<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1997
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. 40 [X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 43 [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)
ALAN R. DYNNER
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
----------------------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective pursuant to Rule 485
(check appropriate box):
[ ] immediately upon filing [ ] on (date) pursuant to paragraph
pursuant to paragraph (b) (a)(1)
[X] on January 1, 1998 pursuant to [ ] 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[ ] 60 days after filing pursuant to [ ] on (date) pursuant to paragraph
paragraph (a)(1) (a)(2).
If appropriate, check the following box:
[ ] this post effective amendment designates a new effective date for a
previously filed post-effective amendment.
TITLE OF SECURITIES BEING REGISTERED: Shares of Beneficial Interest
Government Obligations Portfolio has also executed this Registration
Statement.
================================================================================
<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 Prospectus of:
Eaton Vance Government Obligations Fund
Part B--The Statement of Additional Information of:
Eaton Vance Government Obligations 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
CROSS REFERENCE SHEET FOR
EATON VANCE GOVERNMENT OBLIGATIONS FUND
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ------- ------------ -------------------------------
1. ............ Cover Page Cover Page
2. ............ Synopsis Shareholder and Fund Expenses
3. ............ Condensed Financial The Fund's Financial Highlights,
Information Performance 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 Shares; Distribution
Being Offered and Service Plans; How to Buy
Shares; The Lifetime
Investing Account/
Distribution Options; The
Eaton Vance Exchange
Privilege; Eaton Vance
Shareholder Services
8. ............ Redemption or Repurchase How to Redeem 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
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; Service Plan -
Class A Shares; Distribution
Plans - Class B and Class C
Shares; Custodian;
Independent Accountants
17. ............ Brokerage Allocation and Portfolio Security Transactions
Other Practices
18. ............ Capital Stock and Other Other Information
Securities
19. ............ Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Services for Accumulation -
Class A Shares; Service for
Withdrawal; Service Plan -
Class A Shares; Distribution
Plans - Class B and Class C
Shares
20. ............ Tax Status Taxes
21. ............ Underwriters Principal Underwriter
22. ............ Calculation of Performance Investment Performance
Data
23. ............ Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
[LOGO]
Investing
for the
21st
EATON VANCE
============== Century
Mutual Funds
EATON VANCE
GOVERNMENT OBLIGATIONS FUND
Eaton Vance Government Obligations Fund (the "Fund") is a mutual fund seeking a
high current return, by investing in securities issued, guaranteed or otherwise
backed by the U.S. Government and engaging in active management strategies. The
Fund invests its assets in Government Obligations Portfolio (the "Portfolio"), a
diversified open-end investment company having the same investment objective as
the Fund, rather than by directly investing in and managing its own portfolio of
securities. The Fund is a series of Eaton Vance Mutual Funds Trust.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK OR OTHER INSURED DEPOSITORY INSTITUTION, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS,
INCLUDING FLUCTUATIONS IN VALUE AND THE POSSIBLE LOSS OF SOME OR ALL OF THE
PRINCIPAL INVESTMENT.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated January 1, 1998 for the Fund, as supplemented
from time to time, has been filed with the Securities and Exchange Commission
(the "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>
CONTENTS
Page Page
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shareholder and Fund Expenses 2 How to Buy Shares 11
The Fund's Financial Highlights 4 How to Redeem Shares 13
The Fund's Investment Objective 5 Reports to Shareholders 15
Investment Policies and Risks 5 The Lifetime Investing Account/Distribution Options 15
Organization of the Fund and the Portfolio 8 The Eaton Vance Exchange Privilege 16
Management of the Fund and the Portfolio 9 Eaton Vance Shareholder Services 17
Distribution and Service Plans 10 Distributions and Taxes 17
Valuing Shares 11 Performance Information 18
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
PROSPECTUS DATED JANUARY 1, 1998
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.75% None None
Sales Charges Imposed on Reinvested Distributions None None None
Fees to Exchange Shares None None None
Maximum Contingent Deferred Sales Charge None 5.00% 1.00%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES (as a
percentage of average daily net assets)
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
Investment Adviser Fee 0.75% 0.75% 0.75%
Rule 12b-1 Distribution and/or Service Fees 0.19 0.90 1.00
Other Expenses 0.23 0.23 0.23
---- ---- -----
Total Operating Expenses 1.17 1.88 1.98
==== ==== ====
EXAMPLE
An investor would pay the following expenses and, in the case of Class A
shares, maximum initial sales charge or, in the case of Class B and Class C
shares, the applicable contingent deferred sales charge on a $1,000
investment, assuming (a) 5% annual return and (b) redemption at the end of
each period:
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
1 Year $ 59 $ 69 $ 30
3 Years 83 99 62
5 Years 109 122 107
10 Years 183 220 231
An investor would pay the following expenses on the same investment,
assuming (a) 5% annual return and (b) no redemptions:
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
1 Year $ 59 $ 19 $ 20
3 Years 83 59 62
5 Years 109 102 107
10 Years 183 220 231
</TABLE>
NOTES: The table and Example summarize the aggregate expenses of the Portfolio
and each Class of shares of the Fund and are designed to help investors
understand the costs and expenses they will bear, directly or indirectly, by
investing in the Fund. Information for Class A is for the most recent fiscal
year. Information for Class B and Class C shares is estimated based upon the
most recent fiscal year of its predecessor fund adjusted for the multiple-class
structure.
The Fund offers three classes of shares. Class A shares are sold subject to a
sales charge imposed at the time of purchase. No sales charge is payable at the
time of purchase on investments in Class A shares of $1 million or more.
However, a contingent deferred sales charge ("CDSC") of 1% will be imposed on
such investments in the event of certain redemptions within 12 months of
purchase. Class B shares are sold subject to a declining CDSC (5% maximum) if
redeemed within six years of purchase and Class C shares are sold subject to a
1% CDSC if redeemed within one year of purchase. The CDSC does not apply in
certain circumstances. See "How to Buy Shares" and "How to Redeem Shares".
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.
Long-term holders of Class B and Class C shares 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. For further information
regarding the expenses of the Fund and the Portfolio see "The Fund's Financial
Highlights", "Management of the Fund and the Portfolio", "Distribution and
Service Plans" and "How to Redeem Shares".
The Fund Expense computation and the Example includes interest expense allocated
to the Fund from the Portfolio's borrowings and lending fees allocated to the
Fund from the Portfolio's securities lending activities during the fiscal year
ended December 31, 1996. The Portfolio's borrowings, interest expense,
securities lending activities and lending fees will vary from year to year (see
"Investment Policies and Risks -- Active Management Strategies"). If the Fund
had not been allocated interest expense and lending fees in 1996, Total
Operating Expenses as a percentage of average daily net assets would have been
1.16%, and maximum initial sales charge and expenses incurred on a $1,000
investment for one, three, five and ten years would have been $49, $73, $99 and
$173, for Class A shares, respectively.
The Fund invests exclusively in the Portfolio. Other investors with different
distribution arrangements and fees may invest 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 financial
statements that appear in the Fund's semi-annual and annual reports to
shareholders. The Fund's annual financial statements have been audited by
Coopers & Lybrand L.L.P., independent accountants, as experts in accounting and
auditing. The annual financial statements and the report of independent
accountants and the unaudited semi-annual financial statements are incorporated
by reference into the Statement of Additional Information. The financial
highlights for the fiscal year ended December 31, 1987, presented herein, were
audited by other auditors whose report dated January 15, 1988, expressed an
unqualified opinion on such financial highlights. Further information regarding
the performance of the Fund is contained in its annual and semi-annual reports
to shareholders which may be obtained without charge by contacting the Principal
Underwriter. The financial information for each of the periods presented in the
Fund's Financial Highlights are for the Fund prior to reclassification of its
shares as Class A shares on January 1, 1998. Information for Class B and Class C
shares is not presented because these classes did not exist prior to January 1,
1998. The Financial Highlights for Class B and Class C shares will differ from
the Financial Highlights for Class A shares due to the different fees imposed on
Class B and Class C shares.
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1997 Year Ended December 31,
------------ ------------------------------------------------------------------------------------------------
(Unaudited) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987+
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $10.680 $11.020 $10.420 $11.480 $11.380 $11.800 $11.3700 $11.5200 $11.2300 $11.5400 $12.3600
------- ------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Income from operations:
Net investment
income $ 0.402 $ 0.810 $ 0.807 $ 0.805 $ 0.919 $ 0.975 $ 1.1005 $ 1.1085 $ 1.1280 $ 1.1260 $ 1.1360
Net realized and
unrealized gain
(loss) on
investments (0.110) (0.340) 0.603 (1.029) 0.106 (0.388) 0.4395 (0.1485) 0.2745 (0.2960) (0.6610)
------- ------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total income
(loss) from
operations $ 0.292 $ 0.470 $ 1.410 $(0.224) $ 1.025 $ 0.587 $ 1.5400 $ 0.9600 $ 1.4025 $ 0.8300 $ 0.4750
------- ------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Less distributions:
From net
investment income $(0.402) $(0.810) $(0.810) $(0.805) $(0.919 $(1.007) $(1.1100) $(1.1100) $(0.1125) $(1.1400) $(1.1600)
In excess of net
investment income(4) -- -- -- (0.031) (0.006) -- -- -- -- -- (0.1350)
------- ------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Total
distributions $(0.402) $(0.810) $(0.810) $(0.836) $(0.925) $(1.007) $(1.1100) $(1.1100) $(1.1125) $(1.1400) $(1.2950)
------- ------- ------- ------- ------- ------- -------- -------- -------- -------- --------
Net asset value, end
of year $10.570 $10.680 $11.020 $10.420 $11.480 $11.380 $11.8000 $11.3700 $11.5200 $11.2300 $11.5400
======= ======= ======= ======= ======= ======= ======== ======== ======== ======== ========
Total Return(1) 2.80% 4.52% 13.97% (2.03)% 9.26% 5.29% 14.42% 8.97% 13.21% 7.46% 4.17%
Ratios/Supplemental Data:
Ratio of interest
expense to
average net assets -- 0.70%* 0.71%* 0.56%* 0.40%* 0.31% 0.78% 1.19% 1.11% 0.66% 0.22%
Ratio of other
expenses to
average net assets 1.25%++ 1.16%* 1.16%* 1.17%* 1.12%* 1.10% 1.18% 1.22% 1.22% 1.19% 1.19%
Ratio of net
investment
income to average
net assets 7.69%++ 7.59% 7.53% 7.70% 7.86% 8.52% 9.61% 9.86% 10.02% 9.82% 9.63%
Portfolio Turnover(2) -- -- -- -- 52% 26% 25% 22% 25% 42% 36%
Net Assets, end of
year (000 omitted) $285,233 $302,963 $359,738 $386,186 $503,150 $468,960 $352,480 $279,747 $296,405 $321,584 $374,936
Leverage Analysis(3):
Amount of debt
outstanding at end
of period
(000 omitted) -- -- -- -- -- -- -- $ 4,695 $ 259 $ 7,006 $ 18,285
Average daily
balance of debt
outstanding during
period (000 omitted) -- -- -- -- $ 2,313 $ 1,687 $ 2,321 $ 11,009 $ 3,218 $ 18,301 $ 10,900
Average weekly
balance of shares
outstanding during
period (000 omitted) -- -- -- -- 43,731 37,474 25,915 25,285 26,839 30,570 34,372
Average amount of
debt per share
during period -- -- -- -- $0.053 $0.045 $0.090 $0.435 $0.120 $0.599 $0.317
* Includes the Fund's share of the Portfolio's allocated expenses.
+ Audited by the Fund's previous auditors.
++ Computed on an annualized basis.
(1) Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Distributions, if any, are assumed to be reinvested
at the net asset value on the payable date. Total return is computed on a
non-annualized basis.
(2) Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included in the Fund's Statement of Additional
Informati on.
(3) The Leverage Analysis is for the period prior to the date the Fund
transferred substantially all of its investable assets to the Portfolio.
For subsequent periods, the leverage analysis is shown in the Portfolio's
financial statements which are included in the Fund's Statement of
Additional Information.
(4) The Fund has followed the Statement of Position (SOP) 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distribution by Investment Companies. The SOP
requires that differences in the recognition or classification of income
between the financial statements and tax earnings and profits that result
in temporary over-distributions for financial statement purposes, are
classified as distributions in excess of net investment income or
accumulated net realized gains.
</TABLE>
THE FUND'S INVESTMENT OBJECTIVE
THE FUND'S INVESTMENT OBJECTIVE IS TO REALIZE A HIGH CURRENT RETURN. The Fund
currently seeks to meet its investment objective by investing its assets in the
Government Obligations Portfolio (the "Portfolio"), a separate registered
investment company which has the same investment objective and policies as the
Fund. The Fund's and the Portfolio's investment objectives are nonfundamental
and may be changed when authorized by a vote of the Trustees of the Trust or the
Portfolio, respectively, without obtaining the approval of the Fund's
shareholders or the investors in the Portfolio, as the case may be. The Trustees
of the Trust have no present intention to change the Fund's objective and intend
to submit any proposed material change in the investment objective to
shareholders in advance for their approval.
INVESTMENT POLICIES AND RISKS
IN SEEKING HIGH CURRENT RETURN, THE PORTFOLIO INVESTS IN SECURITIES ISSUED,
GUARANTEED OR OTHERWISE BACKED BY THE U.S. GOVERNMENT, INCLUDING MORTGAGE-BACKED
SECURITIES OF FEDERAL AGENCIES AND FEDERALLY CHARTERED CORPORATIONS, AND ENGAGES
IN ACTIVE MANAGEMENT STRATEGIES, INCLUDING FUTURES TRANSACTIONS AND RELATED
TECHNIQUES PRIMARILY FOR HEDGING PURPOSES. The Portfolio's management believes
that a high current return may be derived from yields on U.S. Government
securities, including market discount accrued on obligations purchased below
their stated redemption value.
U.S. GOVERNMENT SECURITIES. U.S. Government securities include (1) U.S. Treasury
obligations, which differ in their interest rates, maturities and times of
issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years) and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities which are supported by any of
the following: (a) the full faith and credit of the U.S. Treasury, (b) the right
of the issuer to borrow an amount limited to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government to purchase
certain obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. The Portfolio may also invest in any
other security or agreement collateralized or otherwise secured by U.S.
Government securities. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation ("FHLMC"),
Federal National Mortgage Association ("FNMA"), Government National Mortgage
Association ("GNMA"), Student Loan Marketing Association, United States Postal
Service, Small Business Administration, Tennessee Valley Authority and any other
enterprise established or sponsored by the U.S. Government. Because the U.S.
Government generally is not obligated to provide support to its
instrumentalities, the Portfolio will invest in obligations issued by these
instrumentalities only if the Investment Adviser determines that the credit risk
with respect to such obligations is minimal.
MORTGAGE-BACKED SECURITIES. The Portfolio may invest in mortgage-backed
securities that are either issued by the U.S. Government or one of its agencies
or instrumentalities or, if privately issued, collateralized by mortgages that
are insured, guaranteed or otherwise backed by the U.S. Government, its agencies
or instrumentalities. Mortgage-backed securities represent participation
interests in pools of adjustable and fixed-rate mortgage loans. Unlike
conventional debt obligations, mortgage-backed securities provide monthly
payments derived from the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans. The
mortgage loans underlying mortgage-backed securities are generally subject to a
greater rate of principal prepayments in a declining interest rate environment
and to a lesser rate of principal prepayments in an increasing interest rate
environment. Under certain interest and prepayment rate scenarios, the Portfolio
may fail to recover the full amount of its investment in mortgage-backed
securities, notwithstanding any direct or indirect governmental or agency
guarantee. Because faster than expected prepayments must usually be invested in
lower yielding securities, mortgage-backed securities are less effective than
conventional bonds in "locking in" a specified interest rate. To mitigate
prepayment risk, the Investment Adviser considers the selection of
mortgage-backed securities that as a group have a history of more stable
prepayment rates relative to interest rate fluctuations. In a rising interest
rate environment, a declining prepayment rate will extend the average life of
many mortgage-backed securities. This possibility is often referred to as
extension risk. Extending the average life of a mortgage-backed security
increases the risk of depreciation due to future increases in market interest
rates. As of December 31, 1996, the Portfolio had approximately 40% of its net
assets invested in FNMA Mortgage-Backed Certificates, approximately 40% of its
net assets invested in Participation Certificates of FHLMC and approximately
11.1% of its net assets invested in GNMA Certificates. FNMA guarantees the
timely payment of principal and interest of its Certificates, FHLMC guarantees
the timely payment of interest and ultimate collection of the principal of its
Participation Certificates, and GNMA Certificates are guaranteed by the full
faith and credit of the U.S. Government.
The Portfolio may also invest in classes of collateralized mortgage obligations
("CMOs") and various other mortgage-backed securities. Senior CMO classes will
typically have priority over residual CMO classes as to the receipt of principal
and/or interest payments on the underlying mortgages. In choosing among CMO
classes, the Investment Adviser will evaluate the total income potential of each
class and other factors. If such obligations or securities are privately issued
they will currently be considered by the Investment Adviser as possible
investments for the Portfolio only when the mortgage collateral is insured,
guaranteed or otherwise backed by the U.S. Government or one or more of its
agencies or instrumentalities. As of June 30, 1997, the Portfolio had
approximately 3.4% of its net assets invested in CMOs (including one which was
privately issued).
The Portfolio may invest in securities that fluctuate in value with an index.
Such securities generally will either be issued by the U.S. Government or one of
its agencies or instrumentalities or, if privately issued, collateralized by
mortgages that are insured, guaranteed or otherwise backed by the U.S.
Government, its agencies or instrumentalities. The interest rate or, in some
cases, the principal payable at the maturity of an indexed security may change
positively or inversely in relation to one or more interest rates, financial
indices, securities prices or other financial indicators ("reference prices").
An indexed security may be leveraged to the extent that the magnitude of any
change in the interest rate or principal payable on an indexed security is a
multiple of the change in the reference price. Thus, indexed securities may
decline in value due to adverse market changes in reference prices. As of
December 31, 1996, the Portfolio held no such securities. Because
mortgage-backed and indexed securities derive their value from another
instrument, security or index, they are considered derivative debt securities,
and are subject to different combinations of prepayment, extension, interest
rate and/ or other market risks.
The Portfolio may enter into contracts to purchase securities for a fixed price
at a future date beyond the customary settlement time if the Portfolio holds and
maintains until the settlement date in a segregated account cash, U.S.
Government securities and liquid debt obligations in an amount sufficient to
meet the purchase price, or if the Portfolio enters into offsetting contracts
for the forward sale of other securities it owns. Such contracts are customarily
referred to as "forward commitments" and involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date.
The principal of and/or interest on certain U.S. Government securities which may
be purchased by the Portfolio could be (a) payable in foreign currencies rather
than U.S. dollars or (b) increased or diminished as a result of changes in the
value of the U.S. dollar relative to the value of foreign currencies. The value
of such portfolio securities denominated in foreign currencies may be affected
favorably or unfavorably by changes in the exchange rate between foreign
currencies and the U.S. dollar. In order to limit the risk inherent in this type
of security, it is the current policy of the Portfolio not to purchase any such
security if after such purchase (i) more than 5% of its net assets (taken at
market value) would be invested in securities denominated in foreign currencies
or (ii) more than 2% of its net assets (taken at market value) would be invested
in securities denominated in any one foreign currency.
The Portfolio may from time to time have temporary investments in short-term
debt obligations (including certificates of deposit, bankers' acceptances and
commercial paper) pending the making of other investments or as a reserve to
service redemptions and repurchases of its shares.
ACTIVE MANAGEMENT STRATEGIES
The Portfolio may engage in several active management strategies to enhance
income and reduce investment risk. Each strategy requires the Investment Adviser
to consider special factors. In addition, the Portfolio may temporarily borrow
up to 5% of the value of its total assets to satisfy redemption requests or
settle securities transactions.
SECURITIES LENDING. The Portfolio may seek to increase its income by lending
portfolio securities to broker-dealers or other institutional borrowers. During
the existence of a loan, the Portfolio will continue to receive the equivalent
of the interest paid by the issuer on the securities loaned and will also
receive a fee, or all or a portion of the interest on investment of the
collateral, if any. However, the Portfolio may pay lending fees to such
borrowers. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the securities loaned if the borrower of the
securities fails financially. However, the loans will be made only to
organizations deemed by the Portfolio's management to be of good standing and
when, in the judgment of the Portfolio's management, the consideration which can
be earned from securities loans of this type, net of administrative expenses and
any finders fees, justifies the attendant risk. The financial condition of the
borrower will be monitored by the Investment Adviser on an ongoing basis. The
value of the securities loaned will not exceed 30% of the Portfolio's total
assets. During the year ended December 31, 1996, the Portfolio typically had
outstanding approximately $62 million in collateralized loans with terms of 7
days.
FUTURES CONTRACTS AND OTHER DERIVATIVE INSTRUMENTS. The Portfolio may purchase
or sell derivative instruments (which are instruments that derive their value
from another instrument, security, index or currency) to hedge against
fluctuations in interest rates, securities prices or currency exchange rates, to
change the duration of the Portfolio's fixed income portfolio, as a substitute
for the purchase or sale of securities or currency, or to enhance return. The
Portfolio's transactions in derivative instruments may include the purchase or
sale of futures contracts on securities, (such as U.S. Government securities),
indices, other financial instruments (such as certificates of deposit,
Eurodollar time deposits, and economic indices) or currencies; options on
futures contracts; exchange-traded and over-the-counter ("OTC") options on
securities; indices or currencies; and forward contracts to purchase or sell
currencies. All of the Portfolio's transactions in derivative instruments
involve a risk of loss or depreciation due to: unanticipated adverse changes in
interest rates, securities prices or currency exchange rates; the inability to
close out a position; default by the counterparty; imperfect correlation between
a position and the desired hedge; tax constraints on closing out positions; and
portfolio management constraints on securities subject to such transactions. The
loss on derivative instruments (other than purchased options) may substantially
exceed the Portfolio's initial investment in these instruments. In addition, the
Portfolio may lose the entire premium paid for purchased options that expire
before they can be profitably exercised by the Portfolio. The Portfolio incurs
transaction costs in opening and closing positions in derivative instruments.
There can be no assurance that the Investment Adviser's use of derivative
instruments will be advantageous to the Portfolio.
The Portfolio's success in using derivative instruments to hedge portfolio
assets depends on the degree of price correlation between the derivative
instrument and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for the
derivative instrument, the assets underlying the derivative instrument and the
Portfolio's assets. OTC derivative instruments involve a heightened risk that
the issuer or counterparty will fail to perform its contractual obligations. The
staff of the Commission takes the position that purchased OTC options, assets
used as cover for written OTC options, and certain other derivative instruments
(and securities) are subject to the Portfolio's 15% limit on illiquid
investments. The Portfolio's ability to terminate OTC derivative instruments may
depend on the cooperation of the counterparties to such instruments. For thinly
traded derivative securities and contracts, the only source of price quotations
may be the selling dealer or counterparty.
To the extent that the Portfolio enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
regulated by the Commodity Futures Trading Commission ("CFTC"), in each case
that are not for bona fide hedging purposes (as defined by the CFTC), the
aggregate initial margin and premiums required to establish these positions
(excluding the amount by which options are "in-the-money") may not exceed 5% of
the liquidation value of the Portfolio's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Portfolio has
entered into.
SHORT SALES AGAINST-THE-BOX. The Portfolio may sell securities short if 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). By using
this technique 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. The Portfolio's ability to use short sales
against-the-box with respect to holdings of appreciated securities is limited to
circumstances in which the hedging transaction is closed out within thirty days
after the end of the Portfolio's taxable year and the underlying appreciated
securities position is held unhedged for at least the next sixty days after the
hedging transaction is closed. A short sale against-the-box requires that the
short seller absorb certain costs so long as the position is open. In a short
sale against-the-box, the short seller is exposed to the risk of being forced to
deliver appreciated securities to close the position if the borrowed security is
called in, causing a taxable gain to be recognized. The Portfolio expects
normally to close its short sales against-the-box by delivering newly-acquired
securities. Not more than 20% of the Fund's assets will be subject to short
sales at any one time.
SHORT-TERM TRADING. Securities may be sold in anticipation of a market decline
(a rise in interest rates) or purchased in anticipation of a market rise (a
decline in interest rates) and later sold. In addition, a security may be sold
and another purchased at approximately the same time to take advantage of what
the Portfolio believes to be a temporary disparity in the normal yield
relationship between the two securities. Yield disparities may occur for reasons
not directly related to the investment quality of particular issues or the
general movement of interest rates, such as changes in the overall demand for or
supply of various types of fixed-income securities or changes in the investment
objectives of investors.
MORTGAGE ROLLS. The Portfolio may enter into mortgage "dollar rolls" in which
the Portfolio sells mortgage-backed securities for delivery in the current month
and simultaneously contracts to repurchase substantially similar (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio forgoes principal and interest paid on the mortgage-backed
securities. The Portfolio is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
The Portfolio will only enter into covered rolls. Covered rolls are not treated
as a borrowing or other senior security and will be excluded from the
calculation of the Portfolio's borrowings and other senior securities.
LEVERAGE THROUGH BORROWING. The Portfolio may borrow from banks to increase its
portfolio holdings of debt securities on which call options may be written and
to acquire U.S. Treasury bills which may be deposited with the Portfolio's
custodian or a broker-dealer in connection with various Portfolio investments.
Such borrowings will be unsecured. The Investment Company Act of 1940 (the "1940
Act") requires the Portfolio to maintain continuous asset coverage of not less
than 300% with respect to such borrowings. This allows the Portfolio to borrow
for such purposes an amount (when taken together with any borrowings for
temporary extraordinary or emergency purposes as described below) equal to as
much as 50% of the value of its net assets (not including such borrowings). If
such asset coverage should decline to less than 300% due to market fluctuations
or other reasons, the Portfolio may be required to sell some of its portfolio
holdings within three days in order to reduce the Portfolio's debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Leveraging will
exaggerate any increase or decrease in the net asset value of the securities
held by Portfolio, and in that respect may be considered a speculative practice.
Money borrowed for leveraging will be subject to interest costs which may or may
not exceed the option premiums and interest received from the securities
purchased. The Portfolio may also be required to maintain minimum average
balances in connection with such borrowings or to pay a commitment or other fee
to maintain a line of credit; either of these requirements would increase the
cost of borrowing over the stated interest rate.
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements with
respect to U.S. Government securities. Under a repurchase agreement, the seller
agrees to repurchase such securities at the Portfolio's cost plus interest
within a specified time (normally one day). While repurchase agreements involve
certain risks not associated with direct investments in U.S. Government
securities, the Portfolio follows procedures designed to moderate such risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized banks. In addition, the Portfolio's repurchase agreements will
provide that the value of the collateral underlying the repurchase agreements
will always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling bank, the Portfolio will seek to liquidate such
collateral. However, the exercise of the Portfolio's right to liquidate such
collateral would involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase are less
than the repurchase price, the Portfolio could suffer a loss.
ADDITIONAL INVESTMENT INFORMATION
The Portfolio expects that various new types of investments, hedging techniques
and management strategies will be developed and made available to institutional
investors in the future. The Investment Adviser will consider making such
investments or adopting such techniques or strategies if it determines that they
are consistent with the Portfolio's investment objective and policies. Of
course, the total mix of the Portfolio's investments can change daily.
FLUCTUATIONS IN VALUE. Because interest yields on U.S. Government and other
securities and opportunities to realize additional income and net gains from
active management strategies will vary from time to time because of general
economic and market conditions and many other factors, the Fund's current return
will fluctuate, and there can be no assurance that the Fund's objective will be
achieved. As a result of their high credit quality and market liquidity, U.S.
Government securities generally provide a lower current return than obligations
of other issuers. As with other debt securities, the value of U.S. Government
securities changes as interest rates fluctuate. Fluctuations in the value of
securities held by the Portfolio will not affect interest income on existing
portfolio securities but will be reflected in the Fund's net asset value. Thus,
a decrease in interest rates will generally result in an increase in the value
of Fund shares. Conversely, during periods of rising interest rates, the value
of Fund shares will generally decline. The magnitude of these fluctuations will
generally be greater at times when the Portfolio's average maturity is longer.
In addition, as set forth above, the derivative securities the Portfolio may
hold may magnify those risks and pose additional risks. Active management
techniques, if successful, may only partly offset these risks. Shares of the
Fund are not government guaranteed.
INVESTMENT RESTRICTIONS. The Fund and the Portfolio have adopted certain
fundamental investment restrictions which are enumerated in detail in the
Statement of Additional Information and which may not be changed unless
authorized by a shareholder vote and an investor vote, respectively. These
restrictions are designed to reduce investment risk. Except for such enumerated
restrictions and as otherwise indicated in the Prospectus, the investment
objective and policies of the Fund and the Portfolio are not fundamental
policies, and accordingly may be changed by the Trustees of the Trust and the
Portfolio without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be.
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 Trustees of the Trust are responsible for the
overall management and supervision of its affairs. The Trust may issue an
unlimited number of shares of beneficial interest (no par value per share) in
one or more series (such as the Fund). The Trustees of the Trust have divided
the shares of the Fund into multiple classes, including Class A, Class B and
Class C shares. Each class represents an interest in the Fund, but is subject to
different expenses, rights and privileges. See "Distribution and Service Plans"
and "How to Buy Shares". The Trustees have the authority under the Declaration
of Trust to create additional classes of shares with differing rights and
privileges. As a result of a reorganization with separate series of the Trust,
the Fund commenced offering Class A, B and C shares on January 1, 1998.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem Shares". There are no
annual meetings of shareholders, but special meetings may be held as required by
law to elect Trustees and consider certain other matters. Shareholders are
entitled to one vote for each full share held. Fractional shares may be voted
proportionately. Shares of the Fund will be voted together except that only
shareholders of a particular class may vote on matters affecting only that
class. Shares have no preemptive or conversion rights and are freely
transferable. In the event of the liquidation of the Fund, shareholders of each
class are entitled to share pro rata in the net assets attributable to that
class available for distribution to shareholders.
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, may
afford the potential for economies of scale for the Fund (at least when the
assets of the Portfolio exceed $500 million), and may over time result in lower
expenses for the Fund.
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. 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, these differences may
result in differences in returns experienced by investors in the various funds
that invest in the Portfolio. Information regarding other pooled investment
entities or funds which invest in the Portfolio may be obtained by contacting
the Principal Underwriter, 24 Federal Street, Boston, MA 02110, (617) 482-8260.
Whenever the Fund as an investor in the Portfolio is requested to vote on
matters pertaining to the Portfolio (other than the termination of the
Portfolio's business, which may be determined by the Trustees of the Portfolio
without investor approval), the Fund will hold a meeting of Fund shareholders
and will vote its interest in the Portfolio for or against such matters
proportionately to the instructions to vote for or against such matters received
from Fund shareholders. The Fund shall vote shares for which it receives no
voting instructions in the same proportion as the shares for which it receives
voting instructions. Other investors in the Portfolio may alone or collectively
acquire sufficient voting interests in the Portfolio to control matters relating
to the operation of the Portfolio, which may require the Fund to withdraw its
investment in the Portfolio or take other appropriate action. Any such
withdrawal could result in a distribution "in kind" of portfolio securities (as
opposed to a cash distribution from the Portfolio). If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. In addition, the distribution in kind may result in a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing.
The Fund may withdraw (completely redeem) all its assets from the Portfolio at
any time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. In the event the Fund withdraws all of its assets
from the Portfolio, 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, the 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 (or the assets of another
investor in the Portfolio) from the Portfolio.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
Acting under the general supervision of the Board of Trustees of the Portfolio,
BMR manages the Portfolio's investments and affairs. BMR also furnishes for the
use of the Portfolio office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Portfolio. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of .0625% (equivalent to .75% annually) of the average daily net
assets of the Portfolio up to $500 million. On net assets of $500 million and
over the annual fee is reduced as follows:
Annualized Fee Rate
Average Daily Net Assets for the Month (For Each Level)
- ------------------------------------------------------------------------------
$500 million but less than $1 billion 0.6875%
$1 billion but less than $1.5 billion 0.6250%
$1.5 billion but less than $2 billion 0.5625%
$2 billion but less than $3 billion 0.5000%
$3 billion and over 0.4375%
As at December 31, 1996, the Portfolio had net assets of $455,522,548. For the
fiscal year ended December 31, 1996, the Portfolio paid BMR advisory fees
equivalent to 0.75% of the Portfolio's average daily net assets for such year.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $20 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, administration and
marketing activities. The Principal Underwriter is a wholly-owned subsidiary of
Eaton Vance.
Susan Schiff has acted as the portfolio manager of the Portfolio since it
commenced operations. She is a Vice President of Eaton Vance and BMR.
BMR places the portfolio transactions of the Portfolio with many broker-dealer
firms and uses its best efforts to obtain execution of such transactions at
prices which are advantageous to the Portfolio. Subject to the foregoing, BMR
may consider sales of shares of the Fund or of other investment companies
sponsored by BMR or Eaton Vance as a factor in the selection of broker-dealer
firms to execute portfolio transactions. The Trust, 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 such services.
The Portfolio and the Fund, as the case may be, will each be responsible for all
respective costs and expenses not expressly stated to be payable by BMR under
the investment advisory agreement, by Eaton Vance under the administrative
services agreement, or by the Principal Underwriter under the distribution
agreement.
DISTRIBUTION AND SERVICE PLANS
The Trust has adopted a Service Plan (the "Class A Plan") for the Fund's Class A
shares that is designed to meet the service fee requirements of the sales charge
rule of the National Association of Securities Dealers, Inc. THE CLASS A PLAN
PROVIDES THAT CLASS A MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL SERVICES AND/OR
THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL UNDERWRITER, FINANCIAL
SERVICE FIRMS ("AUTHORIZED FIRMS") AND OTHER PERSONS IN AMOUNTS NOT EXCEEDING
.25% OF ITS AVERAGE DAILY NET ASSETS FOR ANY FISCAL YEAR. The Trustees of the
Trust have initially implemented the Class A Plan by authorizing Class A to make
quarterly service fee payments to the Principal Underwriter and Authorized Firms
in amounts not expected to exceed .25% of its average daily net assets for any
fiscal year which is based on the value of Class A shares sold by such persons
and remaining outstanding for at least twelve months. During the fiscal year
ended December 31, 1996, Class A paid or accrued service fees under the Plan
equivalent to 0.19% of average daily net assets for such year.
The Trust has also adopted Distribution Plans ("Class B Plan" and "Class C
Plan") pursuant to Rule 12b-1 under the 1940 Act for the Fund's Class B and
Class C shares. Each Plan is designed to permit an investor to purchase 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 therewith. UNDER SUCH PLANS, CLASS B AND CLASS C EACH PAYS THE
PRINCIPAL UNDERWRITER A FEE, ACCRUED DAILY AND PAID MONTHLY, AT AN ANNUAL RATE
NOT EXCEEDING .75% OF ITS AVERAGE DAILY NET ASSETS TO FINANCE THE DISTRIBUTION
OF ITS SHARES. Such fees compensate the Principal Underwriter for sales
commissions paid by it to Authorized Firms on the sale of Class B and Class C
shares and for interest expenses. Under the Class B Plan, the Principal
Underwriter uses its own funds to pay sales commissions (except on exchange
transactions and reinvestments) to Authorized Firms at the time of sale equal to
4% of the purchase price of the Class B shares sold by such Firms. Under the
Class C Plan, 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. During the first year after a
purchase of Class C shares, the Principal Underwriter will retain the sales
commission as reimbursement for the sales commissions paid to Authorized Firms
at the time of sale. CDSCs paid to the Principal Underwriter will be used to
reduce amounts owed to it. Because payments to the Principal Underwriter under
the two Plans are limited, uncovered distribution charges (sales commissions due
the Principal Underwriter plus interest, less the above fees and CDSCs received
by it) may exist indefinitely.
THE CLASS B AND CLASS C PLANS ALSO AUTHORIZE EACH CLASS TO MAKE PAYMENTS OF
SERVICE FEES TO THE PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN
AMOUNTS NOT EXCEEDING .25% OF ITS AVERAGE DAILY NET ASSETS FOR PERSONAL
SERVICES, AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS. Under the Class B
Plan, this fee is paid quarterly in arrears based on the value of Class B shares
sold by such persons and remaining outstanding for at least twelve months. Under
the Class C Plan, 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
Class C shares sold by such Firm, and (b) monthly service fees approximately
equivalent to 1/12 of .25% of the value of Class C shares sold by such Firm and
remaining outstanding for at least one year. During the first year after a
purchase of Class C shares, the Principal Underwriter will retain the service
fee as reimbursement for the service fee payment made to Authorized Firms at the
time of sale.
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 Principal Underwriter may at times allow
discounts on the sale of Class A shares up to the full sales charge. During
periods when the discount includes the full sales charge, Authorized Firms may
be deemed to be underwriters as that term is defined in the Securities Act of
1933.
The Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of one or more of its classes of its shares at any time. In determining
whether any such action should be taken, the Trust's management intends to
consider all relevant factors, including (without limitation) the size of the
Fund or class, the investment climate and market conditions, the volume of sales
and redemptions of shares, and, in the case of Class B and Class C shares, the
amount of uncovered distribution charges of the Principal Underwriter. The Plans
may continue in effect and payments may be made under the Plans following any
such suspension, discontinuance or limitation of the offering of shares;
however, there is no contractual obligation to continue any Plan for any
particular period of time. Suspension of the offering of shares would not, of
course, affect a shareholder's ability to redeem shares.
VALUING SHARES
THE FUND VALUES ITS SHARES ONCE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, as of the close of regular trading on the
Exchange (normally 4:00 p.m. New York time). Each Class's net asset value per
share is determined by the Trust's custodian, Investors Bank & Trust Company
("IBT"), (as agent for the Trust) in the manner authorized by the Trustees of
the Trust. The net asset value of each Class is computed by dividing the value
of that Class's pro rata share of the Fund's total assets, less its liabilities,
by the number of shares of that Class outstanding. Because the Fund invests its
assets in an interest in the Portfolio, each Class's net asset value will
reflect the value of the Fund's interest in the Portfolio (which in turn,
reflects the underlying value of the Portfolio's assets and liabilities).
The Fund has approved the acceptance of purchase and redemption orders as of the
time of their receipt by certain Authorized Firms (or their designated
intermediaries). Authorized Firms must communicate an investor's order to the
Principal Underwriter by a specific time each day to receive that day's net
asset value per share and, for Class A shares, the public offering price based
thereon. It is the Authorized Firms' responsibility to transmit orders promptly
to the Principal Underwriter.
The Portfolio's net asset value is also determined as of the close of regular
trading on the Exchange by IBT (as custodian and agent for the Portfolio) in the
manner authorized by the Trustees of the Portfolio. Net asset value is computed
by subtracting the liabilities of the Portfolio from the value of its total
assets. Mortgage-backed "pass-through" securities are valued through use of a
matrix pricing system which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF SHARES OWNED BY THE CURRENT NET ASSET VALUE PER SHARE.
HOW TO BUY SHARES
SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
ACCEPTABLE SECURITIES. Class A shares are purchased at the effective public
offering price, which price is based on the effective net asset value per share
plus the applicable sales charge. The sales charge is divided between the
Authorized Firm and the Principal Underwriter. Class B and Class C shares are
purchased at the net asset value per share 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 Trust may suspend the offering of shares
at any time and may refuse an order for the purchase of shares.
An initial investment 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 Trust'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,
the Trust 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 Trust as described below under "How to
Redeem Shares".
CLASS A SHARES. The sales charge may vary depending on the size of the purchase
and the number of Class A shares of Eaton Vance funds the investor may already
own, any arrangement to purchase additional shares during a 13- month period or
special purchase programs. Complete details of how investors may purchase shares
at reduced sales charges under a Statement of Intention or Right of Accumulation
are available from Authorized Firms or the Principal Underwriter.
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
Sales Charge Sales Charge Dealer Commission
as Percentage of as Percentage of as Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 4.75% 4.99% 4.50%
$25,000 but less than $100,000 4.50 4.71 4.25
$100,000 but less than $250,000 3.75 3.90 3.50
$250,000 but less than $500,000 3.00 3.09 2.75
$500,000 but less than $1,000,000 2.00 2.04 2.00
$1,000,000 or more 0.00* 0.00* See Below**
*No sales charge is payable at the time of purchase on investments of $1
million or more. A CDSC of 1% will be imposed on such investments in the
event of certain redemptions within 12 months of purchase.
**A commission on sales of $1 million or more will be paid as follows: 1.00%
on amounts of $1 million or more but less than $3 million; plus 0.50% on
amounts from $3 million but less than $5 million; plus 0.25% on amounts of
$5 million or more. Purchases of $1 million or more will be aggregated
over a 12-month period for purposes of determining the commission to be
paid.
</TABLE>
Class A shares may be sold at net asset value to current and retired Directors
and Trustees of Eaton Vance funds, including the Portfolio; to clients and
current and retired officers and employees of Eaton Vance, its affiliates and
other investment advisers of Eaton Vance sponsored funds; to registered
representatives and employees of Authorized Firms and bank employees who refer
customers to registered representatives of Authorized Firms; to officers and
employees of IBT and the Transfer Agent; and to such persons' spouses and
children under the age of 21 and their beneficial accounts. Class A shares may
also be issued at net asset value (1) in connection with the merger of an
investment company or series thereof with the Fund, (2) to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the Investment Adviser provides multiple investment services, such as
management, brokerage and custody, and (3) to investment advisors, financial
planners or other intermediaries who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services; clients of such investment advisors, financial planners or
other intermediaries who place trades for their own accounts if the accounts are
linked to the master account of such investment advisor, financial planner or
other intermediary on the books and records of the broker or agent; and
retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in Section 401(a), 403(b) or 457 of
the Internal Revenue Code of 1986, as amended (the "Code") and "rabbi trusts".
The Trust's Principal Underwriter may pay commissions to Authorized Firms who
initiate and are responsible for purchases of Class A shares of the Fund by
Eligible Plans of up to 1.00% of the amount invested in such shares.
Until March 31, 1998 no sales charge is payable at the time of purchase where
the amount invested represents redemption proceeds from a mutual fund
unaffiliated with Eaton Vance if the redemption occurred no more than 60 days
prior to the purchase of Class A shares and the redeemed shares were potentially
subject to a sales charge. A CDSC of 0.50% will be imposed on such investments
in the event of certain redemptions within 12 months of purchase and the
Authorized Firm will be paid a commission on such sales of 0.50% of the amount
invested.
STATEMENT OF INTENTION AND ESCROW AGREEMENT. If the investor, on an application,
makes a Statement of Intention to invest a specified amount over a thirteen
month period in Class A shares, then out of the initial purchase (or subsequent
purchases if necessary) 5% of the dollar amount specified on the application
shall be held in escrow by the escrow agent in the form of such shares (computed
to the nearest full share at the public offering price applicable to the initial
purchase hereunder) registered in the investor's name. All income dividends and
capital gains distributions on escrowed shares will be paid to the investor or
to the investor's order. When the minimum investment so specified is completed,
the escrowed shares will be delivered to the investor. If the investor has an
accumulation account the shares will remain on deposit under the investor's
account.
If total purchases under this Statement of Intention are less than the amount
specified, the investor will promptly remit to the Principal Underwriter any
difference between the sales charge on the amount specified and on the amount
actually purchased. If the investor does not within 20 days after written
request by the Principal Underwriter or the Authorized Firm pay such difference
in sales charge, the escrow agent will redeem an appropriate number of the
escrowed shares in order to realize such difference. Full shares remaining after
any such redemption together with any excess cash proceeds of the shares so
redeemed will be delivered to the investor or to the investor's order by the
escrow agent.
If total purchases made under this Statement are large enough to qualify for a
lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
Authorized Firm and by the Principal Underwriter. If at the time of the
recomputation an Authorized Firm other than the original Firm is placing the
orders, the adjustment will be made only on those shares purchased through the
Firm then handling the investor's account.
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. 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 of Class B and C
shares or public offering price of Class A shares 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:
<TABLE>
<CAPTION>
IN THE CASE OF BOOK ENTRY: IN THE CASE OF PHYSICAL DELIVERY:
<S> <C>
Deliver through Depository Trust Co. Investors Bank & Trust Company
Broker #2212 Attention: Eaton Vance Government Obligations Fund
Investors Bank & Trust Company (and Class)
For A/C Eaton Vance Government Obligations Fund Physical Securities Processing Settlement Area
(and Class) 200 Clarendon Street
Boston, MA 02116
</TABLE>
Investors who are contemplating an exchange of securities for shares, 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 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.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM SHARES
A SHAREHOLDER MAY REDEEM FUND SHARES IN ONE OF THREE WAYS -- BY MAIL, BY
TELEPHONE OR THROUGH AN AUTHORIZED FIRM. The redemption price will be based on
the net asset value per share next computed after a redemption request is
received in the proper form as described below. Within seven days after receipt
of a redemption request in good order by the Transfer Agent, the Trust 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 CDSC (described below) and any
federal income tax required to be withheld.
REDEMPTION BY MAIL: Shares may be redeemed by delivering to the Transfer Agent,
First Data Investor Services Group, P.O. Box 5123, Westborough, MA 01581-5123,
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 Commission regulation and
acceptable to the Transfer Agent. In addition, in some cases, good order may
require the furnishing of additional documents such as where shares are
registered in the name of a corporation, partnership or fiduciary.
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 Trust, the Principal Underwriter nor the
Transfer Agent will be responsible for the authenticity of redemption
instructions received by telephone, provided that reasonable procedures to
confirm that instructions communicated by telephone are genuine have been
followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone redemption may be difficult to
implement.
REDEMPTION THROUGH AN AUTHORIZED FIRM: To sell 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 the order is deemed to be
received by the Trust or the Principal Underwriter, as the Trust's agent. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
the Principal Underwriter. Throughout this Prospectus, the word "redemption" is
generally meant to include a repurchase.
While normally payments will be made 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 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 will not be sent
until the check (including a certified or cashier's check) received for the
shares purchased has cleared. Payment for shares tendered for redemption may be
delayed up to 15 days from the purchase date when the purchase check has not yet
cleared. Redemptions may result in a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Trust 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 Trust if the
cause of the low account balance was a reduction in the net asset value of
shares. No CDSC will be imposed with respect to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Each class of shares is subject to a CDSC on
certain redemptions. The CDSC is calculated based on the lower of the net asset
value at the time of purchase or the time of redemption. Shares acquired through
the reinvestment of distributions are exempt. Redemptions are made first from
shares in the account which are not subject to a CDSC.
In calculating a CDSC upon the redemption of shares acquired in an exchange, the
shares are deemed to have been acquired at the time of the original purchase of
the exchanged shares and, in the case of Class B shares, the CDSC schedule
applicable to the exchanged shares will apply to the acquired shares. No CDSC is
imposed on shares sold to Eaton Vance or its affiliates, or to their respective
employees or clients. Shares acquired as the result of a merger or liquidation
of another Eaton Vance sponsored fund generally will be subject to the same CDSC
rate imposed by the prior fund.
CLASS A SHARES. If Class A shares are purchased at net asset value because the
purchase amount is $1 million or more, they will be subject to a 1% CDSC if
redeemed within 12 months of purchase. If Class A shares are purchased prior to
April 1, 1998 at net asset value because the amount invested represents
redemption proceeds from an unaffiliated mutual fund (as described under "How to
Buy Shares"), they will be subject to a .50% CDSC if redeemed within 12 months
of purchase.
CLASS B SHARES. Class B shares will be subject to the following CDSC
schedule:
Year of Redemption
After Purchase CDSC
--------------------------------------------------------------------
First or Second 5%
Third 4%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and following 0%
The Class B CDSC is waived for redemptions (1) pursuant to a Withdrawal Plan
(see "Eaton Vance Shareholder Services"), (2) as part of a required minimum
distribution from a tax-sheltered retirement plan, or (3) following the death of
all beneficial owners of shares, provided the redemption is requested within one
year of death (a death certificate and other applicable documents may be
required).
CLASS C SHARES. Class C Shares will be subject to a 1% CDSC if redeemed within
12 months of purchase. The Class C CDSC is waived for redemptions (1) pursuant
to a Withdrawal Plan (see "Eaton Vance Shareholder Services"), (2) as part of a
distrubution from a retirement plan qualified under Section 401, 403(b) or 457
of the Code, or (3) as part of a required minimum distribution from other
tax-sheltered retirement plans.
REPORTS TO SHAREHOLDERS
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
calendar year, shareholders will be furnished with information necessary for
preparing federal and state tax returns. Consistent with applicable law,
duplicate mailings of shareholder reports and certain other Fund information to
shareholders residing at the same address may be eliminated.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF SHARES, THE TRANSFER AGENT WILL
SET UP A LIFETIME INVESTING ACCOUNT FOR THE INVESTOR ON THE TRUST'S RECORDS.
This account is a complete record of all transactions which at all times shows
the balance of shares owned. The Trust will not issue share certificates except
upon request.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current balance in the account. THE LIFETIME
INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS IN
SHARES BY SENDING A CHECK FOR $50 OR MORE to the Transfer Agent.
Any questions concerning a shareholder's account or services available may be
directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to the Transfer Agent, First Data Investor Services
Group, P.O. Box 5123, Westborough, MA 01581-5123 (please provide the name of the
shareholder, the Fund and Class 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 Trust'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 shareholder communications are returned by the United States Postal Service
or other delivery service as not deliverable, the distribution option on the
account will be automatically changed to the SHARE OPTION until such time as the
shareholder selects a different option. No interest will accrue on amounts
represented by uncashed distribution or redemption checks.
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 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 Trust and its Transfer Agent. Since the
Trust 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 Authorized Firm or to an account directly with the
Trust 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 Authorized
Firm, or transferring the account to another Authorized Firm, an investor
wishing to reinvest distributions should determine whether the Authorized Firm
which will hold the shares allows reinvestment of distributions in "street name"
accounts.
THE EATON VANCE EXCHANGE PRIVILEGE
Shares of the Fund currently may be exchanged for shares of the same class of
one or more other funds in the Eaton Vance Group of Funds. Class A shares may
also be exchanged for shares of Eaton Vance Cash Management Fund, Eaton Vance
Income Fund of Boston, and Eaton Vance Tax Free Reserves. Class B shares may
also be exchanged for shares of Eaton Vance Prime Rate Reserves, which are
subject to an early withdrawal charge, or shares of Eaton Vance Money Market
Fund, which are subject to a CDSC, and shares of a money market fund sponsored
by an Authorized Firm and approved by the Principal Underwriter (an "Authorized
Firm fund"). Class C shares may also be exchanged for shares of Eaton Vance
Money Market Fund and Classic Senior Floating-Rate Fund. Any such exchange will
be made on the basis of the net asset value per share of each Fund/Class at the
time of the exchange (plus, in the case of an exchange made within six months of
the date of purchase of Class A shares subject to an initial sales charge, an
amount equal to the difference, if any, between the sales charge previously paid
on the shares being exchanged and the sales charge payable on the shares being
acquired). Exchange offers are available only in states where shares of the fund
being acquired may be legally sold. Exchanges are subject to any restrictions or
qualifications set forth in the current prospectus of any such fund.
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 Trust does not permit the
exchange privilege to be used for "Market Timing" and may terminate the exchange
privilege for any shareholder account engaged in Market Timing activity. Any
shareholder account for which more than two round-trip exchanges are made within
any twelve-month period will be deemed to be engaged in Market Timing.
Furthermore, a group of unrelated accounts for which exchanges are entered
contemporaneously by a financial intermediary will be considered to be engaged
in Market Timing.
The Transfer Agent makes exchanges at the next determined net asset value after
receiving an exchange request in good order (see "How to Redeem Shares").
Consult the Transfer Agent for additional information concerning the exchange
privilege. Applications and prospectuses of other funds are available from
Authorized Firms or the Principal Underwriter. The prospectus for each fund
describes its investment objectives and policies, and shareholders should obtain
a prospectus and consider these objectives and policies carefully before
requesting an exchange.
No 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, except that 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 Class B shares (except
Prime Rate Reserves and Class B shares of the Limited Maturity Funds), see "How
to Redeem Shares". The CDSC or early withdrawal charge schedule applicable to
Prime Rate Reserves and Class B shares of the Limited Maturity Funds 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.
Telephone exchanges are accepted by the Transfer Agent provided that the
investor has not disclaimed in writing the use of the privilege. To effect such
exchanges, call the Transfer Agent at 800-262-1122, Monday through Friday, 9:00
a.m. to 4:00 p.m. (Eastern Standard Time). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. Neither the Trust, the Principal Underwriter nor the Transfer
Agent will be responsible for the authenticity of exchange instructions received
by telephone, provided that reasonable procedures to confirm that instructions
communicated are genuine have been followed. Telephone instructions will be tape
recorded. In times of drastic economic or market changes, a telephone exchange
may be difficult to implement. An exchange may result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
THE TRUST 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 applicable Fund and Class as an expense to
all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
and specifying the Class being purchased may be mailed directly to the Transfer
Agent, First Data Investor Services Group, P.O. Box 5123, Westborough, MA
01581-5123 at any time -- whether or not distributions are reinvested. The name
of the shareholder, the Fund and Class and the account number should accompany
each investment.
BANK AUTOMATED INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of
$50 or more may be made automatically each month or quarter from the
shareholder's bank account. The $1,000 minimum initial investment and small
account redemption policy are waived for these accounts.
STATEMENT OF INTENTION: Purchases of $25,000 or more of Class A shares made
over a 13-month period are eligible for reduced sales charges. See "How to Buy
Shares -- Statement of Intention and Escrow Agreement".
RIGHT OF ACCUMULATION: Purchases may qualify for reduced sales charges on Class
A shares when the current market value of holdings (shares at current offering
price), plus new purchases, reaches $25,000 or more. Class A shares of the Eaton
Vance funds listed under "The Eaton Vance Exchange Privilege" may be combined
under the Statement of Intention and Right of Accumulation.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks. For Class B and Class C shares, any such
withdrawals may not in the aggregate exceed 12% annually of the account balance
at the time the plan is established. Such amount will not be subject to the
Class B or Class C CDSC. See "How to Redeem Shares". A minimum deposit of $5,000
in shares is required. The maintenance of a withdrawal plan concurrently with
purchases of additional Class A shares would be disadvantageous because of the
sales charge included in such purchases.
REINVESTMENT PRIVILEGE: A shareholder who has redeemed shares may reinvest, with
credit for any CDSCs paid on the redeemed shares, any portion or all of the
redemption proceeds (plus that amount necessary to acquire a fractional share to
round off the purchase to the nearest full share) in the same shares (or for
Class A shares in Class A shares of any other Eaton Vance fund), provided that
the reinvestment is effected within 60 days after such redemption and the
privilege has not been used more than once in the prior 12 months. Shares are
sold to a reinvesting shareholder at the next determined net asset value
following timely receipt of a written purchase order by the Principal
Underwriter or by the Trust (or by the Trust's Transfer Agent). To the extent
that any shares are sold at a loss and the proceeds are reinvested in shares (or
other shares are acquired) within the period beginning 30 days before and ending
30 days after the date of redemption, some or all of the loss generally will not
be allowed as a tax deduction. Shareholders should consult their tax advisers
concerning the tax consequences of reinvestments.
TAX-SHELTERED RETIREMENT PLANS: Class A and Class C shares of the Fund are
available for purchase in connection with certain tax-sheltered retirement
plans. Detailed information concerning these plans, including certain exceptions
to minimum investment requirements, and copies of the plans are available from
the Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
federal income tax consequences of establishing a plan. Participant accounting
services (including trust fund reconciliation services) will be offered only
through third party recordkeepers and not by the Principal Underwriter. Under
all plans, 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 AND CLASS-SPECIFIC
EXPENSES, WILL BE DECLARED DAILY AS A DISTRIBUTION TO SHAREHOLDERS OF RECORD AT
THE TIME OF THE DECLARATION AND WILL GENERALLY BE TAXABLE TO SHAREHOLDERS AS
ORDINARY INCOME, WHETHER TAKEN IN CASH OR REINVESTED IN ADDITIONAL SHARES.
Distributions on Class A shares, 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. Distributions on Class B shares will
ordinarily be paid on the fifteenth day of each month or the next business day
thereafter. Distributions on Class C shares will ordinarily be paid on the
twenty-second day of each month or the next business day thereafter. Daily
distribution crediting will commence on the business day after collected funds
for the purchase of Fund shares are available at the Transfer Agent.
Distributions from net short-term capital gains and certain net foreign exchange
gains are taxable to shareholders as ordinary income, and distributions from net
long-term capital gains designated as such by the Fund are taxable to
shareholders as long-term capital gains, whether received in cash or reinvested
in additional shares of the Fund and regardless of the length of time Fund
shares have been owned by the shareholders. Gains or losses attributable to
transactions by the Portfolio in options on securities, certain currency forward
contracts, futures contracts and options on futures may be treated as 40%
short-term and 60% long-term capital gains or losses or, in the case of certain
of such transactions relating to foreign currencies, as ordinary income or loss
for federal income tax purposes. The Portfolio may have to limit its activities
in these transactions in order to enable the Fund to maintain its qualification
as a regulated investment company.
The amount of the Fund's distributions will vary from time to time depending on
general economic and market conditions, the composition of the Portfolio's
investments, its current investment strategies and the operating expenses of the
Fund and the Portfolio. While distributions will vary from time to time in
response to the factors referred to above, the Fund's management will attempt to
pursue a policy of maintaining a relatively stable monthly distribution payment
to its shareholders. The distributions paid by the Fund during any particular
period may be more or less than the amount of net investment income and net
short-term capital gain actually earned by the Portfolio and allocated to the
Fund during such period. The Portfolio has elected mixed straddle accounting
under the Code for one or more designated classes of activities involving mixed
straddles.
The Portfolio is required to accrue original issue discount on zero coupon and
certain other securities and has elected to accrue market discount on debt
obligations which are purchased at a market discount. While enhancing the Fund's
current return, such accrual will also accelerate the Fund's recognition of
interest income, distributions of which will be taxable as ordinary income.
Furthermore, because the Fund seeks to stabilize monthly distribution payments
and the Portfolio has elected mixed straddle accounting under the Code, it is
possible that a portion of the Fund's aggregate distributions during any year
will be treated as a return of capital for tax purposes, rather than taxable
distributions of dividends or capital gains. The Fund will inform the
shareholders after the end of each year what portion, if any, of such
distributions constitutes a return of capital for tax purposes.
Sales charges paid upon a purchase of Class A shares cannot be taken into
account for purposes of determining gain or loss on a redemption or exchange of
the shares before the 91st day after their purchase to the extent a sales charge
is reduced or eliminated in a subsequent acquision of shares of the Fund or of
another fund pursuant to the Fund's reinvestment or exchange privilege. In
addition, losses realized on a redemption of Class A shares may be disallowed
under certain "wash sale" rules if within a period beginning 30 days before and
ending 30 days after the date of redemption other shares of the Fund are
acquired. Any disregarded amounts will result in an adjustment to the
shareholder's tax basis in some or all of any other shares acquired.
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.
The Fund intends to qualify as a regulated investment company under the Code,
and to satisfy all requirements necessary to avoid paying federal income taxes
on the part of its investment company taxable income (consisting generally of
net investment income and net short-term capital gain) that 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
substantially all of its ordinary income and capital gain net income 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.
Shareholders should consult their tax advisors concerning the applicability of
state, local or other taxes to an investment in the Fund.
PERFORMANCE INFORMATION
FROM TIME TO TIME, YIELD AND/OR AVERAGE ANNUAL TOTAL RETURN MAY BE ADVERTISED.
Current yield is calculated separately for each Class by dividing the net
investment income per share earned during a recent 30-day period by the maximum
offering price per share or the net asset value on the last day of the period
and annualizing the resulting figure. Average annual total return is determined
separately for each Class by computing the average annual percentage change in
value of $1,000 invested at the maximum public offering price (including maximum
sales charge for Class A; net asset value for Class B and Class C) for specified
periods, assuming reinvestment of all distributions. Total return may be quoted
for the period prior to commencement of operations which would reflect the
Class's total return (or that of its predecessor) adjusted to reflect any
applicable sales charge. The average annual total return calculation assumes a
complete redemption of the investment and the deduction of any applicable 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 also furnish total return calculations for each Class which do not
take into account any sales charge. Any performance figure which does not take
into account a sales charge would be reduced to the extent such charge is
imposed. The Fund's performance may be compared in publications to the
performance of various indices and investments for which reliable data is
available, and to averages, performance rankings, or other information prepared
by recognized mutual fund statistical services.
Investors should note that investment results will fluctuate over time, and any
presentation of yield or total return for any prior period should not be
considered as a representation of what an investment may earn or what the yield
or total return may be in any future period.
The following chart reflects the annual investment returns of Class A shares
the Fund for one-year periods ending December 31 and does not take into
account any sales charge which investors may bear. The performance of the
predecessor funds of Class B and Class C was lower.
5 YEAR AVERAGE ANNUAL TOTAL RETURN -- 6.07%
10 YEAR AVERAGE ANNUAL TOTAL RETURN -- 7.81%
4.17% 7.46% 13.21% 8.97% 14.42% 5.29% 9.26% (2.03%) 13.97% 4.52%
- --------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
<PAGE>
[LOGO]
Investing
for the
21st
EATON VANCE
============== Century
Mutual Funds
EATON VANCE
GOVERNMENT OBLIGATIONS FUND
PROSPECTUS
JANUARY 1, 1998
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.,
24 Federal Street, Boston, MA 02110 (800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group,
P.O. Box 5123, Westborough, MA 01581-5123 (800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers &Lybrand L.L.P., One Post Office Square, Boston, MA 02109 GOP
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
January 1, 1998
EATON VANCE GOVERNMENT OBLIGATIONS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information provides general information about
Eaton Vance Government Obligations Fund (the "Fund") and Government Obligations
Portfolio (the "Portfolio"). This Statement of Additional Information is
sometimes referred to herein as the "SAI".
TABLE OF CONTENTS Page
Additional Information about Investment Policies ....................... 1
Investment Restrictions ................................................ 6
Trustees and Officers .................................................. 7
Investment Adviser and Administrator ................................... 9
Custodian .............................................................. 11
Services for Accumulation -- Class A Shares ............................ 12
Service for Withdrawal ................................................. 12
Determination of Net Asset Value ....................................... 12
Investment Performance ................................................. 13
Taxes .................................................................. 14
Principal Underwriter .................................................. 17
Service Plan -- Class A Shares ......................................... 18
Distribution Plans -- Class B and Class C Shares ....................... 18
Portfolio Security Transactions ........................................ 20
Other Information ...................................................... 21
Independent Accountants ................................................ 22
Financial Statements ................................................... 23
Appendix A: Class A Shares ............................................. a-1
Appendix B: Class B Shares ............................................. b-1
Appendix C: Class C Shares ............................................. c-1
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 JANUARY 1, 1998, 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>
This SAI provides information about the Fund and the Portfolio. Capitalized
terms used in this SAI and not otherwise defined have the meanings given them in
the Fund's Prospectus. The Fund is subject to the same investment policies as
those of the Portfolio. The Fund currently seeks to achieve its objective by
investing in the Portfolio.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
MORTGAGE-BACKED SECURITIES
The Portfolio's investments in mortgage-backed securities may include
conventional mortgage pass-through securities, SMBS and certain classes of
multiple class CMOs (as described below). Examples of SMBS include interest only
and principal only securities. The CMO classes in which the Portfolio may invest
include sequential and parallel pay CMOs, including planned amortization class
and target amortization class securities. The Portfolio may also invest in the
floating rate mortgage-backed securities listed under "Indexed Securities."
GNMA Certificates are mortgage-backed securities representing part ownership
of a pool of mortgage loans. These loans -- issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations -- are either
insured by the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group or such mortgages is assembled and, after
being approved by GNMA, is offered to investors through securities dealers. Once
such pool is approved by GNMA, the timely payment of interest and principal on
the Certificates issued representing such pool is guaranteed by the full faith
and credit of the U.S. Government. As mortgage-backed securities, GNMA
Certificates differ from bonds in that the principal is paid back by the
borrower over the length of the loan rather than returned in a lump sum at
maturity. GNMA Certificates are called "pass-through" securities because a pro
rata share of both regular interest and principal payments, as well as
unscheduled early prepayments, on the underlying mortgage pool is passed through
monthly to the holder of the Certificate (i.e., the Portfolio). As indicated
below, since the unscheduled prepayment rate of the underlying mortgage pool
covered by a "pass-through" security cannot be predicted with accuracy, the
average life of a particular issue of GNMA Certificates cannot be accurately
predicted. The Portfolio may purchase GNMA Certificates and various other
mortgage-backed securities on a when-issued basis subject to certain limitations
and requirements.
The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the U.S. Government created by Congress for the purposes of
increasing the availability of mortgage credit for residential housing, issues
participation certificates ("PCs") representing undivided interests in FHLMC's
mortgage portfolio. While FHLMC guarantees the timely payment of interest and
ultimate collection of the principal of its PCs, its PCs are not backed by the
full faith and credit of the U.S. Government. FHLMC PCs differ from GNMA
Certificates in that the mortgages underlying the PCs are mostly "conventional"
mortgages rather than mortgages insured or guaranteed by a federal agency or
instrumentality. However, in several other respects, such as the monthly
pass-through of interest and principal (including unscheduled prepayments) and
the unpredictability of future unscheduled prepayments on the underlying
mortgage pools, FHLMC PCs are similar to GNMA Certificates.
The Federal National Mortgage Association ("FNMA"), a federally chartered
corporation owned entirely by private stockholders, purchases both conventional
and federally insured or guaranteed residential mortgages from various entities,
including savings and loan associations, savings banks, commercial banks, credit
unions and mortgage bankers, and packages pools of such mortgages in the form of
pass-through securities generally called FNMA Mortgage-Backed Certificates,
which are guaranteed as to timely payment of principal and interest by FNMA but
are not backed by the full faith and credit of the U.S. Government. Like GNMA
Certificates and FHLMC PCs, these pass-through securities are subject to the
unpredictability of unscheduled prepayments on the underlying mortgage pools.
While it is not possible to accurately predict the life of a particular
issue of a mortgage-backed "pass-through" security held by the Portfolio, the
actual life of any such security is likely to be substantially less than the
average maturity of the mortgage pool underlying the security. This is because
unscheduled early prepayments of principal on the security owned by the
Portfolio will result from the prepayment, refinancing or foreclosure of the
underlying mortgage loans in the mortgage pool. The Portfolio, when the monthly
payments (which may include unscheduled prepayments) on such a security are
passed through to it, may be able to reinvest them only at a lower rate of
interest. Because of the regular scheduled payments of principal and the early
unscheduled prepayments of principal, the mortgage-backed "pass-through"
security is less effective than other types of obligations as a means of
"locking-in" attractive long-term interest rates. As a result, this type of
security may have less potential for capital appreciation during periods of
declining interest rates than other U.S. Government securities of comparable
maturities, although many issues of mortgage-backed "pass-through" securities
may have a comparable risk of decline in market value during periods of rising
interest rates. If such a security has been purchased by the Portfolio at a
premium above its par value, both a scheduled payment of principal and an
unscheduled prepayment of principal, which would be made at par, will accelerate
the realization of a loss equal to that portion of the premium applicable to the
payment or prepayment and will reduce the Fund's total return. If such a
security has been purchased by the Portfolio at a discount from its par value,
both a scheduled payment of principal and an unscheduled prepayment of principal
will increase current and total returns and will accelerate the recognition of
income, which, when distributed to Fund shareholders, will be taxable as
ordinary income. The Portfolio intends to acquire the majority of its holdings
of mortgage-backed "pass-through" securities at a discount from par value.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs")
CMOs are debt securities issued by the FHLMC and by financial institutions
and other mortgage lenders which are generally fully collateralized by a pool of
mortgages held under an indenture. The key feature of the CMO structure is the
prioritization of the cash flows from a pool of mortgages among the several
classes of CMO holders, thereby creating a series of obligations with varying
rates and maturities appealing to a wide range of investors. CMOs generally are
secured by an assignment to a trustee under the indenture pursuant to which the
bonds are issued of collateral consisting of a pool of mortgages. Payments with
respect to the underlying mortgages generally are made to the trustee under the
indenture. Payments of principal and interest on the underlying mortgages are
not passed through to the holders of the CMOs as such (that is, the character of
payments of principal and interest is not passed through and therefore payments
to holders of CMOs attributable to interest paid and principal repaid on the
underlying mortgages do not necessarily constitute income and return of capital,
respectively, to such holders), but such payments are dedicated to payment of
interest on and repayment of principal of the CMOs. CMOs are issued in two or
more classes or series with varying maturities and stated rates of interest
determined by the issuer. Because the interest and principal payments on the
underlying mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on which
are used to pay interest to each class and to retire successive maturities in
sequence. CMOs are designed to be retired as the underlying mortgages are
repaid. In the event of sufficient early prepayments on such mortgages, the
class or series of CMO first to mature generally will be retired prior to
maturity. Therefore, although in most cases the issuer of CMOs will not supply
additional collateral in the event of such prepayments, there will be sufficient
collateral to secure CMOs that remain outstanding. Currently, the Investment
Adviser will consider privately issued CMOs or other mortgage-backed securities
as possible investments for the Portfolio only when the mortgage collateral is
insured, guaranteed or otherwise backed by the U.S. Government or one or more of
its agencies or instrumentalities (e.g., insured by the Federal Housing
Administration or Farmers Home Administration or guaranteed by the Administrator
of Veterans Affairs or consisting in whole or in part of U.S. Government
securities).
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBs")
The Portfolio may invest in SMBS, which are derivative multiclass mortgage
securities. The Portfolio may only invest in SMBS issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. SMBS are usually structured
with two classes that receive different proportions of the interest and
principal distributions from a pool of mortgages. A common type of SMBS will
have one class receiving all of the interest from the mortgages, while the other
class will receive all of the principal. However, in some instances, one class
will receive some of the interest and most of the principal while the other
class will receive most of the interest and the remainder of the principal. If
the underlying mortgages experience greater than anticipated prepayments of
principal, the Portfolio may fail to fully recoup its initial investment in
these securities. Although the market for such securities is increasingly
liquid, certain SMBS may not be readily marketable and will be considered
illiquid for purposes of the Portfolio's limitation on investments in illiquid
securities. The determination of whether a particular SMBS is liquid will be
made by the Investment Adviser under guidelines and standards established by the
Trustees of the Portfolio. The market value of the class consisting entirely of
principal payments generally is unusually volatile in response to changes in
interest rates. The yields on a class of SMBS that receives all or most of the
interest from mortgages are generally higher than prevailing market yields on
other mortgage-backed securities because their cash flow patterns are more
volatile and there is a greater risk that the initial investment will not be
fully recouped. The Investment Adviser will seek to manage these risks (and
potential benefits) by investing in a variety of such securities and by using
certain hedging techniques.
INDEXED SECURITIES
The indexed securities purchased by the Portfolio may include interest only
("IO") and principal only ("PO") securities, floating rate securities linked to
the Cost of Funds Index ("COFI floaters"), other "lagging rate" floating rate
securities, floating rate securities that are subject to a maximum interest rate
("capped floaters"), leveraged floating rate securities ("super floaters"),
leveraged inverse floating rate securities ("inverse floaters"), dual index
floaters, range floaters, index amortizing notes and various currency indexed
notes.
RISKS OF CERTAIN MORTGAGE-BACKED AND INDEXED SECURITIES
The risk of early prepayments is the primary risk associated with mortgage
IOs, super floaters and other leveraged floating rate mortgage-backed
securities. The primary risks associated with COFI floaters, other "lagging
rate" floaters, capped floaters, inverse floaters, POs and leveraged inverse IOs
are the potential extension of average life and/or depreciation due to rising
interest rates. Although not mortgage-backed securities, index amortizing notes
and other callable securities are subject to extension risk resulting from the
issuer's failure to exercise its option to call or redeem the notes before their
stated maturity date. The residual classes of CMOs are subject to both
prepayment and extension risk.
Other types of floating rate derivative debt securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. The
market values of currency-linked securities may be very volatile and may decline
during periods of unstable currency exchange rates.
LEVERAGE THROUGH BORROWING
The Portfolio and the other investment companies advised by the Investment
Adviser or Eaton Vance Management participate in a Line of Credit Agreement (the
"Credit Agreement") with a group of six banks (the "Lenders"). Citibank, N.A.
serves as the administrative agent. The Lenders have agreed to make advances
("Advances"), the aggregate amount of which to all borrowers cannot exceed
$100,000,000. The Portfolio has determined that its borrowings under the Credit
Agreement will not exceed, at any one time outstanding, the lesser of (a) 1/3 of
the current market value of the net assets of the Portfolio or (b) $7,500,000
(the "Amount Available to the Portfolio"). The Portfolio is obligated to pay to
each Lender, in addition to interest on the Advances made to it, a quarterly fee
of .10% on each Lender's unused commitment. The Portfolio expects to use the
proceeds of the Advances primarily for leveraging purposes. As at June 30, 1997,
the Portfolio had no outstanding balance. The average daily loan balance for the
fiscal year ended June 30, 1997, under the Credit Agreement (and predecessor
contract) was $361,685 and the average daily interest rate was 4.20%.
The Portfolio, like many other investment companies, may also borrow money
for temporary extraordinary or emergency purposes. Such borrowings may not
exceed 5% of the value of the Portfolio's total assets at the time of borrowing.
The Portfolio may pledge up to 10% of the lesser of cost or value of its total
assets to secure such borrowings.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Portfolio may purchase and sell securities on a "forward commitment" or
"when-issued" basis. Forward commitment or when-issued transactions arise when
securities are purchased or sold by the Portfolio with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price and yield to the Portfolio at the time of entering into the
transaction. However, the yield on a comparable security when the transaction is
consummated may vary from the yield on the security at the time that the forward
commitment or when-issued transaction was made. From the time of entering into
the transaction until delivery and payment is made at a later date, the
securities that are the subject of the transaction are subject to market
fluctuations. When the Portfolio engages in forward commitment or when-issued
transactions, the Portfolio relies on the seller or buyer, as the case may be,
to consummate the sale. Failure to do so may result in the Portfolio missing the
opportunity of obtaining a price or yield considered to be advantageous. Forward
commitment or when-issued transactions may be expected to occur a month or more
before delivery is due. However, no payment or delivery is made by the Portfolio
until it receives payment or delivery from the other party to the transaction.
To the extent the Portfolio engages in forward commitment or when-issued
transactions, it will do so for the purpose of acquiring or disposing of
securities held by the Portfolio consistent with the Portfolio's investment
objective and policies and not for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Commission, such loans are required to be secured
continuously by collateral in cash, cash equivalents or U.S. Government
securities held by the Portfolio's custodian and maintained on a current basis
at an amount at least equal to the market value of the securities loaned, which
will be marked to market daily. Cash equivalents include certificates of
deposit, commercial paper and other short-term money market instruments. The
Portfolio would have the right to call a loan and obtain the securities loaned
at any time on up to five business days' notice. The Portfolio would not have
the right to vote any securities having voting rights during the existence of a
loan, but would call the loan in anticipation of an important vote to be taken
among holders of the securities or the giving or withholding of their consent on
a material matter affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in the securities by
the Investment Adviser to be of good standing and when the consideration which
can be earned from securities loans of this type, net of administrative expenses
and any finders fees, justifies the attendant risk. 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.
WRITING AND PURCHASING CALL AND PUT OPTIONS
The Portfolio may write covered put and call options on U.S. Government
securities. The Portfolio does not intend to write a covered option on U.S.
Government securities if after such transaction more than 25% of its net assets,
as measured by the aggregate value of such securities underlying all covered
calls and puts written by the Portfolio, would be subject to such options. The
Portfolio will only write a put option on a security which it intends to
ultimately acquire for its investment portfolio. The Portfolio does not intend
to purchase an option on any U.S. Government security if after such transaction
more than 5% of its net assets, as measured by the aggregate of all premiums
paid for all options held by the Portfolio, would be so invested.
Securities dealers make over-the-counter ("OTC") markets in options on
certain "pass-through" mortgage-backed securities, such as GNMA Certificates,
FHLMC PCs and FNMA Mortgage-Backed Certificates. These dealers buy and sell call
and put options on such securities, and the Portfolio may enter into option
transactions with such dealers. Since the remaining principal balance of a
"pass-through" mortgage-backed security declines each month as a result of
regular scheduled payments and early unscheduled prepayments of principal, the
Portfolio, as a writer of a call option holding such a security as "cover" to
satisfy its delivery obligation in the event of exercise, may find that the
security it holds no longer has a sufficient remaining principal balance for
this purpose. Should this occur, the Portfolio will purchase additional
securities in order to maintain its "cover."
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures Contracts. The Portfolio may enter into futures contracts traded on
an exchange regulated by the Commodity Futures Trading Commission ("CFTC") and
on foreign exchanges, but, with respect to foreign exchange-traded futures
contracts, only if the Investment Adviser determines that trading on each such
foreign exchange does not subject the Portfolio to risks, including credit and
liquidity risks, that are materially greater than the risks associated with
trading on CFTC-regulated exchanges.
Hedging Strategies. In order to hedge its current or anticipated portfolio
positions, the Portfolio may use futures contracts on securities held in its
Portfolio or on securities with characteristics similar to those of the
securities held by the Portfolio. If, in the opinion of the Investment Adviser,
there is a sufficient degree of correlation between price trends for the
securities held by the Portfolio and futures contracts based on other financial
instruments, securities indices or other indices, the Portfolio may also enter
into such futures contracts as part of its hedging strategy. Although under some
circumstances prices of securities held by the Portfolio may be more or less
volatile than prices of such futures contracts, the Investment Adviser will
attempt to estimate the extent of this difference in volatility based on
historical patterns and to compensate for it by having the Portfolio enter into
a greater or lesser number of futures contracts or by attempting to achieve only
a partial hedge against price changes affecting the securities held by the
Portfolio.
Options on Futures Contracts. The Portfolio may purchase and write call and
put options on futures contracts which are traded on a United States exchange or
board of trade or any foreign exchange on which the Portfolio is permitted to
trade futures contracts. The Portfolio will not purchase or write options on
futures contracts unless, in the opinion of the Investment Adviser, the market
for such options has developed sufficiently that the risks associated with such
options transactions are not greater than the risks associated with futures
transactions.
Some derivative securities are not readily marketable or may become illiquid
under adverse market conditions. In addition, during periods of market
volatility, a commodity exchange may suspend or limit in an exchange-traded
derivative instrument, which may make the instrument temporarily illiquid and
difficult to price. Commodity exchanges may also establish daily limits on the
amount that the price of a futures contract or futures option can vary from the
previous day's settlement price. Once the daily limit is reached, no trades may
be made that day at a price beyond the limit. This may prevent the Portfolio
from closing out positions and limiting its losses.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS AND CERTAIN OPTIONS
The Portfolio will engage in futures and related options transactions for
bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. In general, the Portfolio will determine that the price
fluctuations in the futures contracts and options on futures used for hedging
purposes are substantially related to price fluctuations in securities held by
the Portfolio or that it expects to purchase. When it is economically
advantageous for the Portfolio to do so, a long futures (or options) position
may be terminated (or an option may expire) without the corresponding purchase
of securities. The Portfolio will engage in transactions in futures contracts
and related options only to the extent such transactions are consistent with the
requirements of the Code for maintaining the qualification of the Fund as a
regulated investment company for federal income tax purposes (see "Taxes").
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Forward contracts are individually negotiated and privately traded by
currency traders and their customers. A forward contract involves an obligation
to purchase or sell a specific currency (or basket of currencies) for an agreed
price at a future date, which may be any fixed number of days from the date of
the contract. The Portfolio may engage in cross-hedging by using forward
contracts in one currency (or basket of currencies) to hedge against
fluctuations in the value of securities denominated in a different currency if
the Investment Adviser determines that there is an established historical
pattern of correlation between the two currencies (or the basket of currencies
and the underlying currency). Use of a different foreign currency magnifies the
Portfolio's exposure to foreign currency exchange rate fluctuations.
The precise projection of short-term currency market movements is not
possible and short-term hedging provides a means of fixing the dollar value of
only a portion of the Portfolio's foreign assets. The Portfolio will not enter
into forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would obligate the Portfolio to deliver an amount
of foreign currency in excess of the value of the securities held by the
Portfolio or other assets denominated in that currency.
ASSET COVERAGE FOR DERIVATIVE INSTRUMENTS
Transactions using when-issued securities, forward committments, forward
contracts and futures contracts and options thereon (other than options that the
Portfolio has purchased) expose the Portfolio to an obligation to another party.
The Portfolio will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities, currencies, or other
options, futures contracts or forward contracts, or (2) cash or liquid
securities (such as readily marketable obligations and money market instruments)
with a value sufficient at all times to cover its potential obligations not
covered as provided in (1) above. The Portfolio will comply with Commission
guidelines regarding cover for these instruments and, if the guidelines so
require, set aside cash or liquid securities in a segregated account with its
custodian in the prescribed amount.
Assets used as cover or held in a segregated account maintained by the
Fund's custodian cannot be sold while the position requiring coverage or
segregation is outstanding, unless they are replaced with other appropriate
assets. As a result, the commitment of a large portion of the Portfolio's assets
to cover or segregated accounts could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
PORTFOLIO TURNOVER
If the Portfolio writes a substantial number of call options and the market
prices of the underlying securities appreciate, or if the Portfolio writes a
substantial number of put options and the market prices of the underlying
securities depreciate, there may be a very substantial turnover of securities
held by the Portfolio. Although it is not anticipated that the annual portfolio
turnover rate will exceed 200% under such circumstance, portfolio turnover may
be greater than 200% but is not expected to exceed 300%. A 200% turnover rate
could occur if all of the securities held by the Portfolio were sold and either
repurchased or replaced twice within one year. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Portfolio. It may also result in the realization
of capital gains. The Portfolio pays brokerage commissions in connection with
futures transactions and the writing of options and effecting of closing
purchase or sale transactions, as well as for purchases and sales of portfolio
securities. See "Portfolio Security Transactions" for a discussion of the
Portfolio's brokerage practices.
For the fiscal years ended December 31, 1995 and 1996, the portfolio
turnover rates of the Portfolio were 19% and 11%, respectively.
INVESTMENT RESTRICTIONS
The following investment restrictions of the Fund are designated as
fundamental policies and as such cannot be changed without the approval of the
holders of a majority of the Fund's outstanding voting securities, which as used
in this SAI means the lesser of (a) 67% of the shares of the Fund present or
represented by proxy at a meeting if the holders of more than 50% of the shares
are present or represented at the meeting or (b) more than 50% of the shares of
the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of a single issuer or purchase more than 10% of
the outstanding voting securities of a single issuer, except obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
except securities of other investment companies; or invest more than 25% of its
total assets in any single industry (other than securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities);
(2) Borrow money or issue senior securities except as permitted by the 1940
Act;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(6) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities;
(7) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities; or
(8) Buy investment securities from or sell them to any of its officers or
Trustees of the Trust, the investment adviser or its underwriter, as principal;
however, any such person or concerns may be employed as a broker upon customary
terms.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its assets in an open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing investment restrictions adopted by the Fund; such
restrictions cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Portfolio.
The Fund and the Portfolio have adopted the following nonfundamental
investment policies which may be changed by the Trust with respect to the Fund
without approval by the Fund's shareholders or with respect to the Portfolio
without the approval of the Fund or its other investors. As a matter of
nonfundamental policy, the Fund and the Portfolio will not: (a) purchase put or
call options on U.S. Government securities if after such purchase more than 5%
or its net assets, as measured by the aggregate of the premiums paid for such
options held by the Fund or the Portfolio, would be so invested; (b) purchase
any put options, long futures contracts, or call options on a futures contract
if at the date of such purchase realized net losses from such transactions
during the fiscal year to date exceed 5% of its average net assets during such
period; (c) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 25% of its net
assets (taken at current value) is held as collateral for such sales at any one
time; (d) invest more than 15% of net assets in investments which are not
readily marketable, including restricted securities and repurchase agreements
maturing in more than seven days. Restricted securities for the purposes of this
limitation do not include securities elegible for resale pursuant to Rule 144A
of the Securities Act of 1933 and commercial paper issued pursuant to Section
4(2) of said Act that the Board of Trustees of the Trust or the Portfolio, or
their delegate, determines to be liquid, based upon the trading markets for the
specific security; or (e) purchase or retain in its portfolio any securities
issued by an issuer any of whose officers, directors, trustees or security
holders is an officer or Trustee of the Trust or the Portfolio or is a member,
officer, director or trustee of any investment adviser of the Trust or the
Portfolio, if after the purchase of the securities of such issuer by the Fund or
the Portfolio one or more of such persons owns beneficially more than 1/2 of 1%
of the shares or securities or both (all taken at market value) of such issuer
and such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities or both (all
taken at market value).
Whenever an investment policy or investment restriction set forth in the
Prospectus or this SAI states a maximum percentage of assets that may be
invested in any securitiy or other asset, such percentage limitation shall be
determined immediately after and as a result of the Fund's or the Portfolio's
acquisition of such security or asset. Accordingly, any later increase or
decrease resulting from a change in values, assets or other circumstances, will
not compel the Fund or the Portfolio, as the case may be, to dispose of such
security or other asset. Notwithstanding the foregoing, the Fund and the
Portfolio must always be in compliance with the borrowing policies set forth
above.
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 Investment Adviser, BMR, a
wholly-owned subsidiary of Eaton Vance Management ("Eaton Vance"); of Eaton
Vance's parent, Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's
trustee, Eaton Vance, Inc. ("EV"). Eaton Vance and EV are both wholly-owned
subsidiaries of EVC. Those Trustees and officers who are "interested persons" of
the Trust or the Portfolio as defined in the 1940 Act by virtue of their
affiliation with BMR, Eaton Vance, EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (64), President and Trustee*
Vice Chairman 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.
JAMES B. HAWKES (56), Vice President and Trustee*
Chairman, 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.
DONALD R. DWIGHT (66), Trustee
President of Dwight Partners, Inc. (a corporate relations and communications
company); Chairman of the Board of Newspapers of New England, Inc. 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 (62), 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 (62), 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 (71), Trustee
Formerly Director of 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 (67), Trustee
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
SUSAN SCHIFF (36), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
WILLIAM H. AHERN, JR. (38), Vice President of the Trust
Assistant Vice President of Eaton Vance and BMR. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Ahern was elected Vice
President of the Trust on June 19, 1995.
THOMAS J. FETTER (54), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Mr. Fetter was elected Vice
President on October 17, 1997.
MICHAEL B. TERRY (55), Vice President of the Trust
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
MARK S. VENEZIA (48), Vice President of the Portfolio
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (52), Treasurer
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
ALAN R. DYNNER (57), Secretary
Vice President and Chief Legal Officer of BMR, Eaton Vance, EVC and EV since
November 1, 1996. Previously, Mr. Dynner was a Partner of the law firm of
Kirkpartrick & Lockhart LLP, New York and Washington, D.C., and was Executive
Vice President of Neuberger & Berman Management, Inc., a mutual fund
management company. Officer of various investment companies managed by Eaton
Vance or BMR. Mr. Dynner was elected Secretary on June 23, 1997.
JANET E. SANDERS (62), 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 (35), 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). Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary on March 27,
1995.
JOHN P. RYNNE (55), Assistant Secretary of the Trust
Corporate Controller and Vice President of EVC. Vice President of Eaton Vance,
EVD and BMR. Mr. Rynne was elected an officer on June 19, 1995.
ERIC G. WOODBURY (40), Assistant Secretary
Vice President of BMR and Eaton Vance since February 1993; formerly, associate
attorney at Dechert, Price & Rhoads. Officer of various investment companies
managed by Eaton Vance or BMR. Mr. Woodbury was elected Assistant Secretary on
June 19, 1995.
Messrs. Hayes (Chairman), Reamer and Thorndike are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
purpose of the Special Committee is to consider, evaluate and make
recommendations to the full Board of Trustees concerning (i) all contractual
arrangements with service providers to the Fund and the Portfolio, including
investment advisory (Portfolio only), administrative, 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, the Portfolio or investors therein.
The Nominating Committee of the Board of Trustees of the Trust and the
Portfolio is comprised of four Trustees who are not "interested persons" as that
term is defined under the 1940 Act ("noninterested Trustees"). The Committee has
four-year staggered terms, with one member rotating off the Committee to be
replaced by another noninterested Trustee. The purpose of the Committee is to
recommend to the Board nominees for the position of noninterested Trustee and to
assure that at least a majority of the Board of Trustees is independent of Eaton
Vance and its affiliates.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent accountants, and reviewing matters relative to trading and
brokerage policies and practices, accounting and auditing practices and
procedures, accounting records, internal accounting controls, and the functions
performed by the custodian, transfer agent and dividend disbursing agent of the
Trust and of the Portfolio.
Trustees of the Portfolio who are not affiliated with the Investment Adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the
"Trustees" Plan"). Under the Trustees' 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 Trustees' Plan will be determined based upon the performance of such
investments. Deferral of Trustees' fees in accordance with the Trustees' 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 Trust nor the Portfolio has a
retirement plan for its Trustees.
The fees and expenses of the noninterested Trustees of the Trust and the
Portfolio are paid by the Fund (and the other series of the Trust) and the
Portfolio, respectively. (The Trustees of the Trust and the Portfolio who are
members of the Eaton Vance organization receive no compensation from the Trust
or the Portfolio.) During the fiscal year ended December 31, 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 funds in the Eaton Vance fund complex(1):
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION
COMPENSATION COMPENSATION FROM TRUST AND
NAME FROM TRUST(2) FROM PORTFOLIO FUND COMPLEX
- ---- ------------- -------------- ------------
<S> <C> <C> <C>
Donald R. Dwight ................... $ 696 $3,897(3) $145,000(6)
Samuel L. Hayes, III ............... 628 3,894(4) 161,250(7)
Norton H. Reamer ................... 620 3,784 145,000
John L. Thorndike .................. 641 3,971(5) 150,000(8)
Jack L. Treynor .................... 686 4,077 150,000
- ------------
(1) As of January 1, 1998, the Eaton Vance complex consists of 159 registered
investment companies or series thereof.
(2) The Trust consisted of 15 Funds as of December 31, 1996.
(3) Includes $1,593 of deferred compensation.
(4) Includes $700 of deferred compensation.
(5) Includes $957 of deferred compensation.
(6) Includes $45,000 of deferred compensation.
(7) Includes $20,429 of deferred compensation.
(8) Includes $28,125 of deferred compensation.
</TABLE>
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as its investment adviser pursuant to an
Investment Advisory Agreement. BMR or Eaton Vance acts as investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of approximately $20 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 a family of mutual funds,
and individual and various institutional accounts, including corporations,
hospitals, retirement plans, universities, foundations and trusts. Eaton Vance
mutual funds feature international equities, domestic equities, tax-free
municipal bonds, and U.S. government and corporate bonds. Lloyd George
Management has advised Eaton Vance's international equity funds since 1992.
Founded in 1991, Lloyd George is headquartered in Hong Kong with offices in
London and Mumbai, India. It has established itself as a leader in investment
management in Asian equities and other global markets. Lloyd George features an
experienced team of investment professionals that began working together in the
mid-1980s. Lloyd George analysts cover East Asia, the India subcontinent, Russia
and Eastern Europe, Latin America, Australia and New Zealand from offices in
Hong Kong, London and Mumbai. Together Eaton Vance and Lloyd George manage over
$21 billion in assets. Eaton Vance mutual funds are distributed by the Principal
Underwriter both within the United States and offshore.
The Principal Underwriter believes that an investment professional can
provide valuable services to you to help you reach your investment goals.
Meeting investment goals requires time, objectivity and investment savvy. Before
making an investment recommendation, a representative can help you carefully
consider your short- and long-term financial goals, your tolerance for
investment risk, your investment time frame, and other investments you may
already own. Your professional investment representatives are knowledgeable
about financial markets, as well as the wide range of investment opportunities
available. A representative can help you decide when to buy, sell or persevere
with your investments. A professional investment representative can provide you
with tailored financial advice.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and any legal obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto, to the extent not covered by
insurance.
On March 28, 1994, the Trustees of the Portfolio voted to accept a waiver of
BMR's compensation by instituting the breakpoints set forth in the Prospectus
(effective as of April 1, 1994) in the advisory fee rate then provided for in
the Investment Advisory Agreement. Prior to April 1, 1994, the Investment
Advisory Agreement provided for a monthly advisory fee of .0625% (equivalent to
.75% annually) of the average daily net assets of the Portfolio.
For a description of the compensation that the Portfolio pays BMR under the
Investment Advisory Agreement, see the Fund's current Prospectus. As at December
31, 1996, the Portfolio had net assets of $455,522,548. For the fiscal years
ended December 31, 1996, 1995 and 1994, the Portfolio paid BMR advisory fees of
$3,603,385, $3,928,237, $4,259,500, respectively, (equivalent to 0.75%, 0.75%,
and 0.74% of the Portfolio's average daily net assets for each such period).
The Investment Advisory Agreement with BMR continues in effect from year to
year for so long as such continuance is approved at least annually (i) by the
vote of a majority of the noninterested Trustees of the Portfolio 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 days' written notice by the Board of
Trustees of either party, or by vote of the majority of the outstanding voting
securities of the Portfolio, and the Agreement will terminate automatically in
the event of its assignment. The Agreement provides that BMR may render services
to others. The Agreement also provides that BMR shall not be liable for any loss
incurred in connection with the performance of its duties, or action taken or
omitted under that Agreement, in the absence of willful misfeasance, bad faith,
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties thereunder, or for any losses sustained
in the acquisition, holding or disposition of any security or other investment.
As indicated in the Prospectus, Eaton Vance serves as administrator of the
Fund, but currently receives no compensation for providing administrative
services to the Fund. Under its Administrative Services Agreement with the Fund,
Eaton Vance has been engaged to administer the Fund's affairs, subject to the
supervision of the Trustees of the Trust, and shall furnish for the use of the
Fund office space and all necessary office facilities, equipment and personnel
for administering the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) its pro rata
share of the Trust's registration 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 any legal obligation of the Trust to indemnify its Trustees and
officers with respect thereto, to the extent not covered by insurance.
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 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. Hawkes is chairman and Mr. Gardner is vice
chairman. Mr. Hawkes 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, the Voting Trustees of which are Messrs.
Gardner, Hawkes, Rowland, and Thomas E. Faust, Jr., Alan R. Dynner, William M.
Steul and Wharton P. Whitaker. 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 or officers and
Directors of EVC and EV. As of December 31, 1997, Messrs. Gardner and Hawkes
each owned 24% of such voting trust receipts, and Messrs. Dynner, Steul and
Whitaker each owned 8%. Messrs. Rowland and Faust owned 15% and 13%,
respectively. Messrs. Gardner, Hawkes and Dynner are officers or Trustees of
the Trust and/or the Portfolio and are members of the EVC, BMR, Eaton Vance
and EV organizations. Messers. Ahern, Fetter, Murphy, O'Connor, Rynne, Terry,
Venezia and Woodbury and Ms. Sanders and Ms. Schiff are officers or Trustees
of the Trust and/or the Portfolio and are also members of the BMR, Eaton Vance
and EV organizations.
Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment. EVC also owns approximately 21% of the Class
A shares of Lloyd George Management (B.V.I.) Limited, a registered investment
adviser. EVC owns all of the stock of Fulcrum Management, Inc. and MinVen, Inc.,
which are engaged in precious metal mining venture investment and management.
EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, 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 acts as custodian for the Trust and the Portfolio. IBT has the custody
of all cash and securities representing the Fund's interest in the Portfolio,
has custody of all the Portfolio's assets, maintains the general ledger of the
Portfolio and the Fund and computes the daily net asset value of interests in
the Portfolio and the net asset value of shares of the Fund. In such capacity,
it attends to details in connection with the sale, exchange, substitution,
transfer or other dealings with the Portfolio's investments, receives and
disburses all funds and performs various other ministerial duties upon receipt
of proper instructions from the Trust 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.
IBT also provides services in connection with the preparation of shareholder
reports and the electronic filing of such reports with the Commission for which
it receives a separate fee.
SERVICES FOR ACCUMULATION -- CLASS A SHARES
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Intended Quantity Investment -- Statement of Intention. If it is anticipated
that $25,000 or more of Class A shares and shares of other funds exchangeable
for Class A shares and listed under "The Eaton Vance Exchange Privilege" in the
Prospectus will be purchased within a 13-month period, a Statement of Intention
should be signed so that shares may be obtained at the same reduced sales charge
as though the total quantity were invested in one lump sum. Shares held under
Right of Accumulation (see below) as of the date of the Statement will be
included toward the completion of the Statement. The Statement authorizes the
Transfer Agent to hold in escrow sufficient shares (5% of the dollar amount
specified in the Statement) which can be redeemed to make up any difference in
sales charge on the amount intended to be invested and the amount actually
invested. Execution of a Statement does not obligate the shareholder to purchase
or the Fund to sell the full amount indicated in the Statement, and should the
amount actually purchased during the 13-month period be more or less than that
indicated on the Statement, price adjustments will be made. For sales charges
and other information on quantity purchases, see "How to Buy Shares" in the
Prospectus. Any investor considering signing a Statement of Intention should
read it carefully.
Right of Accumulation -- Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Class A shares is calculated by taking the
dollar amount of the current purchase and adding it to the value (calculated at
the maximum current offering price) of the shares the shareholder owns in his or
her account(s) in the Fund and shares of other funds exchangeable for Class A
shares and listed under "The Eaton Vance Exchange Privilege" in the Prospectus.
The sales charge on the shares being purchased will then be at the rate
applicable to the aggregate. For sales charges on quantity purchases, see "How
to Buy Shares" in the Prospectus. Shares purchased (i) by an individual, his or
her spouse and their children under the age of twenty-one, and (ii) by a
trustee, guardian or other fiduciary of a single trust estate or a single
fiduciary account, will be combined for the purpose of determining whether a
purchase will qualify for the Right of Accumulation and if qualifying, the
applicable sales charge level.
For any such discount to be made available, at the time of purchase a
purchaser or his or her Authorized Firm must provide the Principal Underwriter
(in the case of a purchase made through an Authorized Firm) or the Transfer
Agent (in the case of an investment made by mail) with sufficient information to
permit verification that the purchase order qualifies for the accumulation
privilege. Confirmation of the order is subject to such verification. The Right
of Accumulation privilege may be amended or terminated at any time as to
purchases occurring thereafter.
SERVICE FOR WITHDRAWAL
The 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 Prospectus) based upon the value
of the shares held. The checks will be drawn from share redemptions and hence,
although they are a return of principal, may require the recognition of taxable
gain or loss. Income dividends and capital gains distributions in connection
with withdrawal accounts will be credited at net asset value as of the record
date for each distribution. Continued withdrawals in excess of current income
will eventually use up principal, particularly in a period of declining market
prices. A shareholder may not have a withdrawal plan in effect at the same time
he or she has authorized Bank Automated Investing or is otherwise making regular
purchases of Fund shares. The shareholder, the Transfer Agent or the Principal
Underwriter will be able to terminate the withdrawal plan at any time without
penalty.
DETERMINATION OF NET ASSET VALUE
The 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, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Except as described below, debt securities for which the over-the-counter
market is the primary market are normally valued at the mean between the latest
available bid and asked prices. OTC options are valued at the mean between the
bid and asked prices provided by dealers. Financial futures contracts listed on
commodity exchanges and exchange-traded options are valued at closing settlement
prices. Short-term obligations having remaining maturities of less than 60 days
are valued at amortized cost, which approximates value, unless the Trustees
determine that under particular circumstances such method does not result in
fair value. As authorized by the Trustees, debt securities (other than
short-term obligations) may be valued on the basis of valuations furnished by a
pricing service which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. Mortgage-backed
"pass-through" securities are valued through use of a matrix pricing system
which takes into account closing bond valuations, yield differentials,
anticipated prepayments and interest rates. Securities for which there is no
such quotation or valuation and all other assets are valued at fair value as
determined in good faith by or at the direction of the Trustees of the
Portfolio.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the 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 separately for each Class of the
Fund 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 (i) that all distributions are
reinvested at net asset value on the reinvestment dates during the period, (ii)
the deduction of the maximum sales charge from the initial $1,000 purchase order
for Class A shares, (iii) a complete redemption of the investment and (iv) the
deduction of any Class B or Class C CDSC at the end of the period. For further
information concerning the total return of the Classes of the Fund, see Appendix
A, Appendix B and Appendix C.
Yield is computed separately for each Class of the Fund pursuant to a
standardized formula by dividing net investment income per share earned during a
recent thirty-day period by the maximum offering price (including the maximum
initial sales charge for Class A shares) per share on the last day of the period
and annualizing the resulting figure. Net investment income per share is
calculated from the yields to maturity of all obligations held by the Portfolio
based on prescribed methods, reduced by accrued Fund and Class expenses for the
period with the resulting number being divided by the average daily number of
Class shares outstanding and entitled to receive distributions during the
period. This yield figure does not reflect the deduction of any CDSCs which (if
applicable) are imposed on certain redemptions at the rate set forth under "How
to Redeem Shares" in the Prospectus. Yield calculations assume the current
maximum initial sales charge for Class A shares set forth under "How to Buy
Shares" in the Prospectus. (Actual yield may be affected by variations in sales
charges on investments.) For the yield of the Classes of the Fund, see Appendix
A, Appendix B and Appendix C.
The Fund's total return may be compared to relevant indices, such as the
Consumer Price Index and various domestic securities indices. The Fund's total
return and comparisons with these indices may be used in advertisements and in
information furnished to present or prospective shareholders. Advertisements and
information provided to present and prospective investors may also contain
information concerning the stability of the net asset value of the Fund over
varying time periods and a comparison of such net asset value to the value of
other types of investments over similar time periods. The Fund's performance may
differ from that of other investors in the Portfolio, including any other
investment companies.
From time to time, advertisements and other material furnished to present
and prospective shareholders may include information, charts and/or
illustrations of the Fund's net asset value per share history.
From time to time, evaluations of the Fund's performance or rankings of
mutual funds (which include the Fund) may be made by independent sources (e.g.
Lipper Analytical Services, Inc., CDA/Wiesenberger and Morningstar, Inc.) and
may be used in advertisements and in information furnished to present or
prospective shareholders. Information, charts and illustrations showing the
effect of compounding interest or relating to inflation and taxes (including
their effects on the dollar and the return on stocks and other investment
vehicles) may also be included in advertisements and materials furnished to
present and prospective investors.
From time to time, information about the portfolio allocation, portfolio
turnover and holdings of the Portfolio may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information, for example, may include the Portfolio's diversification by asset
type, including mortgage-backed securities with varying maturities and interest
rates.
For example, the Portfolio's diversification by asset type as of March 31,
1997 was:
PORTFOLIO ASSET ALLOCATION PERCENT OF INVESTMENTS
- -------------------------- ----------------------
Mortgage-Backed Securities
Low Coupons: 4-9% 58.3%
High Coupons: 11-16% 23.5%
Other 3.0%
U.S. Treasuries, U.S. Government Agency
Debentures & Other Mortgage-Backed Securities 15.2%
----
TOTAL 100%
Information used in advertisements and materials furnished to present and
prospective investors may include statements or illustrations relating to the
appropriateness of certain types of securities and/or mutual funds to meet
specific financial goals. Such information may address:
-- cost associated with aging parents;
-- funding a college education (including its actual and estimated cost);
-- health care expenses (including actual and projected expenses);
-- long-term disabilities (including the availability of, and coverage
provided by, disability insurance); and
-- retirement (including the availability of social security benefits, the
tax treatment of such benefits and statistics and other information
relating to maintaining a particular standard of living and outliving
existing assets).
Such information may also address different methods for saving money and the
results of such methods, as well as the benefits of investing in equity
securities. Such information may describe: the potential for growth; the
performance of equities as compared to other investment vehicles; and the value
of investing as early as possible and regularly, as well as staying invested.
The benefits of investing in equity securities by means of a mutual fund may
also be included (such benefits may include diversification, professional
management and the variety of equity mutual fund products).
Information in advertisements and materials furnished to present and
prospective investors may include profiles of different types of investors
(i.e., investors with different goals and assets) and different investment
strategies for meeting specific financial goals. Such information may provide
hypothetical illustrations which include: results of various investment
strategies; performance of an investment in the Fund over various time periods;
and results of diversifying assets among several investments with varying
performance. Information in advertisements and materials furnished to present
and prospective investors may also include quotations (including editorial
comments) and statistics concerning investing in securities, as well as
investing in particular types of securities and the performance of such
securities.
The Trust or Principal Underwriter 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
Each series of the Trust is treated as a separate entity for federal income
tax purposes. The Fund has elected to be treated, has qualified and intends to
continue to qualify each year as a regulated investment company ("RIC") under
the Code. Accordingly, the Fund intends to satisfy certain requirements relating
to sources of its income and diversification of its assets and to distribute
substantially all of its ordinary income and net income in accordance with the
timing requirements imposed by the Code, so as to maintain its RIC status and
avoid paying any federal income or excise tax. The Fund so qualified for its
taxable year ended December 31, 1996. 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 also satisfy these
requirements. The Portfolio will allocate at least annually among its investors,
including the Fund, each investors 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 a manner intended to comply 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 (i) will be deemed to own its
proportionate share of each of the assets of the Portfolio and (ii) will be
entitled to the gross income of the Portfolio attributable to such share.
In order to avoid incurring a federal excise tax obligation, 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 capital gain net income
(which is 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 (i) any available capital loss
carryforwards and (ii) 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 paid no federal income tax. Under current law, provided that the Fund
qualifies as a RIC and the Portfolio is treated as a partnership for
Massachusetts and federal tax purposes, neither the Fund nor the Portfolio
should be liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts.
The Portfolio's transactions in foreign currency, foreign currency
denominated debt securities, payables and receivables denominated in a foreign
currency, options and futures on foreign currency and forward foreign currency
exchange contracts are subject to special tax rules that may convert capital
gain or loss into ordinary income or loss and may affect the amount, timing and
character of the Portfolio's income or loss and hence of allocations and/ or
distributions to the Fund's shareholders.
Positions held by the Portfolio which consist of one or more debt securities
and one or more listed options or futures contracts which substantially diminish
the risk of loss of the Portfolio with respect to such debt securities will be
treated as "mixed straddles" for federal income tax purposes. Such straddles are
ordinarily subject to the provisions of Section 1092 of the Code, the operation
of which can result in deferral of losses, adjustments in the holding periods of
the Portfolio's debt securities and conversion of short-term capital losses into
long-term capital losses. The operation of these rules can be mitigated or
eliminated by means of various elections which are available to the Portfolio
for federal income tax purposes.
To eliminate the application of these rules, the Portfolio has elected mixed
straddle accounting for one or more designated classes of activities involving
mixed straddles. Under this method of accounting, figures are derived for
aggregate short-term and long-term capital gains and losses associated with all
positions in a mixed straddle account on a daily basis. Specifically, gains and
losses are computed for all positions disposed of on a given day, and all
outstanding positions on such day are marked to market (subject to subsequent
adjustments to reflect the gain or loss realized thereby). Gains and losses from
all positions in debt securities in the account are netted, as are gains and
losses from all positions in options and futures. If the two resulting figures
both represent net gains or net losses, the net gain or loss attributable to the
debt securities is treated as short-term capital gain or loss, and the net gain
or loss attributable to the options and futures contracts is treated as 60%
long-term and 40% short-term capital gain or loss. Alternatively, if the
resulting figures represent a net gain and a net loss, the two figures are
further netted to arrive at a single figure for the day. This figure is treated
as 60% long-term and 40% short-term capital gain or loss unless it reflects the
fact that the net gain or loss from the debt securities outweighed the net gain
or loss from the options and futures, in which case this figure is treated as
short-term capital gain or loss.
On the last business day of the taxable year the annual account net gain or
loss for each mixed straddle account is determined by netting the daily net
gains or losses for each business day during the taxable year. (The annual
account net gain or loss is adjusted to take into account any interest and
carrying charges incurred in connection with positions in the account which were
required to be capitalized.) Annual account net gains or losses are then netted
for all mixed straddle accounts to yield the total annual account net gain or
loss. This figure is subject to an overall limitation such that no more than 50%
of it will be treated as long-term capital gain and no more than 40% of it will
be treated as short-term capital loss.
The Portfolio may make other tax elections with respect to mixed straddles
which do not properly belong in any of its mixed straddle accounts.
In the absence of a mixed straddle election, futures or currency forward
contracts entered into by the Portfolio and listed nonequity options written or
purchased by the Portfolio (including options on debt securities, options on
futures contracts, options on securities indexes and options on broad-based
stock indexes, but possibly excluding certain foreign currency-related options,
futures or forward contracts) will be governed by Section 1256 of the Code.
Absent a tax election to the contrary, gain or loss attributable to the lapse,
exercise or closing out of any such position will be treated as 60% long-term
and 40% short-term capital gain or loss, and on the last trading day of the
Portfolio's taxable year all outstanding Section 1256 positions will be marked
to market (i.e., treated as if such positions were closed out at their closing
price on such day), and any resulting gain or loss will be recognized as 60%
long-term and 40% short-term capital gain or loss. Under certain circumstances,
entry into a futures contract to sell a security or the purchase of a put option
with respect to a security may constitute a short sale for federal income tax
purposes, causing an adjustment in the holding period of the underlying security
or a substantially identical security held by the Portfolio.
The Portfolio will monitor its transactions in options, futures contracts
and forward contracts in order to enable the Fund to maintain its qualification
as a RIC for federal income tax purposes.
The Portfolio's investment in securities acquired at a market discount, or
zero coupon and certain other securities with original issue discount will cause
it to realize income prior to the receipt of cash payments with respect to these
securities. Such income will be allocated daily to interests in the Portfolio
and, in order to enable the Fund to distribute its proportionate share of this
income and avoid a tax payable by the Fund, the Portfolio may be required to
liquidate portfolio securities that it might otherwise have continued to hold in
order to generate cash that the Fund may withdraw from the Portfolio for
subsequent distribution to Fund shareholders.
Redemptions (including exchanges) of Fund shares are taxable transactions.
Any loss realized upon the redemption or exchange of shares of the Fund with a
tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution of net long-term capital gains with
respect to such shares. All or a portion of a loss realized upon a taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
Fund shares are purchased (whether through reinvestment of dividends or
otherwise) within a period beginning 30 days before and ending 30 days after the
disposition. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
Distributions by the Fund may reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a shareholder's
cost basis, such distribution would be taxable to the shareholder even though,
from an investment standpoint, it may constitute a return of a portion of the
purchase price. Therefore, investors should consider the tax implications of
buying shares immediately before a distribution. Certain distributions declared
in October, November or December and paid the following January will be taxed to
shareholders as if received on December 31 of the year in which they are
declared.
Distributions of the Fund will not qualify for the dividends received
deduction available to certain corporations under the Code. A state income (and
possibly local income and/or intangible property) tax exemption is generally
available to the extent the Fund's distributions are derived from interest on
(or, in the case of intangibles taxes, the value of its assets is attributable
to) certain U.S. Government obligations, provided in some states that certain
thresholds for holdings of such obligations and/or reporting requirements are
satisfied. The Fund will inform shareholders of the proportion of its
distributions which are derived from interest on such obligations. Shareholders
are urged to consult their tax advisers regarding the proper treatment of such
portion of their distributions for state and local income tax purposes.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and to
other retirement plans, and persons investing through such plans should consult
their tax advisers for more information. The deductibility of contributions to
IRAs may be restricted or eliminated for particular shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number
("TIN") and certain certifications required by the Internal Revenue Service (the
"IRS"), as well as shareholders with respect to whom the Fund has received
certain information from the IRS or a broker, may be subject to "backup"
withholding of federal income tax arising from the Fund's taxable dividends and
other distributions as well as the proceeds of redemption transactions
(including repurchases and exchanges) at a rate of 31%. An individual's TIN is
generally his or her social security number.
PRINCIPAL UNDERWRITER
The Trust 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 Trust will exceed
the amounts paid therefor. For the amount paid by the Trust to the Principal
Underwriter for acting as repurchase agent, see Appendix A.
CLASS A SHARES. Class A shares of the Fund may be continuously purchased at
the public offering price through Authorized Firms which have agreements with
the Principal Underwriter. The Trust reserves the right to suspend or limit the
offering of its shares to the public at any time. The public offering price is
the net asset value next computed after receipt of the order, plus, where
applicable, a variable percentage (sales charge) depending upon the amount of
purchase as indicated by the sales charge table set forth in the Prospectus (see
"How to Buy Shares"). Such table is applicable to purchases of a Fund alone or
in combination with purchases of certain other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for his
or their own account, and (ii) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account. The table is also
presently applicable to (1) purchases of Class A shares pursuant to a written
Statement of Intention; or (2) purchases of Class A shares pursuant to the Right
of Accumulation and declared as such at the time of purchase.
Subject to the applicable provisions of the 1940 Act, the Trust may issue
Class A shares at net asset value in the event that an investment company
(whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Class. Normally no
sales charges will be paid in connection with an exchange of Class A shares for
the assets of such investment company. Class A shares may be sold at net asset
value to any officer, director, trustee, general partner or employee of the
Trust, the Portfolio or any investment company for which Eaton Vance or BMR acts
as investment adviser, any investment advisory, agency, custodial or trust
account managed or administered by Eaton Vance or by any parent, subsidiary or
other affiliate of Eaton Vance, or any officer, director or employee of any
parent, subsidiary or other affiliate of Eaton Vance. The terms "officer,"
"director," "trustee," "general partner" or "employee" as used in this paragraph
include any such person's spouse and minor children, and also retired officers,
directors, trustees, general partners and employees and their spouses and minor
children. Class A shares may also be sold at net asset value to registered
representatives and employees of Authorized Firms and to the spouses and
children under the age of 21 and beneficial accounts of such persons.
The Principal Underwriter acts as principal in selling Class A shares under
a Distribution Agreement with the Trust. The expenses of printing copies of
prospectuses used to offer shares to Authorized Firms or investors and other
selling literature and of advertising are borne by the Principal Underwriter.
The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its Class A shares under
federal and state securities laws are borne by the Fund. The Distribution
Agreement is renewable annually by the Board of Trustees of the Trust (including
a majority of the noninterested Trustees), may be terminated on six months'
notice by either party and is automatically terminated upon assignment. The
Principal Underwriter distributes Class A shares on a "best efforts" basis under
which it is required to take and pay for only such shares as may be sold. The
Principal Underwriter allows Authorized Firms discounts from the applicable
public offering price which are alike for all Authorized Firms. The Principal
Underwriter may allow, upon notice to all Authorized Firms with whom it has
agreements, discounts up to the full sales charge during the periods specified
in the notice. During periods when the discount includes the full sales charge,
such Authorized Firms may be deemed to be underwriters as that term is defined
in the Securities Act of 1933. For the amount of sales charges for sales of
Class A shares paid to the Principal Underwriter (and Authorized Firms), see
Appendix A.
CLASS B AND CLASS C SHARES. Under the Distribution Agreement, the Principal
Underwriter acts as principal in selling Class B and Class C shares. 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 Class B and
Class C shares under federal and state securities laws are borne by the Fund. In
addition, each Class B and Class C makes payments to the Principal Underwriter
pursuant to their Distribution Plans as described in the Prospectus; the
provisions of the plan relating to such payments are included in the
Distribution Agreement. The Distribution Agreement is renewable annually by the
Trust's Board of Trustees (including a majority of the noninterested Trustees
who have no direct or indirect financial interest in the operation of the
Distribution Plans or the Distribution Agreement), may be terminated on sixty
days' notice either by such Trustees or by vote of a majority of the outstanding
Class B and Class C shares or on six months' notice by the Principal Underwriter
and is automatically terminated upon assignment. The Principal Underwriter
distributes Class B and Class C shares on a "best efforts" basis under which it
is required to take and pay for only such shares as may be sold.
SERVICE PLAN -- CLASS A SHARES
The Trust on behalf of its Class A shares has adopted a Service Plan (the
"Plan") designed to meet the service fee requirements of the sales charge rule
of the National Association of Securities Dealers, Inc. (the "NASD").
(Management believes service fee payments are not distribution expenses governed
by Rule 12b-1 under the 1940 Act, but has chosen to have the Plan approved as if
that Rule were applicable.) The following supplements the discussion of the Plan
contained in the Prospectus.
The Plan remains in effect from year to year provided such continuance is
approved by a vote of both a majority of (i) the noninterested Trustees who have
no direct or indirect financial interest in the operation of the Plan or any
agreements related to it (the "Plan Trustees") and (ii) all of the Trustees then
in office, cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan. The Plan may be terminated any time by vote of the Plan
Trustees or by a vote of a majority of the outstanding Class A shares of the
Fund. The Plan has been approved by the Board of Trustees of the Trust,
including the Plan Trustees.
The Plan requires quarterly Trustee review of a written report of the amount
expended under the Plan and the purposes for which such expenditures were made.
The Plan may not be amended to increase materially the payments described herein
without approval of the affected shareholders of Class A shares, and the
Trustees. So long as the Plan is in effect, the selection and nomination of the
noninterested Trustees shall be committed to the discretion of such Trustees.
The Trustees have determined that in their judgment there is a reasonable
likelihood that the Plan will benefit the Fund and its Class A shareholders. For
the service fees paid under the Plan, see Appendix A.
DISTRIBUTION PLANS -- CLASS B AND CLASS C SHARES
The Trust has adopted Distribution Plans (the "Plans") on behalf of its
Class B and Class C shares designed to meet the requirements of Rule 12b-1 under
the 1940 Act and the sales charge rule of the NASD. The purpose of the Plans is
to compensate the Principal Underwriter for its distribution services and
facilities provided with respect to Class B and Class C shares.
The Plans provide that the Fund will pay sales commissions and distribution
fees to the Principal Underwriter only after and as a result of the sale of
Class B or Class C 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 Class B sales and
6.25% of Class C sales 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 amount payable to the Principal Underwriter pursuant to the Plans as
sales commissions and distribution fees with respect to each day will be accrued
on such day as a liability of the respective Class and will accordingly reduce
the net assets of the Class 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 net assets of the Class on such day. The level of net
assets changes each day and depends upon the amount of sales and redemptions of
shares, the changes in the value of the investments held by the Portfolio, the
expenses of the Class, the Fund and the Portfolio accrued and allocated to the
Fund and Class 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 Trust does not accrue possible future
payments as a liability of a Class or reduce current net assets in respect of
unknown amounts which may become payable under the Plans in the future because
the standards for accrual of such a liability under accounting principles have
not been satisfied.
The Plans provide 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 Trust to the Principal Underwriter
whenever there exist uncovered distribution charges.
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 Plans since their inception. Payments theretofore paid or
payable under the Plans by the Trust to the Principal Underwriter and CDSCs
theretofore paid or payable to the Principal Underwriter will be subtracted from
such distribution charges; if the result of such subtraction is positive, a
distribution fee (computed at 1% over the prime rate then reported in The Wall
Street Journal) will be computed on such amount and added thereto, with the
resulting sum constituting the amount of outstanding uncovered distribution
charges with respect to such day. The amount of outstanding uncovered
distribution charges of the Principal Underwriter calculated on any day does not
constitute a liability recorded on the financial statements of the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of 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 shares upon which a
CDSC will be imposed, the level and timing of redemptions of shares upon which
no CDSC will be imposed (including redemptions of shares pursuant to the
exchange privilege which result in a reduction of uncovered distribution
charges), changes in the level of the net assets of the Class, and changes in
the interest rate used in the calculation of the distribution fee under the
Plans. Periods with a high level of sales of Class shares accompanied by a low
level of early redemptions of Class shares resulting in the imposition of CDSCs
will tend to increase the time during which there will exist uncovered
distribution charges of the Principal Underwriter.
Currently, payments of sales commissions and distribution fees and of
service fees may equal 1% of average daily net assets per annum. The Trust
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 for Class C sales and sales commissions for Class B sales at the
time of sale, it is anticipated that the Eaton Vance organization will profit by
reason of the operation of the Plans through an increase in the Fund's assets
(thereby increasing the advisory fee payable to BMR by the Portfolio) resulting
from sale of shares and through the amounts paid to the Principal Underwriter,
including CDSCs, pursuant to the Plans. The Eaton Vance organization may be
considered to have realized a profit under the Plans if at any point in time the
aggregate amounts theretofore received by the Principal Underwriter pursuant to
the Plans and from CDSCs have exceeded the total expenses theretofore incurred
by such organization in distributing Class B and Class C 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 Trust.
The Plans continue in effect from year to year for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the noninterested Trustees of the Trust 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 Plans 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
applicable Class. The Plans require quarterly Trustee review of a written report
of the amount expended under the Plans and the purposes for which such
expenditures were made. The Plans may not be amended to increase materially the
payments described therein without approval of the shareholders of the affected
Class and the Trustees. So long as the Plans are in effect, the selection and
nomination of the noninterested Trustees shall be committed to the discretion of
such Trustees.
The Trustees of the Trust believe that the Plans will be a significant
factor in the expected growth of the Fund's assets, and will result in increased
investment flexibility and advantages which have benefitted and will continue to
benefit the Fund and its Class B and Class C shareholders. Payments for sales
commissions and distribution fees made to the Principal Underwriter under the
Plans will compensate the Principal Underwriter for its services and expenses in
distributing Class B and Class C shares of the Fund. Service fee payments made
to the Principal Underwriter and Authorized Firms under the Plans 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 Plans are 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
Plans will benefit the Fund and its Class B and Class C shareholders.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the executing firm, are made by BMR.
BMR is also responsible for the execution of transactions for all other accounts
managed by it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. BMR uses its best
efforts to obtain execution of portfolio security transactions at prices which
are advantageous to the Portfolio and at reasonably competitive spreads or (when
a disclosed commission is being charged) at reasonably competitive commission
rates. In seeking such execution, BMR will use its best judgment in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
nature and character of the market for the security, the confidentiality, speed
and certainty of effective execution required for the transaction, the general
execution and operational capabilities of the executing firm, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions, and
the reasonableness of the commission or spread, if any. The debt securities and
obligations purchased and sold by the Portfolio are generally traded in the
domestic over-the-counter markets on a net basis (i.e. without commission)
through broker-dealers and banks acting for their own accounts rather than as
brokers, or otherwise involve transactions with the issuer of such obligations.
Such firms attempt to profit from such transactions by buying at the bid price
and selling at the higher asked price of the market for such obligations, and
the difference between the bid and asked price is customarily referred to as the
spread. The Portfolio may also purchase such obligations from domestic
underwriters, the cost of which may include undisclosed fees and concessions to
the underwriters. Although spreads or commissions paid on portfolio security
transactions will, in the judgment of BMR, be reasonable in relation to the
value of the services provided, spreads or commissions exceeding those which
another firm might charge may be paid to firms who were selected to execute
transactions on behalf of the Portfolio and BMR's other clients for providing
brokerage and research services to BMR. For the fiscal years ended December 31,
1994, 1995 and 1996, the Portfolio paid no brokerage commissions on portfolio
security transactions.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Portfolio
may receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if BMR
determines in good faith that such compensation was reasonable in relation to
the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which BMR and its affiliates have for accounts over
which they exercise investment discretion. In making any such determination, BMR
will not attempt to place a specific dollar value on the brokerage and research
services provided or to determine what portion of the compensation should be
related to such services. Brokerage and research services may include advice as
to the value of securities, the advisability of investing in, purchasing, or
selling securities, and the availability of securities or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement); and the "Research
Services" referred to in the next paragraph.
It is a common practice of the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealer firms which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, BMR receives Research Services from many broker-dealer firms with
which BMR places the Portfolio transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the NASD, which rule provides that no firm which
is a member of the NASD 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.
Whenever decisions are made to buy or sell securities by the Portfolio and one
or more of such other accounts simultaneously, BMR will allocate the security
transactions (including "hot" issues) in a manner which it believes to be
equitable under the circumstances. As a result of such allocations, there may be
instances where the Portfolio will not paricipate in a transaction that is
allocated among other accounts. If an aggregated order cannot be filled
completely, allocations will generally be made on a pro rata basis. An order may
not be allocated on a pro rata basis where, for example: (i) consideration is
given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account
with specialized investment policies that coincide with the particulars of a
specific investment; (iii) pro rata allocation would result in odd-lot or de
minimis amounts being allocated to a portfolio or other client; or (iv) where
BMR reasonably determines that departure from a pro rata allocation is
advisable. While these aggregation and allocation policies could have a
detrimental effect on the price or amount of the securities available to the
Portfolio from time to time, it is the opinion of the Trustees of the Trust and
the Portfolio that the benefits 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. 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
Fund established multiple classes of shares on January 1, 1998. The operations
of Class A reflect the operations of the Fund prior to such date. Class B and
Class C are successors to the operations of separate series of the Trust.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Declaration of Trust may be amended by the Trustees when authorized by
vote of a majority of the outstanding voting securities of the Trust, the
financial interests of which are affected by the amendment. The Trustees may
also amend the Declaration of Trust without the vote or consent of shareholders
to change the name of the Trust or any series or to make such other changes
(such as reclassifying series or classes of shares or restructuring the Trust)
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's By-laws provide that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with any litigation or proceeding in which they may be involved
because of their offices with the Trust. However, no indemnification will be
provided to any Trustee or officer for any liability to the Trust or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. 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.
Under Massachusetts law, if certain conditions prevail, shareholders of a
Massachusetts business trust (such as the Trust) could be deemed to have
personal liability for the obligations of the Trust. Numerous investment
companies registered under the 1940 Act have been formed as Massachusetts
business trusts, and management is not aware of an instance where such liability
has been imposed. The Trust's Declaration of Trust contains an express
disclaimer of liability on the part of the Fund shareholders and the Trust's
By-laws provide that the Trust shall assume the defense on behalf of any Fund
shareholders. (The Declaration also contains provisions limiting the liability
of a series or class to that series or class). Moreover, the Trust's By-laws
also provide for indemnification out of the property of the Fund of any
shareholder held personally liable solely by reason of being or having been a
shareholder for all loss or expense arising from such liability. The assets of
the Fund are readily marketable and will ordinarily substantially exceed its
liabilities. In light of the nature of the Fund's business and the nature of its
assets, management believes that the possibility of the Fund's liability
exceeding its assets, and therefore the shareholder's risk of personal
liability, is extremely remote.
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 Chairman or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting.
The Portfolio's Declaration of Trust provides that the 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.
The Portfolio's Declaration of Trust provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for federal income tax purposes.
The right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the Commission, or during any emergency
as determined by the Commission which makes it impracticable for the Portfolio
to dispose of its securities or value its assets, or during any other period
permitted by order of the Commission for the protection of investors.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts are
the independent accountants of the Fund and the Portfolio, providing audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Commission.
FINANCIAL STATEMENTS
The audited financial statements of, and the report of independent
accountants for, the Fund and the Portfolio appear in the Fund's most recent
annual report to shareholders and the unaudited financial statements of the Fund
and the Portfolio appear in the Fund's most recent semiannual report to
shareholders, both of which are incorporated by reference into this SAI. A copy
of the Fund's most recent semiannual and annual report accompanies this SAI.
Registrant incorporates by reference the audited financial information for
the fiscal year ended December 31, 1996 and the unaudited financial information
for the six-months ended June 30, 1997, for the Fund and Portfolio listed below,
all as previously filed electronically with the Commission:
Six Months Ended June 30, 1997
EV Traditional Government Obligations Fund
Government Obligations Portfolio
(Accession No. 0000950109-97-005882)
Fiscal Year Ended December 31, 1996
EV Traditional Government Obligations Fund
Government Obligations Portfolio
(Accession No. 0000950156-97-000266)
<PAGE>
APPENDIX A: CLASS A SHARES
FEES AND EXPENSES
SERVICE PLAN
During the fiscal year ended December 31, 1996, the Fund made service fee
payments under the Plan to the Principal Underwriter aggregating $741,245, of
which $702,434 was paid to Authorized Firms and the balance of which was
retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended December 31, 1996, the Fund paid the Principal
Underwriter $6,862.50 for repurchase transactions handled by the Principal
Underwriter.
The total sales charges for sales of shares of the Fund during the fiscal
year ended December 31, 1996, was $302,288, none of which was received by the
Principal Underwriter, and Authorized Firms received $302,288. The total sales
charges for sales of shares of the Fund during the fiscal years ended December
31, 1995 and 1994 were $216,170 and $727,826, respectively, of which $10,288 and
$119,053, respectively, was received by the Principal Underwriter and Authorized
Firms received $205,882 and $608,773, respectively.
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment of $1,000 in Class A shares for the periods shown in
the table. The "Value of Initial Investment" reflects the deduction of the
maximum sales charge of 4.75%. 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.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
TOTAL RETURN EXCLUDING TOTAL RETURN INCLUDING
VALUE OF VALUE OF MAXIMUM SALES CHARGE MAXIMUM SALES CHARGE
INVESTMENT INITIAL INVESTMENT ---------------------- ----------------------
INVESTMENT PERIOD DATE INVESTMENT* ON 6/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
----------------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 6/30/97 6/30/87 $952.65 $2,048.65 115.03% 7.96% 104.86% 7.44%
5 Years Ended 6/30/97 6/30/92 $952.54 $1,295.06 35.96% 6.34% 29.51% 5.31%
1 Year Ended 6/30/97 6/30/96 $952.56 $1,020.60 7.14% 7.14% 2.06% 2.06%
</TABLE>
For the 30-day period ended June 30, 1997, the yield of the Fund was 5.81%.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at November 30, 1997, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As at
November 30, 1997, Merrill Lynch, Pierce, Fenner & Smith, Inc., Jacksonville, FL
was the record owner of approximately 19.0% of the outstanding shares, which it
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person owned of record or beneficially 5% or
more of the Fund's outstanding shares as of such date.
<PAGE>
APPENDIX B: CLASS B SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment in shares of $1,000. Total return for the period prior
to January 1, 1998 reflects the total return of the predecessor to Class B.
Total return prior to the Predecessor Fund's commencment of operations reflects
the total return of Class A, adjusted to reflect the Class B sales charge. The
Class A total return has not been adjusted to reflect certain other expenses
(such as distribution and/or service fees). If such adjustments were made, the
Class B total return would have been lower. 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.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN BEFORE TOTAL RETURN AFTER
DEDUCTING DEDUCTING DEDUCTING THE CDSC DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC ON THE CDSC ON ----------------------- -----------------------
PERIOD DATE INVESTMENT 6/30/97 6/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
---------- ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years
ended
6/30/97 6/30/87 $1,000 $2,097.44 $2,097.44 109.74% 7.69% 109.74% 7.69%
5 Years
ended
6/30/97 6/30/92 $1,000 $1,326.12 $1,307.79 32.61% 5.81% 30.78% 5.51%
1 Year
ended
6/30/97 6/30/96 $1,000 $1,063.60 $1,013.98 6.36% 6.36% 1.40% 1.40%
For the thirty-day period ended June 30, 1997, the yield of the Fund was 5.07%.
</TABLE>
<PAGE>
APPENDIX C: CLASS C SHARES
PERFORMANCE INFORMATION
The table below indicates the cumulative and average annual total return on
a hypothetical investment in shares of $1,000. Total return for the period prior
to January 1, 1998 reflects the total return of the predecessor to Class C.
Total return prior to the Predecessor Fund's commencement of operations reflects
the total return of Class A, adjusted to reflect the Class C sales charge. The
Class A total return has not been adjused to reflect certain other expenses
(such as distribution and/or service fees). If such adjustments were made, the
Class C total return would have been lower. 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.
VALUE OF A $1,000 INVESTMENT
<TABLE>
<CAPTION>
VALUE OF VALUE OF
INVESTMENT INVESTMENT
BEFORE AFTER TOTAL RETURN TOTAL RETURN
DEDUCTING DEDUCTING BEFORE DEDUCTING THE CDSC AFTER DEDUCTING THE CDSC
INVESTMENT INVESTMENT AMOUNT OF THE CDSC THE CDSC ---------------------------- -------------------------
PERIOD DATE INVESTMENT ON 6/30/97 ON 6/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -------------- ---------- ---------- ---------- ---------- -------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended
6/30/97 6/30/87 $1,000 $2,077.55 $2,077.55 107.76% 7.59% 107.76% 7.59%
5 Years Ended
6/30/97 6/30/92 $1,000 $1,313.57 $1,313.57 31.36% 5.61% 31.36% 5.61%
1 Year Ended
6/30/97 6/30/96 $1,000 $1,061.73 $1,051.80 6.17% 6.17% 5.18% 5.18%
For the thirty-day period ended June 30, 1997, the yield of the Fund was 4.89%.
</TABLE>
<PAGE>
[LOGO]
Investing
for the
21st
EATON VANCE
============== Century
Mutual Funds
- -------------------------------------------------------------------------------
EATON VANCE
GOVERNMENT OBLIGATIONS FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 1998
- -------------------------------------------------------------------------------
INVESTMENT ADVISER OF GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research, 24 Federal Street, Boston, MA 02110
ADMINISTRATOR OF EATON VANCE GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management, 24 Federal Street, Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc., 24 Federal Street,
Boston, MA 02110 (800) 225-6265
CUSTODIAN
Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116
TRANSFER AGENT
First Data Investor Services Group,
P.O. Box 5123, Westborough, MA 01581-5123 (800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109 GOSAI
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
INCLUDED IN PART A FOR EATON VANCE GOVERNMENT OBLIGATIONS FUND
(PREVIOUSLY KNOWN AS EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND) ARE
"FINANCIAL HIGHLIGHTS" FOR THE PERIOD FROM JANUARY 1, 1987 TO THE FISCAL
YEAR ENDED DECEMBER 31, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED).
INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS CONTAINED IN THE SEMI-ANNUAL REPORT FOR EATON VANCE
GOVERNMENT OBLIGATIONS FUND (THE "FUND") DATED JUNE 30, 1997 (UNAUDITED)
(WHICH WAS PREVIOUSLY FILED ELECTRONICALLY PURSUANT TO SECTION 30(b)(2)
OF THE INVESTMENT COMPANY ACT OF 1940) (ACCESSION NO.
0000950109-97-005882):
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Financial Highlights (Unaudited)
Notes to Financial Statements (Unaudited)
INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS CONTAINED IN THE ANNUAL REPORT FOR THE FUND DATED DECEMBER
31, 1996 (WHICH WAS PREVIOUSLY FILED ELECTRONICALLY PURSUANT TO SECTION
30(b)(2) OF THE INVESTMENT COMPANY ACT OF 1940) (ACCESSION NO.
0000950156-96-000266):
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS OF GOVERNMENT OBLIGATIONS PORTFOLIO WHICH ARE CONTAINED IN
THE SEMI-ANNUAL REPORT FOR THE FUND DATED JUNE 30, 1997 (UNAUDITED):
Portfolio of Investments (Unaudited)
Statement of Assets and Liabilities (Unaudited)
Statement of Operations (Unaudited)
Statements of Changes in Net Assets (Unaudited)
Supplementary Data (Unaudited)
Notes to Financial Statements (Unaudited)
ALSO INCORPORATED BY REFERENCE INTO PART B ARE THE FOLLOWING FINANCIAL
STATEMENTS OF GOVERNMENT OBLIGATIONS PORTFOLIO WHICH ARE CONTAINED IN
THE ANNUAL REPORT FOR THE FUND DATED DECEMBER 31, 1996:
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Supplementary Data
Notes to Financial Statements
Report of Independent Accountants
(b) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated August 17,
1993 filed as Exhibit (1)(a) to Post-Effective Amendment No.
23 and incorporated herein by reference.
(b) Amendment to Declaration of Trust dated July 10, 1995 filed
as Exhibit (1)(b) to Post- Effective Amendment No. 23 and
incorporated herein by reference.
(c) Amendment to Declaration of Trust dated June 23, 1997 filed
as Exhibit (1)(c) to Post- Effective Amendment No. 38 and
incorporated herein by reference.
(d) Amendment and Restatement of Establishment and Designation of
Series of Shares dated October 17, 1997 filed as Exhibit No.
(1)(c) to Post-Effective Amendment No. 37 and incorporated
herein by reference.
(e) Form of Amendment and Restatement of Establishment and
Designation of Series of Shares filed as Exhibit (1)(e) to
Post-Effective Amendment No. 39 and incorporated herein by
reference.
(2)(a) By-Laws (As Amended November 3, 1986) filed as Exhibit (2)(a)
to Post-Effective Amendment No. 23 and incorporated herein by
reference.
(b) Amendment to By-Laws 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.
(c) Investment Advisory Agreement with Eaton Vance Management for
Eaton Vance Tax-Managed Emerging Growth Fund dated September
16, 1997 filed as Exhibit No. (5)(c) to Post-Effective
Amendment No. 37 and incorporated herein by reference.
(d) Investment Advisory Agreement with Eaton Vance Management for
Eaton Vance Municipal Bond Fund dated October 17, 1997 filed
as Exhibit No. (5)(d) to Post-Effective Amendment No. 37 and
incorporated herein by reference.
(e) Form of Investment Advisory Agreement with Eaton Vance
Management for Eaton Vance Tax-Managed International Growth
Fund filed as Exhibit (5)(e) to Post-Effective Amendment No.
39 and incorporated herein by reference.
(6)(a)(1) Distribution Agreement between Eaton Vance Mutual Funds Trust
(on behalf of its Classic series) and Eaton Vance
Distributors, Inc. effective November 1, 1996 (with attached
Schedule A effective November 1, 1996) filed as Exhibit No.
(6)(a)(1) to Post-Effective Amendment No. 34 and incorporated
herein by reference.
(2) Distribution Agreement between Eaton Vance Mutual Funds Trust
(on behalf of its Marathon series) and Eaton Vance
Distributors, Inc. effective November 1, 1996 (with attached
Schedule A effective November 1, 1996) filed as Exhibit
(6)(a)(2) to Post-Effective Amendment No. 34 and incorporated
herein by reference.
(3) Distribution Agreement between Eaton Vance Mutual Funds Trust
(on behalf of its Traditional series) and Eaton Vance
Distributors, Inc. effective November 1, 1996 (with attached
Schedule A effective November 1, 1996) filed as Exhibit No.
(6)(a)(3) to Post-Effective Amendment No. 34 and incorporated
herein by reference.
(4) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Cash Management Fund, and
Eaton Vance Distributors, Inc. effective November 1, 1996
filed as Exhibit No. (6)(a)(4) to Post-Effective Amendment
No. 34 and incorporated herein by reference.
(5) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Liquid Assets Fund, and Eaton
Vance Distributors, Inc. effective November 1, 1996 filed as
Exhibit No. (6)(a)(5) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(6) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Money Market Fund, and Eaton
Vance Distributors, Inc. effective November 1, 1996 filed as
Exhibit No. (6)(a)(6) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(7) Distribution Agreement between Eaton Vance Mutual Funds
Trust, on behalf of Eaton Vance Tax Free Reserves, and Eaton
Vance Distributors, Inc. effective November 1, 1996 filed as
Exhibit No. (6)(a)(7) to Post-Effective Amendment No. 34 and
incorporated herein by reference.
(8) Distribution Agreement between Eaton Vance Mutual Funds Trust
and Eaton Vance Distributors, Inc. dated June 23, 1997 with
attached Schedules filed as Exhibit (6)(a) (8) to
Post-Effective Amendment No. 38 and incorporated herein by
reference.
(i) Amendment to Distribution Agreement dated October 17,
1997 filed as Exhibit (6)(a)(9) to Post-Effective
Amendment No. 38 and incorporated herein by reference.
(ii) Form of Schedule A-2 to Distribution Agreement filed as
Exhibit (6)(a)(8)(i) to Post-Effective Amendment No. 39
and incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors,
Inc. and Authorized Dealers filed as Exhibit (6)(b) to the
Registration Statement of Eaton Vance Growth Trust Post-
Effective Amendment No. 61 and incorporated herein by
reference.
(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 May 7, 1996)
filed as Exhibit (9)(a) to Post-Effective Amendment No. 24
and incorporated herein by reference.
(1) Amendment to Schedule A dated June 23, 1997 to the Amended
Administrative Services Agreement filed as Exhibit (9)(a)(1)
to Post-Effective Amendment No. 38 and incorporated herein by
reference.
(2) Form of Schedule A-1 to the Amended Administrative Services
Agreement filed as Exhibit (9)(a)(2) to Post-Effective
Amendment No. 39 and incorporated herein by reference.
(b) Transfer Agency Agreement dated June 7, 1989 filed as Exhibit
9(d) to Post-Effective Amendment No. 65 to the Registration
Statement of Eaton Vance Growth Trust (File Nos. 2-22019,
811-1241) and incorporated herein by reference.
(c) Amendment to Transfer Agency Agreement dated February 1, 1993
filed as Exhibit 9(e) to Post-Effective Amendment No. 65 to
the Registration Statement of Eaton Vance Growth Trust (File
Nos. 2-22019, 811-1241) and incorporated herein by reference.
(10) Not applicable
(11) Consent of Independent Accountants for Eaton Vance Government
Obligations Fund.
(12) Not applicable
(13) Not applicable
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for
Self-Employed Persons with Adoption Agreement and
instructions filed as Exhibit 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) 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.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds
Trust on behalf of Eaton Vance Short-Term Treasury Fund
adopted June 24, 1996 filed as Exhibit No. (15)(b)(1) to
Post-Effective Amendment No. 34 and incorporated herein by
reference.
(b) 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.
(c) 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.
(d) 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)(g) to Post-Effective
Amendment No. 25 and incorporated herein by reference.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds
Trust on behalf of Eaton Vance Liquid Assets Fund adopted
June 24, 1996 filed as Exhibit No. (15)(g)(1) to Post-
Effective Amendment No. 34 and incorporated herein by
reference.
(e) 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)(h) to Post-Effective
Amendment No. 25 and incorporated herein by reference.
(1) Amendment to Distribution Plan for Eaton Vance Mutual Funds
Trust on behalf of Eaton Vance Money Market Fund adopted June
24, 1996 filed as Exhibit No. (15)(h)(1) to Post- Effective
Amendment No. 34 and incorporated herein by reference.
(f) Eaton Vance Mutual Funds Trust Class A Service Plan adopted
June 23, 1997 with attached Schedules filed as Exhibit
(15)(i) to Post-Effective Amendment No. 38 and incorporated
herein by reference.
(1) Form of Schedule A-2 to Class A Service Plan filed as Exhibit
(15)(i)(1) to Post- Effective Amendment No. 39 and
incorporated herein by reference.
(g) Eaton Vance Mutual Funds Trust Class B Distribution Plan
adopted June 23, 1997 with attached Schedules filed as
Exhibit (15)(j) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(1) Form of Schedule A-2 to Class B Distribution Plan filed as
Exhibit (15)(j)(1) to Post- Effective Amendment No. 39 and
incorporated herein by reference.
(h) Eaton Vance Mutual Funds Trust Class C Distribution Plan
adopted June 23, 1997 with attached Schedules filed as
Exhibit (15)(k) to Post-Effective Amendment No. 38 and
incorporated herein by reference.
(1) Form of Schedule A-2 to Class C Distribution Plan filed as
Exhibit (15)(k)(1) to Post- Effective Amendment No. 39 and
incorporated herein by reference.
(16) Schedules for Computation of Performance Quotations filed
herewith.
(17)(a) Power of Attorney for Eaton Vance Mutual Funds Trust dated
June 23, 1997, filed as Exhibit No. (17)(a) to Post-Effective
Amendment No. 35 and incorporated herein by reference.
(b) Power of Attorney for Government Obligations Portfolio dated
April 22, 1997 filed as Exhibit (17)(b) to Post-Effective
Amendment No. 36 and incorporated herein by reference.
(c) Power of Attorney for High Income Portfolio dated February
14, 1997 filed as Exhibit (17)(c) to Post-Effective Amendment
No. 36 and incorporated herein by reference.
(d) Power of Attorney for Strategic Income Portfolio dated April
22, 1997 filed as Exhibit (17)(d) to Post-Effective Amendment
No. 36 and incorporated herein by reference.
(e) Power of Attorney for Cash Management Portfolio dated April
22, 1997 filed as Exhibit (17)(e) to Post-Effective Amendment
No. 36 and incorporated herein by reference.
(f) Power of Attorney for Tax-Managed Growth Portfolio dated
October 23, 1995 filed as Exhibit (17)(f) to Post-Effective
Amendment No. 26 and incorporated herein by reference.
(18) Multiple Class Plan for Eaton Vance Funds dated June 23, 1997
filed as Exhibit (18) to Post-Effective Amendment No. 37 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
<TABLE>
<CAPTION>
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
<S> <C>
Shares of beneficial interest without par value as of December 1, 1997
Eaton Vance Short-Term Treasury Fund 71
EV Classic Government Obligations Fund 3,233
EV Marathon Government Obligations Fund 3,344
EV Traditional Government Obligations Fund 8,456
EV Classic High Income Fund 577
EV Marathon High Income Fund 16,239
Eaton Vance Strategic Income Fund - Class A 0
Eaton Vance Strategic Income Fund - Class B 5,334
Eaton Vance Strategic Income Fund - Class C 280
Eaton Vance Tax-Managed Growth Fund - Class A 7,550
Eaton Vance Tax-Managed Growth Fund - Class B 19,801
Eaton Vance Tax-Managed Growth Fund - Class C 6,698
Eaton Vance Cash Management Fund 2,299
Eaton Vance Liquid Assets Fund 414
Eaton Vance Money Market Fund 971
Eaton Vance Tax Free Reserves 182
Eaton Vance Tax-Managed Emerging Growth Fund - Class A 316
Eaton Vance Tax-Managed Emerging Growth Fund - Class B 547
Eaton Vance Tax-Managed Emerging Growth Fund - Class C 143
</TABLE>
ITEM 27. INDEMNIFICATION
Article IV of the Trust's Amended and Restated Declaration of Trust permits
Trustee and officer indemnification by By-law, contract and vote. Article XI of
the By-laws contains indemnification provisions. Registrant's Trustees and
officers are insured under a standard mutual fund errors and omissions insurance
policy covering insured by reason of negligent errors and omissions committed in
their capacities as such.
The distribution agreements of the Trust also provide for reciprocal
indemnity of the Principal Underwriter, on the one hand, and the Trustees and
officers, on the other.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the captions
"Investment Adviser and Administrator" or "Investment Adviser" 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:
Eaton Vance Growth Trust Eaton Vance Mutual Funds Trust
Eaton Vance Income Fund of Boston Eaton Vance Prime Rate Reserves
Eaton Vance Investment Trust Eaton Vance Special Investment Trust
Eaton Vance Municipals Trust EV Classic Senior Floating-Rate Fund
Eaton Vance Municipals Trust II
(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
Albert F. Barbaro Vice President None
Chris Berg Vice President None
Kate Bradshaw Vice President None
David B. Carle Vice President None
Daniel C. Cataldo Vice President None
Raymond Cox Vice President None
Mark P. Doman Vice President None
Alan R. Dynner Vice President Secretary
Richard Finelli Vice President None
Kelly Flynn Vice President None
James Foley Vice President None
Michael A. Foster Vice President None
William M. Gillen Senior Vice President None
Hugh S. Gilmartin Vice President None
Perry D. Hooker Vice President None
Brian Jacobs Senior Vice President None
Thomas P. Luka Vice President None
John Macejka Vice President None
Timothy D. McCarthy Vice President None
Joseph T. McMenamin Vice President None
Morgan C. Mohrman Senior Vice President None
James A. Naughton Vice President None
Mark D. Nelson Vice President None
Linda D. Newkirk Vice President None
James L. O'Connor Vice President Treasurer
Thomas Otis Secretary and Clerk None
George D. Owen, II Vice President None
Erique M. Pineada Vice President None
F. Anthony Robinson Vice President None
Jay S. Rosoff Vice President None
Benjamin A. Rowland, Jr. Vice President, Treasurer and Director None
Stephen M. Rudman Vice President None
John P. Rynne Vice President Assistant Secretary
Kevin Schrader Vice President None
George V.F. Schwab, Jr. Vice President None
Teresa A. Sheehan Vice President None
David C. Sturgis Vice President None
Cornelius J. Sullivan Senior Vice President None
David M. Thill Vice President None
John M. Trotsky Vice President None
Chris Volf Vice President None
Sue Wilder Vice President None
- ----------
*Address is 24 Federal Street, Boston, MA 02110
</TABLE>
(c) Not applicable
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 200 Clarendon Street,
16th Floor, Mail Code ADM27, Boston, MA 02116 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 the High Income 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 accounts and High Income Portfolio's 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
Eaton Vance Tax-Managed Emerging Growth Fund, using financial statements which
need not be certified, within four to six months from the effective date of
Post-Effective Amendment No. 35.
The Registrant undertakes to file a Post-Effective Amendment on behalf of
Eaton Vance Tax-Managed International Growth Fund, using financial statements
which need not be certified, within four to six months from the effective date
of Post-Effective Amendment No. 39.
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 the 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 19th day of December,
1997.
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 December 19, 1997
- ----------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer December 19, 1997
- ----------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Vice President and Trustee December 19, 1997
- ----------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee December 19, 1997
- ----------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 19, 1997
- ----------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 19, 1997
- ----------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 19, 1997
- ----------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 19, 1997
- ----------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
-----------------------------
ALAN R. DYNNER
As Attorney-in-fact
</TABLE>
<PAGE>
SIGNATURES
Government Obligations Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Mutual Funds Trust (File No.
2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and Commonwealth of Massachusetts on the 19th
day of December, 1997.
GOVERNMENT OBLIGATIONS PORTFOLIO
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
/s/ M. DOZIER GARDNER Executive Officer and
Trustee December 19, 1997
- -----------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer and Trustee December 19, 1997
- -----------------------------------
JAMES L. O'CONNOR
Vice President and
/s/ JAMES B. HAWKES Trustee December 19, 1997
- -----------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee December 19, 1997
- -----------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee December 19, 1997
- -----------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee December 19, 1997
- -----------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee December 19, 1997
- -----------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee December 19, 1997
- -----------------------------------
JACK L. TREYNOR
*By: /s/ ALAN R. DYNNER
- -----------------------------------
ALAN R. DYNNER
As Attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- -----------------
(11) Consent of Independent Accountants for
Eaton Vance Government Obligations Fund.
(16) Schedules for Computation of Performance
Quotations.
<PAGE>
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Post-Effective Amendment No. 40 to the
Registration Statement of Eaton Vance Mutual Funds Trust (1933 Act File
No. 2-90946) on behalf of Eaton Vance Government Obligations Fund of our report
dated January 31, 1997, relating to Eaton Vance Government Obligations Fund
(formerly EV Traditional Government Obligations Fund), and of our report dated
January 31, 1997, relating to Government Obligations Portfolio, which reports
are included in the Annual Report to Shareholders for the year ended December
31, 1996 which is incorporated by reference in the Statement of Additional
Information, which is part of such Registration Statement.
We also consent to the reference to our Firm under the heading "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/ COOPERS & LYBRAND L.L.P.
------------------------------
COOPERS & LYBRAND L.L.P.
December 29, 1997
Boston, Massachusetts
<PAGE>
Exhibit 16
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 6/30/97:
Interest Income Earned: $187,940
Plus Dividend Income Earned:
----------
Equal Gross Income: $187,940
Minus Expenses: $ 70,174
----------
Equal Net Investment Income: $117,766
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 3,208,694
----------
Equal Net Investment Income Earned Per Share: $0.0367
Maximum Offering Price Per Share 6/30/97 $9.10
30 Day Yield*: 4.89%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0367/$9.10)+1) -1]
<PAGE>
INVESTMENT PERFORMANCE -- EV CLASSIC GOVERNMENT OBLIGATIONS FUND
<TABLE>
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended June 30, 1997. 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 06/30/97 ON 06/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
06/30/97 06/30/87 $2,077.55 $2,077.55 107.76% 7.59% 107.76% 7.59%
5 YEARS ENDED
06/30/97 06/30/92 $1,313.57 $1,313.57 31.36% 5.61% 31.36% 5.61%
1 YEAR ENDED
06/30/97 06/30/96 $1,061.73 $1,051.80 6.17% 6.17% 5.18% 5.18%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
Exhibit 16
EV MARATHON GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 6/30/97:
Interest Income Earned: $736,014
Plus Dividend Income Earned:
----------
Equal Gross Income: $736,014
Minus Expenses: $257,772
----------
Equal Net Investment Income: $478,242
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 12,563,111
----------
Equal Net Investment Income Earned Per Share: $0.0381
Maximum Offering Price Per Share 6/30/97 $9.10
30 Day Yield*: 5.07%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0381/$9.10)+1) -1]
<PAGE>
INVESTMENT PERFORMANCE -- EV MARATHON GOVERNMENT OBLIGATIONS FUND
<TABLE>
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended June 30, 1997. 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 06/30/97 ON 06/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
06/30/97 06/30/87 $2,097.44 $2,097.44 109.74% 7.69% 109.74% 7.69%
5 YEARS ENDED
06/30/97 06/30/92 $1,326.12 $1,307.79 32.61% 5.81% 30.78% 5.51%
1 YEAR ENDED
06/30/97 06/30/96 $1,063.60 $1,013.98 6.36% 6.36% 1.40% 1.40%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC *
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period after
deducting the CDSC **
P = an initial investment of $1,000
* The average annual total return not including the CDSC is calculated based on the ending investment value
before deducting the CDSC.
** The cumulative total return not including the CDSC is calculated based on the ending investment value before
deducting the CDSC.
</TABLE>
<PAGE>
Exhibit 16
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 6/30/97:
Interest Income Earned: $1,844,066
Plus Dividend Income Earned:
----------
Equal Gross Income: $1,844,066
Minus Expenses: $473,460
----------
Equal Net Investment Income: $1,370,606
Divided Average daily number of shares
outstanding that were entitled
to receive dividends: 27,098,285
----------
Equal Net Investment Income Earned Per Share: $0.0506
Maximum Offering Price Per Share 6/30/97 $10.57
30 Day Yield*: 5.81%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0506/$10.57)+1) -1]
<PAGE>
INVESTMENT PERFORMANCE -- EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
<TABLE>
The table below indicates the total return (capital changes plus reinvestment of all distributions) on a hypothetical investment of
$1,000 in the Fund covering the 1, 5, and 10 year periods ended June 30, 1997.
<CAPTION>
VALUE OF A $1,000 INVESTMENT
VALUE OF VALUE OF TOTAL RETURN TOTAL RETURN
INVESTMENT INVESTMENT INITIAL INVESTMENT EXCLUDING SALES CHARGE INCLUDING SALES CHARGE
PERIOD DATE INVESTMENT* ON 06/30/97 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
<S> <C> <C> <C> <C> <C> <C> <C>
10 YEARS ENDED
06/30/97 06/30/87 $952.65 $2,048.65 115.03% 7.96% 104.86% 7.44%
5 YEARS ENDED
06/30/97 06/30/92 $952.54 $1,295.06 35.96% 6.34% 29.51% 5.31%
1 YEAR ENDED
06/30/97 06/30/96 $952.56 $1,020.60 7.14% 7.14% 2.06% 2.06%
Average annual total return is calculated using the following formula:
n
P(1+T) = ERV
where P = an initial investment of $1,000 **
T = average annual total return
n = number of years
ERV = ending redeemable value of $1,000 initial investment at the end of the period
Cumulative total return is calculated using the following formula:
T = ( ERV / P ) - 1
where T = cumulative total return including the maximum sales charge
ERV = ending redeemable value of $1,000 initial investment at the end of the period
P = an initial investment of $1,000 ***
* Initial investment less the current maximum sales charge of 4.75%.
** The average annual total return including the sales charge is calculated based on an initial investment of $1,000 less the
maximum initial sales charge of 4.75%.
*** The cumulative total return including the sales charge is calculated based on an initial investment of $1,000 less
maximum initial sales charge of 4.75%.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 1
<NAME> EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 288086
<INVESTMENTS-AT-VALUE> 304418
<RECEIVABLES> 123
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 304541
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1577
<TOTAL-LIABILITIES> 1577
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 342796
<SHARES-COMMON-STOCK> 28380
<SHARES-COMMON-PRIOR> 32634
<ACCUMULATED-NII-CURRENT> (945)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (55220)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16332
<NET-ASSETS> 302963
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 25734
<EXPENSES-NET> 1057
<NET-INVESTMENT-INCOME> 24677
<REALIZED-GAINS-CURRENT> (3495)
<APPREC-INCREASE-CURRENT> (7582)
<NET-CHANGE-FROM-OPS> 13599
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (24582)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1855
<NUMBER-OF-SHARES-REDEEMED> (7221)
<SHARES-REINVESTED> 1112
<NET-CHANGE-IN-ASSETS> (56774)
<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> 1057
<AVERAGE-NET-ASSETS> 325025
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> 0.810
<PER-SHARE-GAIN-APPREC> (0.340)
<PER-SHARE-DIVIDEND> (0.810)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000745463
<NAME> EATON VANCE MUTUAL FUNDS TRUST
<SERIES>
<NUMBER> 1
<NAME> EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUNE-30-1997
<INVESTMENTS-AT-COST> 272955
<INVESTMENTS-AT-VALUE> 286255
<RECEIVABLES> 214
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 286469
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1236
<TOTAL-LIABILITIES> 1236
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 328179
<SHARES-COMMON-STOCK> 26995
<SHARES-COMMON-PRIOR> 28380
<ACCUMULATED-NII-CURRENT> (899)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (55348)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13300
<NET-ASSETS> 285233
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 11838
<EXPENSES-NET> 602
<NET-INVESTMENT-INCOME> 11236
<REALIZED-GAINS-CURRENT> (3161)
<APPREC-INCREASE-CURRENT> (3033)
<NET-CHANGE-FROM-OPS> 8075
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11189)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4131
<NUMBER-OF-SHARES-REDEEMED> (5995)
<SHARES-REINVESTED> 480
<NET-CHANGE-IN-ASSETS> (17730)
<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> 602
<AVERAGE-NET-ASSETS> 294811
<PER-SHARE-NAV-BEGIN> 10.68
<PER-SHARE-NII> 0.402
<PER-SHARE-GAIN-APPREC> (0.110)
<PER-SHARE-DIVIDEND> (0.402)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.57
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000912747
<NAME> EATON VANCE GOVERNMENT OBLIGATIONS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 493,863
<INVESTMENTS-AT-VALUE> 509,072
<RECEIVABLES> 7,070
<ASSETS-OTHER> 47
<OTHER-ITEMS-ASSETS> 7
<TOTAL-ASSETS> 516,196
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 60,673
<TOTAL-LIABILITIES> 60,673
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 439,438
<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> 16,085
<NET-ASSETS> 455,523
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 45,154
<OTHER-INCOME> 0
<EXPENSES-NET> 7,296
<NET-INVESTMENT-INCOME> 37,858
<REALIZED-GAINS-CURRENT> (5,404)
<APPREC-INCREASE-CURRENT> (10,812)
<NET-CHANGE-FROM-OPS> 21,642
<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> (66,266)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,603
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,296
<AVERAGE-NET-ASSETS> 480,423
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000912747
<NAME> GOVERNMENT OBLIGATIONS PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 469,974
<INVESTMENTS-AT-VALUE> 482,550
<RECEIVABLES> 6,802
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 72
<TOTAL-ASSETS> 489,429
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 59,664
<TOTAL-LIABILITIES> 59,664
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 418,203
<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> 11,562
<NET-ASSETS> 429,765
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 19,517
<OTHER-INCOME> 0
<EXPENSES-NET> 1,826
<NET-INVESTMENT-INCOME> 17,691
<REALIZED-GAINS-CURRENT> (188)
<APPREC-INCREASE-CURRENT> (4,523)
<NET-CHANGE-FROM-OPS> 12,980
<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> (25,757)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,658
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,827
<AVERAGE-NET-ASSETS> 442,293
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
