sales commissions,
distribution fees and contingent deferred sales charges paid to the Principal
Underwriter. The Eaton Vance organization may be considered to have realized a
profit in distributing shares of the Fund if at any point in time the aggregate
amounts theretofore received by the Principal Underwriter from the Fund pursuant
to the Plan and from contingent deferred sales charges have exceeded the total
expenses theretofore incurred by such organization in distributing shares of the
Fund. Total expenses for this purpose will include an allocable portion of the
overhead costs of such organization and its branch offices, which costs will
include without limitation leasing expense, depreciation of building and
equipment, utilities, communication and postage expense, compensation and
benefits of personnel, travel and promotional expense, stationery and supplies,
literature and sales aids, interest expense, data processing fees, consulting
and temporary help costs, insurance, taxes other than income taxes, legal and
auditing expense and other miscellaneous overhead items. Overhead is calculated
and allocated for such purpose by the Eaton Vance organization in a manner
deemed equitable to the Fund.
The Plan provides that it shall continue in effect for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of
the Trustees then in office, and the Distribution Agreement contains a similar
provision. The Plan and the Distribution Agreement may each be terminated at any
time by vote of a majority of the Rule 12b-1 Trustees, or by a vote of a
majority of the outstanding voting securities of the Fund. The provisions of the
Plan relating to payments of sales commissions and distribution fees to the
Principal Underwriter are also included in the Distribution Agreement between
the Trust on behalf of the Fund and the Principal Underwriter. Pursuant to Rule
12b-1, the Plan has been approved by the Fund's initial sole shareholder (Eaton
Vance) and by the Board of Trustees of the Trust, including the Rule 12b-1
Trustees. Under the Plan the President or a Vice President of the Trust shall
provide to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under the Plan and the
purposes for which such expenditures were made. The Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of the Fund, and all material amendments of the Plan must also be
approved by the Trustees as required by Rule 12b-1. So long as the Plan is in
effect, the selection and nomination of Trustees who are not interested persons
of the Trust shall be committed to the discretion of the Trustees who are not
such interested persons.
The Trustees of the Trust believe that the Plan will be a significant factor
in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which will benefit the Fund and its
shareholders. Payments for sales commissions and distribution fees made to the
Principal Underwriter under the Plan will compensate the Principal Underwriter
for its services and expenses in distributing shares of the Fund. Service fee
payments made to Authorized Firms under the Plan would provide incentives to
provide continuing personal services to investors and the maintenance of
shareholder accounts. By providing incentives to the Principal Underwriter and
Authorized Firms, the Plan is expected to result in the maintenance of, and
possible future growth in, the assets of the Fund. Based on the foregoing and
other relevant factors, the Trustees of the Trust have determined that in their
judgment there is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in the Fund covering the 1, 5, and 10 year
periods ended April 30, 1996. The total return for the period prior to the
Fund's commencement of operations reflects the Portfolio's total return (or that
of its predecessor) adjusted to reflect any applicable Fund contingent deferred
sales charge ("CDSC"). The total return for such prior period has not been
adjusted to reflect the Fund's distribution fees and certain other expenses.
<PAGE>
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN BEFORE TOTAL RETURN AFTER
INVESTMENT INVESTMENT DEDUCTING CDSC DEDUCTING CDSC*
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC ----------------------------- --------------------------
PERIOD DATE ON 4/30/96 ON 4/30/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- ----------------- ----------- ----------- -------------- -------------- ------------- ----------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
10 years ended
4/30/96 4/30/86 $3,643.10 $3,643.10 264.31% 13.80% 264.31% 13.80%
5 years ended
4/30/96 4/30/91 $1,995.62 $1,995.62 99.56% 14.82% 99.56% 14.82%
1 year ended
4/30/96 4/30/95 $1,286.16 $1,276.16 28.62% 28.62% 27.62% 27.62%
</TABLE>
Past performance is not indicative of future results. Investment return
and principal value will fluctuate; shares, when redeemed, may be worth more or
less than their original cost.
- ----------
*No CDSC is imposed on certain redemptions. See the Fund's current Prospectus.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of July 31, 1996, Eaton Vance owned one share of the Fund, being the
only share of the Fund outstanding on such date. Eaton Vance is a Massachusetts
business trust and a wholly-owned subsidiary of EVC.
<PAGE>
FINANCIAL STATEMENTS
TAX-MANAGED GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 23, 1995
ASSETS:
Cash ................................................... $100,010
Deferred organization expenses ......................... 6,850
--------
Total assets ....................................... $106,860
LIABILITIES:
Accrued organization expenses .......................... 6,850
--------
NET ASSETS ............................................. $100,010
--------
NOTES:
(1) Tax-Managed Growth Portfolio (the "Portfolio") was organized as a New York
Trust on October 23, 1995 and has been inactive since that date, except for
matters relating to its organization and registration as an investment
company under the Investment Company Act of 1940 and the sale of interests
therein at the purchase price of $100,000 to Eaton Vance Management and the
sale of interest therein at the purchase price of $10 to Boston Management &
Research (the "Initial Interests").
(2) Organization expenses are being deferred and will be amortized on a
straight-line basis over a period not to exceed five years, commencing on
the effective date of the Portfolio's initial offering of its interests. The
amount paid by the Portfolio on any withdrawal by the holders of the Initial
Interests of any of the respective Initial Interests will be reduced by a
portion of any unamortized organization expenses, determined by the
proportion of the amount of the Initial Interests withdrawn to the Initial
Interests then outstanding.
(3) At 4:00 p.m., New York City time, on each business day of the Portfolio, the
value of an investor's interest in the Portfolio is equal to the product of
(1) the aggregate net asset value of the Portfolio multiplied by (ii) the
percentage representing that investor's share of the aggregate interest in
the Portfolio effective for that day.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of
Tax-Managed Growth Portfolio:
We have audited the accompanying statement of assets and liabilities of
Tax-Managed Growth Portfolio (a New York Trust) as of October 23, 1995. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents fairly, in
all material respects, the financial position of Tax-Managed Growth Portfolio as
of October 23, 1995, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 24, 1995
<PAGE>
[LOGO]
EV CLASSIC
TAX-MANAGED GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF
ADDITIONAL INFORMATION
AUGUST 1, 1996
EV CLASSIC
TAX-MANAGED GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
- --------------------------------------------------------------------------------
INVESTMENT ADVISER OF TAX-MANAGED GROWTH PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
FUND ADMINISTRATOR
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111
TRANSFER AGENT
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123
(800) 262-1122
AUDITORS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110
C-TGSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
FOR EV CLASSIC HIGH INCOME FUND:
Financial Highlights for the fiscal year ended March 31, 1996
and for the period from the start of business, June 8,
1994 through March 31, 1996.
FOR EV MARATHON HIGH INCOME FUND:
Financial Highlights for the fiscal years end March 31, 1996,
1994, 1993, 1992, 1991, 1990, 1989, 1988 and for the
period from the start of business, August 19, 1986,
through March 31, 1987.
INCLUDED IN PART B:
INCORPORATED BY REFERENCE TO THE ANNUAL REPORTS FOR THE HIGH
INCOME FUNDS, EACH DATED MARCH 31, 1996, FILED
ELECTRONICALLY PURSUANT TO SECTION 30(B)(2) OF THE
INVESTMENT COMPANY ACT OF 1940 ARE THE FOLLOWING:
For:
EV Classic High Income Fund (Accession No.
0000950156-96-000510)
EV Marathon High Income Fund (Accession No.
0000950156-96-000510)
The Financial Statements for the above-referenced Funds for
the time periods set forth in the Funds' Annual Reports
dated March 31, 1996 include:
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
For:
High Income Portfolio
The Financial Statements for the above-referenced Portfolio
for the time period set forth in the Funds' Annual Reports
dated March 31, 1996 include:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Report of Independent Accountants
For:
EV Classic Tax Managed Growth Fund:
Financial Statements for Tax-Managed Growth Portfolio:
Statement of Assets and Liabilities as of October 23, 1995
Independent Auditors' Report
INCORPORATED BY REFERENCE TO THE SEMI-ANNUAL REPORT FOR EV
MARATHON TAX-MANAGED GROWTH FUND, FILED ELECTRONICALLY
PURSUANT TO SECTION 30(B)(2) OF THE INVESTMENT COMPANY ACT
OF 1940 ARE THE FOLLOWING FINANCIAL STATEMENTS OF
TAX-MANAGED GROWTH PORTFOLIO (ACCESSION NO.
0000950156-96-000549):
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
(B) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated August 17,
1993 filed as Exhibit (1)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Amendment to Declaration of Trust dated July 10, 1995 filed
as Exhibit (1)(b) to Post- Effective Amendment No. 23 and
incorporated herein by reference.
(c) Amendment and Restatement of Establishment and Designation of
Series dated October 23, 1995 filed as Exhibit (1)(c) to
Post-Effective Amendment No. 26 and incorporated herein by
reference.
(d) Amendment and Restatement of Establishment and Designation of
Series of Shares dated May 7, 1996 filed herewith.
(2)(a) By-Laws (As Amended November 3, 1986) filed as Exhibit (2)(a)
to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Government Obligations
Trust dated December 13, 1993 filed as Exhibit (2)(b) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(3) Not applicable
(4) Not applicable
(5)(a) Investment Advisory Agreement with Eaton Vance Management for
Eaton Vance Short-Term Treasury Fund dated February 4, 1991
filed as Exhibit (5)(a) to Post-Effective Amendment No. 23
and incorporated herein by reference.
(b) Investment Advisory Agreement with Eaton Vance Management for
Eaton Vance Tax Free Reserves dated August 15, 1995 filed as
Exhibit (5)(b) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(6)(a)(1) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Government Obligations Trust (now EV
Traditional Government Obligations Fund) dated July 9, 1984
filed as Exhibit (6)(a)(1) to Post-Effective Amendment No. 23
and incorporated herein by reference.
(2) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Short-Term Treasury Fund dated February 4,
1991 as Amended and Restated February 25, 1991 filed as
Exhibit (6)(a)(2) to Post-Effective Amendment No. 23 and
incorporated herein by reference.
(3) Amended Distribution Agreement with Eaton Vance Distributors,
Inc. for EV Classic Government Obligations Fund dated January
27, 1995 filed as Exhibit (6)(a)(3) to Post- Effective
Amendment No. 22 and incorporated herein by reference.
(4) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon Government Obligations Fund dated October 28,
1993 filed as Exhibit (6)(a)(3) to Post-Effective Amendment
No. 2 and incorporated herein by reference.
(5) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon High Income Fund dated July 31, 1995 filed as
Exhibit (6)(a)(5) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(6) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Classic High Income Fund dated July 31, 1995 filed as
Exhibit (6)(a)(6) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(7) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Classic Strategic Income Fund dated August 15, 1995
filed as Exhibit (6)(a)(7) to Post-Effective Amendment No. 24
and incorporated herein by reference.
(8) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon Strategic Income Fund dated August 15, 1995
filed as Exhibit (6)(a)(8) to Post-Effective Amendment No. 24
and incorporated herein by reference.
(9) Distribution Agreement between Eaton Vance Cash Management
Fund and Eaton Vance Distributors, Inc. dated August 15,
1995, filed as Exhibit (6)(a)(9) to Post-Effective Amendment
No. 25 and incorporated herein by reference.
(10) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Liquid Assets Fund dated August 15, 1995
filed as Exhibit (6)(a)(10) to Post-Effective Amendment No.
25 and incorporated herein by reference.
(11) Distribution Agreement with Eaton Vance Distributors, Inc.
for Eaton Vance Money Market Fund dated August 15, 1995 filed
as Exhibit (6)(a)(11) to Post-Effective Amendment No. 25 and
incorporated herein by reference.
(12) Distribution Agreement between Eaton Vance Tax Free Reserves
and Eaton Vance Distributors, Inc. dated August 15, 1995
filed as Exhibit (6)(a)(12) to Post-Effective Amendment No.
25 and incorporated herein by reference.
(13) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Marathon Tax-Managed Growth Fund dated March 20, 1996
filed as Exhibit (6)(a)(13) to Post-Effective Amendment No.
28 and incorporated herein by reference.
(14) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Traditional Tax- Managed Growth Fund dated March 20,
1996 filed as Exhibit (6)(a)(14) to Post-Effective Amendment
No. 28 and incorporated herein by reference.
(15) Distribution Agreement with EV Distributors, Inc. for EV
Classic Tax-Managed Growth Fund dated May 7, 1996
Post-Effective Amendment herewith.
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to the
Registration Statement of Eaton Vance Growth Trust Post-
Effective Amendment No. 61 and incorporated herein by
reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as
Exhibit (6)(c) to the Registration Statement of Eaton Vance
Growth Trust Post-Effective Amendment No. 59 and incorporated
herein by reference.
(7) The Securities and Exchange Commission has granted the
Registrant an exemptive order that permits the Registrant to
enter into deferred compensation arrangements with its
independent Trustees. See in the Matter of Capital Exchange
Fund, Inc., Release No. IC- 20671 (November 1, 1994).
(8)(a) Custodian Agreement with Investors Bank & Trust Company dated
October 15, 1992 filed as Exhibit (8) to Post-Effective
Amendment No. 23 and incorporated herein by reference.
(b) Amendment to Custodian Agreement with Investors Bank & Trust
Company dated October 23, 1995 filed as Exhibit (8)(b) to
Post-Effective Amendment No. 27 and incorporated herein by
reference.
(9)(a) Amended Administrative Services Agreement between Eaton Vance
Mutual Funds Trust (on behalf of each of its series) and
Eaton Vance Management dated July 31, 1995, with attached
schedules (including Amended Schedule A dated October 23,
1995) under Rule 8b- 31 under the Investment Company Act of
1940, as amended, filed as Exhibit (9)(a) to Post-Effective
Amendment No. 24 and incorporated herein by reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as Exhibit
9(d) to the Registration Statement of Eaton Vance Growth
Trust Post-Effective Amendment No. 59 and incorporated herein
by reference.
(c) Amendment to Transfer Agency Agreement dated February 1, 1993
filed as Exhibit 9(e) to the Registration Statement of Eaton
Vance Growth Trust Post-Effective Amendment No. 59 and
incorporated herein by reference.
(d) Amended Schedule A to Administrative Services Agreement dated
May 7, 1996 filed herewith.
(10) Not applicable
(11)(a) Consent of Independent Accountants for EV Classic High Income
Fund filed herewith.
(b) Consent of Independent Accountants for EV Marathon High
Income Fund filed herewith.
(c) Consent of Independent Accountants for High Income Portfolio
filed herewith.
(d) Consent of Independent Accountants for EV Classic Tax-Managed
Growth Fund filed herewith.
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for
Self-Employed Persons with Adoption Agreement and
instructions filed as Exhibit No. 14(1) to Post-Effective
Amendment #22 on Form N-1 under the Securities Act of 1933
(File No. 2-28471) and incorporated herein by reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution Prototype
Plan and Trust with Adoption Agreements (1) Basic
Profit-Sharing Retirement Plan, (2) Basic Money Purchase
Pension Plan, (3) Thrift Plan Qualifying as Profit Sharing
Plan, (4) Thrift Plan Qualifying as Money Purchase Plan, (5)
Integrated Profit Sharing Retirement Plan, (6) Integrated
Money Purchase Pension Plan filed as Exhibit 14(2) to
Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and
Investment Instruction Form filed as Exhibit 14(3) to
Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype Plan
and Trust with Adoption Agreement filed as Exhibit 14(b) to
Post-Effective Amendment No. 22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated
herein by reference.
(15)(a) Service Plan for Eaton Vance Government Obligations Fund (now
EV Traditional Government Obligations Fund) dated July 7,
1993 filed as Exhibit (15)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 for Eaton Vance Short-Term Treasury Fund
dated February 4, 1991 as Amended and Restated February 25,
1991 filed as Exhibit (15)(b) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(c) Amended Distribution Plan for EV Classic Government
Obligations Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940 dated January 27, 1995 filed as Exhibit
(15)(c) to Post-Effective Amendment No. 22 and incorporated
herein by reference.
(d) Distribution Plan for EV Marathon Government Obligations Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated October 28, 1993 filed as Exhibit (15) (d) to
Post-Effective Amendment No. 23 and incorporated herein by
reference.
(e) Distribution Plan for EV Marathon High Income Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated
June 19, 1995 filed as Exhibit (15)(e) to Post- Effective
Amendment No. 25 and incorporated herein by reference.
(f) Distribution Plan for EV Classic High Income Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940 dated
June 19, 1995 filed as Exhibit (15)(f) to Post- Effective
Amendment No. 25 and incorporated herein by reference.
(g) Distribution Plan for EV Classic Strategic Income Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated June 19, 1995 filed as Exhibit (15)(g) to Post-
Effective Amendment No. 24 and incorporated herein by
reference.
(h) Distribution Plan for EV Marathon Strategic Income Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated June 19, 1995 filed as Exhibit (15)(h) to
Post-Effective Amendment No. 24 and incorporated herein by
reference.
(i) Distribution Plan for Eaton Vance Liquid Assets Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated
June 19, 1995 filed as Exhibit (15)(i) to Post- Effective
Amendment No. 25 and incorporated herein by reference.
(j) Distribution Plan for Eaton Vance Money Market Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940 dated
June 19, 1995 filed as Exhibit (15)(j) to Post- Effective
Amendment No. 25 and incorporated herein by reference.
(k) Distribution Plan for EV ---Marathon ---Tax-Managed Growth
Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940, dated March 20, 1996, filed as Exhibit (15) (k) to
Post-Effective Amendment No. 28 and incorporated herein by
reference.
(l) Service Plan for EV Traditional Tax-Managed Growth Fund dated
March 20, 1996 filed as Exhibit (15)(l) to Post-Effective
Amendment No. 28 and incorporated herein by reference.
(m) Distribution Plan for EV Classic Tax-Managed Growth Fund
pursuant to Rule 12b-1 under the Investment Company Act of
1940 dated August 1, 1996 filed herewith.
(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 June 28, 1996
Eaton Vance Short-Term Treasury Fund 65
EV Classic Government Obligations Fund 936
EV Marathon Government Obligations Fund 3,432
EV Traditional Government Obligations Fund 10,104
EV Classic High Income Fund 278
EV Marathon High Income Fund 15,225
EV Classic Strategic Income Fund 9
EV Marathon Strategic Income Fund 5,821
EV Marathon Tax-Managed Growth Fund 577
EV Traditional Tax-Managed Growth Fund 330
Eaton Vance Cash Management Fund 2,228
Eaton Vance Liquid Assets Fund 687
Eaton Vance Money Market Fund 588
Eaton Vance Tax Free Reserves 185
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 Marathon Greater China Growth Fund
EV Classic Connecticut Municipals Fund EV Marathon Greater India Fund
EV Classic Florida Insured Municipals Fund EV Marathon Growth Fund
EV Classic Florida Limited Maturity EV Marathon Hawaii Municipals Fund
Municipals Fund EV Marathon High Income Fund
EV Classic Florida Municipals Fund EV Marathon High Yield Municipals Fund
EV Classic Government Obligations Fund EV Marathon Information Age Fund
EV Classic Greater China Growth Fund EV Marathon Investors Fund
EV Classic Growth Fund EV Marathon Kansas Municipals Fund
EV Classic High Income Fund EV Marathon Kentucky Municipals Fund
EV Classic Information Age Fund EV Marathon Louisiana Municipals Fund
EV Classic Investors Fund EV Marathon Maryland Municipals Fund
EV Classic Massachusetts Limited Maturity EV Marathon Massachusetts Limited Maturity
Municipals Fund Municipals Fund
EV Classic National Limited Maturity EV Marathon Massachusetts Municipals Fund
Municipals Fund EV Marathon Michigan Limited Maturity
EV Classic National Municipals Fund Municipals Fund
EV Classic New Jersey Municipals Fund EV Marathon Michigan Municipals Fund
EV Classic New York Limited Maturity EV Marathon Minnesota Municipals Fund
Municipals Fund EV Marathon Mississippi Municipals Fund
EV Classic New York Municipals Fund EV Marathon Missouri Municipals Fund
EV Classic Pennsylvania Limited Maturity EV Marathon National Limited Maturity
Municipals Fund Municipals Fund
EV Classic Pennsylvania Municipals Fund EV Marathon National Municipals Fund
EV Classic Rhode Island Municipals Fund EV Marathon New Jersey Limited Maturity
EV Classic Senior Floating-Rate Fund Municipals Fund
EV Classic Strategic Income Fund EV Marathon New Jersey Municipals Fund
EV Classic Special Equities Fund EV Marathon New York Limited Maturity
EV Classic Stock Fund Municipals Fund
EV Classic Tax-Managed Growth Fund EV Marathon New York Municipals Fund
EV Classic Total Return Fund EV Marathon North Carolina Municipals Fund
EV Marathon Alabama Municipals Fund EV Marathon Ohio Limited Maturity
EV Marathon Arizona Municipals Fund Municipals Fund
EV Marathon Arkansas Municipals Fund EV Marathon Ohio Municipals Fund
EV Marathon Asian Small Companies Fund EV Marathon Oregon Municipals Fund
EV Marathon California Limited Maturity EV Marathon Pennsylvania Limited Maturity
Municipals Fund Municipals Fund
EV Marathon California Municipals Fund EV Marathon Pennsylvania Municipals Fund
EV Marathon Colorado Municipals Fund EV Marathon Rhode Island Municipals Fund
EV Marathon Connecticut Limited Maturity EV Marathon Strategic Income Fund
Municipals Fund EV Marathon South Carolina Municipals Fund
EV Marathon Connecticut Municipals Fund EV Marathon Special Equities Fund
EV Marathon Emerging Markets Fund EV Marathon Stock Fund
EV Marathon Florida Insured Municipals Fund EV Marathon Tax-Managed Growth Fund
EV Marathon Florida Limited Maturity EV Marathon Tennessee Municipals Fund
Municipals Fund EV Marathon Texas Municipals Fund
EV Marathon Florida Municipals Fund EV Marathon Total Return Fund
EV Marathon Georgia Municipals Fund EV Marathon Virginia Municipals Fund
EV Marathon Gold & Natural Resources Fund EV Marathon West Virginia Municipals Fund
EV Marathon Government Obligations Fund EV Traditional Alabama Municipals Fund
EV Traditional Arizona Municipals Fund EV Traditional Mississippi Municipals Fund
EV Traditional Arkansas Municipals Fund EV Traditional Missouri Municipals Fund
EV Traditional Asian Small Companies Fund Eaton Vance Municipal Bond Fund L.P.
EV Traditional California Limited Maturity EV Traditional National Limited Maturity
Municipals Fund Municipals Fund
EV Traditional California Municipals Fund EV Traditional National Municipals Fund
EV Traditional Colorado Municipals Fund EV Traditional New Jersey Limited Maturity
EV Traditional Connecticut Limited Maturity Municipals Fund
Municipals Fund EV Traditional New Jersey Municipals Fund
EV Traditional Connecticut Municipals Fund EV Traditional New York Limited Maturity
EV Traditional Emerging Markets Fund Municipals Fund
EV Traditional Florida Insured Municipals Fund EV Traditional New York Municipals Fund
EV Traditional Florida Limited Maturity EV Traditional North Carolina Municipals Fund
Municipals Fund EV Traditional Ohio Limited Maturity
EV Traditional Florida Municipals Fund Municipals Fund
EV Traditional Georgia Municipals Fund EV Traditional Ohio Municipals Fund
EV Traditional Government Obligations Fund EV Traditional Oregon Municipals Fund
EV Traditional Greater China Growth Fund EV Traditional Pennsylvania Municipals Fund
EV Traditional Greater India Fund EV Traditional South Carolina Municipals Fund
EV Traditional Growth Fund EV Traditional Special Equities Fund
EV Traditional Hawaii Municipals Fund EV Traditional Stock Fund
EV Traditional High Yield Municipals Fund EV Traditional Tax-Managed Growth Fund
Eaton Vance Income Fund of Boston EV Traditional Tennessee Municipals Fund
EV Traditional Information Age Fund EV Traditional Texas Municipals Fund
EV Traditional Investors Fund EV Traditional Total Return Fund
EV Traditional Kansas Municipals Fund EV Traditional Virginia Municipals Fund
EV Traditional Kentucky Municipals Fund EV Traditional West Virginia Municipals Fund
EV Traditional Louisiana Municipals Fund Eaton Vance Cash Management Fund
EV Traditional Maryland Municipals Fund Eaton Vance Liquid Assets Trust
EV Traditional Massachusetts Municipals Fund Eaton Vance Money Market Fund
EV Traditional Michigan Limited Maturity Eaton Vance Prime Rate Reserves
Municipals Fund Eaton Vance Short-Term Treasury Fund
EV Traditional Michigan Municipals Fund Eaton Vance Tax Free Reserves
EV Traditional Minnesota Municipals Fund Massachusetts Municipal Bond Portfolio
</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
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
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
<FN>
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(C) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 89 South Street,
Boston, MA 02111 and its transfer agent, First Data Investor Services Group,
4400 Computer Drive, Westborough, MA 01581, with the exception of certain
corporate documents and portfolio trading documents which are in the
possession and custody of Eaton Vance Management, 24 Federal Street, Boston,
MA 02110. Certain corporate documents of High Income Portfolio (the
"Portfolio") are also maintained by IBT Trust Company (Cayman), Ltd., The Bank
of Nova Scotia Building, P.O. Box 501, George Town, Grand Cayman, Cayman
Islands, British West Indies, and certain investor account, Portfolio and the
Registrant's accounting records are held by IBT Fund Services (Canada) Inc., 1
First Canadian Place, Kingstreet West, Suite 2800, P.O. Box 231, Toronto,
Ontario, Canada M5X 1C8. Registrant is informed that all applicable accounts,
books and documents required to be maintained by registered investment
advisers are in the custody and possession of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to 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 file a Post-Effective Amendment on behalf of
EV Classic 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. 30.
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 18th day of
July, 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 July 18, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 18, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President, Trustee July 18, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee July 18, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee July 18, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 18, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 18, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 18, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Tax-Managed Growth Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File
No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, and the Commonwealth of Massachusetts, on
the 18th day of July, 1996.
TAX-MANAGED GROWTH PORTFOLIO
By: /s/ M. DOZIER GARDNER
-------------------------------------
- -----
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Mutual Funds Trust (File No. 2-90946) has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Trustee, President and
Principal Executive
/s/ M. DOZIER GARDNER Officer July 18, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 18, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee July 18, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee July 18, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee July 18, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 18, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 18, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 18, 1996
- ------------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
--------------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
High Income 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 18th day of
July, 1996.
HIGH INCOME 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 July 18, 1996
- ------------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer July 18, 1996
- ------------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee July 18, 1996
- ------------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee July 18, 1996
- ------------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee July 18, 1996
- ------------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee July 18, 1996
- ------------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee July 18, 1996
- ------------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee July 18, 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
- ----------- ----------- ----------------
<C> <S> <C>
(1)(d) Amendment and Restatement of Establishment and Designation of
Series of Shares.
(6)(a)(15) Distribution Agreement with Eaton Vance Distributors, Inc.
for EV Classic Tax- Managed Growth Fund.
(9)(d) Amended Schedule A to Administrative Service Agreement
(11)(a) Consent of Independent Auditors for EV Classic High Income
Fund.
(b) Consent of Independent Auditors for EV Marathon High Income
Fund.
(c) Consent of Independent Auditors for High Income Portfolio.
(d) Consent of Independent Auditors for EV Classic Tax-Managed
Growth Fund.
(15)(m) Distribution Plan for EV Classic Tax-Managed Growth Fund.
(16) Schedules for Calculations of Performance Quotations.
</TABLE>
EXHIBIT 1(d)
EATON VANCE MUTUAL FUNDS TRUST
Amendment and Restatement
of
Establishment and Designation of Series of Shares
of Beneficial Interest, Without Par Value
(as amended and restated June 24, 1996)
WHEREAS, the Trustees of Eaton Vance Mutual Funds Trust, a
Massachusetts business trust (the "Trust"), have previously designated separate
series (or "Funds"); and
WHEREAS, the Trustees now desire to further redesignate the series or
Funds pursuant to Section 5.1 of Article V of the Trust's Amended and Restated
Declaration of Trust dated August 17, 1993 (the "Declaration of Trust");
NOW, THEREFORE, the undersigned, being at least a majority of the duly
elected and qualified Trustees presently in office of the Trust, hereby divide
the shares of beneficial interest of the Trust into fifteen separate series
("Funds"), each Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
EV Classic Government Obligations Fund
EV Marathon Government Obligations Fund
EV Traditional Government Obligations Fund
EV Classic High Income Fund
EV Marathon High Income Fund
EV Classic Strategic Income Fund
EV Marathon Strategic Income Fund
EV Marathon Tax-Managed Growth Fund
EV Traditional Tax-Managed Growth Fund
EV Classic Tax-Managed Growth Fund
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
Eaton Vance Short-Term Treasury Fund
Eaton Vance Tax Free Reserves
2. Each Fund shall be authorized to invest in cash, securities, instruments and
other property as from time to time described in the Trust's then currently
effective registration statements under the Securities Act of 1933 and the
Investment Company Act of 1940. Each share of beneficial interest of each Fund
("share") shall be redeemable, shall be entitled to one vote (or fraction
thereof in respect of a fractional share) on matters on which shares of that
Fund shall be entitled to vote and shall represent a pro rata beneficial
interest in the assets allocated to that Fund, all as provided in the
Declaration of Trust. The proceeds of sales of shares of each Fund, together
with any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law. Each share of
a Fund shall be entitled to receive its pro rata share of net assets of that
Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class to the
extent provided in Rule 18f-2, as from time to time in effect, under the
Investment Company Act of 1940.
4. The assets and liabilities of the Trust shall be allocated among the
above-referenced Funds as set forth in Section 5.5 of Article V of the
Declaration of Trust, except as provided below:
(a) Costs incurred by each Fund in connection with its organization and
start-up, including Federal and state registration and qualification fees and
expenses of the initial public offering of such Fund's shares, shall (if
applicable) be borne by such Fund and deferred and amortized over the five year
period beginning on the date that such Fund commences operations.
(b) Reimbursement required under any expense limitation applicable to
the Trust shall be allocated among those Funds whose expense ratios exceed such
limitation on the basis of the relative expense ratios of such Funds.
(c) The liabilities, expenses, costs, charges and reserves of the Trust
(other than the management and investment advisory fees or the organizational
expenses paid by the Trust) which are not readily identifiable as belonging to
any particular Fund shall be allocated among the Funds on an equitable basis as
determined by the Trustees.
5. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund, and to terminate any Fund or add
additional Funds as provided in the Declaration of Trust.
6. Any Fund may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of its property, including its good will, upon such terms and
conditions and for such consideration when and as authorized by the Trustees;
and any such merger, consolidation, sale, lease or exchange shall be deemed for
all purposes to have been accomplished under and pursuant to the statutes of the
Commonwealth of Massachusetts. The Trustees may also at any time sell and
convert into money all the assets of any Fund. Upon making provision for the
payment of all outstanding obligations, taxes and other liabilities, accrued or
contingent, of such Fund, the Trustees shall distribute the remaining assets of
such Fund ratably among the holders of the outstanding shares. Upon completion
of the distribution of the remaining proceeds or the remaining assets as
provided in this paragraph 6, the Fund shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder with respect
to such Fund and the right, title and interest of all parties with respect to
such Fund shall be cancelled and discharged.
7. The Declaration of Trust authorizes the Trustees to divide each Fund
and any other series of shares into two or more classes and to fix and determine
the relative rights and preferences as between, and all provisions applicable
to, each of the different classes so established and designated by the Trustees.
The establishment and designation of any class of any Fund or other series of
shares shall be effective upon the execution by a majority of then the Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences, and provisions applicable to, such class, or as
otherwise provided in such instrument.
Dated: June 24, 1996
\S\ Donald R. Dwight \S\ Norton H. Reamer
- ------------------------- -------------------------
Donald R. Dwight Norton H. Reamer
\S\ M. Dozier Gardner \S\ Samuel L. Hayes, III
- ------------------------- -------------------------
M. Dozier Gardner Samuel L. Hayes, III
\S\ James B. Hawkes \S\ John L. Thorndike
- ------------------------- -------------------------
James B. Hawkes John L. Thorndike
\S\ Jack L. Treynor
-------------------------
Jack L. Treynor
EXHIBIT 6(a)(15)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION AGREEMENT
ON BEHALF OF EV CLASSIC TAX-MANAGED GROWTH FUND
AGREEMENT effective as of June 24, 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 Classic 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
("IBT"), and First Data Investor Services Group, Transfer Agent of the Fund, or
a successor transfer agent, 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 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 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 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 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 (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 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 1933 Act, or the
Investment Company Act of 1940, as amended from time to time, (the "1940 Act")
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 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 6.25% 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) since inception of this Agreement
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) since
inception of this Agreement 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) since inception of this Agreement 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 since inception of this Agreement 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 (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 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 IBT and First
Data Investor Services Group 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, 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 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 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, 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 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.
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 for one year from the date
of its execution 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 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 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 (60) 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 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 service 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.
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 24th day of June, 1996.
EATON VANCE GROWTH TRUST
(on behalf of EV CLASSIC
TAX-MANAGED GROWTH FUND)
By \S\ James B. Hawkes
--------------------------
President
EATON VANCE DISTRIBUTORS INC.
By \S\ M. Dozier Gardner
--------------------------
President
EXHIBIT 9(d)
SCHEDULE A
EATON VANCE MUTUAL FUNDS TRUST
AMENDED ADMINISTRATIVE SERVICES AGREEMENT
DATED JUNE 24, 1996
Eaton Vance Cash Management Fund
Eaton Vance Liquid Assets Fund
Eaton Vance Money Market Fund
EV Classic Government Obligations Fund
EV Marathon Government Obligations Fund
EV Traditional Government Obligations Fund
EV Classic High Income Fund
EV Marathon High Income Fund
EV Classic Strategic Income Fund
EV Marathon Strategic Income Fund
EV Marathon Tax-Managed Growth Fund
EV Traditional Tax-Managed Growth Fund
EV Classic Tax-Managed Growth Fund
EXHIBIT 11(A)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 36 to the
Registration Statement (1933 Act File No. 32-90946) of Eaton Vance Mutual
Funds Trust on behalf of EV Classic High Income Fund of our report dated April
30, 1996, relating to EV Classic High Income Fund which report is incorporated
by reference in the Statement of Additional Information, which is a part of
such Registration Statement. We also consent to the references to us under the
heading "The Fund's Financial Highlights" appearing in the Prospectus and
under the heading "Financial Statements" in the Statement of Additional
Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
--------------------------
DELOITTE & TOUCHE LLP
July 18, 1996
Boston, Massachusetts
EXHIBIT 11(B)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 36 to the
Registration Statement (1933 Act File No. 32-90946) of Eaton Vance Mutual
Funds Trust on behalf of EV Marathon High Income Fund of our report dated
April 30, 1996, relating to EV Marathon High Income Fund which report is
incorporated by reference in the Statement of Additional Information, which is
a part of such Registration Statement. We also consent to the references to us
under the heading "The Fund's Financial Highlights" appearing in the
Prospectus and under the heading "Financial Statements" in the Statement of
Additional Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE
------------------
DELOITTE & TOUCHE
July 18, 1996
Boston, Massachusetts
EXHIBIT 11(C)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No.
30 to the Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act
File No. 2-90946) on behalf of EV Classic High Income Fund and EV Marathon
High Income Fund of our report relating to High Income Portfolio dated April
30, 1996, in the Statement of Additional Information, which is part of such
Registration Statement.
/s/ DELOITTE & TOUCHE
------------------
DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
British West Indies
July 18, 1996
EXHIBIT 11(D)
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A (1933 Act File Number 2-90946) of Eaton
Vance Mutual Funds Trust on behalf of EV Classic Tax-Managed Growth Fund of
our report dated October 24, 1995, relating to Tax-Managed Growth Portfolio
which report is included in the Statement of Additional Information, which is
part of such Registration Statement. We also consent to the references to us
under the heading "Financial Statements" in the Statement of Additional
Information, which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
----------------------------------------
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 26, 1996
EXHIBIT 15(m)
EATON VANCE MUTUAL FUNDS TRUST
DISTRIBUTION PLAN
ON BEHALF OF
EV CLASSIC TAX-MANAGED GROWTH 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 desires to adopt a separate Distribution Plan on
behalf of its series, EV Classic Tax-Managed Growth Fund (the "Fund"), pursuant
to which the Fund will make payments in connection with the distribution of
shares of the Fund;
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 6.25% 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 since inception of this Plan 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 since inception of this Plan 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 since inception of this
Plan 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 since inception of this Plan 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,
1997, and shall continue in effect indefinitely thereafter, but only for so long
as such continuance after April 28, 1997 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. This Plan shall, prior to the initial accrual or payment of any
amount hereunder, be approved by a vote of at least a majority of the
outstanding voting securities of the Fund.
16. 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.
17. 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 JUNE 24, 1996
* * *
EXHIBIT 16
<TABLE>
INVESTMENT PERFORMANCE -- EV CLASSIC HIGH INCOME 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 August 19, 1986 through March 31, 1996 and for the 1 and 5 year
periods ended March 31, 1996. Total return for the period prior to the Fund's
commencement of operations is for the Portfolio (or its predecessor) adjusted
for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 03/31/96 ON 03/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/19/86 $2,205.43 $2,205.43 120.54% 8.57% 120.54% 8.57%
5 YEARS ENDED
03/31/96 03/31/91 $1,970.67 $1,970.67 97.07% 14.53% 97.07% 14.53%
1 YEAR ENDED
03/31/96 03/31/95 $1,122.52 $1,112.52 12.25% 12.25% 11.25% 11.25%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
*The average annual total return not including the CDSC is calculated based the ending investment value before deducting the CDSC.
**The cumulative total return not including the CDSC is calculated based the ending investment value before deducting the CDSC.
</TABLE>
<PAGE>
EV CLASSIC HIGH INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 3/31/96:
Interest Income Earned: $69,669
Plus Dividend Income Earned: $0
------------
Equal Gross Income: $69,669
Minus Expenses: $10,351
------------
Equal Net Investment Income: $59,318
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 763,966
------------
Equal Net Investment Income Earned Per Share: $0.0776
Net Asset Value Price Per Share 3/31/96 $9.6500
30 Day Yield*: 9.85%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0776/$9.65)+1) -1]
<TABLE>
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON HIGH INCOME 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 August 19, 1986 through March 31, 1996 and for the 1 and 5 year
periods ended March 31, 1996.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
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 03/31/96 ON 03/31/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
LIFE OF
FUND 08/19/86 $2,237.10 $2,237.10 123.71% 8.73% 123.71% 8.73%
5 YEARS ENDED
03/31/96 03/31/91 $1,998.92 $1,978.92 99.89% 14.86% 97.89% 14.63%
1 YEAR ENDED
03/31/96 03/31/95 $1,128.05 $1,078.05 12.80% 12.80% 7.80% 7.80%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
*The average annual total return not including the CDSC is calculated based the ending investment value before deducting the CDSC.
**The cumulative total return not including the CDSC is calculated based the ending investment value before deducting the CDSC.
</TABLE>
<PAGE>
EV MARATHON HIGH INCOME FUND
CALCULATION OF YIELD
For the 30 days ended 3/31/96:
Interest Income Earned: $4,739,148
Plus Dividend Income Earned: $0
------------
Equal Gross Income: $4,739,148
Minus Expenses: $747,515
------------
Equal Net Investment Income: $3,991,633
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 69,737,672
------------
Equal Net Investment Income Earned Per Share: $0.0572
Net Asset Value Price Per Share 3/31/96 $7.1000
30 Day Yield*: 9.87%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0572/$7.10)+1) -1]
<PAGE>
<TABLE>
INVESTMENT PERFORMANCE -- EV CLASSIC TAX-MANAAGED GROWTH FUND
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the 1 and 5 year periods ended April 30, 1996. Total return for the period prior
to the Fund's commencement of operations is for the Portfolio (or its
predecessor) adjusted for the Fund's sales charge.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF
INVESTMENT INVESTMENT TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT BEFORE CDSC AFTER CDSC BEFORE DEDUCTING CDSC AFTER DEDUCTING CDSC
PERIOD DATE ON 04/30/96 ON 04/30/96 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
04/30/96 04/30/86 $3,643.10 $3,643.10 264.31% 13.80% 264.31% 13.80%
5 YEARS ENDED
04/30/96 04/30/91 $1,995.62 $1,995.62 99.56% 14.82% 99.56% 14.82%
1 YEAR ENDED
04/30/96 04/30/95 $1,286.16 $1,276.16 28.62% 28.62% 27.62% 27.62%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
*The average annual total return not including the CDSC is calculated based the ending investment value before deducting the CDSC.
**The cumulative total return not including the CDSC is calculated based the ending investment value before deducting the CDSC.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> EV CLASSIC HIGH INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 7480
<INVESTMENTS-AT-VALUE> 7530
<RECEIVABLES> 125
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7677
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63
<TOTAL-LIABILITIES> 63
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7608
<SHARES-COMMON-STOCK> 789
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 4
<ACCUMULATED-NET-GAINS> (40)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 50
<NET-ASSETS> 7614
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 519
<EXPENSES-NET> 51
<NET-INVESTMENT-INCOME> 468
<REALIZED-GAINS-CURRENT> (24)
<APPREC-INCREASE-CURRENT> 80
<NET-CHANGE-FROM-OPS> 524
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 468
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 3
<NUMBER-OF-SHARES-SOLD> 999
<NUMBER-OF-SHARES-REDEEMED> 459
<SHARES-REINVESTED> 29
<NET-CHANGE-IN-ASSETS> 5538
<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> 130
<AVERAGE-NET-ASSETS> 5106
<PER-SHARE-NAV-BEGIN> 9.43
<PER-SHARE-NII> 0.888
<PER-SHARE-GAIN-APPREC> 0.225
<PER-SHARE-DIVIDEND> 0.888
<PER-SHARE-DISTRIBUTIONS> 0.005
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.65
<EXPENSE-RATIO> 1.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> EV MARATHON HIGH INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 501296
<INVESTMENTS-AT-VALUE> 498602
<RECEIVABLES> 1393
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 499995
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3029
<TOTAL-LIABILITIES> 3029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 569307
<SHARES-COMMON-STOCK> 70033
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2044
<ACCUMULATED-NET-GAINS> (67602)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2694)
<NET-ASSETS> 496966
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 50131
<EXPENSES-NET> 5155
<NET-INVESTMENT-INCOME> 44976
<REALIZED-GAINS-CURRENT> (5110)
<APPREC-INCREASE-CURRENT> 17157
<NET-CHANGE-FROM-OPS> 57023
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 44976
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 626
<NUMBER-OF-SHARES-SOLD> 21674
<NUMBER-OF-SHARES-REDEEMED> 17161
<SHARES-REINVESTED> 2038
<NET-CHANGE-IN-ASSETS> 57795
<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> 5155
<AVERAGE-NET-ASSETS> 479353
<PER-SHARE-NAV-BEGIN> 6.92
<PER-SHARE-NII> 0.665
<PER-SHARE-GAIN-APPREC> 0.189
<PER-SHARE-DIVIDEND> 0.665
<PER-SHARE-DISTRIBUTIONS> 0.009
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.10
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 508435
<INVESTMENTS-AT-VALUE> 505812
<RECEIVABLES> 13573
<ASSETS-OTHER> 14
<OTHER-ITEMS-ASSETS> 44
<TOTAL-ASSETS> 519442
<PAYABLE-FOR-SECURITIES> 8076
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19
<TOTAL-LIABILITIES> 8095
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2624)
<NET-ASSETS> 511347
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54349
<OTHER-INCOME> 0
<EXPENSES-NET> 3452
<NET-INVESTMENT-INCOME> 50897
<REALIZED-GAINS-CURRENT> (5152)
<APPREC-INCREASE-CURRENT> 17258
<NET-CHANGE-FROM-OPS> 63003
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 68795
<ACCUMULATED-NII-PRIOR> 37644
<ACCUMULATED-GAINS-PRIOR> (13222)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3095
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3452
<AVERAGE-NET-ASSETS> 488749
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<INVESTMENTS-AT-COST> 34,932
<INVESTMENTS-AT-VALUE> 208,360
<RECEIVABLES> 171
<ASSETS-OTHER> 908
<OTHER-ITEMS-ASSETS> 15
<TOTAL-ASSETS> 209,453
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9
<TOTAL-LIABILITIES> 9
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,017
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 173,428
<NET-ASSETS> 209,445
<DIVIDEND-INCOME> 864
<INTEREST-INCOME> 47
<OTHER-INCOME> 0
<EXPENSES-NET> 385
<NET-INVESTMENT-INCOME> 526
<REALIZED-GAINS-CURRENT> 1,907
<APPREC-INCREASE-CURRENT> 12,139
<NET-CHANGE-FROM-OPS> 14,571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 209,344
<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> 385
<AVERAGE-NET-ASSETS> 137,223
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
